e10vk
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, DC
20549-1004
Form 10-K
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þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the year ended
December 31, 2006
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OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission file
number 1-143
GENERAL MOTORS
CORPORATION
(Exact Name of Registrant as
Specified in its Charter)
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STATE OF DELAWARE
(State or other
jurisdiction of
Incorporation or Organization)
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38-0572515
(I.R.S. Employer
Identification No.)
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300 Renaissance Center,
Detroit, Michigan
(Address of Principal
Executive Offices)
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48265-3000
(Zip
Code)
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Registrants telephone number, including area code
(313) 556-5000
Securities registered pursuant to Section 12(b) of the
Act:
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Name of Each Exchange on
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Title of Each Class
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which Registered
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Common,
$12/3
par value
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New York Stock Exchange, Inc.
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Note: The
$1 2/3
par value common stock of the Registrant is also listed for
trading on the following exchanges:
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Bourse de Bruxelles
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Brussels, Belgium
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Euronext Paris
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Paris, France
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The London Stock Exchange
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London, England
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Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No
o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months, and (2) has been subject to such filing
requirements for the past
90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. Yes þ No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated
filer þ Accelerated
filer o Non-accelerated
filer o
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
As of June 30, 2006, the aggregate market value of GM
$12/3
par value common stock held by nonaffiliates of GM was
approximately $16.8 billion. The closing price on
June 30, 2006 as reported on the New York Stock Exchange
was $29.79 per share.
As of February 28, 2007, the number of shares outstanding
of GM
$12/3
par value common stock was 565,729,615 shares.
Documents incorporated by reference are as follows:
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Part and Item Number of
Form 10-K
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Document
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into which Incorporated
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General Motors Notice of Annual
Meeting of Stockholders and Proxy Statement for the Annual
Meeting of Stockholders to be held June 5, 2007
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Part III, Items 10
through 14
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GENERAL
MOTORS CORPORATION
INDEX
2
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Explanatory
Note Restatement of Financial
Information
As previously disclosed in its
Forms 8-K
filed on February 16, 2007 and January 26, 2007,
General Motors Corporation (GM) has restated its consolidated
financial statements and financial information for 2002 through
the third quarter of 2006. As such, GMs Annual Report on
Form 10-K
for the year ended December 31, 2006 reflects restatements
of its historical consolidated financial statements for the
quarters ended March 31, 2006, June 30, 2006 and
September 30, 2006, the year ended December 31, 2005,
including the quarters ended March 31, 2005, June 30,
2005, and September 30, 2005, the year ended
December 31, 2004, and other selected financial data for
the years ended December 31, 2003 and 2002. These
restatements as outlined in Notes 2 and 30 to the
Consolidated Financial Statements primarily relate to the
following: (1) accounting for certain derivative contracts
in accordance with Statement of Financial Accounting Standards
(SFAS) No. 133, Accounting for Derivative Instruments
and Hedging Activities, as amended; (2) accounting for
deferred income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes; and (3) other various
accounting adjustments that, upon identification, were
determined to be immaterial, individually and in the aggregate,
and were recorded in the periods in which they were identified.
Due to the adjustments, as discussed above, that required a
restatement of our previously-filed consolidated financial
statements, we are also correcting these out-of-period
adjustments by recording them in the proper periods. The
following table sets forth the effects of the restatements on
net income (loss), earnings (loss) per share and retained
earnings for the periods presented in the accompanying
consolidated financial statements and financial information
(dollars in millions, except per share amounts):
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Retained Earnings
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Net Income (Loss)
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at January 1,
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2005
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2004
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2003
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2002
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2002
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Previously reported
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$
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(10,567
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)
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$
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2,804
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$
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3,859
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$
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1,574
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$
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9,223
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Pre-tax adjustments:
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Derivatives and hedge accounting
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89
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(40
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(213
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)
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545
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(335
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)
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Other out-of-period
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118
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(272
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)
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(263
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)
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(138
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(339
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Total pre-tax adjustments
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207
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(312
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)
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(476
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)
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407
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(674
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)
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Tax effects
provision/(benefit)
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22
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(207
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)
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(202
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)
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168
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(119
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Total of above adjustments, net of
tax
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185
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(105
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(274
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)
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239
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(555
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Deferred income taxes
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(35
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)
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2
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(60
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(78
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)
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1,280
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Net after-tax adjustments
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150
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(103
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)
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(334
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)
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161
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725
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As Restated
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$
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(10,417
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$
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2,701
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$
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3,525
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$
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1,735
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$
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9,948
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3
The following table sets forth a reconciliation of previously
reported and restated earnings (loss) per share attributable to
common stock,
$12/3
par value, for the periods shown:
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2005
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2004
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2003
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2002
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Basic earnings (loss) per
share:
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Continuing operations, as reported
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$
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(18.50
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$
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4.97
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$
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5.17
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$
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3.24
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Adjustments
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0.27
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(0.19
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(.60
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.28
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Continuing operations, as restated
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(18.23
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4.78
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4.57
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3.52
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Discontinued operations
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2.14
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(0.16
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Cumulative effect of a change in
accounting principle
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(0.19
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Earnings (loss) per share, as
restated
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$
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(18.42
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$
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4.78
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$
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6.71
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$
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3.36
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Diluted earnings (loss) per
share:
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Continuing operations, as reported
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$
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(18.50
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$
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4.94
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$
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5.09
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$
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3.23
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Adjustments
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0.27
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(0.18
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(0.58
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)
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0.28
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Continuing operations, as restated
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(18.23
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4.76
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4.51
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3.51
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Discontinued operations
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2.11
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(0.16
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Cumulative effect of a change in
accounting principle
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(0.19
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Earnings (loss) per share, as
restated
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$
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(18.42
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$
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4.76
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$
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6.62
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$
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3.35
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For additional information relating to the effect of the
restatement, reference is made to the following items:
Item 6. Selected Financial Data
Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures
about Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9A. Controls and Procedures
Item 15. Exhibits and Financial Statement Schedule
This Annual Report on
Form 10-K
restates all of the pertinent financial data for the affected
periods, and we do not intend to amend our previously-filed
Annual Reports on
Form 10-K
or Quarterly Reports on
Form 10-Q
for any prior periods. As a result, the reader should not rely
on the prior filings but should rely upon the restated financial
statements, reports of our independent registered public
accounting firm, and related financial information for affected
periods contained in this 2006 Annual Report on
Form 10-K.
4
PART I
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
General Motors Corporation, incorporated in 1916 under the laws
of the State of Delaware, is sometimes referred to in this
Annual Report on
Form 10-K
as we, the Registrant, the
Corporation, General Motors, or
GM. We are the worlds largest automaker in
terms of volume.
General
GM is primarily engaged in the worldwide development,
production, and marketing of cars, trucks, and parts. GM
develops, manufactures, and markets its vehicles worldwide
through its four automotive regions: GM North America (GMNA), GM
Europe (GME), GM Latin America/Africa/Mid-East (GMLAAM), and GM
Asia Pacific (GMAP). Also, GMs finance and insurance
operations are primarily conducted through GMAC LLC, the
successor to General Motors Acceptance Corporation (GMAC LLC and
General Motors Acceptance Corporation are referred to in this
Annual Report on Form 10-K as GMAC). GMAC was a wholly
owned subsidiary until November 30, 2006, when GM sold a
51% controlling ownership interest in GMAC to a consortium of
investors (the GMAC Transaction). Since the GMAC Transaction, GM
has accounted for its 49% ownership interest in GMAC using the
equity method. GMAC provides a broad range of financial
services, including consumer vehicle financing, automotive
dealership and other commercial financing, residential mortgage
services, automobile service contracts, personal automobile
insurance coverage, and selected commercial insurance coverage.
GMs total worldwide car and truck deliveries were
9.1 million, 9.2 million, and 9 million, for
2006, 2005, and 2004, respectively. Substantially all of our
cars, trucks, and parts are marketed through retail dealers in
North America, and through distributors and dealers outside of
North America, the substantial majority of which are
independently owned. GMNA primarily meets the demands of
customers in North America with vehicles developed,
manufactured,
and/or
marketed under the following brands:
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Chevrolet
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Buick
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Saab
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GMC
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Pontiac
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Cadillac
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Hummer
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Saturn
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The demands of customers outside North America are primarily met
with vehicles developed, manufactured,
and/or
marketed under the following brands:
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Opel
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Saab
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GMC
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Hummer
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Vauxhall
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Buick
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Cadillac
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Isuzu
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Holden
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Chevrolet
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Daewoo
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As of December 31, 2006, GM also had equity ownership
stakes directly or indirectly through various regional
subsidiaries, including GM Daewoo Auto & Technology Company
(GM Daewoo), New United Motor Manufacturing, Inc., Shanghai
General Motors Co., Ltd., SAIC-GM-Wuling Automobile Company
Ltd., and CAMI Automotive Inc. These companies design,
manufacture, and market vehicles under the following brands:
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Pontiac
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Wuling
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Chevrolet
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Buick
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Suzuki
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Daewoo
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Cadillac
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Holden
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In addition to the products we sell to our dealers for consumer
retail sales, we also sell cars and trucks to our dealers that
they sell to fleet customers, including daily rental car
companies, commercial fleet customers, leasing companies, and
governments.
GMs retail and fleet customers can obtain a wide range of
after-the-sale
vehicle services and products through our dealer network, such
as maintenance, light repairs, collision repairs, vehicle
accessories, and extended service warranties.
In addition to the information about GM and its subsidiaries
contained in this Annual Report on
Form 10-K
for the year ended December 31, 2006, extensive information
about the Corporation can be found on our website
5
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
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Item 1. |
Business (continued)
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located at www.gm.com, including information about our
management team, our brands and products, and our corporate
governance principles.
The following information is incorporated herein by reference to
the indicated pages:
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Item
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Page(s)
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Employment and Payrolls
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18-19
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Production Volumes
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58-64
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Segment Reporting (Note 27 to
the Consolidated Financial Statements)
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178-182
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Vehicle
Unit Sales
Total industry sales of new motor vehicle units of domestic and
foreign makes and GMs competitive position during the
years ended December 31, 2006, 2005, and 2004 were as
follows:
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Vehicle Unit Sales(1)
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Years Ended December 31,
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2006
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2005
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2004
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GM as
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GM as
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GM as
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a % of
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a % of
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a % of
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Industry
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GM
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Industry
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Industry
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GM
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Industry
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Industry
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GM
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Industry
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(Units in thousands)
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United States
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Cars
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Small
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2,506
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426
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17.0%
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2,370
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490
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20.7%
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2,256
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456
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20.2%
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Midsize
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3,706
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946
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25.5%
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3,740
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1,007
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26.9%
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3,714
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1,190
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32.0%
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Sport
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436
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80
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18.3%
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424
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58
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13.6%
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403
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59
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14.6%
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Luxury
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1,206
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173
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14.4%
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1,208
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|
197
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16.3%
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1,190
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180
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15.2%
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Total cars
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7,854
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1,625
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20.7%
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7,742
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1,752
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22.6%
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7,563
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1,885
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24.9%
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Trucks
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|
|
|
|
|
|
|
|
|
|
|
Pickups
|
|
|
2,874
|
|
|
|
1,022
|
|
|
|
35.6%
|
|
|
|
3,201
|
|
|
|
1,163
|
|
|
|
36.3%
|
|
|
|
3,198
|
|
|
|
1,133
|
|
|
|
35.4%
|
|
Vans
|
|
|
1,326
|
|
|
|
245
|
|
|
|
18.5%
|
|
|
|
1,468
|
|
|
|
328
|
|
|
|
22.4%
|
|
|
|
1,456
|
|
|
|
313
|
|
|
|
21.5%
|
|
Utilities
|
|
|
4,505
|
|
|
|
1,174
|
|
|
|
26.0%
|
|
|
|
4,586
|
|
|
|
1,212
|
|
|
|
26.4%
|
|
|
|
4,693
|
|
|
|
1,324
|
|
|
|
28.2%
|
|
Medium Duty
|
|
|
501
|
|
|
|
59
|
|
|
|
11.8%
|
|
|
|
459
|
|
|
|
63
|
|
|
|
13.8%
|
|
|
|
392
|
|
|
|
52
|
|
|
|
13.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trucks
|
|
|
9,206
|
|
|
|
2,500
|
|
|
|
27.1%
|
|
|
|
9,714
|
|
|
|
2,766
|
|
|
|
28.5%
|
|
|
|
9,739
|
|
|
|
2,822
|
|
|
|
29.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total United States
|
|
|
17,060
|
|
|
|
4,125
|
|
|
|
24.2%
|
|
|
|
17,456
|
|
|
|
4,518
|
|
|
|
25.9%
|
|
|
|
17,302
|
|
|
|
4,707
|
|
|
|
27.2%
|
|
Canada, Mexico, and Other
|
|
|
3,131
|
|
|
|
682
|
|
|
|
21.8%
|
|
|
|
3,090
|
|
|
|
728
|
|
|
|
23.5%
|
|
|
|
2,977
|
|
|
|
700
|
|
|
|
23.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GMNA
|
|
|
20,191
|
|
|
|
4,807
|
|
|
|
23.8%
|
|
|
|
20,546
|
|
|
|
5,246
|
|
|
|
25.5%
|
|
|
|
20,279
|
|
|
|
5,407
|
|
|
|
26.7%
|
|
GME
|
|
|
21,763
|
|
|
|
2,003
|
|
|
|
9.2%
|
|
|
|
21,079
|
|
|
|
1,984
|
|
|
|
9.4%
|
|
|
|
20,778
|
|
|
|
1,956
|
|
|
|
9.4%
|
|
GMLAAM
|
|
|
6,076
|
|
|
|
1,035
|
|
|
|
17.0%
|
|
|
|
5,242
|
|
|
|
882
|
|
|
|
16.8%
|
|
|
|
4,605
|
|
|
|
740
|
|
|
|
16.1%
|
|
GMAP
|
|
|
19,485
|
|
|
|
1,253
|
|
|
|
6.4%
|
|
|
|
18,287
|
|
|
|
1,065
|
|
|
|
5.8%
|
|
|
|
17,160
|
|
|
|
887
|
|
|
|
5.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Worldwide
|
|
|
67,515
|
|
|
|
9,098
|
|
|
|
13.5%
|
|
|
|
65,154
|
|
|
|
9,177
|
|
|
|
14.1%
|
|
|
|
62,822
|
|
|
|
8,990
|
|
|
|
14.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
GMs vehicle unit sales primarily represent vehicles
manufactured by GM, sold under a GM brand, or sold through a
GM-owned distribution network. Consistent with industry
practice, vehicle unit sales information includes estimates of
sales in certain countries where public reporting is not legally
required or otherwise available on a consistent basis. |
6
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 1. |
Business (continued)
|
Fleet
Sales and Deliveries
The sales and market share data provided above includes both
retail and fleet vehicle unit sales. GMs fleet sales are
comprised of vehicle unit sales to daily rental car companies,
as well as leasing companies and commercial fleet and government
customers. Certain fleet transactions, particularly daily
rental, are less profitable than average retail sales. In
addition, in some sales to daily rental fleets GM guarantees to
repurchase the vehicles at contractually agreed upon values.
The table below reflects our fleet unit sales and the amount of
those unit sales as a percentage of our total vehicle unit sales
for the last three years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Units in thousands)
|
|
|
GMNA
|
|
|
1,270
|
|
|
|
1,334
|
|
|
|
1,315
|
|
GME
|
|
|
792
|
|
|
|
814
|
|
|
|
730
|
|
GMLAAM
|
|
|
289
|
|
|
|
259
|
|
|
|
206
|
|
GMAP
|
|
|
227
|
|
|
|
217
|
|
|
|
183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fleet units
|
|
|
2,578
|
|
|
|
2,624
|
|
|
|
2,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daily rental units
|
|
|
1,027
|
|
|
|
1,149
|
|
|
|
1,127
|
|
Other fleet units
|
|
|
1,551
|
|
|
|
1,475
|
|
|
|
1,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fleet units
|
|
|
2,578
|
|
|
|
2,624
|
|
|
|
2,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fleet unit sales as a percentage
of total vehicle unit sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Cars
|
|
|
33.9
|
%
|
|
|
35.2
|
%
|
|
|
33.7
|
%
|
Trucks
|
|
|
20.5
|
%
|
|
|
19.6
|
%
|
|
|
17.9
|
%
|
Total
|
|
|
28.3
|
%
|
|
|
28.6
|
%
|
|
|
27.1
|
%
|
Product
Pricing
Historically, GM has used a number of methods to promote its
products, including the use of dealer, retail, and fleet
incentives such as rebates, finance incentives, and special
lease programs. The level of incentives is dependent in large
part upon the level of competition in the markets in which GM
operates and the level of demand for GMs products.
GM, through the Total Value Promise, announced in
January 2006 that we intended to reduce the use and amount of
retail incentives in our North America operations as a stimulant
to sales and that we would instead reduce the
manufacturers suggested retail price on many GM vehicles
and emphasize the value GM offers to consumers. To carry out
this strategy, GM repositioned prices on 80% of 2006 model year
vehicles, added standard equipment to more than 50 models, and
improved powertrain warranties beginning with 2007 model year
vehicles. At the same time, GM reduced our reliance on
incentives to promote retail business, improved residual value
through improved quality and product execution, reduced daily
rental sales, and reduced the average spending per vehicle for
incentives. In 2007, GM will continue to price vehicles
competitively, including offering strategic and tactical
incentives as closing tools for dealers. GM believes this
strategy builds the reputation of our brands and enhances
residual value for our products while supporting improved
pricing per transaction.
Seasonal
Nature and Cyclical Nature of Business
In the automotive business, retail sales are seasonal and
production varies from month to month. Certain changeovers occur
throughout the year for reasons such as new market entries and
vehicle model changeovers. Traditionally, the changeover period
related to the annual new model introduction was concentrated in
the third
7
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 1. |
Business (continued)
|
quarter of each year, although recently it has started to move
into other periods of the year. Production is typically lower
during the third quarter due to annual product changeovers and
the fact that annual plant shutdowns are planned during this
time to facilitate other product changes. These lower production
rates in the third quarter cause operating results to be, in
general, less favorable than those in the other three quarters
of the year. The magnitude of the changeover needed to commence
production of new models depends on, for example, design
modifications related to improved fuel efficiency, stricter
government standards for safety and emission controls, and
consumer-oriented improvements in performance, comfort,
convenience, and style.
The market for vehicles is cyclical and depends upon general
economic conditions and consumer spending. If general economic
conditions deteriorate, consumers may defer purchasing or
leasing new vehicles or opt for used vehicles, which would
decrease the total number of new cars and light trucks sold.
Fluctuations in the price of fuel also affect consumer
preferences and spending.
Relationship
with Dealers
Globally we market our vehicles through a network of independent
retail dealers and distributors. At December 31, 2006,
there were approximately 7,000 GM vehicle dealers in the United
States, 750 in Canada, and 300 in Mexico. Additionally, there
was a total of approximately 15,800 distribution outlets
throughout the rest of the world for vehicles manufactured by GM
and its affiliates. These outlets include distributors, dealers,
and authorized sales, service, and parts outlets.
GM dealers operated the following number of GM dealerships in
the following regions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
GMNA
|
|
|
8,096
|
|
|
|
8,440
|
|
|
|
8,661
|
|
GME
|
|
|
10,459
|
|
|
|
10,200
|
|
|
|
9,522
|
|
GMLAAM
|
|
|
1,681
|
|
|
|
1,671
|
|
|
|
1,679
|
|
GMAP
|
|
|
3,649
|
|
|
|
3,329
|
|
|
|
2,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Worldwide
|
|
|
23,885
|
|
|
|
23,640
|
|
|
|
22,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GM enters into a contract with each authorized dealer agreeing
to sell the dealer one or more specified product lines at
wholesale prices and granting the dealer the right to sell those
vehicles to retail customers from a GM approved location. GM
dealers often offer more than one GM brand of vehicle in a
single dealership. In some instances, an authorized GM dealer
may also be an authorized dealer for another manufacturers
vehicles. Authorized GM dealers offer parts, accessories,
service, and repairs for GM vehicles in the product lines that
they sell, primarily using genuine GM vehicle accessories and
service parts. GM dealers are authorized to service GM vehicles
under GMs limited warranty, and those repairs are to be
made only with genuine GM parts. In addition, GM dealers
generally provide their customers access to credit or lease
financing, vehicle insurance, and extended service contracts
provided by GMAC or its subsidiaries.
Because dealers maintain the primary sales and service interface
with the ultimate consumer of GM products, the quality of GM
dealerships and GMs relationship with its dealers and
distributors are significant to the success of the Corporation.
In addition to the terms of its contracts with its dealers, GM
is regulated by various country and state franchise laws that
supersede those contractual terms and impose specific regulatory
requirements and standards for initiating dealer network
changes, pursuing terminations for cause, and other contractual
matters.
Continuing
Relationship and Agreements with GMAC
GMAC was formed in 1919 as a wholly owned subsidiary of GM. GMAC
is a global diversified financial services company, with
approximately $287 billion of assets and operations in
approximately 40 countries. It primarily operates in three lines
of businessautomotive finance (dealer wholesale, retail,
and fleet), residential
8
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 1. |
Business (continued)
|
mortgage and related financing and services, largely through its
subsidiary Residential Capital LLC (ResCap), and insurance such
as automotive and homeowners insurance and extended service and
maintenance contracts. It also offers commercial financing
services and owns an interest in Capmark Financial Group
(Capmark), a commercial mortgage company that was formerly GMAC
Commercial Holdings, a GMAC subsidiary.
On November 30, 2006, GM completed the GMAC Transaction,
the sale of a 51% controlling interest in GMAC for a purchase
price of $7.4 billion to FIM Holdings LLC (FIM Holdings).
Subsequent to December 31, 2006, it was determined that GM
would be required to make a capital contribution to GMAC of
approximately $1 billion to restore its adjusted tangible
equity balance to the contractually required amount of
$14.4 billion, due to the decrease in the adjusted tangible
equity balance of GMAC as of November 30, 2006. GMAC is a
financial services company that provides a broad range of
services including automotive finance, mortgage products and
services, and insurance products. Many of these services are
closely related to GMs business, including consumer
vehicle financing, inventory and real estate financing for
automotive dealerships, automotive service contracts, and
personal automotive insurance coverage. Prior to the GMAC
Transaction, GMAC was wholly owned by GM. Beginning in 2001, as
a part of certain transactions by GMAC or its subsidiaries, GM
and GMAC had agreed that any loans by GMAC to GM or its
subsidiaries would be on terms consistent with arms length
transactions, and GM and GMAC subsequently put additional
aspects of their relationship on terms consistent with arms
length transactions.
As part of the GMAC Transaction, GM and GMAC entered into a
number of agreements governing aspects of their relationship in
the future, including agreements related to consumer and dealer
financing by GMAC for the purchase and lease of GM products in
the United States (GMAC Services Agreement). Under the GMAC
Services Agreement, GMAC will continue to finance a broad
spectrum of consumer credits, consistent with current and
historical practice, and will receive a negotiated return. GMAC
will also continue to provide full consideration to consumer
credit applications received from GM-franchised dealers and
purchase consumer financing contracts from GM dealers in
accordance with GMACs usual standards for
creditworthiness, consistent with current and historical
practice.
The GMAC Services Agreement also provides that, subject to
certain conditions and limitations, GM will offer vehicle
financing and leasing incentives to U.S. customers (except for
Saturn-brand products) exclusively through GMAC. GM sets the
terms and conditions and eligibility of all such incentive
programs. In consideration of GMACs exclusive relationship
with GM for vehicle financing and leasing incentives for
consumers, GMAC has agreed to certain targets, and if it does
not meet these targets, GM could impose certain fees and other
monetary consequences or even revoke GMACs exclusivity in
whole or in part. As long as GMACs exclusivity remains in
effect, GMAC will pay GM $75 million annually.
The GMAC Services Agreement also provides that GM will make
certain upfront residual support payments to GMAC with respect
to leased vehicles and vehicles sold pursuant to balloon retail
installment sale contracts to increase the vehicles
contract residual value above certain thresholds set by an
independently published guide.
GM and GMAC have entered into agreements giving GMAC the right
to use the GM name on certain insurance products. In exchange,
GMAC will pay to GM a minimum guaranteed royalty fee of
$15 million.
For further information about the business relationship between
GM and GMAC, see Managements Discussion and Analysis
of Financial Condition and Results of Operations Key
Factors Affecting Future and Current Results
GMAC Sale of 51% Controlling Interest and
Note 28 to the Consolidated Financial Statements,
Transactions with GMAC.
Research,
Development and Intellectual Property
In 2006, GM incurred $6.6 billion in costs for research,
manufacturing engineering, product engineering, design, and
development activities related primarily to developing new
products or services or improving existing products or services,
including activities related to vehicle emissions control,
improved fuel economy, and the
9
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 1. |
Business (continued)
|
safety of drivers and passengers in GM vehicles. GM expended
$6.7 billion and $6.5 billion on similar
company-sponsored research and other product development
activities in 2005 and 2004, respectively.
Research
GMs priorities for research include improving the
environmental performance of GM vehicles, diversifying energy
sources for vehicles, and providing fuel economy and efficiency
around the world. At the same time, GM is driving a transition
to advanced propulsion by pursuing leadership in strategic
technology such as active fuel management, variable valve
timing, six-speed transmissions, advanced diesel engines,
electronics and controls, advanced materials, hydrogen fuel cell
technology, and hybrid vehicles.
The 2007 Saturn Vue Green Line was introduced in Fall 2006, and
GM announced plans for additional hybrid vehicles that will
debut in the next few years. GM will introduce four hybrids in
2007 the Saturn Aura Green Line, Chevrolet Malibu
Hybrid, and Chevrolet Tahoe and GMC Yukon 2-Mode Hybrids. These
vehicles will be equipped with one of three different hybrid
systems designed to meet different American driving patterns and
needs. The systems vary in fuel economy savings and cost,
providing an opportunity for more consumers to own a hybrid
vehicle and to benefit from increased fuel economy savings.
In a November 2006 meeting with President George Bush, GM along
with DaimlerChrysler AG (DaimlerChrysler) and Ford Motor Company
(Ford), announced that these three domestic vehicle
manufacturers intend to make at least half of the vehicles they
produce capable of operating on biofuels by 2012, as part of an
overall national energy strategy. Biofuels, like ethanol, are
renewable fuels that are manufactured from biomass substances
such as corn, sugar cane, manure, timber, and sewage. We are
partnering with governmental agencies, fuel providers, and fuel
retailers across the United States to help promote availability
and distribution of E85 ethanol, an alternative fuel used in
flex fuel vehicles that is a combination of 15% unleaded
gasoline and 85% ethanol, including supporting an infrastructure
of fueling stations.
GM is also developing biodiesel, a clean-burning alternative
diesel fuel that is produced from renewable sources. In 2006,
biodiesel technology is available on Chevrolet Silverado and GMC
Sierra heavy-duty pickup trucks, Chevrolet Express and GMC
Savanna fullsize vans, and the Chevrolet Kodiak and GMC Top Kick
commercial vehicles.
GMs research into flexible fuels is demonstrated in
vehicles produced around the world. In Brazil, GMs
FlexPower flexible fuel engines, which accept a
variety of fuels, account for 90 percent of the vehicles
sold by GM do Brasil in 2006. In Sweden, Saabs
BioPower flexible fuel engine, which can run on E85
ethanol, petroleum, or any mixture of the two, accounted for
85 percent of 2006 sales of Saabs 9-5 model.
In addition, GM is significantly expanding and accelerating its
commitment to electrically driven vehicles, including those
powered by fuel cells, which convert hydrogen into electricity.
Beginning in Fall 2007, 100 Chevrolet Equinox Fuel Cell
prototype vehicles will be placed with customers as part of
Project Driveway, the first large-scale market test
of fuel cell vehicles. The Equinox Fuel Cell vehicle is equipped
with GMs fourth-generation fuel cell propulsion system.
GM has also announced that we have begun work on a plug-in
hybrid vehicle and a flexible electric architecture for future
electrically driven vehicles, and we have entered into two
agreements to develop advanced lithium-ion battery technology.
In January 2007, GM announced production work on
E-Flex, a
family of electrically driven propulsion systems specifically
engineered for future small and midsize GM vehicles. At the same
time, the Chevy Volt concept vehicle was unveiled as an example
of how
E-Flex could
be configured in an extended-range electric vehicle. Work is now
underway to develop all the necessary technology for an
extended-range electric vehicle.
GM generates and holds a significant number of patents in a
number of countries in connection with the operation of
GMs business. While none of these patents by itself is
material to GMs business as a whole, these
10
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 1. |
Business (continued)
|
patents are very important to GMs operations and continued
technological development. In addition, GM holds a number of
trademarks and service marks that are very important to
GMs identity and recognition in the marketplace.
See Business Environmental and Regulatory
Matters for a discussion of vehicle emissions
requirements, vehicle noise requirements, fuel economy
requirements, and safety requirements, which also affect our
research and development.
Product
Development
Over the past few years, GM has implemented the integration of
our vehicle development activities into a single global
organization. This strategy built on earlier efforts to
consolidate and standardize our approach to vehicle development.
For example, during the 1990s GM merged 11 different
engineering centers in the United States into a single
organization. In 2005, GM Europe Engineering was created,
following a similar consolidation from three separate
engineering organizations. At the same time, we have grown our
engineering operations in emerging markets in our GMAP and
GMLAAM regions.
In this integrated process, product development activities are
fully integrated on a global basis under one budget and one
decision-making group. Similar approaches are now used in other
key functions, such as powertrain, purchasing, and manufacturing
organizations to take full advantage of our global capabilities
and resources.
Under our global architecture strategy, future vehicles are
developed by a network of global and regional development teams.
GM generally defines architectures to include a specific range
of performance characteristics and dimensions supporting a
common set of major underbody components and subsystems with
common interfaces.
Global architecture development teams are responsible for, in
general, most of the non-visible parts of the vehicle (for
example, steering, suspension, brake system, HVAC system, and
electrical system). These global teams work very closely with
regional development teams, who are responsible for components
that are unique to each brand, such as fascias and interior
design, tuning of the vehicle to meet the brand character
requirements, and final validation to meet applicable government
requirements.
GM has identified eight different global architectures to date
that are managed by global leadership teams in global
engineering centers.
The eight global architectures are:
|
|
|
Mini Vehicles
|
|
Rear-Wheel-Drive (RWD)
Vehicles
|
|
|
|
Small Vehicles
|
|
Luxury RWD Vehicles
|
|
|
|
Compact Vehicles
|
|
Compact Crossover
Vehicles
|
|
|
|
Midsize Vehicles
|
|
Midsize Trucks
|
GM believes that this integrated global product development
process will result in faster global portfolio turnover with
improved products developed by global experts at a lower cost.
Raw
Materials, Services and Supplies
GM purchases a wide variety of raw materials, parts, supplies,
energy, freight, transportation, and other services from
numerous suppliers for use in the manufacture of its products.
The raw materials primarily consist of steel, aluminum, resins,
copper, lead, and platinum group metals. GM has not experienced
any significant shortages of raw materials and normally does not
carry substantial inventories of such raw materials in excess of
levels reasonably required to meet our production requirements.
Recently, the global automotive industry has experienced
increases in commodity costs, most notably for raw materials
such as aluminum, copper, and precious metals. These
11
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 1. |
Business (continued)
|
price increases have been driven by increased global demand for
aluminum, copper, precious metals, and petroleum, in large part
due to strong demand in Asia. GM attempts to manage fluctuations
in commodity prices by using derivatives to economically hedge a
portion of raw material purchases.
In many instances, GM purchases systems, components, and parts
and supplies from a single source, and may be at an increased
risk for supply disruptions. Furthermore, the inability or
unwillingness of GMs largest supplier, Delphi Corporation
(Delphi), to supply GM with parts and supplies could adversely
affect GM because GMs production could be limited without
those parts and supplies.
Based on our standard payment terms with our systems,
components, and parts suppliers, we are generally required to
pay most of these suppliers on the second day of the second
month following delivery.
Competitive
Position
The global automotive industry is growing, especially in
developing economies such as China and India, and highly
competitive. The principal factors that determine consumer
vehicle preferences in the markets in which we operate include
price, quality, style, safety, reliability, fuel economy, and
functionality. GMs estimated global market share was 13.5%
for 2006 and 14.1% for 2005. As has been true for the prior 74
years, GM had the largest global market share for 2006; however,
there is no assurance we will continue in that position since
our share has declined in recent years while some of our
competitors shares have increased. Some of our competitors
have greater market shares than GM in individual countries in
which we compete.
For decades, GM has had the largest market share in the United
States. The table below sets forth GM and GMs principal
competitors in passenger cars and trucks in the United States
and their respective U.S. market shares for 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
GM
|
|
|
24.2
|
%
|
|
|
25.9
|
%
|
Ford
|
|
|
17.1
|
%
|
|
|
18.2
|
%
|
DaimlerChrysler
|
|
|
14.9
|
%
|
|
|
15.3
|
%
|
Toyota Corporation (Toyota)
|
|
|
14.9
|
%
|
|
|
13.0
|
%
|
Honda Motor Company, Ltd. (Honda)
|
|
|
8.8
|
%
|
|
|
8.4
|
%
|
Nissan Motor Corporation, Ltd.
(Nissan)
|
|
|
6.0
|
%
|
|
|
6.2
|
%
|
Environmental
and Regulatory Matters
Automotive
Emissions Control
The U.S. federal government imposes stringent emission
control requirements on vehicles sold in the United States, and
additional requirements are imposed by various state
governments, most notably California. These requirements include
pre-production testing of vehicles, testing of vehicles after
assembly, the imposition of emission defect and performance
warranties, and the obligation to recall and repair
customer-owned vehicles that do not comply with emissions
requirements.
GM must obtain certification that a demonstration of the
vehicles will meet emission requirements from the
U.S. Environmental Protection Agency (EPA) before it can
sell vehicles in the United States and from the California Air
Resources Board (CARB) before it can sell vehicles in states
that have adopted the California requirements.
The EPA and the CARB both continue to emphasize testing
customer-owned vehicles for compliance. We believe that our
vehicles meet currently applicable EPA and CARB requirements. If
our vehicles do not comply with the emission standards or if
defective emission control systems or components are discovered
during such testing, or as part of government-required defect
reporting, GM could incur substantial costs related to emissions
recalls. New CARB and federal requirements will increase the
time and mileage periods over which manufacturers like GM are
responsible for a vehicles emission performance.
12
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MOTORS CORPORATION AND SUBSIDIARIES
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|
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Business (continued)
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Both the EPA and the CARB emission requirements will become even
more stringent in the future. In addition in 2002, California
passed legislation regulating the emissions of greenhouse gases.
Since GM believes this regulation is effectively a form of fuel
economy requirement, it is discussed below under
Automotive Fuel Economy. A new tier of exhaust
emission standards for cars and light-duty trucks, the
Low-Emission Vehicles (LEV) II standards, began
phasing in for vehicles in states that have California
requirements in the 2004 model year. Similar federal
Tier 2 standards began phasing in during 2004.
In addition, both the CARB and the EPA have adopted more
stringent standards applicable to heavy-duty trucks.
California requires that a specified percentage of cars and
certain light-duty trucks be zero emission vehicles (ZEVs), such
as electric vehicles or hydrogen fuel cell vehicles. This
requirement started at 10% in model year 2005 and increases in
subsequent years. Manufacturers have the option of meeting a
portion of this requirement with partial ZEV credit for vehicles
that meet very stringent exhaust and evaporative emission
standards and have extended emission system warranties. An
additional portion of the ZEV requirement can be met with
vehicles that meet these partial ZEV requirements and
incorporate advanced technology, such as a hybrid electric
propulsion system meeting specified criteria. GM is complying
with the ZEV requirements using a variety of means, including
the introduction of GM products certified to the partial ZEV
requirements beginning in the 2007 model year.
The Clean Air Act permits states that have areas with air
quality compliance issues to adopt the California car and truck
emission standards in lieu of the federal requirements, and four
states New York, Massachusetts, Maine, and
Vermont have these standards in effect now. Six
additional states Connecticut, New Jersey, Oregon,
Pennsylvania, Rhode Island, and Washington have
adopted the California standards, which will become effective
beginning in the 2008 and 2009 model years. Additional states
could also adopt the California standards in the future.
In addition to the exhaust emission programs described above,
advanced onboard diagnostic (OBD) systems, used to identify
and diagnose problems with emission control systems, were
required under federal and California law beginning in the 1996
model year. This system has the potential of increasing warranty
costs and the chance for recall. OBD requirements become more
challenging each year as vehicles must meet lower emission
standards, and new diagnostics are required. Beginning with the
2004 model year, California adopted more stringent OBD
requirements, including new design requirements and
corresponding enforcement procedures, and GM has implemented
hardware and software changes to comply with these more
stringent requirements.
New evaporative emission control requirements for cars and
trucks began phasing in with the 1995 model year in California
and the 1996 model year federally. Systems are being further
modified to accommodate onboard refueling vapor recovery (ORVR)
control standards. ORVR was phased-in on passenger cars in the
1998 through 2000 model years, and phased-in on light-duty
trucks in the 2001 through 2006 model years. Beginning with the
2004 model year, federal and California evaporative emission
standards have become more stringent, and GM has implemented
changes to comply with these more stringent requirements.
GM is subject to similar laws and regulations, including vehicle
exhaust emission standards, vehicle evaporative emission
standards, and OBD requirements, in other regions and countries
throughout the world in which GM sells cars and trucks. Two
different regulatory regimes apply in Europe: the European
Union (EU) imposes stringent emission control requirements
on vehicles sold in all 27 EU Member States, and regulations
apply under the framework of the United Nations Economic
Commission for Europe/Working Party 29 (UN ECE WP 29).
In addition, EU Member States can give incentives to
environmentally friendly vehicles through tax benefits. This
could create specific market requirements rewarding different
technical equipment in various markets, despite the fact there
is only one European-wide emission requirement. The current EU
requirements include type approval of pre-production testing of
vehicles, testing of vehicles after assembly, and the obligation
to recall and repair customer-owned vehicles that do not comply
with emissions requirements. EU requirements and UN ECE
requirements are equivalent in terms of stringency and
implementation. GM must demonstrate that vehicles will meet
emission requirements during witness tests and obtain type
approval from an approval authority before it can sell vehicles
in the EU.
13
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Business (continued)
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Emission requirements in Europe will become even more stringent
in the future. A new step of exhaust emission standards for cars
and light-duty trucks, Euro 5, will apply from
September 2009, while Euro 6 standards are
expected to apply from 2014. In addition to the exhaust emission
programs described above, advanced European OBD systems, have
been required since 2000. This system has the potential of
increasing warranty cost, and the requirements are expected to
become more challenging in the future. With the introduction of
the new European standards, additional technical challenges are
expected to result from a new regulatory approach. While in the
past emission standards were adopted at the same time as the
related technical provisions, under the split level
approach used for Euro 5 and Euro 6, only the
emission limits and other key requirements have now been
adopted. Technical provisions are now being developed and
approved at the EU Commission level. This leads to a number
of uncertainties regarding the content and timing of the
requirements for different vehicles, because the
EU Commission has been given authority to change
fundamental regulatory items. These include test cycles,
durability requirements, OBD, in-service conformity, and
treatment of alternative fuels such as E85.
The new European emission standards focus particularly on
reducing emissions from diesels. Diesel vehicles have become
important in the European market place and achieved almost a 50%
market share in 2006. The new requirements will require
additional technologies and further increase the cost of diesel
engines, which are already above those of gasoline engines. For
Euro 6, it is expected that technologies need to be
implemented which are similar to those being developed to meet
US emission standards. The technologies available today are
not cost-effective and would therefore not be suitable for the
European market for small and midsize diesel vehicles, which
typically are under high cost pressure.
All countries that belong to the European Free Trade Association
(EFTA) apply EU emission standards. Countries that are not
members of the EU have adopted standards defined under the
UN ECE framework within their jurisdictions. A minority of
countries in Eastern Europe, which currently do not require
compliance with the latest limit standards, are considering
convergence to those standards by the end of the decade.
Within the Asia Pacific region, GM vehicles are subject to a
broad range of vehicle emission laws and regulations. Japan sets
specific exhaust emission and durability standards, test
methods, and driving cycles (OBD is required and evaporative
emissions follow the EU). South Korea is transitioning to
California style exhaust emission standards and considering
adopting other aspects of the California emission program (OBD
is required and evaporative emissions follow the EPA standard).
All other countries in which GM conducts operations within the
Asia Pacific region either require or allow some form of EPA,
EU, or UN ECE style emission requirements (with or without OBD).
Within Latin America, Africa and the Mid-East regions, some
countries follow the U.S. test procedure and some follow
the EU test procedure, with different levels of requirements.
Industrial
Environmental Control
GMs operations are subject to a wide range of
environmental protection laws including those laws regulating
air emissions, water discharges, waste management, and
environmental cleanup. GM is in various stages of investigation
or remediation for sites where contamination has been alleged.
GM is involved in a number of remediation actions to clean up
hazardous wastes as required by federal and state laws. Such
statutes require that responsible parties fund remediation
actions regardless of fault, legality of original disposal, or
ownership of a disposal site.
The future impact of environmental matters, including potential
liabilities, is often difficult to estimate. We record an
environmental reserve when it is probable that a liability has
been incurred and the amount of the liability is reasonably
estimable. This practice is followed whether the claims are
asserted or unasserted. Management expects that the amounts
reserved will be paid out over the periods of remediation for
the applicable sites, which typically range from five to 30
years. Expenditures for site remediation actions, including
ongoing operations and maintenance, amounted to
$107 million and $127 million in 2006 and 2005,
respectively. It is possible that such
14
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MOTORS CORPORATION AND SUBSIDIARIES
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|
Item 1. |
Business (continued)
|
remediation actions could require average annual expenditures in
the range of $90 million to $130 million over the next
five years.
For many sites, the remediation costs and other damages for
which we ultimately may be responsible are not reasonably
estimable because of uncertainties with respect to factors such
as our connection to the site or to materials located at the
site, the involvement of other potentially responsible parties,
the application of laws and other standards or regulations, site
conditions, and the nature and scope of investigations, studies,
and remediation to be undertaken (including the technologies to
be required and the extent, duration, and success of
remediation). As a result, we are unable to determine or
reasonably estimate the amount of costs or other damages for
which we are potentially responsible in connection with these
sites, although that total could be substantial.
GM pays annual emission fees of approximately $2 million
per year and annual costs of on-going testing ranging from
$1 million to $2 million per year to comply with the
Clean Air Act Amendments under the Title V Renewable
Operating Permit Program. Additionally, under the Clean Air Act,
complying with the Hazardous Air Pollutant standards is
estimated to cost an aggregate of approximately $55 million
in 2006 through 2007. GM also expends approximately
$7 million per year to comply with regulatory reporting
requirements.
GM is implementing and publicly reporting on various voluntary
initiatives to reduce energy consumption and greenhouse gas
emissions from its worldwide operations. GM surpassed its 2005
target of an 8% reduction in carbon dioxide
(CO2)
emissions from its worldwide facilities compared to 2000
emission levels. By 2005, GM had reduced
CO2
emissions from its worldwide facilities by 16% compared to 2000
levels. Several GM facilities are included in the European
emissions trading regime, which is being implemented to meet the
European Communitys greenhouse gas reduction commitments
under the Kyoto Protocol. GM has reported in accordance with the
Global Reporting Initiative, the Carbon Disclosure Project, and
the DOE 1605(b) since the inception of the programs. Global
Environment and Energy goals and progress made on all voluntary
programs are available in GMs Corporate Responsibility
Report at www.gmresponsibility.com.
Vehicular
Noise Control
All vehicles manufactured and sold by GM may be subject to noise
emission regulations.
In the United States, passenger cars and light-duty trucks are
subject to state and local motor vehicle noise regulations. GM
is committed to designing and developing its products to meet
these noise requirements. Since addressing different vehicle
noise regulations established in numerous state and local
jurisdictions is not practical, GM attempts to identify the most
stringent requirements and validate to those requirements. In
the rare instances where a state or local noise regulation is
not covered by the composite requirement, a waiver of the
requirement is requested. Medium to heavy-duty trucks are
regulated at the federal level. Federal truck regulations
pre-empt all United States state or local noise regulations for
trucks over 10,000 lbs. gross vehicle weight rating.
Outside the United States, noise regulations have been
established by authorities at the national and supranational
level (e.g., EU or UN ECE for Europe). GM believes that its
vehicles meet all applicable noise regulations in the markets
where they are sold.
Automotive
Fuel Economy
The 1975 Energy Policy and Conservation Act provided for average
fuel economy requirements for passenger cars built for the 1978
model year and thereafter, weighted by production volumes under
a complex formula. Based on the EPA combined city-highway test
data, GMs 2006 model year domestic passenger car fleet
achieved a Corporate Average Fuel Economy (CAFE) of
29.9 miles per gallon (mpg), which exceeded the requirement
of 27.5 mpg. The estimated CAFE for GMs 2007 model
year domestic passenger cars is projected to be 29.5 mpg.
15
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
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|
Item 1. |
Business (continued)
|
For GMs imported passenger cars, the 2006 model year CAFE
was 29.0 mpg, which exceeded the requirement of 27.5 mpg. The
CAFE estimate for 2007 model year GM imported passenger cars is
32.5 mpg, which would also exceed the applicable requirement.
Fuel economy standards for light-duty trucks became effective in
1979. GMs light-duty truck CAFE for the 2006 model year
was 22.8 mpg, which exceeds the requirement of 21.6 mpg.
GMs 2007 model year light-duty truck CAFE is projected to
be 22.6 mpg, which would exceed the requirement of 22.2 mpg. The
National Highway Traffic Safety Administration (NHTSA) has
finalized new fuel economy standards for trucks for model years
2008 through 2011, which include substantial changes to the
structure of the truck CAFE program. These final rules establish
reformed standards based upon truck size. These reformed
standards are optional through the 2010 model year, and
mandatory in the 2011 and later model years. The rule sets the
traditional (unreformed) truck CAFE standard at 22.5 mpg for
2008, 23.1 mpg for 2009, and 23.5 mpg for 2010.
Although it is not yet clear what specific changes will be
adopted, it is likely that U.S. fuel economy requirements will
be increased in the near future, which would pose additional
challenges to GMs ability to comply and to maintain a
profitable operation. Some of the requirements that have been
proposed would be beyond the current technical capacity of GM or
any other manufacturer, and there can be no assurance that the
necessary technological advances would be made or would be
available on a timely and economically reasonable basis. Even
less stringent requirements could affect GMs ability to
sell larger vehicles, which comprise a significant and
disproportionately profitable segment of its portfolio of
products.
In addition, in 2002 California passed legislation known as
Assembly Bill 1493 (AB 1493) requiring the CARB to regulate
greenhouse gas emissions from new motor vehicles sold in the
state beginning in the 2009 model year. Since
CO2
is the primary greenhouse gas emitted by automobiles,
CO2
emissions are directly proportional to the amount of fuel
consumed by motor vehicles, and as a result,
CO2
emissions per mile are inextricably linked to fuel consumption
per mile. GM believes that AB 1493 by attempting regulate
CO2
emissions per mile is tantamount to establishing state level
fuel economy standards, which is prohibited by the federal fuel
economy law. Nonetheless, the CARB promulgated rules under AB
1493 (AB 1493 Rules) establishing standards that
effectively require about a 40% increase in new vehicle fuel
economy for passenger cars by 2016. These standards are now
subject to legal challenges by the Alliance of Automobile
Manufacturers and several dealers in federal court and by GM,
DaimlerChrysler, and several dealers in California state court.
Since the CARB has characterized the AB 1493 Rules as an
emission regulation, other states have adopted the
California
CO2
requirements pursuant to claimed authority under the federal
Clean Air Act. As of December 2006, the following states have
adopted the AB 1493 Rules imposing
CO2
requirements on new motor vehicles beginning with the 2009 model
year: Connecticut, Maine, Massachusetts, New Jersey,
New York, Oregon, Pennsylvania, Rhode Island, Vermont, and
Washington. Other states are also considering adopting the
AB 1493 Rules.
As in California, the automotive industry has filed several
lawsuits in federal court challenging the AB 1493 Rules in
other states on the grounds that these attempts at state
regulation of fuel economy are pre-empted by the federal fuel
economy law. Lawsuits challenging the AB 1493 Rules in
state courts in Vermont and Rhode Island have also been filed.
GM does not believe that it is technically possible for it to
comply with the requirements of the AB 1493 Rules,
given its current product portfolio and the technical
improvements that it believes are likely in the near future. If
these lawsuits do not succeed and if the AB 1493 Rules are
applied to GM vehicles sold in certain states, GM could be
forced to cease selling certain vehicles in those states, and
depending upon how widely the AB 1493 Rules are
applied, might curtail production of certain popular and
profitable vehicles that do not comply with the rule.
In Europe, the European Auto Manufacturers Association and
the EU established a voluntary agreement in 1999 with an
emission target of 140 grams of
CO2
per kilometer on average for new passenger cars sold in the EU
by 2008. In February 2007, the EU Commission released a
Communication stating an objective of achieving 120 grams
16
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 1. |
Business (continued)
|
of
CO2
per kilometer by 2012. The proposal would allow 10 grams of
this objective to be achieved through actions such as greater
use of biofuels, making the new vehicle fuel economy target
130 grams
CO2
per kilometer. Discussions are continuing concerning the
framework for achieving this objective.
Potential
Impact of Regulations
We continue to improve the fuel efficiency of our vehicles, even
as we enhance utility and performance, address environmental
aspects of our products, and add more safety features and
customer convenience options, which since they add mass to a
vehicle tend to lower its fuel economy. GMs product lineup
of 2007 models in the United States includes 23 models that get
an EPA estimated 30 miles per gallon or better on the
highway more than any other vehicle manufacturer.
Overall fuel economy and
CO2
emissions from cars and light-duty trucks on the road are
determined by a number of factors, including what products
customers select and how they use them, traffic congestion,
transit alternatives, fuel quality and availability, and land
use patterns.
As described above under Research, Development and
Intellectual Property, GM has established aggressive
near-, mid- and long-term plans to develop and bring to market
technologies designed to further improve fuel efficiency, reduce
emissions, and provide additional value and benefits to our
customers. These include enhancements to conventional internal
combustion engine technology such as Active Fuel Management,
variable valve timing systems, and six-speed automatic
transmissions. In addition, GM currently offers hybrid-electric
buses that are capable of improving the fuel efficiency of city
buses by 25% to 50% and reducing some emissions by as much as
90%. GM currently has hybrid-electrical systems in fullsize
pickup trucks available in the North America market and is
bringing a range of additional hybrid products to market over
the next several years. In 2006, GM launched the Saturn VUE
Green Line with a GM Hybrid System, and in 2007 GM plans to
launch a 2-Mode Hybrid system in the Chevrolet Tahoe and GMC
Yukon, both large sport utility vehicles. In addition, for the
2007 model year GM offers 16 flex-fuel capable models that
can run on E85 ethanol, gasoline, or any combination of the
two fuels. In Europe, Saab offers the 9-5 BioPower FlexFuel
model and plans to extend its BioPower model offerings, and Opel
sells several models that operate on compressed natural gas. GM
has extensive efforts underway to develop fuel cell vehicles
designed to run on hydrogen and emit only water. GM believes
that the development and global implementation of new,
cost-effective energy technologies in all sectors, such as
hydrogen fuel cells, is the most effective way to improve energy
efficiency and reduce greenhouse gas emissions.
Despite these advanced technology efforts, GMs ability to
satisfy fuel
economy/CO2
requirements in major markets such as the United States, Europe,
and China is contingent on various future economic, consumer,
legislative, and regulatory factors that GM cannot control and
cannot predict with certainty. If GM is not able to comply with
specific new fuel economy requirements, which include higher
federal CAFE standards and state
CO2
requirements such as those imposed by the AB 1493 Rules, then we
could be subject to sizeable civil penalties or have to restrict
product offerings drastically to remain in compliance. In turn,
any such actions could have substantial adverse impacts on GM
operations, including plant closings, reduced employment, and
loss of sales revenue.
Safety
New vehicles and equipment sold by GM in the United States are
required to meet certain safety standards promulgated by the
NHTSA. The National Traffic and Motor Vehicle Safety Act of 1966
authorizes the NHTSA to determine these standards and the
schedule for implementing them. In addition, in the case of a
vehicle defect that creates an unreasonable risk to motor
vehicle safety or a noncompliance with a safety standard, the
act generally requires that the manufacturer notify owners and
provide a remedy. The Transportation Recall Enhancement,
Accountability and Documentation Act requires GM to report
certain information relating to certain customer complaints,
warranty claims, field reports, lawsuits, and fatalities and
recalls outside the United States.
In addition to these U.S. rules, GM is subject to certain
safety regulations in the non U.S. markets in which it
operates. For the most part, these standards are similar to
applicable U.S. standards. Nevertheless, from time to time,
other countries pass regulations which are more stringent than
U.S. standards.
17
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 1. |
Business (continued)
|
Pension
Legislation
GM is subject to a variety of federal rules and regulations,
including the Employee Retirement Income Security Act of 1974
(ERISA), which govern the manner in which GM administers its
pensions for its retired employees and their spouses. On
August 17, 2006, President Bush signed into law the Pension
Protection Act of 2006 (PPA). The PPA is designed to, among
other things, require companies to increase the amount of
funding to their pension plans. GMs U.S. hourly and
salaried pension plans are overfunded under current rules and
also under the PPA guidelines, many of which are not yet in
effect. As a result, GM does not expect to make any
contributions to its U.S. hourly and salaried pension plans
for the foreseeable future, assuming there are no material
changes in present market conditions.
Export
Control
GM is subject to a number of domestic and international export
control requirements. GMs Office of Export Compliance
(OEC) is responsible for addressing export compliance issues
that are specified in regulations issued by the
U.S. Department of State, the U.S. Department of
Commerce, and the U.S. Department of Treasury, as well as
issues relating to non U.S. export control laws. The OEC
works with export compliance officers in GM business units who
address export compliance issues on behalf of their business
units. If GM fails to comply with applicable export compliance
regulations, GM and its employees could be subject to criminal
and civil penalties and, under certain circumstances, suspension
and debarment from doing business with the government.
Employees
As of December 31, 2006, GM employed approximately 280,000
employees, of whom approximately 205,000 (73%) were hourly
employees and approximately 75,000 (27%) were salaried
employees. The following represents GMs employment by
regions at December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
GMNA
|
|
|
152
|
|
|
|
173
|
|
|
|
181
|
|
GME
|
|
|
60
|
|
|
|
63
|
|
|
|
61
|
|
GMLAAM
|
|
|
32
|
|
|
|
31
|
|
|
|
29
|
|
GMAP
|
|
|
34
|
|
|
|
31
|
|
|
|
15
|
|
GMAC(1)
|
|
|
|
|
|
|
34
|
|
|
|
34
|
|
Other
|
|
|
2
|
|
|
|
3
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
280
|
|
|
|
335
|
|
|
|
324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts for 2006 exclude GMAC employees, who were removed from
the consolidated payroll as a result of the GMAC Transaction in
November 2006. |
Approximately 89,000 of GMs U.S. employees (73%) were
represented by unions at December 31, 2006. The
International Union, United Automobile, Aerospace and
Agricultural Implement Workers of America (UAW) represents the
largest portion of our U.S. employees who are union
members, representing approximately 86,000 employees. GMs
current collective bargaining agreement with the UAW expires in
September 2007. In addition, many of our hourly employees
outside the United States are represented by various unions. As
of December 31, 2006, GM had approximately 357,000 U.S.
hourly retirees and approximately 115,000 U.S. salaried retirees.
18
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 1.
|
Business (concluded)
|
Employment
and Payrolls
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Worldwide payrolls (billions)
|
|
$
|
22.3
|
|
|
$
|
21.5
|
|
|
$
|
21.5
|
|
U.S. hourly payrolls (in
billions)(1)
|
|
$
|
8.5
|
|
|
$
|
8.0
|
|
|
$
|
8.7
|
|
Average U.S. hourly labor cost per
active hour worked(2)(3)
|
|
$
|
73.26
|
|
|
$
|
81.18
|
|
|
$
|
73.73
|
|
|
|
|
(1) |
|
Includes employees at work (excludes laid-off
employees receiving benefits). |
|
(2) |
|
Includes U.S. hourly wages and benefits divided by the number of
hours worked. |
|
(3) |
|
Cost of an hour including all expenses associated with the
national Special Attrition Program (SAP) is $110.33 in 2006. |
Segment
Reporting Data
Operating segment and principal geographic area data for 2006,
2005, and 2004 are summarized in Note 27 in GMs
Consolidated Financial Statements.
Website
Access to GMs Reports
GMs internet website address is www.gm.com.
Our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
and amendments to those reports filed or furnished pursuant to
section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended (Exchange Act), are available free of charge
through our website as soon as reasonably practicable after they
are electronically filed with, or furnished to, the
U.S. Securities and Exchange Commission (SEC).
In addition to the information about GM and its subsidiaries
contained in this Annual Report on
Form 10-K
for the year ended December 31, 2006, extensive information
about the Corporation can be found on our website, including
information about our management team, our brands and products,
and our corporate governance principles.
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 the factors described below.
While we describe each risk separately, some of these risks are
interrelated and certain risks could trigger the applicability
of other risks described below. Also, the risks and
uncertainties described below are not the only ones that we may
face. Additional risks and uncertainties not presently known to
us, or that we currently do not consider significant, could also
potentially impair our business, results of operations, and
financial condition.
Risks
related to GM and its automotive business
Our
continued ability to achieve structural and material cost
reductions and to realize production efficiencies for our
automotive operations is critical to our ability to achieve our
turnaround plan and return to profitability.
We are continuing to implement a number of structural and
material cost reduction and productivity improvement initiatives
in our automotive operations, including substantial
restructuring initiatives for our unprofitable North American
operations, as more fully discussed below in
Managements Discussion and Analysis of Financial
Condition and Result of Operations. Our future
competitiveness depends upon our continued success in
implementing these restructuring initiatives throughout our
automotive operations, especially in North America. In addition,
while some of the elements of structural cost reduction are
within our control, others such as interest rates or return on
investments, which influence our expense for pension and
postretirement health care and life
19
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 1A.
|
Risk
Factors (continued)
|
insurance benefits (OPEB), depend more on external factors, and
there can be no assurance that such external factors will not
adversely affect our ability to reduce our structural costs.
Restrictions
in our labor agreements could limit our ability to pursue or
achieve cost savings through restructuring initiatives, and
labor strikes, work stoppages, or similar difficulties could
significantly disrupt our operations.
Substantially all of the hourly employees in our U.S., Canadian,
and European automotive operations are represented by labor
unions and are covered by collective bargaining agreements,
which usually have a multi-year duration. Many of these
agreements include provisions that limit our ability to realize
cost savings from restructuring initiatives such as plant
closings and reductions in workforce. Our current collective
bargaining agreement with the UAW will expire in September 2007,
and we intend to pursue our cost reduction goals vigorously in
negotiating the new agreement. Any UAW strikes, threats of
strikes, or other resistance in connection with the negotiation
of a new agreement could materially adversely affect our
business as well as impair our ability to implement further
measures to reduce structural costs and improve production
efficiencies in furtherance of our North American initiatives. A
lengthy strike by the UAW that involves all or a significant
portion of our manufacturing facilities in the United States
would have a material adverse effect on our operations and
financial condition, particularly our liquidity.
We
must continue to make structural changes to reduce our U.S.
health care cost burden, the source of our largest competitive
cost disadvantage.
GMs OPEB obligations for employees and retirees are
significant, $68 billion at December 31, 2006, and
have the capacity to grow even larger on a global basis. In
recent years, we have paid our OPEB expenditures from operating
cash flow, which reduces our liquidity and cash flow from
operations. Our U.S. health-care cash spending in 2006 was
$4.8 billion, and we expect that it will be
$4.7 billion in 2007 (before the effect, if any, of any
amounts incurred or paid on certain benefit guarantees related
to Delphi discussed below and contributions to the independent
Voluntary Employees Beneficiary Association (VEBA) trust
associated with the UAW Mitigation Plan), principally due to
amendments to our hourly and salaried health care plans made in
2006.
To address our rising costs we made modifications to health-care
benefits for salaried workers and retirees in 2005, and in
February 2006 announced a cap on salaried retiree health-care
spending levels effective in January 2007. In 2005, we also
entered into an agreement with the UAW increasing retiree
health-care cost-sharing provisions, which received court
approval in March 2006 (UAW Health Care Settlement Agreement).
Under this agreement, our U.S. OPEB obligation was reduced
by $17 billion. Continued progress in the reduction of
health-care liabilities and expenses, particularly with respect
to our hourly employees and retirees, is a critical element of
our GMNA turnaround initiatives. However, our efforts to control
these costs may not always be successful and will depend in part
on our negotiations with the UAW in 2007. Failure to adequately
control our health-care costs is likely to result in materially
higher expenses and have a material adverse effect on our
results of operations and financial condition.
Our
extensive pension and OPEB obligations to retirees are a
competitive disadvantage for us.
We believe that we are competitively disadvantaged because we
provide pension benefits and OPEB, consisting of both retiree
health care and life insurance, to more than 400,000 retirees
and surviving spouses in the United States. As a result, we
believe, our pension and OPEB payments as a percentage of
revenues are significantly greater than our competitors,
particularly those operating outside the United States. In
addition to the large number of U.S. retirees, we have
mature manufacturing operations in Western Europe, including
Sweden and the United Kingdom, and Australia and as result have
pension and similar obligations to significant numbers of
current retirees and employees who will retire in the near
future. Certain of our pension plans outside the United
20
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 1A.
|
Risk
Factors (continued)
|
States are partially or fully unfunded. As a result of our
worldwide pension and OPEB obligations, we have relatively less
available cash to invest in product development and capital
projects than some of our competitors.
Our
pension and OPEB expenses are affected by factors outside our
control, including the performance of plan assets, interest
rates, actuarial data and experience, and changes in laws and
regulations.
Our future funding obligations for our IRS-qualified
U.S. defined benefit pension plans and our estimated
liability related to OPEB plans depend upon changes in
health-care inflation trend rates, the level of benefits
provided for by the plans, the future performance of assets set
aside in trusts for these plans, the level of interest rates
used to determine funding levels, actuarial data and experience,
and any changes in government laws and regulations. In addition,
our employee benefit plans hold a significant amount of equity
securities. If the market values of these securities decline,
our pension and OPEB expenses would increase and, as a result,
could materially adversely affect our business. Any decreases in
interest rates, if and to the extent not offset by contributions
and asset returns, could also increase our obligations under
such plans. We may be legally required to make contributions to
the pension plans in the future, and those contributions could
be material.
Delphi
may seek to reject or compromise its obligations to us through
its Chapter 11 bankruptcy proceedings.
In connection with its Chapter 11 bankruptcy proceeding,
Delphi has filed a motion seeking authority to reject certain
supply contracts with GM, which is now indefinitely adjourned
while negotiations are in progress. Although Delphi has not
rejected any GM contracts as of this time and has assured GM
that it does not intend to disrupt production at GM assembly
facilities, if GM, Delphi, and the other parties cannot reach
the agreements necessary to resolve all the matters involved in
Delphis bankruptcy, there is a risk that Delphi or one or
more of its affiliates may reject or threaten to reject
individual contracts with GM, either to exit specific lines of
business or to increase the price GM pays for certain parts and
components. As a result, we could experience a material
disruption in our supply of automotive systems, components, and
parts that could force the suspension of production at GM
assembly facilities, which could materially adversely affect our
business, including key elements of our North America turnaround
initiative. In addition, we would likely find it difficult to
locate a different supplier for some of the systems, components,
and parts we purchase from Delphi, particularly those that
require extended lead times for validation and production.
GM is seeking to minimize its risks by protecting our right of
setoff against the $1.15 billion we owed to Delphi as of
the date of its Chapter 11 filing. However, our ability to
benefit from a right to setoff may be subject to limitation by
the Court or dispute by Delphi, the creditors committee,
or Delphis other creditors, so that GM cannot provide any
assurance that it will be able to setoff such amounts fully or
partially. To date setoffs of approximately $53.6 million
have been taken by GM, with Delphis agreement. The
financial impact of a substantial compromise of our right of
setoff could have a material adverse impact on our financial
position. In addition, the basis, amounts, and priority of any
claims against Delphi that GM currently has or may have in the
future may be challenged by other parties in interest in
Delphis bankruptcy proceeding. The scope and results of
such challenges cannot be predicted with certainty.
We
have guaranteed a significant amount of Delphis financial
obligations to its unionized workers. If Delphi fails to satisfy
these obligations, we would be obligated to pay some of these
obligations.
In connection with the spin-off of Delphi from GM in 1999, we
entered into separate agreements with the UAW, the International
Union of Electrical Workers-Communication Workers of America
(IUE-CWA), and the United Steel Workers unions.
Under these agreements, we agreed to guarantee Delphis
payment of certain levels of pension and OPEB to certain former
GM U.S. hourly employees who were transferred to Delphi in
connection with the spin-off. As a result, we are contractually
responsible for such payments to the extent Delphi fails to pay
these benefits at required levels.
21
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 1A.
|
Risk
Factors (continued)
|
GM and Delphi entered into a separate agreement in 1999 that
requires Delphi to indemnify GM if and to the extent GM makes
payments under the benefit guarantees to the UAW employees or
retirees. GM received a notice from Delphi, dated
October 8, 2005, that it was more likely than not that GM
would become obligated to provide benefits pursuant to the
benefit guarantees to the UAW employees or retirees. The notice
stated that Delphi was unable at that time to estimate the
timing and scope of any benefits GM might be required to provide
under those benefit guarantees. The amount of our ultimate
liability for these contingent exposures may change, and will
depend on the results of ongoing discussions among Delphi, its
unions, GM, and other interested parties, as well as other
factors. Any recovery by GM under indemnity claims against
Delphi might be subject to partial or complete discharge in the
Delphi reorganization proceeding. As a result, GMs claims
for indemnity may not be paid in full. We believe that it is
probable that we have incurred a contingent liability under
these benefit guarantees as a result of Delphis
Chapter 11 filing. As a result, we have recorded a charge
of $6.0 billion to date as an estimate of our contingent
exposures. We believe that the range of these contingent
exposures is between $6 billion and $7.5 billion, with
amounts near the low end of the range considered more possible
than amounts near the high end of the range assuming an
agreement is reached among GM, Delphi, and Delphis unions.
These views reflect GMs current assessment that it is
unlikely that a Chapter 11 process will result in both a
termination of Delphis pension plan and complete
elimination of its OPEB plans. Any increase in our contingent
exposures, including under the benefit guarantees, could
materially increase our expenses and adversely affect our
results of operations.
Financial
difficulties, labor stoppages, or work slowdowns at key
suppliers, including Delphi, could result in a disruption in our
operations and have a material adverse effect on our
business.
We rely on many suppliers to provide us with the systems,
components, and parts that we need to manufacture our automotive
products and operate our business. Some of these suppliers have
experienced severe financial difficulties and solvency problems.
For example, our suppliers Dana Corporation, Tower Automotive,
Inc., Dura Automotive Systems, and Collins & Aikman
Corporation are all in the process of reorganizing under the
U.S. Bankruptcy Code. Financial difficulties or solvency
problems at these or other suppliers could materially adversely
affect their ability to supply us with the systems, components,
and parts that we need, which could disrupt our operations.
Similarly, a substantial portion of many of these
suppliers workforces are represented by labor unions.
Workforce disputes that result in work stoppages or slowdowns at
these suppliers could also have a material adverse effect on
their ability to continue meeting our needs.
In particular, our largest supplier, Delphi, filed a
Chapter 11 bankruptcy petition in October 2005. On
March 31, 2006 Delphi filed motions under the
U.S. Bankruptcy Code seeking authority to reject its
U.S. labor agreements and modify retiree welfare benefits.
Delphis unions and certain other parties have filed
objections to these motions. Hearings on these motions have been
adjourned indefinitely to allow Delphi, its unions, and GM
additional time to fully focus on reaching comprehensive
consensual agreements to resolve the issues resulting from
Delphis bankruptcy filing. However, the Delphi employees
represented by the UAW have given the UAW authorization to
strike if Delphi voids its labor contracts pursuant to these
motions. While Delphi has indicated to us that it expects no
disruptions in its ability to continue supplying us with
systems, components, and parts as Delphi pursues its bankruptcy
restructuring plan, labor disruptions at Delphi resulting from
Delphis pursuit of a restructuring plan could seriously
disrupt our North American operations, prevent us from
continuing to implement our turnaround initiatives, and
materially adversely impact our business.
Increase
in cost, disruption of supply or shortage of raw materials could
harm our business.
We use various raw materials in our business including
corrosion-resistant steel, non-ferrous metals such as aluminum
and copper, and precious metals such as platinum and palladium.
The prices for these raw materials fluctuate depending on market
conditions. In recent years, we have experienced significant
increases in freight charges and raw material costs such as
aluminum and copper. Substantial increases in the prices for our
raw materials increase our operating costs, and to the extent
they cannot be recouped through increases in the prices of
vehicles, could reduce our profitability. In addition, some of
these raw materials, such as corrosion-resistant steel, are
available
22
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 1A.
|
Risk
Factors (continued)
|
from a limited number of suppliers. We cannot guarantee that we
will be able to maintain favorable arrangements and
relationships with these suppliers. An increase in the cost or a
sustained interruption in the supply or shortage of some of
these raw materials that may be caused by a deterioration of our
relationships with suppliers or by events such as natural
disasters, power outages, labor strikes, or the like could
negatively impact our net revenues and profits.
A
decline in consumer demand for our higher margin vehicles could
result in diminished profitability.
Our results of operations depend not only on the number of
vehicles we sell, but also the product mix of our vehicle sales.
For example, in the United States sales of luxury and fullsize
vehicles are generally more profitable for us than sales of our
smaller and lower-priced vehicles. Our sales tend to be
concentrated in a relatively small number of models. If customer
preferences shift to product segments in which our competitors
offer strong portfolios, our sales could be disproportionately
affected. Moreover, shifts in demand away from higher margin
sales could materially adversely affect our business. Similarly,
retail sales of vehicles are generally more profitable to us
than fleet sales.
Shortages
and increases in the price of fuel can result in diminished
profitability due to shifts in consumer vehicle
demand.
High gasoline prices in 2006 contributed to weaker demand for
certain of our higher margin vehicles, especially our fullsize
sport utility vehicles, as consumer demand shifted to smaller,
more fuel-efficient vehicles, which provide lower profit margins
and generally represent a smaller proportion of our sales volume
in North America. Any future increases in the price of gasoline
in the United States or in our other markets or any sustained
shortage of fuel could weaken further the demand for such
vehicles. Such a result could lower profitability and have a
material adverse effect on our business.
The
pace of introduction and market acceptance of new vehicles is
important to our success.
Customers have come to expect new and improved vehicle models to
be introduced frequently. In order to meet these expectations,
we must introduce on a regular basis new vehicle models as well
as enhanced versions of existing vehicle models. Our competitors
have introduced, and likely will continue to introduce, new and
improved vehicle models designed to meet consumer expectations.
Because product lifecycles do not all coincide, some competitive
vehicles can be newer than some of our existing models in the
same market segments. This has and will continue to put pricing
and vehicle enhancement pressure on our vehicles and, in some
vehicle segments, has resulted and will result in market share
declines. In addition, consumer preferences for vehicles in
certain market segments change over time. Vehicles in less
popular segments may have to be discounted in order to be sold
in similar volumes. Further, the pace of our development and
introduction of new and improved vehicles is dependent on our
ability to successfully implement improved technological
innovations in design, engineering, and manufacturing. Our
profit margins, sales volumes, and market shares may decrease if
we are unable to produce models that compare favorably to
competing models, particularly in our higher margin vehicle
lines such as fullsize pickup trucks and sport utility vehicles.
Vehicle lines that are particularly important to our future
success include our new sport utility vehicles and pickup
trucks, and although initial reaction to the utility vehicles
and pickup trucks introduced in 2006 has been favorable, there
can be no assurance of success related to market acceptance of
these or any other products.
Decreases
in the residual value of our vehicles could have a significant
negative effect on our results of operations.
Retail customers could be deterred from selecting GM vehicles if
they have weaker or less reliable residual values than our
competitors products. In addition to providing a
competitive disadvantage for our vehicles among retail
customers, weakness in residual values could have a significant
negative effect on our results of operations. To offset risks
associated with declines in residual values, GM typically
provides residual value support to GMAC with
23
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 1A.
|
Risk
Factors (continued)
|
respect to vehicles subject to lease or retail balloon
installment sales contracts. At the beginning of a lease or
balloon contract, GM pays GMAC so that the vehicles
residual value at the end of the contract will be more than the
residual value as estimated by an independently published guide.
After the lease or balloon contract expires and the vehicle is
resold, GM also participates in a risk-sharing arrangement in
which GM in certain circumstances reimburses GMAC for a portion
of any shortfall between the independently estimated residual
value and the resale proceeds. Moreover, in a significant
portion of fleet sales to daily rental companies, GM agrees to
repurchase the vehicles at a set price, thereby assuming the
risk of declines in residual value. GM believes that
improvements in the quality of its vehicles will sustain and
improve residual values, but there can be no assurance that
residual values will improve or even maintain their current
levels.
GMs
significant investment in new technology may not result in
successful vehicle applications.
GM intends to invest up to $9 billion per year in the next
few years to support its products and to develop new technology.
In some cases, such as hydrogen fuel cells, the technologies are
not yet commercially practical and depend on future significant
technological advances by GM and by suppliers, especially in the
area of advanced battery technology. There can be no assurance
that these advances will occur in a timely or feasible way, that
the funds that GM has budgeted for these purposes will be
adequate, or that GM will be able to establish its right to
these technologies. Moreover, GMs competitors and others
are pursuing the same technologies and other competing
technologies, in some cases with more money available, and there
can be no assurance that they will not acquire similar or
superior technologies, sooner than GM, or on an exclusive basis,
or at a significant price advantage.
We
operate in a highly competitive industry that has excess
manufacturing capacity.
The automotive industry is highly competitive, and overall
manufacturing capacity in the automotive industry exceeds
current demand, although it is at a historically high level
globally. We expect competition to increase over the next few
years due primarily to aggressive investment by manufacturers in
established markets in the United States and Western Europe and
the presence of local manufacturers in key emerging markets like
China and India. Many manufacturers including GM have relatively
high fixed labor costs as well as significant limitations on
their ability to close facilities and reduce fixed costs. Our
competitors may respond to these relatively high fixed costs by
attempting to sell more vehicles by adding vehicle enhancements,
providing subsidized financing or leasing programs, offering
option package discounts or other marketing incentives, or
reducing vehicle prices in certain markets. These actions have
had, and are expected to continue to have, a significant
negative impact on our vehicle pricing, market share, and
operating results, and present a significant risk to our ability
to enhance our revenue per vehicle.
The
financial distress, bankruptcy, or insolvency of a major
competitor could have significant adverse consequences for
us.
If a major automotive company experienced financial distress, it
could pursue short-term strategies that would disrupt the market
and force competitors like GM to consider actions that would be
imprudent or even unsustainable in the long term. In addition,
the financial distress, bankruptcy, or insolvency of a major
manufacturer could lead to a disruption in our supply base,
which could materially affect our business. Finally, a
competitor that today has substantial pension and OPEB
obligations to its retirees could gain a significant cost
advantage over us if it succeeded in reducing or eliminating its
contractual obligations to its unionized work force and other
parties through a bankruptcy proceeding.
We
could be materially adversely affected by changes or imbalances
in currency exchange and other rates.
Because we sell products and buy materials globally over a
substantial period, we are exposed to risks related to the
effects of changes in foreign currency exchange rates, commodity
prices, and interest rates. While we carefully watch and attempt
to manage these exposures, these types of changes can have
material adverse effects on our business. In recent years, the
relative weakness of certain currencies has provided competitive
advantages to
24
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 1A.
|
Risk
Factors (continued)
|
certain of our competitors. Specifically, the weakness of the
Japanese yen has provided pricing advantages for vehicles and
parts imported from Japan to markets with more robust currencies
like the United States and Western Europe. To the extent that
the Japanese yen remains relatively weaker than the
U.S. dollar and the currencies of Western Europe, whether
as a result of foreign governments influence or otherwise,
we are at a disadvantage that could have a material adverse
effect on the results of our operations in the United States and
Europe.
Our
liquidity position could be negatively affected by a variety of
factors, which in turn could have a material adverse effect on
our business.
While we believe that we currently have sufficient liquidity to
operate our business over the short and medium term, our ability
to meet our capital requirements over the long term will require
substantial liquidity and will depend on the continued
successful execution of our four-point turnaround plan to return
our North American operations to profitability and positive cash
flow. We incurred a consolidated net loss of $2.0 billion
in 2006 and $10.4 billion in 2005, due primarily to losses
in our North American operations. We are subject to numerous
risks and uncertainties that could negatively affect our cash
flow and liquidity position in the future. These include, among
other things, risk of labor disruptions (either at Delphi, our
largest supplier, or at GM in connection with the renegotiation
of our collective bargaining agreement with the UAW in 2007) or
pressure from suppliers to agree to changed payment or other
contract terms. The occurrence of one or more of these events
could weaken our liquidity position and, under certain
circumstances, materially adversely affect our business, for
example by curtailing our ability to make important capital
expenditures.
Continued
failure to achieve profitability may cause some or all of our
deferred tax assets to expire.
As of December 31, 2006, we had approximately
$34.8 billion in U.S. net deferred tax assets (DTAs).
These DTAs include approximately $5.7 billion net operating
loss carryovers that can be used to offset taxable income in
future periods and reduce our income taxes payable in those
future periods. In December 2006 we increased our U.S. DTAs
by $10.2 billion as a result of recognizing the funded
status of our benefit plans on our 2006 consolidated balance
sheet pursuant to the adoption of SFAS No. 158. Many of
these DTAs will expire if they are not utilized within certain
time periods. At this time, we consider it more likely than not
that we will have U.S. taxable income in the future that
will allow us to realize these DTAs. However, it is possible
that some or all of these DTAs could ultimately expire unused,
especially if our North America restructuring initiatives are
not successful. While the closing of the GMAC Transaction in
November 2006 did not directly affect GMs ability to
realize our DTAs, a significant portion of GMACs
U.S. pre-tax income will no longer be available to GM.
Therefore, unless we are able to generate sufficient
U.S. taxable income from our automotive operations, a
substantial valuation allowance to reduce our U.S. DTAs may
be required, which would materially increase our expenses in the
period it is taken and materially adversely affect our results
of operations and statement of financial condition.
Further
reduction of our credit ratings, or failure to restore our
credit ratings to higher levels, could have a material adverse
effect on our business.
Our credit ratings have been downgraded to historically low
levels. GMs unsecured debt is currently assigned a
non-investment grade rating by each of the four nationally
recognized statistical rating organizations. The decline in our
credit ratings reflects the agencies concerns over our
competitive and financial strength, including whether we will
experience a labor interruption and how we will fund our
health-care liabilities. Our current credit ratings have
substantially reduced our access to the unsecured debt markets
and have unfavorably impacted our overall cost of borrowing. The
financing arrangements we entered into in 2006 included
collateral in some cases because of our current credit ratings.
Further downgrades of our current credit ratings or significant
worsening of our financial condition could also result in
increased demands by our suppliers for accelerated payment terms
or other more onerous supply terms.
25
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 1A.
|
Risk
Factors (continued)
|
The
federal government is currently investigating certain of our
accounting practices. The final outcome of these investigations
could require us to restate prior financial
results.
We have received subpoenas from the SEC in connection with some
of its investigations related to various matters including our
financial reporting concerning pension and OPEB, certain
transactions between us and Delphi, supplier price reductions or
credits, any obligation we may have to fund pension and OPEB
costs in connection with Delphis Chapter 11
proceedings, and certain transactions in precious metal raw
materials used in our automotive manufacturing operations. In
addition, a federal grand jury issued a subpoena to us in
connection with supplier credits. GM has produced documents and
provided testimony in response to the SEC and federal grand jury
subpoenas. We are continuing to cooperate with the government in
connection with all these investigations. A negative outcome of
one or more of these investigations could require us to restate
prior financial results and could result in fines, penalties, or
other remedies being imposed on GM, which under certain
circumstances could have a material adverse effect on our
business.
We
have determined that our internal controls over financial
reporting are currently ineffective. The lack of effective
internal controls could adversely affect our financial condition
and ability to carry out our strategic business
plan.
As discussed in Item 9A, Controls and Procedures, our
management team for financial reporting, under the supervision
and with the participation of our chief executive officer and
chief financial officer, conducted an evaluation of the
effectiveness of the design and operation of our internal
controls. As of December 31, 2006, they concluded that
GMs disclosure controls and procedures and GMs
internal control over financial reporting were not effective.
Although we have made and are continuing to make improvements in
our internal controls, if we are unsuccessful in our focused
effort to permanently and effectively remediate the weaknesses
in our internal control over financial reporting over time, it
may adversely impact our ability to report our financial
condition and results of operations in the future accurately and
in a timely manner, and may potentially adversely impact our
reputation with stakeholders.
Our
indebtedness and other obligations of our automotive operations
are significant and could materially adversely affect our
business.
We have a significant amount of indebtedness. As of
December 31, 2006, we had approximately $38.7 billion
in loans payable and long-term debt outstanding for our
automotive operations. Our significant indebtedness may have
several important consequences. For example, it could:
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Require us to dedicate a significant portion of our cash flow
from operations to the payment of principal of, and interest on,
our indebtedness, which will reduce the funds available for
other purposes such as product development;
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Make us more vulnerable to adverse economic and industry
conditions;
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Limit our ability to withstand competitive pressures; and
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Reduce our flexibility in responding to changing business and
economic conditions.
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Any one or more of these consequences could have a material
adverse effect on our business.
Economic
and industry conditions constantly change and could have a
material adverse effect on our business and results of
operations.
Our business and results of operations are tied to general
economic and industry conditions. The number of cars and trucks
sold industry-wide can vary from year to year. Demand for our
vehicles depends largely on general economic conditions,
including the strength of the global and local market economies,
unemployment levels, consumer confidence levels, the
availability of credit, and the availability and cost of fuel.
Cars and trucks are
26
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
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Item 1A.
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Risk
Factors (continued)
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durable items, and consumers can choose to defer their
acquisition or replacement significantly. Difficult economic
conditions may also cause consumers to shift to new models that
are less expensive and yield lower margins or to used vehicles.
While we may attempt to limit the effect of these trends through
pricing or other marketing measures, these trends can have a
material adverse effect on our business. Because we have
relatively high fixed costs, relatively small changes in the
number of vehicles sold can have a significant effect on our
business. Consequently, if industry demand decreases due to,
among other things, slowing or negative economic growth, our
business, results of operations, and financial condition may be
materially adversely affected. There can be no assurance that
current industry vehicle sales levels will continue.
Our
businesses outside the United States expose us to additional
risks that may cause our revenues and profitability to
decline.
Approximately 55% of our automotive unit sales in 2006 were
generated outside the United States. We intend to continue to
pursue growth opportunities for our business in a variety of
business environments outside the United States, which could
expose us to greater risks. The risks associated with our
operations outside the United States include:
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Multiple foreign regulatory requirements that are subject to
change, including foreign regulations restricting our ability to
sell our products in those countries;
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Differing local product preferences and product requirements;
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Difficulty in establishing and maintaining robust oversight over
foreign operations;
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Differing labor regulations;
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Consequences from changes in tax laws;
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Foreign state takeovers of our manufacturing facilities in those
countries; and
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Political and economic instability, natural calamities, war and
terrorism.
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The effects of these risks may, individually or in the
aggregate, materially adversely affect our business.
Changes
in existing, or the adoption of new, laws, regulations or
policies of governmental organizations, particularly
environmental or fuel economy regulations, may have a
significant negative impact on how we do business.
We are affected significantly by a substantial amount of
governmental regulations, which are expensive to comply with and
anticipated to increase. In the United States and Europe, for
example, governmental regulation is primarily driven by concerns
about the environment, vehicle safety, and fuel economy. These
government regulatory requirements complicate our plans for
global product development and can result in substantial costs,
which can be difficult to pass through to our customers.
The CAFE requirements mandated by the U.S. government pose
special concerns. There have been a number of recent proposals
by the President and various members of Congress to increase
these standards significantly. Some of these proposals might
require us to alter our capital spending and research and
development plans, curtail sales of our higher margin vehicles,
cease production of certain models, or even exit certain
segments of the vehicle market. Proposals that would result in
dramatically higher standards could disrupt our future product
plans in ways that would significantly and adversely affect our
sales volume, revenue, and profitability in the United States
and could result in plant closures and job losses. Similarly, a
growing number of states have adopted regulations that establish
CO2
emission standards that effectively impose similarly heightened
fuel economy standards for new vehicles sold in those states.
Although the automotive industry is challenging certain of these
state regulations in court, no assurance can be given that these
challenges will be successful.
27
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
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Item 1A.
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Risk
Factors (continued)
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Similarly, meeting or exceeding government-mandated safety
standards is difficult and costly, because crashworthiness
standards tend to conflict with the need to reduce vehicle
weight in order to meet emissions and fuel economy standards.
While GM is managing its product development and production
operations on a global basis to reduce costs and lead times,
unique national or regional standards or vehicle rating programs
can result in additional costs for product development, testing,
and manufacturing. Governments often require the implementation
of new requirements during the middle of a product cycle, which
can be substantially more expensive than accommodating these
requirements during the design of a new product.
We are
subject to significant risks of litigation.
We are currently subject to numerous matters in litigation,
including a number of stockholder and bondholder class actions
and derivative lawsuits. We cannot provide assurance that we
will be successful in defending any of these matters, and
adverse judgments could, under certain circumstances, materially
adversely affect our business. We are also routinely named a
defendant in purported class actions alleging a variety of
vehicle defects, in product liability cases seeking damages for
personal injury, and in suits alleging GM responsibility for
claims of asbestos related illnesses. Some of these matters are
described in greater detail in our Legal Proceedings section
below. Since the outcomes of such pending or future litigation
are not predictable, we cannot provide assurance that, under
certain circumstances, such litigation will not materially
adversely affect our business, results of operations, or cash
flows.
Risks
related to GMs 49% ownership interest in GMAC
General
business, economic, and market conditions may significantly
affect the operating results of GMACs
earnings.
Following the GMAC Transaction in November 2006, we have a 49%
ownership interest in GMAC which is accounted for in our
consolidated financial statements using the equity method.
GMACs business and earnings are sensitive to general
business and economic conditions in the United States. These
conditions include short-term and long-term interest rates,
inflation, fluctuations in both debt and equity capital markets,
and the strength of the U.S. economy, as well as the local
economies in which they conduct business. If any of these
conditions worsen, GMACs business and earnings could be
adversely affected and significantly affect our equity
investment. For example, a rising interest rate environment
could decrease the demand for loans or business, and economic
conditions that negatively impact household incomes could
decrease the demand for loans and increase the number of
customers who become delinquent or default on their loans. The
risk of borrower default becomes more important as GMACs
portfolio of loans held for investment continues to grow. A
significant proportion of GMACs revenues and profits in
recent years came from originating, servicing, and securitizing
residential mortgages; as the housing market in the United
States has slowed, GMACs revenues and profits have been
adversely affected, and we believe that this market is not
likely to return to its peak level in the near future.
GMAC
requires substantial capital, and if GMAC is unable to maintain
adequate financing sources, its profitability and financial
condition will suffer and jeopardize its ability to continue
operations.
GMACs liquidity and ongoing profitability are, in large
part, dependent upon its timely access to capital and the costs
associated with raising funds in different segments of the
capital markets. Currently, GMACs primary sources of
financing include public and private securitizations and whole
loan sales. To a lesser extent, GMAC also uses institutional
unsecured term debt, commercial paper, and retail debt
offerings. Reliance on any one source can change going forward.
GMAC depends and will continue to depend on its ability to
access diversified funding alternatives to meet future cash flow
requirements and to continue to fund its operations. Negative
credit events specific to GMAC or GM, or other events affecting
the overall debt markets have adversely impacted its funding
sources, and continued or additional negative events could
further adversely impact its funding sources, especially over
the long term. If
28
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
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Item 1A.
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Risk
Factors (continued)
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GMAC is unable to maintain adequate financing or if other
sources of capital are not available, GMAC could be forced to
suspend, curtail, or reduce certain aspects of its operations,
which could harm its revenues, profitability, financial
condition, and business prospects.
Furthermore, GMAC utilizes asset and mortgage securitizations
and sales as a critical component of its diversified funding
strategy. Several factors could affect its ability to complete
securitizations and sales, including conditions in the
securities markets generally, conditions in the asset-backed or
mortgage-backed securities markets, the credit quality and
performance of its contracts and loans, its ability to service
its contracts and loans, and a decline in the ratings given to
securities previously issued in its securitizations. Any of
these factors could negatively affect the pricing of its
securitizations and sales, resulting in lower proceeds from
these activities.
In its 2006 Annual Report on
Form 10-K,
GMAC has restated prior period financial information to
eliminate hedge accounting treatment that had been applied to
certain callable debt hedged with derivatives. As a result, it
is possible that some of GMACs lenders under certain of
its liquidity facilities could claim that they are not obligated
to honor their lending commitments. While such a claim would not
be entirely unreasonable, GMAC believes that it would not be
sustainable, GMAC believes that this matter is not likely to be
tested because it has no current need or intention to draw on
any of the more significant existing facilities, and renewal and
revision of them is imminent, which likely will eliminate the
issue. There can be no assurance that GMAC is correct in these
assessments. If GMAC is not correct and multiple claims were
asserted and substantiated, available funding in certain of its
liquidity facilities could be adversely impacted, but GMAC
believes this impact is manageable because of its current
substantial liquidity position.
GMACs
indebtedness and other obligations are significant and could
materially adversely affect its business.
GMAC has a significant amount of indebtedness. As of
December 31, 2006, GMAC had approximately $237 billion
in principal amount of indebtedness outstanding. Interest
expense on its indebtedness constitutes approximately 67% of its
total financing revenues. In addition, under the terms of its
current indebtedness, GMAC has the ability to create additional
unsecured indebtedness. If its debt payments increase, whether
due to the increased cost of existing indebtedness or the
incurrence of additional indebtedness, GMAC may be required to
dedicate a significant portion of its cash flow from operations
to the payment of principal of, and interest on, its
indebtedness, which would reduce the funds available for other
purposes. Its indebtedness also could limit its ability to
withstand competitive pressures and reduce its flexibility in
responding to changing business and economic conditions.
GMACs
earnings may decrease because of increases or decreases in
interest rates.
GMACs profitability is directly affected by changes in
interest rates. The following are some of the risks GMAC faces
relating to an increase in interest rates:
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Rising interest rates will increase its cost of funds.
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Rising interest rates may reduce its consumer automotive
financing volume by influencing consumers to pay cash for
vehicle purchases, instead of financing them.
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Rising interest rates generally reduce GMACs residential
mortgage loan production as borrowers become less likely to
refinance and the costs associated with acquiring a new home
become more expensive.
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Rising interest rates will generally reduce the value of
mortgage and automotive financing loans and contracts and
retained interests and fixed income securities held in
GMACs investment portfolio.
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GMAC is also subject to risks from decreasing interest rates.
For example, a significant decrease in interest rates could
increase the rate at which mortgages are prepaid, which could
require GMAC to write down the value of its retained interests.
Moreover, if prepayments are greater than expected, the cash
GMAC receives over the life of its mortgage loans held for
investment and its retained interests would be reduced.
Higher-than-expected
prepayments could also reduce the value of its mortgage
servicing rights and, to the extent the borrower does
29
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
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Item 1A.
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Risk
Factors (continued)
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not refinance with GMAC, the size of its servicing portfolio.
Therefore, any such changes in interest rates could harm
GMACs revenues, profitability and financial condition.
GMACs
hedging strategies may not be successful in mitigating its risks
associated with changes in interest rates and could affect its
profitability and financial condition.
GMAC employs various economic hedging strategies to mitigate the
interest rate and prepayment risk inherent in many of its
assets. Its hedging strategies rely on assumptions and
projections regarding its assets, liabilities, and general
market factors. If these assumptions and projections prove to be
incorrect or its hedges do not adequately mitigate the impact of
changes in interest rates or prepayment speeds, GMAC may incur
losses that could adversely affect its profitability and
financial condition.
GMACs
residential mortgage subsidiarys ability to pay dividends
to GMAC is restricted by contractual arrangements.
On June 24, 2005, GMAC entered into an operating agreement
with GM and ResCap, the holding company for GMACs
residential mortgage business, to create separation between GM
and GMAC, on the one hand, and ResCap, on the other. The
operating agreement restricts ResCaps ability to declare
dividends or prepay subordinated indebtedness to GMAC. As a
result of these arrangements, ResCap has obtained investment
grade credit ratings for its unsecured indebtedness that are
separate from GMACs ratings and the ratings of GM. This
operating agreement was amended on November 27, 2006 and on
November 30, 2006, in conjunction with the GMAC
Transaction. Among other things, these amendments removed GM as
a party to the agreement.
The restrictions contained in the ResCap operating agreement
include the requirements that ResCaps members equity
be at least $6.5 billion in order for dividends to be paid
to GMAC or GMACs other affiliates and that the cumulative
amount of any such dividends may not exceed 50% of ResCaps
cumulative consolidated net income excluding amounts for taxes
relating to the conversion of GMAC to a limited liability
company (LLC), measured from July 1, 2005, through the time
such dividend is paid, minus the cumulative amount of certain
prepayments of its subordinated debt by ResCap if such
prepayments exceed 50% of ResCaps cumulative consolidated
net income at the time a dividend is paid. At December 31,
2006, ResCap had consolidated equity of approximately
$7.7 billion.
GMAC
uses estimates and assumptions in determining the fair value of
certain of its assets, in determining its allowance for credit
losses, in determining lease residual values, and in determining
its reserves for insurance losses and loss adjustment expenses.
If its estimates or assumptions prove to be incorrect, its cash
flow, profitability, financial condition, and business prospects
could be materially adversely affected.
GMAC uses estimates and various assumptions in determining the
fair value of many of its assets, including retained interests
and securitizations of loans and contracts, mortgage servicing
rights, and other investments, which do not have an established
market value or are not publicly traded. GMAC also uses
estimates and assumptions in determining its allowance for
credit losses on its loan and contract portfolios, in
determining the residual values of leased vehicles, and in
determining its reserves for insurance losses and loss
adjustment expenses. It is difficult to determine the accuracy
of its estimates and assumptions, and its actual experience may
differ materially from these estimates and assumptions. As an
example, the continued decline of the domestic housing market,
especially with regard to the nonprime sector, has resulted in
increases of the allowance for loan losses at ResCap for 2006. A
material difference between GMACs estimates and
assumptions and GMACs actual experience may adversely
affect its cash flow, profitability, financial condition, and
business prospects.
GMAC
is exposed to credit risk which could affect its profitability
and financial condition.
GMAC is subject to credit risk resulting from defaults in
payment or performance by customers for its contracts and loans,
as well as contracts and loans that are securitized and in which
GMAC retains a residual
30
GENERAL
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Item 1A.
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Risk
Factors (continued)
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interest. For example, the continued decline in the domestic
housing market has resulted in an increase in delinquency rates
related to mortgage loans that ResCap either holds or in which
it retains an interest. There can be no assurances that
GMACs monitoring of its credit risk as it impacts the
value of these assets and its efforts to mitigate credit risk
through its risk-based pricing, appropriate underwriting
policies, and loss mitigation strategies are or will be
sufficient to prevent an adverse effect on its profitability and
financial condition. As part of the underwriting process, GMAC
relies heavily upon information supplied by third parties. If
any of this information is intentionally or negligently
misrepresented and the misrepresentation is not detected prior
to completing the transaction, the credit risk associated with
the transaction may be increased.
Recent
developments in the residential mortgage market, especially in
the nonprime sector, may adversely affect GMACs revenues,
profitability, and financial condition
Recently, the residential mortgage market in the United States,
and especially the nonprime sector, has experienced a variety of
difficulties and changed economic conditions that adversely
affected GMACs earnings and financial condition in the
fourth quarter of 2006. Delinquencies and losses with respect to
ResCaps nonprime mortgage loans increased significantly
and may continue to increase. Housing prices in many states have
also declined or stopped appreciating, after extended periods of
significant appreciation. In addition, the liquidity provided to
the nonprime sector has recently been significantly reduced,
which will likely cause ResCaps nonprime mortgage
production to decline. These trends have resulted in significant
writedowns to ResCaps mortgage loans held for sale
portfolio and additions to allowance for loan losses for its
mortgage loans held for investment and warehouse lending
receivables portfolios. The lack of liquidity may also have the
effect of reducing the margin available to ResCap in its sales
and securitizations of nonprime mortgage loans.
Another factor that may result in higher delinquency rates on
mortgage loans is the scheduled increase in monthly payments on
adjustable rate mortgage loans. This increase in borrowers
monthly payments, together with any increase in prevailing
market interest rates, may result in significantly increased
monthly payments for borrowers with adjustable rate mortgage
loans. Borrowers seeking to avoid these increased monthly
payments by refinancing their mortgage loans may no longer be
able to fund available replacement loans at comparably low
interest rates. A decline in housing prices may also leave
borrowers with insufficient equity in their homes to permit them
to refinance their loans or sell their homes. In addition, these
mortgage loans may have prepayment premiums that inhibit
refinancing.
Certain government regulators have observed these issues
involving nonprime mortgages and have indicated an intention to
review the mortgage loan programs. To the extent that regulators
restrict the volume, terms and/or type of nonprime mortgage
loan, the liquidity of GMACs nonprime mortgage loan
production and profitability from nonprime mortgage loans could
be negatively impacted.
Changes
in existing U.S. government-sponsored mortgage programs, or
disruptions in the secondary markets in the United States or in
other countries in which GMACs mortgage subsidiaries
operate, could adversely affect the profitability and financial
condition of GMACs mortgage business.
The ability of GMACs mortgage subsidiaries to generate
revenue through mortgage loan sales to institutional investors
in the United States depends to a significant degree on programs
administered by government-sponsored enterprises such as Fannie
Mae, Freddie Mac, Ginnie Mae, and others that facilitate the
issuance of mortgage-backed securities in the secondary market.
These government-sponsored enterprises play a powerful role in
the residential mortgage industry, and GMACs mortgage
subsidiaries have significant business relationships with them.
Proposals are being considered in the U.S. Congress and by
various regulatory authorities that would affect the manner in
which these government-sponsored enterprises conduct their
business, including proposals to establish a new independent
agency to regulate the government-sponsored enterprises, to
require them to register their stock with the SEC, to reduce or
limit certain business benefits they receive from the
U.S. government, and to limit the size of the mortgage loan
portfolios they may hold. Any discontinuation of, or significant
reduction in, the
31
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
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Item 1A.
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Risk
Factors (continued)
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operation of these government-sponsored enterprises could
adversely affect GMACs revenues and profitability. Also,
any significant adverse change in the level of activity in the
secondary market, including declines in institutional
investors desire to invest in our mortgage products, could
adversely affect GMACs business.
GMAC
may be required to repurchase contracts and provide
indemnification if it breaches representations and warranties in
its securitization and whole loan transactions, which could harm
GMACs profitability and financial condition.
When GMAC sells retail contracts or leases through whole loan
sales or securitizes retail contracts, leases, or wholesale
loans to dealers, GMAC is required to make customary
representations and warranties about the contracts, leases, or
loans to the purchaser or securitization trust. GMACs
whole loan sale agreements generally require GMAC to repurchase
retail contracts or provide indemnification if it breaches a
representation or warranty given to the purchaser. Likewise,
GMAC is required to repurchase retail contracts, leases, or
loans and may be required to provide indemnification if GMAC
breaches a representation or warranty in connection with its
securitizations.
Similarly, sales by GMACs mortgage subsidiaries of
mortgage loans through whole loan sales or securitizations
require GMAC to make customary representations and warranties
about the mortgage loans to the purchaser or securitization
trust. GMACs whole loan sale agreements generally require
GMAC to repurchase or substitute loans if it breaches a
representation or warranty given to the purchaser. In addition,
GMACs mortgage subsidiaries may be required to repurchase
mortgage loans as a result of borrower fraud or if a payment
default occurs on a mortgage loan shortly after its origination.
Likewise, GMAC is required to repurchase or substitute mortgage
loans if it breaches a representation or warranty in connection
with its securitizations. The remedies available to a purchaser
of mortgage loans may be broader than those available to
GMACs mortgage subsidiaries against the original seller of
the mortgage loan. If a mortgage loan purchaser enforces its
remedies against GMACs mortgage subsidiaries, GMAC may not
be able to enforce the remedies it has against the seller of the
loan or the borrower.
Significant
indemnification payments or contract, lease, or loan repurchase
activity of retail contracts or leases or mortgage loans could
harm GMACs profitability and financial
condition.
GMAC and its mortgage subsidiaries have repurchase obligations
in their respective capacities as servicers in securitizations
and whole loan sales. If a servicer breaches a representation,
warranty, or servicing covenant with respect to an automotive
receivable or mortgage loan, then the servicer may be required
by the servicing provisions to repurchase that asset from the
purchaser. If the frequency at which repurchases of assets
occurs increases substantially from its present rate, the result
could be a material adverse effect on the financial condition,
liquidity, and results of operations of GMAC or its mortgage
subsidiaries.
A loss
of contractual servicing rights could have a material adverse
effect on GMACs financial condition, liquidity, and
results of operations.
GMAC is the servicer for all of the receivables it has
originated and transferred to other parties in securitizations
and whole loan sales of automotive receivables. GMACs
mortgage subsidiaries service the mortgage loans GMAC has
securitized, and GMAC services the majority of the mortgage
loans GMAC has sold in whole loan sales. In each case, GMAC is
paid a fee for its services, which in the aggregate constitute a
substantial revenue stream for GMAC. In each case, GMAC is
subject to the risk of termination under the circumstances
specified in the applicable servicing provisions.
In most securitizations and whole loan sales, the owner of the
receivables or mortgage loans will be entitled to declare a
servicer default and terminate the servicer upon the occurrence
of specified events. These events typically include a bankruptcy
of the servicer, a material failure by the servicer to perform
its obligations, and a failure by the servicer to turn over
funds on the required basis. The termination of these servicing
rights, were it to occur, could have a material adverse effect
on GMACs financial condition, liquidity, and results of
operations and those of
32
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
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Item 1A.
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Risk
Factors (continued)
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GMACs mortgage subsidiaries. For the year ended
December 31, 2006, GMACs consolidated mortgage
servicing fee income was approximately $1.6 billion.
The
regulatory environment in which GMAC operates could have a
material adverse effect on its business and
earnings.
GMACs domestic operations are subject to various laws and
judicial and administrative decisions imposing various
requirements and restrictions relating to supervision and
regulation by state and federal authorities. Such regulation and
supervision are primarily for the benefit and protection of
GMACs customers, not for the benefit of investors in its
securities, and could limit its discretion in operating its
business. Noncompliance with applicable statutes or regulations
could result in the suspension or revocation of any license or
registration at issue, as well as the imposition of civil fines
and criminal penalties. In addition, changes in the accounting
rules or their interpretation could have an adverse effect on
GMACs business and earnings.
GMACs operations are also heavily regulated in many
jurisdictions outside the United States. For example, certain of
GMACs foreign subsidiaries operate either as a bank or a
regulated finance company, and GMACs insurance operations
are subject to various requirements in the foreign markets in
which GMAC operates. The varying requirements of these
jurisdictions may be inconsistent with U.S. rules and may
materially adversely affect GMACs business or limit
necessary regulatory approvals, or if approvals are obtained,
GMAC may not be able to continue to comply with the terms of the
approvals or applicable regulations. In addition, in many
countries the regulations applicable to the financial services
industry are uncertain and evolving, and it may be difficult for
GMAC to determine the exact regulatory requirements.
GMACs inability to remain in compliance with regulatory
requirements in a particular jurisdiction could have a material
adverse effect on its operations in that market with regard to
the affected product and on its reputation generally. No
assurance can be given that applicable laws or regulations will
not be amended or construed differently, that new laws and
regulations will not be adopted, or that GMAC will not be
prohibited by local laws from raising interest rates above
certain desired levels, any of which could materially adversely
affect GMACs business, financial condition, or results of
operations.
The
worldwide financial services industry is highly competitive. If
GMAC is unable to compete successfully or if there is increased
competition in the automotive financing, mortgage,
and/or
insurance markets or generally in the markets for
securitizations or asset sales, GMACs margins could be
materially adversely affected.
The markets for automotive and mortgage financing, insurance,
and reinsurance are highly competitive. The market for
automotive financing has grown more competitive as more
consumers are financing their vehicle purchases, primarily in
North America and Europe. GMACs mortgage business faces
significant competition from commercial banks, savings
institutions, mortgage companies, and other financial
institutions. GMACs insurance business faces significant
competition from insurance carriers, reinsurers, third-party
administrators, brokers, and other insurance-related companies.
Many of GMACs competitors have substantial positions
nationally or in the markets in which they operate. Some of
GMACs competitors have lower cost structures and lower
cost of capital and are less reliant on securitization and sale
activities. GMAC faces significant competition in various areas,
including product offerings, rates, pricing and fees, and
customer service. If GMAC is unable to compete effectively in
the markets in which it operates, GMACs profitability and
financial condition could be negatively affected.
The markets for asset and mortgage securitizations and whole
loan sales are competitive, and other issuers and originators
could increase the amount of their issuances and sales. In
addition, lenders and other investors within those markets often
establish limits on their credit exposure to particular issuers,
originators, and asset classes, or they may require higher
returns to increase the amount of their exposure. Increased
issuance by other participants in the market or decisions by
investors to limit their credit exposure to or to
require a higher yield for GMAC or to automotive or
mortgage securitizations or whole loans, could negatively affect
GMACs ability and that of
33
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
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Item 1A.
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Risk
Factors (concluded)
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GMACs subsidiaries to price its securitizations and whole
loan sales at attractive rates. The result would be lower
proceeds from these activities and lower profits for GMACs
subsidiaries and GMAC.
* * * * * *
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Item 1B.
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Unresolved
Staff Comments
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None.
* * * * * *
GM has approximately 300 locations operating in approximately
35 states and approximately 175 cities in the United
States. Of these, approximately 20 are engaged in the final
assembly of GM cars and trucks, approximately 30 are service
parts operations responsible for distribution or warehousing,
and the remainder are offices or facilities involved primarily
in testing vehicles or manufacturing automotive components and
power products. In addition, the Corporation has approximately
25 locations in Canada, and assembly, manufacturing,
distribution, or warehousing operations in approximately 50
other countries, including equity interests in associated
companies which conduct assembly, manufacturing, or distribution
operations. The major facilities outside the United States and
Canada, which are principally vehicle manufacturing and assembly
operations, are located in:
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Germany
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Australia
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China
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South Korea
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United Kingdom
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Sweden
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Thailand
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South Africa
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Brazil
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Belgium
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Argentina
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India
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Mexico
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Spain
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Poland
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Most facilities are owned by the Corporation or its
subsidiaries. Leased properties consist primarily of warehouses
and administration, engineering, and sales offices. The leases
for warehouses generally provide for an initial period of five
years and contain renewal options. Leases for sales offices are
generally for shorter periods.
Properties of GM and its subsidiaries include facilities which,
in the opinion of management, are suitable and adequate for the
manufacture, assembly, and distribution of their products.
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Item 3.
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Legal
Proceedings
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The following section summarizes material pending legal
proceedings to which the Corporation became, or was, a party
during the year ended December 31, 2006, or after that date
but before the filing of this report, other than ordinary
routine litigation incidental to the business. GM and the other
defendants affiliated with GM intend to defend all of the
following actions vigorously.
Canadian
Export Antitrust Class Actions
Seventy-nine purported class actions on behalf of all purchasers
of new motor vehicles in the United States since January 1,
2001, have been filed in various state and federal courts
against General Motors Corporation, General Motors of Canada
Limited (GM Canada) and Ford, Daimler Chrysler, Toyota, Honda,
Nissan, and BMW and their Canadian affiliates, the National
Automobile Dealers Association, and the Canadian Automobile
Dealers Association. The federal court actions have been
consolidated for coordinated pretrial proceedings in federal
court under the caption In re New Market Vehicle Canadian
Export Antitrust Litigation Cases in the U.S. District
Court for the District of Maine, and the more than 30 California
cases have been consolidated in the California Superior Court in
San Francisco County under the case captions
Belch v. Toyota Corporation, et al. and
Bell v. General Motors Corporation.
The nearly identical complaints alleged that the defendant
manufacturers, aided by the association defendants, conspired
among themselves and with their dealers to prevent the sale to
U.S. citizens of vehicles produced for the
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Canadian market and sold by dealers in Canada. The complaints
alleged that new vehicle prices in Canada are 10% to 30% lower
than those in the United States, and that preventing the sale of
these vehicles to U.S. citizens resulted in the payment of
supracompetitive prices by U.S. consumers. The complaints, as
amended, sought injunctive relief under federal antitrust law
and treble damages under federal and state antitrust laws, but
did not specify damages. The complaints further alleged unjust
enrichment and violations of state unfair trade practices act.
On March 5, 2004, the U.S. District Court for the District
of Maine issued a decision holding that the purported indirect
purchaser classes failed to state a claim for damages but
allowed a separate claim seeking to enjoin future alleged
violations to continue. On March 10, 2006, the
U.S. District Court for the District of Maine certified a
nationwide class of buyers and lessees under Federal
Rule 23(b)(2) solely for injunctive relief. General Motors
and Nissan filed a motion to the United States Court of Appeals
for the First Circuit to appeal this decision. The district
court ruled that it will likely certify a class action for
damages under various state law theories for six exemplar states
under Federal Rule 23(b)(3) after further discovery to
determine the proper scope of the classes. Plaintiffs
subsequently moved for certification of damages classes for 17
additional states and have asked the court to certify the
damages classes for the period from January 1, 2001 through
April 30, 2003. General Motors intends to appeal any
damages classes certified as class actions and anticipates that
its appeal will be consolidated with the pending appeal of the
class certification for injunctive relief described above.
* * * * * * *
Health
Care Litigation
On October 18, 2005, the UAW and two hourly retirees filed
UAW, et al. v. General Motors Corporation, a
putative class action in the U.S. District Court for the
Eastern District of Michigan on behalf of hourly retirees,
spouses, and dependents, seeking to enjoin unilateral
modifications by GM to hourly retiree health-care benefits,
which was amended on October 31, 2005 to name additional
putative class representatives. GM and the UAW announced a
memorandum of understanding on October 29, 2005 that
provided for a number of changes to health care coverage for
both UAW represented active employees and UAW retirees. On
December 22, 2005, the District Court certified the class
and preliminarily approved the UAW Health Care Settlement
Agreement, among GM, the UAW, and the putative class
representatives. The courts March 31, 2006 order
approving the UAW Health Care Settlement Agreement, on a
class-wide
basis has been appealed to the U.S. Court of Appeals for
the Sixth Circuit by a small number of individual objectors. The
appeal has been fully briefed and is awaiting oral argument and
final decision.
* * * * * * *
General
Motors Securities Litigation
On September 19, 2005, Folksam Asset Management filed a
purported class action complaint in the U.S. District Court
for the Southern District of New York naming as defendants GM,
GMAC, and GMs Chairman and Chief Executive Officer G.
Richard Wagoner, Jr., former Vice Chairman and Chief
Financial Officer John Devine, Treasurer Walter Borst, and
former Chief Accounting Officer Peter Bible, Folksam Asset
Management, et al. v. General Motors Corporation,
et al. Plaintiffs purported to bring the claim on
behalf of purchasers of GM debt
and/or
equity securities during the period February 25, 2002
through March 16, 2005. The complaint alleges that
defendants violated Section 10(b) and, with respect to the
individual defendants, Section 20(a) of the Exchange Act.
The complaint also alleged violations of Section 11,
Section 12(a) and, with respect to the individual
defendants, Section 15 of the Securities Act of 1933, as
amended (Securities Act), in connection with certain registered
debt offerings during the class period. In particular, the
complaint alleged that GMs cash flows during the class
period were overstated based on the reclassification
of certain cash items described in the Corporations Annual
Report on
Form 10-K
for the year ended December 31, 2004. The reclassification
involved cash flows relating to the financing of GMAC wholesale
receivables from dealers that resulted in no net cash receipts
and GMs decision to revise Consolidated Statements of Net
Cash for the years ended December 31, 2002 and 2003. The
complaint also alleged misrepresentations relating to
forward-looking statements of the Corporations 2005
35
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Item 3.
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earnings forecast that were later revised significantly
downward. In October 2005, a similar suit, asserting claims
under the Exchange Act based on substantially the same factual
allegations, was filed and subsequently consolidated with the
Folksam case, Galliani, et al. v. General
Motor Corporation, et al. The consolidated suit was
recaptioned as In re General Motors Corporation Securities
Litigation. Under the terms of the GMAC Transaction, GM is
indemnifying GMAC in connection with these cases.
On November 18, 2005, plaintiffs in the Folksam case
filed an amended complaint, which added several additional
investors as plaintiffs, extended the end of the class period to
November 9, 2005, and named as additional defendants three
current and one former member of GMs audit committee, as
well as GMs independent registered public accountants,
Deloitte & Touche LLP. In addition to the claims
asserted in the original complaint, the amended complaint added
a claim against defendants Wagoner and Devine for rescission of
their bonuses and incentive compensation during the class
period. It also included further allegations regarding GMs
accounting for pension obligations, restatement of income for
2001, and financial results for the first and second quarters of
2005. Neither the original complaint nor the amended complaint
specified the amount of damages sought, and defendants have no
means to estimate damages the plaintiffs will seek based upon
the limited information available in the complaint. The
courts provisional designations of lead plaintiff and lead
counsel on January 17, 2006 were made final on
February 6, 2006. Plaintiffs subsequently filed a second
amended complaint, which added various underwriters as
defendants.
Plaintiffs filed a third amended securities complaint in In
re General Motors Corporation Securities and Derivative
Litigation on August 15, 2006. (As explained below,
certain shareholder derivative cases were consolidated with
In re General Motors Corporation Securities Litigation
for coordinated or consolidated pretrial proceedings and the
caption was modified). The amended complaint in the GM
securities litigation did not include claims against the
underwriters previously named as defendants, alleged a proposed
class period of April 13, 2000 through March 20, 2006,
did not include the previously asserted claim for the rescission
of incentive compensation against Mr. Wagoner and
Mr. Devine, and contained additional factual allegations
regarding GMs restatements of financial information filed
with its reports to the SEC for the years 2000 through 2005. On
October 13, 2006, the GM defendants filed a motion to
dismiss the amended complaint in the GM securities litigation.
This motion remains pending before the Court. On
December 14, 2006, plaintiffs filed a motion for leave to
file a fourth amended complaint in the event the Court grants
the GM defendants motion to dismiss. The GM defendants
have opposed the motion for leave to file a fourth amended
complaint.
Shareholder
Derivative Suits
On November 10, 2005, Albert Stein filed a purported
shareholder derivative action in the U.S. District Court for the
Eastern District of Michigan, ostensibly on behalf of GM,
against the members of the GM board of directors at that time,
Stein v. Bowles, et al. The complaint alleged
that defendants breached their fiduciary duties of due care,
loyalty, and good faith by, among other things, causing GM to
overstate its income (as reflected in the Corporations
restatement of 2001 earnings and second quarter 2005 earnings)
and exposing the Corporation to potential damages in SEC
investigations and investor lawsuits. The suit sought damages
based on defendants alleged breaches and an order
requiring defendants to indemnify the Corporation for any future
litigation losses. Plaintiffs claimed that demand on the GM
board to bring suit itself (ordinarily a prerequisite to suit
under Delaware law) was excused because it would be
futile. The complaint did not specify the amount of
damages sought, and defendants have no means to estimate damages
the plaintiffs will seek based upon the limited information
available in the complaint.
On December 15, 2005, Henry Gluckstern filed a purported
shareholder derivative action in the U.S. District Court
for the Eastern District of Michigan, ostensibly on behalf of
GM, against the GM board of directors, Gluckstern v.
Wagoner, et al. This suit was substantially identical
to Stein v. Bowles, et al. Also on
December 15, 2005, John Orr filed a substantially identical
purported shareholder derivative action in the
U.S. District Court for the Eastern District of Michigan,
ostensibly on behalf of GM, against the GM board of directors,
Orr v. Wagoner, et al.
On December 2, 2005, Sharon Bouth filed a similar purported
shareholder derivative action in the Circuit Court of Wayne
County, Michigan, ostensibly on behalf of GM, against the
members of the GM board of directors and a GM officer not on the
board, Bouth v. Barnevik, et al. The complaint
alleged that defendants breached their
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GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
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Item 3.
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Legal
Proceedings (continued)
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fiduciary duties of due care, loyalty, and good faith by, among
other things, causing GM to overstate its earnings and cash flow
and improperly account for certain transactions and exposing GM
to potential damages in SEC investigations and investor
lawsuits. The suit sought damages based on defendants
alleged breaches and an order requiring defendants to indemnify
the Corporation for any future litigation losses. Plaintiffs
claimed that demand on the GM board was excused because it would
be futile. The complaint did not specify the amount
of damages sought, and defendants have no means to estimate
damages the plaintiffs will seek based upon the limited
information available in the complaint.
On December 16, 2005, Robin Salisbury filed an action in
the Circuit Court of Wayne County, Michigan substantially
identical to the Bouth case described above,
Salisbury v. Barnevik, et al. The Salisbury
and Bouth cases have been consolidated and plaintiffs
have stated they intend to file an amended consolidated
complaint. The directors and the
non-director
officer named in these cases have not yet filed their responses
to the Bouth and Salisbury complaints. On
July 21, 2006, the Court stayed the proceedings in Bouth
and Salisbury. In January 2007, the Court continued
the stay until July 2007.
Plaintiffs filed an amended shareholder derivative complaint in
In re General Motors Corporation Securities and Derivative
Litigation on August 15, 2006. The amended complaint in
the shareholder derivative litigation alleged that the board
breached its fiduciary obligations by failing to oversee
GMs operations properly and prevent alleged improprieties
in connection with GMs accounting with regard to cash
flows, pension-related liabilities and supplier credits. The
defendants filed a motion to dismiss the amended complaint. On
November 9, 2006, the Court granted the plaintiffs leave to
file a second consolidated and amended derivative complaint,
which adds allegations concerning recent changes to the GM
bylaws and the resignation of Jerome B. York from the GM board
of directors. The defendants have filed a motion to dismiss
plaintiffs second consolidated and amended derivative
complaint.
Consolidation
of Securities and Shareholder Derivative Actions in the Eastern
District of Michigan
On December 13, 2005, defendants in In re General Motors
Corporation Securities Litigation (previously Folksam
Asset Management v. General Motors Corporation,
et al. and Galliani v. General Motors
Corporation, et al.) and Stein v. Bowles,
et al. filed a Motion with the Judicial Panel on
Multidistrict Litigation to transfer and consolidate these cases
for pretrial proceedings in the U.S. District Court for the
Eastern District of Michigan.
On January 5, 2006, defendants submitted to the Judicial
Panel on Multidistrict Litigation an Amended Motion seeking to
add to their original Motion the Rosen, Gluckstern, and
Orr cases for consolidated pretrial proceedings in the
U.S. District Court for the Eastern District of Michigan.
On April 17, 2006, the Judicial Panel on Multidistrict
Litigation entered an order transferring In re General Motors
Corporation Securities Litigation to the U.S. District
Court for the Eastern District of Michigan for coordinated or
consolidated pretrial proceedings with Stein v. Bowles,
et al.; Rosen, et al. v. General Motors Corp.,
et al.; Gluckstern v. Wagoner, et al.; and
Orr v. Wagoner, et al. (While the motion was
pending, plaintiffs voluntarily dismissed Rosen.) The
case is now captioned as In re General Motors Corporation
Securities and Derivative Litigation.
The securities and shareholder derivative cases described above
are in preliminary phases. No determination has been made that
the securities cases can be maintained as class actions or that
the shareholder derivative actions can proceed without making a
demand in accordance with Delaware law that the GM board bring
the actions. As a result, the scope of the actions and whether
they will be permitted to proceed is uncertain.
* * * * * * *
GMAC
Bondholder Class Actions
On November 29, 2005, Stanley Zielezienski filed a
purported class action, Zielezienski, et al. v.
General Motors Corporation, et al. The action was filed
in the Circuit Court for Palm Beach County, Florida, against GM,
GMAC, GMs Chairman and Chief Executive Officer G. Richard
Wagoner, Jr., GMACs Chairman Eric A. Feldstein, and
certain GM and GMAC officers, namely, William F. Muir, Linda K.
Zukauckas, Richard J.S. Clout, John E. Gibson, W. Allen Reed,
Walter G. Borst, John M. Devine, and Gary L. Cowger. The action
also named
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Item 3.
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certain underwriters of GMAC debt securities as defendants. The
complaint alleged that defendants violated Section 11 of
the Securities Act, and with respect to all defendants except
GM, Section 12(a)(2) of the Securities Act. The complaint
also alleges that GM violated Section 15 of the Securities
Act. In particular, the complaint alleged material
misrepresentations in certain GMAC financial statements
incorporated by reference with GMACs Registration
Statement on Form S-3 and Prospectus filed in 2003. More
specifically, the complaint alleged material misrepresentations
in connection with the offering for sale of GMAC SmartNotes in
certain GMAC financial statements contained in GMACs
Forms 10-Q
for the quarterly periods ended in March 31, 2004 and
June 30, 2004 and the
Form 8-K
which disclosed financial results for the quarterly period ended
in September 30, 2004, were materially false and misleading
as evidenced by GMACs 2005 restatement of these quarterly
results. In December 2005, plaintiff filed an amended complaint
making substantially the same allegations as were in the
previous filing with respect to additional debt securities
issued by GMAC during the period from April 23, 2004 to
March 14, 2005 and adding approximately 60 additional
underwriters as defendants. The complaint did not specify the
amount of damages sought, and defendants have no means to
estimate damages the plaintiffs will seek based upon the limited
information available in the complaint. On January 6, 2006,
the defendants named in the original complaint removed this case
to the U.S. District Court for the Southern District of
Florida, and on April 3, 2006, that court transferred the
case to the U.S. District Court for the Eastern District of
Michigan.
On December 28, 2005, J&R Marketing, SEP, filed a
purported class action, J&R Marketing,
et al. v. General Motors Corporation, et al.
The action was filed in the Circuit Court for Wayne County,
Michigan, against GM, GMAC, Eric Feldstein, William F. Muir,
Linda K. Zukauckas, Richard J.S. Clout, John E. Gibson, W. Allen
Reed, Walter G. Borst, John M. Devine, Gary L. Cowger, G.
Richard Wagoner, Jr., and several underwriters of GMAC debt
securities. Similar to the original complaint filed in the
Zielezienski case described above, the complaint alleged
claims under Sections 11, 12(a), and 15 of the Securities
Act based on alleged material misrepresentations or omissions in
the registration statements for GMAC SmartNotes purchased
between September 30, 2003 and March 16, 2005. The
complaint alleged inadequate disclosure of GMs financial
condition and performance as well as issues arising from
GMACs 2005 restatement of quarterly results for the three
quarters ended September 30, 2005. The complaint did not
specify the amount of damages sought, and defendants have no
means to estimate damages the plaintiffs will seek based upon
the limited information available in the complaint. On
January 13, 2006, defendants removed this case to the
U.S. District Court for the Eastern District of Michigan.
On February 17, 2006, Alex Mager filed a purported class
action, Mager v. General Motors Corporation,
et al. The action was filed in the
U.S. District Court for the Eastern District of Michigan
and was substantively identical to the J&R Marketing
case described above. On February 24, 2006, J&R
Marketing filed a motion to consolidate the Mager case
with its case (discussed above) and for appointment as lead
plaintiff and the appointment of lead counsel. On March 8,
2006, the court entered an order consolidating the two cases and
subsequently consolidated those cases with the Zielezienski
case described above. Lead plaintiffs counsel has been
appointed, and on July 28, 2006, plaintiffs filed a
Consolidated Amended Complaint, differing mainly from the
initial complaints by asserting claims for GMAC debt securities
purchased during a different time period, of July 28, 2003
through November 9, 2005, and adding additional underwriter
defendants. On August 28, 2006, the underwriter defendants
were dismissed without prejudice. The GM and GMAC defendants
filed a motion to dismiss the amended complaint. No
determination has been made that the case may be maintained as a
class action.
On February 27, 2007, the district court in the
consolidated case captioned J&R Marketing issued an
opinion granting defendants motion to dismiss, and
dismissing plaintiffs complaint. Under the terms of the
GMAC Transaction, GM is indemnifying GMAC in connection with
these cases.
* * * * * * *
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Item 3.
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ERISA
Class Actions
In May 2005, the U.S. District Court for the Eastern
District of Michigan consolidated three related purported class
actions brought under ERISA against GM and other named
defendants who are alleged to be fiduciaries of the GM stock
purchase programs and personal savings plans for salaried and
hourly employees, under the case caption In re General Motors
Corporation ERISA Litigation. In June 2005, plaintiffs filed
a consolidated class action complaint against GM, the Investment
Funds Committee of the GM board, its individual members,
GMs Chairman and Chief Executive Officer, members of
GMs Employee Benefits Committee during the putative class
period, GMs wholly owned subsidiary General Motors
Investment Management Corporation (GMIMCo), and State Street
Bank (State Street). The complaint alleged that the GM
defendants breached their fiduciary duties to plan participants
by, among other things, investing their assets, or offering them
the option of investing, in GM stock on the ground that it was
not a prudent investment. Plaintiffs purported to bring these
claims on behalf of all persons who were participants in or
beneficiaries of the plans from March 18, 1999 to the
present, and sought to recover losses allegedly suffered by the
plans. The complaint did not specify the amount of damages
sought, and defendants have no means at this time to estimate
damages the plaintiffs will seek based upon the limited
information available in the complaint. On July 17, 2006,
plaintiffs filed a First Amended Consolidated Class Action
Complaint, which principally added allegations about GMs
restated earnings and reclassification of cash flows, but which
did not name any additional defendants or assert any new claims.
On August 24, 2006, the GM defendants filed a motion to
dismiss the amended complaint. No determination has been made
that the case may be maintained as a class action.
In addition, GMIMCo is one of numerous defendants in several
purported class action lawsuits filed in March and April 2005 in
the U.S. District Court for the Eastern District of
Michigan, alleging violations of ERISA with respect to the
Delphi company stock plans for salaried and hourly employees.
The cases have been consolidated under the case caption In re
Delphi ERISA Litigation in the Eastern District of Michigan
for coordinated pretrial proceedings with other Delphi
stockholder lawsuits in which GMIMCo is not named as a
defendant. On March 3, 2006, the lead plaintiffs appointed
by the court filed a consolidated amended class action complaint
alleging that from May 28, 1999 to November 1, 2005,
GMIMCo, a named fiduciary of the Delphi plans, breached its
fiduciary duties to plan participants by allowing them to invest
in the Delphi Common Stock Fund when it was imprudent to do so,
failing to monitor State Street, the entity appointed by GMIMCo
to serve as investment manager for the Delphi Common Stock Fund,
and by knowingly participating in, enabling, or failing to
remedy breaches of fiduciary duty by other defendants. GMIMCo
filed a motion to dismiss the consolidated amended complaint on
April 4, 2006. No determination has been made that a class
action can be maintained against GMIMCo, and there have been no
decisions on the merits of the claims.
On March 8, 2007, a purported class action lawsuit was
filed in the U.S. District Court for the Southern District
of New York captioned Young, et al. v. General Motors
Investment Management Corporation, et al. The case, brought
by four plaintiffs who are alleged to be participants in the
General Motors Savings-Stock Purchase Program for Salaried
Employees and the General Motors Personal Savings Plan for
Hourly-Rate Employees, purports to bring claims on behalf of all
participants in these two plans as well as participants in the
General Motors Income Security Plan for Hourly-Rate Employees
and the Saturn Individual Savings Plan for Represented Members
against GMIMCo and State Street. The complaint alleges that
GMIMCo and State Street breached their fiduciary duties to plan
participants by allowing participants to invest in five
different funds that held primarily the equity of a single
company: the EDS Fund, the DIRECTV Fund, the News Corp. Fund,
the Raytheon Fund, and the Delphi Fund, all of which plaintiffs
allege were imprudent investments because of their inherent risk
and poor performance relative to more prudent investment
alternatives. The complaint also alleges that GMIMCo breached
its fiduciary duties to plan participants by allowing
participants to invest in mutual funds offered by FMR Corp.
under the Fidelity brand name. Plaintiffs allege that by
investing in these funds, participants paid excessive fees and
costs that they would not have incurred had they invested in
more prudent investment alternatives. The complaint seeks a
declaration that defendants have breached their fiduciary
duties, an order requiring defendants to compensate the plans
for their losses resulting from their breaches of fiduciary
duties, the removal of defendants as fiduciaries, an injunction
39
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Item 3.
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against further breaches of fiduciary duties, other unspecified
equitable and monetary relief, and attorneys fees and costs. No
determination has been made that the case may be maintained as a
class action.
* * * * * * *
Hughes
Split-Off Class Actions
On April 11 and 15, 2003, two purported class actions,
Matcovsky, et al., v. Hughes Electronics
Corporation, et al. and Brody v. Hughes
Electronics Corporation, et al., were filed in Superior
Court in Los Angeles, California, against Hughes, GM and the
directors of Hughes Electronics Corporation (Hughes) and GM.
These cases were consolidated in state court in Los Angeles, and
plaintiffs in both cases have filed consolidated complaints.
The cases, which seek unspecified damages, alleged that the
transactions involving News Corp.s acquisition of a 34%
interest in Hughes provided benefits to GM not available to all
holders of the former class of GM Class H common stock, in
violation of fiduciary duties. The Superior Court has dismissed
all claims against directors without any connection to
California for lack of personal jurisdiction and stayed the
consolidated case pending a ruling on the motion to dismiss a
similar complaint filed in Delaware Chancery Court. In March
2006, the Delaware Supreme Court affirmed the dismissal of the
Delaware complaint.
* * * * * * *
Asbestos
Litigation
Like most automobile manufacturers, GM has been subject in
recent years to asbestos-related claims. GM has used some
products which incorporated small amounts of encapsulated
asbestos. These products, generally brake linings, are known as
asbestos-containing friction products. There is a significant
body of scientific data demonstrating that these
asbestos-containing friction products are not unsafe and do not
create an increased risk of asbestos-related disease. GM
believes that the use of asbestos in these products was
appropriate. A number of the claims are filed against GM by
automotive mechanics and their relatives seeking recovery based
on their alleged exposure to the small amount of asbestos used
in brake components. These claims generally identify numerous
other potential sources for the claimants alleged exposure
to asbestos that do not involve GM or asbestos-containing
friction products, and many of these other potential sources
would place users at much greater risk. Most of these claimants
do not have an asbestos-related illness and may never develop
one. This is consistent with the experience reported by other
automotive manufacturers and other end users of asbestos.
Two other types of claims related to alleged asbestos exposure
that are asserted against GM locomotive and
premises represent a significantly lower exposure to
liability than the automotive friction product claims. GM sold
its locomotive manufacturing business in 2005. Like other
locomotive manufacturers, GM used a limited amount of asbestos
in locomotive brakes and in the insulation used in some
locomotives. These uses have been the basis of lawsuits filed
against GM by railroad workers seeking relief based on their
alleged exposure to asbestos. These claims generally identify
numerous other potential sources for the claimants alleged
exposure to asbestos that do not involve GM or locomotives. Many
of these claimants do not have an asbestos-related illness and
may never develop one. Moreover, the West Virginia and Ohio
supreme courts have ruled that Federal law preempts asbestos
tort claims asserted on behalf of railroad workers. Such
preemption means that Federal law eliminates the possibility
that railroad workers could maintain state law claims against
GM. In addition, a relatively small number of claims are brought
by contractors who are seeking recovery based on alleged
exposure to asbestos-containing products while working on
premises owned by GM. These claims generally identify numerous
other potential sources for the claimants alleged exposure
to asbestos that do not involve GM.
While GM has resolved many of its asbestos claims and continues
to do so for strategic litigation reasons, such as avoiding
defense costs and possible exposure to excessive verdicts,
management believes that only a small portion of these claimants
have or will ever develop an asbestos-related impairment.
40
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The amount expended in defense of asbestos claims in any year
depends on the number of claims filed, the amount of pretrial
proceedings, and the number of trials and settlements during the
period. GMs expenditures related to asbestos claims,
including both defense costs and payments to claimants, have
declined over the past several years.
* * * * * * *
John
Evans and Evans Cooling System v. General Motors
Plaintiffs John Evans and Evans Cooling Systems, Inc. commenced
litigation in Connecticut state court against GM in January 1994
by filing separate suits for patent infringement and trade
secret misappropriation. In the patent case, summary judgment
for GM was affirmed on appeal. In 2003, the presiding judge
ruled in favor of GM in the trade secret case, and plaintiffs
appealed. On March 15, 2006, the Connecticut Supreme Court
reversed and remanded to the trial court for a jury trial. The
plaintiffs have expanded their claims for the new trial to
include a subsequent generation of engines, used in a wide
variety of GM vehicles. Plaintiffs seek relief in excess of
$12 billion.
* * * * * * *
Coolant
System Class Action Litigation
GM has been named as the defendant in 21 putative class actions
in various federal and state courts in the United States
alleging defects in the engine cooling systems in GM vehicles;
14 cases are still pending in U.S. courts including six
cases that have been consolidated, either finally or
conditionally, for pre-trial proceedings in a multi-district
proceeding in the United States District Court for the Southern
District of Illinois. State courts in California and Michigan
have denied motions to certify cases for class treatment. Most
recently, in an opinion dated February 16, 2007,
certification of a multi-state class was denied in the Federal
multi-district proceeding on the grounds that individual issues
predominate over common questions. However, in
Gutzler v. General Motors Corporation, the Circuit
Court of Jackson County, Missouri certified an
issues class in January 2006 comprised of all
consumers who purchased or leased a GM vehicle in Missouri that
was factory-equipped with Dex-Cool coolant, which
was included as original equipment in GM vehicles manufactured
since 1995. The Court also certified two
sub-classes
comprised of i) class members who purchased or leased a
vehicle with a 4.3-liter engine, and ii) class members who
purchased or leased a vehicle with a 3.1, 3.4, or 3.8-liter
engine. The Gutzler courts order provided for
addressing specific issues on a class basis, including the
extent of GMs warranty on coolant and whether GMs
coolant is incompatible with other vehicle components. Trial on
these issues is now scheduled for November 2007.
Kenneth Stewart v. General Motors of Canada Limited and
General Motors Corporation, a complaint filed in the
Superior Court of Ontario dated April 24, 2006, alleged a
class action covering Canadian residents, except residents of
British Columbia and Quebec, who purchased 1995 to 2003 GM
vehicles with 3.1, 3.4, 3.8, and 4.3 liter engines. Plaintiff
alleged that defects in the engine cooling systems allow coolant
to leak into the engine and cause engine damage. The complaint
alleged violation of the Business Practices and Competition Acts
and sought alleged benefits received as a result of failure to
warn and negligence, compensatory damages, punitive damages,
fees, and costs. Similar complaints (some involving 2004
vehicles as well) have been filed in 17 putative class actions
against GM and GM Canada, in ten provinces. Class certification
has not been approved in any of these cases, and all have been
stayed on the agreement of counsel pending the outcome of the
class certification hearing in Stewart, which is
scheduled for December 2007.
* * * * * * *
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
None
* * * * * * *
41
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Item 4A. Executive
Officers of the Registrant
The names and ages, as of March 1, 2007, of all executive
officers of GM and their positions and offices with GM are as
follows:
|
|
|
Name and (Age)
|
|
Positions and Offices
|
|
G. Richard Wagoner, Jr. (54)
|
|
Chairman and Chief Executive
Officer
|
Frederick A. Henderson (48)
|
|
Vice Chairman and Chief Financial
Officer
|
Robert A. Lutz (75)
|
|
Vice Chairman, Global Product
Development
|
Thomas A. Gottschalk (64)
|
|
Executive Vice President, Law and
Public Policy
|
Bo I. Andersson (51)
|
|
Vice President, Global Purchasing
and Supply Chain
|
Kathleen S. Barclay (51)
|
|
Vice President, Global Human
Resources
|
Walter G. Borst (45)
|
|
Treasurer
|
Lawrence D. Burns (55)
|
|
Vice President, Research &
Development and Strategic Planning
|
Troy A. Clarke (51)
|
|
Group Vice President and
President, North America
|
Gary L. Cowger (59)
|
|
Group Vice President, Global
Manufacturing and Labor Relations
|
Nicholas S. Cyprus (53)
|
|
Controller and Chief Accounting
Officer
|
Carl-Peter Forster (52)
|
|
Group Vice President and
President, GM Europe
|
Steven J. Harris (61)
|
|
Vice President, Global
Communications
|
Maureen Kempston-Darkes (58)
|
|
Group Vice President and
President, GM Latin America, Africa and Middle East
|
Robert S. Osborne (52)
|
|
Group Vice President and General
Counsel
|
David N. Reilly (57)
|
|
Group Vice President and
President, GM Asia Pacific
|
Thomas G. Stephens (58)
|
|
Group Vice President, GM Powertrain
|
Ralph J. Szygenda (58)
|
|
Group Vice President and Chief
Information Officer
|
There are no family relationships, as defined in Item 401
of
Regulation S-K,
between any of the officers named above, and there is no
arrangement or understanding between any of the officers named
above and any other person pursuant to which he or she was
selected as an officer. Each of the officers named above was
elected by the board of directors or a committee of the board to
hold office until the next annual election of officers and until
his or her successor is elected and qualified or until his or
her earlier resignation or removal. The board of directors
elects the officers immediately following each annual meeting of
the stockholders and may appoint other officers between annual
meetings.
G. Richard Wagoner, Jr. has been associated with General
Motors since 1977. In October 1998, he was elected a director
and President and Chief Operating Officer of General Motors. On
June 1, 2000, Mr. Wagoner was named Chief Executive
Officer and became Chairman of the Board of Directors on
May 1, 2003. He is currently a director of GMAC.
Frederick A. Henderson became Vice Chairman and Chief Financial
Officer for General Motors on January 1, 2006. Prior to his
promotion, Mr. Henderson was a GM Group Vice President and
Chairman of GME. Mr. Henderson has been associated with
General Motors since 1984. He was named GM Group Vice President
and President of GMAP effective January 1, 2002. Effective
June 1, 2004, he was appointed Group Vice President and
Chairman of GME. He is currently a director of GMAC.
Robert A. Lutz was named Vice Chairman, Product Development of
General Motors, effective September 1, 2001. He was named
Chairman of GMNA on November 13, 2001, and served in that
capacity until April 4, 2005, when he assumed
responsibility for Global Product Development. He also served as
president of GME on an interim basis from March to June 2004.
42
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Item 4A. Executive
Officers of the
Registrant (continued)
Thomas A. Gottschalk is Executive Vice President, Law and Public
Policy. He has been associated with General Motors since 1994.
He previously held the position of Senior Vice President and
General Counsel. He was elected to the position of Executive
Vice President of General Motors with primary responsibility for
Law and Public Policy on May 25, 2001 and served as General
Counsel until September 1, 2006.
Bo I. Andersson began his career with GM in 1987. He was
appointed GM Vice President, Worldwide Purchasing, Production
Control and Logistics on December 1, 2001 and GM Vice
President, Global Purchasing and Supply Chain on March 1,
2005.
Kathleen S. Barclay has been associated with General Motors
since 1985 and has been Vice President in charge of Global Human
Resources since 1998.
Walter G. Borst has been associated with General Motors since
1980. He was named Treasurer in February 2003. Prior to that,
Mr. Borst was Executive Director of Finance and Chief
Financial Officer for GMs German subsidiary, Adam Opel AG,
since October 2000. He is currently a director of GMAC.
Lawrence D. Burns has been associated with General Motors since
1969 and has been Vice President of Research &
Development and Strategic Planning since 1998.
Troy A. Clarke joined General Motors in 1973. He was
appointed Group Vice President and President, GMNA in July 2006.
He was named Group Vice President and Executive Vice President,
GMAP on February 4, 2004, and President of GMAP, effective
June 1, 2004. Mr. Clarke was named GM Group Vice
President of Manufacturing and Labor Relations in June 2002, and
had been Vice President of Labor Relations since January 2001.
Gary L. Cowger was appointed Group Vice President, Global
Manufacturing and Labor Relations in April 2005 and had
previously been GM Group Vice President and President, GMNA
since November 13, 2001. He has been associated with
General Motors since 1965. Mr. Cowger became Group Vice
President in charge of GM Manufacturing and Labor Relations on
January 1, 2001.
Nicholas S. Cyprus joined General Motors as Controller and Chief
Accounting Officer in December 2006. Mr. Cyprus was Senior
Vice President, Controller and Chief Accounting Officer for the
Interpublic Group of Companies from May 2004 to March 2006.
Prior to that, he was Vice President, Controller and Chief
Accounting Officer from 1999 to 2004 at AT&T Corporation.
Carl-Peter Forster has been GM Vice President and President, GME
since June 2004 and was appointed GM Group Vice President and
President, GME effective January 1, 2006. He has been
chairman of the Opel Supervisory Board since June 2004 and
chairman of Saab since April 2005. Mr. Forster was Chairman
and Managing Director of Adam Opel AG from April 2001, and
before that date he was responsible for vehicle development
projects for BMW AG.
Steven J. Harris was elected General Motors Vice President,
Global Communications February 1, 2006, when he returned to
the Corporation from retirement. He previously served as Vice
President of GM Communications from 1999 until his retirement on
January 1, 2004.
Maureen Kempston-Darkes has been associated with General Motors
since 1975. She was named GM Group Vice President and President,
GMLAAM effective January 1, 2002. She was president and
general manager of GM Canada and Vice President of General
Motors Corporation, from 1994 to 2001. She is a member of the
board of directors of Thomson Corporation and the Canadian
National Railway.
Robert S. Osborne joined General Motors as Group Vice President
and General Counsel in September 2006. Prior to joining GM, he
had been a senior partner in the law firm of Jenner &
Block since 2002. He is also responsible for the Office of the
Secretary and the Office of Export Compliance.
David N. Reilly was appointed Group Vice President and
President, GMAP in July 2006 and had previously been President
and Chief Executive Officer of GM Daewoo after leading GMs
transition team in the formation of
43
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 4A.
|
Executive
Officers of the Registrant (concluded)
|
GM Daewoo beginning in January 2002. Mr. Reilly joined
General Motors in 1975 and served as Vice President
GM Europe for Sales, Marketing, and Aftersales beginning in 2001.
In December 2006, Mr. Reilly was charged with regard to
certain alleged violations of South Korean labor laws. The
criminal charges are based on the alleged illegal engagement of
certain workers employed by an outsourcing agency in production
activities at GM Daewoo, in which GM owns a majority interest.
The charges were filed against Mr. Reilly in his capacity
as the most senior GM executive in South Korea and the
companys Representative Director, who under South Korean
law is the most senior member of management of a stock
corporation, and is the person typically named as the individual
respondent or defendant in any legal action brought against such
company. These charges constitute a criminal offense under the
laws of South Korea but would not constitute a criminal offense
in the United States. Mr. Reilly has filed a formal request
for trial to defend against the charges.
Thomas G. Stephens is the Group Vice President responsible for
GM Powertrain. He joined General Motors in 1969 and was named
Group Vice President for GM Powertrain in 2001.
Ralph J. Szygenda was named Group Vice President and Chief
Information Officer on January 7, 2000. Mr. Szygenda
is a member of the board of directors of the Handleman Company.
He has been associated with GM since 1996.
* * * * * * *
44
PART II
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 5.
|
Market
for the Registrants Common Equity and Related Stockholder
Matters and Issuer Purchases of Equity Securities
|
General Motors lists its common stock on the stock exchanges
specified on the cover page of this Annual Report on
Form 10-K
under the trading symbol GM.
As of December 31, 2006, there were 364,408 holders of
record of GMs
$12/3
par value common stock. As of December 31, 2005, there were
384,375 holders of record of GMs
$12/3
par value common stock. The following table sets forth the high
and low sale prices of GMs
$12/3
par value common stock and the quarterly dividends declared for
the last two years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 Quarters
|
|
|
|
|
|
1st
|
|
|
2nd
|
|
|
3rd
|
|
|
4th
|
|
|
Cash dividends per share of common
stock
$12/3
par value
|
|
$
|
0.25
|
|
|
$
|
0.25
|
|
|
$
|
0.25
|
|
|
$
|
0.25
|
|
Price range of common stock
$12/3
par value(1):
|
|
High
|
|
$
|
24.60
|
|
|
$
|
30.56
|
|
|
$
|
33.64
|
|
|
$
|
36.56
|
|
|
|
Low
|
|
$
|
18.47
|
|
|
$
|
19.00
|
|
|
$
|
27.12
|
|
|
$
|
28.49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 Quarters
|
|
|
|
|
|
1st
|
|
|
2nd
|
|
|
3rd
|
|
|
4th
|
|
|
Cash dividends per share of common
stock
$12/3
par value
|
|
$
|
0.50
|
|
|
$
|
0.50
|
|
|
$
|
0.50
|
|
|
$
|
0.50
|
|
Price range of common stock
$12/3
par value(1):
|
|
High
|
|
$
|
40.80
|
|
|
$
|
36.65
|
|
|
$
|
37.70
|
|
|
$
|
31.50
|
|
|
|
Low
|
|
$
|
27.98
|
|
|
$
|
24.67
|
|
|
$
|
30.21
|
|
|
$
|
18.33
|
|
|
|
|
(1) |
|
New York Stock Exchange composite interday prices as listed in
the price history database available at www.NYSEnet.com. |
On February 6, 2007, GMs board of directors declared
a quarterly cash dividend of $0.25 per share for the first
quarter of 2007. GMs dividend policy is described in
Managements Discussion and Analysis of Financial
Condition and Results of Operations in Item 7.
The table below contains information about securities authorized
for issuance under equity compensation plans. The features of
these plans are described further in Note 25 to the
Consolidated Financial Statements in Part II.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
Number of Securities
|
|
|
|
to be Issued Upon
|
|
|
Weighted Average
|
|
|
Remaining Available for
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Future Issuance Under
|
|
|
|
Outstanding Options,
|
|
|
Outstanding Options,
|
|
|
Equity Compensation
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
Warrants and Rights
|
|
|
Plans(1)
|
|
|
Equity compensation plans approved
by security holders:
|
|
|
|
|
|
|
|
|
|
|
|
|
General Motors Amended Stock
Incentive Plan (GMSIP)
|
|
|
81,655,178
|
|
|
$
|
52.41
|
|
|
|
4,885,385
|
|
Equity compensation plans not
approved by security holders(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
General Motors 1998 Salaried Stock
Option Plan (GMSSOP)
|
|
|
26,583,895
|
|
|
$
|
55.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
108,239,073
|
|
|
$
|
53.10
|
|
|
|
4,885,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Excludes securities reflected in the first column, Number
of securities to be issued upon exercise of outstanding options,
warrants and rights. |
45
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 5.
|
Market
for the Registrants Common Equity and Related Stockholder
Matters and Issuer Purchases of Equity
Securities (concluded)
|
|
|
|
(2) |
|
All equity compensation plans except the GMSSOP were approved by
the stockholders. The GMSSOP was adopted by the board of
directors in 1998 and expires December 31, 2007. The
purpose of the plans is to recognize the importance and
contribution of GM employees in the creation of stockholder
value, to further align compensation with business success, and
to provide employees with the opportunity for long-term capital
accumulation through the grant of options to acquire shares of
GMs common stock. |
Purchases
of Equity Securities
GM made no purchases of GM
$12/3
par value common stock during the three months ended
December 31, 2006.
* * * * * * *
46
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 6.
|
Selected
Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
|
|
|
Previously
|
|
|
|
|
|
Previously
|
|
|
|
|
|
Previously
|
|
|
|
|
|
Previously
|
|
|
|
|
|
|
Reported
|
|
|
Reported
|
|
|
Restated(1)
|
|
|
Reported
|
|
|
Restated(1)
|
|
|
Reported
|
|
|
Restated(1)
|
|
|
Reported
|
|
|
Restated(1)
|
|
|
|
(Dollars in millions except per share amounts)
|
|
|
Total net sales and revenues(2)
|
|
$
|
207,349
|
|
|
$
|
191,184
|
|
|
$
|
194,655
|
|
|
$
|
191,909
|
|
|
$
|
195,351
|
|
|
$
|
183,255
|
|
|
$
|
186,065
|
|
|
$
|
176,723
|
|
|
$
|
179,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
$
|
(1,978
|
)
|
|
$
|
(10,458
|
)
|
|
$
|
(10,308
|
)
|
|
$
|
2,804
|
|
|
$
|
2,701
|
|
|
$
|
2,899
|
|
|
$
|
2,565
|
|
|
$
|
1,813
|
|
|
$
|
1,974
|
|
(Loss) from discontinued
operations(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(219
|
)
|
|
|
(219
|
)
|
|
|
(239
|
)
|
|
|
(239
|
)
|
Gain from sale of discontinued
operations(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,179
|
|
|
|
1,179
|
|
|
|
|
|
|
|
|
|
Cumulative effect of a change in
accounting principle(4)
|
|
|
|
|
|
|
(109
|
)
|
|
|
(109
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)(5)
|
|
$
|
(1,978
|
)
|
|
$
|
(10,567
|
)
|
|
$
|
(10,417
|
)
|
|
$
|
2,804
|
|
|
$
|
2,701
|
|
|
$
|
3,859
|
|
|
$
|
3,525
|
|
|
$
|
1,574
|
|
|
$
|
1,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$12/3
par value common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
from continuing operations before cumulative effect of
accounting change
|
|
$
|
(3.50
|
)
|
|
$
|
(18.50
|
)
|
|
$
|
(18.23
|
)
|
|
$
|
4.97
|
|
|
$
|
4.78
|
|
|
$
|
5.17
|
|
|
$
|
4.57
|
|
|
$
|
3.24
|
|
|
$
|
3.52
|
|
Basic earnings (loss) per share
from discontinued operations(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.14
|
|
|
|
2.14
|
|
|
|
(0.16
|
)
|
|
|
(0.16
|
)
|
Basic (loss) per share from
cumulative effect of a change in accounting principle(4)
|
|
|
|
|
|
|
(0.19
|
)
|
|
|
(0.19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
(3.50
|
)
|
|
$
|
(18.69
|
)
|
|
$
|
(18.42
|
)
|
|
$
|
4.97
|
|
|
$
|
4.78
|
|
|
$
|
7.31
|
|
|
$
|
6.71
|
|
|
$
|
3.08
|
|
|
$
|
3.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share
from continuing operations before cumulative effect of
accounting change
|
|
$
|
(3.50
|
)
|
|
$
|
(18.50
|
)
|
|
$
|
(18.23
|
)
|
|
$
|
4.94
|
|
|
$
|
4.76
|
|
|
$
|
5.09
|
|
|
$
|
4.51
|
|
|
$
|
3.23
|
|
|
$
|
3.51
|
|
Diluted earnings (loss) per share
from discontinued operations(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.11
|
|
|
|
2.11
|
|
|
|
(0.16
|
)
|
|
|
(0.16
|
)
|
Diluted (loss) per share from
cumulative effect of accounting change(4)
|
|
|
|
|
|
|
(0.19
|
)
|
|
|
(0.19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
(3.50
|
)
|
|
$
|
(18.69
|
)
|
|
$
|
(18.42
|
)
|
|
$
|
4.94
|
|
|
$
|
4.76
|
|
|
$
|
7.20
|
|
|
$
|
6.62
|
|
|
$
|
3.07
|
|
|
$
|
3.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GMs Class H common
stock(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.22
|
)
|
|
$
|
(0.22
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
(0.21
|
)
|
Diluted earnings (loss) per share
from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.22
|
)
|
|
$
|
(0.22
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
(0.21
|
)
|
Cash dividends declared per share(6)
|
|
$
|
1.00
|
|
|
$
|
2.00
|
|
|
$
|
2.00
|
|
|
$
|
2.00
|
|
|
$
|
2.00
|
|
|
$
|
2.00
|
|
|
$
|
2.00
|
|
|
$
|
2.00
|
|
|
$
|
2.00
|
|
Total assets(7)
|
|
$
|
186,192
|
|
|
$
|
476,078
|
|
|
$
|
474,156
|
|
|
$
|
479,921
|
|
|
$
|
480,660
|
|
|
$
|
448,819
|
|
|
$
|
448,813
|
|
|
$
|
369,346
|
|
|
$
|
369,531
|
|
Notes and loans payable(7)
|
|
$
|
48,171
|
|
|
$
|
285,750
|
|
|
$
|
287,715
|
|
|
$
|
300,279
|
|
|
$
|
301,965
|
|
|
$
|
271,756
|
|
|
$
|
273,250
|
|
|
$
|
200,168
|
|
|
$
|
201,093
|
|
Stockholders equity
(deficit)(8)
|
|
$
|
(5,441
|
)
|
|
$
|
14,597
|
|
|
$
|
14,653
|
|
|
$
|
27,360
|
|
|
$
|
27,880
|
|
|
$
|
24,903
|
|
|
$
|
24,876
|
|
|
$
|
6,412
|
|
|
$
|
6,637
|
|
Certain prior period amounts have been reclassified in the
consolidated statements of operations to conform to the current
year presentation.
|
|
|
(1) |
|
As previously disclosed in Current Reports on
Forms 8-K
filed February 16, 2007 and January 26, 2007, GM has
restated its consolidated financial statements and financial
information to correct its accounting for certain derivative
instruments and deferred income taxes. In addition, GM has
recorded other accounting adjustments that were previously not
recorded in the proper period. Refer to Note 2 to the
Consolidated Financial Statements |
47
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 6.
|
Selected
Financial Data (concluded)
|
|
|
|
|
|
for further information relating to the restatement. The
following table sets forth a reconciliation of previously
reported and restated net income (loss) and retained earnings as
of the dates and for the periods shown. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
|
Retained Earnings
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
at January 1, 2002
|
|
|
Previously reported
|
|
$
|
(10,567
|
)
|
|
$
|
2,804
|
|
|
$
|
3,859
|
|
|
$
|
1,574
|
|
|
$
|
9,223
|
|
Pre-tax adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives and hedge accounting
|
|
|
89
|
|
|
|
(40
|
)
|
|
|
(213
|
)
|
|
|
545
|
|
|
|
(335
|
)
|
Other
out-of-period
|
|
|
118
|
|
|
|
(272
|
)
|
|
|
(263
|
)
|
|
|
(138
|
)
|
|
|
(339
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pre-tax adjustments
|
|
|
207
|
|
|
|
(312
|
)
|
|
|
(476
|
)
|
|
|
407
|
|
|
|
(674
|
)
|
Tax effects
provision/(benefit)
|
|
|
22
|
|
|
|
(207
|
)
|
|
|
(202
|
)
|
|
|
168
|
|
|
|
(119
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total of above adjustments, net of
tax
|
|
|
185
|
|
|
|
(105
|
)
|
|
|
(274
|
)
|
|
|
239
|
|
|
|
(555
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes adjustments
|
|
|
(35
|
)
|
|
|
2
|
|
|
|
(60
|
)
|
|
|
(78
|
)
|
|
|
1,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net after-tax adjustments
|
|
|
150
|
|
|
|
(103
|
)
|
|
|
(334
|
)
|
|
|
161
|
|
|
|
725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restated
|
|
$
|
(10,417
|
)
|
|
$
|
2,701
|
|
|
$
|
3,525
|
|
|
$
|
1,735
|
|
|
$
|
9,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
To comply with EITF
00-10,
Accounting for Shipping and Handling Fees and Costs, in
2006 GM reclassified shipping and handling costs incurred to
transport product to its customers. This reclassification
increased Automotive sales and Automotive cost of sales for the
2005, 2004, 2003, and 2002 years in the amount of
$3.6 billion, $3.6 billion, $3.1 billion, and $2.8
billion, respectively. The reclassification did not impact net
income (loss), or earnings (loss) per share. |
|
(3) |
|
Effective December 22, 2003, GM split off Hughes by
distributing Hughes common stock to the holders of GM
Class H common stock in exchange for all outstanding shares
of GM Class H common stock. Simultaneously, GM sold its
19.8% retained economic interest in Hughes to News Corporation
in exchange for cash and News Corporation Preferred American
Depository Shares. All shares of GM Class H common stock
were then cancelled. GM recorded a net gain of $1.2 billion
from the sale in 2003, and net losses from discontinued
operations of Hughes were $219 million and
$239 million in 2003 and 2002, respectively. |
|
(4) |
|
As of December 31, 2005, GM recorded an asset retirement
obligation of $181 million in accordance with the
requirements of FASB Interpretation No. (FIN) 47,
Accounting for Conditional Asset Retirement
Obligations. The cumulative effect on net loss, net of
related income tax effects, of recording the asset retirement
obligations was $109 million or $0.19 per share on a
diluted basis. |
|
(5) |
|
Effective January 1, 2003, GM began expensing the fair
market value of newly granted stock options and other
stock-based compensation awards issued to employees to conform
to SFAS No. 123, Accounting for Stock-Based
Compensation. Effective July 1, 2003, GM began
consolidating certain variable interest entities to conform to
FIN 46(R), Consolidation of Variable Interest
Entities. |
|
(6) |
|
In February 2006, GMs board of directors reduced the
quarterly dividend on common stock from $0.50 per share to
$0.25 per share. |
|
(7) |
|
In November 2006, GM sold a 51% controlling ownership interest
in GMAC, resulting in a significant decrease in total
consolidated assets and notes and loans payable. |
|
(8) |
|
As of December 31, 2006, GM recognized the funded status of
its benefit plans on its consolidated balance sheet with an
offsetting adjustment to accumulated other comprehensive income
(loss) in stockholders equity (deficit) of $16.9 billion
in accordance with the adoption of SFAS No. 158,
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans. |
* * * * * * *
48
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
Overview
GM is primarily engaged in the worldwide development,
production, and marketing of automobiles, consisting of cars and
trucks. GM develops, manufactures, and markets vehicles
worldwide through four automotive regions: GM North America
(GMNA), GM Europe (GME), GM Latin America/Africa/Mid-East
(GMLAAM), and GM Asia Pacific (GMAP) (collectively Automotive
business). Also, GMs finance and insurance operations are
primarily conducted through GMAC, the successor to General
Motors Acceptance Corporation, a wholly owned subsidiary until
the GMAC Transaction at the end of November 2006 when GM sold a
51% controlling ownership interest in GMAC to a consortium of
investors. After the GMAC Transaction, GM has accounted for its
49% ownership interest in GMAC using the equity method. GMAC
provides a broad range of financial services, including consumer
vehicle financing, automotive dealership and other commercial
financing, residential mortgage services, automobile service
contracts, personal automobile insurance coverage, and selected
commercial insurance coverage.
From time to time, GM discusses issues of shared interest such
as possible transactions with other parties, including other
vehicle manufacturers. Frequently these proposals do not come to
fruition. We do not confirm or comment on any potential
transactions or other matters unless and until we determine that
disclosure is appropriate.
Automotive
Industry
In 2006, the global automotive industry continued to show strong
sales and revenue growth. Global industry vehicle sales to
retail and fleet customers were 67.5 million units in 2006,
representing a 4% increase over 2005. We expect industry sales
to be approximately 69 million units in 2007. Over the past
five years, the global automotive industry has experienced
consistent
year-to-year
increases, growing approximately 17.7% from 2001 to 2006.
Overall revenue growth for the industry has averaged
approximately 6% per year over the last decade. Much of this
growth is attributable to demand in emerging markets, such as
China, where industry vehicle unit sales increased 25.8% to
7.4 million units in 2006, from 5.9 million units in
2005.
GMs worldwide vehicle sales for 2006 were 9.1 million
units compared to 9.2 million units in 2005. Vehicle unit
sales increased for GME, GMLAAM, and GMAP and declined for GMNA.
GMs global market share in 2006 was 13.5% compared to
14.1% in 2005. Market share increased in 2006 compared to 2005
from 16.8% to 17% for GMLAAM and from 5.8% to 6.4% for GMAP, and
declined over the same period from 25.5% to 23.8% for GMNA and
from 9.4% to 9.2% for GME.
Competition and factors such as commodity and energy prices and
currency exchange continued to exert pricing pressure in the
global automotive market in 2006. We expect competition to
increase over the next few years due primarily to aggressive
investment by manufacturers in established markets in the United
States and Western Europe and the presence of local
manufacturers in key emerging markets such as China and India.
Commodity price increases, particularly for aluminum, copper,
precious metals, and resins, have contributed to substantial
cost pressures in the industry for vehicle manufacturers as well
as suppliers. In addition, the historically low value of the yen
against the U.S. dollar has benefited Japanese manufacturers
exporting vehicles or components to the United States. Due in
part to these pressures, industry pricing for comparably
equipped products has continued to decline in most major
markets. In the United States, actual prices for vehicles with
similar content have declined at an accelerating pace over the
last decade. We expect that this challenging pricing environment
will continue for the foreseeable future.
Financial
Results
GMs consolidated net sales and revenues grew to
$207.3 billion in 2006 from $194.7 billion in 2005. GM
incurred a consolidated net loss of $2.0 billion, compared
to a net loss of $10.4 billion in 2005. The improvement in
revenues and reduction in net loss was a result of improved
automotive business performance primarily driven by higher
revenues and a reduced loss at GMNA due to the favorable impact
of the GMNA turnaround plan. GMAC net income on a GM
consolidated basis was $2.2 billion in 2006 and
$2.3 billion in 2005.
49
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Financial Results (concluded)
GMs results of operations in 2006 were most significantly
affected by the following strategy, trends, and significant
events:
Strategy
As in 2006, our top priorities continue to be improving our
business in North America and achieving global competitiveness
in an increasingly global environment, thus positioning GM for
sustained profitability and growth in the long term, while at
the same time maintaining strong liquidity.
Our growth and profitability priorities for 2007 are
straightforward:
|
|
|
|
|
Continue to execute the North America turnaround plan;
|
|
|
|
Grow aggressively in emerging markets;
|
|
|
|
Continue to drive the benefits of managing the business globally;
|
|
|
|
Continue development and implementation of GMs advanced
propulsion strategy; and
|
|
|
|
Improve business results.
|
Continue
to execute the North America turnaround plan
Our first priority in 2007 is improving our earnings and cash
flow, particularly in GMNA, the traditional core of our
operations and financial results. We are systematically and
aggressively implementing our turnaround plan for GMNA to return
these vital operations to profitability and positive cash flow
as soon as possible. This plan is built on four elements,
described more fully below in Key Factors Affecting Future
and Current Results Turnaround Plan:
|
|
|
|
|
Product Excellence
|
|
|
|
Revitalize Sales and Marketing Strategy
|
|
|
|
Accelerate Cost Reductions and Quality Improvements; and
|
|
|
|
Address Health Care/Legacy Cost Burden
|
The 2006 year-end results show that we are continuing to
make progress toward stabilizing our business in North America,
although additional work will be required to fully implement our
turnaround plan. We believe that continued success in our
turnaround efforts would not only return GM to profitability,
but structure GM for sustained profitability, positive cash
flow, and growth so we can be competitive in the long term by
effectively managing our business cost, revenue, and
liquidity.
Our primary revenue related goals for 2007 include selling a
profitable product mix and improving contribution margin in
North America. We are pursuing these goals by emphasizing the
quality and value of our vehicles, reducing reliance on sales
marketing incentives, and focusing on our newly launched
products. We are gaining momentum in the North American
marketplace and realizing benefits associated with the
Total Value Promise initiative announced in January
2006, which has contributed to approximately $875 average
reduction per vehicle incentive levels. In 2007 we intend to
continue steps such as reducing daily rental car sales in order
to increase residual values, while improving customer service,
in order to increase repeat business from our current customers.
In September 2006, we announced a five year or 100,000 mile
extended powertrain warranty policy, which we believe offers
more extensive warranty coverage than any other full-line auto
manufacturer and will provide a significant competitive
advantage for us with consumers focused on reliability and total
cost of ownership. We plan to introduce an array of new vehicles
in 2007, including the GMC Acadia, Saturn Outlook, and Buick
Enclave, and the all-new Cadillac CTS and Chevrolet Malibu,
which we believe will contribute to continued revenue growth. In
addition, we will introduce heavy-duty versions of our all new
pickup trucks launched in the fourth quarter of 2006.
50
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Strategy (continued)
Our primary cost related goals for 2007 in North America remain
addressing our legacy cost burden and reducing our structural
costs in line with current levels of revenue. Legacy costs are
primarily related to the cost of benefits provided to retired
employees and their dependents, and costs associated with
employees of businesses divested by GM and their dependents.
Structural costs, such as compensation for unionized and
salaried employees, are those costs that do not vary with
production and include all costs other than material, freight,
and policy and warranty costs. Some of these costs are within
our control, while others such as our pension and OPEB expenses
(which are influenced by interest rates and our return on
investments) are more dependent on outside factors. As discussed
below under Key Factors Affecting Future and Current
Results, GM has taken action in a number of areas to
reduce legacy and structural costs. In North America, we
realized structural cost savings of $6.8 billion in 2006
compared to 2005 levels. These major cost reduction actions
contributed substantially to our significantly improved results
in our automotive business, which in the second quarter 2006
showed a profit for the first time since 2004. Going forward, we
intend to reduce our structural costs in North America by an
average of $9 billion per year on a running rate basis in
2007 compared to 2005, and we remain focused on repositioning
our business for long-term competitiveness, including a
successful resolution to the Delphi situation and a new
collective bargaining agreement with the UAW in 2007 that
benefits both GM and its hourly employees.
Grow
Aggressively in Emerging Markets
Our second key priority is to focus on emerging markets and
capitalize on the growth in areas such as China, India, and the
ASEAN region, as well as Russia, Brazil, the Middle East, and
the Andean region. Vehicle sales and revenues continue to grow
globally, with the strongest growth in these emerging markets.
In response, we are planning to expand capacity in China,
Russia, and India, and to pursue additional growth opportunities
through our relationships with Shanghai Automotive and GM
Daewoo. In many cases, such as our operations in China, these
businesses become profitable in a short time and are able to
fund their own expansion. Fifty-five percent of our unit sales
in 2006 were made outside of the United States and, because we
expect that unit sales in these key emerging markets will
continue to grow at a faster pace than the U.S. market, we
anticipate that this percentage will continue to grow. In
addition to this growth in sales and revenues, we expect that
these emerging markets will become increasingly profitable. In
2006, we experienced growth in revenue in each of our geographic
regions and improved profitability in all four of our regions, a
continuation of progress made in the first half of the year.
Continue
to Drive the Benefits of Managing the Business
Globally
Our third key priority is to continue to integrate our
operations around the world to manage our business on a global
basis. GM has been focusing on restructuring its operations and
has already taken a number of steps to globalize our principal
business functions such as product development, manufacturing,
powertrain, and purchasing, to improve our performance in an
ever-more competitive environment.
Through global product development initiatives, we are seeking
to leverage our global capabilities in design and engineering to
bring products to market faster and at lower cost. We have
identified and developed centers of technical expertise
throughout the world, each dedicated to planning, designing, and
engineering specific vehicles or technologies for GM
globally for example, GMNA for crossover and sport
utility vehicles and rear wheel drive high-performance cars, GME
for front wheel drive midsize sedans, and GMAP for small and
mini-class cars. These design centers are supported by global
manufacturing and purchasing organizations. For many years we
have leveraged our scale to capitalize on global purchasing
synergies, which has yielded significant cost savings. GM
intends to build on this strategy by making its sourcing
decisions on a global basis to purchase from the most capable
and cost-effective suppliers, wherever they are located.
Continue
to Develop and Implement GMs Advanced Propulsion
Strategy
Our fourth key priority is to continue to develop and advance
our alternative propulsion strategy, focused on fuel and other
technologies, making energy diversity and environmental
leadership a critical element of our ongoing
51
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Strategy (concluded)
strategy. In addition to continuing to improve the efficiency of
our internal combustion engines, we are focused on the
introduction of propulsion technologies which utilize
alternative fuels. By the end of 2006, we sold over
two million vehicles that run on E85 ethanol-gasoline
blend. We have also continued our development of electrically
driven vehicles, hybrid vehicles, and hydrogen fuel cell
vehicles. For example, in November 2006 we announced that we had
begun work on our first plug-in hybrid, and in January 2007 we
introduced the Chevrolet Volt concept vehicle, an extended range
electrically driven vehicle based on
E-Flex
technology with a pure electric vehicle range of 40 city miles,
E85 ethanol/gasoline fuel economy of 150 miles per gallon, and
gasoline fuel economy of 50 miles per gallon. The large
lithium-ion battery necessary to power the Volt could be ready
for production beginning between 2010 and 2012. We continue to
increase our spending on alternative technologies and have
intensified our efforts to displace traditional petroleum-based
fuels. A portion of the increased capital expenditures discussed
below under Liquidity and Capital Resources will be
devoted to these new technologies.
Improve
Business Results Earnings and Cash Flow
We anticipate improved automotive earnings and cash flow in
2007, resulting from further structural cost reductions,
material cost reductions, and increased unit sales, particularly
of newly introduced models. In addition to our other priorities
outlined above, we are focused on the continued improvement of
our balance sheet and liquidity position. In 2006 we materially
strengthened our liquidity and financial flexibility, which
should allow us to meet our short and medium-term liquidity
needs, including the funding of our projected increase in
capital spending from $7.5 billion in 2006 to
$8.5 billion to $9 billion in 2007 and in 2008. Over
the long term, we believe our ability to meet our capital
requirements will primarily depend on the execution of our
turnaround plan and the return of our North American operations
to profitability and positive cash flow.
Basis of
Presentation
This Managements Discussion and Analysis of Financial
Condition and Results of Operations (MD&A) gives effect to
the restatement discussed in Item 8. Financial
Statements and Supplemental Data, Note 2
Restatement of Previously Issued Financial Statements, and
should be read in conjunction with the accompanying consolidated
financial statements. In addition, this MD&A should be read
in conjunction with the GMAC Annual Report on
Form 10-K
for the year ended December 31, 2006, filed separately with
the SEC, Part I, Item 1 (Business) and Part II,
Item 6 (Selected Financial Data), Item 7 (MD&A)
and Item 8 (Financial Statements and Supplementary Data),
all of which are incorporated into this document by reference.
All earnings per share amounts included in the MD&A are
reported on a fully diluted basis.
GM operates in two businesses, consisting of Automotive
(Auto) and Financing and Insurance Operations (FIO).
GMs Auto business consists of GMs four
automotive regions: GMNA, GME, GMLAAM, and GMAP, which together
constitute GM Automotive (GMA).
GMs FIO business consists of the operating results of GMAC
for 2004, 2005, and the eleven months ended November 30,
2006 on a consolidated basis and includes GMs 49% share of
GMACs operating results for the month of December 2006 on
an equity method basis. FIO also includes Other Financing, which
includes financing entities that are not consolidated by GMAC.
The disaggregated financial results for GMA 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 purpose of assisting in making
internal operating decisions. In this regard, certain common
expenses were allocated among regions. These allocations may
have been different than would be required for
stand-alone
financial information prepared in accordance with accounting
principles generally accepted in the United States (GAAP). The
financial results represent the historical information used by
management for internal
decision-making
purposes;
52
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Basis of
Presentation (concluded)
therefore, other data prepared to represent the way in which the
business will operate in the future, or data prepared in
accordance with GAAP, may be materially different.
Consistent with industry practice, our market share information
includes estimates of sales in certain countries where public
reporting is not legally required or otherwise available on a
consistent basis.
Consolidated
Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in millions)
|
|
|
Total net sales and revenues
|
|
$
|
207,349
|
|
|
$
|
194,655
|
|
|
$
|
195,351
|
|
Income (loss) before income tax
(expense) benefit
|
|
|
(4,947
|
)
|
|
|
(16,740
|
)
|
|
|
855
|
|
Income tax (expense) benefit
|
|
|
2,785
|
|
|
|
5,870
|
|
|
|
1,126
|
|
Equity income (loss) and minority
interests
|
|
|
184
|
|
|
|
562
|
|
|
|
720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before cumulative
effect of a change in accounting principle
|
|
$
|
(1,978
|
)
|
|
$
|
(10,308
|
)
|
|
$
|
2,701
|
|
Cumulative effect of a change in
accounting principle
|
|
|
|
|
|
|
(109
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(1,978
|
)
|
|
$
|
(10,417
|
)
|
|
$
|
2,701
|
|
GMs consolidated net sales and revenues grew to
$207.3 billion in 2006 from $194.7 billion in 2005. GM
incurred a consolidated net loss of $2.0 billion, compared
to a net loss of $10.4 billion in 2005. The improvement in
revenues and reduction in net loss was a result of improved
automotive business performance primarily driven by higher
revenues and a reduced loss at GMNA due to the favorable impact
of the GMNA turnaround plan. Revenues and net income in 2006 for
GMs FIO business reflect GMAC on a fully consolidated
basis for 11 months and one month on an equity basis.
GMAC net income on a GM consolidated basis was $2.2 billion
in 2006 and $2.3 billion in 2005. GMs consolidated
net sales and revenues were $195.4 billion in 2004 and net
income was $2.7 billion. Further information on each of
GMs businesses and geographic regions are discussed below.
GM
Automotive Operations Financial Review
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in millions)
|
|
|
Total Automotive net sales and
revenues
|
|
$
|
173,089
|
|
|
$
|
160,197
|
|
|
$
|
162,369
|
|
Automotive cost of sales
|
|
|
(164,839
|
)
|
|
|
(158,164
|
)
|
|
|
(150,360
|
)
|
Selling, general &
administrative expenses
|
|
|
(13,218
|
)
|
|
|
(12,758
|
)
|
|
|
(11,486
|
)
|
Income (loss), before income tax
expense (benefit)
|
|
|
(5,665
|
)
|
|
|
(13,223
|
)
|
|
|
(551
|
)
|
Income tax (expense) benefit
|
|
|
2,310
|
|
|
|
2,775
|
|
|
|
1,177
|
|
Equity income (loss) and minority
interests
|
|
|
187
|
|
|
|
484
|
|
|
|
744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before
cumulative effect of a change in accounting principle
|
|
|
(3,168
|
)
|
|
|
(9,964
|
)
|
|
|
1,370
|
|
Cumulative effect of a change in
accounting principle
|
|
|
|
|
|
|
(109
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(3,168
|
)
|
|
$
|
(10,073
|
)
|
|
$
|
1,370
|
|
|
|
(Volume in thousands)
|
GM production volume
|
|
|
9,181
|
|
|
|
9,051
|
|
|
|
9,098
|
|
Vehicle unit sales industry
|
|
|
67,515
|
|
|
|
65,154
|
|
|
|
62,822
|
|
GM global automotive market share
|
|
|
13.5
|
%
|
|
|
14.1
|
%
|
|
|
14.3
|
%
|
53
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
GM Automotive Operations Financial Review
(concluded)
GM management evaluates its automotive business and makes
certain decisions using supplemental measures for variable
expenses and non-variable expenses. GM believes that because
these measures provide it with useful information, investors
would find it beneficial to have the opportunity to view the
business in a similar manner. See Explanation of
contribution costs, structural costs and impairment and
restructuring charges below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in billions)
|
|
|
Automotive net sales and revenues
|
|
$
|
173
|
|
|
$
|
160
|
|
|
$
|
162
|
|
Contribution costs(a)
|
|
$
|
(119
|
)
|
|
$
|
(110
|
)
|
|
$
|
(108
|
)
|
Structural costs(b)
|
|
$
|
(52
|
)
|
|
$
|
(55
|
)
|
|
$
|
(52
|
)
|
Impairment and restructuring
charges(c)
|
|
$
|
(7
|
)
|
|
$
|
(5
|
)
|
|
$
|
(1
|
)
|
|
|
|
(a) |
|
Contribution costs are expenses that are considered by GM to be
variable with production. The amount of contribution costs
included in cost of sales is $118 billion,
$109 billion, and $107 billion in 2006, 2005, and
2004, respectively, and those costs are comprised of material
cost, freight, and policy and warranty expenses. The amount of
contribution costs included in selling, general, and
administrative expenses is $1 billion in each of 2006,
2005, and 2004, and those costs are related to advertising
expense. |
|
(b) |
|
Structural costs are expenses that do not generally vary with
production and are recorded in both cost of sales and selling,
general, and administrative expenses, such as costs of
manufacturing labor, pension/OPEB, engineering expense, and
marketing related costs. Certain costs related to restructuring
and impairments that are included in cost of sales are also
excluded from structural costs. The amount of structural costs
included in cost of sales is $40 billion, $44 billion,
and $42 billion in 2006, 2005, and 2004, respectively, and
the amount of structural costs included in selling, general and
administrative expenses is approximately $12 billion,
$11 billion, and $10 billion in 2006, 2005, and 2004,
respectively, |
|
(c) |
|
The amount of impairment and restructuring charges included in
cost of sales is $7 billion, $5 billion, and
$1 billion in 2006, 2005, and 2004, respectively. |
Industry
Global Vehicle Sales
Worldwide industry vehicle unit sales increased approximately
2.4 million units in 2006, to about 67.5 million
units, compared to about 65.2 million units in 2005.
Industry sales decreased in North America by approximately 350
thousand units, to 20.2 million units, compared to about
20.5 million units in 2005. All other regions experienced
growth in industry unit volume compared to 2005, particularly
the Latin America/Africa/Mid-East region, up about 830 thousand
units to about 6.1 million units in 2006, and the Asia
Pacific region, up approximately 1.2 million units to about
19.5 million units in 2006.
GM
Global Vehicle Sales
Worldwide GM vehicle unit sales were 9.1 million units, a
decline of approximately 79 thousand units, compared to about
9.2 million units in 2005. GME, GMLAAM, and GMAP all
reported sales unit increases, while a sales decline was
reported in GMNA. Global market share for GM was 13.5% compared
to 14.1% in 2005. GM market share increased in GMLAAM and GMAP,
with a share loss at GMNA and a slight reduction at GME
contributing to the overall drop in global market share.
GM global production volume for 2006 was 9.2 million units,
an increase of approximately 130 thousand units from 2005.
Production increased
year-over-year
in GMLAAM and GMAP, with a slight decrease in GME and an
approximately 210 thousand unit reduction in GMNA.
In 2004, GM achieved a global market share of 14.3%, with
vehicle unit sales of 9.0 million units and global
production of 9.1 million units.
54
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Automotive
Revenues
GM automotive revenues were $173 billion in 2006, an
increase of approximately $13 billion from 2005, as GM sold
a mix of products with greater content and higher prices.
Pricing improvements in GMNA, GME, and GMLAAM also contributed
to the revenue increase as sales allowances were reduced and
prices increased on new model introductions. Strategic unit
sales volume reductions to less profitable daily rental fleets
in GMNA and GME contributed to improved overall mix and vehicle
revenue per unit. Key factors in the increase in total revenue
over 2005 include:
|
|
|
|
|
Approximately $7 billion due to vehicle mix and pricing,
resulting from changes to GMs vehicle portfolio including
new fullsize utilities in North America.
|
|
|
|
Approximately $2 billion due to increased production volume
globally
|
|
|
|
Approximately $2 billion due to the consolidation of GM
Daewoo on June 30, 2005, providing a full year of revenue
reported in 2006 as compared to a half year reported in 2005.
|
|
|
|
Approximately $2 billion due to the impact of foreign
exchange rates, primarily the Canadian Dollar, Euro, U.K. Pound,
Swedish Krona, Brazilian Real, and Korean Won versus the
U.S. Dollar.
|
GM automotive revenues were $162 billion in 2004. The
decrease from 2004 to 2005 was due to lower production and mix
declines as a result of sales reductions of fullsize utility,
pickup, midsize utility, and medium car segments at GMNA.
Revenues increased at GMLAAM and GMAP.
Contribution
Costs
Contribution costs in 2006 totaled $119 billion, an
increase of $9 billion from 2005. The increase is a result
of increased material costs from higher production volume and
higher levels of vehicle content and product mix, as well as
higher freight cost. Material performance is slightly favorable
year-over-year
as improvements realized from global architecture sourcing and
optimizing manufacturing and supplier footprints offset higher
raw material costs. Increased global demand for aluminum,
copper, precious metals, petroleum, and resins increased
contribution costs by $0.6 billion in 2006 versus 2005.
Contribution costs as a percentage of revenue were unchanged in
2006 from 2005.
Contribution costs were $110 billion in 2005 compared to
$108 billion in 2004. Contribution costs increased from
2004 to 2005 in total and as a percentage of revenue. The
increase was primarily due to unfavorable mix at the total
automotive level as production declined at GMNA along with fewer
fullsize utilities and pickups, offset by production increases
at GME, GMLAAM, and GMAP. Higher steel and
non-ferrous
metal prices resulted in an increase in material costs of
$0.7 billion in 2005.
Structural
Costs
Automotive structural cost were $52 billion in 2006, a
decrease of approximately $3 billion from 2005. Cost
reductions in GMNA of over $6 billion were the primary
reason for this reduction, partially offset by structural cost
increases in GMLAAM and GMAP as GM continued to invest in
infrastructure to support the higher unit production and sales
volumes in those regions. Consolidation of GM Daewoo also
increased 2006 structural cost in GMAP by over $1 billion
as compared to 2005 since GM Daewoo was consolidated on
June 30, 2005.
The majority of structural cost reductions in North America were
driven by turnaround actions implemented throughout 2006,
largely related to changes to pension, OPEB, and the hourly
workforce level:
|
|
|
|
|
GMNA pension and OPEB costs were reduced by $2.8 billion
largely as a result of the UAW Health Care Settlement Agreement,
the hourly accelerated attrition program, and changes to
salaried pension and health care benefit plans.
|
|
|
|
GMNA manufacturing costs were reduced by $1.0 billion as
total labor costs were lowered as employees retired or left GM
under the accelerated attrition program offered to hourly
employees represented by the
|
55
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
|
|
|
Structural Costs (concluded)
|
|
|
|
|
|
UAW and IUE/CWA. Approximately 34,400 GM hourly employees agreed
to participate in the program and have retired or left the
company as of January 1, 2007.
|
|
|
|
|
|
Other Automotive costs were lower due to reduction in various
administrative costs and in global engineering, where costs were
lower as GM increasingly leveraged global vehicle development
and architectures.
|
Automotive structural costs were $52 billion in 2004 and
increased by $3 billion in 2005. Health-care expense
increased primarily due to escalating health-care cost trends
and falling discount rates in the United States. Global consumer
influence expense increased due to efforts to increase product
awareness. Other costs increased outside of North America as GM
invested in emerging markets.
Impairment
and Restructuring Charges
GM incurred certain expenses primarily related to restructuring
and asset impairments, which are included in Automotive cost of
sales. Such costs totaled approximately $7 billion,
$5 billion, and $1 billion in 2006, 2005, and 2004,
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in billions)
|
|
|
UAW Attrition Agreement
|
|
$
|
6.4
|
|
|
$
|
|
|
|
$
|
|
|
Vehicle impairments
|
|
|
0.5
|
|
|
|
1.2
|
|
|
|
0.6
|
|
Facility impairments
|
|
|
0.2
|
|
|
|
0.9
|
|
|
|
0.2
|
|
Restructuring initiatives
|
|
|
(0.4
|
)
|
|
|
3.1
|
|
|
|
|
|
Other
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6.9
|
|
|
$
|
5.2
|
|
|
$
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The 2006 amounts are related to the following:
|
|
|
|
|
$6.4 billion net charge related to the program under the
UAW Attrition Agreement (UAW Attrition Program), primarily for
payments to employees (approximately $2.1 billion) and for
the curtailment charges associated with GMs
U.S. hourly pension, OPEB, and extended disability plans as
a result of the UAW Attrition Program (approximately
$4.3 billion).
|
|
|
|
Approximately $0.4 billion of impairment charges related to
the write-down of product-specific assets, primarily at GMNA.
|
|
|
|
Approximately $0.1 billion of impairment charges related to
the write-down of plant facilities at GME.
|
|
|
|
Approximately $0.6 billion for various restructuring and
other matters. Of this total, approximately $0.4 billion
was incurred at GME, with additional charges recorded at the
other regions. A favorable revision to the reserve recorded in
the fourth quarter of 2005 related to North American plant
capacity actions (approximately $1.0 billion), primarily
attributable to the impact of the UAW Attrition Program. This is
more fully discussed below in
GM-UAW-Delphi
Special Attrition Program Agreement.
|
|
|
|
Approximately $0.2 billion taken in conjunction with
cessation of production at a previously divested business.
|
The 2005 amounts are related to the following:
|
|
|
|
|
Approximately $1.2 billion for impairment charges related
to the write-down of product-specific assets, of which
$0.7 billion was at GMNA, $0.3 billion was at GME,
with additional charges taken at GMLAAM and GMAP.
|
|
|
|
Approximately $0.8 billion of impairment charges related to
the write-down of plant facilities at GMNA.
|
56
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Impairments and Restructuring
Charges (concluded)
|
|
|
|
|
Approximately $3.1 billion associated with restructuring
initiatives. Of this, approximately $2.0 billion was
incurred at GMNA, including $1.8 billion for employee
related costs in connection with the restructuring initiatives
announced in the fourth quarter of 2005, and approximately
$0.2 billion associated with a voluntary early retirement
program and other separation programs related to the
U.S. salaried workforce. GME recognized separation and
contract cancellation charges of $1.1 billion, mainly
related to the restructuring plan announced in the fourth
quarter of 2004. In addition, GMAP recognized separation costs
related to restructuring activities at GM Holden Australia.
|
In 2004, charges were recognized for asset impairments totaling
approximately $0.8 billion. Vehicle tooling impairments
were $0.6 billion, and plant and facilities impairments
were $0.2 billion.
Interest
Expense, Other Expense, Interest Income and Other Non-Operating
Income, Equity Income and Minority Interest, and Tax
Benefit
Automotive interest expense in 2006 was $4.3 billion, an
increase of $0.3 billion from 2005, resulting primarily
from intercompany transactions between Automotive and Other
Operations. In total, Automotive and Other Operations interest
expense was $2.6 billion in 2006, $100 million higher
than 2005. Automotive interest expense was $3.2 billion in
2004, $2.3 billion at Automotive and Other Operations after
intercompany elimination.
Other expense was zero in 2006, an improvement from the
$0.8 billion expense recorded in 2005 due to the write-down
to fair value of GMs investment in approximately 20% of
the common stock of Fuji Heavy Industries (FHI) in 2005.
Interest income and other non-operating income was
$3.6 billion in 2006, an increase of $1.3 billion from
2005. The $1.3 billion increase was a result of gains associated
with the sale of Mesa, Arizona Proving Grounds, and part of our
interest in Suzuki Motor Corporation (Suzuki), and Isuzu Motors
Limited (Isuzu). Interest income and other non-operating income
was $2.2 billion in 2004.
Automotive equity income and minority interest was
$200 million in 2006, $300 million lower than 2005 due
to the sale of the majority of GMs investment in Suzuki
and an increase in minority interest associated with the
consolidation of GM Daewoo in June 2005. Equity income and
minority interest was $700 million in 2004,
$200 million higher than in 2005, primarily due to
consolidation of GM Daewoo in 2005.
Automotive tax was a net benefit of $2.3 billion in 2006
and $2.8 billion in 2005. Tax benefit was $1.2 billion
in 2004, reflecting primarily tax benefits in GMNA.
Net
Income/Loss
As a result of the above factors, GMs Automotive business
incurred net losses from continuing operations of
$3.2 billion and $10.1 billion in 2006 and 2005,
respectively. 2005 net loss of $10.1 billion included
$100 million cumulative effect of a change in accounting
principle related to implementation of FIN 47
Accounting for Conditional Asset Retirement
Obligations. Automotive net income was $1.4 billion
in 2004.
Explanation
of contribution costs, structural costs, and impairment and
restructuring charges
Management believes that contribution costs, structural costs,
and impairment and restructuring charges provide meaningful
supplemental information regarding our expenses because they
place Automotive expenses into categories that allow GM
management to assess the cost performance of GMA and the
geographic regions. GM management uses these categories to
evaluate GMs expenses and believes these measures allow GM
management to readily view operating trends, perform analytical
comparisons, benchmark expenses among geographic regions, and
assess whether the turnaround and globalization strategy for
cutting costs are on target. GM management uses these categories
for forecasting purposes, evaluating management, and determining
its future capital investment
57
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Explanation of contribution costs, structural costs, and
impairment and restructuring
charges (concluded)
allocations. Accordingly, GM believes these categories are
useful to investors in allowing for greater transparency of
supplemental information used by management in its financial and
operational decision-making.
While GM believes that contribution costs, structural costs, and
impairment and restructuring charges provide useful information,
there are limitations associated with the use of these
categories. Contribution costs, structural costs, and impairment
and restructuring charges may not be completely comparable to
similarly titled measures of other companies due to potential
differences in the exact method of calculation between
companies. As a result, these categories have limitations and
should not be considered in isolation from, or as a substitute
for, other measures such as cost of sales and selling, general,
and administrative expenses. GM compensates for these
limitations by using these categories as supplements to cost of
sales and selling, general, and administrative expenses.
GM
Automotive Regional Results
GM
North America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in millions)
|
|
|
GMNA:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenues
|
|
$
|
109,779
|
|
|
$
|
105,640
|
|
|
$
|
115,321
|
|
Income (loss) before income tax
expense (benefit)
|
|
$
|
(6,903
|
)
|
|
$
|
(10,583
|
)
|
|
$
|
725
|
|
Income tax (expense) benefit
|
|
|
2,243
|
|
|
|
2,480
|
|
|
|
600
|
|
Equity income (loss) and minority
interest
|
|
|
41
|
|
|
|
(47
|
)
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before
cumulative effect of a change in accounting principle
|
|
|
(4,619
|
)
|
|
|
(8,150
|
)
|
|
|
1,357
|
|
Cumulative effect of a change in
accounting principle
|
|
|
|
|
|
|
(83
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(4,619
|
)
|
|
$
|
(8,233
|
)
|
|
$
|
1,357
|
|
Net margin
|
|
|
(4.2
|
)%
|
|
|
(7.8
|
)%
|
|
|
1.2
|
%
|
|
|
(Volume in thousands)
|
Production volume
|
|
|
|
|
|
|
|
|
|
|
|
|
Cars
|
|
|
1,822
|
|
|
|
1,834
|
|
|
|
1,997
|
|
Trucks
|
|
|
2,827
|
|
|
|
3,022
|
|
|
|
3,223
|
|
Total GMNA
|
|
|
4,649
|
|
|
|
4,856
|
|
|
|
5,220
|
|
Vehicle unit sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Industry North America
|
|
|
20,191
|
|
|
|
20,546
|
|
|
|
20,279
|
|
GM as a percentage of industry
|
|
|
23.8
|
%
|
|
|
25.5
|
%
|
|
|
26.7
|
%
|
Industry U.S.
|
|
|
17,060
|
|
|
|
17,456
|
|
|
|
17,302
|
|
GM as a percentage of industry
|
|
|
24.2
|
%
|
|
|
25.9
|
%
|
|
|
27.2
|
%
|
GM cars
|
|
|
20.7
|
%
|
|
|
22.6
|
%
|
|
|
24.9
|
%
|
GM trucks
|
|
|
27.1
|
%
|
|
|
28.5
|
%
|
|
|
29.0
|
%
|
North American industry vehicle unit sales declined 1.7% to
20.2 million units during 2006, and we expect unit sales to
be relatively flat in 2007. While industry volume declined 1.7%,
GMNAs production declined 4.3% to 4.6 million units.
GMNA ended the year with a market share of 23.8% for 2006,
compared to 25.5% for 2005.
During 2006, industry vehicle unit sales in the United States
decreased to 17.1 million units, while GMs
U.S. market share decreased by 1.7 percentage points
due in part to a strategic decision to reduce sales to daily
rental
58
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
GM North America (continued)
customers by approximately 75,000 units, because of the
comparatively low profits from such sales, and due to a consumer
shift to passenger cars where GM traditionally has lower
penetration. Dealer inventories in the U.S. totaled
approximately 1.050 million units as of December 31,
2006, consistent with managements expectations as well as
in-line with year ago levels. Despite the decline in volume,
revenue in North America increased in 2006 over 2005 by
$4.1 billion or 3.9%, driven primarily by a favorable mix
of higher end products. In 2005 revenue declined by
$9.7 billion or 8.4% compared to 2004, driven primarily by
unfavorable product mix and a decline in sales volume.
2006 vs. 2005 Earnings
Pre-tax earnings at GMNA improved by $3.7 billion in 2006,
from a loss of $10.6 billion in 2005 to a loss of
$6.9 billion in 2006. Major factors contributing to the
improvement included:
|
|
|
|
|
Pension and OPEB costs decreased by $2.8 billion largely as
a result of the UAW Health Care Settlement Agreement which
reduced hourly OPEB costs, the impact of the UAW Attrition
Program, and the effects of the changes in salaried retiree
benefits plans announced in the first quarter of 2006.
|
|
|
|
Other costs decreased by approximately $2.5 billion due to
a reduction in advertising and sales promotion expenses, more
efficient engineering spending, and lower product warranty and
recall costs as a result of improved vehicle quality. In
addition, GMNAs product liability reserve decreased by
approximately $0.1 billion, after including a charge for
incurred but not reported asbestos liabilities of
approximately $0.1 billion.
|
|
|
|
Manufacturing related structural costs decreased by
$1.0 billion, as a result of the UAW Attrition Program
under which approximately 34,400 GM hourly employees have
retired or left GM by January 1, 2007.
|
|
|
|
Favorable product mix resulted in increased earnings of
approximately $0.4 billion due primarily to the launch of
the new full-size utilities.
|
|
|
|
The sale of the Mesa, Arizona Proving Grounds resulted in a
$270 million gain in 2006.
|
|
|
|
In connection with the GMAC Transaction in the fourth quarter of
2006, GM reduced its lease residual and risk sharing support
expense by approximately $0.2 billion because negotiated
payments for lease residual and risk sharing support were lower
than the previously recorded liabilities.
|
|
|
|
Production volume decreases of 4.3% attributable to GMNAs
market share decline and the reduction in sales to daily rental
businesses by approximately 75,000 units, resulted in a
decrease in earnings of approximately $1.0 billion.
|
In addition to the above factors, there were restructuring and
impairment charges of approximately $6.2 billion in 2006,
as compared to $3.6 billion in 2005. The table below
provides further information regarding these charges.
|
|
|
|
|
|
|
|
|
GMNA Restructuring and Impairment Charges
|
|
|
|
2006
|
|
|
2005
|
|
|
|
($ billions)
|
|
|
UAW Attrition Agreement
|
|
$
|
6.4
|
|
|
$
|
|
|
Vehicle Impairments
|
|
|
0.5
|
|
|
|
0.7
|
|
Facility Impairments
|
|
|
|
|
|
|
0.8
|
|
Adjustment to 2005 Capacity
Reserve and Other Restructuring Initiatives
|
|
|
(0.9
|
)
|
|
|
2.0
|
|
Other
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6.2
|
|
|
$
|
3.5
|
|
|
|
|
|
|
|
|
|
|
GMNAs net loss improved by $3.6 billion, from a net
loss of $8.2 billion in 2005 to a net loss of
$4.6 billion in 2006. The improvement was driven by matters
discussed above and their related tax effects.
59
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
GM North America (concluded)
2005 vs. 2004 Earnings
Pre-tax earnings at GMNA declined by $11.3 billion in 2005,
from pre-tax earnings of $0.7 billion in 2004 to a loss of
$10.6 billion in 2005. Major factors contributing to the
decline included:
|
|
|
|
|
Unfavorable product mix adversely affected earnings by
approximately $2.7 billion due primarily to reduced demand
for GMNAs large utility vehicles which were reaching the
end of their product life cycle, as well as declines in sales of
higher margin large cars.
|
|
|
|
Production volume decreases of 7% attributable to GMNA market
share decline and a significant reduction in dealer inventories
accounted for a decrease in earnings of approximately
$2.5 billion.
|
|
|
|
Unfavorable material costs after factoring in the cost of
government mandated product improvements accounted for a
decrease in earnings of approximately $0.9 billion.
|
|
|
|
Increased health care expenses primarily due to the recognition
of OPEB net actuarial losses, caused by escalating health-care
cost trends and falling discount rates in the United States,
accounted for a decrease in income of approximately
$0.7 billion. These 2005 health-care cost increases do not
reflect new health-care initiatives with the UAW and salaried
employees and retirees, which will benefit subsequent years.
|
|
|
|
Other factors resulted in a decrease in earnings of
approximately $0.9 billion. The largest of these relates to
increased advertising and sales promotion costs resulting from
further efforts to increase product awareness.
|
|
|
|
In 2004 GMNA recognized a gain on sale of XM Satellite Radio
Holdings stock of approximately $200 million.
|
|
|
|
In addition to the above, there were restructuring and
impairment charges of approximately $3.6 billion in 2005,
as compared to $0.3 billion in 2004. The table below
provides further information regarding these charges.
|
|
|
|
|
|
|
|
|
|
GMNA Restructuring and Impairment Charges
|
|
|
|
2005
|
|
|
2004
|
|
|
|
($ billions)
|
|
|
Vehicle Impairments
|
|
$
|
0.7
|
|
|
$
|
0.1
|
|
Facility Impairments
|
|
|
0.8
|
|
|
|
0.2
|
|
Restructuring Initiatives
|
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3.5
|
|
|
$
|
0.3
|
|
|
|
|
|
|
|
|
|
|
60
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
GM
Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in millions)
|
|
|
Total net sales and revenues
|
|
$
|
33,193
|
|
|
$
|
31,892
|
|
|
$
|
31,196
|
|
(Loss) before income tax expense
(benefit)
|
|
$
|
(312
|
)
|
|
$
|
(1,794
|
)
|
|
$
|
(1,424
|
)
|
Income tax (expense) benefit
|
|
|
72
|
|
|
|
734
|
|
|
|
599
|
|
Equity income (loss) and minority
interests
|
|
|
15
|
|
|
|
53
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) before cumulative
effect of a change in accounting principle
|
|
|
(225
|
)
|
|
|
(1,007
|
)
|
|
|
(768
|
)
|
Cumulative effect of a change in
accounting principle
|
|
|
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(225
|
)
|
|
$
|
(1,028
|
)
|
|
$
|
(768
|
)
|
Net margin
|
|
|
(0.7
|
)%
|
|
|
(3.2
|
)%
|
|
|
(2.5
|
)%
|
|
|
(Volume in thousands)
|
Production volume
|
|
|
1,806
|
|
|
|
1,858
|
|
|
|
1,829
|
|
Vehicle unit sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Industry
|
|
|
21,763
|
|
|
|
21,079
|
|
|
|
20,778
|
|
GM as a percentage of industry
|
|
|
9.2
|
%
|
|
|
9.4
|
%
|
|
|
9.4
|
%
|
GM market share Germany
|
|
|
10.1
|
%
|
|
|
10.8
|
%
|
|
|
10.6
|
%
|
GM market share United
Kingdom
|
|
|
14.3
|
%
|
|
|
14.7
|
%
|
|
|
13.9
|
%
|
Industry vehicle unit sales in Europe increased to
21.8 million units in 2006, or 3.2% over 2005 and 4.7% over
2004. GMEs 2006 total market share decreased slightly to
9.2% from 9.4%. European industry vehicle unit sales are
expected to be relatively flat in 2007. In the two largest
markets in Europe, GM market share decreased: market share was
10.1% in Germany, a 0.7 percentage point decrease versus
2005 and a 0.5 percentage point decrease versus 2004; and
in the United Kingdom market share was 14.3%, a decrease of
0.4 percentage point versus 2005 and an increase of
0.4 percentage point versus 2004. Revenues in 2006
increased $1.3 billion or 4.1% over 2005, primarily due to
the impact of full consolidation of the European powertrain
organization and improved pricing. Revenue in 2005 increased
$0.7 billion over 2004 driven primarily by favorable mix
partly offset by volume declines and negative pricing.
2006 vs. 2005 Earnings
The GME restructuring plan announced in the fourth quarter of
2004 gained further traction in 2006 and, together with
continued progress on pricing and material cost, delivered
improved results in 2006 compared to previous periods. Loss
before taxes from GME totaled $312 million,
$1.8 billion and $1.4 billion in 2006, 2005, and 2004,
respectively. The improvement of $1.5 billion in loss
before taxes in 2006 versus 2005 was primarily due to the
following factors:
|
|
|
|
|
Improvement in operating performance of
$0.8 billion Material cost performance and
structural cost performance resulting from the implementation of
the restructuring plan, along with improved pricing, which more
than offset volume declines and additional cost related to
product upgrades.
|
|
|
|
Lower restructuring and impairment charges of
$0.7 billion Restructuring and impairment
charges for 2006 totaled $586 million compared to
$1,330 million in 2005. The 2006 charges included
impairment charges of $149 million, of which
$89 million related to the closure of GMs Portugal
assembly plant and $60 million related to product specific
assets. Separations and contract cancellations totaled
$437 million, mostly related to the closure of GMs
Portugal assembly plant, a shift reduction in GMs
Ellesmere Port assembly plant, and the restructuring plan
announced in the fourth quarter of 2004. The charges for 2005
comprehended separations and contract cancellation costs of
$1.1 billion, mainly related to the restructuring plan
announced in the fourth quarter of 2004, but also included costs
related to the dissolution of the
|
61
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
|
|
|
Powertrain joint venture with Fiat S.p.A. (Fiat) and other
contract cancellations of $59 million, and a charge for
product specific asset impairments of $262 million.
|
GMEs 2006 net loss of $225 million declined by
$803 million from the loss of $1.0 billion in the
prior year. This is largely comprised of the operating
improvements and the lower restructuring and impairment charges
discussed above, plus the related tax effect on these items. In
addition, 2005 included a charge of $21 million in
connection with the adoption of FIN 47, Accounting
for Conditional Asset Retirement Obligations, and
favorable equity income related to the effects of changes in the
Polish tax law.
2005 vs. 2004 Earnings
The increase in GMEs loss before tax in 2005 versus 2004
of approximately $0.4 billion resulted mainly from the
following factors:
|
|
|
|
|
Higher restructuring and impairment charges of
$1.0 billion Restructuring and impairment
charges for 2005 of $1.3 billion compared to
$372 million in 2004. The charges for 2005 comprehended
separations and contract cancellation costs of
$1.1 billion, mainly related to the restructuring plan
announced in the fourth quarter of 2004, but also included costs
related to the dissolution of the Powertrain joint venture with
Fiat, and other contract cancellation costs of $59 million,
and a charge for product specific asset impairments of
$262 million. The charges for 2004 consisted of product
specific asset impairments.
|
|
|
|
Improvement in operating performance of
$0.6 billion Primarily favorable mix together
with material cost performance and structural cost performance
resulting from the implementation of the above-mentioned
restructuring plan, more than compensated for volume declines
and negative pricing.
|
The GME turnaround plan remains on track, and we expect to see
more progress in 2007. In addition to the continued
implementation of our significant cost reduction initiatives, we
expect to benefit from the introduction of new products such as
the Opel Corsa and the Opel Antara and will continue to focus on
the rollout of our multi-brand strategy.
GM
Latin America/Africa/Mid-East
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in millions)
|
|
|
Total net sales and revenues
|
|
$
|
14,618
|
|
|
$
|
11,844
|
|
|
$
|
8,877
|
|
Income before income tax expense
|
|
$
|
527
|
|
|
$
|
43
|
|
|
$
|
94
|
|
Income tax (expense) benefit
|
|
|
(28
|
)
|
|
|
(611
|
)
|
|
|
(33
|
)
|
Equity income (loss) and minority
interests
|
|
|
(9
|
)
|
|
|
4
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before
cumulative effect of a change in accounting principle
|
|
|
490
|
|
|
|
(564
|
)
|
|
|
50
|
|
Cumulative effect of a change in
accounting principle
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
490
|
|
|
$
|
(566
|
)
|
|
$
|
50
|
|
Net margin
|
|
|
3.4
|
%
|
|
|
(4.8
|
)%
|
|
|
0.6
|
%
|
|
|
(Volume in thousands)
|
Production volume
|
|
|
830
|
|
|
|
775
|
|
|
|
716
|
|
Vehicle unit sales
|
|
|
1,035
|
|
|
|
882
|
|
|
|
740
|
|
Industry
|
|
|
6,076
|
|
|
|
5,242
|
|
|
|
4,605
|
|
GM as a percentage of industry
|
|
|
17.0
|
%
|
|
|
16.8
|
%
|
|
|
16.1
|
%
|
GM market share Brazil
|
|
|
21.3
|
%
|
|
|
21.3
|
%
|
|
|
23.1
|
%
|
62
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
GM Latin
America/Africa/Mid-East (concluded)
The industry in Latin America, Africa and Mid-East increased to
6.1 million units in 2006, up 15.9% versus 2005.
GMLAAMs vehicle unit sales increased by 17.3% over 2005
and 39.9% over 2004. The calendar year 2006 was a record
breaking year for GMLAAM. The region achieved a sales volume
record of 1.03 million units, the first time in history
where GMLAAM exceeded more than 1 million units in annual
sales. This growth led to a 17.0% market share in GMLAAM, a
0.2 percentage point increase compared to 2005 and a
0.9 percentage point increase over 2004. This overall
market share gain was primarily attributable to increases in
Colombia, Africa, and the Middle East, while Brazils
market share remained flat in 2006.
The year-end consumer price inflation dropped from 2005 to 2006
in Brazil (GMLAAMs largest market) from 5.7% to 3.3%, in
Argentina from 12.1% to 9.7%, in Chile from 3.7% to 2.6%, in
Colombia from 4.8% to 4.5%, and in Ecuador from 3.1% to 2.9%.
The consumer price inflation at year-end increased from 2005 to
2006 in Venezuela from 14.6% to 17.3% and in South Africa from
3.6% to 5.8%. An overall decrease in inflation for the region
improved the affordability of GMs products and contributed
to the increased net sales and income. Inflation in Brazil,
Venezuela, and Colombia in 2005 decreased as compared to 2004
while inflation increased in Argentina, Chile, Ecuador, and
South Africa.
2006 vs. 2005 Earnings
In 2006, GMLAAM achieved record revenue of $14.6 billion,
an increase of $2.8 billion or 23% over the prior year,
driven by strong volume. Pre-tax income of $527 million
increased $484 million versus 2005 income of
$43 million. This improvement of approximately
$0.5 billion was due to various factors, including:
|
|
|
|
|
Higher production volumes and improved product mix contributed
approximately $0.4 billion
|
|
|
|
Favorable pricing contributed approximately $0.3 billion
|
|
|
|
A reduction from 2005 to 2006 of approximately $0.1 billion
in restructuring and impairment charges
|
|
|
|
Unfavorable foreign exchange of approximately $0.2 billion
|
|
|
|
Other unfavorable factors totaling about $0.1 billion
|
GMLAAM reported net income of $490 million in 2006, an
approximately $1.1 billion improvement over 2005s
reported net loss of $566 million. This increase is largely
comprised of the operational improvement and the favorable
impact on restructuring and impairment charges previously
discussed, and a tax valuation allowance which was established
in 2005 at GM do Brasil for $617 million associated with
DTAs that could no longer be realized.
2005 vs. 2004 Earnings
GMLAAM reported 2005 net revenues of $11.8 billion,
which was an increase of $3.0 billion from 2004. Income
before tax decreased from $94 million in 2004 to
$43 million in 2005. The deterioration of $51 million
was due in part to an impairment charge of $150 million for
assets still in service (related to GMLAAMs export
business) in 2005, partly offset by favorable volume, product
mix, and pricing improvements.
For 2007, the industry is expected to continue to grow, but at a
more moderate rate. Consumer price inflation is expected to
remain under control in Brazil, Colombia, Chile, Ecuador, and
South Africa with increases expected in Argentina and Venezuela
for 2007. GMLAAM expects to launch four new products including
the Chevrolet Captiva across many Latin American countries, the
Chevrolet Epica in Venezuela and Africa, the Cadillac BLS and
SRX in South Africa, and the GMC Acadia in the Middle East. This
is in addition to the launch of the Hummer H3G in South Africa
at the end of 2006. GMLAAM is also planning to grow its
aftermarket sales business in 2007. The region will also
continue a strong focus on reducing structural costs across the
region to offset volume related cost increases.
63
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
GM
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in millions)
|
|
|
Total net sales and revenues
|
|
$
|
15,499
|
|
|
$
|
10,821
|
|
|
$
|
6,975
|
|
Income (loss) before income tax
expense (benefit)
|
|
$
|
1,023
|
|
|
$
|
(889
|
)
|
|
$
|
54
|
|
Income tax (expense) benefit
|
|
|
23
|
|
|
|
172
|
|
|
|
11
|
|
Equity income (loss) and minority
interests
|
|
|
140
|
|
|
|
474
|
|
|
|
666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before
cumulative effect of a change in accounting principle
|
|
|
1,186
|
|
|
|
(243
|
)
|
|
|
731
|
|
Cumulative effect of a change in
accounting principle
|
|
|
|
|
|
$
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GMAP net income (loss)
|
|
$
|
1,186
|
|
|
$
|
(246
|
)
|
|
$
|
731
|
|
GMAP net margin
|
|
|
7.7
|
%
|
|
|
(2.3
|
)%
|
|
|
10.5
|
%
|
|
|
(Volume in thousands)
|
Production volume(1)
|
|
|
1,896
|
|
|
|
1,562
|
|
|
|
1,333
|
|
Vehicle unit sales(2)(3)
|
|
|
1,253
|
|
|
|
1,065
|
|
|
|
887
|
|
Industry
|
|
|
19,485
|
|
|
|
18,287
|
|
|
|
17,160
|
|
GM as a percentage of industry
|
|
|
6.4
|
%
|
|
|
5.8
|
%
|
|
|
5.2
|
%
|
GM market share
Australia
|
|
|
15.4
|
%
|
|
|
17.8
|
%
|
|
|
19.4
|
%
|
GM market share
China(3)
|
|
|
11.8
|
%
|
|
|
11.2
|
%
|
|
|
9.4
|
%
|
|
|
|
(1) |
|
2006, 2005 and 2004 calendar years include GM Daewoo and Wuling
joint venture production |
|
(2) |
|
Includes GM Daewoo and Wuling joint venture sales for 2006,
2005, and 2004. |
|
(3) |
|
Includes Wuling joint venture sales due to GM equity position
and local ownership requirements. |
Industry vehicle unit sales in the Asia Pacific region increased
approximately 6.6% in 2006, to 19.5 million units from
18.3 million units in 2005. This result reflects strong
growth in China, where industry vehicle unit sales increased
25.8% to 7.4 million units in 2006, from 5.9 million
units in 2005. GMAP increased its vehicle unit sales in the Asia
Pacific region by almost 18% in 2006, to 1.3 million units
from 1.1 million in 2005. GMAPs 2006 market share was
6.4%, a 0.6 percentage point increase over 2005 and a
1.2 percentage point increase over 2004. Market share in
China increased 0.6 percentage points to 11.8% in 2006, and
market share in Australia fell 2.4 percentage points to
15.4% in 2006. As a result of increased vehicle unit sales and
the June 30, 2005 consolidation of GM Daewoo, GMAP revenue
rose 43% to $15.5 billion in 2006 compared to
$10.8 billion in 2005. In 2005 revenue grew
$3.8 billion, or 55% over 2004.
2006 vs. 2005 Earnings
Income (loss) before tax benefit for GMAP was $1.0 billion
and $(889) million in 2006 and 2005, respectively. Income
before tax benefit improved by $1.9 billion in 2006 versus
2005, principally due to the following:
|
|
|
|
|
The write-down to fair market value of GMs investment in
FHI resulted in a loss of $735 million in 2005.
|
|
|
|
In 2006, GM sold approximately 85% of its investment in Suzuki,
resulting in a gain of $666 million.
|
|
|
|
GM also sold its remaining interest in Isuzu for a gain of
$311 million in 2006.
|
|
|
|
Improved performance of approximately $200 million at GM
Daewoo on a fully consolidated basis, resulting from increased
volume and improved material cost performance, partially offset
by unfavorable foreign exchange and interest.
|
|
|
|
In addition, restructuring and impairment charges were
$42 million less in 2006 versus 2005.
|
64
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
|
|
|
GM Asia Pacific (concluded)
|
The reduction in equity income and minority interests from 2005
to 2006 resulted from the sale of the majority of GMs
equity investment in Suzuki and decreased equity income
associated with the consolidation of GM Daewoo beginning
June 30, 2005.
GMAPs net income improved by $1.4 billion, from a net
loss of $246 million in 2005 to a net income of
$1.2 billion in 2006. This improvement was driven by the
matters previously discussed, as well as their related tax
effects, and the reversal of a deferred tax asset valuation
allowance in 2006 at GM Daewoo for $215 million, as
management now believes these deferred tax assets will be
utilized.
2005 vs. 2004 Earnings
Income before tax in GMAP decreased by $0.9 billion in 2005
versus 2004, mainly the result of charges in 2005 related to the
$735 million write-down to fair market value of GMs
investment in FHI and a charge related to product specific asset
impairments of $64 million and separation costs of
$54 million at GM Holden in Australia. Unfavorable volume
and product mix at GM Holden in Australia was offset by
favorable results from GM Daewoo.
In 2007, Asia Pacific regional industry volume is expected to
continue to expand, with continued strong growth in China and
India. GMAP expects to take advantage of the strong industry and
grow revenue in 2007 by continuing to implement the multi-brand
strategy in China as well as leverage the product development
capabilities of GM Daewoo. Overall, GMs broad operational
footprint in the Asia Pacific region well positions it to meet
regional market demand. GMAP also expects to improve its
material cost performance through increased supplier
localization and increase its structural cost in 2007 to take
advantage of the continuing robust growth in the region.
Corporate
and Other Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in millions)
|
|
|
Total net sales, revenues and
eliminations
|
|
$
|
(162
|
)
|
|
$
|
31
|
|
|
$
|
972
|
|
(Loss) before income tax expense
(benefit)
|
|
$
|
(1,152
|
)
|
|
$
|
(6,916
|
)
|
|
$
|
(2,821
|
)
|
Income tax (expense) benefit
|
|
|
1,310
|
|
|
|
4,288
|
|
|
|
1,292
|
|
Equity income (loss) and minority
interests
|
|
|
3
|
|
|
|
27
|
|
|
|
(16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before
cumulative effect of a change in accounting principle
|
|
|
161
|
|
|
|
(2,601
|
)
|
|
|
(1,545
|
)
|
Cumulative effect of a change in
accounting principle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
161
|
|
|
$
|
(2,601
|
)
|
|
$
|
(1,545
|
)
|
Total Corporate and Other revenue consists primarily of
corporate eliminations.
2006 vs. 2005 Earnings
Corporate and Other Operations loss before income tax benefit
was $1.2 billion in 2006 compared to $6.9 billion in
2005. The
year-over-year
improvement in 2006 was primarily due to the 2005 charge of
$5.5 billion related to the Delphi benefit guarantee charge
pertaining to the contingent exposures relating to Delphis
Chapter 11 filing. During 2006 an additional charge of
$0.5 billion was recorded related to the Delphi benefit
guarantee (refer to Note 20 to the Consolidated Financial
Statements for further background). Results for 2006 also
included the benefit of approximately $1.0 billion lower
OPEB expense resulting from the UAW Health Care Settlement
Agreement that reduced legacy costs related to employee benefits
of divested businesses for which GM has retained responsibility
and the OPEB curtailment related to the GMAC Transaction. Other
costs also increased by
65
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Corporate
and Other Operations (concluded)
approximately $0.5 billion in 2006, primarily related to
increased administrative expenses and the elimination of hedge
accounting in connection with the restatement of our prior
financial statements for SFAS No. 133.
2005 vs. 2004 Earnings
Other Operations loss before income tax expense was
$2.8 billion in 2004 and included a charge of
$1.6 billion related to the settlement agreement reached
between GM and Fiat to terminate the Master Agreement (including
the Put Option) and settle various disputes between the two
companies. Other Operations also included OPEB legacy costs of
approximately $0.7 billion and administration expense of
$0.4 billion in 2004.
Tax benefit in 2006 was $1.3 billion compared to
$4.3 billion in 2005, the reduced benefit primarily related
to the larger pre-tax loss in 2005. Tax contingencies were
reduced by $0.5 billion in 2006. Tax benefit was
$1.3 billion in 2004.
Net income was $0.2 billion in 2006 compared to a net loss
of $2.6 billion in 2005. Net loss was $1.5 billion in
2004.
FIO
Financial Review
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
FIO Results of Operations
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in millions)
|
|
|
|
FIO
|
|
|
|
|
|
FIO
|
|
|
FIO
|
|
|
GMAC:
|
|
|
GMAC(a)
|
|
|
|
GMAC(c)
|
|
|
|
|
|
|
|
|
|
Automotive Finance Operations
|
|
$
|
1,151
|
|
|
$
|
1,174
|
|
|
$
|
880
|
|
|
$
|
1,341
|
|
ResCap
|
|
|
827
|
|
|
|
705
|
|
|
|
1,021
|
|
|
|
904
|
|
Insurance Operations
|
|
|
1,079
|
|
|
|
1,127
|
|
|
|
417
|
|
|
|
329
|
|
Other/eliminations
|
|
|
(882
|
)
|
|
|
(881
|
)
|
|
|
(38
|
)
|
|
|
320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
2,175
|
|
|
$
|
2,125
|
|
|
$
|
2,280
|
|
|
$
|
2,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity loss for GMAC(b)
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Dividends
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Financing
|
|
|
(1,150
|
)
|
|
|
|
|
|
|
(23
|
)
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total FIO Net Income
|
|
$
|
1,029
|
|
|
$
|
2,125
|
|
|
$
|
2,257
|
|
|
$
|
2,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
GMAC segment data as reported by GM line of business are
GMACs results of operations for 11 months ended
November 30, 2006. |
|
(b) |
|
This represents GMs share of GMACs loss for one
month (December) following the sale of GMAC using the equity
method. |
|
(c) |
|
This represents GMACs reported results for the year ended
December 31, 2006. |
GMs FIO business consists of the results of GMACs
lines of business: Automotive Finance Operations, ResCap;
Insurance, and Other, which includes its Commercial Finance
business and GMACs equity investment in Capmark. Also
included in FIO is Other Financing, which includes financing
entities that are not consolidated by GMAC as well as two
special purpose entities holding automotive leases previously
owned by GMAC and its affiliates that were transferred to GM as
part of the GMAC Transaction.
FIO net income was $1.0 billion, $2.3 billion and
$2.9 billion for the years ended December 31, 2006,
2005 and 2004, respectively. This decrease of 54% or
1.2 billion from 2005 to 2006, was primarily due to the
GMAC transaction as discussed in more detail below. In 2006, FIO
net income of $1.0 billion includes 12 months of
activity for GMAC comprised of 11 months of operations as a
wholly-owned subsidiary of General Motors Corporation
66
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
FIO
Financial Review (concluded)
totaling $2.2 billion of income and one month of
equity loss of $5 million as a result of the sale of a
controlling interest in GMAC to FIM Holdings LLC. All
comparisons for the GMAC activity below are on a 12 months
basis.
Automotive Finance Operations net income for 2006 increased 33%
when compared to 2005. Net income was positively impacted by
$383 million related to the write-off of certain net
deferred tax liabilities as part of the conversion of GMAC to an
LLC during November 2006. These net deferred tax
liabilities have been simultaneously recorded in GMs
parent company financial statements through income tax expense.
Results for 2006 include an unfavorable after-tax earnings
impact of $135 million from a $1 billion debt tender
offer to repurchase certain deferred interest debentures. The
decrease in 2005 net income from 2004 reflects lower net
interest margins as a result of increased borrowing costs due to
widening spreads and higher market interest rates.
ResCap net income for 2006 declined 31% when compared to 2005.
The 2006 operating results were adversely affected by domestic
economic conditions especially during the fourth quarter. These
developments were offset by the conversion to an LLC for income
tax purposes, which resulted in the elimination of a
$523 million net deferred tax liability. Excluding the LLC
benefit, ResCaps net income was $182 million. The
increase in 2005 net income over 2004 reflects improvements in
earnings from increased loan production, favorable credit
experience, improved mortgage servicing results, and gains on
sales of mortgages.
Insurance Operations net income totaled a record
$1.1 billion in 2006 compared to $417 million in 2005.
The increase in income is mainly a result of higher realized
capital gains of approximately $1.0 billion in 2006 as
compared to $108 million in 2005. Underwriting results were
favorable primarily due to increased insurance premiums and
service revenue earned and improved loss and loss adjustment
expense experience partially offset by higher expenses. The
increase in 2005 net income over 2004 reflects a combination of
strong results achieved through increased premium revenue,
higher realized capital gains, and improved investment portfolio
performance.
GMACs Other segment had a net loss of $881 million in
2006 compared to a loss of $38 million in 2005. The
increased loss was mainly due to the decline in income from
Capmark (GMACs former commercial mortgage operations) of
$237 million due to the sale of 79% interest of the
business on March 23, 2006, additional non-cash goodwill
charges of $695 million, higher loss provisions, and the
tax impact related to GMACs LLC conversion. Other segment
net income decreased 111% in 2005 compared with 2004 primarily
due to $439 million of after-tax goodwill impairment
charges in 2005.
FIO Other Financing net loss increased $1.1 billion to
$1.2 billion in 2006, mainly due to the $2.9 billion
pre-tax loss on the GMAC Transaction. This loss was offset by an
increase in income of $2.5 billion related to the ceasing
of depreciation on GMACs long lived assets classified as
held for sale. In addition, a $786 million income tax
expense arose due to GMACs LLC conversion, and
$351 million of incremental tax arose due to the GMAC sale.
These were offset by the reversal of State/Local tax
contingencies and income related to the automotive leases
transferred to GM as part of the GMAC Transaction. FIO Other net
loss increased by $5 million in 2005 in comparison with
2004.
Key
Factors Affecting Future and Current Results
The following discussion identifies the key factors, known
events, and trends that could affect our future results:
Turnaround
Plan
Over the past year, one of our top priorities has been improving
our business in North America to position GM for sustained
profitability and growth in the long-term and to achieve
competitiveness on a global basis in an increasingly global
environment. GM has been systematically and aggressively
implementing its turnaround plan for GMNAs business to
return the operations to profitability and positive cash flow as
soon as possible. This plan is built on four elements:
67
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Turnaround Plan (continued)
|
|
|
|
|
Product Excellence
|
|
|
|
Revitalize Sales and Marketing Strategy
|
|
|
|
Accelerate Cost Reductions and Quality Improvements; and
|
|
|
|
Address Health Care/Legacy Cost Burden
|
The following update describes what we have done so far to
achieve these elements:
Product
Excellence
GM continues to focus significant attention on maintaining
consistent product freshness by introducing new vehicles and
reducing the average vehicle lifecycle. In 2006 approximately
30% of GMNAs retail sales volume came from cars and trucks
launched within the past 18 months. These launches included
the next generation of large utility trucks (Chevrolet Tahoe and
Suburban, GMC Yukon and Yukon XL, and Cadillac Escalade), Saturn
Aura, Chevy HHR, Saturn Sky, Pontiac G-6 convertible, Buick
Lucerne, Saab 9-3 SportCombi, Hummer H3, and Cadillac DTS. While
all these launch vehicles contributed favorably to improved
profitability, sales of the newly launched large utility trucks
had the most significant impact on profitability, despite the
negative effect of higher fuel prices and overall lower industry
demand.
In 2007 we expect that approximately 36% of GMNAs retail
sales will come from vehicles launched within 18 months.
These launches will include the new Chevrolet Silverado, GMC
Sierra, Chevrolet Malibu, Cadillac CTS, and entries in the large
crossover segment (GMC Acadia, Saturn Outlook, and Buick
Enclave). In support of new car and truck programs, GMs
total capital spending in 2006 was $7.5 billion, of which
$5.0 billion was devoted to GMNA. GM expects to increase
this commitment going forward spending between $8.5 billion
and $9 billion in each of 2007 and 2008, of which
approximately $5.7 billion in 2007 and approximately
$5.5 billion to $5.7 billion in 2008 will be devoted
to GMNA.
GMNA is also allocating capital and engineering to support more
fuel-efficient vehicles, including hybrid vehicles in the United
States, and is increasing production of active fuel management
engines and six-speed transmissions. GM recently announced its
intention to build its first plug-in hybrid and unveiled the
Chevy Volt extended range electric concept vehicle, while at the
same time announcing two partnerships to accelerate development
of advanced lithium-ion batteries. In addition, GM is
undertaking a major initiative in alternate fuels through
sustainable technologies such as E85 Flex Fuel vehicles. GM has
sold two million E85 vehicles and plans to build over
two million more in the next five years. GM is also adding
five more E85-capable models to its lineup for 2007, raising
GMs total flex-fuel offerings to 14 vehicles.
In addition to offering its flex-fuel vehicles, GM responded to
the strong market demand for fuel economy by selling more than
one million 2006 model year vehicles that achieve 30 mpg or
better on the highway (as estimated by the EPA). In the 2007
model year, GM will increase the number of vehicle models that
it sells in the United States that achieve 30 mpg or more to 23
vehicles.
Revitalize
Sales and Marketing Strategy
GM is pursuing a revised sales and marketing strategy by
focusing on clearly differentiating our brands, optimizing our
distribution network, growing in key metropolitan markets, and
re-focusing our marketing efforts on the strength and value of
our products. GM continues to support a more orderly and
consistent alignment of its dealers, particularly among Buick,
Pontiac, and GMC dealers, which we believe will strengthen those
brands.
In January 2006, GM significantly lowered manufacturers
suggested retail prices on vehicles that accounted for about 80%
of its 2006 model year automotive sales volume. GMs
promotion strategy now emphasizes its brands and vehicles,
rather than price incentives. In addition, GM intends to
increase advertising in support of new products and specific
marketing initiatives to improve GMs sales performance in
certain metropolitan markets.
68
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Turnaround Plan (continued)
In September 2006, GM extended its powertrain warranty policy to
five years or 100,000 miles, applicable to all 2007 models
in the United States and Canada. GM believes that with its
expanded warranty it now offers more extensive warranty coverage
in the United States and Canada than any other full-line vehicle
manufacturer. We anticipate that this expanded warranty will
enhance consumer confidence in the quality and durability of our
vehicles in the United States and Canada.
GMs pricing strategy, improved quality, and product
execution, reduced sales to daily rental fleets, as well as a
strong market for used vehicles, resulted in higher residual
values on GMs cars and trucks.
For 2007, GM plans to continue to focus on consistent alignment
of its dealers, particularly among Buick, Pontiac, and GMC
dealers, improved retail performance in key metropolitan
markets, and further reductions in sales to daily rental
companies.
Accelerate
Cost Reductions and Quality Improvements
Following our November 2005 announcement of our strategy to
reduce structural costs in the manufacturing area, GM has
introduced a variety of initiatives to accomplish that strategy.
In 2007, we expect to realize the $9 billion
structural-cost savings target versus 2005 in our GMNA and
Corporate and Other segments on a running rate basis. Running
rate basis refers to the average annualized cost savings into
the foreseeable future anticipated to result from cost savings
actions when fully implemented. GM realized $6.8 billion in
structural cost reductions in North America during 2006,
exceeding the $4 billion of structural cost reductions
estimated for 2006 in GMs 2005 Annual Report on
Form 10-K.
This improvement is due largely to the success of the attrition
programs, including the effect of the pension remeasurement. The
expected total annual cash savings from structural cost
reductions is approximately $5 billion on an average
running rate basis. In addition, GM is focusing on our long-term
goal of reducing our global automotive structural costs to 25%
of global revenue. For 2006, global automotive structural costs
were less than 30% of revenue, down from about 35% in 2005.
In November 2005, GM announced that it would cease operations at
12 manufacturing facilities by 2008, and reduce manufacturing
employment levels by approximately 30,000 employees by the end
of 2008. In fact, GM reached the reduced employment levels as of
January 2, 2007. To support its structural cost
initiatives, in March 2006 GM, the UAW, and Delphi entered into
the UAW Attrition Agreement designed to reduce the number of
hourly employees at GM and at Delphi through the UAW Attrition
Program in which approximately 34,400 GM employees
participated. Beginning in 2007, GMNA will benefit from the full
year impact of the UAW Attrition Program since the remainder of
the participants in the program either retired or otherwise left
as of January 1, 2007. See GM-UAW-Delphi Special
Attrition Program Agreement below for a further
description of the UAW Attrition Agreement. GM believes these
actions collectively will reduce our excess capacity by
one million units, in addition to the one million unit
capacity we eliminated between 2002 and 2005, and reduce
structural costs to assist in closing the cost gap with other
vehicle manufacturers. To achieve further cost reductions,
GMs management is putting a high priority on negotiating a
more competitive collective bargaining agreement with the UAW in
2007.
In the first quarter of 2006, GM announced plans to
substantially alter pension benefits for current
U.S. salaried employees by freezing accrued benefits in the
current plan and implementing a new benefit structure for future
accruals, which include a reduced defined benefit plan for some
salaried employees and a new defined contribution plan for the
other salaried employees. These pension plan changes will not
affect retirees or surviving spouses who are currently drawing
benefits from the Salaried Retirement Program.
Reducing material costs remains a critical part of GMNAs
overall long-term cost reduction plans, although improved
performance in purchasing has been offset by higher commodity
prices for aluminum and copper and troubled supplier support. GM
continues its aggressive pursuit of material cost reductions via
improvements in its global processes for product development,
which will enable further commonization and application of parts
among vehicle architectures, as well as through the continued
use of the most competitive supply sources globally and the
extensive use of benchmarking and supplier footprint
optimization. By leveraging its global reach to take advantage
69
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Turnaround Plan (continued)
of economies of scale in purchasing, engineering, advertising,
salaried employment levels, and indirect material costs, GM
seeks to continue to achieve cost reductions. GM also
anticipates that a resolution of the Delphi bankruptcy
reorganization, discussed below, will include an opportunity for
GM to mitigate the cost penalty it now pays Delphi for certain
parts.
GM has seen significant improvements in both warranty and other
quality related costs over the past several years, which has
enabled the implementation of the extended powertrain warranty
described above. In 2007, we will continue to focus on reducing
these costs.
Address
Health Care/Legacy Cost Burden
Addressing the legacy cost burden of health care for employees
and retirees in the United States is one of the critical
challenges facing GM.
In October 2005, we announced an agreement with the UAW that
will reduce GMs hourly retiree health-care obligations. GM
began recognizing the benefit from the UAW Health Care
Settlement Agreement in the third quarter of 2006. The
remeasurement of the U.S. hourly OPEB plans as of
March 31, 2006 generated a $1.3 billion reduction in
OPEB expense and an approximate $17 billion reduction in
the OPEB obligation. This reduction in expense was partially
offset by the recognition of expense associated with the
approximate $3 billion related to capped benefits expected
to be paid from GM contributions to the new UAW Mitigation Plan.
Refer to Note 19 to the Consolidated Financial Statements
for further discussion of the financial impacts of the UAW
Settlement Agreement.
The UAW Health Care Settlement Agreement will remain in effect
until at least September 2011, after which either GM or the UAW
may cancel the agreement upon 90 days written notice.
Similarly, GMs contractual obligations to provide
health-care benefits to UAW hourly retirees extends to at least
September 2011 and will continue thereafter until terminated by
either GM or the UAW. As a result, the provisions of the UAW
Health Care Settlement Agreement will continue in effect for the
UAW retirees beyond the expiration of the current collective
bargaining agreement between GM and the UAW in September 2007,
regardless of what other changes to the contract GM and the UAW
may negotiate.
In April 2006, GM and the IUE-CWA also reached a tentative
agreement to reduce health-care costs that is similar to the UAW
Health Care Settlement Agreement. The agreement was ratified by
the IUE-CWA membership in April 2006 and received court approval
in November 2006. Because the effect was not material and did
not require remeasurement in 2006, the estimated
$0.6 billion reduction in our OPEB obligation will be
recognized in the January 1, 2007 measurement of
U.S. OPEB plans and reflected as part of our OPEB expense
for 2007.
GM is also increasing the U.S. salaried workforces
participation in the cost of health care. In February 2006, GM
announced that beginning in January 2007, it would cap its
contributions to salaried retiree health care at the level of
its 2006 expenditures. This change affects employees and
retirees who are eligible for the salaried postretirement
health-care benefit and their spouses. Salaried employees who
were hired after January 1, 1993 are not eligible for
retiree health-care benefits, so they are not affected by these
changes. After 2006, when average costs exceed established
limits, GM will make additional plan changes that affect
cost-sharing features of program coverage, effective with the
start of the next calendar year. Program changes may include,
but are not limited to, higher monthly contributions,
deductibles, coinsurance,
out-of-pocket
maximums, and prescription drug payments. Plan changes may be
implemented in medical, dental, vision, and prescription drug
plans. The remeasurement of the U.S. salaried OPEB health
care plan as of February 9, 2006 resulted in a
$4.7 billion reduction in the OPEB obligation and
$0.5 billion in OPEB expense commencing in the second
quarter.
In October 2006, the GM board of directors approved a reduction
in the levels of coverage for corporate-paid life insurance for
salaried retirees. For eligible salaried employees who retire on
or after May 1, 2007, coverage will reduce by 50% on the
tenth anniversary of their retirement date, and salaried
employees who retire before May 1,
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GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Turnaround Plan (concluded)
2007 will have their coverage reduced by 50% on January 1,
2017. This change reduced GMs year-end OPEB obligation by
approximately $0.5 billion.
In 2007, GM will benefit from the full year impact of the
changes in health care discussed above. In addition, GM will
continue to work with its employees, health-care providers, and
the U.S. government to find solutions to the critical
issues posed by the rising cost of health care.
Labor
Negotiations
GMs current collective bargaining agreement with the UAW
expires in September 2007. The negotiations present both risks
and an opportunity to address cost competitiveness issues
relative to competitors in the industry. GM recognizes the
impact that any resulting labor stoppages could have on GM, its
suppliers, and its dealers, and has begun contingency planning
with these groups. If the collective bargaining agreement
expires before a new agreement is reached, GM anticipates that
it would attempt to persuade the UAW to support continuing its
operations while negotiations continue. It is possible, however,
that the expiration of the collective bargaining agreement could
result in labor disruptions affecting some or all GM facilities
in the United States, or the operations of some of its suppliers
that employ workers represented by the UAW. A lengthy strike by
the UAW that involves all or a significant portion of our
manufacturing facilities in the United States would have a
material adverse effect on our operations and financial
condition, particularly our liquidity.
Delphi
Bankruptcy
General. In October 2005, Delphi filed a
petition for Chapter 11 proceedings under the
U.S. Bankruptcy Code for itself and many of its
U.S. subsidiaries. Delphi is GMs largest supplier of
automotive systems, components, and parts, and GM is
Delphis largest customer.
GM has worked and will continue to work constructively in the
court proceedings with Delphi, Delphis unions, and other
participants in Delphis Chapter 11 restructuring
process. Delphi continues to assure GM that it expects no
disruption in its ability to supply GM with the systems,
components, and parts it needs as Delphi pursues a restructuring
plan under the Chapter 11 process. Although the challenges
faced by Delphi during its restructuring process could create
operating and financial risks for GM, that process is also
expected to present opportunities for GM. These opportunities
include reducing, over the long term, the significant cost
penalty GM incurs in obtaining parts from Delphi, as well as
improving the quality of systems, components, and parts GM
procures from Delphi. However, there can be no assurance that GM
will be able to realize any benefits as a result of
Delphis restructuring process.
Framework Support Agreement. On
December 18, 2006, to facilitate the consensual resolution
of Delphis bankruptcy, GM entered into a Plan Framework
Support Agreement (Framework Agreement) with Delphi and a
consortium of potential investors in Delphi (Plan Investors),
which outlines certain material terms of a proposed
restructuring plan for Delphi (Proposed Plan). The Proposed Plan
is conditioned both on the implementation of an overall
transformation strategy that would include the settlement of
certain issues and disputes between GM and Delphi (Designated
Issues) and on proposed equity investments by the Plan Investors
in Delphi. The Designated Issues include (a) legacy
obligations related to Delphi employees who formerly were GM
hourly employees, including responsibility for various pension
and other OPEB obligations, (b) costs associated with the
transformation of Delphis business, (c) Delphis
support for GMs efforts to resource certain products
purchased by GM, (d) the restructuring of on-going
contractual relationships between GM and Delphi, and
(e) the amount and treatment of GMs claims against
Delphi in the Chapter 11 proceedings. Under the Framework
Agreement, GM has agreed to, among other things, negotiate these
matters in good faith but is not obligated to enter into any
agreements. If GM and Delphi reach any commercial, business, and
labor-related agreements, those agreements will be evidenced in
definitive documentation.
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GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Delphi Bankruptcy (continued)
Under the Framework Agreement, the Proposed Plan would provide
that GMs claims against Delphi (other than ordinary course
of business and environmental claims, which would flow through
the bankruptcy) would be satisfied by the payment of
$2.63 billion in cash and seven million shares of
common stock in Delphi as reorganized (out of a total of
135 million fully diluted shares).
GM expects that the obligations and costs that it would assume
to resolve the Designated Issues together with its recoveries
contemplated under the Proposed Plan would be consistent with
the $6 billion to $7.5 billion estimated range of
contingent exposures (as discussed below) associated with
Delphis Chapter 11 proceedings.
Pursuant to the Framework Agreement, Delphi intends to, among
other things, negotiate and finalize the Proposed Plan and other
related documents, seek Bankruptcy Court approval of the
Proposed Plan and payment of related expenses, prepare and
distribute a draft disclosure statement with respect to the
Proposed Plan to the Plan Investors and GM, and seek Bankruptcy
Court approval of such disclosure statement (the
Disclosure Statement Order). Provided that GM and
Delphi reach agreement on all the issues and documents affecting
GM that are negotiated under the Proposed Plan, GM will support
the Disclosure Statement Order and not object to confirmation of
the Proposed Plan by the Bankruptcy Court. The Framework
Agreement can be terminated by any party to the Agreement at any
time after April 1, 2007 or upon termination of the
investment agreement between Delphi and the Plan Investors,
which can be terminated at any time.
In addition, the Framework Agreement provides that until
April 1, 2007 GM and the Plan Investors will not pursue,
negotiate, or facilitate any transaction inconsistent with the
proposed investment of the Plan Investors in Delphi. This
commitment could be extended beyond that date by the consent of
GM and the Plan Investors, which may not be withheld
unreasonably. If GM and Delphi reach a comprehensive resolution
of the issues affecting them, which is the goal of current
negotiations under the Framework Agreement, the matters
described in the remainder of this section will be handled as
the parties agree. Since negotiations are still underway,
however, and there can be no assurance that GM and Delphi will
succeed in agreeing upon a comprehensive resolution, the
following matters continue to pose significant risks to GM.
Delphi Motions Seeking Authority to Reject Various
Contracts. Delphi has consented, in consideration
of the progress made toward a consensual resolution of the
Chapter 11 process, to an indefinite adjournment of
hearings on its motions filed in March 2006 under the
U.S. Bankruptcy Code seeking authority to reject its
U.S. labor agreements and modify retiree welfare benefits
and to reject certain supply contracts with GM. If Delphi, its
unions, the Plan Investors, and GM are unable to negotiate
comprehensive agreements to resolve the issues involved in
Delphis bankruptcy, Delphi or one or more of its
affiliates could be subject to labor disruptions or could reject
or threaten to reject individual contracts with GM, either for
the purpose of exiting specific lines of business or in an
attempt to increase the price GM pays for certain parts and
components. Any of these events could materially adversely
affect GM by disrupting the supply of automotive systems,
components, and parts, and could even force the suspension of
production at GM assembly facilities.
While GM believes that it is likely that GM and Delphi will
reach a consensual resolution pursuant to the Framework
Agreement, we are seeking to minimize our risks by protecting
our right of setoff against the $1.15 billion we owed to
Delphi as of the date of its Chapter 11 filing. However,
the extent to which these obligations are covered by our right
to setoff may be subject to dispute by Delphi, the
creditors committee, or Delphis other creditors, and
limitation by the court. GM cannot provide any assurance that it
will be able to setoff such amounts fully or partially. To date,
GM has taken setoffs of approximately $53.6 million, with
Delphis agreement.
Benefit Guarantee Agreements. As described
above, the Designated Issues between Delphi and GM include
legacy obligations and responsibility for various pension and
other OPEB obligations related to certain U.S. hourly
employees who formerly were GM employees and became Delphi
employees in GMs spin-off of Delphi in 1999 (Transferred
Employees). In connection with that spin-off, GM entered into
separate agreements with the UAW, the IUE-CWA, and the United
Steel Workers (Benefit Guarantee Agreements), providing
contingent benefit guarantees
72
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Delphi Bankruptcy (continued)
to make payments for limited pension and OPEB to certain
Transferred Employees who meet the applicable eligibility
requirements for such payments (Covered Employees).
Each Benefit Guarantee Agreement contains separate benefit
guarantees relating to pension and OPEB obligations, with
different triggering events under which GM could be liable if
Delphi fails to provide the corresponding benefit at the
required level. Therefore, GM could incur liability under one of
the guarantees (e.g., OPEB) without triggering the other
guarantees (e.g., pension). In addition, with respect to pension
benefits, GMs guarantee of pension benefits arises only to
the extent that pension benefits provided both by Delphi (or an
applicable successor) and by the Pension Benefit Guaranty
Corporation fall short of the guaranteed amounts.
GMs obligations under the Benefit Guarantee Agreements
have not been triggered by Delphis Chapter 11 filing,
Delphis motions in Bankruptcy Court to reject its
U.S. labor agreements and modify retiree welfare benefits,
or any other actions to date. The benefit guarantees will expire
on October 18, 2007 unless they are triggered before that
date.
The Benefit Guarantee Agreements do not obligate GM to guarantee
any benefits for Delphi retirees in excess of the corresponding
benefits GM provides at the time to its own hourly retirees.
Accordingly, any reduction of the benefits GM provides to its
hourly retirees would reduce GMs obligations under the
corresponding benefit guarantee.
A separate agreement between GM and Delphi, which also expires
on October 18, 2007, requires Delphi to indemnify GM for
any payments under the benefit guarantees to the UAW employees
or retirees. Any recovery by GM under indemnity claims against
Delphi might be subject to partial or complete discharge in the
Delphi reorganization proceeding. As a result, GMs claims
for indemnity may not be paid fully or partially.
As part of GMs discussions in 2005 with the UAW that led
to a settlement with the UAW changing health-care benefits for
hourly retirees, GM provided the Covered Employees represented
by the UAW the potential to earn up to seven years of credited
service for purposes of eligibility for certain health-care
benefits under the GM/UAW benefit guarantee agreement.
UAW Attrition Agreement. In the first half of
2006, GM, Delphi, and the UAW implemented the UAW Attrition
Agreement, which provided a combination of early retirement
programs and other incentives to reduce hourly employment levels
at both GM and Delphi. As of December 31, 2006,
approximately 12,400 UAW-represented Delphi employees elected
one of the retirement options available under the UAW Attrition
Program.
Under the UAW Attrition Agreement, GM agreed to assume certain
costs regarding UAW-represented Delphi employees. Specifically,
GM agreed to: (1) pay lump sums of $35,000 to certain
employees who participate in the UAW Attrition Program;
(2) assume all OPEB obligations to Transferred Employees
who agree to retire under the UAW Attrition Program via a return
to GM; (3) subsidize health-care costs for Delphi employees
participating in a special voluntary pre-retirement program for
an interim period, if Delphi reduces or eliminates its health
care and/or
life insurance coverage provided to active UAW employees; and
(4) accept back 5,000 active Transferred Employees.
GM will have a pre-petition, general unsecured claim assertable
against Delphi in the amount of approximately $2.9 billion,
related to certain of GMs costs under the UAW Attrition
Agreement, subject to objections on any grounds other than that
the claim did not arise under the terms of certain
pre-existing
contractual agreements between GM and Delphi.
Additional Attrition Programs. As of
December 31, 2006 approximately 6,200 Transferred
Employees represented by the
IUE-CWA and
approximately 1,400 Transferred Employees represented by
the UAW elected to participate in additional attrition and
buyout programs offered in the second half of 2006, which were
similar to the program under the UAW Attrition Agreement
described above. GM will have a pre-petition, general unsecured
claim assertable against Delphi in the amount of approximately
$0.6 billion, related to certain of GMs costs under
the IUE-CWA
attrition program, subject to objections on any grounds other
than that the claim did not arise under the terms of a certain
preexisting contractual agreement between GM and Delphi. GM will
also have an allowed
73
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Delphi Bankruptcy (concluded)
pre-petition
general unsecured claim against Delphi in the amount of
approximately $0.3 billion for GMs portion of buyout
payments made under these additional
IUE-CWA and
UAW programs.
GM Claims Against Delphi. In July 2006, GM
filed a Consolidated Proof of Claim, in accordance with the
Bankruptcy Courts procedures order, setting forth GM
claims (including the claims of various GM subsidiaries) against
Delphi and the other debtor entities. The exact amount of
GMs claims cannot be established because of the contingent
nature of many of the claims involved and the fact that the
validity and amount of the claims may be subject to objections
from Delphi and other stakeholders, but, based on currently
available data, the amount of GMs claims could be as much
as $13 billion. Although the Proof of Claim preserves
GMs right to pursue recovery of its claims from Delphi,
these claims may be subject to compromise in the bankruptcy
process or as part of a negotiated settlement, and GM may
receive only a portion, if any, of these claims.
GM Contingent Liability. Depending on the
outcome of the current negotiations and other factors, GM
believes that it is probable that it has incurred a contingent
liability due to Delphis Chapter 11 filing. Based on
currently available data and ongoing discussions with Delphi and
other stakeholders, GM believes that the range of the contingent
exposures is between $6 billion and $7.5 billion, with
amounts near the low end of the range considered more possible
than amounts near the high end of the range. Initially, GM
established a liability of $5.5 billion ($3.6 billion
after tax) for this contingent exposure in the fourth quarter of
2005, and recorded an additional charge of $0.5 billion
($0.3 billion after tax) in the third quarter of 2006 to
reflect GMs potential exposure for OPEB costs associated
with previously divested Delphi business units and certain labor
restructuring costs, including but not limited to expenditures
related to the attrition plans discussed above. At
December 31, 2006 and 2005, GMs contingent liability
related to the Delphi matters was $1.5 billion and
$5.5 billion, respectively. During 2006, amounts previously
recorded under the benefit guarantee were reclassified to
GMs OPEB liability as GM has assumed the OPEB obligation
for approximately 17,800 Delphi employees who have returned back
to GM to continue working or retire from GM. These views reflect
GMs current assessment that it is unlikely that a
Chapter 11 process will result in both a termination of
Delphis pension plan and complete elimination of its OPEB
plans. In addition to theses charges, GM may agree to reimburse
Delphi for certain labor expenses to be incurred upon and after
Delphis emergence from bankruptcy. GMs current
estimate of these expenses involves an initial payment in 2007,
not expected to exceed approximately $400 million, and
ongoing expenses of limited duration and estimated to average
less than $100 million annually. GM will recognize these
expenses as incurred in the future. GM expects these payments to
be far exceeded by anticipated reductions in the price of
systems, components, and parts it purchases from Delphi. Because
negotiations are ongoing, the actual impact of the resolution of
issues related to Delphi cannot be determined until the
Bankruptcy Courts approval of a comprehensive resolution,
and there can be no assurance that the parties will reach a
comprehensive resolution or that the Bankruptcy Court will
approve such a resolution, or that any resolution will include
the terms described above.
If GM is required to make OPEB payments to current Delphi
retirees under the Benefit Guarantee Agreements, GM would expect
to make such payments from ongoing operating cash flow and
financings. Such payments, if any, are not expected to have a
material effect on GMs cash flows in the short term.
However, if required, these payments would be likely to increase
over time and could have a material effect on GMs
liquidity in coming years. (For reference, Delphis 2006
Annual Report on
Form 10-K
reported that in 2006 it paid benefits of $229 million to
hourly and salaried retirees; salaried retirees are not covered
under the Benefit Guarantee Agreements).
GMAC
Sale of 51% Controlling Interest
On November 30, 2006, GM completed the GMAC Transaction,
which was the sale of a 51% controlling interest in GMAC for a
purchase price of $7.4 billion to FIM Holdings. FIM
Holdings is a consortium of investors including Cerberus FIM
Investors LLC, Citigroup Inc., Aozora Bank Limited, and a
subsidiary of The PNC Financial Services Group, Inc. GM has
retained a 49% interest in GMACs Common Membership
Interests. In addition, FIM Holdings purchased 555,000 of
GMACs Preferred Membership Interests for a cash purchase
price of $500 million and GM purchased 1,555,000 Preferred
Membership Interests for a cash purchase price of
$1.4 billion.
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GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
GMAC Sale of 51% Controlling
Interest (continued)
The total value of the cash proceeds and distributions to GM
after payment of certain intercompany obligations, and before it
purchased the preferred membership interests of GMAC was
expected to be approximately $14 billion over three years,
comprised of the $7.4 billion purchase price and
$2.7 billion cash dividend at closing, and other
transaction related cash flows including the monetization of
certain retained assets. Subsequent to December 31, 2006,
it was determined that GM would be required to make a capital
contribution to GMAC of approximately $1.0 billion to
restore its adjusted tangible equity balance to the
contractually required amount of $14.4 billion, due to the
decrease in the adjusted tangible equity balance of GMAC as of
November 30, 2006.
GMAC is required to make certain quarterly distributions to
holders of the Preferred Membership Interests in cash on a pro
rata basis. The Preferred Membership Interests are issued in
units of $1,000 and accrue a yield at a rate of 10% per
annum. GMACs Board of Managers (GMAC Board) may reduce any
distribution to the extent required to avoid a reduction of the
equity capital of GMAC below a minimum amount of equity capital
equal to the net book value of GMAC at November 30, 2006.
In addition, the GMAC Board may suspend the payment of Preferred
Membership Interest distributions with the consent of the
holders of a majority of the Preferred Membership Interest. If
distributions are not made with respect to any fiscal quarter,
the distributions would not be cumulative. If the accrued yield
of GMACs Preferred Membership Interests for any fiscal
quarter is fully paid to the preferred holders, then a portion
of the excess of the net financial book income of GMAC in any
fiscal quarter over the amount of yield distributed to the
holders of the Preferred Membership Interests in such quarter
will be distributed to the holders of the Common Membership
Interests as follows: at least 40% of the excess will be paid
for fiscal quarters ending prior to December 31, 2008 and
at least 70% of the excess will be paid for fiscal quarters
ending after December 31, 2008.
Prior to consummation of the GMAC Transaction, (i) certain
assets with respect to automotive leases owned by GMAC and its
affiliates having a net book value of approximately
$4 billion and related deferred tax liabilities of
$1.8 billion were transferred to GM, (ii) GM assumed
or retained certain of GMACs OPEB obligations of
$842 million, and related deferred tax assets of
$302 million. (iii) GMAC transferred entities that
hold certain real properties to GM, (iv) GMAC paid cash
dividends to GM based on GMACs anticipated net income for
the period September 30, 2005 to November 30, 2006
totaling $1.9 billion, (v) GM repaid certain
indebtedness and specified intercompany unsecured obligations
owing to GMAC, and (vi) GMAC made a one-time distribution
to GM of $2.7 billion of cash to reflect the increase in
GMACs equity resulting from the transfer of a portion of
GMACs net deferred tax liabilities arising from the
conversion of GMAC and certain of its subsidiaries to LLCs.
As part of the agreement, GM retained an option, for
10 years after the closing date, to repurchase from GMAC
certain assets related to the automotive finance business of the
North American Operations and International Operations of GMAC.
GMs exercise of the option is conditional on GMs
credit rating being investment grade or higher than GMACs
credit rating. The call option price is calculated as the higher
of (i) fair market value or (ii) 9.5 times the
consolidated net income of GMACs automotive finance
business in either the calendar year the call option is
exercised or the calendar year immediately following the year
the call option is exercised.
The GMAC Transaction, an important element in GMs
turnaround efforts, provided the following:
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Strong long-term services agreement between GM and
GMAC As part of the transaction, GM and GMAC entered
into a number of agreements that were intended to continue the
mutually-beneficial global relationship between GM and GMAC.
These agreements, in substance, were consistent with the
existing and historical practices between GM and GMAC, including
requiring GMAC to continue to allocate capital to automotive
financing, thereby continuing to provide critical financing
support to a significant share of GMs global sales. While
GMAC retains the right to make individual credit decisions, GMAC
has committed to fund a broad spectrum of customers and dealers
consistent with historical practice in the relevant
jurisdictions. Subject to GMACs fulfillment of certain
conditions, GM has granted GMAC exclusivity for GM products in
specified markets around the world for U.S., Canadian, and
international GM-sponsored retail, lease and dealer marketing
incentives, with the exception of Saturn branded products.
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75
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
GMAC Sale of 51% Controlling
Interest (concluded)
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Improved Liquidity GM received significant cash
proceeds at the closing to bolster GMs liquidity,
strengthening GMs balance sheet and funding the turnaround
plan.
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Enhanced stockholder value through a stronger
GMAC GM retained a 49% Common Membership
Interest in GMAC, and will be able to continue to participate in
GMACs strong profitability levels.
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Delinkage of GMACs credit rating from GM In
pursuing the sale of a majority interest in GMAC, GM expected
that the introduction of a new controlling investor for GMAC,
new capital at GMAC, and significantly reduced intercompany
exposures to GM would provide GMAC with a solid foundation to
improve its current credit rating, and de-link the GMAC credit
ratings from GM. Following the sale, in December 2006 Fitch
Ratings (Fitch) and Standard & Poors (S&P) both
raised GMACs credit rating one notch, although it remains
below investment grade.
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Investigations
As previously reported, GM is cooperating with federal
governmental agencies in connection with a number of
investigations.
The SEC has issued subpoenas to GM in connection with various
matters including GMs financial reporting concerning
pension and OPEB, certain transactions between GM and Delphi,
supplier price reductions or credits, and any obligation GM may
have to fund pension and OPEB costs in connection with
Delphis proceedings under Chapter 11 of the
Bankruptcy Code. In addition, the SEC has issued a subpoena in
connection with an investigation of our transactions in precious
metal raw materials used in our automotive manufacturing
operation, and a federal grand jury issued a subpoena in
connection with supplier credits.
GM has produced documents and provided testimony in response to
the SEC and federal grand jury subpoenas. GM will continue to
cooperate with the SEC and federal grand jury with respect to
these matters.
In addition, SEC and federal grand jury subpoenas have been
served on GMAC entities in connection with industry-wide
investigations into practices in the insurance industry relating
to loss mitigation insurance products such as finite risk
insurance. Following the GMAC Transaction, GMAC retained
responsibility for this matter.
Liquidity
and Capital Resources
Investors or potential investors in GM securities consider cash
flows of the Automotive and FIO businesses to be a relevant
measure in the analysis of GMs various securities that
trade in public markets. Accordingly, GM provides supplemental
statements of cash flows to aid users of GMs consolidated
financial statements in the analysis of performance and
liquidity and capital resources.
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GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Liquidity
and Capital Resources (continued)
This information reconciles to the Consolidated Statements of
Cash Flows after the elimination of Net investing activity
with Financing and Insurance Operations and Net
financing activity with Automotive and Other Operations
line items shown in the table below. Following are such
statements for the years ended December 31, 2006, 2005, and
2004:
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|
|
|
|
Automotive and Other
|
|
|
Financing and Insurance
|
|
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
(As restated)
|
|
|
|
|
|
(As restated)
|
|
|
|
(Dollars in millions)
|
|
|
Cash flows from operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(3,007
|
)
|
|
$
|
(12,674
|
)
|
|
$
|
(175
|
)
|
|
$
|
1,029
|
|
|
$
|
2,257
|
|
|
$
|
2,876
|
|
Cumulative effect of a change in
accounting principle
|
|
|
|
|
|
|
109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net
income (loss) before cumulative effect of a change in accounting
principle to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, impairments and
amortization expense
|
|
|
8,159
|
|
|
|
10,101
|
|
|
|
8,679
|
|
|
|
2,791
|
|
|
|
5,696
|
|
|
|
5,523
|
|
Mortgage servicing rights and
premium amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,021
|
|
|
|
1,142
|
|
|
|
1,675
|
|
Goodwill impairment - GMAC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
828
|
|
|
|
712
|
|
|
|
|
|
Delphi Benefit Guarantee
|
|
|
500
|
|
|
|
5,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sale of 51% interest in
GMAC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,910
|
|
|
|
|
|
|
|
|
|
Provision for credit losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,799
|
|
|
|
1,074
|
|
|
|
1,944
|
|
Net gains on sale of finance
receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,256
|
)
|
|
|
(1,741
|
)
|
|
|
(1,332
|
)
|
Net gains on investment securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,006
|
)
|
|
|
(104
|
)
|
|
|
(52
|
)
|
Postretirement benefits other than
pensions, net of payments and VEBA contributions/withdrawals
|
|
|
2,840
|
|
|
|
4,717
|
|
|
|
(8,048
|
)
|
|
|
1
|
|
|
|
38
|
|
|
|
14
|
|
Pension expense, net of
contributions
|
|
|
3,611
|
|
|
|
1,408
|
|
|
|
1,174
|
|
|
|
23
|
|
|
|
14
|
|
|
|
34
|
|
Net change in mortgage loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,578
|
)
|
|
|
(29,119
|
)
|
|
|
(2,312
|
)
|
Net change in mortgage securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
427
|
|
|
|
(1,155
|
)
|
|
|
614
|
|
Change in other investments and
miscellaneous assets
|
|
|
588
|
|
|
|
141
|
|
|
|
(1
|
)
|
|
|
(1,058
|
)
|
|
|
(826
|
)
|
|
|
105
|
|
Change in other operating assets
and liabilities, net of acquisitions and disposals
|
|
|
(8,499
|
)
|
|
|
(10,986
|
)
|
|
|
(316
|
)
|
|
|
(4,109
|
)
|
|
|
4,188
|
|
|
|
(1,438
|
)
|
Other
|
|
|
1,365
|
|
|
|
1,720
|
|
|
|
(95
|
)
|
|
|
862
|
|
|
|
932
|
|
|
|
487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
operating activities
|
|
$
|
5,557
|
|
|
$
|
36
|
|
|
$
|
1,218
|
|
|
$
|
(17,316
|
)
|
|
$
|
(16,892
|
)
|
|
$
|
8,138
|
|
77
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive and Other
|
|
|
Financing and Insurance
|
|
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
(As restated)
|
|
|
|
|
|
(As restated)
|
|
|
|
(Dollars in millions)
|
|
|
Liquidity and Capital
Resources (concluded)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures for property
|
|
$
|
(7,531
|
)
|
|
$
|
(7,896
|
)
|
|
$
|
(7,284
|
)
|
|
$
|
(402
|
)
|
|
$
|
(283
|
)
|
|
$
|
(469
|
)
|
Investments in marketable
securities, acquisitions
|
|
|
(149
|
)
|
|
|
(2,616
|
)
|
|
|
(2,209
|
)
|
|
|
(25,381
|
)
|
|
|
(19,184
|
)
|
|
|
(13,069
|
)
|
Investments in marketable
securities, liquidations
|
|
|
1,727
|
|
|
|
7,663
|
|
|
|
4,609
|
|
|
|
26,822
|
|
|
|
14,874
|
|
|
|
11,302
|
|
Net change in mortgage servicing
rights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(61
|
)
|
|
|
(267
|
)
|
|
|
(326
|
)
|
Increase in finance receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,160
|
)
|
|
|
(6,582
|
)
|
|
|
(38,673
|
)
|
Proceeds from sale of finance
receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,374
|
|
|
|
31,652
|
|
|
|
23,385
|
|
Proceeds from the sale of 51%
interest in GMAC LLC
|
|
|
7,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of business
units/equity investments
|
|
|
1,968
|
|
|
|
846
|
|
|
|
|
|
|
|
8,538
|
|
|
|
|
|
|
|
|
|
Operating leases, acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,070
|
)
|
|
|
(15,496
|
)
|
|
|
(14,324
|
)
|
Operating leases, liquidations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,039
|
|
|
|
5,362
|
|
|
|
7,696
|
|
Net investing activity with
Financing and Insurance Operations
|
|
|
3,354
|
|
|
|
2,500
|
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in companies, net of
cash acquired
|
|
|
(20
|
)
|
|
|
1,357
|
|
|
|
(48
|
)
|
|
|
(337
|
)
|
|
|
(2
|
)
|
|
|
(12
|
)
|
Other
|
|
|
(353
|
)
|
|
|
640
|
|
|
|
882
|
|
|
|
338
|
|
|
|
(1,503
|
)
|
|
|
477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities
|
|
|
6,349
|
|
|
|
2,494
|
|
|
|
(2,550
|
)
|
|
|
16,700
|
|
|
|
8,571
|
|
|
|
(24,013
|
)
|
Cash flows from financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in loans
payable
|
|
|
(256
|
)
|
|
|
(177
|
)
|
|
|
(803
|
)
|
|
|
7,289
|
|
|
|
(9,949
|
)
|
|
|
2,995
|
|
Long-term debt, borrowings
|
|
|
1,937
|
|
|
|
386
|
|
|
|
758
|
|
|
|
77,629
|
|
|
|
77,890
|
|
|
|
72,753
|
|
Long-term debt, repayments
|
|
|
(97
|
)
|
|
|
(46
|
)
|
|
|
(79
|
)
|
|
|
(92,193
|
)
|
|
|
(69,520
|
)
|
|
|
(57,743
|
)
|
Net financing activity with
Automotive and Other Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,354
|
)
|
|
|
(2,500
|
)
|
|
|
(1,500
|
)
|
Cash dividends paid to stockholders
|
|
|
(563
|
)
|
|
|
(1,134
|
)
|
|
|
(1,129
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,487
|
|
|
|
6,030
|
|
|
|
4,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by
financing activities
|
|
|
1,021
|
|
|
|
(971
|
)
|
|
|
(1,253
|
)
|
|
|
(8,142
|
)
|
|
|
1,951
|
|
|
|
21,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on
cash and cash equivalents
|
|
|
189
|
|
|
|
(40
|
)
|
|
|
375
|
|
|
|
176
|
|
|
|
(45
|
)
|
|
|
296
|
|
Net transactions with Automotive
Other/Financing Insurance
|
|
|
(4,529
|
)
|
|
|
520
|
|
|
|
934
|
|
|
|
4,529
|
|
|
|
(520
|
)
|
|
|
(934
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
and cash equivalents
|
|
|
8,587
|
|
|
|
2,039
|
|
|
|
(1,276
|
)
|
|
|
(4,053
|
)
|
|
|
(6,935
|
)
|
|
|
4,715
|
|
Cash and cash equivalents retained
by GMAC LLC upon disposal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,137
|
)
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
reclassified to Assets Held for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(371
|
)
|
|
|
|
|
Cash and cash equivalents at
beginning of the year
|
|
|
15,187
|
|
|
|
13,148
|
|
|
|
14,424
|
|
|
|
15,539
|
|
|
|
22,845
|
|
|
|
18,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at
end of the year
|
|
$
|
23,774
|
|
|
$
|
15,187
|
|
|
$
|
13,148
|
|
|
$
|
349
|
|
|
$
|
15,539
|
|
|
$
|
22,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Auto
Available
Liquidity
GM believes it has sufficient liquidity and financial
flexibility to meet its capital requirements over the short and
medium term under reasonably foreseeable circumstances. Over the
long term, GM believes that its ability to meet its capital
requirements will primarily depend on the successful execution
of its turnaround plan and the return of its North American
operations to profitability and positive cash flow. Auto
available liquidity includes its cash balances, marketable
securities and readily available assets of its VEBA trusts. At
December 31, 2006, Autos available liquidity was
$26.4 billion compared with $20.4 billion at
December 31, 2005 and $23.3 billion at
December 31, 2004. The amount of GMs consolidated
cash and marketable securities is subject to intra-month and
seasonal fluctuations and includes balances held by various GM
business units and subsidiaries worldwide that are needed to
fund their operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in billions)
|
|
|
Cash and cash equivalents
|
|
$
|
23.8
|
|
|
$
|
15.2
|
|
|
$
|
13.1
|
|
Marketable securities
|
|
|
0.1
|
|
|
|
1.4
|
|
|
|
6.7
|
|
Readily-available assets of VEBA
trusts
|
|
|
2.5
|
|
|
|
3.8
|
|
|
|
3.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available Liquidity
|
|
$
|
26.4
|
|
|
$
|
20.4
|
|
|
$
|
23.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In addition to the $2.5 billion of readily-available VEBA
trust assets included in available liquidity, GM expects to have
access to additional VEBA trust assets over time to reimburse
OPEB plan costs. These additional VEBA trust assets totaled
approximately $15.3 billion at December 31, 2006,
making the total VEBA trust assets available to GM
$17.8 billion at December 31, 2006. At
December 31, 2005, the total VEBA trust assets were
$19.1 billion, $3.8 billion of which was readily
available. At December 31, 2004, the total VEBA trust
assets were $20 billion, $3.5 billion of which was
readily available. The decline in VEBA balances since
December 31, 2005 was primarily driven by $4.1 billion
of withdrawals during 2006, partially offset by favorable asset
returns during the year.
On November 30, 2006, GM consummated the GMAC Transaction,
in which it sold a controlling interest in GMAC to FIM Holdings.
The total value of the cash proceeds and distributions to GM
after repayment of certain intercompany obligations and before
it purchased preferred membership interests of GMAC was expected
to be approximately $14 billion over three years, comprised
of the $7.4 billion purchase price and the
$2.7 billion cash dividend at closing and other transaction
related cash flows including monetization of certain retained
assets over three years. From the proceeds, GM invested
$1.4 billion of cash in new preferred membership interests
of GMAC. Subsequent to December 31, 2006, it was determined
that GM would be required to make a capital contribution to GMAC
of approximately $1 billion to restore its adjusted
tangible equity balance to the contractually required amount of
$14.4 billion, due to the decrease in the adjusted tangible
equity balance of GMAC as of November 30, 2006.
GM also has a $4.6 billion standby revolving credit
facility with a syndicate of banks, of which $150 million
terminates in June 2008 and $4.5 billion terminates July
2011. There are approximately $69 million of letters of
credit issued under the credit facility, but no loans are
currently outstanding. GM believes that the banks will continue
to lend under the facility, notwithstanding the restatement of
certain historical financial statements described in this
Annual Report on Form 10-K. Under the $4.5 billion
secured facility, borrowings are limited to an amount based on
the value of the underlying collateral, which consists of
certain North American accounts receivable and inventory of GM,
Saturn Corporation, and GM Canada, certain plants, property and
equipment of GM Canada, and a pledge of 65% of the stock of the
holding company for GMs indirect subsidiary GM de Mexico.
In addition to the $4.5 billion secured line of credit, the
collateral also secures certain lines of credit, automatic
clearinghouse and overdraft arrangements, and letters of credit
provided by the same secured lenders, totaling
79
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Available Liquidity (continued)
approximately $1.5 billion. In the event of certain work
stoppages, the secured facility would be temporarily reduced to
$3.5 billion.
GM believes that it is possible that issues may arise from its
most recent restatement of its prior financial statements under
various other financing arrangements. These financing
arrangements consist principally of obligations in connection
with sale/leaseback transactions and other lease obligations
(including off-balance sheet arrangements) and do not include
GMs public debt indentures. In view of the recent
restatement of its prior financial statements, GM has evaluated
the effect of its restatement under these agreements, including
its legal rights (such as its ability to cure) with respect to
any claims that could be asserted. Based on its review, GM
believes that amounts subject to possible claims of
acceleration, termination or other remedies are not likely to
exceed $2.7 billion (consisting primarily of off-balance
sheet arrangements), although no assurances can be given as to
the likelihood, nature, or amount of any claims that may be
asserted. Moreover, GM believes there may be economic or other
disincentives for third parties to raise such claims to the
extent they have them. Based on this review, GM reclassified
approximately $257 million of these obligations from long-term
debt to short-term debt. GM believes that it has sufficient
liquidity over the short and medium term, regardless of the
resolution of these matters.
GM also has an additional $1.2 billion in undrawn committed
facilities (including certain off-balance sheet securitization
programs) with various maturities and $0.8 billion in
undrawn uncommitted lines of credit. In addition, GMs
consolidated affiliates with non-GM minority shareholders,
primarily GM Daewoo, have a combined $1.6 billion in
undrawn committed facilities.
Other potential measures to strengthen available liquidity could
include the sale of non-core assets, additional public or
private financing transactions, and recoveries under the
Framework Agreement entered into with Delphi and the Plan
Investors. In January 2007, GM announced that it was
looking at strategic options for its Allison Transmission
commercial and military operations, including a potential sale
of the business. Additionally, GM currently believes it has
access to bank financing and limited access to the public
markets through debt or equity or some combination thereof.
Access to these markets is dependent on market conditions and
our own financial condition. In connection with Delphi, the
recoveries to GM under the arrangement contemplated by the
Framework Agreement are expected to include an estimated
$2.6 billion in cash for GMs claims under the Delphi
bankruptcy and up to $2.0 billion in cash and/or notes
receivable in connection with the transfer of a portion of
Delphis U.S. hourly pension plan obligations to GM. GM
anticipates that such additional liquidity could be used in
funding the turnaround plan and addressing the potential risks
and contingencies described above in Risk
Factors Risks Related to GM and its Automotive
Business.
Cash
Flow
The increase in available liquidity to $26.4 billion at
December 31, 2006 from $20.4 billion at
December 31, 2005 was primarily a result of the GMAC
Transaction, cash dividends received from GMAC, net cash
received from GMs partial sale of its interest in Suzuki
common stock, increase in long-term borrowings, and withdrawals
from GMs VEBA trusts. This increase was partially offset
by Autos loss before cumulative effect of a change in
accounting principle, significant capital expenditures required
to support the business, and cash payments for retiree
healthcare and life insurance benefits.
Investments in marketable securities primarily consist of
purchases, sales, and maturities of highly-liquid corporate,
U.S. government, U.S. government agency, and
mortgage-backed debt securities used for cash management
purposes. During 2006, GM acquired approximately
$0.2 billion of marketable securities while sales and
maturities of marketable securities were approximately
$1.7 billion.
For the year ended December 31, 2006, Auto had positive
operating cash flow of $5.6 billion on a net loss of
$3.0 billion. That result compares with the positive
operating cash flow of $36 million and a net loss of
$12.7 billion in 2005. Apart from the improvements in
GMs net loss position, 2006 operating cash flow included
withdrawals of $4.1 billion from GMs VEBA trust for
its OPEB plans for reimbursement of retiree health-care and life
insurance
80
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Available Liquidity (concluded)
benefits provided to eligible plan participants. Operating cash
flow was unfavorably impacted by approximately $0.4 billion
of cash costs related to the GMNA restructuring initiative,
$0.1 billion of cash costs related to the GME restructuring
initiative, and $0.4 billion of cash costs related to the
Delphi special attrition programs, for which the charges were
recorded in 2003 to 2005.
The 2006 charge of $6.4 billion related to the UAW
Attrition Agreement includes $2.1 billion for cash payments
to employees, of which $1.4 billion was paid in 2006, and
the balance of $0.7 billion is expected to be paid over the
next three years. These payments were and will be funded using
cash flow from operations. The remaining $4.3 billion of
the charge reflects non-cash curtailment charges associated with
GMs pension, OPEB, and extended disability plans U.S.
Hourly employees and consequently had no immediate cash flow
impact.
Capital expenditures were a significant use of investing cash in
2006. Capital expenditures were $7.5 billion, primarily
attributable to ongoing investment in GMNA required to support
new product launches. For the years ended December 31, 2005
and 2004, capital expenditures were $7.9 billion and
$7.3 billion, respectively. Favorable investing cash flows
included $4.8 billion of dividends from GMAC, up from
$2.5 billion in 2005 and $1.5 billion in 2004. The
increase in dividends from GMAC in 2006 was largely attributable
to the GMAC Transaction. Other favorable investing cash flows
included $9.3 billion of proceeds from the sale of business
units and equity investments, comprising GMs sale of its
controlling interest in GMAC for approximately $7.4 billion
in cash in November 2006 and GMs sale of its interest in
Suzuki common stock for approximately $2.0 billion in March
2006. GM anticipates total annual capital spending to be between
$8.5 billion and $9 billion in 2007 and 2008, of which
approximately $5.7 billion in 2007 and approximately
$5.5 billion to $5.7 billion in 2008 will be devoted
to GMNA.
Debt
Autos total debt, including capital leases, industrial
revenue bond obligations, and borrowings from GMAC at
December 31, 2006 was $38.7 billion, of which
$5.7 billion was classified as short-term or current
portion of long-term debt and $33.0 billion was classified
as non-current long-term. At December 31, 2005, total debt
was $34.2 billion, of which $1.6 billion was
short-term or current portion of long-term debt and
$32.6 billion was non-current long-term. This increase in
total debt was primarily a result of the issuance of a
$1.5 billion term loan on November 29, 2006 and the
classification of $2.9 billion of liabilities due to GMAC
as debt as of December 31, 2006 instead of an amount due to
GMAC prior to the GMAC Transaction.
Short-term borrowing and current portion of long-term debt of
$5.7 billion includes approximately $1.2 billion
related to convertible debentures that were puttable to GM and
of which $1.1 billion was settled for cash on March 6,
2007, approximately $1.0 billion of debt issued by
GMs subsidiaries and consolidated affiliates, and
$2.8 billion of related party debt, mainly dealer financing
from GMAC. The reclassification of GMAC financing was the
primary driver of the increase in short-term debt year over
year. GM funded the settlement of the convertible debentures
using cash flow from operations and available liquidity. GM has
various debt maturities of approximately $2.8 billion in
2008 and $0.7 billion in 2009. GM believes it has adequate
liquidity to settle those obligations as they become due.
In order to provide financial flexibility to GM and its
suppliers, GM maintains a trade payables program through GMAC
Commercial Finance (GMACCF). Under the terms of the GMAC
Transaction, GM will be permitted to continue administering the
program through GMACCF so long as GM provides the funding of
advance payments to suppliers under the program. As of
May 1, 2006, GM commenced funding of the advance payments,
and as a result, at December 31, 2006, there was no
outstanding balance owed by GM to GMACCF under the program.
81
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Available Liquidity (concluded)
Net
Liquidity
Net liquidity, calculated as cash, marketable securities, and
$2.5 billion ($3.8 billion at December 31,
2005) of readily-available assets of the VEBA trust less
the short-term borrowings and long-term debt, was a negative
$12.3 billion at December 31, 2006, compared with a
negative $13.8 billion at December 31, 2005.
Financing
and Insurance Operations
As described above under GMAC Sale of 51%
Controlling Interest, prior to consummation of the GMAC
Transaction, GMAC dividended to GM lease-related assets having a
net equity value of approximately $4 billion and related
deferred tax liabilities of $1.8 billion. This dividend
resulted in the transfer to GM of two bankruptcy-remote
subsidiaries that hold the equity interests in ten trusts that
own leased vehicles and issued asset-backed securities secured
by the vehicles. GMAC originated those securitizations and
remains as the servicer of the securitizations. GM consolidates
the bankruptcy-remote subsidiaries and the ten trusts for
financial reporting purposes. As a result, at December 31,
2006, GM had vehicles subject to operating leases of
$11.8 billion, other net assets of $1.5 billion,
outstanding secured debt of $9.4 billion, and net equity of
$3.9 billion associated with these bankruptcy-remote
subsidiaries. The secured debt has recourse solely to the leased
vehicles and related assets. GM continues to be obligated to the
bankruptcy-remote subsidiaries for residual support payments on
the leased vehicles in an amount estimated to equal
approximately $1.6 billion at December 31, 2006.
However, neither the securitization investors nor the trusts
have any rights to the residual support payments. GM expects the
operating leases and related securitization debt to gradually
amortize over the next three to four years resulting in the
release to these two bankruptcy-remote subsidiaries of certain
cash flows related to their ownership of the securitization
trusts and related operating leases. The cash flow that GM
expects to realize from the leased vehicle securitizations over
the next three to four years will come from three principal
sources. The first is cash released from the securitizations on
a monthly basis, as a result of available funds exceeding debt
service and other required payments in that month. The second is
cash received upon and following termination of a
securitization, to the extent of remaining
overcollateralization. The third is a return of the residual
support payments owing from GM each month. Since being
transferred from GMAC to GM and through December 31, 2006,
the total cash flows released to these two bankruptcy-remote
subsidiaries was approximately $118 million.
Status of
Debt Ratings
Dominion Bond Rating Services (DBRS), Moodys Investor
Service ( Moodys), Fitch, and S&P currently rate
GMs credit at non-investment grade. The following table
summarizes GMs credit ratings as of March 12, 2007:
|
|
|
|
|
|
|
Rating Agency
|
|
Senior Unsecured Debt
|
|
Outlook
|
|
Commercial Paper
|
|
DBRS
|
|
B
|
|
Negative
|
|
R-5
|
Fitch
|
|
B
|
|
Rating Watch Negative
|
|
Withdrawn
|
Moodys
|
|
Caa1
|
|
Negative
|
|
Not Prime
|
S&P
|
|
B-
|
|
Negative
|
|
B-3
|
During 2006, each of DBRS, Fitch, Moodys and S&P
downgraded GMs unsecured debt.
On July 24, 2006 DBRS downgraded GMs senior unsecured
rating to B from B (high) and commercial paper rating to
R-3 (low)
from R-3
(middle) following the completion of the aforementioned secured
credit transaction. The trend remained negative. On
September 15, 2006, DBRS revised its short-term credit
rating on GM to
R-5 Negative
from R-3
(low) Negative as a result of its new ratings methodology. On
November 30, 2006 DBRS affirmed GMs senior unsecured
rating at B (negative trend) and commercial paper rating at
R-5
(negative trend).
On March 1, 2006, Fitch downgraded GMs senior
unsecured rating from B+ to B. On June 20, 2006, Fitch
assigned a BB rating with negative rating watch to GMs
secured credit facility. GMs issuer rating remained
unchanged at B, on Rating Watch Negative. On November 13,
2006, Fitch assigned a BB rating with negative rating watch to
GMs secured term loan.
82
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Status of
Debt Ratings (concluded)
On February 21, 2006, Moodys downgraded GMs
senior unsecured debt to B2 with a negative outlook from B1
under review for a possible downgrade. On March 16, 2006,
Moodys placed the senior unsecured ratings of GM under
review for a possible downgrade. On March 29, 2006
Moodys downgraded GMs senior unsecured debt to B3
with a negative outlook. On May 5, 2006, Moodys
placed GMs senior unsecured debt rating under review for a
possible downgrade. GMs corporate rating was unaffected.
On June 20, 2006, Moodys assigned a B2 rating to
GMs secured credit facility, affirmed the companys
B3 corporate rating and lowered its unsecured credit rating to
Caa1. The rating outlook is negative. On September 22,
2006, Moodys revised the debt rating of the secured credit
facility as a result of new Loss-Given-Default methodology to
Ba3 from B2. Issuer credit rating and long-term unsecured debt
rating of GM were unaffected. On November 13, 2006,
Moodys assigned a Ba3 rating to GMs new senior
secured term loan.
On March 29, 2006, S&P placed both GMs long-term
B and short-term
B-3
corporate credit ratings on CreditWatch with negative
implications. On June 20, 2006, S&P assigned a B+
credit rating on the proposed GM senior bank loan facility with
a recovery rating of 1 signifying that lenders can
expect full recovery of principal in the event of a payment
default. At the same time, S&P affirmed the companys B
corporate credit rating and lowered the senior unsecured debt
rating on GM to B- as a result of the secured bank transaction
and the rating remained on CreditWatch with negative
implications. On November 14, 2006, S&P assigned a B+
credit rating on the proposed GM senior term loan facility with
a recovery rating of 1 signifying that lenders can
expect full recovery of principal in the event of a payment
default. On December 13, 2006 S&P affirmed its B
corporate credit rating with negative outlook on GM and removed
the credit rating from CreditWatch.
While the ratings actions described above have increased
borrowing costs and limited access to unsecured debt markets,
these outcomes have been mitigated by actions taken by GM over
the past few years to focus on increased use of liquidity
sources other than institutional unsecured markets, which are
not directly affected by ratings on unsecured debt, including
secured funding sources and conduit facilities. Further
reductions of GMs credit ratings could increase the
possibility of additional terms and conditions contained in any
new or replacement financing arrangements. As a result of
specific funding actions taken over the past few years,
management believes that GM will continue to have access to
sufficient capital to meet its ongoing funding needs over the
short and medium-term. Notwithstanding the foregoing, management
believes that the current ratings situation and outlook increase
the level of risk for achieving GMs funding strategy. In
addition, the ratings situation and outlook increase the
importance of successfully executing GMs plans for
improvement of operating results.
Pension
and Other Postretirement Benefits
Plans covering represented employees generally provide benefits
of negotiated, stated amounts for each year of service as well
as significant supplemental benefits for employees who retire
with 30 years of service before normal retirement age.
GMs policy with respect to its qualified pension plans is
to contribute annually not less than the minimum required by
applicable law and regulation, or to directly pay benefit
payments where appropriate. As of December 31, 2006, all
legal funding requirements had been met. GM made contributions
to its pension plans as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in millions)
|
|
|
U.S. hourly and salaried
|
|
$
|
2
|
|
|
$
|
|
|
|
$
|
|
|
Other U.S.
|
|
|
78
|
|
|
|
125
|
|
|
|
117
|
|
Non-U.S.
|
|
|
889
|
|
|
|
708
|
|
|
|
802
|
|
In 2007, GM does not have any contributions due for its
U.S. hourly or salaried pension plans. GM does not expect
to make any discretionary contributions into the
U.S. hourly or salaried pension plans in 2007. GM expects
to
83
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Pension
and Other Postretirement
Benefits (concluded)
contribute or pay benefits of approximately $100 million to
its other U.S. pension plan and $600 million to its
primary
non-U.S. pension
plans, which include GM Canada, Adam Opel, and Vauxhall, in 2007.
GMs U.S. hourly and salaried pension plans were
overfunded by $17.1 billion in 2006 and $7.5 billion
in 2005. This increase was primarily attributable to strong
actual asset returns of approximately 15% in 2006. GMs
non-U.S. pension
plans were underfunded by $10.9 billion at the end of 2006
and $10.7 billion at the end of 2005.
GM also maintains hourly and salaried OPEB plans that provide
postretirement medical, dental, vision and life insurance to
most U.S. retirees and eligible dependents. Certain of the
non-U.S. subsidiaries
have postretirement benefit plans, although most participants
are covered by government sponsored or administered programs.
GMs U.S. OPEB plan was underfunded by
$47.4 billion in 2006 and $62.1 billion in 2005.
GMs
non-U.S. OPEB
plans were underfunded by $3.7 billion in 2006 and
$3.8 billion in 2005.
In 2006, GM withdrew a total of $4.1 billion from plan
assets of its VEBA trusts for its OPEB plans for reimbursement
of retiree healthcare and life insurance benefits provided to
eligible plan participants. In 2005, GM withdrew a total of
$3.2 billion from its VEBA trust. In 2007, GM currently
anticipates to withdraw approximately $2 billion from plan
assets of its VEBA trust for OPEB plans.
Pursuant to the UAW Health Care Settlement Agreement, GM is
required to make certain contributions to a new independent VEBA
trust to be used to mitigate the effect of reduced GM
health-care coverage for UAW retirees over a number of years. GM
has no control over the assets of this VEBA trust.
The following benefit payments, which reflect estimated future
employee services, as appropriate, are expected to be paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits*
|
|
|
|
|
|
|
|
|
|
|
|
|
Primary
|
|
|
Other Benefits
|
|
|
|
U.S. Plans
|
|
|
Non-U.S. Plans
|
|
|
U.S. Plans
|
|
|
Non-U.S. Plans
|
|
|
|
(Dollars in millions)
|
|
|
2007
|
|
$
|
7,270
|
|
|
$
|
956
|
|
|
$
|
3,751
|
|
|
$
|
146
|
|
2008
|
|
|
7,142
|
|
|
|
1,027
|
|
|
|
3,895
|
|
|
|
157
|
|
2009
|
|
|
7,037
|
|
|
|
1,056
|
|
|
|
4,035
|
|
|
|
167
|
|
2010
|
|
|
6,959
|
|
|
|
1,097
|
|
|
|
4,161
|
|
|
|
177
|
|
2011
|
|
|
6,890
|
|
|
|
1,140
|
|
|
|
4,254
|
|
|
|
187
|
|
|
|
|
* |
|
Benefits for most U.S. pension plans and certain non-U.S.
pension plans are paid out of plan assets rather than cash. |
Off-Balance
Sheet Arrangements
GM uses off-balance sheet arrangements where the economics and
sound business principles warrant their use. GMs principal
use of off-balance sheet arrangements occurs in connection with
the securitization and sale of financial assets.
The financial assets sold by GM consist principally of trade
receivables that are part of a securitization program that GM
has participated in since 2004. As part of this program, GM
entered into an agreement to sell undivided interests in
eligible trade receivables up to $850 million and
$1 billion in 2006 and 2005, respectively, to a bank
conduit that funds its purchases through issuance of commercial
paper or via direct bank funding. The receivables under the
program were sold at a fair market value and were excluded from
the consolidated balance sheets. The loss on the trade
receivables sold is included in Automotive cost of sales and was
$30 million in 2006 and $23 million in 2005. The
amount of receivables sold as of December 31, 2006 and 2005
was $200 million and $444 million, respectively. GM
does not have a retained interest in the receivables sold, but
performs collection and administrative functions. The gross
amount of proceeds received from the sale of receivables under
this program was approximately $9.0 billion and
$12.8 billion in 2006 and 2005, respectively.
84
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Off-Balance
Sheet Arrangements (concluded)
In addition to this securitization program, GM participates in
other trade receivable securitization programs, primarily in
Europe. Financing providers had a beneficial interest in
GMs pool of eligible European receivables of
$0.1 billion and $0.3 billion as of December 31, 2006
and 2005, respectively, related to those securitization programs.
GM leases real estate and equipment from various off-balance
sheet entities that have been established to facilitate the
financing of those assets for GM by nationally prominent lessors
that GM believes are creditworthy. These assets consist
principally of office buildings, warehouses, and machinery and
equipment. The use of such entities allows the parties providing
the financing to isolate particular assets in a single entity
and thereby syndicate the financing to multiple third parties.
This is a conventional financing technique used to lower the
cost of borrowing and, thus, the lease cost to a lessee such as
GM. There is a well-established market in which institutions
participate in the financing of such property through their
purchase of ownership interests in these entities, and each is
owned by institutions that are independent of, and not
affiliated with, GM. GM believes that no officers, directors, or
employees of GM, or their affiliates hold any direct or indirect
equity interests in such entities.
Because of the GMAC Transaction in November 2006, GMACs
assets in off-balance sheet entities were not attributable to GM
at the end of 2006. The GMAC transaction and a lower utilization
of GMs trade receivables securitization primarily explain
the decrease in off-balance sheet arrangements. Assets in
off-balance sheet entities were as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
Assets leased under operating
leases
|
|
$
|
2,248
|
|
|
$
|
2,430
|
|
Trade receivables sold*
|
|
|
309
|
|
|
|
708
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,557
|
|
|
$
|
3,138
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
As of December 31, 2005, additional off-balance sheet trade
receivables sold to GMAC were $525 million.
|
Contractual
Obligations and Other Long-Term Liabilities
GM has the following minimum commitments under contractual
obligations, including purchase obligations, as defined by the
SEC. A purchase obligation is defined as an
agreement to purchase goods or services that is enforceable and
legally binding on GM and that specifies all significant terms,
including: fixed or minimum quantities to be purchased; fixed,
minimum, or variable price provisions; and the approximate
timing of the transaction. Other long-term liabilities are
defined as long-term liabilities that are reflected on GMs
balance sheet under GAAP. Based on this definition, the table
below includes only those contracts which include fixed or
minimum obligations. It does not include normal purchases, which
are made in the ordinary course of business.
85
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Contractual
Obligations and Other Long-Term Liabilities
(concluded)
The following table provides aggregated information about our
outstanding contractual obligations and other long-term
liabilities as of December 31, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
2007
|
|
|
2008-2009
|
|
|
2010-2011
|
|
|
2012 and after
|
|
|
Total
|
|
|
|
(Dollars in millions)
|
|
|
Debt
|
|
$
|
5,585
|
|
|
$
|
2,416
|
|
|
$
|
1,745
|
|
|
$
|
27,375
|
|
|
$
|
37,121
|
|
Capital lease obligations
|
|
|
229
|
|
|
|
1,134
|
|
|
|
181
|
|
|
|
380
|
|
|
|
1,924
|
|
Operating lease obligations
|
|
|
535
|
|
|
|
890
|
|
|
|
770
|
|
|
|
788
|
|
|
|
2,983
|
|
Contractual commitments for
capital expenditures
|
|
|
644
|
|
|
|
59
|
|
|
|
5
|
|
|
|
4
|
|
|
|
712
|
|
Other contractual commitments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postretirement benefits(1)
|
|
|
4,144
|
|
|
|
5,610
|
|
|
|
6,582
|
|
|
|
|
|
|
|
16,336
|
|
Less: VEBA assets(2)
|
|
|
(4,144
|
)
|
|
|
(5,610
|
)
|
|
|
(6,582
|
)
|
|
|
|
|
|
|
(16,336
|
)
|
Net post retirement benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Material
|
|
|
1,858
|
|
|
|
2,620
|
|
|
|
1,222
|
|
|
|
375
|
|
|
|
6,075
|
|
Information technology
|
|
|
1,065
|
|
|
|
98
|
|
|
|
1
|
|
|
|
|
|
|
|
1,164
|
|
Marketing
|
|
|
1,438
|
|
|
|
719
|
|
|
|
394
|
|
|
|
36
|
|
|
|
2,587
|
|
Facilities
|
|
|
465
|
|
|
|
549
|
|
|
|
169
|
|
|
|
81
|
|
|
|
1,264
|
|
Rental car repurchases
|
|
|
6,353
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
6,358
|
|
Policy, product warranty and
recall campaigns liability
|
|
|
4,417
|
|
|
|
4,094
|
|
|
|
508
|
|
|
|
45
|
|
|
|
9,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual commitments
|
|
$
|
22,589
|
|
|
$
|
12,584
|
|
|
$
|
4,995
|
|
|
$
|
29,084
|
|
|
$
|
69,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining balance postretirement
benefits
|
|
$
|
723
|
|
|
$
|
2,641
|
|
|
$
|
3,192
|
|
|
$
|
45,113
|
|
|
$
|
51,669
|
|
Less: VEBA assets(2)
|
|
|
(543
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(543
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
180
|
|
|
$
|
2,641
|
|
|
$
|
3,192
|
|
|
$
|
45,113
|
|
|
$
|
51,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts include postretirement benefits under the current
contractual labor agreements in North America. The remainder of
the estimated liability, for benefits beyond the current labor
agreement and for essentially all salaried employees, is
classified under remaining balance of postretirement benefits.
These obligations are not contractual. |
|
(2) |
|
Total VEBA assets were allocated based on projected spending
requirements. Amount includes $0.1 billion VEBA withdrawal
in the fourth quarter of 2006. |
The combined U.S. hourly and salaried pension plans were
$17.1 billion overfunded at year-end 2006. As a result, GM
does not expect to make any contributions to its
U.S. hourly and salaried pension plans for the foreseeable
future, assuming there are no material changes in present market
conditions.
Dividends
Dividends may be paid on our
$12/3
par value common stock when, as, and if declared by GMs
board of directors in its sole discretion out of amounts
available for dividends under applicable law. Under Delaware
law, our board may declare dividends only to the extent of our
statutory surplus (i.e., total assets minus total
liabilities, in each case at fair market value, minus statutory
capital), or if there is no such surplus, out of our net profits
for the then current
and/or
immediately preceding fiscal year.
GMs policy is to distribute dividends on its
$12/3
par value common stock based on the outlook and indicated
capital needs of the business. Cash dividends per share of GM
$12/3
par value common stock were $1.00 in 2006, and
86
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Dividends
(concluded)
$2.00 in 2005 and 2004. At the February 6, 2007 meeting of
the GM board of directors, the board approved the payment of a
$0.25 quarterly dividend on GM
$12/3
par value common stock for the first quarter of 2007. Cash
dividends per share of common stock were $0.25 per quarter
for 2006.
Critical
Accounting Estimates
The preparation of the consolidated financial statements in
accordance with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the reported amounts of asset and
liabilities, the disclosure of contingent assets and liabilities
at the date of the financial statements, and the reported
amounts of revenues and expenses during the periods presented.
Management believes that the accounting estimates employed are
appropriate and the resulting balances are reasonable; however,
due to the inherent uncertainties in making estimates actual
results could differ from the original estimates, requiring
adjustments to these balances in future periods.
Pension
and OPEB
Pension and OPEB costs and liabilities are dependent on
assumptions used in calculating such amounts. The primary
assumptions include factors such as discount rates, health care
cost trend rates, expected return on plan assets, mortality
rates, retirement rates, and rate of compensation increase,
discussed below:
|
|
|
|
|
Discount rates. Beginning with the
2005 year-end valuations, GM estimates the discount rate
for its U.S. pension and OPEB obligations using an
iterative process based on a hypothetical investment in a
portfolio of high-quality bonds (rated AA or higher by a
recognized rating agency) and a hypothetical reinvestment of the
proceeds of such bonds upon maturity (at forward rates derived
from a yield curve) until its U.S. pension and OPEB
obligations are fully defeased. GM incorporates this
reinvestment component into its methodology because it is not
feasible, in light of the magnitude and time horizon over which
its U.S. pension and OPEB obligations extend, to accomplish
full defeasance through direct cash flows from an actual set of
bonds selected at any given measurement date. This improved
methodology, considered a change in estimate, was developed
during 2005 and was adopted because it was deemed superior to
the previously available algorithms for estimating assumed
discount rates. In particular, this approach permits a better
match of future cash outflows related to benefit payments with
future cash inflows associated with bond coupons and maturities.
|
Prior to the 2005 year-end valuations, GM estimated the
discount rate for its U.S. pension and OPEB obligations by
reference to Moodys AA Index, Citibank Salomon Smith
Barneys above-median curve, and Watson Wyatts
bond-matching model as well as benchmarking.
|
|
|
|
|
Health care cost trend rate. Our health-care
cost trend rate is based on historical retiree cost data, near
term health care outlook, including appropriate cost control
measures implemented by GM, and industry benchmarks and surveys.
|
|
|
|
Expected return on plan assets. Our expected
return on plan assets is derived from detailed periodic studies,
which include a review of asset allocation strategies,
anticipated future long-term performance of individual asset
classes, risks (standard deviations), and correlations of
returns among the asset classes that comprise the plans
asset mix. While the studies give appropriate consideration to
recent plan performance and historical returns, the assumptions
are primarily long-term, prospective rates of return.
|
|
|
|
Mortality rates. Mortality rates are based on
actual and projected plan experience.
|
|
|
|
Retirement rates. Retirement rates are based
on actual and projected plan experience.
|
|
|
|
Rate of compensation increase. The rate of
compensation increase for final pay plans reflects our long-term
actual experience and our outlook, including contractually
agreed upon wage rate increases for represented hourly employees.
|
87
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Pension and OPEB (concluded)
In accordance with GAAP, actual results that differ from the
assumptions are accumulated and amortized over future periods
and, therefore, generally affect recognized expense and the
recorded obligation in future periods. While management believes
that the assumptions used are appropriate, differences in actual
experience or changes in assumptions may affect GMs
pension and other postretirement obligations and future expense.
The following information illustrates the sensitivity to a
change in certain assumptions for U.S. pension plans (as of
December 31, 2006 the projected benefit obligation (PBO)
for U.S. pension plans was $85 billion):
|
|
|
|
|
|
|
|
|
|
|
Effect on 2007
|
|
|
Effect on
|
|
|
|
Pre-Tax
|
|
|
December 31, 2006
|
|
Change in Assumption
|
|
Pension Expense
|
|
|
PBO
|
|
|
25 basis point decrease in
discount rate
|
|
+$
|
110 million
|
|
|
+$
|
2.0 billion
|
|
25 basis point increase in
discount rate
|
|
−$
|
110 million
|
|
|
−$
|
2.0 billion
|
|
25 basis point decrease in
expected return on assets
|
|
+$
|
230 million
|
|
|
|
|
|
25 basis point increase in
expected return on assets
|
|
−$
|
230 million
|
|
|
|
|
|
GMs U.S. pension plans generally provide covered
U.S. hourly employees with pension benefits of negotiated,
flat dollar amounts for each year of credited service earned by
an individual employee. Formulas providing for such stated
amounts are contained in the prevailing labor contract that
expires in September 2007. Consistent with GAAP, the 2006
pension expense and December 31, 2006 PBO do not comprehend
any future benefit increases or decreases from one contract to
the next. The current cycle for negotiating new labor contracts
is every four years. There is no past practice of maintaining a
consistent level of benefit increases or decreases from one
contract to the next. However, the following data illustrates
the sensitivity of pension expense and PBO to hypothetical
assumed changes in future basic benefits. An annual
one-percentage point increase in the benefit units for
U.S. hourly employees would result in a $100 million
increase in 2007 pension expense and a $510 million increase in
the December 31, 2006 U.S. hourly plan PBO. An annual
one-percentage point decrease in the same benefit unit would
result in a $90 million decrease in 2007 pension expense
and a $460 million decrease in the same PBO.
The following table illustrates the sensitivity to a change in
the discount rate assumption related to GMs U.S. OPEB
plans (the U.S. accumulated postretirement benefit
obligation (APBO) was a significant portion of GMs
worldwide APBO of $68 billion as of December 31, 2006):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on
|
|
|
|
Effect on 2007
|
|
|
December 31, 2006
|
|
Change in Assumption
|
|
Pre-Tax OPEB Expense
|
|
|
APBO
|
|
|
25 basis point decrease in
discount rate
|
|
+$
|
107 million
|
|
|
+$
|
1.8 billion
|
|
25 basis point increase in
discount rate
|
|
−$
|
102 million
|
|
|
−$
|
1.7 billion
|
|
A one-percentage point increase in the assumed U.S. health
care trend rates would have increased the U.S. APBO by $6.0
billion, and the aggregate service and interest cost components
of non-pension postretirement benefit expense on an annualized
basis by $502 million. A one-percentage point decrease would
have decreased the U.S. APBO by $5.0 billion and the
aggregate service and interest cost components of non-pension
postretirement benefit expense on an annualized basis by $413
million.
The above sensitivities reflect the effect of changing one
assumption at a time. It should be noted that economic factors
and conditions often affect multiple assumptions simultaneously
and the effects of changes in key assumptions are not
necessarily linear.
88
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Deferred
Taxes
GM recognizes deferred tax assets and liabilities based on the
differences between the financial statement carrying amounts and
the tax bases of assets and liabilities. GM regularly evaluates
for recoverability its deferred tax assets and establishes a
valuation allowance based on historical taxable income,
projected future taxable income, the expected timing of the
reversals of existing temporary differences and the
implementation of tax-planning strategies. GM considers whether
it is more likely than not that some portion or all of the
deferred tax assets will not be realized. If GM is unable to
generate sufficient future taxable income in certain tax
jurisdictions, or if there is a material change in the actual
effective tax rates or time period within which the underlying
temporary differences become taxable or deductible, GM could be
required to increase its valuation allowance against its
deferred tax assets resulting in additional income tax expense.
As of December 31, 2006, we had approximately
$34.8 billion in U.S. net deferred tax assets. At this
time, we consider it more likely than not that we will have
U.S. taxable income in the future that will allow us to
realize these deferred tax assets. However, it is possible that
some or all of these deferred tax assets could ultimately expire
unused, especially if GMs automotive operations are not
profitable.
Sales
Incentives
At the later of the time of sale or the time an incentive is
announced to dealers (applies to vehicles sold by GM and in
dealer inventory), GM records as a reduction of revenue the
estimated impact of sales allowances in the form of dealer and
customer incentives. There may be numerous types of incentives
available at any particular time. Incentive programs are
generally brand specific, model specific, or regionally
specific. Some factors used in estimating the cost of incentives
include the volume of vehicles that will be affected by the
incentive programs offered by product, product mix, and the rate
of customer acceptance of any incentive program. If the actual
number of affected vehicles differs from this estimate, or if a
different mix of incentives is actually paid, the reduction of
revenue for sales incentives could be affected. As discussed
above, there are a multitude of inputs affecting the calculation
of the estimate for sales allowances, an increase or decrease of
any of these variables could have a significant impact on the
reduction of revenue for sales allowances.
Policy,
Warranty and Recalls
Provisions for estimated expenses related to policy and product
warranties are made at the time products are sold. These
estimates are established using historical information on the
nature, frequency, and average cost of claims. Management
actively studies trends of claims and takes action to improve
vehicle quality and minimize claims. Actual experience could
differ from the amounts estimated requiring adjustment to these
liabilities in future periods.
Impairment
of Long-Lived Assets
GM periodically reviews the carrying value of its long-lived
assets held and used, other than goodwill and intangible assets
with indefinite lives and assets to be disposed of, when events
and circumstances warrant and in conjunction with the annual
business planning cycle. This review is performed using
estimates of future cash flows discounted at a rate commensurate
with the risk involved. If the carrying value of a long-lived
asset is considered impaired, an impairment charge is recorded
for the amount by which the carrying value of the long-lived
asset exceeds its fair value. Product lines could become
impaired in the future or require additional charges as a result
of declines in profitability due to changes in volume, pricing
or costs.
Postemployment
Benefits
Costs to idle, consolidate, or close facilities and provide
postemployment benefits to employees on an other than temporary
basis are accrued based on managements best estimate of
the wage and benefits costs that will be incurred for qualified
employees under the JOBS bank provisions of the current labor
agreement through the date of its expiration in September 2007,
plus estimated costs expected to be paid thereafter. These
estimates include a 45% and 9% projected level of acceptance of
normal and early retirement offers, respectively, made pursuant
to the current labor agreement. The estimates of acceptances
were based on GMs historical experience of offering such
89
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Postemployment
Benefits (concluded)
programs. Costs related to the idling of employees that is
expected to be temporary are expensed as incurred. GM reviews
the adequacy and continuing need for these liabilities on an
annual basis in conjunction with its year-end production and
labor forecasts. Furthermore, GM reviews the reasonableness of
these liabilities on a quarterly basis.
Valuation
of Operating Leases and Lease Residuals
In accounting for operating leases, management must make a
determination at the beginning of the lease of the estimated
realizable value (i.e., residual value) of the vehicle at the
end of the lease. Residual value represents an estimate of the
market value of the vehicle at the end of the lease term, which
typically ranges from nine months to four years. The customer is
obligated to make payments during the term of the lease to the
contract residual. However, since the customer is not obligated
to purchase the vehicle at the end of the contract, we are
exposed to a risk of loss to the extent the value of the vehicle
is below the residual value estimated at contract inception.
The residual values represent an estimate of the values of the
assets at the end of the lease contracts and are initially
determined by consulting independently published residual value
guides. Realization of the residual values is dependent on our
future ability to market the vehicles under the prevailing
market conditions. Over the life of the lease, we evaluate the
adequacy of our estimate of the residual value and may make
adjustments to the extent the expected value of the vehicle at
lease termination changes. For operating leases arising from
vehicle sales to daily rental car companies, the adjustment may
be in the form of revisions to the depreciation rate or
recognition of an impairment loss. Impairment is determined to
exist if the undiscounted expected future cash flows are lower
than the carrying value of the asset. For operating leases
arising from vehicles sold to dealers, the adjustment is made to
the estimate of marketing incentive accruals for residual
support programs initially recognized when vehicles are sold to
dealers (refer to Marketing Incentives and Operating Lease
Residuals in Note 28). When a lease vehicle is returned
to us, the asset is reclassified from investment in operating
leases to inventory at the lower of cost or estimated fair
value, less costs to sell.
Our depreciation methodology on operating lease assets considers
managements expectation of the value of the vehicles upon
lease termination, which is based on numerous assumptions and
factors influencing used automotive vehicle values. The critical
assumptions underlying the estimated carrying value of
automotive lease assets include: (1) estimated market value
information obtained and used by management in estimating
residual values, (2) proper identification and estimation
of business conditions, (3) our remarketing abilities, and
(4) GMs vehicle and marketing programs. Changes in
these assumptions could have a significant impact on the value
of the lease residuals.
Accounting
for Derivatives and Other Fair Value Measurements
The Corporation uses derivatives in the normal course of
business to manage its exposure to fluctuations in commodity
prices and interest and foreign currency rates. The Corporation
accounts for its derivatives on the Consolidated Balance Sheet
as assets or liabilities at fair value in accordance with
SFAS No. 133. Such accounting is complex and requires
significant judgments and estimates involved in the estimating
of fair values in the absence of quoted market prices.
We use estimates and various assumptions in determining the fair
value of many of our assets, including retained interests and
securitizations of loans and contracts, mortgage servicing
rights, and other investments which do not have an established
market value or are not publicly traded. It is difficult to
determine the accuracy of our estimates and assumptions, and our
actual experience may differ materially from these estimates and
assumptions.
New
Accounting Standards
In June 2006, the FASB issued Interpretation No. 48,
Accounting for Uncertainty in Income Taxes
(FIN 48), which supplements SFAS No. 109,
Accounting for Income Taxes, by defining the
confidence level that a tax position must meet in order to be
recognized in the financial statements. The Interpretation
requires that the tax
90
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
New Accounting
Standards (continued)
effects of a position be recognized only if it is
more-likely-than-not to be sustained based solely on
its technical merits as of the reporting date. The
more-likely-than-not threshold represents a positive assertion
by management that a company is entitled to the economic
benefits of a tax position. If a tax position is not considered
more-likely-than-not to be sustained based solely on its
technical merits, no benefits of the position are to be
recognized. Moreover, the more-likely-than-not threshold must
continue to be met in each reporting period to support continued
recognition of a benefit. At adoption, companies must adjust
their financial statements to reflect only those tax positions
that are more-likely-than-not to be sustained as of the adoption
date. Any necessary adjustment would be recorded directly to
retained earnings in the period of adoption and reported as a
change in accounting principle. This Interpretation is effective
as of the beginning of the first fiscal year beginning after
December 15, 2006. Management estimates that upon adoption,
a cumulative effect adjustment of approximately $50 million
to $100 million will decrease reserves for uncertain tax
positions and increase retained earnings. This estimate is
subject to revision as management completes its analysis.
In September 2006, the SEC issued Staff Accounting Bulletin
(SAB) No. 108, Quantifying Financial
Misstatements, which expresses the Staffs views
regarding the process of quantifying financial statement
misstatements. Registrants are required to quantify the impact
of correcting all misstatements, including both the carryover
and reversing effects of prior year misstatements, on the
current year financial statements. The techniques most commonly
used in practice to accumulate and quantify misstatements are
generally referred to as the rollover (current year
income statement perspective) and iron curtain
(year-end balance sheet perspective) approaches. The financial
statements would require adjustment when either approach results
in quantifying a misstatement that is material, after
considering all relevant quantitative and qualitative factors.
This bulletin is effective for financial statements for the
first fiscal year ending after
November 15,
2006. Prior to the issuance of this Bulletin, GM quantified the
impact of errors using both the iron curtain approach and
rollover approach, therefore, this SAB has no financial
statement impact for GM.
In September 2006, the FASB issued SFAS No. 157
Fair Value Measurement (SFAS No. 157) which
provides a definition of fair value, establishes a framework for
measuring fair value and requires expanded disclosures about
fair value measurements. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after
November 15, 2007 and interim periods within those fiscal
years. The provisions of SFAS No. 157 should be
applied prospectively. Management is assessing the potential
impact of this standard on GMs financial condition and
results of operations.
In September 2006, the FASB issued SFAS No. 158,
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans, (SFAS No. 158) which
amends SFAS No. 87, Employers Accounting
for Pensions (SFAS No. 87),
SFAS No. 88, Employers Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans
and for Termination Benefits (SFAS No. 88),
SFAS No. 106, Employers Accounting for
Postretirement Benefits Other Than Pensions
(SFAS No. 106), and SFAS No. 132(R),
Employers Disclosures about Pensions and Other
Postretirement Benefits (revised 2003)
(SFAS No. 132(R)). This Statement requires companies
to recognize an asset or liability for the overfunded or
underfunded status of their benefit plans in their financial
statements. SFAS No. 158 also requires the measurement
date for plan assets and liabilities to coincide with the
sponsors year end. The standard provides two transition
alternatives related to the change in measurement date
provisions. The recognition of an asset and liability related to
the funded status provision is effective for fiscal year ending
after December 15, 2006 and the change in measurement date
provisions is effective for fiscal years ending after
December 15, 2008. GM adopted the recognition of an asset
and liability related to the funded status provisions of SFAS
No. 158 at December 31, 2006. The additional net pension
and OPEB liability included on the balance sheet is
$27.4 billion. The impact of adoption also resulted in
additional net deferred tax assets of $10.8 billion. The
impact of adoption to shareholders equity was a reduction
of $16.9 billion. There was no impact on pension or OPEB
expense, cash flow or benefits plans. See Note 19 for
further discussion of the implementation of the recognition
provisions of SFAS No. 158. Management has elected to early
adopt the measurement-date provisions of SFAS No. 158,
which requires new measurement dates coinciding with GMs
fiscal year for all plans, for 2007. GM will use the
two-measurement approach in adopting the
measurement-date provisions of
91
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
New Accounting
Standards (continued)
SFAS No. 158. See Note 19 for further discussions
of the measurement-date provisions of SFAS No. 158
which were early adopted by GM on January 1, 2007.
In October 2006, the FASB issued
FSP No. 123(R)-5
Amendment of FASB Staff Position
FAS No. 123(R)-1.
This FSP amends FSP FAS
No. 123(R)-1,
Classification and Measurement of Freestanding Financial
Instruments Originally Issued in Exchange for Employee Services
under SFAS No. 123(R), to clarify that
freestanding financial instruments that were originally issued
as employee compensation subject to SFAS No. 123(R)
and subsequently modified solely to reflect an equity
restructuring that occurs when the holders are no longer
employees, should continue to be subject to the recognition and
measurement provisions of SFAS No. 123(R) if certain
conditions are met. The provisions in this FSP are effective for
the first reporting period beginning after October 10,
2006. GM adopted the provisions of FSP
123(R)-5 on
January 1, 2007. This guidance did not have a material
effect on GMs financial condition and results of
operations.
In October 2006, the FASB issued
FSP No. 123(R)-6
Technical Corrections of FASB Statement
No. 123(R), which revises the definition of
short-term inducement to exclude an offer to settle
an award. The provisions of this FSP are effective for the first
reporting period beginning after October 20, 2006. GM
adopted the provisions of
FSP 123R-6
on January 1, 2007. This guidance did not have a material
effect on GMs financial condition and results of
operations.
In February 2007, the FASB issued SFAS No. 159 The
Fair Value Option for Financial Assets and Financial
Liabilities Including an Amendment of SFAS
No. 115 (SFAS No. 159), which permits an entity to
measure many financial assets and financial liabilities at fair
value that are not currently required to be measured at fair
value. Entities that elect the fair value option will report
unrealized gains and losses in earnings at each subsequent
reporting date. The fair value option may be elected on an
instrument-by-instrument
basis, with a few exceptions. SFAS No. 159 amends previous
guidance to extend the use of the fair value option to
available-for-sale
and
held-to-maturity
securities. The Statement also establishes presentation and
disclosure requirements to help financial statement users
understand the effect of the election. SFAS No. 159 is
effective as of the beginning of the first fiscal year beginning
after November 15, 2007. Management is currently assessing
the potential impact of the standard on GMs financial
condition and results of operations.
Forward-Looking
Statements
In this report, in reports subsequently filed by GM with the SEC
on
Form 10-Q
and filed or furnished on
Form 8-K,
and in related comments by management of GM, our use of the
words 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. All
statements in this report and subsequent reports which GM may
file with the SEC on
Form 10-Q
or file or furnish on
Form 8-K,
other than statements of historical fact, including without
limitation, statements about future events and financial
performance, are forward-looking statements that involve certain
risks and uncertainties. We believe these judgments are
reasonable, but these statements are not guarantees of any
events or financial results, and GMs actual results may
differ materially due to a variety of important factors that may
be revised or supplemented in subsequent reports on SEC
Forms 10-Q
and 8-K.
Such factors include, among others, the following:
|
|
|
|
|
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 the Corporations new products;
|
92
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Forward-Looking
Statements (continued)
|
|
|
|
|
Significant changes in the competitive environment and the
effect of competition in the Corporations markets,
including on the Corporations 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 our 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;
|
|
|
|
Changes in relations with unions and employees/retirees and the
legal interpretations of the agreements with those unions with
regard to employees/retirees;
|
|
|
|
Negotiations and bankruptcy court actions with respect to
Delphis obligations to GM, negotiations with respect to
GMs obligations under the pension benefit guarantees to
Delphi employees, and GMs 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 GMs key suppliers
such as Delphi;
|
|
|
|
Additional credit rating downgrades and the effects thereof;
|
|
|
|
Shortages of and price increases for fuel; and
|
|
|
|
Changes in economic conditions, commodity prices, currency
exchange rates, or political stability in the markets in which
we operate.
|
In addition, GMACs actual results may differ materially
due to numerous important factors that are described in
GMACs most recent report on SEC
Form 10-K,
which may be revised or supplemented in subsequent reports on
SEC
Forms 10-Q
and 8-K.
Such factors include, among others, the following:
|
|
|
|
|
Factors affecting results of operations and financial condition
such as credit ratings, adequate access to the market, changes
in the residual value of off-lease vehicles, changes in U.S.
government-sponsored mortgage programs, disruptions in the
markets in which its mortgage subsidiaries operate, and changes
in its contractual servicing rights;
|
|
|
|
Significant changes in the competitive environment and the
effect of competition in the GMACs markets, including on
the GMACs pricing policies;
|
|
|
|
Its ability to maintain adequate financing sources;
|
|
|
|
Its ability to maintain an appropriate level of debt;
|
|
|
|
Restrictions on ResCaps ability 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 GMACs mortgage
subsidiaries operate;
|
|
|
|
Changes in its contractual servicing rights;
|
|
|
|
Costs and risks associated with litigation;
|
93
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Forward-Looking Statements (concluded)
|
|
|
|
|
Changes in GMACs accounting assumptions that may require
or that result from changes in the accounting rules or their
application, which could result in an impact on earnings;
|
|
|
|
Changes in the credit ratings of GMAC or GM;
|
|
|
|
The threat of natural calamities;
|
|
|
|
Changes in economic conditions, currency exchange rates, or
political stability in the markets in which it operates; and
|
|
|
|
Changes in the existing, or the adoption of new, laws,
regulations, policies, or other activities of governments,
agencies and similar organizations.
|
We caution investors not to place undue reliance on
forward-looking statements. We undertake no obligation to update
publicly or otherwise revise any forward-looking statements,
whether as a result of new information, future events, or other
such factors that affect the subject of these statements, except
where we are expressly required to do so by law.
* * * * * * *
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
GM is exposed to market risk from changes in foreign currency
exchange rates, interest rates, and certain commodity and equity
prices. The Company enters into a variety of foreign exchange,
interest rate, and commodity forward contracts and options to
maintain the desired level of exposure arising from these risks.
The overall financial risk management program is placed under
the responsibility of the Risk Management Committee (RMC), which
reviews and, where appropriate, approves recommendations on the
level of exposure and the strategies to be pursued to mitigate
these risks. A risk management control system is utilized to
monitor the strategies, risks, and related hedge positions, in
accordance with the policies and procedures approved by the RMC.
A discussion of GMs accounting policies for derivative
financial instruments is included in Note 3 to the
Consolidated Financial Statements. Further information on
GMs exposure to market risk is included in Notes 23
and 24 to the Consolidated Financial Statements.
The following analyses provide quantitative information
regarding GMs exposure to foreign currency exchange rate
risk, interest rate risk, and commodity and equity price risk.
GM uses sensitivity analysis to measure the potential loss in
the fair value of financial instruments with exposure to market
risk. The model used assumes instantaneous, parallel shifts in
exchange rates, interest rate yield curves, and commodity and
equity prices. For options and other instruments with nonlinear
returns, models appropriate to these types of instruments are
utilized to determine the impact of market shifts. There are
certain shortcomings inherent in the sensitivity analyses
presented, primarily due to the assumption that exchange rates
change in a parallel fashion and that interest rates change
instantaneously. In addition, the analyses are unable to reflect
the complex market reactions that normally would arise from the
market shifts modeled.
Foreign
Exchange Rate Risk
GM has foreign currency exposures related to buying, selling,
and financing in currencies other than the local currencies in
which it operates. Derivative instruments, such as foreign
currency forwards, swaps and options are used to hedge these
exposures. At December 31, 2006, the net fair value asset
of financial instruments with exposure to foreign currency risk
was approximately $8.4 billion compared to a net fair value
liability of $3.5 billion at December 31, 2005. The
potential loss in fair value for such financial instruments from
a 10% adverse change in quoted foreign currency exchange rates
would be approximately $1.8 billion and $0.5 billion
for 2006 and 2005, respectively.
94
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Foreign Exchange Rate
Risk (concluded)
The analysis excludes GMACs portfolio at December 31,
2006. This entity is reported as an equity-method investee from
December 1, 2006, while it was consolidated at
December 31, 2005.
Interest
Rate Risk
GM is subject to market risk from exposure to changes in
interest rates due to its financing activities. Interest rate
risk is managed mainly with interest rate swaps.
At December 31, 2006 and 2005, the net fair value asset of
financial instruments held for purposes other than trading with
exposure to interest rate risk was approximately
$25.3 billion and $41.9 billion, respectively. The
potential loss in fair value resulting from a 10% adverse shift
in quoted interest rates would be approximately
$1.5 billion and $3.0 billion for 2006 and 2005,
respectively.
The analysis excludes GMACs portfolio at December 31,
2006. This entity is reported as an equity-method investee from
December 1, 2006, while it was consolidated at
December 31, 2005.
Commodity
Price Risk
GM is exposed to changes in prices of commodities used in its
Automotive business, primarily associated with various
non-ferrous and precious metals for automotive components, and
energy used in the overall manufacturing process. Some of the
commodity purchase contracts meet the definition of a derivative
under SFAS No. 133. In addition, GM enters into various
derivatives, such as commodity swaps and options, to offset its
commodity price exposures.
At December 31, 2006 and 2005 the net fair value asset of
derivative and purchase contracts was approximately
$754.6 million and $781.6 million, respectively. The
potential loss in fair value resulting from a 10% adverse change
in the underlying commodity prices would be approximately
$318.2 million and $289.5 million for 2006 and 2005,
respectively. This amount excludes the offsetting impact of the
commodity price risk inherent in the physical purchase of the
underlying commodities.
Equity
Price Risk
The
available-for-sale
equity securities at December 31, 2005 were related to the
insurance business of GMAC. This entity is reported as an
equity-method investee from December 1, 2006 and therefore
its investments are no longer reported in the consolidated
balance sheet.
* * * * * * *
95
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
General Motors Corporation, its Directors, and Stockholders:
We have audited managements assessment, included in the
accompanying Managements Report on Internal Control over
Financial Reporting in Item 9A, that General Motors
Corporation and subsidiaries (the Corporation) did not maintain
effective internal control over financial reporting as of
December 31, 2006, because of the effect of the material
weaknesses identified in managements assessment, based on
criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. The Corporations
management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our
responsibility is to express an opinion on managements
assessment and an opinion on the effectiveness of the
Corporations internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating
managements assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinions.
A companys internal control over financial reporting is a
process designed by, or under the supervision of, the
companys principal executive and principal financial
officers, or persons performing similar functions, and effected
by the companys board of directors, management, and other
personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting
to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
A material weakness is a significant deficiency, or combination
of significant deficiencies, that results in more than a remote
likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected. The
following material weaknesses have been identified and included
in managements assessment resulting from deficiencies in
the design or operation of the respective controls:
(1) The Corporation lacked the technical expertise and
processes to ensure compliance with Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes, and did not maintain adequate controls with
respect to (a) timely tax account reconciliations and
analyses, (b) coordination and communication between
Corporate Accounting and Tax Staffs, and (c) timely review
and analysis of corporate journals recorded in the consolidation
process. This material weakness resulted in a restatement of
prior financial statements, as described in Note 2 to the
consolidated financial statements and, if not remediated, could
result in a material misstatement in the future.
(2) The Corporation, in certain instances, lacked the
technical expertise and did not maintain adequate procedures to
ensure that the accounting for derivative financial instruments
under SFAS No. 133, Accounting
96
for Derivative Instruments and Hedging Activities
(SFAS No. 133), was appropriate. Procedures relating
to hedging transactions in certain instances did not operate
effectively to (a) properly evaluate hedge accounting
treatment, (b) meet the documentation requirements of
SFAS No. 133, (c) adequately assess and measure
hedge effectiveness on a quarterly basis, and (d) establish
the appropriate communication and coordination between relevant
GM departments involved in complex hedging transactions. This
material weakness resulted in a restatement of prior financial
statements, as described in Note 2 to the consolidated
financial statements and, if not remediated, could result in a
material misstatement in the future.
(3) The Corporation did not maintain a sufficient
complement of personnel with an appropriate level of accounting
knowledge, experience, and training in the application of
generally accepted accounting principles commensurate with the
Corporations complex financial accounting and reporting
requirements. This material weakness contributed to the
restatement of prior financial statements, as described in
Note 2 to the consolidated financial statements and, if not
remediated, has the potential to cause a material misstatement
in the future.
(4) Due to the previously reported material weaknesses, as
evidenced by the significant number and magnitude of
out-of-period
adjustments identified during the year-end closing process and
the resulting restatement related to deferred taxes, and
derivatives and hedging activities, management has concluded
that the controls over the period-end financial reporting
process were not operating effectively. Specifically, controls
were not effective to ensure that significant non-routine
transactions, accounting estimates, and other adjustments were
appropriately reviewed, analyzed, and monitored on a timely
basis. This material weakness contributed to the restatement of
prior financial statements, as described in Note 2 to the
consolidated financial statements and, if not remediated, has
the potential to cause a material misstatement in the future.
Management has restated previously reported 2005 and 2004
consolidated financial statements due to these matters. These
material weaknesses were considered in determining the nature,
timing, and extent of audit tests applied in our audit of the
consolidated financial statements and the financial statement
schedule listed at Item 15 as of and for the year ended
December 31, 2006 (collectively, the financial statements
and financial statement schedule). This report does not affect
our report on such consolidated financial statements and
financial statement schedule.
In our opinion, managements assessment that the
Corporation did not maintain effective internal control over
financial reporting as of December 31, 2006, is fairly
stated, in all material respects, based on the criteria
established in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Also in our opinion,
because of the effect of the material weaknesses described above
on the achievement of the objectives of the control criteria,
the Corporation has not maintained effective internal control
over financial reporting as of December 31, 2006, based on
the criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
Consolidated Balance Sheet and the related Consolidated
Statements of Operations, Cash Flows, and Stockholders
Equity (Deficit) of the Corporation as of and for the year ended
December 31, 2006. Our audit also included the financial
statement schedule listed at Item 15 as of and for the year
ended December 31, 2006. Our report dated March 14,
2007 expressed an unqualified opinion on those financial
statements and financial statement schedule and included
explanatory paragraphs concerning (1) the adoption of the
funded status recognition provisions of SFAS No. 158,
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans an amendment of FASB
Statements No. 87, 88, 106, and 132(R) and (2) the
Corporations sale of a controlling interest in GMAC LLC.
/s/ Deloitte &
Touche llp
Deloitte &
Touche llp
Detroit, Michigan
March 14, 2007
97
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
General Motors Corporation, its Directors, and Stockholders:
We have audited the accompanying Consolidated Balance Sheets of
General Motors Corporation and subsidiaries (the Corporation) as
of December 31, 2006 and 2005, and the related Consolidated
Statements of Operations, Cash Flows, and Stockholders
Equity (Deficit) for each of the three years in the period ended
December 31, 2006. Our audits also included the financial
statement schedule listed at Item 15. These financial
statements and financial statement schedule are the
responsibility of the Corporations management. Our
responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
General Motors Corporation and subsidiaries at December 31,
2006 and 2005, and the results of their operations and their
cash flows for each of the three years in the period ended
December 31, 2006, in conformity with accounting principles
generally accepted in the United States of America. Also, in our
opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as
a whole, presents fairly, in all material respects, the
information set forth therein.
As discussed in Note 2 to the consolidated financial
statements, the accompanying 2005 and 2004 consolidated
financial statements have been restated.
As discussed in Note 3 to the consolidated financial
statements, the Corporation: (1) effective
December 31, 2006, began to recognize the funded status of
its benefit plans in its consolidated balance sheet to conform
to Statement of Financial Accounting Standards No. 158,
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans an amendment of FASB
Statements No. 87, 88, 106, and 132(R), and
(2) effective December 31, 2005, began to account for
the estimated fair value of conditional asset retirement
obligations to conform to FASB Interpretation No. 47,
Accounting for Conditional Asset Retirement Obligations.
As discussed in Note 4 to the consolidated financial
statements, on November 30, 2006, the Corporation sold a
51% controlling interest in GMAC LLC, its former wholly-owned
finance subsidiary. Effective December 1, 2006, the
Corporations remaining 49% interest in GMAC LLC is
accounted for as an equity method investment.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of the Corporations internal control over
financial reporting as of December 31, 2006, based on the
criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated
March 14, 2007 expressed an unqualified opinion on
managements assessment of the effectiveness of the
Corporations internal control over financial reporting and
an adverse opinion on the effectiveness of the
Corporations internal control over financial reporting.
/s/ Deloitte &
Touche llp
Deloitte &
Touche llp
Detroit, Michigan
March 14, 2007
98
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
(As restated,
|
|
|
(As restated,
|
|
|
|
|
|
|
see Note 2)
|
|
|
see Note 2)
|
|
|
Net sales and revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive sales
|
|
$
|
172,927
|
|
|
$
|
160,228
|
|
|
$
|
163,341
|
|
Financial services and insurance
revenues
|
|
|
34,422
|
|
|
|
34,427
|
|
|
|
32,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenues
|
|
|
207,349
|
|
|
|
194,655
|
|
|
|
195,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive cost of sales
|
|
|
164,682
|
|
|
|
158,887
|
|
|
|
152,115
|
|
Selling, general, and
administrative expenses
|
|
|
25,081
|
|
|
|
27,513
|
|
|
|
25,969
|
|
Interest expense
|
|
|
16,945
|
|
|
|
15,607
|
|
|
|
11,913
|
|
Provisions for credit and insurance
losses related to financing and insurance operations
|
|
|
4,071
|
|
|
|
3,430
|
|
|
|
4,315
|
|
Other expenses
|
|
|
4,238
|
|
|
|
7,024
|
|
|
|
1,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
215,017
|
|
|
|
212,461
|
|
|
|
195,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(7,668
|
)
|
|
|
(17,806
|
)
|
|
|
(545
|
)
|
Automotive interest income and
other non-operating income, net
|
|
|
2,721
|
|
|
|
1,066
|
|
|
|
1,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes,
equity income (loss) and minority interests and cumulative
effect of a change in accounting principle
|
|
|
(4,947
|
)
|
|
|
(16,740
|
)
|
|
|
855
|
|
Income tax benefit
|
|
|
(2,785
|
)
|
|
|
(5,870
|
)
|
|
|
(1,126
|
)
|
Equity income (loss) and minority
interests, net of tax
|
|
|
184
|
|
|
|
562
|
|
|
|
720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before cumulative
effect of a change in accounting principle
|
|
|
(1,978
|
)
|
|
|
(10,308
|
)
|
|
|
2,701
|
|
Cumulative effect of a change in
accounting principle
|
|
|
|
|
|
|
(109
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(1,978
|
)
|
|
$
|
(10,417
|
)
|
|
$
|
2,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before cumulative
effect of a change in accounting principle
|
|
$
|
(3.50
|
)
|
|
$
|
(18.23
|
)
|
|
$
|
4.78
|
|
Cumulative effect of a change in
accounting principle
|
|
|
|
|
|
|
(0.19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share, basic
|
|
$
|
(3.50
|
)
|
|
$
|
(18.42
|
)
|
|
$
|
4.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding, basic (millions)
|
|
|
566
|
|
|
|
565
|
|
|
|
565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before cumulative
effect of a change in accounting principle
|
|
$
|
(3.50
|
)
|
|
$
|
(18.23
|
)
|
|
$
|
4.76
|
|
Cumulative effect of a change in
accounting principle
|
|
|
|
|
|
|
(0.19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share, diluted
|
|
$
|
(3.50
|
)
|
|
$
|
(18.42
|
)
|
|
$
|
4.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding, diluted (millions)
|
|
|
566
|
|
|
|
565
|
|
|
|
567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per share
|
|
$
|
1.00
|
|
|
$
|
2.00
|
|
|
$
|
2.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reference should be made to the notes to consolidated financial
statements.
99
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
(As restated,
|
|
|
|
|
|
|
see Note 2)
|
|
|
ASSETS
|
Current
Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
23,774
|
|
|
$
|
15,187
|
|
Marketable securities
|
|
|
138
|
|
|
|
1,416
|
|
|
|
|
|
|
|
|
|
|
Total cash and marketable securities
|
|
|
23,912
|
|
|
|
16,603
|
|
Accounts and notes receivable, net
|
|
|
8,216
|
|
|
|
5,917
|
|
Inventories
|
|
|
13,921
|
|
|
|
13,862
|
|
Equipment on operating leases, net
|
|
|
6,125
|
|
|
|
6,993
|
|
Deferred income taxes and other
current assets
|
|
|
11,957
|
|
|
|
8,982
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
64,131
|
|
|
|
52,357
|
|
Financing and Insurance
Operations Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
349
|
|
|
|
15,539
|
|
Investments in securities
|
|
|
188
|
|
|
|
18,310
|
|
Finance receivables, net
|
|
|
|
|
|
|
180,849
|
|
Loans held for sale
|
|
|
|
|
|
|
21,865
|
|
Assets held for sale
|
|
|
|
|
|
|
19,030
|
|
Equipment on operating leases, net
|
|
|
11,794
|
|
|
|
31,194
|
|
Equity in net assets of GMAC LLC
|
|
|
7,523
|
|
|
|
|
|
Other assets
|
|
|
2,269
|
|
|
|
25,157
|
|
|
|
|
|
|
|
|
|
|
Total Financing and Insurance
Operations assets
|
|
|
22,123
|
|
|
|
311,944
|
|
Non-Current Assets
|
|
|
|
|
|
|
|
|
Equity in net assets of
nonconsolidated affiliates
|
|
|
1,969
|
|
|
|
3,242
|
|
Property, net
|
|
|
41,934
|
|
|
|
38,543
|
|
Intangible assets, net
|
|
|
1,118
|
|
|
|
1,869
|
|
Deferred income taxes
|
|
|
32,967
|
|
|
|
23,761
|
|
Prepaid pension
|
|
|
17,366
|
|
|
|
37,576
|
|
Other assets
|
|
|
4,584
|
|
|
|
4,864
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
99,938
|
|
|
|
109,855
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
186,192
|
|
|
$
|
474,156
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY (DEFICIT)
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable (principally trade)
|
|
$
|
26,931
|
|
|
$
|
26,402
|
|
Short-term borrowings and current
portion of long-term debt
|
|
|
5,666
|
|
|
|
1,627
|
|
Accrued expenses
|
|
|
35,225
|
|
|
|
42,697
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
67,822
|
|
|
|
70,726
|
|
Financing and Insurance
Operations Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
1,214
|
|
|
|
3,731
|
|
Liabilities related to assets held
for sale
|
|
|
|
|
|
|
10,941
|
|
Debt
|
|
|
9,438
|
|
|
|
253,508
|
|
Other liabilities and deferred
income taxes
|
|
|
925
|
|
|
|
26,325
|
|
|
|
|
|
|
|
|
|
|
Total Financing and Insurance
Operations liabilities
|
|
|
11,577
|
|
|
|
294,505
|
|
Non-Current
Liabilities
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
33,067
|
|
|
|
32,580
|
|
Postretirement benefits other than
pensions
|
|
|
50,086
|
|
|
|
28,990
|
|
Pensions
|
|
|
11,934
|
|
|
|
11,225
|
|
Other liabilities and deferred
income taxes
|
|
|
15,957
|
|
|
|
20,430
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
111,044
|
|
|
|
93,225
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
190,443
|
|
|
|
458,456
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
(Note 20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interests
|
|
|
1,190
|
|
|
|
1,047
|
|
Stockholders Equity
(Deficit)
|
|
|
|
|
|
|
|
|
Preferred stock, no par value,
authorized 6,000,000, no shares issued and outstanding
|
|
|
|
|
|
|
|
|
$12/3
par value common stock (2,000,000,000 shares authorized,
756,637,541 and 565,670,254 shares issued and outstanding
at December 31, 2006, respectively, and 756,637,541 and
565,518,106 at December 31, 2005, respectively)
|
|
|
943
|
|
|
|
943
|
|
Capital surplus (principally
additional paid-in capital)
|
|
|
15,336
|
|
|
|
15,285
|
|
Retained earnings
|
|
|
406
|
|
|
|
2,960
|
|
Accumulated other comprehensive
(loss)
|
|
|
(22,126
|
)
|
|
|
(4,535
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
(deficit)
|
|
|
(5,441
|
)
|
|
|
14,653
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, minority
interests, and stockholders equity (deficit)
|
|
$
|
186,192
|
|
|
$
|
474,156
|
|
|
|
|
|
|
|
|
|
|
Reference should be made to the
notes to consolidated financial statements.
100
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
(Dollars
in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
(As restated,
|
|
|
(As restated,
|
|
|
|
|
|
|
see note 2)
|
|
|
see note 2)
|
|
Cash flows from operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(1,978
|
)
|
|
$
|
(10,417
|
)
|
|
$
|
2,701
|
|
Cumulative effect of a change in
accounting principle
|
|
|
|
|
|
|
109
|
|
|
|
|
|
Adjustments to reconcile income
(loss) before cumulative effect of a change in accounting
principle to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, impairments, and
amortization expense
|
|
|
10,950
|
|
|
|
15,797
|
|
|
|
14,202
|
|
Mortgages: servicing rights and
premium amortization
|
|
|
1,021
|
|
|
|
1,142
|
|
|
|
1,675
|
|
Goodwill impairment GMAC
|
|
|
828
|
|
|
|
712
|
|
|
|
|
|
Delphi benefit guarantee
|
|
|
500
|
|
|
|
5,500
|
|
|
|
|
|
Loss on sale of 51% interest in GMAC
|
|
|
2,910
|
|
|
|
|
|
|
|
|
|
Provision for credit financing
losses
|
|
|
1,799
|
|
|
|
1,074
|
|
|
|
1,944
|
|
Net gains on sale of credit
receivables
|
|
|
(1,256
|
)
|
|
|
(1,741
|
)
|
|
|
(1,332
|
)
|
Net gains on sale of investment
securities
|
|
|
(1,006
|
)
|
|
|
(104
|
)
|
|
|
(52
|
)
|
Other postretirement employee
benefit (OPEB) expense
|
|
|
3,582
|
|
|
|
5,671
|
|
|
|
4,558
|
|
OPEB payments
|
|
|
(3,802
|
)
|
|
|
(4,084
|
)
|
|
|
(3,974
|
)
|
VEBA/401(h) withdrawals
|
|
|
3,061
|
|
|
|
3,168
|
|
|
|
(8,618
|
)
|
Pension expense
|
|
|
4,928
|
|
|
|
2,519
|
|
|
|
2,456
|
|
Pension contributions
|
|
|
(969
|
)
|
|
|
(833
|
)
|
|
|
(919
|
)
|
Retiree lump sum and vehicle
voucher expense, net of payments
|
|
|
(325
|
)
|
|
|
(264
|
)
|
|
|
(329
|
)
|
Net change in mortgage loans
|
|
|
(21,578
|
)
|
|
|
(29,119
|
)
|
|
|
(2,312
|
)
|
Net change in mortgage securities
|
|
|
427
|
|
|
|
(1,155
|
)
|
|
|
614
|
|
Change in other investments and
miscellaneous assets
|
|
|
(470
|
)
|
|
|
(685
|
)
|
|
|
104
|
|
Changes in assets and liabilities,
net of acquisitions and disposals
|
|
|
(12,608
|
)
|
|
|
(6,798
|
)
|
|
|
(1,754
|
)
|
Other
|
|
|
2,227
|
|
|
|
2,652
|
|
|
|
392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
operating activities
|
|
|
(11,759
|
)
|
|
|
(16,856
|
)
|
|
|
9,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures for property
|
|
|
(7,933
|
)
|
|
|
(8,179
|
)
|
|
|
(7,753
|
)
|
Investments in marketable
securities, acquisitions
|
|
|
(25,530
|
)
|
|
|
(21,800
|
)
|
|
|
(15,278
|
)
|
Investments in marketable
securities, liquidations
|
|
|
28,549
|
|
|
|
22,537
|
|
|
|
15,911
|
|
Net change in mortgage servicing
rights
|
|
|
(61
|
)
|
|
|
(267
|
)
|
|
|
(326
|
)
|
Increase in finance receivables
|
|
|
(1,160
|
)
|
|
|
(6,582
|
)
|
|
|
(38,673
|
)
|
Proceeds from sale of finance
receivables
|
|
|
18,374
|
|
|
|
31,652
|
|
|
|
23,385
|
|
Proceeds from sale of 51% interest
in GMAC
|
|
|
7,353
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of business
units/equity investments
|
|
|
10,506
|
|
|
|
846
|
|
|
|
|
|
Operating leases, acquisitions
|
|
|
(17,070
|
)
|
|
|
(15,496
|
)
|
|
|
(14,324
|
)
|
Operating leases, liquidations
|
|
|
7,039
|
|
|
|
5,362
|
|
|
|
7,696
|
|
Investments in companies, net of
cash acquired
|
|
|
(357
|
)
|
|
|
1,355
|
|
|
|
(60
|
)
|
Other
|
|
|
(15
|
)
|
|
|
(863
|
)
|
|
|
1,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities
|
|
|
19,695
|
|
|
|
8,565
|
|
|
|
(28,063
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in
short-term borrowings
|
|
|
7,033
|
|
|
|
(10,126
|
)
|
|
|
2,192
|
|
Borrowings of long-term debt
|
|
|
79,566
|
|
|
|
78,276
|
|
|
|
73,511
|
|
Payments made on long-term debt
|
|
|
(92,290
|
)
|
|
|
(69,566
|
)
|
|
|
(57,822
|
)
|
Cash dividends paid to stockholders
|
|
|
(563
|
)
|
|
|
(1,134
|
)
|
|
|
(1,129
|
)
|
Other
|
|
|
2,487
|
|
|
|
6,030
|
|
|
|
4,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities
|
|
|
(3,767
|
)
|
|
|
3,480
|
|
|
|
21,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on
cash and cash equivalents
|
|
|
365
|
|
|
|
(85
|
)
|
|
|
671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and
cash equivalents
|
|
|
4,534
|
|
|
|
(4,896
|
)
|
|
|
3,439
|
|
Cash and cash equivalents
reclassified to assets held for sale
|
|
|
|
|
|
|
(371
|
)
|
|
|
|
|
Cash and cash equivalents retained
by GMAC LLC upon disposal
|
|
|
(11,137
|
)
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at
beginning of the year
|
|
|
30,726
|
|
|
|
35,993
|
|
|
|
32,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end
of the year
|
|
$
|
24,123
|
|
|
$
|
30,726
|
|
|
$
|
35,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reference should be made to the notes to consolidated financial
statements.
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
|
Other
|
|
|
Total
|
|
|
|
Shares of
|
|
|
|
|
|
|
|
|
Comprehensive
|
|
|
Earnings
|
|
|
Comprehensive
|
|
|
Stockholders
|
|
|
|
Common
|
|
|
Capital
|
|
|
Capital
|
|
|
Income
|
|
|
(Accumulated
|
|
|
Income
|
|
|
Equity
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Surplus
|
|
|
(Loss)
|
|
|
Deficit)
|
|
|
(Loss)
|
|
|
(Deficit)
|
|
|
Balance January 1, 2004, as
previously reported
|
|
|
562
|
|
|
$
|
937
|
|
|
$
|
15,185
|
|
|
|
|
|
|
$
|
12,387
|
|
|
$
|
(3,606
|
)
|
|
$
|
24,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior period adjustments (see
Note 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
552
|
|
|
|
(579
|
)
|
|
|
(27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2004, as
restated
|
|
|
562
|
|
|
$
|
937
|
|
|
$
|
15,185
|
|
|
|
|
|
|
$
|
12,939
|
|
|
|
(4,185
|
)
|
|
$
|
24,876
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,701
|
|
|
|
2,701
|
|
|
|
|
|
|
|
2,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum pension liability adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(571
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,371
|
|
|
|
|
|
|
|
1,371
|
|
|
|
1,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
3
|
|
|
|
5
|
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61
|
|
Cash dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,129
|
)
|
|
$
|
|
|
|
|
(1,129
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2004,
as restated
|
|
|
565
|
|
|
$
|
942
|
|
|
$
|
15,241
|
|
|
|
|
|
|
$
|
14,511
|
|
|
$
|
(2,814
|
)
|
|
$
|
27,880
|
|
Net (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(10,417
|
)
|
|
|
(10,417
|
)
|
|
|
|
|
|
|
(10,417
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(929
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (loss) on securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(67
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum pension liability adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(758
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,721
|
)
|
|
|
|
|
|
|
(1,721
|
)
|
|
|
(1,721
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(12,138
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
1
|
|
|
|
1
|
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
|
|
Cash dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,134
|
)
|
|
|
|
|
|
|
(1,134
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2005,
as restated
|
|
|
566
|
|
|
$
|
943
|
|
|
$
|
15,285
|
|
|
|
|
|
|
$
|
2,960
|
|
|
$
|
(4,535
|
)
|
|
$
|
14,653
|
|
Net (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,978
|
)
|
|
|
(1,978
|
)
|
|
|
|
|
|
|
(1,978
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (loss) on derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(249
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (loss) on securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(504
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum pension liability adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(67
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(645
|
)
|
|
|
|
|
|
|
(645
|
)
|
|
|
(645
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(2,623
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to initially apply
SFAS No. 158, net of income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,946
|
)
|
|
|
(16,946
|
)
|
Stock options
|
|
|
|
|
|
|
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51
|
|
Cumulative effect of a change in
accounting principle adoption of SFAS No. 156,
net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
(13
|
)
|
Cash dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(563
|
)
|
|
|
|
|
|
|
(563
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31,
2006
|
|
|
566
|
|
|
$
|
943
|
|
|
$
|
15,336
|
|
|
|
|
|
|
$
|
406
|
|
|
$
|
(22,126
|
)
|
|
$
|
(5,441
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reference should be made to the notes to consolidated financial
statements.
102
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Note 1.
|
Nature of
Operations
|
GM is primarily engaged in the worldwide production and
marketing of cars and trucks. GM develops, manufactures, and
markets vehicles worldwide through its four regions. GMs
four automotive regions consist of GM North America (GMNA), GM
Europe (GME), GM Latin America/Africa/Mid-East (GMLAAM), and GM
Asia Pacific (GMAP). Also, GMs finance and insurance
operations are primarily conducted through GMAC LLC, the
successor to General Motors Acceptance Corporation (together
with GMAC LLC, GMAC), a wholly-owned subsidiary through November
2006. On November 30, 2006, GM sold a 51% controlling
ownership interest in GMAC to a consortium of investors. After
the sale, GM has accounted for its 49% ownership interest in
GMAC using the equity method. GMAC provides a broad range of
financial services, including consumer vehicle financing,
automotive dealership and other commercial financing,
residential mortgage services, automobile service contracts,
personal automobile insurance coverage and selected commercial
insurance coverage.
|
|
Note 2.
|
Restatement
of Previously Issued Consolidated Financial Statements
|
The accompanying 2005 and 2004 consolidated financial statements
have been restated to correct the accounting for certain
derivative transactions under Statement of Financial Accounting
Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended
(SFAS No. 133); accounting for deferred income taxes
under SFAS No. 109, Accounting for Income Taxes
(SFAS No. 109), and various other accounting
adjustments.
The following table sets forth a reconciliation of previously
reported and restated net income (loss) and retained earnings as
of the dates and for the periods shown (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
|
Retained Earnings at
|
|
|
|
2005
|
|
|
2004
|
|
|
January 1, 2004
|
|
|
As previously
reported
|
|
$
|
(10,567
|
)
|
|
$
|
2,804
|
|
|
$
|
12,387
|
|
Pre-tax adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative and hedge accounting
adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal purchases and normal
sales scope exception for certain commodity contracts
|
|
|
111
|
|
|
|
65
|
|
|
|
(4
|
)
|
Hedge accounting related to
commodity cash flow hedges
|
|
|
120
|
|
|
|
247
|
|
|
|
25
|
|
Foreign Exchange
Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedge accounting related to
foreign currency cash flow and net investment hedges
|
|
|
114
|
|
|
|
(209
|
)
|
|
|
(112
|
)
|
Interest Rate
Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedge accounting related to
certain debt investments
|
|
|
(256
|
)
|
|
|
(143
|
)
|
|
|
88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative and hedge
accounting adjustments
|
|
|
89
|
|
|
|
(40
|
)
|
|
|
(3
|
)
|
Other
out-of-period
adjustments
|
|
|
118
|
|
|
|
(272
|
)
|
|
|
(740
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pre-tax adjustments
|
|
|
207
|
|
|
|
(312
|
)
|
|
|
(743
|
)
|
Tax effects
provision/(benefit)
|
|
|
22
|
|
|
|
(207
|
)
|
|
|
(153
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total of above adjustments, net of
tax
|
|
|
185
|
|
|
|
(105
|
)
|
|
|
(590
|
)
|
Deferred income tax
adjustments
|
|
|
(35
|
)
|
|
|
2
|
|
|
|
1,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net after-tax adjustments
|
|
|
150
|
|
|
|
(103
|
)
|
|
|
552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As restated
|
|
$
|
(10,417
|
)
|
|
$
|
2,701
|
|
|
$
|
12,939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 2.
|
Restatement
of Previously Issued Consolidated Financial
Statements (continued)
|
The following table sets forth a reconciliation of previously
reported and restated earnings (loss) per share for the periods
shown (in millions):
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
Basic earnings (loss) per share:
|
|
|
|
|
|
|
|
|
Earnings (loss) before cumulative
effect of a change in accounting principle, as reported
|
|
$
|
(18.50
|
)
|
|
$
|
4.97
|
|
Adjustments
|
|
|
0.27
|
|
|
|
(0.19
|
)
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before cumulative
effect of a change in accounting principle, as restated
|
|
|
(18.23
|
)
|
|
|
4.78
|
|
Cumulative effect of a change in
accounting principle
|
|
|
(0.19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share, as
restated
|
|
($
|
18.42
|
)
|
|
$
|
4.78
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
|
Earnings (loss) before cumulative
effect of a change in accounting principle, as reported
|
|
$
|
(18.50
|
)
|
|
$
|
4.94
|
|
Adjustments
|
|
|
0.27
|
|
|
|
(0.18
|
)
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before cumulative
effect of a change in accounting principle, as restated
|
|
|
(18.23
|
)
|
|
|
4.76
|
|
Cumulative effect of a change in
accounting principle
|
|
|
(0.19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share, as
restated
|
|
$
|
(18.42
|
)
|
|
$
|
4.76
|
|
|
|
|
|
|
|
|
|
|
These restatement adjustments and revisions are further
described below:
Derivatives
and Hedge Accounting Adjustments
Commodity
Contracts
In reviewing the accounting for certain commodity purchase
contracts, GM determined that it had incorrectly concluded that
the normal purchases and normal sales scope
exception in paragraph 10(b) of SFAS No. 133
applied. Therefore, these commodity purchase contracts should
have been accounted for as derivatives. The financial statements
have been restated to record the fair value of these purchase
contracts in the 2005 consolidated balance sheet and record the
changes in the fair value of the commodity contracts as charges
or credits in the consolidated statements of operations. This
adjustment resulted in recording derivative assets and
liabilities of $178.8 million and $7.1 million,
respectively, at December 31, 2005. Additionally, pre-tax
earnings were increased, through a reduction of Automotive cost
of sales, by $111.4 million ($72.4 million after tax)
and $64.7 million ($42.0 million after tax) in 2005
and 2004, respectively.
Additionally, GM entered into various commodity derivatives
contracts, including swaps and options, to hedge its forecasted
purchases of precious and non-ferrous metals and energy. These
commodity derivatives were designated as cash flow hedges. Under
SFAS No. 133, hedge accounting is appropriate only for
those hedging relationships that a company expects will be
highly effective in achieving offsetting changes in fair value
or cash flows attributable to the risk being hedged. To
determine whether transactions satisfy these requirements,
companies must periodically assess and document the
effectiveness of their hedging relationships both
retrospectively and prospectively and measure and recognize any
ineffectiveness. For certain commodity cash flow hedges, GM
inappropriately applied the matched terms method of
assessing hedge effectiveness as outlined in paragraph 65
of SFAS No. 133 by not considering in its assessment
certain terms of the underlying commodity contracts that created
ineffectiveness in the cash flow hedging relationship. In
addition, for other commodity cash flow hedges, GM did not
properly document the hedging relationship or properly perform
the periodic retrospective assessment of effectiveness necessary
to qualify for hedge accounting or properly measure hedge
ineffectiveness,
104
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 2.
|
Restatement
of Previously Issued Consolidated Financial
Statements (continued)
|
and did not properly reclassify amounts from Other Comprehensive
Income (OCI) when the underlying hedged forecasted transaction
affected earnings. Accordingly, the commodity derivatives should
have been
marked-to-market
with gains and losses recorded in cost of sales. Changes in the
fair value of the commodity derivatives that had been recorded
in OCI as part of these cash flow hedging relationships were
reversed and recorded in Automotive cost of sales. Pre-tax
earnings were increased, through a reduction of Automotive cost
of sales, by $119.5 million ($77.6 million after tax)
and $246.6 million ($160.3 million after tax) in 2005
and 2004, respectively.
Foreign
Exchange Contracts
GM enters into foreign currency forward contracts and
cross-currency swaps to hedge foreign-currency-denominated debt
and forecasted transactions. GM also designates
foreign-currency-denominated debt as hedges of net investments
in foreign operations.
GM concluded that it did not properly apply the matched
terms method of assessing hedge effectiveness as outlined
in paragraph 65 of SFAS No. 133, inadequately
measured hedging effectiveness, and lacked contemporaneous hedge
documentation and, therefore, incorrectly applied hedge
accounting to certain cash flow hedges and net investment
hedges. The changes in fair value of certain derivatives used in
cash flow hedging relationships and amounts related to a net
investment hedge previously recorded in OCI were released from
OCI and recorded in Automotive cost of sales. Pre-tax earnings
were increased by $38.8 million ($25.2 million after
tax) in 2005 and decreased by $86.9 million
($56.5 million after tax) in 2004.
In addition, GM determined it incorrectly applied cash flow
hedge accounting treatment to one of two concurrent offsetting
derivatives by accounting for the two derivatives separately
instead of treating them as one combined arrangement in
accordance with SFAS No. 133, Implementation Issue
F6, Concurrent Offsetting Matching Swaps and Use of One as
Hedging Instrument, and SFAS No. 133,
Implementation Issue K1, Determining Whether Separate
Transactions Should Be Viewed as a Unit. The changes in fair
value of the derivatives used in this hedging strategy
previously accounted for as cash flow hedges were released from
OCI and recorded in Automotive cost of sales. Pre-tax earnings
were increased by $75.3 million ($48.9 million after
tax) in 2005 and decreased by $121.7 million
($79.1 million after tax) in 2004.
Interest
Rate Contracts
GMAC determined that its hedge accounting documentation and
hedge effectiveness assessment methodologies did not meet the
requirements of paragraph 20(b) of SFAS No. 133
for certain hedges of callable fixed rate debt instruments.
Under SFAS No. 133, hedge accounting is appropriate
only for those hedging relationships that a company has
sufficiently documented an expectation that such relationship
will be highly effective in achieving offsetting changes in fair
values attributable to the risk being hedged at the inception of
the hedging relationship. To determine whether transactions
satisfy these requirements, a company must periodically assess
the effectiveness of its hedging relationships both
prospectively and retrospectively. After review, GMAC determined
that the interest rate derivatives did not qualify for hedge
accounting. Accordingly, hedge accounting should not have been
applied to any of the hedging relationships in this strategy and
therefore, market value adjustments on the debt instruments
included in the hedging relationships related to changes in fair
value due to movements in the designated benchmark interest rate
should not have been recorded. Changes in the fair value of the
debt instruments recorded in earnings under these fair value
hedge relationships were reversed. Pre-tax earnings were
decreased, through an increase to interest expense, by
$256 million ($157.2 million after tax) and
$143 million ($87.8 million after tax) in 2005 and
2004,
respectively.
105
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 2.
|
Restatement
of Previously Issued Consolidated Financial
Statements (continued)
|
The net effect of all derivative and hedge accounting
adjustments decreased retained earnings at January 1, 2004
by $4.6 million.
Deferred
Income Tax Adjustments
As a result of a comprehensive deferred tax account
reconciliation that was performed in 2006, GM determined that
deferred income tax liabilities were overstated and net income
was understated by approximately $1.1 billion, principally
the result of duplicate or incorrect recording of deferred
income tax expense related to temporary differences, primarily
arising in years prior to 2002. These adjustments increased net
loss in 2005 by $35.2 million, increased net income in 2004
by $1.6 million, and increased retained earnings at
January 1, 2004 by approximately $1.1 billion.
In addition, we inappropriately provided deferred income taxes
on translation adjustments for certain non-US subsidiaries,
which resulted in an overstatement of deferred tax assets and
OCI of $423 million, $74 million and $680 million
as of December 31, 2005, December 31, 2004, and
January 1, 2004, respectively.
Other
Out-of-Period
Adjustments
Subsequent to the completion of our previously filed
consolidated financial statements for each period being
restated, we identified adjustments that should have been
recorded in these earlier periods
(out-of-period
adjustments). Upon identification, we determined these
adjustments to be immaterial, individually and in the aggregate,
to our previously filed consolidated financial statements, and
recorded these adjustments in the periods in which they were
identified. Due to the adjustments, as discussed above, that
required a restatement of our previously filed consolidated
financial statements, we are also correcting these
out-of-period
adjustments by recording them in the proper periods.
The
out-of-period
adjustments in the table above include the following:
Unemployment benefit payments: Subsequent to
December 31, 2005 but prior to the issuance of our 2005
consolidated financial statements, we were notified by the
German Labor Office that we were released from certain
contingent unemployment benefit payment obligations previously
recorded. As part of our restatement, pre-tax earnings were
increased, through a reduction of Automotive cost of sales, by
$50.2 million ($31.1 million after tax) in 2005.
Automotive revenue recognition: We recorded an
adjustment to correct deferred revenue related to data disks
provided to customers to update their vehicles
navigational system. We did not compute deferred revenue using
fair value as determined by vendor specific objective evidence
as required by EITF
00-21,
Revenue Arrangements with Multiple Deliverables.
Additionally, we did not defer revenue on the correct number of
2006 models year vehicles containing navigation systems. As part
of our restatement, pre-tax earnings were decreased, through a
reduction of Automotive sales, by $33.1 million
($21.5 million after tax) in 2005.
In addition, we incorrectly recognized revenue for our
sponsorship of the GM Card program, which offers rebates that
can be applied primarily against the purchase or lease of GM
vehicles. We corrected this accounting by deferring and
recognizing additional revenue over the average utilization
period of points earned by retail customers. As part of our
restatement, pre-tax earnings were increased, through an
increase to Automotive sales, by $42.3 million
($27.5 million after tax) and $19.7 million
($12.8 million after tax) in 2005 and 2004, respectively,
and retained earnings was decreased at January 1, 2004 by
$147 million.
Impairment of long-lived assets: We
incorrectly determined impairment charges associated with a
plant closing. As part of our restatement, pre-tax earnings were
decreased, through an increase to Automotive cost of sales, by
$24.2 million ($15.9 million after tax) and
$42.8 million ($27.8 million after tax) in 2005 and
2004, respectively, and retained earnings was decreased at
January 1, 2004 by $4.0 million.
106
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 2.
|
Restatement
of Previously Issued Consolidated Financial
Statements (concluded)
|
Cooperative advertising program: Under our
cooperative advertising program with our dealers, we are
obligated to match a portion of the funds contributed by our
dealers for advertising. We recorded an adjustment to correctly
reflect the timing of our obligation under this arrangement.
Previously, our matching portion of the advertising costs was
expensed as incurred. As part of our restatement, pre-tax
earnings were decreased, through an increase to Selling,
general, and administrative expenses, by $5.7 million
($3.7 million after tax) and pre-tax earnings were
increased, through a decrease to Selling, general, and
administrative expenses, by $11.4 million
($7.4 million after tax) in 2005 and 2004, respectively,
and retained earnings at January 1, 2004 was decreased by
$46.6 million.
Environmental operation and maintenance: We
recorded an adjustment to properly reflect our obligation for
ongoing operation and maintenance costs for certain
environmental sites. As part of our restatement, pre-tax
earnings were decreased, through an increase to Automotive cost
of sales, by $1.4 million ($0.9 million after tax) and
$4.9 million ($3.2 million after tax) in 2005 and
2004, respectively, and retained earnings at January 1,
2004 was decreased by $32.2 million.
Available-for-sale
securities: We incorrectly recorded the foreign
exchange component of the changes in the market value of
foreign-currency-denominated
available-for-sale
debt securities in earnings rather than OCI. As part of our
restatement, pre-tax earnings were increased, through a decrease
to Automotive cost of sales, by $158 million
($102.7 million after tax) in 2005, pre-tax earnings were
decreased, through an increase to Automotive cost of sales, by
$107.1 million ($69.6 million after tax) in 2004 and
retained earnings at January 1, 2004 decreased by
$33.1 million.
LIFO inventory reserve: We recorded an
adjustment to properly include certain inventories in our LIFO
inventory reserve. As part of our restatement, pre-tax earnings
were decreased, through an increase to Automotive cost of sales,
by $9.2 million ($6 million after tax) and
$22.5 million ($14.6 million after tax) in 2005 and
2004, respectively, and retained earnings at January 1,
2004, was decreased by approximately $1.5 million.
Development costs: We recorded an adjustment
to correctly expense supplier development costs. As part of our
restatement, pre-tax and after-tax earnings were increased,
through a reduction of Automotive cost of sales, by
$14.4 million in both 2005 and 2004, and retained earnings
at January 1, 2004 was decreased by $85.5 million.
Inventory: We recorded an adjustment to
correct Automotive cost of sales associated with inventory
errors identified at one of our international subsidiaries. As
part of our restatement, retained earnings at January 1,
2004 was decreased by $37.7 million.
In addition to the items listed above, we also recorded other
less significant
out-of-period
pre-tax and income tax adjustments, the net effect of which
decreased pre-tax earnings by $73.3 million and decreased
after-tax earnings by $9.4 million in 2005, decreased
pre-tax earnings by $140.2 million and decreased after-tax
earnings by $2.9 million in 2004, and decreased retained
earnings at January 1, 2004 by $198.3 million.
The restatement also included an adjustment to comply with EITF
00-10,
Accounting for Shipping and Handling Fees and Costs,
related to shipping and handling costs incurred to transport
product to customers. The correction for this reclassification
increased Automotive sales and Automotive cost of sales by
$3.6 billion in both 2005 and 2004. This correction did not
affect net income (loss) or earnings (loss) per share.
107
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
The following is a summary of the effect of the restatement on
the originally issued Consolidated Statements of Operations,
Consolidated Balance Sheets and Consolidated Statements of Cash
Flows.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
|
Previously
|
|
|
|
|
|
Previously
|
|
|
|
|
|
|
Reported
|
|
|
Restated
|
|
|
Reported
|
|
|
Restated
|
|
Net sales and revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive sales
|
|
$
|
156,801
|
|
|
$
|
160,228
|
|
|
$
|
159,937
|
|
|
$
|
163,341
|
|
Financial services and insurance
revenues
|
|
|
34,383
|
|
|
|
34,427
|
|
|
|
31,972
|
|
|
|
32,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenues
|
|
|
191,184
|
|
|
|
194,655
|
|
|
|
191,909
|
|
|
|
195,351
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive cost of sales
|
|
|
155,863
|
|
|
|
158,887
|
|
|
|
148,642
|
|
|
|
152,115
|
|
Selling, general and administrative
expenses
|
|
|
27,440
|
|
|
|
27,513
|
|
|
|
25,810
|
|
|
|
25,969
|
|
Interest expense
|
|
|
15,768
|
|
|
|
15,607
|
|
|
|
11,980
|
|
|
|
11,913
|
|
Provisions for credit and insurance
losses related to financing and insurance operations
|
|
|
3,440
|
|
|
|
3,430
|
|
|
|
4,315
|
|
|
|
4,315
|
|
Other expenses
|
|
|
7,024
|
|
|
|
7,024
|
|
|
|
1,584
|
|
|
|
1,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
209,535
|
|
|
|
212,461
|
|
|
|
192,331
|
|
|
|
195,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss)
|
|
|
(18,351
|
)
|
|
|
(17,806
|
)
|
|
|
(422
|
)
|
|
|
(545
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive interest income and
other non-operating income, net
|
|
$
|
1,420
|
|
|
$
|
1,066
|
|
|
$
|
1,608
|
|
|
$
|
1,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes,
equity income (loss) and minority interests and cumulative
effect of a change in accounting principle
|
|
|
(16,931
|
)
|
|
|
(16,740
|
)
|
|
|
1,186
|
|
|
|
855
|
|
Income tax (benefit)
|
|
|
(5,878
|
)
|
|
|
(5,870
|
)
|
|
|
(916
|
)
|
|
|
(1,126
|
)
|
Equity income (loss) and minority
interests, net of tax
|
|
|
595
|
|
|
|
562
|
|
|
|
702
|
|
|
|
720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before cumulative
effect of a change in accounting principle
|
|
|
(10,458
|
)
|
|
|
(10,308
|
)
|
|
|
2,804
|
|
|
|
2,701
|
|
Cumulative effect of a change in
accounting principle
|
|
|
(109
|
)
|
|
|
(109
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(10,567
|
)
|
|
$
|
(10,417
|
)
|
|
$
|
2,804
|
|
|
$
|
2,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
CONSOLIDATED
BALANCE SHEETS
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
|
|
|
Previously
|
|
|
|
|
|
|
Reported
|
|
|
Restated
|
|
ASSETS
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
15,187
|
|
|
$
|
15,187
|
|
Marketable securities
|
|
|
1,416
|
|
|
|
1,416
|
|
|
|
|
|
|
|
|
|
|
Total cash and marketable securities
|
|
|
16,603
|
|
|
|
16,603
|
|
Accounts and notes receivable, net
|
|
|
7,758
|
|
|
|
5,917
|
|
Inventories
|
|
|
13,851
|
|
|
|
13,862
|
|
Equipment on operating leases, net
|
|
|
6,993
|
|
|
|
6,993
|
|
Deferred income taxes and other
current assets
|
|
|
8,877
|
|
|
|
8,982
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
54,082
|
|
|
|
52,357
|
|
Financing and Insurance
Operations Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
15,539
|
|
|
|
15,539
|
|
Investments in securities
|
|
|
18,310
|
|
|
|
18,310
|
|
Finance receivables, net
|
|
|
180,793
|
|
|
|
180,849
|
|
Loans held for sale
|
|
|
21,865
|
|
|
|
21,865
|
|
Assets held for sale
|
|
|
19,030
|
|
|
|
19,030
|
|
Equipment on operating leases, net
|
|
|
31,194
|
|
|
|
31,194
|
|
Other assets
|
|
|
27,694
|
|
|
|
25,157
|
|
|
|
|
|
|
|
|
|
|
Total Financing and Insurance
Operations assets
|
|
|
314,425
|
|
|
|
311,944
|
|
Non-Current Assets
|
|
|
|
|
|
|
|
|
Equity in net assets of
nonconsolidated affiliates
|
|
|
3,291
|
|
|
|
3,242
|
|
Property, net
|
|
|
38,466
|
|
|
|
38,543
|
|
Intangible assets, net
|
|
|
1,862
|
|
|
|
1,869
|
|
Deferred income taxes
|
|
|
22,849
|
|
|
|
23,761
|
|
Prepaid pension
|
|
|
37,690
|
|
|
|
37,576
|
|
Other assets
|
|
|
3,413
|
|
|
|
4,864
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
107,571
|
|
|
|
109,855
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
476,078
|
|
|
$
|
474,156
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable (principally trade)
|
|
$
|
26,182
|
|
|
$
|
26,402
|
|
Short-term borrowings and current
portion of long-term debt
|
|
|
1,519
|
|
|
|
1,627
|
|
Accrued expenses
|
|
|
42,665
|
|
|
|
42,697
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
70,366
|
|
|
|
70,726
|
|
Finance and Insurance Operations
Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
3,731
|
|
|
|
3,731
|
|
Liabilities related to assets held
for sale
|
|
|
10,941
|
|
|
|
10,941
|
|
Debt
|
|
|
253,217
|
|
|
|
253,508
|
|
Other liabilities and deferred
income taxes
|
|
|
28,946
|
|
|
|
26,325
|
|
|
|
|
|
|
|
|
|
|
Total Financing and Insurance
Operations liabilities
|
|
|
296,835
|
|
|
|
294,505
|
|
Non-Current
Liabilities
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
31,014
|
|
|
|
32,580
|
|
Postretirement benefits other than
pensions
|
|
|
28,990
|
|
|
|
28,990
|
|
Pensions
|
|
|
11,214
|
|
|
|
11,225
|
|
Other liabilities and deferred
income taxes
|
|
|
22,023
|
|
|
|
20,430
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
93,241
|
|
|
|
93,225
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
460,442
|
|
|
|
458,456
|
|
Commitments and contingencies
(Note 20)
|
|
|
|
|
|
|
|
|
Minority interests
|
|
|
1,039
|
|
|
|
1,047
|
|
Stockholders
Equity
|
|
|
|
|
|
|
|
|
Preferred stock, no par value,
authorized 6,000,000, no shares issued and outstanding
|
|
|
|
|
|
|
|
|
$12/3
par value common stock (2,000,000,000 shares authorized,
756,637,541 and 565,518,106 shares issued and outstanding,
respectively, at December 31, 2005)
|
|
|
943
|
|
|
|
943
|
|
Capital surplus (principally
additional paid-in capital)
|
|
|
15,285
|
|
|
|
15,285
|
|
Retained earnings
|
|
|
2,361
|
|
|
|
2,960
|
|
Accumulated other comprehensive
(loss)
|
|
|
(3,992
|
)
|
|
|
(4,535
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
14,597
|
|
|
|
14,653
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, minority
interest, and stockholders equity
|
|
$
|
476,078
|
|
|
$
|
474,156
|
|
|
|
|
|
|
|
|
|
|
109
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
|
Previously
|
|
|
|
|
|
Previously
|
|
|
|
|
|
|
Reported
|
|
|
Restated
|
|
|
Reported
|
|
|
Restated
|
|
Cash flows from operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(10,458
|
)
|
|
$
|
(10,417
|
)
|
|
$
|
2,804
|
|
|
$
|
2,701
|
|
Cumulative effect of a change in
accounting principle
|
|
|
|
|
|
|
109
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile income
(loss) before cumulative effect of a change in accounting
principle to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, impairment, and
amortization expense
|
|
|
15,769
|
|
|
|
15,797
|
|
|
|
14,152
|
|
|
|
14,202
|
|
Mortgage servicing rights and
premium amortization
|
|
|
1,142
|
|
|
|
1,142
|
|
|
|
1,675
|
|
|
|
1,675
|
|
Goodwill impairment
|
|
|
712
|
|
|
|
712
|
|
|
|
|
|
|
|
|
|
Delphi benefit guarantee
|
|
|
5,500
|
|
|
|
5,500
|
|
|
|
|
|
|
|
|
|
Provision for credit financing
losses
|
|
|
1,085
|
|
|
|
1,074
|
|
|
|
1,944
|
|
|
|
1,944
|
|
Net gains on sale of finance
receivables
|
|
|
(1,695
|
)
|
|
|
(1,741
|
)
|
|
|
(1,312
|
)
|
|
|
(1,332
|
)
|
Net gains on sale of investment
securities
|
|
|
(104
|
)
|
|
|
(104
|
)
|
|
|
(52
|
)
|
|
|
(52
|
)
|
Other postretirement employee
benefit (OPEB) expense
|
|
|
5,671
|
|
|
|
5,671
|
|
|
|
4,558
|
|
|
|
4,558
|
|
OPEB payments
|
|
|
(4,084
|
)
|
|
|
(4,084
|
)
|
|
|
(3,974
|
)
|
|
|
(3,974
|
)
|
VEBA/401(h) withdrawals
|
|
|
3,168
|
|
|
|
3,168
|
|
|
|
(8,618
|
)
|
|
|
(8,618
|
)
|
Pension expense
|
|
|
2,496
|
|
|
|
2,519
|
|
|
|
2,456
|
|
|
|
2,456
|
|
Pension contributions
|
|
|
(833
|
)
|
|
|
(833
|
)
|
|
|
(919
|
)
|
|
|
(919
|
)
|
Retiree lump sum and vehicle
voucher expense, net of payments
|
|
|
(264
|
)
|
|
|
(264
|
)
|
|
|
(329
|
)
|
|
|
(329
|
)
|
Net change in mortgage loans
|
|
|
(29,119
|
)
|
|
|
(29,119
|
)
|
|
|
(2,312
|
)
|
|
|
(2,312
|
)
|
Net change in mortgage securities
|
|
|
(1,155
|
)
|
|
|
(1,155
|
)
|
|
|
614
|
|
|
|
614
|
|
Change in other investments and
miscellaneous assets
|
|
|
(653
|
)
|
|
|
(685
|
)
|
|
|
83
|
|
|
|
104
|
|
Changes in assets and liabilities,
net of acquisitions and disposals
|
|
|
(6,683
|
)
|
|
|
(6,798
|
)
|
|
|
(1,644
|
)
|
|
|
(1,754
|
)
|
Other
|
|
|
2,649
|
|
|
|
2,652
|
|
|
|
230
|
|
|
|
392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
operating activities
|
|
|
(16,856
|
)
|
|
|
(16,856
|
)
|
|
|
9,356
|
|
|
|
9,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures for property
|
|
|
(8,179
|
)
|
|
|
(8,179
|
)
|
|
|
(7,753
|
)
|
|
|
(7,753
|
)
|
Investments in marketable
securities, acquisitions
|
|
|
(21,800
|
)
|
|
|
(21,800
|
)
|
|
|
(15,278
|
)
|
|
|
(15,278
|
)
|
Investments in marketable
securities, liquidations
|
|
|
22,537
|
|
|
|
22,537
|
|
|
|
15,911
|
|
|
|
15,911
|
|
Net change in mortgage servicing
rights
|
|
|
(267
|
)
|
|
|
(267
|
)
|
|
|
(326
|
)
|
|
|
(326
|
)
|
Increase in finance receivables
|
|
|
(6,582
|
)
|
|
|
(6,582
|
)
|
|
|
(38,673
|
)
|
|
|
(38,673
|
)
|
Proceeds from sale of finance
receivables
|
|
|
31,652
|
|
|
|
31,652
|
|
|
|
23,385
|
|
|
|
23,385
|
|
Proceeds from sale of business
units/equity investments
|
|
|
846
|
|
|
|
846
|
|
|
|
|
|
|
|
|
|
Operating leases, acquisitions
|
|
|
(15,496
|
)
|
|
|
(15,496
|
)
|
|
|
(14,324
|
)
|
|
|
(14,324
|
)
|
Operating leases, liquidations
|
|
|
5,362
|
|
|
|
5,362
|
|
|
|
7,696
|
|
|
|
7,696
|
|
Investments in companies, net of
cash acquired
|
|
|
1,355
|
|
|
|
1,355
|
|
|
|
(60
|
)
|
|
|
(60
|
)
|
Other
|
|
|
(863
|
)
|
|
|
(863
|
)
|
|
|
1,359
|
|
|
|
1,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities
|
|
|
8,565
|
|
|
|
8,565
|
|
|
|
(28,063
|
)
|
|
|
(28,063
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in
short-term borrowings
|
|
|
(10,126
|
)
|
|
|
(10,126
|
)
|
|
|
2,192
|
|
|
|
2,192
|
|
Borrowings of long-term debt
|
|
|
78,276
|
|
|
|
78,276
|
|
|
|
73,511
|
|
|
|
73,511
|
|
Payments made on long-term debt
|
|
|
(69,566
|
)
|
|
|
(69,566
|
)
|
|
|
(57,822
|
)
|
|
|
(57,822
|
)
|
Cash dividends paid to stockholders
|
|
|
(1,134
|
)
|
|
|
(1,134
|
)
|
|
|
(1,129
|
)
|
|
|
(1,129
|
)
|
Other
|
|
|
6,030
|
|
|
|
6,030
|
|
|
|
4,723
|
|
|
|
4,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities
|
|
|
3,480
|
|
|
|
3,480
|
|
|
|
21,475
|
|
|
|
21,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on
cash and cash equivalents
|
|
|
(85
|
)
|
|
|
(85
|
)
|
|
|
671
|
|
|
|
671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and
cash equivalents
|
|
|
(4,896
|
)
|
|
|
(4,896
|
)
|
|
|
3,439
|
|
|
|
3,439
|
|
Cash and cash equivalents
reclassified to assets held for sale
|
|
|
(371
|
)
|
|
|
(371
|
)
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at
beginning of the year
|
|
|
35,993
|
|
|
|
35,993
|
|
|
|
32,554
|
|
|
|
32,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end
of the year
|
|
$
|
30,726
|
|
|
$
|
30,726
|
|
|
$
|
35,993
|
|
|
$
|
35,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 3.
|
Significant
Accounting Policies
|
Principles
of Consolidation and Financial Statement
Presentation
The consolidated financial statements include the accounts of
General Motors Corporation and its subsidiaries that are more
than 50% owned. In addition, in accordance with Financial
Accounting Standards Board (FASB) Interpretation No. 46(R),
Consolidation of Variable Interest Entities, an
interpretation of ARB No. 51 (FIN 46(R)), GM consolidates
variable interest entities (VIEs) for which it is deemed to be
the primary beneficiary. GMs share of earnings or losses
of investees is included in the consolidated operating results
using the equity method of accounting, when GM is able to
exercise significant influence over the operating and financial
decisions of the investee. If GM is not able to exercise
significant influence over the operating and financial decisions
of the investee, the cost method of accounting is used. All
intercompany balances and transactions have been eliminated in
consolidation.
Transactions between segments have been eliminated. These
transactions consist principally of borrowings and other
financial services provided by our FIO business to our
Automotive business. A master intercompany agreement was in
effect until November 30, 2006 which governed the nature of
these transactions to ensure that they were done in accordance
with commercially reasonable standards.
Use of
Estimates in the Preparation of the Financial
Statements
The consolidated financial statements of GM are prepared in
conformity with accounting principles generally accepted in the
United States, which require the use of estimates,
judgments, and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
periods presented. Management believes that the accounting
estimates employed are appropriate and the resulting balances
are reasonable; however, due to the inherent uncertainties in
making estimates actual results could differ from the original
estimates, requiring adjustments to these balances in future
periods.
Revenue
Recognition
Automotive sales consist primarily of revenue generated from the
sale of vehicles. Vehicle sales are recorded when the title and
risks and rewards of ownership have passed, which is generally
when the vehicle is released to the carrier responsible for
transporting vehicles to dealers. Provisions for dealer and
customer sales and leasing incentives, consisting of allowances
and rebates, are recorded as reductions to automotive sales at
the time of vehicle sales. Incentives, allowances, and rebates
related to vehicles previously sold are recognized as reductions
to automotive sales when announced.
Vehicle sales to daily rental car companies with guaranteed
repurchase obligations are accounted for as equipment on
operating leases. Lease revenue is recognized ratably over the
term of the lease based on the difference between net sales
proceeds and the guaranteed repurchase amount. The equipment on
operating lease is depreciated based on the difference between
the cost of the vehicle and estimated residual value using the
straight-line method over the term of the lease agreement.
Management reviews residual values periodically to determine
that estimates remain appropriate, and if an asset is impaired
losses are recognized at the time of the impairment.
GM also generates revenue from customer subscriptions related to
the offering of services on comprehensive in-vehicle security,
communications, and diagnostic systems in its vehicles, as well
as the sale of prepaid minutes for its Hands-Free Calling (HFC)
system. Subscription service revenue is deferred and recognized
on a straight-line basis over the subscription period. OnStar
offers a one-year free subscription as part of the sale or lease
of a new GM vehicle. The fair value of the subscription is
recorded as deferred revenue when a vehicle is sold, and
amortized over the one year subscription period. The HFC revenue
is deferred and recognized on a straight-line basis over the
life of the contract.
Financial services revenues are generated through the purchase
of retail installment loans, dealer floor plan financing and
other lines of credit to dealers, fleet leasing, and factoring
of receivables. Financing revenue is
111
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 3.
|
Significant
Accounting Policies (continued)
|
recorded over the terms of the receivables using the interest
method. Income from operating lease assets is recognized on a
straight-line basis over the scheduled lease terms.
Insurance revenues consist of premiums earned on a basis related
to coverage provided over the terms of the policies.
Commissions, premium taxes, and other costs incurred in
acquiring new business are deferred and amortized over the terms
of the related policies on the same basis as premiums are earned.
Mortgage service revenues are generated through the origination,
purchase, servicing, sale and securitization of consumer (i.e.,
residential) and commercial mortgage loans, and other mortgage
related products. Typically, mortgage loans are originated and
sold to investors in the secondary market, including
securitization sales.
Advertising
Advertising expenses, which amounted to $5.4 billion in
2006, $5.8 billion in 2005, and $5.2 billion in 2004,
are expensed as incurred.
Research
and Development Expenditures
Research and development, and other product-related costs of
$6.6 billion, $6.7 billion, and $6.5 billion for
2006, 2005, and 2004, respectively, are charged to expense as
incurred.
Depreciation
and Amortization
Expenditures for special tools placed in service after
January 1, 2002 were capitalized and amortized using the
straight-line method over their estimated useful lives which
range from one year to 12 years. Expenditures for special
tools placed in service prior to January 1, 2002, are
capitalized and amortized over their estimated useful lives,
using the units of production method. Also as of January 1,
2001 GM adopted the straight-line method of depreciation for
real estate, plants, and equipment placed in service after that
date. Assets placed in service before January 1, 2001
continue to be depreciated using accelerated methods. The
accelerated methods accumulate depreciation of approximately
two-thirds of the depreciable cost during the first half of the
estimated useful lives of property groups as compared to the
straight-line method, which allocates depreciable costs equally
over the estimated useful lives of property groups. Management
believes the adoption of the straight-line amortization or
depreciation method for special tools placed into service after
January 1, 2002, and real estate, plants, and equipment
placed into service after January 1, 2001 better reflects
the consistent use of these assets over their useful lives.
Goodwill
and Other Intangibles
Goodwill and other intangible assets, net of accumulated
amortization, are reported in other assets. Goodwill represents
the excess of the cost of an acquisition over the fair value of
net assets acquired. In accordance with SFAS No. 142,
Goodwill and Other Intangible Assets, goodwill is
reviewed for impairment utilizing a two-step process. The first
step of the impairment test requires the identification of the
reporting units, and comparison of the fair value of each of
these reporting units to the respective carrying value. The fair
value of the reporting units is determined based on valuation
techniques using the best information that is available, such as
discounted cash flow projections. If the carrying value is less
than the fair value, no impairment exists and the second step is
not performed. If the carrying value is higher than the fair
value, there is an indication that impairment may exist and the
second step must be performed to compute the amount of the
impairment. In the second step, the impairment is computed by
comparing the implied fair value of reporting unit goodwill with
the carrying amount of that goodwill. SFAS No. 142
requires goodwill to be tested for impairment annually at the
same time every year, and when an event occurs or circumstances
change such that it is reasonably possible that an impairment
may exist. The annual impairment tests are performed in the
fourth quarter of each year.
Other intangible assets, which include customer lists,
trademarks, and other identifiable intangible assets, are
amortized on a straight-line basis over estimated useful lives
of three to 10 years.
112
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 3.
|
Significant
Accounting Policies (continued)
|
Valuation
of Long-Lived Assets
GM periodically evaluates the carrying value of long-lived
assets to be held and used in the business, other than goodwill
and intangible assets with indefinite lives and assets held for
sale, when events and circumstances warrant and in conjunction
with the annual business planning cycle. If the carrying value
of a long-lived asset is considered impaired, a loss is
recognized based on the amount by which the carrying value
exceeds the fair market value for assets to be held and used.
For assets classified as held for sale, such assets are
reflected at the lower of carrying value or fair value less cost
to sell. Fair market value is determined primarily using the
anticipated cash flows discounted at a rate commensurate with
the risk involved. Long-lived assets to be disposed of other
than by sale are considered held and for use until disposition.
Equipment
on Operating Leases, net
Equipment on operating leases is reported at cost, less
accumulated depreciation and net of origination fees or costs.
Income from operating lease assets, which includes lease
origination fees, net of lease origination costs, is recognized
as operating lease revenue on a straight-line basis over the
scheduled lease term. Depreciation of vehicles is generally
provided on a straight-line basis to an estimated residual value
over a period of time, consistent with the term of the
underlying operating lease agreement. We evaluate our
depreciation policy for leased vehicles on a regular basis.
We have significant investments in vehicles in our operating
lease portfolio and are exposed to changes in the residual
values of those assets. The residual values represent an
estimate of the values of the assets at the end of the lease
contracts and are determined by consulting an independently
published residual value guide. Realization of the residual
values is dependent on our future ability to market the vehicles
under the prevailing market conditions. Over the life of the
lease, we evaluate the adequacy of our estimate of the residual
value and may make adjustments to the extent the expected value
of the vehicle at lease termination changes. For operating
leases arising from vehicle sales to daily rental car companies,
the adjustment may be in the form of revisions to the
depreciation rate or recognition of an impairment loss.
Impairment is determined to exist if the undiscounted expected
future cash flows are lower than the carrying value of the
asset. For operating leases arising from vehicles sold to
dealers, the adjustment is made to the estimate of marketing
incentive accruals for residual support programs initially
recognized when vehicles are sold to dealers (see Note 28.
Transactions with GMAC Marketing Incentives and
Operating Lease Residuals). When a lease vehicle is returned to
us, the asset is reclassified from investment in operating
leases to inventory at the lower of cost or estimated fair
value, less costs to sell.
Foreign
Currency Transactions and Translation
The assets and liabilities of GMs foreign subsidiaries,
using the local currency as their functional currency, are
translated to US dollars based on the current exchange rate
prevailing at each balance sheet date and any resulting
translation adjustments are included in accumulated other
comprehensive income (loss).
Included in net income (loss) are the gains and losses arising
from foreign currency transactions. GMs revenues and
expenses are translated into U.S. dollars using the average
exchange rates prevailing for each period presented. The impact
on net income (loss) of foreign currency transactions including
the results of our foreign currency hedging activities, amounted
to a gain of $296 million, a loss of $118 million, and
a loss of $22 million in 2006, 2005, and 2004, respectively.
Policy
and Warranty
Provisions for estimated expenses related to policy and product
warranties are made at the time products are sold. These
estimates are established using historical information on the
nature, frequency, and average cost of claims. Revision to the
reserves for estimated policy and product warranties is made
when necessary, based on
113
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 3.
|
Significant
Accounting Policies (continued)
|
changes in these factors. Management actively studies trends of
claims and takes action to improve vehicle quality and minimize
claims.
Recall
Campaigns
Provisions for estimated expenses related to product recalls
(based on a formal campaign soliciting return of that product)
are made when they are deemed to be probable and reasonably
estimable upon approval of the recall campaign by management.
Environmental
Costs
GM records a liability for environmental cleanup costs when it
is both probable and reasonably estimable. For environmental
sites where there are potentially multiple responsible parties,
GM records a liability for the allocable share of the costs
related to its involvement with the site, as well as an
allocable share of costs related to insolvent parties or
unidentified shares. For environmental sites where GM is the
only potentially responsible party, GM records a liability for
the total estimated costs of remediation before consideration of
recovery from insurers or other third parties.
GM has an established process to develop its environmental
reserve. This process consists of a number of phases which
begins with the visual site inspections and an examination of
historical site records. Once a potential problem has been
identified, physical sampling of the site may include analysis
of ground water and soil borings. The evidence obtained is then
evaluated and based upon this evaluation, a remediation strategy
is submitted for approval. The final phase of this process
involves the commencement of remediation activities according to
the approved plan. This process is used globally for all such
sites.
Included in the estimated environmental liabilities are costs
for ongoing operating, maintenance, and monitoring at
environmental sites where remediation has been put in place.
Subsequent adjustments to initial estimates are recorded as
necessary based upon additional information developed in
subsequent periods. This liability is determined based upon
historical experience and discounted using a risk-free rate of
return over the periods in which the ongoing maintenance is
expected to occur, generally five to 30 years.
Postemployment
Benefits
Costs to idle, consolidate, or close facilities and provide
postemployment benefits to employees on an other than temporary
basis are accrued based on managements best estimate of
the wage and benefits costs that will be incurred for qualified
employees under the JOBS bank provisions of the current labor
agreement through the date of its expiration in September 2007,
plus estimated costs expected to be paid after consideration of
changes that GM intends to negotiate into the JOBS program after
the expiration of the current collective bargaining agreement.
The accrual established in 2005 related to GMNAs
restructuring plan assumed a 45% and 9% projected level of
acceptance of normal and early retirement offers, respectively,
made pursuant to the current labor agreement. The estimates of
acceptance were based on GMs historical experience of
offering such programs. Costs related to the idling of employees
that are expected to be temporary are expensed as incurred.
Costs to terminate a contract without economic benefit to GM are
expensed at the time the contract is terminated. One-time
termination benefits that are not subject to contractual
arrangements provided to employees who are involuntarily
terminated are recorded when management commits to a detailed
plan of termination, that plan is communicated to employees, and
actions required to complete the plan indicate that significant
changes to the plan are not likely. If employees are required to
render service until they are terminated in order to earn the
termination benefit, the benefits are recognized ratably over
the future service period.
Cash
Equivalents
Cash equivalents are defined as short-term, highly-liquid
investments with original maturities of 90 days or less.
114
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 3.
|
Significant
Accounting Policies (continued)
|
Marketable
Securities
Marketable securities are classified as
available-for-sale,
except for certain mortgage-related securities, which are
classified as
held-to-maturity
or trading securities.
Available-for-sale
securities are recorded at fair value with unrealized gains and
losses reported, net of related income taxes, in other
comprehensive income (loss) until realized. Trading securities
are recorded at fair value with unrealized gains and losses
recorded currently in earnings.
Held-to-maturity
securities are recorded at amortized cost. GM determines
realized gains and losses using the specific identification
method.
Derivative
Instruments
GM is party to a variety of foreign exchange rate, interest
rate, and commodity derivative contracts entered into in
connection with the management of its exposure to fluctuations
in foreign exchange rates, interest rates, and certain commodity
prices. These financial exposures are managed in accordance with
corporate policies and procedures.
All derivatives are recorded at fair value in the consolidated
balance sheets. Effective changes in fair value of derivatives
designated as cash flow hedges are recorded in net unrealized
gains (losses) on derivatives within a separate component of
other comprehensive income (loss). Amounts are reclassified from
accumulated other comprehensive income (loss) when the
underlying hedged item affects earnings. All ineffective changes
in fair value are recorded currently in earnings. Changes in
fair value of derivatives designated as fair value hedges are
recorded currently in earnings offset by changes in fair value
of the hedged item to the extent the derivative was effective.
Changes in fair value of derivatives not designated as hedging
instruments are recorded currently in earnings.
Accounting
for Income Taxes
GM uses the liability method in accounting for income taxes.
Deferred tax assets and liabilities are recorded for temporary
differences between the tax basis of assets and liabilities and
their reported amounts in the consolidated financial statements,
using the statutory tax rates in effect for the year in which
the differences are expected to reverse. The effect on deferred
tax assets and liabilities of a change in tax rates is
recognized in the results of operations in the period that
includes the enactment date. A valuation allowance is recorded
to reduce the carrying amounts of deferred tax assets unless it
is more likely than not that such assets will be realized.
GM recognizes accrued interest related to unrecognized tax
benefits and penalties in interest expense. The amount of
interest and penalties recognized was immaterial for all periods
presented.
Accounting
for Other Early Retirement Programs
GM offers an early retirement program to certain employees
located in the GME region which allows these employees to early
transition from employment into retirement before their legal
retirement age. Eligible employees who elect to participate in
this pre-retirement leave program work full time during half of
the pre-retirement period (the active period) and then do not
work for the remaining half, the inactive period, and receive
50% of their salary during this pre-retirement period. These
employees also receive an annual bonus equal to approximately
35% of their net pay at the beginning of the pre-retirement
period. Additionally, GM is required to make contributions into
the German government pension program for participants during
the pre-retirement period. Under these programs, companies are
entitled to a government subsidy if certain conditions are met.
GM has not been entitled to any program subsidy.
On January 1, 2006, GM adopted EITF
05-5,
Accounting for Early Retirement or Postemployment Programs
with Specific Features, which states that the bonus and
contributions made into the German government pension program
should be accounted for under the guidance in
SFAS No. 112, Employers Accounting for
Postemployment Benefit Costs and the government subsidy
should be recognized when a company meets the necessary
conditions to be entitled to the subsidy. As clarified in
EITF 05-5, beginning in 2006, GM recognized the bonus and
115
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 3.
|
Significant
Accounting Policies (continued)
|
additional contributions (collectively, additional compensation)
into the German government pension plan over the period from
which the employee signed the program contract until the end of
the active service period. Prior to 2006, GM recognized the full
additional compensation one-year before the employee entered the
active service period. The change, reported as a change in
accounting estimate effected by a change in accounting
principle, resulted in additional compensation expense of
$68 million in 2006.
Accounting
for Extended Disability Benefits
GM accrues for estimated disability pay ratably over the
employees active service period using the delayed
recognition provisions prescribed by SFAS No. 106,
Employers Accounting for Postretirement Benefits
Other than Pensions, prior to December 31, 2006. As
discussed in Note 19, at December 31, 2006, GM adopted
the recognition provisions of SFAS No. 158,
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans, an amendment of FASB
Statements No. 87, 88, 106 and 132(R). The liability
consists of the future obligations for income replacement,
health-care costs and life insurance premiums for employees
currently disabled and those in the active workforce who may
become disabled. GM estimates future disabilities in the current
workforce using actuarial methods based on sufficient historical
experience.
Labor
Force
GM, on a worldwide basis, has a concentration of its labor
supply in employees working under union collective bargaining
agreements. The current International Union, United Automobile,
Aerospace and Agricultural Implement Workers of America (UAW)
labor contract is effective for a four-year term which began in
October 2003 and expires in September 2007. The contract
included a $3,000 lump sum payment for each UAW employee which
was paid in October 2003, and a 3% performance bonus for each
UAW employee, which was paid in October 2004. GM amortized these
payments over the
12-month
period following the respective payment dates. UAW employees
received a gross wage increase of 2% in 2005. For 2006, these
employees were also granted a 3% gross wage increase under the
labor contract, which was subsequently agreed between GM and the
UAW, to be contributed to a Mitigation VEBA as a wage deferral,
in connection with the UAW Healthcare Settlement Agreement.
Refer to Note 19. Active UAW employees were also granted
pension benefit increases. There were no pension benefit
increases granted to current retirees and surviving spouses.
However, the contract does provide for four lump sum payments
and two vehicle discount vouchers for current retirees and
surviving spouses.
Changes
in Accounting Principles
Accounting
for Servicing of Financial Assets
On January 1, 2006, GM adopted SFAS No. 156,
Accounting for Servicing of Financial Assets, which
(1) provides revised guidance on when a servicing asset and
servicing liability should be recognized, (2) requires all
separately recognized servicing assets and liabilities to be
initially measured at fair value, if practicable,
(3) permits an entity to elect to measure servicing assets
and liabilities at fair value each reporting date and report
changes in fair value in earnings in the period in which the
changes occur, (4) provides that upon initial adoption, a
one-time reclassification of
available-for-sale
securities to trading securities for securities which are
identified as offsetting an entitys exposure to changes in
the fair value of servicing assets or liabilities that a
servicer elects to subsequently measure at fair value, and
(5) requires separate presentation of servicing assets and
liabilities subsequently measured at fair value in the balance
sheet and additional disclosures. GM recorded a reduction to
retained earnings as of January 1, 2006 of $13 million
as a cumulative effect of a change in accounting principle for
the adoption of SFAS No. 156.
116
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 3.
|
Significant
Accounting Policies (continued)
|
Accounting
for Conditional Asset Retirement Obligations
Effective December 31, 2005, GM adopted Financial
Accounting Standards Board (FASB) Interpretation No. 47,
Accounting for Conditional Asset Retirement
Obligations, (FIN 47). FIN 47 relates to legal
obligations associated with retirement of tangible long-lived
assets that result from acquisition, construction, development,
or normal operation of a long-lived asset. GM performed an
analysis of such obligations associated with all real property
owned or leased, including plants, warehouses, and offices.
GMs estimates of conditional asset retirement obligations
relate, in the case of owned properties, to costs estimated to
be necessary for the legally required removal or remediation of
various regulated materials, primarily asbestos. Asbestos
abatement was estimated using site-specific surveys where
available and a per square foot estimate where surveys were
unavailable. For leased properties, such obligations relate to
the estimated cost of contractually required property
restoration. Refer to Note 20. The application of
FIN 47 resulted in a charge of $109 million,
after-tax, in 2005 presented as a cumulative effect of a change
in accounting principle. The liability for conditional asset
retirement obligations at December 31, 2006 and 2005 was
$193 million and $181 million, respectively. Pro forma
amounts, as if FIN 47 had been applied for 2005 and 2004
are as follows:
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in millions except per share amounts)
|
|
|
Net income (loss) as restated
|
|
$
|
(10,417
|
)
|
|
$
|
2,701
|
|
Add: FIN 47 cumulative
effect, net of tax
|
|
|
109
|
|
|
|
|
|
Less: FIN 47 depreciation and
accretion expense, net of tax
|
|
|
(16
|
)
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
Pro forma net income (loss)
|
|
$
|
(10,324
|
)
|
|
$
|
2,687
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share
|
|
|
|
|
|
|
|
|
Basic: As restated
|
|
$
|
(18.42
|
)
|
|
$
|
4.78
|
|
|
|
|
|
|
|
|
|
|
Pro forma
|
|
$
|
(18.26
|
)
|
|
$
|
4.76
|
|
|
|
|
|
|
|
|
|
|
Diluted: As restated
|
|
$
|
(18.42
|
)
|
|
$
|
4.76
|
|
|
|
|
|
|
|
|
|
|
Pro forma
|
|
$
|
(18.26
|
)
|
|
$
|
4.74
|
|
|
|
|
|
|
|
|
|
|
Pro forma asset retirement
obligation net, as of year-end
|
|
$
|
181
|
|
|
$
|
159
|
|
|
|
|
|
|
|
|
|
|
Asset retirement obligations are included in other long-term
liabilities on the consolidated balance sheets. The following
table reconciles our asset retirement obligations as of
December 31, 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
Asset retirement obligations as of
January 1
|
|
$
|
181
|
|
|
$
|
|
|
Accretion expense
|
|
|
18
|
|
|
|
|
|
Liabilities incurred, including
adoption of FIN 47
|
|
|
5
|
|
|
|
181
|
|
Liabilities settled or disposed
|
|
|
(9
|
)
|
|
|
|
|
Revisions to estimates
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset retirement obligations as of
December 31
|
|
$
|
193
|
|
|
$
|
181
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006, our asset retirement obligation
was primarily related to removal or remediation of various
regulated materials, primarily asbestos.
117
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 3.
|
Significant
Accounting Policies (continued)
|
New
Accounting Standards
In accordance with the disclosure requirements of SFAS
No. 148, Accounting for Stock-Based
Compensation Transition and Disclosure, GM
adopted the fair value based method of accounting for
stock-based employee compensation pursuant to SFAS No. 123
effective January 1, 2003, for newly granted stock-based
compensation awards only. On January 1, 2006, GM adopted
SFAS No. 123(R), Accounting for Stock-Based
Compensation. In 2006 and 2005 all awards were accounted
for at fair value. The following table illustrates the effect on
net income and earnings per share for 2004 if compensation cost
for all outstanding and unvested stock options and other
stock-based employee compensation awards had been determined
based on their fair values at the grant date (dollars in
millions except per share amounts):
|
|
|
|
|
|
|
2004
|
|
|
Net income (loss)
|
|
$
|
2,701
|
|
Add: stock-based compensation
expense, included in reported net income, net of related tax
effects
|
|
|
38
|
|
Deduct: total stock-based
compensation expense determined under fair value based method
for all awards, net of related tax effects
|
|
|
(52
|
)
|
|
|
|
|
|
Pro forma net income
|
|
$
|
2,687
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
|
|
as reported
|
|
$
|
4.78
|
|
pro forma
|
|
$
|
4.75
|
|
Diluted earnings per share
|
|
|
|
|
as reported
|
|
$
|
4.76
|
|
pro forma
|
|
$
|
4.74
|
|
In June 2006, the FASB issued Interpretation No. 48,
Accounting for Uncertainty in Income Taxes
(FIN 48), which supplements SFAS No. 109,
Accounting for Income Taxes, by defining the
confidence level that a tax position must meet in order to be
recognized in the financial statements. The Interpretation
requires that the tax effects of a position be recognized only
if it is more-likely-than-not to be sustained based
solely on its technical merits as of the reporting date. The
more-likely-than-not threshold represents a positive assertion
by management that a company is entitled to the economic
benefits of a tax position. If a tax position is not considered
more-likely-than-not to be sustained based solely on its
technical merits, no benefits of the position are to be
recognized. Moreover, the more-likely-than-not threshold must
continue to be met in each reporting period to support continued
recognition of a benefit. At adoption, companies must adjust
their financial statements to reflect only those tax positions
that are more-likely-than-not to be sustained as of the adoption
date. Any necessary adjustment would be recorded directly to
retained earnings in the period of adoption and reported as a
change in accounting principle. This Interpretation is effective
as of the beginning of the first fiscal year beginning after
December 15, 2006. Management estimates that upon adoption,
a cumulative effect adjustment of approximately $50 million
to $100 million will decrease reserves for uncertain tax
positions and increase retained earnings. This estimate is
subject to revision as management completes its analysis.
In September 2006, the SEC issued Staff Accounting Bulletin
(SAB) No. 108 Quantifying Financial
Misstatements which expresses the Staffs views
regarding the process of quantifying financial statement
misstatements. Registrants are required to quantify the impact
of correcting all misstatements, including both the carryover
and reversing effects of prior year misstatements, on the
current year financial statements. The
118
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 3.
|
Significant
Accounting Policies (continued)
|
techniques most commonly used in practice to accumulate and
quantify misstatements are generally referred to as the
rollover (current year income statement perspective)
and iron curtain (year-end balance sheet
perspective) approaches. The financial statements would require
adjustment when either approach results in quantifying a
misstatement that is material, after considering all relevant
quantitative and qualitative factors. This bulletin is effective
for financial statements for the first fiscal year ending after
November 15, 2006. Prior to the issuance of this Bulletin,
GM quantified the impact of errors using both the iron curtain
approach and rollover approach, therefore, this SAB has no
financial statement impact for GM.
In September 2006, the FASB issued SFAS No. 157
Fair Value Measurements, (SFAS No. 157) which
provides a definition of fair value, establishes a framework for
measuring fair value and requires expanded disclosures about
fair value measurements. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after
November 15, 2007 and interim periods within those fiscal
years. The provisions of SFAS No. 157 should be
applied prospectively. Management is assessing the potential
impact of this standard on GMs financial condition and
results of operations.
In September 2006, the FASB issued SFAS No. 158
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans, (SFAS No. 158) which amends
SFAS No. 87 Employers Accounting for
Pensions (SFAS No. 87), SFAS No. 88
Employers Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for
Termination Benefits (SFAS No. 88),
SFAS No. 106 Employers Accounting for
Postretirement Benefits Other Than Pensions
(SFAS No. 106), and SFAS No. 132R
Employers Disclosures about Pensions and Other
Postretirement Benefits (revised 2003)
(SFAS No. 132R). This Statement requires companies to
recognize an asset or liability for the overfunded or
underfunded status of their benefit plans in their financial
statements. SFAS No. 158 also requires the measurement
date for plan assets and liabilities to coincide with the
sponsors year end. The standard provides two transition
alternatives related to the change in measurement date
provisions. The recognition of an asset and liability related to
the funded status provision is effective for fiscal years ending
after December 15, 2006 and the change in measurement date
provisions is effective for fiscal years ending after
December 15, 2008. GM adopted the recognition of an asset
and liability related to the funded status provisions of SFAS
No. 158 at December 31, 2006. The additional pension
and OPEB liability included on the balance sheet is
$27.4 billion. The impact of adoption also resulted in
additional net deferred tax assets of $10.8 billion. The
impact of adoption to stockholders equity was a reduction
of $16.9 billion. There was no impact on pension or OPEB
expense, cash flow or benefits plans. See Note 19 to the
Consolidated Financial Statements for further discussion of the
implementation of the recognition provisions of
SFAS No. 158. Management has elected to early adopt
the measurement-date provisions of SFAS No. 158, which
requires new measurement dates coinciding with GMs fiscal
year for all plans in 2007. GM will use the
two-measurement approach in adopting the
measurement-date provisions of SFAS No. 158. See
Note 19 to the Consolidated Financial Statements for
further discussion of the measurement-date provisions of
SFAS No. 158 which were early adopted by GM on
January 1, 2007.
In October 2006, the FASB issued FSP FAS
123(R)-5
Amendment of FASB Staff Position
FAS No. 123(R)-1,
(FSP
FAS 123(R)-5)
which amends FSP
FAS 123(R)-1,
Classification and Measurement of Freestanding Financial
Instruments Originally Issued in Exchange for Employee Services
under SFAS No. 123(R), to clarify that
freestanding financial instruments that were originally issued
as employee compensation subject to SFAS No. 123(R)
and subsequently modified solely to reflect an equity
restructuring that occurs when the holders are no longer
employees, should continue to be subject to the recognition and
measurement provisions of SFAS No. 123(R) if certain
conditions are met. The provisions of FSP FAS 123(R)-5 are
effective for the first reporting period beginning after
October 10, 2006. GM adopted the provisions of FSP FAS
123(R)-5 on January 1, 2007. This guidance did not have a
material effect on GMs financial condition and results of
operations.
In October 2006, the FASB issued
FSP FAS 123(R)-6,
Technical Corrections of FASB Statement
No. 123(R), (FSP
FAS 123(R)-6)
which revises the computation of minimum compensation cost that
must be recognized as
119
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 3.
|
Significant
Accounting Policies (concluded)
|
defined in paragraph 42 of SFAS No. 123(R). Also,
FSP FAS 123(R)-6 amends the definition of
short-term inducement to exclude an offer to settle
an award. The provisions of this FSP are effective for the first
reporting period beginning after October 20, 2006. GM
adopted the provisions of FSP FAS 123(R)-6 on
January 1, 2007. This guidance did not have a material
effect on GMs financial condition and results of
operations.
In February 2007, the FASB issued SFAS No. 159 The
Fair Value Option for Financial Assets and Financial
Liabilities including an Amendment of SFAS
No. 115 (SFAS No. 159), which permits an entity
to measure many financial assets and financial liabilities at
fair value that are not currently required to be measured at
fair value. Entities that elect the fair value option will
report unrealized gains and losses in earnings at each
subsequent reporting date. The fair value option may be elected
on an instrument-by-instrument basis, with few exceptions. SFAS
No. 159 amends previous guidance to extend the use of the
fair value option to available-for-sale and held-to-maturity
securities. The Statement also establishes presentation and
disclosure requirements to help financial statement users
understand the effect of the election. SFAS No. 159 is
effective as of the beginning of the first fiscal year beginning
after November 15, 2007. Management is currently assessing
the potential impact of this standard on GMs financial
condition and results of operations.
|
|
Note 4.
|
Acquisition
and Disposal of Businesses
|
Sale
of 51% Controlling Interest in GMAC
On November 30, 2006, GM completed the sale of a 51%
controlling interest in GMAC for a purchase price of
$7.4 billion to FIM Holdings LLC (FIM Holdings). FIM
Holdings is a consortium of investors including Cerberus FIM
Investors LLC, Citigroup Inc., Aozora Bank Limited, and a
subsidiary of The PNC Financial Services Group, Inc. GM has
retained a 49% interest in GMACs Common Membership
Interests. In addition, FIM Holdings purchased 555,000 of
GMACs Preferred Membership Interests for a cash purchase
price of $500 million and GM purchased 1,555,000 Preferred
Membership Interests for a cash purchase price of
$1.4 billion. The total value of the cash proceeds and
distributions to GM after repayment of certain intercompany
obligations, and before it purchased the preferred membership
interests of GMAC was expected to be approximately
$14 billion over three years, comprised of the
$7.4 billion purchase price and $2.7 billion cash
dividend at closing, and other transaction related cash flows
including the monetization of certain retained assets.
Subsequent to December 31, 2006, it was determined that GM
would be required to make a capital contribution to GMAC of
approximately $1 billion to restore its adjusted tangible
equity balance to the contractually required amount of $14.4
billion, due to the decrease in the adjusted tangible equity
balance of GMAC as of November 30, 2006.
Prior to consummation of the transaction, (i) certain
assets with respect to automotive leases owned by GMAC and its
affiliates having a net book value of approximately
$4 billion and related deferred tax liabilities of $1.8
billion, were transferred to GM, (ii) GM assumed or
retained certain of GMACs postemployment benefit
obligations totaling $842 million and related deferred tax
assets of $302 million, (iii) GMAC transferred to GM
certain entities that hold a fee interest in certain real
properties, (iv) GMAC paid cash dividends to GM based upon
GMACs anticipated net income for the period
September 30, 2005 to November 30, 2006 totaling
$1.9 billion, (v) GM repaid certain indebtedness owing
to GMAC and specified intercompany unsecured obligations owing
to GMAC, and (vi) GMAC made a one-time distribution to GM
of $2.7 billion of cash to reflect the increase in
GMACs equity resulting from the transfer of a portion of
GMACs net deferred tax liabilities arising from the
conversion of GMAC and certain of its subsidiaries to limited
liability company form.
In accordance with the terms of the sale agreement, in the
second quarter of 2006, GM settled its estimated outstanding
liability with respect to a residual support and risk sharing
agreement that was in place with GMAC related to certain
operating lease portfolios in the amount of $1.4 billion.
Under this arrangement, the customers contractual residual
value was set above GMACs standard residual values. GM
reimbursed GMAC to the extent that remarketing sales proceeds
were less than the customers contractual residual value
limited to GMACs
120
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 4.
|
Acquisition
and Disposal of Businesses (continued)
|
standard residual sales value. GM also participated in a risk
sharing arrangement whereby GM shared equally in residual losses
to the extent that remarketing proceeds were below GMAC standard
residual values limited to a floor. The amount of the liability
previously recorded by GM amounted to approximately
$1.8 billion, resulting in a gain on settlement of
approximately $390 million. Approximately $252 million
of the gain was recognized in 2006 with the remainder reflected
as a deferred gain which will be recognized in future periods as
the leases terminate.
GM recognized a non-cash impairment charge of approximately
$2.9 billion in Other expenses in 2006. The charge is
comprised of the write-down of the carrying value of GMAC assets
that were sold on November 30, 2006, partially offset by
the realization of 51% of the unrecognized net gains reflected
in GMACs other comprehensive income.
For the eleven months ended November 30, 2006, GMACs
earnings and cash flows are fully consolidated in GMs
Consolidated Statements of Operations and Statements of Cash
Flows. After November 30, 2006, GMs remaining 49%
interest in GMACs common membership interests is reflected
as an equity method investment. Also, GMs interest in
GMACs preferred membership interests is reflected as a
cost method investment. Refer to Note 7.
As part of the agreement, GM retained an option, for
10 years after the closing date, to repurchase from GMAC
certain assets related to the automotive finance business of the
North American Operations and International Operations of GMAC.
GMs exercise of the option is conditional on GMs
credit rating being investment grade or higher than GMACs
credit rating. The call option price is calculated as the higher
of (i) fair market value or (ii) 9.5 times the
consolidated net income of GMACs automotive finance
business in either the calendar year the call option is
exercised or the calendar year immediately following the year
the call option is exercised. No value was assigned to this fair
value option.
GM and GMAC entered into a number of agreements that were
intended to continue the mutually-beneficial global relationship
between GM and GMAC. These agreements, in substance, were
consistent with the existing and historical practices between GM
and GMAC, including requiring GMAC to continue to allocate
capital to automotive financing thereby continuing to provide
critical financing support to a significant share of GMs
global sales. While GMAC retains the right to make individual
credit decisions, GMAC has committed to fund a broad spectrum of
customers and dealers consistent with historical practice in the
relevant jurisdiction. Subject to GMACs fulfillment of
certain conditions, GM has granted GMAC exclusivity for U.S.,
Canadian, and international GM-sponsored consumer and wholesale
marketing incentives for GM products in specified markets around
the world, with the exception of Saturn branded products. Refer
to Note 28 for additional information of the ongoing
arrangements between GM and GMAC.
Sale
of GMAC Commercial Mortgage
On March 23, 2006, GM through GMAC sold approximately 79%
of its equity in GMAC Commercial Mortgage for approximately
$1.5 billion in cash. Subsequent to the sale, the remaining
interest in GMAC Commercial Mortgage is reflected using the
equity method. At December 31, 2005, GMAC Commercial
Mortgages assets and liabilities had been classified as
held for sale in GMs Consolidated Balance Sheet.
Acquisition
of GM Daewoo
On February 3, 2005, GM completed the purchase of
16.6 million newly-issued shares of common stock in GM
Daewoo for approximately $49 million, which increased
GMs ownership in GM Daewoo to 48.2% from 44.6%. No other
shareholders in GM Daewoo participated in the issue. On
June 28, 2005, GM purchased from Suzuki Motor Corporation
(Suzuki) 6.9 million shares of outstanding common stock in
GM Daewoo for approximately $21 million. This increased
GMs ownership in GM Daewoo to 50.9%. Accordingly, GM began
consolidating the operations of GM Daewoo in June 2005. This
increased GMs total assets and liabilities as of
June 30, 2005 by
121
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 4.
|
Acquisition
and Disposal of Businesses (concluded)
|
approximately $4.7 billion and $4.5 billion,
respectively, including one-time increases of $1.6 billion
of cash and marketable securities and $1.3 billion of
long-term debt.
The pro forma unaudited impact on Automotive sales had GM
consolidated GM Daewoo in 2005 and 2004 would have been an
increase to revenue of $2.8 billion and $4.3 billion,
respectively. The pro forma effect on net income (loss) is not
significant compared to equity income recognized.
Sale
of Electro-Motive Division
On April 4, 2005, GM completed the sale of its
Electro-Motive Division (EMD) to an investor group led by
Greenbriar Equity Group LLC and Berkshire Partners LLC for total
consideration of $201 million. The sale covered
substantially all of the EMD businesses and both the LaGrange,
Illinois and London, Ontario manufacturing facilities. This
transaction did not have a material effect on GMs
consolidated financial position or results of operations.
|
|
Note 5.
|
Impairments,
Restructuring and Other Initiatives
|
Impairments
In 2006, GM recorded impairment charges totaling
$424 million related to product specific assets based on
GMs periodic review of its long-lived assets classified as
held and used. Of this, $303 million was at GMNA,
$60 million at GME, and $61 million at GMAP. In
addition, GMNA recorded impairment charges totaling
$172 million in 2006 which includes $102 million
related to product specific assets and $70 million related
to the write-down of various plant assets due to decreased
profitability and production associated with the planned
cessation of production at the Doraville, Georgia assembly plant
in 2008. Additionally, GME recorded an asset impairment charge
in 2006 of $89 million in connection with the announced
closure of GMs Portugal assembly plant, which closed in
December 2006.
In November 2005, GMNA announced a restructuring initiative
which will cease operations at nine assembly, stamping, and
powertrain facilities and three Service Parts and Operations
facilities by 2008. As a result of these capacity reduction
initiatives, GM recorded a charge of $700 million for the
write down to fair market value of property, plants, and
equipment for assets that were still in service as of
December 31, 2005. See Note 6 for further discussion of the
employee costs associated with this restructuring.
In 2005, the business planning cycle was accelerated as a result
of the lack of improved performance in the second quarter of
2005. In connection with this process, GM reviewed the carrying
value of certain long-lived assets held and used, other than
goodwill and intangible assets with indefinite lives. These
reviews resulted in impairment charges in GMNA and GME. In
addition, restructuring initiatives were announced in the third
quarter of 2005 in GMAP related to production in Australia,
resulting in additional impairment charges. In GMLAAM, unusually
strong South American currencies have adversely affected the
profitability of GMLAAMs export business.
Managements decision to adjust GMLAAMs export
volumes resulted in lower expected future cash flows, resulting
in an impairment charge in the region. These reviews and
initiatives resulted in impairment charges totaling
$1.2 billion recognized in 2005 ($743 million at GMNA,
$262 million at GME, $150 million at GMLAAM, and
$64 million at GMAP) for assets that were still in service.
In 2005, GMNA also recorded a charge of $134 million for
the write down to fair market value of various plant assets in
connection with the first quarter 2005 announcement to
discontinue production at a Lansing, Michigan assembly plant
during the second quarter of 2005.
In 2004, impairment analyses resulted in charges totaling
$609 million with respect to product-specific assets.
Additional charges of $161 million were recorded at GMNA
for the write-down to fair market value of various plant
122
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 5.
|
Impairments,
Restructuring and Other Initiatives
(continued)
|
assets in connection with facilities rationalization actions at
assembly plants in Baltimore, Maryland and Linden, New Jersey.
Restructuring
and Other Initiatives
GMNA results for 2006 included a charge of $115 million
related to costs incurred in 2006 under a new salaried severance
program, which allows involuntarily terminated employees to
receive continued salary and benefits for a period of time after
termination.
Results for 2005 include charges recognized of $223 million
in GMNA and $13 million in Other Operations related to
voluntary early retirement and other separation programs with
respect to certain salaried employees in the United States.
GME results for 2006 include charges for separations and
contract cancellations of $437 million. These charges are
related to the restructuring plan announced in the fourth
quarter of 2004, the closure of GMs Portugal assembly
plant, the reduction of one shift at the Ellesmere Port plant in
the United Kingdom, and new separation programs for Belgium, the
United Kingdom, Sweden, and Germany announced in the fourth
quarter of 2006. The charge in 2006 for the restructuring plan
announced in 2004 was $184 million. GMEs
restructuring plan targeted a total reduction of 12,000
employees over the period 2005 through 2007 through separation
programs, early retirements, and selected outsourcing
initiatives. As of December 31, 2006 approximately
11,600 employees left GM under this restructuring program
and the program is on target to achieve the total headcount
reduction, and has achieved the targeted annual structural cost
reduction of $600 million by 2006. The charge in 2006 for
the closure of the Portugal plant was $79 million and was
related to separations and contract cancellations. The plant
closed in December 2006, resulting in a total separation of
approximately 1,100 employees. The charge in 2006 for the shift
reduction in Ellesmere Port was $134 million. The shift
reduction reduced the work force in the U.K. by approximately
1,200 employees by the end of 2006. The charge for 2006 related
to separation programs in Belgium, the United Kingdom, and
Sweden was $32 million. These charges relate to the
separation of approximately 280 employees, primarily in
Sweden. In addition, a charge of $8 million was recorded in
2006 relating to an early retirement program in Germany approved
in the fourth quarter of 2006. Approximately
2,600 employees will leave under this program through 2013.
The cost will be recognized over the remaining service period of
each employee.
GME results for 2005 included restructuring charges of
$1.1 billion for separations, mainly related to the
restructuring plan announced in the fourth quarter of 2004, and
also included costs related to the dissolution of the Powertrain
joint venture with Fiat in the second quarter of 2005 and other
contract cancellation charges.
GMLAAM results for 2006 include restructuring charges of
$43 million. These restructuring charges relate to the
costs of voluntary employee separations at GM do Brasil.
GMAP results for 2006 include restructuring charges of
$15 million. These restructuring charges relate to the
costs of voluntary employee separations at GM Holden.
|
|
Note 6.
|
GMNA
Postemployment Benefit Costs
|
Costs to idle, consolidate, or close facilities and provide
postemployment benefits to employees idled on an other than
temporary basis are accrued based on managements best
estimate of the wage and benefits costs that will be incurred
for qualified employees under the JOBS bank provisions of the
current labor agreement through the date of its expiration in
September 2007, plus estimated costs expected to be paid
thereafter taking into account policy changes that GM intends to
negotiate into the JOBS program after the expiration of the
current collective bargaining agreement. Costs related to the
idling of employees that are expected to be temporary are
expensed as incurred. GM
123
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 6.
|
GMNA
Postemployment Benefit Costs (continued)
|
reviews the adequacy and continuing need for these liabilities
on an annual basis in conjunction with its year-end production
and labor forecasts. Furthermore, GM reviews the reasonableness
of the liabilities on a quarterly basis.
In 2005, GM recognized a charge of $1.8 billion for
postemployment benefits related to the restructuring of its
North American operations announced in November 2005.
Approximately 17,500 employees were included in the charge
for locations included in this action, some leaving the company
through attrition and some transferring to other sites.
On March 22, 2006, GM, Delphi, and the UAW reached an
agreement (the UAW Attrition Agreement) intended to reduce the
number of U.S. hourly employees through an accelerated
attrition program (the Attrition Program). The program was
offered to U.S. GM hourly employees and select
UAW-represented members of Delphis hourly work force. The
program also permitted the return of UAW-represented Delphi
employees back to GM until September 2007. In addition, eligible
UAW-represented Delphi employees could elect to retire from
Delphi or return to GM and retire. Under the agreement, GM has
agreed to assume the financial obligations related to the lump
sum payments that were made to eligible Delphi U.S. hourly
employees accepting normal or voluntary retirement incentives
and certain post-retirement employee benefit obligations related
to Delphi employees who returned to GM under the plan. Refer to
Note 20 for additional information in regards to GMs
financial obligation with respect to Delphi.
Under the UAW Attrition Program, GM provided certain
UAW-represented employees at GM with (i) a lump sum payment
of $35,000 for normal or early voluntary retirements retroactive
to October 1, 2005; (ii) a mutually satisfactory
retirement for employees with at least 10 years of credited
service and 50 years of age or older; (iii) payment of
gross monthly wages ranging from $2,750 to $2,900 to those
employees who participate in a special voluntary pre-retirement
program depending on years of credited service and plant work
location; and (iv) a buyout of $140,000 for employees with
ten or more years of seniority, or of $70,000 for employees with
less than 10 years seniority, provided such employees sever
all ties with GM except for any vested pension benefits.
Approximately 34,400 GM hourly employees have agreed to the
terms of the Attrition Program. GM recorded a charge of
approximately $2.1 billion in 2006 to recognize the wage
and benefit cost of those accepting normal and voluntary
retirements, buy-outs or pre-retirement leaves. As a result of
the Attrition Program, the JOBS Bank was substantially reduced
as employees from the Bank retired, took a buy-out or filled
openings created by the Attrition Program. Employees who chose
to leave GM retired or left by January 1, 2007.
Throughout 2006, GM recorded favorable adjustments totaling
approximately $1.0 billion to the postemployment benefits
reserve primarily as a result of (i) the transfer of
employees from idled plants to other plant sites to replace
those positions previously held by employees that accepted
retirements, buy-outs, or pre-retirement leaves, (ii) a
higher than anticipated level of Attrition Program participation
by employees at idled facilities and facilities to be idled that
were previously accrued for under the JOBS bank provisions, and
(iii) higher than anticipated headcount reductions
associated with previously announced GMNA plant idling
activities. The employees wage and benefit costs were then
included in the charge attributable to the Attrition Program in
2006, which is discussed in the above paragraph. In addition, a
charge of $81 million was recorded in 2006 to reflect
GMs commitment under the UAW Attrition Agreement to pay a
lump-sum to certain UAW and IUE-represented GM retirees with
recent retirements. GM also announced plans to idle a shift at
the Lordstown Assembly Plant in 2006 and to idle its service
parts operations at the Drayton Plains facility in 2008 which
resulted in a charge of $13 million in 2006 to recognize
future wages and benefit obligations associated with the idling
of workforce at these two facilities.
At December 31, 2006, the postemployment benefit cost
reserve reflects estimated future wages and benefits of
$1.3 billion related to approximately 8,500 employees,
primarily located at idled facilities and facilities to be idled
as a result of previous announcements, and approximately 10,900
employees under the terms of the Attrition Program. At
December 31, 2005, this reserve was approximately
$2 billion related to the estimated future wages and
benefits of approximately 18,400 employees, primarily at idled
facilities and facilities to be idled as a result of
124
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 6.
|
GMNA
Postemployment Benefit Costs (concluded)
|
previous announcements in 2005. The postemployment benefits
reserve was $237 million as of December 31, 2004,
which related to numerous facilities and approximately 1,900
employees. The following table summarizes the activity in the
reserve for the years 2006, 2005 and 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in millions)
|
|
|
Beginning balance
|
|
$
|
2,012
|
|
|
$
|
237
|
|
|
$
|
384
|
|
Additions
|
|
|
2,212
|
|
|
|
1,891
|
|
|
|
|
|
Interest accretion
|
|
|
31
|
|
|
|
12
|
|
|
|
19
|
|
Payments
|
|
|
(1,834
|
)
|
|
|
(91
|
)
|
|
|
(151
|
)
|
Adjustments
|
|
|
(1,152
|
)
|
|
|
(37
|
)
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
1,269
|
|
|
$
|
2,012
|
|
|
$
|
237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 7.
|
Investment
in Nonconsolidated Affiliates
|
Nonconsolidated affiliates of GM identified herein are those
entities in which GM owns an equity interest and for which GM
uses the equity method of accounting, because GM has the ability
to exert significant influence over decisions relating to their
operating and financial affairs. GMs significant
affiliates, and the percent of GMs equity ownership or
voting interest in them include the following:
United States GMAC (49% at December 31, 2006);
Japan Fuji Heavy Industries Ltd. (FHI) (sold at
December 31, 2005 and 20.1% in 2004), Suzuki Motor
Corporation (3.7% at December 31, 2006, and 20.4% in 2005
and 2004);
China Shanghai General Motors Co., Ltd (50% in 2006,
2005 and 2004), SAIC-GM-Wuling Automobile Co., Ltd (34% in 2006,
2005 and 2004);
South Korea GM Daewoo (50.9% at December 31,
2006 and 2005, 44.6% in 2004; with the increase in ownership to
more than 50%, GM consolidated GM Daewoo at June 30,
2005 see Note 4);
Italy GM-Fiat Powertrain (FGP) (dissolved at
December 31, 2005 and 50% in 2004).
125
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 7.
|
Investment
in Nonconsolidated Affiliates (continued)
|
Information regarding GMs significant nonconsolidated
affiliates, as described above in the following countries is
included in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
|
|
|
|
|
|
|
|
|
|
|
|
South
|
|
|
|
States
|
|
|
Italy
|
|
|
Japan
|
|
|
China
|
|
|
Korea
|
|
|
|
(Dollars in millions)
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value of GMs
investments in affiliates
|
|
$
|
7,523
|
|
|
|
NA
|
|
|
|
NA
|
|
|
$
|
851
|
|
|
|
NA
|
|
GMs share of
affiliates net income (loss)
|
|
|
(5
|
)
|
|
|
NA
|
|
|
$
|
21
|
|
|
$
|
306
|
|
|
|
NA
|
|
Total assets of significant
affiliates
|
|
|
287,439
|
|
|
|
NA
|
|
|
|
NA
|
|
|
$
|
4,828
|
|
|
|
NA
|
|
Total liabilities of significant
affiliates
|
|
|
270,875
|
|
|
|
NA
|
|
|
|
NA
|
|
|
$
|
2,951
|
|
|
|
NA
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value of GMs
investments in affiliates
|
|
|
NA
|
|
|
|
NA
|
|
|
$
|
1,576
|
|
|
$
|
822
|
|
|
|
NA
|
|
GMs share of
affiliates net income (loss)
|
|
|
NA
|
|
|
$
|
32
|
|
|
$
|
183
|
|
|
$
|
302
|
|
|
$
|
17
|
|
Total assets of significant
affiliates
|
|
|
NA
|
|
|
|
NA
|
|
|
$
|
15,507
|
|
|
$
|
3,912
|
|
|
|
NA
|
|
Total liabilities of significant
affiliates
|
|
|
NA
|
|
|
|
NA
|
|
|
$
|
7,467
|
|
|
$
|
2,179
|
|
|
|
NA
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value of GMs
investments in affiliates
|
|
|
NA
|
|
|
$
|
1,293
|
|
|
$
|
3,174
|
|
|
$
|
1,084
|
|
|
$
|
193
|
|
GMs share of
affiliates net income (loss)
|
|
|
NA
|
|
|
$
|
86
|
|
|
$
|
255
|
|
|
$
|
432
|
|
|
$
|
(35
|
)
|
Total assets of significant
affiliates
|
|
|
NA
|
|
|
$
|
8,616
|
|
|
$
|
30,582
|
|
|
$
|
3,438
|
|
|
$
|
5,288
|
|
Total liabilities of significant
affiliates
|
|
|
NA
|
|
|
$
|
5,539
|
|
|
$
|
17,417
|
|
|
$
|
1,592
|
|
|
$
|
4,447
|
|
As discussed in Note 4, GM sold a 51% ownership interest in
GMAC in November 2006. As such, the remaining 49% ownership
interest held by GM is accounted for under the equity method. In
addition, FIM Holdings purchased 555,000 of GMACs
Preferred Membership Interests for a cash purchase price of
$500 million and GM purchased 1,555,000 Preferred
Membership Interests for a cash purchase price of
$1.4 billion. The investment in GMAC Preferred Membership
Interests, a cost method investment, was initially recorded at
fair value at the date of its acquisition. The excess of fair
value over the purchase price of the Preferred Membership
Interests reduced the Corporations investment in GMAC
Common Membership Interests. GMAC is required to make certain
quarterly distributions to holders of the Preferred Membership
Interest in cash on a pro rata basis. The Preferred Membership
Interests are issued in units of $1,000 and accrue a yield at a
rate of 10% per annum. GMACs Board of Managers (GMAC
Board) may reduce any distribution to the extent required to
avoid a reduction of the equity capital of GMAC below a minimum
amount of equity capital equal to the net book value of GMAC at
November 30, 2006. In addition, the GMAC Board may suspend
the payment of Preferred Membership Interest distributions with
the consent of a majority of the Preferred Membership Interests.
If distributions are not made with respect to any fiscal
quarter, the distributions would not be cumulative. If the
accrued yield of GMACs Preferred Membership Interests for
any fiscal quarter is fully paid to the preferred holders, then
a portion of the excess of the net financial book income of GMAC
in any fiscal quarter over the amount of yield distributed to
the holders of the Preferred Membership Interests in such
quarter will be distributed to the holders of the Common
Membership Interests as follows: at least 40% of the excess will
be paid for fiscal quarters ending prior to December 31,
2008 and at least 70% of the excess will be paid for fiscal
quarters ending after December 31, 2008.
In 2006, GMAC recognized a gain of $415 million on the sale
of its entire equity interest in a regional home builder. Under
the equity method of accounting, GMACs share of income
recorded from this investment was approximately
$42.4 million and $35.2 million in 2006 and 2005,
respectively.
Also, in 2006, GM sold 92.36 million shares of its
investment in Suzuki, reducing GMs equity stake in Suzuki
from 20.4% to 3.7% (16.3 million shares). The sale of
GMs interest generated cash proceeds of $2 billion
and a gain
126
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 7.
|
Investment
in Nonconsolidated Affiliates (concluded)
|
on sale of $666 million in 2006. Effective with completion
of the sale, GMs remaining investment in Suzuki is
accounted for as an available-for-sale equity security. Refer to
Note 8.
In the fourth quarter of 2005, GM completed the sale of its
20.1% investment in the common stock of FHI. In the second
quarter of 2005, GM recorded an impairment charge of
$812 million associated with its investment in the common
stock of FHI. In the fourth quarter of 2005, GM recorded a gain
of $78 million, due to the appreciation of the fair value
of such stock after June 30, 2005, the date of the FHI
impairment charge. The sale generated net proceeds of
approximately $775 million.
On February 13, 2005, GM and Fiat S.p.A. (Fiat) reached a
settlement agreement whereby GM agreed to pay Fiat approximately
$2.0 billion and to return its 10% equity interest in Fiat
Auto Holdings B.V. (FAH), to terminate the Master Agreement
(including the Put Option) entered into in March 2000, settle
various disputes related thereto, and acquire an interest in key
strategic diesel engine assets, and other important rights with
respect to diesel engine technology and know-how. The settlement
agreement resulted in a charge of approximately
$1.4 billion, which is recorded in Other expenses in the
Consolidated Statements of Operations. Since the underlying
events and disputes giving rise to GMs and Fiats
agreement to settle these disputes and terminate the Master
Agreement (including the Put Option) existed at
December 31, 2004, GM recognized this charge in the fourth
quarter of 2004.
In addition, the settlement agreement included, among other
things, the following actions or provisions:
|
|
|
|
|
FGP joint venture company was dissolved and GM regained complete
ownership of all GM assets originally contributed.
|
|
|
|
GM would retain co-ownership with Fiat of the key powertrain
intellectual property, including SDE and JTD diesel engines
and the M20-32 six-speed manual transmission;
|
|
|
|
GM would hold a 50% interest in Fiat GM Powertrain Polska, a
joint venture limited to operating the powertrain manufacturing
plant in Bielsko-Biala, Poland, which currently produces the 1.3
liter SDE diesel engine;
|
|
|
|
The companies will continue to supply each other with
powertrains under long-term contracts, which provide
considerable ongoing savings;
|
Effective May 13, 2005 the liquidation of these joint
ventures and GMs acquisition of certain strategic assets
from Fiat were completed. GM and Fiat have exchanged broad
releases of all claims and liabilities.
In the fourth quarter of 2004, GM completed its annual review of
its investment in FAH. As a result of continued deterioration in
the performance of Fiat Auto S.p.A. and its debt structure, GM
recorded a non-cash charge of $220 million to reduce the
carrying value of GMs investment in FAH to zero.
|
|
Note 8.
|
Marketable
Securities
|
Marketable securities held by GM are classified as
available-for-sale,
except for certain mortgage-related securities, which are
classified as
held-to-maturity
or trading securities. Unrealized gains and losses, net of
related income taxes, for
available-for-sale
securities are included as a separate component of
stockholders equity. Unrealized gains and losses for
trading securities are recorded currently in earnings. GM
determines cost on the specific identification basis.
127
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 8.
|
Marketable
Securities (continued)
|
Investments in marketable securities were as follows (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006
|
|
|
December 31, 2005
|
|
|
|
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities and other
|
|
$
|
122
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
122
|
|
|
$
|
741
|
|
|
$
|
|
|
|
$
|
13
|
|
|
$
|
728
|
|
United States government and
agencies
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
455
|
|
|
|
|
|
|
|
5
|
|
|
|
450
|
|
Mortgage-backed securities
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
243
|
|
|
|
|
|
|
|
5
|
|
|
|
238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
138
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
138
|
|
|
$
|
1,439
|
|
|
$
|
|
|
|
$
|
23
|
|
|
$
|
1,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing and Insurance
Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities held for
trading purposes
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
3,766
|
|
|
$
|
131
|
|
|
$
|
|
|
|
$
|
3,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States government and
agencies
|
|
|
93
|
|
|
|
1
|
|
|
|
|
|
|
|
94
|
|
|
|
2,945
|
|
|
|
5
|
|
|
|
46
|
|
|
|
2,904
|
|
States and municipalities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
863
|
|
|
|
27
|
|
|
|
1
|
|
|
|
889
|
|
Foreign government securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
844
|
|
|
|
11
|
|
|
|
2
|
|
|
|
853
|
|
Mortgage and asset-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,216
|
|
|
|
29
|
|
|
|
5
|
|
|
|
1,240
|
|
Corporate debt securities and other
|
|
|
98
|
|
|
|
|
|
|
|
4
|
|
|
|
94
|
|
|
|
6,136
|
|
|
|
43
|
|
|
|
35
|
|
|
|
6,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
191
|
|
|
$
|
1
|
|
|
$
|
4
|
|
|
$
|
188
|
|
|
$
|
12,004
|
|
|
$
|
115
|
|
|
$
|
89
|
|
|
$
|
12,030
|
|
Equity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,510
|
|
|
|
874
|
|
|
|
17
|
|
|
|
2,367
|
|
Mortgage-backed securities
held-to-maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
191
|
|
|
$
|
1
|
|
|
$
|
4
|
|
|
$
|
188
|
|
|
$
|
17,296
|
|
|
$
|
1,120
|
|
|
$
|
106
|
|
|
$
|
18,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated
|
|
$
|
329
|
|
|
$
|
1
|
|
|
$
|
4
|
|
|
$
|
326
|
|
|
$
|
18,735
|
|
|
$
|
1,120
|
|
|
$
|
129
|
|
|
$
|
19,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of marketable securities totaled
$7.9 billion in 2006, $20.4 billion in 2005, and
$18 billion in 2004. The gross gains related to sales of
marketable securities were $1.1 billion, $223 million,
and $163 million in 2006, 2005, and 2004, respectively. The
gross losses related to sales of marketable securities were
$105 million in 2006, $132 million in 2005, and
$79 million in 2004.
The amortized cost and fair value of investments in
available-for-sale
securities by contractual maturity at December 31, 2006
were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing and Insurance
|
|
|
|
Available-for-Sale
|
|
|
Available-for-Sale
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
Amortized
|
|
|
Fair
|
|
Contractual Maturity
|
|
Cost
|
|
|
Value
|
|
|
Cost
|
|
|
Value
|
|
|
1 year
|
|
$
|
116
|
|
|
$
|
116
|
|
|
$
|
191
|
|
|
$
|
188
|
|
2-5 years
|
|
|
22
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
6-10 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11 years and later
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
138
|
|
|
$
|
138
|
|
|
$
|
191
|
|
|
$
|
188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 8.
|
Marketable
Securities (concluded)
|
The fair value and gross unrealized losses of investments in an
unrealized loss position that are not deemed to be
other-than-temporarily
impaired are summarized in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006
|
|
|
|
|
|
|
|
|
|
Less than 12 Months
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
Unrealized Losses
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
|
|
|
|
|
|
|
Financing and Insurance
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities and other
|
|
$
|
94
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale securities
|
|
$
|
94
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
|
|
|
Less than 12 Months
|
|
|
12 Months or Longer
|
|
|
|
Fair Value
|
|
|
Unrealized Losses
|
|
|
Fair Value
|
|
|
Unrealized Losses
|
|
|
|
(Dollars in millions)
|
|
|
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities and other
|
|
$
|
201
|
|
|
$
|
3
|
|
|
$
|
370
|
|
|
$
|
10
|
|
U.S. government and agencies
|
|
|
289
|
|
|
|
2
|
|
|
|
84
|
|
|
|
3
|
|
Mortgage backed securities
|
|
|
153
|
|
|
|
3
|
|
|
|
65
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
643
|
|
|
$
|
8
|
|
|
$
|
519
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing and Insurance
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States government and
agencies
|
|
$
|
1,590
|
|
|
$
|
32
|
|
|
$
|
520
|
|
|
$
|
15
|
|
States and political subdivisions
|
|
|
79
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Foreign government securities
|
|
|
179
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed
securities
|
|
|
36
|
|
|
|
1
|
|
|
|
76
|
|
|
|
2
|
|
Interest-only strips
|
|
|
81
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
|
1,865
|
|
|
|
20
|
|
|
|
331
|
|
|
|
10
|
|
Other
|
|
|
175
|
|
|
|
3
|
|
|
|
21
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
4,005
|
|
|
|
61
|
|
|
|
948
|
|
|
|
28
|
|
Equity securities
|
|
|
137
|
|
|
|
15
|
|
|
|
19
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale securities
|
|
$
|
4,142
|
|
|
$
|
76
|
|
|
$
|
967
|
|
|
$
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held to maturity securities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
129
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
In addition, as of December 31, 2006, GM holds a strategic
3.7% stake in Suzuki that is recorded in Other Assets at its
fair value of $460 million. GMs cost basis in this
investment is approximately $236 million. Prior to 2006, GM
held a 20.4% interest and accounted for its investment using the
equity method.
|
|
Note 9.
|
Variable
Interest Entities
|
GM is providing the information below concerning VIEs that:
(1) are consolidated since GM is deemed to be the primary
beneficiary and (2) those entities that GM does not
consolidate because, although GM has significant interests in
such VIEs, GM is not the primary beneficiary. Those VIEs listed
below that related to the Financing and Insurance Operations
were consolidated in 2004, 2005 and the period January 1,
2006 to November 30, 2006.
Synthetic Leases GM leases real estate and
equipment from various SPEs that have been established to
facilitate the financing of those assets for GM by nationally
prominent, creditworthy lessors. These assets consist
principally of office buildings, warehouses, and machinery and
equipment. The use of SPEs allows the parties providing the
financing to isolate particular assets in a single entity and
thereby syndicate the financing to multiple third parties. This
is a conventional financing technique used to lower the cost of
borrowing and, thus, the lease cost to a lessee such as GM.
There is a well-established market in which institutions
participate in the financing of such property through their
purchase of interests in these SPEs. Certain of these SPEs were
determined to be VIEs under FIN 46(R). GM consolidates any
entities with leases where GM provides a residual value
guarantee of the leased property, and is considered the primary
beneficiary under FIN 46(R). As of December 31, 2006,
the carrying amount of assets and liabilities consolidated under
FIN 46(R) amounted to $636 million and
$797 million, respectively, compared to $780 million
and $1 billion as of December 31, 2005. Assets
consolidated are reflected in
property-net
in GMs consolidated financial statements. GMs
maximum exposure to loss related to the consolidated VIEs
amounted to $695 million at December 31, 2006. For
other such lease arrangements involving VIEs, GM holds
significant variable interests but is not considered the primary
beneficiary under FIN 46(R). GMs maximum exposure to
loss related to these VIEs where GM has a significant variable
interest, but does not consolidate the entity, amounted to
$624 million at December 31, 2006.
Financing
and Insurance Operations
Automotive finance receivables In certain
securitization transactions, GMAC transfers consumer finance
receivables and wholesale lines of credit into bank-sponsored
multi-seller commercial paper conduits. These conduits provide a
funding source to GMAC (as well as other transferors into the
conduit) as they fund the purchase of the receivables through
the issuance of commercial paper. Total assets outstanding in
these bank-sponsored conduits approximated $15.3 billion as
of December 31, 2005. While GMAC has a variable interest in
these conduits, it is not considered to be the primary
beneficiary, as GMAC does not retain the majority of the
expected losses or returns.
Mortgage warehouse funding GMACs
Mortgage operations transfer commercial and residential mortgage
loans, lending receivables, home equity loans, and lines of
credit pending permanent sale or securitization through various
structured finance arrangements in order to provide funds for
the origination and purchase of future loans. These structured
finance arrangements include transfers to warehouse funding
entities, including GMAC and bank-sponsored commercial paper
conduits. Transfers of assets from GMAC into each facility are
accounted for as either sales (off-balance sheet) or secured
financings (on-balance sheet) based on the provisions of
SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities (SFAS No. 140). However, in either case,
creditors of these facilities have no legal recourse to the
general credit of GMAC. Some of these warehouse funding entities
represent variable interest entities under FIN 46(R).
Management has determined that for certain mortgage warehouse
funding facilities, GMAC is the primary beneficiary and, as
such, consolidates the entities in accordance with
FIN 46(R). The assets of these residential mortgage
warehouse entities totaled $7.2 billion at
December 31, 2005, the majority of which are included in
loans held for sale and finance receivables, net, in the
Consolidated Balance Sheet.
130
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 9.
|
Variable
Interest Entities (continued)
|
Residential mortgage loan alliances GMAC has
invested in strategic alliances with several mortgage loan
originators. These alliances may include common or preferred
equity investments, working capital or other subordinated
lending, and warrants. In addition to warehouse lending
arrangements, management has determined that GMAC does not have
the majority of the expected losses or returns and as such,
consolidation is not appropriate under FIN 46(R). Total
assets in these alliances were $139 million at
December 31, 2005.
Construction and real estate lending GMAC
uses an SPE to finance construction lending receivables. The SPE
purchases and holds the receivables and funds the majority of
the purchases through financing obtained from third-party
asset-backed commercial paper conduits. GMAC is the primary
beneficiary, and as such, consolidates the entity in accordance
with FIN 46(R). The assets in this entity totaled
$1.6 billion at December 31, 2005, which are included
in finance receivables, net, in the Consolidated Balance Sheet.
The beneficial interest holders of this variable interest entity
do not have legal recourse to the general credit of GMAC.
GMAC has subordinated real estate lending arrangements with
certain entities. These entitles are created to develop land and
construct residential homes. Management has determined that GMAC
does not have the majority of the expected losses or returns,
and as such, consolidation is not appropriate under
FIN 46(R). Total assets in these entities were
$496 million at December 31, 2005.
Warehouse lending GMAC has a facility in
which it transfers mortgage warehouse lending receivables to a
100% owned SPE which then sells a senior participation interest
in the receivables to an unconsolidated qualifying special
purpose entity (QSPE). The QSPE funds the purchase of the
participation interest from the SPE through financing obtained
from third-party asset-backed commercial paper conduits. The SPE
funds the purchase of the receivables from GMAC with cash
obtained from the QSPE, as well as a subordinated loan
and/or an
equity contribution from GMAC. The senior participation interest
sold to the QSPE, and the commercial paper issued are not
included in the assets or liabilities of GMAC. Once the
receivables have been sold, they may not be purchased by GMAC
except in very limited circumstances, such as a breach in
representations or warranties. Management has determined that
GMAC is the primary beneficiary of the SPE, and as such,
consolidates the entity in accordance with FIN 46(R). The
assets in this entity totaled $3.5 billion at
December 31, 2005, which are included in finance
receivables, net of unearned income, in the Consolidated Balance
Sheet.
Collateralized debt obligations (CDOs)
GMACs Mortgage operations sponsor and serve as collateral
manager for CDOs. Under CDO transactions, a trust is established
that purchases a portfolio of securities and issues debt and
equity certificates, representing interests in the portfolio of
assets. In addition to receiving variable compensation for
managing the portfolio, GMAC sometimes retains equity
investments in the CDOs. The majority of the CDOs sponsored by
GMAC were initially structured or have been restructured (with
approval by the senior beneficial interest holders) as QSPEs,
and are therefore exempt from FIN 46(R).
In the event that an asset is credit impaired, a call option is
triggered whereby GMAC, as collateral manager, may buy the asset
out of the pool and sell it to a third party. The call is
triggered only by events that are outside GMACs control,
such as the downgrade by a rating agency of an asset in the pool
or in the event more than a specified percentage of mortgage
loans underlying a security are greater than 60 days
delinquent (or have been liquidated). In the event the
conditions under which GMAC can exercise the call option are
met, GMAC recognizes these assets. In accordance with these
provisions, GMAC did not recognize any assets as of
December 31, 2005.
Management has determined that for certain CDO entities, GMAC is
the primary beneficiary, and as such,
131
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 9.
|
Variable
Interest Entities (concluded)
|
consolidates the entities in accordance with FIN 46(R). The
assets in these entities totaled $569 million at
December 31, 2005, the majority of which are included in
marketable securities in the Consolidated Balance Sheet.
Interests in real estate partnerships
GMACs Commercial Mortgage operations syndicate investments
in real estate partnerships to unaffiliated investors, and in
certain partnerships, have guaranteed the timely payments of a
specified return to those investors. The investor returns are
principally generated from each partnerships share of
affordable housing tax credits and tax losses derived from the
partnerships investments in entities which develop, own
and operate affordable housing properties throughout the United
States. These entities are considered VIEs under
FIN 46(R). The determination of whether GMAC is the primary
beneficiary of a given tax credit fund depends on many factors,
including the number of limited partners and the rights and
obligations of the general and limited partners in that fund.
GMAC has variable interests in the underlying operating
partnerships (primarily in the form of limited partnership
interests). The results of the variable interest analysis
indicated that GMAC is not the primary beneficiary of some of
these partnerships and, as a result, is not required to
consolidate these entities under FIN 46(R). Assets
outstanding in these underlying operating partnerships
approximated $6.5 billion at December 31, 2005.
GMACs maximum exposure to loss related to these
partnerships is $682 million. In addition, management has
determined that for certain partnerships, GMAC is the primary
beneficiary, and as such, consolidates the partnerships in
accordance with FIN 46(R). The impact of consolidation
results in an increase to our assets totaling $452 million
at December 31, 2005, which are included in the
Corporations Consolidated Balance Sheet. This
consolidation did not impact reported net income. Real estate
assets held as collateral for these entities totaled
$252 million at December 31, 2005.
GMAC holds variable interests in syndicated affordable housing
partnerships where it provides unaffiliated investors with a
guaranteed yield on their investment. These partnerships were
reflected as held for sale in GMs Consolidated Balance
Sheet at December 31, 2005 under the financing method in
accordance with Statement of Financial Accounting Standards No
66, Accounting for Sales of Real Estate
(SFAS No. 66). GMACs exposure to loss at
December 31, 2005 was $1.4 billion representing the
$1.0 billion financing liability reflected in the
Consolidated Balance Sheet (i.e., real estate syndication
proceeds) as well as $0.4 billion in additional unpaid
equity installments. The maximum exposure amount represents the
amount payable to investors, as unaffiliated investors place
additional guaranteed commitments with GMAC, and decreases as
tax benefits are delivered to the investors. Considering such
amounts, GMAC exposure to loss in future periods is not expected
to exceed $1.9 billion.
New markets tax credit funds GMAC syndicates
and manages investments in partnerships that make investments,
typically mortgage loans that, in turn, qualify the partnerships
to earn New Markets Tax Credits. New Markets Tax Credits permit
taxpayers to receive a federal income tax credit for making
qualified equity investments in community development entities.
For one particular tax credit fund management has determined
that GMAC does not have the majority of the expected losses or
returns and, as such, consolidation is not appropriate under
FIN 46(R). The assets in these investments totaled
$62 million at December 31, 2005, of which
$41 million represents GMACs maximum exposure to
loss. In addition to this entity, management has determined that
for other tax credit funds, GMAC is a primary beneficiary and as
such, consolidates these entities in accordance with
FIN 46(R). The impact of consolidation results in an
increase to our assets classified as held for sale in the
Consolidated Balance Sheet totaling $206 million at
December 31, 2005.
|
|
Note 10.
|
Finance
Receivables and Securitizations
|
GM generates receivables from its sales of vehicles to its
dealer network domestically and internationally, as well as from
its service parts, transmission, and powertrain sales. Certain
of these receivables are sold to a GM wholly-owned
bankruptcy-remote SPE. The SPE is a separate legal entity that
assumes the risks and rewards of ownership of the receivables.
In turn, the SPE participates in a trade accounts receivable
securitization program whereby it enters into an agreement to
sell undivided interests in an eligible pool of trade
receivables limited to
132
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 10.
|
Finance
Receivables and
Securitizations (continued)
|
$0.85 billion and $1 billion in 2006 and 2005,
respectively, to a bank conduit that funds its purchases through
issuance of commercial paper or via direct bank funding. The
receivables under the program were sold at fair market value,
and excluded from GMs Consolidated Balance Sheet. The loss
recorded on the trade receivables sold is included in Automotive
cost of sales and was $30 million, $23 million and
$3 million in 2006, 2005 and 2004, respectively. As of
December 31, 2006 and 2005, the bank conduit had a
beneficial interest of $0.2 billion and $0.4 billion,
respectively, of the SPEs pool of eligible trade
receivables. GM does not have a retained interest in the
receivables sold, but performs collection and administrative
functions. The gross amount of proceeds from collections
reinvested in revolving securitizations was $9.0 billion,
$12.8 billion and $6.9 billion for 2006, 2005, and
2004 respectively.
In addition to this securitization program, GM participates in
other trade receivable securitization programs, primarily in
Europe. Financing providers had a beneficial interest in
GMs pool of eligible European receivables of
$0.1 billion and $0.3 billion as of December 31,
2006 and 2005 respectively, related to those securitization
programs.
Since April 2006, certain other GM trade accounts receivables
related to vehicle sales to dealers primarily in the Middle East
are pledged as collateral under an on balance sheet securitized
borrowing program. The receivables pledged are not reported
separately from other trade accounts receivables on the
Consolidated Balance Sheet. The amount of receivables pledged
under this program as of December 31, 2006 was
approximately $0.3 billion and such amount is also reported
as short-term borrowings. In addition, GM has other on balance
sheet trade receivable and other financing programs with GMAC as
counterparty. The balance under these programs was
$1.8 billion as of December 31, 2006 which is reported
as debt since the completion of the GMAC Transaction.
Finance
Receivables, Net
Finance receivables net included the following at
December 31, 2005:
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
Consumer:
|
|
|
|
|
|
|
Retail automotive
|
|
$
|
71,477
|
|
|
|
Residential mortgages
|
|
|
68,959
|
|
|
|
|
|
|
|
|
|
|
Total consumer
|
|
|
140,436
|
|
|
|
Commercial:
|
|
|
|
|
|
|
Automotive:
|
|
|
|
|
|
|
Wholesale
|
|
|
19,641
|
|
|
|
Leasing and lease financing
|
|
|
1,228
|
|
|
|
Term loans to dealers and others
|
|
|
2,973
|
|
|
|
Commercial and industrial
|
|
|
16,936
|
|
|
|
Commercial real estate:
|
|
|
|
|
|
|
Commercial mortgage(1)
|
|
|
43
|
|
|
|
Real estate construction
|
|
|
2,677
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
43,498
|
|
|
|
|
|
|
|
|
|
|
Total finance receivables and loans
|
|
|
183,934
|
|
|
|
Allowance for financing losses
|
|
|
(3,085
|
)
|
|
|
|
|
|
|
|
|
|
Total consolidated finance
receivables, net (2)
|
|
$
|
180,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
At December 31, 2005, $3.0 billion ($2.1 billion
domestic and $949 million foreign) in GMAC Commercial
Mortgages finance receivables and loans were transferred
to held for sale on the Consolidated Balance Sheet. |
|
(2) |
|
Net of unearned income of $5.9 billion at December 31,
2005. |
133
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 10.
|
Finance
Receivables and
Securitizations (continued)
|
Finance receivables that originated outside the United States
were $32.5 billion at December 31, 2005.
Securitizations
of Finance Receivables and Mortgage Loans
As described in Note 4, GMAC transferred to GM two
bankruptcy-remote subsidiaries (SPEs) that hold the equity
interests in ten trusts that are parties to lease asset
securitizations. The balance of lease securitization debt under
these two SPEs as of December 31, 2006 was
$9.4 billion.
GMAC has significant finance receivables. With the completion of
the GMAC Transaction before year-end 2006, GMACs finance
receivables are no longer part of the consolidated balance
sheet. Below is information on GMAC finance receivables as of
December 31, 2005.
GMAC sells retail finance receivables, wholesale and dealer
loans, and residential mortgage loans. The following discussion
and related information is only applicable to the transfers of
finance receivables and loans that qualify as off-balance sheet
securitizations under the requirements of SFAS No. 140.
GMAC retains servicing responsibilities for and subordinated
interests in all of its securitizations of retail finance
receivables and wholesale loans. Servicing responsibilities are
retained for the majority of its residential and commercial
mortgage loan securitizations and GMAC may retain subordinated
interests in some of these securitizations. GMAC also holds
subordinated interests and acts as collateral manager in its
collateralized debt obligation (CDO) securitization program.
As servicer, GMAC receives a monthly fee stated as a percentage
of the outstanding sold receivables. Typically, for retail
automotive finance receivables where GMAC is paid a fee, it has
concluded that the fee represents adequate compensation as a
servicer and, as such, no servicing asset or liability is
recognized. Considering the short-term revolving nature of
wholesale loans, no servicing asset or liability is recognized
upon securitization of the loans. As of December 31, 2005,
the weighted average basic servicing fees for its primary
servicing activities were 100 basis points, 100 basis
points and 40 basis points of the outstanding principal
balance for sold retail finance receivables, wholesale loans,
residential mortgage loans and commercial mortgage loans,
respectively. Additionally, GMAC retain the rights to cash flows
remaining after the investors in most securitization trusts have
received their contractual payments. In certain retail
securitization transactions, retail receivables are sold on a
servicing retained basis, but with no servicing compensation
and, as such, a servicing liability is established and recorded
in other liabilities. As of December 31, 2005, servicing
liabilities of $32 million were outstanding related to such
retail securitization transactions. In addition, in 2005, GMAC
completed a retail automotive securitization where the servicing
fee received is considered greater than adequate compensation
requiring the recording of a servicing asset. As of
December 31, 2005, the fair value of the servicing asset
was $30 million.
For mortgage servicing, GMAC capitalizes the value expected to
be realized from performing specified residential and commercial
mortgage servicing activities as mortgage servicing rights.
134
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 10.
|
Finance
Receivables and
Securitizations (continued)
|
The following tables summarize gains on securitizations and
certain cash flows received from and paid to securitization
trusts for transfers of finance receivables and loans that were
completed during the eleven months ended November 30, 2006,
and the years ended December 31, 2005 and 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eleven Months Ended November 30, 2006
|
|
|
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance
|
|
|
Wholesale
|
|
|
Mortgage Loans
|
|
|
|
Receivables
|
|
|
Loans
|
|
|
Residential
|
|
|
Commercial
|
|
|
|
(Dollars in millions)
|
|
|
Pre-tax gains (losses) on
securitizations
|
|
$
|
|
|
|
$
|
551
|
|
|
$
|
731
|
|
|
|
|
|
Cash inflow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from new securitizations
|
|
|
3,315
|
|
|
|
|
|
|
|
56,510
|
|
|
|
|
|
Servicing fees received
|
|
|
|
|
|
|
166
|
|
|
|
435
|
|
|
|
|
|
Other cash flows received on
retained interests
|
|
|
308
|
|
|
|
28
|
|
|
|
534
|
|
|
|
|
|
Proceeds from collections
reinvested in revolving securitizations
|
|
|
|
|
|
|
89,385
|
|
|
|
|
|
|
|
|
|
Repayments of servicing advances
|
|
|
3
|
|
|
|
|
|
|
|
1,065
|
|
|
|
|
|
Cash outflow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Servicing advances
|
|
|
48
|
|
|
|
|
|
|
|
(1,125
|
)
|
|
|
|
|
Purchase obligations and options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans under conditional
call option
|
|
|
|
|
|
|
|
|
|
|
(20
|
)
|
|
|
|
|
Representations and warranties
obligations
|
|
|
|
|
|
|
|
|
|
|
(37
|
)
|
|
|
|
|
Administrator or servicer actions
|
|
|
5
|
|
|
|
|
|
|
|
(56
|
)
|
|
|
|
|
Asset performance conditional calls
|
|
|
|
|
|
|
|
|
|
|
(47
|
)
|
|
|
|
|
Clean-up
calls
|
|
|
(242
|
)
|
|
|
|
|
|
|
(1,099
|
)
|
|
|
|
|
135
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 10.
|
Finance
Receivables and
Securitizations (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2005
|
|
|
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
Finance
|
|
|
Wholesale
|
|
|
Mortgage Loans
|
|
|
Mortgage
|
|
|
|
Receivables
|
|
|
Loans
|
|
|
Residential
|
|
|
Commercial
|
|
|
Securities
|
|
|
|
(Dollars in millions)
|
|
|
Pre-tax gains (losses) on
securitizations
|
|
$
|
(2
|
)
|
|
$
|
543
|
|
|
$
|
513
|
|
|
$
|
68
|
|
|
$
|
8
|
|
Cash inflow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from new securitizations
|
|
|
4,874
|
|
|
|
7,705
|
|
|
|
41,987
|
|
|
|
3,990
|
|
|
|
741
|
|
Servicing fees received
|
|
|
65
|
|
|
|
179
|
|
|
|
245
|
|
|
|
21
|
|
|
|
|
|
Other cash flows received on
retained interests
|
|
|
249
|
|
|
|
503
|
|
|
|
583
|
|
|
|
262
|
|
|
|
42
|
|
Proceeds from collections
reinvested in revolving securitizations
|
|
|
|
|
|
|
102,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of servicing advances
|
|
|
43
|
|
|
|
|
|
|
|
1,115
|
|
|
|
198
|
|
|
|
|
|
Cash outflow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Servicing advances
|
|
|
(46
|
)
|
|
|
|
|
|
|
(1,163
|
)
|
|
|
(188
|
)
|
|
|
|
|
Purchase obligations and options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans under conditional
call option
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
Representations and warranties
obligations
|
|
|
|
|
|
|
|
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
|
Administrator or servicer actions
|
|
|
(76
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset performance conditional calls
|
|
|
|
|
|
|
|
|
|
|
(99
|
)
|
|
|
|
|
|
|
|
|
Clean-up
calls
|
|
|
(715
|
)
|
|
|
|
|
|
|
(2,202
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2004
|
|
|
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
Finance
|
|
|
Wholesale
|
|
|
Mortgage Loans
|
|
|
Mortgage
|
|
|
|
Receivables
|
|
|
Loans
|
|
|
Residential
|
|
|
Commercial
|
|
|
Securities
|
|
|
|
(Dollars in millions)
|
|
|
Pre-tax gains on securitizations
|
|
$
|
9
|
|
|
$
|
497
|
|
|
$
|
602
|
|
|
$
|
54
|
|
|
$
|
11
|
|
Cash inflow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from new securitizations
|
|
|
1,824
|
|
|
|
9,188
|
|
|
|
29,412
|
|
|
|
2,108
|
|
|
|
935
|
|
Servicing fees received
|
|
|
105
|
|
|
|
174
|
|
|
|
208
|
|
|
|
20
|
|
|
|
|
|
Other cash flows received on
retained interests
|
|
|
340
|
|
|
|
808
|
|
|
|
729
|
|
|
|
216
|
|
|
|
68
|
|
Proceeds from collections
reinvested in revolving securitizations
|
|
|
|
|
|
|
91,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of servicing advances
|
|
|
75
|
|
|
|
|
|
|
|
947
|
|
|
|
147
|
|
|
|
|
|
Cash outflow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Servicing advances
|
|
|
(64
|
)
|
|
|
|
|
|
|
(1,035
|
)
|
|
|
(169
|
)
|
|
|
|
|
Purchase obligations and options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans under conditional
call option
|
|
|
|
|
|
|
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
Representations and warranties
obligations
|
|
|
(1
|
)
|
|
|
|
|
|
|
(66
|
)
|
|
|
|
|
|
|
|
|
Administrator or servicer actions
|
|
|
(75
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset performance conditional calls
|
|
|
|
|
|
|
|
|
|
|
(137
|
)
|
|
|
|
|
|
|
|
|
Clean-up
calls
|
|
|
(269
|
)
|
|
|
|
|
|
|
(3,797
|
)
|
|
|
|
|
|
|
|
|
136
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 10.
|
Finance
Receivables and
Securitizations (continued)
|
Key economic assumptions used in measuring the estimated fair
value of retained interests of sales completed during the eleven
months ended November 30, 2006 and the year ended
December 31, 2005, as of the dates of such sales, were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eleven Months
|
|
|
|
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2006
|
|
|
Year Ended December 31, 2005
|
|
|
|
Retail
|
|
|
Residential
|
|
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance
|
|
|
Mortgage
|
|
|
Finance
|
|
|
Mortgage Loans
|
|
|
Commercial
|
|
|
|
Receivables
|
|
|
Loans
|
|
|
Receivables
|
|
|
Residential
|
|
|
|
|
|
Mortgage
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(a)
|
|
|
(b)
|
|
|
Commercial
|
|
|
Securities
|
|
|
Key assumptions(c) (rates per
annum):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual prepayment rate(d)
|
|
|
0.9-1.7
|
%
|
|
|
0.0-90.0
|
%
|
|
|
0.9-1.2
|
%
|
|
|
0.0-60.0
|
%
|
|
|
0.0-50.0
|
%
|
|
|
0.0
|
%
|
Weighted average life (in years)
|
|
|
1.4-1.5
|
|
|
|
1.1-7.2
|
|
|
|
1.6-1.7
|
|
|
|
1.1-8.5
|
|
|
|
0.3-8.6
|
|
|
|
5.9-9.9
|
|
Expected credit losses
|
|
|
0.4-1.0
|
|
|
|
0.0-18.3
|
|
|
|
0.4-1.6
|
|
|
|
0.0-4.9
|
|
|
|
0.0
|
|
|
|
0.0
|
|
Discount rate
|
|
|
9.5-16.0
|
%
|
|
|
7.0-25.0
|
%
|
|
|
9.5-15.0
|
%
|
|
|
6.5-21.4
|
%
|
|
|
4.2-10.7
|
%
|
|
|
10.0-12.0
|
%
|
|
|
|
(a) |
|
The fair value of retained interests in wholesale
securitizations approximates cost because of the short-term and
floating rate nature of wholesale loans. |
|
(b) |
|
Included within residential mortgage loans are home equity loans
and lines, high
loan-to-value
loans, and residential first and second mortgage loans. |
|
(c) |
|
The assumptions used to measure the expected yield on variable
rate retained interests are based on a benchmark interest rate
yield curve plus a contractual spread, as appropriate. The
actual yield curve utilized varies depending on the specific
retained interests. |
|
(d) |
|
Based on the weighted average maturity for finance receivables
and constant prepayment rate for mortgage loans and commercial
mortgage securities. |
GM hedges interest rate and prepayment risks associated with
certain of the retained interests; the effects of such hedge
strategies have not been considered herein. Expected static pool
net credit losses include actual incurred losses plus projected
net credit losses divided by the original balance of the
outstandings comprising the securitization pool. The table below
displays the expected static pool net credit losses based on
GMs securitization transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans Securitized in Years
|
|
|
|
Ended December 31,(a)
|
|
|
|
2006(b)
|
|
|
2005
|
|
|
2004
|
|
|
Retail automotive
|
|
|
0.7
|
%
|
|
|
0.6
|
%
|
|
|
0.4
|
%
|
Residential mortgage
|
|
|
0.0-12.8
|
%
|
|
|
0.0-16.9
|
%
|
|
|
0.0-26.1
|
%
|
Commercial mortgage
|
|
|
|
|
|
|
0.0-3.4
|
%
|
|
|
0.0-4.2
|
%
|
Commercial investment securities
|
|
|
|
|
|
|
0.0-6.7
|
%
|
|
|
0.0-39.5
|
%
|
|
|
|
(a) |
|
Static pool losses not applicable to wholesale finance
receivable securitizations because of their short-term nature. |
|
(b) |
|
Represents eleven months ended November 30, 2006. |
137
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 10.
|
Finance
Receivables and
Securitizations (concluded)
|
The following table presents components of securitized financial
assets and other assets managed, along with quantitative
information about delinquencies and net credit losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
|
|
|
|
Total Finance
|
|
|
60 Days
|
|
|
Net
|
|
|
|
Receivables
|
|
|
or More
|
|
|
Credit
|
|
|
|
and Loans
|
|
|
Past Due
|
|
|
Losses
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2005
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
Retail automotive
|
|
$
|
77,222
|
|
|
$
|
892
|
|
|
$
|
867
|
|
Residential mortgage
|
|
|
167,584
|
|
|
|
8,682
|
|
|
|
885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer
|
|
|
244,806
|
|
|
|
9,574
|
|
|
|
1,752
|
|
Wholesale
|
|
|
41,994
|
|
|
|
73
|
|
|
|
4
|
|
Commercial mortgage
|
|
|
43
|
|
|
|
|
|
|
|
4
|
|
Other automotive and commercial
|
|
|
23,996
|
|
|
|
575
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial(a)
|
|
|
66,033
|
|
|
|
648
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total managed portfolio(b)
|
|
|
310,839
|
|
|
$
|
10,222
|
|
|
$
|
1,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitized finance receivables
and loans
|
|
|
(103,947
|
)
|
|
|
|
|
|
|
|
|
Loans held for sale (unpaid
principal)
|
|
|
(21,882
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total finance receivables and loans
|
|
$
|
185,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
At December 31, 2005, excludes $26.3 billion of
managed assets of GMACs Commercial Mortgage business. |
|
(b) |
|
Managed portfolio represent finance receivables and loans on the
balance sheet or that have been securitized, excluding
securitized finance receivables and loans that GMAC continues to
service but has no other continuing involvement (i.e., in which
GMAC retains an interest or risk of loss in the underlying
receivables). |
Inventories included the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
Productive material, work in
process, and supplies
|
|
$
|
5,810
|
|
|
$
|
5,512
|
|
Finished product, service parts,
etc.
|
|
|
9,619
|
|
|
|
9,875
|
|
|
|
|
|
|
|
|
|
|
Total inventories at FIFO
|
|
|
15,429
|
|
|
|
15,387
|
|
Less LIFO allowance
|
|
|
(1,508
|
)
|
|
|
(1,525
|
)
|
|
|
|
|
|
|
|
|
|
Total inventories, less allowances
|
|
|
13,921
|
|
|
|
13,862
|
|
FIO Off-lease vehicles
|
|
|
185
|
|
|
|
503
|
|
|
|
|
|
|
|
|
|
|
Total consolidated inventories,
less allowances
|
|
$
|
14,106
|
|
|
$
|
14,365
|
|
|
|
|
|
|
|
|
|
|
Inventories are stated at cost, which is not in excess of
market. The cost of approximately 52% of U.S. inventories
is determined by the
last-in,
first-out (LIFO) method. The cost of all other inventories is
determined by either the
first-in,
first-out (FIFO) or average cost methods.
138
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 11.
|
Inventories
(concluded)
|
During 2006 and 2005, U.S. LIFO eligible inventory
quantities were reduced. This reduction resulted in a
liquidation of LIFO inventory quantities carried at lower costs
prevailing in prior years as compared with the cost of 2006 and
2005 purchases, the effect of which decreased cost of goods sold
by approximately $50 million in 2006 and $100 million
in 2005.
|
|
Note 12.
|
Equipment
on Operating Leases
|
Equipment on operating leases and accumulated depreciation were
as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
Equipment on operating leases
|
|
$
|
6,629
|
|
|
$
|
7,629
|
|
Less accumulated depreciation
|
|
|
(504
|
)
|
|
|
(636
|
)
|
|
|
|
|
|
|
|
|
|
Net book value
|
|
$
|
6,125
|
|
|
$
|
6,993
|
|
|
|
|
|
|
|
|
|
|
Financing and Insurance
Operations
|
|
|
|
|
|
|
|
|
Equipment on operating leases
|
|
$
|
14,909
|
|
|
$
|
39,675
|
|
Less accumulated depreciation
|
|
|
(3,115
|
)
|
|
|
(8,481
|
)
|
|
|
|
|
|
|
|
|
|
Net book value
|
|
|
11,794
|
|
|
|
31,194
|
|
|
|
|
|
|
|
|
|
|
Total consolidated net book value
|
|
$
|
17,919
|
|
|
$
|
38,187
|
|
|
|
|
|
|
|
|
|
|
The lease payments to be received related to equipment on
operating leases maturing in each of the five years following
December 31, 2006, are as follows: Auto none,
as the payment is received at lease inception and the income is
deferred over the lease period; FIO
2007-$2.2 billion; 2008-$1.4 billion;
2009-$534 million; 2010-$56 million. There are no
leases maturing after 2010.
Income (loss) before income taxes, equity income (loss) and
minority interests and cumulative effect of a change in
accounting principle included the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in millions)
|
|
|
U.S. income (loss)
|
|
$
|
(5,203
|
)
|
|
$
|
(16,028
|
)
|
|
$
|
(123
|
)
|
Foreign income (loss)
|
|
|
256
|
|
|
|
(712
|
)
|
|
|
978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(4,947
|
)
|
|
$
|
(16,740
|
)
|
|
$
|
855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
139
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 13.
|
Income
Taxes (continued)
|
The provision for income taxes was estimated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in millions)
|
|
|
Income taxes estimated to be
payable currently
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
$
|
|
|
|
$
|
(147
|
)
|
|
$
|
(282
|
)
|
Foreign
|
|
|
1,096
|
|
|
|
842
|
|
|
|
1,018
|
|
U.S. state and local
|
|
|
21
|
|
|
|
(2
|
)
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total payable currently
|
|
|
1,117
|
|
|
|
693
|
|
|
|
772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax expense
(credit) net
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
|
(2,498
|
)
|
|
|
(6,883
|
)
|
|
|
(644
|
)
|
Foreign
|
|
|
(1,201
|
)
|
|
|
(655
|
)
|
|
|
(1,232
|
)
|
U.S. state and local
|
|
|
(203
|
)
|
|
|
975
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
(3,902
|
)
|
|
|
(6,563
|
)
|
|
|
(1,898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income taxes
|
|
$
|
(2,785
|
)
|
|
$
|
(5,870
|
)
|
|
$
|
(1,126
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual tax provisions include amounts considered sufficient to
pay assessments that may result from examination of prior year
tax returns. Cash paid for income taxes in 2006, 2005, and 2004
was $259 million, $305 million, and $293 million,
respectively.
Provisions are made for estimated U.S. and foreign income taxes,
less available tax credits and deductions, which may be incurred
on the remittance of the Corporations share of
subsidiaries undistributed earnings not deemed to be
permanently reinvested. Taxes have not been provided on foreign
subsidiaries earnings, which are deemed permanently
reinvested, of $8.5 billion at December 31, 2006 and
$12.6 billion at December 31, 2005. Quantification of
the deferred tax liability, if any, associated with permanently
reinvested earnings is not practicable.
140
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 13.
|
Income
Taxes (continued)
|
A reconciliation of the provision for income taxes compared with
the amounts at the U.S. federal statutory rate was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in millions)
|
|
|
Tax at U.S. federal statutory
income tax rate
|
|
$
|
(1,731
|
)
|
|
$
|
(5,859
|
)
|
|
$
|
299
|
|
State and local tax expense
|
|
|
(119
|
)
|
|
|
(600
|
)
|
|
|
(952
|
)
|
Foreign income taxed at rates
other than 35%
|
|
|
(525
|
)
|
|
|
(776
|
)
|
|
|
(631
|
)
|
Taxes on unremitted earnings of
subsidiaries
|
|
|
(124
|
)
|
|
|
(100
|
)
|
|
|
(262
|
)
|
Other tax credits
|
|
|
(115
|
)
|
|
|
(69
|
)
|
|
|
(41
|
)
|
Settlement of prior year tax
matters
|
|
|
(160
|
)
|
|
|
(515
|
)
|
|
|
(191
|
)
|
Change in valuation allowance
|
|
|
239
|
|
|
|
2,780
|
|
|
|
1,553
|
|
ESOP dividend deduction(1)
|
|
|
(23
|
)
|
|
|
(52
|
)
|
|
|
(53
|
)
|
Tax effects of foreign
reorganizations
|
|
|
96
|
|
|
|
(84
|
)
|
|
|
(483
|
)
|
Medicare prescription drug benefit
|
|
|
(352
|
)
|
|
|
(325
|
)
|
|
|
(211
|
)
|
Loss carryforward related to
investment write-down
|
|
|
|
|
|
|
|
|
|
|
(168
|
)
|
Other adjustments
|
|
|
29
|
|
|
|
(270
|
)
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax (benefit) expense
|
|
$
|
(2,785
|
)
|
|
$
|
(5,870
|
)
|
|
$
|
(1,126
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Deduction for dividends paid on GM
$12/3
par value common stock held under the employee stock ownership
portion of the GM Savings Plans, pursuant to the Economic Growth
and Tax Relief Reconciliation Act of 2001. |
Deferred income tax assets and liabilities for 2006 and 2005
reflect the effect of temporary differences between amounts of
assets, liabilities, and equity for financial reporting purposes
and the bases of such assets, liabilities, and equity as
measured by tax laws, as well as tax loss and tax credit
carryforwards.
141
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 13.
|
Income
Taxes (continued)
|
Temporary differences and carryforwards that gave rise to
deferred tax assets and liabilities included the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
Deferred Tax
|
|
|
Deferred Tax
|
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Assets
|
|
|
Liabilities
|
|
|
|
(Dollars in millions)
|
|
|
Postretirement benefits other than
pensions
|
|
$
|
18,609
|
|
|
$
|
|
|
|
$
|
12,757
|
|
|
$
|
|
|
Pension and other employee benefit
plans
|
|
|
5,044
|
|
|
|
6,137
|
|
|
|
3,807
|
|
|
|
12,985
|
|
Warranties, dealer and customer
allowances, claims, and discounts
|
|
|
4,070
|
|
|
|
47
|
|
|
|
6,739
|
|
|
|
52
|
|
Depreciation and amortization
|
|
|
6,098
|
|
|
|
2,008
|
|
|
|
5,713
|
|
|
|
2,584
|
|
Tax carryforwards
|
|
|
13,293
|
|
|
|
|
|
|
|
12,139
|
|
|
|
|
|
Lease transactions
|
|
|
|
|
|
|
199
|
|
|
|
|
|
|
|
4,351
|
|
Miscellaneous foreign
|
|
|
2,992
|
|
|
|
40
|
|
|
|
4,580
|
|
|
|
371
|
|
Other
|
|
|
8,240
|
|
|
|
2,194
|
|
|
|
10,922
|
|
|
|
3,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
58,346
|
|
|
|
10,625
|
|
|
|
56,657
|
|
|
|
24,020
|
|
Valuation allowances
|
|
|
(6,523
|
)
|
|
|
|
|
|
|
(6,284
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred taxes
|
|
$
|
51,823
|
|
|
$
|
10,625
|
|
|
$
|
50,373
|
|
|
$
|
24,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
41,198
|
|
|
|
|
|
|
$
|
26,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following deferred tax balances are included in the
consolidated balance sheet:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
Current deferred tax assets
|
|
$
|
10,293
|
|
|
$
|
7,073
|
|
Current deferred tax liabilities
|
|
|
(9
|
)
|
|
|
(1,208
|
)
|
Non-current deferred tax assets
|
|
|
31,639
|
|
|
|
21,206
|
|
Non-current deferred tax
liabilities
|
|
|
(725
|
)
|
|
|
(718
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
41,198
|
|
|
$
|
26,353
|
|
|
|
|
|
|
|
|
|
|
Of the tax carryforwards at December 31, 2006,
approximately 5% relates to the alternative minimum tax credit
(which can be carried forward indefinitely), approximately 32%
relates to U.S. federal net operating loss carryforwards
and approximately 11% relates to the U.S. state net
operating loss carryforwards, which will expire in
2007-2026 if
not used. Approximately 84% of the U.S. state net operating
loss carryforwards will not expire until after 2009.
Approximately 29% of the tax carryforwards relate to general
business credits (which consist primarily of research and
experimentation credits) and U.S. foreign tax credits which
will expire between 2007 and 2026 if not used. The remaining tax
carryforwards relate to accumulated foreign operating losses of
which approximately 77% can be carried forward indefinitely and
the remaining 23% will expire by 2021.
142
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 13.
|
Income
Taxes (continued)
|
GM has the following net deferred tax assets applicable to the
following taxing jurisdictions where the Corporations
operations have a recent history of cumulative losses for
financial reporting purposes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statutory
|
|
|
|
|
|
|
|
|
|
Operating Loss
|
|
Jurisdiction
|
|
2006
|
|
|
2005
|
|
|
Carryforward Period
|
|
|
United States
|
|
$
|
34,824
|
|
|
$
|
23,010
|
|
|
|
20 years/Unlimited
|
|
Canada
|
|
|
3,068
|
|
|
|
2,675
|
|
|
|
20 years/Unlimited
|
|
Germany
|
|
|
2,496
|
|
|
|
2,034
|
|
|
|
Unlimited
|
|
United Kingdom
|
|
|
215
|
|
|
|
299
|
|
|
|
Unlimited
|
|
Spain
|
|
|
220
|
|
|
|
230
|
|
|
|
15 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
40,823
|
|
|
$
|
28,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The need to establish valuation allowances for these net
deferred tax assets is assessed periodically based on a
more-likely-than-not realization threshold, in accordance with
SFAS No. 109. Appropriate consideration is given to all
positive and negative evidence related to that realization. This
assessment considers, among other matters, the nature, frequency
and severity of recent losses, forecasts of future
profitability, the duration of statutory carryforward periods,
GMs experience with tax attributes expiring unused, and
tax planning alternatives. The weight given to these
considerations depends upon the degree to which they can be
objectively verified.
The valuation allowances that GM has recognized relate to
certain U.S. state and foreign jurisdiction net deferred
tax assets. The change in the valuation allowance and related
considerations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Beginning Balance
|
|
$
|
6,284
|
|
|
$
|
3,504
|
|
|
$
|
1,951
|
|
Additions/(Utilization):
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. State & Local
|
|
|
250
|
|
|
|
1,425
|
|
|
|
977
|
|
Poland
|
|
|
6
|
|
|
|
538
|
|
|
|
|
|
Sweden
|
|
|
73
|
|
|
|
109
|
|
|
|
155
|
|
Brazil
|
|
|
(48
|
)
|
|
|
617
|
|
|
|
|
|
Korea
|
|
|
(211
|
)
|
|
|
16
|
|
|
|
66
|
|
Other
|
|
|
169
|
|
|
|
75
|
|
|
|
355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
6,523
|
|
|
$
|
6,284
|
|
|
$
|
3,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States & Canada No valuation
allowance has been established for GMs U.S. federal
and Canadian net deferred tax assets, which GM believes will
more likely than not be realized. This expectation is based in
part on the fact that, while GM has incurred cumulative losses
over the last three years in the United States and Canada, those
losses were largely driven by GMs restructuring of GMNA
and by foreign exchange. Accordingly, those losses are unusual
in nature and the former were incurred in order to improve
future profitability. In addition, consideration has been given
to the lengthy period over which these net deferred tax assets
can be realized, and GMs history of never having lost a
significant U.S. federal or Canadian tax attribute through
expiration. GM has also given consideration to its forecast of
future profitability, which includes the following key elements:
|
|
|
|
|
The launch of new sport utility vehicles and fullsize pickup
trucks beginning in 2006, which are expected to produce
substantially higher revenues and profits than the predecessor
models in these segments in 2006;
|
|
|
|
Reductions of GMNAs cost structure as a result of the
implementation of its restructuring plan; and
|
143
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 13.
|
Income
Taxes (concluded)
|
|
|
|
|
|
Participation in anticipated GMAC earnings in the United States
|
The anticipated outcome of these events is expected to improve
North America operating results. At the forecast levels of
future profitability, the U.S. federal and Canadian
net deferred tax assets are considered more likely than not to
be realizable over the periods that the underlying transactions
become deductible for U.S. federal and Canadian tax
purposes. If future events
and/or the
outcome of GMs cost reduction actions were to be
significantly different than GM currently forecasts, a
substantial valuation allowance for the U.S. and Canadian net
deferred tax assets might be required.
An additional valuation allowance was recorded in 2006 related
to the 2006 loss allocable to certain U.S. state
jurisdictions where it has been previously determined that tax
attributes related to those jurisdictions were not realizable.
Brazil In 2005, it was determined that it is
more-likely-than-not that the deferred taxes in GMs
Brazilian operations would not be realized. Therefore, GM
recorded a full valuation allowance against all tax credit
carryforwards and net timing differences in Brazil. The decision
was based on a consideration of historical results at GMs
operations in Brazil coupled with the government-imposed 30%
annual limitation on net operating loss utilization.
Germany and United Kingdom No valuation
allowances have been established for GMs net deferred tax
assets in Germany or the United Kingdom. Although GMs
German and UK operations have incurred cumulative losses in
recent years, GM believes other considerations overcome that
fact and, accordingly, their deferred tax assets will
more-likely-than-not be realized. This determination is based in
particular on the unlimited expiration of net operating loss
carryforwards in Germany and the United Kingdom, together with
those operations histories of utilizing tax attributions
in the past through earnings, and their strong prospects for
future earnings.
Spain No valuation allowance has been
established for GMs Spanish net deferred tax assets, which
GM believes will more-likely-than-not be realized. Spanish net
operating loss carryforwards expire after 15 years, but
losses in the Spanish operations have largely been caused by
non-recurring transactions. In addition, GM believes its Spanish
operations continue to have strong prospects for future earnings.
South Korea A full valuation allowance has
historically been recorded on the net deferred tax assets in
South Korea. Several positive events occurred during 2006
leading GM to conclude that a valuation allowance is no longer
necessary. The Corporation now expects continuing profitability
in South Korea and that the net deferred tax asset is more
likely than not to be realized.
GM has open tax years from primarily 1999 to 2006 with various
significant taxing jurisdictions including the United States,
Canada, Mexico, Germany, and Brazil. These open years contain
matters that could be subject to differing interpretations of
applicable tax laws and regulations as they relate to the
amount, timing or inclusion of revenue and expenses or the
sustainability of income tax credits for a given audit cycle. GM
has established a liability of $2.8 billion for those
matters where the amount of loss is probable and reasonably
estimable. The amount of the liability is based on
managements best estimate given the Corporations
history with similar matters and interpretations of current laws
and regulations.
144
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
Property net was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
Useful Lives
|
|
|
December 31,
|
|
|
|
(Years)
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
(Dollars in millions)
|
|
|
Land
|
|
|
|
|
|
$
|
1,235
|
|
|
$
|
1,222
|
|
Buildings and land improvements
|
|
|
2-40
|
|
|
|
18,535
|
|
|
|
16,278
|
|
Machinery and equipment
|
|
|
3-30
|
|
|
|
51,017
|
|
|
|
48,344
|
|
Construction in progress
|
|
|
|
|
|
|
3,396
|
|
|
|
4,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, plants, and equipment
|
|
|
|
|
|
|
74,183
|
|
|
|
69,943
|
|
Less accumulated depreciation
|
|
|
|
|
|
|
(43,440
|
)
|
|
|
(41,627
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, plants, and
equipment net
|
|
|
|
|
|
|
30,743
|
|
|
|
28,316
|
|
Special tools net
|
|
|
1-10
|
|
|
|
11,191
|
|
|
|
10,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property net
|
|
|
|
|
|
|
41,934
|
|
|
|
38,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing and Insurance
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment and other
|
|
|
2-10
|
|
|
|
19
|
|
|
|
2,902
|
|
Less accumulated depreciation
|
|
|
|
|
|
|
(10
|
)
|
|
|
(1,154
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property net
|
|
|
|
|
|
|
9
|
|
|
|
1,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated
property net
|
|
|
|
|
|
$
|
41,943
|
|
|
$
|
40,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, impairment and amortization expense was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in millions)
|
|
|
Depreciation and impairments
|
|
$
|
4,622
|
|
|
$
|
5,517
|
|
|
$
|
5,078
|
|
Amortization and impairment of
special tools
|
|
|
3,468
|
|
|
|
4,516
|
|
|
|
3,562
|
|
Amortization of intangible assets
|
|
|
69
|
|
|
|
68
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
8,159
|
|
|
|
10,101
|
|
|
|
8,679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing and Insurance
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation(a)
|
|
|
2,776
|
|
|
|
5,680
|
|
|
|
5,512
|
|
Amortization of intangible assets
|
|
|
15
|
|
|
|
16
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,791
|
|
|
|
5,696
|
|
|
|
5,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated depreciation,
impairments and amortization
|
|
$
|
10,950
|
|
|
$
|
15,797
|
|
|
$
|
14,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Depreciation of property held by GMAC was ceased in April 2006
at the time the assets were classified as held for sale.
|
In December 2006, GM sold its proving grounds facility in Mesa,
Arizona for $283 million in cash and subsequently leased it
back for a three year period. GM recognized a gain of
$270 million.
145
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 15.
|
Goodwill
and Intangible Assets
|
The components of intangible assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Carrying
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
|
(Dollars in millions)
|
|
|
December 31,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizing intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents and intellectual property
rights
|
|
$
|
488
|
|
|
$
|
169
|
|
|
$
|
319
|
|
Non-amortizing
intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total goodwill and intangible
assets
|
|
|
|
|
|
|
|
|
|
$
|
1,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizing intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents and intellectual property
rights
|
|
$
|
488
|
|
|
$
|
119
|
|
|
$
|
369
|
|
Non-amortizing
intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
757
|
|
Prepaid pension asset
|
|
|
|
|
|
|
|
|
|
|
743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total goodwill and intangible
assets
|
|
|
|
|
|
|
|
|
|
$
|
1,869
|
|
Financing and Insurance
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizing intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer lists and contracts
|
|
$
|
57
|
|
|
$
|
41
|
|
|
$
|
16
|
|
Trademarks and other
|
|
|
35
|
|
|
|
20
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
92
|
|
|
$
|
61
|
|
|
$
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-amortizing
intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
2,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total goodwill and intangible
assets (Note 16)
|
|
|
|
|
|
|
|
|
|
|
2,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated goodwill and
intangible assets
|
|
|
|
|
|
|
|
|
|
$
|
4,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate amortization expense on existing acquired intangible
assets was $84 million for the year ended December 31,
2006. Estimated amortization expense in each of the next five
years is as follows: 2007 $57 million;
2008 $50 million; 2009
$46 million; 2010 $23 million; and
2011 $21 million.
146
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 15.
|
Goodwill
and Intangible Assets (concluded)
|
The changes in the carrying amounts of goodwill for the years
ended December 31, 2006 and 2005 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
GMNA
|
|
|
GME
|
|
|
Auto
|
|
|
GMAC
|
|
|
Total
|
|
|
|
(Dollars in millions)
|
|
|
Balance as of December 31,
2004
|
|
$
|
154
|
|
|
$
|
446
|
|
|
$
|
600
|
|
|
$
|
3,274
|
|
|
$
|
3,874
|
|
Goodwill acquired during the period
|
|
|
238
|
|
|
|
|
|
|
|
238
|
|
|
|
22
|
|
|
|
260
|
|
Impairment(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(712
|
)
|
|
|
(712
|
)
|
Reclassification of Commercial
Mortgage goodwill to assets held for sale(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(59
|
)
|
|
|
(59
|
)
|
Effect of foreign currency
translation and other
|
|
|
(9
|
)
|
|
|
(72
|
)
|
|
|
(81
|
)
|
|
|
(79
|
)
|
|
|
(160
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31,
2005
|
|
|
383
|
|
|
|
374
|
|
|
|
757
|
|
|
|
2,446
|
|
|
|
3,203
|
|
Goodwill acquired during the
period(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
151
|
|
|
|
151
|
|
Impairment(4)
|
|
|
(25
|
)
|
|
|
|
|
|
|
(25
|
)
|
|
|
(828
|
)
|
|
|
(853
|
)
|
Transfer of business unit
|
|
|
(59
|
)
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GMAC divestiture(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,827
|
)
|
|
|
(1,827
|
)
|
Effect of foreign currency
translation and other
|
|
|
|
|
|
|
67
|
|
|
|
67
|
|
|
|
58
|
|
|
|
125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31,
2006
|
|
$
|
299
|
|
|
$
|
500
|
|
|
$
|
799
|
|
|
$
|
|
|
|
$
|
799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In 2005, GMAC recorded an impairment charge of
$712 million, related to the goodwill in its commercial
mortgage business. |
|
(2) |
|
At December 31, 2005, $59 million of GMACs
Commercial Mortgage goodwill was reclassified to assets held for
sale. |
|
(3) |
|
During 2006, GMAC recorded goodwill of $151 million
primarily as a result of the purchase of a regional insurance
company. |
|
(4) |
|
With the changes in key personnel in the Commercial Finance
business, GMAC initiated a goodwill impairment test, in
accordance with SFAS No. 142, Goodwill and Other
Intangible Assets (SFAS No. 142), outside of the
annual goodwill impairment testing period. A thorough review of
the business by the new leadership, with a particular focus on
long-term strategy, was performed. As a result of the review,
the operating divisions were reorganized, and the decision was
made to implement a different exit strategy for the workout
portfolio and to exit product lines with lower returns. These
decisions had a significant impact on expected asset levels and
growth rate assumptions used to estimate the fair value of the
business. In particular, the analysis performed during the third
quarter of 2006 incorporates managements decision to
discontinue activity in the equipment finance business, which
had a portfolio of over $1 billion, representing
approximately 20% of Commercial Finance business average assets
outstanding during 2006. The fair value of the Commercial
Finance business was determined using an internally developed
discounted cash flow analysis based on five year projected net
income and a market driven terminal value multiple. Based upon
the results of the assessment, an impairment charge of
$828 million was recorded in 2006. |
|
(5) |
|
On November 30, 2006, GM completed the sale of a 51%
controlling interest in GMAC (See Note 4). |
147
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
Other assets included the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
Derivative assets
|
|
$
|
2,080
|
|
|
$
|
1,938
|
|
Other
|
|
|
2,504
|
|
|
|
2,926
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
$
|
4,584
|
|
|
|
4,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing and Insurance
Operations
|
|
|
|
|
|
|
|
|
Mortgage servicing rights
|
|
$
|
|
|
|
$
|
4,015
|
|
Premiums and other insurance
receivables
|
|
|
|
|
|
|
1,873
|
|
Deferred policy acquisition costs
|
|
|
|
|
|
|
1,696
|
|
Derivative assets
|
|
|
|
|
|
|
3,000
|
|
Intangible assets
|
|
|
|
|
|
|
2,477
|
|
Investment in GMAC Preferred
Membership Interests (Note 7)
|
|
|
1,601
|
|
|
|
|
|
Property
|
|
|
9
|
|
|
|
1,748
|
|
Cash deposits held for
securitization trusts
|
|
|
709
|
|
|
|
2,907
|
|
Restricted cash collections for
securitization trusts
|
|
|
434
|
|
|
|
1,871
|
|
Other
|
|
|
(484
|
)
|
|
|
5,570
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
$
|
2,269
|
|
|
$
|
25,157
|
|
|
|
|
|
|
|
|
|
|
Total consolidated other assets
|
|
$
|
6,853
|
|
|
$
|
30,021
|
|
|
|
|
|
|
|
|
|
|
148
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 17.
|
Accrued
Expenses, Other Liabilities, and Deferred Income Taxes
|
Accrued expenses, other liabilities, and deferred income taxes
included the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
Dealer and customer allowances,
claims and discounts
|
|
$
|
10,142
|
|
|
$
|
11,593
|
|
Deferred revenue and deposits from
rental car companies
|
|
|
12,127
|
|
|
|
13,527
|
|
Policy, product warranty, and
recall campaigns
|
|
|
9,064
|
|
|
|
9,135
|
|
Delphi contingent liability
|
|
|
1,451
|
|
|
|
5,500
|
|
Payrolls and employee benefits
excluding postemployment benefits
|
|
|
4,013
|
|
|
|
3,970
|
|
Self-insurance reserves
|
|
|
1,922
|
|
|
|
1,827
|
|
Taxes
|
|
|
1,761
|
|
|
|
2,430
|
|
Postemployment
benefits plant idling
|
|
|
1,269
|
|
|
|
2,012
|
|
Postretirement benefits other than
pensions
|
|
|
275
|
|
|
|
4,154
|
|
Other
|
|
|
9,158
|
|
|
|
8,979
|
|
|
|
|
|
|
|
|
|
|
Total accrued expenses, other
liabilities, and deferred income taxes
|
|
$
|
51,182
|
|
|
$
|
63,127
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
35,225
|
|
|
$
|
42,697
|
|
Non-current
|
|
|
15,957
|
|
|
|
20,430
|
|
|
|
|
|
|
|
|
|
|
Total accrued expenses, other
liabilities, and deferred income taxes
|
|
$
|
51,182
|
|
|
$
|
63,127
|
|
|
|
|
|
|
|
|
|
|
Financing and Insurance
Operations
|
|
|
|
|
|
|
|
|
Unpaid insurance losses, loss
adjustment expenses, and unearned insurance premiums
|
|
$
|
125
|
|
|
$
|
7,588
|
|
Interest
|
|
|
46
|
|
|
|
3,057
|
|
Deposits
|
|
|
|
|
|
|
8,367
|
|
Interest rate derivatives
|
|
|
2
|
|
|
|
2,224
|
|
Deferred income taxes
|
|
|
|
|
|
|
1,184
|
|
Other
|
|
|
752
|
|
|
|
3,905
|
|
|
|
|
|
|
|
|
|
|
Total other liabilities and
deferred income taxes
|
|
$
|
925
|
|
|
$
|
26,325
|
|
|
|
|
|
|
|
|
|
|
Policy, product warranty, recall campaigns and certified used
vehicles liability included the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
Beginning balance
|
|
$
|
9,135
|
|
|
$
|
9,315
|
|
Payments
|
|
|
(4,463
|
)
|
|
|
(4,696
|
)
|
Increase in liability (warranties
issued during period)
|
|
|
4,517
|
|
|
|
5,159
|
|
Adjustments to liability
(pre-existing warranties)
|
|
|
(570
|
)
|
|
|
(371
|
)
|
Effect of foreign currency
translation
|
|
|
445
|
|
|
|
(272
|
)
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
9,064
|
|
|
$
|
9,135
|
|
|
|
|
|
|
|
|
|
|
Management reviews and adjusts these estimates on a regular
basis based on the differences between actual experience and
historical estimates or other available information.
149
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 18.
|
Short-Term
Borrowings and Long-Term Debt
|
Short-Term
Borrowings
GM had short-term borrowings of $3.3 billion and
$0.9 billion at December 31, 2006 and 2005,
respectively. As of December 31, 2006, short-term
borrowings included related party debt of $2.8 billion,
mainly dealer financing from GMAC. Amounts available under
short-term line of credit agreements were $4.5 billion and
$2.4 billion at December 31, 2006 and 2005,
respectively. The interest rate on short-term borrowings
outstanding was 2.5% to 11.2% at December 31, 2006 and 1.1%
to 9.2% at December 31, 2005.
Long-term
debt
Long-term debt consisted of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Unsecured bonds
|
|
$
|
16,119
|
|
|
$
|
16,406
|
|
Convertible bonds
|
|
|
8,050
|
|
|
|
8,050
|
|
Foreign-currency-denominated bonds
|
|
|
4,479
|
|
|
|
3,996
|
|
Other long-term debt
|
|
|
6,824
|
|
|
|
4,783
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
35,472
|
|
|
|
33,235
|
|
Less current portion of long-term
debt
|
|
|
(2,341
|
)
|
|
|
(672
|
)
|
Fair value adjustment(a)
|
|
|
(64
|
)
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
33,067
|
|
|
$
|
32,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
To adjust hedged fixed rate debt for fair value changes
attributable to the hedged risk in accordance with
SFAS No. 133. |
Unsecured bonds represent obligations having various annual
coupons ranging from 6.375% to 9.45% and maturities ranging from
2008 to 2052.
Convertible bonds include $1.2 billion principal amount of
4.5% Series A convertible senior debentures due in 2032
(Series A), $2.6 billion principal amount of 5.25%
Series B convertible senior debentures due in 2032
(Series B), and $4.3 billion principal amount of 6.25%
and Series C convertible senior debentures due in 2033
(Series C). GM has unilaterally and irrevocably waived and
relinquished its right to use stock, and has committed to use
cash, to settle the principal amount of the debentures if
(1) holders choose to convert the debentures or (2) GM
is required by holders to repurchase the debentures. GM retains
the right to use either cash or stock to settle any amount that
may become due to debt holders in excess of the principal
amount. Conversion prices for the bonds are as follows: $70.20
for the Series A securities, $64.90 for the Series B
securities, and $47.62 for the Series C securities. In
2007, Series A convertible debentures were put to GM and
settled entirely in cash on March 6, 2007 for
$1.1 billion. These convertible debentures are included in
current portion of long-term debt at December 31, 2006.
The notes are convertible by the holder as outlined below:
|
|
|
|
|
If the closing sale price of GMs
$12/3 par
value common stock exceeds 120% of the conversion price for at
least 20 trading days in the 30 consecutive trading days ending
on the last trading day of the preceding fiscal quarter; or
|
|
|
|
If during the five business day period after any nine
consecutive trading day period in which the trading price of the
debentures for each day of such period was less than 95% of the
product of the closing sale price of
|
150
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 18.
|
Short-Term
Borrowings and Long-Term Debt (continued)
|
|
|
|
|
|
GMs
$12/3 par
value common stock multiplied by the number of shares issuable
upon conversion of $25.00 principal amount of the
debentures; or
|
|
|
|
|
|
If the debentures have been called for redemption (Series A
on or after March 6, 2007, Series B on or after
March 6, 2009 and Series C on or after July 20,
2010); or
|
Upon the occurrence of specified corporate events
GMs requirement to repurchase all or a portion of the
notes is described below:
|
|
|
|
|
If the investor exercises its right to require GM to repurchase
all or a portion of the debentures on the specified repurchase
dates for each security (Series A: March 6, 2007,
2012, 2017, 2022, or 2027; Series B: March 6, 2014, 2019,
2024, or 2029; Series C: July 15, 2018, 2023 or
2028) or, if any of those days is not a business day, the
next succeeding business day.
|
Foreign currency denominated bonds include Euro-denominated
bonds with annual coupons ranging from 7.25% to 8.375% and
maturity dates ranging from 2013 to 2033. Also, included within
foreign-currency-denominated bonds are British Pounds bonds with
annual coupons ranging from 8.375% to 8.875% and maturity dates
ranging from 2015 to 2023. To mitigate the foreign exchange
exposure created by this debt, GM enters into cross currency
swaps. The notional values of these swaps was $2.4 billion in
both 2006 and in 2005.
Other long-term debt of $6.8 billion and $4.8 billion
at December 31, 2006 and 2005, respectively, consisted of
municipal bonds, capital leases, and other long-term
obligations. .
GM also has a $4.6 billion standby revolving credit
facility with a syndicate of banks, of which $150 million
terminates in June 2008 and $4.5 billion terminates July
2011. There are approximately $69 million of letters of
credit issued under the credit facility, but no loans are
currently outstanding. Under the $4.5 billion secured
facility, borrowings are limited to an amount based on the value
of the underlying collateral, which consists of certain North
American accounts receivable and inventory of GM, Saturn
Corporation, and GM Canada, certain plants, property and
equipment of GM Canada, and a pledge of 65% of the stock of the
holding company for GMs indirect subsidiary GM de Mexico.
In addition to the $4.5 billion secured line of credit, the
collateral also secures certain lines of credit, automatic
clearinghouse and overdraft arrangements, and letters of credit
provided by the same secured lenders, totaling approximately
$1.5 billion. In the event of certain work stoppages, the
secured facility would be temporarily reduced to
$3.5 billion.
GMs available long-term borrowings under line of credit
arrangements with various banks totaled $4.7 billion and
$5.6 billion at December 31, 2006 and 2005,
respectively. The unused portion of the credit lines totaled
$4.6 billion at December 31, 2006. In addition,
GMs consolidated affiliates with non-GM minority
shareholders, primarily GM Daewoo, have lines of credit with
various banks that totaled $2.7 billion at
December 31, 2006, all of which represented long-term
facilities, compared with $2.5 billion at December 31,
2005. The unused portion of the credit lines totaled
$1.6 billion at December 31, 2006.
To achieve its desired balance between fixed and variable debt,
GM has entered into interest rate swaps. The notional amount of
pay variable swap agreements as of December 31, 2006 and
2005 for Automotive was approximately $5.3 billion and
$5.5 billion, respectively.
At December 31, 2006 and 2005, long-term unsecured bonds,
convertible bonds, secured debt and capital lease obligations
included $25.5 billion and $26.1 billion,
respectively, of obligations with fixed interest rates and
$7.6 billion and $6.5 billion, respectively, of
obligations with variable interest rates (predominantly LIBOR),
after interest rate swap agreements.
GM has other financing arrangements consisting principally of
obligations in connection with sale/leaseback transactions and
other lease obligations (including off-balance sheet
arrangements). In view of the recent
151
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 18.
|
Short-Term
Borrowings and Long-Term Debt (concluded)
|
restatement of its prior financial statements, GM has evaluated
the effect of its restatement under these agreements, including
its legal rights (such as its ability to cure) with respect to
any claims that could be asserted. Based on its review, GM
believes that amounts subject to possible claims of
acceleration, termination or other remedies are not likely to
exceed $2.7 billion (consisting primarily of off-balance
sheet arrangements) although no assurances can be given as to
the likelihood, nature or amount of any claims that may be
asserted. Based on this review, GM reclassified approximately
$257 million of these obligations from long-term debt to
short-term debt.
Long-term debt maturities including capital leases at
December 31, 2006 are as follows: 2007
$2.3 billion; 2008 $2.8 billion;
2009 $0.7 billion; 2010
$0.2 billion; and 2011 $1.7 billion.
Financing
and Insurance Operations
Debt consisted of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Short-term debt:
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
$
|
|
|
|
$
|
528
|
|
Demand notes
|
|
|
|
|
|
|
6,047
|
|
Bank loans and overdrafts
|
|
|
23
|
|
|
|
6,652
|
|
Repurchase agreements and other
|
|
|
|
|
|
|
27,744
|
|
|
|
|
|
|
|
|
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
Senior indebtedness
|
|
|
|
|
|
|
212,537
|
|
Related party GMAC
|
|
|
472
|
|
|
|
|
|
Secured debt
|
|
|
8,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
$
|
9,438
|
|
|
$
|
253,508
|
|
|
|
|
|
|
|
|
|
|
As described in Note 4, GMAC transferred to GM two
bankruptcy-remote subsidiaries that hold a number of trusts that
are parties to lease asset securitizations. The
$9.4 billion of secured debt as of December 31, 2006
is primarily comprised of the asset-backed debt securities
issued by these trusts as part of these lease securitizations.
To achieve its desired balance between fixed and variable debt,
GM has entered into interest rate swaps and cap agreements with
GMAC as the counterparty. The notional amount of such agreements
as of December 31, 2006 for FIO was approximately
$7.2 billion pay floating, and the variable interest rates
ranged from 5.3% to 6.6%. The notional amount of such agreements
as of December 31, 2005 for FIO were approximately
$104.5 billion relating to swap agreements
($75.4 billion pay variable and $29.1 billion pay
fixed). At December 31, 2005 certain of FIOs debt
obligations are denominated in currencies other than the
currency of the issuing country. These amounted to Canadian
dollar ($8.1 billion), Euro ($6.6 billion), U.K. pound
sterling ($6.1 billion) and Australian dollar
($1.4 billion).
Long-term debt maturities at December 31, 2006 are as
follows: 2007 $4.4 billion; 2008
$3.8 billion; 2009 $1.2 billion;
2010 $0; and 2011 $5 million.
152
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 19.
|
Pensions
and Other Postretirement Benefits
|
GM sponsors a number of defined benefit pension plans covering
substantially all U.S. and Canadian employees as well as certain
other
non-U.S. employees.
Plans covering U.S. and Canadian represented employees generally
provide benefits of negotiated, stated amounts for each year of
service as well as significant supplemental benefits for
employees who retire with 30 years of service before normal
retirement age. The benefits provided by the plans covering U.S.
and Canadian salaried employees and employees in certain other
non-U.S. locations
are generally based on years of service and compensation
history. GM also has certain nonqualified pension plans covering
executives that are based on targeted wage replacement
percentages and are unfunded.
GM also sponsors defined contribution retirement savings plans
for hourly and salaried employees. GM matches contributions for
U.S. salaried employees up to certain predefined limits based
upon eligible base salary. GM suspended the Corporations
match effective January 1, 2006. GM reinstated the match
for U.S. salaried employees effective January 1, 2007. In
addition to the GM Matching Contribution, GM makes a
contribution equal to 1% of eligible base salary for U.S.
salaried employees with a service date on or after
January 1, 1993 to cover certain benefits in retirement
that are different from U.S. salaried employees with a service
date prior to January 1, 1993. The charge to expense for
these U.S. salaried contributions was $11.7 million in
2006, $65.2 million in 2005, and $112.8 million in
2004. In addition, GM established a new GM contribution to its
Savings Stock Purchase Program (S-SPP) for U.S. salaried
employees with a length of service date on or after
January 1, 2001 effective January 1, 2007. GM will
automatically contribute an amount equal to 4% of eligible base
salary under this program. GM also provides contributions to
certain international defined contribution plans. These
contributions are immaterial for all periods presented.
Additionally, GM maintains hourly and salaried benefit plans
that provide postretirement medical, dental, vision, and life
insurance to most U.S. and Canadian retirees and eligible
dependents. The cost of such benefits is recognized in the
consolidated financial statements during the period employees
provide service to GM. Certain
non-U.S. subsidiaries
have postretirement benefit plans, although most participants
are covered by government sponsored or administered programs.
The cost of such programs generally is not significant to GM.
GM also provides post-employment extended disability benefits
comprised of income security, health care, and life insurance to
U.S. and Canadian employees who become disabled and can no
longer actively work. The cost of such benefits is recognized
during the period employees provide service.
In September 2006, the FASB issued SFAS No. 158, which
requires companies to recognize an asset or liability for the
overfunded or underfunded status of their benefit plans in their
financial statements as of the year ending after
December 15, 2006. GM recognized the funded status of its
benefit plans at December 31, 2006. SFAS No. 158
also requires the measurement date for plan assets and
liabilities to coincide with the sponsors year end. GM has
elected to early adopt the measurement-date provisions of
SFAS No. 158, which requires new measurement dates
coinciding with GMs year end for all plans, in 2007 using
the two-measurement approach. Under this approach,
GM will perform a measurement using the prior year year-end
reporting covering the period between the previous measurement
date and December 31, 2006, with the net benefit
expense/income for that period recorded as an adjustment to
beginning retained earnings at January 1, 2007. GM will
then perform another measurement at January 1, 2007 to
determine the net benefit expense/income that will be recorded
in 2007. The changes in fair value of plan assets and benefit
obligations between the prior measurement date and
January 1, 2007 will be recorded as an adjustment to
accumulated other comprehensive income, net of taxes at
January 1, 2007. In adopting the measurement date
provisions in 2007, GM will record an adjustment to retained
earnings of $0.7 billion and accumulated other
comprehensive income of $2.1 billion as of January 1,
2007.
153
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 19.
|
Pensions
and Other Postretirement Benefits
(continued)
|
The incremental effect of applying the recognition provisions of
SFAS No. 158 on the individual line items in the
consolidated balance sheet as of December 31, 2006 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior to
|
|
|
|
|
|
After Application
|
|
|
|
Application of SFAS No. 158
|
|
|
Adjustments
|
|
|
of SFAS No. 158
|
|
|
|
(Dollars in millions)
|
|
|
Deferred income taxes and other
current assets
|
|
$
|
1,122
|
|
|
$
|
10,835
|
|
|
$
|
11,957
|
|
Intangible assets, net
|
|
|
1,578
|
|
|
|
(460
|
)
|
|
|
1,118
|
|
Prepaid pension
|
|
|
33,949
|
|
|
|
(16,583
|
)
|
|
|
17,366
|
|
Total assets
|
|
|
192,400
|
|
|
|
(6,208
|
)
|
|
|
186,192
|
|
Accrued expenses
|
|
|
38,842
|
|
|
|
(3,617
|
)
|
|
|
35,225
|
|
Postretirement benefits other than
pensions
|
|
|
36,050
|
|
|
|
14,036
|
|
|
|
50,086
|
|
Pensions
|
|
|
11,541
|
|
|
|
393
|
|
|
|
11,934
|
|
Other liabilities and deferred
income taxes
|
|
|
16,031
|
|
|
|
(74
|
)
|
|
|
15,957
|
|
Total liabilities
|
|
|
179,705
|
|
|
|
10,738
|
|
|
|
190,443
|
|
Accumulated other comprehensive
loss
|
|
|
(5,108
|
)
|
|
|
(16,946
|
)
|
|
|
(22,126
|
)
|
Total stockholders equity
|
|
|
11,505
|
|
|
|
(16,946
|
)
|
|
|
(5,441
|
)
|
Total liabilities, minority
interests and stockholders equity
|
|
$
|
192,400
|
|
|
$
|
(6,208
|
)
|
|
$
|
186,192
|
|
GMs funding policy with respect to its qualified pension
plans is to contribute annually not less than the minimum
required by applicable law and regulations, or to directly pay
benefit payments where appropriate. GM made pension
contributions to the U.S. hourly and salaried, other U.S.,
and
non-U.S. pension
plans, or made direct payments where appropriate, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in millions)
|
|
|
U.S. hourly and salaried
|
|
$
|
2
|
|
|
$
|
|
|
|
$
|
|
|
Other U.S.
|
|
|
78
|
|
|
|
125
|
|
|
|
117
|
|
Non-U.S.
|
|
|
889
|
|
|
|
708
|
|
|
|
802
|
|
In 2007, GM does not have any contributions due for its
U.S. hourly or salaried pension plans. GM does not expect
to make any discretionary contributions into the
U.S. hourly and salaried pension plans in 2007. GM expects
to contribute or pay benefits of approximately $100 million
to its other U.S. pension plans and $600 million to
its primary
non-U.S. pension
plans, which include GM of Canada Limited, Adam Opel, and
Vauxhall.
GM contributes to its U.S. hourly and salaried Voluntary
Employees Beneficiary Association (VEBA) trusts for OPEB plans.
There were no contributions made by GM to the VEBA trust during
2006 and 2005. Contributions by participants to the other OPEB
plans were $129 million, $89 million and
$87 million for 2006, 2005 and 2004, respectively. GM
withdrew a total of $4.1 billion and $3.2 billion from
plan assets of its VEBA trusts for OPEB plans in 2006 and 2005,
respectively.
GM uses a December 31 measurement date for the majority of
its U.S. pension plans and a September 30 measurement
date for U.S. OPEB plans. GMs measurement dates for
its Canadian, Adam Opel and Vauxhall Motors primary pension
plans are November 30, September 30 and
September 30, respectively. GMs measurement dates for
its Canadian and South African OPEB plans are December 31.
As discussed above, with the adoption of
154
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 19.
|
Pensions
and Other Postretirement Benefits
(continued)
|
the measurement-date provisions of SFAS No. 158 in 2007,
all plans will have a December 31 measurement date which
coincides with GMs year-end.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
Non-U.S. Plans
|
|
|
|
|
|
Non-U.S.
|
|
|
|
Pension Benefits
|
|
|
Pension Benefits
|
|
|
U.S. Other Benefits*
|
|
|
Other Benefits*
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
Change in benefit
obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of
year
|
|
$
|
89,133
|
|
|
$
|
90,760
|
|
|
$
|
20,850
|
|
|
$
|
18,056
|
|
|
$
|
81,181
|
|
|
$
|
73,772
|
|
|
$
|
3,760
|
|
|
$
|
3,702
|
|
Service cost
|
|
|
727
|
|
|
|
1,117
|
|
|
|
484
|
|
|
|
345
|
|
|
|
551
|
|
|
|
702
|
|
|
|
53
|
|
|
|
50
|
|
Interest cost
|
|
|
4,965
|
|
|
|
4,883
|
|
|
|
967
|
|
|
|
965
|
|
|
|
3,929
|
|
|
|
4,107
|
|
|
|
190
|
|
|
|
218
|
|
Plan participants
contributions
|
|
|
19
|
|
|
|
22
|
|
|
|
30
|
|
|
|
27
|
|
|
|
129
|
|
|
|
88
|
|
|
|
|
|
|
|
1
|
|
Amendments
|
|
|
(1,960
|
)
|
|
|
(65
|
)
|
|
|
(669
|
)
|
|
|
113
|
|
|
|
(15,091
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial (gains) losses
|
|
|
(3,682
|
)
|
|
|
(975
|
)
|
|
|
524
|
|
|
|
2,233
|
|
|
|
(6,468
|
)
|
|
|
6,720
|
|
|
|
(145
|
)
|
|
|
(200
|
)
|
Benefits paid
|
|
|
(7,013
|
)
|
|
|
(6,695
|
)
|
|
|
(1,049
|
)
|
|
|
(922
|
)
|
|
|
(3,945
|
)
|
|
|
(4,208
|
)
|
|
|
(133
|
)
|
|
|
(118
|
)
|
Exchange rate movements
|
|
|
|
|
|
|
|
|
|
|
1,250
|
|
|
|
(942
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Curtailments, settlements, and other
|
|
|
3,233
|
|
|
|
86
|
|
|
|
151
|
|
|
|
975
|
|
|
|
4,012
|
|
|
|
|
|
|
|
(18
|
)
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year
|
|
|
85,422
|
|
|
|
89,133
|
|
|
|
22,538
|
|
|
|
20,850
|
|
|
|
64,298
|
|
|
|
81,181
|
|
|
|
3,707
|
|
|
|
3,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at
beginning of year
|
|
|
95,250
|
|
|
|
90,886
|
|
|
|
10,063
|
|
|
|
9,023
|
|
|
|
20,282
|
|
|
|
16,016
|
|
|
|
|
|
|
|
|
|
Actual return on plan assets
|
|
|
13,384
|
|
|
|
10,924
|
|
|
|
1,280
|
|
|
|
1,382
|
|
|
|
1,834
|
|
|
|
2,258
|
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
80
|
|
|
|
125
|
|
|
|
810
|
|
|
|
645
|
|
|
|
(5,177
|
)
|
|
|
2,008
|
|
|
|
|
|
|
|
|
|
Plan participants
contributions
|
|
|
19
|
|
|
|
22
|
|
|
|
30
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits paid
|
|
|
(7,013
|
)
|
|
|
(6,695
|
)
|
|
|
(1,049
|
)
|
|
|
(922
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange rate movements
|
|
|
|
|
|
|
|
|
|
|
435
|
|
|
|
(119
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Curtailments, settlements, and other
|
|
|
(328
|
)
|
|
|
(12
|
)
|
|
|
(63
|
)
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of
year
|
|
|
101,392
|
|
|
|
95,250
|
|
|
|
11,506
|
|
|
|
10,063
|
|
|
|
16,939
|
|
|
|
20,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status(1)
|
|
|
15,970
|
|
|
|
6,117
|
|
|
|
(11,032
|
)
|
|
|
(10,787
|
)
|
|
|
(47,359
|
)
|
|
|
(60,899
|
)
|
|
|
(3,707
|
)
|
|
|
(3,760
|
)
|
Unrecognized actuarial loss
|
|
|
|
|
|
|
25,538
|
|
|
|
|
|
|
|
6,554
|
|
|
|
|
|
|
|
30,592
|
|
|
|
|
|
|
|
1,698
|
|
Unrecognized prior service cost
(credit)
|
|
|
|
|
|
|
4,616
|
|
|
|
|
|
|
|
770
|
|
|
|
|
|
|
|
(714
|
)
|
|
|
|
|
|
|
(584
|
)
|
Unrecognized transition obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer contributions/withdrawals
in fourth quarter
|
|
|
|
|
|
|
|
|
|
|
142
|
|
|
|
63
|
|
|
|
(60
|
)
|
|
|
(1,176
|
)
|
|
|
|
|
|
|
|
|
Benefits paid in fourth quarter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
765
|
|
|
|
846
|
|
|
|
|
|
|
|
|
|
Curtailments and settlements in
fourth quarter
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
15,970
|
|
|
$
|
36,271
|
|
|
$
|
(10,873
|
)
|
|
$
|
(3,372
|
)
|
|
$
|
(46,654
|
)
|
|
$
|
(31,351
|
)
|
|
$
|
(3,707
|
)
|
|
$
|
(2,646
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
155
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
Non-U.S. Plans
|
|
|
|
|
|
Non-U.S.
|
|
|
|
Pension Benefits
|
|
|
Pension Benefits
|
|
|
U.S. Other Benefits*
|
|
|
Other Benefits*
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
Note 19. Pensions
and Other Postretirement Benefits
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the
consolidated balance sheet consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid benefit cost
|
|
|
|
|
|
$
|
37,280
|
|
|
|
|
|
|
$
|
296
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
Accrued benefit liability
|
|
|
|
|
|
|
(1,177
|
)
|
|
|
|
|
|
|
(10,138
|
)
|
|
|
|
|
|
|
(31,351
|
)
|
|
|
|
|
|
|
(2,646
|
)
|
Intangible asset
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive
income
|
|
|
|
|
|
|
168
|
|
|
|
|
|
|
|
5,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
|
|
|
|
$
|
36,271
|
|
|
|
|
|
|
$
|
(3,372
|
)
|
|
|
|
|
|
$
|
(31,351
|
)
|
|
|
|
|
|
$
|
(2,646
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Asset
|
|
$
|
17,150
|
|
|
|
|
|
|
$
|
216
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
Current liability
|
|
|
(85
|
)
|
|
|
|
|
|
|
(250
|
)
|
|
|
|
|
|
|
(134
|
)
|
|
|
|
|
|
|
(141
|
)
|
|
|
|
|
Noncurrent liability
|
|
|
(1,095
|
)
|
|
|
|
|
|
|
(10,839
|
)
|
|
|
|
|
|
|
(46,520
|
)
|
|
|
|
|
|
|
(3,566
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,970
|
|
|
|
|
|
|
$
|
(10,873
|
)
|
|
|
|
|
|
$
|
(46,654
|
)
|
|
|
|
|
|
$
|
(3,707
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated
other comprehensive income consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
$
|
15,483
|
|
|
|
|
|
|
$
|
6,478
|
|
|
|
|
|
|
$
|
21,957
|
|
|
|
|
|
|
$
|
1,406
|
|
|
|
|
|
Net prior service cost (credit)
|
|
|
1,165
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
(12,450
|
)
|
|
|
|
|
|
|
(501
|
)
|
|
|
|
|
Transition obligation (asset)
|
|
|
|
|
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
16,648
|
|
|
|
|
|
|
$
|
6,516
|
|
|
|
|
|
|
$
|
9,507
|
|
|
|
|
|
|
$
|
905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Table does not include extended disability plans with a total
APBO of $866 million at December 31, 2006 and
$1.1 billion at December 31, 2005 due to materiality.
|
|
|
(1) |
Includes overfunded status of the combined U.S. hourly and
salaried pension plans of $17.1 billion and
$7.5 billion as of December 31, 2006 and 2005.
|
The total accumulated benefit obligation, the accumulated
benefit obligation and fair value of plan assets for GMs
pension plans with accumulated benefit obligations in excess of
plan assets, and the projected benefit obligation and fair value
of plan assets for pension plans with projected benefit
obligations in excess of plan assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
Non-U.S. Plans
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
Accumulated Benefit
Obligation
|
|
$
|
85,422
|
|
|
$
|
86,885
|
|
|
$
|
21,926
|
|
|
$
|
19,923
|
|
Plans with ABO in excess of
plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ABO
|
|
$
|
1,180
|
|
|
$
|
1,207
|
|
|
$
|
21,429
|
|
|
$
|
19,441
|
|
Fair value of plan assets
|
|
|
|
|
|
|
30
|
|
|
|
10,769
|
|
|
|
9,387
|
|
Plans with PBO in excess of
plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PBO
|
|
$
|
1,180
|
|
|
$
|
1,703
|
|
|
$
|
22,270
|
|
|
$
|
20,724
|
|
Fair value of plan assets
|
|
|
|
|
|
|
295
|
|
|
|
11,155
|
|
|
|
9,759
|
|
156
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 19.
|
Pensions
and Other Postretirement Benefits
(continued)
|
The components of pension and OPEB expense along with the
assumptions used to determine benefit obligations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
|
|
|
|
|
|
|
U.S. Plans Pension Benefits
|
|
|
Pension Benefits
|
|
|
U.S. Other Benefits*
|
|
|
Other Benefits*
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in millions)
|
|
|
Components of expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
727
|
|
|
$
|
1,117
|
|
|
$
|
1,097
|
|
|
$
|
484
|
|
|
$
|
345
|
|
|
$
|
247
|
|
|
$
|
551
|
|
|
$
|
702
|
|
|
$
|
566
|
|
|
$
|
53
|
|
|
$
|
50
|
|
|
$
|
39
|
|
Interest cost
|
|
|
4,965
|
|
|
|
4,883
|
|
|
|
5,050
|
|
|
|
966
|
|
|
|
965
|
|
|
|
892
|
|
|
|
3,929
|
|
|
|
4,107
|
|
|
|
3,726
|
|
|
|
190
|
|
|
|
218
|
|
|
|
201
|
|
Expected return on plan assets
|
|
|
(8,167
|
)
|
|
|
(7,898
|
)
|
|
|
(7,823
|
)
|
|
|
(842
|
)
|
|
|
(740
|
)
|
|
|
(669
|
)
|
|
|
(1,593
|
)
|
|
|
(1,684
|
)
|
|
|
(1,095
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost
(credit)
|
|
|
785
|
|
|
|
1,164
|
|
|
|
1,279
|
|
|
|
78
|
|
|
|
102
|
|
|
|
93
|
|
|
|
(1,071
|
)
|
|
|
(70
|
)
|
|
|
(87
|
)
|
|
|
(82
|
)
|
|
|
8
|
|
|
|
8
|
|
Amortization of transition
obligation/(asset)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
6
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized net actuarial loss
|
|
|
1,126
|
|
|
|
2,065
|
|
|
|
1,857
|
|
|
|
399
|
|
|
|
281
|
|
|
|
188
|
|
|
|
1,986
|
|
|
|
2,250
|
|
|
|
1,138
|
|
|
|
133
|
|
|
|
88
|
|
|
|
62
|
|
Curtailments, settlements, and other
|
|
|
4,260
|
|
|
|
115
|
|
|
|
34
|
|
|
|
140
|
|
|
|
114
|
|
|
|
204
|
|
|
|
(505
|
)
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net expense
|
|
$
|
3,696
|
|
|
$
|
1,446
|
|
|
$
|
1,494
|
|
|
$
|
1,232
|
|
|
$
|
1,073
|
|
|
$
|
962
|
|
|
$
|
3,297
|
|
|
$
|
5,305
|
|
|
$
|
4,248
|
|
|
$
|
285
|
|
|
$
|
366
|
|
|
$
|
310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average assumptions
used to determine benefit obligations at
December 31(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.90
|
%
|
|
|
5.70
|
%
|
|
|
5.60
|
%
|
|
|
4.76
|
%
|
|
|
4.72
|
%
|
|
|
5.61
|
%
|
|
|
5.90
|
%
|
|
|
5.45
|
%
|
|
|
5.75
|
%
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
|
|
6.00
|
%
|
Rate of compensation increase
|
|
|
5.00
|
%
|
|
|
4.9
|
%
|
|
|
5.0
|
%
|
|
|
3.0
|
%
|
|
|
3.1
|
%
|
|
|
3.2
|
%
|
|
|
4.6
|
%
|
|
|
4.2
|
%
|
|
|
3.9
|
%
|
|
|
4.0
|
%
|
|
|
4.0
|
%
|
|
|
4.0
|
%
|
Weighted-average assumptions
used to determine net expense for years ended
December 31(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.70
|
%
|
|
|
5.60
|
%
|
|
|
6.00
|
%
|
|
|
4.72
|
%
|
|
|
5.61
|
%
|
|
|
6.12
|
%
|
|
|
5.45
|
%
|
|
|
5.75
|
%
|
|
|
6.25
|
%
|
|
|
5.00
|
%
|
|
|
6.00
|
%
|
|
|
6.75
|
%
|
Expected return on plan assets
|
|
|
9.0
|
%
|
|
|
9.0
|
%
|
|
|
9.0
|
%
|
|
|
8.4
|
%
|
|
|
8.5
|
%
|
|
|
8.4
|
%
|
|
|
8.8
|
%
|
|
|
8.8
|
%
|
|
|
8.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate of compensation increase
|
|
|
4.9
|
%
|
|
|
5.0
|
%
|
|
|
5.0
|
%
|
|
|
3.1
|
%
|
|
|
3.2
|
%
|
|
|
3.4
|
%
|
|
|
4.2
|
%
|
|
|
3.9
|
%
|
|
|
4.2
|
%
|
|
|
4.0
|
%
|
|
|
4.0
|
%
|
|
|
4.0
|
%
|
|
|
* |
Table does not include extended disability plans with a total
net expense of $105 million (excluding curtailments) in
2006, $79 million in 2005, and $64 million in 2004 due
to materiality.
|
|
|
(1)
|
Determined as of end of year.
|
|
(2)
|
Determined as of beginning of year. Appropriate discount rates
were used during 2006 to measure the effects of curtailments and
plan amendments on various plans.
|
The following are estimated amounts to be amortized from
accumulated comprehensive income into net periodic benefit cost
during 2007 based on December 31, 2006 and January 1,
2007 plan measurements (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
Non-U.S. Plans
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
|
Pension Benefits
|
|
|
Pension Benefits
|
|
|
Other Benefits
|
|
|
Other Benefits
|
|
|
Amortization of prior service cost
(credit)
|
|
$
|
519
|
|
|
$
|
27
|
|
|
$
|
(1,845
|
)
|
|
$
|
(82
|
)
|
Amortization of transition
obligation (asset)
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
Recognized net actuarial loss
(gain)
|
|
|
810
|
|
|
|
329
|
|
|
|
1,357
|
|
|
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,329
|
|
|
$
|
363
|
|
|
$
|
(488
|
)
|
|
$
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
157
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 19.
|
Pensions
and Other Postretirement Benefits
(continued)
|
On February 7, 2006, GM announced it would increase the
U.S. salaried workforces participation in the cost of
health care, capping GMs contributions to salaried retiree
health care at the level of 2006 expenditures. The remeasurement
of the U.S. salaried OPEB plans as of February 9, 2006
as a result of these benefit modifications generated a $0.5
billion reduction in OPEB expense for 2006 and is reflected in
the components of expense table above. This remeasurement
reduced the U.S. accumulated postretirement benefit obligation
(APBO) by $4.7 billion.
On March 7, 2006, GM announced it would modify the terms of
the U.S. salaried pension plan to freeze benefits under the
current plan as of December 31, 2006 and implement a new
plan using a new pension formula thereafter. The remeasurement
of GMs U.S. salaried pension plans as of
March 31, 2006 as a result of these benefit modifications
generated a $0.4 billion reduction in pension expense for
2006 and is reflected in the components of expense table above.
This remeasurement reduced the U.S. projected benefit obligation
(PBO) by $2.8 billion.
Effective March 31, 2006, the U.S. District Court for
the Eastern District of Michigan approved the tentative
settlement agreement with the UAW (UAW Settlement Agreement)
related to reductions in hourly retiree health care; this
approval is now under appeal. The UAW Settlement Agreement will
remain in effect until at least September 2011, after which
either GM or the UAW may cancel the agreement upon 90 days
written notice. Similarly, GMs contractual obligations to
provide health care benefits to UAW hourly retirees extends to
at least September 2011 and will continue thereafter until
terminated by either GM or the UAW. As a result, the provisions
of the UAW Settlement Agreement will continue in effect for the
UAW retirees beyond the expiration in September 2007 of the
current collective bargaining agreement between GM and the UAW.
Given the significance of the effect of the UAW Settlement
Agreement, the plans were remeasured. The remeasurement of the
U.S. hourly OPEB plans as of March 31, 2006 due to the
UAW Settlement Agreement generated a $1.3 billion reduction
in OPEB expense for 2006 and is reflected in the components of
expense table above. This remeasurement reduced the U.S. APBO by
$14.5 billion.
GM accounted for the reduced health care coverage provisions of
the UAW Settlement Agreement as an amendment of GMs Health
Care Program for Hourly Employees (Modified Plan). GM previously
estimated that the reduced health care coverage provisions of
the UAW Settlement Agreement would result in an approximately
$15 billion reduction of GMs OPEB obligations related
to the Modified Plan. In conjunction with the measurement of the
Modified Plan as of March 31, 2006, the estimated reduction
of GMs OPEB obligations increased from $15 billion to
$17.4 billion attributable primarily to an increase in the
discount rate utilized in the March 31, 2006 measurement.
The Modified Plan APBO reduction of $17.4 billion is being
amortized on a straight-line basis over the remaining service
lives of active UAW hourly employees (7.4 years) as a
reduction of OPEB expense. This reduction of expense will be
partially offset by the amortization over the same period of
$2.9 billion related to capped benefits expected to be paid
from contributions to the Mitigation Plan as discussed below,
and the expense related to previously negotiated wage increases
for active employees now diverted to the Mitigation Plan.
As mentioned above, the UAW Settlement Agreement also provides
that GM make contributions to a new independent VEBA (Mitigation
Plan). The assets of the Mitigation Plan will be used to
mitigate the effect of reduced GM health care coverage on
individual UAW retirees and, depending on the level of
mitigation, are expected to be available for a number of years.
The new independent Mitigation Plan is being partially funded by
GM contributions of $1 billion in each of 2006, 2007 and
2011. The 2011 contribution may be accelerated under specified
circumstances. GM will also make future contributions subject to
provisions of the UAW Settlement Agreement that relate to profit
sharing payments, increases in the value of a notional number of
shares of GMs
$12/3
par value common stock (collectively, the Supplemental
Contributions), as well as wage deferral payments and dividend
payments.
GMs obligation to make contributions to the Mitigation
Plan are fixed or determined by a formula as defined in the UAW
Settlement Agreement. GMs obligations are limited to these
contributions. GM is not obligated to
158
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 19.
|
Pensions
and Other Postretirement Benefits
(continued)
|
provide incremental funding in the event of an asset shortfall
in the Mitigation Plan and the UAW Settlement Agreement further
provides that the ability of the assets in the Mitigation Plan
to mitigate retiree health care costs is not guaranteed by GM.
Furthermore, the Mitigation Plan is completely independent of GM
and is administered by an independent trust committee (the
Committee) which shall not include any GM representatives. The
assets of the independent VEBA trust for UAW retirees of GM are
the responsibility of the Committee, which has full fiduciary
responsibility for the investment strategy, safeguarding of
assets and execution of the benefit plan as designed.
GM accounted for the Mitigation Plan as a defined benefit plan,
with a cap on GMs OPEB obligation under the plan limited
to the present value of the three $1 billion cash payments
and minimum Supplemental Contributions required by the
Settlement Agreement. The present value of GMs obligation
to the Mitigation plan of $2.9 billion will be amortized on
a straight-line basis over the remaining service lives of active
UAW hourly employees (7.4 years) as OPEB expense. Payments
from GM to the Mitigation Plan related to wage deferrals,
dividends or changes in the estimate of Supplemental
Contributions will be recorded as an expense in the quarter that
the hours are worked, the dividend is declared, or the change in
estimate occurs, respectively. GM will recognize the expense for
the wage deferrals as the future services are rendered, since
the active-UAW represented-hourly-employees elected to forgo
contractual wage increases and have those amounts contributed to
the Mitigation Plan. During 2006, as required in the UAW
Settlement Agreement, GM made a $1 billion contribution to
the Mitigation Plan.
As of the measurement date, the Mitigation Plan had a benefit
obligation totaling $2.8 billion and plan assets totaling
$0.9 billion, as detailed in the table below. The
($1.9) billion net underfunded status of the Mitigation
Plan is reflected GMs financial statements and in the
Changes in Benefit Obligation (under U.S. Other
Benefits) in the table above. The following represent the
changes in plan assets and benefit obligation of the Mitigation
Plan for the year ended December 31, 2006 (dollars in
millions):
|
|
|
|
|
Changes in Benefit
Obligation
|
|
|
|
|
Benefit obligation at beginning of
year
|
|
$
|
|
|
Interest cost
|
|
|
56
|
|
Amendments
|
|
|
2,876
|
|
Actuarial (gains)/losses
|
|
|
7
|
|
Benefits paid
|
|
|
(119
|
)
|
Other
|
|
|
(15
|
)
|
|
|
|
|
|
Benefit obligation at end of year
|
|
$
|
2,805
|
|
|
|
|
|
|
|
|
|
|
|
Changes in Plan
Assets
|
|
|
|
|
Fair value at beginning of year
|
|
$
|
|
|
GM contributions
|
|
|
1,000
|
|
Wage deferral contributions
|
|
|
4
|
|
Mitigation payments on behalf of
GM retirees
|
|
|
(119
|
)
|
Actual return on plan assets
|
|
|
29
|
|
|
|
|
|
|
Fair value at end of year
|
|
$
|
914
|
|
|
|
|
|
|
As detailed in Note 6, GM, Delphi, and the UAW reached an
agreement on March 22, 2006 intended to reduce the number
of U.S. hourly employees through the Attrition Program. As
a result of the Attrition Program, GM has recognized curtailment
losses under SFAS No. 88 and SFAS No. 106
due to the significant reduction in the expected aggregate years
of future service of the employees in the U.S. hourly
pension, OPEB and extended disability plans, respectively. The
curtailment losses include recognition of the change in the PBO
or APBO and a portion of the previously unrecognized prior
service cost reflecting the reduction in expected future
service. GM recognized a
159
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 19.
|
Pensions
and Other Postretirement Benefits
(continued)
|
curtailment loss related to the U.S. hourly pension plan of
approximately $4.4 billion at April 30, 2006. GM
recognized a curtailment loss of $23 million in 2006
related to the U.S. hourly OPEB plans measured at
May 31, 2006. GM recognized a curtailment gain of
$132 million related to the U.S. hourly extended
disability plan measured at June 30, 2006. The impacts for
the pension and OPEB plans are reflected in the components of
expense table above.
The remeasurement of GMs U.S. hourly pension plan as
of April 30, 2006 as a result of the Attrition Program
generated a $0.7 billion reduction in pension expense for
2006. This remeasurement reduced the U.S. pension PBO by
$1.2 billion. The remeasurement of the U.S. hourly
OPEB plans as of May 31, 2006 as a result of the Attrition
Program generated an approximate $143 million reduction in
OPEB expense for 2006. This remeasurement reduced the U.S. OPEB
APBO by $0.7 billion. The effects of these restatements are
reflected in the components of expense table above.
In October 2006, the GM Board of Directors approved a reduction
in the levels of coverage for corporate-paid life insurance for
salaried retirees. For eligible salaried employees who retire on
or after May 1, 2007, coverage will reduce by 50% on the
tenth anniversary of their retirement date, and salaried
employees who retire before May 1, 2007 will have their
coverage reduced by 50% on January 1, 2017. This change
reduced GMs year-end U.S. OPEB APBO by
$0.5 billion and will be reflected in 2007 OPEB expense.
On November 30, 2006, GM sold a 51% controlling interest in
GMAC. As a result of the sale, GMAC salaried employees will have
their pension benefits frozen under the current GM pension
plans. The remeasurement of GMs U.S. salaried pension
plans as of November 30, 2006 as a result of this benefit
modification generated a $0.1 billion curtailment gain and
$8 million reduction in pension expense for 2006. This
remeasurement increased the U.S. PBO by $0.2 billion.
GM will also maintain the salaried OPEB obligation for current
GMAC retirees and OPEB eligible employees. GMAC employees who
were non-OPEB eligible were offered a cash lump sum payment
based on credited service in lieu of GM provided OPEB at their
date of retirement. The remeasurement of the U.S. and
non-U.S. OPEB
plans as of November 30, 2006 as a result of these
modifications generated a $563 million curtailment gain,
$27 million settlement loss, and $536 million
reduction in OPEB expense for 2006. This remeasurement reduced
the U.S. and
Non-U.S. APBO
by $0.1 billion. The impact to extended disability benefits
generated a curtailment gain of $14 million.
GM sets the discount rate assumption annually for each of its
retirement-related U.S. benefit plans at their respective
measurement dates to reflect the yield of a portfolio of high
quality, fixed-income debt instruments that would produce cash
flows sufficient to defease projected future benefits. GM has
established for its U.S. pension plans and U.S. OPEB
plans a discount rate of 5.90% for year-end 2006.
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
Assumed Health-Care Trend Rates at December 31
|
|
2006
|
|
|
2005
|
|
|
Initial Health-care Cost Trend Rate
|
|
|
9.0
|
%
|
|
|
10.0
|
%
|
Ultimate Health-care Cost Trend
Rate
|
|
|
5.0
|
%
|
|
|
5.0
|
%
|
Number of Years to Ultimate Trend
Rate
|
|
|
6
|
|
|
|
6
|
|
A one percentage point increase in the assumed health care trend
rates for all future periods would have increased the
U.S. APBO by $6.0 billion at December 31, 2006
and the U.S. aggregate service and interest cost components
of non-pension postretirement benefit expense for 2006 by
$502 million. A one percentage point decrease would have
decreased the U.S. APBO by $5.0 billion and the
U.S. aggregate service and interest cost components of
non-pension postretirement benefit expense for 2006 by
$413 million.
GMs long-term strategic mix among asset classes and the
expected return on asset assumptions for its U.S. pension
plans are derived from detailed periodic studies conducted by
GMs outside actuaries and GMs asset management
group. The U.S. study includes a review of alternative
asset allocation strategies, anticipated future
160
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 19.
|
Pensions
and Other Postretirement Benefits
(continued)
|
long-term performance of individual asset classes, risks
(standard deviations) and correlations among the asset classes
that comprise the plans asset mix. The primary
non-U.S. plans
conduct similar studies in conjunction with local actuaries and
asset managers. While the studies give appropriate consideration
to recent fund performance and historical returns, the
assumptions are primarily long-term, prospective rates of return.
Based on a study performed in 2006, GMs asset management
group has commenced implementation of certain changes in the
long-run strategic asset allocations of the U.S. pension
plans. Specifically, the target allocations have been modified
to increase the fixed income exposure by 20% of total plan
assets and to reduce the equity exposure by a corresponding
amount. This change in strategic asset allocation is intended to
significantly lower the expected volatility of asset returns and
plan funded status, as well as the probability of future
contribution requirements. In setting the new strategic asset
mix, GM considered the likelihood that the selected mix would
effectively fund the projected pension plan liabilities while
aligning with the risk tolerance of the plans fiduciaries.
GMs strategic asset mix for U.S. pension plans is
intended to reduce exposure to equity market risks, to utilize
asset classes which reduce surplus volatility, and to utilize
asset classes where active management has historically generated
excess returns above market returns. This asset mix is intended
to place greater emphasis on investment manager skills than on
general market returns to produce expected long-term returns,
while employing various risk mitigation strategies to reduce
surplus volatility. Based on the new target asset allocations
and a re-examination of expected asset return assumptions, GM
revised its expected long-term annual return rate assumption for
its U.S. plans effective January 1, 2007 to 8.5%, a
reduction from its previous level of 9.0%. When the new
strategic mix is fully implemented, GMs U.S. pension
assets will have the following target allocation relative to
total assets: global equity, 29%; global bonds, 52%;
real estate, 8%; and alternative investments, 11%. In 2006,
GMs target allocations for such assets were: global
equity, 49%; global bonds, 32%; real estate, 8%; and
alternative investments, 11%.
In 2004, GM made significant contributions to its hourly VEBA
plan and adopted a new investment policy to manage VEBA plan
assets under a single investment policy with an expanded range
of asset classes. The hourly VEBA is managed to achieve
long-term asset returns while maintaining adequate liquidity for
reimbursement of benefit payments, as needed. The new asset
allocation was implemented on October 1, 2004. In addition,
in late 2004, a new salaried VEBA plan was created and funded.
It is primarily invested in shorter-term liquid securities. For
2006, the expected annual return for the hourly VEBA plan was
9.0% and the expected annual return for the salaried VEBA plan
was 4.5%. Based on a reexamination of expected long-term asset
return assumptions, GM revised its expected long-term annual
return assumptions effective January 1, 2007 for the hourly
VEBA and salaried VEBA plans to 8.5% and 6.0%, respectively.
161
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
U.S. and
non-U.S. pension
plans and OPEB plans have the following asset allocations, as of
their respective measurement dates in 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Assets
|
|
|
|
|
|
|
|
|
|
Primary
|
|
|
|
|
|
|
Plan Assets
|
|
|
Non-U.S.
|
|
|
|
|
|
|
U.S. Pension
|
|
|
Pension
|
|
|
|
|
|
|
Plans Actual
|
|
|
Plans Actual
|
|
|
Plan Assets OPEB
|
|
|
|
Percentage of
|
|
|
Percentage of
|
|
|
Actual Percentage of
|
|
|
|
Plan Assets
|
|
|
Plan Assets
|
|
|
Plan Assets
|
|
Asset Category
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Equity Securities
|
|
|
38
|
%
|
|
|
47
|
%
|
|
|
60
|
%
|
|
|
61
|
%
|
|
|
54
|
%
|
|
|
52
|
%
|
Debt Securities
|
|
|
43
|
%
|
|
|
32
|
%
|
|
|
31
|
%
|
|
|
31
|
%
|
|
|
28
|
%
|
|
|
31
|
%
|
Real Estate
|
|
|
8
|
%
|
|
|
7
|
%
|
|
|
9
|
%
|
|
|
8
|
%
|
|
|
4
|
%
|
|
|
3
|
%
|
Other
|
|
|
11
|
%
|
|
|
14
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
14
|
%
|
|
|
14
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities include GM common stock in the amounts of
$24 million (less than 1% of total pension plan assets) and
$11 million (less than 1% of total pension plan assets) at
December 31, 2006 and 2005, respectively.
The following benefit payments, which includes assumptions
related to estimated future employee service, as appropriate,
are expected to be paid in the future:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits*
|
|
|
Other Benefits
|
|
|
Non-U.S. Other
Benefits
|
|
|
|
|
|
|
Primary Non-
|
|
|
Gross Benefit
|
|
|
Gross Medicare
|
|
|
Gross Benefit
|
|
|
Gross Medicare
|
|
|
|
U.S. Plans
|
|
|
U.S. Plans
|
|
|
Payments
|
|
|
Part D Receipts
|
|
|
Payments
|
|
|
Part D Receipts
|
|
|
|
(Dollars in millions)
|
|
|
2007
|
|
|
7,270
|
|
|
|
956
|
|
|
|
3,994
|
|
|
|
243
|
|
|
|
146
|
|
|
|
|
|
2008
|
|
|
7,142
|
|
|
|
1,027
|
|
|
|
4,163
|
|
|
|
268
|
|
|
|
157
|
|
|
|
|
|
2009
|
|
|
7,037
|
|
|
|
1,056
|
|
|
|
4,327
|
|
|
|
292
|
|
|
|
167
|
|
|
|
|
|
2010
|
|
|
6,959
|
|
|
|
1,097
|
|
|
|
4,475
|
|
|
|
314
|
|
|
|
177
|
|
|
|
|
|
2011
|
|
|
6,890
|
|
|
|
1,140
|
|
|
|
4,589
|
|
|
|
335
|
|
|
|
187
|
|
|
|
|
|
2012-2016
|
|
$
|
33,356
|
|
|
$
|
6,161
|
|
|
$
|
24,050
|
|
|
$
|
1,966
|
|
|
$
|
1,087
|
|
|
|
|
|
|
|
|
* |
|
Benefits for most U.S. pension plans and certain non-U.S.
pension plans are paid out of plan assets rather than cash. |
|
|
Note 20.
|
Commitments
and Contingent Matters
|
Commitments
GM had the following minimum commitments under noncancelable
capital leases having remaining terms in excess of one year,
primarily for property (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
and thereafter
|
|
|
Minimum commitments
|
|
$
|
257
|
|
|
$
|
748
|
|
|
$
|
440
|
|
|
|
141
|
|
|
$
|
94
|
|
|
$
|
824
|
|
Sublease income
|
|
|
(28
|
)
|
|
|
(27
|
)
|
|
|
(27
|
)
|
|
|
(27
|
)
|
|
|
(27
|
)
|
|
|
(444
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net minimum commitments
|
|
$
|
229
|
|
|
$
|
721
|
|
|
$
|
413
|
|
|
$
|
114
|
|
|
$
|
67
|
|
|
$
|
380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
162
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 20.
|
Commitments
and Contingent Matters (continued)
|
GM had the following minimum commitments under noncancelable
operating leases having remaining terms in excess of one year,
primarily for property (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
and after
|
|
|
Minimum commitments
|
|
$
|
765
|
|
|
$
|
678
|
|
|
$
|
651
|
|
|
$
|
642
|
|
|
$
|
553
|
|
|
$
|
3,081
|
|
Sublease income
|
|
|
(230
|
)
|
|
|
(222
|
)
|
|
|
(217
|
)
|
|
|
(213
|
)
|
|
|
(212
|
)
|
|
|
(2,293
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net minimum commitments
|
|
$
|
535
|
|
|
$
|
456
|
|
|
$
|
434
|
|
|
$
|
429
|
|
|
$
|
341
|
|
|
$
|
788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain of these minimum commitments fund the obligations of
non-consolidated VIEs. Certain of the leases contain escalation
clauses and renewal or purchase options. Rental expenses under
operating leases were $1.2 billion, $1.0 billion, and
$973 million in 2006, 2005, and 2004, respectively.
GM sponsors a credit card program, entitled the GM Card program,
which offers rebates that can be applied primarily against the
purchase or lease of GM vehicles. The amount of rebates
available to qualified cardholders net of deferred program
income was $4.9 billion and $4.7 billion at
December 31, 2006 and 2005, respectively.
Guarantees
GM has provided guarantees in relation to the residual value of
certain operating leases, primarily related to the lease of
GMs corporate headquarters. At December 31, 2006, the
maximum potential amount of future undiscounted payments that
could be required to be made under these guarantees amount to
$624 million. Years of expiration pertaining to these
guarantees range from 2008 to 2018, and certain of the leases
contain renewal options.
GM has agreements with third parties that guarantee the
fulfillment of certain suppliers commitments. At
December 31, 2006, the maximum potential amount of future
undiscounted payments that could be required to be made under
these guarantees amount to $61 million. Years of expiration
pertaining to these guarantees range from 2007 to 2035. Other
guarantees with a maximum potential amount of future
undiscounted payments that could be required amounted to
$4 million with the period of expiration determined by
business conditions, i.e., emergence from bankruptcy or the sale
of the business.
In addition, in some instances, certain assets of the party
whose debt or performance is guaranteed may offset, to some
degree, the effect of the triggering of the guarantee. The
offset of certain payables of GM may also apply to certain
guarantees. Accordingly, no liabilities were recorded with
respect to such guarantees.
GM also provides payment guarantees on commercial loans made by
GMAC and outstanding with certain third-party customers,
primarily related to rental car companies. As of
December 31, 2006 maximum commercial obligations guaranteed
by GM were $169 million. Years of expiration pertaining to
these guarantees range from 2007 to 2012. Based on the credit
worthiness of these rental car companies, the value ascribed to
the guarantee provided by GM was determined to be insignificant.
In addition, GM has also entered into agreements with GMAC and
FIM Holdings LLC, related to the disposal of 51% of GMAC, that
incorporate indemnification provisions. The maximum potential
amount of future undiscounted payments to which GM may be
exposed in terms of these indemnification provisions amounts to
$2.5 billion. No amounts have been recorded for such
indemnities as GMs obligations under them are not probable
and estimable and the fair value of these indemnifications is
immaterial.
GM has entered into agreements indemnifying certain parties with
respect to environmental conditions pertaining to existing or
sold GM properties. Due to the nature of the indemnifications,
GMs maximum exposure under these guarantees cannot be
estimated. No amounts have been recorded for such indemnities,
as GMs obligations are not probable or estimable at this
time.
163
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 20.
|
Commitments
and Contingent Matters (continued)
|
GM has provided guarantees with respect to benefits of former GM
employees relating to pensions, postretirement health care and
life insurance in connection with certain divestitures. Other
than the benefits related to Delphi and another divested unit,
it is not possible to predict the maximum potential amount of
future undiscounted payments under these agreements due to the
conditional nature of GMs obligations. No amounts have
been recorded for such indemnities as GMs obligations are
not probable and estimable at this time.
In addition to the guarantees and indemnifying agreements
mentioned above, GM periodically enters into agreements that
incorporate indemnification provisions in the normal course of
business. Due to the nature of these agreements, the maximum
potential amount of future undiscounted payments to which GM may
be exposed cannot be estimated. No amounts have been recorded
for such indemnities as GMs obligations under them are not
probable and estimable at this time.
Environmental
GMs operations, like operations of other companies engaged
in similar businesses, are subject to a wide range of
environmental protection laws including laws regulating air
emissions, water discharges, waste management, and environmental
cleanup. GM is in various stages of investigation or remediation
for sites where contamination has been alleged. We are involved
in a number of remediation actions to clean up hazardous wastes
as required by federal and state laws. Such statutes require
that responsible parties fund remediation actions regardless of
fault, legality of original disposal or ownership of a disposal
site.
The future impact of environmental matters, including potential
liabilities, is often difficult to estimate. We record an
environmental reserve when it is probable that a liability has
been incurred and the amount of the liability is reasonably
estimable. This practice is followed whether the claims are
asserted or unasserted. Management expects that the amounts
reserved will be paid out over the periods of remediation for
the applicable sites, which typically range from five to
30 years. Expenditures for site remediation actions,
including ongoing operations and maintenance, amounted to
$107 million and $127 million in 2006 and 2005,
respectively. It is possible that such remediation actions could
require average annual expenditures in the range of
$90 million to $130 million over the next five years.
GM has a liability of approximately $323 million and
$336 million at December 31, 2006 and 2005,
respectively for worldwide environmental investigation and
remediation including future ongoing maintenance requirements.
For many sites, the remediation costs and other damages for
which we ultimately may be responsible are not reasonably
estimable because of uncertainties with respect to factors such
as our connection to the site or to materials there, the
involvement of other potentially responsible parties, the
application of laws and other standards or regulations, site
conditions, and the nature and scope of investigations, studies,
and remediation to be undertaken (including the technologies to
be required and the extent, duration, and success of
remediation). As a result, we are unable to determine or
reasonably estimate the amount of costs or other damages for
which we are potentially responsible in connection with these
sites, although that total could be substantial.
While the final outcome of environmental matters cannot be
predicted with certainty, it is the opinion of GM that none of
these items, when finally resolved, will have a material adverse
effect on the Companys financial position or liquidity.
However, should a number of these items occur in the same
period, it could have a material adverse effect on the results
of operations in a particular quarter or fiscal year.
Asbestos
Claims
Like most automobile manufacturers, GM has been subject in
recent years to asbestos-related claims. GM has seen these
claims primarily arise from three circumstances. A majority of
these claims seek damages for illnesses
164
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 20.
|
Commitments
and Contingent Matters (continued)
|
alleged to have resulted from asbestos used in brake components.
A limited numbers of claims have arisen from asbestos contained
in the insulation and brakes used in the manufacturing of
locomotives and claims brought by contractors who allege
exposure to asbestos-containing products while working on
premises owned by GM.
While GM has resolved many of the asbestos-related cases over
the years and continues to do so for strategic litigation
reasons such as avoiding defense costs and possible exposure to
excessive verdicts, management believes that only a small
proportion of the claimants has or will ever develop any
asbestos-related impairment. Only a small percentage of the
claims pending against GM allege causation of a malignant
disease associated with asbestos exposure. The amount expended
on asbestos-related matters in any year depends on the number of
claims filed, the amount of pretrial proceedings, and the number
of trials and settlements during the period.
GM records an estimated liability associated with reported
asbestos claims when it believes that the expected loss is both
probable and can be reasonably estimated. Prior to 2006, with
respect to incurred but not yet reported claims, GM concluded
that a range of probable losses was not reasonably estimable.
Over the last several years, GM has continued to accumulate data
associated with asbestos claims. Based on review of this data,
management determined that it had enough information so it
could determine a reasonable estimate of its projected incurred
but not yet reported claims that could be asserted over the next
two years.
Based on its analysis, GM recorded an additional
$127 million charge for unasserted asbestos claims in the
fourth quarter of 2006. The charge reduced net income by
$82 million or earnings per share by $0.15 for the year
ended December 31, 2006.
The amounts recorded by GM for the asbestos-related claims were
based upon currently known information. Future events, such as
the number of new claims to be filed each year and the average
cost of disposing of claims, as well as the numerous
uncertainties surrounding asbestos litigation in the United
States, could cause the actual costs to be significantly
different from those projected. Due to the uncertainty inherent
in factors used to determine GMs asbestos-related
liabilities, it is reasonably possible that future costs to
resolve asbestos claims may be greater than the estimate;
however, GM does not believe that it can reasonably estimate how
much greater it could be. However, GM believes that the
$127 million recorded at December 31, 2006, is the
best estimate of its minimum probable future obligation for the
resolution of incurred but not yet reported asbestos claims.
While the final outcome of asbestos-related matters cannot be
predicted with certainty, after discussion with counsel and
considering among other things liabilities that have been
recorded, it is the opinion of management that none of these
items, when finally resolved, is expected to have a material
adverse effect on GMs financial position or liquidity.
However, should many of these items occur in the same period,
they could have a material adverse effect on the results of
operations in a particular quarter or year.
Contingent
Matters
Litigation is subject to uncertainties and the outcome of
individual litigated matters is not predictable with assurance.
Various legal actions, governmental investigations, claims, and
proceedings are pending against the Corporation, including a
number of shareholder class actions, bondholder class actions,
shareholder derivative suits and ERISA class actions and other
matters arising out of alleged product defects including
asbestos-related claims; employment-related matters;
governmental regulations relating to safety, emissions, and fuel
economy; product warranties; financial services; dealer,
supplier, and other contractual relationships; and environmental
matters.
GM has established reserves for matters in which it believes
that losses are probable and can be reasonably estimated. Some
of the matters may involve compensatory, punitive, or other
treble damage claims, or demands for recall campaigns, incurred
but not reported asbestos-related claims, environmental
remediation programs, or sanctions, that if granted, could
require the Corporation to pay damages or make other
expenditures in amounts that could not be reasonably estimated
at December 31, 2006. While the final outcome of these
matters cannot be predicted with certainty, after discussion
with counsel, it is the opinion of management that such claims
are not
165
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 20.
|
Commitments
and Contingent Matters (continued)
|
expected to have a material adverse effect on GMs
consolidated financial condition or results of operations.
However, should many of these items occur in the same period,
they could have a material adverse effect on the results of
operations in a particular quarter or year.
Delphi
As mentioned above, GM provided guarantees with respect to
benefits for former GM employees related to pensions and
postretirement health care and life insurance (OPEB) for certain
divestitures made prior to January 1, 2003. As such, in
connection with GMs spin-off of Delphi in 1999, GM entered
into separate agreements with the UAW, the IUE-CWA and the
United Steel Workers (Benefit Guarantee Agreements) providing
contingent benefit guarantees, to make payments for limited
pension and OPEB expenses to certain former GM U.S. hourly
employees who transferred to Delphi and meet the eligibility
requirements for such payments (Covered Employees). Each Benefit
Guarantee Agreement contains separate benefit guarantees
relating to pension and OPEB obligations, with different
triggering events under which GM could be liable if Delphi fails
to provide the corresponding benefit at the required level.
Therefore, GM could incur liability under one of the guarantees
(e.g., OPEB) without triggering the other guarantees (e.g.,
pension). In addition, with respect to pension benefits,
GMs guarantee of pension benefits arises only to the
extent that the pension benefits provided by Delphi and the
Pension Benefit Guaranty Corporation falls short of the
guaranteed amount. The benefit guarantees will expire on
October 18, 2007 unless Delphi fails before that date to
pay the specified benefits which would trigger the related
guarantee. If a benefit guarantee is triggered before its
expiration date, GMs obligation could extend for the lives
of affected Covered Employees, subject to the applicable terms
of the pertinent benefit plans or other relevant agreements. A
separate agreement between GM and Delphi which also expires on
October 18, 2007, requires Delphi to indemnify GM for any
payments under the benefit guarantees to the UAW employees or
retirees. Any recovery by GM under indemnity claims against
Delphi might be subject to partial or complete discharge in the
Delphi reorganization proceeding. As a result, GMs claims
for indemnity may not be paid in part or full.
As discussed in Note 6, in 2006 GM together with Delphi and
the UAW entered into the UAW Attrition Agreement, which provided
a combination of early retirement payments and other incentives
to reduce the number of U.S. hourly employees at GM and Delphi.
At December 31, 2006, 12,400 UAW-represented Delphi
employees elected one of the retirement options available under
the UAW agreement.
Under the UAW Attrition Agreement, GM agreed to assume certain
costs regarding UAW-represented Delphi employees. Specifically,
GM agreed to: (1) pay lump sums of $35,000 to certain
employees who participate in the Attrition Program;
(2) allow Delphi employees who agree to retire under the
Attrition Program to return to GM for purposes of retirement
whereby GM would assume all OPEB obligations to such retiree;
(3) subsidize OPEB costs for Delphi employees participating
in a special voluntary pre-retirement program for an interim
period, if Delphi reduces or eliminates its health care and/or
life insurance coverage provided to active UAW employees; and
(4) accept 5,000 active flowback employees. GM will have a
prepetition, general unsecured claim assertable against Delphi,
other than the $35,000 lump sum payment subject to objections on
any grounds other than the claim did not arise under the terms
of the pre-existing contractual agreements between GM and Delphi.
As of December 31, 2006, approximately 6,200
IUE-CWA-represented Delphi employees and approximately 1,400
UAW-represented Delphi employees elected to participate in these
attrition and buyout programs similar to the program under the
UAW attrition agreements described above. GM and Delphi will
share the cost of these programs.
GM believes that it is probable that it has incurred a
contingent liability due to Delphis Chapter 11 filing
in October 2005. GM established a liability of $5.5 billion
in 2005 and recorded an additional charge of $0.5 billion
in 2006 for OPEB obligations associated with previously divested
Delphi business units and certain labor restructuring costs,
including but not limited to expenditures related to the
attrition programs discussed above. Based on currently available
data and ongoing discussions with Delphi and other stakeholders,
GM believes that the range of the contingent exposures is
between $6 billion and $7.5 billion, with amounts near
the low end of the range considered
166
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 20.
|
Commitments
and Contingent Matters (concluded)
|
more possible than amounts near the high end of the range.
GMs claims against Delphi and the other Debtors for
recoveries, would be satisfied by the payment of
$2.63 billion in cash and 7 million shares of common
stock in Delphi as reorganized, out of a total of
135 million fully diluted shares, which has been
contemplated in the range of contingent exposure and is provided
in the framework under which the parties are negotiating. Also,
GM would expect to receive up to $2 billion in cash and/or
Notes Receivable, which GM would expect to monetize within 10
days, for assuming a portion of Delphis U.S. hourly
pension plan obligations. These views reflect GMs current
assessment that it is unlikely that a Chapter 11 process
will result in both a termination of Delphis pension plan
in addition to complete elimination of its OPEB plans. The
amount of this charge may change, depending on the result of
further discussions among GM, Delphi, and Delphis unions,
and other factors. In addition to these charges, GM may agree to
reimburse Delphi for certain labor expenses to be incurred upon
and after Delphis emergence from bankruptcy. GMs
current estimate of these expenses involves an initial payment
in 2007, not expected to exceed approximately $400 million,
and ongoing expenses of limited duration and estimated to
average less than $100 million annually. As a result of
ongoing negotiations, the actual impact of the Delphi matter
will not be known until a consensual agreement has been reached
and approved by the Bankruptcy Court.
At December 31, 2006 and 2005, GMs contingent
liability related to the Delphi matters was $1.5 billion
and $5.5 billion, respectively. During 2006, amounts
previously recorded under the benefit guarantee were
reclassified to GMs OPEB liability as GM has assumed the
OPEB obligation for approximately 17,800 Delphi employees that
have returned back to GM to continue working or retire with GM
and for those covered employees that remain at Delphi.
In March 2006, Delphi also filed a motion under the U.S.
Bankruptcy Code seeking authority to reject certain supply
contracts with GM. A hearing on this motion was adjourned
indefinitely by the court pending further developments related
to Delphis U.S. labor agreements and retiree welfare
benefits. Although Delphi has not rejected any GM contracts as
of this time and has assured GM that it does not intend to
disrupt production at GM assembly facilities, there is a risk
that Delphi or one or more of its affiliates may reject or
threaten to reject individual contracts with GM, either for the
purpose of exiting specific lines of business or in an attempt
to increase the price GM pays for certain parts and components.
As a result, GM could be materially adversely affected by
disruption in the supply of automotive systems, components and
parts that could force the suspension of production at GM
assembly facilities.
Delphi is GMs largest supplier of automotive systems,
components and parts, and GM is Delphis largest customer.
GM has worked and will continue to work constructively in the
court proceedings with Delphi, Delphis unions, and other
participants in Delphis restructuring process. GMs
goal is to achieve outcomes that are in the best interests of GM
and its stockholders, and to the extent conducive to that goal,
that enable Delphi to continue as an important supplier to GM.
Benefit
Guarantees Related to Divested Unit
GM has entered into various guarantees regarding benefits for
former GM employees at two previously divested plants that
manufacture component parts whose results continue to be
included in GMs financial statements in accordance with
FIN 46(R), Consolidation of Variable Interest Entities. For
these divested plants, GM entered into agreements with both the
purchaser to indemnify, defend, and hold the purchaser harmless
for any liabilities arising out of the divested plants and with
the UAW guaranteeing certain postretirement health care benefits
and payment of postemployment benefits.
In October 2006, it was announced that production would cease at
these two plants which would permanently idle approximately
2,000 workers. Accordingly, during the fourth quarter of
2006, GM results include a charge of $206 million comprised
of the following related to the closure of these plants:
(1) a $214 million charge to recognize wage and
benefit costs associated with employees accepting retirement
packages, buyouts, or supplemental
167
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 20.
|
Commitments
and Contingent Matters (concluded)
|
unemployment benefit costs in connection with the plant closure,
(2) a curtailment loss of $3 million related to
pension benefits, and (3) a $11 million curtailment
gain with respect to other postretirement benefits.
|
|
Note 21.
|
Stockholders
Equity
|
Common
Stock
GM has 2.0 billion shares of
$12/3 par
value common stock authorized. The liquidation rights of the GM
$12/3
par value common stock are subject to certain adjustments if
outstanding common stock is subdivided, by stock split or
otherwise.
Preferred
Stock
GM has 6.0 million shares of preferred stock authorized,
without par value. The preferred stock is issuable in series
with such voting powers, designations, powers, privileges, and
rights and such qualifications, limits, or restrictions as may
be determined by GMs board of directors, without
stockholder approval. The preferred stock ranks senior to GM
common stock and any other class of stock issued by the
Corporation. Holders of preferred stock shall be entitled to
receive cumulative dividends, when and as declared by the board
of directors on a quarterly basis. At December 31, 2006 and
2005, no shares of preferred stock were issued and outstanding.
Accumulated
Other Comprehensive Income (Loss)
The following table summarizes the components of accumulated
other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in millions)
|
|
|
Foreign currency translation
adjustments
|
|
$
|
(1,965
|
)
|
|
$
|
(2,140
|
)
|
|
$
|
(1,211
|
)
|
Net unrealized gain on derivatives
|
|
|
359
|
|
|
|
608
|
|
|
|
575
|
|
Net unrealized gain on securities
|
|
|
282
|
|
|
|
786
|
|
|
|
853
|
|
Defined benefit plans
|
|
|
(20,802
|
)
|
|
|
|
|
|
|
|
|
Minimum pension liability
adjustment
|
|
|
|
|
|
|
(3,789
|
)
|
|
|
(3,031
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive
income (loss)
|
|
$
|
(22,126
|
)
|
|
$
|
(4,535
|
)
|
|
$
|
(2,814
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
168
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 21.
|
Stockholders
Equity (concluded)
|
Other
Comprehensive Income
The changes in the components of other comprehensive income
(loss) are reported net of income taxes as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
Tax
|
|
|
|
|
|
|
|
|
Tax
|
|
|
|
|
|
|
|
|
Tax
|
|
|
|
|
|
|
Pre-tax
|
|
|
Expense
|
|
|
Net
|
|
|
Pre-tax
|
|
|
Expense
|
|
|
Net
|
|
|
Pre-tax
|
|
|
Expense
|
|
|
Net
|
|
|
|
Amount
|
|
|
(Credit)
|
|
|
Amount
|
|
|
Amount
|
|
|
(Credit)
|
|
|
Amount
|
|
|
Amount
|
|
|
(Credit)
|
|
|
Amount
|
|
|
|
(Dollars in millions)
|
|
|
Foreign currency translation
adjustments
|
|
$
|
370
|
|
|
$
|
195
|
|
|
$
|
175
|
|
|
$
|
(975
|
)
|
|
$
|
(46
|
)
|
|
$
|
(929
|
)
|
|
$
|
1,192
|
|
|
$
|
(85
|
)
|
|
$
|
1,277
|
|
Unrealized gain on securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gain (loss)
|
|
|
196
|
|
|
|
69
|
|
|
|
127
|
|
|
|
146
|
|
|
|
51
|
|
|
|
95
|
|
|
|
378
|
|
|
|
132
|
|
|
|
246
|
|
Reclassification adjustment
|
|
|
(971
|
)
|
|
|
(340
|
)
|
|
|
(631
|
)
|
|
|
(249
|
)
|
|
|
(87
|
)
|
|
|
(162
|
)
|
|
|
(67
|
)
|
|
|
(23
|
)
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gain (loss)
|
|
|
(775
|
)
|
|
|
(271
|
)
|
|
|
(504
|
)
|
|
|
(103
|
)
|
|
|
(36
|
)
|
|
|
(67
|
)
|
|
|
311
|
|
|
|
109
|
|
|
|
202
|
|
Minimum pension liability adjustment
|
|
|
(103
|
)
|
|
|
(36
|
)
|
|
|
(67
|
)
|
|
|
(1,166
|
)
|
|
|
(408
|
)
|
|
|
(758
|
)
|
|
|
(878
|
)
|
|
|
(307
|
)
|
|
|
(571
|
)
|
Net unrealized gain (loss) on
derivatives
|
|
|
(383
|
)
|
|
|
(134
|
)
|
|
|
(249
|
)
|
|
|
51
|
|
|
|
18
|
|
|
|
33
|
|
|
|
712
|
|
|
|
249
|
|
|
|
463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
$
|
(891
|
)
|
|
$
|
(246
|
)
|
|
$
|
(645
|
)
|
|
$
|
(2,193
|
)
|
|
$
|
(472
|
)
|
|
$
|
(1,721
|
)
|
|
$
|
1,337
|
|
|
$
|
(34
|
)
|
|
$
|
1,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 22.
|
Earnings
(Loss) Per Share
|
Earnings per share (EPS) attributable to GM common stock was
determined based on earnings for the period divided by the
weighted-average number of common shares outstanding during the
period. Diluted EPS attributable to GM common stock considers
the effect of potential common shares, unless the inclusion of
the potential common shares would have an antidilutive effect.
169
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
Note 22. Earnings
(Loss) Per Share (concluded)
The reconciliation of the amounts used in the basic and diluted
earnings per share computations was as follows (dollars in
millions, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share
|
|
|
|
Income (loss)
|
|
|
Shares
|
|
|
Amount
|
|
|
Year ended December 31,
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before cumulative
effect of a change in accounting principle attributable to
common stock
|
|
$
|
(1,978
|
)
|
|
|
566
|
|
|
$
|
(3.50
|
)
|
Effect of Dilutive
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumed exercise of dilutive stock
options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted income (loss)
attributable to common stock
|
|
$
|
(1,978
|
)
|
|
|
566
|
|
|
$
|
(3.50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before cumulative
effect of a change in accounting principle attributable to
common stock
|
|
$
|
(10,308
|
)
|
|
|
566
|
|
|
$
|
(18.23
|
)
|
Effect of Dilutive
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumed exercise of dilutive stock
options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted income (loss)
attributable to common stock
|
|
$
|
(10,308
|
)
|
|
|
566
|
|
|
$
|
(18.23
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before cumulative effect of
a change in accounting principle attributable to common stock
|
|
$
|
2,701
|
|
|
|
565
|
|
|
$
|
4.78
|
|
Effect of Dilutive
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumed exercise of dilutive stock
options
|
|
|
|
|
|
|
2
|
|
|
|
(.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted income attributable to
common stock
|
|
$
|
2,701
|
|
|
|
567
|
|
|
$
|
4.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain stock options and convertible securities were not
included in the computation of diluted earnings per share for
the periods presented since the instruments underlying
exercise prices were greater than the average market prices of
GM
$12/3
par value common stock and inclusion would be antidilutive. Such
shares not included in the computation of diluted earnings per
share were 106 million, 111 million, and
88 million as of December 31, 2006, 2005, and 2004,
respectively. In addition, for periods in which there was a loss
attributable to common stock, options to purchase shares of GM
$12/3
par value common stock with the underlying exercise prices less
than the average market prices were outstanding, but were
excluded from the calculations of diluted loss per share, as
inclusion of these securities would have been antidilutive.
No shares potentially issuable to satisfy the
in-the-money-amount
of the convertible debentures have been included in diluted
earnings per share as of December 31, 2006, as the
convertible debentures have not met the requirements for
conversion.
170
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 23.
|
Derivative
Financial Instruments and Risk Management
|
Derivatives
and Hedges
GM is exposed to market risk from changes in foreign currency
exchange rates, interest rates, and certain commodity prices. In
the normal course of business, GM enters into a variety of
foreign exchange, interest rate, and commodity forward
contracts, swaps, and options, with the objective of managing
its financial and operational exposure arising from these risks
by offsetting gains and losses on the underlying exposures with
gains and losses on the derivatives used to hedge them.
GMs risk management control system is used to assist in
monitoring the hedging program, derivative positions and hedging
strategies. GMs hedging documentation includes the hedging
objectives, practices and procedures, and related accounting
treatment. Hedges that receive designated hedge accounting
treatment are evaluated for effectiveness at the time they are
designated as well as throughout the hedging period. As
discussed in Note 2, GM restated its 2005 and 2004
financial statements for certain derivative transactions.
Cash Flow Hedges
GM uses financial instruments designated as cash flow hedges to
hedge its exposure to foreign currency exchange risk associated
with buying, selling, and financing in currencies other than the
local currencies in which it operates, and to variability in
cash flows related to its exposure to commodity price risk
associated with changes in the prices of commodities used in its
automotive business, primarily precious metals, nonferrous
metals, and energy and to hedge exposure to variability in cash
flows related to foreign-currency-denominated debt. For foreign
currency transactions, GM typically hedges forecasted exposures
up to three years in the future. For commodities, GM typically
hedges exposure up to three years in the future.
For derivatives designated as cash flow hedges, GM records
changes in fair value in OCI, then releases those changes to
earnings contemporaneously with the earnings effects of the
hedged item. If the hedge relationship is terminated and the
forecasted transaction is no longer probable of occurring, then
the cumulative change in fair value of the derivative recorded
in OCI is recognized in earnings. To the extent the hedging
relationship is not effective, the ineffective portion of the
change in fair value of the derivative instrument is recorded in
earnings.
For the year ended December 31, 2006, hedge ineffectiveness
associated with instruments designated as cash flow hedges
increased Automotive cost of sales by $17.4 million. For the
year ended December 31, 2005, hedge ineffectiveness
associated with instruments designated as cash flow hedges
decreased Automotive cost of sales by $9.5 million. For the year
ended December 31, 2006, net derivative gains of
$484.2 million were reclassified from OCI to Automotive
cost of sales and net derivative gains of $693.1 million
were reclassified from OCI to Automotive revenue. For the year
ended December 31, 2005, net derivative gains of
$205.6 million were reclassified from OCI to cost of sales
and $199.8 million was reclassified from OCI to revenue.
These net (losses) gains were offset by net gains (losses) on
the transactions being hedged.
Approximately $292.7 million of net derivative gains
included in OCI at December 31, 2006, is expected to be
reclassified into earnings within 12 months from that date.
For the years ended December 31, 2006 and 2005, there was a
net loss of approximately $17.8 million and a net gain of
approximately $46.6 million, respectively, which were
reclassified into earnings as a result of the discontinuance of
certain commodity cash flow hedges because it was probable that
the original forecasted transactions would not occur.
Fair Value Hedges
GM uses financial instruments designated as fair value hedges to
manage certain of its exposure to interest rate risk. GM is
subject to market risk from exposures to changes in interest
rates due to its financing, investing, and cash management
activities. A variety of instruments are used to hedge GMs
exposure associated with its fixed rate debt and mortgage
servicing rights (MSRs). GM records changes in the fair value of
a derivative designated as a fair value hedge in earnings,
offset by corresponding changes in the fair value of the hedged
item to the extent the hedge is effective.
171
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 23.
|
Derivative
Financial Instruments and Risk
Management (concluded)
|
For the year ended December 31, 2006 and 2005, hedge
ineffectiveness associated with instruments designated as fair
value hedges, primarily due to hedging of MSRs, increased
selling, general, and administrative expenses by $1 million and
decreased selling, general, and administrative expenses by
$26 million, respectively.
Net Investment Hedges
GM uses foreign-currency-denominated-debt to offset the
translation and economic exposures related to its investment in
foreign entities. Foreign currency transaction gains and losses
related to these debt instruments are recorded in accumulated
foreign currency translation adjustment. For the year ended
December 31, 2006 and 2005, unrealized losses of $138.5
million loss and unrealized gains of $50.5 million,
respectively, were recorded in accumulated foreign currency
translation adjustment.
Derivatives
Not Qualifying for Hedge Accounting
GM purchases raw materials and parts comprising various
commodities whose purchase price varies based on changes in the
price of the related commodity. The Corporation hedges the
commodity price risk economically by entering into derivative
contracts and previously designated those instruments as cash
flow hedges. However, as discussed in Note 2, GM determined
that certain of these derivative instruments did not qualify for
hedge accounting treatment under SFAS No. 133 and, therefore,
certain derivative instruments were marked-to-market through
Automotive cost of sales in 2006, 2005, and 2004.
Additionally, GM is exposed to foreign exchange risk related to
its forecasted foreign currency sales and purchases and its net
investments in foreign subsidiaries. GM hedges the foreign
exchange risk economically by entering into derivative contracts
and previously designated certain of those instruments as cash
flow hedges or as net investment hedges. However, as discussed
in Note 2, GM determined that some of these derivative
instruments did not qualify for hedge accounting and, therefore,
these derivative instruments were marked-to-market through
Automotive cost of sales in 2006, 2005, and 2004.
Derivatives
Not Meeting a Scope Exception from Fair Value
Accounting
GM enters into purchase contracts to hedge its physical exposure
to the availability of certain commodities used in the
production of cars and trucks. GM did not previously account for
these contracts as derivatives, instead GM applied the
normal purchases and normal sales (NPNS) scope
exception in SFAS No. 133. As described in Note 2, GM
determined that some of these contracts did not qualify for the
NPNS scope exception from fair value accounting in SFAS
No. 133 and, therefore, these commodity purchase contracts
have been accounted for as derivatives with gains and losses
recorded in Automotive cost of sales in 2006, 2005, and 2004.
Derivatives Not Designated as Hedges
GM uses derivatives such as forward contracts and options,
including caps, floors and collars to economically hedge
exposures. Unrealized gains and losses related to these
derivatives that are not designated as accounting hedges are
recognized currently in Automotive cost of sales.
Note 24. Fair
Value of Financial Instruments
The estimated fair value of financial instruments has been
determined using available market information or other
appropriate valuation methodologies. However, considerable
judgment is required in interpreting market data to develop
estimates of fair value; therefore, the estimates are not
necessarily indicative of the amounts that could be realized or
would be paid in a current market exchange. The effect of using
different market assumptions
and/or
estimation methodologies may be material to the estimated fair
value amounts.
172
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 24.
|
Fair
Value of Financial Instruments (concluded)
|
Book and estimated fair values of financial instruments for
which it is practicable to estimate fair value were as follows
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
Book Value
|
|
|
Fair Value
|
|
|
Book Value
|
|
|
Fair Value
|
|
|
Assets
|
Derivative assets
|
|
$
|
2,080
|
|
|
$
|
2,080
|
|
|
$
|
1,938
|
|
|
$
|
1,938
|
|
|
Liabilities
|
Long-term debt(1)
|
|
$
|
33,067
|
|
|
$
|
28,877
|
|
|
$
|
32,580
|
|
|
$
|
25,447
|
|
Derivative liabilities
|
|
$
|
916
|
|
|
$
|
916
|
|
|
$
|
859
|
|
|
$
|
859
|
|
Financing and Insurance
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance receivables
net(2)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
180,849
|
|
|
$
|
181,146
|
|
Derivative assets
|
|
$
|
35
|
|
|
$
|
35
|
|
|
$
|
3,000
|
|
|
$
|
3,000
|
|
Loans held for sale(3)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
21,865
|
|
|
$
|
21,934
|
|
Other assets(4)
|
|
$
|
1,601
|
|
|
$
|
1,601
|
|
|
$
|
|
|
|
$
|
|
|
|
Liabilities
|
Debt(1)
|
|
$
|
9,438
|
|
|
$
|
9,438
|
|
|
$
|
253,508
|
|
|
$
|
245,247
|
|
Derivative liabilities
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
2,444
|
|
|
$
|
2,444
|
|
Other liabilities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
5,930
|
|
|
$
|
5,930
|
|
|
|
|
(1) |
|
Long-term debt has an estimated fair value based on quoted
market prices for the same or similar issues or based on the
current rates offered to GM for debt of similar remaining
maturities. Estimated values of Industrial Development Bonds,
included in long-term debt, were based on quoted market prices
for the same or similar issues. |
|
(2) |
|
The fair value was estimated by discounting the future cash
flows using applicable spreads to approximate current rates
applicable to each category of the receivables. |
|
(3) |
|
The fair value of loans held for sale is based upon actual
prices on recent sales of loans and securities to investors and
projected prices obtained through investor indications
considering interest rates, loan type and credit quality. |
|
(4) |
|
The fair value of the GMAC Preferred Membership Interest was
estimated by discounting the future cash flows considering
dividend rate, interest rate, and credit spreads. |
Due to their short-term nature, the book value approximates fair
value for cash and marketable securities, accounts and notes
receivable (less allowances), accounts payable (principally
trade), Auto & Other loans payable and FIO debt payable
within one year for the years ended December 31, 2006 and
2005.
Note 25. Stock
Incentive Plans
GMs stock incentive plans consist of the General Motors
2002 Stock Incentive Plan, formerly the 1997 General Motors
Amended Stock Incentive Plan (GMSIP), the General Motors 1998
Salaried Stock Option Plan (GMSSOP), the General Motors 2002
Long Term Incentive Plan (GMLTIP), and the General Motors 2006
Cash-Based Restricted Stock Unit Plan (GMCRSU), collectively the
Plans. The GMSIP, the GMLTIP and the GMCRSU are administered by
the Executive Compensation Committee of GMs board of
directors. The GMSSOP is administered by the Vice President of
Global Human Resources.
173
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 25.
|
Stock
Incentive Plans (continued)
|
The compensation cost for the above plans was approximately
$170 million, $88.7 million, and $66 million for
the years ended December 31, 2006, 2005, and 2004,
respectively. The total income tax benefit recognized for
share-based compensation arrangements was approximately
$53.3 million, $31 million, and $23.1 million for
the years ended December 31, 2006, 2005, and 2004,
respectively.
On November 30, 2006, GM sold a 51% controlling interest in
GMAC. GMAC employees who participated in the GM stock incentive
plans changed status from employee to non-employee. Based on
this change in status, certain outstanding share-based payment
awards were forfeited under the original terms but were modified
to allow continued vesting. This resulted in the cancellation of
the original awards and the issuance of a new award to
non-employees. The remainder of the awards were not forfeited
under the original terms, and thus there was no modification to
the outstanding awards. GM awards that require future service
with GMAC will be accounted for as awards to non-employees over
the remaining service period. The effect on compensation cost
was not significant to GM.
GMSIP
and GMSSOP
Under the GMSIP, 27.4 million shares of GM
$12/3
par value common stock may be granted from June 1, 2002
through May 31, 2007, of which approximately
4.9 million were available for grants at December 31,
2006. Any shares granted and undelivered under the GMSIP, due
primarily to expiration or termination, become again available
for grant. Stock option grants awarded since 1997 are generally
exercisable one-third after one year, one-third after two years
and fully after three years from the dates of grant. Option
prices are 100% of fair market value on the dates of grant, and
the options generally expire 10 years from the dates of
grant, subject to earlier termination under certain conditions.
GMs policy is to issue treasury shares upon exercise of
employee stock options.
Under the GMSSOP, which commenced January 1, 1998 and ends
December 31, 2007, the number of shares of GM
$12/3
par value common stock that may be granted each year is
determined by management. Based on an amendment to the GMSSOP in
2006, there are no shares of GM
$12/3
par value common stock available for grants at December 31,
2006. Stock options granted from 1998 through 2004 are
exercisable two years from the date of grant. There have been no
option grants made under the plan since 2004. Option prices are
100% of fair market value on the dates of grant, and the options
generally expire ten years and two days from the dates of
grant subject to earlier termination under certain conditions.
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the
weighted-average assumptions noted in the following table.
Expected volatilities are based on both the implied and
historical volatility of the Corporations stock. The
Corporation uses historical data to estimate option exercise and
employee termination within the valuation model. The expected
term of options represents the period of time that options
granted are expected to be outstanding. The interest rate for
periods during the expected life of the option is based on the
U.S. Treasury yield curve in effect at the time of the
grant.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
GM
|
|
|
GM
|
|
|
GM
|
|
|
GM
|
|
|
GM
|
|
|
GM
|
|
|
|
SIP
|
|
|
SSOP
|
|
|
SIP
|
|
|
SSOP
|
|
|
SIP
|
|
|
SSOP
|
|
|
Interest rate
|
|
|
4.66
|
%
|
|
|
|
%
|
|
|
3.8
|
%
|
|
|
|
%
|
|
|
3.1
|
%
|
|
|
3.1
|
%
|
Expected life (years)
|
|
|
6.0
|
|
|
|
|
|
|
|
6.0
|
|
|
|
|
|
|
|
5.0
|
|
|
|
5.0
|
|
Expected volatility
|
|
|
47.9
|
%
|
|
|
|
%
|
|
|
32.5
|
%
|
|
|
|
%
|
|
|
33.9
|
%
|
|
|
33.9
|
%
|
Dividend yield
|
|
|
4.7
|
%
|
|
|
|
%
|
|
|
5.5
|
%
|
|
|
|
%
|
|
|
3.7
|
%
|
|
|
3.7
|
%
|
The primary grant to executives on February 23, 2006,
January 24, 2005, and January 23, 2004 made under the
Stock Incentive Plan were 2,702,796, 7,619,250, and 7,920,660
shares, respectively, at a grant date fair value of
174
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 25.
|
Stock
Incentive Plans (continued)
|
$7.06, $7.21, and $12.85, respectively. The assumptions used to
estimate the grant date fair value of these grants are detailed
in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Interest rate
|
|
|
4.63
|
%
|
|
|
3.74
|
%
|
|
|
3.06
|
%
|
Expected life (years)
|
|
|
6.0
|
|
|
|
6.0
|
|
|
|
5.0
|
|
Expected volatility
|
|
|
48.4
|
%
|
|
|
32.4
|
%
|
|
|
33.9
|
%
|
Dividend yield
|
|
|
4.78
|
%
|
|
|
5.50
|
%
|
|
|
3.71
|
%
|
Changes in the status of outstanding options during the year
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GMSIP
|
|
|
|
$12/3 Par
Value Common
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Shares Under
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Option
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
|
Options outstanding at
January 1, 2006
|
|
|
84,130,586
|
|
|
$
|
53.11
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
2,841,686
|
|
|
$
|
21.33
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
5,317,094
|
|
|
$
|
46.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at
December 31, 2006
|
|
|
81,655,178
|
|
|
$
|
52.41
|
|
|
|
4.6
|
|
|
$
|
26,324,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at
December 31, 2006
|
|
|
71,561,211
|
|
|
$
|
54.67
|
|
|
|
4.1
|
|
|
$
|
30,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GMSSOP
|
|
|
|
$12/3 Par
Value Common
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Shares Under
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Option
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
|
Options outstanding at
January 1, 2006
|
|
|
27,213,635
|
|
|
$
|
55.19
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
629,740
|
|
|
$
|
53.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at
December 31, 2006
|
|
|
26,583,895
|
|
|
$
|
55.23
|
|
|
|
4.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at
December 31, 2006
|
|
|
26,583,895
|
|
|
$
|
55.23
|
|
|
|
4.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted-average grant-date fair value was $7.19, $7.23, and
$12.82 for the GMSIP options granted in 2006, 2005, and 2004,
respectively. The weighted-average grant-date fair value was $0,
$0, and $12.85 for the GMSSOP options granted in 2006, 2005, and
2004, respectively. The total intrinsic value of GMSIP options
exercised during the years ended December 31, 2006, 2005,
and 2004 was $0, $2.1 million, and $9.6 million,
respectively. The total intrinsic value of GMSSOP options
exercised during the years ended December 31, 2006, 2005,
and 2004 was $0, $0, and $0.1 million, respectively. The
tax benefit from the exercise of the share-based payment
arrangements for the years ended December 31, 2006, 2005,
and 2004 totaled $0, $0.7 million, and $3.4 million,
respectively.
175
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 25.
|
Stock
Incentive Plans (continued)
|
Summary
A summary of the status of the Corporations options as of
December 31, 2006 and the changes during the year then
ended, is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant-Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Nonvested at January 1, 2006
|
|
|
15,923,106
|
|
|
$
|
9.28
|
|
Granted
|
|
|
2,841,686
|
|
|
|
7.19
|
|
Vested
|
|
|
8,431,121
|
|
|
|
9.44
|
|
Forfeited
|
|
|
239,704
|
|
|
|
8.61
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2006
|
|
|
10,093,967
|
|
|
$
|
8.57
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006, there was $12.2 million of
total unrecognized compensation cost related to nonvested
share-based compensation arrangements granted under the Plans.
That cost is expected to be recognized over a weighted-average
period of 0.8 years.
Cash received from option exercise under all share-based payment
arrangements for the years ended December 31, 2006, 2005,
and 2004 was $0 million, $0.4 million, and
$1.5 million, respectively.
GMLTIP
The GMLTIP consists of award opportunities granted to
participants that are based on the achievement of specific
corporate business criteria. The target number of shares of GM
$12/3
par value common stock that may be granted each year is
determined by management. These grants are subject to a three
year performance period and the final award payout may vary
based on the achievement of those criteria. The condition for
all awards is a minimum percentile ranking of GMs TSR
among the companies in the S&P 500.
At December 31, 2006, approximately 5.7 million target
shares were outstanding under the GMLTIP. Of these outstanding
shares, a total of 1.3 million were granted in 2004 at a
grant-date fair value of $53.92. If the minimum performance
criteria are achieved, management intends to settle these awards
with GM
$12/3
par value common stock. Of the remaining outstanding shares,
approximately 2.4 million and 2.0 million were granted
in 2006 and 2005 at a grant date fair value of $24.81 and
$36.37, respectively. Management is required to settle these
awards in cash. As a result, these cash-settled awards are
recorded as a liability until the date of final award payout. In
accordance with SFAS No. 123(R), the fair value of
each cash-settled award is recalculated at the end of each
reporting period and the liability and expense adjusted based on
the change in fair value. The preceding is the targeted number
of shares that would be used in the final award calculation
should the targeted performance condition be achieved. Final
payout is subject to approval by the Executive Compensation
Committee of the Board of Directors. The fair value at
December 31, 2006 was $43.80 and $11.90 for the awards
granted during the years ended December 31, 2006 and 2005,
respectively.
Prior to the adoption of SFAS No. 123(R), the fair
value of each award under the GMLTIP was equal to the fair
market value of the underlying shares on the date of grant.
Beginning January 1, 2006 in accordance with the adoption
of SFAS No. 123(R), the fair value of each
cash-settled award under the GMLTIP is estimated on the date of
grant, and for each subsequent reporting period, using a
lattice-based option valuation model that uses the assumptions
noted in the following table. Because lattice-based valuation
models incorporate ranges of assumptions for inputs, those
ranges are disclosed. Expected volatilities are based on the
implied volatility from GMs
176
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 25.
|
Stock
Incentive Plans (concluded)
|
tradable options. The expected term of these target awards
represent the remaining time in the performance period. The
risk-free rate for periods during the contractual life of the
performance shares is based on the U.S. Treasury yield
curve in effect at the time of valuation. Because the payout
depends on the Corporations performance ranked with the
S&P 500, the valuation also depends on the performance of
other stocks in the S&P 500 from the grant date to the
exercise date as well as estimates of the correlations among
their future performances.
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
Expected volatility
|
|
|
38.1
|
%
|
|
|
37.6
|
%
|
Expected dividends
|
|
|
N/A
|
|
|
|
N/A
|
|
Expected term (years)
|
|
|
2.0
|
|
|
|
1.0
|
|
Risk-free interest rate
|
|
|
5.24
|
%
|
|
|
5.13
|
%
|
The primary grant to executives on February 23, 2006 and
January 24, 2005 made under the GMLTIP were 2,427,869 and
1,959,490 shares, respectively, at a grant date fair value of
$24.81 and $36.37, respectively. The assumptions used to
estimate fair value at December 31, 2006 are detailed in
the table above.
The weighted average remaining contractual term was
1.2 years for target awards outstanding at
December 31, 2006. As the threshold performance required
for a payment under the
2004-2006
LTIP was not achieved, there were no shares delivered for this
plan in 2006. The
2005-2007
and
2006-2008
performance periods remain open at December 31, 2006.
GM
CRSU
In 2006, the Corporation established a cash-based restricted
stock unit plan that provides cash equal to the value of
underlying restricted share units to certain global executives
at predetermined vesting dates. Awards under the plan vest and
are paid in one-third increments on each anniversary date of the
award over a three year period. Compensation expense is
recognized on a straight-line basis over the requisite service
period for each separately vesting portion of the award. Since
the awards are settled in cash, these cash-settled awards are
recorded as a liability until the date of payment. In accordance
with SFAS No. 123(R), the fair value of each
cash-settled award is recalculated at the end of each reporting
period and the liability and expense adjusted based on the new
fair value.
The fair value of each CRSU is based on the Corporations
stock price on the date of grant and each subsequent reporting
period until date of settlement. There were 4.3 million
CRSUs granted during the year ended December 31, 2006 with
a weighted average grant date fair value of $21.04 per
share. The fair value at December 31, 2006 was
$30.72 per share, and there were 3.9 million CRSUs
outstanding.
The weighted average remaining contractual term was
2.2 years for the CRSUs outstanding at December 31,
2006. There were no share units vested or delivered during the
year ended December 31, 2006, other than for share units
related to GMAC employees who received pro-rata settlements
based on their service to GM prior to the GMAC sale. The share
units related to these GMAC employees were delivered in 2007.
177
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 26.
|
Supplemental
Information for Statements of Cash Flows
|
Statements
of Cash Flows Supplementary Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
Restated
|
|
|
|
(Dollars in millions)
|
|
|
Increase (decrease) in other
operating assets and liabilities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
(242
|
)
|
|
$
|
63
|
|
|
$
|
(268
|
)
|
Other receivables
|
|
|
(2,983
|
)
|
|
|
4,092
|
|
|
|
419
|
|
Prepaid expenses and other
deferred charges
|
|
|
303
|
|
|
|
(83
|
)
|
|
|
42
|
|
Inventories
|
|
|
377
|
|
|
|
(1,464
|
)
|
|
|
(140
|
)
|
Other assets
|
|
|
(173
|
)
|
|
|
(32
|
)
|
|
|
(153
|
)
|
Accounts payable
|
|
|
418
|
|
|
|
(122
|
)
|
|
|
2,434
|
|
Deferred taxes and income taxes
payable
|
|
|
(4,241
|
)
|
|
|
(6,386
|
)
|
|
|
(1,145
|
)
|
Accrued expenses and other
liabilities
|
|
|
(5,892
|
)
|
|
|
(793
|
)
|
|
|
(1,783
|
)
|
Fleet rental
acquisitions
|
|
|
(8,701
|
)
|
|
|
(9,452
|
)
|
|
|
(7,846
|
)
|
Fleet rental
liquidations
|
|
|
8,526
|
|
|
|
7,379
|
|
|
|
6,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(12,608
|
)
|
|
$
|
(6,798
|
)
|
|
$
|
(1,754
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
17,415
|
|
|
$
|
15,815
|
|
|
$
|
11,395
|
|
|
|
Note 27.
|
Segment
Reporting
|
SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, established standards
for reporting information about operating segments in financial
statements. Operating segments are defined as components of an
enterprise about which separate financial information is
available that is evaluated regularly by the chief operating
decision maker, or decision making group, in deciding how to
allocate resources and in assessing performance. GMs chief
operating decision maker is the Chief Executive Officer. The
operating segments are managed separately because each operating
segment represents a strategic business unit that offers
different products and serves different markets.
GMs Automotive business consists of GMs four
automotive regions: GMNA, GME, GMLAAM, and GMAP, which together
constitute GM Automotive (GMA). GMNA develops, manufactures,
and/or
markets vehicles primarily in North America under the following
brands: Chevrolet, Pontiac, GMC, Buick, Cadillac, Saturn, Saab,
and Hummer. GME, GMLAAM, and GMAP primarily meet the demands of
customers outside North America with vehicles developed,
manufactured, and marketed under the following brands: Opel,
Vauxhall, Holden, Saab, Buick, Chevrolet, GMC, Cadillac, and
Daewoo. GMs FIO business consists of GMAC for 2004, 2005
and the eleven months ended November 30, 2006 and GMs
49% share of GMACs operating results for the month of
December 2006 on the equity method and Other Financing, which
includes financing entities that are not consolidated by GMAC.
GMAC provides a broad range of financial services, including
consumer vehicle financing, full-service leasing and fleet
leasing, dealer financing, car and truck extended service
contracts, residential and commercial mortgage services,
commercial and vehicle insurance, and asset-based lending.
Corporate & Other includes the elimination of intersegment
transactions, certain non-segment specific revenues and
expenditures, including legacy costs related to postretirement
benefits for certain Delphi and other retirees, and certain
corporate activities.
The disaggregated financial results 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. Transactions between segments have been
eliminated.
178
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
Note 27. Segment
Reporting (continued)
These transactions consist principally of borrowings and other
financial services provided by FIO to Auto. A master
intercompany agreement was in effect until November 30,
2006 which governed the nature of these transactions to ensure
that they were done in accordance with commercially reasonable
standards. GM evaluates performance based on stand-alone
operating segment net income and generally accounts for
intersegment sales and transfers as if the sales or transfers
were to third parties, that is, at current market prices.
Revenues are attributed to geographic areas based on the
location of the assets producing the revenues.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GM
|
|
|
|
|
|
Total
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
Corporate
|
|
|
|
|
|
|
GMNA
|
|
|
GME
|
|
|
LAAM
|
|
|
GMAP
|
|
|
GMA
|
|
|
GMAC(c)
|
|
|
Financing(d)
|
|
|
Financing
|
|
|
& Other
|
|
|
Total
|
|
|
|
(Dollars in millions)
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External customers
|
|
$
|
115,756
|
|
|
$
|
31,405
|
|
|
$
|
14,015
|
|
|
$
|
11,912
|
|
|
$
|
173,088
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(161
|
)
|
|
$
|
172,927
|
|
Intersegment
|
|
|
(5,977
|
)
|
|
|
1,788
|
|
|
|
603
|
|
|
|
3,587
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total automotive sales
|
|
|
109,779
|
|
|
|
33,193
|
|
|
|
14,618
|
|
|
|
15,499
|
|
|
|
173,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(162
|
)
|
|
|
172,927
|
|
Financial services and insurance
revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,629
|
|
|
|
793
|
|
|
|
34,422
|
|
|
|
|
|
|
|
34,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenues
|
|
$
|
109,779
|
|
|
$
|
33,193
|
|
|
$
|
14,618
|
|
|
$
|
15,499
|
|
|
$
|
173,089
|
|
|
$
|
33,629
|
|
|
$
|
793
|
|
|
$
|
34,422
|
|
|
$
|
(162
|
)
|
|
$
|
207,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive cost of sales
|
|
$
|
106,575
|
|
|
$
|
30,783
|
|
|
$
|
13,296
|
|
|
$
|
14,185
|
|
|
$
|
164,839
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(157
|
)
|
|
$
|
164,682
|
|
Selling, general and administrative
expense
|
|
$
|
8,709
|
|
|
$
|
2,600
|
|
|
$
|
764
|
|
|
$
|
1,145
|
|
|
$
|
13,218
|
|
|
$
|
12,702
|
|
|
$
|
(1,524
|
)
|
|
$
|
11,178
|
|
|
$
|
685
|
|
|
$
|
25,081
|
|
Depreciation and amortization
|
|
$
|
5,793
|
|
|
$
|
1,634
|
|
|
$
|
227
|
|
|
$
|
483
|
|
|
$
|
8,137
|
|
|
$
|
5,252
|
|
|
$
|
(2,461
|
)
|
|
$
|
2,791
|
|
|
$
|
22
|
|
|
$
|
10,950
|
|
Interest income
|
|
$
|
1,353
|
|
|
$
|
533
|
|
|
$
|
87
|
|
|
$
|
122
|
|
|
$
|
2,095
|
|
|
$
|
2,332
|
|
|
$
|
(480
|
)
|
|
$
|
1,852
|
|
|
$
|
(1,374
|
)
|
|
$
|
2,573
|
|
Interest expense
|
|
$
|
3,285
|
|
|
$
|
664
|
|
|
$
|
158
|
|
|
$
|
222
|
|
|
$
|
4,329
|
|
|
$
|
14,196
|
|
|
$
|
105
|
|
|
$
|
14,301
|
|
|
$
|
(1,685
|
)
|
|
$
|
16,945
|
|
Income tax expense (benefit)
|
|
$
|
(2,243
|
)
|
|
$
|
(72
|
)
|
|
$
|
28
|
|
|
$
|
(23
|
)
|
|
$
|
(2,310
|
)
|
|
$
|
62
|
|
|
$
|
773
|
|
|
$
|
835
|
|
|
$
|
(1,310
|
)
|
|
$
|
(2,785
|
)
|
Earnings (losses) of
nonconsolidated affiliates
|
|
$
|
104
|
|
|
$
|
36
|
|
|
$
|
16
|
|
|
$
|
365
|
|
|
$
|
521
|
|
|
$
|
(16
|
)
|
|
$
|
|
|
|
$
|
(16
|
)
|
|
$
|
3
|
|
|
$
|
508
|
|
Net income (loss)(b)
|
|
$
|
(4,619
|
)
|
|
$
|
(225
|
)
|
|
$
|
490
|
|
|
$
|
1,186
|
|
|
$
|
(3,168
|
)
|
|
$
|
2,179
|
|
|
$
|
(1,150
|
)
|
|
$
|
1,029
|
|
|
$
|
161
|
|
|
$
|
(1,978
|
)
|
Investments in nonconsolidated
affiliates
|
|
$
|
295
|
|
|
$
|
408
|
|
|
$
|
132
|
|
|
$
|
1,100
|
|
|
$
|
1,935
|
|
|
$
|
7,523
|
|
|
$
|
|
|
|
$
|
7,523
|
|
|
$
|
34
|
|
|
$
|
9,492
|
|
Segment assets
|
|
$
|
118,573
|
|
|
$
|
26,610
|
|
|
$
|
4,202
|
|
|
$
|
13,285
|
|
|
$
|
162,670
|
|
|
$
|
13,050
|
|
|
$
|
9,073
|
|
|
$
|
22,123
|
|
|
$
|
1,399
|
|
|
$
|
186,192
|
|
Goodwill
|
|
$
|
299
|
|
|
$
|
500
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
799
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
799
|
|
Expenditures for property
|
|
$
|
5,048
|
|
|
$
|
1,103
|
|
|
$
|
279
|
|
|
$
|
1,030
|
|
|
$
|
7,460
|
|
|
$
|
401
|
|
|
$
|
1
|
|
|
$
|
402
|
|
|
$
|
71
|
|
|
$
|
7,933
|
|
179
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
Note 27. Segment
Reporting (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GM
|
|
|
|
|
|
Total
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
Corporate
|
|
|
|
|
|
|
GMNA
|
|
|
GME
|
|
|
LAAM
|
|
|
GMAP
|
|
|
GMA
|
|
|
GMAC(c)
|
|
|
Financing(d)
|
|
|
Financing
|
|
|
& Other
|
|
|
Total
|
|
|
|
(Dollars in millions)
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External customers
|
|
$
|
110,121
|
|
|
$
|
30,173
|
|
|
$
|
11,129
|
|
|
$
|
8,771
|
|
|
$
|
160,194
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
34
|
|
|
$
|
160,228
|
|
Intersegment
|
|
|
(4,481
|
)
|
|
|
1,719
|
|
|
|
715
|
|
|
|
2,050
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total automotive sales(a)
|
|
|
105,640
|
|
|
|
31,892
|
|
|
|
11,844
|
|
|
|
10,821
|
|
|
|
160,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
|
160,228
|
|
Financial services and insurance
revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,081
|
|
|
|
346
|
|
|
|
34,427
|
|
|
|
|
|
|
|
34,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenues
|
|
$
|
105,640
|
|
|
$
|
31,892
|
|
|
$
|
11,844
|
|
|
$
|
10,821
|
|
|
$
|
160,197
|
|
|
$
|
34,081
|
|
|
$
|
346
|
|
|
$
|
34,427
|
|
|
$
|
31
|
|
|
$
|
194,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive cost of sales
|
|
$
|
105,718
|
|
|
$
|
31,152
|
|
|
$
|
11,070
|
|
|
$
|
10,224
|
|
|
$
|
158,164
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
723
|
|
|
$
|
158,887
|
|
Selling, general and administrative
expense
|
|
$
|
8,968
|
|
|
$
|
2,406
|
|
|
$
|
623
|
|
|
$
|
761
|
|
|
$
|
12,758
|
|
|
$
|
13,407
|
|
|
$
|
905
|
|
|
$
|
14,312
|
|
|
$
|
443
|
|
|
$
|
27,513
|
|
Depreciation and amortization
|
|
$
|
7,593
|
|
|
$
|
1,788
|
|
|
$
|
325
|
|
|
$
|
379
|
|
|
$
|
10,085
|
|
|
$
|
5,548
|
|
|
$
|
148
|
|
|
$
|
5,696
|
|
|
$
|
16
|
|
|
$
|
15,797
|
|
Interest income
|
|
$
|
1,333
|
|
|
$
|
420
|
|
|
$
|
57
|
|
|
$
|
47
|
|
|
$
|
1,857
|
|
|
$
|
2,185
|
|
|
$
|
(514
|
)
|
|
$
|
1,671
|
|
|
$
|
(1,329
|
)
|
|
$
|
2,199
|
|
Interest expense
|
|
$
|
3,170
|
|
|
$
|
555
|
|
|
$
|
197
|
|
|
$
|
107
|
|
|
$
|
4,029
|
|
|
$
|
13,106
|
|
|
$
|
(35
|
)
|
|
$
|
13,071
|
|
|
$
|
(1,493
|
)
|
|
$
|
15,607
|
|
Income tax expense (benefit)
|
|
$
|
(2,480
|
)
|
|
$
|
(734
|
)
|
|
$
|
611
|
|
|
$
|
(172
|
)
|
|
$
|
(2,775
|
)
|
|
$
|
1,197
|
|
|
$
|
(4
|
)
|
|
$
|
1,193
|
|
|
$
|
(4,288
|
)
|
|
$
|
(5,870
|
)
|
Earnings (losses) of
nonconsolidated affiliates
|
|
$
|
(48
|
)
|
|
$
|
102
|
|
|
$
|
15
|
|
|
$
|
527
|
|
|
$
|
596
|
|
|
$
|
(6
|
)
|
|
$
|
|
|
|
$
|
(6
|
)
|
|
$
|
20
|
|
|
$
|
610
|
|
Income (loss) before cumulative
effect of accounting change
|
|
$
|
(8,150
|
)
|
|
$
|
(1,007
|
)
|
|
$
|
(564
|
)
|
|
$
|
(243
|
)
|
|
$
|
(9,964
|
)
|
|
$
|
2,280
|
|
|
$
|
(23
|
)
|
|
$
|
2,257
|
|
|
$
|
(2,601
|
)
|
|
$
|
(10,308
|
)
|
Net income (loss)
|
|
$
|
(8,233
|
)
|
|
$
|
(1,028
|
)
|
|
$
|
(566
|
)
|
|
$
|
(246
|
)
|
|
$
|
(10,073
|
)
|
|
$
|
2,280
|
|
|
$
|
(23
|
)
|
|
$
|
2,257
|
|
|
$
|
(2,601
|
)
|
|
$
|
(10,417
|
)
|
Investments in nonconsolidated
affiliates
|
|
$
|
18
|
|
|
$
|
359
|
|
|
$
|
155
|
|
|
$
|
2,590
|
|
|
$
|
3,122
|
|
|
$
|
308
|
|
|
$
|
(308
|
)
|
|
$
|
|
|
|
$
|
120
|
|
|
$
|
3,242
|
|
Segment assets
|
|
$
|
126,472
|
|
|
$
|
21,069
|
|
|
$
|
4,340
|
|
|
$
|
10,138
|
|
|
$
|
162,019
|
|
|
$
|
320,557
|
|
|
$
|
(8,613
|
)
|
|
$
|
311,944
|
|
|
$
|
193
|
|
|
$
|
474,156
|
|
Goodwill
|
|
$
|
383
|
|
|
$
|
374
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
757
|
|
|
$
|
2,446
|
|
|
$
|
|
|
|
$
|
2,446
|
|
|
$
|
|
|
|
$
|
3,203
|
|
Expenditures for property
|
|
$
|
5,418
|
|
|
$
|
1,396
|
|
|
$
|
229
|
|
|
$
|
839
|
|
|
$
|
7,882
|
|
|
$
|
279
|
|
|
$
|
4
|
|
|
$
|
283
|
|
|
$
|
14
|
|
|
$
|
8,179
|
|
180
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
Note 27. Segment
Reporting (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GM
|
|
|
|
|
|
Total
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
Corporate
|
|
|
|
|
|
|
GMNA
|
|
|
GME
|
|
|
LAAM
|
|
|
GMAP
|
|
|
GMA
|
|
|
GMAC(c)
|
|
|
Financing(d)
|
|
|
Financing
|
|
|
& Other
|
|
|
Total
|
|
|
|
(Dollars in millions)
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External customers
|
|
$
|
118,132
|
|
|
$
|
29,957
|
|
|
$
|
8,204
|
|
|
$
|
6,072
|
|
|
$
|
162,365
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
976
|
|
|
$
|
163,341
|
|
Intersegment
|
|
|
(2,811
|
)
|
|
|
1,239
|
|
|
|
673
|
|
|
|
903
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total automotive sales(a)
|
|
|
115,321
|
|
|
|
31,196
|
|
|
|
8,877
|
|
|
|
6,975
|
|
|
|
162,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
972
|
|
|
|
163,341
|
|
Financial services and insurance
revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,225
|
|
|
|
785
|
|
|
|
32,010
|
|
|
|
|
|
|
|
32,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenues
|
|
$
|
115,321
|
|
|
$
|
31,196
|
|
|
$
|
8,877
|
|
|
$
|
6,975
|
|
|
$
|
162,369
|
|
|
$
|
31,225
|
|
|
$
|
785
|
|
|
$
|
32,010
|
|
|
$
|
972
|
|
|
$
|
195,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive cost of sales
|
|
$
|
105,585
|
|
|
$
|
30,145
|
|
|
$
|
8,244
|
|
|
$
|
6,386
|
|
|
$
|
150,360
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,755
|
|
|
$
|
152,115
|
|
Selling, general and administrative
expense
|
|
$
|
7,891
|
|
|
$
|
2,486
|
|
|
$
|
514
|
|
|
$
|
595
|
|
|
$
|
11,486
|
|
|
$
|
12,988
|
|
|
$
|
1,128
|
|
|
$
|
14,116
|
|
|
$
|
367
|
|
|
$
|
25,969
|
|
Depreciation and amortization
|
|
$
|
6,389
|
|
|
$
|
1,821
|
|
|
$
|
195
|
|
|
$
|
235
|
|
|
$
|
8,640
|
|
|
$
|
5,299
|
|
|
$
|
224
|
|
|
$
|
5,523
|
|
|
$
|
39
|
|
|
$
|
14,202
|
|
Interest income
|
|
$
|
1,016
|
|
|
$
|
402
|
|
|
$
|
20
|
|
|
$
|
13
|
|
|
$
|
1,451
|
|
|
$
|
1,117
|
|
|
$
|
(310
|
)
|
|
$
|
807
|
|
|
$
|
(843
|
)
|
|
$
|
1,415
|
|
Interest expense
|
|
$
|
2,734
|
|
|
$
|
415
|
|
|
$
|
74
|
|
|
$
|
21
|
|
|
$
|
3,244
|
|
|
$
|
9,659
|
|
|
$
|
(34
|
)
|
|
$
|
9,625
|
|
|
$
|
(956
|
)
|
|
$
|
11,913
|
|
Income tax expense (benefit)
|
|
$
|
(600
|
)
|
|
$
|
(599
|
)
|
|
$
|
33
|
|
|
$
|
(11
|
)
|
|
$
|
(1,177
|
)
|
|
$
|
1,362
|
|
|
$
|
(19
|
)
|
|
$
|
1,343
|
|
|
$
|
(1,292
|
)
|
|
$
|
(1,126
|
)
|
Earnings (losses) of
nonconsolidated affiliates
|
|
$
|
58
|
|
|
$
|
102
|
|
|
$
|
(3
|
)
|
|
$
|
666
|
|
|
$
|
823
|
|
|
$
|
(6
|
)
|
|
$
|
|
|
|
$
|
(6
|
)
|
|
$
|
(16
|
)
|
|
$
|
801
|
|
Net income (loss)
|
|
$
|
1,357
|
|
|
$
|
(768
|
)
|
|
$
|
50
|
|
|
$
|
731
|
|
|
$
|
1,370
|
|
|
$
|
2,894
|
|
|
$
|
(18
|
)
|
|
$
|
2,876
|
|
|
$
|
(1,545
|
)
|
|
$
|
2,701
|
|
Investments in nonconsolidated
affiliates
|
|
$
|
458
|
|
|
$
|
1,476
|
|
|
$
|
276
|
|
|
$
|
4,541
|
|
|
$
|
6,751
|
|
|
$
|
179
|
|
|
$
|
(179
|
)
|
|
$
|
|
|
|
$
|
1
|
|
|
$
|
6,752
|
|
Segment assets(a)
|
|
$
|
127,031
|
|
|
$
|
26,628
|
|
|
$
|
3,823
|
|
|
$
|
5,054
|
|
|
$
|
162,536
|
|
|
$
|
324,042
|
|
|
$
|
(3,839
|
)
|
|
$
|
320,203
|
|
|
$
|
(2,079
|
)
|
|
$
|
480,660
|
|
Goodwill
|
|
$
|
154
|
|
|
$
|
446
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
600
|
|
|
$
|
3,274
|
|
|
$
|
|
|
|
$
|
3,274
|
|
|
$
|
|
|
|
$
|
3,874
|
|
Expenditures for property
|
|
$
|
5,163
|
|
|
$
|
1,331
|
|
|
$
|
158
|
|
|
$
|
496
|
|
|
$
|
7,148
|
|
|
$
|
470
|
|
|
$
|
(1
|
)
|
|
$
|
469
|
|
|
$
|
136
|
|
|
$
|
7,753
|
|
181
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
Note 27. Segment
Reporting (concluded)
|
|
|
(a) |
|
Effective January 1, 2006, four powertrain entities were
transferred from GMNA to GME for management reporting purposes.
Accordingly, 2005 amounts have been revised for comparability by
reclassifying $466 million of revenue, $99 million of
net income, and $221 million of segment assets from GMNA to
GME. For 2004, amounts have been revised by reclassifying
$667 million of revenue, $124 million of net income,
and $10 million of segment assets from GMNA to GME. |
|
(b) |
|
In 2006, GM recognized a non-cash impairment charge of
$2.9 billion in connection with the sale of a controlling
interest in GMAC which is reflected in the column Other
Financing. Refer to Note 4. |
|
(c) |
|
GM sold a 51% ownership interest in GMAC in November 2006. The
remaining 49% ownership interest held by GM is accounted for
under the equity method, and GMs investment is included in
GMACs segment assets. |
|
(d) |
|
Other Financing includes the elimination of net receivables from
total assets in Auto & Other. Receivables eliminated
were $4.1 billion, $4.5 billion, and $2.4 billion at
December 31, 2006, 2005, and 2004, respectively. |
Information concerning principal geographic areas was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
Net
|
|
|
Long
|
|
|
Net
|
|
|
Long
|
|
|
Net
|
|
|
Long
|
|
|
|
Sales &
|
|
|
Lived
|
|
|
Sales &
|
|
|
Lived
|
|
|
Sales &
|
|
|
Lived
|
|
|
|
Revenues
|
|
|
Assets(1)
|
|
|
Revenues
|
|
|
Assets(1)
|
|
|
Revenues
|
|
|
Assets(1)
|
|
|
|
(Dollars in millions)
|
|
|
North America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
129,041
|
|
|
$
|
39,434
|
|
|
$
|
124,615
|
|
|
$
|
49,619
|
|
|
$
|
132,612
|
|
|
$
|
46,810
|
|
Canada and Mexico
|
|
|
19,979
|
|
|
|
4,906
|
|
|
|
16,769
|
|
|
|
12,739
|
|
|
|
15,484
|
|
|
|
10,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total North America
|
|
|
149,020
|
|
|
|
44,340
|
|
|
|
141,384
|
|
|
|
62,358
|
|
|
|
148,096
|
|
|
|
57,252
|
|
Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
France
|
|
|
2,411
|
|
|
|
284
|
|
|
|
2,612
|
|
|
|
333
|
|
|
|
2,669
|
|
|
|
262
|
|
Germany
|
|
|
7,687
|
|
|
|
3,651
|
|
|
|
7,384
|
|
|
|
4,090
|
|
|
|
6,710
|
|
|
|
4,479
|
|
Spain
|
|
|
2,866
|
|
|
|
1,364
|
|
|
|
2,847
|
|
|
|
1,182
|
|
|
|
2,661
|
|
|
|
1,181
|
|
United Kingdom
|
|
|
7,975
|
|
|
|
1,143
|
|
|
|
7,859
|
|
|
|
1,958
|
|
|
|
7,563
|
|
|
|
2,273
|
|
Other
|
|
|
13,407
|
|
|
|
3,583
|
|
|
|
12,834
|
|
|
|
3,794
|
|
|
|
13,538
|
|
|
|
3,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Europe
|
|
|
34,346
|
|
|
|
10,025
|
|
|
|
33,536
|
|
|
|
11,357
|
|
|
|
33,141
|
|
|
|
12,006
|
|
Latin America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brazil
|
|
|
4,961
|
|
|
|
882
|
|
|
|
3,813
|
|
|
|
784
|
|
|
|
2,987
|
|
|
|
609
|
|
Other Latin America
|
|
|
4,768
|
|
|
|
159
|
|
|
|
3,829
|
|
|
|
162
|
|
|
|
2,696
|
|
|
|
180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Latin America
|
|
|
9,729
|
|
|
|
1,041
|
|
|
|
7,642
|
|
|
|
946
|
|
|
|
5,683
|
|
|
|
789
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Australia
|
|
|
301
|
|
|
|
18
|
|
|
|
357
|
|
|
|
0
|
|
|
|
381
|
|
|
|
0
|
|
Korea
|
|
|
7,550
|
|
|
|
2,154
|
|
|
|
2,861
|
|
|
|
1,523
|
|
|
|
0
|
|
|
|
0
|
|
Other Asia Pacific
|
|
|
3,353
|
|
|
|
2,126
|
|
|
|
5,362
|
|
|
|
1,981
|
|
|
|
5,823
|
|
|
|
1,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Asia Pacific
|
|
|
11,204
|
|
|
|
4,298
|
|
|
|
8,580
|
|
|
|
3,504
|
|
|
|
6,204
|
|
|
|
1,957
|
|
All Other
|
|
|
3,050
|
|
|
|
158
|
|
|
|
3,513
|
|
|
|
313
|
|
|
|
2,227
|
|
|
|
1,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
207,349
|
|
|
$
|
59,862
|
|
|
$
|
194,655
|
|
|
$
|
78,478
|
|
|
$
|
195,351
|
|
|
$
|
73,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Consists of property (Note 14), and equipment on operating
leases (Note 12), net of accumulated depreciation. |
|
|
Note 28.
|
Transactions
with GMAC
|
As part of the sale of a 51% controlling interest in GMAC, GM
entered into various operating and financing arrangements with
GMAC. The nature and terms of these arrangements were negotiated
at arms length. The
182
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
Note 28. Transactions
with GMAC (continued)
following describes the transactions and related impacts that
occurred between GM and GMAC for the month of December 2006 that
have not been eliminated in GMs consolidated financial
statements:
Marketing
Incentives and Operating Lease Residuals
As a marketing incentive, GM may sponsor interest rate support
and residual support programs as a way to lower customers
monthly lease payments. Under the interest rate support
programs, GM pays an amount to GMAC at the time of lease
contract origination to adjust the interest rate implicit in the
lease contract below GMACs standard interest rate. Under
the residual support programs, the customers contractual
residual value is adjusted above GMACs standard residual
values. GM reimburses GMAC to the extent that remarketing sales
proceeds are less than the customers contractual residual
value, limited to GMACs standard residual value. In
addition to interest rate support and residual support programs,
GM also participates in a risk sharing arrangement with GMAC in
which GM, in certain circumstances, reimburses GMAC for a
portion of any shortfall between the standard residual value and
the resale proceeds. The terms and conditions of interest rate
support and residual support programs, as well as the risk
sharing arrangement, are included in the U.S., Canadian, and
International Consumer Financing Services Agreements, which
expire in November 2016.
In addition, as it relates to U.S. lease originations and all
U.S. balloon retail contract originations occurring after
April 30, 2006 that GMAC retained after the consummation of
the sale transaction, GM agreed to begin payment of the present
value of the expected residual support owed to GMAC at the time
of contract origination as opposed to after contract termination
at the time of sale of the related used vehicle. The residual
support amount GM owes GMAC is adjusted as the leases terminate
and, in cases where the estimate was incorrect, GM may be
obligated to pay GMAC or GMAC may be obliged to reimburse GM,
under the terms of the residual support programs. For the
affected contracts originated through December 2006, GM paid or
agreed to pay GMAC a total of $486 million. Based on the
U.S. operating lease portfolio outstanding, at December 31,
2006 the maximum additional amount that could be paid by GM
under the residual support programs is approximately
$276 million and would only be paid in the unlikely event
that the proceeds from the entire lease portfolio of assets
would be lower than both the contractual residual value and
GMACs standard residual rates. Based on the U.S. operating
lease portfolio outstanding at December 31, 2006, the
maximum amount that could be paid under the risk sharing
arrangement is approximately $339 million and would only be
paid in the unlikely event that the proceeds from all
outstanding lease vehicles would be lower than GMACs
standard residual rates.
Exclusivity
Arrangement
Subject to GMACs fulfillment of certain conditions, GM has
granted GMAC exclusivity for U.S., Canadian, and international
GM-sponsored consumer and wholesale marketing incentives for GM
products in specified markets around the world, with the
exception of Saturn branded products. In return for this
exclusivity, GMAC will pay GM an annual exclusivity fee of
$105 million ($75 million for the U.S. retail
business, $15 million for the Canadian retail business,
$10 million for retail business in international
operations, and $5 million for the dealer business) and is
committed to provide financing to GM customers and dealers
consistent with historical practices.
Marketing
Service Agreement
GM and GMAC have entered into a ten-year marketing, promoting,
advertising, and customer support arrangement related to GM
products, GMAC products and the retail financing for GM products.
Royalty
Arrangement
For certain insurance products, GM and GMAC have entered into
ten-year intellectual property license agreements giving GMAC
the right to use the GM name on certain insurance products. In
exchange, GMAC will
183
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
Note 28. Transactions
with GMAC (continued)
pay to GM a royalty fee of 3.25% of revenue, net of
cancellations, related to these products with a minimum annual
guarantee of $15 million. The amount of royalty recognized
for the year ended December 31. 2006 was approximately
$1 million.
Shared
and Transition Services Agreement
GM and GMAC entered into a Shared and Transition Services
Agreement to continue to provide to each other global support
services, such as Treasury, Tax, Real Estate, and Human
Resources for a transition period of one to two years. GM
expects that when the Shared and Transition Services Agreement
expires, GM and GMAC will either renew such services agreement
or that GM and GMAC will perform the related services internally
or outsource to other providers.
Balance
Sheet
A summary of the balance sheet effects of transactions with GMAC
are as follows ($ in millions):
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
Assets:
|
|
|
|
|
Accounts and notes receivable(a)
|
|
$
|
676
|
|
Other assets(b)
|
|
|
20
|
|
Liabilities:
|
|
|
|
|
Accounts payable(c)
|
|
|
1,716
|
|
Loans payable(d)
|
|
|
2,901
|
|
Accrued expenses(e)
|
|
|
29
|
|
Long-term debt(f)
|
|
|
445
|
|
|
|
|
(a) |
|
Represents wholesale settlements due from GMAC, as well as
amounts owing by GMAC with respect to the operating lease assets
transferred to GM. |
|
(b) |
|
Represents mainly Preferred Membership Interest distributions
due from GMAC. |
|
(c) |
|
Represents the approximately $1.0 billion capital
contribution to GMAC to restore its adjusted tangible equity
balance to the contractually required amount of $14.4 billion,
due to the decrease in the adjusted tangible equity balance of
GMAC as of November 30, 2006. |
|
(d) |
|
Represents wholesale financing, sales of receivable
transactions, and the short term portion of term loans provided
to certain dealerships wholly owned by GM or in which GM has an
equity interest. In addition, includes borrowing arrangements
with Adam Opel and arrangements related to GMACs funding
of GM company-owned vehicles, rental car vehicles awaiting sale
at auction, and funding of the sale of GM vehicles in which GM
retains title while the vehicles are consigned to GMAC or
dealers in the United Kingdom. The financing to GM remains
outstanding until the title is transferred to the dealers. Also
includes the short term portion of a note provided to a wholly
owned subsidiary of GM holding debt related to the operating
leases transferred to GM. |
|
(e) |
|
Represents mainly interest accrued on the transactions in
(d) above. |
|
(f) |
|
Represents the long term portion of term loans and a note
payable in respect of the operating leases transferred to GM
mentioned in (d) above. |
184
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
Note 28. Transactions
with GMAC (concluded)
Statement
of Operations
A summary of the income statement effects of transactions with
GMAC for the month of December 2006 are as follows ($ in
millions):
|
|
|
|
|
Net sales and revenues(a)
|
|
$
|
(104
|
)
|
Automotive interest income and
other non-operating income(b)
|
|
|
20
|
|
Cost of sales and other expenses
|
|
|
1
|
|
Interest expense(c)
|
|
|
22
|
|
Servicing expense(d)
|
|
|
18
|
|
Derivatives(e)
|
|
|
6
|
|
|
|
|
(a) |
|
Represents the reduction in net sales and revenues related to
the amount of residual support accrued under the residual
support and risk sharing programs, rate support under the
interest rate support programs, operating lease and finance
receivable capitalized cost reduction incentives paid to GMAC to
reduce the capitalized cost in automotive lease contracts and
retail automotive contracts, and costs under lease pull-ahead
programs. GM sponsors lease pull-ahead programs, by which
consumers are encouraged to terminate lease contracts early in
conjunction with the acquisition of a new GM vehicle, with the
customers remaining payment obligation waived. For certain
programs, GM compensates GMAC for the waived payments, adjusted
for the remarketing results associated with the underlying
vehicle. |
|
(b) |
|
Represents Preferred Membership Interest distributions and
payments to GM for services and rent. |
|
(c) |
|
Represents interest on term loans, notes payable and wholesale
settlements. The settlement terms related to the wholesale
financing of certain GM products are at shipment date. To the
extent that wholesale settlements with GM are made prior to the
expiration of transit, GM pays interest to GMAC. |
|
(d) |
|
Represents servicing fee paid to GMAC related to the automotive
leases distributed to GM prior to the closing of the GMAC sale
transaction. |
|
(e) |
|
Represents the loss related to a derivative transaction entered
into with GMAC as counterparty. |
Other expenses included the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars in millions)
|
|
|
Loss on controlling interest of
GMAC (see Note 4)
|
|
$
|
2,910
|
|
|
$
|
|
|
|
$
|
|
|
FHI impairment loss (see
Note 7)
|
|
|
|
|
|
|
812
|
|
|
|
|
|
Delphi contingent exposure (see
Note 20)
|
|
|
500
|
|
|
|
5,500
|
|
|
|
|
|
Goodwill impairment GMAC
(see Note 15)
|
|
|
828
|
|
|
|
712
|
|
|
|
|
|
Fiat settlement/writedown (see
Note 7)
|
|
|
|
|
|
|
|
|
|
|
1,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses
|
|
$
|
4,238
|
|
|
$
|
7,024
|
|
|
$
|
1,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
185
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
|
|
Note 30:
|
Supplementary
Quarterly Financial Information (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
|
|
|
|
1st(2)
|
|
|
2nd(2)
|
|
|
3rd(2)
|
|
|
4th(2)(3)
|
|
|
|
Previously
|
|
|
|
|
|
Previously
|
|
|
|
|
|
Previously
|
|
|
|
|
|
|
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
Reported
|
|
|
|
(Dollars in millions, except per share amounts)
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenue
|
|
$
|
51,397
|
|
|
$
|
52,376
|
|
|
$
|
53,378
|
|
|
$
|
54,464
|
|
|
$
|
48,465
|
|
|
$
|
49,300
|
|
|
$
|
51,209
|
|
Operating income (loss)
|
|
$
|
(276
|
)
|
|
$
|
(47
|
)
|
|
$
|
(6,219
|
)
|
|
$
|
(6,184
|
)
|
|
$
|
(1,322
|
)
|
|
$
|
(1,305
|
)
|
|
$
|
(132
|
)
|
Income (loss) from continuing
operations
|
|
$
|
445
|
|
|
$
|
602
|
|
|
$
|
(3,379
|
)
|
|
$
|
(3,383
|
)
|
|
$
|
(91
|
)
|
|
$
|
(147
|
)
|
|
$
|
950
|
|
Net income (loss)
|
|
$
|
445
|
|
|
$
|
602
|
|
|
$
|
(3,379
|
)
|
|
$
|
(3,383
|
)
|
|
$
|
(91
|
)
|
|
$
|
(147
|
)
|
|
$
|
950
|
|
Basic earnings (loss) per share
from continuing operations
|
|
$
|
0.79
|
|
|
$
|
1.06
|
|
|
$
|
(5.97
|
)
|
|
$
|
(5.98
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
1.68
|
|
Diluted earnings (loss) per share
from continuing operations
|
|
$
|
0.78
|
|
|
$
|
1.06
|
|
|
$
|
(5.97
|
)
|
|
$
|
(5.98
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
1.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
|
|
|
|
1st(4)
|
|
|
2nd(4)
|
|
|
3rd(4)
|
|
|
4th(4)(5)
|
|
|
|
Previously
|
|
|
|
|
|
Previously
|
|
|
|
|
|
Previously
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
Reported
|
|
|
Restated
|
|
|
|
(Dollars in millions, except per share amounts)
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenue
|
|
$
|
45,458
|
|
|
$
|
46,286
|
|
|
$
|
48,168
|
|
|
$
|
48,990
|
|
|
$
|
46,835
|
|
|
$
|
47,727
|
|
|
$
|
50,723
|
|
|
$
|
51,652
|
|
Operating income (loss)
|
|
$
|
(2,609
|
)
|
|
$
|
(2,523
|
)
|
|
$
|
(1,706
|
)
|
|
$
|
(1,522
|
)
|
|
$
|
(3,218
|
)
|
|
$
|
(3,095
|
)
|
|
$
|
(10,818
|
)
|
|
$
|
(10,666
|
)
|
Income (loss) from continuing
operations
|
|
$
|
(1,253
|
)
|
|
$
|
(1,250
|
)
|
|
$
|
(987
|
)
|
|
$
|
(917
|
)
|
|
$
|
(1,664
|
)
|
|
$
|
(1,673
|
)
|
|
$
|
(6,554
|
)
|
|
$
|
(6,468
|
)
|
Cumulative effect of a change in
accounting principle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(109
|
)
|
|
|
(109
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(1,253
|
)
|
|
$
|
(1,250
|
)
|
|
$
|
(987
|
)
|
|
$
|
(917
|
)
|
|
$
|
(1,664
|
)
|
|
$
|
(1,673
|
)
|
|
$
|
(6,663
|
)
|
|
|
(6,577
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
from continuing operations
|
|
$
|
(2.22
|
)
|
|
$
|
(2.21
|
)
|
|
$
|
(1.75
|
)
|
|
$
|
(1.62
|
)
|
|
$
|
(2.94
|
)
|
|
$
|
(2.96
|
)
|
|
$
|
(11.59
|
)
|
|
$
|
(11.44
|
)
|
Cumulative effect of a change in
accounting principle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.19
|
)
|
|
|
(0.19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(2.22
|
)
|
|
$
|
(2.21
|
)
|
|
$
|
(1.75
|
)
|
|
$
|
(1.62
|
)
|
|
$
|
(2.94
|
)
|
|
$
|
(2.96
|
)
|
|
$
|
(11.78
|
)
|
|
$
|
(11.63
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share
from continuing operations
|
|
$
|
(2.22
|
)
|
|
$
|
(2.21
|
)
|
|
$
|
(1.75
|
)
|
|
$
|
(1.62
|
)
|
|
$
|
(2.94
|
)
|
|
$
|
(2.96
|
)
|
|
$
|
(11.59
|
)
|
|
$
|
(11.44
|
)
|
Cumulative effect of a change in
accounting principle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.19
|
)
|
|
|
(0.19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(2.22
|
)
|
|
$
|
(2.21
|
)
|
|
$
|
(1.75
|
)
|
|
$
|
(1.62
|
)
|
|
$
|
(2.94
|
)
|
|
$
|
(2.96
|
)
|
|
|
(11.78
|
)
|
|
$
|
(11.63
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
186
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
Note 30: Supplementary
Quarterly Financial Information (Unaudited)
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
|
|
|
|
March 31
|
|
|
June 30
|
|
|
September 30
|
|
|
|
Previously
|
|
|
|
|
|
Previously
|
|
|
|
|
|
Previously
|
|
|
|
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
|
(Dollars in millions except per share amounts)
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales and revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive sales
|
|
$
|
42,542
|
|
|
$
|
43,529
|
|
|
$
|
44,311
|
|
|
$
|
45,377
|
|
|
$
|
39,101
|
|
|
$
|
40,020
|
|
Financial services and insurance
revenue
|
|
|
8,855
|
|
|
|
8,847
|
|
|
|
9,067
|
|
|
|
9,087
|
|
|
|
9,364
|
|
|
|
9,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenue
|
|
$
|
51,397
|
|
|
$
|
52,376
|
|
|
$
|
53,378
|
|
|
$
|
54,464
|
|
|
$
|
48,465
|
|
|
$
|
49,300
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive costs and expenses
|
|
|
39,514
|
|
|
|
40,073
|
|
|
|
46,851
|
|
|
|
47,737
|
|
|
|
36,720
|
|
|
|
37,467
|
|
Selling, general and
administrative expenses
|
|
|
7,198
|
|
|
|
7,152
|
|
|
|
6,069
|
|
|
|
6,077
|
|
|
|
5,708
|
|
|
|
5,701
|
|
Interest expense
|
|
|
4,229
|
|
|
|
4,435
|
|
|
|
4,531
|
|
|
|
4,705
|
|
|
|
4,850
|
|
|
|
4,411
|
|
Provisions for financing and
insurance operations for credit and insurance losses
|
|
|
732
|
|
|
|
763
|
|
|
|
938
|
|
|
|
921
|
|
|
|
1,066
|
|
|
|
1,083
|
|
Other expense
|
|
|
|
|
|
|
|
|
|
|
1,208
|
|
|
|
1,208
|
|
|
|
1,443
|
|
|
|
1,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
51,673
|
|
|
|
52,423
|
|
|
|
59,597
|
|
|
|
60,648
|
|
|
|
49,787
|
|
|
|
50,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(276
|
)
|
|
|
(47
|
)
|
|
|
(6,219
|
)
|
|
|
(6,184
|
)
|
|
|
(1,322
|
)
|
|
|
(1,305
|
)
|
Automotive interest income and
other non-operating income/(expense), net
|
|
|
848
|
|
|
|
798
|
|
|
|
1,017
|
|
|
|
991
|
|
|
|
423
|
|
|
|
308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) before income tax
(benefit) expense, equity income (loss) and minority interest
|
|
|
572
|
|
|
|
751
|
|
|
|
(5,202
|
)
|
|
|
(5,193
|
)
|
|
|
(899
|
)
|
|
|
(997
|
)
|
Tax (benefit) expense
|
|
|
194
|
|
|
|
232
|
|
|
|
(1,655
|
)
|
|
|
(1,651
|
)
|
|
|
(867
|
)
|
|
|
(899
|
)
|
Equity income (loss) and minority
interest
|
|
|
67
|
|
|
|
83
|
|
|
|
168
|
|
|
|
159
|
|
|
|
(59
|
)
|
|
|
(49
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
445
|
|
|
$
|
602
|
|
|
$
|
(3,379
|
)
|
|
$
|
(3,383
|
)
|
|
$
|
(91
|
)
|
|
$
|
(147
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per share
attributable to common stock, basic
|
|
$
|
0.79
|
|
|
$
|
1.06
|
|
|
$
|
(5.97
|
)
|
|
$
|
(5.98
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per share
|
|
$
|
0.25
|
|
|
$
|
0.25
|
|
|
$
|
0.25
|
|
|
$
|
0.25
|
|
|
$
|
0.25
|
|
|
$
|
0.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding, basic (millions)
|
|
|
566
|
|
|
|
566
|
|
|
|
566
|
|
|
|
566
|
|
|
|
566
|
|
|
|
566
|
|
Income (loss) per share
attributable to common stock, diluted
|
|
$
|
0.78
|
|
|
$
|
1.06
|
|
|
$
|
(5.97
|
)
|
|
$
|
(5.98
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding, diluted (millions)
|
|
|
569
|
|
|
|
569
|
|
|
|
566
|
|
|
|
566
|
|
|
|
566
|
|
|
|
566
|
|
187
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
Note 30: Supplementary
Quarterly Financial Information (Unaudited)
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
|
|
|
|
March 31
|
|
|
June 30
|
|
|
September 30
|
|
|
|
Previously
|
|
|
|
|
|
Previously
|
|
|
|
|
|
Previously
|
|
|
|
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
|
(Dollars in millions)
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
17,427
|
|
|
$
|
17,427
|
|
|
$
|
19,997
|
|
|
|
19,997
|
|
|
$
|
17,802
|
|
|
$
|
17,802
|
|
Marketable securities
|
|
|
1,396
|
|
|
|
1,396
|
|
|
|
115
|
|
|
|
115
|
|
|
|
107
|
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash and marketable securities
|
|
|
18,823
|
|
|
|
18,823
|
|
|
|
20,112
|
|
|
|
20,112
|
|
|
|
17,909
|
|
|
|
17,909
|
|
Accounts and notes receivable (less
allowances)
|
|
|
9,440
|
|
|
|
6,966
|
|
|
|
10,302
|
|
|
|
7,572
|
|
|
|
9,022
|
|
|
|
6,855
|
|
Inventories (less allowances)
|
|
|
14,862
|
|
|
|
14,867
|
|
|
|
14,449
|
|
|
|
14,496
|
|
|
|
14,825
|
|
|
|
14,822
|
|
Net equipment on operating leases
(less accumulated depreciation)
|
|
|
7,217
|
|
|
|
7,217
|
|
|
|
6,892
|
|
|
|
6,891
|
|
|
|
6,569
|
|
|
|
6,569
|
|
Deferred income taxes and other
current assets
|
|
|
10,032
|
|
|
|
10,139
|
|
|
|
10,260
|
|
|
|
10,376
|
|
|
|
10,698
|
|
|
|
10,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
60,374
|
|
|
|
58,012
|
|
|
|
62,015
|
|
|
|
59,447
|
|
|
|
59,023
|
|
|
|
56,968
|
|
Financing and insurance
operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
17,441
|
|
|
|
17,441
|
|
|
|
2,848
|
|
|
|
2,848
|
|
|
|
3,089
|
|
|
|
3,089
|
|
Investments in securities
|
|
|
18,443
|
|
|
|
18,443
|
|
|
|
199
|
|
|
|
199
|
|
|
|
80
|
|
|
|
80
|
|
Finance receivables, net
|
|
|
180,161
|
|
|
|
180,173
|
|
|
|
4,284
|
|
|
|
4,284
|
|
|
|
117
|
|
|
|
117
|
|
Loans held for sale
|
|
|
18,171
|
|
|
|
18,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets held for sale (less
allowances)
|
|
|
|
|
|
|
|
|
|
|
274,294
|
|
|
|
274,267
|
|
|
|
282,955
|
|
|
|
282,847
|
|
Net equipment on operating leases
(less accumulated depreciation)
|
|
|
32,570
|
|
|
|
32,570
|
|
|
|
16,533
|
|
|
|
16,533
|
|
|
|
13,325
|
|
|
|
13,325
|
|
Other assets
|
|
|
31,608
|
|
|
|
28,996
|
|
|
|
3,925
|
|
|
|
1,374
|
|
|
|
4,181
|
|
|
|
1,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing and insurance
operations assets
|
|
|
298,394
|
|
|
|
295,794
|
|
|
|
302,083
|
|
|
|
299,505
|
|
|
|
303,747
|
|
|
|
301,088
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in net assets of
unconsolidated Affiliates
|
|
|
1,830
|
|
|
|
1,789
|
|
|
|
1,901
|
|
|
|
1,856
|
|
|
|
2,030
|
|
|
|
1,991
|
|
Property, net
|
|
|
38,457
|
|
|
|
38,551
|
|
|
|
38,535
|
|
|
|
38,639
|
|
|
|
38,893
|
|
|
|
38,959
|
|
Intangible assets, net
|
|
|
1,851
|
|
|
|
1,855
|
|
|
|
1,662
|
|
|
|
1,663
|
|
|
|
1,649
|
|
|
|
1,649
|
|
Deferred income taxes
|
|
|
21,034
|
|
|
|
22,387
|
|
|
|
23,083
|
|
|
|
24,382
|
|
|
|
23,496
|
|
|
|
24,860
|
|
Prepaid pension
|
|
|
37,592
|
|
|
|
37,478
|
|
|
|
37,594
|
|
|
|
37,480
|
|
|
|
37,805
|
|
|
|
37,691
|
|
Other assets
|
|
|
4,132
|
|
|
|
6,273
|
|
|
|
3,633
|
|
|
|
6,019
|
|
|
|
2,935
|
|
|
|
4,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
104,896
|
|
|
|
108,333
|
|
|
|
106,408
|
|
|
|
110,039
|
|
|
|
106,808
|
|
|
|
109,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
463,664
|
|
|
$
|
462,139
|
|
|
$
|
470,506
|
|
|
$
|
468,991
|
|
|
$
|
469,578
|
|
|
$
|
467,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
188
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
Note 30: Supplementary
Quarterly Financial Information (Unaudited)
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
|
|
|
|
March 31
|
|
|
June 30
|
|
|
September 30
|
|
|
|
Previously
|
|
|
|
|
|
Previously
|
|
|
|
|
|
Previously
|
|
|
|
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
|
(Dollars in millions)
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable (principally trade)
|
|
$
|
26,614
|
|
|
$
|
26,872
|
|
|
$
|
27,674
|
|
|
$
|
27,930
|
|
|
$
|
27,113
|
|
|
$
|
27,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans payable
|
|
|
1,207
|
|
|
|
1,294
|
|
|
|
1,254
|
|
|
|
1,340
|
|
|
|
1,346
|
|
|
|
1,436
|
|
Accrued expenses
|
|
|
43,317
|
|
|
|
43,424
|
|
|
|
48,441
|
|
|
|
48,516
|
|
|
|
40,183
|
|
|
|
40,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
71,138
|
|
|
|
71,590
|
|
|
|
77,369
|
|
|
|
77,786
|
|
|
|
68,642
|
|
|
|
68,989
|
|
Finance and Insurance
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
3,596
|
|
|
|
3,596
|
|
|
|
23
|
|
|
|
23
|
|
|
|
32
|
|
|
|
32
|
|
Liabilities related to assets held
for sale
|
|
|
|
|
|
|
|
|
|
|
267,551
|
|
|
|
267,925
|
|
|
|
272,725
|
|
|
|
272,869
|
|
Debt
|
|
|
244,779
|
|
|
|
245,260
|
|
|
|
12,849
|
|
|
|
12,849
|
|
|
|
10,073
|
|
|
|
10,073
|
|
Other liabilities and deferred
income taxes
|
|
|
31,924
|
|
|
|
29,136
|
|
|
|
4,804
|
|
|
|
2,255
|
|
|
|
4,762
|
|
|
|
2,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Financing and Insurance
Operations Liabilities
|
|
|
280,299
|
|
|
|
277,992
|
|
|
|
285,227
|
|
|
|
283,052
|
|
|
|
287,592
|
|
|
|
285,185
|
|
Non-current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
31,021
|
|
|
|
32,612
|
|
|
|
31,275
|
|
|
|
32,946
|
|
|
|
31,414
|
|
|
|
33,118
|
|
Postretirement benefits other than
pensions
|
|
|
31,431
|
|
|
|
31,431
|
|
|
|
30,668
|
|
|
|
30,668
|
|
|
|
34,211
|
|
|
|
34,211
|
|
Pensions
|
|
|
11,576
|
|
|
|
11,576
|
|
|
|
11,502
|
|
|
|
11,498
|
|
|
|
15,937
|
|
|
|
15,937
|
|
Other liabilities and deferred
income taxes
|
|
|
21,699
|
|
|
|
20,084
|
|
|
|
21,744
|
|
|
|
20,014
|
|
|
|
19,426
|
|
|
|
17,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
95,727
|
|
|
|
95,703
|
|
|
|
95,189
|
|
|
|
95,126
|
|
|
|
100,988
|
|
|
|
100,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
447,164
|
|
|
|
445,285
|
|
|
|
457,785
|
|
|
|
455,964
|
|
|
|
457,222
|
|
|
|
455,154
|
|
Minority interest
|
|
|
1,075
|
|
|
|
1,075
|
|
|
|
1,081
|
|
|
|
1,084
|
|
|
|
1,212
|
|
|
|
1,210
|
|
Stockholders
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$12/3 par
value common stock (outstanding, 565,559,329; 565,607,779; and
565,611,157 shares)
|
|
|
943
|
|
|
|
943
|
|
|
|
943
|
|
|
|
943
|
|
|
|
943
|
|
|
|
943
|
|
Capital surplus (principally
additional
paid-in-capital)
|
|
|
15,296
|
|
|
|
15,296
|
|
|
|
15,306
|
|
|
|
15,306
|
|
|
|
15,316
|
|
|
|
15,316
|
|
Retained earnings (accumulated
deficit)
|
|
|
2,652
|
|
|
|
3,408
|
|
|
|
(869
|
)
|
|
|
(117
|
)
|
|
|
(1,101
|
)
|
|
|
(405
|
)
|
Accumulated other comprehensive
income (loss)
|
|
|
(3,466
|
)
|
|
|
(3,868
|
)
|
|
|
(3,740
|
)
|
|
|
(4,189
|
)
|
|
|
(4,014
|
)
|
|
|
(4,295
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
15,425
|
|
|
|
15,779
|
|
|
|
11,640
|
|
|
|
11,943
|
|
|
|
11,144
|
|
|
|
11,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
463,664
|
|
|
|
462,139
|
|
|
$
|
470,506
|
|
|
$
|
468,991
|
|
|
$
|
469,578
|
|
|
$
|
467,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
189
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
Note 30: Supplementary
Quarterly Financial Information (Unaudited)
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
|
|
|
|
March 31
|
|
|
June 30
|
|
|
September 30
|
|
|
|
Previously
|
|
|
|
|
|
Previously
|
|
|
|
|
|
Previously
|
|
|
|
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
|
(In millions, except per share amounts)
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales and revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive sales
|
|
$
|
36,988
|
|
|
$
|
37,793
|
|
|
$
|
39,877
|
|
|
$
|
40,686
|
|
|
$
|
38,016
|
|
|
$
|
38,921
|
|
Financial services and insurance
revenue
|
|
|
8,470
|
|
|
|
8,493
|
|
|
|
8,291
|
|
|
|
8,304
|
|
|
|
8,819
|
|
|
|
8,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenue
|
|
$
|
45,458
|
|
|
$
|
46,286
|
|
|
$
|
48,168
|
|
|
$
|
48,990
|
|
|
$
|
46,835
|
|
|
$
|
47,727
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive costs and expenses
|
|
|
37,146
|
|
|
|
37,781
|
|
|
|
37,908
|
|
|
|
38,848
|
|
|
|
38,130
|
|
|
|
38,919
|
|
Selling, general and
administrative expenses
|
|
|
6,324
|
|
|
|
6,353
|
|
|
|
6,645
|
|
|
|
6,644
|
|
|
|
6,886
|
|
|
|
6,854
|
|
Interest expense
|
|
|
3,679
|
|
|
|
3,773
|
|
|
|
3,712
|
|
|
|
3,395
|
|
|
|
4,059
|
|
|
|
4,071
|
|
Provisions for financing and
insurance operations for credit and insurance losses
|
|
|
918
|
|
|
|
902
|
|
|
|
797
|
|
|
|
813
|
|
|
|
978
|
|
|
|
978
|
|
Other expense
|
|
|
|
|
|
|
|
|
|
|
812
|
|
|
|
812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
48,067
|
|
|
|
48,809
|
|
|
|
49,874
|
|
|
|
50,512
|
|
|
|
50,053
|
|
|
|
50,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(2,609
|
)
|
|
|
(2,523
|
)
|
|
|
(1,706
|
)
|
|
|
(1,522
|
)
|
|
|
(3,218
|
)
|
|
|
(3,095
|
)
|
Automotive interest income and
other non-operating income/(expense), net
|
|
|
315
|
|
|
|
227
|
|
|
|
301
|
|
|
|
231
|
|
|
|
347
|
|
|
|
210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax
(benefit) expense, equity income (loss) and minority interest
|
|
|
(2,294
|
)
|
|
|
(2,296
|
)
|
|
|
(1,405
|
)
|
|
|
(1,291
|
)
|
|
|
(2,871
|
)
|
|
|
(2,885
|
)
|
Tax (benefit) expense
|
|
|
(972
|
)
|
|
|
(982
|
)
|
|
|
(245
|
)
|
|
|
(205
|
)
|
|
|
(1,107
|
)
|
|
|
(1,116
|
)
|
Equity income (loss) and minority
interest
|
|
|
69
|
|
|
|
64
|
|
|
|
173
|
|
|
|
169
|
|
|
|
100
|
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(1,253
|
)
|
|
$
|
(1,250
|
)
|
|
$
|
(987
|
)
|
|
$
|
(917
|
)
|
|
$
|
(1,664
|
)
|
|
$
|
(1,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per share
attributable to common stock, basic and diluted
|
|
$
|
(2.22
|
)
|
|
$
|
(2.21
|
)
|
|
$
|
(1.75
|
)
|
|
$
|
(1.62
|
)
|
|
$
|
(2.94
|
)
|
|
$
|
(2.96
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per share
|
|
$
|
0.50
|
|
|
$
|
0.50
|
|
|
$
|
0.50
|
|
|
$
|
0.50
|
|
|
$
|
0.50
|
|
|
$
|
0.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding, basic and diluted (millions)
|
|
|
565
|
|
|
|
565
|
|
|
|
565
|
|
|
|
565
|
|
|
|
566
|
|
|
|
566
|
|
190
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
Note 30: Supplementary
Quarterly Financial Information (Unaudited)
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
|
|
|
|
March 31
|
|
|
June 30
|
|
|
September 30
|
|
|
|
Previously
|
|
|
|
|
|
Previously
|
|
|
|
|
|
Previously
|
|
|
|
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
|
(Dollars in millions)
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
10,205
|
|
|
$
|
10,205
|
|
|
$
|
12,445
|
|
|
$
|
12,445
|
|
|
$
|
13,695
|
|
|
$
|
13,695
|
|
Marketable securities
|
|
|
5,447
|
|
|
|
5,447
|
|
|
|
3,629
|
|
|
|
3,629
|
|
|
|
1,437
|
|
|
|
1,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash and marketable securities
|
|
|
15,652
|
|
|
|
15,652
|
|
|
|
16,074
|
|
|
|
16,074
|
|
|
|
15,132
|
|
|
|
15,132
|
|
Accounts and notes receivable (less
allowances)
|
|
|
6,493
|
|
|
|
5,096
|
|
|
|
8,087
|
|
|
|
6,708
|
|
|
|
7,800
|
|
|
|
6,153
|
|
Inventories (less allowances)
|
|
|
12,736
|
|
|
|
12,753
|
|
|
|
12,818
|
|
|
|
12,827
|
|
|
|
13,755
|
|
|
|
13,764
|
|
Net equipment on operating leases
(less accumulated depreciation)
|
|
|
6,329
|
|
|
|
6,329
|
|
|
|
6,723
|
|
|
|
6,723
|
|
|
|
7,302
|
|
|
|
7,302
|
|
Deferred income taxes and other
current assets
|
|
|
10,975
|
|
|
|
10,971
|
|
|
|
10,516
|
|
|
|
10,513
|
|
|
|
9,778
|
|
|
|
9,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
52,185
|
|
|
|
50,801
|
|
|
|
54,218
|
|
|
|
52,845
|
|
|
|
53,767
|
|
|
|
52,126
|
|
Financing and insurance
operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
16,184
|
|
|
|
16,184
|
|
|
|
19,816
|
|
|
|
19,816
|
|
|
|
21,394
|
|
|
|
21,394
|
|
Investments in securities
|
|
|
20,809
|
|
|
|
20,809
|
|
|
|
19,384
|
|
|
|
19,384
|
|
|
|
16,575
|
|
|
|
16,575
|
|
Finance receivables, net
|
|
|
190,646
|
|
|
|
190,684
|
|
|
|
178,137
|
|
|
|
178,179
|
|
|
|
177,082
|
|
|
|
177,110
|
|
Loans held for sale
|
|
|
22,569
|
|
|
|
22,569
|
|
|
|
26,903
|
|
|
|
26,903
|
|
|
|
17,581
|
|
|
|
17,581
|
|
Assets held for sale (less
allowances)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,748
|
|
|
|
18,748
|
|
Net equipment on operating leases
(less accumulated depreciation)
|
|
|
28,042
|
|
|
|
28,042
|
|
|
|
29,353
|
|
|
|
29,353
|
|
|
|
30,670
|
|
|
|
30,670
|
|
Other assets
|
|
|
34,849
|
|
|
|
32,200
|
|
|
|
33,228
|
|
|
|
30,625
|
|
|
|
27,975
|
|
|
|
25,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing and insurance
operations assets
|
|
|
313,099
|
|
|
|
310,488
|
|
|
|
306,821
|
|
|
|
304,260
|
|
|
|
310,025
|
|
|
|
307,468
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in net assets of
unconsolidated affiliates
|
|
|
6,500
|
|
|
|
6,473
|
|
|
|
4,156
|
|
|
|
4,124
|
|
|
|
4,260
|
|
|
|
4,222
|
|
Property, net
|
|
|
36,265
|
|
|
|
36,363
|
|
|
|
38,480
|
|
|
|
38,578
|
|
|
|
37,860
|
|
|
|
37,958
|
|
Intangible assets, net
|
|
|
1,550
|
|
|
|
1,550
|
|
|
|
1,658
|
|
|
|
1,658
|
|
|
|
1,674
|
|
|
|
1,674
|
|
Deferred income taxes
|
|
|
18,093
|
|
|
|
19,413
|
|
|
|
19,253
|
|
|
|
20,569
|
|
|
|
20,731
|
|
|
|
22,041
|
|
Prepaid pension
|
|
|
38,576
|
|
|
|
38,576
|
|
|
|
38,255
|
|
|
|
38,255
|
|
|
|
37,949
|
|
|
|
37,949
|
|
Other assets
|
|
|
1,829
|
|
|
|
2,775
|
|
|
|
3,160
|
|
|
|
4,061
|
|
|
|
3,152
|
|
|
|
4,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
102,813
|
|
|
|
105,150
|
|
|
|
104,962
|
|
|
|
107,245
|
|
|
|
105,626
|
|
|
|
108,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
468,097
|
|
|
$
|
466,439
|
|
|
$
|
466,001
|
|
|
$
|
464,350
|
|
|
$
|
469,418
|
|
|
$
|
467,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
191
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
Note 30: Supplementary
Quarterly Financial Information (Unaudited)
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
|
|
|
|
March 31
|
|
|
June 30
|
|
|
September 30
|
|
|
|
Previously
|
|
|
|
|
|
Previously
|
|
|
|
|
|
Previously
|
|
|
|
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
Reported(1)
|
|
|
Restated
|
|
|
|
(Dollars in millions)
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable (principally trade)
|
|
$
|
24,168
|
|
|
$
|
24,356
|
|
|
$
|
25,361
|
|
|
$
|
25,508
|
|
|
$
|
26,784
|
|
|
$
|
26,942
|
|
Loans payable
|
|
|
2,446
|
|
|
|
2,515
|
|
|
|
1,563
|
|
|
|
1,652
|
|
|
|
1,509
|
|
|
|
1,597
|
|
Accrued expenses
|
|
|
44,544
|
|
|
|
44,624
|
|
|
|
44,517
|
|
|
|
44,592
|
|
|
|
43,280
|
|
|
|
43,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
71,158
|
|
|
|
71,495
|
|
|
|
71,441
|
|
|
|
71,752
|
|
|
|
71,573
|
|
|
|
71,890
|
|
Finance and Insurance Operations
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
4,351
|
|
|
|
4,351
|
|
|
|
3,333
|
|
|
|
3,333
|
|
|
|
3,102
|
|
|
|
3,102
|
|
Liabilities related to assets held
for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,319
|
|
|
|
12,319
|
|
Debt
|
|
|
259,506
|
|
|
|
259,742
|
|
|
|
251,015
|
|
|
|
251,022
|
|
|
|
245,794
|
|
|
|
245,968
|
|
Other liabilities and deferred
income taxes
|
|
|
28,814
|
|
|
|
26,120
|
|
|
|
32,473
|
|
|
|
29,902
|
|
|
|
29,298
|
|
|
|
26,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Financing and Insurance
Operations Liabilities
|
|
|
292,671
|
|
|
|
290,213
|
|
|
|
286,821
|
|
|
|
284,257
|
|
|
|
290,513
|
|
|
|
288,035
|
|
Non-current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
29,879
|
|
|
|
30,895
|
|
|
|
31,043
|
|
|
|
32,118
|
|
|
|
30,929
|
|
|
|
32,021
|
|
Postretirement benefits other than
pensions
|
|
|
23,754
|
|
|
|
23,754
|
|
|
|
25,882
|
|
|
|
25,882
|
|
|
|
27,445
|
|
|
|
27,445
|
|
Pensions
|
|
|
9,204
|
|
|
|
9,215
|
|
|
|
9,619
|
|
|
|
9,630
|
|
|
|
9,877
|
|
|
|
9,888
|
|
Other liabilities and deferred
income taxes
|
|
|
15,924
|
|
|
|
14,870
|
|
|
|
16,447
|
|
|
|
15,314
|
|
|
|
16,273
|
|
|
|
15,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
78,761
|
|
|
|
78,734
|
|
|
|
82,991
|
|
|
|
82,944
|
|
|
|
84,524
|
|
|
|
84,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
442,590
|
|
|
|
440,442
|
|
|
|
441,253
|
|
|
|
438,953
|
|
|
|
446,610
|
|
|
|
444,402
|
|
Minority interest
|
|
|
416
|
|
|
|
416
|
|
|
|
902
|
|
|
|
902
|
|
|
|
829
|
|
|
|
829
|
|
Stockholders
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1 2/3 par value common stock
(outstanding, 565,470,511; 565,503,422; and
565,504,852 shares)
|
|
|
942
|
|
|
|
942
|
|
|
|
943
|
|
|
|
943
|
|
|
|
943
|
|
|
|
943
|
|
Capital surplus (principally
additional
paid-in-capital)
|
|
|
15,234
|
|
|
|
15,234
|
|
|
|
15,255
|
|
|
|
15,255
|
|
|
|
15,281
|
|
|
|
15,281
|
|
Retained earnings
|
|
|
12,526
|
|
|
|
12,978
|
|
|
|
11,252
|
|
|
|
11,774
|
|
|
|
9,295
|
|
|
|
9,808
|
|
Accumulated other comprehensive
income (loss)
|
|
|
(3,611
|
)
|
|
|
(3,573
|
)
|
|
|
(3,604
|
)
|
|
|
(3,477
|
)
|
|
|
(3,540
|
)
|
|
|
(3,472
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
25,091
|
|
|
|
25,581
|
|
|
|
23,846
|
|
|
|
24,495
|
|
|
|
21,979
|
|
|
|
22,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
468,097
|
|
|
$
|
466,439
|
|
|
$
|
466,001
|
|
|
$
|
464,350
|
|
|
$
|
469,418
|
|
|
$
|
467,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
192
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
Note 30: Supplementary
Quarterly Financial Information (Unaudited)
(continued)
|
|
|
(1) |
|
As reported in the Corporations
Form 10-Q
for the applicable periods then ended. |
|
(2) |
|
GM previously disclosed that it would restate its consolidated
financial statements to correct its accounting for
(1) certain derivative transactions under
SFAS No. 133, (2) deferred income taxes under
SFAS No. 109, and (3) other various adjustments.
The restatement effects for the first three quarters of 2006 are
summarized below. This restatement did not affect cash flows. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 Quarters
|
|
|
|
1st
|
|
|
2nd
|
|
|
3rd
|
|
|
Net income (loss), as previously
reported
|
|
$
|
445
|
|
|
$
|
(3,379
|
)
|
|
$
|
(91
|
)
|
Pre-tax adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives and hedge accounting(a)
|
|
|
274
|
|
|
|
(138
|
)
|
|
|
61
|
|
Unemployment benefit payments(a)
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
Development costs(a)
|
|
|
57
|
|
|
|
|
|
|
|
|
|
Advertising expenses(a)
|
|
|
(35
|
)
|
|
|
(5
|
)
|
|
|
17
|
|
Gain on sale of equity method
investment(b)
|
|
|
36
|
|
|
|
|
|
|
|
|
|
Employee-related costs(c)
|
|
|
(52
|
)
|
|
|
80
|
|
|
|
(52
|
)
|
Impairment of long-lived assets(a)
|
|
|
10
|
|
|
|
(1
|
)
|
|
|
(42
|
)
|
Other adjustments(d)
|
|
|
(46
|
)
|
|
|
57
|
|
|
|
(49
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pre-tax
adjustments
|
|
|
194
|
|
|
|
(7
|
)
|
|
|
(65
|
)
|
Tax effects
provision/(benefit)
|
|
|
37
|
|
|
|
(3
|
)
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total of above adjustments, net of
tax
|
|
|
157
|
|
|
|
(4
|
)
|
|
|
(56
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss), as
restated
|
|
$
|
602
|
|
|
$
|
(3,383
|
)
|
|
$
|
(147
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Refer to Note 2 to the Consolidated Financial Statements
for background related to these adjustments. |
|
(b) |
|
GM erroneously determined its gain on the sale of a portion of
an equity method investment. |
|
(c) |
|
GM erroneously recorded employee-related costs related to the
Special Attrition Program (See Note 19 to the Consolidated
Financial Statements) and restructuring activities at GME
(See Note 5 to the Consolidated Financial Statements). The
adjustments were recorded to correct Automotive cost of sales in
each quarterly period shown above. |
|
(d) |
|
Subsequent to the completion of our previously filed
consolidated financial statements for each period being
restated, we identified adjustments that should have been
recorded in these earlier periods. Upon identification, we
determined these adjustments to be immaterial, individually and
in the aggregate, to our previously filed consolidated financial
statements, and recorded these out-of-period adjustments in the
periods in which they were identified. Due to the adjustments
that required a restatement of our previously filed consolidated
financial statements, we are also reversing these
out-of-period
adjustments and recording them in the proper periods. |
|
|
|
In addition to the above adjustments, to comply with EITF
00-10,
Accounting for Shipping and Handling Fees and Costs,
in 2006 GM reclassified shipping and handling costs incurred to
transport product to its customers. The correction for this
reclassification increased Automotive sales and Automotive cost
of sales for the first, second and third quarters in the year
ended December 31, 2006 in the amount of $1.0 billion,
$1.1 billion, and $900 million, respectively. This correction
did not affect net income (loss) or earnings (loss) per share. |
|
(3) |
|
Fourth quarter 2006 results include the following after-tax
items: |
|
|
|
|
|
A gain of $175 million related to the sale of the desert
proving grounds in Mesa, Arizona.
|
193
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (continued)
Note 30: Supplementary
Quarterly Financial Information (Unaudited)
(continued)
|
|
|
|
|
A charge of $111 million for severance costs associated
with a previously announced restructuring plan at GME.
|
|
|
|
A charge of $53 million associated with plant and product
impairments and separation costs at GM Holden.
|
|
|
|
Gains of approximately $712 million associated with
pension/OPEB curtailment related to GMAC salaried employees no
longer receiving credited service under the GM benefit plans and
sales of marketable securities held by GMACs insurance
business.
|
|
|
|
A gain of $208 million related to the settlement of
residual support and risk sharing obligations as part of the
GMAC Transaction on existing leases at May 1, 2006 and on
new lease originations subsequent to this date. See Note 4.
|
|
|
|
(4) |
|
The restatement effects for the quarterly results of 2005 are
summarized below. This restatement did not affect cash flows. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 Quarters
|
|
|
|
1st
|
|
|
2nd
|
|
|
3rd
|
|
|
4th
|
|
|
Net income (loss), as previously
reported
|
|
$
|
(1,253
|
)
|
|
$
|
(987
|
)
|
|
$
|
(1,664
|
)
|
|
$
|
(6,663
|
)
|
Pre-tax adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives and hedge accounting(a)
|
|
|
(80
|
)
|
|
|
(12
|
)
|
|
|
(26
|
)
|
|
|
207
|
|
Available-for-sale
securities(a)
|
|
|
68
|
|
|
|
98
|
|
|
|
(8
|
)
|
|
|
|
|
Unemployment benefit payments(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50
|
|
Utility accruals(b)
|
|
|
(5
|
)
|
|
|
20
|
|
|
|
(5
|
)
|
|
|
(25
|
)
|
Other adjustments(c)
|
|
|
10
|
|
|
|
3
|
|
|
|
21
|
|
|
|
(172
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pre-tax
adjustments
|
|
|
(7
|
)
|
|
|
109
|
|
|
|
(18
|
)
|
|
|
60
|
|
Tax effects
provision/(benefit)
|
|
|
(10
|
)
|
|
|
39
|
|
|
|
(9
|
)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total of above adjustments, net of
tax
|
|
|
3
|
|
|
|
70
|
|
|
|
(9
|
)
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax adjustment(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net after-tax adjustments
|
|
|
3
|
|
|
|
70
|
|
|
|
(9
|
)
|
|
|
86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss), as
restated
|
|
$
|
(1,250
|
)
|
|
$
|
(917
|
)
|
|
$
|
(1,673
|
)
|
|
$
|
(6,577
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Refer to Note 2 to the Consolidated Financial Statements
for background related to these adjustments. |
|
(b) |
|
GM erroneously recorded its utility-related accruals in the
improper periods. The adjustment was recorded to correct
Automotive cost of sales in each quarterly period shown above. |
|
(c) |
|
Subsequent to the completion of our previously filed
consolidated financial statements for each period being
restated, we identified adjustments that should have been
recorded in these earlier periods. Upon identification, we
determined these adjustments to be immaterial, individually and
in the aggregate, to our previously filed consolidated financial
statements, and recorded these out of period adjustments in the
periods in which they were identified. Due to the adjustments
that required a restatement of our previously filed consolidated
financial statements, we are also reversing these
out-of-period
adjustments and recording them in the proper periods. |
|
|
|
In addition to the above adjustments, to comply with EITF
00-10,
Accounting for Shipping and Handling Fees and Costs,
in 2006, GM reclassified shipping and handling costs incurred to
transport product to its customers. The correction for this
reclassification increased Automotive sales and Automotive cost
of sales for the first, second, third, and fourth quarters in
the year ended December 31, 2005 in the amount of |
194
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (concluded)
Note 30: Supplementary
Quarterly Financial Information (Unaudited)
(concluded)
|
|
|
|
|
$850 million, $846 million, $890 million and
$1.0 billion, respectively. This correction did not affect
net income (loss) or earnings (loss) per share. |
|
|
|
(d) |
|
GM erroneously recorded an adjustment to its income taxes
payable as part of the 2005 provision to return reconciliation
process. |
|
|
|
(5) |
|
Fourth quarter 2005 results include the following after-tax
items: |
|
|
|
|
|
A charge of $1.7 billion in connection with the North
American manufacturing capacity actions announced in November
2005. This charge includes $1.2 billion associated with the
hourly employees at the facilities GM is idling and
$455 million for the non-cash write-down of property,
plants and equipment.
|
|
|
|
A charge of $3.6 billion for GMs contingent exposures
relating to Delphis Chapter 11 filing, including under the
benefit guarantees for certain former GM U.S. hourly employees
who transferred to Delphi.
|
|
|
|
A gain of $71 million related to the sale of GMs
investment in the common stock of FHI, due to the appreciation
of the fair value of such stock after June 30, 2005, the
date of the FHI impairment charge. Also in the fourth quarter,
GME recorded cancellation charges of $20 million related to
FHI, resulting in a net adjustment of $51 million in the
fourth quarter.
|
|
|
|
Restructuring charges totaling $114 million, as follows: An
additional charge related to the GME restructuring plan noted
above, of $69 million for approximately 800 additional
separations, as well as charges related to previous separations
that are required to be amortized over future periods;
$38 million at GMAP; and $7 million at Other.
|
|
|
|
A charge of $109 million related to the adoption of
FIN 47, Accounting for Conditional Asset Retirement
Obligations, as of December 31, 2005, which was
recorded as the cumulative effect of a change in accounting
principle.
|
|
|
|
A benefit of $49 million related to the effect of changes
in Polish tax law at a GM Powertrain joint venture; such amount
is included in equity income.
|
|
|
|
The recognition of a valuation allowance of $617 million
against deferred tax assets at GM do Brasil.
|
195
|
|
Item 9.
|
Changes
in and disagreements with accountants on accounting and
financial disclosure
|
None
* * * * * *
|
|
Item 9A.
|
Controls
and Procedures
|
Disclosure
Controls and Procedures
The Corporation maintains disclosure controls and procedures
designed to provide reasonable assurance that information
required to be disclosed in reports filed under the Exchange Act
is recorded, processed, summarized, and reported within the
specified time periods and accumulated and communicated to
GMs management, including its principal executive officer
and principal financial officer, as appropriate to allow timely
decisions regarding required disclosure.
GMs management, under the supervision and with the
participation of its Chairman and Chief Executive Officer (CEO)
and its Vice Chairman and Chief Financial Officer (CFO),
evaluated the effectiveness of our disclosure controls and
procedures (as defined in
Rules 13a-15(e)
or 15d-15(e)
promulgated under the Exchange Act) as of the end of the period
covered by this report. Based on that evaluation, GMs CEO
and CFO concluded that, as of that date, GMs disclosure
controls and procedures required by paragraph (b) of
13a-15 or
15d-15 were
not effective at the reasonable assurance level because of the
identification of material weaknesses in our internal control
over financial reporting, which we view as an integral part of
our disclosure controls and procedures.
Managements
Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining
effective internal control over financial reporting of the
Corporation. This system is designed to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with GAAP.
The Corporations internal control over financial reporting
includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions
of the assets of the Corporation; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and
expenditures of the Corporation are being made only in
accordance with authorizations of management and directors of
the Corporation; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the Corporations
assets that could have a material effect on the financial
statements.
A material weakness is a significant deficiency, or combination
of significant deficiencies, that results in there being a more
than remote likelihood that a material misstatement of the
annual or interim financial statements will not be prevented or
detected. In its assessment of the effectiveness of internal
control over financial reporting as of December 31, 2006,
the Corporation determined that there were control deficiencies
that constituted material weaknesses, as described below.
1. The Corporation lacked the technical expertise and
processes to ensure compliance with SFAS No. 109,
Accounting for Income Taxes, and did not maintain
adequate controls with respect to (a) timely tax account
reconciliations and analyses, (b) coordination and
communication between Corporate Accounting and Tax Staffs, and
(c) timely review and analysis of corporate journals
recorded in the consolidation process. This material weakness
resulted in a restatement of prior financial statements, as
described in Note 2 to the Consolidated Financial
Statements, and, if not remediated, has the potential to cause a
material misstatement in the future.
2. The Corporation in certain instances lacked the
technical expertise and did not maintain adequate procedures to
ensure that the accounting for derivative financial instruments
under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, was appropriate.
Procedures relating to hedging transactions in certain instances
did not operate effectively to (a) properly evaluate hedge
accounting treatment (b) meet the documentation
requirements of SFAS No. 133, (c) adequately
assess and measure hedge
196
effectiveness on a quarterly basis, and (d) establish the
appropriate communication and coordination between relevant GM
departments involved in complex financial transactions. This
material weakness resulted in a restatement of prior financial
statements, as described in Note 2 to the Consolidated
Financial Statements and, if not remediated, has the potential
to cause a material misstatement in the future.
3. The Corporation did not maintain a sufficient complement
of personnel with an appropriate level of technical accounting
knowledge, experience, and training in the application of
generally accepted accounting principles commensurate with the
Corporations complex financial accounting and reporting
requirements and low materiality thresholds. This was evidenced
by a significant number of out-of-period adjustment noted during
the year-end closing process. This material weakness contributed
to the restatement of prior financial statements, as described
in Note 2 to the Consolidated Financial Statements and, if
not remediated, has the potential to cause a material
misstatement in the future.
4. Due to the previously reported material weaknesses, as
evidenced by the significant number and magnitude of
out-of-period adjustments identified during the year-end closing
process and the resulting restatements related to deferred taxes
and hedging activities, management has concluded that the
controls over the period-end financial reporting process were
not operating effectively. Specifically, controls were not
effective to ensure that significant non-routine transactions,
accounting estimates, and other adjustments were appropriately
reviewed, analyzed, and monitored on a timely basis. A material
weakness in the period-end financial reporting process could
result in the Corporation not being able to meet its regulatory
filing deadlines and, if not remediated, has the potential to
cause a material misstatement or to miss a filing deadline in
the future.
Management performed an assessment of the effectiveness of the
Corporations internal control over financial reporting as
of December 31, 2006, utilizing the criteria described in
the Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The
objective of this assessment was to determine whether the
Corporations internal control over financial reporting was
effective as of December 31, 2006.
Based on our assessment, and because of the material weaknesses
described above, management has concluded that our internal
control over financial reporting was not effective as of
December 31, 2006.
Managements assessment of the effectiveness of the
Corporations internal control over financial reporting has
been audited by Deloitte & Touche LLP, an independent
registered public accounting firm, as stated in their report
which is included herein.
197
Changes
in Internal Control over Financial Reporting
During the fourth quarter of 2006, GM sold a 51% interest in our
wholly-owned subsidiary General Motors Acceptance Corporation
(GMAC), which is described in more detail in Note 4 of the
Notes to the Consolidated Financial Statements. Accordingly,
GMACs controls were not part of managements
assessment of internal control over financial reporting as of
December 31, 2006; however, the Corporation has designed
and implemented controls to ensure the appropriate recognition
of equity method earnings and losses for GMAC and the effective
monitoring of its investment account balance.
Certain of the personnel changes described below in
Remediation of Material Weaknesses occurred during
the fourth quarter of 2006. Other than as described above, there
have not been any other changes in the Corporations
internal control over financial reporting during the quarter
ended December 31, 2006, that have materially affected, or
are reasonably likely to materially affect, the
Corporations internal control over financial reporting.
|
|
|
|
|
|
/s/ G.
RICHARD WAGONER,
JR.
G.
Richard Wagoner, Jr.
Chairman and Chief Executive Officer
|
|
/s/ FREDERICK
A. HENDERSON
Frederick
A. Henderson
Vice Chairman and Chief Financial Officer
|
March 14, 2007
|
|
March 14, 2007
|
Limitations
on the Effectiveness of Controls
Our management, including our CEO and CFO, does not expect that
our Disclosure Controls or our internal controls will prevent or
detect all errors and all fraud. A control system, no matter how
well designed and operated, can provide only reasonable, not
absolute, assurance that the control systems objectives
will be met. Further, the design of a control system must
reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs.
Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within General
Motors have been detected. These inherent limitations include
the realities that judgments in decision-making can be faulty,
and that breakdowns can occur because of simple error or
mistake. Controls can also be circumvented by the individual
acts of some persons, by collusion of two or more people, or by
management override of the controls. The design of any system of
controls is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that
any design will succeed in achieving its stated goals under all
potential future conditions. Over time, controls may become
inadequate because of changes in conditions or deterioration in
the degree of compliance with associated policies or procedures.
Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be
detected.
198
Remediation
of Material Weaknesses
The Corporation is in the process of developing and implementing
remediation plans to address our material weaknesses. Management
has taken the following actions to improve the internal controls
over financial reporting:
|
|
|
|
|
A new Controller and Corporate Chief Accounting Officer was
appointed, effective December 1, 2006.
|
|
|
|
A new Chief Accounting Officer (CAO) for GMNA was appointed
along with the appointment of six new accounting managers to
support GMNA, Global Purchasing Supply Chain, Information
Systems and Services, Vehicle Sales, Service and Marketing,
Manufacturing related activities, and Powertrain. Also, a new
CAO was appointed for Treasury Operations.
|
|
|
|
A new Director of Accounting Policy, Research, and SEC Reporting
was appointed to manage all SEC related activities including
accounting guidance and periodic reporting.
|
|
|
|
Management has initiated the Accounting Career Development
Program, which is intended to facilitate improvements in the
recruitment, training, and development of technical accounting
personnel.
|
In addition, the following describes specific remedial actions
to be taken for each of the material weaknesses described above:
1. Reorganize and restructure the Tax Department by
(a) moving the Tax Accounting function from Corporate
Accounting to the Tax Department to ensure better coordination
on complex tax issues, (b) implementing new policies and
procedures to ensure that tax account reconciliations and
analyses are properly prepared and monitored on a timely basis,
(c) establishing appropriate communication and
collaboration protocols between the Tax Department and Corporate
Accounting group, and (d) hiring the necessary technical
tax accounting personnel to support GMs complex tax
environment.
2. Implement additional policies, procedures, and
documentation retention requirements for hedge accounting to
ensure compliance with SFAS No. 133. Contract with
outside SFAS No. 133 experts in the interim until the
necessary technical accounting personnel can be hired to support
GMs complex hedge accounting activities.
3. Reorganize and restructure Corporate Accounting by
(a) revising the reporting structure and establishing clear
roles, responsibilities, and accountability, (b) hiring
additional technical accounting personnel to address GMs
complex accounting and financial reporting requirements, and
(c) assessing the technical accounting capabilities in the
operating units to ensure the right complement of knowledge,
skills, and training.
4. Improve period-end closing procedures by
(a) requiring all significant non-routine transactions to
be reviewed by Corporate Accounting, (b) ensuring that
account reconciliations and analyses for significant financial
statement accounts are reviewed for completeness and accuracy by
qualified accounting personnel, (c) implementing a process
that ensures the timely review and approval of complex
accounting estimates by qualified accounting personnel and
subject matter experts, where appropriate, and
(d) developing better monitoring controls at Corporate
Accounting and the operating units.
In light of this, management has augmented the resources in
Corporate Accounting by utilizing external resources in
technical accounting areas and implemented additional closing
procedures for the year ended December 31, 2006. As a
result, management believes that there are no material
inaccuracies or omissions of material fact and, to the best of
its knowledge, believes that the consolidated financial
statements for the year ended December 31, 2006 fairly
present in all material respects the financial condition and
results of operations for the Corporation in conformity with
accounting principles generally accepted in the United States of
America.
As discussed in GMs Annual Report on
Form 10-K
for the year ended December 31, 2005, GM management also
identified a significant deficiency in internal controls related
to accounting for complex contracts. This deficiency was noted
as a result of certain contracts being accounted for incorrectly
and without appropriate consideration of the economic substance
of the contracts. As part of its remediation efforts, GM
management issued procedural guidance regarding the evaluation
of and accounting for complex contracts. Further, GM management
has implemented a delegation of authority for approval of the
accounting for complex contracts that requires formal
199
review and approval by experienced accounting personnel. GM
management will continue to monitor the effectiveness of the
remedial actions.
* * * * *
*
|
|
Item 9B.
|
Other
Information
|
None
* * * * * *
PART III
|
|
Item 10.
|
Directors
and Executive Officers of the Registrant Code of
Ethics
|
General Motors Corporation has adopted a code of ethics that
applies to the Corporations directors, officers, and
employees, including the Chief Executive Officer, Chief
Financial Officer, Controller and Chief Accounting Officer, and
any other persons performing similar functions. The text of
GMs code of ethics, Winning With Integrity,
has been posted on the Corporations website at
http://investor.gm.com at Investor
Information Corporate Governance. GM will
provide a copy of the code of ethics without charge upon request
to Corporate Secretary, General Motors Corporation, Mail Code
482-C38-B71, 300 Renaissance Center, P. O. Box 300,
Detroit, MI
48265-3000.
* * * * * *
Items 10, 11,
12, 13, and 14
Information required by Part III (Items 10, 11,
12, 13, and 14) of this
Form 10-K
is incorporated by reference from General Motors
Corporations definitive Proxy Statement for its 2007
Annual Meeting of Stockholders, which will be filed with the
Securities and Exchange Commission, pursuant to
Regulation 14A, not later than 120 days after the end
of the 2006 fiscal year, all of which information is hereby
incorporated by reference in, and made part of, this
Form 10-K,
except that the information required by Item 10 with
respect to GMs code of ethics in Item 10 above and
disclosure of GMs executive officers, which is included in
Item 4A of Part I of this report.
* * * * * *
200
PART IV
|
|
ITEM 15.
|
Exhibits
and Financial Statement Schedule
|
|
|
(a) 1.
|
All Financial Statements and Supplemental Information
|
|
2.
|
Financial Statement Schedule II Valuation and
Qualifying Accounts
|
|
3.
|
Consolidated Financial Statements of GMAC LLC and subsidiaries
as of December 31, 2006 and 2005 and for each of the three years
ended in the year ended December 31, 2006.
|
4. Exhibits
(b) Exhibits
|
|
|
Exhibits listed below, which have been filed with the SEC
pursuant to the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, and which were
filed as noted below, are hereby incorporated by reference and
made a part of this report with the same effect as filed
herewith.
|
|
|
|
(3)(i)
|
|
Restated Certificate of
Incorporation dated March 1, 2004 incorporated herein by
reference to Exhibit 3(i) to General Motors
Corporations Annual Report on
Form 10-K
filed March 11, 2004.
|
(3)(ii)
|
|
Bylaws of General Motors
Corporation, as amended, dated October 3, 2006 incorporated
herein by reference to Exhibit 3.1 to General Motors
Corporations Current Report on
Form 8-K
filed March 9, 2007.
|
(4)(a)
|
|
Indenture, dated as of
November 15, 1990, between General Motors Corporation and
Citibank, N.A., Trustee, incorporated herein by reference to
Exhibit Amendment No. 1(a) to
Form S-3
Registration Statement
No. 33-41577
filed July 3, 1991.
|
(4)(b)(i)
|
|
Indenture, dated as of
December 7, 1995, between General Motors Corporation and
Citibank, N.A., Trustee, incorporated herein by reference to
Exhibit 4(a) to Amendment No. 1 to
Form S-3
Registration Statement
No. 33-64229
filed November 14, 1995.
|
(4)(b)(ii)
|
|
First Supplemental Indenture,
dated as of March 4, 2002, between General Motors
Corporation and Citibank, N.A., incorporated herein by reference
to Exhibit 2 to the Current Report on
Form 8-K
of General Motors Corporation filed March 6, 2002.
|
4(b)(iii)
|
|
Second Supplemental Indenture,
dated as of November 5, 2004, between General Motors
Corporation and Citibank, N.A., incorporated herein by reference
to Exhibit 4.1 to the Current Report on
Form 8-K
of General Motors Corporation filed November 10, 2004.
|
4(b)(iv)
|
|
Third Supplemental Indenture,
dated as of November 5, 2004, between General Motors
Corporation and Citibank, N.A. incorporated herein by reference
to Exhibit 4.2 to the Current Report on
Form 8-K
of General Motors Corporation filed November 10, 2004.
|
4(b)(v)
|
|
Fourth Supplemental Indenture,
dated as of November 5, 2004, between General Motors
Corporation and Citibank, N.A., incorporated herein by reference
to Exhibit 4.3 to the Current Report on
Form 8-K
of General Motors Corporation filed November 10, 2004.
|
4(c)
|
|
Amended and Restated Credit
Agreement, dated July 20, 2006, among General Motors
Corporation, General Motors Canada Limited, Saturn Corporation,
and a syndicate of lenders, incorporated herein by reference to
Exhibit 4 to General Motors Corporations Quarterly
Report on
Form 10-Q
filed August 8, 2006.
|
(10)
|
|
Agreement, dated as of
October 22, 2001, between General Motors Corporation and
General Motors Acceptance Corporation, incorporated herein by
reference to Exhibit 10 to the Annual Report on
Form 10-K
of General Motors Corporation filed March 28, 2006.
|
(10)(a)
|
|
Agreement, dated as of
November 30, 2006, between General Motors Corporation and
GMAC LLC, incorporated herein by reference to Exhibit 10.1
to the Current Report on
Form 8-K
of General Motors Corporation filed November 30, 2006.
|
(10)(b)
|
|
General Motors 2002 Annual
Incentive Plan, as amended.
|
(10)(c)
|
|
General Motors 2002 Stock
Incentive Plan, as amended.
|
201
|
|
|
(10)(d)
|
|
General Motors 2002 Long-term
Incentive Plan, as amended.
|
10(e)*
|
|
Compensation Plan for Nonemployee
Directors, incorporated herein by reference to Exhibit A to
the Proxy Statement of General Motors Corporation filed
April 16, 1997.
|
(10)(h)*
|
|
General Motors Company Vehicle
Operations Senior Management Vehicle Program (SMVP)
Supplement, revised December 15, 2005, incorporated herein
by reference to Exhibit 10(g) to the Annual Report on
Form 10-K
of General Motors Corporation filed March 28, 2006.
|
(10)(i)*
|
|
Compensation Statement for G.R.
Wagoner, Jr. commencing January 1, 2003, incorporated
herein by reference to Exhibit 10(h) to the Annual Report
on
Form 10-K
of General Motors Corporation filed March 28, 2006.
|
(10)(j)*
|
|
Compensation Statement for
Frederick A. Henderson commencing January 1, 2006.
|
(10)(k)*
|
|
Compensation Statement for Robert
A. Lutz commencing January 1, 2003, incorporated herein by
reference to Exhibit 10(j) to the Annual Report on
Form 10-K
of General Motors Corporation filed March 28, 2006.
|
(10)(l)*
|
|
Compensation Statement for G.L.
Cowger commencing February 1, 2004, incorporated herein by
reference to Exhibit 10(k) to the Annual Report on
Form 10-K
of General Motors Corporation filed March 28, 2006.
|
(10)(m)*
|
|
Compensation Statement for Thomas
A. Gottschalk commencing January 1, 2005 and description of
retirement program, incorporated herein by reference to
Exhibit 10(l) to the Annual Report on
Form 10-K
of General Motors Corporation filed March 28, 2006.
|
(10)(n)
|
|
General Motors Executive
Retirement Plan, effective for retirements on and after
January 1, 2007, as amended through January 1, 2007.
|
(10)(o)*
|
|
Description of Executive and Board
Compensation Reductions, incorporated herein by reference to
Exhibit 10(o) to the Annual Report on
Form 10-K
of General Motors Corporation filed March 28, 2006.
|
(10)(p)*
|
|
Deferred Compensation Plan for
Executive Employees, incorporated by reference to
Exhibit 10.1 to the Current Report on
Form 8-K
of General Motors Corporation filed December 8, 2006.
|
(10)(q)
|
|
Memorandum of Understanding dated
October 29, 2005 between the International Union, UAW and
General Motors Corporation, incorporated herein by reference to
Exhibit 10.1 to the Quarterly Report on
Form 10-Q
of General Motors Corporation filed May 10, 2006.
|
(10)(r)
|
|
UAW-GM-Delphi Special Attrition
Program dated March 22, 2006 among the International Union,
UAW, General Motors Corporation and Delphi Corporation,
incorporated herein by reference to Exhibit 10.1 to the
Quarterly Report on
Form 10-Q
of General Motors Corporation filed May 10, 2006.
|
(12)
|
|
Computation of Ratios of Earnings
to Fixed Charges for the Years Ended December 31, 2006,
2005, and 2004.
|
(21)
|
|
Subsidiaries of the Registrant as
of December 31, 2006.
|
(23)
|
|
Consent of Independent Registered
Public Accounting Firm.
|
(31.1)
|
|
Section 302 Certification of
the Chief Executive Officer.
|
(31.2)
|
|
Section 302 Certification of
the Chief Financial Officer.
|
(32.1)
|
|
Certification of the Chief
Executive Officer Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
|
(32.2)
|
|
Certification of the Chief
Financial Officer Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
|
|
|
|
* |
|
Management contract or compensatory plan required to be filed as
an exhibit pursuant to Item 15(b) of
Form 10-K. |
|
|
|
Filed herewith. |
* * * * *
*
202
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
Additions
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Charged to
|
|
|
Charged to
|
|
|
|
|
|
Balance at
|
|
|
|
Beginning
|
|
|
Costs and
|
|
|
Other
|
|
|
|
|
|
End of
|
|
Description
|
|
of Year
|
|
|
Expenses
|
|
|
Accounts
|
|
|
Deductions
|
|
|
Year
|
|
|
|
(Dollars in millions)
|
|
|
For the Year Ended
December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowances Deducted from Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses
|
|
$
|
3,085
|
|
|
$
|
1,799
|
|
|
$
|
|
|
|
$
|
4,884
|
(d)
|
|
$
|
|
|
Accounts and notes receivable (for
doubtful receivables)
|
|
|
353
|
|
|
|
56
|
|
|
|
|
|
|
|
12
|
|
|
|
397
|
|
Inventories (principally for
obsolescence of service parts)
|
|
|
411
|
|
|
|
121
|
(c)
|
|
|
|
|
|
|
|
|
|
|
532
|
|
Other investments and
miscellaneous assets (receivables and other)
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
Miscellaneous allowances (mortgage
and other)
|
|
|
84
|
|
|
|
62
|
|
|
|
|
|
|
|
146
|
(d)
|
|
|
|
|
For the Year Ended
December 31, 2005, as restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowances Deducted from Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses
|
|
$
|
3,402
|
|
|
$
|
1,074
|
|
|
$
|
|
|
|
$
|
1,391
|
(b)
|
|
$
|
3,085
|
|
Accounts and notes receivable (for
doubtful receivables)
|
|
|
318
|
|
|
|
73
|
|
|
|
|
|
|
|
38
|
(b)
|
|
|
353
|
|
Inventories (principally for
obsolescence of service parts)
|
|
|
340
|
|
|
|
71
|
(c)
|
|
|
|
|
|
|
|
|
|
|
411
|
|
Other investments and
miscellaneous assets (receivables and other)
|
|
|
10
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
17
|
|
Miscellaneous allowances (mortgage
and other)
|
|
|
161
|
|
|
|
25
|
|
|
|
21
|
|
|
|
123
|
|
|
|
84
|
|
For the Year Ended
December 31, 2004, as restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowances Deducted from Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses
|
|
$
|
3,022
|
|
|
$
|
1,947
|
|
|
$
|
|
|
|
$
|
1,567
|
(b)
|
|
$
|
3,402
|
|
Accounts and notes receivable (for
doubtful receivables)
|
|
|
217
|
|
|
|
122
|
|
|
|
5
|
(a)
|
|
|
26
|
(b)
|
|
|
318
|
|
Inventories (principally for
obsolescence of service parts)
|
|
|
393
|
|
|
|
|
|
|
|
|
|
|
|
53
|
(c)
|
|
|
340
|
|
Other investments and
miscellaneous assets (receivables and other)
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
74
|
|
|
|
10
|
|
Miscellaneous allowances (mortgage
and other)
|
|
|
193
|
|
|
|
28
|
|
|
|
163
|
|
|
|
223
|
|
|
|
161
|
|
|
|
|
(a) |
|
Primarily reflects the recovery of accounts previously written
off. |
|
(b) |
|
Accounts written off. |
|
(c) |
|
Represents net change of inventory allowances. |
|
(d) |
|
Primarily reflects allowances removed as a result of sale of 51%
controlling interest in GMAC. At the time of the sale GMAC had
an allowance for credit loss balance and miscellaneous allowance
balance of $3.5 billion and $123 million respectively. |
203
Report of
Independent Registered Public Accounting Firm
To the Board of Directors and Member Interest Holder of GMAC LLC:
We have audited the accompanying Consolidated Balance Sheet of
GMAC LLC and subsidiaries (the Company) as of
December 31, 2006 and 2005, and the related Consolidated
Statements of Income, Changes in Equity, and Cash Flows for each
of the three years in the period ended December 31, 2006.
These financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the
Company at December 31, 2006 and 2005, and the results of
its operations and its cash flows for each of the three years in
the period ended December 31, 2006, in conformity with
accounting principles generally accepted in the United States of
America.
As discussed in Notes 1 and 24 to the consolidated
financial statements, the accompanying Consolidated Balance
Sheet as of December 31, 2005, and Consolidated Statements
of Income, Changes in Equity, and Cash Flows for the years ended
December 31, 2005 and 2004 have been restated.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of the Companys internal control over
financial reporting as of December 31, 2006, based on the
criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report (not
presented herein) dated March 12, 2007 expressed an
unqualified opinion on managements assessment of the
effectiveness of the Companys internal control over
financial reporting and an adverse opinion on the effectiveness
of the Companys internal control over financial reporting
because of a material weakness.
/s/ Deloitte &
Touche LLP
Deloitte & Touche LLP
Detroit,
Michigan
March 12, 2007
204
Consolidated
Statement of Income
GMAC
LLC Form 10-K
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
(As restated
|
|
|
(As restated
|
|
Year
ended December 31, ($ in millions)
|
|
2006
|
|
|
see
Note 1)
|
|
|
see
Note 1)
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
$10,472
|
|
|
|
$9,943
|
|
|
|
$10,316
|
|
Commercial
|
|
|
3,112
|
|
|
|
2,685
|
|
|
|
2,177
|
|
Loans held for sale
|
|
|
1,777
|
|
|
|
1,652
|
|
|
|
1,269
|
|
Operating leases
|
|
|
7,742
|
|
|
|
7,032
|
|
|
|
6,563
|
|
|
|
Total financing revenue
|
|
|
23,103
|
|
|
|
21,312
|
|
|
|
20,325
|
|
Interest expense
|
|
|
15,560
|
|
|
|
13,106
|
|
|
|
9,659
|
|
|
|
Net financing revenue before
provision for credit losses
|
|
|
7,543
|
|
|
|
8,206
|
|
|
|
10,666
|
|
Provision for credit losses
|
|
|
2,000
|
|
|
|
1,074
|
|
|
|
1,953
|
|
|
|
Net financing revenue
|
|
|
5,543
|
|
|
|
7,132
|
|
|
|
8,713
|
|
Servicing fees
|
|
|
1,893
|
|
|
|
1,730
|
|
|
|
1,547
|
|
Amortization and impairment of
servicing rights
|
|
|
(23
|
)
|
|
|
(869
|
)
|
|
|
(1,112
|
)
|
Servicing asset valuation and
hedge activities, net
|
|
|
(1,100
|
)
|
|
|
61
|
|
|
|
243
|
|
|
|
Net loan servicing income
|
|
|
770
|
|
|
|
922
|
|
|
|
678
|
|
Insurance premiums and service
revenue earned
|
|
|
4,183
|
|
|
|
3,762
|
|
|
|
3,528
|
|
Gain on sale of mortgage and
automotive loans
|
|
|
1,470
|
|
|
|
1,656
|
|
|
|
1,347
|
|
Investment income
|
|
|
2,143
|
|
|
|
1,216
|
|
|
|
845
|
|
Gains on sale of equity method
investment
|
|
|
411
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
3,643
|
|
|
|
4,399
|
|
|
|
3,470
|
|
|
|
Total net financing revenue and
other income
|
|
|
18,163
|
|
|
|
19,087
|
|
|
|
18,581
|
|
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense on operating
lease assets
|
|
|
5,341
|
|
|
|
5,244
|
|
|
|
4,828
|
|
Compensation and benefits expense
|
|
|
2,558
|
|
|
|
3,163
|
|
|
|
2,916
|
|
Insurance losses and loss
adjustment expenses
|
|
|
2,420
|
|
|
|
2,355
|
|
|
|
2,371
|
|
Other operating expenses
|
|
|
4,776
|
|
|
|
4,134
|
|
|
|
4,210
|
|
Impairment of goodwill and other
intangible assets
|
|
|
840
|
|
|
|
712
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
15,935
|
|
|
|
15,608
|
|
|
|
14,325
|
|
Income before income tax
expense
|
|
|
2,228
|
|
|
|
3,479
|
|
|
|
4,256
|
|
Income tax expense
|
|
|
103
|
|
|
|
1,197
|
|
|
|
1,362
|
|
|
|
Net income
|
|
|
$2,125
|
|
|
|
$2,282
|
|
|
|
$2,894
|
|
|
|
Preferred interest accretion to
redemption value and dividends
|
|
|
(295
|
)
|
|
|
|
|
|
|
|
|
Net income available to
members
|
|
|
$1,830
|
|
|
|
$
|
|
|
|
$
|
|
|
The Notes to the Consolidated Financial Statements are an
integral part of these statements.
205
Consolidated Balance
Sheet
GMAC
LLC Form 10-K
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
|
|
|
(As restated
|
|
December 31,
($ in millions)
|
|
2006
|
|
|
see
Note 1)
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$15,459
|
|
|
|
$15,424
|
|
Investment securities
|
|
|
16,791
|
|
|
|
18,207
|
|
Loans held for sale
|
|
|
27,718
|
|
|
|
21,865
|
|
Assets held for sale
|
|
|
|
|
|
|
19,030
|
|
Finance receivables and loans, net
of unearned income
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
130,542
|
|
|
|
140,436
|
|
Commercial
|
|
|
43,904
|
|
|
|
44,574
|
|
Allowance for credit losses
|
|
|
(3,576
|
)
|
|
|
(3,085
|
)
|
|
|
Total finance receivables and
loans, net
|
|
|
170,870
|
|
|
|
181,925
|
|
Investment in operating leases, net
|
|
|
24,184
|
|
|
|
31,211
|
|
Notes receivable from GM
|
|
|
1,975
|
|
|
|
4,565
|
|
Mortgage servicing rights
|
|
|
4,930
|
|
|
|
4,015
|
|
Premiums and other insurance
receivables
|
|
|
2,016
|
|
|
|
1,873
|
|
Other assets
|
|
|
23,496
|
|
|
|
22,442
|
|
|
|
Total assets
|
|
|
$287,439
|
|
|
|
$320,557
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
|
|
Unsecured
|
|
|
$113,500
|
|
|
|
$133,560
|
|
Secured
|
|
|
123,485
|
|
|
|
121,138
|
|
|
|
Total debt
|
|
|
236,985
|
|
|
|
254,698
|
|
Interest payable
|
|
|
2,592
|
|
|
|
3,057
|
|
Liabilities related to assets held
for sale
|
|
|
|
|
|
|
10,941
|
|
Unearned insurance premiums and
service revenue
|
|
|
5,002
|
|
|
|
5,054
|
|
Reserves for insurance losses and
loss adjustment expenses
|
|
|
2,630
|
|
|
|
2,534
|
|
Accrued expenses and other
liabilities
|
|
|
22,659
|
|
|
|
18,224
|
|
Deferred income taxes
|
|
|
1,007
|
|
|
|
4,364
|
|
|
|
Total liabilities
|
|
|
270,875
|
|
|
|
298,872
|
|
Preferred interests
|
|
|
2,195
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Common stock and paid-in capital
|
|
|
|
|
|
|
5,760
|
|
Members interest
|
|
|
6,711
|
|
|
|
|
|
Retained earnings
|
|
|
7,173
|
|
|
|
15,095
|
|
Accumulated other comprehensive
income
|
|
|
485
|
|
|
|
830
|
|
|
|
Total equity
|
|
|
14,369
|
|
|
|
21,685
|
|
|
|
Total liabilities, preferred
interests and equity
|
|
|
$287,439
|
|
|
|
$320,557
|
|
|
The Notes to the Consolidated
Financial Statements are an integral part of these statements.
206
Consolidated
Statement of Changes in Equity
GMAC
LLC Form 10-K
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
Stock
|
|
|
|
|
|
|
|
other
|
|
|
|
|
and paid-
|
|
Members
|
|
Retained
|
|
Comprehensive
|
|
comprehensive
|
|
Total
|
($ in
millions)
|
|
in
capital
|
|
interest
|
|
earnings
|
|
income
|
|
income
(loss)
|
|
equity
|
|
|
Balance
at December 31, 2003 (As restated see Note
1)
|
|
|
$5,641
|
|
|
|
$
|
|
|
|
$14,114
|
|
|
|
|
|
|
|
$518
|
|
|
|
$20,273
|
|
Increase in paid-in capital
|
|
|
119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
119
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
2,894
|
|
|
|
$2,894
|
|
|
|
|
|
|
|
2,894
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
(1,500
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,500
|
)
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
650
|
|
|
|
650
|
|
|
|
650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$3,544
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2004 (As restated see Note
1)
|
|
|
$5,760
|
|
|
|
$
|
|
|
|
$15,508
|
|
|
|
|
|
|
|
$1,168
|
|
|
|
$22,436
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
2,282
|
|
|
|
2,282
|
|
|
|
|
|
|
|
2,282
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
(2,500
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,500
|
)
|
Repurchase transaction (a)
|
|
|
|
|
|
|
|
|
|
|
(195
|
)
|
|
|
|
|
|
|
|
|
|
|
(195
|
)
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(338
|
)
|
|
|
(338
|
)
|
|
|
(338
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1,944
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2005 (As restated see Note
1)
|
|
|
$5,760
|
|
|
|
$
|
|
|
|
$15,095
|
|
|
|
|
|
|
|
$830
|
|
|
|
$21,685
|
|
|
Conversion of common stock to
members interest on July 20, 2006
|
|
|
(5,760
|
)
|
|
|
5,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
2,125
|
|
|
|
2,125
|
|
|
|
|
|
|
|
2,125
|
|
Preferred interest accretion to
redemption value and dividends
|
|
|
|
|
|
|
|
|
|
|
(295
|
)
|
|
|
|
|
|
|
|
|
|
|
(295
|
)
|
Cumulative effect of a change in
accounting principle, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer of unrealized loss for
certain available for sale securities to trading securities
|
|
|
|
|
|
|
|
|
|
|
(17
|
)
|
|
|
|
|
|
|
17
|
|
|
|
|
|
Recognize mortgage servicing
rights at fair value
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
4
|
|
|
|
|
|
|
|
4
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
(9,739
|
)
|
|
|
|
|
|
|
|
|
|
|
(9,739
|
)
|
Capital contributions
|
|
|
|
|
|
|
951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
951
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(362
|
)
|
|
|
(362
|
)
|
|
|
(362
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1,767
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31,
2006
|
|
|
$
|
|
|
|
$6,711
|
|
|
|
$7,173
|
|
|
|
|
|
|
|
$485
|
|
|
|
$14,369
|
|
|
|
|
(a) |
In October 2005 we repurchased operating lease assets and
related deferred tax liabilities from GM. Refer to Note 18
to our Consolidated Financial Statements for further detail.
|
The Notes to the Consolidated
Financial Statements are an integral part of these statements.
207
Consolidated
Statement of Cash Flows
GMAC
LLC Form 10-K
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
(As restated
|
|
|
(As restated
|
|
Year
ended December 31, ($ in millions)
|
|
2006
|
|
|
see
Note 1)
|
|
|
see
Note 1)
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$2,125
|
|
|
|
$2,282
|
|
|
|
$2,894
|
|
Reconciliation of net income to net
cash (used in) provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
6,459
|
|
|
|
5,964
|
|
|
|
5,433
|
|
Goodwill impairment
|
|
|
840
|
|
|
|
712
|
|
|
|
|
|
Amortization and valuation
adjustments of mortgage servicing rights
|
|
|
843
|
|
|
|
782
|
|
|
|
1,384
|
|
Provision for credit losses
|
|
|
2,000
|
|
|
|
1,074
|
|
|
|
1,953
|
|
Net gains on sales of finance
receivables and loans
|
|
|
(1,470
|
)
|
|
|
(1,741
|
)
|
|
|
(1,332
|
)
|
Net gains on investment securities
|
|
|
(1,005
|
)
|
|
|
(104
|
)
|
|
|
(52
|
)
|
Capitalized interest income
|
|
|
|
|
|
|
(23
|
)
|
|
|
(30
|
)
|
Net change in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities
|
|
|
370
|
|
|
|
(1,155
|
)
|
|
|
614
|
|
Loans held for sale (a)
|
|
|
(19,346
|
)
|
|
|
(29,119
|
)
|
|
|
(2,312
|
)
|
Deferred income taxes
|
|
|
(1,346
|
)
|
|
|
351
|
|
|
|
(118
|
)
|
Interest payable
|
|
|
(470
|
)
|
|
|
(290
|
)
|
|
|
311
|
|
Other assets
|
|
|
(2,340
|
)
|
|
|
(2,446
|
)
|
|
|
2,426
|
|
Other liabilities
|
|
|
(1,067
|
)
|
|
|
45
|
|
|
|
(2,875
|
)
|
Other, net
|
|
|
(287
|
)
|
|
|
568
|
|
|
|
1,167
|
|
|
|
Net cash (used in) provided by
operating activities
|
|
|
(14,694
|
)
|
|
|
(23,100
|
)
|
|
|
9,463
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of available for sale
securities
|
|
|
(28,184
|
)
|
|
|
(19,165
|
)
|
|
|
(12,783
|
)
|
Proceeds from sales of available
for sale securities
|
|
|
6,628
|
|
|
|
5,721
|
|
|
|
3,276
|
|
Proceeds from maturities of
available for sale securities
|
|
|
23,147
|
|
|
|
8,887
|
|
|
|
7,250
|
|
Net increase in finance receivables
and loans
|
|
|
(94,869
|
)
|
|
|
(96,028
|
)
|
|
|
(125,183
|
)
|
Proceeds from sales of finance
receivables and loans
|
|
|
117,830
|
|
|
|
125,836
|
|
|
|
108,147
|
|
Purchases of operating lease assets
|
|
|
(18,190
|
)
|
|
|
(15,496
|
)
|
|
|
(14,055
|
)
|
Disposals of operating lease assets
|
|
|
7,303
|
|
|
|
5,164
|
|
|
|
7,668
|
|
Change in notes receivable from GM
|
|
|
1,660
|
|
|
|
1,053
|
|
|
|
(1,635
|
)
|
Purchases of mortgage servicing
rights, net
|
|
|
(61
|
)
|
|
|
(267
|
)
|
|
|
(326
|
)
|
Acquisitions of subsidiaries, net
of cash acquired
|
|
|
(340
|
)
|
|
|
(2
|
)
|
|
|
9
|
|
Proceeds from sale of business
units, net
|
|
|
8,537
|
|
|
|
|
|
|
|
|
|
Settlement of residual support and
risk sharing obligations with GM
|
|
|
1,357
|
|
|
|
|
|
|
|
|
|
Other, net
|
|
|
(21
|
)
|
|
|
(1,549
|
)
|
|
|
260
|
|
|
|
Net cash provided by (used in)
investing activities
|
|
|
24,797
|
|
|
|
14,154
|
|
|
|
(27,372
|
)
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in short-term debt
|
|
|
2,665
|
|
|
|
(9,970
|
)
|
|
|
4,123
|
|
Proceeds from issuance of long-term
debt
|
|
|
88,180
|
|
|
|
77,890
|
|
|
|
72,753
|
|
Repayments of long-term debt
|
|
|
(100,840
|
)
|
|
|
(69,520
|
)
|
|
|
(57,743
|
)
|
Other financing activities
|
|
|
2,259
|
|
|
|
6,168
|
|
|
|
4,723
|
|
Dividends paid
|
|
|
(4,755
|
)
|
|
|
(2,500
|
)
|
|
|
(1,500
|
)
|
Proceeds from issuance of preferred
interests
|
|
|
1,900
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by
financing activities
|
|
|
(10,591
|
)
|
|
|
2,068
|
|
|
|
22,356
|
|
|
|
Effect of exchange rate changes on
cash and cash equivalents
|
|
|
152
|
|
|
|
(45
|
)
|
|
|
295
|
|
|
|
Net (decrease) increase in cash and
cash equivalents
|
|
|
(336
|
)
|
|
|
(6,923
|
)
|
|
|
4,742
|
|
Cash and cash equivalents at
beginning of year (d)
|
|
|
15,795
|
|
|
|
22,718
|
|
|
|
17,976
|
|
|
|
Cash and cash equivalents at end of
year (b)
|
|
|
$15,459
|
|
|
|
$15,795
|
|
|
|
$22,718
|
|
|
|
Supplemental
disclosures
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
$15,889
|
|
|
|
$13,025
|
|
|
|
$8,887
|
|
Income taxes
|
|
|
1,087
|
|
|
|
1,339
|
|
|
|
2,003
|
|
Non-cash items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance receivables and loans held
for sale (c)
|
|
|
|
|
|
|
|
|
|
|
6,849
|
|
(Decrease) increase in
equity (d)
|
|
|
|
|
|
|
(195
|
)
|
|
|
119
|
|
Loans held for sale transferred to
finance receivables and loans
|
|
|
14,549
|
|
|
|
20,084
|
|
|
|
4,332
|
|
Finance receivables and loans
transferred to loans held for sale
|
|
|
3,889
|
|
|
|
3,904
|
|
|
|
3,506
|
|
Finance receivables and loans
transferred to other assets
|
|
|
1,771
|
|
|
|
1,017
|
|
|
|
388
|
|
Transfer of investment securities
classified as trading to investment securities classified as
available for sale
|
|
|
|
|
|
|
257
|
|
|
|
561
|
|
Various assets and liabilities
acquired through consolidation of variable interest entities
|
|
|
|
|
|
|
325
|
|
|
|
|
|
Available for sale securities
transferred to trading securities
|
|
|
927
|
|
|
|
|
|
|
|
|
|
Capital contributions from GM
relating to GMAC sale (e)
|
|
|
951
|
|
|
|
|
|
|
|
|
|
Non cash dividends paid to GM
relating to GMAC sale (e)
|
|
|
4,984
|
|
|
|
|
|
|
|
|
|
Proceeds from sales and repayments
of mortgage loans held for investment originally designated as
held for sale
|
|
|
7,562
|
|
|
|
2,063
|
|
|
|
1,550
|
|
|
|
|
(a)
|
Includes origination of mortgage
servicing rights of $1,732, $1,272 and $1,228 for 2006, 2005 and
2004, respectively.
|
(b)
|
2005 includes $371 of cash and cash
equivalents classified as assets held for sale. Refer to
Note 1 to our Consolidated Financial Statements.
|
(c)
|
Represents the consolidation of
certain assets related to an accounting change under
SFAS 140 in 2004.
|
(d)
|
For 2005 represents the repurchase
of operating lease assets and related deferred tax liabilities
from GM. For 2004 represents the consolidation of Banco GM under
FIN 46R beginning January 1, 2004; in the fourth
quarter, we purchased Banco GM.
|
(e)
|
As further described in
Note 18 to our Consolidated Financial Statements.
|
The Notes to the Consolidated
Financial Statements are an integral part of these statements.
208
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
1 Description
of Business and Significant Accounting Policies
GMAC LLC (referred to herein as GMAC, we, our or us) was founded
in 1919 as a wholly owned subsidiary of General Motors
Corporation (General Motors or GM). On November 30, 2006,
GM sold a 51% interest in us for approximately $7.4 billion
(the Sale Transactions) to FIM Holdings LLC (FIM Holdings). FIM
Holdings is an investment consortium led by Cerberus FIM
Investors, LLC, the sole managing member, Citigroup Inc., Aozora
Bank Ltd., and a subsidiary of The PNC Financial Services Group,
Inc.
Prior to consummation of the Sale Transactions, (i) GMAC
distributed to GM certain assets with respect to automotive
leases owned by GMAC and its affiliates, such assets having a
net book value of approximately $4.0 billion and related
deferred tax liabilities of $1.8 billion, (ii) GM
assumed or retained certain of GMACs post-employment
welfare benefits, (iii) GMAC transferred to GM certain
entities that hold a fee interest in certain real properties,
(iv) GMAC made distributions to GM for a portion of
GMACs net income from September 30, 2005, to the date
of consummation of the Sale Transactions, (v) GM and its
subsidiaries repaid certain indebtedness owing to GMAC such that
the specified unsecured obligations owing to GMAC and its
subsidiaries from GM and its U.S. subsidiaries are no
greater than $1.5 billion and (vi) GMAC made a
one-time distribution to GM of approximately $2.7 billion
of cash primarily to reflect the increase in GMACs equity
resulting from the elimination of a portion of its net deferred
tax liabilities arising from the conversion of GMAC and certain
of its subsidiaries to limited liability form.
Restatement of
Previously Issued Consolidated Financial Statements
As discussed in Note 24 to the Consolidated Financial
Statements, we are restating our historical Consolidated Balance
Sheet as of December 31, 2005 and Consolidated Statements
of Income, Changes in Equity and Cash Flows for the two years
then ended. This restatement relates to the accounting treatment
for certain hedging transactions under Statement of Financial
Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended and
interpreted (SFAS 133). We are also correcting certain
other
out-of-period
errors, which were deemed immaterial, individually and in the
aggregate, in the years in which they were originally recorded
and identified. These items relate to transactions involving
certain transfers of financial assets, valuations of certain
financial instruments, amortization of unearned income on
certain products, income taxes and other inconsequential items.
Because of this derivative restatement, we are correcting these
amounts to record them in the proper period.
The following table sets forth a reconciliation of previously
reported and restated net income for the annual periods shown.
The restatement increased January 1, 2004 retained earnings
to $14,114 million from $14,078 million. The increase
of $36 million was comprised of a $55 million increase
related to the elimination of hedge accounting related to
certain debt instruments and a decrease of $16 related to other
immaterial items.
|
|
|
|
|
|
|
|
|
|
|
Net income for the
year ended December 31,
|
|
($
in millions)
|
|
2005
|
|
|
2004
|
|
|
|
Previously reported net income
|
|
$
|
2,394
|
|
|
$
|
2,913
|
|
Elimination of hedge accounting
related to certain debt instruments
|
|
|
(256
|
)
|
|
|
(143
|
)
|
Other, net
|
|
|
136
|
|
|
|
52
|
|
|
|
Total pre-tax adjustments
|
|
|
(120
|
)
|
|
|
(91
|
)
|
Related income tax effects
|
|
|
8
|
|
|
|
72
|
|
|
|
Restated net income
|
|
$
|
2,282
|
|
|
$
|
2,894
|
|
|
|
% change
|
|
|
(4.7
|
)
|
|
|
(0.7
|
)
|
|
|
Consolidation and
Basis of Presentation
The consolidated financial statements include our accounts and
accounts of our majority-owned subsidiaries after eliminating
all significant intercompany balances and transactions, and
includes all variable interest entities in which we are the
primary beneficiary. Refer to Note 21 to our Consolidated
Financial Statements for further details on our variable
interest entities. Our accounting and reporting policies conform
to accounting principles generally accepted in the United States
of America (GAAP). Certain amounts in prior periods have been
reclassified to conform to the current periods
presentation.
We operate our international subsidiaries in a similar manner as
in the United States of America (U.S. or United States),
subject to local laws or other circumstances that may cause us
to modify our procedures accordingly. The financial statements
of subsidiaries which operate outside of the U.S. generally
are measured using the local currency as the functional
currency. All assets and liabilities of foreign subsidiaries are
translated into U.S. dollars at year-end
209
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
exchange rates. Income and expense items are translated at
average exchange rates prevailing during the reporting period.
The resulting translation adjustments are recorded as
accumulated other comprehensive income, a component of equity.
Use of Estimates
and Assumptions
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the
date of the financial statements and income and expenses during
the reporting period. In developing the estimates and
assumptions, management uses all available evidence. However,
because of uncertainties associated with estimating the amounts,
timing, and likelihood of possible outcomes, actual results
could differ from estimates.
Cash
Equivalents
Cash equivalents are generally defined as short-term, highly
liquid investments with original maturities of 90 days or
less and include investments. The balance of cash equivalents
was $13.4 billion and $13.8 billion at
December 31, 2006 and 2005, respectively. The book value of
cash equivalents approximates fair value because of the short
maturities of these instruments. Certain securities with
original maturities less than 90 days that are held as a
portion of longer term investment portfolios, primarily relating
to GMAC Insurance Holdings, Inc., are classified as investment
securities.
Investment
Securities
Our portfolio of investment securities includes bonds, equity
securities, asset- and mortgage-backed securities, notes,
interests in securitization trusts and other investments.
Investment securities are classified based on managements
intent. Our trading securities primarily consist of retained and
purchased interests in certain securitizations. The retained
interests are carried at fair value with changes in fair value
recorded in current period earnings. Debt securities which
management has the intent and ability to hold to maturity are
classified as held to maturity and reported at amortized cost as
of the trade date. Premiums and discounts on debt securities are
amortized as an adjustment to yield over the contractual term of
the security. All other investment securities are classified as
available for sale and carried at fair value as of the trade
date, with unrealized gains and losses (excluding other than
temporary impairments) included in accumulated other
comprehensive income, a component of equity, on an after-tax
basis. Investments classified as available for sale or held to
maturity are considered to be impaired when a decline in fair
value is judged to be other than temporary. We employ a
systematic methodology that considers available evidence in
evaluating potential impairment of our investments. In the event
that the cost of an investment exceeds its fair value, we
evaluate, among other factors, the magnitude and duration of the
decline in fair value. For equity and debt securities, we also
evaluate the financial health of and business outlook for the
issuer, the performance of the underlying assets for interests
in securitized assets and our intent and ability to hold the
investment. Once a decline in fair value is determined to be
other than temporary, a new cost basis in the investment is
established. Realized gains and losses on investment securities
are reported in investment income and are determined using the
specific identification method.
In the normal course of business, we enter into securities
lending agreements with various other counterparties. Under
these agreements, we lend the rights to designated securities we
own in exchange for collateral in the form of cash or
governmental securities, approximating 102% (domestic) or 105%
(foreign) of the value of the securities loaned. These
agreements are primarily overnight in nature and settle the next
business day. At December 31, 2006, we had loaned
securities of $439 million and had received corresponding
cash collateral of $445 million for such loans. We had no
such securities on loan at December 31, 2005.
Loans Held for
Sale
Loans held for sale may include automotive, commercial finance
and residential receivables and loans and are carried at the
lower of aggregate cost or estimated fair value, or, if such
loans are part of hedge accounting relationships pursuant to
SFAS 133, they are reported at fair value. Fair value is
based on contractually established commitments from investors or
is based on current investor yield requirements. Revenue
recognition on consumer automotive finance receivables is
suspended when finance receivables and loans are placed on
nonaccrual status. Retail automotive receivables held for sale
are placed on nonaccrual status when contractually delinquent
for 120 days.
Assets Held for
Sale
On August 3, 2005, we announced that we had entered into a
definitive agreement to sell a majority equity interest in
Capmark. As a result of this previous definitive agreement, the
assets and liabilities of Capmark were classified as held for
sale separately in our Consolidated Balance Sheet at
December 31, 2005. On March 23, 2006, we completed the
sale of approximately 79% of our equity in Capmark.
Finance
Receivables and Loans
Finance receivables and loans are reported at the principal
amount outstanding, net of unearned income. Unearned income,
which includes deferred origination fees reduced by origination
costs and unearned rate support received from GM, is amortized
over the contractual life of the related finance receivable or
loan using the interest method. Loan commitment fees are
generally deferred and amortized into commercial revenue over
the commitment period.
Acquired
Loans
We acquire certain loans individually and in groups or
portfolios, which have experienced deterioration of credit
quality between origination and our acquisition. The amount paid
for these loans reflects our determination that it is probable
that we will be unable to collect all amounts due according to
the loans contractual terms. These acquired loans are
accounted for under American Institute of
210
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
Certified Public Accountants Statement of
Position 03-3,
Accounting for Certain Loans or Debt Securities Acquired in a
Transfer
(SOP 03-3).
We recognize the accretable yield to the excess of our estimate
of undiscounted expected principal, interest and other cash
flows (expected at acquisition to be collected) over our initial
investment in the acquired asset.
Over the life of the loan or pool, we update the estimated cash
flows we expect to collect. At each balance sheet date, we
evaluate whether the expected cash flows of these loans has
changed. We adjust the amount of accretable yield for any loans
or pools where there is an increase in expected cash flows. We
record a valuation allowance for any loans or pools for which
there is a decrease in expected cash flows. In accordance with
Statement of Financial Accounting Standards No. 114,
Accounting by Creditors for Impairment of a Loan
(SFAS 114), we measure such impairments based upon the
present value of the expected future cash flows discounted using
the loans effective interest rate or, as a practical
expedient when reliable information is available, through the
fair value of the collateral less expected costs to sell. The
present value of any subsequent increase in the loans or
pools actual cash flows or cash flows expected to be
collected is used first to reverse any existing valuation
allowance for that loan or pool.
Nonaccrual
Loans
Consumer and commercial revenue recognition is suspended when
finance receivables and loans are placed on nonaccrual status.
Prime retail automotive receivables are placed on nonaccrual
status when delinquent for 120 days. Nonprime retail
automotive receivables are placed on nonaccrual status when
delinquent for 60 days. Residential mortgages and
commercial real estate loans are placed on nonaccrual status
when delinquent for 60 days. Warehouse, construction, and
other lending receivables are placed on nonaccrual status when
delinquent for 90 days. Revenue accrued but not collected
at the date finance receivables and loans are placed on
nonaccrual status is reversed and subsequently recognized only
to the extent it is received in cash. Finance receivables and
loans are restored to accrual status only when contractually
current and the collection of future payments is reasonably
assured.
Impaired
Loans
Commercial loans are considered impaired when it is probable
that we will be unable to collect all amounts due according to
the terms of the loan agreement and the recorded investment in
the loan exceeds the fair value of the underlying collateral. We
recognize income on impaired loans as discussed previously for
nonaccrual loans. If the recorded investment in impaired loans
exceeds the fair value, a valuation allowance is established as
a component of the allowance for credit losses. In addition to
commercial loans specifically identified for impairment, we have
pools of loans that are collectively evaluated for impairment,
as discussed within the allowance for credit losses accounting
policy.
Allowance for
Credit Losses
The allowance for credit losses is managements estimate of
incurred losses in the lending portfolios. Portions of the
allowance for credit losses are specified to cover the estimated
losses on commercial loans specifically identified for
impairment. The unspecified portion of the allowance for credit
losses covers estimated losses on the homogeneous portfolios of
finance receivables and loans collectively evaluated for
impairment. Amounts determined to be uncollectible are charged
against the allowance for credit losses. Additionally, losses
arising from the sale of repossessed assets collateralizing
automotive finance receivables and loans are charged to the
allowance for credit losses. Recoveries of previously
charged-off amounts are credited at time of collection.
We perform periodic and systematic detailed reviews of our
lending portfolios to identify inherent risks and to assess the
overall collectibility of those portfolios. The allowance
relates to portfolios collectively reviewed for impairment,
generally consumer finance receivables and loans, and is based
on aggregated portfolio evaluations by product type. Loss models
are utilized for these portfolios which consider a variety of
factors including, but not limited to, historical loss
experience, current economic conditions, anticipated
repossessions or foreclosures based on portfolio trends,
delinquencies and credit scores, and expected loss factors by
receivable and loan type. Loans in the commercial portfolios are
generally reviewed on an individual loan basis and, if
necessary, an allowance is established for individual loan
impairment. Loans subject to individual reviews are analyzed
based on factors including, but not limited to, historical loss
experience, current economic conditions, collateral performance,
performance trends within specific geographic and portfolio
segments, and any other pertinent information, which result in
the estimation of specific allowances for credit losses. The
allowance related to specifically identified impaired loans is
established based on discounted expected cash flows, observable
market prices, or for loans that are solely dependent on the
collateral for repayment, the fair value of the collateral. The
evaluation of these factors for both consumer and commercial
finance receivables and loans involves complex, subjective
judgments.
Securitizations
and Other Off-balance Sheet Transactions
We securitize, sell and service retail finance receivables,
operating leases, wholesale loans, securities, and residential
loans. Interests in the securitized and sold loans are generally
retained in the form of interest-only strips, senior or
subordinated interests, cash reserve accounts and servicing
rights. Our retained interests are generally subordinate to
investors interests. The investors and the securitization
trusts generally have no recourse to our other assets for
failure of debtors to pay when due.
We retain servicing responsibilities for all of our retail
finance receivable, operating lease, and wholesale loan
securitizations and for the majority of our residential loan
securitizations. We may
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Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
receive servicing fees based on the securitized loan balances
and certain ancillary fees, all of which are recorded in
servicing fees income. We also retain the right to service the
residential loans sold as a result of mortgage-backed security
transactions with Ginnie Mae, Fannie Mae, and Freddie Mac. We
also serve as the collateral manager in the securitizations of
commercial investment securities.
Gains or losses on securitizations and sales depend on the
previous carrying amount of the assets involved in the transfer
and are allocated between the assets sold and the retained
interests based on relative fair values, except for certain
servicing assets or liabilities which are initially recorded at
fair value, at the date of sale. Since quoted market prices are
generally not available, we estimate the fair value of retained
interests by determining the present value of future expected
cash flows using modeling techniques that incorporate
managements best estimates of key variables, including
credit losses, prepayment speeds, weighted average life and
discount rates commensurate with the risks involved and, if
applicable, interest or finance rates on variable and adjustable
rate contracts. Credit loss assumptions are based upon
historical experience, market information for similar
investments, and the characteristics of individual receivables
and loans underlying the securities. Prepayment speed estimates
are determined utilizing data obtained from market participants,
where available, or based on historical prepayment rates on
similar assets. Discount rate assumptions are determined using
data obtained from market participants, where available, or
based on current relevant treasury rates plus a risk adjusted
spread based on analysis of historical spreads on similar types
of securities. Estimates of interest rates on variable and
adjustable contracts are based on spreads over the applicable
benchmark interest rate using market-based yield curves. Gains
on securitizations and sales are reported in gain on sale of
mortgage and automotive loans for retail finance receivables,
wholesale loans and residential loans. Retained interests are
recorded at fair value with any declines in fair value below the
carrying amount reflected in other comprehensive income, a
component of equity, or in earnings, if declines are determined
to be other than temporary or if the interests are classified as
trading. Retained interest-only strips and senior and
subordinated interests are generally included in available for
sale investment securities, or in trading investment securities,
depending on managements intent at the time of
securitization. Retained cash reserve accounts are included in
other assets.
Investment in
Operating Leases
Investment in operating leases is reported at cost, less
accumulated depreciation and net of origination fees or costs.
Income from operating lease assets, which includes lease
origination fees net of lease origination costs, is recognized
as operating lease revenue on a straight-line basis over the
scheduled lease term. Depreciation of vehicles is generally
provided on a straight-line basis to an estimated residual value
over a period of time, consistent with the term of the
underlying operating lease agreement. We evaluate our
depreciation policy for leased vehicles on a regular basis.
We have significant investments in the residual values of assets
in our operating lease portfolio. The residual values represent
an estimate of the values of the assets at the end of the lease
contracts and are initially recorded based on residual values
established at contract inception by consulting independently
published residual value guides. Realization of the residual
values is dependent on our future ability to market the vehicles
under the prevailing market conditions. Over the life of the
lease, we evaluate the adequacy of our estimate of the residual
value and may make adjustments to the depreciation rates to the
extent the expected value of the vehicle (including any residual
support payments from GM) at lease termination changes. In
addition to estimating the residual value at lease termination,
we also evaluate the current value of the operating lease asset
and test for impairment to the extent necessary based on market
considerations and portfolio characteristics. Other than
temporary impairment is determined to exist if the undiscounted
expected future cash flows are lower than the carrying value of
the asset. When a lease vehicle is returned to us, the asset is
reclassified from investment in operating leases to other assets
at the lower of cost or estimated fair value, less costs to sell.
Mortgage
Servicing Rights
Primary servicing involves the collection of payments from
individual borrowers and the distribution of these payments to
the investors. Master servicing rights represent our right to
service mortgage and asset-backed securities and whole loan
packages issued for investors. Master servicing involves the
collection of borrower payments from primary servicers and the
distribution of those funds to investors in mortgage and
asset-backed securities and whole loan packages.
We capitalize the value expected to be realized from performing
specified mortgage servicing activities for others as mortgage
servicing rights (MSRs). Such capitalized servicing rights are
purchased or retained upon sale or securitization of mortgages.
Prior to January 1, 2006, mortgage servicing rights were
recorded on both securitizations that were accounted for as
sales, as well as those accounted for as secured financings.
Effective January 1, 2006, with the adoption of
SFAS 156, mortgage servicing rights are not recorded on
securitizations accounted for as secured financings. The total
cost of the mortgage loans, which includes the cost to acquire
the mortgage servicing rights, is allocated to the mortgage
loans, the servicing rights and other retained assets based on
their relative fair values. We measure mortgage servicing assets
and liabilities at fair value.
We define our classes of servicing rights based on both the
availability of market inputs and the manner in which we manage
the risks of our servicing assets and liabilities. We manage our
servicing rights at the reportable operating segment level where
sufficient market inputs exist to determine the fair value of
our recognized servicing assets and liabilities.
Since quoted market prices for MSRs are not available, we
estimate the fair value of MSRs by determining the present value
of future expected cash flows using modeling techniques that
incorporate
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Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
managements best estimates of key variables, including
expected cash flows, credit losses, prepayment speeds and return
requirements commensurate with the risks involved. Cash flow
assumptions are based on our actual performance, and where
possible, the reasonableness of assumptions is periodically
validated through comparisons to other market participants.
Credit loss assumptions are based upon historical experience and
the characteristics of individual loans underlying the MSRs.
Prepayment speed estimates are determined from historical
prepayment rates on similar assets or obtained from third-party
data. Return requirement assumptions are determined using data
obtained from market participants, where available, or based on
current relevant interest rates plus a risk-adjusted spread.
Since many factors can affect the estimate of the fair value of
mortgage servicing rights, we regularly evaluate the major
assumptions and modeling techniques used in our estimate and
review such assumptions against market comparables, if available.
We monitor the actual performance of our MSRs by regularly
comparing actual cash flow, credit and prepayment experience to
modeled estimates. We periodically invest in trading and
available for sale securities and derivative financial
instruments to mitigate the effect of changes in fair value from
the interest rate risk inherent in the MSRs.
Reinsurance
We assume and cede insurance risk under various reinsurance
agreements. We seek to reduce the loss that may arise from
catastrophes or other events that cause unfavorable underwriting
results by reinsuring certain levels of risk with other
insurance enterprises. We remain liable with respect to any
reinsurance ceded if the assuming companies are unable to meet
their obligations under these reinsurance agreements. We also
assume insurance risks from other insurance companies, receiving
a premium as consideration for the risk assumption. Amounts
recoverable from reinsurers on paid losses and loss adjustment
expenses are included in premiums and other insurance
receivables. Amounts recoverable from reinsurers on unpaid
losses, including incurred but not reported losses and loss
adjustment expenses, pursuant to reinsurance contracts are
estimated and reported with premiums and other insurance
receivables. Amounts paid to reinsurers relating to the
unexpired portion of reinsurance contracts are reported as
prepaid reinsurance premiums within premiums and other insurance
receivables.
Repossessed and
Foreclosed Assets
Assets are classified as repossessed and foreclosed and included
in other assets when physical possession of the collateral is
taken, regardless of whether foreclosure proceedings have taken
place. Repossessed and foreclosed assets are carried at the
lower of the outstanding balance at the time of repossession or
foreclosure, or fair value of the asset less estimated costs to
sell. Losses on the revaluation of repossessed and foreclosed
assets are charged to the allowance for credit losses at the
time of repossession. Subsequent holding period losses and
losses arising from the sale of repossessed assets
collateralizing automotive finance receivables and loans are
expensed as incurred in other operating expenses.
Goodwill and
Other Intangibles
Goodwill and other intangible assets, net of accumulated
amortization, are reported in other assets. In accordance with
Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets (SFAS 142),
goodwill represents the excess of the cost of an acquisition
over the fair value of net assets acquired. Goodwill is reviewed
for impairment utilizing a two step process. The first step of
the impairment test requires us to define the reporting units,
which for us represents the operating segments as disclosed in
Note 22 and compare the fair value of each of these
reporting units to the respective carrying value. The fair value
of the reporting units is determined based on various analyses,
including discounted cash flow projections. If the carrying
value is less than the fair value, no impairment exists and the
second step does not need to be completed. If the carrying value
is higher than the fair value, there is an indication that
impairment may exist and a second step must be performed to
compute the amount of the impairment. SFAS 142 requires
goodwill to be tested for impairment annually at the same time
every year, and when an event occurs or circumstances change
such that it is reasonably possible that an impairment may
exist. We conclude on our annual impairment test in the fourth
quarter.
Other intangible assets, which include customer lists,
trademarks and other identifiable intangible assets, are
amortized on a straight-line basis over an estimated useful life
of 3 to 15 years.
Impairment of
Long Lived Assets
The carrying value of long-lived assets (including premises and
equipment and investment in operating leases as well as certain
identifiable intangibles) are evaluated for impairment whenever
events or changes in circumstances indicate that the carrying
value of an asset may not be recoverable from the estimated
undiscounted future cash flows expected to result from its use
and eventual disposition. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of
an asset to future net undiscounted cash flows expected to be
generated by the asset. If such assets are considered to be
impaired, the impairment is measured as the amount by which the
carrying amount of the assets exceeds the fair value as
estimated by discounted cash flows. No material impairment was
recognized.
Premises and
Equipment
Premises and equipment, stated at cost net of accumulated
depreciation and amortization, are reported in other assets.
Included in premises and equipment are certain capitalized
software costs. The capitalized software is generally amortized
on a straight-line basis over its useful life for a period not
to exceed three years. Capitalized software that is not expected
to provide substantive service potential or for which
development costs significantly exceed
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Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
the amount originally expected is considered impaired and
written down to fair value.
Deferred Policy
Acquisition Costs
Commissions and other costs of acquiring insurance, and
compensation paid to producers of extended service contracts
that are primarily related to and vary with the production of
business are deferred and recorded in other assets. These costs
are subsequently amortized over the terms of the related
policies and service contracts on the same basis as premiums and
revenue are earned, except for direct response advertising costs
which are amortized over a three year period, based on the
anticipated future benefit.
Unearned
Insurance Premiums and Service Revenue
Insurance premiums, net of premiums ceded to reinsurers, and
service revenue are earned over the terms of the policies. The
portion of premiums and service revenue written applicable to
the unexpired terms of the policies is recorded as unearned
insurance premiums or unearned service revenue. For short
duration contracts, premiums and unearned service revenue are
earned on a pro rata basis. For extended service and maintenance
contracts, premiums and service revenues are earned on a basis
proportionate to the anticipated loss emergence.
Reserves for
Insurance Losses and Loss
Adjustment Expenses
Reserves for insurance losses and loss adjustment expenses are
established for the unpaid cost of insured events that have
occurred as of a point in time. More specifically, the reserves
for insurance losses and loss adjustment expenses represent the
accumulation of estimates for reported losses and a provision
for losses incurred but not reported, including claims
adjustment expenses, relating to direct insurance and assumed
reinsurance agreements. Estimates for salvage and subrogation
recoverable are recognized at the time losses are incurred and
netted against insurance losses and loss adjustment expenses.
Reserves are established for each business at the lowest
meaningful level of homogeneous data based on actuarial analysis
and volatility considerations. Since the reserves are based on
estimates, the ultimate liability may be more or less than such
reserves. Adjustments in such estimated reserves are included in
the period in which the adjustments are considered necessary.
Such adjustments may occur in future periods and could have a
material impact on our consolidated financial position, results
of operations or cash flows.
Derivative
Instruments and Hedging Activities
In accordance with SFAS 133, all derivative financial
instruments, whether designated for hedging relationships or
not, are required to be recorded on the balance sheet as assets
or liabilities, carried at fair value and periodically adjusted.
At inception of a hedging relationship, we designate each
qualifying derivative financial instrument as a hedge of the
fair value of a specifically identified asset or liability (fair
value hedge) or as a hedge of the variability of cash flows to
be received or paid related to a recognized asset or liability
(cash flow hedge). We also use derivative financial instruments
which, although acquired for risk management purposes, do not
qualify as hedges under GAAP. Changes in the fair value of
derivative financial instruments that are designated and qualify
as fair value hedges, along with the gain or loss on the hedged
asset or liability attributable to the hedged risk, are recorded
in current period earnings. For qualifying cash flow hedges, the
effective portion of the change in the fair value of the
derivative financial instruments is recorded in other
comprehensive income, a component of equity, and recognized in
the income statement when the hedged cash flows affect earnings.
Changes in the fair value of derivative financial instruments
held for risk management purposes that do not meet the criteria
to qualify as hedges under GAAP are reported in current period
earnings. The ineffective portions of fair value and cash flow
hedges are immediately recognized in earnings. The hedge
accounting treatment described herein is no longer applied if a
derivative financial instrument is terminated or the hedge
designation is removed. For these terminated fair value hedges,
any changes to the hedged asset or liability remain as part of
the basis of the asset or liability and are recognized into
income over the remaining life of the asset or liability. For
terminated cash flow hedges, unless it is probable that the
forecasted cash flows will not occur within a specified time
frame, any changes in fair value of the derivative financial
instrument remain in other comprehensive income, a component of
equity, and are reclassified into earnings in the same period
during which the cash flows affect earnings.
Loan Commitments
We enter into commitments to make loans whereby the interest
rate on the loan is set prior to funding (i.e., interest rate
lock commitments). Interest rate lock commitments for loans to
be originated or purchased for sale, and for loans to be
purchased and held for investment (including commitments to
acquire senior interests in mortgage loan pools from off-balance
sheet facilities), are derivative financial instruments carried
at fair value in accordance with SFAS 133 and Staff
Accounting Bulletin No. 105, Application of
Accounting Principles to Loan Commitments
(SAB 105). SAB 105 provides specific guidance on
the measurement of loan commitments, specifying that fair value
measurement exclude any expected future cash flows related to
the customer relationship or loan servicing. Servicing assets
are recognized once they are contractually separated from the
underlying loan by sale or securitization.
Income
Taxes
Prior to November 30, 2006, we filed a consolidated
U.S. federal income tax return with GM. The portion of the
consolidated tax recorded by us and our subsidiaries included in
the consolidated tax return generally is equivalent to the
liability that we would have incurred on a separate return basis
and is settled as GMs tax payments are due.
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Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
During 2006, we and a number of our U.S. subsidiaries
converted to limited liability companies (LLCs) and effective
November 28, 2006, became disregarded or pass-through
entities for U.S. federal income tax purposes. Income taxes
incurred by these converting entities have been provided through
November 30, 2006 as required under the tax sharing
agreement between GM and GMAC. Subsequent to November 30,
2006, income taxes have not been provided for these entities as
they have ceased to be taxable entities. Taxation for these
entities is generally levied at each members level for
their allocable share of taxable income. Where entity level tax
applies, it has been provided for in the consolidated financial
statements. Any related deferred taxes have been eliminated with
respect to entities that have ceased to be taxable enterprises.
Our banking, insurance and foreign subsidiaries are generally
corporations and continue to be subject to and provide for
U.S. federal, state, and foreign income taxes. Deferred tax
assets and liabilities are established for future tax
consequences of events that have been recognized in the
financial statements or tax returns, based upon enacted tax laws
and rates. Deferred tax assets are recognized subject to
managements judgment that realization is more likely than
not. We also establish reserves related to disputed items with
various tax authorities when an unfavorable judgment against us
becomes probable and the costs can be reasonably estimated.
Preferred
Membership Interest
We issued 2,110,000 Preferred Membership Interests (Preferred
Interests) each with a face value of $1,000 in November 2006. GM
and FIM Holdings purchased 1,555,000 and 555,000 Preferred
Interests, respectively, at a 10% discount, for total cash
proceeds of $1.9 billion. Preferred Interests are
non-voting, can not be converted into any additional membership
interest in us, and have a 3% redemption premium if redeemed
within the first five years after issuance. In accordance with
Emerging Issues Task Force Topic
No. D-98,
Classification and Measurement of Redeemable Securities,
the Preferred Interests have been recorded as mezzanine equity
at their redemption value, as they are redeemable at the option
of the holder, and are revalued to redemption value at each
balance sheet date. The accretion to redemption value and
dividends on the Preferred Interests were recorded as an
adjustment to retained earnings.
Membership
Interest
We currently have three additional classes of Membership
Interests, consisting of 51,000 Class A Membership
Interests, 49,000 Class B Membership Interests and 5,820
Class C Membership Interests. All Class A and
Class B Membership Interests are issued and outstanding at
December 31, 2006, and have equal rights and preferences in
the assets of GMAC. FIM Holdings owns all 51,000 Class A
Interests (a 51% ownership interest in us) and GM, through a
wholly-owned subsidiary, owns all 49,000 Class B Interests
(a 49% ownership interest in us). There were 3,703 Class C
Membership Interests authorized, at December 31, 2006,
which are considered profit interests and not
capital interests as defined in Revenue Procedure
93-27,
1993-2 C.B.
343. These Class C Membership Interests may be issued from
time to time pursuant to the GMAC Management LLC Class C
Membership Interest Plan. Each outstanding class of membership
interest is classified as equity in our consolidated financial
statements. Any additional membership interests must be approved
by the Board of Managers (Board). There is no established
trading market for our Common Equity interests, Preferred
Membership Interest or Class C Membership Interests. At
December 31, 2006, there were no Class C Membership
Interests granted.
Membership
Interest Distributions
We are required to make certain distributions to holders of the
Preferred Interests (preferred holders). Distributions will be
made in cash on a pro rata basis within ten business days of
delivering the GMAC financial statements to the members.
Distributions are issued in units of $1,000 and will accrue
yield during each fiscal quarter at a rate of 10% per
annum. Our Board may reduce any distribution to the extent
required to avoid a reduction of the equity capital of GMAC
below a minimum amount of equity capital equal to the net book
value of GMAC as of November 30, 2006 (determined in
accordance with GAAP).
In addition, our Board may suspend the payment distributions
with respect to any one or more fiscal quarters with majority
members consent. If distributions are not made with
respect to any fiscal quarter, the distributions will be
non-cumulative and will be reduced to zero. If the accrued yield
of GMACs preferred interests for any fiscal quarter is
fully paid to the preferred members, then the excess of the net
financial book income of GMAC in any fiscal quarter over the
amount of yield distributed to the holders of our preferred
equity interests in such fiscal quarter, will be distributed to
the holders of our common membership interests (Class A and
Class B Membership Interests) as follows: at least 40% of
the excess will be paid for fiscal quarters ending prior to
December 31, 2008 and at least 70% of the excess will
be paid for fiscal quarters ending after December 31, 2008.
In this event, distribution priorities are to common membership
interest holders first, up to the agreed upon amounts, and then
ratably to Class A, Class B and Class C
Membership Interest holders based on the total interest of each
such holder.
In the event of sale or dissolution of GMAC, cash proceeds
available for distribution to the members shall be distributed
first to the Preferred Interest holders ratably for the amount
of preferred accrued dividends. Thereafter, distributions shall
be made to the Preferred Interest holders ratably for the amount
of aggregate unreturned preferred capital amounts, until the
unreturned preferred capital amounts are fully paid. Following
these dividends to preferred holders, distributions shall be
made to the holder of our common equity interest ratably until
such holders have received a return of their agreed initial
value. Finally, remaining distributions shall be made to
Class A, Class B and Class C Membership Interest
holders based on the total interest of each such holder.
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Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
Share-based
Incentive Plans
During the 2006 year, the Compensation Committee of the
Board approved two share-based compensation plans for senior and
executive-level employees a Long-term Phantom
Incentive Plan (LTIP) and a Management Profits Interest Plan
(MPI). The LTIP provides for a cash bonus paid after a
three-year performance period based on our performance. The MPI
provides for an equity interest in a management company that
holds our Class C Membership Interests. There were no
grants under either plan in 2006.
Change in
Accounting Principle
On January 1, 2006, we adopted Statement of Financial
Accounting Standards No. 156, Accounting for Servicing
of Financial Assets (SFAS 156) that:
(1) provides revised guidance on when a servicing asset and
servicing liability should be recognized; (2) requires all
separately recognized servicing assets and liabilities to be
initially measured at fair value, if practicable;
(3) permits an entity to elect to measure servicing assets
and liabilities at fair value each reporting date and report
changes in fair value in earnings in the period in which the
changes occur; (4) upon initial adoption, permits a one
time reclassification of
available-for-sale
securities to trading securities for securities, which are
identified as offsetting an entitys exposure to changes in
the fair value of servicing assets or liabilities that a
servicer elects to subsequently measure at fair value and
(5) requires separate presentation of servicing assets and
liabilities subsequently measured at fair value in the balance
sheet and additional disclosures. We elected to subsequently
measure the majority of servicing assets and liabilities at fair
value and report changes in fair value in earnings in the period
in which the changes occur. In addition, we made a one-time
reclassification of $927 million of available for sale
securities to trading securities for those securities identified
as offsetting our exposure to changes in the fair value of
servicing assets or liabilities. The adoption of
SFAS No. 156 resulted in a $13 million reduction
in the beginning of the year retained earnings, net of tax, as a
cumulative effect of a change in accounting principle. However,
the impact to total equity was a $4 million increase, net
of tax.
We define our classes of servicing rights based on both the
availability of market inputs and the manner in which we manage
the risks of our servicing assets and liabilities. We manage our
servicing rights at the reportable operating segment level. For
all servicing assets and liabilities recorded on our
consolidated balance sheet at January 1, 2006, the date of
adoption, we identified three classes of servicing rights, those
pertaining to: residential mortgage in our Residential Capital,
LLC (ResCap), reporting segment, auto finance in our North
American Operations reporting segment and commercial mortgages.
As a result of the sale of approximately 79% of Capmark on
March 23, 2006, the commercial mortgage servicing
rights are no longer recorded on our consolidated balance sheet
at December 31, 2006. We have elected to measure our
residential mortgage servicing rights at fair value for each
reporting date and report changes in fair value in earnings
during the period in which the changes occur. At
December 31, 2006 and 2005, these mortgage servicing rights
were valued at $4.9 billion and $4.0 billion,
respectively, on our Consolidated Balance Sheet.
For auto finance servicing assets we have elected to continue to
use the amortization method of accounting. Our auto finance
servicing assets and liabilities at December 31, 2006,
totaled $9 million and $18 million, respectively, and
are recorded in other assets and other liabilities,
respectively, on our Consolidated Balance Sheet.
Recently Issued
Accounting Standards
Statement of Position
05-1
In September 2005 the American Institute of Certified Public
Accountants (AICPA) issued Statement of Position
05-1,
Accounting by Insurance Enterprises for Deferred Acquisition
Costs in Connection with Modifications or Exchanges of Insurance
Contracts
(SOP 05-1).
SOP 05-1
provides guidance on accounting for deferred acquisition costs
on internal replacements of insurance contracts.
SOP 05-1
defines an internal replacement and specifies the conditions
that determine whether the replacement contract is substantially
or unsubstantially changed from the replaced contract. An
internal replacement determined to result in a substantially
changed contract should be accounted for as an extinguishment of
the replaced contract; unamortized deferred acquisition costs
and unearned revenue liabilities of the replaced contract should
no longer be deferred. An internal replacement determined to
result in an unsubstantially changed contract should be
accounted for as a continuation of the replaced asset.
SOP 05-01
introduces the terms integrated and non-integrated contract
features and specifies that non-integrated features do not
change the base contract and are to be accounted for in a manner
similar to a separately issued contract. Integrated features are
evaluated in conjunction with the base contract.
SOP 05-1
is effective for internal replacements occurring in fiscal years
beginning after December 15, 2006. Adoption of
SOP 05-1
is not expected to have a material impact on our consolidated
financial position or results of operations.
Statement of Financial Accounting Standards
No. 155 In February 2006 the Financial
Accounting Standards Board (FASB) issued Statement of Financial
Standards No. 155 Accounting for Certain Hybrid
Financial Instruments an amendment of FASB
Statements No. 133 and 140 (SFAS 155). This
standard permits fair value remeasurement for any hybrid
financial instrument that contains an embedded derivative that
otherwise would require bifurcation. SFAS 155 allows an
entity to make an irrevocable election to measure such a hybrid
financial instrument at fair value on an
instrument-by-instrument
basis. The standard eliminates the prohibition on a QSPE from
holding a derivative financial instrument that pertains to a
beneficial interest other than another derivative financial
instrument. SFAS 155 also clarifies which interest-only and
principal-only strips are not subject to the requirements of
SFAS 133, as well as determines that concentrations of
credit risk in the form of subordination are not embedded
derivatives. SFAS 155 is effective for all financial
instruments acquired or issued after the
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Consolidated Financial Statements
GMAC
LLC Form 10-K
beginning of the fiscal year that begins after
September 15, 2006. Adoption of SFAS 155 is not
expected to have a material impact on our consolidated financial
position or results of operations.
FASB Staff Position
FIN 46(R)-6 In April 2006 the FASB issued
FIN 46(R)-6, Determining the Variability to Be
Considered in Applying FASB Interpretation No. 46(R),
which requires the variability of an entity to be analyzed
based on the design of the entity. The nature and risks in the
entity, as well as the purpose for the entitys creation,
are examined to determine the variability in applying
FIN 46(R). The variability is used in applying
FIN 46(R) to determine whether an entity is a variable
interest entity, which interests are variable interests in the
entity and who is the primary beneficiary of the variable
interest entity. This statement is applied prospectively and is
effective for all reporting periods beginning after
June 15, 2006. The guidance did not have a material impact
on our consolidated financial position or results of operations.
FASB Interpretation No. 48 In June 2006
the FASB issued Interpretation No. 48, Accounting for
Uncertainty in Income Taxes (FIN 48), which supplements
Statement of Financial Accounting Standard No. 109 by
defining the confidence level that a tax position must meet in
order to be recognized in the financial statements. The
Interpretation requires that the tax effects of a position be
recognized only if it is more-likely-than-not to be
sustained solely on its technical merits as of the reporting
date. The more-likely-than-not threshold represents a positive
assertion by management that a company is entitled to the
economic benefits of a tax position. If a tax position is not
considered more-likely-than-not to be sustained based solely on
its technical merits, no benefits of the position are to be
recognized. Moreover, the more-likely-than-not threshold must
continue to be met in each reporting period to support continued
recognition of a benefit. At adoption, companies must adjust
their financial statements to reflect only those tax positions
that are more-likely-than-not to be sustained as of the adoption
date. Any necessary adjustment would be recorded directly to
retained earnings in the period of adoption and reported as a
change in accounting principle. The adoption of this
Interpretation as of January 1, 2007, is not expected to
have a material impact on our consolidated financial position.
FASB Staff Position (FSP)
No. 13-2
In July 2006 the FASB issued FSP
No. 13-2
Accounting for a Change or Projected Change in the Timing of
Cash Flows Relating to Income Taxes Generated by a Leveraged
Lease Transaction, (FSP
13-2), which
amends SFAS No. 13, Accounting for Leases, by
requiring lessors to recalculate the rate of return and periodic
income allocation for leveraged-lease transactions when there is
a change or projected change in the timing of income tax cash
flows related to the lease. FSP
13-2
requires lessors to use the model in FIN 48 to determine
the timing and amount of expected tax cash flows in
leveraged-lease calculations and recalculations. FSP
13-2 is
effective in the same period as FIN 48. At the date of
adoption, the lessor is required to reassess projected income
tax cash flows related to leveraged leases using the FIN 48
model for recognition and measurement. Revisions to the net
investment in a leverage lease required when FSP
13-2 is
adopted would be recorded as an adjustment to the beginning
balance of retained earnings and reported as a change in
accounting principle. Adoption of this guidance is not expected
to have a material impact on our consolidated financial position
or results of operations.
SEC Staff Accounting
Bulletin No. 108 In September 2006 the
SEC issued Staff Accounting Bulletin (SAB) No. 108
Quantifying Financial Misstatements, which expresses the
Staffs views regarding the process of quantifying
financial statement misstatements. Registrants are required to
quantify the impact of correcting all misstatements, including
both the carryover and reversing effects of prior year
misstatements, on the current year financial statements. The
techniques most commonly used in practice to accumulate and
quantify misstatements are generally referred to as the
rollover (current year income statement perspective)
and iron curtain (year-end balance perspective)
approaches. The financial statements would require adjustment
when either approach results in quantifying a misstatement that
is material, after considering all relevant quantitative and
qualitative factors. SAB 108 did not have a material effect
on our current process for assessing and quantifying financial
statement misstatements.
SFAS No. 157 In September 2006 the
FASB issued SFAS No. 157 Fair Value
Measurements, which provides a definition of fair value,
establishes a framework for measuring fair value and requires
expanded disclosures about fair value measurements. The
statement applies when GAAP requires or allows assets or
liabilities to be measured at fair value, and therefore, does
not expand the use of fair value in any new circumstance. Fair
value refers to the price that would be received to sell an
asset or paid to transfer a liability in an arms length
transaction between market participants, in such markets where
we conduct business. SFAS 157 clarifies that fair value
should be based on the assumptions market participants would use
when pricing an asset or liability and establishes a fair value
hierarchy that prioritizes the information used to develop those
assumptions. The fair value hierarchy gives the highest priority
to quoted prices available in active markets and the lowest
priority to data lacking transparency. The level of the
reliability of inputs utilized for fair value calculations drive
the extent of disclosure requirements of the valuation
methodologies used under the standard. SFAS 157 is
effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods
within those years. The provisions of SFAS 157 should be
applied prospectively. Management is assessing the potential
impact on our consolidated financial position and results of
operations.
SFAS No. 158 In September 2006 the
FASB issued SFAS No. 158 Employers Accounting
for Defined Benefit Pension and Other Postretirement Plans,
which amends SFAS No. 87 Employers Accounting
for Pensions (SFAS No. 87), SFAS No. 88
Employers Accounting for Settlements and Curtailments
of Defined Benefit Pension Plans and for Termination Benefits
(SFAS No. 88), SFAS No. 106
Employers Accounting for Postretirement Benefits Other
Than Pensions (SFAS No. 106), and
SFAS No. 132(R) Employers Disclosures about
Pensions and Other Postretirement
217
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
Benefits (revised 2003) (SFAS 132(R)). This
Statement requires companies to recognize an asset or liability
for the overfunded or underfunded status of their benefit plans
in their financial statements. The asset or liability is the
offset to other comprehensive income, consisting of previously
unrecognized prior service costs and credits, actuarial gains or
losses and transition obligations and assets. SFAS 158 also
required the measurement date for plan assets and liabilities to
coincide with the sponsors year end. The statement
provides two transition alternatives for companies to make the
measurement-date provisions. The recognition of asset and
liability related to funded status provision is effective for us
for fiscal years ending after June 15, 2007, and the change
in measurement is effective for fiscal years ending after
December 15, 2008. Adoption of this guidance is not
expected to have a material impact on our consolidated financial
position or results of operations.
SFAS No. 159 In February 2007 the
FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities (SFAS 159).
SFAS 159 permits entities to choose to measure at fair
value many financial instruments and certain other items that
are not currently required to be measured at fair value.
Subsequent changes in fair value for designated items will be
required to be reported in earnings in the current period.
SFAS 159 also establishes presentation and disclosure
requirements for similar types of assets and liabilities
measured at fair value. SFAS 159 is effective for financial
statements issued for fiscal years beginning after
November 15, 2007. We are currently assessing the effect of
implementing this guidance, which directly depends on the nature
and extent of eligible items elected to be measured at fair
value, upon initial application of the standard on
January 1, 2008.
2 Insurance
Premiums and Service Revenue Earned
The following table is a summary of insurance premiums and
service revenue written and earned:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Year
ended December 31, ($ in millions)
|
|
Written
|
|
|
Earned
|
|
|
Written
|
|
|
Earned
|
|
|
Written
|
|
|
Earned
|
|
|
|
Insurance premiums
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
|
|
|
$2,575
|
|
|
|
$2,733
|
|
|
|
$2,493
|
|
|
|
$2,644
|
|
|
|
$2,400
|
|
|
|
$2,604
|
|
Assumed
|
|
|
696
|
|
|
|
693
|
|
|
|
634
|
|
|
|
595
|
|
|
|
611
|
|
|
|
630
|
|
|
|
Gross insurance premiums
|
|
|
3,271
|
|
|
|
3,426
|
|
|
|
3,127
|
|
|
|
3,239
|
|
|
|
3,011
|
|
|
|
3,234
|
|
Ceded
|
|
|
(445
|
)
|
|
|
(450
|
)
|
|
|
(401
|
)
|
|
|
(387
|
)
|
|
|
(348
|
)
|
|
|
(347
|
)
|
|
|
Net insurance premiums
|
|
|
2,826
|
|
|
|
2,976
|
|
|
|
2,726
|
|
|
|
2,852
|
|
|
|
2,663
|
|
|
|
2,887
|
|
Service revenue
|
|
|
1,209
|
|
|
|
1,207
|
|
|
|
1,345
|
|
|
|
910
|
|
|
|
1,319
|
|
|
|
641
|
|
|
|
Insurance premiums and service
revenue written and earned
|
|
|
$4,035
|
|
|
|
$4,183
|
|
|
|
$4,071
|
|
|
|
$3,762
|
|
|
|
$3,982
|
|
|
|
$3,528
|
|
|
|
218
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
3 Other
Income
Details of other income were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended December 31, ($ in millions)
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
Real estate services
|
|
|
$593
|
|
|
|
$712
|
|
|
|
$464
|
|
Interest and service fees on
transactions with GM (a)
|
|
|
576
|
|
|
|
568
|
|
|
|
370
|
|
Interest on cash equivalents
|
|
|
489
|
|
|
|
480
|
|
|
|
244
|
|
Other interest revenue
|
|
|
536
|
|
|
|
450
|
|
|
|
297
|
|
Full service leasing fees
|
|
|
280
|
|
|
|
170
|
|
|
|
153
|
|
Late charges and other
administrative fees
|
|
|
164
|
|
|
|
164
|
|
|
|
164
|
|
Mortgage processing fees
|
|
|
136
|
|
|
|
461
|
|
|
|
518
|
|
Interest on restricted cash deposits
|
|
|
119
|
|
|
|
102
|
|
|
|
60
|
|
Insurance service fees
|
|
|
131
|
|
|
|
111
|
|
|
|
136
|
|
Real estate and other investment
income
|
|
|
106
|
|
|
|
157
|
|
|
|
148
|
|
Factoring commissions
|
|
|
60
|
|
|
|
74
|
|
|
|
77
|
|
Specialty lending fees
|
|
|
57
|
|
|
|
59
|
|
|
|
60
|
|
Fair value adjustment on certain
derivatives (b)
|
|
|
6
|
|
|
|
(36
|
)
|
|
|
(26
|
)
|
Other
|
|
|
390
|
|
|
|
927
|
|
|
|
805
|
|
|
|
Total other income
|
|
|
$3,643
|
|
|
|
$4,399
|
|
|
|
$3,470
|
|
|
|
|
|
(a)
|
Refer to Note 18 to our Consolidated Financial Statements
for a description of transactions with GM.
|
(b)
|
Refer to Note 15 to our Consolidated Financial Statements
for a description of our derivative instruments and hedging
activities.
|
4 Other
Operating Expenses
Details of other operating expenses were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended December 31, ($ in millions)
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
Insurance commissions
|
|
|
$898
|
|
|
|
$901
|
|
|
|
$928
|
|
Technology and communications
expense
|
|
|
573
|
|
|
|
591
|
|
|
|
569
|
|
Professional services
|
|
|
493
|
|
|
|
452
|
|
|
|
474
|
|
Advertising and marketing
|
|
|
363
|
|
|
|
359
|
|
|
|
537
|
|
Premises and equipment depreciation
|
|
|
253
|
|
|
|
288
|
|
|
|
294
|
|
Rent and storage
|
|
|
243
|
|
|
|
272
|
|
|
|
253
|
|
Full service leasing vehicle
maintenance costs
|
|
|
257
|
|
|
|
236
|
|
|
|
215
|
|
Lease and loan administration
|
|
|
222
|
|
|
|
196
|
|
|
|
175
|
|
Auto remarketing and repossession
|
|
|
288
|
|
|
|
187
|
|
|
|
136
|
|
Operating lease disposal loss (gain)
|
|
|
29
|
|
|
|
(304
|
)
|
|
|
(192
|
)
|
Other
|
|
|
1,157
|
|
|
|
956
|
|
|
|
821
|
|
|
|
Total other operating expenses
|
|
|
$4,776
|
|
|
|
$4,134
|
|
|
|
$4,210
|
|
|
|
219
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
5 Investment
Securities
Our portfolio of securities includes bonds, equity securities,
asset- and mortgage-backed securities, notes, interests in
securitization trusts and other investments. The cost, fair
value and gross unrealized gains and losses on available for
sale and held to maturity securities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
2005
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
unrealized
|
|
Fair
|
|
|
|
unrealized
|
|
Fair
|
December 31,
($ in millions)
|
|
Cost
|
|
gains
|
|
losses
|
|
value
|
|
Cost
|
|
gains
|
|
losses
|
|
value
|
|
Available for sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal
agencies
|
|
|
$3,173
|
|
|
|
$3
|
|
|
|
($19
|
)
|
|
|
$3,157
|
|
|
|
$2,945
|
|
|
|
$5
|
|
|
|
($46
|
)
|
|
|
$2,904
|
|
States and political subdivisions
|
|
|
734
|
|
|
|
23
|
|
|
|
(1
|
)
|
|
|
756
|
|
|
|
863
|
|
|
|
27
|
|
|
|
(1
|
)
|
|
|
889
|
|
Foreign government securities
|
|
|
809
|
|
|
|
6
|
|
|
|
(5
|
)
|
|
|
810
|
|
|
|
844
|
|
|
|
11
|
|
|
|
(2
|
)
|
|
|
853
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
185
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
183
|
|
|
|
119
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
117
|
|
Commercial
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
26
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
Asset-backed securities (a)
|
|
|
1,735
|
|
|
|
2
|
|
|
|
|
|
|
|
1,737
|
|
|
|
956
|
|
|
|
|
|
|
|
|
|
|
|
956
|
|
Interest-only strips
|
|
|
43
|
|
|
|
10
|
|
|
|
|
|
|
|
53
|
|
|
|
122
|
|
|
|
29
|
|
|
|
(3
|
)
|
|
|
148
|
|
Corporate debt securities
|
|
|
3,713
|
|
|
|
18
|
|
|
|
(32
|
)
|
|
|
3,699
|
|
|
|
5,124
|
|
|
|
27
|
|
|
|
(30
|
)
|
|
|
5,121
|
|
Other
|
|
|
994
|
|
|
|
9
|
|
|
|
(3
|
)
|
|
|
1,000
|
|
|
|
909
|
|
|
|
16
|
|
|
|
(5
|
)
|
|
|
920
|
|
|
|
Total debt securities (b)
|
|
|
11,412
|
|
|
|
71
|
|
|
|
(62
|
)
|
|
|
11,421
|
|
|
|
11,901
|
|
|
|
115
|
|
|
|
(89
|
)
|
|
|
11,927
|
|
Equity securities
|
|
|
418
|
|
|
|
161
|
|
|
|
(5
|
)
|
|
|
574
|
|
|
|
1,510
|
|
|
|
874
|
|
|
|
(17
|
)
|
|
|
2,367
|
|
|
|
Total available for sale securities
|
|
|
$11,830
|
|
|
|
$232
|
|
|
|
($67
|
)
|
|
|
$11,995
|
|
|
|
$13,411
|
|
|
|
$989
|
|
|
|
($106
|
)
|
|
|
$14,294
|
|
|
|
Held-to-maturity
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
held-to-maturity
securities
|
|
|
$12
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$12
|
|
|
|
$16
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$16
|
|
|
|
|
|
(a)
|
Includes approximately $471 of Notes secured by operating lease
assets distributed to GM on November 22, 2006. Refer to
Note 18 for further discussion.
|
(b)
|
In connection with certain borrowings and letters of credit
relating to certain assumed reinsurance contracts $194 and
$1,098 of primarily U.S. Treasury securities were pledged
as collateral as of December 31, 2006 and 2005,
respectively.
|
220
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
We had other than temporary impairment write-downs of $12, $16
and $17 million for the years ended December 31, 2006,
2005, and 2004, respectively. Gross unrealized gains and losses
on investment securities available for sale totaled $997 and
$33 million, respectively, as of December 31, 2004.
The fair value, unrealized gains (losses) and amount pledged as
collateral for our portfolio of trading securities were as
follows:
|
|
|
|
|
|
|
|
|
December 31,
($ in millions)
|
|
2006
|
|
2005
|
|
Trading securities
|
|
|
|
|
|
|
|
|
Fair value
|
|
|
|
|
|
|
|
|
U.S. Treasury Securities
|
|
|
$401
|
|
|
|
$
|
|
Residential mortgage-backed
securities
|
|
|
1,748
|
|
|
|
1,042
|
|
Mortgage residual interests
|
|
|
1,019
|
|
|
|
764
|
|
Asset backed securities
|
|
|
19
|
|
|
|
|
|
Interest-only strips
|
|
|
572
|
|
|
|
265
|
|
Principal-only strips
|
|
|
957
|
|
|
|
651
|
|
Debt and other
|
|
|
68
|
|
|
|
1,175
|
|
|
|
Total trading securities
|
|
|
$4,784
|
|
|
|
$3,897
|
|
|
|
Net unrealized gains (a)
|
|
|
$118
|
|
|
|
$131
|
|
Pledged as collateral
|
|
|
$1,524
|
|
|
|
$2,697
|
|
|
|
|
|
(a) |
Unrealized gains and losses are included in investment income on
a current period basis. Net unrealized gains totaled $35 at
December 31, 2004.
|
The maturity distribution of available for sale and held to
maturity debt securities outstanding is summarized in the
following table. Prepayments may cause actual maturities to
differ from scheduled maturities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available
|
|
Held to
|
|
|
for
sale
|
|
maturity
|
December 31,
2006
|
|
|
|
Fair
|
|
|
|
Fair
|
($ in
millions)
|
|
Cost
|
|
value
|
|
Cost
|
|
value
|
|
|
Due in one year or less
|
|
|
$3,077
|
|
|
|
$3,076
|
|
|
|
$8
|
|
|
|
$8
|
|
Due after one year through
five years
|
|
|
4,059
|
|
|
|
4,042
|
|
|
|
|
|
|
|
|
|
Due after five years through
ten years
|
|
|
1,923
|
|
|
|
1,926
|
|
|
|
|
|
|
|
|
|
Due after ten years
|
|
|
678
|
|
|
|
691
|
|
|
|
4
|
|
|
|
4
|
|
Mortgage-backed securities
and interests in securitization trusts
|
|
|
1,675
|
|
|
|
1,686
|
|
|
|
|
|
|
|
|
|
|
|
Total securities
|
|
|
$11,412
|
|
|
|
$11,421
|
|
|
|
$12
|
|
|
|
$12
|
|
|
|
The following table presents gross gains and losses realized
upon the sales of available for sale securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended December 31,
|
|
|
|
|
|
|
($ in
millions)
|
|
2006
|
|
2005
|
|
2004
|
|
|
Gross realized gains (a)
|
|
|
$1,081
|
|
|
|
$186
|
|
|
|
$138
|
|
Gross realized losses
|
|
|
(76
|
)
|
|
|
(66
|
)
|
|
|
(49
|
)
|
|
|
Net realized gains
|
|
|
$1,005
|
|
|
|
$120
|
|
|
|
$89
|
|
|
|
|
|
(a) |
Gains realized in 2006 primarily relate to the rebalancing of
the investment portfolio at our Insurance operations.
|
In the opinion of management, the gross unrealized losses in the
table below are not considered to be other than temporarily
impaired.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
2005
|
|
|
Less than
12 months
|
|
12 months or
longer
|
|
Less than
12 months
|
|
12 months or
longer
|
Year ended
December 31,
|
|
|
|
Unrealized
|
|
|
|
Unrealized
|
|
|
|
Unrealized
|
|
|
|
Unrealized
|
($ in
millions)
|
|
Fair value
|
|
loss
|
|
Fair value
|
|
loss
|
|
Fair value
|
|
loss
|
|
Fair value
|
|
loss
|
|
|
Available for sale
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal
agencies
|
|
|
$858
|
|
|
|
($3
|
)
|
|
|
$919
|
|
|
|
($16
|
)
|
|
|
$1,590
|
|
|
|
($32
|
)
|
|
|
$520
|
|
|
|
($15
|
)
|
States and political subdivision
|
|
|
127
|
|
|
|
(1
|
)
|
|
|
29
|
|
|
|
|
|
|
|
79
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
Foreign government securities
|
|
|
338
|
|
|
|
(3
|
)
|
|
|
81
|
|
|
|
(2
|
)
|
|
|
179
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
Residential mortgage-backed
securities
|
|
|
60
|
|
|
|
|
|
|
|
82
|
|
|
|
(2
|
)
|
|
|
36
|
|
|
|
(1
|
)
|
|
|
76
|
|
|
|
(2
|
)
|
Interest-only strips
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
|
697
|
|
|
|
(3
|
)
|
|
|
1,191
|
|
|
|
(29
|
)
|
|
|
1,865
|
|
|
|
(20
|
)
|
|
|
331
|
|
|
|
(10
|
)
|
Other
|
|
|
299
|
|
|
|
(1
|
)
|
|
|
107
|
|
|
|
(2
|
)
|
|
|
175
|
|
|
|
(3
|
)
|
|
|
21
|
|
|
|
(1
|
)
|
|
|
Total temporarily impaired
securities
|
|
|
2,379
|
|
|
|
(11
|
)
|
|
|
2,409
|
|
|
|
(51
|
)
|
|
|
4,005
|
|
|
|
(61
|
)
|
|
|
948
|
|
|
|
(28
|
)
|
Equity securities
|
|
|
73
|
|
|
|
(4
|
)
|
|
|
7
|
|
|
|
(1
|
)
|
|
|
137
|
|
|
|
(15
|
)
|
|
|
19
|
|
|
|
(2
|
)
|
|
|
Total available for sale securities
|
|
|
$2,452
|
|
|
|
($15
|
)
|
|
|
$2,416
|
|
|
|
($52
|
)
|
|
|
$4,142
|
|
|
|
($76
|
)
|
|
|
$967
|
|
|
|
($30
|
)
|
|
|
221
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
6 Finance
Receivables and Loans
The composition of finance receivables and loans outstanding was
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
2005
|
December 31,
($ in millions)
|
|
Domestic
|
|
Foreign
|
|
Total
|
|
Domestic
|
|
Foreign
|
|
Total
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail automotive
|
|
|
$40,568
|
|
|
|
$20,538
|
|
|
|
$61,106
|
|
|
|
$53,814
|
|
|
|
$17,663
|
|
|
|
$71,477
|
|
Residential mortgages
|
|
|
65,928
|
|
|
|
3,508
|
|
|
|
69,436
|
|
|
|
65,040
|
|
|
|
3,919
|
|
|
|
68,959
|
|
|
|
Total consumer
|
|
|
106,496
|
|
|
|
24,046
|
|
|
|
130,542
|
|
|
|
118,854
|
|
|
|
21,582
|
|
|
|
140,436
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale
|
|
|
12,723
|
|
|
|
7,854
|
|
|
|
20,577
|
|
|
|
13,202
|
|
|
|
7,372
|
|
|
|
20,574
|
|
Leasing and lease financing
|
|
|
326
|
|
|
|
901
|
|
|
|
1,227
|
|
|
|
461
|
|
|
|
767
|
|
|
|
1,228
|
|
Term loans to dealers and others
|
|
|
1,843
|
|
|
|
764
|
|
|
|
2,607
|
|
|
|
2,397
|
|
|
|
719
|
|
|
|
3,116
|
|
Commercial and industrial
|
|
|
14,068
|
|
|
|
2,213
|
|
|
|
16,281
|
|
|
|
14,908
|
|
|
|
2,028
|
|
|
|
16,936
|
|
Real estate construction and other
|
|
|
2,969
|
|
|
|
243
|
|
|
|
3,212
|
|
|
|
2,601
|
|
|
|
119
|
|
|
|
2,720
|
|
|
|
Total commercial
|
|
|
31,929
|
|
|
|
11,975
|
|
|
|
43,904
|
|
|
|
33,569
|
|
|
|
11,005
|
|
|
|
44,574
|
|
|
|
Total finance receivables and
loans (a) (b)
|
|
|
$138,425
|
|
|
|
$36,021
|
|
|
|
$174,446
|
|
|
|
$152,423
|
|
|
|
$32,587
|
|
|
|
$185,010
|
|
|
|
|
(a)
|
Net of unearned income of $5.7 billion and
$5.9 billion at December 31, 2006 and 2005,
respectively.
|
(b)
|
The aggregate amount of finance receivables and loans maturing
in the next five years is as follows: $57,230 in 2007; $18,994
in 2008; $14,974 in 2009; $9,919 in 2010; $6,212 in 2011 and
$72,849 in 2012 and thereafter. Prepayments may cause actual
maturities to differ from scheduled maturities.
|
The following table presents an analysis of the activity in the
allowance for credit losses on finance receivables and loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
December 31,
|
|
2006
|
|
2005
|
|
2004
|
($ in
millions)
|
|
Consumer
|
|
Commercial
|
|
Total
|
|
Consumer
|
|
Commercial
|
|
Total
|
|
Consumer
|
|
Commercial
|
|
Total
|
|
|
Allowance at beginning of year
|
|
|
$2,652
|
|
|
|
$433
|
|
|
|
$3,085
|
|
|
|
$2,931
|
|
|
|
$471
|
|
|
|
$3,402
|
|
|
|
$2,513
|
|
|
|
$509
|
|
|
|
$3,022
|
|
Provision for credit losses
|
|
|
1,668
|
|
|
|
332
|
|
|
|
2,000
|
|
|
|
1,006
|
|
|
|
68
|
|
|
|
1,074
|
|
|
|
1,935
|
|
|
|
18
|
|
|
|
1,953
|
|
Charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
(1,436
|
)
|
|
|
(139
|
)
|
|
|
(1,575
|
)
|
|
|
(1,302
|
)
|
|
|
(45
|
)
|
|
|
(1,347
|
)
|
|
|
(1,469
|
)
|
|
|
(96
|
)
|
|
|
(1,565
|
)
|
Foreign
|
|
|
(182
|
)
|
|
|
(35
|
)
|
|
|
(217
|
)
|
|
|
(194
|
)
|
|
|
(26
|
)
|
|
|
(220
|
)
|
|
|
(269
|
)
|
|
|
(7
|
)
|
|
|
(276
|
)
|
|
|
Total charge-offs
|
|
|
(1,618
|
)
|
|
|
(174
|
)
|
|
|
(1,792
|
)
|
|
|
(1,496
|
)
|
|
|
(71
|
)
|
|
|
(1,567
|
)
|
|
|
(1,738
|
)
|
|
|
(103
|
)
|
|
|
(1,841
|
)
|
|
|
Recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
198
|
|
|
|
14
|
|
|
|
212
|
|
|
|
168
|
|
|
|
9
|
|
|
|
177
|
|
|
|
112
|
|
|
|
10
|
|
|
|
122
|
|
Foreign
|
|
|
47
|
|
|
|
3
|
|
|
|
50
|
|
|
|
48
|
|
|
|
4
|
|
|
|
52
|
|
|
|
81
|
|
|
|
3
|
|
|
|
84
|
|
|
|
Total recoveries
|
|
|
245
|
|
|
|
17
|
|
|
|
262
|
|
|
|
216
|
|
|
|
13
|
|
|
|
229
|
|
|
|
193
|
|
|
|
13
|
|
|
|
206
|
|
|
|
Net charge-offs
|
|
|
(1,373
|
)
|
|
|
(157
|
)
|
|
|
(1,530
|
)
|
|
|
(1,280
|
)
|
|
|
(58
|
)
|
|
|
(1,338
|
)
|
|
|
(1,545
|
)
|
|
|
(90
|
)
|
|
|
(1,635
|
)
|
Transfers to assets held for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28
|
)
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Impacts of foreign currency
translation
|
|
|
19
|
|
|
|
(1
|
)
|
|
|
18
|
|
|
|
(9
|
)
|
|
|
(15
|
)
|
|
|
(24
|
)
|
|
|
20
|
|
|
|
6
|
|
|
|
26
|
|
Securitization activity
|
|
|
3
|
|
|
|
|
|
|
|
3
|
|
|
|
4
|
|
|
|
(5
|
)
|
|
|
(1
|
)
|
|
|
8
|
|
|
|
28
|
|
|
|
36
|
|
|
|
Allowance at end of year
|
|
|
$2,969
|
|
|
|
$607
|
|
|
|
$3,576
|
|
|
|
$2,652
|
|
|
|
$433
|
|
|
|
$3,085
|
|
|
|
$2,931
|
|
|
|
$471
|
|
|
|
$3,402
|
|
|
222
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
The following table presents information about commercial
finance receivables and loans specifically identified for
impairment.
|
|
|
|
|
|
|
|
|
December 31,
($ in millions)
|
|
2006
|
|
2005
|
|
|
Impaired loans
|
|
|
$1,975
|
|
|
|
$887
|
|
Related allowance
|
|
|
346
|
|
|
|
184
|
|
Average balance of impaired loans
during the year
|
|
|
972
|
|
|
|
1,120
|
|
|
|
We have loans that were acquired in a transfer, which at
acquisition, had evidence of deterioration of credit quality
since origination and for which it was probable, at acquisition,
that all contractually required payments would not be collected.
The carrying amount of these loans, included in the balance
sheet amounts of finance receivables and loans, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
($ in millions)
|
|
2006
|
|
2005
|
|
2004
|
|
|
Consumer
|
|
|
$2,576
|
|
|
|
$1,658
|
|
|
|
$1,824
|
|
Commercial
|
|
|
|
|
|
|
680
|
|
|
|
580
|
|
|
|
Total outstanding balance
|
|
|
2,576
|
|
|
|
2,338
|
|
|
|
2,404
|
|
Allowance
|
|
|
(105
|
)
|
|
|
(103
|
)
|
|
|
(99
|
)
|
|
|
Total carrying amount
|
|
|
$2,471
|
|
|
|
$2,235
|
|
|
|
$2,305
|
|
|
|
For loans acquired after December 31, 2005,
SOP 03-3
requires us to record revenue using an accretable yield method.
The following table represents accretable yield activity.
|
|
|
|
|
|
|
|
|
Year
ended December 31, ($ in millions)
|
|
2006
|
|
2005
|
|
|
Accretable yield at beginning of
year
|
|
|
$52
|
|
|
|
$121
|
|
Additions
|
|
|
251
|
|
|
|
285
|
|
Accretion
|
|
|
(69
|
)
|
|
|
(131
|
)
|
Reclassification from
nonaccretable
difference
|
|
|
|
|
|
|
11
|
|
Transfers to assets held for sale
|
|
|
|
|
|
|
(155
|
)
|
Disposals
|
|
|
(88
|
)
|
|
|
(79
|
)
|
|
|
Accretable yield at end of year
|
|
|
$146
|
|
|
|
$52
|
|
|
|
Loans acquired during each year for which it was probable at
acquisition that all contractually required payments would not
be collected are as follows:
|
|
|
|
|
|
|
|
|
Year
ended December 31, ($ in millions)
|
|
2006
|
|
2005
|
|
|
Contractually required payments
receivable at acquisition:
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
$6,992
|
|
|
|
$3,158
|
|
Commercial
|
|
|
|
|
|
|
1,848
|
|
|
|
Total payments
|
|
|
$6,992
|
|
|
|
$5,006
|
|
Cash flows expected to be
collected
at acquisition
|
|
|
$3,155
|
|
|
|
$2,333
|
|
Basis in acquired loans at
acquisition
|
|
|
$2,588
|
|
|
|
$1,900
|
|
|
|
223
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
7 Off-Balance
Sheet Securitizations
We securitize automotive and mortgage financial assets as a
funding source. We sell retail finance receivables, wholesale
and dealer loans and residential mortgage loans. The following
discussion and related information is only applicable to the
transfers of finance receivables and loans that qualify as
off-balance sheet securitizations under the requirements of
SFAS 140.
We retain servicing responsibilities for and subordinated
interests in all of our securitizations of retail finance
receivables and wholesale loans. Servicing responsibilities are
retained for the majority of our residential loan
securitizations, and we may retain subordinated interests in
some of these securitizations. We also hold subordinated
interests and act as collateral manager in our collateralized
debt obligation (CDO) securitization program.
As servicer, we generally receive a monthly fee stated as a
percentage of the outstanding sold receivables. Typically, for
retail automotive finance receivables where we are paid a fee,
we have concluded that the fee represents adequate compensation
as a servicer and, as such, no servicing asset or liability is
recognized. Considering the short-term revolving nature of
wholesale loans, no servicing asset or liability is recognized
upon securitization of the loans. As of December 31, 2006,
the weighted average basic servicing fees for our primary
servicing activities were 100 basis points, 100 basis
points and 34 basis points of the outstanding principal
balance for sold retail finance receivables, wholesale loans and
residential mortgage loans, respectively. Additionally, we
retain the rights to cash flows remaining after the investors in
most securitization trusts have received their contractual
payments. In certain retail securitization transactions, retail
receivables are sold on a servicing retained basis but with no
servicing compensation and, as such, a servicing liability is
established and recorded in other liabilities. As of
December 31, 2006 and 2005, servicing liabilities of
$18 million and $32 million, respectively, were
outstanding related to such retail automotive securitization
transactions. In addition, in 2005 we completed a retail
automotive securitization where the servicing fee received is
considered greater than adequate compensation requiring the
recording of a servicing asset. As of December 31, 2006 and
2005, the fair value of the servicing asset was $9 million
and $30 million, respectively. For mortgage servicing, we
capitalize the value expected to be realized from performing
specified residential mortgage servicing activities as mortgage
servicing rights. Refer to Note 9 to our Consolidated
Financial Statements.
We maintain cash reserve accounts at predetermined amounts for
certain securitization activities in the unlikely event that
deficiencies occur in cash flows owed to the investors. The
amounts available in such cash reserve accounts totaled
$39 million, $1,001 million and $309 million, as
of December 31, 2006, related to securitizations of retail
finance receivables, wholesale loans and residential mortgage
loans, respectively, and $52 million, $1,012 million
and $88 million as of December 31, 2005, respectively.
The following table summarizes pre-tax gains (losses) on
securitizations and certain cash flows received from and paid to
securitization trusts for transfers of finance receivables and
loans that were completed during 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
Retail
|
|
|
|
|
|
|
finance
|
|
Wholesale
|
|
|
Year
ended December 31, ($ in millions)
|
|
receivables
|
|
loans
|
|
ResCap
|
|
|
Pre-tax (losses) gains on
securitizations
|
|
|
($51
|
)
|
|
|
$601
|
|
|
|
$825
|
|
Cash inflows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from new securitizations
|
|
|
6,302
|
|
|
|
|
|
|
|
65,687
|
|
Servicing fees received
|
|
|
65
|
|
|
|
181
|
|
|
|
480
|
|
Other cash flows received on
retained interests
|
|
|
232
|
|
|
|
140
|
|
|
|
587
|
|
Proceeds from collections
reinvested in revolving securitizations
|
|
|
|
|
|
|
96,969
|
|
|
|
|
|
Repayments of servicing advances
|
|
|
46
|
|
|
|
|
|
|
|
1,199
|
|
Cash outflows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Servicing advances
|
|
|
(51
|
)
|
|
|
|
|
|
|
(1,265
|
)
|
Purchase obligations and
options:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans under conditional
call option
|
|
|
|
|
|
|
|
|
|
|
(20
|
)
|
Representations and warranties
obligations
|
|
|
|
|
|
|
|
|
|
|
(94
|
)
|
Administrator or servicer actions
|
|
|
(27
|
)
|
|
|
|
|
|
|
(60
|
)
|
Asset performance conditional calls
|
|
|
|
|
|
|
|
|
|
|
(82
|
)
|
Cleanup calls
|
|
|
(242
|
)
|
|
|
|
|
|
|
(1,055
|
)
|
|
|
224
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
The following table summarizes pre-tax gains (losses) on
securitizations and certain cash flows received from and paid to
securitization trusts for transfers of finance receivables and
loans that were completed during 2005 and 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
2004
|
|
|
Retail
|
|
|
|
|
|
|
|
Retail
|
|
|
|
|
|
|
Year
ended December 31,
|
|
finance
|
|
Wholesale
|
|
|
|
|
|
finance
|
|
Wholesale
|
|
|
|
|
($ in
millions)
|
|
receivables
|
|
loans
|
|
ResCap
|
|
Other
|
|
receivables
|
|
loans
|
|
ResCap
|
|
Other
|
|
|
Pre-tax gains (losses) on
securitizations
|
|
|
($2
|
)
|
|
|
$543
|
|
|
|
$513
|
|
|
|
$76
|
|
|
|
$9
|
|
|
|
$497
|
|
|
|
$602
|
|
|
|
$65
|
|
Cash inflows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from new securitizations
|
|
|
4,874
|
|
|
|
7,705
|
|
|
|
41,987
|
|
|
|
4,731
|
|
|
|
1,824
|
|
|
|
9,188
|
|
|
|
29,412
|
|
|
|
3,043
|
|
Servicing fees received
|
|
|
65
|
|
|
|
179
|
|
|
|
245
|
|
|
|
21
|
|
|
|
105
|
|
|
|
174
|
|
|
|
208
|
|
|
|
20
|
|
Other cash flows received on
retained interests
|
|
|
249
|
|
|
|
503
|
|
|
|
583
|
|
|
|
304
|
|
|
|
340
|
|
|
|
808
|
|
|
|
729
|
|
|
|
284
|
|
Proceeds from collections
reinvested in revolving securitizations
|
|
|
|
|
|
|
102,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91,360
|
|
|
|
|
|
|
|
|
|
Repayments of servicing advances
|
|
|
43
|
|
|
|
|
|
|
|
1,115
|
|
|
|
198
|
|
|
|
75
|
|
|
|
|
|
|
|
947
|
|
|
|
|
|
Cash outflows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Servicing advances
|
|
|
(46
|
)
|
|
|
|
|
|
|
(1,163
|
)
|
|
|
(188
|
)
|
|
|
(64
|
)
|
|
|
|
|
|
|
(1,035
|
)
|
|
|
|
|
Purchase obligations and
options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans under conditional
call option
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22
|
)
|
|
|
|
|
Representations and warranties
obligations
|
|
|
|
|
|
|
|
|
|
|
(29
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
(66
|
)
|
|
|
|
|
Administrator or servicer actions
|
|
|
(76
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(75
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset performance conditional calls
|
|
|
|
|
|
|
|
|
|
|
(99
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(137
|
)
|
|
|
|
|
Clean up calls
|
|
|
(715
|
)
|
|
|
|
|
|
|
(2,202
|
)
|
|
|
|
|
|
|
(269
|
)
|
|
|
|
|
|
|
(3,797
|
)
|
|
|
|
|
|
|
Key economic assumptions used in measuring the estimated fair
value of retained interests of sales completed during 2006,
2005, and 2004 as of the dates of such sales, were as follows:
|
|
|
|
|
|
|
|
|
Retail
|
|
|
|
|
|
|
finance
|
|
|
|
|
Year
ended December 31,
|
|
receivables (a)
|
|
ResCap (b)
|
|
Other
|
|
|
2006
|
|
|
|
|
|
|
Key
assumptions (d)
(rates per annum):
|
|
|
|
|
|
|
Annual prepayment rate (e)
|
|
0.9-1.7%
|
|
0.0-90.0%
|
|
(c)
|
Weighted average life (in years)
|
|
1.4-1.9
|
|
1.1-10.5
|
|
(c)
|
Expected credit losses
|
|
0.4-1.0%
|
|
0.0-18.3%
|
|
(c)
|
Discount rate
|
|
9.5-16.0%
|
|
7.0-25.0%
|
|
(c)
|
|
|
2005
|
|
|
|
|
|
|
Key
assumptions (d)
(rates per annum):
|
|
|
|
|
|
|
Annual prepayment rate (e)
|
|
0.9-1.2%
|
|
0.0-60.0%
|
|
0.0-50.0%
|
Weighted average life (in years)
|
|
1.6-1.7
|
|
1.1-8.5
|
|
0.3-9.9
|
Expected credit losses
|
|
0.4-1.6%
|
|
0.0-4.9%
|
|
0.0%
|
Discount rate
|
|
9.5-15.0%
|
|
6.5-21.4%
|
|
4.2-12.0%
|
|
|
2004
|
|
|
|
|
|
|
Key
assumptions (d)
(rates per annum):
|
|
|
|
|
|
|
Annual prepayment rate (e)
|
|
0.9-1.0%
|
|
0.0-51.3%
|
|
0.0-50.0%
|
Weighted average life (in years)
|
|
1.6-1.8
|
|
1.1-6.0
|
|
0.4-17.4
|
Expected credit losses
|
|
0.4%
|
|
0.2-10.9%
|
|
0.0-3.1%
|
Discount rate
|
|
9.5%
|
|
6.5-24.8%
|
|
4.3-15.0%
|
|
|
|
|
(a)
|
The fair value of retained
interests in wholesale securitizations approximates cost because
of the short-term and floating rate nature of wholesale loans.
|
(b)
|
Included within residential
mortgage loans are home equity loans and lines, high
loan-to-value
loans and residential first and second mortgage loans.
|
(c)
|
Represents the former GMAC
Commercial Mortgage, for which we sold approximately 79% of our
equity interest on March 23, 2006.
|
(d)
|
The assumptions used to measure the
expected yield on variable rate retained interests are based on
a benchmark interest rate yield curve plus a contractual spread,
as appropriate. The actual yield curve utilized varies depending
on the specific retained interests.
|
225
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
|
|
(e)
|
Based on the weighted average
maturity (WAM) for finance receivables and constant prepayment
rate (CPR) for mortgage loans.
|
The following table summarizes the key economic assumptions and
the sensitivity of the fair value of retained interests at
December 31, 2006 and 2005, to immediate 10% and 20%
adverse changes in those assumptions.
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
2005
|
|
|
Retail finance
|
|
|
|
Retail finance
|
|
|
|
|
Year ended
December 31, ($ in millions)
|
|
receivables (a)
|
|
ResCap
|
|
receivables
|
|
ResCap
|
|
Other
|
|
|
Carrying value/fair value of
retained interests
|
|
$355
|
|
$1,420
|
|
$314
|
|
$1,057
|
|
$432
|
Weighted average life (in years)
|
|
0.0-1.3
|
|
1.0-8.9
|
|
0.1-1.2
|
|
1.0-6.2
|
|
0.0-17.7
|
Annual prepayment rate
|
|
0.8-1.4%WAM
|
|
0.0-90.0%CPR
|
|
0.7-1.2%WAM
|
|
0.0-60.0%CPR
|
|
0.0-50.0%CPR
|
Impact of 10% adverse change
|
|
($4)
|
|
($55)
|
|
($1)
|
|
($46)
|
|
($1)
|
Impact of 20% adverse change
|
|
(7)
|
|
(102)
|
|
(2)
|
|
(82)
|
|
(1)
|
|
|
Loss assumption
|
|
0.4-1.0% (b)
|
|
0.0-12.8%
|
|
0.4% (b)
|
|
0.0-16.9%
|
|
0.0%-6.7%
|
Impact of 10% adverse change
|
|
($5)
|
|
($37)
|
|
($2)
|
|
($43)
|
|
($9)
|
Impact of 20% adverse change
|
|
(10)
|
|
(70)
|
|
(4)
|
|
(81)
|
|
(16)
|
|
|
Discount rate
|
|
9.5-16.0%
|
|
6.5-43.5%
|
|
9.5-12.0%
|
|
6.5-40.0%
|
|
0.1-33.5%
|
Impact of 10% adverse change
|
|
($6)
|
|
($51)
|
|
($2)
|
|
($34)
|
|
($14)
|
Impact of 20% adverse change
|
|
(12)
|
|
(94)
|
|
(5)
|
|
(65)
|
|
(27)
|
|
|
Market rate
|
|
(c)
|
|
(c)
|
|
3.9-5.1%
|
|
(c)
|
|
(c)
|
Impact of 10% adverse change
|
|
($4)
|
|
($38)
|
|
($7)
|
|
($11)
|
|
($)
|
Impact of 20% adverse change
|
|
(9)
|
|
(74)
|
|
(15)
|
|
(26)
|
|
()
|
|
|
|
|
(a)
|
The fair value of retained
interests in wholesale securitizations approximates cost of $691
because of the short-term and floating rate nature of wholesale
receivables.
|
(b)
|
Net of a reserve for expected
credit losses totaling $8 and $14 at December 31, 2006
and 2005, respectively. Such amounts are included in the fair
value of the retained interests, which are classified as
investment securities.
|
(c)
|
Forward benchmark interest rate
yield curve plus contractual spread.
|
These sensitivities are hypothetical and should be used with
caution. As the figures indicate, changes in fair value based on
a 10% and 20% variation in assumptions generally cannot be
extrapolated because the relationship of the change in
assumption to the change in fair value may not be linear. Also,
in this table, the effect of a variation in a particular
assumption on the fair value of the retained interest is
calculated without changing any other assumption. In reality,
changes in one factor may result in changes in another, which
may magnify or counteract the sensitivities. Additionally, we
hedge interest rate and prepayment risks associated with certain
of the retained interests; the effects of such hedge strategies
have not been considered herein.
Expected static pool net credit losses include actual incurred
losses plus projected net credit losses divided by the original
balance of the outstandings comprising the securitization pool.
The following table displays the expected static pool net credit
losses on our securitization transactions.
|
|
|
|
|
|
|
December 31,
(a)
|
|
2006
|
|
2005
|
|
2004
|
|
|
Retail automotive
|
|
0.6%
|
|
0.4%
|
|
0.4%
|
Residential mortgage
|
|
0.0-12.8%
|
|
0.0-16.9%
|
|
0.0-26.1%
|
Other
|
|
(b)
|
|
0.0-6.7%
|
|
0.0-39.5%
|
|
|
|
|
(a)
|
Static pool losses not applicable to wholesale finance
receivable securitizations because of their short-term nature.
|
(b)
|
Represents the former commercial mortgage operations, for which
we sold approximately 79% of our equity interest on
March 23, 2006.
|
226
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
The following table presents components of securitized financial
assets and other assets managed, along with quantitative
information about delinquencies and net credit losses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total finance
|
|
|
Amount
60 days or
|
|
|
|
|
receivables and
loans
|
|
|
more past
due
|
|
Net credit
losses
|
December 31,
($ in millions)
|
|
2006
|
|
2005
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
Retail automotive
|
|
|
$68,348
|
|
|
|
$77,222
|
|
|
|
|
$693
|
|
|
|
$892
|
|
|
|
$707
|
|
|
|
$867
|
|
Residential mortgage
|
|
|
217,972
|
|
|
|
167,584
|
|
|
|
|
15,175
|
|
|
|
8,682
|
|
|
|
981
|
|
|
|
885
|
|
|
Total consumer
|
|
|
286,320
|
|
|
|
244,806
|
|
|
|
|
15,868
|
|
|
|
9,574
|
|
|
|
1,688
|
|
|
|
1,752
|
|
|
Wholesale
|
|
|
40,484
|
|
|
|
41,994
|
|
|
|
|
66
|
|
|
|
73
|
|
|
|
2
|
|
|
|
4
|
|
Commercial mortgage (a)
|
|
|
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
4
|
|
Other automotive and commercial
|
|
|
23,385
|
|
|
|
23,996
|
|
|
|
|
1,582
|
|
|
|
575
|
|
|
|
8
|
|
|
|
33
|
|
|
Total commercial
|
|
|
63,869
|
|
|
|
66,033
|
|
|
|
|
1,648
|
|
|
|
648
|
|
|
|
16
|
|
|
|
41
|
|
|
Total managed portfolio (b)
|
|
|
350,189
|
|
|
|
310,839
|
|
|
|
|
$17,516
|
|
|
|
$10,222
|
|
|
|
$1,704
|
|
|
|
$1,793
|
|
Securitized finance receivables and
loans
|
|
|
(148,009
|
)
|
|
|
(103,947
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held for sale (unpaid
principal)
|
|
|
(27,734
|
)
|
|
|
(21,882
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total finance receivables and loans
|
|
|
$174,446
|
|
|
|
$185,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
On March 23, 2006, we sold approximately 79% of our equity
interest in Capmark, our commercial mortgage operations.
|
(b)
|
Managed portfolio represents finance receivables and loans on
the balance sheet or that have been securitized, excluding
securitized finance receivables and loans that we continue to
service but have no other continuing involvement (i.e., in which
we retain an interest or risk of loss in the underlying
receivables).
|
8 Investment
in Operating Leases
Investments in operating leases were as follows:
|
|
|
|
|
|
|
|
|
December 31,
($ in millions)
|
|
2006
|
|
2005
|
|
|
Vehicles and other equipment, at
cost
|
|
|
$30,281
|
|
|
|
$39,443
|
|
Accumulated depreciation
|
|
|
(6,097
|
)
|
|
|
(8,232
|
)
|
|
|
Investment in operating leases, net
(a)
|
|
|
$24,184
|
|
|
|
$31,211
|
|
|
|
|
|
(a) |
On November 22, 2006, $12.6 billion of operating lease
assets comprised of $15.7 billion of vehicles at cost, net
of $3.1 billion of accumulated depreciation were
distributed to GM. Refer to Note 18 to our Consolidated
Financial Statements for further description of the distribution.
|
The future lease payments due from customers for equipment on
operating leases at December 31, 2006, totaled
$11,390 million and are due as follows: $4,937 million
in 2007, $3,553 million in 2008, $2,187 million in
2009, $673 million in 2010 and $40 million in 2011 and
after.
Our investments in operating lease assets represents the
expected future cash flows we expect to realize under the
operating leases and includes both customer payments and the
expected residual value upon remarketing the vehicle at the end
of the lease. As described in Note 18 to our Consolidated
Financial Statements, GM may sponsor residual support programs
that result in the contractual residual value being in excess of
our standard residual value. GM reimburses us if remarketing
sales proceeds are less than the customers contract
residual value limited to our standard residual value. In
addition to residual support programs, GM also participates in a
risk sharing arrangement whereby GM shares equally in residual
losses to the extent that remarketing proceeds are below our
standard residual rates (limited to a floor). In connection with
the sale of 51 percent ownership interest in GMAC, GM
settled its estimated liabilities with respect to residual
support and risk sharing on a portion of our operating lease
portfolio. Based on the December 31, 2006 outstanding
U.S. operating lease portfolio, the maximum amount that
could be paid by GM under the residual support programs and the
risk sharing arrangement is approximately $276 million and
$339 million, respectively, as more fully discussed in
Note 18 to our Consolidated Financial Statements.
9 Mortgage
Servicing Rights
We define our classes of servicing rights based on both the
availability of market inputs and the manner in which we manage
our risks of our servicing assets and liabilities. We manage our
servicing rights at the reportable operating segment level and
where sufficient market inputs exist to determine the fair value
of our recognized servicing assets and servicing liabilities.
227
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
The following table summarizes activity related to mortgage
servicing rights (MSRs) carried at fair value.
|
|
|
|
|
Period
ended December 31, 2006 ($ in millions)
|
|
Total
|
|
|
Estimated fair value at
January 1, 2006
|
|
|
$4,021
|
|
Additions obtained from sales of
financial assets
|
|
|
1,723
|
|
Additions from purchases of
servicing rights
|
|
|
12
|
|
Changes in fair value:
|
|
|
|
|
Due to changes in valuation inputs
or assumptions used in the valuation model
|
|
|
(44
|
)
|
Other changes in fair value
|
|
|
(782
|
)
|
|
|
Estimated fair value at
December 31, 2006
|
|
|
$4,930
|
|
|
|
Changes in fair value, due to changes in valuation inputs or
assumptions used in the valuation models, include all changes
due to a revaluation by a model or by a benchmarking exercise.
This line item also includes changes in fair value due to a
change in valuation assumptions
and/or model
calculations. Other changes in fair value primarily include the
accretion of the present value of the discount related to
forecasted cash flows and the economic run-off of the portfolio,
as well as foreign currency adjustments and the extinguishment
of mortgage servicing rights related to
clean-up
calls of securitization transactions.
The key economic assumptions and sensitivity of the current fair
value of MSRs to immediate 10% and 20% adverse changes in those
assumptions are as follows:
|
|
|
December 31,
2006 ($ in millions)
|
|
|
|
|
Range of prepayment speeds
(constant prepayment rate)
|
|
1.0-43.2%
|
Impact on fair value of 10% adverse
change
|
|
($227)
|
Impact on fair value of 20% adverse
change
|
|
($413)
|
Range of discount rates
|
|
8.0-14.0%
|
Impact on fair value of 10% adverse
change
|
|
($67)
|
Impact on fair value of 20% adverse
change
|
|
($132)
|
|
|
These sensitivities are hypothetical and should be considered
with caution. As the figures indicate, changes in fair value
based on a 10% variation in assumptions generally cannot be
extrapolated because the relationship of the change in
assumptions to the change in fair value may not be linear. Also,
the effect of a variation in a particular assumption on the fair
value is calculated without changing any other assumption. In
reality, changes in one factor may result in changes in another
(e.g., increased market interest rates may result in lower
prepayments and increased credit losses), which could magnify or
counteract the sensitivities. Further, these sensitivities show
only the change in the asset balances and do not show any
expected change in the fair value of the instruments used to
manage the interest rates and prepayment risks associated with
these assets.
Our servicing rights primary risk is interest rate risk
and the resulting impact on prepayments. A significant decline
in interest rates could lead to higher than expected
prepayments, which could reduce the value of the mortgage
servicing rights. We economically hedge the income statement
impact of these risks with both derivative and non-derivative
financial instruments. These instruments include interest rate
swaps, caps and floors, options to purchase these items, futures
and forward contracts
and/or
purchasing or selling U.S. Treasury and principal-only
securities. At December 31, 2006, the fair value of
derivative financial instruments and non-derivative financial
instruments used to mitigate these risks amounted to
$159 million and $1.3 billion, respectively. The
change in the fair value of the derivative financial instruments
amounted to a loss of $281 million for the year ended
December 31, 2006, and is included in servicing asset
valuation and hedge activities, net in the Consolidated
Statement of Income.
The components of servicing fees were as follows for the year
ended December 31, 2006:
|
|
|
|
|
($
in millions)
|
|
Total
|
|
|
Contractual servicing fees, net of
guarantee fees and including subservicing
|
|
|
$1,327
|
|
Late fees
|
|
|
130
|
|
Ancillary fees
|
|
|
127
|
|
|
|
Total
|
|
|
$1,584
|
|
|
|
At December 31, 2006, we pledged MSRs of $2.4 billion
as collateral for borrowings.
The following table summarizes activity related to MSRs, which
prior to January 1, 2006, were carried at lower of cost or
fair value:
|
|
|
|
|
|
|
|
|
Year
ended December 31, ($ in millions)
|
|
2005
|
|
2004
|
|
|
Balance at beginning of year
|
|
|
$4,819
|
|
|
|
$4,869
|
|
Originations and purchases, net of
sales
|
|
|
1,546
|
|
|
|
1,554
|
|
Amortization
|
|
|
(1,106
|
)
|
|
|
(879
|
)
|
SFAS 133 hedge valuation
adjustments
|
|
|
86
|
|
|
|
(272
|
)
|
Transfers to assets held for sale
(a)
|
|
|
(632
|
)
|
|
|
|
|
Other than temporary impairment
|
|
|
(55
|
)
|
|
|
(453
|
)
|
|
|
Balance at end of year
|
|
|
$4,658
|
|
|
|
$4,819
|
|
Valuation allowance
|
|
|
(643
|
)
|
|
|
(929
|
)
|
|
|
Carrying value at end of year
|
|
|
$4,015
|
|
|
|
$3,890
|
|
|
|
Estimated fair value at end of year
|
|
|
$4,021
|
|
|
|
$3,990
|
|
|
|
|
|
(a) |
At December 31, 2005, $632 in Capmark mortgage servicing
rights, net were transferred to assets held for sale in our
Consolidated Balance Sheet.
|
228
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
The following table summarizes activity related to changes in
the valuation allowance for impairment of MSRs:
|
|
|
|
|
|
|
|
|
Year
ended December 31, ($ in millions)
|
|
2005
|
|
2004
|
|
|
Valuation allowance at beginning of
period
|
|
|
$929
|
|
|
|
$1,149
|
|
Additions (deductions) (a)
|
|
|
(237
|
)
|
|
|
233
|
|
Other than temporary impairment
|
|
|
(55
|
)
|
|
|
(453
|
)
|
Other
|
|
|
6
|
|
|
|
|
|
|
|
Valuation allowance at end of year
|
|
|
$643
|
|
|
|
$929
|
|
|
|
|
|
(a) |
Changes to the valuation allowance are reflected as a component
of amortization and impairment of servicing rights in our
Consolidated Statement of Income.
|
During 2005 and 2004, we recorded other than temporary
impairment of $55 million and $453 million,
respectively, reducing both the MSRs gross carrying value
and valuation allowance by this amount. This amount was based on
a statistical analysis of historical changes in mortgage and
other market interest rates to determine the amount that the
MSRs asset value will increase with only a remote probability of
occurring. The adjustment to the valuation allowance reduces the
maximum potential future increase to the MSRs carrying
value (under lower of cost or market accounting), but it has no
impact on the net carrying value of the asset or on earnings.
We have an active risk management program to hedge the value of
MSRs. The MSRs management program contemplates the use of
derivative financial instruments and treasury securities and
principal-only securities that experience changes in value
offsetting those of the MSRs in response to changes in market
interest rates. See Note 15 for a discussion of the
derivative financial instruments used to hedge mortgage
servicing rights. U.S. Treasury securities used in
connection with this risk management strategy are designated as
trading or available for sale. At December 31, 2005, there
were $2.1 billion of U.S. Treasury securities
outstanding related to this risk management activity, which were
reflected as investment securities. Principal-only securities
are designated as trading. At December 31, 2005, there was
$596 million in principal-only securities related to this
risk management activity.
The key economic assumptions and the sensitivity of the current
fair value of MSRs to immediate 10% and 20% adverse changes in
those assumptions are as follows:
|
|
|
|
|
Year
ended December 31, ($ in millions)
|
|
2005
|
|
2004
|
|
|
Estimated fair value of MSRs
|
|
$4,021
|
|
$3,990
|
|
|
Range of prepayment speeds
(constant prepayment rate)
|
|
8.3-28.2%
|
|
2.0-29.8%
|
Impact on fair value of 10% adverse
change
|
|
($183)
|
|
($189)
|
Impact on fair value of 20% adverse
change
|
|
($345)
|
|
($359)
|
Range of discount rates
|
|
8.0-12.7%
|
|
9.4-12.6%
|
Impact on fair value of 10% adverse
change
|
|
($106)
|
|
($107)
|
Impact on fair value of 20% adverse
change
|
|
($206)
|
|
($207)
|
|
|
These sensitivities are hypothetical and should be considered
with caution. As the figures indicate, changes in fair value
based on a 10% variation in assumptions generally cannot be
extrapolated because the relationship of the change in
assumptions to the change in fair value may not be linear. Also,
the effect of a variation in a particular assumption on the fair
value is calculated without changing any other assumption. In
reality, changes in one factor may result in changes in another
(e.g., increased market interest rates may result in lower
prepayments and increased credit losses), which could magnify or
counteract the sensitivities. Further, these sensitivities show
only the change in the asset balances and do not show any
expected change in the fair value of the instruments used to
manage the interest rate and prepayment risks associated with
these assets.
10 Premiums
and Other Insurance Receivables
Premiums and other insurance receivables consisted of the
following:
|
|
|
|
|
|
|
|
|
December 31,
($ in millions)
|
|
2006
|
|
|
2005
|
|
|
|
Prepaid reinsurance premiums
|
|
|
$367
|
|
|
|
$359
|
|
Reinsurance recoverable on unpaid
losses
|
|
|
876
|
|
|
|
762
|
|
Reinsurance recoverable on paid
losses (a)
|
|
|
95
|
|
|
|
87
|
|
Premiums receivable (b)
|
|
|
678
|
|
|
|
665
|
|
|
|
Total premiums and other insurance
receivables
|
|
|
$2,016
|
|
|
|
$1,873
|
|
|
|
|
|
(a)
|
Net of $1 and $1 allowance for uncollectible reinsurance
recoverable on paid losses at December 31, 2006 and 2005,
respectively.
|
(b)
|
Net of $7 and $8 allowance for uncollectible premiums receivable
at December 31, 2006 and 2005, respectively.
|
229
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
11 Other
Assets
Other assets consisted of:
|
|
|
|
|
|
|
|
|
December 31,
($ in millions)
|
|
2006
|
|
|
2005
|
|
|
|
Premises and equipment at cost
|
|
|
$1,645
|
|
|
|
$2,899
|
|
Accumulated depreciation
|
|
|
(1,067
|
)
|
|
|
(1,145
|
)
|
|
|
Net premises and equipment
|
|
|
578
|
|
|
|
1,754
|
|
Cash reserve deposits held for
securitization trusts (a)
|
|
|
2,623
|
|
|
|
2,907
|
|
Fair value of derivative contracts
in receivable position
|
|
|
2,544
|
|
|
|
3,000
|
|
Real estate and other
investments (b)
|
|
|
3,068
|
|
|
|
1,855
|
|
Restricted cash collections for
securitization trusts (c)
|
|
|
1,858
|
|
|
|
1,871
|
|
Goodwill, net of accumulated
amortization
|
|
|
1,827
|
|
|
|
2,446
|
|
Deferred policy acquisition cost
|
|
|
1,740
|
|
|
|
1,696
|
|
Accrued interest and rent receivable
|
|
|
1,315
|
|
|
|
1,163
|
|
Repossessed and foreclosed assets,
net
|
|
|
1,215
|
|
|
|
689
|
|
Debt issuance costs
|
|
|
643
|
|
|
|
726
|
|
Servicer advances
|
|
|
606
|
|
|
|
499
|
|
Securities lending
|
|
|
445
|
|
|
|
|
|
Investment in used vehicles held
for sale, at lower of cost or market
|
|
|
423
|
|
|
|
503
|
|
Subordinated note receivable
|
|
|
250
|
|
|
|
|
|
Intangible assets, net of
accumulated amortization (d)
|
|
|
|
|
|
|
|
|
Customer lists and contracts
|
|
|
48
|
|
|
|
16
|
|
Trademarks and other
|
|
|
11
|
|
|
|
15
|
|
Receivables related to taxes
|
|
|
9
|
|
|
|
774
|
|
Other assets
|
|
|
4,293
|
|
|
|
2,528
|
|
|
|
Total other assets
|
|
|
$23,496
|
|
|
|
$22,442
|
|
|
|
|
|
(a)
|
Represents credit enhancement in the form of cash reserves for
various securitization transactions we have executed. On
November 22, 2006, $710 of cash reserve deposits were
transferred to GM as part of a distribution of certain
securitized U.S. lease assets. Refer to Note 18 to our
Consolidated Financial Statements for further description of the
distribution.
|
(b)
|
Includes residential real estate investments of $2 billion
and $1.3 billion and related accumulated depreciation of
$13 and $9 for years ended December 31, 2006 and 2005,
respectively.
|
(c)
|
Represents cash collection from customer payments on securitized
receivables. These funds are distributed to investors as the
related secured debt matures.
|
(d)
|
Aggregate amortization expense on intangible assets was $16 and
$17, including $1 and $8 for Capmark, for the years ended
December 31, 2006 and 2005, respectively. Amortization
expense is expected to average $10 per year over the next
five fiscal years. In addition, during 2006, our Commercial
Finance Group had $13 of intangible assets that were deemed
impaired and subsequently written off during the third quarter
of 2006.
|
230
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
The changes in the carrying amounts of goodwill for the periods
indicated were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
|
|
|
|
|
|
|
|
|
|
American
|
|
International
|
|
|
|
|
|
|
|
|
($
in millions)
|
|
Operations
|
|
Operations
|
|
ResCap
|
|
Insurance
|
|
Other
|
|
Total
|
|
|
Goodwill at beginning of 2005
|
|
|
$14
|
|
|
|
$515
|
|
|
|
$455
|
|
|
|
$666
|
|
|
|
$1,624
|
|
|
|
$3,274
|
|
Goodwill acquired
|
|
|
|
|
|
|
3
|
|
|
|
16
|
|
|
|
3
|
|
|
|
|
|
|
|
22
|
|
Impairment losses (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(712
|
)
|
|
|
(712
|
)
|
Other
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
(18
|
)
|
|
|
(22
|
)
|
Foreign currency translation effect
|
|
|
|
|
|
|
(14
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
(36
|
)
|
|
|
(57
|
)
|
Transfers to assets held for
sale (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(59
|
)
|
|
|
(59
|
)
|
|
|
Goodwill at beginning of 2006
|
|
|
$14
|
|
|
|
$504
|
|
|
|
$460
|
|
|
|
$669
|
|
|
|
$799
|
|
|
|
$2,446
|
|
Goodwill acquired
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
148
|
|
|
|
|
|
|
|
151
|
|
Impairment losses (c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(827
|
)
|
|
|
(827
|
)
|
Other
|
|
|
|
|
|
|
3
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Foreign currency translation effect
|
|
|
|
|
|
|
16
|
|
|
|
7
|
|
|
|
2
|
|
|
|
28
|
|
|
|
53
|
|
|
|
Goodwill at end of 2006
|
|
|
$14
|
|
|
|
$523
|
|
|
|
$471
|
|
|
|
$819
|
|
|
|
$
|
|
|
|
$1,827
|
|
|
|
|
|
(a)
|
During the fourth quarter of 2005,
we completed our goodwill impairment analysis of our Commercial
Finance Group (CFG) reporting unit in accordance with
SFAS 142. The CFG reporting units goodwill related
primarily to its 1999 acquisition of The Bank of New Yorks
commercial finance business. With the assistance of a third
party, management performed an assessment of the fair value of
the CFG reporting unit. The fair value of the CFG reporting unit
was determined using the average of an internally developed
discounted cash flow methodology and a valuation derived from
recent market precedent transactions. Based on this assessment,
it was determined that indicators of impairment existed as the
carrying amount of the CFG reporting unit including goodwill
exceeded its fair value. These indicators were largely
attributed to current competitive conditions in the industry in
which CFG operates, the relative level of liquidity in its
market and the CFG reporting unit experiencing declining margins
and a more difficult environment for growth than anticipated in
previous forecasts. Because the carrying amount of the CFG
reporting unit, including goodwill, as a whole exceeded its fair
value, management assessed the fair value of the CFG reporting
units individual assets, including identifiable intangible
assets and liabilities, to derive an implied fair value of the
CFG reporting units goodwill. Based on this assessment, we
recorded an impairment charge of $648 in the fourth quarter of
2005 as it was determined that the carrying value of the CFG
reporting units goodwill was greater than its implied fair
value. In addition, other includes impairment losses of $64
related to the former GMAC Commercial Mortgage business.
|
(b)
|
At December 31, 2005, $59 of
goodwill in the former GMAC Commercial Mortgage business was
transferred to assets held for sale in our Consolidated Balance
Sheet.
|
(c)
|
Following attrition of key
personnel around the middle of the year, our Commercial Finance
reporting unit initiated a goodwill impairment test, in
accordance with SFAS 142, outside the normal fourth quarter
cycle. A necessary precedent to such test was a thorough review
of the business by new leadership, with a particular focus on
long-term strategy. As a result of the review the operating
divisions were reorganized and the decision was made to
implement a different exit strategy for the workout portfolio
and to exit product lines with lower returns. These decisions
had a significant impact on expected asset levels and growth
rate assumptions used to estimate the fair value of the
business. In particular, the analysis performed during the third
quarter incorporates managements decision to discontinue
activity in the equipment finance business, which had a
portfolio of over $1 billion, representing approximately
20% of Commercial Finance businesss average commercial
loan portfolio during 2006. Consistent with the prior analysis,
the fair value of the Commercial Finance business was determined
using an internally developed discounted cash flow analysis
based on five-year projected net income and a market driven
terminal value multiple. Based upon the results of the
assessment, we concluded that the carrying value of goodwill
exceeded its fair value, resulting in an impairment loss of $827
during 2006.
|
231
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
12 Debt
The presentation of debt in the following table is classified
between domestic and foreign based on the location of the office
recording the transaction.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
average
interest
|
|
|
|
|
|
|
|
|
|
rates (a)
|
|
|
2006
|
|
|
2005
|
|
December 31,
($ in millions)
|
|
2006
|
|
|
2005
|
|
|
Domestic
|
|
|
Foreign
|
|
|
Total
|
|
|
Domestic
|
|
|
Foreign
|
|
|
Total
|
|
|
|
Short-term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
|
|
|
|
|
|
|
|
|
$742
|
|
|
|
$781
|
|
|
|
$1,523
|
|
|
|
$227
|
|
|
|
$297
|
|
|
|
$524
|
|
Demand notes
|
|
|
|
|
|
|
|
|
|
|
5,917
|
|
|
|
157
|
|
|
|
6,074
|
|
|
|
5,928
|
|
|
|
119
|
|
|
|
6,047
|
|
Bank loans and overdrafts
|
|
|
|
|
|
|
|
|
|
|
991
|
|
|
|
5,272
|
|
|
|
6,263
|
|
|
|
1,165
|
|
|
|
5,487
|
|
|
|
6,652
|
|
Repurchase agreements and
other (b)
|
|
|
|
|
|
|
|
|
|
|
22,506
|
|
|
|
7,232
|
|
|
|
29,738
|
|
|
|
22,330
|
|
|
|
5,954
|
|
|
|
28,284
|
|
|
|
Total short-term debt
|
|
|
5.8%
|
|
|
|
4.6%
|
|
|
|
30,156
|
|
|
|
13,442
|
|
|
|
43,598
|
|
|
|
29,650
|
|
|
|
11,857
|
|
|
|
41,507
|
|
Long-term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior indebtedness
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due within one year
|
|
|
5.5%
|
|
|
|
4.9%
|
|
|
|
20,010
|
|
|
|
15,204
|
|
|
|
35,214
|
|
|
|
31,286
|
|
|
|
10,443
|
|
|
|
41,729
|
|
Due after one year
|
|
|
5.9%
|
|
|
|
5.2%
|
|
|
|
135,693
|
|
|
|
22,589
|
|
|
|
158,282
|
|
|
|
147,288
|
|
|
|
23,862
|
|
|
|
171,150
|
|
|
|
Total long-term debt (c)
|
|
|
5.9%
|
|
|
|
5.2%
|
|
|
|
155,703
|
|
|
|
37,793
|
|
|
|
193,496
|
|
|
|
178,574
|
|
|
|
34,305
|
|
|
|
212,879
|
|
Fair value adjustment (d)
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
(106
|
)
|
|
|
(109
|
)
|
|
|
310
|
|
|
|
2
|
|
|
|
312
|
|
|
|
Total debt
|
|
|
|
|
|
|
|
|
|
|
$185,856
|
|
|
|
$51,129
|
|
|
|
$236,985
|
|
|
|
$208,534
|
|
|
|
$46,164
|
|
|
|
$254,698
|
|
|
|
|
|
(a)
|
The weighted average interest rates include the effects of
derivative financial instruments designated as hedges of debt.
|
(b)
|
Repurchase agreements consist of secured financing arrangements
with third parties at ResCap. Other primarily includes non-bank
secured borrowings, as well as Notes payable to GM. Refer to
Note 18 to our Consolidated Financial Statements for
further details.
|
(c)
|
We have issued warrants to subscribe for up to $300 aggregate
principal amount of 6.5% notes due October 15, 2009.
The warrants entitle the holder to purchase from us the
aggregate principal amount at par plus any accrued interest. The
warrants are exercisable up to and including October 15,
2007. In December 2003 and February 2004, $125 of the warrants
were exercised each year, resulting in $50 aggregate principal
amount of these warrants remaining outstanding.
|
(d)
|
To adjust designated fixed rate debt to fair value in accordance
with SFAS 133.
|
The following summarizes assets that are restricted as
collateral for the payment of the related debt obligation
primarily arising from securitization transactions accounted for
as secured borrowings and repurchase agreements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
Related
secured
|
|
|
|
|
|
Related secured
|
|
December 31,
($ in millions)
|
|
Assets
|
|
|
debt (a)
|
|
|
Assets
|
|
|
debt (a)
|
|
|
|
Loans held for sale
|
|
|
$22,834
|
|
|
|
$20,525
|
|
|
|
$16,147
|
|
|
|
$12,647
|
|
Mortgage assets held for investment
and lending receivables
|
|
|
80,343
|
|
|
|
68,333
|
|
|
|
78,820
|
|
|
|
71,083
|
|
Retail automotive finance
receivables
|
|
|
21,320
|
|
|
|
19,098
|
|
|
|
20,427
|
|
|
|
18,888
|
|
Investment securities
|
|
|
3,662
|
|
|
|
4,523
|
|
|
|
3,631
|
|
|
|
4,205
|
|
Investment in operating leases, net
(b)
|
|
|
6,851
|
|
|
|
6,456
|
|
|
|
13,136
|
|
|
|
11,707
|
|
Real estate investments and other
assets
|
|
|
8,025
|
|
|
|
4,550
|
|
|
|
4,771
|
|
|
|
2,608
|
|
|
|
Total
|
|
|
$143,035
|
|
|
|
$123,485
|
|
|
|
$136,932
|
|
|
|
$121,138
|
|
|
|
|
|
(a)
|
Included as part of secured debt are repurchase agreements of
$11.5 and $9.9 billion where we have pledged assets,
reflected as investment securities, as collateral for
approximately the same amount of debt at December 31, 2006
and 2005, respectively.
|
(b)
|
On November 22, 2006, GM assumed $10.1 billion of debt
secured by $12.6 billion of net operating lease assets that
GMAC distributed to GM. Refer to Note 18 to our
Consolidated Financial Statements for further discussion of the
distribution.
|
From time to time, we repurchase previously issued debt as part
of our cash and liquidity management strategy. In October 2006
we successfully completed a debt tender offer by paying
$1 billion to retire a portion of our deferred interest
debentures, resulting in a $135 million after-tax loss,
which will generate significant interest savings going forward.
In addition, on December 15, 2006, we entered into an
agreement to sell $1 billion of Senior Unsecured Notes due
December 15, 2011.
232
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
The following table presents the scheduled maturity of long-term
debt at December 31, 2006, assuming that no early
redemptions will occur. The actual payment of secured debt may
vary based on the payment activity of the related secured assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended December 31, ($ in millions)
|
|
Secured
|
|
|
Unsecured
|
|
|
Total
|
|
|
|
2007
|
|
|
$12,391
|
|
|
|
$22,823
|
|
|
|
$35,214
|
|
2008
|
|
|
16,708
|
|
|
|
16,551
|
|
|
|
33,259
|
|
2009
|
|
|
6,392
|
|
|
|
11,066
|
|
|
|
17,458
|
|
2010
|
|
|
2,058
|
|
|
|
7,908
|
|
|
|
9,966
|
|
2011
|
|
|
1,580
|
|
|
|
13,336
|
|
|
|
14,916
|
|
2012 and thereafter
|
|
|
55,185
|
|
|
|
27,884
|
|
|
|
83,069
|
|
|
|
Long-term debt (a)
|
|
|
94,314
|
|
|
|
99,568
|
|
|
|
193,882
|
|
Unamortized discount
|
|
|
(35
|
)
|
|
|
(351
|
)
|
|
|
(386
|
)
|
|
|
Total long-term debt
|
|
|
$94,279
|
|
|
|
$99,217
|
|
|
|
$193,496
|
|
|
|
|
|
(a) |
Debt issues totaling $14,628 are redeemable at or above par, at
our option anytime prior to the scheduled maturity dates, the
latest of which is November 2049.
|
To achieve the desired balance between fixed and variable rate
debt, we utilize interest rate swap and interest rate cap
agreements. The use of such derivative financial instruments had
the effect of synthetically converting $53.3 billion of our
$147.3 billion of fixed rate debt into variable rate
obligations and $40.1 billion of our $90.1 billion of
variable rate debt into fixed rate obligations at
December 31, 2006. In addition, certain of our debt
obligations are denominated in currencies other than the
currency of the issuing country. Foreign currency swap
agreements are used to hedge exposure to changes in the exchange
rates of these obligations.
233
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
Liquidity
facilities
Liquidity facilities represent additional funding sources, if
required. The financial institutions providing the uncommitted
facilities are not legally obligated to fund those facilities.
The following table summarizes the liquidity facilities
maintained by us.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Unused
|
|
|
|
Committed
|
|
|
Uncommitted
|
|
|
liquidity
|
|
|
liquidity
|
|
|
|
facilities
|
|
|
facilities
|
|
|
facilities
|
|
|
facilities
|
|
December 31,
($ in billions)
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
Automotive Finance operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syndicated multicurrency global
credit facility (a)
|
|
|
$7.6
|
|
|
|
$7.4
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$7.6
|
|
|
|
$7.4
|
|
|
|
$7.6
|
|
|
|
$7.4
|
|
ResCap (b)
|
|
|
3.9
|
|
|
|
3.9
|
|
|
|
1.9
|
|
|
|
0.9
|
|
|
|
5.8
|
|
|
|
4.8
|
|
|
|
2.7
|
|
|
|
2.2
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. asset-backed commercial
paper liquidity and receivables facilities (c)
|
|
|
18.3
|
|
|
|
21.5
|
|
|
|
|
|
|
|
|
|
|
|
18.3
|
|
|
|
21.5
|
|
|
|
18.3
|
|
|
|
21.5
|
|
Other foreign facilities (d)
|
|
|
3.3
|
|
|
|
2.9
|
|
|
|
8.8
|
|
|
|
7.5
|
|
|
|
12.1
|
|
|
|
10.4
|
|
|
|
3.1
|
|
|
|
1.7
|
|
|
|
Total bank liquidity facilities
|
|
|
33.1
|
|
|
|
35.7
|
|
|
|
10.7
|
|
|
|
8.4
|
|
|
|
43.8
|
|
|
|
44.1
|
|
|
|
31.7
|
|
|
|
32.8
|
|
|
|
Secured funding facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive Finance
operations (e)
|
|
|
36.6
|
|
|
|
28.1
|
|
|
|
|
|
|
|
|
|
|
|
36.6
|
|
|
|
28.1
|
|
|
|
9.8
|
|
|
|
5.6
|
|
ResCap (f)
|
|
|
29.4
|
|
|
|
26.8
|
|
|
|
73.3
|
|
|
|
42.1
|
|
|
|
102.7
|
|
|
|
68.9
|
|
|
|
59.7
|
|
|
|
35.1
|
|
Whole loan forward flow agreements
|
|
|
45.5
|
|
|
|
64.2
|
|
|
|
|
|
|
|
|
|
|
|
45.5
|
|
|
|
64.2
|
|
|
|
45.5
|
|
|
|
64.2
|
|
Other (g)
|
|
|
3.9
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
3.9
|
|
|
|
0.6
|
|
|
|
2.3
|
|
|
|
0.1
|
|
|
|
Total secured funding facilities
|
|
|
115.4
|
|
|
|
119.7
|
|
|
|
73.3
|
|
|
|
42.1
|
|
|
|
188.7
|
|
|
|
161.8
|
|
|
|
117.3
|
|
|
|
105.0
|
|
|
|
Total
|
|
|
$148.5
|
|
|
|
$155.4
|
|
|
|
$84.0
|
|
|
|
$50.5
|
|
|
|
$232.5
|
|
|
|
$205.9
|
|
|
|
$149.0
|
|
|
|
$137.8
|
|
|
|
|
|
(a)
|
The entire $7.6 is available for use in the U.S., $0.8 is
available for use by GMAC (UK) plc and $0.8 is available for use
by GMAC International Finance B.V. in Europe.
|
(b)
|
ResCap maintains $3.5 of syndicated bank facilities, consisting
of $1.75 syndicated term loan committed through July 2008, an
$875 million syndicated line of credit committed through
July 2008 and an $875 million syndicated line of credit
committed through July 2007.
|
(c)
|
Relates to New Center Asset Trust (NCAT), which is a special
purpose entity administered by us for the purpose of funding
assets as part of our securitization funding programs. This
entity funds assets primarily through the issuance of
asset-backed commercial paper and represents an important source
of liquidity to us. At December 31, 2006, NCAT had
commercial paper outstanding of $9.5, which is not consolidated
in the Consolidated Balance Sheet.
|
(d)
|
Consists primarily of credit facilities supporting operations in
Canada, Europe, Latin America and Asia-Pacific.
|
(e)
|
In August 2006 we closed a three-year, $10 billion facility
with a subsidiary of Citigroup.
|
|
|
(f) |
ResCaps primary sources of secured financing include
whole-loan sales, secured aggregation facilities, asset-backed
commercial paper facilities, and repurchase agreements. In
addition to the above, ResCaps collateralized borrowings
in securitized trusts totaled $53.3 and $56.1 as of
December 31, 2006 and 2005, respectively.
|
|
|
(g) |
Consists primarily of Commercial Finance secured funding
facilities.
|
The syndicated multi-currency global facility includes a
$4.35 billion five-year facility (expires June
2008) and a $3.25 billion
364-day
facility (expires June 2007). The
364-day
facility includes a term out option which, if exercised by us
prior to expiration, carries a one-year term. Additionally, a
leverage covenant in the liquidity facilities and certain other
funding facilities restricts the ratio of consolidated borrowed
funds (excluding certain obligations of bankruptcy remote
special purpose entities) to consolidated net worth to no
greater than 11.0:1 under certain conditions. More specifically,
the covenant is only applicable on the last day of any fiscal
quarter (other than the fiscal quarter during which a change in
rating occurs) during such times that we have senior unsecured
long-term debt outstanding, without third-party enhancement,
which is rated BBB+ or less (by Standard &
Poors), or Baa1 or less (by Moodys). Our leverage
ratio covenant was 10.8:1 at December 31, 2006, and we
are, therefore, in compliance with this covenant.
234
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
13 Reserves
for Insurance Losses and Loss Adjustment Expenses
The following table provides a reconciliation of the activity in
the reserves for insurance losses and loss adjustment expenses.
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended December 31,
|
|
|
|
|
|
|
($ in
millions)
|
|
2006
|
|
2005
|
|
2004
|
|
|
Balance at beginning of year
|
|
|
$2,534
|
|
|
|
$2,505
|
|
|
|
$2,340
|
|
Reinsurance recoverables
|
|
|
(762
|
)
|
|
|
(775
|
)
|
|
|
(871
|
)
|
|
|
Net balance at beginning of year
|
|
|
1,772
|
|
|
|
1,730
|
|
|
|
1,469
|
|
Net reserves from acquisitions
|
|
|
80
|
|
|
|
|
|
|
|
|
|
Incurred related to
|
|
|
|
|
|
|
|
|
|
|
|
|
Current year
|
|
|
2,513
|
|
|
|
2,471
|
|
|
|
2,344
|
|
Prior years (a)
|
|
|
(93
|
)
|
|
|
(116
|
)
|
|
|
27
|
|
|
|
Total incurred (b)
|
|
|
2,420
|
|
|
|
2,355
|
|
|
|
2,371
|
|
Paid related to
|
|
|
|
|
|
|
|
|
|
|
|
|
Current year
|
|
|
(1,723
|
)
|
|
|
(1,682
|
)
|
|
|
(1,567
|
)
|
Prior years
|
|
|
(803
|
)
|
|
|
(619
|
)
|
|
|
(558
|
)
|
|
|
Total paid
|
|
|
(2,526
|
)
|
|
|
(2,301
|
)
|
|
|
(2,125
|
)
|
Other (c)
|
|
|
8
|
|
|
|
(12
|
)
|
|
|
15
|
|
|
|
Net balance at end of year (d)
|
|
|
1,754
|
|
|
|
1,772
|
|
|
|
1,730
|
|
Reinsurance recoverables
|
|
|
876
|
|
|
|
762
|
|
|
|
775
|
|
|
|
Balance at end of year
|
|
|
$2,630
|
|
|
|
$2,534
|
|
|
|
$2,505
|
|
|
|
|
|
(a) |
Incurred losses and loss adjustment expenses during 2006 and
2005 were reduced by $93 and $116, respectively, as a result of
decreases in prior years reserve estimates for certain
reinsurance and private passenger automobile coverages in both
the United States and internationally. In addition, 2006
included the reduction of reserves related to an insurance
program transferred to GM. During 2004, incurred losses and loss
adjustment expenses included increases to prior years
reserve estimates, which were based on additional knowledge
available to us during 2004. In addition, 2004 also includes
$29 related to reinsurance agreements we decided to commute.
|
|
|
(b)
|
Reflected net of reinsurance recoveries totaling $306, $342 and
$312 for the years ended December 31, 2006, 2005 and
2004, respectively.
|
(c)
|
Effects of exchange rate changes for the years ended
December 31, 2006, 2005 and 2004.
|
(d)
|
Includes exposure to asbestos and environmental claims from the
reinsurance of general liability, commercial multiple peril,
homeowners and workers compensation claims. Reported
claim activity to date has not been significant. Net reserves
for loss and loss adjustment expenses for such matters were $5,
$6 and $8 at December 31, 2006, 2005 and 2004,
respectively.
|
14 Accrued
Expenses and Other Liabilities
Accrued expenses and other liabilities consisted of:
|
|
|
|
|
|
|
|
|
December 31,
($ in millions)
|
|
2006
|
|
2005
|
|
|
Deposits
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
$8,200
|
|
|
|
$4,574
|
|
Commercial
|
|
|
2,288
|
|
|
|
2,280
|
|
Fair value of derivative contracts
in payable position
|
|
|
1,745
|
|
|
|
2,447
|
|
Employee compensation and benefits
(a)
|
|
|
540
|
|
|
|
1,574
|
|
Mortgage escrow deposits
|
|
|
1,366
|
|
|
|
1,356
|
|
Factored client payables
|
|
|
813
|
|
|
|
819
|
|
Securitization trustee payable
|
|
|
902
|
|
|
|
703
|
|
GM payable, net
|
|
|
70
|
|
|
|
152
|
|
Taxes payable (receivable)
|
|
|
249
|
|
|
|
(169
|
)
|
Accounts payable
|
|
|
1,844
|
|
|
|
2,170
|
|
Other liabilities
|
|
|
4,642
|
|
|
|
2,318
|
|
|
|
Total accrued expenses and other
liabilities
|
|
|
$22,659
|
|
|
|
$18,224
|
|
|
|
|
|
(a) |
Reduction reflects $801 of liabilities related to U.S. based GM
sponsored other postretirement programs assumed by GM as part of
the Sales Transactions.
|
15 Derivative
Instruments and Hedging Activities
We enter into interest rate and foreign currency futures,
forwards, options and swaps in connection with our market risk
management activities. Derivative instruments are used to manage
interest rate risk relating to specific groups of assets and
liabilities, including investment securities, loans held for
sale, mortgage servicing rights, debts and deposits, as well as
off-balance sheet securitizations. In addition foreign exchange
contracts are used to hedge foreign currency denominated debt
and foreign exchange transactions. In accordance with
SFAS 133, as amended and interpreted, we record derivative
financial instruments on the consolidated balance sheet as
assets or liabilities at fair value. Changes in fair value are
accounted for depending on the use of the derivative financial
instruments and whether it qualifies for hedge accounting
treatment.
Our primary objective for utilizing derivative financial
instruments is to manage market risk volatility associated with
interest rate and foreign currency risks related to the assets
and liabilities of the automotive and mortgage operations.
Managing this volatility enables us to price our finance and
mortgage offerings at competitive rates and to minimize the
impact of market risk on our earnings. These strategies are
applied on a decentralized basis by the respective automotive
finance and mortgage operations, consistent with the level at
which market risk is managed, but are subject to various limits
and controls at both the local unit and consolidated level. One
of the key goals of our strategy is to modify the asset and
liability and interest rate mix, including the assets and
liabilities associated with securitization transactions that may
be
235
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
recorded in off-balance sheet special purpose entities. In
addition, we use derivative financial instruments to mitigate
the risk of changes in the fair values of mortgage loans held
for sale and mortgage servicing rights. Derivative financial
instruments are also utilized to manage the foreign currency
exposure related to foreign currency denominated debt. The
following summarizes our derivative activity based on the
accounting hedge designation:
Fair Value
Hedges
Our fair value hedges primarily include hedges of fixed-rate
debt and loans held for sale:
|
|
|
Debt obligations Interest rate swaps are used
to modify our exposure to interest rate risk by converting fixed
rate debt to a floating rate. Generally, individual swaps are
designated as hedges of specific debt at the time of issuance
with the terms of the swap matching the terms of the underlying
debt. As the terms of the swap are designed to match the terms
of the debt, a significant portion of our debt obligation
hedging relationships receive short-cut treatment under
SFAS 133, resulting in the assumption of no hedge
ineffectiveness.
|
|
|
Loans held for sale We use derivative
financial instruments to hedge exposure to risk associated with
our mortgage loans held for sale. After loans are funded, they
are generally sold into the secondary market to various
investors, often as mortgage-backed securities sponsored by
Fannie Mae, Freddie Mac or Ginnie Mae. Mortgage loans that are
not eligible for agency sponsored securitization are sold
through public or private securitization transactions or in
whole loan sales. The primary risk associated with closed loans
awaiting sale is a change in the fair value of the loans due to
fluctuations in interest rates. Our primary strategies to
protect against this risk are selling loans or mortgage-backed
securities forward to investors using mandatory and optional
forward commitments and the use of interest rate swaps. Hedge
periods are closed daily, representative of daily hedge
portfolio rebalancing due to new loan funding and sales.
Effectiveness is assessed using historical daily hedge period
data. We assess hedge effectiveness employing a
statistical-based approach, which must meet thresholds for
R-squared, slope, and F-statistic.
|
Cash Flow
Hedges
We enter into derivative financial instrument contracts to hedge
exposure to variability in cash flows related to floating rate
and foreign currency financial instruments. Interest rate swaps
are used to modify exposure to variability in expected future
cash flows attributable to variable rate debt. Currency swaps
and forwards are used to hedge foreign exchange exposure on
foreign currency denominated debt by converting the funding
currency to the same currency of the assets being financed.
Similar to our fair value hedges, the swaps are generally
concurrent with the debt issuance, with the terms of the swap
matching the terms of the underlying debt.
We use derivative financial instruments to hedge exposure to
variability in expected cash flows associated with the future
issuance of bonds payable related to securitizations of mortgage
loans held for investment. The primary risk associated with
these transactions is the variability on the issuance price of
the debt securities. Our primary strategy to protect against
this risk is selling loans or mortgage-backed securities forward
using mandatory and optional forward commitments. Upon issuance
of the debt securities, the hedging relationship terminates and
the changes in fair value of the hedging instrument are
reclassified out of other comprehensive income, a component of
equity, and into earnings over the term of the debt securities,
as an adjustment to yield.
Economic Hedges
not Designated as Accounting Hedges
We utilize certain derivative financial instruments to manage
interest rate, price and foreign exchange risks along with the
value of MSRs and mortgage loans, which do not qualify or
are not designated as hedges under SFAS 133. As these
derivatives are not designated as accounting hedges, changes in
the fair value of the derivative instruments are recognized in
earnings each period.
|
|
|
Mortgage servicing rights We enter into a
combination of derivative contracts that are economic hedges of
the servicing rights associated with groups of similar mortgage
loans. These derivatives include interest rate caps and floors,
futures options, futures, mortgage-backed security options,
interest rate swaps and swaptions. The maturities of these
instruments range between six months and twenty years. We have
entered into written options on U.S. Treasury futures for
notional amounts lower than purchased options on futures. The
purchased option coverage is at a strike price less than or
equal to the corresponding written option coverage, thereby
mitigating our loss exposure. We are required to deposit cash in
margin accounts maintained by counterparties for unrealized
losses on future contracts.
|
In addition, the following describes other uses of derivatives
that do not qualify for or for which we elect not to apply hedge
accounting:
|
|
|
Off-balance sheet securitization activities
We enter into interest rate swaps to facilitate securitization
transactions where the underlying receivables are sold to a
non-consolidated qualified special purpose entity (QSPE). As the
underlying assets are carried in a non-consolidated entity, the
interest rate swaps do not qualify for hedge accounting
treatment.
|
|
|
Foreign currency debt We have elected not to
treat currency swaps that are used to convert foreign
denominated debt back into the functional currency at a floating
rate as hedges for accounting purposes. While these currency
swaps are similar to the foreign currency cash flow hedges
described in the foregoing, we have not designated them as
hedges as the changes in the fair values of the currency swaps
are substantially offset by the
|
236
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
|
|
|
foreign currency revaluation gains and losses of the underlying
debt.
|
|
|
|
Mortgage related securities We use interest
rate options, futures, swaps, caps and floors to mitigate risk
related to mortgage related securities classified as trading.
|
|
|
Callable debt obligations We enter into
cancellable interest rate swaps as economic hedges of certain
callable fixed rate debt in connection with our market risk
management policy.
|
The following table summarizes the pre-tax earnings effect for
each type of hedge classification, segregated by the asset or
liability hedged.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended December 31, ($ in millions)
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Income
statement classification
|
|
Fair value hedge ineffectiveness
gain (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt obligations
|
|
|
$
|
|
|
|
($2
|
)
|
|
|
$1
|
|
|
Interest expense
|
Mortgage servicing rights
|
|
|
|
|
|
|
57
|
|
|
|
70
|
|
|
Servicing asset valuation and hedge
activities, net
|
Loans held for sale
|
|
|
(1
|
)
|
|
|
(29
|
)
|
|
|
(12
|
)
|
|
Gain on sale of mortgage and
automotive loans, net
|
Cash flow hedges ineffectiveness
gain (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt obligations
|
|
|
|
|
|
|
3
|
|
|
|
(19
|
)
|
|
Interest expense
|
Economic hedge change in fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-balance sheet securitization
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive Finance operations
|
|
|
2
|
|
|
|
(36
|
)
|
|
|
(26
|
)
|
|
Other income
|
Mortgage operations
|
|
|
|
|
|
|
1
|
|
|
|
(18
|
)
|
|
Other income
|
Foreign currency debt (a)
|
|
|
54
|
|
|
|
(202
|
)
|
|
|
44
|
|
|
Interest expense
|
Loans held for sale or investment
|
|
|
35
|
|
|
|
59
|
|
|
|
(60
|
)
|
|
Gain on sale of mortgage and
automotive loans, net
|
Mortgage servicing rights
|
|
|
(281
|
)
|
|
|
(55
|
)
|
|
|
(7
|
)
|
|
Servicing asset valuation and hedge
activities, net
|
Mortgage related securities
|
|
|
3
|
|
|
|
(42
|
)
|
|
|
(95
|
)
|
|
Investment income
|
Callable debt obligations
|
|
|
(22
|
)
|
|
|
(240
|
)
|
|
|
(82
|
)
|
|
Interest expense
|
Other
|
|
|
21
|
|
|
|
(11
|
)
|
|
|
(18
|
)
|
|
Other income, Interest expense,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating expenses
|
|
|
|
|
|
|
Total loss
|
|
|
($189
|
)
|
|
|
($497
|
)
|
|
|
($222
|
)
|
|
|
|
|
|
|
(a) |
Amount represents the difference between the changes in the fair
values of the currency swap, net of the revaluation of the
related foreign denominated debt.
|
The following table presents additional information related to
our derivative financial instruments.
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended December 31, ($ in millions)
|
|
2006
|
|
2005
|
|
2004
|
|
|
Net gain on fair value hedges
excluded from assessment of effectiveness
|
|
|
$
|
|
|
|
$59
|
|
|
|
$180
|
|
Expected reclassifications from
other comprehensive income to earnings (a)
|
|
|
8
|
|
|
|
12
|
|
|
|
(1
|
)
|
|
|
|
|
(a) |
Estimated to occur over the next 12 months.
|
Derivative financial instruments contain an element of credit
risk if counterparties are unable to meet the terms of the
agreements. Credit risk associated with derivative financial
instruments is measured as the net replacement cost should the
counterparties which owe us under the contract completely fail
to perform under the terms of those contracts, assuming no
recoveries of underlying collateral, as measured by the market
value of the derivative financial instrument. At
December 31, 2006 and 2005, the market value of derivative
financial instruments in an asset or receivable position (from
our perspective) was $2.5 billion and $3.0 billion,
including accrued interest of $0.6 billion and
$0.7 billion, respectively. We minimize the credit risk
exposure by limiting the counterparties to those major banks and
financial institutions that meet established credit guidelines.
As of December 31, 2006, more than 74% of our exposure is
with counterparties with a Fitch rating of A+ or higher (or an
equivalent rating from another rating agency if a counterparty
is not rated by Fitch), as compared with more than 84% as of
December 31, 2005. Additionally, we reduce credit risk on
the majority of our derivative financial instruments by entering
into legally enforceable agreements that permit the closeout and
netting of transactions with the same counterparty upon
occurrence of certain events. To further mitigate the risk of
counterparty default, we maintain collateral agreements with
certain counterparties. The agreements require both parties to
maintain cash deposits in the event the fair values of the
derivative financial instruments meet established thresholds. We
have placed cash deposits totaling $206 million and
$125 million at December 31, 2006 and 2005,
respectively, in accounts maintained by counterparties. We have
received cash deposits from counterparties totaling
$215 million and $247 million at December 31,
2006 and 2005, respectively. The cash deposits placed and
received are included in our Consolidated Balance Sheet in Other
assets and Accrued expenses and other liabilities, respectively.
237
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
16 Pension
and Other Postretirement Benefits
Pension
Until the consummation of the Sale Transactions, a number of our
employees were eligible to participate in various domestic and
foreign pension plans of GM. While we were a participating
employer in these plans, GM allocated to us a portion of their
pension expense which is made on a pro-rata basis and, as such,
is impacted by the various assumptions (discount rate, return on
plan assets, etc.) that GM utilized in determining its pension
obligation. Detailed information about GMs pension plans
can be found in the GM Annual Report
Form 10-K,
filed separately with the SEC, which report is not deemed to be
incorporated into any our filings under the SEC Act or Exchange
Act. Certain of our other employees (primarily at our ResCap,
Commercial Finance, Insurance and International Automotive
Finance groups) participate in separate retirement plans that
provide for pension payments to eligible employees upon
retirement based on factors such as length of service and salary.
During 2006, GM announced that, effective immediately, it would
freeze accrued pension benefits for U.S. salaried
employees. Furthermore, effective November 30, 2006, upon
completion of the sale, our employees were no longer eligible to
participate in these pension plans. Also, pursuant to the
purchase and sale agreement we transferred, froze or terminated
a significant portion of our non-GM sponsored defined benefit
plans during 2006. As such, at December 31, 2006, our
pension obligation is lower than in previous periods. A listing
of the more significant 2006 pension transactions is discussed
below:
|
|
|
During the second quarter, we approved the freezing of the
benefit accrual of a defined benefit retirement plan as of
December 31, 2006, covering primarily ResCap employees. No
further participant benefits will accrue subsequent to that date
and no new entrants will be permitted in the plan. As a result
of these developments, a curtailment gain of approximately
$43 million was recorded in compensation and benefits
expense on our Consolidated Statement of Income.
|
|
|
During the third quarter, GMAC Commercial Finance UK and GMAC
Commercial Finance Canada announced intentions to terminate
their retirement plans, resulting in a curtailment loss of
approximately $9 million expense recorded in compensation
and benefits expense on our Consolidated Statement of Income.
|
|
|
During the fourth quarter, we expensed payments to the plans of
approximately $48 million to fully fund the GMAC portion of
the GM U.K. pension plans. These payments were required as a
Section 75 debt obligation under the UK Pension Act of 2004
and were recorded in compensation and benefits expense on our
Consolidated Statement of Income.
|
|
|
We transferred to GM the financial liability associated with the
GMAC portion of certain GM plans in Canada as of
November 30, 2006.
|
During 2005, GMAC Commercial Finance terminated the GMAC
Commercial Credit LLC U.S. Retirement Plan, resulting in an
extinguishment of approximately $11 million in accumulated
benefits.
The following summarizes information relating to our non-GM
sponsored plans:
|
|
|
|
|
|
|
|
|
Year
ended December 31, ($ in millions)
|
|
2006
|
|
2005
|
|
|
Benefit obligation
|
|
|
$434
|
|
|
|
$443
|
|
Fair value of plan assets
|
|
|
391
|
|
|
|
334
|
|
|
|
Funded status
|
|
|
(43
|
)
|
|
|
(109
|
)
|
Unrecognized net actuarial gain
|
|
|
16
|
|
|
|
75
|
|
Unrecognized prior service cost
|
|
|
2
|
|
|
|
3
|
|
Net transition obligation
|
|
|
|
|
|
|
(1
|
)
|
|
|
Accrued pension cost
|
|
|
($25
|
)
|
|
|
($32
|
)
|
|
|
Net pension expense, which is recorded in compensation and
benefits expense on our Consolidated Statement of Income,
includes the curtailment and other gains and losses from the
transactions described above. Net pension expense for our
employees that participated in GM sponsored plans totaled
$80 million, $60 million and $50 million for
2006, 2005 and 2004, respectively; net pension expense for
non-GM sponsored plans totaled ($3) million,
$28 million and $44 million for 2006, 2005 and 2004,
respectively. Based on the termination of our eligibility in the
GM sponsored plans and the transactions we have completed to
change our defined benefit plans discussed above, we anticipate
that our net pension expense will not be significant for future
years. Contributions to non-GM sponsored pension plans for 2006
were approximately $4 million, and we expect these
contribution levels to remain minimal for our defined benefit
plans worldwide in 2007.
The expected rate of return on plan assets is an estimate we
determine by summing the expected inflation and the expected
real rate of return on stocks and bonds based on allocation
percentages within the trust. The weighted average assumptions
for the non-GM sponsored pension plans are as follows:
|
|
|
|
|
|
|
|
|
Year
ended December 31,
|
|
2006
|
|
2005
|
|
|
Discount rate
|
|
|
5.47%
|
|
|
|
5.71%
|
|
Expected return on plan assets
|
|
|
8.48%
|
|
|
|
8.61%
|
|
Rate of compensation increase
|
|
|
4.40%
|
|
|
|
4.66%
|
|
|
|
Other
Postretirement Benefits
Certain of our subsidiaries participated in various
postretirement medical, dental, vision and life insurance plans
of GM, while other subsidiaries participated in separately
maintained postretirement plans. These benefits were funded as
incurred from our general assets. We previously accrued
postretirement benefit costs over the active service period of
employees to the date of full eligibility for
238
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
such benefits. Effective November 30, 2006, upon completion
of the sale, our employees were no longer eligible to
participate in GMs postretirement plans. Prior to the
sale, GM agreed to assume or retain approximately
$801 million of liabilities related to U.S. based GM
sponsored other postretirement benefit programs for our
employees, as well as approximately $302 million of related
deferred tax assets, and the net amount was recorded as a
capital contribution. We have provided for certain amounts
associated with estimated future postretirement benefits other
than pensions and characterized such amounts as other
postretirement benefits. Notwithstanding the recording of such
amounts and the use of these terms, we do not admit or otherwise
acknowledge that such amounts or existing postretirement benefit
plans (other than pensions) represent legally enforceable
liabilities. Other postretirement benefits expense, which is
recorded in Compensation and benefits expense in our
Consolidated Statement of Income, totaled $35 million in
2006, which was lower than the $88 million and
$72 million in 2005 and 2004, respectively, primarily due
to GMs restructuring of its benefit plans and the other
transactions mentioned above. We expect our other postretirement
expense to be minimal in future years.
Defined
Contribution Plan
A significant number of our employees are covered by defined
contribution plans. Employer contributions vary based on
criteria specific to each individual plan and amounted to
$40 million, $41 million, and $39 million in
2006, 2005 and 2004, respectively, and were recorded in
Compensation and benefit expenses in our Consolidated Statement
of Income. As a result of the sale and the associated
reorganization of our employee benefit plans, the number of
employees covered by defined contribution plans and the required
employer contributions are expected to increase during 2007.
17 Income
Taxes
Effective November 28, 2006, GMAC, along with certain
U.S. subsidiaries, became disregarded or pass-through
entities for U.S. federal income tax purposes. Income taxes
incurred by these converting entities have been provided through
November 30, 2006, as required under the tax sharing
agreement between GM and GMAC. Subsequent to November 30,
2006, income taxes have not been provided for these entities as
they ceased to be taxable entities, with the exception of a few
local jurisdictions that continue to tax LLCs or partnerships.
Due to our change in tax status, a net deferred tax liability
was eliminated through income tax expense totaling
$791 million. Members each report their share of our
taxable income in their respective income tax returns. Our
banking, insurance and foreign subsidiaries are generally
corporations and continue to be subject to and provide for
U.S. federal and foreign income taxes. The income tax
expense related to these corporations is included in our income
tax expense, along with other miscellaneous state, local and
franchise taxes of GMAC and certain other subsidiaries.
The significant components of income tax expense were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended December 31, ($ in millions)
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
Current income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
|
$1,115
|
|
|
|
$620
|
|
|
|
$1,452
|
|
Foreign
|
|
|
432
|
|
|
|
52
|
|
|
|
128
|
|
State and local
|
|
|
43
|
|
|
|
17
|
|
|
|
(43
|
)
|
|
|
Total current expense
|
|
|
1,590
|
|
|
|
689
|
|
|
|
1,537
|
|
|
|
Deferred income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
|
(396
|
)
|
|
|
168
|
|
|
|
(466
|
)
|
Foreign
|
|
|
(316
|
)
|
|
|
271
|
|
|
|
142
|
|
State and local
|
|
|
16
|
|
|
|
69
|
|
|
|
149
|
|
|
|
Total deferred (benefit) expense
|
|
|
(696
|
)
|
|
|
508
|
|
|
|
(175
|
)
|
|
|
Total income tax expense before
change in tax status
|
|
|
894
|
|
|
|
1,197
|
|
|
|
1,362
|
|
Change in tax status
|
|
|
(791
|
)
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
|
|
|
$103
|
|
|
|
$1,197
|
|
|
|
$1,362
|
|
|
|
239
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
A reconciliation of the statutory U.S. federal income tax
rate to our effective tax rate applicable to income and our
change in tax status is shown in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended December 31,
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
Statutory U.S. federal tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
Change in tax rate resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and local income taxes, net
of federal income tax benefit
|
|
|
1.8
|
|
|
|
1.8
|
|
|
|
2.7
|
|
|
|
Tax-exempt income
|
|
|
(0.9
|
)
|
|
|
(1.1
|
)
|
|
|
(0.9
|
)
|
|
|
Foreign income tax rate differential
|
|
|
(5.4
|
)
|
|
|
(1.9
|
)
|
|
|
(1.3
|
)
|
|
|
Goodwill impairment
|
|
|
7.5
|
|
|
|
|
|
|
|
|
|
|
|
Other (a)
|
|
|
(0.8
|
)
|
|
|
.6
|
|
|
|
(3.5
|
)
|
|
|
|
|
Effective tax rate before change in
tax status
|
|
|
37.2
|
|
|
|
34.4
|
|
|
|
32.0
|
|
|
|
Effect of tax status change
|
|
|
(35.5
|
)
|
|
|
|
|
|
|
|
|
|
|
LLC loss not subject to federal or
state income taxes
|
|
|
2.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
4.6
|
%
|
|
|
34.4
|
%
|
|
|
32.0
|
%
|
|
|
|
|
|
|
(a) |
In 2004, principally reflects the benefit of favorable
settlements with various tax authorities (both U.S. and
International), as well as the impact of changes in reserve
requirements.
|
Deferred tax assets and liabilities result from differences
between assets and liabilities measured for financial reporting
purposes and those measured for income tax return purposes.
Under the terms of the Purchase and Sale Agreement between GM
and FIM Holdings LLC, the distribution of lease assets and
assumption by GM of certain postretirement benefits resulted in
a reduction of deferred tax liabilities and assets of
$1,845 million and $302 million, respectively.
Additionally, the change in tax status resulted in a
$791 million reduction in income tax expense related to the
elimination of deferred tax liabilities and assets of
$1,486 million and $695 million, respectively. The
significant components of deferred tax assets and liabilities
after consideration of these adjustments are reflected in the
following table.
|
|
|
|
|
|
|
|
|
December 31,
($ in millions)
|
|
2006
|
|
|
2005
|
|
|
|
Deferred tax
liabilities
|
|
|
|
|
|
|
|
|
Lease transactions
|
|
|
$1,236
|
|
|
|
$4,020
|
|
Deferred acquisition costs
|
|
|
560
|
|
|
|
676
|
|
Unrealized gains on securities
|
|
|
54
|
|
|
|
277
|
|
Sales of finance receivables
|
|
|
41
|
|
|
|
(327
|
)
|
State and local taxes
|
|
|
3
|
|
|
|
118
|
|
Mortgage servicing rights
|
|
|
15
|
|
|
|
857
|
|
Debt issuance costs
|
|
|
|
|
|
|
316
|
|
Goodwill
|
|
|
3
|
|
|
|
(102
|
)
|
Other
|
|
|
146
|
|
|
|
189
|
|
|
|
Gross deferred tax liabilities
|
|
|
2,058
|
|
|
|
6,024
|
|
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
Unearned insurance premiums
|
|
|
293
|
|
|
|
297
|
|
Tax carryforwards
|
|
|
206
|
|
|
|
54
|
|
Manufacturer incentive payments
|
|
|
132
|
|
|
|
|
|
Provision for credit losses
|
|
|
91
|
|
|
|
809
|
|
Postretirement benefits
|
|
|
15
|
|
|
|
301
|
|
Hedging transactions
|
|
|
2
|
|
|
|
(61
|
)
|
Other
|
|
|
312
|
|
|
|
260
|
|
|
|
Gross deferred tax assets
|
|
|
1,051
|
|
|
|
1,660
|
|
|
|
Net deferred tax liability (a)
|
|
|
$1,007
|
|
|
|
$4,364
|
|
|
|
|
|
(a) |
GMAC Commercial Mortgages net deferred tax asset of
$169 million was transferred to liabilities related to
assets held for sale in our Consolidated Balance Sheet as of
December 31, 2005.
|
At December 31, 2006, our net assets of flow-through
entities exceeded their tax basis by approximately
$2,460 million, primarily related to lease transactions,
mortgage servicing rights and sales of finance receivables.
240
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
Foreign pre-tax income totaled $336 million in 2006,
$988 million in 2005 and $1,003 million in 2004.
Foreign pre-tax income is subject to U.S. taxation when
effectively repatriated. For our entities that are disregarded
for U.S. federal income tax purposes, it is the
responsibility of our members to provide federal income taxes on
the undistributed earnings of foreign subsidiaries to the extent
that such earnings are not deemed permanently reinvested outside
the United States. For our banking and insurance subsidiaries
that continue to be subject to U.S. federal income taxes,
we provide for federal income taxes on the undistributed
earnings of foreign subsidiaries, except to the extent that such
earnings are indefinitely reinvested outside the United States.
At December 31, 2006, $4,388 million of accumulated
undistributed earnings of foreign subsidiaries was indefinitely
reinvested. Quantification of the deferred tax liability, if
any, associated with indefinitely reinvested earnings is not
practicable.
For the eleven months ending November 30, 2006, and years
ending 2005 and 2004, GM had consolidated federal net operating
losses. After GM utilized all prior year federal carryback
potential, the remaining net operating losses were carried
forward. The consolidated federal net operating losses also
created charitable contribution deduction and foreign tax credit
carryforwards. Pursuant to the tax sharing agreement between GM
and us, our consolidated allocation of tax attributes from GM
for this time periods federal net operating losses (due to
certain loss subsidiaries), charitable contributions deduction
and foreign tax credits are carried forward for our subsidiaries
that remain separate U.S. tax paying entities. For the
Company and certain subsidiaries which have converted to limited
liability companies and have elected to be treated as
pass-through entities, intercompany receivables from GM related
to tax attributes totaling $1.1 billion were dividended to
GM as of November 30, 2006. For comparative purposes, at
December 31, 2005, we had an intercompany tax receivable
from GM of $690 million. The receivable was comprised of
federal net operating loss carryforward of $611 million,
charitable contributions carryforward of $12 million and
foreign tax credit carryforward of $67 million.
Under the terms of the Purchase and Sale Agreement between GM
and FIM Holdings LLC, the tax sharing agreement between GM and
us was terminated as of November 30, 2006. Terms of the
sale agreement stipulate that GM will indemnify us for any
contingent tax liabilities related to periods prior to
November 30, 2006, that would be in excess of those
established as of the sale date. Additionally, net tax related
assets consisting of tax deposits, claims and contingencies as
of November 30, 2006, for the converting entities have been
assumed by and transferred to GM through equity totaling
$107 million.
We have open tax years primarily from 2001 to current with
various U.S. and foreign taxing jurisdictions. These open years
contain matters that could be subject to differing
interpretations of applicable tax laws and regulations as they
related to timing or inclusion of revenue and expenses or the
sustainability of income tax credits for a given audit cycle. We
have established a liability of approximately $375 million
for those matters where the amount of loss is probable and
estimable. This amount includes the liability related to our
banking, insurance and foreign subsidiaries that continue to be
subject to U.S. and foreign income taxes, as well as the
liability for the converting entities related to state and local
jurisdictions where we previously filed as a separate company
taxpayer. The amount of the liability is based on
managements best estimate given our history with similar
matters and interpretations of current laws and regulations.
In June 2006 the FASB issued FIN 48. The adoption of this
Interpretation as of January 1, 2007, is not expected to
not have a material impact on our consolidated financial
position.
241
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
18 Related
Party Transactions
Balance
Sheet
A summary of the balance sheet effect of transactions with GM,
FIM Holdings and affiliated companies is as follows:
|
|
|
|
|
|
|
|
|
December 31,
($ in millions)
|
|
2006
|
|
|
2005
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Available for sale investment in
asset-backed security (a)
|
|
|
$471
|
|
|
|
$
|
|
Finance receivables and loans, net
of unearned income (b)
|
|
|
|
|
|
|
|
|
Wholesale auto financing
|
|
|
938
|
|
|
|
1,159
|
|
Term loans to dealers
|
|
|
207
|
|
|
|
207
|
|
Investment in operating leases,
net (c)
|
|
|
290
|
|
|
|
286
|
|
Notes receivable from GM (d)
|
|
|
1,975
|
|
|
|
4,565
|
|
Other assets
|
|
|
|
|
|
|
|
|
Real estate leases (e)
|
|
|
28
|
|
|
|
1,005
|
|
Receivable related to taxes due
from GM (f)
|
|
|
317
|
|
|
|
690
|
|
Other (g)
|
|
|
22
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Unsecured debt
|
|
|
|
|
|
|
|
|
Notes payable to GM
|
|
|
60
|
|
|
|
1,190
|
|
Accrued expenses and other
liabilities (h)
|
|
|
|
|
|
|
|
|
Wholesale payable
|
|
|
499
|
|
|
|
802
|
|
Subvention receivables (rate and
residual support)
|
|
|
(309
|
)
|
|
|
(133
|
)
|
Insurance premium and contract
payable (receivable)
|
|
|
1
|
|
|
|
(81
|
)
|
Lease pull ahead receivable
|
|
|
(62
|
)
|
|
|
(189
|
)
|
Other receivables
|
|
|
(101
|
)
|
|
|
(246
|
)
|
Preferred interests (i)
|
|
|
2,195
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
Dividends paid to GM (j)
|
|
|
9,739
|
|
|
|
2,500
|
|
Capital contributions
received (k)
|
|
|
951
|
|
|
|
|
|
Preferred interest accretion to
redemption value
|
|
|
295
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
In November 2006, GMAC retained an
investment in a note secured by operating lease assets
transferred to GM. As part of the transfer, GMAC provided a note
to the trust, a wholly owned subsidiary of GM. The note is
classified in Investment Securities on our Consolidated Balance
Sheet.
|
(b)
|
|
Represents wholesale financing and
term loans to certain dealerships wholly owned by GM or in which
GM has an interest.
|
(c)
|
|
Includes net balance of vehicles,
buildings and other equipment classified as operating lease
assets that are leased to GM affiliated entities.
|
(d)
|
|
Includes borrowing arrangements
with GM Opel and arrangements related to our funding of GM
company-owned vehicles, rental car vehicles awaiting sale at
auction, our funding of the sale of GM vehicles through the use
of overseas distributors and amounts related to GM trade
supplier finance program. In addition, we provide wholesale
financing to GM for vehicles in which GM retains title while the
vehicles are consigned to us or dealers in the UK and Italy. The
financing to GM remains outstanding until the title is
transferred to the dealers. The amount of financing provided to
GM under this arrangement varies based on inventory levels.
|
(e)
|
|
During 2000 GM entered into a
16-year
lease arrangement, under which we agreed to fund and capitalize
improvements to three Michigan properties leased by GM totaling
$1.2 billion. In 2004 the lease arrangement was increased
to $1.3 billion. The total construction advances as of
December 30, 2005, were $971. On October 31, 2006,
these assets were transferred to GM in the form of a non-cash
dividend. Subsequently, the lease arrangement was terminated,
and no further payments or advances will be made. The balance at
December 31, 2006, represents Argonaut dealership leases.
|
(f)
|
|
In November 2006, GMAC transferred
NOL tax receivables to GM for entities converting to an LLC. For
all non-converting entities, the amount was reclassified to
deferred income taxes on the Consolidated Balance Sheet. At
December 31, 2006, this balance represents an overpayment
of taxes and was included in accrued expenses and other
liabilities on our Consolidated Balance Sheet.
|
(g)
|
|
Represents certain servicing
activities related to automotive leases distributed to GM on
November 22, 2006.
|
(h)
|
|
Includes (receivables) payables
from GM as follows: wholesale settlements payable to GM,
subvention receivables due from GM and other (receivables)
payables due to/from GM, which are included in accrued expenses
and other liabilities and debt, respectively.
|
(i)
|
|
Represents proceeds from preferred
interests issued in November and held by a wholly owned
subsidiary of GM of $1,555 and FIM Holdings of $555 and the
related accrued dividends of $21 and redemption premium of $64.
|
(j)
|
|
Amount includes cash dividends of
$4.8 billion and non-cash dividends of $4.9 billion in
2006. During the fourth quarter of 2006 in connection with the
Sale Transactions, GMAC made $7.8 billion of dividends to
GM which was comprised of the following (i) a cash dividend
of $2.7 billion representing a one-time distribution to GM
primarily to reflect the increase in GMACs equity
resulting from the elimination of a portion of our net deferred
tax liabilities arising from the conversion of GMAC and certain
of our subsidiaries to a limited liability company,
(ii) certain assets with respect to automotive leases owned
by GMAC and its affiliates having a net book value of
approximately $4.0 billion and related deferred tax
liabilities of $1.8 billion, (iii) certain Michigan
properties with a carrying value of approximately
$1.2 billion to GM, (iv) intercompany receivables from
GM related to tax attributes of $1.1 billion, (v) net
contingent tax assets of $491 and (vi) other miscellaneous
transactions.
|
(k)
|
|
Amount is comprised of the
following (i) approximately $801 of liabilities related to
U.S. and Canadian based GM sponsored other postretirement
programs and related deferred tax assets of $302,
(ii) contingent tax liabilities of $384 assumed by GM and
(iii) deferred tax assets transferred from GM of $68.
|
242
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
In October 2005 we repurchased operating lease assets and
related deferred tax liabilities from GM previously sold to them
under a purchase and sale agreement. The leases were repurchased
at fair market value; however, the assets and liabilities were
transferred at their carrying value because this was a
transaction between related parties. The difference between the
net assets acquired and the proceeds remitted to GM is reflected
as a reduction to our stockholders equity.
Retail and lease contracts acquired by us that included rate and
residual subvention from GM, payable directly or indirectly to
GM dealers, as a percent of total new retail installment and
lease contracts acquired, were as follows:
|
|
|
|
|
|
|
|
|
|
|
Year
ended December 31,
|
|
2006
|
|
2005
|
|
|
|
GM and affiliates rate subvented
contracts acquired:
|
|
|
|
|
|
|
|
|
|
|
North American operations (a)
|
|
|
90
|
%
|
|
|
78
|
%
|
|
|
International operations
|
|
|
49
|
%
|
|
|
53
|
%
|
|
|
|
|
|
|
|
(a)
|
The increase in 2006 is primarily due to the
72-hour sale
that occurred in July 2006. Contracts were sold at 0% financing
for 72 months.
|
|
GM also provides payment guarantees on certain commercial assets
we have outstanding with certain third-party customers. As of
December 31, 2006, and December 31, 2005, commercial
obligations guaranteed by GM were $216 million and
$934 million, respectively. In addition, we have a
consignment arrangement with GM for commercial inventories in
Europe. As of December 31, 2006 and 2005, commercial
inventories related to this arrangement were $151 million
and $108 million, respectively, and are reflected in Other
assets in our Consolidated Balance Sheet.
Income
Statement
A summary of the income statement effect of transactions with GM
and affiliated companies is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended December 31, ($ in millions)
|
|
2006
|
|
2005
|
|
2004
|
|
|
Net financing revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
GM and affiliates lease residual
value support (a)
|
|
|
$749
|
|
|
|
$507
|
|
|
|
$560
|
|
Wholesale subvention and service
fees from GM
|
|
|
207
|
|
|
|
159
|
|
|
|
174
|
|
Interest paid on loans from GM
|
|
|
(50
|
)
|
|
|
(46
|
)
|
|
|
(45
|
)
|
Consumer lease payments from
GM (b)
|
|
|
74
|
|
|
|
168
|
|
|
|
348
|
|
Insurance premiums earned from GM
|
|
|
334
|
|
|
|
384
|
|
|
|
450
|
|
Other income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on notes receivable from
GM and affiliates
|
|
|
282
|
|
|
|
300
|
|
|
|
153
|
|
Interest on wholesale
settlements (c)
|
|
|
183
|
|
|
|
150
|
|
|
|
101
|
|
Revenues from GM leased properties,
net
|
|
|
93
|
|
|
|
79
|
|
|
|
73
|
|
Derivatives (d)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
Service fee income:
|
|
|
|
|
|
|
|
|
|
|
|
|
GMAC of Canada operating lease
administration (e)
|
|
|
|
|
|
|
18
|
|
|
|
28
|
|
Rental car repurchases held for
resale (f)
|
|
|
18
|
|
|
|
22
|
|
|
|
16
|
|
U.S. Automotive operating
leases (g)
|
|
|
37
|
|
|
|
|
|
|
|
|
|
Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee retirement plan costs
allocated by GM
|
|
|
136
|
|
|
|
157
|
|
|
|
129
|
|
Off-lease vehicle selling expense
reimbursement (h)
|
|
|
(29
|
)
|
|
|
(17
|
)
|
|
|
(51
|
)
|
Payments to GM for services, rent
and marketing expenses (i)
|
|
|
106
|
|
|
|
131
|
|
|
|
281
|
|
|
|
|
|
|
(a)
|
|
Represents total amount of residual
support and risk sharing paid (or invoiced) under the residual
support and risk sharing programs and deferred revenue related
to the settlement of residual support and risk sharing
obligations for a portion of the lease portfolio, as described
below.
|
(b)
|
|
GM sponsors lease pull-ahead
programs whereby consumers are encouraged to terminate lease
contracts early in conjunction with the acquisition of a new GM
vehicle, with the customers remaining payment obligation
waived. For certain programs, GM compensates us for the waived
payments, adjusted based on the remarketing results associated
with the underlying vehicle.
|
(c)
|
|
The settlement terms related to the
wholesale financing of certain GM products are at shipment date.
To the extent that wholesale settlements with GM are made prior
to the expiration of transit, we receive interest from GM.
|
(d)
|
|
Represents income (loss) related to
derivative transactions entered into with GM as counterparty.
|
(e)
|
|
GMAC of Canada, Limited
administered operating lease receivables on behalf of GM of
Canada, Limited (GMCL) and received a servicing fee, which was
included in other income. As of October 2005, GMAC of Canada,
Limited no longer administers these operating lease receivables.
|
(f)
|
|
We receive a servicing fee from GM
related to the resale of rental car repurchases. At
December 31, 2006, this program was terminated.
|
(g)
|
|
Represents servicing income related
to automotive leases distributed to GM on November 22, 2006.
|
(h)
|
|
An agreement with GM provides for
the reimbursement of certain selling expenses incurred by us on
off-lease vehicles sold by GM at auction.
|
(i)
|
|
GM provides us certain other
services and facilities services for which we reimburse them.
Included in this amount are rental payments for our primary
executive and administrative offices located in the Renaissance
Center in Detroit, Michigan. In December 2006 we signed a lease
to continue renting the facilities, operating expenses and the
associated parking through November 30, 2016.
|
243
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
Operating Lease
Residuals
As a marketing incentive GM may sponsor residual support
programs as a way to lower customer monthly payments. Under
residual support programs, the customers contractual
residual value is adjusted above our standard residual values.
Historically, GM reimbursed us if remarketing sales proceeds
were less than the customers contractual residual value
limited to our standard residual value. In addition to residual
support programs, GM also participated in a risk sharing
arrangement whereby GM shared equally in residual losses to the
extent that remarketing proceeds were below our standard
residual values (limited to a floor).
In connection with the Sale Transactions GM settled its
estimated liabilities with respect to residual support and risk
sharing on a portion of our operating lease portfolio and on the
entire U.S. balloon retail receivables portfolio in a
series of lump-sum payments. A negotiated amount totaling
approximately $1.4 billion was agreed to by GM under these
leases and balloon contracts and was paid to us. As of
December 31, 2006, the maximum amount that would have
been paid under the residual support and risk sharing
arrangements with GM on this portion of these portfolios totaled
approximately $3.3 billion. This amount would only have
been paid in the unlikely event that the proceeds from these
entire portfolios of lease assets and balloon retail receivables
would have been lower than both the contractual residual value
and GMACs standard residual rates. The payments were
recorded as a deferred amount in accrued expenses and other
liabilities in our Consolidated Balance Sheet and are treated as
sales proceeds on the underlying assets, as the contracts
terminate and the vehicles are sold at auction, in recognizing
the gain or loss on sale.
Certain assets with respect to automotive leases that were not
subject to the above settlement having a net book value of
$4.0 billion and related deferred tax liabilities of
$1.8 billion, were distributed to GM just prior to the Sale
Transactions. As part of the transfer of the automotive lease
assets to GM, GMAC relinquished the rights to any residual
support and risk sharing payments that otherwise would have been
due from GM on such lease assets.
In addition, as it relates to U.S. lease originations and
all U.S. balloon retail contract originations occurring
after April 30, 2006, that remained with GMAC after
the consummation of the Sale Transactions, GM agreed to begin
payment of the present value of the expected residual support
owed to us at the time of contract origination as opposed to
after contract termination at the time of sale of the related
vehicle. The residual support amount GM actually owes us is
trued up as the leases actually terminate and, in
cases where the estimate was incorrect, GM may be obligated to
pay us, or we may be obligated to reimburse GM, under the terms
of the residual support programs. For the affected contracts
originated through December 2006, GM paid or agreed to pay us a
total of $486 million in 2006.
Based on the December 31, 2006 outstanding
U.S. operating lease portfolio, the additional maximum
amount that could be paid by GM under the residual support
programs is approximately $276 million and would only be
paid in the unlikely event that the proceeds from the entire
portfolio of lease assets would be lower than both the
contractual residual value and GMACs standard residual
rates. Based on the December 31, 2006 outstanding
U.S. operating lease portfolio, the maximum amount that
could be paid under the risk sharing arrangements is
approximately $339 million and would only be paid in the
unlikely event that the proceeds from all outstanding lease
vehicles would be lower than GMACs standard residual
rates. The amounts in the above table represent the amounts paid
over the past three years under both the residual support and
risk sharing programs.
Distribution of
Operating Lease Assets
In connection with the sale by GM of a 51 percent interest
in GMAC, on November 22, 2006, GMAC transferred to GM
certain GMAC U.S. lease assets, along with related secured debt
and other assets as described in Notes 8, 11 and 12,
respectively. GMAC retained an investment in a note, which had a
balance as of December 31, 2006 of $471 million
secured by the lease assets distributed to GM as described in
Note 5. GMAC will continue to service the assets and
related secured debt on behalf of GM and will receive a fee for
this service. As it does for other securitization transactions,
GMAC is obligated as servicer to repurchase any lease asset that
is in breach of any of the covenants of the securitization
documents. In addition, in a number of the transactions
securitizing the lease assets transferred to GM, the trusts
issued one or more series of floating rate debt obligations and
entered into primary derivative transactions to remove the
market risk associated with funding the fixed payment lease
assets with floating interest rate debt. To facilitate these
securitization transactions, GMAC entered into secondary
derivative transactions with the primary derivative
counterparties, essentially offsetting the primary derivatives.
As part of the distribution, GM assumed the rights and
obligations of the primary derivative while GMAC retained the
secondary, leaving both companies exposed to market value
movements of their respective derivatives. GMAC and GM have
subsequently entered into derivative transactions with each
other that are intended to offset the exposure each party has to
its component of the primary and secondary derivatives.
Exclusivity
Arrangement
GM and GMAC have entered into several service agreements which
codify the mutually beneficial historical relationship between
GM and GMAC. In connection with the agreements, GMAC has been
granted a
10-year
exclusivity right covering U.S. subvented automotive consumer
business. In return for this exclusivity, GMAC will pay GM an
annual exclusivity fee of $75 million and is committed to
provide financing to GM customers in accordance with historical
practices. Specifically, in connection with the U.S. Consumer
Financing Agreement, GMAC must meet certain targets with respect
to consumer retail and lease financings of new GM vehicles. If
the contractual commitments are not met, GM may
244
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
assess financial penalties to GMAC, or even rescind GMACs
exclusivity rights. The agreement provides GMAC ample
flexibility to provide GM with required financing support
without compromising GMACs underwriting standards.
In addition, we have entered into various services agreements
with GM that are designed to document and maintain the current
and historical relationship between us. We are required to pay
GM fees in connection with certain of these agreements related
to our financing of GM consumers and dealers in certain parts of
the world.
Royalty
Arrangement
For certain insurance products, GM and GMAC have entered into
the Intellectual Property License Agreement for the right of
GMAC to use the GM name on certain insurance products. In
exchange, GMAC will pay to GM a minimum annual guaranteed
royalty fee of $15 million.
GM
Option
GM retains an option, for 10 years, to repurchase certain
assets from us related to the Automotive Finance operations of
our North American Operations and our International Operations.
GMs exercise of the option is conditional on GMs
credit rating being investment grade, or higher than our credit
rating. The call option price will be calculated as the higher
of (i) fair market value or (ii) 9.5 times the
consolidated net income of our Automotive Finance operations in
either the calendar year the call option is exercised or the
calendar year immediately following the year the call option is
exercised.
Revolving Line of
Credit
In addition to the financing arrangements summarized in the
foregoing table, GM had a $4 billion revolving line of
credit from us that expired September 15, 2006, and was not
renewed.
19 Comprehensive
Income
Comprehensive income is composed of net income and other
comprehensive income, which includes the after-tax change in
unrealized gains and losses on available for sale securities,
foreign currency translation adjustments and cash flow hedging
activities. The following table presents the components and
annual activity in other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Unrealized gains
(losses)
|
|
|
|
|
|
other
|
|
|
on investment
|
|
Translation
|
|
Cash flow
|
|
comprehensive
|
Year
ended December 31, ($ in millions)
|
|
securities
(a)
|
|
adjustments
(b)
|
|
hedges
|
|
income
(loss)
|
|
|
Balance at December 31, 2003
|
|
|
$548
|
|
|
|
$60
|
|
|
|
($90
|
)
|
|
|
$518
|
|
2004 net change
|
|
|
78
|
|
|
|
306
|
|
|
|
266
|
|
|
|
650
|
|
|
|
Balance at December 31, 2004
|
|
|
626
|
|
|
|
366
|
|
|
|
176
|
|
|
|
1,168
|
|
2005 net change
|
|
|
(89
|
)
|
|
|
(295
|
)
|
|
|
46
|
|
|
|
(338
|
)
|
|
|
Balance at December 31, 2005
|
|
|
537
|
|
|
|
71
|
|
|
|
222
|
|
|
|
830
|
|
2006 net change
|
|
|
(431
|
)
|
|
|
291
|
|
|
|
(205
|
)
|
|
|
(345
|
)
|
|
|
Balance at December 31,
2006
|
|
|
$106
|
|
|
|
$362
|
|
|
|
$17
|
|
|
|
$485
|
|
|
|
|
|
(a)
|
Primarily represents the after-tax difference between the fair
value and amortized cost of our available for sale securities
portfolio.
|
(b)
|
Includes after-tax gains and losses on foreign currency
translation from operations for which the functional currency is
other than the U.S. dollar. Net change amounts are net of a
tax benefit of $37 and $35 for the years ended December 31,
2006 and 2005, respectively, and tax expense of $104 for the
year ended December 31, 2004.
|
245
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
The net changes in the following table represent the sum of net
unrealized gains (losses) of available for sale securities and
net unrealized gains (losses) on cash flow hedges with the
respective reclassification adjustments. Reclassification
adjustments are amounts recognized in net income during the
current year and that would have been reported in other
comprehensive income in previous years. The 2006 amounts also
include the cumulative effect of a change in accounting
principle due to the adoption of SFAS 156. SFAS 156,
upon initial adoption, permitted a one time reclassification of
available-for-sale securities to trading securities for
securities, which were identified as offsetting an entitys
exposure or liabilities that a servicer elects to subsequently
measure at fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended December 31, ($ in millions)
|
|
2006
|
|
2005
|
|
2004
|
|
|
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of a change in
accounting principle, net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer of unrealized loss for
certain available for sale securities
|
|
|
$17
|
|
|
|
$
|
|
|
|
$
|
|
Net unrealized gains (losses)
arising during the period, net of taxes (a)
|
|
|
204
|
|
|
|
(11
|
)
|
|
|
125
|
|
Reclassification adjustment for net
gains included in net income, net of taxes (b)
|
|
|
(652
|
)
|
|
|
(78
|
)
|
|
|
(47
|
)
|
|
|
Net change
|
|
|
(431
|
)
|
|
|
(89
|
)
|
|
|
78
|
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains (losses) on
cash flow hedges, net of taxes (c)
|
|
|
(207
|
)
|
|
|
45
|
|
|
|
265
|
|
Reclassification adjustment for net
losses included in net income, net of taxes (d)
|
|
|
2
|
|
|
|
1
|
|
|
|
1
|
|
|
|
Net change
|
|
|
($205
|
)
|
|
|
$46
|
|
|
|
$266
|
|
|
|
|
|
(a)
|
Net of tax expense of $107 for 2006, tax benefit of $6 for 2005
and tax expense of $67 for 2004.
|
(b)
|
Net of tax expense of $351 for 2006, $42 for 2005, and tax
benefit of $25 for 2004.
|
(c)
|
Net of tax benefit of $121 for 2006, tax expense of $23 for 2005
and $142 for 2004.
|
(d)
|
Net of tax benefit of $1 for 2006, 2005 and 2004.
|
20 Fair
Value of Financial Instruments
We have developed the following fair value estimates by
utilization of available market information or other appropriate
valuation methodologies. However, considerable judgment is
required in interpreting market data to develop estimates of
fair value, so the estimates are not necessarily indicative of
the amounts that could be realized or would be paid in a current
market exchange. The effect of using different market
assumptions or estimation methodologies could be material to the
estimated fair values. Fair value information presented herein
is based on information available at December 31, 2006 and
2005. Although management is not aware of any factors that would
significantly affect the estimated fair value amounts, such
amounts have not been updated since those dates and, therefore,
the current estimates of fair value at dates subsequent to
December 31, 2006 and 2005 could differ significantly from
these amounts. The following describes the methodologies and
assumptions used to determine fair value for the respective
classes of financial instruments.
Investment
Securities
Bonds, equity securities, notes and other available for sale
investment securities are carried at fair value, which is
primarily based on quoted market prices. The fair value of
mortgage-related trading securities is based on market quotes to
the extent available, discounted using market prepayment
assumptions and discount rates. If external quotes are not
available, valuations are based on internal valuation models
using market based assumptions. Held to maturity investment
securities are carried at amortized cost. The fair value of the
held to maturity investment securities is based on valuation
models using market based assumptions. Interests in
securitization trusts are carried at fair value based on
expected cash flows discounted at current market rates.
Loans Held for
Sale
The fair value of loans held for sale is based upon actual
prices received on recent sales of loans and securities to
investors and projected prices obtained through investor
indications considering interest rates, loan type and credit
quality.
Finance
Receivables and Loans, Net
The fair value of finance receivables is estimated by
discounting the future cash flows using applicable spreads to
approximate current rates applicable to each category of finance
receivables. The carrying value of wholesale receivables and
other automotive and mortgage lending receivables for which
interest rates reset on a short-term basis with applicable
market indices are assumed to approximate fair value either
because of the short-term nature or because of the interest rate
adjustment feature. The fair value of mortgage loans held for
investment is based on discounted cash flows, using interest
rates currently being offered for loans with similar terms to
borrowers with similar credit quality; the net realizable value
of collateral
and/or the
estimated sales price based on quoted market prices where
available or actual prices received on comparable sales of
mortgage loans to investors.
Notes Receivable
from GM
The fair value is estimated by discounting the future cash flows
using applicable spreads to approximate current rates applicable
to certain categories of other financing assets.
Derivative Assets
and Liabilities
The fair value of interest rate swaps is estimated based on
discounted expected cash flows using quoted market interest
rates. The fair value of caps, written and purchased options,
and mortgage-related interest rate swaps is based upon quoted
market prices or broker-dealer quotes. The fair value of foreign
currency swaps is based on discounted expected cash flows using
market exchange rates over the remaining term of the agreement.
246
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
Debt
The fair value of debt is determined by using quoted market
prices for the same or similar issues, if available, or based on
the current rates offered to us for debt with similar remaining
maturities. Commercial paper, master notes, and demand notes
have an original term of less than 270 days and, therefore,
the carrying amount of these liabilities is considered to
approximate fair value.
Bank deposits and
escrows
Bank deposits and escrows deposits represent certain consumer
bank deposits as well as mortgage escrow deposits. The fair
value of deposits with no stated maturity is equal to their
carrying amount. The fair value of fixed-maturity deposits was
estimated by discounting cash flows using currently offered
rates for deposits of similar maturities.
The following table presents the carrying and estimated fair
value of assets and liabilities considered financial instruments
under Statements of Financial Accounting Standards No. 107,
Disclosures about Fair Value of Financial Instruments
(SFAS 107). Accordingly, certain items that are not
considered financial instruments are excluded from the table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
2005
|
|
|
Carrying
|
|
Fair
|
|
Carrying
|
|
Fair
|
December 31,
($ in millions)
|
|
value
|
|
value
|
|
value
|
|
value
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities
|
|
|
$16,791
|
|
|
|
$16,791
|
|
|
|
$18,207
|
|
|
|
$18,207
|
|
Loans held for sale
|
|
|
27,718
|
|
|
|
28,025
|
|
|
|
21,865
|
|
|
|
21,934
|
|
Finance receivables and loans, net
|
|
|
170,870
|
|
|
|
171,076
|
|
|
|
181,925
|
|
|
|
182,222
|
|
Notes receivable from GM
|
|
|
1,975
|
|
|
|
1,975
|
|
|
|
4,565
|
|
|
|
4,565
|
|
Derivative assets
|
|
|
2,544
|
|
|
|
2,544
|
|
|
|
3,000
|
|
|
|
3,000
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt (a)
|
|
|
237,338
|
|
|
|
237,733
|
|
|
|
255,511
|
|
|
|
247,250
|
|
Bank deposits and escrows
|
|
|
9,566
|
|
|
|
9,566
|
|
|
|
5,930
|
|
|
|
5,930
|
|
Derivative liabilities
|
|
|
1,745
|
|
|
|
1,745
|
|
|
|
2,440
|
|
|
|
2,440
|
|
|
|
|
|
(a) |
Debt includes deferred interest for zero coupon bonds of $353
and $813 for 2006 and 2005, respectively.
|
21 Variable
Interest Entities
The following describes the variable interest entities that we
have consolidated or in which we have a significant variable
interest as described in Interpretation No. 46,
Consolidation of Variable Interest Entities
(FIN 46R).
Automotive finance receivables In certain
securitization transactions, we transfer consumer finance
receivables and wholesale lines of credit into bank-sponsored
multi-seller commercial paper conduits. These conduits provide a
funding source to us (as well as other transferors into the
conduit) as they fund the purchase of the receivables through
the issuance of commercial paper. Total assets outstanding in
these bank-sponsored conduits approximated $12.1 billion as
of December 31, 2006. While we have variable interests
in these conduits, we are not considered to be the primary
beneficiary, as we do not retain the majority of the expected
losses or returns. Our maximum exposure to loss as a result of
our involvement with these non-consolidated variable interest
entities is $109 million and would only be incurred in the
event of a complete loss on the assets that we transferred.
Mortgage warehouse funding Our ResCap
operations transfer residential mortgage loans, lending
receivables, home equity loans and lines of credit pending
permanent sale or securitization through various structured
finance arrangements in order to provide funds for the
origination and purchase of future loans. These structured
finance arrangements include transfers to warehouse funding
entities, including GMAC and bank-sponsored commercial paper
conduits. Transfers of assets into each facility are accounted
for as either sales
(off-balance
sheet) or secured financings (on-balance sheet) based on the
provisions of SFAS 140. However, in either case, creditors
of these facilities have no legal recourse to our general
credit. Some of these warehouse funding entities represent
variable interest entities under FIN 46R.
Management has determined that for certain mortgage warehouse
funding facilities, we are the primary beneficiary and, as such,
we consolidate the entities in accordance with FIN 46R. The
assets of these residential mortgage warehouse entities totaled
$14.5 billion at December 31, 2006, the majority
of which are included in loans held for sale, in our
Consolidated Balance Sheet. The beneficial interest holders of
these variable interest entities do not have legal recourse to
our general credit.
Residential mortgage loan alliances ResCap
has invested in strategic alliances with several mortgage loan
originators. These alliances may include common or preferred
equity investments, working capital or
247
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
other subordinated lending, and warrants. In addition to
warehouse lending arrangements, management has determined that
we do not have the majority of the expected losses or returns
and as such, consolidation is not appropriate. Total assets in
these alliances were $158 million at
December 31, 2006. Our maximum exposure to loss under
these alliances, including commitments to lend additional funds
or purchase loans at above-market rates, is $110 million at
December 31, 2006.
Construction and real estate lending We use a
special purpose entity to finance construction lending
receivables. This special purpose entity purchases and holds the
receivables and funds the majority of the purchases through
financing obtained from third-party asset-backed commercial
paper conduits. The results of our variable interest analysis
indicate that we are the primary beneficiary, and as such, we
consolidate the entity. The assets in this entity totaled
$2.1 billion and $1.6 billion at
December 31, 2006 and 2005, respectively, which are
included in finance receivables and loans, net of unearned
income, in our Consolidated Balance Sheet. The beneficial
interest holders of this variable interest entity do not have
legal recourse to our general credit.
We have subordinated real estate lending arrangements with
certain entities. These entities are created to develop land and
construct residential homes. Management has determined that we
do not have the majority of the expected losses or returns, and
as such, consolidation is not appropriate. Total assets in these
entities were $616 million at December 31, 2006,
of which $201 million represents our maximum exposure to
loss.
Warehouse lending We have a facility in which
we transfer mortgage warehouse lending receivables to a 100%
owned SPE which then sells a senior participation interest in
the receivables to an unconsolidated QSPE. The QSPE funds the
purchase of the participation interest from the SPE through
financing obtained from third-party asset-backed commercial
paper conduits. The SPE funds the purchase of the
receivables from us with cash obtained from the QSPE, as well as
a subordinated loan
and/or an
equity contribution from us. The senior participation interest
sold to the QSPE and the commercial paper issued were not
included in our assets or liabilities in 2004. However, the QSPE
was terminated and a new SPE was created in 2005. As a result,
the senior participation interest sold and commercial paper
issued were included in our Consolidated Balance Sheet at
December 31, 2006 and 2005, respectively. Once the
receivables have been sold, they may not be purchased by us
except in very limited circumstances, such as a breach in
representations or warranties.
Management has determined that we are the primary beneficiary of
the SPE, and as such, consolidates the entity. The assets of the
SPE totaled $14.5 billion and $3.5 billion at
December 31, 2006 and 2005, respectively, which are
included in finance receivables and loans, net of unearned
income, in our Consolidated Balance Sheet. The beneficial
interest holders of this variable interest entity do not have
legal recourse to our general credit.
Collateralized debt obligations (CDOs) Our
ResCap operations sponsors and manages the collateral of a CDOs.
Under CDO transactions, a trust is established that purchases a
portfolio of securities and issues debt and equity certificates,
representing interests in the portfolio of assets. Bonds
representing the collateral for the CDO include both those
issued by us from loan securitizations and those issued by third
parties. In addition to receiving variable compensation for
managing the portfolio, we sometimes retain equity investments
in the CDOs. The majority of the CDOs sponsored by us were
initially structured or have been restructured (with approval by
the senior beneficial interest holders) as qualifying special
purpose entities, and are therefore exempt from FIN 46R.
In the event that an asset is credit impaired, a call option is
triggered whereby we, as collateral manager, may buy the asset
out of the pool and sell it to a third-party. The call is
triggered only by events that are outside of our control, such
as the downgrade by a rating agency of an asset in the pool or
in the event more than a specified percentage of mortgage loans
underlying a security are greater than 60 days delinquent
(or have been liquidated). In the event the conditions under
which we can exercise the call option are met, we recognize
these assets. In accordance with these provisions, we did not
recognize any assets as of December 31, 2006.
Management has determined that for certain CDO entities, we are
the primary beneficiary, and as such, we consolidate the
entities. The assets in these entities totaled $732 million
and $569 million at December 31, 2006 and 2005,
respectively, the majority of which are included in investment
securities in our Consolidated Balance Sheet. The beneficial
interest holders of these variable interest entities do not have
legal recourse to our general credit.
Commercial finance receivables We have a
facility in which we transfer commercial lending receivables to
a 100% owned SPE which, in turn, issues notes received to
third-party financial institutions, GMAC Commercial Finance, and
asset-backed commercial paper conduits. The SPE funds the
purchase of receivables from us with cash obtained from the sale
of notes. Management has determined that we are the primary
beneficiary of the SPE and, as such, consolidates the entity.
The assets of the SPE totaled $879 million as of
December 31, 2006, which are included in finance
receivables and loans, net of unearned income, in our
Consolidated Balance Sheet. The beneficial interest holders of
this variable interest entity do not have legal recourse to our
general credit.
In other securitization transactions, we transfer commercial
trade receivables into bank-sponsored multi-seller commercial
paper conduits. These conduits provide a funding source to us
(as well as other transferors into the conduit) as they fund the
purchase of the receivables through the issuance of commercial
paper. Total assets outstanding in these bank-sponsored conduits
approximated $2.1 billion as of
December 31, 2006. While we have a variable interest
in these conduits, we may at our discretion prepay all or any
portion of the loans at any time.
248
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
22 Segment
and Geographic Information
Operating segments are defined as components of an enterprise
that engage in business activity from which revenues are earned
and expenses incurred for which discrete financial information
is available that is evaluated regularly by the chief operating
decision makers in deciding how to allocate resources and in
assessing performance. Financial information for our reportable
operating segments is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive
Finance Operations (a)
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
|
|
|
|
|
|
|
|
Year
ended December 31,
|
|
American
|
|
International
|
|
|
|
|
|
|
|
|
($ in
millions)
|
|
Operations
|
|
Operations
(b)
|
|
ResCap
|
|
Insurance
|
|
Other
(c)
|
|
Consolidated
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financing revenue before
provision for credit losses
|
|
|
$4,402
|
|
|
|
$1,613
|
|
|
|
$958
|
|
|
|
$
|
|
|
|
$570
|
|
|
|
$7,543
|
|
Provision for credit losses
|
|
|
(425
|
)
|
|
|
(86
|
)
|
|
|
(1,334
|
)
|
|
|
|
|
|
|
(155
|
)
|
|
|
(2,000
|
)
|
Other revenue
|
|
|
3,065
|
|
|
|
564
|
|
|
|
3,360
|
|
|
|
5,616
|
|
|
|
15
|
|
|
|
12,620
|
|
|
|
Total net financing revenue and
other income
|
|
|
7,042
|
|
|
|
2,091
|
|
|
|
2,984
|
|
|
|
5,616
|
|
|
|
430
|
|
|
|
18,163
|
|
Impairment of goodwill and other
intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
840
|
|
|
|
840
|
|
Other noninterest expense
|
|
|
6,405
|
|
|
|
1,671
|
|
|
|
2,568
|
|
|
|
3,990
|
|
|
|
461
|
|
|
|
15,095
|
|
|
|
Income (loss) before income tax
expense
|
|
|
637
|
|
|
|
420
|
|
|
|
416
|
|
|
|
1,626
|
|
|
|
(871
|
)
|
|
|
2,228
|
|
Income tax (benefit) expense
|
|
|
(229
|
)
|
|
|
112
|
|
|
|
(289
|
)
|
|
|
499
|
|
|
|
10
|
|
|
|
103
|
|
|
|
Net income (loss)
|
|
|
$866
|
|
|
|
$308
|
|
|
|
$705
|
|
|
|
$1,127
|
|
|
|
($881
|
)
|
|
|
$2,125
|
|
|
|
Total assets
|
|
|
$127,822
|
|
|
|
$25,588
|
|
|
|
$130,569
|
|
|
|
$13,424
|
|
|
|
($9,964
|
)
|
|
|
$287,439
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financing revenue before
provision for credit losses
|
|
|
$4,216
|
|
|
|
$1,563
|
|
|
|
$1,352
|
|
|
|
$
|
|
|
|
$1,075
|
|
|
|
$8,206
|
|
Provision for credit losses
|
|
|
(313
|
)
|
|
|
(102
|
)
|
|
|
(626
|
)
|
|
|
|
|
|
|
(33
|
)
|
|
|
(1,074
|
)
|
Other revenue
|
|
|
2,815
|
|
|
|
709
|
|
|
|
3,508
|
|
|
|
4,259
|
|
|
|
664
|
|
|
|
11,955
|
|
|
|
Total net financing revenue and
other income
|
|
|
6,718
|
|
|
|
2,170
|
|
|
|
4,234
|
|
|
|
4,259
|
|
|
|
1,706
|
|
|
|
19,087
|
|
Impairment of goodwill and other
intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
712
|
|
|
|
712
|
|
Other noninterest expense
|
|
|
5,987
|
|
|
|
1,604
|
|
|
|
2,607
|
|
|
|
3,627
|
|
|
|
1,071
|
|
|
|
14,896
|
|
|
|
Income before income tax expense
|
|
|
731
|
|
|
|
566
|
|
|
|
1,627
|
|
|
|
632
|
|
|
|
(77
|
)
|
|
|
3,479
|
|
Income tax expense (benefit)
|
|
|
259
|
|
|
|
158
|
|
|
|
606
|
|
|
|
215
|
|
|
|
(41
|
)
|
|
|
1,197
|
|
|
|
Net income (loss)
|
|
|
$472
|
|
|
|
$408
|
|
|
|
$1,021
|
|
|
|
$417
|
|
|
|
($36
|
)
|
|
|
$2,282
|
|
|
|
Total assets
|
|
|
$165,139
|
|
|
|
$27,285
|
|
|
|
$118,608
|
|
|
|
$12,624
|
|
|
|
($3,099
|
)
|
|
|
$320,557
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financing revenue before
provision for credit losses
|
|
|
$5,838
|
|
|
|
$1,602
|
|
|
|
$2,429
|
|
|
|
$
|
|
|
|
$797
|
|
|
|
$10,666
|
|
Provision for credit losses
|
|
|
(814
|
)
|
|
|
(145
|
)
|
|
|
(978
|
)
|
|
|
|
|
|
|
(16
|
)
|
|
|
(1,953
|
)
|
Other revenue
|
|
|
2,239
|
|
|
|
601
|
|
|
|
2,427
|
|
|
|
3,983
|
|
|
|
618
|
|
|
|
9,868
|
|
|
|
Total net financing revenue and
other income
|
|
|
7,263
|
|
|
|
2,058
|
|
|
|
3,878
|
|
|
|
3,983
|
|
|
|
1,399
|
|
|
|
18,581
|
|
Noninterest expense
|
|
|
5,972
|
|
|
|
1,491
|
|
|
|
2,371
|
|
|
|
3,497
|
|
|
|
994
|
|
|
|
14,325
|
|
|
|
Income before income tax expense
|
|
|
1,291
|
|
|
|
567
|
|
|
|
1,507
|
|
|
|
486
|
|
|
|
405
|
|
|
|
4,256
|
|
Income tax expense
|
|
|
365
|
|
|
|
152
|
|
|
|
603
|
|
|
|
157
|
|
|
|
85
|
|
|
|
1,362
|
|
|
|
Net income
|
|
|
$926
|
|
|
|
$415
|
|
|
|
$904
|
|
|
|
$329
|
|
|
|
$320
|
|
|
|
$2,894
|
|
|
|
Total assets
|
|
|
$192,250
|
|
|
|
$31,291
|
|
|
|
$93,941
|
|
|
|
$11,744
|
|
|
|
($5,184
|
)
|
|
|
$324,042
|
|
|
|
|
|
(a)
|
North American Operations consist
of automotive financing in the U.S. and Canada and corporate
activities. International Operations consist of automotive
financing and full service leasing in all other countries and
Puerto Rico through March 31, 2006. Beginning April 1,
2006, Puerto Rico is included in North American Operations.
|
(b)
|
Amounts includes
intra-segment
eliminations between the North American Operations and
International Operations.
|
(c)
|
Represents our Commercial Finance
business, Capmark, certain corporate activities and
reclassifications and elimination between the reporting
segments. The financial results for 2006 reflect our
approximately 21% equity interest in Capmark commencing
March 23, 2006, while the 2005 financial results represent
Capmark as wholly owned. At December 31, 2006, total assets
were $5.4 billion for the Commercial Finance business, and
($15.4) billion in reclassifications and eliminations.
|
249
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
Information concerning principal geographic areas was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived
|
Year
ended December 31, ($ in millions)
|
|
Revenue (a)
|
|
assets (b)
|
|
|
2006
|
|
|
|
|
|
|
|
|
Canada
|
|
|
$2,304
|
|
|
|
$8,447
|
|
Europe
|
|
|
2,213
|
|
|
|
2,357
|
|
Latin America
|
|
|
957
|
|
|
|
138
|
|
Asia-Pacific
|
|
|
194
|
|
|
|
201
|
|
|
|
Total foreign
|
|
|
5,668
|
|
|
|
11,143
|
|
Total domestic
|
|
|
12,495
|
|
|
|
13,620
|
|
|
|
Total
|
|
|
$18,163
|
|
|
|
$24,763
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
Canada
|
|
|
$1,881
|
|
|
|
$7,784
|
|
Europe
|
|
|
2,285
|
|
|
|
2,740
|
|
Latin America
|
|
|
947
|
|
|
|
121
|
|
Asia-Pacific
|
|
|
302
|
|
|
|
201
|
|
|
|
Total foreign
|
|
|
5,415
|
|
|
|
10,846
|
|
Total domestic
|
|
|
13,672
|
|
|
|
22,119
|
|
|
|
Total
|
|
|
$19,087
|
|
|
|
$32,965
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
Canada
|
|
|
$1,552
|
|
|
|
$5,908
|
|
Europe
|
|
|
2,127
|
|
|
|
2,193
|
|
Latin America
|
|
|
768
|
|
|
|
86
|
|
Asia-Pacific
|
|
|
309
|
|
|
|
265
|
|
|
|
Total foreign
|
|
|
4,756
|
|
|
|
8,452
|
|
Total domestic
|
|
|
13,825
|
|
|
|
19,475
|
|
|
|
Total
|
|
|
$18,581
|
|
|
|
$27,927
|
|
|
|
|
|
(a)
|
Revenue consists of total net financing revenue and other income
as presented in our Consolidated Statement of Income.
|
(b)
|
Consists of net operating leases assets and net property and
equipment.
|
250
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
23 Guarantees,
Commitments, Contingencies and Other Risks
Guarantees
Guarantees are defined as contracts or indemnification
agreements that contingently require us to make payments to
third parties based on changes in an underlying agreement that
is related to a guaranteed party. The following summarizes our
outstanding guarantees made to third parties, including Capmark
for 2005, which has been classified as assets held for sale in
our Consolidated Balance Sheet, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
2005
|
|
|
|
|
Carrying value
|
|
|
|
Carrying value
|
December 31,
($ in millions)
|
|
Maximum
liability
|
|
of
liability
|
|
Maximum
liability
|
|
of
liability
|
|
|
Agency/construction lending (a)
|
|
|
$
|
|
|
|
$
|
|
|
|
$847
|
|
|
|
$2
|
|
Standby letters of credit
|
|
|
161
|
|
|
|
7
|
|
|
|
135
|
|
|
|
3
|
|
Securitization and sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HLTV and international
securitizations
|
|
|
108
|
|
|
|
|
|
|
|
205
|
|
|
|
1
|
|
Other (a)
|
|
|
|
|
|
|
|
|
|
|
2,113
|
|
|
|
19
|
|
Agency loan program
|
|
|
6,390
|
|
|
|
|
|
|
|
6,196
|
|
|
|
|
|
Guarantees for repayment of
third-party debt
|
|
|
617
|
|
|
|
|
|
|
|
393
|
|
|
|
|
|
Repurchase guarantees
|
|
|
204
|
|
|
|
|
|
|
|
256
|
|
|
|
|
|
Non-financial
guarantees
|
|
|
233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other guarantees
|
|
|
223
|
|
|
|
4
|
|
|
|
108
|
|
|
|
3
|
|
|
|
|
|
(a) |
On March 23, 2006, GMAC sold approximately 79% of our
equity in Capmark and subsequently recorded the remaining
balance under the equity method. Prior to the sale, Capmark had
a number of guarantees including agency/loan construction
lending, agency/loans sold with recourse, and commercial
mortgage securitizations.
|
Standby letters of credit Our finance
operations (primarily through our Commercial Finance Group)
issues financial standby letters of credit to customers that
represent irrevocable guarantees of payment of specified
financial obligations (typically to clients suppliers). In
addition, our ResCap operations issues financial standby letters
of credit as part of its warehouse and construction lending
activities. Expiration dates on the letters of credit range from
2006 to ongoing commitments and are generally collateralized by
assets of the client (trade receivables, cash deposits, etc.).
High
loan-to-value
(HLTV) and international securitizations Our
ResCap operations have entered into agreements to provide credit
loss protection for certain HLTV and international
securitization transactions. The maximum potential obligation
for certain agreements is equal to the lesser of a specified
percentage of the original loan pool balance or a specified
percentage of the current loan pool balance. We are required to
perform on our guaranty obligation when the bond insurer makes a
payment under the bond insurance policy. We pledged mortgage
loans held for sale totaling $60 million and
$53 million and cash of $9 million and
$43 million as collateral for these obligations as of
December 31, 2006 and 2005, respectively. For certain
other HLTV securitizations, the maximum obligation is equivalent
to the pledged collateral amount. We pledged mortgage loans held
for sale totaling $57 million and $70 million as
collateral for these obligations as of
December 31, 2006 and 2005, respectively. The event
which will require us to perform on our guaranty obligation
occurs when the security credit enhancements are exhausted and
losses are passed through to over the counter dealers. The
guarantees terminate the first calendar month during which the
aggregate note amount is reduced to zero.
Agency loan program Our ResCap operations
deliver loans to certain agencies that allow streamlined loan
processing and limited documentation requirements. In the event
any loans delivered under these programs reach a specified
delinquency status, we may be required to provide certain
documentation or, in some cases, repurchase the loan or
indemnify the investors for any losses sustained. Each program
includes termination features whereby once the loan has
performed satisfactorily for a specified period of time we are
no longer obligated under the program. The maximum liability
represents the principal balance for loans sold under these
programs.
Guarantees for repayment of third-party debt
Under certain arrangements, we guarantee the repayment of
third-party debt obligations in the case of default. Some of
these guarantees are collateralized by letters of credit.
Our Commercial Finance Group provides credit protection to third
parties which guarantee payment of specified financial
obligations of the third parties customers, without purchasing
such obligations.
Repurchase guarantees Our ResCap operations
have issued repurchase guarantees to buyers of certain mortgage
loans
251
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
whereby, if a closing condition or document deficiency is
identified by an investor after the closing, we may be required
to indemnify the investor if the loan becomes delinquent.
Non-financial
guarantees In connection with the sale of
approximately 79% of our equity in Capmark, we were released
from all financial guarantees related to the former GMAC
Commercial Holdings business. Certain
non-financial
guarantees did survive closing, but are indemnified by Capmark
for payment made or liabilities incurred by us in connection
with these guarantees.
Other guarantees We have other standard
indemnification clauses in certain of our funding arrangements
that would require us to pay lenders for increased costs
resulting from certain changes in laws or regulations. Since any
changes would be dictated by legislative and regulatory actions,
which are inherently unpredictable, we are not able to estimate
a maximum exposure under these arrangements. To date, we have
not made any payments under these indemnification clauses.
Our ResCap operations have guaranteed certain amounts related to
servicing advances, set-aside letters and credit enhancement and
performance guarantees.
In connection with certain asset sales and securitization
transactions, we typically deliver standard representations and
warranties to the purchaser regarding the characteristics of the
underlying transferred assets. These representations and
warranties conform to specific guidelines, which are customary
in securitization transactions. These clauses are intended to
ensure that the terms and conditions of the sales contracts are
met upon transfer of the asset. Prior to any sale or
securitization transaction, we perform due diligence with
respect to the assets to be included in the sale to ensure that
they meet the purchasers requirements, as expressed in the
representations and warranties. Due to these procedures, we
believe that the potential for loss under these arrangements is
remote. Accordingly, no liability is reflected in our
Consolidated Balance Sheet related to these potential
obligations. The maximum potential amount of future payments we
could be required to make would be equal to the current balances
of all assets subject to such securitization or sale activities.
We do not monitor the total value of assets historically
transferred to securitization vehicles or through other asset
sales. Therefore, we are unable to develop an estimate of the
maximum payout under these representations and warranties.
Commitments
Financing
Commitments
The contract amount and gain and loss positions of financial
commitments were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
|
Contract
|
|
|
Gain
|
|
|
Loss
|
|
|
Contract
|
|
|
Gain
|
|
|
Loss
|
|
December 31,
($ in millions)
|
|
amount
|
|
|
position
|
|
|
position
|
|
|
amount
|
|
|
position
|
|
|
position
|
|
|
|
Commitments to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originate/purchase mortgages or
securities (a)
|
|
|
$14,248
|
|
|
|
$
|
|
|
|
($48
|
)
|
|
|
$16,560
|
|
|
|
$42
|
|
|
|
($4
|
)
|
Sell mortgages or
securities (a)
|
|
|
20,702
|
|
|
|
28
|
|
|
|
(1
|
)
|
|
|
11,592
|
|
|
|
4
|
|
|
|
(28
|
)
|
Remit excess cash flows on certain
loan portfolios (b)
|
|
|
5,334
|
|
|
|
39
|
|
|
|
|
|
|
|
4,305
|
|
|
|
|
|
|
|
(39
|
)
|
Sell retail automotive
receivables (c)
|
|
|
21,500
|
|
|
|
|
|
|
|
|
|
|
|
33,000
|
|
|
|
|
|
|
|
|
|
Provide capital to equity method
investees (d)
|
|
|
278
|
|
|
|
|
|
|
|
|
|
|
|
1,038
|
|
|
|
|
|
|
|
|
|
Fund construction lending (e)
|
|
|
352
|
|
|
|
|
|
|
|
|
|
|
|
2,387
|
|
|
|
|
|
|
|
|
|
Unused mortgage lending
commitments (f)
|
|
|
9,019
|
|
|
|
|
|
|
|
|
|
|
|
16,097
|
|
|
|
|
|
|
|
|
|
Bank certificates of deposit
|
|
|
6,686
|
|
|
|
|
|
|
|
|
|
|
|
4,044
|
|
|
|
|
|
|
|
|
|
Unused revolving credit line
commitments (g)
|
|
|
7,381
|
|
|
|
|
|
|
|
|
|
|
|
7,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The fair value is estimated using published market information
associated with commitments to sell similar instruments.
Included as of December 31, 2006 and 2005 are commitments
accounted for as derivatives with a contract amount of $37,082
and $25,670, a gain position of $28 and $46 and a loss position
of $49 and $32, respectively.
|
(b)
|
Under certain residential mortgage purchase agreements, we are
committed to remitting to its shared execution partners
cash flows that exceed a required rate of return less credit
loss reimbursements to the mortgage originators. This commitment
is accounted for as a derivative.
|
(c)
|
We have entered into agreements with third-party banks to sell
automotive retail receivables in which we transfer all credit
risk to the purchaser (whole loan sales).
|
(d)
|
We are committed to lend equity capital to certain private
equity funds. The fair value of these commitments is considered
in the overall valuation of the underlying assets with which
they are associated.
|
(e)
|
We are committed to fund the completion of the development of
certain lots and model homes up to the amount of the agreed upon
amount per project.
|
(f)
|
The fair value of these commitments is considered in the overall
valuation of the related assets.
|
(g)
|
The unused portions of revolving lines of credit reset at
prevailing market rates and, as such, approximate market value.
|
252
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
The mortgage lending and revolving credit line commitments
contain an element of credit risk. Management reduces its credit
risk for unused mortgage lending and unused revolving credit
line commitments by applying the same credit policies in making
commitments as it does for extending loans. We typically require
collateral as these commitments are drawn.
Lease
Commitments
Future minimum rental payments required under operating leases,
primarily for real property, with noncancelable lease terms that
expire after December 31, 2006, were as follows:
|
|
|
|
|
Year
ended December 31, ($ in millions)
|
|
|
|
|
|
2007
|
|
|
$207
|
|
2008
|
|
|
168
|
|
2009
|
|
|
115
|
|
2010
|
|
|
90
|
|
2011
|
|
|
76
|
|
2012 and thereafter
|
|
|
212
|
|
|
|
Total minimum payment required
|
|
|
$868
|
|
|
|
Certain of the leases contain escalation clauses and renewal or
purchase options. Rental expenses under operating leases were
$230 million, $224 million and $230 million in
2006, 2005 and 2004, respectively.
Contractual Commitments We have entered into
multiple agreements for information technology, marketing and
advertising, and voice and communication technology and
maintenance. Many of the agreements are subject to variable
price provisions, fixed or minimum price provisions, and
termination or renewal provisions. Future payment obligations
under these agreements totaled $1,093 million and are due
as follows: $322 million in 2007, $440 million in 2008
and 2009, $246 million in 2010 and 2011, and
$85 million after 2012.
Extended Service and Maintenance Contract
Commitments Extended service contract programs
provide consumers with expansions and extensions of vehicle
warranty coverage for specified periods of time and mileages.
Such coverage generally provides for the repair or replacement
of components in the event of failure. The terms of these
contracts, which are sold through automobile dealerships and
direct mail, range from 3 to 84 months.
The following table presents an analysis of activity in unearned
service revenue.
|
|
|
|
|
|
|
|
|
Year
ended December 31, ($ in millions)
|
|
2006
|
|
2005
|
|
Balance at beginning of year
|
|
|
$3,159
|
|
|
|
$2,723
|
|
Written service contract revenue
|
|
|
1,209
|
|
|
|
1,345
|
|
Earned service contract revenue
|
|
|
(1,207
|
)
|
|
|
(909
|
)
|
|
|
Balance at end of year
|
|
|
$3,161
|
|
|
|
$3,159
|
|
|
|
Legal
Contingencies
We are subject to potential liability under laws and government
regulations and various claims and legal actions that are
pending or may be asserted against us.
We are named as defendants in a number of legal actions and are,
from time to time, involved in governmental proceedings arising
in connection with our various businesses. Some of the pending
actions purport to be class actions. We establish reserves for
legal claims when payments associated with the claims become
probable and the costs can be reasonably estimated. The actual
costs of resolving legal claims may be substantially higher or
lower than the amounts reserved for those claims. Based on
information currently available, advice of counsel, available
insurance coverage and established reserves, it is the opinion
of management that the eventual outcome of the actions against
us will not have a material adverse effect on our consolidated
financial condition, results of operations or cash flows.
Other
Contingencies
We are subject to potential liability under various other
exposures including tax, non-recourse loans, self-insurance and
other miscellaneous contingencies. We establish reserves for
these contingencies when the item becomes probable and the costs
can be reasonably estimated. The actual costs of resolving these
items may be substantially higher or lower than the amounts
reserved for any one item. Based on information currently
available, it is the opinion of management that the eventual
outcome of these items will not have a material adverse effect
on our consolidated financial condition, results of operations
or cash flows.
Other
Risks
Loans Sold with
Recourse
Our outstanding recourse obligations were as follows:
|
|
|
|
|
|
|
|
|
December 31,
($ in millions)
|
|
2006
|
|
2005
|
|
Loans sold with recourse
|
|
|
$800
|
|
|
|
$5,622
|
|
Maximum exposure on loans sold with
recourse (a):
|
|
|
|
|
|
|
|
|
Full exposure
|
|
|
189
|
|
|
|
976
|
|
Limited exposure
|
|
|
58
|
|
|
|
142
|
|
|
|
Total exposure
|
|
|
$247
|
|
|
|
$1,118
|
|
|
|
|
|
(a) |
Maximum recourse exposure is net of amounts reinsured with third
parties totaling $1 and $1 at December 31, 2006 and 2005,
respectively. Loss reserves, included in Accrued expenses and
other liabilities on our Consolidated Balance Sheet, related to
loans sold with recourse totaled $0 and $11 at December 31,
2006 and 2005, respectively.
|
Concentrations
Our primary business is to provide vehicle financing for GM
products to GM dealers and their customers. Wholesale and dealer
loan financing relates primarily to GM dealers, with collateral
consisting of primarily GM vehicles (for wholesale) and GM
253
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
dealership property (for loans). For wholesale financing, we are
also provided further protection by GM factory repurchase
programs. Retail installment contracts and operating lease
assets relate primarily to the secured sale and lease,
respectively, of vehicles (primarily GM). Any protracted
reduction or suspension of GMs production or sale of
vehicles, resulting from a decline in demand, work stoppage,
governmental action or any other event, could have a substantial
adverse effect on us. Conversely, an increase in production or a
significant marketing program could positively impact our
results.
The majority of our finance receivables and loans and operating
lease assets are geographically diversified throughout the
United States. Outside the United States, finance receivables
and loans and operating lease assets are concentrated in Canada,
Germany, the United Kingdom, Italy, Australia, Mexico and Brazil.
Our Insurance operations have a concentration of credit risk
related to loss and loss adjustment expenses and prepaid
reinsurance ceded to certain state insurance funds. Michigan
insurance law and our large market share in North Carolina,
result in credit exposure to the Michigan Catastrophic Claims
Association and the North Carolina Reinsurance Facility totaling
$909 million and $782 million at December 31,
2006 and 2005, respectively.
We originate and purchase residential mortgage loans that have
contractual features that may increase our exposure to credit
risk and thereby result in a concentration of credit risk. These
mortgage loans include loans that may subject borrowers to
significant future payment increases, create the potential for
negative amortization of the principal balance or result in high
loan-to-value
ratios. These loan products include interest only mortgages,
option adjustable rate mortgages, high
loan-to-value
mortgage loans and teaser rate mortgages. Our total loan
production related to these products and our combined exposure
related to these products recorded in finance receivables and
loans and loans held for sale (unpaid principal balance) for the
years ended and as of December 31, 2006 and 2005 is
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid
principal
|
|
|
Loan
production
|
|
as of
|
|
|
for the
year
|
|
December 31,
|
($
in millions)
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
Interest only mortgages
|
|
|
$48,335
|
|
|
|
$43,298
|
|
|
|
$22,416
|
|
|
|
$19,361
|
|
Option adjustable rate mortgages
|
|
|
18,308
|
|
|
|
5,077
|
|
|
|
1,955
|
|
|
|
1,114
|
|
High
loan-to-value
(100% or more) mortgages
|
|
|
8,768
|
|
|
|
6,610
|
|
|
|
11,978
|
|
|
|
13,364
|
|
Below market initial rate (teaser)
mortgages
|
|
|
257
|
|
|
|
537
|
|
|
|
192
|
|
|
|
411
|
|
|
|
|
|
|
Interest-only mortgages Allow interest-only
payments for a fixed period of time. At the end of the
interest-only period, the loan payment includes principal
payments and increases significantly. The borrowers new
payment, once the loan becomes amortizing (i.e., includes
principal payments), will be greater than if the borrower had
been making principal payments since the origination of the loan.
|
|
|
Option adjustable rate mortgages Permit a
variety of repayment options. The repayment options include
minimum, interest-only, fully amortizing
30-year and
fully amortizing
15-year
payments. The minimum payment option sets the monthly payment at
the initial interest rate for the first year of the loan. The
interest rate resets after the first year, but the borrower can
continue to make the minimum payment. The interest-only option
sets the monthly payment at the amount of interest due on the
loan. If the interest-only option payment would be less than the
minimum payment, the interest-only option is not available to
the borrower. Under the fully amortizing
30-year and
15-year
payment options, the borrowers monthly payment is set
based on the interest rate, loan balance and remaining loan term.
|
|
|
High
loan-to-value
mortgages Defined as first-lien loans with
loan-to-value
ratios in excess of 100% or second-lien loans that when combined
with the underlying first-lien mortgage loan result in a
loan-to-value
ratio in excess of 100%.
|
|
|
Below market rate (teaser) mortgages Contain
contractual features that limit the initial interest rate to a
below market interest rate for a specified time period with an
increase to a market interest rate in a future period. The
increase to the market interest rate could result in a
significant increase in the borrowers monthly payment
amount.
|
All of the mortgage loans we originate and most of the mortgages
we purchase (including the higher risk loans in the preceding
table) are subject to our underwriting guidelines and loan
origination standards. This includes guidelines and standards
that we have tailored for these products and include a variety
of factors, including the borrowers capacity to repay the
loan, their credit history and the characteristics of the loan,
including certain characteristics summarized in the table that
may increase our credit risk. When we purchase mortgage loans
from correspondent lenders, we either re-underwrite the loan
prior to purchase or delegate underwriting responsibility to the
correspondent originating the loan. We believe our underwriting
procedures adequately consider the unique risks which may come
from these products. We conduct a variety of quality control
procedures and periodic audits to ensure compliance with our
origination standards, including our criteria for lending and
legal requirements. We leverage technology in performing both
our underwriting process and our quality control procedures.
Capital
Requirements
Various of our international subsidiaries are subject to
regulatory and other requirements of the jurisdictions in which
they operate. These entities operate either as a bank or a
regulated finance company in the local market. The regulatory
restrictions primarily dictate that these subsidiaries meet
certain minimum capital requirements, restrict dividend
distributions and require that some
254
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
assets be restricted. To date, compliance with these various
regulations has not had a materially adverse effect on our
financial position, results of operations or cash flows. Total
assets in these entities approximated $15.5 billion and
$12.9 billion as of December 31, 2006 and 2005,
respectively.
GMAC Bank, which provides services to both the Automotive and
ResCap operations, is licensed as an industrial bank pursuant to
the laws of Utah and its deposits are insured by the Federal
Deposit Insurance Corporation (FDIC). GMAC is required to file
periodic reports with the FDIC concerning its financial
condition. Assets in GMAC Bank totaled $20.2 billion
at December 31, 2006. As of December 31, 2005, certain
depository institution assets were held at a Federal savings
bank that was wholly-owned by ResCap. Effective
November 22, 2006, substantially all of these federal
savings bank assets and liabilities were transferred at book
value to GMAC Bank. Total assets of these institutions at
December 31, 2005, approximated $16.9 billion.
As of December 31, 2006, we have met all regulatory
requirements and were in compliance with the minimum capital
requirements.
On June 24, 2005, we entered into an operating agreement
with GM and ResCap, the holding company for our residential
mortgage business, to create separation between GM and
ourselves, on the one hand, and ResCap, on the other. The
operating agreement restricts ResCaps ability to declare
dividends or prepay subordinated indebtedness to us. As a result
of these arrangements, ResCap has obtained investment grade
credit ratings for its unsecured indebtedness that are separate
from our ratings. This operating agreement was amended on
November 27, 2006, and again on November 30, 2006, in
conjunction with the Sale Transactions. Among other things,
these amendments removed GM as a party to the agreement.
The restrictions contained in the ResCap operating agreement
include the requirements that ResCaps members equity
be at least $6.5 billion for dividends to be paid. If
ResCap is permitted to pay dividends pursuant to the previous
sentence, the cumulative amount of such dividends may not exceed
50% of our cumulative net income (excluding payments for income
taxes from our election for federal income tax purposes to be
treated as a limited liability company), measured from
July 1, 2005, at the time such dividend is paid. These
restrictions will cease to be effective if ResCaps
members equity has been at least $12 billion as of
the end of each of two consecutive fiscal quarters or if we
cease to be the majority owner. In connection with the Sale
Transactions, GM was released as a party to this operating
agreement, but it remains in effect between ResCap and us. At
December 31, 2006, ResCap had consolidated equity of
approximately $7.7 billion.
GMAC Insurance is subject to certain minimum aggregated capital
requirements, restricted net assets, and restricted dividend
distributions under applicable state insurance law, the National
Association of Securities Dealers, the Financial Services
Authority in England, the Office of the Superintendent of
Financial Institution of Canada and the National Insurance and
Bonding Commission of Mexico. To date, compliance with these
various regulations has not had a materially adverse effect on
our financial condition, results of operations or cash flows.
Under the various state insurance regulations, dividend
distributions may be made only from statutory unassigned
surplus, and the state regulatory authorities must approve such
distributions if they exceed certain statutory limitations.
Based on the December 31, 2006 statutory
policyholders surplus, the maximum dividend that could be
paid by the insurance subsidiaries over the next twelve months
without prior statutory approval approximates $303 million.
24 Restatement
of the Financial Statements
Subsequent to the issuance of our Consolidated Financial
Statements for the year ended December 31, 2005, management
concluded that our hedge accounting documentation and hedge
effectiveness assessment methodologies related to particular
hedges of callable fixed rate debt instruments funding our North
American automotive operations did not satisfy the requirements
of SFAS 133. One of the requirements of SFAS 133 is
that hedge accounting is appropriate only for those hedging
relationships for which a company has a sufficiently documented
expectation that such relationships will be highly effective in
achieving offsetting changes in fair values attributable to the
risk being hedged at the inception of the hedging relationship.
To determine whether transactions continue to satisfy this
requirement, companies must periodically assess the
effectiveness of hedging relationships both prospectively and
retrospectively.
Management determined that hedge accounting treatment should not
have been applied to these hedging relationships. As a result,
we should not have recorded any adjustments on the debt
instruments included in the hedging relationships related to
changes in fair value due to movements in the designated
benchmark interest rate. Accordingly, we have restated our
Consolidated Financial Statements for the years ended
December 31, 2005 and 2004 from the amounts previously
reported to remove such recorded adjustments on these debt
instruments from our reported interest expense during the
affected years. The elimination of hedge accounting treatment
introduces increased funding cost volatility in our restated
results. The changes in the fair value of fixed rate debt
previously recorded were affected by changes in the designated
benchmark interest rate (LIBOR). Prior to the restatement,
adjustments to record increases in the value of this debt
occurred in periods when interest rates declined, and
adjustments to record decreases in value were made in periods
when interest rates rose. As a result, changes in the benchmark
interest rates caused volatility in the debts fair value
adjustments that were recognized in our historical earnings,
which were mitigated by the changes in the value of the interest
rate swaps in the hedge relationships. The interest rate
swaps,
255
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
which economically hedge these debt instruments continue to be
recorded at fair value with changes in fair value recorded in
earnings. We are also correcting certain other out-of-period
errors, which were deemed immaterial, individually and in the
aggregate, in the periods in which they were originally recorded
and identified. These items relate to transactions involving
certain transfers of financial assets, valuations of certain
financial instruments, amortization of unearned income on
certain products, income taxes and other inconsequential items.
Because of this derivative restatement, we are correcting these
amounts to record them in the proper period. For the effect of
the restatement on the quarterly financial data refer to
Note 25 to our Consolidated Financial Statements.
The following table presents the effects of the restatement on
the Consolidated Income Statement. Certain amounts in the
previously reported columns have been reclassified to conform to
the 2006 presentation. The most significant reclassifications
relate to servicing fees; amortization and impairment of
servicing rights; servicing asset valuation and hedge
activities, net and gain on sale of mortgage and automotive
loans, net, which were previously included in mortgage banking
income and other income and are now reflected as separate
components of total net financing revenue and other income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
2004
|
|
|
Previously
|
|
|
|
Previously
|
|
|
Year ended
December 31, ($ in millions)
|
|
reported
|
|
Restated
|
|
reported
|
|
Restated
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
$9,945
|
|
|
|
$9,943
|
|
|
|
$10,332
|
|
|
|
$10,316
|
|
Commercial
|
|
|
2,685
|
|
|
|
2,685
|
|
|
|
2,177
|
|
|
|
2,177
|
|
Loans held for sale
|
|
|
1,652
|
|
|
|
1,652
|
|
|
|
1,269
|
|
|
|
1,269
|
|
Operating leases
|
|
|
7,032
|
|
|
|
7,032
|
|
|
|
6,563
|
|
|
|
6,563
|
|
|
|
Total financing revenue
|
|
|
21,314
|
|
|
|
21,312
|
|
|
|
20,341
|
|
|
|
20,325
|
|
Interest expense
|
|
|
12,930
|
|
|
|
13,106
|
|
|
|
9,535
|
|
|
|
9,659
|
|
|
|
Net financing revenue before
provision for credit losses
|
|
|
8,384
|
|
|
|
8,206
|
|
|
|
10,806
|
|
|
|
10,666
|
|
Provision for credit losses
|
|
|
1,085
|
|
|
|
1,074
|
|
|
|
1,953
|
|
|
|
1,953
|
|
|
|
Net financing revenue
|
|
|
7,299
|
|
|
|
7,132
|
|
|
|
8,853
|
|
|
|
8,713
|
|
Servicing fees
|
|
|
1,730
|
|
|
|
1,730
|
|
|
|
1,547
|
|
|
|
1,547
|
|
Amortization and impairment of
servicing rights
|
|
|
(869
|
)
|
|
|
(869
|
)
|
|
|
(1,112
|
)
|
|
|
(1,112
|
)
|
Servicing asset valuation and hedge
activities, net
|
|
|
61
|
|
|
|
61
|
|
|
|
243
|
|
|
|
243
|
|
|
|
Net loan servicing income
|
|
|
922
|
|
|
|
922
|
|
|
|
678
|
|
|
|
678
|
|
Insurance premiums and service
revenue earned
|
|
|
3,762
|
|
|
|
3,762
|
|
|
|
3,528
|
|
|
|
3,528
|
|
Gain on sale of mortgage and
automotive loans, net
|
|
|
1,656
|
|
|
|
1,656
|
|
|
|
1,347
|
|
|
|
1,347
|
|
Investment income
|
|
|
1,216
|
|
|
|
1,216
|
|
|
|
845
|
|
|
|
845
|
|
Other income
|
|
|
4,352
|
|
|
|
4,399
|
|
|
|
3,416
|
|
|
|
3,470
|
|
|
|
Total net financing revenue and
other income
|
|
|
19,207
|
|
|
|
19,087
|
|
|
|
18,667
|
|
|
|
18,581
|
|
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense on operating
lease assets
|
|
|
5,244
|
|
|
|
5,244
|
|
|
|
4,828
|
|
|
|
4,828
|
|
Compensation and benefits expense
|
|
|
3,163
|
|
|
|
3,163
|
|
|
|
2,916
|
|
|
|
2,916
|
|
Insurance losses and loss
adjustment expenses
|
|
|
2,355
|
|
|
|
2,355
|
|
|
|
2,371
|
|
|
|
2,371
|
|
Other operating expenses
|
|
|
4,134
|
|
|
|
4,134
|
|
|
|
4,205
|
|
|
|
4,210
|
|
Impairment of goodwill and other
intangible assets
|
|
|
712
|
|
|
|
712
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
15,608
|
|
|
|
15,608
|
|
|
|
14,320
|
|
|
|
14,325
|
|
Income before income tax
expense
|
|
|
3,599
|
|
|
|
3,479
|
|
|
|
4,347
|
|
|
|
4,256
|
|
Income tax expense
|
|
|
1,205
|
|
|
|
1,197
|
|
|
|
1,434
|
|
|
|
1,362
|
|
|
|
Net income
|
|
|
$2,394
|
|
|
|
$2,282
|
|
|
|
$2,913
|
|
|
|
$2,894
|
|
|
|
256
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
The following table presents the effects of the restatement on
the Consolidated Balance Sheet:
|
|
|
|
|
|
|
|
|
|
|
Previously
|
|
|
December 31,
2005 ($ in millions)
|
|
reported
|
|
Restated
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$15,424
|
|
|
|
$15,424
|
|
Investment securities
|
|
|
18,207
|
|
|
|
18,207
|
|
Loans held for sale
|
|
|
21,865
|
|
|
|
21,865
|
|
Assets held for sale
|
|
|
19,030
|
|
|
|
19,030
|
|
Finance receivables and loans, net
of unearned income
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
140,411
|
|
|
|
140,436
|
|
Commercial
|
|
|
44,574
|
|
|
|
44,574
|
|
Allowance for credit losses
|
|
|
(3,116
|
)
|
|
|
(3,085
|
)
|
|
|
Total finance receivables and
loans, net
|
|
|
181,869
|
|
|
|
181,925
|
|
Investment in operating leases, net
|
|
|
31,211
|
|
|
|
31,211
|
|
Notes receivable from GM
|
|
|
4,565
|
|
|
|
4,565
|
|
Mortgage servicing rights
|
|
|
4,015
|
|
|
|
4,015
|
|
Premiums and other insurance
receivables
|
|
|
1,873
|
|
|
|
1,873
|
|
Other assets
|
|
|
22,457
|
|
|
|
22,442
|
|
|
|
Total assets
|
|
|
$320,516
|
|
|
|
$320,557
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
|
|
Unsecured
|
|
|
$133,269
|
|
|
|
$133,560
|
|
Secured
|
|
|
121,138
|
|
|
|
121,138
|
|
|
|
Total debt
|
|
|
254,407
|
|
|
|
254,698
|
|
Interest payable
|
|
|
3,057
|
|
|
|
3,057
|
|
Liabilities related to assets held
for sale
|
|
|
10,941
|
|
|
|
10,941
|
|
Unearned insurance premiums and
service revenue
|
|
|
5,054
|
|
|
|
5,054
|
|
Reserves for insurance losses and
loss adjustment expenses
|
|
|
2,534
|
|
|
|
2,534
|
|
Accrued expenses and other
liabilities
|
|
|
18,381
|
|
|
|
18,224
|
|
Deferred income taxes
|
|
|
4,364
|
|
|
|
4,364
|
|
|
|
Total liabilities
|
|
|
298,738
|
|
|
|
298,872
|
|
Equity
|
|
|
|
|
|
|
|
|
Common stock and paid-in capital
|
|
|
5,760
|
|
|
|
5,760
|
|
Retained earnings
|
|
|
15,190
|
|
|
|
15,095
|
|
Accumulated other comprehensive
income
|
|
|
828
|
|
|
|
830
|
|
|
|
Total equity
|
|
|
21,778
|
|
|
|
21,685
|
|
|
|
Total liabilities and equity
|
|
|
$320,516
|
|
|
|
$320,557
|
|
|
|
257
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
The following table presents the effects of the restatement on
the Consolidated Statement of Changes in Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
2004
|
|
|
Previously
|
|
|
|
Previously
|
|
|
Year
ended December 31, ($ in millions)
|
|
reported
|
|
Restated
|
|
reported
|
|
Restated
|
|
Common stock and paid-in
capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
$5,760
|
|
|
|
$5,760
|
|
|
|
$5,641
|
|
|
|
$5,641
|
|
Increase in paid-in capital
|
|
|
|
|
|
|
|
|
|
|
119
|
|
|
|
119
|
|
|
|
Balance at end of year
|
|
|
5,760
|
|
|
|
5,760
|
|
|
|
5,760
|
|
|
|
5,760
|
|
|
|
Retained earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
15,491
|
|
|
|
15,508
|
|
|
|
14,078
|
|
|
|
14,114
|
|
Net income
|
|
|
2,394
|
|
|
|
2,282
|
|
|
|
2,913
|
|
|
|
2,894
|
|
Dividends paid
|
|
|
(2,500
|
)
|
|
|
(2,500
|
)
|
|
|
(1,500
|
)
|
|
|
(1,500
|
)
|
Repurchase transaction
|
|
|
(195
|
)
|
|
|
(195
|
)
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
|
15,190
|
|
|
|
15,095
|
|
|
|
15,491
|
|
|
|
15,508
|
|
|
|
Accumulated other comprehensive
income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
1,166
|
|
|
|
1,168
|
|
|
|
517
|
|
|
|
518
|
|
Other comprehensive (loss) income
|
|
|
(338
|
)
|
|
|
(338
|
)
|
|
|
649
|
|
|
|
650
|
|
|
|
Balance at end of year
|
|
|
828
|
|
|
|
830
|
|
|
|
1,166
|
|
|
|
1,168
|
|
|
|
Total equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
22,417
|
|
|
|
22,436
|
|
|
|
20,236
|
|
|
|
20,273
|
|
Increase in paid-in capital
|
|
|
|
|
|
|
|
|
|
|
119
|
|
|
|
119
|
|
Net income
|
|
|
2,394
|
|
|
|
2,282
|
|
|
|
2,913
|
|
|
|
2,894
|
|
Dividends paid
|
|
|
(2,500
|
)
|
|
|
(2,500
|
)
|
|
|
(1,500
|
)
|
|
|
(1,500
|
)
|
Repurchase transaction
|
|
|
(195
|
)
|
|
|
(195
|
)
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income
|
|
|
(338
|
)
|
|
|
(338
|
)
|
|
|
649
|
|
|
|
650
|
|
|
|
Total equity at end of year
|
|
|
$21,778
|
|
|
|
$21,685
|
|
|
|
$22,417
|
|
|
|
$22,436
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$2,394
|
|
|
|
$2,282
|
|
|
|
$2,913
|
|
|
|
$2,894
|
|
Other comprehensive (loss) income
|
|
|
(338
|
)
|
|
|
(338
|
)
|
|
|
649
|
|
|
|
650
|
|
|
|
Comprehensive income
|
|
|
$2,056
|
|
|
|
$1,944
|
|
|
|
$3,562
|
|
|
|
$3,544
|
|
|
|
258
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
The following table presents the effects of the restatement on
the Consolidated Statement of Cash Flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
2004
|
|
|
Previously
|
|
|
|
Previously
|
|
|
Year ended
December 31, ($ in millions)
|
|
reported
|
|
Restated
|
|
reported
|
|
Restated
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$2,394
|
|
|
|
$2,282
|
|
|
|
$2,913
|
|
|
|
$2,894
|
|
Reconciliation of net income to net cash (used in) provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
5,964
|
|
|
|
5,964
|
|
|
|
5,433
|
|
|
|
5,433
|
|
Goodwill impairment
|
|
|
712
|
|
|
|
712
|
|
|
|
|
|
|
|
|
|
Amortization and valuation adjustments of mortgage servicing
rights
|
|
|
782
|
|
|
|
782
|
|
|
|
1,384
|
|
|
|
1,384
|
|
Provision for credit losses
|
|
|
1,085
|
|
|
|
1,074
|
|
|
|
1,953
|
|
|
|
1,953
|
|
Net gains on sales of finance receivables and loans
|
|
|
(1,695
|
)
|
|
|
(1,741
|
)
|
|
|
(1,312
|
)
|
|
|
(1,332
|
)
|
Net (gains) losses on investment securities
|
|
|
(104
|
)
|
|
|
(104
|
)
|
|
|
(52
|
)
|
|
|
(52
|
)
|
Capitalized interest income
|
|
|
(23
|
)
|
|
|
(23
|
)
|
|
|
(30
|
)
|
|
|
(30
|
)
|
Net change in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities
|
|
|
(1,155
|
)
|
|
|
(1,155
|
)
|
|
|
614
|
|
|
|
614
|
|
Loans held for sale
|
|
|
(29,119
|
)
|
|
|
(29,119
|
)
|
|
|
(2,312
|
)
|
|
|
(2,312
|
)
|
Deferred income taxes
|
|
|
351
|
|
|
|
351
|
|
|
|
(118
|
)
|
|
|
(118
|
)
|
Interest payable
|
|
|
(290
|
)
|
|
|
(290
|
)
|
|
|
311
|
|
|
|
311
|
|
Other assets
|
|
|
(2,366
|
)
|
|
|
(2,446
|
)
|
|
|
2,468
|
|
|
|
2,426
|
|
Other liabilities
|
|
|
49
|
|
|
|
45
|
|
|
|
(2,800
|
)
|
|
|
(2,875
|
)
|
Other, net
|
|
|
315
|
|
|
|
568
|
|
|
|
1,011
|
|
|
|
1,167
|
|
|
Net cash (used in) provided by operating activities
|
|
|
(23,100
|
)
|
|
|
(23,100
|
)
|
|
|
9,463
|
|
|
|
9,463
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of available for sale securities
|
|
|
(19,165
|
)
|
|
|
(19,165
|
)
|
|
|
(12,783
|
)
|
|
|
(12,783
|
)
|
Proceeds from sales of available for sale securities
|
|
|
5,721
|
|
|
|
5,721
|
|
|
|
3,276
|
|
|
|
3,276
|
|
Proceeds from maturities of available for sale securities
|
|
|
8,887
|
|
|
|
8,887
|
|
|
|
7,250
|
|
|
|
7,250
|
|
Net increase in finance receivables and loans
|
|
|
(96,028
|
)
|
|
|
(96,028
|
)
|
|
|
(125,183
|
)
|
|
|
(125,183
|
)
|
Proceeds from sales of finance receivables and loans
|
|
|
125,836
|
|
|
|
125,836
|
|
|
|
108,147
|
|
|
|
108,147
|
|
Purchases of operating lease assets
|
|
|
(15,496
|
)
|
|
|
(15,496
|
)
|
|
|
(14,055
|
)
|
|
|
(14,055
|
)
|
Disposals of operating lease assets
|
|
|
5,164
|
|
|
|
5,164
|
|
|
|
7,668
|
|
|
|
7,668
|
|
Change in notes receivable from GM
|
|
|
1,053
|
|
|
|
1,053
|
|
|
|
(1,635
|
)
|
|
|
(1,635
|
)
|
Purchases of mortgage servicing rights, net
|
|
|
(267
|
)
|
|
|
(267
|
)
|
|
|
(326
|
)
|
|
|
(326
|
)
|
Acquisitions of subsidiaries, net of cash acquired
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
9
|
|
|
|
9
|
|
Other, net
|
|
|
(1,549
|
)
|
|
|
(1,549
|
)
|
|
|
260
|
|
|
|
260
|
|
|
Net cash provided by (used in) investing activities
|
|
|
14,154
|
|
|
|
14,154
|
|
|
|
(27,372
|
)
|
|
|
(27,372
|
)
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in short-term debt
|
|
|
(9,970
|
)
|
|
|
(9,970
|
)
|
|
|
4,123
|
|
|
|
4,123
|
|
Proceeds from issuance of long-term debt
|
|
|
77,890
|
|
|
|
77,890
|
|
|
|
72,753
|
|
|
|
72,753
|
|
Repayments of long-term debt
|
|
|
(69,520
|
)
|
|
|
(69,520
|
)
|
|
|
(57,743
|
)
|
|
|
(57,743
|
)
|
Other financing activities
|
|
|
6,168
|
|
|
|
6,168
|
|
|
|
4,723
|
|
|
|
4,723
|
|
Dividends paid
|
|
|
(2,500
|
)
|
|
|
(2,500
|
)
|
|
|
(1,500
|
)
|
|
|
(1,500
|
)
|
|
Net cash provided by financing activities
|
|
|
2,068
|
|
|
|
2,068
|
|
|
|
22,356
|
|
|
|
22,356
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(45
|
)
|
|
|
(45
|
)
|
|
|
295
|
|
|
|
295
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(6,923
|
)
|
|
|
(6,923
|
)
|
|
|
4,742
|
|
|
|
4,742
|
|
Cash and cash equivalents at beginning of year
|
|
|
22,718
|
|
|
|
22,718
|
|
|
|
17,976
|
|
|
|
17,976
|
|
|
Cash and cash equivalents at end of year
|
|
|
$15,795
|
|
|
|
$15,795
|
|
|
|
$22,718
|
|
|
|
$22,718
|
|
|
259
Notes to
Consolidated Financial Statements
GMAC
LLC Form 10-K
25 Quarterly
Financial Statements (unaudited)
The following tables present the quarterly results for 2006 and
2005, including the effects of the restatement on the applicable
periods. For further details on the restatement refer to
Notes 1 and 24 to these Consolidated Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
quarter
|
|
Second
quarter
|
|
Third
quarter
|
|
Fourth
quarter
|
2006
|
|
Previously
|
|
|
|
Previously
|
|
|
|
Previously
|
|
|
|
|
($ in
millions)
|
|
reported
|
|
Restated
|
|
reported
|
|
Restated
|
|
reported
|
|
Restated
|
|
|
|
|
Net financing revenue before
provision for credit losses
|
|
|
$2,140
|
|
|
|
$1,891
|
|
|
|
$1,908
|
|
|
|
$1,743
|
|
|
|
$1,691
|
|
|
|
$2,033
|
|
|
|
$1,876
|
|
Provision for credit losses
|
|
|
(135
|
)
|
|
|
(166
|
)
|
|
|
(285
|
)
|
|
|
(268
|
)
|
|
|
(486
|
)
|
|
|
(503
|
)
|
|
|
(1,063
|
)
|
Other revenue
|
|
|
2,911
|
|
|
|
2,899
|
|
|
|
3,542
|
|
|
|
3,522
|
|
|
|
3,083
|
|
|
|
3,015
|
|
|
|
3,184
|
|
|
|
Total net financing revenue and
other income
|
|
|
4,916
|
|
|
|
4,624
|
|
|
|
5,165
|
|
|
|
4,997
|
|
|
|
4,288
|
|
|
|
4,545
|
|
|
|
3,997
|
|
Noninterest expense
|
|
|
3,928
|
|
|
|
3,907
|
|
|
|
3,835
|
|
|
|
3,850
|
|
|
|
4,542
|
|
|
|
4,535
|
|
|
|
3,643
|
|
|
|
Income (loss) before income tax
expense
|
|
|
988
|
|
|
|
717
|
|
|
|
1,330
|
|
|
|
1,147
|
|
|
|
(254
|
)
|
|
|
10
|
|
|
|
354
|
|
Income tax expense (benefit)
|
|
|
316
|
|
|
|
222
|
|
|
|
430
|
|
|
|
360
|
|
|
|
70
|
|
|
|
183
|
|
|
|
(662
|
)(b)
|
|
|
Net income (loss)
|
|
|
$672
|
|
|
|
$495
|
|
|
|
$900
|
|
|
|
$787
|
|
|
|
($324
|
)(a)
|
|
|
($173
|
)(a)
|
|
|
$1,016
|
|
|
|
|
|
(a)
|
Decline in third quarter 2006 net income primarily relates
to goodwill impairment taken at our Commercial Finance business.
Refer to Note 11 to our Consolidated Financial Statements
for further details.
|
(b)
|
Effective November 28, 2006, GMAC, along with certain
U.S. subsidiaries, became disregarded or pass-through
entities for U.S. federal income tax purposes. Due to our
change in tax status, a net deferred tax liability was
eliminated through income tax expense totaling $791 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
Second quarter
|
|
Third quarter
|
|
Fourth quarter
|
2005
|
|
Previously
|
|
|
|
Previously
|
|
|
|
Previously
|
|
|
|
Previously
|
|
|
($ in
millions)
|
|
reported
|
|
Restated
|
|
reported
|
|
Restated
|
|
reported
|
|
Restated
|
|
reported
|
|
Restated
|
|
|
Net financing revenue before
provision for credit losses
|
|
|
$2,187
|
|
|
|
$2,015
|
|
|
|
$2,267
|
|
|
|
$2,510
|
|
|
|
$2,004
|
|
|
|
$1,861
|
|
|
|
$1,926
|
|
|
|
$1,820
|
|
Provision for credit losses
|
|
|
(329
|
)
|
|
|
(313
|
)
|
|
|
(201
|
)
|
|
|
(217
|
)
|
|
|
(385
|
)
|
|
|
(385
|
)
|
|
|
(170
|
)
|
|
|
(159
|
)
|
Other revenue
|
|
|
2,841
|
|
|
|
2,859
|
|
|
|
2,784
|
|
|
|
2,805
|
|
|
|
3,288
|
|
|
|
3,274
|
|
|
|
2,995
|
|
|
|
3,017
|
|
|
|
Total net financing revenue and
other income
|
|
|
4,699
|
|
|
|
4,561
|
|
|
|
4,850
|
|
|
|
5,098
|
|
|
|
4,907
|
|
|
|
4,750
|
|
|
|
4,751
|
|
|
|
4,678
|
|
Noninterest
expense
|
|
|
3,596
|
|
|
|
3,574
|
|
|
|
3,638
|
|
|
|
3,613
|
|
|
|
3,856
|
|
|
|
3,854
|
|
|
|
4,518
|
|
|
|
4,567
|
|
|
|
Income before income tax expense
|
|
|
1,103
|
|
|
|
987
|
|
|
|
1,212
|
|
|
|
1,485
|
|
|
|
1,051
|
|
|
|
896
|
|
|
|
233
|
|
|
|
111
|
|
Income tax expense (benefit)
|
|
|
375
|
|
|
|
363
|
|
|
|
396
|
|
|
|
511
|
|
|
|
376
|
|
|
|
324
|
|
|
|
58
|
|
|
|
(1
|
)
|
|
|
Net income
|
|
|
$728
|
|
|
|
$624
|
|
|
|
$816
|
|
|
|
$974
|
|
|
|
$675
|
|
|
|
$572
|
|
|
|
$175
|
(a)
|
|
|
$112
|
(a)
|
|
|
|
|
(a) |
Decline in fourth quarter 2005 net income primarily relates
to goodwill impairments taken at our Commercial Finance business
and Capmark. Refer to Note 11 to our Consolidated Financial
Statements for further details.
|
260
SIGNATURES
Pursuant to the requirements of Section 13 of the
Securities Exchange Act of 1934, as amended, the Registrant has
duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
GENERAL MOTORS CORPORATION
(Registrant)
Date: March 14, 2007
By:
/s/ G.
RICHARD WAGONER, JR.
G. Richard Wagoner, Jr.
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below on this 14th day of
March 2007 by the following persons on behalf of the
Registrant and in the capacities indicated, including a majority
of the directors.
|
|
|
|
|
Signature
|
|
Title
|
|
/s/ G.
RICHARD WAGONER,
JR.
(G.
Richard Wagoner, Jr.)
|
|
Chairman and Chief Executive
Officer
|
|
|
|
/s/ FREDERICK
A.
HENDERSON
(Frederick
A. Henderson)
|
|
Vice Chairman and Chief Financial
Officer
|
|
|
|
/s/ WALTER
G.
BORST (Walter
G. Borst)
|
|
Treasurer
|
|
|
|
/s/ NICK
S. CYPRUS
(Nick
S. Cyprus)
|
|
Controller and Chief Accounting
Officer
|
|
|
|
/s/ PERCY
BARNEVIK (Percy
Barnevik)
|
|
Director
|
|
|
|
/s/ ERSKINE
BOWLES (Erskine
Bowles)
|
|
Director
|
|
|
|
/s/ JOHN
H.
BRYAN (John
H. Bryan)
|
|
Director
|
|
|
|
/s/ ARMANDO
CODINA (Armando
Codina)
|
|
Director
|
|
|
|
/s/ GEORGE
M.C.
FISHER (George
M.C. Fisher)
|
|
Director
|
|
|
|
/s/ KAREN
KATEN (Karen
Katen)
|
|
Director
|
261
|
|
|
|
|
Signature
|
|
Title
|
|
/s/ KENT
KRESA (Kent
Kresa)
|
|
Director
|
|
|
|
/s/ ELLEN
J.
KULLMAN (Ellen
J. Kullman)
|
|
Director
|
|
|
|
/s/ PHILIP
A.
LASKAWY (Philip
A. Laskawy)
|
|
Director
|
|
|
|
/s/ ECKHARD
PFEIFFER (Eckhard
Pfeiffer)
|
|
Director
|
262