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 fiscal year ended December 31, 2005 |
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 |
Commission file number 1-143
GENERAL MOTORS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
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STATE OF DELAWARE |
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38-0572515 |
(State or other jurisdiction of
Incorporation or Organization) |
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(I.R.S. Employer
Identification No.) |
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300 Renaissance Center, Detroit, Michigan |
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48265-3000 |
(Address of Principal Executive Offices) |
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(Zip Code) |
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 |
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. |
Note: The
$12/3
par value common stock of the Registrant is also listed
for trading on the following exchanges:
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Chicago Stock Exchange, Inc. |
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Chicago, Illinois |
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Pacific Exchange, Inc. |
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San Francisco, California |
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Philadelphia Stock Exchange, Inc. |
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Philadelphia, Pennsylvania |
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Frankfurter Wertpapierborse |
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Frankfurt am Main, Germany |
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Borse Düsseldorf |
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Düsseldorf, Germany |
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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 |
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, 2005, the aggregate market value of General
Motors
$12/3
par value common stock held by nonaffiliates of GM was
approximately $19.2 billion. The closing price on
June 30, 2005 as reported on the New York Stock Exchange
was $34.00 per share. As of June 30, 2005, the number
of shares outstanding of GM
$12/3
par value common stock was 565,503,422 shares.
Documents incorporated by reference are as follows:
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Part and Item Number of Form 10-K |
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 6, 2006
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Part III, Items 10 through 14 |
General Motors Acceptance Corporation Annual Report on Form
10-K
for the year ended December 31, 2005
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Part I, Item 1; Part II, Items 6, 7, and 8 |
GENERAL MOTORS CORPORATION
INDEX
PART I
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
THE CORPORATION
General Motors Corporation, incorporated in 1916 under the laws
of the State of Delaware, is hereinafter sometimes referred to
as we, the Registrant, the
Corporation, General Motors, or
GM.
General
GM is primarily engaged in automotive production and marketing,
and financing and insurance operations. GM designs,
manufactures, and markets vehicles worldwide, having its largest
operating presence in North America. GMs finance and
insurance operations are principally those of General Motors
Acceptance Corporation (GMAC), a wholly owned subsidiary of GM,
which provides a broad range of financial services, including
automotive finance and mortgage products and services.
The following information is incorporated herein by reference to
the indicated pages in Part II:
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Item |
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Page(s) |
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Production Volumes
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II-12 through II-17 |
Employment and Payrolls
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II-39 |
Note 26 to the GM Consolidated Financial Statements
(Segment Reporting)
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II-120 through II-123 |
GM presents separate supplemental financial information for its
reportable operating segments:
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Automotive and Other Operations (Auto & Other); and |
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Financing and Insurance Operations (FIO). |
GMs Auto & Other reportable operating segment
consists of:
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GMs four automotive regions: GM North America (GMNA), GM
Europe (GME), GM Latin America/ Africa/ Mid-East (GMLAAM), and
GM Asia Pacific (GMAP), which constitute GM Automotive
(GMA); and |
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Other, which includes the elimination of intersegment
transactions, certain non-segment specific revenues and
expenditures, including legacy costs related to postretirement
benefits for certain Delphi Corporation (Delphi) and other
retirees, and certain corporate activities. |
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GM Automotive and Other Operations |
GMNA primarily meets the demands of customers inside North
America with vehicles designed, manufactured, and/or marketed
under the following nameplates:
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Chevrolet
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Buick |
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Saab |
Pontiac
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Cadillac |
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Hummer |
GMC
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Saturn |
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GME, GMLAAM, and GMAP primarily meet the demands of customers
outside North America with vehicles designed, manufactured,
and/or marketed under the following nameplates:
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Opel
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Saab |
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GMC |
Vauxhall
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Buick |
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Cadillac |
Holden
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Chevrolet |
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Daewoo |
I-1
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
As of December 31, 2005, GM also has equity ownership
directly or indirectly through various regional subsidiaries in
New United Motor Manufacturing, Inc. (NUMMI), Suzuki Motor
Corporation (Suzuki), Isuzu Motors Ltd., Shanghai General Motors
Co., Ltd. (SGM), SAIC-GM-Wuling Automobile Company Ltd., and
CAMI Automotive Inc. (CAMI). These investees design, manufacture
and market vehicles under the following nameplates:
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Pontiac
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Wuling |
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Saab |
Suzuki
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Daewoo |
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Chevrolet |
Isuzu
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Holden |
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Buick
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Cadillac |
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GM Financing and Insurance Operations |
GMs FIO reportable operating segment consists of GMAC 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, automotive
dealership and other commercial financing, residential and
commercial mortgage services, automobile service contracts,
personal automobile insurance coverage and selected commercial
insurance coverage. See related business discussion in
GMACs
Form 10-K,
Item 1, which is incorporated herein by reference.
GMACs
Form 10-K is filed
separately with the Securities and Exchange Commission (SEC).
GMs businesses included those of Hughes Electronics
Corporation (Hughes) prior to the split-off of that business
from GM on December 22, 2003. Hughes activities
included digital entertainment, information and communication
services, and satellite-based private business networks.
Vehicle Unit Sales
Production volume of GM passenger cars and trucks during the
three years ended December 31, 2005 is summarized in the
Managements Discussion and Analysis of Financial Condition
and Results of Operations section below.
I-2
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Total industry new motor vehicle (passenger cars, trucks and
buses) unit sales of domestic and foreign makes and GMs
competitive position during the years ended December 31,
2005, 2004, and 2003 were as follows:
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Vehicle Unit Sales(1) | |
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Years Ended December 31, | |
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2005 | |
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2004 | |
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2003 | |
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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) | |
United States
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Cars
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Small
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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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2,339 |
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487 |
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20.8% |
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Mid-size
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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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3,681 |
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1,240 |
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33.7% |
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Sport
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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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420 |
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32 |
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7.5% |
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Luxury
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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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1,197 |
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202 |
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16.9% |
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Total cars
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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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7,637 |
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1,961 |
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25.7% |
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Trucks
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Pickups
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3,201 |
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1,163 |
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36.3% |
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3,198 |
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1,133 |
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35.4% |
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3,115 |
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1,151 |
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37.0% |
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Vans
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1,468 |
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328 |
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22.4% |
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1,456 |
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313 |
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21.5% |
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1,398 |
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339 |
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24.3% |
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Utilities
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4,585 |
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1,212 |
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26.4% |
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4,693 |
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1,324 |
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28.2% |
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4,523 |
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1,264 |
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27.9% |
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Medium Duty
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459 |
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63 |
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13.8% |
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392 |
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52 |
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13.2% |
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297 |
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42 |
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14.0% |
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Total trucks
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9,713 |
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2,766 |
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28.5% |
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9,739 |
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2,822 |
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29.0% |
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9,333 |
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2,796 |
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30.0% |
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Total United States
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17,455 |
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4,518 |
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25.9% |
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17,302 |
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4,707 |
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27.2% |
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16,970 |
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4,757 |
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28.0% |
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Canada, Mexico, and Other
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3,087 |
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728 |
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23.6% |
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2,980 |
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705 |
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23.6% |
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2,872 |
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683 |
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23.8% |
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Total GMNA
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20,542 |
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5,246 |
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25.5% |
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20,282 |
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5,412 |
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26.7% |
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19,842 |
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5,440 |
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27.4% |
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GME
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20,970 |
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1,982 |
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9.5% |
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20,763 |
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1,956 |
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9.4% |
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19,588 |
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1,819 |
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9.3% |
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GMLAAM
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4,980 |
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881 |
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17.7% |
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4,225 |
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738 |
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17.5% |
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3,626 |
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584 |
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16.1% |
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GMAP
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18,240 |
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1,064 |
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5.8% |
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17,156 |
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887 |
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5.2% |
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15,919 |
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773 |
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4.9% |
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Total Worldwide
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64,732 |
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9,173 |
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14.2% |
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62,426 |
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8,993 |
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14.4% |
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58,975 |
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8,616 |
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14.6% |
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(1) |
GM vehicle unit sales primarily represent vehicles manufactured
by GM or manufactured by GMs investees and sold either
under a GM nameplate or 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. |
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Fleet Sales and Deliveries |
The U.S. sales and market share data provided above cover
both retail and fleet sales and deliveries. GMs
U.S. fleet sales are comprised primarily of sales and
deliveries to daily rental car companies, as well as commercial
fleet and government customers. Certain U.S. fleet
transactions, especially daily rental, are less profitable than
U.S. retail sales.
I-3
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
The table below shows our fleet sales in the United States, and
the amount of those sales as a percentage of our total
U.S. car and truck vehicle unit sales for the last three
years. The daily rental category principally consists of vehicle
transactions that GM guarantees to repurchase from customers at
contractually agreed upon values. See Note 1 to the
Consolidated Financial Statements for a description of our
accounting treatment for U.S. fleet transactions and our
revenue recognition policies.
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GM U.S. Fleet Sales | |
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Years Ended December 31, | |
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2005 | |
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2004 | |
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2003 | |
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(Units in thousands) | |
Daily rental units
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780 |
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801 |
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713 |
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Other fleet units
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388 |
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353 |
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288 |
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Total fleet units
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1,168 |
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1,154 |
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1,001 |
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U.S. retail/ fleet mix
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U.S. fleet sales as % of total sales
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Cars
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36.8 |
% |
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36.7 |
% |
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31.7 |
% |
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Trucks
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19.0 |
% |
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16.4 |
% |
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13.6 |
% |
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Total
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25.9 |
% |
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24.5 |
% |
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21.0 |
% |
Product Pricing
GM, through the Total Value Promise, announced in
January 2006 its intent to reduce the use and amount of
incentives in GMNA as a stimulant to sales and that it would
instead reduce the manufacturers suggested retail price on
many GM vehicles and, on that basis, emphasize the value GM
offers to consumers. Historically, GM has used a number of
methods to promote its products, including the use of
incentives. GM uses retail and fleet incentives, primarily
through rebates, finance incentives and special lease programs.
In addition, GM uses dealer incentives to promote its vehicles.
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.
Seasonal Nature and Cyclical Nature of Business
In the automotive business, there are retail sales fluctuations
of a seasonal nature, and production varies from month to month.
Certain changeovers occur throughout the year for reasons such
as new market entries and vehicle model changeovers; however,
the changeover period related to the annual new model
introduction has traditionally been concentrated in the third
quarter of each year. Production is typically lower during the
third quarter due to these annual product changeovers and the
fact that annual plant shutdowns are planned during this time to
facilitate product changes. For this reason, 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 more fuel-efficient vehicle packaging,
stricter government standards for safety and emission controls,
and consumer-oriented improvements in performance, comfort,
convenience, and style.
The market for automobiles is cyclical and dependent upon
general economic conditions and consumer spending. A
deterioration in general economic conditions may cause consumers
to defer purchasing or leasing new vehicles or opt for used
vehicles instead, resulting in a decrease in the total number of
new cars and light trucks sold. Fluctuations in the price of
fuel also affect consumer preferences and spending.
I-4
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Relationships with Dealers
We market our vehicles and provide financing for those products
through a network of independent retail dealers and distributors
in the United States, Canada, and Mexico, and through
distributors and dealers overseas. At December 31, 2005,
there were approximately 7,350 GM vehicle dealers in the United
States, 750 in Canada, and 300 in Mexico. Additionally, there
were a total of approximately 15,600 distribution outlets
overseas 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 locations:
|
|
|
|
|
|
|
|
|
|
|
As of December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
GMNA
|
|
|
8,440 |
|
|
|
8,661 |
|
GME
|
|
|
10,200 |
|
|
|
9,522 |
|
GMLAAM
|
|
|
2,053 |
|
|
|
1,679 |
|
GMAP
|
|
|
3,329 |
|
|
|
2,788 |
|
|
|
|
|
|
|
|
Total Worldwide
|
|
|
24,022 |
|
|
|
22,650 |
|
|
|
|
|
|
|
|
In North America, GM enters into contracts 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 from a GM approved location to retail
customers. GM dealers often offer more than one GM brand of
vehicle in a single dealership. GMs current dealer network
plans focus primarily on combining only certain GM brands within
dealerships. 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, usually 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 one of 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 is significant to the success of the Corporation.
In addition to the terms of its contracts with its dealers, GM
is regulated by various state franchise laws that take
precedence over those contractual terms and impose specific
regulatory requirements and standards for initiating dealer
network changes, pursuing terminations for cause, and other
contractual matters.
Research, Development and Intellectual Property
In 2005, GM incurred $6.7 billion in costs for research,
manufacturing engineering, product engineering, and development
activities related primarily to the development of new products
or services or the improvement of existing products or services,
including activities related to vehicle emissions control,
improved fuel economy, and the safety of persons using GM
products. GM spent $6.5 billion and $6.2 billion on
similar company-sponsored research and other product development
activities in 2004 and 2003, respectively. GMs research
activities include working to improve the environmental
performance of our vehicles, diversify energy sources, and
provide gasoline-saving solutions around the world. For example,
in addition to our gas hybrid vehicles and fuel cell development
activities, GM has delivered to date in the United States more
than 1.5 million vehicles capable of running on E85, a
blend of 85% ethanol and 15% gasoline, and we expect to produce
approximately 400,000 more such vehicles in 2006.
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 patents are
very important to GMs operations and continued
technological development. In addition,
I-5
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
GM holds a number of trademarks and service marks that are very
important to GMs identity and recognition in the
marketplace.
Raw Materials, Services and Supplies
GM purchases a wide variety of raw materials, parts, supplies,
freight, transportation, energy, and other services from
numerous firms and suppliers for use in the manufacture of our
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 steel and petroleum-based products (such as resins).
These price increases have been driven by increased global
demand for steel and petroleum, in large part due to strong
demand in Asia. GM attempts to manage fluctuations in commodity
prices through the use of derivatives. GM does not speculate in
the use of derivatives, but rather attempts to systematically
hedge percentages 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 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 highly competitive. The
principal factors that determine consumer automobile preferences
in the markets in which we operate include price, quality,
style, safety, reliability, fuel economy and functionality. The
table below sets forth, as of December 31, 2005, GMs
principal competitors in passenger cars and trucks in the United
States and their respective U.S. market shares. We also
compete with these and other manufacturers on a worldwide basis.
|
|
|
|
|
|
|
U.S Market Share | |
|
|
| |
GM
|
|
|
25.9 |
% |
Ford Motor Company
|
|
|
18.2 |
% |
DaimlerChrysler AG
|
|
|
15.3 |
% |
Toyota Corporation
|
|
|
13.0 |
% |
Honda Motor Company, Ltd.
|
|
|
8.4 |
% |
Nissan Motor Corporation, Ltd.
|
|
|
6.2 |
% |
The global automobile market is growing, especially in
developing economies such as China and India. While GM has the
leading market share in the United States, some of its
competitors have greater market shares in other countries in
which GM competes. Even though GM produced the second highest
annual volume in its operating history in 2005, its market share
on a worldwide basis declined from 14.4% in 2004 to 14.2% in
2005.
Environmental and Regulatory Matters
|
|
|
Automotive Emissions Control |
Both the U.S. federal and California governments currently
impose stringent emission control requirements on vehicles sold
in their respective jurisdictions. These requirements include
pre-production testing of vehicles, testing of vehicles after
assembly, the imposition of emission defect and performance
warranties, and
I-6
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
the obligation to recall and repair customer-owned vehicles
determined to be non-compliant with emissions requirements.
Both the U.S. Environmental Protection Agency
(EPA) and the California Air Resources Board
(CARB) continue to place emphasis on compliance testing of
customer-owned vehicles. We believe that our vehicles meet
currently applicable EPA and CARB requirements. However, failure
to comply with the emission standards or defective emission
control systems or components discovered during such testing, or
discovered during government-required defect reporting, can lead
to substantial cost for General Motors related to emissions
recalls. New CARB and federal requirements will increase the
time and mileage periods over which manufacturers are
responsible for a vehicles emission performance.
Both the EPA and the CARB emission requirements will become even
more stringent in the future. A new tier of exhaust emission
standards for cars and light-duty trucks, the Low-Emission
Vehicles (LEV) II standards, began phasing in for
California vehicles 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 future 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 credits, which are
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.
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
requirements in effect now. Six states (Connecticut, New Jersey,
Oregon, Pennsylvania, Rhode Island and Washington) have or are
adopting the California requirements that will begin in the
future. Additional states could also adopt the California
standards in the future.
In addition to the above-mentioned exhaust emission programs,
onboard diagnostic (OBD) systems, used to diagnose problems
with emission control systems, were required both federally and
in California effective with 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. California has adopted more stringent
OBD requirements beginning in the 2004 model year, including new
design requirements and corresponding enforcement procedures.
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 is phasing-in on
light-duty trucks in the 2001 through 2006 model years.
Beginning with the 2004 model year, even more stringent
evaporative emission standards apply in California, as well as
federally.
|
|
|
Industrial Environmental Control |
GM is subject to various laws relating to protection of the
environment, including laws regulating air emissions, water
discharges, waste management, and environmental cleanup.
I-7
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
GM is in various stages of investigation or remediation for
sites where contamination has been alleged, and recorded a
liability of $255 million at December 31, 2005 and
$214 million at December 31, 2004 for worldwide
environmental investigation and remediation as summarized below:
|
|
|
|
|
GM has been identified as a potentially responsible party at
sites identified by the EPA and state regulatory agencies for
investigation and remediation of soil and/or groundwater
contamination under the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA) and similar state
statutes. GM voluntarily and actively participates in cleanup
activity where such involvement has been verified. The total
liability for sites involving GM was $66 million at
December 31, 2005. This compares with $79 million at
December 31, 2004. |
|
|
|
For closed plants owned by the Corporation, the estimated
liability for environmental investigation and remediation was
$29 million at December 31, 2005, based on an
environmental assessment of the plant property. This compares
with $17 million at December 31, 2004. The increase in
2005 was primarily due to additional
clean-up
responsibilities at two idled facilities. |
|
|
|
GM is involved in investigation and remediation activities at
additional locations worldwide with an estimated liability of
$160 million at December 31, 2005. This compares with
an estimated liability of $118 million at December 31,
2004. The increase in 2005 was primarily due to additional
clean-up
responsibilities at an active facility. |
The cost impact of the Clean Air Act Amendments under the
Title V Renewable Operating Permit Program is the annual
emission fees of approximately $2 million per year and
annual cost of on-going testing of $1 million to
$2 million per year. Additionally, under the Clean Air Act,
complying with the Hazardous Air Pollutant standards is
estimated to cost an aggregate of approximately $55 million
from 2006 through 2007. General Motors also spends 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 operations around the globe. GM surpassed its
2005 target of a reduction of 8% in carbon dioxide
(CO2)
emissions from its global facilities compared to 2000 emission
levels. By 2004, GM had reduced
CO2
emissions from its global facilities by 12.5% 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 been reporting in accordance
with the Global Reporting Initiative (GRI), 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.
All vehicles manufactured and sold by General Motors may be
subject to noise emission regulation.
In the United States, passenger cars and light-duty trucks are
subject to state and local motor vehicle noise regulations.
General Motors is committed to designing and developing its
products to meet these noise requirements. Addressing the
various vehicle noise regulations established in numerous state
and local jurisdictions, however, is not practical or possible.
The Corporation therefore identifies the most stringent
requirements and validates to a composite requirement that
satisfies the most stringent of these requirements. In those
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
preempt all United States state/local noise regulations for
trucks over 10,000 lbs. gross vehicle weight rating (GVWR).
Outside the United States, noise regulations have been
established by national and supranational (e.g., European Union
or United Nations Economic Commission for Europe) authorities.
General Motors believes that its vehicles meet all applicable
noise regulations in the markets where they are sold.
I-8
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
The Energy Policy and Conservation Act passed in 1975 provided
for production-weighted average fuel economy requirements for
passenger cars built for the 1978 model year and thereafter.
Based on EPA combined city-highway test data, the GM 2005 model
year domestic passenger car fleet achieved a Corporate Average
Fuel Economy (CAFE) of 29.2 miles per gallon (mpg),
which exceeded the requirement of 27.5 mpg. GMs CAFE
estimate for 2006 model year domestic passenger cars is
projected at 29.1 mpg.
For GMs imported passenger cars, 2005 model year CAFE
attained 30.5 mpg. which exceeded the requirement of 27.5 mpg.
The CAFE estimate for 2006 model year import passenger cars is
29.8 mpg.
Fuel economy standards for light-duty trucks became effective in
1979. General Motors light truck CAFE fleet average for
the 2005 model year achieved at 21.8 mpg which exceeds the
requirement of 21.0 mpg. GMs 2006 model year truck CAFE is
projected at 22.6 mpg which exceeds the requirement of 21.6 mpg.
The National Highway Traffic Safety Administration
(NHTSA) has proposed new fuel economy standards for trucks
for model years 2008 2011 and substantial changes to
the structure of the truck CAFE program.
In addition, in 2002 California passed legislation (known as
Assembly Bill 1493) requiring the California Air Resources Board
(CARB) to regulate greenhouse gas emissions from new motor
vehicles sold in the state beginning in the 2009 model year.
Because
CO2
is the primary greenhouse gas emitted by automobiles and
CO2
emissions are directly proportional to the amount of fuel
consumed by motor vehicles, AB 1493 is tantamount to
establishing state level fuel economy standards, which is
prohibited by the federal fuel economy law. Nonetheless, CARB
promulgated its AB 1493 Rule standards, which effectively
require about a 40% increase in new vehicle fuel economy 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
state court.
Because CARB has characterized its AB 1493 Rule as an
emission regulation, other states have adopted the
California
CO2
requirements pursuant to claimed authority under the federal
Clean Air Act. As of March 2006, the following states have
adopted Californias AB 1493 Rule imposing
CO2
(i.e., state fuel economy) requirements on new motor vehicles
beginning with the 2009 model year: Connecticut, Maine;
Massachusetts; New Jersey; New York; Oregon; Rhode Island;
Vermont; and Washington. Other states, such as Pennsylvania, are
also considering adoption of the AB 1493 Rule.
Because these attempts at state regulation of fuel economy are
believed to be preempted by the federal fuel economy law, the
industry has filed several federal lawsuits challenging the AB
1493 Rule. In addition to the California federal litigation
mentioned above, there are also federal lawsuits challenging the
AB 1493 Rule in Vermont and Rhode Island.
Further, in 1999, ACEA (the European Auto Manufacturers
Association) and the European Union established a voluntary
agreement with an emission target of 140 grams of
CO2
per kilometer on average for new passenger cars sold in the
European Union by 2008. Discussions are now ongoing between the
European Union and European auto manufacturers, including GM, on
targets for the period beyond 2008.
We continue to improve the fuel efficiency of our vehicles, even
as we add more safety features, customer convenience options,
enhance utility and performance and address other environmental
aspects of our products, which as they add mass to a vehicle
tend to lower its fuel economy. GM provides the broadest array
of fuel efficient cars and trucks in the United States of any
manufacturer. Based on EPA 2006 fuel economy data, GM leads in
fuel economy comparisons on a model to model basis across the
vehicle spectrum in the United States. For both cars and trucks,
GM leads in 56% (74 of 132) of the comparisons (combined
city-highway unadjusted) in which GM has an offering. GMs
product lineup includes a wide array of models that get an EPA
estimated 30 miles per gallon or better on the
highway more than any other automaker. 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, congestion, transit
alternatives, fuel quality and availability and land use
patterns.
I-9
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
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, six-speed
automatic transmissions, and
flex-fuel E85 ethanol
vehicles. 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 full-sized pickup
trucks available in the market and is bringing a range of
additional hybrid products to market over the next several
years. In 2006, GM will offer the Saturn VUE Green Line with a
GM Hybrid System, and in 2007, GM plans to launch a Two-mode
Hybrid system in our large sport utility vehicles. GM has
extensive efforts underway to develop fuel cell vehicles
designed to run on hydrogen. 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 requirements 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, including state
CO2
requirements such as those imposed by the AB 1493 Rule, then GM
could be subject to sizeable civil penalties and/or could have
to severely restrict product offerings or close plants to remain
in compliance. Any such actions could have substantial adverse
impacts on GM operations, including plant closings and loss of
sales revenue.
GMs non U.S. operations are affected significantly by
various laws and government regulations which are designed to
reduce automotive emissions, encourage the recycling of
end-of-life vehicles
and parts and increase fuel economy and vehicle safety. Many
foreign governments impose certain tariffs, non-tariff trade
barriers and other price or exchange controls on imports. In
addition, certain foreign governments place restrictions on the
ability of GM to repatriate profits. GM works to mitigate any
adverse effect of these regulations on GMs business and
operations.
New vehicles and equipment sold by GM in the United States are
required to meet certain safety standards promulgated by the
National Highway Traffic Safety Administration (NHTSA). The
National Traffic and Motor Vehicle Safety Act of 1966 authorizes
the NHTSA to determine these standards and the schedule pursuant
to which they are implemented. In addition, if there is 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 non
U.S. fatalities and recalls.
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,
these countries pass regulations which are more stringent than
U.S. standards.
GM is subject to a variety of federal rules and regulations
which govern the manner in which it administers its pensions.
The U.S. Congress is currently considering two separate
bills which would effect significant reforms in these rules and
regulations, the Pension Protection Act of 2005, which passed
the U.S. House of Representatives (House) on
December 16, 2005 and the Pension Security and Transparency
Act, which passed the U.S. Senate (Senate) on
December 23, 2005. GM does not know what form the final
I-10
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
version of any pension reform legislation may take or whether
such legislation will eventually become law. However, both bills
are designed to increase the amount by which companies fund
their pension plans, to require companies that sponsor defined
benefit plans to pay higher premiums to the Pension Benefit
Guaranty Corporation (PBGC), and to prohibit the funding of
certain executive compensation agreements when a companys
pension plan is severely underfunded. The Senate bill also
contains a provision which would use a companys credit
ratings as one condition, among several, in determining whether
its pension plans should be considered at risk and
thereby subject to stricter funding and benefit rules. While
GMs U.S. Hourly and Salaried pension plans were
overfunded on a Statement of Financial Standards No. 87
basis by $7.5 billion as of December 31, 2005, under
both versions of the proposed legislation, GM, under certain
future circumstances, could become subject to additional funding
requirements.
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
organizations. If GM fails to comply with applicable export
compliance regulations, GM could be subject to criminal and
civil penalties and, under certain circumstances, suspension and
debarment.
Employees
As of December 31, 2005, GM employed approximately 335,000
employees, of whom approximately 67% (225,000) were hourly
employees and approximately 33% (110,000) were salaried
employees, in the following business segments (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
GMNA
|
|
|
173 |
|
|
|
181 |
|
GME(1)
|
|
|
63 |
|
|
|
61 |
|
GMLAAM
|
|
|
31 |
|
|
|
29 |
|
GMAP(2)
|
|
|
31 |
|
|
|
15 |
|
GMAC
|
|
|
34 |
|
|
|
34 |
|
Other
|
|
|
3 |
|
|
|
4 |
|
|
|
|
|
|
|
|
Total
|
|
|
335 |
|
|
|
324 |
|
|
|
|
|
|
|
|
|
|
(1) |
2005 includes approximately 7,000 employees added from a former
powertrain joint venture with Fiat. |
|
(2) |
2005 includes approximately 13,000 employees added as the result
of the consolidation of GM Daewoo. |
As of December 31, 2005, GM had approximately 343,000
U.S. hourly and approximately 121,000 U.S. salaried
retirees. As of December 31, 2005, approximately 75%
(106,000) of GMs U.S. employees were represented by
unions. 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 102,000 employees. Our 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.
Segment Reporting Data
Operating segment and principal geographic area data for 2005,
2004, and 2003 are summarized in Note 26 to the GM
Consolidated Financial Statements in Part II.
I-11
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
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 (the Exchange Act) are available free of charge
through our website as soon as reasonably practicable after they
are electronically filed with, or furnished to, the SEC.
Item 1A. Risk Factors
We face a number of significant risks and uncertainties in
connection with our operations. Our business, results of
operations, and financial condition could be materially
adversely affected by the factors described below, which we have
divided generally into two categories:
|
|
|
|
|
Risks related to GM and its automotive business; and |
|
|
|
Risks related to GMs finance, mortgage and insurance
businesses. |
While we describe each risk separately, some of these risks are
interrelated and it is possible that 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 face. Additional risks and uncertainties not presently
known to us, or that we currently deem immaterial, could also
potentially impair our business, results of operations and
financial condition.
Risks related to GM and its automotive business
|
|
|
Our 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 currently are in the process of implementing a number of
structural (fixed) and material cost reduction and
productivity improvement initiatives in our automotive
operations, including substantial restructuring initiatives for
our GMNA operations, which were unprofitable in 2005, as more
fully discussed below in our Managements Discussion and
Analysis of Financial Condition and Result of Operations
section. Successfully implementing these restructuring
initiatives throughout our automotive operations, and in GMNA in
particular, is critical to our future competitiveness and
ability to return to profitability. However, there can be no
assurance that these initiatives will be successful in this
regard.
|
|
|
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. In recent years, some of
these suppliers have experienced severe financial difficulties
and solvency problems. Financial difficulties or solvency
problems at those suppliers could materially adversely affect
their ability to supply us with the systems, components and
parts that we need to operate our business, resulting in a
disruption in our operations. Similarly, many of these suppliers
utilize workforces with substantial union representation.
Workforce disputes resulting in work stoppages or slowdowns at
these suppliers could also have a material adverse effect on
their ability to continue supplying us.
In particular, our largest supplier, Delphi, filed a
Chapter 11 bankruptcy petition in October 2005. While
Delphi has indicated to us that it expects no disruption in its
ability to continue supplying us with the systems, components
and parts we need 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 executing our GMNA
turnaround initiatives, and materially adversely affect our
business.
I-12
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
In addition, a number of our other suppliers, including
Collins & Aikman Corporation, Dana Corporation and
Tower Automotive, Inc., have filed Chapter 11 bankruptcy
petitions, which could lead to a material adverse effect on our
business.
|
|
|
Delphi may seek to reject or compromise its obligations to
us through its Chapter 11 bankruptcy proceedings. |
In connection with its Chapter 11 bankruptcy restructuring,
Delphi may attempt to reject some or all of its contracts with
us in order to exit specific lines of business or increase the
price GM pays for various systems, components and parts we
purchase from Delphi. 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 implementation of our
GMNA turnaround initiatives. It is also difficult for us to
quickly switch to a different supplier for some of the systems,
components and parts we purchase from Delphi as a result of the
extended validation and production lead times for these items.
In addition, various financial obligations Delphi has to GM as
of the date of Delphis Chapter 11 filing, including
the $951 million payable for amounts that Delphi owed to GM
relating to Delphi employees who were formerly GM employees and
subsequently transferred back to GM as job openings became
available to them under certain employee flowback
arrangements as of the date of Delphis filing for
Chapter 11, may be subject to compromise in the bankruptcy
proceedings, which may result in GM receiving payment of only a
portion of the face amount owed by Delphi. GM will seek to
minimize this risk by protecting our right of setoff against the
$1.15 billion we owed to Delphi as of the date of its
Chapter 11 filing. A procedure for determining setoff
claims has been put in place by the bankruptcy court. 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 fully or partially setoff such amounts. However, to date
setoffs of approximately $52.5 million have been agreed to
by Delphi and taken by GM. The financial impact of a substantial
compromise of our right of setoff could have a material adverse
impact on our financial position.
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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 1999 spin-off of Delphi from GM, we
entered into separate agreements with the UAW, the International
Union of Electrical Workers and the United Steel Workers unions.
Under these agreements, we agreed to guarantee Delphis
payment of certain levels of pension and post-retirement
health-care and life insurance benefits (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.
A separate agreement between GM and Delphi 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. 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, in the fourth quarter of
2005, we recorded a charge of $5.5 billion
($3.6 billion after tax) as an estimate of contingent
exposures relating to Delphis Chapter 11 filing. We
believe that the range of these contingent exposures is between
$5.5 billion and $12 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
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GENERAL MOTORS CORPORATION AND SUBSIDIARIES
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.
The amount of our ultimate liability for these contingent
exposures may change, and will depend on the results of ongoing
discussions among us, Delphi, and Delphis unions, and
other factors. We are currently unable to estimate the amount of
additional charges that could arise from Delphis
Chapter 11 filing. Any increase in our contingent
exposures, including under the benefit guarantees, could
materially increase our expenses and adversely affect our
results of operations.
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Our health-care cost burden is one of our biggest
competitive challenges, and if we do not make progress on
structurally fixing this issue, it will continue to be a
long-term threat to GM. |
GMs health-care costs for employees and retirees have been
rising significantly over the past few years. In particular, we
are exposed to significant and growing liabilities for OPEB for
both our hourly and salaried workforces. These OPEB liabilities
have grown to approximately $84.9 billion on a global basis
as of December 31, 2005, with increases in recent years
primarily resulting from increases in health-care inflation and
decreases in the discount rates used in calculating OPEB
liabilities. To address these 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 effective in January 2007. We also
entered into a tentative agreement with the UAW related to
retiree health care that we announced in October 2005 and
finalized that agreement with the UAW and a class of hourly
retirees in December 2005. This agreement is subject to court
approval. Under this agreement, our U.S. pre-tax OPEB
expense, which was $5.3 billion for 2005, is expected to
decrease to an estimated $4.0 billion in 2006, which is
before the effect (if any) of any amounts incurred or paid on
the Delphi benefit guarantees and contributions to a defined
contribution plan. In recent years, we have paid our OPEB
expenditures from operating cash flow, which reduces our
liquidity and cash flow from operations. We expect that our
U.S. health-care cash spending will be $5.0 billion in
2006, which is before the effect (if any) of any amounts
incurred or paid on the Delphi benefit guarantees and
contributions to a defined contribution plan, down from
$5.4 billion in 2005, principally due to our tentative
agreement with the UAW. If this agreement is not approved by the
court, these health-care savings will not be achieved.
Controlling our 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. 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.
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Our extensive pension and OPEB obligations to retirees are
a competitive disadvantage for us. |
We believe that we are competitively disadvantaged due to the
relatively large number of retirees for whom we provide pension
and OPEB benefits, consisting of both retiree health care and
life insurance. In particular, we believe that our pension and
OPEB cash expenditures as a percentage of revenues are
significantly greater than our competitors and that, as a
result, we have relatively less available cash to invest in
product development and capital projects.
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We have recently experienced a series of credit rating
actions that have downgraded our credit ratings to historically
low levels. 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. |
Substantially all of our unsecured debt has been rated by four
nationally recognized statistical rating organizations. Concerns
over our competitive and financial strength, including whether
we will experience a labor interruption and how we will fund our
health-care liabilities, have led to a series of rating actions
that have downgraded the credit ratings on our debt. These
actions have substantially reduced our access to the unsecured
debt markets and have unfavorably impacted our overall cost of
borrowing. Each of GM and GMAC is currently assigned a
non-investment grade rating by each of these rating agencies,
and Residential
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GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Capital Corporation (ResCap), the holding company for
GMACs residential mortgage business, has recently been
downgraded to the lowest investment grade rating.
Our current credit ratings have resulted in increased borrowing
costs and could severely limit GMs and GMACs access
to unsecured debt markets. Our current credit ratings also
increase the possibility that more burdensome and restrictive
terms and conditions will be added to any new or replacement
financing arrangements.
Further downgrades of our current credit ratings, or significant
worsening of our financial condition generally, could also
result in increased demands by our suppliers for accelerated
payment terms, increased finance charges, or other more onerous
supply terms.
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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 our successful
execution of our four-point turnaround plan and the return of
our North American operations to profitability and positive cash
flow, and our ability to execute the globalization of our
principal business functions. Last year, we incurred a
consolidated net loss of $10.6 billion, due primarily to
losses at GMNA. 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, such as in connection with the renegotiation
of our collective bargaining agreement with the UAW in 2007),
any inability to access (or amend or replace) our existing
standby bank credit facility, any claims that may be
successfully asserted against GM under various financing
agreements in view of GMs recent restatement of its prior
financial statements, obligations associated with approximately
$1.2 billion of convertible debentures that may be put to
GM for cash settlement in March 2007 ahead of the scheduled
maturity date, 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,
such as by curtailing our ability to make important capital
expenditures.
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GMs recent restatement of its prior financial
statements could negatively impact its rights and obligations
under certain contracts to which it is a party, including its
$5.6 billion standby credit facility, which could under
certain circumstances materially adversely affect GMs
future liquidity. |
GM believes that it has a good faith basis on which to make a
borrowing request under its $5.6 billion unsecured standby
line of credit facility. However, in view of GMs recent
restatement of its prior financial statements, there is
substantial uncertainty as to whether the bank syndicate would
be required to honor such a request, and therefore there is a
high risk that GM would not be able to borrow under this
facility. GM believes that this matter is unlikely to be tested
because GM has no current need or intention to draw on the
existing facility. Moreover, GM is currently exploring the
possibility of amending or replacing the existing facility with
new terms that would, among other things, resolve any
uncertainty regarding GMs ability to borrow thereunder.
There can be no assurance that GM will be successful in
negotiating an amendment or replacement of the existing credit
line or, if so, as to the amount, terms or conditions of any
such amended or replacement facility. GM believes that issues
also may arise from its restatement under various financing
agreements, which consist principally of obligations in
connection with sale/ leaseback transactions and other lease
obligations and do not include GMs public debt indentures,
as to which GM is a party. GM is currently studying the effect
of its recent restatement of prior financial statements under
these agreements, including its legal rights (such as its
ability to cure) with respect to any claims that could be
asserted as well as economic disincentives for third parties to
raise such claims to the extent they have them. Under certain
circumstances, these matters could materially adversely affect
GMs future liquidity.
I-15
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
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Continued failure to achieve profitability may cause some
or all of our deferred tax assets to expire. |
As of December 31, 2005, we had approximately
$21.6 billion in U.S. net deferred tax assets. These
deferred tax assets include 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.
However, many of these deferred tax assets 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 deferred tax assets. However, it is possible that
some or all of these deferred tax assets could ultimately expire
unused, especially if our GMNA restructuring initiatives are not
successful or if GMACs income declines. Furthermore, if
GMACs U.S. pre-tax income declines or if a significant
portion of GMACs U.S. pre-tax income were to no longer be
available to GM, because of the sale of a controlling interest
in GMAC or otherwise, a substantial valuation allowance may be
required, which would materially increase our expenses in the
period taken and adversely affect our business. If we were
required to record a valuation allowance against all of our
U.S. deferred tax assets as of December 31, 2005, our
resulting total stockholders equity would have been
negative.
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Restrictions in our labor agreements, including the JOBS
bank provisions in the UAW agreement, 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 work force. In particular, our
collective bargaining agreement with the UAW, which covers the
majority of our U.S. hourly employees, includes a JOBS bank
provision that requires us to continue paying full wages and
benefits, generally after 48 weeks of layoff, during the
term of the agreement to qualified employees who would have
otherwise been laid off due to plant idlings or other
restructuring initiatives. We have been discussing these
provisions with the UAW in an effort to develop an agreed upon
accelerated attrition program by which we can reduce the number
of employees that are and will be in the JOBS bank in a cost
effective manner. However, currently this provision
significantly limits our ability in the United States to achieve
cost savings through plant idlings, workforce reductions, or
similar initiatives and, in particular, our ability to execute
our GMNA turnaround initiatives.
As part of our discussions with the UAW, on March 22, 2006,
GM, Delphi and the UAW reached a tentative agreement intended to
reduce the number of U.S. hourly employees through an
accelerated attrition program. The agreement is subject to
approval by the bankruptcy court of Delphis participation
in the agreement. We cannot provide any assurance that the
bankruptcy court will approve of Delphis participation in
the agreement (and if such approval is not obtained, GM and the
UAW will have no obligations under the agreement) or that enough
employees will agree to participate in the attrition program to
reduce employment levels at GM sufficient to provide the
benefits we anticipate.
Our current collective bargaining agreement with the UAW will
expire in September 2007. Any UAW strikes, threats of strikes,
or other resistance in connection with the negotiation of a new
agreement could impair our ability to implement further measures
to reduce structural costs and improve production efficiencies
in furtherance of our GMNA initiatives.
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The government is currently investigating certain of our
accounting practices. The final outcome of these investigations
could require us to restate prior financial results. |
The SEC has issued subpoenas to us in connection with various
matters that it is investigating. These matters for which we
have received subpoenas include our financial reporting
concerning pension and OPEB, certain transactions between us and
Delphi, supplier price reductions or credits, and any obligation
we may have to fund pension and OPEB costs in connection with
Delphis Chapter 11 proceedings. In addition, the SEC
recently issued a subpoena in connection with an investigation
of our transactions in precious metal raw
I-16
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
materials used in our automotive manufacturing operations, and a
federal grand jury recently issued a subpoena in connection with
supplier credits. Separately, 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. We are cooperating 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 (in addition to our recent restatements)
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.
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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, which is at a historically high level. We have
encountered significant price competition in our markets and
expect this competition to continue in the future. In addition,
many of the markets in which we compete present few barriers to
entry for our competitors. Over the past several years,
industry-wide manufacturing overcapacity has put pressure on GM
and other manufacturers to make vehicles more attractive to
customers by adding vehicle enhancements or marketing incentives
or reducing vehicle prices in certain markets. Some strategies
employed to help maintain market share are subsidized financing
or leasing programs, option package discounts or rebates. This
overcapacity has had, and is expected to continue to have a
negative impact on our vehicle pricing, market share and
operating results, and presents a significant risk to our
ability to enhance our per vehicle revenue.
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The bankruptcy or insolvency of a major competitor could
result in further competitive disadvantages for us in relation
to that competitor. |
Certain of our major competitors are obligated, like us, to
provide substantial pension and OPEB benefits to their retirees.
The bankruptcy or insolvency of a major competitor with
substantial pension and OPEB obligations could result in that
competitor gaining a significant cost advantage over us by
eliminating or reducing through bankruptcy its contractual
obligations to unions and other parties. In addition, the
bankruptcy or insolvency of a major U.S. automotive
manufacturer could lead to a disruption in our supply base,
which could materially adversely affect our business.
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Shortages and increases in the price of fuel can result in
diminished profitability due to shifts in consumer vehicle
demand. |
High gasoline prices in 2005 have contributed to weaker demand
for certain of our higher margin vehicles, especially our
full-size sport utility vehicles, as consumer demand has shifted
to more fuel-efficient, smaller and lower margin vehicles. 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 lead to lower revenues and have a material adverse effect
on our business.
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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.
Sales of full-size and luxury vehicles are generally more
profitable for us than sales of our smaller and lower-priced
vehicles. Similarly, retail sales of vehicles are generally more
profitable to us than fleet sales. Shifts in demand away from
these higher margin sales could materially adversely affect our
business.
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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, 2005, we had approximately $33 billion in
loans payable and long-term debt outstanding for our automotive
operations, which includes
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GENERAL MOTORS CORPORATION AND SUBSIDIARIES
approximately $1.2 billion of convertible debentures that
may be put to GM for cash settlement in March 2007. 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; and |
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Make us more vulnerable to adverse economic and industry
conditions, limit our ability to withstand competitive pressures
and reduce our flexibility in responding to changing business
and economic conditions. |
Any one or more of these consequences could have a material
adverse effect on our business.
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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 OPEB plans depend
upon changes in 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 minimum
ERISA 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 to
a point where our pension obligations are not fully funded, 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.
In addition, the Financial Accounting Standards Board (FASB) has
announced that it is considering changes in the accounting rules
for pensions and other postretirement benefits. The rule changes
that are expected to be proposed in March 2006 would require a
company to include on its balance sheet an additional net asset
or net liability to reflect the funded or unfunded status, as
the case may be, of its retirement plans. In light of the
unrecognized losses associated with our pension and OPEB
liabilities under existing accounting rules, if these expected
proposed rules had been in effect as of December 31, 2005,
the substantial additional liability that we would have had to
include on our balance sheet would have caused our total
stockholders equity to be negative.
Further, the U.S. Congress is currently considering
legislation that, if adopted, would affect the manner in which
GM administers its pensions. This proposed legislation is
designed, among other things, to increase the amount by which
companies fund their pension plans and to require companies that
sponsor defined benefit plans to pay higher premiums to the
PBGC. If this proposed legislation becomes law, GM, under
certain future circumstances, could become subject to additional
material funding requirements.
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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 an annual basis both 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 will always 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 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, production and
manufacturing. Continuing reduction in our margins, sales
volumes and market shares will result if we are unable to
produce models that compare favorably to competing models,
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GENERAL MOTORS CORPORATION AND SUBSIDIARIES
particularly in our higher margin vehicle lines such as
full-size sport utility vehicles. Vehicle lines that are
particularly important to our future success include our new
sport utility vehicles and pickup trucks, and there can be no
assurance of success related to market acceptance of these or
any other products.
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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 durable items, the replacement of which can
be significantly deferred. Difficult economic conditions may
also cause buying patterns to shift to less-expensive and lower
margin vehicle models 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 higher fixed costs,
relatively small changes in the number of vehicles sold can have
a significant effect on our business. Consequently, if industry
demand softens 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.
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Changes in existing, or the adoption of new, laws,
regulations or policies of governmental organizations may have a
significant negative impact on how we do business. |
We are affected significantly by a substantial amount of costly
governmental regulation, which is anticipated to increase. In
the U.S. and Europe, for example, governmental regulation has
arisen primarily out of environmental, vehicle safety and fuel
economy concerns. The costs of complying with government
regulatory requirements can be substantial, and it can be
difficult to pass these costs through to our customers.
Of particular concern are the U.S. mandated corporate
average fuel economy requirements. If these standards are
increased significantly, we may have to curtail sales of our
higher margin vehicles. Similarly, a number of states have
adopted regulations that establish carbon dioxide emission
standards that effectively impose heightened fuel economy
standards for new vehicles sold in those states. Although GM and
other automobile manufacturers are challenging certain of these
state regulations in court, no assurance can be given that these
challenges will be successful.
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.
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Our businesses outside the United States expose us to
additional risks that may cause our revenues and profitability
to decline. |
We conduct a significant portion of our automotive business and
our finance, insurance and mortgage businesses outside the
United States. We intend to continue to pursue growth
opportunities for our businesses 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; |
I-19
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
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Differing local product preferences and product requirements; |
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Fluctuations in foreign currency exchange rates and interest
rates; |
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Difficulty in establishing, staffing and managing 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. |
The effects of these risks may, individually or in the
aggregate, materially adversely affect our business.
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A failure of or interruption in the communications and
information systems on which we rely to conduct our operations
could adversely affect our business. |
We rely heavily upon communications and information systems to
conduct our business in each country and market in which we
operate. The failure or interruption of our information systems
or the third-party information systems on which we rely could
cause supply, production and delivery delays in connection with
our automotive operations. Such a failure or interruption could
cause underwriting or other delays or result in significantly
fewer applications being received, slower processing of
applications and reduced efficiency in servicing in connection
with GMACs operations. The occurrence of any of these
events could have a material adverse effect on our business.
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We could be materially adversely affected by changes in
currency exchange rates, commodity prices, equity prices and
interest rates. |
We are exposed to risks related to the effects of changes in
foreign currency exchange rates, commodity prices, equity 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.
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We are subject to significant risks of litigation. |
We are currently subject to numerous litigation matters,
including a number of stockholder and bondholder class action
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 regularly 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
claimed 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.
Risks related GMs finance, mortgage and insurance
businesses
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We are considering the sale of a controlling interest in
GMAC as well as exploring strategic and structural alternatives
for ResCap. There is a risk that these initiatives may not
occur, or if they do occur, they may not delink GMACs
credit rating from GMs credit rating or maintain
ResCaps investment grade credit rating. In addition, any
such initiative, if completed, would reduce our interest in
their earnings going forward. |
As previously announced, we are exploring the possible sale of a
controlling interest in GMAC, as well as exploring other
strategic and structural alternatives with respect to ResCap.
The extent of the effect on GMACs and ResCaps credit
ratings, if any, will depend on the structure and other terms of
any potential
I-20
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
transaction as well as the extent of GMACs ongoing credit
exposure to GM. We are uncertain at this time if any transaction
with respect to GMAC or ResCap will occur or, if any transaction
were to occur, on what terms. Furthermore, even if a third party
acquires a controlling interest in GMAC, or if a transaction is
completed with respect to ResCap, there is the possibility that
these initiatives will not delink GMACs credit rating from
GMs credit rating or maintain ResCaps credit rating
at investment grade.
Failure to execute a GMAC strategic transaction will place
further pressure on both GMs and GMACs credit
profiles, potentially resulting in further downgrades with
GMACs credit ratings explicitly re-linked to those of GM.
Moreover, any reduction in the automotive finance capacity of
GMAC could materially adversely affect GMs business to the
extent that third party financing is not available to fund
GMs automotive sales. In the absence of a transaction:
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GMACs access to capital may be seriously constrained, as
most unsecured funding sources may decline, including bank
funding; |
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The cost of funds related to borrowings that are secured by
assets may increase, leading to a reduction in liquidity for
certain asset classes; |
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It may be increasingly difficult to securitize assets, resulting
in reduced capacity to support overall automotive originations; |
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Uncompetitive funding costs may result in a lower return on
capital and significantly lower earnings and dividends; and |
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GMAC may need to consider divesting certain businesses in order
to maintain adequate liquidity to fund new originations or
otherwise preserve the value of its businesses. |
In addition, any such transactions, if completed, would reduce
our interest in the earnings of GMAC and ResCap, although the
financial effects of that reduction would be offset by the value
of any consideration we receive from a purchaser.
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Our finance, mortgage and insurance businesses require
substantial capital, and if we are unable to maintain adequate
financing sources, our business, results of operations and
financial condition will suffer and jeopardize our ability to
continue operations. |
Our liquidity and ongoing profitability in this segment are in
large part dependent upon our timely access to capital and the
costs associated with raising funds in different segments of the
capital markets. Our primary sources of financing include public
and private securitizations and whole loan sales. To a lesser
extent, we also use institutional unsecured term debt,
commercial paper and retail debt offerings. Reliance on any one
source can change going forward.
We depend and will continue to depend on our ability to access
diversified funding alternatives to meet future cash flow
requirements and to continue to fund our operations. Negative
credit events specific to GMAC, or other events affecting the
overall debt markets have adversely impacted our funding
sources, and continued or additional negative events could
further adversely impact our funding sources, especially over
the long-term. If we are unable to maintain adequate financing,
or if other sources of capital are not available to us, we could
be forced to suspend, curtail or reduce certain aspects of our
insurance, mortgage and finance operations, which could harm our
business, results of operations and financial condition.
Furthermore, we utilize asset and mortgage securitizations and
sales as a critical component of our diversified funding
strategy. Several factors could affect our 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 our contracts and loans, our ability to service
our contracts and loans and a decline in the ratings given to
securities previously issued in our securitizations. Any of
these factors could negatively affect the pricing of our
securitizations and sales, resulting in lower proceeds from
these activities.
I-21
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
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We are exposed to credit risk which could affect the
business, results of operations and financial condition of our
finance, mortgage and insurance operations. |
We are subject to credit risk resulting from defaults in payment
or performance by customers for our contracts and loans as well
as contracts and loans that are securitized and in which we
retain a residual interest. There can be no assurances that our
monitoring of our credit risk as it impacts the value of these
assets and our efforts to mitigate credit risk through our
risk-based pricing, appropriate underwriting policies and loss
mitigation strategies are or will be sufficient to prevent an
adverse effect on the business, results of operations and
financial condition of our finance, mortgage and insurance
operations. As part of the underwriting process, we rely 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.
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Our earnings may decrease because of increases or
decreases in interest rates. |
The profitability of our finance, mortgage and insurance
operations is directly affected by changes in interest rates.
The following are some of the risks we face relating to an
increase in interest rates:
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Rising interest rates will increase our cost of funds. |
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Rising interest rates may reduce our consumer automotive
financing volume by influencing consumers to pay cash for, as
opposed to financing, vehicle purchases. |
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Rising interest rates generally reduce our 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, retained
interests and fixed income securities held in our investment
portfolio. |
We are 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 us
to write down the value of our retained interests. Moreover, if
prepayments are greater than expected, the cash we receive over
the life of our mortgage loans held for investment and our
retained interests would be reduced. Higher-than-expected
prepayments could also reduce the value of our mortgage
servicing rights and, to the extent the borrower does not
refinance with us, the size of our servicing portfolio.
Therefore, any such changes in interest rates could harm the
business, results of operations and financial condition of our
finance, mortgage and insurance operations.
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Our hedging strategies may not be successful in mitigating
our risks associated with changes in interest rates. |
We employ various economic hedging strategies to mitigate the
interest rate and prepayment risk inherent in many of our
assets. Our hedging strategies rely on assumptions and
projections regarding our assets, liabilities, and general
market factors. If these assumptions and projections prove to be
incorrect, or if our hedges do not adequately mitigate the
impact of changes in interest rates or prepayment speeds, we may
incur losses that could adversely affect the business, results
of operations and financial condition of our finance, mortgage
and insurance operations.
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ResCaps ability to pay dividends and to prepay
subordinated debt obligations to GMAC is restricted by
contractual arrangements. |
In June 2005, we entered into an operating agreement with
GMAC and ResCap to create separation between GMAC and ourselves,
on the one hand, and ResCap, on the other hand. The operating
agreement restricts ResCaps ability to declare dividends
or prepay subordinated indebtedness to GMAC. As a result of
I-22
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
these arrangements, ResCap has obtained investment grade credit
ratings for its unsecured indebtedness that are separate from
our ratings and the ratings of GMAC.
The restrictions contained in the ResCap operating agreement
include the requirements that ResCaps stockholders
equity be at least $6.5 billion in order for dividends to
be paid to GMAC or our other affiliates, and that the cumulative
amount of any such dividends may not exceed 50% of ResCaps
cumulative consolidated net income, measured from July 1,
2005, through the time such dividend is paid, minus the
cumulative amount of certain prepayments of our 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, 2005, ResCap had consolidated
stockholders equity of approximately $7.5 billion.
The ResCap operating agreement further restricts ResCaps
ability to prepay subordinated debt owed to us or any of our
other affiliates. As of December 31, 2005, ResCap owed GMAC
$4.1 billion pursuant to a Subordinated
Note Agreement, under which interest is payable quarterly
and all outstanding principal is due at maturity on
September 30, 2015.
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We use estimates and assumptions in determining the fair
value of certain of our assets, in determining our allowance for
credit losses, in determining lease residual values and in
determining our reserves for insurance losses and loss
adjustment expenses. If our estimates or assumptions prove to be
incorrect, the business, results of operations and financial
condition of our finance, mortgage and insurance operations
could be materially adversely affected. |
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. We also use estimates
and assumptions in determining our allowance for credit losses
on our loan and contract portfolios, in determining the residual
values of leased vehicles and in determining our reserves for
insurance losses and loss adjustment expenses with respect to
reported losses and losses incurred but not reported. It is
difficult to determine the accuracy of our estimates and
assumptions, and our actual experience may differ materially
from these estimates and assumptions. A material difference
between our estimates and assumptions and our actual experience
may materially adversely affect the business, results of
operations and financial condition of our finance, mortgage and
insurance operations.
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General business and economic conditions of the industries
and geographic areas in which we operate affect the business,
results of operations and financial condition of our finance,
mortgage and insurance operations. |
Our business, results of operation and financial condition are
sensitive to general business and economic conditions in the
United States and in the markets in which we operate outside the
United States. A downturn in economic conditions resulting in
increased unemployment rates, increased consumer and commercial
bankruptcy filings or other factors that negatively impact
household incomes could decrease demand for our financing and
mortgage products and increase delinquency and loss. In
addition, because our credit exposures are generally
collateralized, the severity of losses is particularly sensitive
to a decline in used vehicle and residential home prices.
Some further examples of these risks include the following:
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A significant and sustained increase in gasoline prices could
decrease new and used vehicle purchases, thereby reducing the
demand for automotive retail financing and automotive wholesale
financing. |
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A general decline in residential home prices in the United
States could negatively affect the value of our mortgage loans
held for investment and our retained interests in securitized
mortgage loans. Such a decrease could also restrict our ability
to originate, sell or securitize mortgage loans and impact the
repayment of advances under our warehouse loans. |
I-23
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
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An increase in automotive labor rates or parts prices could
negatively affect the value of our automotive extended service
contracts. |
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Our business, results of operations and financial
condition may be materially adversely affected by decreases in
the residual value of off-lease vehicles. |
Our expectation of the residual value of a vehicle subject to an
automotive lease contract is a critical element used to
determine the amount of the lease payments under the contract at
the time that it is entered into by the customer. As a result,
to the extent that the actual residual value of the vehicle, as
reflected in the sales proceeds received upon remarketing, is
less than the expected residual value for the vehicle at lease
inception, GMAC will incur a loss on the lease transaction.
General economic conditions, the supply of off-lease vehicles
and new vehicle market prices heavily influence used vehicle
prices and thus the actual residual value of off-lease vehicles.
Our brand image, consumer preference for our products, and our
marketing programs that influence the new and used vehicle
market for our vehicles also influence lease residual values. In
addition, our ability to efficiently process and effectively
market off-lease vehicles impacts the disposal costs and
proceeds realized from the vehicle sales. Differences between
the actual residual values realized on leased vehicles and our
expectations of such values at contract inception could have a
negative impact on our business, results of operation and
financial condition.
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Fluctuations in valuation of investment securities or
significant fluctuations in investment market prices could
negatively affect revenues. |
Investment market prices in general are subject to fluctuation.
Consequently, the amount realized in the subsequent sale of an
investment may significantly differ from the reported market
value which could negatively affect our revenues. Fluctuation in
the market price of a security may result from perceived changes
in the underlying economic characteristics of the investee, the
relative price of alternative investments, national and
international events and general market conditions.
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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 our mortgage
subsidiaries operate, could materially adversely affect the
business, results of operations and financial condition of our
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 our mortgage subsidiaries
have significant business relationships with them. Proposals are
being considered in 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 that they receive from the
U.S. government and to limit the size of the mortgage loan
portfolios that they may hold. Any discontinuation of, or
significant reduction in, the operation of these
government-sponsored enterprises could materially adversely
affect our revenues and profitability of our mortgage business.
Also, any significant adverse change in the level of activity in
the secondary market or the underwriting criteria of these
government-sponsored enterprises could adversely affect our
business.
I-24
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
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GMAC may be required to repurchase contracts and provide
indemnification if GMAC breaches representations and warranties
from its securitization and whole loan transactions, which could
harm our business, results of operations 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 GMAC 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 GMAC 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 GMAC 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.
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Significant indemnification payments or contract, lease or
loan repurchase activity of retail contracts or leases or
mortgage loans could harm our business, results of operations
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 our business, results of
operations and financial condition or those of our mortgage
subsidiaries.
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A loss of contractual servicing rights could have a
material adverse effect on our 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 it has
securitized, and GMAC services the majority of the mortgage
loans that GMAC has sold in whole loan sales. In each case, GMAC
is paid a fee for its services, which fees in the aggregate
constitute a substantial revenue stream for us. In each case, we
are 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 or 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 our business, results of operations and financial condition
and/or those of our mortgage subsidiaries. For the year ended
December 31, 2005, our consolidated mortgage servicing fee
income was $1.6 billion.
I-25
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
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The regulatory environment in which GMAC operates could
have a material adverse effect on its business. |
Our domestic finance, mortgage and insurance operations are
generally 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 laws and supervision are primarily for
the benefit and protection of our customers, and not for the
benefit of investors in our securities, and could limit our
discretion in operating our 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 our business,
results of operations and financial condition.
Our finance, mortgage and insurance operations are also heavily
regulated in many jurisdictions outside the United States. For
example, certain of our foreign subsidiaries operate either as a
bank or a regulated finance company in the local markets and our
insurance operations are subject to various requirements in the
markets in which they operate. The varying requirements of these
jurisdictions may be inconsistent with U.S. rules and may
materially adversely affect our business or limit necessary
regulatory approvals, or if approvals are obtained we 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 us to
determine the exact regulatory requirements.
Our inability to remain in compliance with regulatory
requirements in a particular jurisdiction could have a material
adverse effect on our operations in that market with regard to
the affected product and on our reputation generally. There can
be no assurance that applicable laws or regulations will not be
amended or construed differently, that new laws and regulations
will not be adopted or that we will not be prohibited by local
laws from raising interest rates above certain desired levels,
any of which could materially adversely affect our business,
results of operations and financial condition.
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The worldwide financial services industry is highly
competitive. If we are 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, our 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 as more consumers are financing their
vehicle purchases, primarily in North America and Europe. Our
mortgage business faces significant competition from commercial
banks, savings institutions, mortgage companies and other
financial institutions. Our insurance business faces significant
competition from insurance carriers, reinsurers, third party
administrators, brokers and other insurance-related companies.
Many of our competitors have substantial positions nationally or
in the markets in which they operate. Some of our competitors
have lower cost structures, lower cost of capital and are less
reliant on securitization and sale activities. We face
significant competition in various areas, including product
offerings, rates, pricing and fees and customer service. If we
are unable to compete effectively in the markets in which we
operate, our business, results of operation 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, us or to automotive or mortgage
securitizations or whole loans, could negatively affect our
ability to price our securitizations and whole loan sales at
attractive rates. The result would be lower proceeds from these
activities and lower profits for GMAC.
I-26
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
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Item 1B. |
Unresolved Staff Comments |
None.
* * * * * *
The Corporation, excluding its Financing and Insurance
Operations, has approximately 335 locations operating in
approximately 40 states and approximately 200 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 involved primarily
in the testing of vehicles or the manufacturing of automotive
components and power products. In addition, the Corporation has
approximately 20 locations in Canada and assembly,
manufacturing, distribution, or warehousing operations in
approximately 55 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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Poland |
United Kingdom
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Sweden |
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Thailand |
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South Korea |
Brazil
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Belgium |
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Argentina |
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South Africa |
Mexico
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Spain |
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Portugal |
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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.
Additional information regarding worldwide expenditures for
plants and equipment is presented in Note 26 to the GM
Consolidated Financial Statements in Part II.
GMAC owns properties in southeastern Michigan that are leased to
GM. GMAC primarily operates its finance, insurance and mortgage
businesses from leased office space.
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Item 3. |
Legal Proceedings |
Material pending legal proceedings, other than ordinary routine
litigation incidental to the business, to which the Corporation
became, or was, a party during the year ended December 31,
2005, or subsequent thereto but before the filing of this
report, are summarized below:
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
Ltd. 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, et al. and Bell v.
General Motors.
I-27
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Legal Proceedings (continued)
The nearly identical complaints allege that the defendant
manufacturers, aided by the association defendants, conspired
among themselves and with their dealers to prevent the sale to
United States citizens of vehicles produced for the Canadian
market and sold by dealers in Canada. The complaints allege 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 United States citizens resulted in the payment of
supracompetitive prices by United States consumers. The
complaints, as amended, seek injunctive relief under federal
antitrust law and treble damages under federal and state
antitrust laws, but do not specify damages. The complaints
further allege unjust enrichment and violations of state unfair
trade practices act. On March 5, 2004, the federal court in
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 federal
court in Maine certified a nationwide class of buyers and
lessees under Federal Rule 23(b)(2) solely for injunctive
relief. The court expressly deferred to an unspecified later
time a decision on plaintiffs Federal Rule 23(b)(3)
motion to certify a class for damages under the laws of as many
as 23 states and the District of Columbia. No determination
has been made to certify any of these cases as a damages class
action under federal or state law. General Motors believes its
actions have been lawful and intends to vigorously defend these
cases.
* * * * * * *
Health Care Litigation
UAW, et al. v. General Motors
Corporation On October 18, 2005, the UAW
and two hourly retirees filed a putative class action in the
U.S. District Court for the Eastern District of Michigan on
behalf of hourly retirees, spouses and dependants, seeking to
enjoin unilateral modifications by GM to hourly retiree
health-care benefits, claiming that such benefits are
unalterably vested. GM maintains that retiree health-care
benefits are not vested and that it has expressly reserved the
right to make unilateral changes. On October 29, 2005, GM
and the UAW entered into a memorandum of understanding that
provided for a number of changes to health care coverage for
both UAW represented active employees and UAW retirees. On
October 31, 2005, plaintiffs filed an amended
complaint adding four additional retirees and one surviving
spouse as putative class representatives. The lawsuit followed
months of negotiations between GM and the UAW regarding changes
to retiree health-care benefits and is the initial step in
implementing this agreement.
On December 16, 2005, GM, the UAW and the putative class
representatives finalized a settlement agreement and submitted
motions to the court for certification of the class, preliminary
approval of the final settlement and approval of the proposed
notice to class members. At a hearing on December 22, 2005,
the court granted the motion for class certification,
preliminarily approved the final settlement agreement and
directed that proposed notice of the settlement be mailed to
class members. That mailing was complete on December 30,
2005. A final hearing to determine whether the settlement
agreement is fair, reasonable and adequate with respect to the
class was held on March 6, 2006. GM is awaiting a final
determination on the settlement agreement by the court.
* * * * * * *
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., Vice Chairman, John Devine,
Treasurer, Walter Borst and Chief Accounting Officer, Peter
Bible, Folksam Asset Management, et.al. v. General
Motors, et al. Plaintiffs purported to bring the claim
on behalf of purchasers of GM debt and/or equity
I-28
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Legal Proceedings (continued)
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 alleges 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 alleges that GMs cash flows during the class
period were overstated based on the reclassification
of certain cash items described in the Corporations 2004
Form 10-K. The
reclassification involves 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 2002 and 2003. The
complaint also alleges misrepresentations relating to
forward-looking statements of the Corporations 2005
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 Motors,
et al. The consolidated suit is now called In re
General Motors Securities Litigation.
On November 18, 2005, plaintiffs in the Folksam case
filed an amended complaint, which adds several additional
investors as plaintiffs, extends the end of the class period to
November 9, 2005, and names as additional defendants three
current and one former member of GMs audit committee, as
well as GMs independent accountants, Deloitte &
Touche LLP. In addition to the claims asserted in the original
complaint, the amended complaint adds a claim against defendants
Wagoner and Devine for rescission of their bonuses and incentive
compensation during the class period. It also includes 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 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. Defendants have not yet
filed their response to the complaints, but intend to vigorously
defend these actions. On January 17, 2006, the court made
provisional designations of lead plaintiff and lead counsel,
which designations were made final on February 6, 2006.
On November 21, 2005, Teresa and Joseph Paul Sacco filed a
purported class action, Sacco, et al. v. General
Motors Corporation, et al. On December 21, 2005,
Charles Rosen filed a purported class action, Rosen,
et al. v. General Motors Corporation, et al.
Both of these actions were filed in the U.S. District Court
for the Eastern District of Michigan against GM, G. Richard
Wagoner, Jr., John F. Smith, Jr. (in Rosen
only), Peter R. Bible, and John M. Devine. Plaintiffs
purported to bring claims on behalf of purchasers of GM stock
during the period April 18, 2001 through November 9,
2005. The complaints alleged that defendants violated
Section 10(b) and, with respect to the individual
defendants, Section 20(a) of the Exchange Act. The
complaints focused on certain statements regarding the
Corporations financial performance. The complaints did not
specify the amount of damages sought, and defendants had no
means to estimate damages the plaintiffs sought based upon the
limited information available in the complaints. On
January 6, 2006, the plaintiffs in Sacco filed a
notice of voluntary dismissal. On February 16, 2006, the
plaintiffs in Rosen filed a notice of voluntary dismissal.
* * * * * * *
Shareholder Derivative Suits
On November 10, 2005, Albert Stein filed a purported
shareholder derivative action in 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 alleges 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 seeks damages based on defendants
I-29
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Legal Proceedings (continued)
alleged breaches and an order requiring defendants to indemnify
the Corporation for any future litigation losses. Plaintiffs
claim that demand on the GM board to bring suit itself
(ordinarily a prerequisite to suit under Delaware law) is
excused because it would be futile. The complaint
does 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 is 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. Counsel for plaintiffs
in the Stein, Gluckstern and Orr actions have
filed a motion to consolidate these three actions, to appoint
lead plaintiff and to approve selection of lead counsel. The
directors have not yet filed their response to the Stein,
Gluckstern and Orr complaints, but intend to
vigorously defend these actions.
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
alleges that defendants breached their 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 seeks damages
based on defendants alleged breaches and an order
requiring defendants to indemnify the Corporation for any future
litigation losses. Plaintiffs claim that demand on the GM board
is excused because it would be futile. The complaint
does 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 officer not on the board named in these cases have not
yet filed their responses to the Bouth or
Salisbury complaints, but intend to vigorously defend
these actions.
* * * * * * *
Motion for Consolidation and Transfer to the Eastern District
of Michigan
On December 13, 2005, defendants in In re General Motors
Securities Litigation (previously Folksam Asset
Management v. General Motors, et al. and
Galliani v. General Motors, 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.
The Panel has set this motion for hearing on March 30, 2006.
* * * * * * *
Bondholder Class Actions
On November 29, 2005, Stanley Zielezienski filed a
purported class action, Zielezienski, et al. v.
General Motors, et al. The action was filed in the
Circuit Court for Palm Beach County, Florida, against GM, GMAC,
I-30
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Legal Proceedings (continued)
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 names certain underwriters of GMAC debt securities as
defendants. The complaint alleges 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 alleges
material misrepresentations in certain GMAC financial statements
incorporated by reference with GMACs 2003
Form S-3
Registration Statement and Prospectus. More specifically, the
complaint alleges 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 does 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. Defendants have not yet
filed their response to the complaints, but intend to vigorously
defend this action. On January 6, 2006, defendants named in
the original complaint removed this case to the
U.S. District Court for the Southern District of Florida.
On February 6, 2006, plaintiff filed a motion to remand the
case to Florida state court, which is currently being briefed by
the parties. On March 28, 2006, the parties submitted a
proposed stipulated order withdrawing plaintiffs motion to
remand and transferring the case to the United States District
Court for the Eastern District of Michigan. If this order is
entered, the parties have agreed to seek to have this case
consolidated with the J&R Marketing and Mager
cases described below.
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 alleges
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,
inclusive. The complaint alleges 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 does 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. Defendants have not yet filed their response to the
complaint, but intend to vigorously defend this action. 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 is substantively
identical to the J&R Marketing case described above.
Defendants have not yet filed their response to the complaint,
but intend to vigorously defend this action. 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.
All of the above cases are in preliminary phases. No
determination has been made that the shareholder and bondholder
cases can be maintained as class actions or that the shareholder
derivative actions can proceed
I-31
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Legal Proceedings (continued)
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.
* * * * * * *
Asbestos Litigation
Like most domestic and foreign automobile manufacturers, over
the years GM has used some brake 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 being 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 almost always identify numerous other
potential sources for the claimants alleged exposure to
asbestos, which do not involve GM or even asbestos-containing
friction products, and many of these other potential sources
would place users at much greater risk. The vast majority 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
are being asserted against GM, representing a significantly
lower exposure than the automotive friction product claims. Like
other locomotive manufacturers, GM used a limited amount of
asbestos in locomotive brakes and in the insulation used in the
manufacturing of 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
almost always identify numerous other potential sources for the
claimants alleged exposure to asbestos, which do not
involve GM or even locomotives. Many of these claimants do not
have an asbestos-related illness and may never develop one. In
addition, like many other manufacturers, 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
almost always identify numerous other potential sources for the
claimants alleged exposure to asbestos which do not
involve GM. The vast majority of these claimants do not have an
asbestos-related illness and may never develop one.
While GM has resolved many of these cases over the years and
continues to do so for conventional strategic litigation reasons
(avoiding defense costs and possible exposure to runaway
verdicts), GM, as stated above, believes the vast majority of
such claims against GM are without merit. Only a small
percentage of the claims pending against GM allege the
contraction of a malignant disease associated with asbestos
exposure. GM intends to vigorously defend these actions whenever
possible. 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 entirely eliminates the possibility that railroad workers
could maintain state law claims against GM.
As previously reported, GMs annual expenditures associated
with the resolution of these claims decreased in 2004 after
increasing in nonmaterial amounts in prior years. They remained
approximately the same in 2005, but the amount expended in any
year is highly dependent on the number of claims filed, the
amount of pretrial proceedings conducted, and the number of
trials and settlements which occur during the period.
* * * * * * *
I-32
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Legal Proceedings (continued)
ERISA Class Actions
In May 2005, the U.S. District Court for the Eastern
District of Michigan consolidated under the case caption In
re General Motors ERISA Litigation three related Employment
Retirement Income Security Act (ERISA) purported class
actions 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. 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, General Motors Investment Management
Corporation (GMIMCo) and State Street Bank. The complaint
alleges 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
purport 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 seek to recover losses
allegedly suffered by the plans. The complaint does not specify
the amount of damages sought and defendants have no means at
this time to estimate damages the plaintiffs will seek.
Defendants filed a motion to dismiss the complaint in September
2005. The court heard arguments on the defendants motion
on February 1, 2006, but has not yet ruled on the motion.
No determination has been made that the case can be maintained
as a class action. General Motors intends to vigorously defend
this action.
In addition, GMIMCo, a wholly-owned subsidiary of GM, 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. On September 13, 2005, the
cases were consolidated under the case caption In re Delphi
ERISA Litigation and have been transferred to the Eastern
District of Michigan for coordinated pretrial proceedings with
other Delphi shareholder 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 Bank and
Trust, 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. 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. GMIMCo
intends to defend these cases vigorously.
* * * * * * *
Hughes Split-Off Class Actions
On April 11 and 14, 2003, two purported class actions,
Young v. Pearce, et al. and
Silverstein v. Pearce, et al., were filed in
Delaware Chancery Court on behalf of owners of GM Class H
shares against Hughes Electronics Corporation, General Motors
Corporation, News Corporation and the Hughes directors. 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 Hughes and
GM directors. Two purported stockholder class actions which name
only General Motors and the GM directors have been brought in
Delaware Chancery Court challenging the agreements with News
Corp., Wyser-Pratte Management Company v. General Motors
Corporation, et al., which was filed April 18,
2003, and Robert LaMarche v. General Motors Corporation,
et al., which was filed April 28, 2003. The
Delaware cases were consolidated in the Delaware Chancery Court
and the California cases were consolidated in state court in Los
Angeles and plaintiffs in both cases have filed consolidated
complaints.
I-33
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Legal Proceedings (concluded)
The Delaware cases allege that GM and the GM directors performed
ultra vires acts and that the GM directors breached their
fiduciary duties by approving a transaction that is more
favorable to the holders of GM
$12/3
par value common stock than the holders of GM
Class H common stock. They claim that the holders of GM
Class H common stock were treated unfairly because
(1) GM received mostly cash for its shares while the
holders of GM Class H common stock received News Corp.
American Depositary Shares (ADSs) that may fluctuate in value,
(2) GM received a $275 million payment from Hughes,
(3) a substantial number of shares of GM Class H
common stock were contributed to various GM employee benefit
plans prior to announcement of the deal to improve the prospects
of shareholder approval, and (4) the transaction was
announced just prior to the announcement of improved financial
results at Hughes and PanAmSat to make it appear that holders of
GM Class H common stock would receive a premium that would
exceed the 20% recapitalization premium provided for in the GM
restated certificate of incorporation, as amended. The
California cases allege that the transactions involving News
Corp.s acquisition of a 34% interest in Hughes provides
benefits to GM not available to all GM Class H
shareholders, in violation of fiduciary duties. The new
consolidated complaints are similar to the original complaints,
except that the Delaware complaint adds allegations challenging
the adequacy of the disclosures in the consent solicitation and
only names GM and members of the GM board of directors as
defendants. Plaintiffs in both cases seek unspecified damages.
GMs motion to dismiss the Delaware cases was granted by
the Delaware Chancery Court on May 4, 2005. On
March 20, 2006, the Delaware Supreme Court unanimously
affirmed the dismissal of the consolidated Delaware cases. In
the California cases, the claims against directors without any
connection to California have been dismissed and the
consolidated case has been stayed pending a ruling on the motion
to dismiss the Delaware consolidated complaint. GM and the
director defendants intend to vigorously defend the lawsuits.
* * * * * * *
John Evans and Evans Cooling System v. General Motors
On March 15, 2006, the Connecticut Supreme Court reversed
and remanded to the trial court for a jury trial a judgment in
favor of GM alleging trade secret misappropriation. Plaintiffs
John Evans and Evans Cooling Systems, Inc. commenced litigation
against GM in January 1994 comprising separate suits for patent
infringement and trade secret misappropriation. In the patent
case, summary judgment for GM was affirmed on appeal. In the
trade secret case, following a four-week trial in 2003, the
presiding judge ruled for GM and plaintiffs appealed. Plaintiffs
seek relief in excess of $12 billion. The trade secret
lawsuit involves the so-called reverse flow cooling
system employed on GMs Gen II (LT1) engine, which was
first introduced on the 1992 Corvette and later used on other
rear wheel drive passenger cars. The Gen II engine has
since been replaced by the Gen III engine, which utilizes a
conventional cooling system not involved in the litigation
(although plaintiffs may seek to expand the case to encompass
the Gen III engine on remand). GM intends to vigorously
defend this case on re-trial.
* * * * * * *
|
|
Item 4. |
Submission of Matters to a Vote of Security Holders |
None
I-34
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 4A. |
Executive Officers of the Registrant |
The names and ages, as of March 15, 2006, of all executive
officers of General Motors and their positions and offices with
General Motors are as follows:
|
|
|
Name and (Age) |
|
Positions and Offices |
|
|
|
G. Richard Wagoner, Jr. (53)
|
|
Chairman and Chief Executive Officer |
John M. Devine (61)
|
|
Vice Chairman |
Frederick A. Henderson (47)
|
|
Vice Chairman and Chief Financial Officer |
Robert A. Lutz (74)
|
|
Vice Chairman Global Product Development |
Thomas A. Gottschalk (63)
|
|
Executive Vice President Law and Public Policy, and
General Counsel |
The following information pertains to all other officers of
General Motors who file reports pursuant to Section 16(b)
of the Exchange Act:
|
|
|
Name and (Age) |
|
Positions and Offices |
|
|
|
Troy A. Clarke (50)
|
|
Group Vice President and President, GM Asia Pacific |
Gary L. Cowger (58)
|
|
Group Vice President, Global Manufacturing and Labor Relations |
Eric A. Feldstein (46)
|
|
Group Vice President and Chairman, General Motors Acceptance
Corporation |
Carl-Peter Forster (51)
|
|
Group Vice President and President, GM Europe |
Maureen Kempston Darkes (57)
|
|
Group Vice President and President, GM Latin America, Africa and
Middle East |
Thomas G. Stephens (57)
|
|
Group Vice President, GM Powertrain |
Ralph J. Szygenda (57)
|
|
Group Vice President and Chief Information Officer |
Bo I. Andersson (50)
|
|
Vice President, Global Purchasing and Supply Chain |
Kathleen S. Barclay (50)
|
|
Vice President, Global Human Resources |
Lawrence D. Burns (54)
|
|
Vice President, Research & Development and Strategic
Planning |
Steven J. Harris (60)
|
|
Vice President, Global Communications |
Peter R. Bible (47)
|
|
Chief Accounting Officer |
Walter G. Borst (44)
|
|
Treasurer |
Paul W. Schmidt (61)
|
|
Controller |
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 in conjunction with 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, President and Chief Operating Officer of General
Motors. On June 1, 2000, Mr. Wagoner
I-35
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Executive Officers of the Registrant
(continued)
was named Chief Executive Officer and became Chairman of the
Board of Directors on May 1, 2003. He is currently a
director of GMAC.
John M. Devine was named Vice Chairman and Chief Financial
Officer of General Motors, effective January 1, 2001. He
relinquished the title of chief financial officer in January
2006, but he continues to serve as Vice Chairman, focusing on
implementing the Corporations North America turnaround
plan and other strategic issues. Mr. Devine was Chairman
and Chief Executive Officer of Fluid Ventures, LLC, immediately
prior to his GM appointment.
Frederick A. Henderson became Vice Chairman and Chief Financial
Officer for General Motors on January 1, 2006. Prior to his
promotion, Henderson was a GM Group Vice President and Chairman
of GME. Mr. Henderson has been associated with General
Motors since 1984, and from June 1, 2000 he served as Group
Vice President and President of GMLAAM. 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 President 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.
Thomas A. Gottschalk 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.
He retains the General Counsel responsibility in his current
position and is also responsible for the Office of the Secretary.
Troy A. Clarke was appointed 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 of Global
Manufacturing and Labor Relations in April 2005 and had
previously been president of 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. He
was named GM Group Vice President and President of GMNA on
November 13, 2001.
Eric A. Feldstein has been associated with General Motors since
1981. Mr. Feldstein was named GM Vice President and
Treasurer in 1997 and GM Vice President of Finance and Treasurer
in 2001. He was named GM Group Vice President and Chairman
of GMAC in November 2002.
Carl-Peter Forster has been GM Vice President and President of
GME since June 2004 and was appointed GM Group Vice
President effective January 1, 2006. 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.
Maureen Kempston-Darkes has been associated with General Motors
since 1975. She was named GM Group Vice President and
President of GMLAAM effective January 1, 2002. She is a
member of the board of directors of Falconbridge Limited,
Thomson Corporation, and the Canadian National Railway.
Thomas G. Stephens is the Group Vice President responsible for
GM Powertrain. He was appointed Vice President of Vehicle
Integration in January 2001 and held this position prior to
being named Group Vice President for GM Powertrain in 2001.
I-36
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Executive Officers of the Registrant
(concluded)
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.
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.
Lawrence D. Burns has been associated with General Motors since
1969 and has been Vice President of Research &
Development and Strategic Planning since 1998.
Steven J. Harris was elected General Motors Vice President in
charge of 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.
Peter R. Bible joined General Motors as Chief Accounting Officer
in December 1996.
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.
Paul W. Schmidt has been associated with General Motors since
1969. He was named Controller in 2002. Mr. Schmidt had been
executive-in-charge of
GMs investor relations since August 2001. Prior to that,
he was
executive-in-charge of
GMNA Finance since 1994. Mr. Schmidt is a member of the
board of directors of Lennox Corporation.
I-37
PART II
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 5. |
Market for the Registrants Common Equity and Related
Stockholder Matters |
General Motors lists its common stock on the stock exchanges
specified on the cover page of this
Form 10-K under
the trading symbol GM.
As of December 31, 2005, there were 384,375 holders of
record of GM
$12/3
par value common stock. As of December 31, 2004, there were
405,272 holders of record of GM
$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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 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
|
|
$ |
55.55 |
|
|
$ |
50.04 |
|
|
$ |
46.93 |
|
|
$ |
43.29 |
|
|
Low
|
|
$ |
44.72 |
|
|
$ |
42.88 |
|
|
$ |
40.53 |
|
|
$ |
36.90 |
|
|
|
(1) |
New York Stock Exchange composite interday prices as listed in
the price history database available at www.NYSEnet.com. |
On February 6, 2006, GMs Board of Directors declared
a quarterly cash dividend of $0.25 per share, representing
a reduction from the quarterly rate of $0.50 per share that
had been followed since the first quarter of 1997. GMs
Dividend Policy is described in the Managements Discussion
and Analysis of Financial Condition and Results of Operations
section below.
The table below contains information about securities authorized
for issuance under equity compensation plans. The features of
these plans are described further in Note 24 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)
|
|
|
84,130,586 |
|
|
$ |
53.11 |
|
|
|
4,901,267 |
|
Equity compensation plans not approved by security holders(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Motors 1998 Salaried Stock Option Plan (GMSSOP)
|
|
|
27,213,635 |
|
|
$ |
55.19 |
|
|
|
771,326 |
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
111,344,221 |
|
|
$ |
53.62 |
|
|
|
5,672,593 |
|
|
|
|
|
|
|
|
|
|
|
II-1
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Market for the Registrants Common Equity and Related
Stockholder Matters (concluded)
|
|
(1) |
Excludes securities reflected in the first column, Number
of securities to be issued upon exercise of outstanding options,
warrants and rights. |
|
(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
General Motors 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, 2005.
II-2
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 6. |
Selected Financial Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31 | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(Dollars in millions except per share amounts) | |
Total net sales and revenues
|
|
$ |
192,604 |
|
|
$ |
193,517 |
|
|
$ |
185,837 |
|
|
$ |
177,867 |
|
|
$ |
169,051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$ |
(10,458 |
) |
|
$ |
2,804 |
|
|
$ |
2,899 |
|
|
$ |
1,813 |
|
|
$ |
1,041 |
|
(Loss) from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(219 |
) |
|
|
(239 |
) |
|
|
(621 |
) |
Gain from sale of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
1,179 |
|
|
|
|
|
|
|
|
|
Cumulative effect of accounting change
|
|
|
(109 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)(1)
|
|
$ |
(10,567 |
) |
|
$ |
2,804 |
|
|
$ |
3,859 |
|
|
$ |
1,574 |
|
|
$ |
420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$12/3
par value common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (losses) per share from continuing operations
before cumulative effect of accounting change
|
|
$ |
(18.50 |
) |
|
$ |
4.97 |
|
|
$ |
5.17 |
|
|
$ |
3.24 |
|
|
$ |
1.89 |
|
|
Basic earnings (losses) per share from discontinued operations
|
|
|
|
|
|
|
|
|
|
$ |
2.14 |
|
|
$ |
(0.16 |
) |
|
$ |
(0.42 |
) |
|
Basic (losses) per share from cumulative effect of accounting
change
|
|
$ |
(0.19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (losses) per share from continuing operations
before cumulative effect of accounting change
|
|
$ |
(18.50 |
) |
|
$ |
4.94 |
|
|
$ |
5.09 |
|
|
$ |
3.23 |
|
|
$ |
1.87 |
|
|
Diluted earnings (losses) per share from discontinued operations
|
|
|
|
|
|
|
|
|
|
$ |
2.11 |
|
|
$ |
(0.16 |
) |
|
$ |
(0.43 |
) |
|
Diluted (loss) per share from cumulative effect of accounting
change
|
|
$ |
(0.19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per share
|
|
$ |
2.00 |
|
|
$ |
2.00 |
|
|
$ |
2.00 |
|
|
$ |
2.00 |
|
|
$ |
2.00 |
|
GMs Class H common stock(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (losses) per share from discontinued operations
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(0.22 |
) |
|
$ |
(0.21 |
) |
|
$ |
(0.55 |
) |
|
Diluted earnings (losses) per share from discontinued operations
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(0.22 |
) |
|
$ |
(0.21 |
) |
|
$ |
(0.55 |
) |
|
Cash dividends declared per share
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total assets
|
|
$ |
476,078 |
|
|
$ |
479,921 |
|
|
$ |
448,819 |
|
|
$ |
369,346 |
|
|
$ |
322,637 |
|
Notes and loans payable
|
|
$ |
285,750 |
|
|
$ |
300,279 |
|
|
$ |
271,756 |
|
|
$ |
200,168 |
|
|
$ |
165,361 |
|
Stockholders equity
|
|
$ |
14,597 |
|
|
$ |
27,360 |
|
|
$ |
24,903 |
|
|
$ |
6,412 |
|
|
$ |
19,467 |
|
Reference should be made to the notes to GMs consolidated
financial statements and Managements Discussion and
Analysis of Financial Condition and Results of Operations.
This selected financial data should also be read in conjunction
with Part II, Item 6 (Selected Financial Data),
Item 7 (MD&A) and Item 8 (Financial Statements and
Supplementary Data) of the GMAC Annual Report on
Form 10-K for the
period ended December 31, 2005, filed separately with the
SEC, which is incorporated into this document by reference.
|
|
(1) |
On January 1, 2002, the Corporation implemented Statement
of Financial Accounting Standards (SFAS) No. 142
Goodwill and Other Intangible Assets, which ceased
the amortization method of accounting for goodwill and changed
to an impairment only approach. Accordingly, goodwill is no
longer amortized and is tested for impairment at least annually.
Effective January 1, 2003, the Corporation |
II-3
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Selected Financial Data (concluded)
|
|
|
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,
the Corporation began consolidating certain variable interest
entities to conform to FASB Interpretation No. (FIN) 46,
Consolidation of Variable Interest Entities. As of
December 31, 2005, the Corporation recorded a pre-tax asset
retirement obligation of $181 million in accordance with
the requirements of 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. |
|
(2) |
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 ADSs. All
shares of GM Class H common stock were then cancelled. See
Note 2 to the Consolidated Financial Statements. |
* * * *
II-4
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 7. |
Managements Discussion and Analysis of Financial
Condition and Results of Operations |
Overview
GM is primarily engaged in automotive production and marketing
and financing and insurance operations. GM designs,
manufactures, and markets vehicles worldwide, having its largest
operating presence in North America. GMs finance and
insurance operations primarily relate to General Motors
Acceptance Corporation (GMAC), a wholly owned subsidiary of GM,
which provides a broad range of financial services, including
automotive finance and mortgage products and services.
In 2005, global industry vehicle sales to retail and fleet
customers were 64.7 million units, representing a 3.7%
increase over 2004. We expect industry sales to be between
65.5 million and 66 million units in 2006. GMs
worldwide vehicle sales for 2005 were 9.2 million units
compared to 9.0 million units in 2004. This represents a
global market share of 14.2% for 2005, down slightly from
GMs 2004 global market share of 14.4%. In 2005, GM posted
market share gains in three of its four automotive regions, with
the exception of GM North America (GMNA) where GMs
market share declined. Over the past five years, the global
automotive industry has experienced consistent
year-to-year increases,
growing approximately 13% from 2001 to 2005. Much of this growth
is attributable to the continued development of emerging markets
such as China.
In the United States, where GM has its largest presence, 2005
industry vehicle sales totaled 17.5 million units,
representing a slight increase from the 2004 U.S. sales
level of 17.3 million units. While the U.S. industry
has experienced annual sales volumes of approximately
17 million units for the past eight years, management
believes that competition among automotive manufacturers
involving price, incentive promotions, and financing offers has
been a very important factor in maintaining this level of
industry sales. GMs market share in the United States was
25.9% for 2005, down from 27.2% in 2004, due in part to declines
in sales of full-size utilities, mid sized utilities and mid
sized cars.
The overall U.S. industry-wide proportion of light trucks
as a percentage of total U.S. vehicle sales has continued
to increase over the past several decades. Light trucks include
all pickups, vans, utilities, and cross over utilities derived
from car platforms. In 1981, light trucks accounted for only 19%
of the overall U.S. vehicle market. By 1999, light trucks
had surpassed cars to take over 50% of the market for the first
time. Despite the negative influence of fuel prices, in 2005
light trucks, including the growing segment of cross over
vehicles, still accounted for 56% of the U.S. vehicle
market, compared to 56% and 55% respectively in 2004 and 2003.
GMs consolidated net sales and revenues fell to
$192.6 billion in 2005 from $193.5 billion in 2004. GM
incurred a consolidated net loss in 2005 of $10.6 billion,
compared to net income of $2.8 billion in 2004. The
unfavorable results were driven primarily by losses at GMNA.
GMACs net income in 2005 declined to $2.4 billion,
compared to $3.0 billion in 2004.
GMs results of operations in 2005 were most significantly
affected by the following trends and significant events:
|
|
|
GMNA Market Share and Product Mix |
While industry-wide North American vehicle sales grew slightly,
GMNAs vehicle production declined 7% in 2005 to
4.9 million units due in part to GMs efforts to
reduce high dealer inventory levels, and its market share
decreased by 1.2 percentage points. Compounding this decline in
volumes was the effect of unfavorable product mix, whereby GM
had fewer sales of higher margin large trucks and large cars,
due to a combination of volatility of consumer demand and the
anticipated introduction of new truck models to replace products
at the end of their lifecycles.
II-5
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
|
|
|
Financial Results (concluded) |
|
|
|
Delphi Chapter 11 Proceedings |
For the fourth quarter of 2005, GM recorded a charge of
$5.5 billion ($3.6 billion after tax) as an estimate
of contingent exposures relating to the Chapter 11 filing of
Delphi Corporation (Delphi), including under the benefit
guarantees for certain former GM U.S. employees who
transferred to Delphi in connection with its 1999 spin-off from
GM. GM believes that the range of these contingent exposures is
between $5.5 billion and $12 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.
|
|
|
GMNA Restructuring and Global Asset Impairments |
As a result of the North American manufacturing restructuring
actions announced in November 2005, GM recorded an after-tax
charge of $1.7 billion. This charge includes
$1.2 billion associated with the employees and
$455 million for the non-cash write-down of property,
plants and equipment that we currently believe are likely to be
impacted by the actions. The employee costs represent our best
estimate of the wage and benefits costs that we will incur 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 to be paid thereafter. We
have been discussing these provisions with the International
Union, United Automobile, Aerospace and Agricultural Implement
Workers of America (UAW) in an effort to develop an agreed upon
accelerated attrition program that, among other things, would
not require or entitle participants to also be eligible for the
JOBS bank. As part of these discussions, on March 22, 2006,
GM, Delphi and the UAW reached a tentative agreement intended to
reduce the number of U.S. hourly employees through an
accelerated attrition program. The agreement is subject to
approval by the bankruptcy court of Delphis participation
in the agreement. If so approved, the agreement will provide for
a combination of early retirement programs and other incentives
designed to help reduce employment levels at GM, which may have
the effect of reducing the number of employees that are or will
be in the JOBS bank. This attrition program is expected to
result in additional charges being recorded in 2006 as employees
at locations that were not included in the North American
manufacturing restructuring actions announced in November 2005
agree to participate. Under the agreement, GM and the UAW also
agreed to discuss other options to address remaining surplus
people at specific locations and all areas in which GM and the
UAW can work together to close GMs competitive gap with
its foreign competition and reduce GMs structural costs.
In addition, GMs results reflect the write-down of the
Corporations investment in Fuji Heavy Industries, Ltd.
(FHI) of $717 million after tax (considering the original
impairment of $788 million and a gain on sale of
$71 million due to the appreciation of the stock following
the write-down). Furthermore, GM recorded after-tax charges of
$872 million for plant and facility asset impairments
within its automotive regions.
|
|
|
Health-Care Cost Escalation |
Health care in the United States is one of our biggest
competitive challenges, and if we do not make progress on
structurally fixing this issue, it could be a long-term threat
to our company. In 2005, GM was challenged with the compound
impact of escalating health-care cost rates and falling discount
rates used to determine future health-care liabilities. As a
result of these factors, in 2005, GMs U.S. other
postretirement employee benefits (OPEB) expense, consisting of
retiree health care and life insurance, increased to
$5.3 billion, an increase of more than $1 billion from
2004.
The size of GMs 2005 loss, most of which related to its
North American operations, clearly demonstrates the need for
significant changes in GMs business model. A large part of
these losses arise from GMs huge legacy cost burden and
the difficulty of adjusting structural costs in line with
falling revenue. Legacy costs are
II-6
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Strategy (continued)
primarily related to the cost of benefits provided to retired
employees and their dependents, and costs associated with
employees and their dependents of businesses divested by GM.
Structural costs are those costs that do not vary with
production and include all costs other than material, freight,
and policy and warranty costs. Structural costs include, among
other things, the cost of unionized employees.
The top priority for GM is to return its North American
operations to profitability and positive cash flow as soon as
possible. GM has been systematically and aggressively
implementing its four-point turnaround plan for GMNAs
business. The four elements of this plan include:
|
|
|
|
|
Product Excellence continue to raise the bar in the
execution of great cars and trucks |
|
|
|
Revitalize Sales and Marketing Strategy offer
customers the best value in the industry |
|
|
|
Accelerate Cost Reductions and Quality Improvements
improve GMs cost position and reduce our breakeven point
in response to an intensely competitive environment |
|
|
|
Address Health Care Burden reduce legacy cost
disadvantages |
To date GM has been focusing on restructuring its operations,
and has already taken a number of steps to improve its
performance in a more competitive global environment. A key
driver of these efforts is the globalization of our principal
business functions, including more aggressive engineering,
product development, manufacturing and purchasing. In addition,
we backed up our commitment to great cars and trucks by raising
our related capital expenditures in 2005, and we intend to
maintain this commitment going forward. We are endeavoring to
revitalize our sales and marketing strategy to more clearly
focus customer recognition on our brands, align our distribution
channels, and refocus our marketing efforts on the quality of
our cars and trucks and the value they offer in price, features
and performance.
In the health-care area, GM announced in October 2005 a
historic agreement with the UAW that will, among other things,
reduce its health-care obligations for retired hourly employees.
In February 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. In
March 2006, GM announced the details of its plan to
substantially alter the pension benefits for current
U.S. salaried employees, under which GM will freeze accrued
benefits in the current plan and implement a reduced defined
benefit plan for some salaried employees and a new defined
contribution plan for the other salaried employees.
As mentioned above, GM announced a North American restructuring
plan in November 2005 that will impact multiple manufacturing
facilities. This GMNA restructuring initiative will reduce
excess capacity by one million units and will reduce
manufacturing employment levels by approximately 30,000
employees. As a result of this initiative and other cost
reduction actions, we currently expect to reduce structural
costs in North America by an average of $7 billion per year
on a running rate basis by the end of 2006 and to reduce net
material costs by $1 billion in 2006. We expect $4 billion
of the structural cost reduction to be realized during calendar
year 2006. Further information about these matters may be found
in the GM North American Restructuring Plan discussion starting
on page II-20. GMs objective is to reduce its global
structural costs to 25% of automotive revenue by 2010, down from
its current level of approximately 34%. In order to achieve this
objective, we need to go beyond the GMNA turnaround plan and
accomplish capacity rationalization and other efficiency
measures on a global basis.
Our management believes that the four elements of the GMNA
turnaround plan, as well as global benchmarking of best
competitive practices for major automotive processes and
GMs economy of scale, make this 25% global structural cost
reduction target a realistic objective. We believe that managing
our business on a global, functional basis will enable us to
leverage product development spending, consolidate our brand
structure, share best practices throughout the Corporation, and
optimize our manufacturing, supply and engineering footprint.
Accomplishing this structural cost reduction is critical to
GMs future success.
II-7
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Strategy (concluded)
In addition to the GMNA turnaround activities, GM plans to
continue to address other important strategic issues, including:
|
|
|
|
|
The bankruptcy of our largest supplier, Delphi. This situation
presents significant risks to GM, including disruption in the
supply of automotive systems, components, and parts, GM
receiving only a portion of amounts owed by Delphi to GM, and
obligations in excess of amounts recognized by GM in 2005 in
connection with benefit guarantees. This situation also presents
opportunities for GM, including 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 as a result of the
restructuring of Delphi through the Chapter 11 process. |
|
|
|
The pursuit of a possible sale of a controlling interest in GMAC
with the goal of delinking GMACs credit rating from
GMs credit rating and renewing GMACs access to low
cost financing, and the exploration of strategic and structural
alternatives for ResCap. |
|
|
|
Negotiations with the UAW in connection with the expiration of
our collective bargaining agreement in September 2007. |
|
|
|
Restructuring initiatives in other areas, including Brazil,
Europe, and Australia. |
GM believes that it has sufficient balance sheet strength to
fund its short- and medium-term cash needs and implement its
four-point turnaround plan and other strategic objectives under
reasonably foreseeable circumstances. Over the long term, we
believe that GMs ability to meet its capital requirements
will primarily depend on its successful execution of its
four-point turnaround plan and the return of its North American
operations to profitability and positive cash flow, and its
ability to execute the globalization of its principal business
functions.
As of December 31, 2005, GMs Automotive and Other
operations had cash, marketable securities, and readily
available assets of the Voluntary Employees Beneficiary
Association (VEBA) trust totaling $20.4 billion, and its
debt is principally long-term. We note that our cash balance
varies from time to time during the calendar year and, in
particular, our cash balance is generally materially lower
during the third quarter as a result of product changeovers and
the annual shutdown of our North American manufacturing
facilities for approximately two weeks during that period. GMAC
continues to maintain adequate liquidity with cash reserve
balances at December 31, 2005 of $19.7 billion,
including $4.2 billion in marketable securities with
maturities greater than 90 days. In addition, GM has
recently implemented a number of cost-cutting and cash-saving
initiatives intended to help maintain adequate liquidity,
including the recent reduction of its quarterly dividend from
$0.50 per share to $0.25 per share. Nevertheless,
there are significant risks to GMs liquidity position,
including the possibility of an extended labor dispute at
Delphi, any inability to access (or amend or replace) our
existing standby bank credit facility, any claims that may be
successfully asserted against GM under various financing
agreements in view of GMs recent restatement of its prior
financial statements, the further deterioration in GMACs
credit rating leading to a higher cost of capital, the failure
to improve our competitive position through the 2007 labor
negotiations, and the payment to Delphi employees of any amounts
incremental to previously announced charges for contingent
exposures relating to Delphis Chapter 11 filing. The
occurrence of any one or a combination of these events could
severely threaten our liquidity position and threaten the
successful implementation of our turnaround plan.
There is uncertainty regarding our future earnings given the
potential that some of these matters have to affect our
earnings, both positively and negatively. We put our four-point
turnaround plan in place in 2005, and we have a tremendous sense
of urgency in executing the elements of the plan to the highest
degree possible in 2006 and the coming years.
II-8
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
GM views the following factors, many of which are important to
the execution of GMNAs four-point turnaround plan, as the
most significant drivers of its near term financial results:
|
|
|
|
|
Continued demand for GMs most profitable products and the
maintenance of a strong product mix; |
|
|
|
The introduction of innovative new products on a timely cadence,
through the integration of global architectures, engineering,
and procurement efforts; |
|
|
|
The implementation of measures for reducing structural costs,
offsetting legacy and health-care burdens; |
|
|
|
Maintenance of sufficient balance sheet strength and
liquidity; and |
|
|
|
Other factors affecting GMs Financing and Insurance
Operations (FIO) reportable operating segment results, including
interest rates, credit ratings, and demand for mortgage
financing. |
In addition to these drivers, the most significant risks to the
execution of our business strategy and improved financial
performance are discussed above under Risk Factors.
Basis of Presentation
This managements discussion and analysis of financial
condition and results of operations (MD&A) should be read in
conjunction with the GMAC Annual Report on
Form 10-K for the
period ended December 31, 2005, 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) 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 presents separate supplemental financial information for its
reportable operating segments: Automotive and Other Operations
(Auto & Other) and Financing and Insurance Operations
(FIO).
GMs Auto & Other reportable operating segment
consists of:
|
|
|
|
|
GMs four automotive regions: GM North America (GMNA),
GM Europe (GME), GM Latin
America/Africa/Mid-East
(GMLAAM), and GM Asia Pacific (GMAP), which constitute
GM Automotive (GMA); and |
|
|
|
Other, which 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. |
GMs FIO reportable operating segment consists of GMAC and
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 less precisely 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; 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.
II-9
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Results of Operations
Consolidated Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
Consolidated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenues
|
|
$ |
192,604 |
|
|
$ |
193,517 |
|
|
$ |
185,837 |
|
|
Income (loss) from continuing operations before cumulative
effect of accounting change
|
|
$ |
(10,458 |
) |
|
$ |
2,804 |
|
|
$ |
2,899 |
|
|
Net income
|
|
$ |
(10,567 |
) |
|
$ |
2,804 |
|
|
$ |
3,859 |
|
|
Net margin from continuing operations
|
|
|
(5.4 |
)% |
|
|
1.4 |
% |
|
|
1.6 |
% |
Automotive and Other Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenues
|
|
$ |
158,221 |
|
|
$ |
161,545 |
|
|
$ |
155,831 |
|
|
Income (loss) from continuing operations before cumulative
effect of accounting change
|
|
$ |
(12,816 |
) |
|
$ |
(145 |
) |
|
$ |
137 |
|
|
Net income (loss)
|
|
$ |
(12,925 |
) |
|
$ |
(145 |
) |
|
$ |
1,097 |
|
Financing and Insurance Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$ |
34,383 |
|
|
$ |
31,972 |
|
|
$ |
30,006 |
|
|
Net income
|
|
$ |
2,358 |
|
|
$ |
2,949 |
|
|
$ |
2,762 |
|
Total net sales and revenues decreased in 2005, compared with
2004, primarily due to decreased GMNA revenue of
$9.8 billion, largely offset by increases in GMLAAM and
GMAP revenue of $3.0 billion and $3.9 billion
respectively, and increases at GMAC of $2.8 billion. Total
net sales and revenues increased in 2004, compared with 2003,
due to increases in GMA revenue of $6.6 billion, including
increases in GMLAAM and GME revenue of $3.4 billion and
$3.3 billion respectively, and increases in GMAC revenue of
$1.8 billion.
Net income decreased $13.4 billion in 2005, compared to
2004, primarily driven by losses at GMNA due largely to
unfavorable volume and product mix, restructuring charges, and
charges for asset impairments. All other automotive regions also
incurred losses in 2005. The GME loss was primarily driven by
restructuring charges, offset partially by improved operating
performance. The GMLAAM loss was largely attributable to a full
valuation allowance taken against GM do Brasils deferred
tax assets. The GMAP loss was mainly due to the write down of
GMs investment in FHI, as described above. GMACs net
income declined to $2.4 billion, from $3.0 billion in
2004, primarily due to goodwill impairment charges.
In 2004, income from continuing operations decreased
$95 million to $2.8 billion, compared to 2003.
Automotive results improved by $614 million due to
improvement at GMNA, a strong recovery at GMLAAM, and record
income at GMAP, more than offsetting increased losses at GME.
Other Operations 2004 results include an after-tax charge
of $886 million related to the February 2005 settlement
reached between GM and Fiat S.p.A. (Fiat) to terminate the
Master Agreement (including the Put Option) and settle various
disputes between the two companies. GMAC earned a record
$3.0 billion net income, due to higher financing and
insurance income.
2005 results included:
|
|
|
|
|
Consolidated net loss of $10.6 billion, or $18.69 per
share; |
|
|
|
Losses at all automotive regions; |
|
|
|
Charge recognized for announced GMNA restructuring plan; |
|
|
|
Charge recognized for contingent exposures relating to
Delphis Chapter 11 filing, including under the
benefit guarantees; |
|
|
|
Strong performance at GMAC despite challenging environment; |
|
|
|
Strong year-end cash position; and |
II-10
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Consolidated Results (concluded)
|
|
|
|
|
Favorable returns on pension assets, resulting in
U.S. Hourly and Salaried plans being overfunded on a
Statement of Financial Accounting Standards No. 87 basis by
approximately $6 billion. |
More detailed discussions on the results of operations for the
automotive regions, other operations, and GMAC can be found in
the following sections.
GM Automotive and Other Operations Financial Review
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
Auto & Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenues
|
|
$ |
158,221 |
|
|
$ |
161,545 |
|
|
$ |
155,831 |
|
|
Income (loss) from continuing operations before cumulative
effect of accounting change
|
|
$ |
(12,816 |
) |
|
$ |
(145 |
) |
|
$ |
137 |
|
|
(Loss) from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(219 |
) |
|
Gain on sale of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
1,179 |
|
|
Cumulative effect of accounting change
|
|
|
(109 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
(12,925 |
) |
|
$ |
(145 |
) |
|
$ |
1,097 |
|
|
|
|
|
|
|
|
|
|
|
GMA net income (loss) by region:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GMNA
|
|
$ |
(8,239 |
) |
|
$ |
1,409 |
|
|
$ |
879 |
|
|
GME
|
|
|
(1,198 |
) |
|
|
(925 |
) |
|
|
(466 |
) |
|
GMLAAM
|
|
|
(571 |
) |
|
|
60 |
|
|
|
(329 |
) |
|
GMAP
|
|
|
(220 |
) |
|
|
730 |
|
|
|
576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
(10,228 |
) |
|
$ |
1,274 |
|
|
$ |
660 |
|
|
|
|
|
|
|
|
|
|
|
|
Net margin
|
|
|
(6.4 |
)% |
|
|
0.8 |
% |
|
|
0.4 |
% |
|
GM global automotive market share
|
|
|
14.2 |
% |
|
|
14.4 |
% |
|
|
14.6 |
% |
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$ |
(2,697 |
) |
|
$ |
(1,419 |
) |
|
$ |
(523 |
) |
|
(Loss) from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(219 |
) |
|
Gain on sale of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
1,179 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
(2,697 |
) |
|
$ |
(1,419 |
) |
|
$ |
437 |
|
|
|
|
|
|
|
|
|
|
|
The decrease in 2005 total net sales and revenues, compared with
2004, resulted from decreased GMNA revenue of $9.8 billion,
primarily from lower production and unfavorable product mix,
largely offset by significant increases at GMLAAM and GMAP
amounting to $3.0 billion and $3.9 billion
respectively. The increase in 2004 total net sales and revenues,
compared with 2003, was largely due to higher wholesale volumes
at GMLAAM and GME and continued growth at GMAP, partially offset
by lower GMNA revenue. GMs global market share was 14.2%
and 14.4% for the years 2005 and 2004, respectively. GMNA posted
a 1.2 percentage point decline in market share largely as a
result of sales declines within the large sport utility and
pickup, mid sized utility and mid sized car segments. Market
share gains were recognized in the other three automotive
regions.
GMAs 2005 net income decreased $11.5 billion
compared with 2004. Each automotive region sustained a net loss
for 2005, with volume and mix unfavorable overall. In addition,
the restructuring charge at GMNA noted above, other
restructuring charges at GME and GMAP, and asset impairments at
all regions
II-11
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
GM Automotive and Other Operations Financial Review
(continued)
contributed to the poor results for the year. GMAs
2004 net income increased $614 million compared with
2003. GMNAs income increased due to material cost savings
and favorable tax items, partially offset by decreased
production and negative mix. GMAP and GMLAAM both improved over
2003, while GMEs loss for 2004 increased due to continued
price pressure and unfavorable exchange rates.
See discussion of Other Operations results below.
GM Automotive Regional Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
GMNA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenues
|
|
$ |
104,755 |
|
|
$ |
114,545 |
|
|
$ |
116,310 |
|
|
Net income (loss)
|
|
$ |
(8,239 |
) |
|
$ |
1,409 |
|
|
$ |
879 |
|
|
Net margin
|
|
|
(7.9 |
)% |
|
|
1.2 |
% |
|
|
0.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Volume in thousands) | |
Production volume
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cars
|
|
|
1,834 |
|
|
|
1,997 |
|
|
|
2,184 |
|
|
Trucks
|
|
|
3,022 |
|
|
|
3,223 |
|
|
|
3,277 |
|
|
|
Total GMNA
|
|
|
4,856 |
|
|
|
5,220 |
|
|
|
5,461 |
|
Vehicle unit sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industry North America
|
|
|
20,542 |
|
|
|
20,282 |
|
|
|
19,842 |
|
|
GM as a percentage of industry
|
|
|
25.5 |
% |
|
|
26.7 |
% |
|
|
27.4 |
% |
|
Industry U.S.
|
|
|
17,455 |
|
|
|
17,302 |
|
|
|
16,970 |
|
|
GM as a percentage of industry
|
|
|
25.9 |
% |
|
|
27.2 |
% |
|
|
28.0 |
% |
|
GM cars
|
|
|
22.6 |
% |
|
|
24.9 |
% |
|
|
25.7 |
% |
|
GM trucks
|
|
|
28.5 |
% |
|
|
29.0 |
% |
|
|
30.0 |
% |
North American industry vehicle unit sales increased 1.3% to
20.5 million units during 2005, and we expect unit sales to
be relatively flat in 2006. Despite slight industry growth,
GMNAs production declined 7.0% to 4.9 million units
as a result of the decreased market share of 1.2 percentage
points along with a significant reduction of dealer inventories
by approximately 200,000 units. GMNA ended the year with a
market share of 25.5% for 2005, compared to 26.7% for 2004.
During 2005, industry vehicle unit sales in the United States
increased to 17.5 million units, while GMs
U.S. market share decreased by 1.3 percentage points
due to sales declines in segments where GM has high volume such
as large sport utilities, mid sized utilities and mid sized
cars. GM ended the year with a U.S. market share of 25.9%
for 2005, versus 27.2% for 2004. GMs U.S. car market
share declined by 2.3 percentage points to 22.6%, while
U.S. truck market share for the year was 28.5%, down
0.5 percentage point. Truck sales represented 61% of
GMs total U.S. vehicle unit sales in 2005, up
slightly from 60% in 2004.
II-12
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
GM Automotive and Other Operations Financial Review
(continued)
GM North America (continued)
Net loss from GMNA totaled $8.2 billion in 2005, compared
to income of $1.4 billion and $879 million in 2004 and
2003, respectively. The deterioration in 2005 was due in part to
various operating factors, including:
|
|
|
|
|
Unfavorable product mix, which adversely affected net income by
approximately $2.2 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 net income of approximately
$2.1 billion; |
|
|
|
Unfavorable material costs after factoring in the cost of
government mandated product improvements accounted for a
decrease in net income of approximately $700 million; |
|
|
|
Increased health-care expenses primarily due to the recognition
of OPEB net actuarial losses, which are caused by escalating
health care cost trends, and falling discount rates in the U.S.,
accounted for a decrease in net income of approximately
$600 million. 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; and |
|
|
|
Advertising and sales promotion cost increases, accounting for a
decrease in net income of $500 million due to further
efforts to increase product awareness. |
In addition to the above items, GMNA recognized a fourth quarter
2005 restructuring charge of $1.7 billion, after tax, as a
result of the GMNA restructuring initiatives announced in the
fourth quarter of 2005 (refer also to subsequent discussion in
Key Factors Affecting Future Results). These initiatives
represent a critical step towards reducing structural costs
given the high-cost manufacturing environment in the United
States. The charge of $1.7 billion included
$455 million, after tax, for the non-cash writedown of
property, plants and equipment, comprised of $362 million
for production facilities still in service at December 31,
2005, as well as other product specific assets of
$93 million. The charge also included $1.2 billion,
after tax, for employee costs, representing our best estimate of
the wage and benefits costs that we will incur 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.
Approximately 17,500 employees were affected and included
in the restructuring charge. We have been discussing these
provisions with the UAW in an effort to develop an agreed upon
accelerated attrition program by which we can reduce the number
of employees that are and will be in the JOBS bank in a cost
effective manner. As part of these discussions, on
March 22, 2006, GM, Delphi and the UAW reached a tentative
agreement intended to reduce the number of U.S. hourly employees
through an accelerated attrition program. The agreement is
subject to approval by the bankruptcy court of Delphis
participation in the agreement. If so approved, the agreement
will provide for a combination of early retirement programs and
other incentives designed to help reduce employment levels at
GM, which may have the effect of reducing the number of
employees that are or will be in the JOBS bank. This attrition
program is expected to result in additional charges being
recorded in 2006 as employees at locations that were not
included in the North American manufacturing restructuring
actions announced in November 2005 agree to participate. Under
the agreement, GM and the UAW also agreed to discuss other
options to address remaining surplus people at specific
locations and all areas in which GM and the UAW can work
together to close GMs competitive gap with its foreign
competition and reduce GMs structural costs.
In 2005, GMNA also recognized after-tax impairment charges of
$552 million. In the first quarter, GMNA recorded
$84 million for the write-down to fair market value of
various production facility assets ($82 million) and
product specific assets ($2 million) in connection with the
cessation of production at a Lansing, Michigan assembly plant.
In the third quarter of 2005, as part of the business planning
cycle, the carrying value of long-lived assets held and used,
other than goodwill and intangible assets with indefinite lives,
were compared to the projected cash flows. Based on this review,
GMNA concluded that certain
II-13
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
GM Automotive and Other Operations Financial Review
(continued)
GM North America (concluded)
product-specific assets, as well as certain office and
production facilities, were not recoverable. Accordingly, in the
third quarter of 2005 GMNA recorded an after-tax impairment
charge of $468 million for assets still in service,
comprised of $421 million of product-specific assets, and
$47 million related to certain office and production
facilities.
The increase in GMNAs 2004 net income from 2003 was
due in part to the effects of material cost savings and
structural cost savings, partially offset by lower volume and
unfavorable product mix. Additionally, 2004 net income
includes the effect of GMs contribution of approximately
11 million shares of XM Satellite Radio Holdings Inc.
(XM) common stock to GMs VEBA, which resulted in an
after-tax gain to GMNA of $118 million. GMNA recognized tax
benefits in 2004 of $540 million primarily as the result of
U.S. and Mexico tax legislation and Canadian capital loss
carryforwards, as well as a benefit related to the settlement of
various prior year tax matters in the U.S. In addition, in
the third quarter of 2004 GM completed its periodic review of
products liability reserves, which comprehend all products
liability exposure. This review resulted in an after-tax
reduction to these reserves of approximately $250 million,
in order to appropriately reflect the current level of exposure.
During 2003, GMNA incurred charges of $448 million, after
tax, related to the October 2003 contract with the UAW, which
provided for lump-sum payments and vehicle discount vouchers for
retirees. In addition, GMNA adjusted a previously established
reserve for idled workers, primarily related to the Janesville,
Wisconsin plant, resulting in $103 million of net income,
after tax. Also, GMNA incurred various structural cost
adjustments, asset impairment and other charges, favorable
interest income from settlements of prior year tax matters, and
income related to the market valuation of XM warrants. These
items netted to approximately $90 million of income for the
year.
In the fourth quarter of 2004, GM announced plans to close its
assembly plant in Baltimore, Maryland, with approximately 1,000
employees, and to lay off approximately 950 employees at
GMs assembly plant in Linden, New Jersey. In connection
with these actions, GMNA recognized after-tax charges totaling
$78 million in 2004 for impairment of production
facilities. In addition, GMNA incurred after-tax charges in 2004
of $55 million for impairment of facilities not related to
these actions, and $63 million for impairments of other
product-specific assets. There were no employee idling or
separation costs in conjunction with these impairments, since at
the time it was believed employees would be redeployed.
In the fourth quarter of 2005, GMNA announced a four-point
turnaround plan focused on improving results, and addressing
factors contributing to the loss items described above. The top
priority for the Corporation is to return GMNAs operations
to profitability and positive cash flow as soon as possible, via
the systematic and aggressive implementation of our four-point
turnaround plan. This plan is discussed in detail in the GM
North American Restructuring Plan section of Key Factors
Affecting Future Results found on
page II-20.
II-14
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
GM Automotive and Other Operations Financial Review
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
GME total net sales and revenues
|
|
$ |
31,719 |
|
|
$ |
30,820 |
|
|
$ |
27,478 |
|
GME net (loss)
|
|
$ |
(1,198 |
) |
|
$ |
(925 |
) |
|
$ |
(466 |
) |
GME net margin
|
|
|
(3.8 |
)% |
|
|
(3.0 |
)% |
|
|
(1.7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Volume in thousands) | |
Production volume(1)
|
|
|
1,858 |
|
|
|
1,829 |
|
|
|
1,818 |
|
Vehicle unit sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industry
|
|
|
20,970 |
|
|
|
20,763 |
|
|
|
19,588 |
|
|
GM as a percentage of industry
|
|
|
9.5 |
% |
|
|
9.4 |
% |
|
|
9.3 |
% |
GM market share Germany
|
|
|
10.8 |
% |
|
|
10.6 |
% |
|
|
10.4 |
% |
GM market share United Kingdom
|
|
|
14.7 |
% |
|
|
13.9 |
% |
|
|
13.7 |
% |
|
|
(1) |
2004 and 2005 calendar years include GM-Avtovaz joint venture
production |
Industry vehicle unit sales in Europe increased slightly in
2005, by 1.0% over 2004, and GMEs total market share
increased slightly to 9.5% from 9.4%. European industry vehicle
unit sales are expected to be relatively flat in 2006. In the
two largest markets in Europe, GM continued to increase market
share: market share was 10.8% in Germany, a 0.2 percentage
point increase over 2004; and in the United Kingdom market share
was 14.7%, an increase of 0.8 percentage point over 2004.
Net loss from GME totaled $1.2 billion, $925 million,
and $466 million, in 2005, 2004, and 2003, respectively.
The increase in GMEs loss in 2005 over 2004 was due in
part to the following factors:
|
|
|
|
|
Restructuring charges totaling $673 million in connection
with the restructuring plan announced in the fourth quarter of
2004, as well as costs related to the dissolution of GMs
powertrain and purchasing joint ventures with Fiat. The
restructuring plan involves a reduction in workforce of up to
12,000 through 2007, largely in manufacturing operations in
Germany. In December 2004, GM reached agreement with various
labor unions in Europe on a framework for the restructuring
plan. The charges in 2005 related to the separation of
approximately 7,500 people. No charge was recognized in 2004
because the agreements were not yet finalized. |
|
|
|
Favorable material cost, structural costs, and product mix,
which more than offset pricing and volume declines, resulting in
an almost $370 million improvement in year over year
performance. |
In addition to the above items, GME recorded charges for
impairment of product specific assets of $176 million and
$234 million in 2005 and 2004, respectively. These charges
were identified as part of the business planning cycles in the
third quarter of 2005 and the fourth quarter of 2004, during
which the carrying value of long-lived assets held and used,
other than goodwill and intangible assets with indefinite lives,
was determined to exceed the projected cash flows.
The increase in GMEs loss in 2004 over 2003 was primarily
due to continued negative pricing and unfavorable exchange rates
with respect to the weakening of the U.S. dollar compared
to the euro and Swedish krona, partially offset by favorable
volume and mix, material cost savings and reduced structural
costs. In addition, in 2004 GMEs net loss included an
after-tax charge of $234 million for the impairment of
various product-specific assets.
We have implemented a GME turnaround plan, which remains on
track, and we expect to see more progress in 2006. In addition
to the continued implementation of our significant cost
reduction initiatives, we
II-15
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
GM Automotive and Other Operations Financial Review
(continued)
GM Europe (concluded)
expect to benefit from the introduction of new products such as
the Opel Corsa and will continue to focus on the rollout of our
multibrand strategy and particularly efforts to expand the
Chevrolet brand.
|
|
|
GM Latin America/ Africa/ Mid-East |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
GMLAAM total net sales and revenues
|
|
$ |
11,745 |
|
|
$ |
8,792 |
|
|
$ |
5,387 |
|
GMLAAM net income (loss)
|
|
$ |
(571 |
) |
|
$ |
60 |
|
|
$ |
(329 |
) |
GMLAAM net margin
|
|
|
(4.9 |
)% |
|
|
0.7 |
% |
|
|
(6.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Volume in thousands) | |
Production volume
|
|
|
775 |
|
|
|
716 |
|
|
|
547 |
|
Vehicle unit sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industry
|
|
|
4,980 |
|
|
|
4,225 |
|
|
|
3,626 |
|
|
GM as a percentage of industry
|
|
|
17.7 |
% |
|
|
17.5 |
% |
|
|
16.1 |
% |
GM market share Brazil
|
|
|
21.3 |
% |
|
|
23.1 |
% |
|
|
23.3 |
% |
Improving economic conditions in Latin America resulted in
significant industry growth in 2005, with the markets in
Venezuela and Argentina increasing by approximately 70% and 34%,
respectively. Brazils market grew more than 8% in 2005
compared to 10% in 2004. In addition, the South Africa market
grew more than 25% in 2005 compared to 20% in 2004. We
anticipate regional industry sales will show slower growth
during 2006; however, growth should still remain positive.
GMLAAM improved its regional market share by 0.2 percentage
points to 17.7% in 2005 with a 19% increase in vehicle unit
sales, to 881 thousand from 738 thousand in 2004.
In 2005, GMLAAM net sales and revenues improved by approximately
34% or about $3.0 billion compared to 2004. Improved volume
and mix contributed $1.8 billion while favorable exchange
rates and pricing contributed $0.9 billion and
$0.3 billion, respectively. The 2004 increase in net sales
and revenues of 63% or $3.4 billion over 2003 results is
attributable to volume and mix related improvements of
$1.7 billion, acquisition of the remaining interest in
Delta Motors totaling $1.0 billion, and favorable exchange
rates and pricing of $0.2 billion and $0.5 billion,
respectively.
Net (loss) income from GMLAAM totaled $(571) million,
$60 million, and $(329) million in 2005, 2004, and
2003, respectively. The deterioration in GMLAAMs 2005
results compared to 2004 was due in part to the following
factors:
|
|
|
|
|
A full valuation allowance charge of $617 million taken
against GM do Brasils deferred tax assets as it was
determined that it is more likely than not that deferred taxes
in GMs Brazilian operations would not be realized; and |
|
|
|
Volume, product mix, and pricing improvements which exceeded
losses from unfavorable exchange rate changes, primarily with
respect to the Brazilian real, by approximately $40 million
from 2004 to 2005. |
In addition to the above items, the 2005 results include third
quarter impairment charges of $99 million for assets still
in service, determined by comparing projected cash flows to the
book value of specific product-related assets and production
facilities. Charges included $52 million, after tax, for
product-specific assets, and $47 million, after tax, for
production facilities. Unusually strong South American
currencies have impacted
II-16
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
GM Automotive and Other Operations Financial Review
(continued)
GM Latin America/ Africa/ Mid-East
(concluded)
the profitability of GMLAAMs export business.
Managements decision to adjust export volumes resulted in
lower future cash flows triggering the impairment charge.
In 2004, favorable volume and mix and positive pricing,
partially offset by increased material and structural costs,
drove improved results. In 2003, GMLAAM incurred asset
impairment charges and unfavorable exchange effects, which were
partially offset by net price increases.
Effective January 1, 2004, GM increased its ownership of
Delta Motor Co. in South Africa to 100%, from 49% previously,
moving from the equity method of accounting to full
consolidation. The company is now known as General Motors South
Africa.
Our focus for GMLAAM in 2006 is to continue to leverage our
position in South Africa, accelerate our turnaround program in
Brazil, and build on our strong performance in the Middle East
and Andean region countries.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
GMAP total net sales and revenues
|
|
$ |
10,893 |
|
|
$ |
6,978 |
|
|
$ |
5,338 |
|
GMAP net income (loss)
|
|
$ |
(220 |
) |
|
$ |
730 |
|
|
$ |
576 |
|
GMAP net margin
|
|
|
(2.0 |
)% |
|
|
10.5 |
% |
|
|
10.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Volume in thousands) | |
Production volume(1)
|
|
|
1,562 |
|
|
|
1,333 |
|
|
|
420 |
|
Vehicle unit sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industry
|
|
|
18,240 |
|
|
|
17,156 |
|
|
|
15,919 |
|
|
GM as a percentage of industry
|
|
|
5.8 |
% |
|
|
5.2 |
% |
|
|
4.9 |
% |
GM market share Australia
|
|
|
17.8 |
% |
|
|
19.4 |
% |
|
|
20.4 |
% |
GM market share China
|
|
|
11.2 |
% |
|
|
9.4 |
% |
|
|
8.5 |
% |
|
|
(1) |
2004 and 2005 calendar years include GM Daewoo and Wuling joint
venture production |
Industry vehicle unit sales in the Asia Pacific region increased
approximately 6.3% in 2005, to 18.2 million units, from
17.2 million units in 2004. This reflects slower growth in
China than in previous years, where vehicle unit sales increased
13.2% to 5.9 million units in 2005, from 5.2 million
units in 2004. During 2004 industry vehicle unit sales in China
increased 15% over 2003 levels. We anticipate that the Asia
Pacific region will remain the fastest growing automotive region
in 2006, continuing its role as real catalyst for growth in
automotive sales globally. GMAP increased its vehicle unit sales
(including GM Daewoo Auto & Technology Company (GM
Daewoo, formerly referred to as GM-DAT) and China affiliates) in
the Asia Pacific region by 20% in the period, to
1.1 million units from 887 thousand in 2004. GMAPs
2005 market share was 5.8%, compared to 5.2% in 2004.
GMAPs market share in China increased 1.8 percentage
points to 11.2% in 2005, and China was GMs second largest
market for 2005.
Net income (loss) from GMAP totaled $(220) million,
$730 million, and $576 million, in 2005, 2004, and
2003, respectively. The deterioration in GMAPs 2005
results compared to 2004 was due in part to the following
factors:
|
|
|
|
|
Write-down of GMs investment in FHI in the second quarter
for $788 million, after-tax, as a result of FHIs
declining financial performance and the downward adjustments in
their business plan in May |
II-17
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
GM Automotive and Other Operations Financial Review
(concluded)
GM Asia Pacific (concluded)
|
|
|
|
|
2005. This writedown was partially offset in the fourth quarter,
when GM completed the sale of its investment in the common stock
of FHI and recorded a gain of $71 million (after tax) due
to the appreciation of the fair value of such stock after
June 30, 2005, the date of the FHI impairment
charge; and |
|
|
|
Volume and product mix at GM Holden in Australia, as well as
reduced equity income from higher costs associated with
GMs growth initiatives in China, were partially offset by
favorable results from GM Daewoo, resulting in a decrease in net
income of approximately $200 million from 2004 to 2005. |
In addition to the above items, in the third quarter of 2005
GMAP recognized asset impairment charges of $45 million,
after tax, for assets still in service at GM Holden, determined
by comparing projected cash flows to the book value of assets.
The charges were comprised of $23 million for
product-specific assets and $22 million related to
production facilities. In the fourth quarter of 2005, GMAP
recognized $38 million of separation costs associated with
restructuring activities that resulted in the idling of
approximately 1,200 employees.
The increase in GMAPs 2004 net income over 2003 was
due to improved results at equity investees in Japan and GM
Daewoo, as well as improved earnings at GM operations in
Thailand and India, partially offset by reduced income at GM
Holden.
In 2006, GMAP will continue to take advantage of the strong
position and growth in China, leverage its capabilities at GM
Daewoo, and execute the turnaround at GMs Holden unit.
Other Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales, revenues, and eliminations
|
|
$ |
(891 |
) |
|
$ |
410 |
|
|
$ |
1,318 |
|
|
Income (loss) from continuing operations
|
|
$ |
(2,697 |
) |
|
$ |
(1,419 |
) |
|
$ |
(523 |
) |
|
(Loss) from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(219 |
) |
|
Gain from sale of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
1,179 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
(2,697 |
) |
|
$ |
(1,419 |
) |
|
$ |
437 |
|
|
|
|
|
|
|
|
|
|
|
Other Operations net loss increased $1.3 billion in
2005 compared to 2004. The 2005 total net loss is primarily due
to the impact of Delphi benefit guarantee charges offset by
favorable income tax items. In the fourth quarter of 2005, an
after-tax charge of $3.6 billion was recorded pertaining to
the contingent exposures relating to Delphis
Chapter 11 filing, including under the benefit guarantees
(see subsequent discussion in Factors Affecting Future Results).
Income tax expense in 2005 is allocated to GMs automotive
regions based on tax rates used by management for evaluating
their performance. Tax benefits realized in excess of those
assigned to GMA are allocated to Other Operations, which totaled
$1.6 billion in 2005.
In December 2004, GM wrote off the remaining balance of its
investment in Fiat Auto Holdings B.V. (FAH), to Other
Operations cost of sales, resulting in an after-tax charge
of $136 million. On February 13, 2005, GM and Fiat
reached a settlement agreement whereby GM paid Fiat
approximately $2.0 billion, returned its 10% equity
interest in 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
II-18
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Other Operations (concluded)
diesel engine assets and other important rights with respect to
diesel engine technology and know-how. The settlement agreement
resulted in a pre-tax charge to earnings of approximately
$1.4 billion ($886 million after tax or $1.56 per
fully diluted share). 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. This charge was
recorded in cost of sales and other expenses in Other Operations.
Other Operations results include after-tax legacy costs of
$477 million and $402 million for 2005 and 2004,
respectively, related to employee benefit costs of divested
businesses, primarily Delphi, for which GM has retained
responsibility.
Discontinued Operations
In December 2003, GM split off Hughes by distributing Hughes
common stock to the holders of GM Class H common stock in
exchange for all the outstanding shares of GM Class H
common stock. Simultaneously, GM sold its 19.8% retained
economic interest in Hughes to The News Corporation Ltd. (News
Corporation) in exchange for cash and News Corporation Preferred
American Depositary Shares.
As of the completion of these transactions on December 22,
2003, the results of operations, cash flows, and the assets and
liabilities of Hughes were classified as discontinued operations
for all periods through such date presented in GMs
consolidated financial statements. The transactions resulted in
an after-tax gain of approximately $1.2 billion classified
as gain on sale of discontinued operations in GMs
consolidated statement of income for the year ended
December 31, 2003. See Note 2 to the Consolidated
Financial Statements for further discussion.
GMAC Financial Review
GMACs net income was $2.4 billion, $3.0 billion,
and $2.7 billion for 2005, 2004, and 2003 respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
Financing operations
|
|
$ |
627 |
|
|
$ |
1,430 |
|
|
$ |
1,391 |
|
Mortgage operations
|
|
|
1,345 |
|
|
|
1,186 |
|
|
|
1,175 |
|
Insurance operations
|
|
|
411 |
|
|
|
352 |
|
|
|
162 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
2,383 |
|
|
$ |
2,968 |
|
|
$ |
2,728 |
|
|
|
|
|
|
|
|
|
|
|
Net income from financing operations totaled $0.6 billion,
$1.4 billion, and $1.4 billion in 2005, 2004, and
2003, respectively. The decrease in 2005 net income over
2004 was primarily due to goodwill impairment charges of
$439 million, after tax, relating primarily to goodwill
recognized in connection with the acquisition of GMACs
commercial finance business, as well as lower net interest
margins as a result of increased borrowing costs due to widening
spreads and higher market interest rates. The decline in net
interest margins was somewhat mitigated by lower consumer credit
provisions, primarily as a result of lower asset levels, and the
effect of improved used vehicle prices on terminating leases.
The increase in 2004 net income over 2003 reflects
improvement in earnings from international operations, lower
credit loss provisions, improved vehicle remarketing results in
North America and favorable tax items, partially offset by lower
net interest margins.
Net income from mortgage operations totaled $1.3 billion,
$1.2 billion, and $1.2 billion in 2005, 2004, and
2003, respectively. The increase in 2005 net income
reflects increases in both the residential and commercial
mortgage operations. GMACs residential mortgage businesses
benefited from increased loan production, favorable credit
experience, improved mortgage servicing results and gains on
sales of mortgages. GMAC Commercial Mortgage also experienced an
increase in earnings compared to 2004 largely due to record loan
origination volume, higher gains on sales of loans and increases
in fee and investment income. In 2004,
II-19
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
GMAC Financial Review (concluded)
U.S. residential mortgage industry volumes declined by
approximately 30% compared to 2003. However, despite the lower
industry volumes, mortgage operations achieved market share
gains, asset growth, improved mortgage servicing results and an
increase in fee-based revenue in 2004 compared to 2003.
Net income from insurance operations totaled a record
$411 million in 2005, and $352 million and
$162 million in 2004 and 2003, respectively. The increase
in 2005 reflects a combination of strong results achieved
through increased premium revenue, higher capital gains, and
improved investment portfolio performance. In addition, GMAC
Insurance maintained a strong investment portfolio, with a
market value of $7.7 billion at December 31, 2005,
including net unrealized gains of $573 million. At
December 31, 2004, the investment portfolio was valued at
$7.3 billion, with net unrealized gains of
$563 million.
As previously announced in October 2005, GM is pursuing the sale
of a controlling interest in GMAC, with the goal of delinking
GMACs credit rating from GMs credit rating and
renewing its access to low-cost financing. GM is currently in
discussions with potential interested parties, and the process
is ongoing. On March 23, 2006, GMAC completed the
previously announced sale of a controlling interest in GMAC
Commercial Mortgage.
Key Factors Affecting Future Results
The following discussion identifies the key factors, known
events, and trends that could affect our future results.
|
|
|
GM North America Restructuring Plan |
The size of GMs 2005 loss, most of which is related to
GMNA, clearly demonstrates the need for significant changes in
GMs business model. A large part of those losses arises
from GMs legacy cost burden and the fixed nature of much
of its cost base.
In response to these cost burdens, GM has been intently
focusing, especially over the past year, on restructuring its
operations to succeed in a more competitive global environment.
GM has been systematically and aggressively implementing a
four-point turnaround plan for GMNAs business. The
following is an update of the key elements of these plans and
actions to date.
GMNA is keeping an intense focus on improving both revenue and
contribution margin. Contribution margin is our revenues less
material, freight, policy and warranty costs. GMNA increased
capital spending by approximately $400 million in 2005 in
support of new car and truck programs, despite financial
pressures. GM anticipates total capital spending on product
development in 2006 of $8.7 billion, of which
$5.7 billion will be devoted to GMNA. The execution of new
product introductions continues to be a major emphasis, as shown
by the success of new entries such as the Chevrolet Cobalt,
Impala, and HHR, the Hummer H3, Pontiac G6 and Solstice, Buick
Lucerne, and Cadillac STS and DTS. Starting in 2006, GM will
rapidly revitalize its product portfolio over the next two years
with new full-sized sport utility vehicles and
pick-up trucks,
additional cross over vehicles, and a significantly expanded
line up for Saturn. In 2006, approximately 29% of GMNAs
sales volume is expected to come from recently launched cars and
trucks, as well as upcoming launch vehicles such as the
Chevrolet Tahoe, Saturn Sky, GMC Yukon, Cadillac Escalade, and
Saturn Aura. By 2007, GM expects more than 30% of GMs
sales volumes to come from these new vehicles. GMNA is
reallocating 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 is also undertaking a
major initiative in alternate fuels through sustainable
technologies such as ethanol/gasoline blended (E85) FlexFuel
vehicles. During 2006, GM will offer nine E85 FlexFuel models,
bringing an additional 400,000 E85 FlexFuel vehicles into its
fleet.
II-20
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Key Factors Affecting Future Results
(continued)
|
|
|
GM North America Restructuring Plan
(continued) |
|
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|
Revitalize Sales and Marketing Strategy |
In January 2006, GM announced that it significantly lowered
manufacturers suggested retail prices on vehicles
accounting for about 80% of its automotive sales volume. This
included every Chevrolet, Buick, and GMC model, as well as most
Pontiac cars and trucks. This is the next step in GMs
Total Value Promise initiative in GMNA to emphasize
the value it offers to consumers.
Clarifying, focusing, and differentiating the role of each North
American brand continues to be an important goal. GM also
continues to implement a more orderly and consistent alignment
of its distribution system, especially among Pontiac, Buick, and
GMC dealers. In addition, GM believes that its increased
advertising in support of new products and its specific
marketing initiatives to improve GMs sales performance in
certain major metropolitan markets will support growing
GMNAs business.
|
|
|
Accelerate Cost Reductions and Quality Improvements |
GM announced in November 2005 a significant move to reduce its
structural costs in the manufacturing area. These plans include
the cessation of operations at nine assembly, stamping, and
powertrain facilities and three Service and Parts Operations
facilities by 2008, and a reduction in manufacturing employment
levels of approximately 30,000. GM expects that these actions,
together with other efficiency and productivity initiatives,
will result in efficiency and productivity gains and reduce
excess capacity by one million units annually. This is in
addition to the one million-unit annual reduction in assembly
capacity that has been achieved over the 2002 to 2005 period.
In addition, we have been in discussions with the UAW in an
effort to develop an agreed upon accelerated attrition program
by which we can reduce the number of employees that are and will
be in the JOBS bank in a cost effective manner. As part of these
discussions, on March 22, 2006, GM, Delphi and the UAW
reached a tentative agreement intended to reduce the number of
U.S. hourly employees through an accelerated attrition program.
The agreement is subject to approval by the bankruptcy court of
Delphis participation in the agreement. If so approved,
the agreement will provide for a combination of early retirement
programs and other incentives designed to help reduce employment
levels at GM, which may have the effect of reducing the number
of employees that are or will be in the JOBS bank. Under the
agreement, GM and the UAW also agreed to discuss other options
to address remaining surplus people at specific locations and
all areas in which GM and the UAW can work together to close
GMs competitive gap with its foreign competition and
reduce GMs structural costs. Further, GMs management
believes it is very important to negotiate a more competitive
collective bargaining agreement with the UAW in 2007.
On February 7, 2006, GM announced its intention to
substantially alter the pension benefits for current
U.S. salaried employees. On March 7, 2006, GM
announced the details of this plan, under which GM will freeze
accrued benefits in the current plan, and implement a new
benefit structure for future accruals, which will 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 current retirees or
surviving spouses who are drawing benefits from the Salaried
Retirement Program.
Reducing material costs, by far the largest cost item in the
aggregate, remains a critical part of GMNAs overall cost
reduction plans. Despite higher commodity prices and troubled
supplier situations, GMNA is targeting for 2006 a net reduction
of $1 billion, prior to factoring in the cost of government
mandated product improvements. GM believes that its utilization
of the most competitive supply sources and its improvements to
its global processes for product development are two major
opportunities to reduce material costs.
GMNA is also seeking cost efficiencies in most other areas of
the business including engineering, advertising, salaried
employment levels, and indirect material costs. Engineering will
seek to reduce
II-21
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Key Factors Affecting Future Results
(continued)
|
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|
GM North America Restructuring Plan
(continued) |
development costs through the use of common vehicle
architectures that can be used on a global basis. Advertising
will seek more efficient and focused spending in line with brand
focus. In 2006, salaried headcount levels are expected to
continue to decline. Our headcount reduction efforts have
resulted in a 30% reduction to salaried headcount over the past
five years.
|
|
|
Address Health-Care Burden |
Addressing the legacy cost burden of health care for employees
and retirees in the United States is one of the critical
challenges facing the Corporation.
In October 2005, GM and the UAW reached a tentative agreement to
reduce GMs health-care costs significantly while
maintaining a high level of health-care benefits for its hourly
employees and retirees in the United States. In December 2005,
GM, the UAW and a class of hourly retirees finalized that
agreement, which is subject to court approval, and submitted it
for court approval.
The agreement is projected to reduce GMs retiree
health-care (OPEB) liabilities by about $15 billion,
or 25% of the Corporations hourly health-care liability,
reduce GMs annual employee health-care expense by about
$3 billion on a pre-tax basis during a seven-year
amortization period, and result in cash flow savings estimated
to be about $1 billion a year, after the agreement is fully
implemented. The agreement will remain in effect until September
2011, after which either GM or the UAW may cancel the agreement
upon 90 days written notice. Similarly, GMs
contractual obligations to provide UAW hourly retiree heath-care
benefits extends to September 2011 and will continue thereafter
unless terminated by GM or the UAW. This essentially means that
the matters covered by this agreement will continue in effect
for UAW retirees beyond the expiration of GMs current
collective bargaining agreement in September 2007.
The agreement also commits GM to make contributions to a new
independent Defined Contribution Voluntary Employees
Beneficiary Association (DC VEBA) that will be used to mitigate
the effect of reduced GM health-care coverage on individual UAW
hourly retirees. The new independent DC VEBA will be partially
funded by GM contributions of $1 billion in each of three
years, currently expected to be 2006, 2007 and 2011. GM will
also make future contributions subject to provisions of the
tentative agreement referencing profit sharing payments, wage
deferral payments, increases in value of GM
$12/3
par value common stock, and dividend payments. In
addition, generally speaking, under the terms of the agreement,
UAW retirees are responsible for annual increases in health-care
benefit costs up to 3% and GM is responsible for increases in
excess thereof.
Although GM continues to believe that it can lawfully make
changes to retiree health-care benefits, GM and the UAW agreed
as part of their tentative settlement to seek court approval.
The agreement was finalized by GM, the UAW and a class of hourly
retirees in December 2005 and submitted to a court for approval.
GM is awaiting a final determination on the agreement by the
court.
GM is also increasing the U.S. salaried workforces
participation in the cost of health care. On February 7,
2006, GM announced that it will cap its contributions to
salaried retiree health care at the level of its 2006
expenditures. The cap will take effect beginning January 1,
2007. This affects those employees and retirees who are eligible
for the salaried post-retirement health-care benefit, their
surviving spouses, and their eligible dependents. 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. When average costs exceed established
limits following 2006, additional plan changes that affect
cost-sharing features of program coverage will occur, 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.
II-22
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Key Factors Affecting Future Results
(continued)
|
|
|
GM North America Restructuring
Plan (concluded) |
GM currently expects to remeasure its OPEB liability for the
revised health-care benefits for salaried retirees, which become
effective in January 2007. The remeasurement is expected to
result in a reduction of this liability of approximately
$4.8 billion. The benefit associated with the reduction in
the OPEB liability is expected to be amortized and reduce
expenses at an annual pre-tax rate of $900 million for
approximately eight years and have a favorable effect on
GMs 2006 pre-tax earnings estimated to be approximately
$500 million. The majority of the OPEB liability reduction
and related expense would accrue to GMs North American
automotive operations. Cash savings will be limited initially,
but GM expects that annual cash savings from this action will
grow to about $200 million within five years, and continue
to increase after that.
These expected health-care cost-reduction results exclude any
possible effect from the Delphi situation discussed below. GM is
committed to meeting the challenges and opportunities related to
the Delphi bankruptcy, and will work as constructively as
possible with Delphi to support their objective of emerging from
bankruptcy as a viable ongoing business.
|
|
|
Expected Cost Reduction in North America |
Based on the GMNA restructuring initiatives, in late 2005 we set
a target of reducing structural costs in North America by $6
billion on a running rate basis by the end of 2006 and reducing
net material costs by $1 billion in 2006. Running rate basis
refers to the annualized cost savings into the foreseeable
future anticipated to result from cost savings actions when
fully implemented. Largely due to additional cost-reduction
actions in the areas of U.S. salaried retiree health care and
U.S. salaried employee pension benefits, we now expect to reduce
structural costs in North America by an average of $7 billion on
a running rate basis by the end of 2006. We expect $4 billion of
the structural cost reduction to be realized during calendar
year 2006. The $7 billion average reduction on a running rate
basis takes into account the unfavorable impact on structural
costs of $1 billion contributions that we have committed to make
to a new DC VEBA in each of 2006, 2007, and 2011 in order to
mitigate the effect of reduced GM health care coverage on
individual UAW hourly retirees.
The expected annual structural cost reductions consist of:
|
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|
Approximately $3 billion related to the UAW health-care
agreement. The $3 billion is comprised of approximately
$1 billion principally related to OPEB service and interest
costs expected to be realized each year during the six-year term
of the agreement and approximately $2 billion which results
from the amortization of a $15 billion gain related to the
agreement over approximately a seven-year period, which
coincides with the remaining service life of active employees.
The annual savings will be allocated approximately 80% to GMNA
and 20% to the corporate sector. |
|
|
|
Approximately $2 billion based on the capacity utilization
and other manufacturing initiatives; and |
|
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|
Approximately $2 billion based on additional productivity
and cost efficiencies in other areas of the business, including
engineering, advertising and salaried employment levels and
benefits. |
Execution of our four-point turnaround plan is critical to our
success. Although a substantial portion of the cost savings
arising from the UAW health-care agreement will be amortized
over the six- and seven-year periods described above, GM expects
to pursue other initiatives that will enable it to continue to
achieve structural cost reductions in excess of this annual
running rate beyond that date. GM believes that it has
sufficient balance sheet strength to finance the four-point
turnaround plan under reasonably foreseeable circumstances.
Nevertheless, there are significant risks to GMs liquidity
position, including the possibility of an extended labor dispute
at Delphi, any inability to access (or amend or replace) our
existing standby bank credit facility, any claims that may be
successfully asserted against GM under various financing
agreements in view of GMs recent restatement of its prior
financial statements, the further deterioration in GMACs
credit rating leading to a higher cost of capital, the failure
to improve our competitive position through the 2007
II-23
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Key Factors Affecting Future Results
(continued)
|
|
|
GM North America Restructuring
Plan (concluded) |
labor negotiations, and the payment to Delphi employees of any
amounts incremental to previously announced charges for
contingent exposures related to Delphis Chapter 11
filing. Further information about our liquidity can be found in
the Liquidity and Capital Resources section below.
On October 8, 2005, Delphi filed a petition for
Chapter 11 proceedings under the United States Bankruptcy
Code for itself and many of its U.S. subsidiaries. GM
expects no immediate effect on its global automotive operations
as a result of Delphis action. Delphi is GMs largest
supplier of automotive systems, components and parts, and GM is
Delphis largest customer.
GM will continue to work constructively in the court proceedings
with Delphi, Delphis unions, and other participants in
Delphis restructuring process. GMs goal is to pursue
outcomes that are in the best interests of GM and its
stockholders, and that enable Delphi to continue as an important
supplier to GM.
Delphi has indicated to 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 as a
result of the restructuring of Delphi through the
Chapter 11 process. However, there can be no assurance that
GM will be able to realize any benefits.
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 might 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.
In addition, various financial obligations Delphi has to GM as
of the date of Delphis Chapter 11 filing, including
the $951 million payable for amounts that Delphi owed to GM
relating to Delphi employees who were formerly GM employees and
subsequently transferred back to GM as job openings became
available to them under certain employee flowback
arrangements as of the date of Delphis filing for
Chapter 11, may be subject to compromise in the bankruptcy
proceedings, which may result in GM receiving payment of only a
portion of the face amount owed by Delphi.
GM will seek to minimize this risk by protecting our right of
setoff against the $1.15 billion we owed to Delphi as of
the date of its Chapter 11 filing. A procedure for
determining setoff claims has been put in place by the
bankruptcy court. 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 fully or partially setoff such
amounts. However, to date setoffs of approximately
$52.5 million have been agreed to by Delphi and taken by
GM. Although GM believes that it is probable that it will be
able to collect all of the amounts due from Delphi, the
financial impact of a substantial compromise of our right of
setoff could have a material adverse impact on our financial
position.
In connection with GMs spin-off of Delphi in 1999, GM
entered into separate agreements with the UAW, the International
Union of Electrical Workers and the United Steel Workers. In
each of these three agreements (Benefit Guarantee Agreement(s)),
GM provided contingent benefit guarantees to make payments for
limited pension and OPEB expenses to certain former GM
U.S. hourly employees who
II-24
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Key Factors Affecting Future Results
(continued)
Delphi
Bankruptcy (continued)
transferred to Delphi as part of the spin-off and meet the
eligibility requirements for such payments (Covered Employees).
Each Benefit Guarantee Agreement contains separate benefit
guarantees relating to pension, post-retirement health care and
life insurance benefits. These limited benefit guarantees each
have separate triggering events that initiate potential GM
liability if Delphi fails to provide the corresponding benefit
at the required level. Therefore, it is possible that GM could
incur liability under one of the guarantees (e.g., pension)
without triggering the other guarantees (e.g., post-retirement
health care or life insurance). In addition, with respect to
pension benefits, GMs obligation under the pension benefit
guarantees only arises to the extent that the combination of
pension benefits provided by Delphi and the Pension Benefit
Guaranty Corporation (PBGC) falls short of the amounts GM
has guaranteed.
The Chapter 11 filing by Delphi does not by itself trigger
any of the benefit guarantees. In addition, the benefit
guarantees expire on October 18, 2007 if not previously
triggered by Delphis failure to pay the specified
benefits. 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.
The benefit guarantees do not obligate GM to guarantee any
benefits for Delphi retirees in excess of the levels of
corresponding benefits GM provides at any given time to
GMs own hourly retirees. Accordingly, if any of the
benefits GM provides to its hourly retirees are reduced, there
would be a similar reduction in GMs obligations under the
corresponding benefit guarantee.
A separate agreement between GM and Delphi 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. 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.
As part of the discussion to attain GMs tentative
health-care agreement with the UAW, GM provided former GM
employees who became Delphi employees 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.
On March 22, 2006, GM, Delphi and the UAW reached a
tentative agreement intended to reduce the number of U.S. hourly
employees at GM and Delphi through an accelerated attrition
program. The agreement is subject to approval by the bankruptcy
court of Delphis participation in the agreement. If so
approved, the agreement will provide for a combination of early
retirement programs and other incentives designed to help reduce
employment levels at both GM and Delphi. The agreement also
calls for the flowback of 5,000 UAW-represented Delphi employees
to GM by September 2007 (subject to extension). Eligible
UAW-represented Delphi employees may elect to retire from Delphi
or flow back to GM and retire. Under the agreement, GM has
agreed to assume the financial obligations relating to the lump
sum payments to be made to eligible Delphi U.S. hourly employees
accepting normal or voluntary retirement incentives and certain
post-retirement employee benefit obligations relating to Delphi
employees who flow back to GM under the agreement. GM believes
that the agreement will enhance the prospects for GM, the UAW
and Delphi to reach a broad-based consensual resolution of
issues relating to the Delphi restructuring. However, GM cannot
provide any assurance that the bankruptcy court will approve of
Delphis participation in the agreement (and if such
approval is not obtained, GM and the UAW will have no
obligations under the agreement) or that
II-25
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Key Factors Affecting Future Results
(continued)
Delphi
Bankruptcy (concluded)
enough employees will agree to participate in the attrition
program to reduce employment levels at Delphi sufficient to
provide the benefits we anticipate.
GM believes that it is probable that it has incurred a
contingent liability due to Delphis Chapter 11
filing. GM believes that the range of the contingent exposures
is between $5.5 billion and $12 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. As a result,
GM established a reserve of $5.5 billion ($3.6 billion
after tax) as a non-cash charge in the fourth quarter of 2005.
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. The amount of this charge may
change, depending on the result of discussions among GM, Delphi,
and Delphis unions, and other factors. GM is currently
unable to estimate the amount of additional charges, if any,
which may arise from Delphis Chapter 11 filing. A
consensual agreement to resolve the Delphi matter may cause GM
to incur additional costs in exchange for benefits that would
accrue to GM over time.
With respect to the possible cash flow effect on GM related to
its ability to make either pension or OPEB payments, if any are
required under the benefit guarantees, 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
payable, these payments would be likely to increase over time,
and could have a material effect on GMs liquidity in
coming years. (For reference, Delphis 2004
Form 10-K reported
that its total cash outlay for OPEB for 2004 was
$226 million, which included $154 million for both
hourly and salaried retirees, the latter of whom are not covered
under the benefit guarantees, plus $72 million in payments
to GM for certain former Delphi hourly employees that flowed
back to retire from GM). If benefits to Delphis
U.S. hourly employees under Delphis pension plan are
reduced or terminated, the resulting effect on GM cash flows in
future years due to the Benefit Guarantee Agreements is
currently not reasonably estimable.
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|
|
GMAC Strategic Alternatives |
On October 17, 2005, GM announced that it is exploring the
possible sale of a controlling interest in GMAC, with the goal
of delinking GMACs credit rating from GMs credit
rating and renewing its access to low-cost financing. Although
any transaction involving GMAC would reduce our interest in the
earnings of GMAC, it is expected that the financial effects of
that reduction would be offset by the value of any consideration
we receive from a purchaser. We are working to finalize a
transaction as rapidly as we can. Structuring a GMAC transaction
is a complex endeavor and we cannot predict whether any
transaction with respect to GMAC will occur, the terms of any
transaction, the identity of any purchaser, or whether and over
what period a transaction could achieve the principal strategic
goals. Even if we do not complete a transaction involving GMAC,
management believes that GMAC will be able to maintain the
necessary liquidity to support GM vehicle sales with its vehicle
financing activities in 2006.
A sale of a controlling interest in GMAC would trigger a need to
reassess the valuation attributable to the interest we sell and
the interest we retain in GMAC. Even if we do not sell a
controlling interest in GMAC, we will continue to reassess the
value of GMAC on a periodic basis.
GMAC also announced that it will continue to evaluate strategic
and structural alternatives to help ensure that its residential
mortgage business, Residential Capital Corp. (ResCap), retains
its investment grade credit ratings.
II-26
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Key Factors Affecting Future Results
(concluded)
Health-Care Liquidity
Matters
In recent years, GM has paid its OPEB expenditures from
operating cash flow, which reduces GMs liquidity and cash
flow from operations. GMs OPEB spending was
$4.3 billion in 2005, up $0.5 billion from 2004.
GMs total cash spending for health care in 2005 was
$5.5 billion, up approximately $0.1 billion from 2004
spending levels. However, GM has VEBA and 401(h) trusts with
assets totaling $19.1 billion in value as of
December 31, 2005 that could be used to reimburse GM for
its OPEB expenditures under certain circumstances. During each
of the second and third quarters of 2005, GM withdrew
$1 billion from its VEBA trust as a reimbursement for its
retiree health care payments and life insurance costs. On
October 3, 2005, GM withdrew an additional $1 billion
from the VEBA and in December withdrew $121 million from
the hourly VEBA and $55 million from the salaried VEBA. GM
withdrew $1 billion from the hourly VEBA trust on
February 1, 2006 and March 1, 2006, respectively. On a
quarter-by-quarter basis, GM will evaluate the need for
additional withdrawals as the cost of health care continues to
adversely affect GMs liquidity. GMs OPEB liabilities
also negatively affect GMs credit ratings, which are
discussed in the Status of Debt Ratings section below.
Because of the importance of OPEB liabilities to GMs
financial condition, GM management is pursuing an aggressive
strategy on several fronts to mitigate the continued growth of
these liabilities. These efforts include public policy
initiatives, improvements to the health-care delivery system,
enhanced consumer awareness of the effect of health-care choices
and increased cost sharing with salaried and hourly employees.
GMs turnaround plan and future prospects could be
materially adversely affected unless substantial progress is
made on its health-care cost issues in the future.
GM has been cooperating with the government in connection with a
number of investigations, including investigations concerning
pension and OPEB and certain transactions between GM and Delphi.
The Securities and Exchange Commission (SEC) has issued
subpoenas to GM in connection with various matters involving GM
that it has under investigation. These matters include 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 U.S. Bankruptcy Code. In addition,
the SEC recently issued a subpoena in connection with an
investigation of our transactions in precious metal raw
materials used in our automotive manufacturing operations, and a
federal grand jury recently issued a subpoena in connection with
supplier credits.
Separately, 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.
II-27
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
GM has concluded an internal review of credits received from
suppliers and the appropriateness of its accounting treatment
for them during the years 2000 through 2005. The review
indicated that GM erroneously recognized some supplier credits
as income in the year in which they were received, when it
should have instead amortized them over the future periods to
which they were attributable. Upon completion of this review, GM
filed revised periodic reports with the SEC in which GM restated
its financial statements for these and other errors identified
in all periods presented in those reports. The restated
financial statements presented in those reports corrected the
erroneous accounting for supplier credits, transactions between
GM and Delphi, OPEB, pension, transactions involving precious
metals, classifications of cash flows at ResCap, and other
matters requiring
out-of-period
adjustments.
Certain financing agreements to which GM is a party contain
customary covenants and representations with respect to the
delivery and certification of financial statements, which
generally require that those financial statements be materially
accurate when delivered. As a result of GMs recent
restatement of its financial statements, it is possible that the
counterparties under certain of those financing agreements may
assert that GM is no longer entitled to the benefits under the
agreements or that a default has occurred with regard to the
financial statements which GM provided and which GM has now
restated. These agreements consist principally of obligations in
connection with sale/leaseback transactions and other lease
obligations and do not include GMs public debt indentures.
Although GM has certain legal rights (such as the ability to
cure) with respect to certain claims that could be asserted and
there may be economic disincentives for third parties to raise
certain claims to the extent they have them, there can be no
assurance that one or more counterparties will not attempt to
declare a default or exercise such rights or remedies as they
may deem available, which could include acceleration,
termination or other remedies, and the amounts involved could be
material. To date, GM has not received any notices of any
declaration of default or similar action from any such other
counterparty, and GM continues to make required payments and
satisfy other obligations under these agreements.
Liquidity and Capital Resources
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Automotive and Other Operations |
Available Liquidity
GM believes it has sufficient liquidity, balance sheet strength
and financial flexibility to meet its capital requirements over
the short and medium-term under reasonably foreseeable
circumstances. Over the long term, we believe that GMs
ability to meet its capital requirements will primarily depend
on the successful execution of its four-point turnaround plan
and the return of its North American operations to profitability
and positive cash flow, and its ability to execute the
globalization of its principal business functions. GM
Auto & Others available liquidity includes its
cash balances, marketable securities and readily-available
assets of its VEBA trusts. At December 31, 2005, GM
Auto & Others available liquidity was
$20.4 billion compared with $23.3 billion at
December 31, 2004. In March 2006, GM sold approximately 17%
of Suzukis common stock for approximately
$2.0 billion in cash, and continues to hold approximately
3.7% of Suzukis common stock. The amount of GMs
consolidated cash and marketable securities is subject to
intra-month and seasonal fluctuations and includes balances held
by various GM business units and subsidiaries worldwide that are
needed to fund their operations.
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Years Ended December 31, | |
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2005 | |
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2004 | |
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2003 | |
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(Dollars in billions) | |
Cash and cash equivalents
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$ |
15.2 |
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|
$ |
13.1 |
|
|
$ |
14.4 |
|
Other marketable securities
|
|
|
1.4 |
|
|
|
6.7 |
|
|
|
9.1 |
|
Readily-available assets of VEBA trusts
|
|
|
3.8 |
|
|
|
3.5 |
|
|
|
3.5 |
|
|
|
|
|
|
|
|
|
|
|
|
Available Liquidity
|
|
$ |
20.4 |
|
|
$ |
23.3 |
|
|
$ |
27.0 |
|
|
|
|
|
|
|
|
|
|
|
II-28
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Automotive and Other
Operations (continued)
Available Liquidity (continued)
In addition to the readily-available portion of GMs VEBA
trusts included in available liquidity, GM expects to have
access to significant additional assets in its VEBA trusts over
time to fund its future OPEB plan costs. Total assets in the
VEBA trusts approximated $19.1 billion at December 31,
2005 versus $20.0 billion at December 31, 2004. The
decline in these balances was primarily driven by
$3.2 billion of withdrawals during 2005, partially offset
by favorable asset returns during the year.
GM also has a $5.6 billion unsecured line of credit under a
standby facility with a syndicate of banks that terminates in
June 2008. GM has not previously drawn on this credit facility
or its predecessor facilities and believes that it has
sufficient liquidity over the short and medium term without
drawing on this facility. GM believes that it has a good faith
basis on which to make a borrowing request under this credit
facility. However, in view of GMs recent restatement of
its prior financial statements, there is substantial uncertainty
as to whether the bank syndicate would be required to honor such
a request, and therefore there is a high risk that GM would not
be able to borrow under this facility. GM believes that this
matter is unlikely to be tested because GM has no current need
or intention to draw on the existing facility. Moreover, GM is
currently exploring the possibility of amending or replacing the
existing facility with new terms that would, among other things,
resolve any uncertainty regarding GMs ability to borrow
thereunder. There can be no assurance that GM will be successful
in negotiating an amendment or replacement of the existing
credit line or, if so, as to the amount, terms or conditions of
any such amended or replacement facility.
GM believes that issues also may arise from its recent
restatement of its prior financial statements under various
financing agreements, which consist principally of obligations
in connection with sale/ leaseback transactions and other lease
obligations and do not include GMs public debt indentures,
as to which GM is a party. 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. While the amounts that might be subject to
possible claims of acceleration, termination or other remedies
under some or all of these agreements are uncertain, GM
currently believes such amounts would likely not exceed
approximately $3 billion. In addition, there may be
economic disincentives for third parties to raise such claims to
the extent they have them. 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 $0.3 billion in undrawn committed
facilities with various maturities and undrawn uncommitted lines
of credit of $0.7 billion. In addition, GMs
consolidated affiliates with non-GM minority shareholders,
primarily GM Daewoo, have a combined $1.5 billion in
undrawn committed facilities. Other potential sources of
liquidity could include the acceleration of additional dividends
from GMAC and the sale of non-core assets.
The decrease in available liquidity to $20.4 billion at
December 31, 2005 from $23.3 billion at
December 31, 2004 was primarily a result of GM
Auto & Others negative operating cash flow and
the significant capital expenditures required to support the
business, partially offset by withdrawals from GMs VEBA
trusts for its OPEB plans for reimbursement of retiree
healthcare and life insurance benefits, cash dividends received
from GMAC and net cash received and consolidated as part of
transactions related to equity interests in affiliates.
For the year ended December 31, 2005, Auto &
Others operating cash flow was breakeven, principally
driven by the $(12.8) billion net loss from continuing
operations before cumulative effect of accounting change. That
result compares with operating cash flow of $1.2 billion
and a net loss from continuing operations of $(145) million
in 2004. In addition to the significant net loss, 2005 operating
cash flow was unfavorably impacted by approximately
$1.8 billion of cash payments made by GM to Fiat to
terminate the Master Agreement and settle various disputes
related thereto (GM paid a total of approximately
$2.0 billion as a result of the Fiat settlement,
approximately $1.8 billion of which was classified as
operating cash flow, while
II-29
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Automotive and Other
Operations (continued)
Available Liquidity (continued)
approximately $200 million, primarily related to the
purchase of certain assets, was classified as investing cash
flow), and by approximately $802 million of cash costs
related to the GME restructuring initiative. During 2005, GM
withdrew $3.2 billion from its VEBA trusts for its OPEB
plans for reimbursement of retiree health care and life
insurance benefits provided to eligible plan participants,
improving operating cash flow by $3.2 billion.
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 2005, GM acquired approximately
$2.6 billion of marketable securities while sales and
maturities of marketable securities were approximately
$7.7 billion.
Capital expenditures were a significant use of investing cash in
2005. Capital expenditures were $7.9 billion, up from
$7.3 billion in 2004 primarily as a result of significant
investment in GMNA required to support new product launches.
Favorable investing cash flows included $2.5 billion of
dividends from GMAC, up from $1.5 billion in 2004,
$1.4 billion of cash acquired (net of investment) as a
result of investment activity, and $846 million of proceeds
from the sale of business units/equity investments. The
$1.4 billion of cash acquired (net of investment) as a
result of investment activity in 2005 was driven primarily by
GMs acquisition in 2005 of a majority interest in GM
Daewoo, which resulted in GM consolidating GM Daewoos cash
balance of approximately $1.6 billion (net of
$70 million cash paid by GM to acquire the additional 6.3%
interest in GM Daewoo). Proceeds from the sale of business
units/equity investments was primarily driven by GMs sale
of its interest in FHI, for which GM received approximately
$800 million. In March 2006, GM sold its interest in Suzuki
common stock for approximately $2.0 billion in cash. In
2006, GM anticipates total capital spending on product
development, including GMs full-size pickup trucks, in
2006 of $8.7 billion, of which $5.7 billion will be
devoted to GMNA. We maintain a commitment to product
development, but our substantial legacy costs give us less
available cash to invest relative to some of our competitors.
GM Auto & Others total debt at December 31,
2005 was $32.5 billion, of which $1.5 billion was
classified as short-term and $31.0 billion was classified
as long-term. At December 31, 2004, total debt was
$32.5 billion, of which $2.1 billion was short-term
and $30.4 billion was long-term.
Separate to the $1.5 billion of short-term debt, near-term
North American term debt maturities include up to approximately
$1.2 billion in 2007, primarily related to approximately
$1.2 billion of convertible debentures that may be put to
GM for cash settlement in March 2007, and approximately
$1.3 billion of various maturities in 2008.
In order to provide financial flexibility to GM and its
suppliers, GM maintains a trade payables program through GMACCF.
The GMACCF program was implemented in the second quarter of
2005, replacing a larger program that GM maintained with General
Electric Capital Corporation. Under the GMACCF program, GMAC
Commercial Finance (GMACCF) pays participating GM suppliers the
amount due to them from GM in advance of their contractual
original due dates. In exchange for the early payment, these
suppliers accept a discounted payment. On the original due date
of the payables, GM pays GMACCF the full amount. At
December 31, 2005, GM owed approximately $0.3 billion
to GMACCF under the program, which amount is included in the
balances of net payable to FIO and net receivable from
Auto & Other in GMs Supplemental Information to
the Consolidated Balance Sheets, and is eliminated in GMs
Consolidated Balance Sheets.
II-30
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Automotive and Other
Operations (concluded)
Available Liquidity (concluded)
Net liquidity, calculated as cash, marketable securities, and
$3.8 billion ($3.5 billion at December 31, 2004)
of readily-available assets of the VEBA trust less the total of
loans payable and long-term debt, was a negative
$12.1 billion at December 31, 2005, compared with a
negative $9.2 billion at December 31, 2004.
Financing and Insurance Operations
GMACs consolidated assets totaled $320.5 billion at
December 31, 2005, down 1.2% from $324.2 billion at
December 31, 2004, which decrease was primarily
attributable to a decrease in consumer finance receivables,
primarily due to lower automotive finance receivables as a
result of an increase in whole loan sales.
Consistent with the reduction in assets, GMACs total debt
decreased to $253.2 billion at December 31, 2005
(excluding Commercial Mortgage debt of $4.3 billion, which
has been reclassified as held for sale), compared to
$267.8 billion at December 31, 2004 and
$239.4 billion at December 31, 2003. GMACs
2005 year-end ratio of total debt to total
stockholders equity was 11.9:1 compared to 12.0:1 at
December 31, 2004. GMACs liquidity, as well as its
ability to profit from ongoing activity, is in large part
dependent upon its timely access to capital and the costs
associated with raising funds in different segments of the
capital markets. Part of GMACs strategy in managing
liquidity risk has been to develop diversified funding sources
across a global investor base. As an important part of its
overall funding and liquidity strategy, GMAC maintains
substantial bank lines of credit. These bank lines of credit,
which totaled $47.0 billion at December 31, 2005,
provide back-up liquidity and represent additional
funding sources, if required.
GMAC currently has a $3.0 billion syndicated line of credit
committed through June 2006, $4.4 billion committed through
June 2008, and committed and uncommitted lines of credit of
$3.6 billion and $11.0 billion, respectively. In
addition, at December 31, 2005, New Center Asset Trust
(NCAT) had an $18.5 billion committed liquidity
facility. NCAT is a special purpose entity administered by GMAC
for the purpose of funding assets as part of GMACs
securitization funding programs. This entity funds the purchase
of assets through the issuance of asset-backed commercial paper
and represents an important source of liquidity to GMAC. At
December 31, 2005, NCAT had commercial paper outstanding of
$10.9 billion, which is not consolidated in the
Corporations Consolidated Balance Sheet. In addition, GMAC
has $126.8 billion in committed and uncommitted secured
funding facilities with third-parties, including commitments
with third-party asset-backed commercial paper conduits, as well
as forward flow sale agreements with third-parties and
repurchase facilities. This includes five year commitments that
GMAC has entered into in 2005 with remaining capacity to sell up
to $64 billion of retail automotive receivables to third
party purchasers through 2010. The unused portion of these
committed and uncommitted facilities totaled $87.7 billion
at December 31, 2005.
Status of Debt Ratings
Standard & Poors, Moodys, and Fitch
currently rate GMs and GMACs credit at
non-investment grade. Dominion Bond Rating Services
(DBRS) rates GMs credit at non-investment grade and
maintains an investment grade rating for GMAC. All major rating
agencies rate ResCap at investment grade. The following table
summarizes GMs, GMACs and ResCaps credit
ratings as of March 27, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Debt |
|
|
Commercial Paper |
|
|
|
|
|
|
Rating Agency |
|
GM |
|
GMAC |
|
ResCap |
|
|
GM |
|
GMAC |
|
ResCap |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DBRS
|
|
B (High) |
|
BBB (Low) |
|
BBB |
|
|
R-3 (Mid) |
|
R-2 (Low) |
|
R-2 (Mid) |
Fitch
|
|
B |
|
BB |
|
BBB- |
|
|
Withdrawn |
|
B |
|
F3 |
Moodys
|
|
B2 |
|
Ba1 |
|
Baa3 |
|
|
Not Prime |
|
Not Prime |
|
P3 |
S&P
|
|
B |
|
BB |
|
BBB- |
|
|
B-3 |
|
B-1 |
|
A-3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
II-31
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
Outlook |
|
|
|
Rating Agency |
|
GM |
|
GMAC |
|
ResCap |
|
|
|
|
|
|
|
DBRS
|
|
Negative |
|
Developing |
|
Developing |
Fitch
|
|
Rating Watch Negative |
|
Evolving |
|
Evolving |
Moodys
|
|
Review for Possible Downgrade |
|
Review for Possible Downgrade |
|
Review for Possible Downgrade |
S&P
|
|
Negative |
|
Developing |
|
Developing |
|
|
|
|
|
|
|
While GM experienced limited access to the capital markets in
2005 as a result of deterioration in its credit ratings, it was
able to utilize available liquidity to meet its capital
requirements. Similarly, due to the downgrade of its unsecured
debt to non-investment grade, GMACs access to the
unsecured capital markets was limited. GMAC was able to meet its
capital requirements by accessing alternative funding sources,
with a focus on secured funding and automotive whole loan sales.
In addition, GMAC has been able to diversify its unsecured
funding through the formation of ResCap, which in 2005 issued
$5.25 billion in unsecured debt to investors.
Each of Standard and Poors, Moodys, Fitch, and DBRS
has recently downgraded GMs senior debt ratings.
On October 10, 2005, Moodys placed GMs Ba2 and
GMACs Ba1 senior unsecured ratings under review for a
possible downgrade. On October 17, 2005, Moodys
announced a change in GMACs and ResCaps review
status to direction uncertain from review for
a possible downgrade. In addition, Moodys placed
GMACs Non-Prime shortterm rating on review for
possible upgrade. On November 1, 2005, Moodys
downgraded GMs long-term credit rating from Ba2 to B1 with
a negative outlook. GMACs rating, at Ba1, and
Rescaps at Baa3, were left under review with direction
uncertain. Moodys affirmed the ratings of these entities
on both November 21, 2005, and January 19, 2006. 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, GMAC and
ResCap under review for a possible downgrade. At the same time,
Moodys changed the review status of ResCaps
short-term
P-3 ratings to
review for possible downgrade from direction uncertain.
On October 3, 2005, Standard and Poors placed the
ratings of GM, GMAC, and ResCap on CreditWatch with negative
implications. On October 10, 2005, Standard and Poors
downgraded GMs long-term corporate credit rating from BB,
CreditWatch with negative implications to BB minus CreditWatch
with negative implications and, at the same time, downgraded
GMs shortterm rating from B-1 CreditWatch with
negative implications to B-2 CreditWatch with negative
implications. The ratings for GMAC and Rescap were left at BB
and BBB minus, respectively. The outlook for GMAC and ResCap
remained on CreditWatch, but the implications on both entities
were changed to developing from
negative. On December 12, 2005, Standard and
Poors resolved GMs issuer credit rating by
downgrading the rating from BB minus, CreditWatch with negative
implications to B, outlook negative, and downgraded GMs
shortterm ratings from B-2, CreditWatch with negative
implications to B-3 outlook negative. GMs ratings were
removed from Creditwatch. The long-term ratings of GMAC and
ResCap were unchanged at BB and BBB minus, respectively, both
under CreditWatch with developing implications. GMACs and
ResCaps shortterm ratings remained unchanged at B-1
and A-3 respectively, both under CreditWatch with developing
implications.
On October 17, 2005 Fitch affirmed GMs senior debt
credit rating of BB and placed the ratings of GMAC and ResCap on
Rating Watch Evolving with a rating of BB and BBB-minus,
respectively. On November 9, 2005, Fitch downgraded
GMs senior unsecured ratings from BB to B-plus, Rating
Watch Negative, leaving the ratings of GMAC and Rescap
unchanged. GMs shortterm rating was withdrawn.
GMACs and ResCaps shortterm ratings were left
at B and F-3, respectively (both on Rating Watch
II-32
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Status of Debt Ratings (concluded)
Evolving). Fitch affirmed the ratings of GM, GMAC, and ResCap on
February 7, 2006. On March 1, 2006, Fitch downgraded
GMs senior unsecured rating from B+ to B. Fitch maintained
the rating watch negative outlook for GMs ratings.
On October 11, 2005, DBRS placed the ratings of GMAC and
ResCap under review with developing implications. On
October 14, 2005, DBRS downgraded GMs long-term debt
to BB with negative trends and confirmed GMs commercial
paper rating of R-3 (high), also with negative trends. On
December 16, 2005, DBRS downgraded GMs longterm
debt to B (high) and GMs shortterm rating to
R-3 (mid), both with negative trends.
While the aforementioned ratings actions have increased
borrowing costs and limited access to unsecured debt markets,
these outcomes have been mitigated by actions taken by GM and
GMAC over the past few years to focus on an increased use of
liquidity sources other than institutional unsecured markets
that are not directly affected by ratings on unsecured debt,
including secured funding sources beyond traditional asset
classes and geographical markets, automotive whole loan sales,
and use of bank and conduit facilities. Further reductions of
GMs and/or GMACs 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 and GMAC will continue to have
access to sufficient capital to meet the Corporations
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 the Corporations funding strategy and
GMACs ability to sustain current level of asset
originations over the long-term. In addition, the ratings
situation and outlook increase the importance of successfully
executing the Corporations plans for improvement of
operating results. Management continuously assesses these
matters and is seeking to mitigate the increased risk by
exploring whether actions could be taken that would provide a
basis for rating agencies to evaluate GMACs financial
performance in order to provide GMAC with ratings independent of
those assigned to GM. On October 17, 2005, GM made an
announcement that it is exploring the possible sale of a
controlling interest in GMAC, with the goal of delinking
GMACs credit rating from GMs credit rating and
renewing its access to low-cost financing. There can be no
assurance that any such actions, if taken, would be successful
in achieving a delinking of GMACs credit rating from
GMs credit rating by the rating agencies.
In addition, GMAC has been able to diversify its unsecured
funding through the formation of ResCap. ResCap, which was
formed as the holding company of GMACs residential
mortgage businesses, successfully achieved an investment grade
rating (independent from GMAC) and issued $4 billion of
unsecured debt in the second quarter of 2005. Following the bond
offering, in July 2005, ResCap closed a $3.5 billion
syndication of its bank facilities consisting of a
$1.75 billion syndicated term loan, $0.9 billion
syndicated line of credit committed through July 2008 and a
$0.9 billion syndicated line of credit committed through
July 2006. In addition, in the fourth quarter of 2005, ResCap
filed a $12 billion shelf registration statement in order
to offer senior and/or subordinated debt securities and has
issued $3 billion ($1.75 billion issued in February
2006) in unsecured debt to investors, with a portion of the
proceeds from the notes used to repay a portion of intercompany
borrowings. These facilities are intended to be used primarily
for general corporate and working capital purposes, as well as
to repay affiliate borrowings, thus providing additional
liquidity.
Line of Credit Between GM and GMAC
GM has a $4 billion revolving line of credit from GMAC that
expires in September 2006. This credit line is used for general
operating and seasonal working capital purposes and to reduce
external liquidity requirements, given the differences in the
timing of GMs and GMACs peak funding requirements.
The maximum amount outstanding on this line during the year was
$3.3 billion with no amounts outstanding on this line at
December 31, 2005. Interest is payable on amounts advanced
under the arrangements based on market interest rates, adjusted
to reflect the credit rating of GM or GMAC in its capacity as
borrower. In
II-33
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
addition to this line of credit, GMAC had a similar line of
credit with GM that allowed GMAC to draw up to $6 billion.
This arrangement expired in December 2005 and was not renewed.
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, 2005, all
legal funding requirements had been met. GM made contributions
to its pension plans as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
U.S. hourly and salaried
|
|
$ |
|
|
|
$ |
|
|
|
$ |
18,504 |
|
Other U.S.
|
|
|
125 |
|
|
|
117 |
|
|
|
117 |
|
Non-U.S.
|
|
|
708 |
|
|
|
802 |
|
|
|
442 |
|
In 2006, GM does not have any contributions due for its
U.S. hourly pension plan. In February 2006, GM contributed
$1.7 million into its U.S. salaried pension plan. This
contribution was a required contribution on behalf of GM
employees who were former participants in the Saturn PCRP plan,
which was merged into the GM salaried pension plan in 2005. GM
does not expect to make any additional contributions into the
salaried pension plan in 2006. GM expects to contribute or pay
benefits of approximately $100 million to its other
U.S. pension plan and $500 million to its primary
non-U.S. pension
plans, which include GM Canada Limited, Adam Opel and Vauxhall,
in 2006.
GMs U.S. hourly and salaried pension plans are
overfunded by $7.5 billion in 2005 and $1.6 billion in
2004. This increase was primarily attributable to strong actual
asset returns of approximately 13% in 2005. The
non-U.S. pension
plans are underfunded. The deficit for
non-U.S. pension
benefits increased from approximately $9 billion at the end
of 2004 to $10.7 billion at the end of 2005. This increase
was primarily due to declines in discount rates in various
countries that GM sponsors plans.
GM also maintains hourly and salaried benefit 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
$62.1 billion in 2005 and $53.8 billion in 2004.
GMs
non-U.S. OPEB
plans were underfunded by $3.8 billion in 2005 and
$3.7 billion in 2004.
In 2005, GM withdrew a total of $3.2 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 2004, GM contributed a total of
$9 billion to its U.S. OPEB plans, primarily
U.S. hourly and salaried VEBA for OPEB plan accounts. GM
withdrew $1 billion from its VEBA trust on each of
February 1, 2006 and March 1, 2006.
II-34
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Pension and Other Postretirement Benefits
(concluded)
The following benefit payments, which reflect estimated future
employee services, as appropriate, are expected to be paid
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Benefits | |
|
Non-U.S. Other Benefits |
|
|
|
|
| |
|
|
|
|
Pension Benefits | |
|
|
|
Gross | |
|
|
|
Gross |
|
|
| |
|
|
|
Medicare | |
|
|
|
Medicare |
|
|
|
|
Primary | |
|
Gross Benefit | |
|
Part D | |
|
Gross Benefit | |
|
Part D |
|
|
U.S. Plans | |
|
Non-U.S. Plans | |
|
Payments | |
|
Receipts | |
|
Payments | |
|
Receipts |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
2006
|
|
|
6,794 |
|
|
|
834 |
|
|
|
4,337 |
|
|
|
181 |
|
|
|
128 |
|
|
|
|
|
2007
|
|
|
6,693 |
|
|
|
865 |
|
|
|
4,637 |
|
|
|
271 |
|
|
|
137 |
|
|
|
|
|
2008
|
|
|
6,728 |
|
|
|
905 |
|
|
|
4,916 |
|
|
|
301 |
|
|
|
147 |
|
|
|
|
|
2009
|
|
|
6,744 |
|
|
|
940 |
|
|
|
5,163 |
|
|
|
328 |
|
|
|
157 |
|
|
|
|
|
2010
|
|
|
6,754 |
|
|
|
979 |
|
|
|
5,383 |
|
|
|
353 |
|
|
|
167 |
|
|
|
|
|
2011-2015
|
|
$ |
33,517 |
|
|
$ |
5,443 |
|
|
$ |
29,187 |
|
|
$ |
2,116 |
|
|
$ |
993 |
|
|
$ |
|
|
Off-Balance Sheet Arrangements
GM and GMAC use 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 generated or acquired in the ordinary course of business
by GMAC and its subsidiaries and, to a lesser extent, by GM. The
assets securitized and sold by GMAC and its subsidiaries consist
principally of mortgages, and wholesale and retail loans secured
by vehicles sold through GMs dealer network. The assets
sold by GM consist principally of trade receivables.
In addition, 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, GMAC, or their affiliates hold any direct or
indirect equity interests in such entities.
The amounts outstanding in off-balance sheet facilities used by
GM in its FIO reportable segment have increased over the past
few years as GMAC continues to use securitization transactions
that, while similar in legal structure to off-balance sheet
securitizations, are accounted for as secured financings and are
recorded as receivables and debt on the balance sheet.
Assets in off-balance sheet entities were as follows (dollars in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
December 31 | |
|
|
| |
Automotive and Other Operations |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Assets leased under operating leases
|
|
$ |
2,430 |
|
|
$ |
2,553 |
|
Trade receivables sold(1)
|
|
|
708 |
|
|
|
1,210 |
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
3,138 |
|
|
$ |
3,763 |
|
|
|
|
|
|
|
|
II-35
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Off-Balance Sheet Arrangements (concluded)
|
|
|
|
|
|
|
|
|
|
|
Financing and Insurance Operations |
|
|
|
|
|
|
|
|
|
Receivables sold or securitized:
|
|
|
|
|
|
|
|
|
|
Mortgage loans
|
|
$ |
99,084 |
|
|
$ |
79,043 |
|
|
Retail finance receivables
|
|
|
6,014 |
|
|
|
5,615 |
|
|
Wholesale finance receivables
|
|
|
21,421 |
|
|
|
21,291 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
126,519 |
|
|
$ |
105,949 |
|
|
|
|
|
|
|
|
|
|
(1) |
In addition, trade receivables sold to GMAC were
$525 million as of December 31, 2005 and
$549 million as of December 31, 2004. |
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 tables below
include only those contracts which include fixed or minimum
obligations. It does not include normal purchases, which are
made in the ordinary course of business.
II-36
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Contractual Obligations and Other Long-Term
Liabilities (continued)
The following table provides aggregated information about our
Auto & Other segments outstanding contractual
obligations and other long-term liabilities as of
December 31, 2005.
Automotive and Other Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period | |
|
|
| |
|
|
2006 | |
|
2007-2008 | |
|
2009-2010 | |
|
2011 and after | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(dollars in millions) | |
Debt
|
|
$ |
1,519 |
|
|
$ |
2,847 |
|
|
$ |
589 |
|
|
$ |
27,648 |
|
|
$ |
32,603 |
|
Capital lease obligations
|
|
|
174 |
|
|
|
597 |
|
|
|
251 |
|
|
|
573 |
|
|
|
1,595 |
|
Operating lease obligations
|
|
|
630 |
|
|
|
1,472 |
|
|
|
895 |
|
|
|
1,323 |
|
|
|
4,320 |
|
Contractual commitments for capital expenditures
|
|
|
745 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
760 |
|
Other contractual commitments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postretirement benefits(1)
|
|
|
3,517 |
|
|
|
3,827 |
|
|
|
|
|
|
|
|
|
|
|
7,344 |
|
|
|
Less: VEBA assets(2)
|
|
|
(3,517 |
) |
|
|
(3,827 |
) |
|
|
|
|
|
|
|
|
|
|
(7,344 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Material
|
|
|
1,079 |
|
|
|
1,676 |
|
|
|
1,262 |
|
|
|
332 |
|
|
|
4,349 |
|
|
Information technology(3)
|
|
|
333 |
|
|
|
179 |
|
|
|
4 |
|
|
|
1 |
|
|
|
517 |
|
|
Marketing
|
|
|
1,647 |
|
|
|
634 |
|
|
|
429 |
|
|
|
115 |
|
|
|
2,825 |
|
|
Facilities
|
|
|
201 |
|
|
|
227 |
|
|
|
178 |
|
|
|
445 |
|
|
|
1,051 |
|
|
Rental car repurchases
|
|
|
8,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,347 |
|
|
Policy, product warranty and recall campaigns liability
|
|
|
4,480 |
|
|
|
4,123 |
|
|
|
482 |
|
|
|
43 |
|
|
|
9,128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual commitments
|
|
$ |
19,155 |
|
|
$ |
11,770 |
|
|
$ |
4,090 |
|
|
$ |
30,480 |
|
|
$ |
65,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining balance postretirement benefits
|
|
$ |
767 |
|
|
$ |
5,438 |
|
|
$ |
10,189 |
|
|
$ |
61,203 |
|
|
$ |
77,597 |
|
|
|
Less: VEBA assets(2)
|
|
|
(767 |
) |
|
|
(5,438 |
) |
|
|
(5,557 |
) |
|
|
|
|
|
|
(11,762 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
$ |
|
|
|
$ |
|
|
|
$ |
4,632 |
|
|
$ |
61,203 |
|
|
$ |
65,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt payable beyond one year at December 31, 2005
includes scheduled maturities as follows: 2007
$1 billion; 2008 $1.9 billion;
2009 $0.4 billion; 2010
$0.2 billion; 2011 and after
$27.6 billion. Included in the long-term debt payable
beyond one year are certain convertible debentures of
approximately $1.2 billion that may be put to GM for cash
settlement in March 2007, ahead of its scheduled maturity after
2011.
|
|
(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. |
|
(2) |
Total VEBA assets were allocated based on projected spending
requirements. Amount includes $1.0 billion VEBA withdrawal
and $0.2 billion VEBA withdrawal in the fourth quarter of
2005. |
|
(3) |
Does not reflect the effect of the January 2006 agreements
with information technology providers. |
The combined U.S. hourly and salaried pension plans were
$7.5 billion overfunded on a Statement of Financial
Accounting Standards No. 87 Basis at year-end 2005. As a
result, and under normal conditions, GM does not expect to make
any contribution to its U.S. hourly and salaried pension
plans for the foreseeable future.
II-37
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Contractual Obligations and Other Long-Term
Liabilities (continued)
The following table provides aggregated information about our
FIO segments outstanding contractual obligations and other
long-term liabilities as of December 31, 2005.
Financing and Insurance Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period | |
|
|
| |
|
|
|
|
2011 and | |
|
|
|
|
2006 | |
|
2007-2008 | |
|
2009-2010 | |
|
after | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
Debt
|
|
$ |
82,054 |
|
|
$ |
59,512 |
|
|
$ |
18,801 |
|
|
$ |
93,386 |
|
|
$ |
253,753 |
|
Operating lease obligations
|
|
|
201 |
|
|
|
304 |
|
|
|
161 |
|
|
|
158 |
|
|
|
824 |
|
Mortgage purchase and sale commitments
|
|
|
24,619 |
|
|
|
3,463 |
|
|
|
|
|
|
|
70 |
|
|
|
28,152 |
|
Lending commitments
|
|
|
18,500 |
|
|
|
2,213 |
|
|
|
669 |
|
|
|
4,493 |
|
|
|
25,875 |
|
Commitments to remit excess cash flows on certain loan portfolios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,305 |
|
|
|
4,305 |
|
Commitments to sell retail automotive receivables
|
|
|
9,000 |
|
|
|
12,000 |
|
|
|
12,000 |
|
|
|
|
|
|
|
33,000 |
|
Commitments to provide capital to equity method investees
|
|
|
553 |
|
|
|
90 |
|
|
|
107 |
|
|
|
287 |
|
|
|
1,037 |
|
Purchase obligations
|
|
|
150 |
|
|
|
77 |
|
|
|
13 |
|
|
|
|
|
|
|
240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual commitments
|
|
$ |
135,077 |
|
|
$ |
77,659 |
|
|
$ |
31,751 |
|
|
$ |
102,699 |
|
|
$ |
347,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book Value per Share
Book value per share represents the net assets of the
Corporation divided by the number of outstanding shares and was
determined based on the liquidation rights of the common
stockholders. Book value per share of GM
$12/3
par value common stock decreased to $25.81 at
December 31, 2005, from $48.41 at December 31, 2004.
Book value per share is a meaningful financial measure for GM,
as it provides investors an objective metric based on GAAP that
can be compared to similar metrics for competitors and other
industry participants. The book value per share can vary
significantly from the trading price of common stock since the
latter is driven by investor expectations about a variety of
factors, including the present value of future cash flows, which
may or may not warrant financial statement recognition under
GAAP.
As of December 31, 2005, GMs book value per share was
significantly higher than the trading price of its
$12/3
par value common stock. GM believes that this difference
is driven mainly by marketplace uncertainty surrounding future
events at GM, such as those matters discussed in the Risk
Factors section above.
We also believe the fact that GMs book value exceeds the
recent trading price of its
$12/3
par value common stock is a potential indicator of
impairment. Presently, none of these uncertainties warrant
modification to the amounts reflected in GMs consolidated
financial statements.
Dividends
Dividends may be paid on our
$12/3
par value common stock only when, as, and if declared by
GMs Board of Directors in its sole discretion out of
amounts available for dividends under applicable law. At
December 31, 2005, the amount of our capital surplus plus
retained earnings on a GAAP basis was about $17.6 billion.
Under Delaware law, our board may declare dividends only to the
extent of our statutory surplus (which is defined as
total assets minus total liabilities, in each case at fair
market value, minus
II-38
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Contractual Obligations and Other Long-Term
Liabilities (concluded)
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 $2.00 in 2005, 2004, and 2003. At
the February 6, 2006 meeting of the GM Board of Directors,
the board approved the reduction of the quarterly dividend on GM
$12/3
par value common stock from $0.50 per share to
$0.25 per share, effective for the first quarter of 2006,
which was paid on March 10, 2006 to holders of record as of
February 16, 2006.
Employment and Payrolls
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Worldwide employment at December 31, (in thousands) |
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
GMNA
|
|
|
173 |
|
|
|
181 |
|
|
|
190 |
|
GME(1)
|
|
|
63 |
|
|
|
61 |
|
|
|
62 |
|
GMLAAM
|
|
|
31 |
|
|
|
29 |
|
|
|
23 |
|
GMAP(2)
|
|
|
31 |
|
|
|
15 |
|
|
|
14 |
|
GMAC
|
|
|
34 |
|
|
|
34 |
|
|
|
32 |
|
Other
|
|
|
3 |
|
|
|
4 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
Total employees
|
|
|
335 |
|
|
|
324 |
|
|
|
326 |
|
|
|
|
|
|
|
|
|
|
|
Worldwide payrolls excluding benefits (in billions)
|
|
$ |
21.5 |
|
|
$ |
21.5 |
|
|
$ |
20.9 |
|
U.S. hourly payrolls excluding benefits (in billions)(3)
|
|
$ |
8.0 |
|
|
$ |
8.7 |
|
|
$ |
8.9 |
|
Average labor cost per active hour worked U.S. hourly(4)
|
|
$ |
81.18 |
|
|
$ |
73.73 |
|
|
$ |
78.39 |
|
|
|
(1) |
2005 includes approximately 7,000 employees added from a former
powertrain joint venture with Fiat. |
|
(2) |
2005 includes approximately 13,000 employees added as the result
of the consolidation of GM Daewoo. |
|
(3) |
Includes employees at work (excludes laid-off
employees receiving benefits). |
|
(4) |
Includes U.S. hourly wages and benefits divided by the
number of hours worked. |
Critical Accounting Estimates
Accounting policies are integral to understanding this MD&A.
The consolidated financial statements of GM are prepared in
conformity with GAAP, which requires 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. GMs accounting policies are described
in Note 1 to the Consolidated Financial Statements.
Critical accounting estimates are described in this section. An
accounting estimate is considered critical if: the estimate
requires management to make assumptions about matters that were
highly uncertain at the time the estimate was made; different
estimates reasonably could have been used; or if changes in the
estimate that would have a material impact on the
Corporations financial condition or results of operations
are reasonably likely to occur from period to period. Management
believes that the accounting estimates employed are appropriate
and resulting balances are reasonable; however, actual results
could differ from the original estimates, requiring adjustments
to these balances in future periods. The Corporation has
discussed the development, selection and disclosures of these
critical accounting estimates with the Audit Committee of
GMs Board of Directors, and the Audit Committee has
reviewed the Corporations disclosures relating to these
estimates.
II-39
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Critical Accounting Estimates (continued)
|
|
|
Pension and Other Postretirement Employee Benefits
(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. For 2005, our discount rates are based on
creating a hypothetical portfolio of high quality bonds (rated
AA by a recognized rating agency) for which the timing and
amount of cash inflows approximates the estimated outflows of
the defined benefit plan. |
|
|
|
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, risk
and correlations for each of the asset classes that comprise the
funds asset mix, and recent and long-term historical
performance. |
|
|
|
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. |
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.
As of December 31, 2005, GM had unrecognized actuarial
losses of $32.1 billion for its U.S. and non
U.S. pension plans, and $32.3 billion for its U.S. and
non U.S. OPEB plans. These balances were accumulated
by differences in actual experience compared to original
assumptions accumulated over several years, in particular, the
general trend of lower discount rates, driven by interest rate
environments, as well as escalating health care cost trend
rates. GM amortizes these amounts over the future working lives
of the plan participants, accordingly higher levels of
unrecognized actuarial losses will have unfavorable impacts on
reported pension and OPEB expense. The recognized net actuarial
losses component of total U.S. and non U.S. pension
and OPEB expense for 2005, 2004, and 2003 was $4.7 billion,
$3.2 billion, and $2.7 billion, respectively. The
increases to the total recognized net actuarial losses for U.S.
and non U.S. pension and OPEB expense in 2005, 2004,
and 2003 were $1.4 billion, $0.6 billion, and
$1.5 billion, respectively. The balance sheet
classification of these unrecognized losses is the subject of a
current FASB project.
GM has established for its U.S. pension plans a discount
rate of 5.70% for year-end 2005, which represents a
10 basis point increase from the 5.60% discount rate used
at year-end 2004. GMs U.S. pre-tax pension expense is
forecasted to decrease from approximately $1.3 billion in
2005, excluding curtailments and settlements, to approximately
$0.6 billion in 2006 due to the approximately 13% actual
return on plan assets in 2005.
II-40
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Critical Accounting Estimates (continued)
The following information illustrates the sensitivity to a
change in certain assumptions for U.S. pension plans (as of
December 31, 2005 the projected benefit obligation (PBO)
for U.S. pension plans was $89 billion and the minimum
pension liability charged to equity with respect to
U.S. pension plans was $109 million net of tax):
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on | |
|
|
Effect on 2006 | |
|
December 31, 2005 | |
Change in Assumption |
|
Pre-Tax Pension Expense | |
|
PBO | |
|
|
| |
|
| |
25 basis point decrease in discount rate
|
|
+$ |
150 million |
|
|
+$ |
2.3 billion |
|
25 basis point increase in discount rate
|
|
-$ |
160 million |
|
|
-$ |
2.2 billion |
|
25 basis point decrease in expected return on assets
|
|
+$ |
220 million |
|
|
|
|
|
25 basis point increase in expected return on assets
|
|
-$ |
220 million |
|
|
|
|
|
GMs U.S. hourly 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. Consistent with GAAP, the 2005 pre-tax pension expense
and December 31, 2005 PBO do not comprehend any future
benefit increases beyond the amounts stated in the currently
prevailing contract that expires in September 2007. 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. A 1% increase in the basic benefit for
U.S. hourly employees would result in a $140 million
increase in 2006 pre-tax pension expense and a $660 million
increase in the December 31, 2005 PBO. A 1% decrease in the
same benefit would result in a $130 million decrease in
2006 pre-tax pension expense and a $610 million decrease in
the December 31, 2005 PBO.
These changes in assumptions would have no effect on GMs
funding requirements. In addition, at December 31, 2005, a
25 basis point decrease in the discount rate would decrease
stockholders equity by $19.5 million, net of tax; a
25 basis point increase in the discount rate would increase
stockholders equity by $19.5 million, net of tax. The
impact of greater than a 25 basis point decrease/increase
in discount rate would not be proportional to the first
25 basis point decrease/increase in the discount rate.
GM has established for its U.S. OPEB plans a discount rate
of 5.45% for year-end 2005, which represents a 30 basis
point reduction from the 5.75% discount rate used at year-end
2004.
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 $84.9 billion as of December 31,
2005):
|
|
|
|
|
|
|
|
|
|
|
Effect on 2006 | |
|
Effect on | |
|
|
Pre-Tax OPEB | |
|
December 31, 2005 | |
Change in Assumption |
|
Expense | |
|
APBO | |
|
|
| |
|
| |
25 basis point decrease in discount rate
|
|
+$ |
220 million |
|
|
+$ |
2.6 billion |
|
25 basis point increase in discount rate
|
|
-$ |
230 million |
|
|
-$ |
2.4 billion |
|
GM assumes a 10% initial U.S. health-care cost trend rate
for the 2006 calendar year and a 5.0% ultimate
U.S. health-care cost trend rate projected for calendar
year 2012 and beyond as of December 31, 2005. A one
percentage point increase in the assumed U.S. health care
trend rates for all periods would have increased the
U.S. APBO by $9.3 billion at December 31, 2005,
and the aggregate service and interest cost components of
non-pension postretirement benefit expense for 2005 by
$629 million. A one-percentage point decrease would have
decreased the U.S. APBO by $7.7 billion and the
aggregate service and interest cost components of non-pension
postretirement benefit expense for 2005 by $516 million.
II-41
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Critical Accounting Estimates (continued)
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.
In recent years, 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.
Beginning with 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 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 in the hypothetical described above.
GMs discount rate estimation under this iterative process
involves four steps:
First, GM identifies a bond universe that consists of all
AA-rated or higher bonds with an amount outstanding greater than
$25 million. GM excludes from this universe all callable
and convertible bonds, mortgage-backed and asset-backed
securities and bonds with a negative credit watch. The bond
universe data, including amounts outstanding, market prices,
credit ratings and other relevant data, is obtained from
Bloomberg.
Second, GM creates a defeasance portfolio from the bond universe
by selecting a set of bonds that would yield cash flows (through
coupons, maturation and reinvestment) that are sufficient to
defease its U.S. pension and OPEB obligations.
Reinvestments are assumed to occur at forward rates calculated
using a yield curve developed with the following methodology.
For years during which the bond universe has a sufficient number
of bonds, the yield curve is based on the yields of such bonds.
For future years, when the bond universe does not have a
sufficient number of bonds, the yield curve is extrapolated as
follows:
|
|
|
|
|
GM computes the spread between the yield curve and the swap
curve (a market-based curve), |
|
|
|
To extrapolate the yield curve for the period beginning after
the last year where substantial bonds are available in the bond
universe and ending in year 50, GM adds the spread to the swap
curve, which is observable over 50 years, and |
|
|
|
To extrapolate the yield curve beyond the 50th year, GM
assumes that the last one-year forward rate on the yield curve
(at the 49th year) remains constant for the remaining years. |
Third, GM determines the market value of the defeasance
portfolio using the actual initial market value of the bonds
selected as part of the defeasance portfolio.
Fourth, GM computes the internal rate of return (IRR) of
the defeasance portfolio based on its market value as of the
measurement date and the final net cash flows from the coupons,
maturations and reinvestments. GM uses this IRR as the discount
rate for its U.S. pension and OPEB obligations.
Beginning with 2005 year-end valuations, GM rounds its
discount rates for its U.S. pensions and U.S. OPEB
plans to the nearest 0.05 percentage point, rather than to
the nearest 0.25 percentage point as in prior years.
II-42
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Critical Accounting Estimates (continued)
Using this new methodology, GM has established for its
U.S. pension plans and U.S. OPEB plans discount rates
of 5.70% and 5.45%, respectively, for year-end 2005.
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. 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 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 sales allowances could be affected.
Provisions for estimated expenses related to 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 warranty claims. Management
actively studies trends of warranty claims and takes action to
improve vehicle quality and minimize warranty claims. See
Note 16 to the Consolidated Financial Statements for the
effect of retroactive adjustments to the liability for
pre-existing warranties.
|
|
|
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 such a review. This review is
performed using estimates of future cash flows. 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.
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. Costs related to the idling of
employees that are 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.
|
|
|
Allowance for Credit Losses |
The allowance for credit losses is managements estimate of
incurred losses in GMACs consumer and commercial finance
receivable and loan portfolios held for investment. Management
periodically performs detailed reviews of these portfolios to
determine if impairment has occurred and to assess the estimated
realizable value of collateral where applicable and the adequacy
of the allowance for credit losses, based on historical and
current trends and other factors affecting credit quality
losses. Determination of the allowance for credit losses
requires management to exercise significant judgment about the
timing, frequency, and severity of credit losses, which could
materially affect the provision for credit losses and therefore,
net income.
II-43
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Critical Accounting Estimates (concluded)
|
|
|
Investments in Operating Leases |
GMACs investments in its leasing portfolio represent an
estimate of the realizable values of the assets which is based
on the residual value established at contract inception. GMAC
establishes residual values at contract inception by using
independently published residual value guides. Management
reviews residual values periodically to determine that recorded
amounts are appropriate and the operating lease assets have not
been impaired. GMAC actively manages the remarketing of
off-lease vehicles to maximize the realization of their value.
Changes in the value of the residuals or other external factors
impacting GMACs future ability to market the vehicles
under prevailing market conditions may impact the realization of
residual values. For example, a change in the estimated
realizable value of 1% on the U.S. operating lease
portfolio could result in a cumulative after-tax earnings impact
of $41 million as of December 31, 2005, to be
recognized over the remaining term of the lease portfolio.
|
|
|
Mortgage Servicing Rights |
The Corporation capitalizes mortgage servicing rights,
which represents the capitalized value associated with the
right to receive future cash flows in connection with the
servicing of mortgage loans. Because residential mortgage loans
typically contain a prepayment option, borrowers often elect to
prepay their mortgages, refinancing at lower rates during
declining interest rate environments. As such, the market value
of residential mortgage servicing rights is very sensitive to
changes in interest rates, and tends to decline as market
interest rates decline and increase as interest rates rise.
The Corporation capitalizes the cost of originated mortgage
servicing rights based upon the relative fair market value of
the underlying mortgage loans and mortgage servicing rights at
the time of sale or securitization of the underlying mortgage
loan. Purchased mortgage servicing rights are capitalized at
cost (which approximates the fair market value of such assets)
and assumed mortgage servicing rights are recorded at fair
market value as of the date the servicing obligation is assumed.
The carrying value of mortgage servicing rights is dependent
upon whether the asset is hedged or not. Mortgage servicing
rights that are hedged with derivatives which receive hedge
accounting treatment, as prescribed by SFAS No. 133,
Accounting for Derivative Instruments and Hedging
Activities, are carried at fair value. Changes in fair
value are recognized in current period earnings, generally
offset by changes in the fair value of the underlying
derivative, if the changes in the value of the asset and
derivative are highly correlated. The majority of mortgage
servicing rights are hedged as part of the Corporations
risk management program. Mortgage servicing rights that do not
receive hedge accounting treatment are carried at lower of cost
or fair value.
|
|
|
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. A material difference between our estimates and
assumptions and our actual experience may materially adversely
affect the cash flow, profitability, financial condition and
business prospects of our finance, mortgage, and insurance
operations.
II-44
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
New Accounting Standards
In December 2004, the Financial Accounting Standards Board
(FASB) revised Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based
Compensation (SFAS No. 123R), requiring
companies to record share-based payment transactions as
compensation expense at fair market value.
SFAS No. 123R further defines the concept of fair
market value as it relates to such arrangements. Based on SEC
guidance issued in Staff Accounting Bulletin (SAB) 107 in
April 2005, the provisions of this statement will be effective
for GM as of January 1, 2006. The Corporation began
expensing the fair market value of newly granted stock options
and other stock based compensation awards to employees pursuant
to SFAS No. 123 in 2003; therefore this statement is
not expected to have a material effect on GMs consolidated
financial position or results of operations.
In December 2005, the FASB released FASB Staff Position
(FSP) SFAS 123(R)-3, Transition Election Related
to Accounting for the Tax Effects of Share-Based Payment
Awards, which provides a practical transition election
related to accounting for the tax effects of share-based payment
awards to employees. The Corporation is currently reviewing the
transition alternatives and will elect the appropriate
alternative within one year of the adoption of SFAS 123(R).
In April 2005, the FASB issued SFAS No. 154,
Accounting Changes and Error Corrections, requiring
retrospective application as the required method for reporting a
change in accounting principle, unless impracticable or a
pronouncement includes specific transition provisions. This
statement also requires that a change in depreciation,
amortization, or depletion method for long-lived, nonfinancial
assets be accounted for as a change in accounting estimate
effected by a change in accounting principle. This statement
carries forward the guidance in APB Opinion No. 20,
Accounting Changes, for the reporting of the
correction of an error and a change in accounting estimate. This
statement is effective for accounting changes and correction of
errors made in fiscal years beginning after December 15,
2005.
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. All statements
in subsequent reports which GM may file with the SEC on
Form 10-Q and
filed or furnished 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. While these statements represent our
current judgment on what the future may hold, and we believe
these judgments are reasonable when made, these statements are
not guarantees of any events or financial results, and GMs
actual results may differ materially due to numerous 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:
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|
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|
|
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; |
|
|
|
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; |
II-45
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Forward-Looking Statements (continued)
|
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|
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|
Restrictions on GMACs and ResCaps ability to pay
dividends and prepay subordinated debt obligations to us; |
|
|
|
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; |
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|
Costs and risks associated with litigation; |
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|
|
The final results of investigations and inquiries by the SEC; |
|
|
|
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; |
|
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|
Additional credit rating downgrades and the effects thereof; |
|
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|
The effect of a potential sale or other extraordinary
transaction involving GMAC on the results of GMs and
GMACs operations and liquidity; |
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|
Other factors affecting financing and insurance operating
segments 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 or disruptions
in the markets in which our mortgage subsidiaries operate, and
changes in our contractual servicing rights; |
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Shortages of and price increases for fuel; and |
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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:
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|
The ability of GM to complete a transaction regarding a
controlling interest in GMAC while maintaining a significant
stake in GMAC, securing separate credit ratings and low cost
funding to sustain growth for GMAC and ResCap, and maintaining
the mutually beneficial relationship between GMAC and GM; |
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|
Significant changes in the competitive environment and the
effect of competition in the Corporations markets,
including on the Corporations pricing policies; |
|
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Our ability to maintain adequate financing sources; |
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|
Our ability to maintain an appropriate level of debt; |
II-46
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Forward-Looking Statements (concluded)
|
|
|
|
|
The profitability and financial condition of GM, including
changes in production or sales of GM vehicles, risks based on
GMs contingent benefit guarantees and the possibility of
labor strikes or work stoppages at GM or at key suppliers such
as Delphi; |
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|
Funding obligations under GM and its subsidiaries
qualified U.S. defined benefits pension plans; |
|
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|
Restrictions on ResCaps ability to pay dividends and
prepay subordinated debt obligations to us; |
|
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Changes in the residual value of off-lease vehicles; |
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Changes in U.S. government-sponsored mortgage programs or
disruptions in the markets in which our mortgage subsidiaries
operate; |
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Changes in our contractual servicing rights; |
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Costs and risks associated with litigation; |
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Changes in our 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; |
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Changes in the credit ratings of GMAC or GM; |
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The threat of natural calamities; |
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Changes in economic conditions, currency exchange rates or
political stability in the markets in which we operate; and |
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Changes in the existing, or the adoption of new, laws,
regulations, policies or other activities of governments,
agencies and similar organizations. |
Investors are cautioned not to place undue reliance on
forward-looking statements. GM undertakes 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 expressly required by law.
* * * * *
|
|
Item 7A. |
Quantitative and Qualitative Disclosures About Market
Risk |
GM, through various market risk sensitive instruments, is
exposed to market risk from changes in foreign currency exchange
rates, interest rates, and certain commodity and equity security
prices. GM enters into a variety of foreign exchange, interest
rate, and commodity forward contracts and options, primarily to
maintain the desired level of exposure arising from these risks.
A risk management control system is utilized to monitor foreign
exchange, interest rate, commodity and equity price risks, and
related hedge positions.
A discussion of GMs accounting policies for derivative
financial instruments is included in Note 1 to the GM
Consolidated Financial Statements. Further information on
GMs exposure to market risk is included in Notes 22
and 23 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 a model to evaluate the sensitivity of the fair value of
financial instruments with exposure to market risk that assumes
instantaneous, parallel shifts in exchange rates, interest rate
yield curves, and commodity and equity prices. For options and
instruments with nonlinear returns, models appropriate to the
instrument 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.
II-47
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Quantitative and Qualitative Disclosures About Market
Risk (concluded)
In addition, the analyses are unable to reflect the complex
market reactions that normally would arise from the market
shifts modeled.
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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. More specifically, GM is exposed to foreign
currency risk related to the uncertainty to which future
earnings or asset and liability values are exposed as the result
of operating cash flows and various financial instruments that
are denominated in foreign currencies. At December 31,
2005, the net fair value asset of financial instruments with
exposure to foreign currency risk was approximately
$6.8 billion compared to a net fair value liability of
$5.8 billion at December 31, 2004. The potential loss
in fair value for such financial instruments from a 10% adverse
change in quoted foreign currency exchange rates would be
approximately $1.2 billion for 2005 and 2004.
GM is subject to market risk from exposure to changes in
interest rates due to its financing, investing, and cash
management activities. More specifically, the Corporation is
exposed to interest rate risk associated with long-term debt and
contracts to provide commercial and retail financing, retained
mortgage servicing rights, and retained assets related to
mortgage securitizations. In addition, GM is exposed to
prepayment risk associated with its capitalized mortgage
servicing rights and its retained assets related to
securitization activities. This risk is managed with
U.S. Treasury options and futures, exposing GM to basis
risk since the derivative instruments do not have identical
characteristics to the underlying mortgage servicing rights. At
December 31, 2005 and 2004, the net fair value liability of
financial instruments held for purposes other than trading with
exposure to interest rate risk was approximately
$41.9 billion and $51.1 billion, respectively. The
potential loss in fair value resulting from a 10% adverse shift
in quoted interest rates would be approximately
$3.0 billion for 2005 and 2004. At December 31, 2005
and 2004, the net fair value asset of financial instruments held
for trading purposes with exposure to interest rate risk was
approximately $4.6 billion and $3.5 billion,
respectively. The potential loss in fair value resulting from a
10% adverse shift in quoted interest rates would be
approximately $127 million and $33 million for 2005
and 2004, respectively. This analysis excludes GMs
operating lease portfolio. A fair value change in the debt that
funds this portfolio would potentially have a different impact
on the fair value of the portfolio itself. As such, the overall
effect to the fair value of financial instruments from a
hypothetical change in interest rates may be overstated.
GM is exposed to changes in prices of commodities used in its
automotive business, primarily associated with various
non-ferrous metals used in the manufacturing of automotive
components. GM enters into commodity forward and option
contracts to offset such exposure. At December 31, 2005 and
2004 the net fair value asset of such contracts was
approximately $610 million and $431 million,
respectively. The potential loss in fair value resulting from a
10% adverse change in the underlying commodity prices would be
approximately $241 million and $264 million for 2005
and 2004, respectively. This amount excludes the offsetting
impact of the price risk inherent in the physical purchase of
the underlying commodities.
GM is exposed to changes in prices of various available-for-sale
equity securities in which it invests. At December 31, 2005
and 2004, the fair value of such investments was approximately
$2.8 billion and $2.6 billion, respectively. The
potential loss in fair value resulting from a 10% adverse change
in equity prices would be approximately $280 million and
$258 million for 2005 and 2004, respectively.
II-48
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
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 accounting principles generally accepted in the
United States of America.
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 result 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.
The following material weaknesses in GMs internal controls
were identified:
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(A) |
A material weakness was identified related to our design and
maintenance of adequate controls over the preparation, review,
presentation and disclosure of amounts included in our
consolidated statements of cash flows, which resulted in
misstatements therein. Cash outflows related to certain mortgage
loan originations and purchases were not appropriately
classified as either operating cash flows or investing cash
flows consistent with our original description as loans held for
sale or loans held for investment. In addition, proceeds from
sales and repayments related to certain mortgage loans, which
initially were classified as mortgage loans held for investment
and subsequently transferred to mortgage loans held for sale,
were reported as operating cash flows instead of investing cash
flows in our consolidated statements of cash flows, as required
by Statement of Financial Accounting Standards No. 102
Statement of Cash Flows Exemption of Certain
Enterprises and Classification of Cash Flows from Certain
Securities Acquired for Resale. Finally, certain non-cash
proceeds and transfers were not appropriately presented in the
Statements of Cash Flows. |
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|
|
(B) |
A material weakness was identified related to the fact that
GMs management did not adequately design the control
procedures to account for GMs portfolio of vehicles on
operating lease with daily rental car entities, which was
impaired at lease inception, and prematurely revalued to reflect
increased anticipated proceeds upon disposal. This material
weakness was identified in January, 2006, and remediated by
discontinuing the premature revaluation of previously recognized
impairments. |
Management assessed our internal control over financial
reporting as of December 31, 2005, the end of our fiscal
year. Management based its assessment on criteria established in
the Internal Control/ Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
Based on our assessment, and because of the material weakness
described above, management has concluded that our internal
control over financial reporting was not effective as of the end
of the fiscal year to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external reporting purposes in
accordance with generally accepted accounting principles.
II-49
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Our independent registered public accounting firm,
Deloitte & Touche LLP, audited managements
assessment of internal control over financial reporting and has
issued an attestation report on managements assessment,
included in Part II, Item 8 of this annual report on
Form 10-K.
|
|
|
/s/ G. RICHARD WAGONER, JR. |
|
/s/ FREDERICK A. HENDERSON |
|
|
|
G. Richard Wagoner, Jr.
Chairman and Chief Executive Officer
March 28, 2006 |
|
Frederick A. Henderson
Chief Financial Officer
March 28, 2006 |
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.
II-50
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, that General Motors Corporation and
subsidiaries (the Corporation) did not maintain effective
internal control over financial reporting as of
December 31, 2005, 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: (1) management did not
design and maintain adequate controls over the preparation,
review, presentation and disclosure of amounts included in the
consolidated statements of cash flows, which resulted in
misstatements therein, and (2) a material weakness was
identified related to the fact that GMs management did not
adequately design the control procedures used to account for
GMs portfolio of vehicles on operating lease with daily
rental car entities, which was impaired at lease inception and
prematurely revalued to reflect increased anticipated proceeds
upon disposal. As discussed in Selected Quarterly Data,
management restated previously reported 2005 quarterly financial
statements due to the identification of these errors. These
material weaknesses were considered in determining the nature,
timing, and extent of audit tests applied in our audit of the
Consolidated Balance Sheet and the related Consolidated
Statements of Income, Cash Flows, and Stockholders Equity
of the Corporation, the Supplemental Information to the
Consolidated Balance Sheet and Consolidated Statements of Income
and Cash Flows and the financial statement schedule listed at
Item 15 as of and for the year ended December 31, 2005
(collectively, the financial statements and financial statement
schedules). This report does not affect our report on such
financial statements and financial statement schedules.
In our opinion, managements assessment that the
Corporation did not maintain effective internal control over
financial reporting as of December 31, 2005, 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, 2005, 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 Income, Cash Flows, and Stockholders Equity
of the Corporation as of and for the year ended
December 31, 2005. Our audit also included the Supplemental
Information to the Consolidated Balance Sheet and Consolidated
Statements of Income and Cash Flows and the financial statement
schedule listed at Item 15 (collectively, the financial
statement schedules) as of and for the year ended
December 31, 2005. Our report dated March 28, 2006
expressed an unqualified opinion on those financial statements
and financial statement schedules and included an explanatory
paragraph relating to the accounting for the estimated fair
value of conditional asset retirement obligations described in
Note 1.
/s/ Deloitte &
Touche llp
Deloitte & Touche llp
Detroit, Michigan
March 28, 2006
II-51
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, 2005 and 2004, and the related Consolidated
Statements of Income, Cash Flows, and Stockholders Equity
for each of the three years in the period ended
December 31, 2005. Our audits also included the
Supplemental Information to the Consolidated Balance Sheets and
Consolidated Statements of Income and Cash Flows and the
financial statement schedule listed at Item 15
(collectively, the financial statement schedules). These
financial statements and financial statement schedules are the
responsibility of the Corporations management. Our
responsibility is to express an opinion on these financial
statements and financial statement schedules 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,
2005 and 2004, and the results of their operations and their
cash flows for each of the three years in the period ended
December 31, 2005, in conformity with accounting principles
generally accepted in the United States of America. Also, in our
opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as
a whole, present fairly, in all material respects, the
information set forth therein.
As discussed in Note 1 to the consolidated financial
statements, the Corporation: (1) 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, (2) effective
July 1, 2003, began consolidating certain variable interest
entities to conform to FASB Interpretation No. 46(R),
Consolidation of Variable Interest Entities, and
(3) effective January 1, 2003, began expensing the
fair market value of newly granted stock options and other
stock-based compensation awards issued to employees to conform
to Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation.
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, 2005, 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 28, 2006 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 28, 2006
II-52
|
|
Item 8. |
Financial Statements and Supplementary Data |
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(Dollars in millions except per share | |
|
|
amounts) | |
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenues (Notes 1 and 25)
|
|
$ |
192,604 |
|
|
$ |
193,517 |
|
|
$ |
185,837 |
|
|
|
|
|
|
|
|
|
|
|
Cost of sales and other expenses
|
|
|
171,033 |
|
|
|
159,957 |
|
|
|
152,419 |
|
Selling, general, and administrative expenses
|
|
|
22,734 |
|
|
|
20,394 |
|
|
|
20,957 |
|
Interest expense
|
|
|
15,768 |
|
|
|
11,980 |
|
|
|
9,464 |
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
209,535 |
|
|
|
192,331 |
|
|
|
182,840 |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes,
equity income and minority interests
|
|
|
(16,931 |
) |
|
|
1,186 |
|
|
|
2,997 |
|
Income tax (benefit) expense (Note 12)
|
|
|
(5,878 |
) |
|
|
(916 |
) |
|
|
710 |
|
Equity income and minority interests
|
|
|
595 |
|
|
|
702 |
|
|
|
612 |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before cumulative
effect of accounting change
|
|
|
(10,458 |
) |
|
|
2,804 |
|
|
|
2,899 |
|
(Loss) from discontinued operations (Note 3)
|
|
|
|
|
|
|
|
|
|
|
(219 |
) |
Gain on sale of discontinued operations (Note 3)
|
|
|
|
|
|
|
|
|
|
|
1,179 |
|
Cumulative effect of accounting change (Note 1)
|
|
|
(109 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
(10,567 |
) |
|
$ |
2,804 |
|
|
$ |
3,859 |
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share attributable to common
stocks
|
|
|
|
|
|
|
|
|
|
|
|
|
$12/3
par value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations before cumulative effect of accounting
change
|
|
$ |
(18.50 |
) |
|
$ |
4.97 |
|
|
$ |
5.17 |
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
2.14 |
|
|
Cumulative effect of accounting change (Note 1)
|
|
|
(0.19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share attributable to
$12/3
par value
|
|
$ |
(18.69 |
) |
|
$ |
4.97 |
|
|
$ |
7.31 |
|
|
|
|
|
|
|
|
|
|
|
(Loss) per share from discontinued operations attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class H
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(0.22 |
) |
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share attributable to common stocks
assuming dilution
|
|
|
|
|
|
|
|
|
|
|
|
|
$12/3
par value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations before cumulative effect of accounting
change
|
|
$ |
(18.50 |
) |
|
$ |
4.94 |
|
|
$ |
5.09 |
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
2.11 |
|
|
Cumulative effect of accounting change (Note 1)
|
|
|
(0.19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share attributable to
$12/3
par value
|
|
$ |
(18.69 |
) |
|
$ |
4.94 |
|
|
$ |
7.20 |
|
|
|
|
|
|
|
|
|
|
|
(Loss) per share from discontinued operations attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class H
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(0.22 |
) |
|
|
|
|
|
|
|
|
|
|
Reference should be made to the notes to consolidated financial
statements.
II-53
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION TO THE CONSOLIDATED STATEMENTS OF
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
AUTOMOTIVE AND OTHER OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenues (Notes 1 and 25)
|
|
$ |
158,221 |
|
|
$ |
161,545 |
|
|
$ |
155,831 |
|
|
|
|
|
|
|
|
|
|
|
Cost of sales and other expenses
|
|
|
162,173 |
|
|
|
150,224 |
|
|
|
143,408 |
|
Selling, general, and administrative expenses
|
|
|
13,222 |
|
|
|
11,863 |
|
|
|
11,737 |
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
175,395 |
|
|
|
162,087 |
|
|
|
155,145 |
|
Interest expense
|
|
|
2,873 |
|
|
|
2,480 |
|
|
|
1,780 |
|
Net expense from transactions with Financing and Insurance
Operations (Note 1)
|
|
|
497 |
|
|
|
273 |
|
|
|
297 |
|
|
|
|
|
|
|
|
|
|
|
(Loss) from continuing operations before income taxes, equity
income, and minority interests
|
|
|
(20,544 |
) |
|
|
(3,295 |
) |
|
|
(1,391 |
) |
Income tax (benefit) (Note 12)
|
|
|
(7,184 |
) |
|
|
(2,440 |
) |
|
|
(854 |
) |
Equity income (loss) and minority interests
|
|
|
544 |
|
|
|
710 |
|
|
|
674 |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before cumulative
effect of accounting change
|
|
|
(12,816 |
) |
|
|
(145 |
) |
|
|
137 |
|
(Loss) from discontinued operations (Note 3)
|
|
|
|
|
|
|
|
|
|
|
(219 |
) |
Gain on sale of discontinued operations (Note 3)
|
|
|
|
|
|
|
|
|
|
|
1,179 |
|
Cumulative effect of accounting change (Note 1)
|
|
|
(109 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) Automotive and Other
Operations
|
|
$ |
(12,925 |
) |
|
$ |
(145 |
) |
|
$ |
1,097 |
|
|
|
|
|
|
|
|
|
|
|
FINANCING AND INSURANCE OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$ |
34,383 |
|
|
$ |
31,972 |
|
|
$ |
30,006 |
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
12,895 |
|
|
|
9,500 |
|
|
|
7,684 |
|
Depreciation and amortization expense (Note 13)
|
|
|
5,696 |
|
|
|
5,523 |
|
|
|
5,567 |
|
Operating and other expenses
|
|
|
9,236 |
|
|
|
8,426 |
|
|
|
8,705 |
|
Provisions for financing and insurance losses
|
|
|
3,440 |
|
|
|
4,315 |
|
|
|
3,959 |
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
31,267 |
|
|
|
27,764 |
|
|
|
25,915 |
|
|
|
|
|
|
|
|
|
|
|
Net income from transactions with Automotive and Other
Operations (Note 1)
|
|
|
(497 |
) |
|
|
(273 |
) |
|
|
(297 |
) |
|
|
|
|
|
|
|
|
|
|
Income before income taxes, equity income and minority interests
|
|
|
3,613 |
|
|
|
4,481 |
|
|
|
4,388 |
|
Income tax expense (Note 12)
|
|
|
1,306 |
|
|
|
1,524 |
|
|
|
1,564 |
|
Equity income (loss) and minority interests
|
|
|
51 |
|
|
|
(8 |
) |
|
|
(62 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net income Financing and Insurance Operations
|
|
$ |
2,358 |
|
|
$ |
2,949 |
|
|
$ |
2,762 |
|
|
|
|
|
|
|
|
|
|
|
The above Supplemental Information is intended to facilitate
analysis of General Motors Corporations businesses:
(1) Automotive and Other Operations; and (2) Financing
and Insurance Operations.
Reference should be made to the notes to consolidated financial
statements.
II-54
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
|
(Dollars in millions) | |
ASSETS |
Cash and cash equivalents (Note 1)
|
|
$ |
30,726 |
|
|
$ |
35,993 |
|
Other marketable securities (Note 7)
|
|
|
19,726 |
|
|
|
21,737 |
|
|
|
|
|
|
|
|
|
Total cash and marketable securities
|
|
|
50,452 |
|
|
|
57,730 |
|
Finance receivables net (Note 9)
|
|
|
180,793 |
|
|
|
199,600 |
|
Loans held for sale
|
|
|
21,865 |
|
|
|
19,934 |
|
Accounts and notes receivable (less allowances)
|
|
|
15,578 |
|
|
|
21,236 |
|
Inventories (less allowances) (Note 10)
|
|
|
14,354 |
|
|
|
12,247 |
|
Assets held for sale (Note 1)
|
|
|
19,030 |
|
|
|
|
|
Deferred income taxes (Note 12)
|
|
|
29,889 |
|
|
|
26,559 |
|
Net equipment on operating leases (less accumulated
depreciation) (Note 11)
|
|
|
38,187 |
|
|
|
34,214 |
|
Equity in net assets of nonconsolidated affiliates
|
|
|
3,291 |
|
|
|
6,776 |
|
Property net (Note 13)
|
|
|
40,214 |
|
|
|
39,020 |
|
Intangible assets net (Notes 1 and 14)
|
|
|
4,339 |
|
|
|
4,925 |
|
Other assets (Note 15)
|
|
|
58,086 |
|
|
|
57,680 |
|
|
|
|
|
|
|
|
|
Total assets
|
|
$ |
476,078 |
|
|
$ |
479,921 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
Accounts payable (principally trade)
|
|
$ |
29,913 |
|
|
$ |
28,830 |
|
Notes and loans payable (Note 17)
|
|
|
285,750 |
|
|
|
300,279 |
|
Liabilities related to assets held for sale (Note 1)
|
|
|
10,941 |
|
|
|
|
|
Postretirement benefits other than pensions (Note 18)
|
|
|
33,997 |
|
|
|
28,182 |
|
Pensions (Note 18)
|
|
|
11,304 |
|
|
|
9,455 |
|
Deferred income taxes (Notes 12 and 16)
|
|
|
4,477 |
|
|
|
7,078 |
|
Accrued expenses and other liabilities (Note 16)
|
|
|
84,060 |
|
|
|
78,340 |
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
460,442 |
|
|
|
452,164 |
|
Minority interests
|
|
|
1,039 |
|
|
|
397 |
|
Stockholders equity (Note 20)
|
|
|
|
|
|
|
|
|
$12/3
par value common stock (outstanding, 565,518,106 and
565,132,021 shares)
|
|
|
943 |
|
|
|
942 |
|
Capital surplus (principally additional paid-in capital)
|
|
|
15,285 |
|
|
|
15,241 |
|
Retained earnings
|
|
|
2,361 |
|
|
|
14,062 |
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
18,589 |
|
|
|
30,245 |
|
Accumulated foreign currency translation adjustments
|
|
|
(1,722 |
) |
|
|
(1,194 |
) |
Net unrealized gains on derivatives
|
|
|
733 |
|
|
|
589 |
|
Net unrealized gains on securities
|
|
|
786 |
|
|
|
751 |
|
Minimum pension liability adjustment
|
|
|
(3,789 |
) |
|
|
(3,031 |
) |
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
|
|
(3,992 |
) |
|
|
(2,885 |
) |
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
14,597 |
|
|
|
27,360 |
|
|
|
|
|
|
|
|
Total liabilities, minority interests and stockholders
equity
|
|
$ |
476,078 |
|
|
$ |
479,921 |
|
|
|
|
|
|
|
|
Reference should be made to the notes to consolidated financial
statements.
II-55
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION TO THE CONSOLIDATED BALANCE
SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
|
(Dollars in millions) | |
ASSETS |
Automotive and Other Operations
|
|
|
|
|
|
|
|
|
Cash and cash equivalents (Note 1)
|
|
$ |
15,187 |
|
|
$ |
13,148 |
|
Marketable securities (Note 7)
|
|
|
1,416 |
|
|
|
6,655 |
|
|
|
|
|
|
|
|
|
Total cash and marketable securities
|
|
|
16,603 |
|
|
|
19,803 |
|
Accounts and notes receivable (less allowances)
|
|
|
7,758 |
|
|
|
6,713 |
|
Inventories (less allowances) (Note 10)
|
|
|
13,851 |
|
|
|
11,717 |
|
Net equipment on operating leases (less accumulated
depreciation) (Note 11)
|
|
|
6,993 |
|
|
|
6,488 |
|
Deferred income taxes and other current assets (Note 12)
|
|
|
8,877 |
|
|
|
10,794 |
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
54,082 |
|
|
|
55,515 |
|
Equity in net assets of nonconsolidated affiliates
|
|
|
3,291 |
|
|
|
6,776 |
|
Property net (Note 13)
|
|
|
38,466 |
|
|
|
37,170 |
|
Intangible assets net (Notes 1 and 14)
|
|
|
1,862 |
|
|
|
1,599 |
|
Deferred income taxes (Note 12)
|
|
|
22,849 |
|
|
|
17,639 |
|
Other assets (Note 15)
|
|
|
41,103 |
|
|
|
40,844 |
|
|
|
|
|
|
|
|
|
Total Automotive and Other Operations assets
|
|
|
161,653 |
|
|
|
159,543 |
|
Financing and Insurance Operations
|
|
|
|
|
|
|
|
|
Cash and cash equivalents (Note 1)
|
|
|
15,539 |
|
|
|
22,845 |
|
Investments in securities (Note 7)
|
|
|
18,310 |
|
|
|
15,082 |
|
Finance receivables net (Note 9)
|
|
|
180,793 |
|
|
|
199,600 |
|
Loans held for sale
|
|
|
21,865 |
|
|
|
19,934 |
|
Assets held for sale
|
|
|
19,030 |
|
|
|
|
|
Net equipment on operating leases (less accumulated
depreciation) (Note 11)
|
|
|
31,194 |
|
|
|
27,726 |
|
Other assets (Note 15)
|
|
|
27,694 |
|
|
|
35,191 |
|
Net receivable from Automotive and Other Operations (Note 1)
|
|
|
4,452 |
|
|
|
2,426 |
|
|
|
|
|
|
|
|
|
Total Financing and Insurance Operations assets
|
|
|
318,877 |
|
|
|
322,804 |
|
|
|
|
|
|
|
|
Total assets
|
|
$ |
480,530 |
|
|
$ |
482,347 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
Automotive and Other Operations
|
|
|
|
|
|
|
|
|
Accounts payable (principally trade)
|
|
$ |
26,182 |
|
|
$ |
24,257 |
|
Loans payable (Note 17)
|
|
|
1,519 |
|
|
|
2,062 |
|
Accrued expenses (Note 16)
|
|
|
42,665 |
|
|
|
46,202 |
|
Net payable to Financing and Insurance Operations (Note 1)
|
|
|
4,452 |
|
|
|
2,426 |
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
74,818 |
|
|
|
74,947 |
|
Long-term debt (Note 17)
|
|
|
31,014 |
|
|
|
30,460 |
|
Postretirement benefits other than pensions (Note 18)
|
|
|
28,990 |
|
|
|
23,477 |
|
Pensions (Note 18)
|
|
|
11,214 |
|
|
|
9,371 |
|
Other liabilities and deferred income taxes (Notes 12 and
16)
|
|
|
22,023 |
|
|
|
16,206 |
|
|
|
|
|
|
|
|
|
Total Automotive and Other Operations liabilities
|
|
|
168,059 |
|
|
|
154,461 |
|
Financing and Insurance Operations
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
3,731 |
|
|
|
4,573 |
|
Liabilities related to assets held for sale
|
|
|
10,941 |
|
|
|
|
|
Debt (Note 17)
|
|
|
253,217 |
|
|
|
267,757 |
|
Other liabilities and deferred income taxes (Notes 12 and
16)
|
|
|
28,946 |
|
|
|
27,799 |
|
|
|
|
|
|
|
|
|
Total Financing and Insurance Operations liabilities
|
|
|
296,835 |
|
|
|
300,129 |
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
464,894 |
|
|
|
454,590 |
|
Minority interests
|
|
|
1,039 |
|
|
|
397 |
|
|
Total stockholders equity
|
|
|
14,597 |
|
|
|
27,360 |
|
|
|
|
|
|
|
|
Total liabilities, minority interests and stockholders
equity
|
|
$ |
480,530 |
|
|
$ |
482,347 |
|
|
|
|
|
|
|
|
The above Supplemental Information is intended to facilitate
analysis of General Motors Corporations businesses:
(1) Automotive and Other Operations; and (2) Financing
and Insurance Operations.
Reference should be made to the notes to consolidated financial
statements.
II-56
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
Cash flows from continuing operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from continuing operations
|
|
$ |
(10,458 |
) |
|
$ |
2,804 |
|
|
$ |
2,899 |
|
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expenses
|
|
|
15,769 |
|
|
|
14,152 |
|
|
|
13,513 |
|
|
Mortgages: servicing rights and premium amortization
|
|
|
1,142 |
|
|
|
1,675 |
|
|
|
1,797 |
|
|
Goodwill impairment
|
|
|
712 |
|
|
|
|
|
|
|
|
|
|
Provision for financing losses
|
|
|
1,085 |
|
|
|
1,944 |
|
|
|
1,721 |
|
|
Net gains on sale of finance receivables
|
|
|
(1,695 |
) |
|
|
(1,312 |
) |
|
|
(2,462 |
) |
|
Other postretirement employee benefit (OPEB) expense
|
|
|
5,671 |
|
|
|
4,558 |
|
|
|
4,650 |
|
|
OPEB payments
|
|
|
(4,084 |
) |
|
|
(3,974 |
) |
|
|
(3,536 |
) |
|
VEBA/ 401(h) (contributions)/ withdrawals
|
|
|
3,168 |
|
|
|
(8,618 |
) |
|
|
(3,000 |
) |
|
Pension expense
|
|
|
2,496 |
|
|
|
2,456 |
|
|
|
3,412 |
|
|
Pension contributions
|
|
|
(833 |
) |
|
|
(919 |
) |
|
|
(18,168 |
) |
|
Retiree lump sum and vehicle voucher expense, net of payments
|
|
|
(264 |
) |
|
|
(329 |
) |
|
|
923 |
|
|
Net change in mortgage loans
|
|
|
(29,119 |
) |
|
|
(2,312 |
) |
|
|
(4,124 |
) |
|
Net change in mortgage securities
|
|
|
(1,155 |
) |
|
|
614 |
|
|
|
233 |
|
|
Change in other investments and miscellaneous assets
|
|
|
(653 |
) |
|
|
83 |
|
|
|
409 |
|
|
Change in other operating assets and liabilities
|
|
|
(1,183 |
) |
|
|
(1,644 |
) |
|
|
(2,358 |
) |
|
Other
|
|
|
2,545 |
|
|
|
178 |
|
|
|
915 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) continuing operating
activities
|
|
$ |
(16,856 |
) |
|
$ |
9,356 |
|
|
$ |
(3,176 |
) |
|
|
|
|
|
|
|
|
|
|
Cash flows from continuing investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures for property
|
|
|
(8,179 |
) |
|
|
(7,753 |
) |
|
|
(7,091 |
) |
Investments in marketable securities acquisitions
|
|
|
(21,800 |
) |
|
|
(15,278 |
) |
|
|
(28,660 |
) |
Investments in marketable securities liquidations
|
|
|
22,537 |
|
|
|
15,911 |
|
|
|
24,253 |
|
Net change in mortgage servicing rights
|
|
|
(267 |
) |
|
|
(326 |
) |
|
|
(513 |
) |
Increase in finance receivables
|
|
|
(6,582 |
) |
|
|
(38,673 |
) |
|
|
(56,119 |
) |
Proceeds from sale of finance receivables
|
|
|
31,652 |
|
|
|
23,385 |
|
|
|
22,182 |
|
Proceeds from sale of business units/equity investments
|
|
|
846 |
|
|
|
|
|
|
|
4,148 |
|
Dividends received from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
275 |
|
Operating leases acquisitions
|
|
|
(15,496 |
) |
|
|
(14,324 |
) |
|
|
(11,032 |
) |
Operating leases liquidations
|
|
|
5,362 |
|
|
|
7,696 |
|
|
|
9,604 |
|
Investments in companies, net of cash acquired
|
|
|
1,355 |
|
|
|
(60 |
) |
|
|
(201 |
) |
Other
|
|
|
(863 |
) |
|
|
1,359 |
|
|
|
(1,287 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) continuing investing
activities
|
|
|
8,565 |
|
|
|
(28,063 |
) |
|
|
(44,441 |
) |
|
|
|
|
|
|
|
|
|
|
Cash flows from continuing financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in loans payable
|
|
|
(10,126 |
) |
|
|
2,192 |
|
|
|
235 |
|
Long-term debt borrowings
|
|
|
78,276 |
|
|
|
73,511 |
|
|
|
97,391 |
|
Long-term debt repayments
|
|
|
(69,566 |
) |
|
|
(57,822 |
) |
|
|
(38,962 |
) |
Proceeds from sales of treasury stocks
|
|
|
|
|
|
|
|
|
|
|
60 |
|
Cash dividends paid to stockholders
|
|
|
(1,134 |
) |
|
|
(1,129 |
) |
|
|
(1,121 |
) |
Other
|
|
|
6,030 |
|
|
|
4,723 |
|
|
|
1,319 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by continuing financing activities
|
|
|
3,480 |
|
|
|
21,475 |
|
|
|
58,922 |
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(85 |
) |
|
|
671 |
|
|
|
929 |
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(4,896 |
) |
|
|
3,439 |
|
|
|
12,234 |
|
Cash and cash equivalents reclassified to Assets Held for Sale
|
|
|
(371 |
) |
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of the year
|
|
|
35,993 |
|
|
|
32,554 |
|
|
|
20,320 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the year
|
|
$ |
30,726 |
|
|
$ |
35,993 |
|
|
$ |
32,554 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities of discontinued
operations
|
|
|
|
|
|
|
|
|
|
|
846 |
|
Net cash used in investing activities of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(629 |
) |
Net cash provided by financing activities of discontinued
operations
|
|
|
|
|
|
|
|
|
|
|
918 |
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents of discontinued
operations
|
|
|
|
|
|
|
|
|
|
|
1,135 |
|
Cash retained by discontinued operations upon disposal
|
|
|
|
|
|
|
|
|
|
|
(2,216 |
) |
Cash reclassified as Assets of Discontinued Operations at
beginning of year
|
|
|
|
|
|
|
|
|
|
|
1,081 |
|
|
|
|
|
|
|
|
|
|
|
Cash included in Assets of Discontinued Operations at end of
year
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Reference should be made to the notes to consolidated financial
statements.
II-57
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION TO THE CONSOLIDATED STATEMENTS OF
CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
Automotive | |
|
Financing | |
|
Automotive | |
|
Financing | |
|
Automotive | |
|
Financing | |
|
|
and Other | |
|
and | |
|
and Other | |
|
and | |
|
and Other | |
|
and | |
|
|
Operations | |
|
Insurance(a) | |
|
Operations | |
|
Insurance | |
|
Operations | |
|
Insurance | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
(Dollars in millions) | |
|
|
|
|
Cash flows from continuing operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before cumulative
effect of accounting change
|
|
$ |
(12,816 |
) |
|
$ |
2,358 |
|
|
$ |
(145 |
) |
|
$ |
2,949 |
|
|
$ |
137 |
|
|
$ |
2,762 |
|
Adjustments to reconcile income (loss) from continuing
operations before cumulative effect of accounting change to net
cash provided by operating activities
Depreciation and amortization expenses
|
|
|
10,073 |
|
|
|
5,696 |
|
|
|
8,629 |
|
|
|
5,523 |
|
|
|
7,946 |
|
|
|
5,567 |
|
|
Mortgages: servicing rights and premium amortization
|
|
|
|
|
|
|
1,142 |
|
|
|
|
|
|
|
1,675 |
|
|
|
|
|
|
|
1,797 |
|
|
Goodwill impairment
|
|
|
|
|
|
|
712 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for financing losses
|
|
|
|
|
|
|
1,085 |
|
|
|
|
|
|
|
1,944 |
|
|
|
|
|
|
|
1,721 |
|
|
Net gains on sale of finance receivables
|
|
|
|
|
|
|
(1,695 |
) |
|
|
|
|
|
|
(1,312 |
) |
|
|
|
|
|
|
(2,462 |
) |
|
Postretirement benefits other than pensions, net of payments and
VEBA contributions/withdrawals
|
|
|
4,717 |
|
|
|
38 |
|
|
|
(8,048 |
) |
|
|
14 |
|
|
|
(1,906 |
) |
|
|
20 |
|
|
Pension expense, net of contributions
|
|
|
1,385 |
|
|
|
14 |
|
|
|
1,174 |
|
|
|
34 |
|
|
|
(13,869 |
) |
|
|
36 |
|
|
Net change in mortgage loans
|
|
|
|
|
|
|
(29,119 |
) |
|
|
|
|
|
|
(2,312 |
) |
|
|
|
|
|
|
(4,124 |
) |
|
Net change in mortgage securities
|
|
|
|
|
|
|
(1,155 |
) |
|
|
|
|
|
|
614 |
|
|
|
|
|
|
|
233 |
|
|
Change in other investments and miscellaneous assets
|
|
|
173 |
|
|
|
(826 |
) |
|
|
(22 |
) |
|
|
105 |
|
|
|
(207 |
) |
|
|
616 |
|
|
Change in other operating assets and liabilities
|
|
|
(5,466 |
) |
|
|
4,283 |
|
|
|
(268 |
) |
|
|
(1,376 |
) |
|
|
2,921 |
|
|
|
(5,279 |
) |
|
Other
|
|
|
1,970 |
|
|
|
575 |
|
|
|
(102 |
) |
|
|
280 |
|
|
|
(348 |
) |
|
|
1,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) continuing operating
activities
|
|
$ |
36 |
|
|
$ |
(16,892 |
) |
|
$ |
1,218 |
|
|
$ |
8,138 |
|
|
$ |
(5,326 |
) |
|
$ |
2,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from continuing investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures for property
|
|
|
(7,896 |
) |
|
|
(283 |
) |
|
|
(7,284 |
) |
|
|
(469 |
) |
|
|
(6,616 |
) |
|
|
(475 |
) |
Investments in marketable securities acquisitions
|
|
|
(2,616 |
) |
|
|
(19,184 |
) |
|
|
(2,209 |
) |
|
|
(13,069 |
) |
|
|
(13,138 |
) |
|
|
(15,522 |
) |
Investments in marketable securities liquidations
|
|
|
7,663 |
|
|
|
14,874 |
|
|
|
4,609 |
|
|
|
11,302 |
|
|
|
7,109 |
|
|
|
17,144 |
|
Net change in mortgage servicing rights
|
|
|
|
|
|
|
(267 |
) |
|
|
|
|
|
|
(326 |
) |
|
|
|
|
|
|
(513 |
) |
Increase in finance receivables
|
|
|
|
|
|
|
(6,582 |
) |
|
|
|
|
|
|
(38,673 |
) |
|
|
|
|
|
|
(56,119 |
) |
Proceeds from sales of finance receivables
|
|
|
|
|
|
|
31,652 |
|
|
|
|
|
|
|
23,385 |
|
|
|
|
|
|
|
22,182 |
|
Proceeds from sale of business units/ equity investments
|
|
|
846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,148 |
|
|
|
|
|
Dividends received from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
275 |
|
|
|
|
|
Operating leases acquisitions
|
|
|
|
|
|
|
(15,496 |
) |
|
|
|
|
|
|
(14,324 |
) |
|
|
|
|
|
|
(11,032 |
) |
Operating leases liquidations
|
|
|
|
|
|
|
5,362 |
|
|
|
|
|
|
|
7,696 |
|
|
|
|
|
|
|
9,604 |
|
Investments in companies, net of cash acquired
|
|
|
1,357 |
|
|
|
(2 |
) |
|
|
(48 |
) |
|
|
(12 |
) |
|
|
(57 |
) |
|
|
(144 |
) |
Net investing activity with FIO
|
|
|
2,500 |
|
|
|
|
|
|
|
1,500 |
|
|
|
|
|
|
|
1,000 |
|
|
|
|
|
Other
|
|
|
640 |
|
|
|
(1,503 |
) |
|
|
882 |
|
|
|
477 |
|
|
|
332 |
|
|
|
(1,619 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) continuing investing
activities
|
|
|
2,494 |
|
|
|
8,571 |
|
|
|
(2,550 |
) |
|
|
(24,013 |
) |
|
|
(6,947 |
) |
|
|
(36,494 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from continuing financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in loans payable
|
|
|
(177 |
) |
|
|
(9,949 |
) |
|
|
(803 |
) |
|
|
2,995 |
|
|
|
(234 |
) |
|
|
469 |
|
Long-term debt borrowings
|
|
|
386 |
|
|
|
77,890 |
|
|
|
758 |
|
|
|
72,753 |
|
|
|
14,785 |
|
|
|
82,606 |
|
Long-term debt repayments
|
|
|
(46 |
) |
|
|
(69,520 |
) |
|
|
(79 |
) |
|
|
(57,743 |
) |
|
|
(19 |
) |
|
|
(38,943 |
) |
Net financing activity with Auto and Other
|
|
|
|
|
|
|
(2,500 |
) |
|
|
|
|
|
|
(1,500 |
) |
|
|
|
|
|
|
(1,000 |
) |
Proceeds from sales of treasury stocks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60 |
|
|
|
|
|
Cash dividends paid to stockholders
|
|
|
(1,134 |
) |
|
|
|
|
|
|
(1,129 |
) |
|
|
|
|
|
|
(1,121 |
) |
|
|
|
|
Other
|
|
|
|
|
|
|
6,030 |
|
|
|
|
|
|
|
4,723 |
|
|
|
|
|
|
|
1,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) continuing financing
activities
|
|
|
(971 |
) |
|
|
1,951 |
|
|
|
(1,253 |
) |
|
|
21,228 |
|
|
|
13,471 |
|
|
|
44,451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(40 |
) |
|
|
(45 |
) |
|
|
375 |
|
|
|
296 |
|
|
|
661 |
|
|
|
268 |
|
Net transactions with Automotive/ Financing Operations
|
|
|
520 |
|
|
|
(520 |
) |
|
|
934 |
|
|
|
(934 |
) |
|
|
403 |
|
|
|
(403 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
2,039 |
|
|
|
(6,935 |
) |
|
|
(1,276 |
) |
|
|
4,715 |
|
|
|
2,262 |
|
|
|
9,972 |
|
Cash and cash equivalents reclassified to Assets Held for Sale
|
|
|
|
|
|
|
(371 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of the year
|
|
|
13,148 |
|
|
|
22,845 |
|
|
|
14,424 |
|
|
|
18,130 |
|
|
|
12,162 |
|
|
|
8,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the year
|
|
$ |
15,187 |
|
|
$ |
15,539 |
|
|
$ |
13,148 |
|
|
$ |
22,845 |
|
|
$ |
14,424 |
|
|
$ |
18,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The above Supplemental Information is intended to facilitate
analysis of General Motors Corporations businesses:
(1) Automotive and Other Operations; and (2) Financing
and Insurance Operations. Classification of cash flows for
Financing and Insurance Operations is consistent with
presentation in GMs Consolidated Statement of Cash Flows.
See Note 1.
Reference should be made to the notes to consolidated financial
statements.
II-58
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2005, 2004, AND 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated | |
|
|
|
|
Total | |
|
|
|
|
|
|
|
Other | |
|
Total | |
|
|
Capital | |
|
Capital | |
|
Comprehensive | |
|
Retained | |
|
Comprehensive | |
|
Stockholders | |
|
|
Stock | |
|
Surplus | |
|
Income (Loss) | |
|
Earnings | |
|
Income (Loss) | |
|
Equity | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
Balance at January 1, 2003
|
|
$ |
1,032 |
|
|
$ |
21,583 |
|
|
|
|
|
|
$ |
9,629 |
|
|
$ |
(25,832 |
) |
|
$ |
6,412 |
|
Shares issued
|
|
|
16 |
|
|
|
1,324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,340 |
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$ |
3,859 |
|
|
|
3,859 |
|
|
|
|
|
|
|
3,859 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
969 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on derivatives
|
|
|
|
|
|
|
|
|
|
|
256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on securities
|
|
|
|
|
|
|
|
|
|
|
246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum pension liability adjustment
|
|
|
|
|
|
|
|
|
|
|
20,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
22,226 |
|
|
|
|
|
|
|
22,226 |
|
|
|
22,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
$ |
26,085 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Hughes transactions (Note 3)
|
|
|
(111 |
) |
|
|
(8,056 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,167 |
) |
Stock Options
|
|
|
|
|
|
|
334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
334 |
|
Delphi spin-off adjustment(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20 |
|
|
|
|
|
|
|
20 |
|
Cash dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,121 |
) |
|
|
|
|
|
|
(1,121 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2003
|
|
$ |
937 |
|
|
$ |
15,185 |
|
|
|
|
|
|
$ |
12,387 |
|
|
$ |
(3,606 |
) |
|
$ |
24,903 |
|
Shares issued
|
|
|
5 |
|
|
|
138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
143 |
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$ |
2,804 |
|
|
|
2,804 |
|
|
|
|
|
|
|
2,804 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on derivatives
|
|
|
|
|
|
|
|
|
|
|
538 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on securities
|
|
|
|
|
|
|
|
|
|
|
133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum pension liability adjustment
|
|
|
|
|
|
|
|
|
|
|
(571 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
721 |
|
|
|
|
|
|
|
721 |
|
|
|
721 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
$ |
3,525 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
|
|
|
|
(82 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(82 |
) |
Cash dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,129 |
) |
|
|
|
|
|
|
(1,129 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2004
|
|
$ |
942 |
|
|
$ |
15,241 |
|
|
|
|
|
|
$ |
14,062 |
|
|
$ |
(2,885 |
) |
|
$ |
27,360 |
|
Shares issued
|
|
|
1 |
|
|
|
102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103 |
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
|
|
|
|
|
|
|
$ |
(10,567 |
) |
|
|
(10,567 |
) |
|
|
|
|
|
|
(10,567 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
(528 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on derivatives
|
|
|
|
|
|
|
|
|
|
|
144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on securities
|
|
|
|
|
|
|
|
|
|
|
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum pension liability adjustment
|
|
|
|
|
|
|
|
|
|
|
(758 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
(1,107 |
) |
|
|
|
|
|
|
(1,107 |
) |
|
|
(1,107 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
$ |
(11,674 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
|
|
|
|
(58 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(58 |
) |
Cash dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,134 |
) |
|
|
|
|
|
|
(1,134 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
$ |
943 |
|
|
$ |
15,285 |
|
|
|
|
|
|
$ |
2,361 |
|
|
$ |
(3,992 |
) |
|
$ |
14,597 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Write off of deferred taxes related to the 1999 spin-off of
Delphi Automotive Systems. |
Reference should be made to the notes to consolidated financial
statements.
II-59
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
Note 1. |
Significant Accounting Policies |
|
|
|
Principles of Consolidation |
The consolidated financial statements include the accounts of
General Motors Corporation and domestic and foreign subsidiaries
that are more than 50% owned, principally General Motors
Acceptance Corporation and Subsidiaries (GMAC) (collectively
referred to as the Corporation, General
Motors or GM). In addition, GM consolidates
variable interest entities (VIEs) for which it is deemed to be
the primary beneficiary. General Motors share of earnings
or losses of associates, in which at least 20% of the voting
securities is owned, is included in the consolidated operating
results using the equity method of accounting, except for
investments where GM is not able to exercise significant
influence over the operating and financial decisions of the
investee, in which case the cost method of accounting is used.
GM encourages reference to the GMAC Annual Report on
Form 10-K for the
period ended December 31, 2005, filed separately with the
U.S. Securities and Exchange Commission (SEC) and
incorporated herein by reference.
Certain amounts for 2004 and 2003 have been reclassified to
conform to the 2005 classifications.
|
|
|
Nature of Operations, Financial Statement Presentation,
and Supplemental Information |
GM presents its primary financial statements on a fully
consolidated basis. Transactions between reportable operating
segments, Automotive and Other Operations (Auto &
Other) and Financing and Insurance Operations (FIO), have been
eliminated in the Corporations consolidated financial
statements. These transactions consist principally of borrowings
and other financial services provided by FIO to Auto &
Other. A master intercompany agreement governs the nature of
these transactions to ensure that they are done in accordance
with commercially reasonable standards.
To facilitate analysis, GM presents separate supplemental
financial information for its reportable operating segments.
GMs Auto & Other reportable operating segment
consists of:
|
|
|
|
|
GMs four automotive regions: GM North America (GMNA), GM
Europe (GME), GM Latin America/ Africa/ Mid-East (GMLAAM), and
GM Asia Pacific (GMAP), which constitute GM Automotive
(GMA); and |
|
|
|
Other, which 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. |
GMs FIO reportable operating segment consists of GMAC and
Other Financing, which includes financing entities that are not
consolidated by GMAC.
|
|
|
Use of Estimates in the Preparation of the Financial
Statements |
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that
affect amounts reported therein. Due to the inherent
uncertainties involved in making estimates, actual results
reported in future periods may differ from those estimates.
Sales generally are recorded when products are shipped (when
title and risks and rewards of ownership have passed), or when
services are rendered to independent dealers or other third
parties. Provisions for dealer and customer sales incentives,
customer leasing incentives, allowances, and rebates are made at
the time of
II-60
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 1. |
Significant Accounting
Policies (continued) |
vehicle sales. Incentives, allowances, and rebates related to
vehicles previously sold are recognized as reductions of sales
when announced.
Sales to daily rental car companies with guaranteed repurchase
options are accounted for as equipment on operating leases.
Lease revenue is recognized over the term of the lease.
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.
Financing revenue is 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 premiums are 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.
|
|
|
Advertising and Research and Development |
Advertising, research and development, and other product-related
costs are charged to expense as incurred. Advertising expense
was $5.8 billion in 2005, $5.2 billion in 2004, and
$4.7 billion in 2003. Research and development expense was
$6.7 billion in 2005, $6.5 billion in 2004 and
$6.2 billion in 2003.
|
|
|
Depreciation and Amortization |
Expenditures for special tools placed in service after
January 1, 2002 are amortized using the straight-line
method over their estimated useful lives. Expenditures for
special tools placed in service prior to January 1, 2002,
are amortized over their estimated useful lives, primarily using
the units of production method. Replacements of special tools
for reasons other than changes in products are charged directly
to cost of sales. As of January 1, 2001, the Corporation
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
generally 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/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.
Equipment on operating leases is depreciated using the
straight-line method over the term of the lease agreement. For
Auto & Other, the difference between the net book value
and the proceeds of sale or salvage on items disposed of is
accounted for as a charge against or credit to sales allowances.
|
|
|
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
identify the reporting units, 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
II-61
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 1. |
Significant Accounting
Policies (continued) |
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 generally perform our
annual impairment tests in the third or fourth quarters.
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 three to 10 years.
|
|
|
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, generally 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 held for sale, such loss is further increased
by costs 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 used
until disposed of.
|
|
|
Foreign Currency Transactions and Translation |
Foreign currency exchange transaction and translation losses,
including the effect of derivatives, net of taxes, included in
consolidated net income in 2005, 2004, and 2003, pursuant to
SFAS No. 52, Foreign Currency Translation,
amounted to $262 million, $167 million, and
$122 million, respectively.
Provisions for estimated expenses related to 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 warranty claims. Management
actively studies trends of warranty claims and takes action to
improve vehicle quality and minimize warranty claims. See
Note 16.
|
|
|
Exit or Disposal Activities |
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. Costs related to the idlings of
employees that are expected to be temporary are expensed as
incurred. Costs to terminate a contract without economic benefit
to the Corporation 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 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.
II-62
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 1. |
Significant Accounting
Policies (continued) |
|
|
|
Cash and Cash Equivalents |
Cash equivalents are defined as short-term, highly-liquid
investments with original maturities of 90 days or less.
|
|
|
Statements of Cash Flows Supplementary Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, | |
|
|
| |
Automotive and Other Operations |
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
Increase (decrease) in cash due to changes in other operating
assets and liabilities was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$ |
59 |
|
|
$ |
(284 |
) |
|
$ |
(575 |
) |
|
Prepaid expenses and other deferred charges
|
|
|
(83 |
) |
|
|
42 |
|
|
|
(578 |
) |
|
Inventories
|
|
|
(1,484 |
) |
|
|
(156 |
) |
|
|
(518 |
) |
|
Accounts payable
|
|
|
249 |
|
|
|
1,723 |
|
|
|
2,400 |
|
|
Deferred taxes and income taxes payable
|
|
|
(6,069 |
) |
|
|
(444 |
) |
|
|
2,235 |
|
|
Accrued expenses and other liabilities
|
|
|
3,935 |
|
|
|
11 |
|
|
|
2,887 |
|
|
Fleet rental acquisitions
|
|
|
(9,452 |
) |
|
|
(7,846 |
) |
|
|
(7,761 |
) |
|
Fleet rental liquidations
|
|
|
7,379 |
|
|
|
6,686 |
|
|
|
4,831 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
(5,466 |
) |
|
$ |
(268 |
) |
|
$ |
2,921 |
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$ |
2,790 |
|
|
$ |
2,508 |
|
|
$ |
1,398 |
|
During 2005, Auto & Other had cash inflows related to
investments in companies, net of cash acquired, of approximately
$1.4 billion. This amount is driven primarily by GMs
acquisition in 2005 of a majority interest in GM Daewoo, which
resulted in GM consolidating GM Daewoos cash balance of
approximately $1.6 billion (net of $70 million cash
paid by GM to acquire the additional 6.3% interest in GM Daewoo).
During 2004 and 2003, Auto & Other had cash outflows
related to investments in companies, net of cash acquired, of
approximately $50 million and $60 million,
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, | |
|
|
| |
Financing and Insurance Operations |
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
Increase (decrease) in cash due to changes in other operating
assets and liabilities was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other receivables
|
|
$ |
4,092 |
|
|
$ |
419 |
|
|
$ |
(5,236 |
) |
|
Other assets
|
|
|
48 |
|
|
|
(111 |
) |
|
|
186 |
|
|
Accounts payable and other liabilities
|
|
|
332 |
|
|
|
(1,173 |
) |
|
|
1,765 |
|
|
Deferred taxes and income taxes payable
|
|
|
(189 |
) |
|
|
(511 |
) |
|
|
(1,994 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
4,283 |
|
|
$ |
(1,376 |
) |
|
$ |
(5,279 |
) |
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$ |
13,025 |
|
|
$ |
8,887 |
|
|
$ |
6,965 |
|
During 2005, FIO made investments in companies, net of cash
acquired, of approximately $2 million. During 2004 and
2003, FIO made investments in companies, net of cash acquired,
of approximately $12 million and $144 million,
respectively.
II-63
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 1. |
Significant Accounting
Policies (continued) |
GM is party to a variety of foreign exchange rate, interest rate
and commodity forward contracts, and options 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 on the consolidated
balance sheet. Effective changes in fair value of derivatives
designated as cash flow hedges and hedges of a net investment in
a foreign operation are recorded in net unrealized gain/(loss)
on derivatives, 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, to the extent the derivative was
effective, by changes in fair value of the hedged item. Changes
in fair value of derivatives not designated as hedging
instruments are recorded currently in earnings.
|
|
|
Assets and Liabilities Classified as Held for Sale |
On August 3, 2005, GMAC announced that it had entered into
a definitive agreement to sell a majority equity interest in
GMAC Commercial Holding Corp. (GMAC Commercial
Mortgage). See Note 27 for subsequent events. For the year
ended December 31, 2005, GMAC Commercial Mortgages
earnings and cash flows are fully consolidated in GMs
Consolidated Statements of Income and Statements of Cash Flows.
However, as a result of the agreement to sell a majority equity
interest, the assets and liabilities of GMAC Commercial Mortgage
have been classified as held for sale separately in GMs
Consolidated Balance Sheet at December 31, 2005. The
following table presents GMAC Commercial Mortgages major
classes of assets and liabilities classified as held for sale as
of December 31, 2005 (dollars in millions):
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
371 |
|
Marketable securities
|
|
|
2,295 |
|
|
|
|
|
|
Total cash and marketable securities
|
|
|
2,666 |
|
Finance receivables net
|
|
|
2,990 |
|
Loans held for sale
|
|
|
9,019 |
|
Other assets
|
|
|
4,355 |
|
|
|
|
|
|
Total assets held for sale
|
|
$ |
19,030 |
|
|
|
|
|
Accounts payable
|
|
$ |
794 |
|
Debt
|
|
|
3,519 |
|
Deferred income taxes and other liabilities
|
|
|
6,628 |
|
|
|
|
|
|
|
Total liabilities related to assets held for sale
|
|
$ |
10,941 |
|
|
|
|
|
GM, on a worldwide basis, has a concentration of its labor
supply in employees working under union collective bargaining
agreements, of which certain contracts expired in 2003.
The 2003 International Union, United Automobile, Aerospace and
Agricultural Implement Workers of America (UAW) labor contract
was effective on October 6, 2003, covering a four-year term
from 2003-2007. The contract included a $3,000 lump sum payment
per UAW employee paid in October 2003, and a 3%
II-64
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 1. |
Significant Accounting
Policies (continued) |
performance bonus per UAW employee was paid in
October 2004. GM amortizes these payments over the
12-month period
following the respective payment dates. UAW employees
received a gross wage increase of 2% in 2005 and 3% in 2006.
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. The retiree
lump sum payments and vehicle discount vouchers resulted in a
charge to GMs 2003 cost of sales of approximately
$1.2 billion ($725 million after tax).
Change in Accounting Principle: Conditional Asset Retirement
Obligations
Effective December 31, 2005, the Corporation 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 a tangible long-lived
assets that result from their acquisition, construction, or
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.
For leased properties, such obligations relate to the estimated
cost of contractually required property restoration. The
application of FIN 47 resulted in a charge, net of tax, of
$109 million included in the Consolidated Statement of
Income for the year ended December 31, 2005 as the
cumulative effect of a change in accounting principle, all
attributable to Auto & Other. The liability for
conditional asset retirement obligations recognized at
December 31, 2005, as the result of the application of
FIN 47 was $181 million. Pro forma amounts, as if
FIN 47 had been applied for all periods, follow (dollars in
millions, except per share amounts).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Net income (loss) as reported
|
|
$ |
(10,567 |
) |
|
$ |
2,804 |
|
|
$ |
3,859 |
|
Add: FIN 47 cumulative effect, net of tax
|
|
|
109 |
|
|
|
|
|
|
|
|
|
Less: FIN 47 depreciation and accretion expense, net of tax
|
|
|
(16 |
) |
|
|
(14 |
) |
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
Pro forma net income (loss)
|
|
$ |
(10,474 |
) |
|
$ |
2,790 |
|
|
$ |
3,846 |
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic: As reported
|
|
$ |
(18.69 |
) |
|
$ |
4.97 |
|
|
$ |
7.31 |
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma
|
|
$ |
(18.52 |
) |
|
$ |
4.94 |
|
|
$ |
7.29 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted: As reported
|
|
$ |
(18.69 |
) |
|
$ |
4.94 |
|
|
$ |
7.20 |
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma
|
|
$ |
(18.52 |
) |
|
$ |
4.92 |
|
|
$ |
7.18 |
|
|
|
|
|
|
|
|
|
|
|
Pro forma asset retirement obligation net, as of
year-end
|
|
$ |
181 |
|
|
$ |
159 |
|
|
$ |
140 |
|
|
|
|
|
|
|
|
|
|
|
New Accounting Standards
In December 2004, the Financial Accounting Standards Board
(FASB) revised SFAS No. 123, Accounting for
Stock-Based Compensation (SFAS 123R), requiring
companies to record share-based payment transactions as
compensation expense at fair market value. SFAS 123R
further defines the concept of fair market value as it relates
to such arrangements. Based on SEC guidance issued in Staff
Accounting Bulletin (SAB) 107 in April 2005, the provisions
of this statement will be effective for General Motors as of
II-65
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 1. |
Significant Accounting
Policies (continued) |
January 1, 2006. The Corporation began expensing the fair
market value of newly granted stock options and other stock
based compensation awards to employees pursuant to SFAS 123
in 2003; therefore this statement is not expected to have a
material effect on GMs consolidated financial position or
results of operations.
In accordance with the disclosure requirements of
SFAS No. 148, Accounting for Stock-Based
Compensation Transition and Disclosure, since
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, the following
table illustrates the effect on net income and earnings per
share 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):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Income (loss) from continuing operations before cumulative
effect of accounting change
|
|
$ |
(10,458 |
) |
|
$ |
2,804 |
|
|
$ |
2,899 |
|
Add: stock-based compensation expense, included in reported net
income, net of related tax effects
|
|
|
58 |
|
|
|
38 |
|
|
|
142 |
|
Deduct: total stock-based compensation expense determined under
fair value based method for all awards, net of related tax
effects
|
|
|
(58 |
) |
|
|
(52 |
) |
|
|
(195 |
) |
|
|
|
|
|
|
|
|
|
|
Pro forma net income from continuing operations
|
|
$ |
(10,458 |
) |
|
$ |
2,790 |
|
|
$ |
2,846 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share from continuing operations attributable
to GM
$12/3
par value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- as reported
|
|
$ |
(18.50 |
) |
|
$ |
4.97 |
|
|
$ |
5.17 |
|
|
|
- pro forma
|
|
$ |
(18.50 |
) |
|
$ |
4.94 |
|
|
$ |
5.08 |
|
|
Diluted earnings per share from continuing operations
attributable to GM
$12/3
par value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- as reported
|
|
$ |
(18.50 |
) |
|
$ |
4.94 |
|
|
$ |
5.09 |
|
|
|
- pro forma
|
|
$ |
(18.50 |
) |
|
$ |
4.92 |
|
|
$ |
5.00 |
|
In December 2005, the FASB released FASB Staff Position (FSP)
SFAS 123(R)-3,
Transition Election Related to Accounting for the Tax
Effects of Share-Based Payment Awards, which provides a
practical transition election related to accounting for the tax
effects of share-based payment awards to employees. The
Corporation is currently reviewing the transition alternatives
and will elect the appropriate alternative within one year of
the adoption of SFAS 123(R).
In April 2005, the FASB issued SFAS No. 154,
Accounting Changes and Error Corrections, requiring
retrospective application as the required method for reporting a
change in accounting principle, unless impracticable or a
pronouncement includes specific transition provisions. This
statement also requires that a change in depreciation,
amortization, or depletion method for long-lived, nonfinancial
assets be accounted for as a change in accounting estimate
effected by a change in accounting principle. This statement
carries forward the guidance in APB Opinion No. 20,
Accounting Changes, for the reporting of the
correction of an error and a change in accounting estimate. This
statement is effective for accounting changes and correction of
errors made in fiscal years beginning after December 15,
2005.
In November 2005, the FASB released FSP FIN 45-3,
Application of FASB Interpretation No. 45 to Minimum
Revenue Guarantees Granted to a Business or Its Owners,
requiring companies to disclose minimum revenue guarantees in
accordance with the guidelines provided in FIN 45 for
interim and annual financial statements. GM adopted
FIN 45-3 upon
issuance. The Interpretation did not have a material effect on
GMs consolidated financial position or results of
operations.
Effective July 1, 2003, the Corporation began consolidating
certain variable interest entities to conform to FASB
Interpretation No. 46, Consolidation of Variable
Interest Entities (FIN 46). GM adopted the
II-66
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 1. |
Significant Accounting
Policies (concluded) |
revision to FIN 46, FIN 46R, which clarified certain
provisions of the original interpretation and exempted certain
entities from its requirements. As of January 1, 2004, the
adoption of FIN 46R did not have a significant effect on
the Corporations financial condition or results of
operations.
|
|
Note 2. |
Acquisition and Disposal of Businesses |
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, as of
June 30, 2005, GM began consolidating GM Daewoo. This
increased GMs total assets and liabilities as of
June 30, 2005 by 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 following unaudited financial information for the periods
ended December 31, 2005, 2004, and 2003 represents amounts
attributable to GM Daewoo on a basis consistent with giving
effect to the increased ownership and consolidation as of
January 1, 2003 (dollars in millions). The pro forma effect
on net income (loss) is not significant compared to equity
income recognized.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Total net sales and revenues
|
|
$ |
5,738 |
|
|
$ |
4,338 |
|
|
$ |
3,161 |
|
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 pre-tax charge to earnings of
approximately $1.4 billion ($886 million after tax).
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. This charge was recorded in cost of
sales and other expenses in Other Operations.
In addition, the settlement agreement included, among other
things, the following actions or provisions:
|
|
|
|
|
The Fiat-GM Powertrain (FGP) joint venture company would be
dissolved and GM would regain complete ownership of all GM
assets originally contributed. During a transition period, FGP
would continue to supply both companies so that their respective
operations would not be disrupted. |
|
|
|
GM will 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 will hold a 50% interest in a joint venture limited to
operating the powertrain manufacturing plant in Bielsko-Biala,
Poland, that 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; |
|
|
|
GM and Fiat will also continue to work together to develop
certain car programs; |
|
|
|
Fiat will participate in GMs purchasing alliance program; |
|
|
|
GM and Fiat have exchanged broad releases of all claims and
liabilities. |
II-67
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 2. |
Acquisition and Disposal of Businesses
(concluded) |
Effective May 13, 2005 the liquidation of these joint
ventures and GMs acquisition of certain strategic assets
from Fiat were completed.
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. 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.
In the fourth quarter of 2005, GM completed the sale of its
20.1% investment in the common stock of Fuji Heavy Industries
Ltd. (FHI). In the second quarter of 2005, GM recorded an after
tax impairment charge of $788 million associated with its
investment in the common stock of FHI. In the fourth quarter of
2005, GM recorded a gain of $71 million, after tax, 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 August 3, 2005, GMAC announced that it had entered into
a definitive agreement to sell a 60% equity interest in GMAC
Commercial Holding Corp. (GMAC Commercial Mortgage). See
Note 27 for subsequent events. As a result of the
agreement, the assets and liabilities of GMAC Commercial
Mortgage have been classified as held for sale separately in
GMs consolidated balance sheet at December 31, 2005.
See Note 1.
|
|
Note 3. |
Discontinued Operations |
On December 22, 2003, GM completed a series of transactions
that resulted in the split-off of Hughes from GM and the
simultaneous sale of GMs approximately 19.8% retained
economic interest in Hughes to The News Corporation Limited
(News Corporation).
In the transactions, 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 Depositary Shares (Preferred
ADSs). All shares of GM Class H common stock were then
cancelled. News Corporation then acquired from the former GM
Class H common stockholders an additional 14.2% of the
outstanding shares of Hughes common stock in exchange for News
Corporation Preferred ADSs.
GM sold 80% of its 19.8% retained economic interest in Hughes to
News Corporation for a total of approximately $3.1 billion
in cash. GM sold the remaining 20% of its retained economic
interest in Hughes to News Corporation for approximately
28.6 million News Corporation Preferred ADSs, valued at
$819 million at December 22, 2003. Including
Hughes transaction expenses of approximately
$90 million, GM recorded a net gain of $1.2 billion
from the sale of GMs approximately 19.8% economic interest
in Hughes, reported as gain on sale of discontinued operations
in GMs Consolidated Statement of Income for 2003. In
addition, as a result of the transactions, there was a net
reduction to GMs stockholders equity of
approximately $7.0 billion.
GM sold all its News Corporation Preferred ADSs in January 2004.
The financial data related to GMs investment in Hughes
through December 22, 2003 is classified as discontinued
operations for the year ended December 31, 2003.
Hughes net sales included in discontinued operations were
$9.8 billion, and Hughes net losses from discontinued
operations were $219 million.
II-68
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 4. |
Asset Impairments |
GM reassesses the carrying value of long-lived assets held and
used, other than goodwill and intangible assets with indefinite
lives, in connection with the annual business planning cycle, or
when events and circumstances indicate the need for such a
review. This impairment analysis is performed by comparing
projected cash flows to the book value of specific
product-related assets, which include special tools and other
assets related to product lines, and facilities.
In the first quarter 2005, GMNA recorded an after tax charge of
$84 million for the write-down to fair market value of
various plant assets in connection with the cessation of
production at a Lansing, Michigan assembly plant.
In the second quarter of 2005, GMAP determined that the value of
its investment in the common stock of Fuji Heavy Industries Ltd.
(FHI) was impaired on an other-than-temporary basis.
Accordingly, GMAP recorded an after-tax impairment charge of
$788 million associated with its investment in the common
stock of FHI. In the fourth quarter of 2005, GM completed the
sale of it is investment in FHI, and recorded a gain of
$71 million, after tax, due to the appreciation of the fair
value of such stock after June 30, 2005, the date of the
FHI impairment charge.
In the third quarter of 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 after-tax impairment
charges totaling $788 million recognized in the third
quarter of 2005 ($468 million at GMNA, $176 million at
GME, $99 million at GMLAAM, and $45 million at GMAP)
for assets that were still in service.
In the fourth quarter of 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 an after-tax charge of
$455 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 5 for
further discussion of the employee costs associated with this
restructuring.
Total after-tax impairment charges recognized in 2005, were
$2.0 billion, including $767 million for
product-specific assets, $560 million for production and
office facilities, and $717 for investments in equity
securities. The charges were recorded in cost of sales and other
expenses in the consolidated statement of income. Unless
otherwise noted above, there were no employee idling or
separation costs, and no lease contracts were terminated.
In 2004, impairment analyses resulted in after-tax charges
totaling $383 million ($118 million at GMNA,
$234 million at GME, and $31 million at Other) with
respect to product-specific assets. Additional after-tax charges
of $78 million were recorded at GMNA for the write-down to
fair market value of various plant assets in connection with
facilities rationalization actions at assembly plants in
Baltimore, Maryland and Linden, New Jersey.
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
($136 million, after-tax) to reduce the carrying value of
GMs investment in FAH to zero. See Note 2.
II-69
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 4. |
Asset Impairments (concluded) |
In 2003, impairment analyses as described above resulted in
after-tax charges totaling $491 million ($400 million
at GMNA, $11 million at GME, $55 million at GMLAAM,
and $25 million at GMAP) with respect to product-specific
assets. Additional after-tax charges of $42 million were
recorded at GMNA for the write-down to fair market value of
various facilities.
|
|
Note 5. |
Postemployment Benefit Costs (Plant Idling Reserve) |
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. Costs
related to the idling of employees that are 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 the liabilities on
a quarterly basis.
In 2005, GM recognized a pretax charge of $1.8 billion, or
$1.2 billion after tax, for postemployment benefit
liabilities related to the restructuring of North American
operations announced in November 2005 (the GMNA restructuring).
Approximately 17,500 employees are included in the charge for
locations included in this action, some leaving the company
through attrition and some transferring to other sites.
GMs overall four-year employment reduction through 2008
remains at the approximate 30,000 employee level previously
announced.
The charge is composed of two elements. The first element
includes the costs GM expects to incur under the existing JOBS
bank provisions of the current collective bargaining agreement
(CBA), through its expiration in September 2007. This element of
the charge was calculated based on the substantive
postemployment benefits plan that GM has developed over time
with regard to the JOBS bank, including its historical
experience related to acceptance of routine retirement offers.
GM is currently discussing the JOBS bank provisions of the CBA
with the UAW in an effort to develop an agreed upon accelerated
attrition program for active employees, by which the Corporation
will be able to reduce the number of employees that are and will
be in the JOBS bank in a cost effective manner. See Note 27
for subsequent events. In this regard, GM believes it is likely
that the JOBS bank provisions will be modified after the current
CBA expires. Consequently, the second element of the charge
includes GMs best estimate of costs to be paid after the
expiration of the current CBA, including costs for employees at
locations expected to be idled after the CBA expiration. In
determining its best estimate, GM considered the effect of
(i) the accelerated attrition program under discussion
which, for employees in the JOBS bank, creates opportunities to
return to active service, and (ii) policy changes that it
intends to negotiate into the JOBS program.
The $1.8 billion reflects GMs best estimate based on
the information it has at the current time, but because the
outcome of the discussions with the UAW may differ from
GMs current best estimate, this estimate could increase or
decrease by material amounts in subsequent periods. GM also
considered an alternative approach to estimating the charge,
which would have excluded the anticipated impact of the
accelerated attrition program and changes to the terms of the
JOBS bank in the next CBA, and accrued an amount based on the
terms of the current JOBS bank to reflect payments that would be
made to idled employees until their estimated retirement dates
including normal attrition and early retirement. That approach
would have increased the pre-tax charge by $4.8 billion, to
a total of $6.6 billion. GM rejected that approach because
it believes the probability of payment of that amount is remote,
the measurement methodology does not result in an amount that is
probable, and the terms of the JOBS bank in the existing
II-70
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 5. |
Postemployment Benefit Costs (Plant Idling
Reserve) (concluded) |
CBA do not reflect a substantive plan that GM expects will
continue beyond the end of that CBA through the employees
remaining service period.
The liability for postemployment benefits (primarily wage and
benefit continuation) as of December 31, 2005 totals
approximately $2.0 billion relating to multiple plants and
approximately 18,400 employees. The liability for postemployment
benefits was $237 million relating to numerous plants and
to approximately 1,900 employees as of December 31, 2004.
The liability for postemployment benefits was $384 million
relating to approximately 2,900 employees as of
December 31, 2003. The following tables summarize the
activity from December 31, 2003 through December 31,
2005 for this liability (dollars in millions):
|
|
|
|
|
|
Balance at December 31, 2003
|
|
$ |
384 |
|
|
Spending
|
|
|
(151 |
) |
|
Interest accretion
|
|
|
19 |
|
|
Additions
|
|
|
|
|
|
Adjustments
|
|
|
(15 |
) |
|
|
|
|
Balance at December 31, 2004
|
|
$ |
237 |
|
|
Spending
|
|
|
(91 |
) |
|
Interest accretion
|
|
|
12 |
|
|
Additions
|
|
|
1,891 |
|
|
Adjustments
|
|
|
(37 |
) |
|
|
|
|
Balance at December 31, 2005
|
|
$ |
2,012 |
|
|
|
|
|
|
|
Note 6. |
Investment in Nonconsolidated Affiliates |
Nonconsolidated affiliates of GM identified herein are those
investees 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 percentage of GMs year-end equity
ownership, or voting interest, in them include the following:
Japan FHI (sold at December 31, 2005, 20.1% in
2004 and 21.1% in 2003), Suzuki Motor Corporation (20.4% in 2005
and 2004, and 20.3% in 2003); China Shanghai General
Motors Co., Ltd. (50% in 2005, 2004, and 2003); SAIC GM Wuling
Automobile Co., Ltd (34% in 2005, 2004, 2003); South
Korea GM-Daewoo (50.9% at December 31, 2005,
44.6% in 2004 and 2003) (with the increase in ownership to more
than 50%, GM consolidated GM Daewoo at June 30,
2005 see Note 2); Italy GM-Fiat
Powertrain (FGP) (dissolved at December 31, 2005, and 50%
in 2004 and 2003).
Information regarding GMs share of income for all
nonconsolidated affiliates (as defined above) in the following
countries is included in the table below (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South | |
2005 |
|
Italy | |
|
Japan | |
|
China | |
|
Korea | |
|
|
| |
|
| |
|
| |
|
| |
Book value of GMs investments in affiliates
|
|
|
NA |
|
|
$ |
1,576 |
|
|
$ |
1,020 |
|
|
|
NA |
|
GMs share of affiliates net income (loss)
|
|
$ |
32 |
|
|
$ |
183 |
|
|
$ |
327 |
|
|
$ |
17 |
|
Total assets of significant affiliates
|
|
|
NA |
|
|
$ |
15,507 |
|
|
$ |
4,363 |
|
|
|
NA |
|
Total liabilities of significant affiliates
|
|
|
NA |
|
|
$ |
7,467 |
|
|
$ |
2,425 |
|
|
|
NA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value of GMs investments in affiliates
|
|
$ |
1,293 |
|
|
$ |
3,174 |
|
|
$ |
1,173 |
|
|
$ |
193 |
|
GMs share of affiliates net income (loss)
|
|
$ |
87 |
|
|
$ |
255 |
|
|
$ |
417 |
|
|
$ |
(53 |
) |
Total assets of significant affiliates
|
|
$ |
8,616 |
|
|
$ |
30,582 |
|
|
$ |
3,429 |
|
|
$ |
5,288 |
|
Total liabilities of significant affiliates
|
|
$ |
5,539 |
|
|
$ |
17,417 |
|
|
$ |
1,630 |
|
|
$ |
4,447 |
|
II-71
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 6. |
Investment in Nonconsolidated Affiliates
(concluded) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South | |
2003 |
|
Italy | |
|
Japan | |
|
China | |
|
Korea | |
|
|
| |
|
| |
|
| |
|
| |
Book value of GMs investments in affiliates
|
|
$ |
946 |
|
|
$ |
2,781 |
|
|
$ |
964 |
|
|
$ |
200 |
|
GMs share of affiliates net income (loss)
|
|
$ |
95 |
|
|
$ |
196 |
|
|
$ |
414 |
|
|
$ |
(74 |
) |
Total assets of significant affiliates
|
|
$ |
7,933 |
|
|
$ |
29,622 |
|
|
$ |
3,103 |
|
|
$ |
3,263 |
|
Total liabilities of significant affiliates
|
|
$ |
5,304 |
|
|
$ |
17,764 |
|
|
$ |
1,460 |
|
|
$ |
2,892 |
|
|
|
Note 7. |
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 included in income
on a current basis. GM determines cost on the specific
identification basis.
|
|
|
Automotive and Other Operations |
Investments in available for sale marketable securities were as
follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book/Fair | |
|
Unrealized |
|
Unrealized | |
|
|
Cost | |
|
Value | |
|
Gains |
|
Losses | |
|
|
| |
|
| |
|
|
|
| |
|
|
December 31, 2005 | |
|
|
| |
Type of security
Corporate debt securities and other |
|
$ |
741 |
|
|
$ |
728 |
|
|
$ |
|
|
|
$ |
13 |
|
U.S. government and agencies
|
|
|
455 |
|
|
|
450 |
|
|
|
|
|
|
|
5 |
|
Mortgage-backed securities
|
|
|
243 |
|
|
|
238 |
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total marketable securities
|
|
$ |
1,439 |
|
|
$ |
1,416 |
|
|
$ |
|
|
|
$ |
23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book/Fair | |
|
Unrealized | |
|
Unrealized | |
|
|
Cost | |
|
Value | |
|
Gains | |
|
Losses | |
|
|
| |
|
| |
|
| |
|
| |
|
|
December 31, 2004 | |
|
|
| |
Type of security
Corporate debt securities and other |
|
$ |
3,697 |
|
|
$ |
3,691 |
|
|
$ |
12 |
|
|
$ |
18 |
|
U.S. government and agencies
|
|
|
2,146 |
|
|
|
2,141 |
|
|
|
6 |
|
|
|
11 |
|
Mortgage-backed securities
|
|
|
826 |
|
|
|
823 |
|
|
|
3 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total marketable securities
|
|
$ |
6,669 |
|
|
$ |
6,655 |
|
|
$ |
21 |
|
|
$ |
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities totaling $99 million mature within one year
and $938 million mature after one through five years,
$79 million mature after five through ten years and
$300 million mature after ten years. Proceeds from sales of
marketable securities totaled $14.7 billion in 2005,
$14.8 billion in 2004, and $7.1 billion in 2003. The
gross gains related to sales of marketable securities were
$37 million, $25 million, and $7 million in 2005,
2004, and 2003, respectively. The gross losses related to sales
of marketable securities were $66 million in 2005,
$30 million in 2004, and $11 million in 2003.
II-72
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 7. |
Marketable Securities (continued) |
|
|
|
Financing and Insurance Operations |
Investments in marketable securities were as follows (dollars in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book/Fair | |
|
Unrealized | |
|
Unrealized | |
|
|
Cost | |
|
Value | |
|
Gains | |
|
Losses | |
|
|
| |
|
| |
|
| |
|
| |
|
|
December 31, 2005 | |
|
|
| |
Type of security
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds, notes, and other securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States government and agencies
|
|
$ |
2,945 |
|
|
$ |
2,904 |
|
|
$ |
5 |
|
|
$ |
46 |
|
|
States and municipalities
|
|
|
863 |
|
|
|
889 |
|
|
|
27 |
|
|
|
1 |
|
|
Foreign government securities
|
|
|
844 |
|
|
|
853 |
|
|
|
11 |
|
|
|
2 |
|
|
Mortgage and asset-backed securities
|
|
|
1,216 |
|
|
|
1,240 |
|
|
|
29 |
|
|
|
5 |
|
|
Corporate debt securities and other
|
|
|
6,136 |
|
|
|
6,144 |
|
|
|
43 |
|
|
|
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities available-for-sale
|
|
|
12,004 |
|
|
|
12,030 |
|
|
|
115 |
|
|
|
89 |
|
Mortgage-backed securities held-to-maturity
|
|
|
16 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
Mortgage-backed securities held for Trading purposes
|
|
|
3,766 |
|
|
|
3,897 |
|
|
|
131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
15,786 |
|
|
|
15,943 |
|
|
|
246 |
|
|
|
89 |
|
Equity securities
|
|
|
1,510 |
|
|
|
2,367 |
|
|
|
874 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment in marketable securities
|
|
$ |
17,296 |
|
|
$ |
18,310 |
|
|
$ |
1,120 |
|
|
$ |
106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated other marketable securities
|
|
$ |
18,735 |
|
|
$ |
19,726 |
|
|
$ |
1,120 |
|
|
$ |
129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book/Fair | |
|
Unrealized | |
|
Unrealized | |
|
|
Cost | |
|
Value | |
|
Gains | |
|
Losses | |
|
|
| |
|
| |
|
| |
|
| |
|
|
December 31, 2004 | |
|
|
| |
Type of security
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds, notes, and other securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States government and agencies
|
|
$ |
2,198 |
|
|
$ |
2,208 |
|
|
$ |
18 |
|
|
$ |
8 |
|
|
States and municipalities
|
|
|
556 |
|
|
|
596 |
|
|
|
40 |
|
|
|
|
|
|
Foreign government securities
|
|
|
792 |
|
|
|
805 |
|
|
|
14 |
|
|
|
1 |
|
|
Mortgage and asset-backed securities
|
|
|
1,988 |
|
|
|
2,074 |
|
|
|
97 |
|
|
|
11 |
|
|
Corporate debt securities and other
|
|
|
3,399 |
|
|
|
3,489 |
|
|
|
97 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities available-for-sale
|
|
|
8,933 |
|
|
|
9,172 |
|
|
|
266 |
|
|
|
27 |
|
Mortgage-backed securities held-to-maturity
|
|
|
135 |
|
|
|
135 |
|
|
|
|
|
|
|
|
|
Mortgage-backed securities held for trading purposes
|
|
|
3,510 |
|
|
|
3,545 |
|
|
|
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
12,578 |
|
|
|
12,852 |
|
|
|
301 |
|
|
|
27 |
|
Equity securities
|
|
|
1,505 |
|
|
|
2,230 |
|
|
|
731 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment in marketable securities
|
|
$ |
14,083 |
|
|
$ |
15,082 |
|
|
$ |
1,032 |
|
|
$ |
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated other marketable securities
|
|
$ |
20,752 |
|
|
$ |
21,737 |
|
|
$ |
1,053 |
|
|
$ |
68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
II-73
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 7. |
Marketable Securities (continued) |
Debt securities available-for-sale totaling $1.7 billion
mature within one year, $6.0 billion mature after one
through five years, $2.0 billion mature after five years
through ten years, and $1.0 billion mature after ten years.
Mortgage-backed securities and interests in securitization
trusts totaled $1.3 billion. Proceeds from sales of
marketable securities totaled $5.7 billion in 2005,
$3.2 billion in 2004, and $7.6 billion in 2003. The
gross gains related to sales of marketable securities were
$186 million, $138 million, and $270 million in
2005, 2004, and 2003, respectively. The gross losses related to
sales of marketable securities were $66 million,
$49 million, and $202 million in 2005, 2004, and 2003,
respectively.
The fair value and gross unrealized losses of the
Corporations investments in an unrealized loss position
that are not deemed to be other-than-temporarily impaired are
summarized in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005 | |
|
|
| |
|
|
Less than 12 Months | |
|
12 months or longer | |
|
|
| |
|
| |
|
|
Fair value | |
|
Unrealized losses | |
|
Fair value | |
|
Unrealized losses | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
Automotive and Other Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 marketable securities
|
|
$ |
643 |
|
|
$ |
8 |
|
|
$ |
519 |
|
|
$ |
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing and Insurance Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal 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
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
II-74
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 7. |
Marketable Securities (concluded) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2004 | |
|
|
| |
|
|
Less than 12 Months | |
|
12 months or longer | |
|
|
| |
|
| |
|
|
Fair value | |
|
Unrealized losses | |
|
Fair value | |
|
Unrealized losses | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
Automotive and Other Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities and other
|
|
$ |
1,698 |
|
|
$ |
16 |
|
|
$ |
81 |
|
|
$ |
3 |
|
|
U.S. government and agencies
|
|
|
1,293 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
Mortgage backed securities
|
|
|
418 |
|
|
|
4 |
|
|
|
33 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total marketable securities
|
|
$ |
3,409 |
|
|
$ |
31 |
|
|
$ |
114 |
|
|
$ |
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing and Insurance Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and federal agencies
|
|
$ |
971 |
|
|
$ |
8 |
|
|
$ |
|
|
|
$ |
|
|
|
Foreign government securities
|
|
|
208 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
67 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
343 |
|
|
|
2 |
|
|
|
14 |
|
|
|
1 |
|
|
Interest-only strips
|
|
|
27 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
|
547 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
35 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
|
2,198 |
|
|
|
26 |
|
|
|
14 |
|
|
|
1 |
|
Equity securities
|
|
|
88 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale securities
|
|
$ |
2,286 |
|
|
$ |
32 |
|
|
$ |
14 |
|
|
$ |
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held to maturity securities
|
|
$ |
15 |
|
|
$ |
1 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 8. |
Variable Interest Entities |
GM applied the provisions of FIN 46, later clarified by
FIN 46R, to all variable interest entities beginning
July 1, 2003. In connection with the application of
FIN 46R, GM is providing information below concerning
variable interest entities that: (1) are consolidated by GM
because 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 variable interest
entities, GM is not the primary beneficiary.
|
|
|
Automotive and Other Operations |
Synthetic Leases GM leases real estate and
equipment from various special purpose entities (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. GM
consolidates any entities
II-75
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 8. Variable Interest
Entities (continued)
with leases where GM provides a residual value guarantee of the
leased property, and is considered the primary beneficiary under
FIN 46. As of December 31, 2005, the carrying amount
of assets and liabilities consolidated under FIN 46R
amounted to $780 million and $1.0 billion,
respectively, compared to $883 million and
$1.0 billion as of December 31, 2004. Assets
consolidated are classified as Property in GMs
consolidated financial statements. GMs maximum exposure to
loss related to consolidated VIEs amounts to $853 million.
For other such lease arrangements involving VIEs, GM holds
significant variable interests but is not considered the primary
beneficiary under FIN 46R. GMs maximum exposure to
loss related to VIEs where GM has a significant variable
interest, but does not consolidate the entity, amounts to
$639 million.
|
|
|
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. GMACs maximum exposure to loss
as a result of its involvement with these non-consolidated
variable interest entities is $132 million and would only
be incurred in the event of a complete loss on the assets that
GMAC transferred.
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. 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 46R.
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 46R.
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 Corporations Consolidated
Balance Sheet.
During 2005, the use of the commercial mortgage warehouse
entities was terminated. The assets of the commercial mortgage
warehouse entities totaled $526 million at
December 31, 2004, the majority of which are included in
loans held for sale and finance receivables and loans, net of
unearned income, included in the Corporations Consolidated
Balance Sheet. The beneficial interest holders of these variable
interest entities do not have legal recourse to the general
credit of GMAC.
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 46R. Total
assets in these alliances were $139 million at
II-76
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 8. Variable Interest
Entities (continued)
December 31, 2005. GMACs maximum exposure to loss
under these alliances, including commitments to lend additional
funds or purchase loans at above-market rates, is
$265 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 46R. The assets in this entity totaled
$1.6 billion at December 31, 2005, which are included
in finance receivables, net, in the Corporations
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 46R. Total assets in these entities were
$496 million at December 31, 2005, of which
$134 million represents GMACs maximum exposure to
loss.
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 the
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 46R. 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 Corporations
Consolidated Balance Sheet. The beneficial interest holders of
this variable interest entity do not have legal recourse to the
general credit of GMAC.
Collateralized debt obligations (CDOs)
GMACs Mortgage operations sponsor, purchase subordinate
and equity interests in, 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 46R.
GMAC receives an asset management fee for purposes of
surveillance of existing collateral performance. 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 of 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 or 2004.
For the majority of GMACs remaining CDOs, the results of
the primary beneficiary analysis support the conclusion that
consolidation is not appropriate under FIN 46R, because
GMAC does not have the majority of the expected losses or
returns. The assets in these CDOs totaled $3.1 billion at
December 31, 2005, of
II-77
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 8. Variable Interest
Entities (continued)
which GMACs maximum exposure to loss is $43 million,
representing GMACs retained interests in these entities.
The maximum exposure to loss would only occur in the unlikely
event that there was a complete loss on GMACs retained
interests in these entities. In addition, management has
determined that for certain CDO entities, GMAC is the primary
beneficiary, and as such, consolidates the entities in
accordance with FIN 46R. The assets in these entities
totaled $569 million at December 31, 2005, the
majority of which are included in other marketable securities in
the Corporations Consolidated Balance Sheet. The
beneficiary interest holders of these variable interest entities
do not have legal recourse to the general credit of GMAC.
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 46R. 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, are not required to
consolidate these entities under FIN 46R. 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 46R. 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. The beneficial
interest holders of these variable interest entities do not have
legal recourse to the GMACs general credit.
We hold variable interests in syndicated affordable housing
partnerships where we provide unaffiliated investors with a
guaranteed yield on their investment. These partnerships are
reflected in the reporting segment held for sale in the
Corporations Consolidated Balance Sheet under the
financing method in accordance with Statement of Financial
Accounting Standards No 66, Accounting for Sales of Real
Estate (SFAS 66). GMACs exposure to loss at
December 31, 2005 was $1.4 billion representing the
$1.0 billion financing liability reflected in the
Corporations 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 market tax credit funds The Corporation
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 46R. 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 46R. The impact of consolidation results in an increase
to our assets totaling $206 million at December 31,
2005, which are included in the reporting segment
II-78
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 8. Variable Interest
Entities (concluded)
held for sale in the Corporations Consolidated Balance
Sheet. The beneficial interest holders of these variable
interest entities do not have legal recourse to the general
credit of GMAC.
|
|
Note 9. |
Finance Receivables and Securitizations |
|
|
|
Finance Receivables Net |
Finance receivables net included the following
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Consumer:
|
|
|
|
|
|
|
|
|
|
Retail automotive
|
|
$ |
71,452 |
|
|
$ |
92,225 |
|
|
Residential mortgages
|
|
|
68,959 |
|
|
|
57,709 |
|
|
|
|
|
|
|
|
Total consumer
|
|
|
140,411 |
|
|
|
149,934 |
|
Commercial:
|
|
|
|
|
|
|
|
|
|
Automotive:
|
|
|
|
|
|
|
|
|
|
|
Wholesale
|
|
|
19,641 |
|
|
|
27,796 |
|
|
|
Leasing and lease financing
|
|
|
1,228 |
|
|
|
1,466 |
|
|
|
Term loans to dealers and others
|
|
|
2,973 |
|
|
|
3,662 |
|
|
Commercial and industrial
|
|
|
16,936 |
|
|
|
14,203 |
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgage(1)
|
|
|
43 |
|
|
|
3,148 |
|
|
|
Real estate construction
|
|
|
2,677 |
|
|
|
2,810 |
|
|
|
|
|
|
|
|
Total commercial
|
|
|
43,498 |
|
|
|
53,085 |
|
|
|
|
|
|
|
|
Total finance receivables and loans
|
|
|
183,909 |
|
|
|
203,019 |
|
Allowance for financing losses
|
|
|
(3,116 |
) |
|
|
(3,419 |
) |
|
|
|
|
|
|
|
Total consolidated finance receivables net(2)
|
|
$ |
180,793 |
|
|
$ |
199,600 |
|
|
|
|
|
|
|
|
|
|
(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 the reporting segment held for sale on the Corporations
Consolidated Balance Sheet (refer to Note 1 for further
details). |
|
(2) |
Net of unearned income of $5.9 billion and
$7.6 billion at December 31, 2005 and 2004,
respectively. |
Finance receivables that originated outside the United States
were $32.5 billion and $35.4 billion at
December 31, 2005 and 2004, respectively. The aggregate
amounts of total finance receivables maturing in each of the
five years following December 31, 2005, are as follows:
2006 $61.4 billion; 2007
$23.3 billion; 2008 $16.8 billion;
2009 $10.6 billion; 2010
$6.5 billion; and 2011 and thereafter
$71.2 billion. Actual maturities may differ from those
scheduled due to prepayments.
II-79
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 9. Finance Receivables and
Securitizations (continued)
|
|
|
Securitizations of Finance Receivables and Mortgage
Loans |
The Corporation securitizes automotive and mortgage financial
assets as a funding source. GMAC sells retail finance
receivables, wholesale loans, residential mortgage loans,
commercial mortgage loans and commercial mortgage securities.
The information contained below relates only to the transfers of
finance receivables and loans that qualify as off-balance sheet
securitizations under the requirements of SFAS 140.
The Corporation 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 the
Corporation may retain subordinated interests in some of these
securitizations. GMAC also holds subordinated interests and acts
as collateral manager in the Corporations collateralized
debt obligation (CDO) securitization program.
As servicer, GMAC generally receives a monthly fee stated as a
percentage of the outstanding sold receivables. For retail
automotive finance receivables where GMAC is paid a fee, the
Corporation 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 GMACs primary servicing activities were
100 basis points, 100 basis points, 40 basis
points and 7 basis points of the outstanding principal
balance for sold retail finance receivables, wholesale loans,
residential mortgage loans, and commercial mortgage loans,
respectively. Additionally, the Corporation retains 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 and December 31, 2004, servicing
liabilities of $32 million and $30 million,
respectively, were outstanding related to such retail
securitization transactions. 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, the Corporation capitalizes the value
expected to be realized from performing specified residential
and commercial mortgage servicing activities as mortgage
servicing rights.
GMAC maintains 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
$52 million, $1.0 billion, $88 million, and
$7 million as of December 31, 2005 related to
securitizations of retail finance receivables, wholesale loans,
residential mortgage loans, and commercial mortgage loans,
respectively, and $118 million, $1.0 billion,
$44 million, and $10 million as of December 31,
2004, respectively.
II-80
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 9. Finance Receivables and
Securitizations (continued)
The following tables summarize pre-tax 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 2005, 2004 and 2003 (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2005 | |
|
|
| |
|
|
Retail | |
|
|
|
Mortgage Loans | |
|
Commercial | |
|
|
Finance | |
|
Wholesale | |
|
| |
|
Mortgage | |
|
|
Receivables | |
|
Loans | |
|
Residential | |
|
Commercial | |
|
Securities | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Pre-tax gains on securitizations
|
|
$ |
(2 |
) |
|
$ |
543 |
|
|
$ |
513 |
|
|
$ |
68 |
|
|
$ |
8 |
|
Cash flow 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Representations and warranties obligations
|
|
|
|
|
|
|
|
|
|
|
(29 |
) |
|
|
|
|
|
|
|
|
Administrator or servicer actions
|
|
|
(76 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset performance conditional calls
|
|
|
|
|
|
|
|
|
|
|
(99 |
) |
|
|
|
|
|
|
|
|
Clean-up calls
|
|
|
(715 |
) |
|
|
|
|
|
|
(2,202 |
) |
|
|
|
|
|
|
|
|
II-81
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 9. Finance Receivables and
Securitizations (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2004 | |
|
|
| |
|
|
Retail | |
|
|
|
Mortgage loans | |
|
Commercial | |
|
|
Finance | |
|
Wholesale | |
|
| |
|
Mortgage | |
|
|
Receivables | |
|
Loans | |
|
Residential | |
|
Commercial | |
|
Securities | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Pre-tax gains on securitizations
|
|
$ |
9 |
|
|
$ |
497 |
|
|
$ |
602 |
|
|
$ |
54 |
|
|
$ |
11 |
|
Cash flow 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Representations and warranties obligations
|
|
|
(1 |
) |
|
|
|
|
|
|
(66 |
) |
|
|
|
|
|
|
|
|
Administrator or servicer actions
|
|
|
(75 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset performance conditional calls
|
|
|
|
|
|
|
|
|
|
|
(137 |
) |
|
|
|
|
|
|
|
|
Clean-up calls
|
|
|
(269 |
) |
|
|
|
|
|
|
(3,797 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2003 | |
|
|
| |
|
|
Retail | |
|
|
|
Mortgage Loans | |
|
Commercial | |
|
|
Finance | |
|
Wholesale | |
|
| |
|
Mortgage | |
|
|
Receivables | |
|
Loans | |
|
Residential | |
|
Commercial | |
|
Securities | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Pre-tax gains on securitizations
|
|
$ |
37 |
|
|
$ |
488 |
|
|
$ |
522 |
|
|
$ |
75 |
|
|
$ |
14 |
|
Cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from new securitizations
|
|
|
1,604 |
|
|
|
3,625 |
|
|
|
29,566 |
|
|
|
3,342 |
|
|
|
1,870 |
|
|
|
|
228 |
|
|
|
164 |
|
|
|
250 |
|
|
|
20 |
|
|
|
|
|
Other cash flows received on retained interests
|
|
|
753 |
|
|
|
174 |
|
|
|
955 |
|
|
|
317 |
|
|
|
69 |
|
Proceeds from collections reinvested in revolving securitizations
|
|
|
862 |
|
|
|
97,829 |
|
|
|
|
|
|
|
5 |
|
|
|
|
|
Repayments of servicing advances
|
|
|
114 |
|
|
|
|
|
|
|
1,208 |
|
|
|
116 |
|
|
|
|
|
Cash outflow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Servicing advances
|
|
|
(118 |
) |
|
|
|
|
|
|
(1,242 |
) |
|
|
(117 |
) |
|
|
|
|
Purchase obligations and options:(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Representations and warranties obligations
|
|
|
(25 |
) |
|
|
|
|
|
|
(154 |
) |
|
|
|
|
|
|
|
|
Administrator or servicer actions
|
|
|
(146 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset performance conditional calls
|
|
|
|
|
|
|
|
|
|
|
(122 |
) |
|
|
|
|
|
|
|
|
Clean-up calls
|
|
|
(885 |
) |
|
|
|
|
|
|
(1,919 |
) |
|
|
|
|
|
|
|
|
II-82
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 9. Finance Receivables and
Securitizations (continued)
Key economic assumptions used in measuring the estimated fair
value of retained interests of sales completed during 2005 and
2004, as of the dates of such sales, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2005 | |
|
Year Ended December 31, 2004 | |
|
|
| |
|
| |
|
|
Retail | |
|
Mortgage loans | |
|
|
|
Retail | |
|
Mortgage loans | |
|
|
|
|
finance | |
|
| |
|
Commercial | |
|
finance | |
|
| |
|
Commercial | |
|
|
receivables | |
|
Residential | |
|
|
|
mortgage | |
|
receivables | |
|
Residential | |
|
|
|
mortgage | |
|
|
(a) | |
|
(b) | |
|
Commercial | |
|
securities | |
|
(a) | |
|
(b) | |
|
Commercial | |
|
securities | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Key assumptions(c) (rates per annum):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual prepayment rate(d)
|
|
|
0.9-1.2 |
% |
|
|
0.0-60.0 |
% |
|
|
0.0-50.0 |
% |
|
|
0.0 |
% |
|
|
0.9-1.0 |
% |
|
|
0.0- 51.3 |
% |
|
|
0.0-50.0 |
% |
|
|
0.0-19.9 |
% |
Weighted average life (in years)
|
|
|
1.6-1.7 |
|
|
|
1.1-8.5 |
|
|
|
0.3-8.6 |
|
|
|
5.9-9.9 |
|
|
|
1.6-1.8 |
|
|
|
1.1-5.5 |
|
|
|
0.4-8.8 |
|
|
|
2.5-17.4 |
|
Expected credit losses
|
|
|
0.4-1.6 |
% |
|
|
0.0-4.9 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.4 |
% |
|
|
0.0-10.9 |
% |
|
|
0.0 |
% |
|
|
0.0-3.1 |
% |
Discount rate
|
|
|
9.5-15.0 |
% |
|
|
6.5- 21.4 |
% |
|
|
4.2-10.7 |
% |
|
|
10.0- 12.0 |
% |
|
|
9.5 |
% |
|
|
6.5- 24.8 |
% |
|
|
4.3-15.0 |
% |
|
|
8.2-11.7 |
% |
|
|
(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 (WAM) for finance
receivables and constant prepayment rate (CPR) for mortgage
loans and commercial mortgage securities. |
II-83
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 9. Finance Receivables and
Securitizations (continued)
The table below outlines the key economic assumptions and the
sensitivity of the fair value of retained interests at
December 31, 2005 to immediate 10% and 20% adverse changes
in those assumptions (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans | |
|
|
|
|
Retail finance | |
|
| |
|
Commercial mortgage | |
|
|
receivables (a) | |
|
Residential | |
|
Commercial | |
|
securities | |
|
|
| |
|
| |
|
| |
|
| |
Carrying value/fair value of retained interests
|
|
$ |
314 |
|
|
$ |
1,057 |
|
|
$ |
250 |
|
|
$ |
182 |
|
Weighted average life (in years)
|
|
|
0.1-1.2 |
|
|
|
1.0-6.2 |
|
|
|
0.0-17.7 |
|
|
|
2.4-16.1 |
|
Annual prepayment rate
|
|
|
0.7-1.2% WAM |
|
|
|
0.0-60.0% CPR |
|
|
|
0.0-50.0% CPR |
|
|
|
1.2-16.0% CPR |
|
|
Impact of 10% adverse change
|
|
|
$(1 |
) |
|
|
$(46 |
) |
|
|
$(1 |
) |
|
|
$ |
|
|
Impact of 20% adverse change
|
|
|
(2 |
) |
|
|
(82 |
) |
|
|
(1 |
) |
|
|
|
|
Loss assumption
|
|
|
0.4%(b |
) |
|
|
0.0-16.9% |
|
|
|
0.0-3.4% |
|
|
|
0.0-6.7% |
|
|
Impact of 10% adverse change
|
|
|
$(2 |
) |
|
|
$(43 |
) |
|
|
$(6 |
) |
|
|
$(3 |
) |
|
Impact of 20% adverse change
|
|
|
(4 |
) |
|
|
(81 |
) |
|
|
(10 |
) |
|
|
(6 |
) |
Discount rate
|
|
|
9.5-12.0% |
|
|
|
6.5-40.0% |
|
|
|
0.1-33.5% |
|
|
|
5.3-21.1% |
|
|
Impact of 10% adverse change
|
|
|
$(2 |
) |
|
|
$(34 |
) |
|
|
$(5 |
) |
|
|
$(9 |
) |
|
Impact of 20% adverse change
|
|
|
(5 |
) |
|
|
(65 |
) |
|
|
(10 |
) |
|
|
(17 |
) |
Market rate(d)
|
|
|
3.9-5.1% |
|
|
|
(c |
) |
|
|
(c |
) |
|
|
(c |
) |
|
Impact of 10% adverse change
|
|
|
$(7 |
) |
|
|
$(11 |
) |
|
|
$ |
|
|
|
$ |
|
|
Impact of 20% adverse change
|
|
|
(15 |
) |
|
|
(26 |
) |
|
|
|
|
|
|
|
|
|
|
(a) |
Fair value of retained interests in wholesale securitizations
approximates cost of $690 million because of the short-term
and floating rate nature of wholesale receivables. |
|
|
|
(b) |
|
Net of a reserve for expected credit losses totaling
$14 million at December 31, 2005. 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. |
|
(d) |
|
Represents the rate of return paid to the investors. |
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, the
Corporation 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
II-84
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 9. Finance Receivables and
Securitizations (concluded)
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 the
Corporations securitization transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans securitized in years ended | |
|
|
December 31, (a) | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Retail automotive
|
|
|
0.4 |
% |
|
|
0.4 |
% |
|
|
0.4 |
% |
Residential mortgage
|
|
|
0.0- 16.9 |
% |
|
|
0.0- 26.1 |
% |
|
|
0.0- 26.1 |
% |
Commercial mortgage
|
|
|
0.0-3.4 |
% |
|
|
0.0- 4.2 |
% |
|
|
0.0- 6.6 |
% |
Commercial investment securities
|
|
|
0.0-6.7 |
% |
|
|
0.0- 39.5 |
% |
|
|
0.9- 33.7 |
% |
|
|
(a) |
Static pool losses not applicable to wholesale finance
receivable securitizations because of their short-term nature. |
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 receivables | |
|
Amount 60 days or | |
|
|
|
|
and loans | |
|
more past due | |
|
Net credit losses | |
|
|
| |
|
| |
|
| |
December 31, (dollars in millions) |
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Retail automotive
|
|
$ |
77,197 |
|
|
$ |
97,631 |
|
|
$ |
892 |
|
|
$ |
806 |
|
|
$ |
867 |
|
|
$ |
1,044 |
|
Residential mortgage
|
|
|
167,584 |
|
|
|
129,550 |
|
|
|
8,682 |
|
|
|
6,686 |
|
|
|
885 |
|
|
|
944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer
|
|
|
244,781 |
|
|
|
227,181 |
|
|
|
9,574 |
|
|
|
7,492 |
|
|
|
1,752 |
|
|
|
1,988 |
|
Wholesale
|
|
|
41,062 |
|
|
|
49,197 |
|
|
|
73 |
|
|
|
51 |
|
|
|
4 |
|
|
|
2 |
|
Commercial mortgage
|
|
|
43 |
|
|
|
21,353 |
|
|
|
|
|
|
|
410 |
|
|
|
4 |
|
|
|
130 |
|
Other automotive and commercial
|
|
|
23,852 |
|
|
|
22,155 |
|
|
|
575 |
|
|
|
544 |
|
|
|
33 |
|
|
|
71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial(a)
|
|
|
64,957 |
|
|
|
92,705 |
|
|
|
648 |
|
|
|
1,005 |
|
|
|
41 |
|
|
|
203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total managed portfolio(b)
|
|
|
309,738 |
|
|
|
319,886 |
|
|
$ |
10,222 |
|
|
$ |
8,497 |
|
|
$ |
1,793 |
|
|
$ |
2,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitized finance receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and loans
|
|
|
(103,947 |
) |
|
|
(96,801 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held for sale (unpaid principal)
|
|
|
(21,882 |
) |
|
|
(19,941 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total finance receivables and loans
|
|
$ |
183,909 |
|
|
$ |
203,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Excludes $26,320 million in GMAC commercial mortgages
managed assets. At December 31, 2005, commercial mortgage
had $281 million in accounts past due and net credit losses
of $228 million. |
|
|
|
(b) |
|
Managed portfolio represents 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). |
II-85
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 10. Inventories
|
|
|
Automotive and Other Operations |
Inventories included the following (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Productive material, work in process, and supplies
|
|
$ |
5,471 |
|
|
$ |
4,838 |
|
Finished product, service parts, etc.
|
|
|
9,871 |
|
|
|
8,321 |
|
|
|
|
|
|
|
|
|
Total inventories at FIFO
|
|
|
15,342 |
|
|
|
13,159 |
|
|
|
Less LIFO allowance
|
|
|
(1,491 |
) |
|
|
(1,442 |
) |
|
|
|
|
|
|
|
|
|
|
Total inventories (less allowances)
|
|
$ |
13,851 |
|
|
$ |
11,717 |
|
Inventories are stated generally at cost, which is not in excess
of market. The cost of approximately 67% of
U.S. inventories is determined by the
last-in, first-out
(LIFO) method. Generally, the cost of all other inventories
is determined by either the
first-in, first-out
(FIFO) or average cost methods.
During 2005 and 2004, 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 2005 and
2004 purchases, the effect of which decreased cost of goods sold
by approximately $100 million, pre-tax, in both 2005 and
2004.
|
|
|
Financing and Insurance Operations |
Inventories included the following (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Off-lease vehicles
|
|
$ |
503 |
|
|
$ |
530 |
|
|
|
|
|
|
|
|
Total consolidated inventories (less allowances)
|
|
$ |
14,354 |
|
|
$ |
12,247 |
|
|
|
|
|
|
|
|
Note 11. Equipment on
Operating Leases
The Corporation has significant investments in its vehicle
leasing portfolios. The residual values of vehicles on lease
represent the estimate of the values of the assets at the end of
the lease contracts and are initially determined based on
appraisals and estimates. Realization of the residual values is
dependent on the Corporations future ability to market the
vehicles under then prevailing market conditions. Management
reviews residual values periodically to determine that the
estimates remain appropriate.
|
|
|
Automotive and Other Operations |
Equipment on operating leases and accumulated depreciation were
as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Equipment on operating leases
|
|
$ |
7,629 |
|
|
$ |
7,475 |
|
Less accumulated depreciation
|
|
|
(636 |
) |
|
|
(987 |
) |
|
|
|
|
|
|
|
|
Net book value
|
|
$ |
6,993 |
|
|
$ |
6,488 |
|
II-86
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 11. Equipment on
Operating Leases (concluded)
|
|
|
Financing and Insurance Operations |
Equipment on operating leases and accumulated depreciation were
as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Equipment on operating leases
|
|
$ |
39,675 |
|
|
$ |
36,002 |
|
Less accumulated depreciation
|
|
|
(8,481 |
) |
|
|
(8,276 |
) |
|
|
|
|
|
|
|
|
Net book value
|
|
$ |
31,194 |
|
|
$ |
27,726 |
|
|
|
|
|
|
|
|
Total consolidated net book value
|
|
$ |
38,187 |
|
|
$ |
34,214 |
|
|
|
|
|
|
|
|
The lease payments to be received related to equipment on
operating leases maturing in each of the five years following
December 31, 2005, are as follows: Auto &
Other none, as the payment is received at lease
inception and the income is deferred over the lease period;
FIO 2006-$6.3 billion; 2007-$4.4 billion;
2008- $2.4 billion; 2009-$665 million; and
2010-$27 million. There are no leases maturing after 2010.
Note 12. Income Taxes
Income (loss) from continuing operations before income taxes and
minority interests included the following (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
U.S. income (loss)
|
|
$ |
(16,171 |
) |
|
$ |
242 |
|
|
$ |
1,802 |
|
Foreign income (loss)
|
|
|
(760 |
) |
|
|
944 |
|
|
|
1,195 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
(16,931 |
) |
|
$ |
1,186 |
|
|
$ |
2,997 |
|
|
|
|
|
|
|
|
|
|
|
The provision for income taxes was estimated as follows (dollars
in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Income taxes estimated to be payable currently
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
$ |
(147 |
) |
|
$ |
(282 |
) |
|
$ |
167 |
|
|
Foreign
|
|
|
841 |
|
|
|
1,018 |
|
|
|
1,159 |
|
|
U.S. state and local
|
|
|
(2 |
) |
|
|
36 |
|
|
|
414 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total payable currently
|
|
|
692 |
|
|
|
772 |
|
|
|
1,740 |
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax expense (credit) net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
|
(6,878 |
) |
|
|
(427 |
) |
|
|
134 |
|
|
Foreign
|
|
|
(668 |
) |
|
|
(1,239 |
) |
|
|
(1,136 |
) |
|
U.S. state and local
|
|
|
976 |
|
|
|
(22 |
) |
|
|
(28 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
(6,570 |
) |
|
|
(1,688 |
) |
|
|
(1,030 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income taxes
|
|
$ |
(5,878 |
) |
|
$ |
(916 |
) |
|
$ |
710 |
|
|
|
|
|
|
|
|
|
|
|
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 2005, 2004, and 2003
was $305 million, $293 million, and $542 million,
respectively.
II-87
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 12. Income
Taxes (continued)
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 $12.6 billion at December 31, 2005 and
$11.0 billion at December 31, 2004. Quantification of
the deferred tax liability, if any, associated with permanently
reinvested earnings is not practicable.
A reconciliation of the provision for income taxes compared with
the amounts at the U.S. federal statutory rate was as
follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Tax at U.S. federal statutory income tax rate
|
|
$ |
(5,926 |
) |
|
$ |
415 |
|
|
$ |
1,049 |
|
State and local tax expense
|
|
|
(589 |
) |
|
|
(949 |
) |
|
|
21 |
|
Foreign rates other than 35%
|
|
|
(174 |
) |
|
|
(510 |
) |
|
|
(269 |
) |
Taxes on unremitted earnings of subsidiaries
|
|
|
(276 |
) |
|
|
(366 |
) |
|
|
(125 |
) |
Other tax credits
|
|
|
(69 |
) |
|
|
(41 |
) |
|
|
(52 |
) |
Settlement of prior year tax matters
|
|
|
(515 |
) |
|
|
(191 |
) |
|
|
(194 |
) |
Change in valuation allowance
|
|
|
2,178 |
|
|
|
1,432 |
|
|
|
566 |
|
ESOP dividend deduction(1)
|
|
|
(52 |
) |
|
|
(53 |
) |
|
|
(53 |
) |
Realization of basis differences due to foreign reorganizations
|
|
|
(84 |
) |
|
|
(483 |
) |
|
|
|
|
Medicare prescription drug benefit
|
|
|
(325 |
) |
|
|
(211 |
) |
|
|
|
|
Loss carryforward related to investment write-down
|
|
|
|
|
|
|
(168 |
) |
|
|
|
|
Stock contribution to pension plans(2)
|
|
|
|
|
|
|
|
|
|
|
(87 |
) |
Other adjustments
|
|
|
(46 |
) |
|
|
209 |
|
|
|
(146 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total income tax (benefit) expense
|
|
$ |
(5,878 |
) |
|
$ |
(916 |
) |
|
$ |
710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. |
|
(2) |
Additional tax benefit related to the GM Class H Common
Stock contribution to the pension and VEBA plans. |
Deferred income tax assets and liabilities for 2005 and 2004
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.
II-88
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 12. Income
Taxes (continued)
Temporary differences and carryforwards that gave rise to
deferred tax assets and liabilities included the following
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
Deferred Tax | |
|
Deferred Tax | |
|
|
| |
|
| |
|
|
Assets | |
|
Liabilities | |
|
Assets | |
|
Liabilities | |
|
|
| |
|
| |
|
| |
|
| |
Postretirement benefits other than pensions
|
|
$ |
12,757 |
|
|
$ |
|
|
|
$ |
9,377 |
|
|
$ |
|
|
Pension and other employee benefit plans
|
|
|
3,807 |
|
|
|
12,985 |
|
|
|
3,787 |
|
|
|
13,408 |
|
Warranties, dealer and customer allowances, claims, and discounts
|
|
|
6,739 |
|
|
|
52 |
|
|
|
6,907 |
|
|
|
42 |
|
Depreciation and amortization
|
|
|
5,713 |
|
|
|
2,584 |
|
|
|
5,043 |
|
|
|
3,118 |
|
Tax carryforwards
|
|
|
11,155 |
|
|
|
|
|
|
|
10,422 |
|
|
|
|
|
Lease transactions
|
|
|
|
|
|
|
4,351 |
|
|
|
19 |
|
|
|
3,801 |
|
Miscellaneous foreign
|
|
|
4,510 |
|
|
|
371 |
|
|
|
4,401 |
|
|
|
2,300 |
|
Other
|
|
|
9,981 |
|
|
|
3,677 |
|
|
|
9,050 |
|
|
|
3,804 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
54,662 |
|
|
|
24,020 |
|
|
|
49,006 |
|
|
|
26,473 |
|
Valuation allowances
|
|
|
(5,230 |
) |
|
|
|
|
|
|
(3,052 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred taxes
|
|
$ |
49,432 |
|
|
$ |
24,020 |
|
|
$ |
45,954 |
|
|
$ |
26,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$ |
25,412 |
|
|
|
|
|
|
$ |
19,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
These deferred tax balances are included in the following
captions in the consolidated balance sheet and supplemental
information:
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Current deferred tax assets
|
|
$ |
7,073 |
|
|
$ |
8,883 |
|
Current deferred tax liabilities
|
|
|
(3,759 |
) |
|
|
(5,226 |
) |
Non-current deferred tax assets
|
|
|
22,816 |
|
|
|
17,676 |
|
Non-current deferred tax liabilities
|
|
|
(718 |
) |
|
|
(1,852 |
) |
|
|
|
|
|
|
|
|
Total
|
|
$ |
25,412 |
|
|
$ |
19,481 |
|
|
|
|
|
|
|
|
Of the tax carryforwards at December 31, 2005,
approximately 5% relates to the alternative minimum tax credit
(which can be carried forward indefinitely), approximately 26%
relates to U.S. federal net operating loss carryforwards
and approximately 12% relates to the U.S. state net
operating loss carryforwards, which will expire in 2006-2025 if
not used. Approximately 85% of the U.S. state net operating
loss carryforwards will not expire until after 2008.
Approximately 38% 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 in 2009-2025 if not used. The remaining tax
carryforwards relate to accumulated foreign operating losses of
which approximately 93% can be carried forward indefinitely and
the remaining 7% will expire by 2015.
II-89
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 12. Income
Taxes (continued)
The Corporation has the following net deferred tax assets
applicable to the following taxing jurisdictions where the
Corporations operations have a recent history of pre-tax
cumulative losses for financial reporting purposes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statutory | |
|
|
|
|
|
|
Operating Loss | |
Jurisdiction |
|
2005 | |
|
2004 | |
|
Carryforward Period | |
|
|
| |
|
| |
|
| |
United States
|
|
$ |
21,633 |
|
|
$ |
15,719 |
|
|
|
20 years/ Unlimited |
|
Germany
|
|
|
2,034 |
|
|
|
1,427 |
|
|
|
Unlimited |
|
Brazil
|
|
|
0 |
|
|
|
453 |
|
|
|
Unlimited |
|
United Kingdom
|
|
|
299 |
|
|
|
363 |
|
|
|
Unlimited |
|
Spain
|
|
|
230 |
|
|
|
186 |
|
|
|
15 years |
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
24,196 |
|
|
$ |
18,148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 109, Accounting for Income Taxes.
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:
|
|
|
|
|
|
Balance December 31, 2004
|
|
$ |
3,052 |
|
Additions:
|
|
|
|
|
|
US State & Local
|
|
|
1,424 |
|
|
Brazil
|
|
|
617 |
|
|
Other
|
|
|
137 |
|
|
|
|
|
Balance December 31, 2005
|
|
$ |
5,230 |
|
|
|
|
|
United States No valuation allowance has been
established for GMs U.S. Federal 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, those losses occurred only in 2005. Moreover, the
2005 U.S. losses were largely driven by the
Corporations restructuring of its North American
Operations; accordingly, those losses are unusual in nature and
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 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 full size
pick-up trucks
primarily in 2006, which are expected to produce substantially
higher revenues and profits than the predecessor models in these
segments in 2005; |
|
|
|
The amendment of the GM Health Care Program for Hourly Employees
and the establishment of a defined contribution health care
plan, which will result in a substantial reduction in health
care costs in |
II-90
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 12. |
Income Taxes (concluded) |
|
|
|
|
|
the U.S. beginning in 2006. The amendment has been ratified
by the UAW and granted preliminary approval by the
U.S. District Court for the Eastern District of Michigan; |
|
|
|
Reductions of GMNAs cost structure as a result of the
implementation of its restructuring plan; and |
|
|
|
Continued strength of GMAC earnings in the U.S. |
The anticipated outcome of these events is expected to improve
GMNAs pre-tax results in the United States. At the
forecast levels of future profitability, the U.S. 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 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. net deferred
tax assets might be required. Furthermore, if GMACs
U.S. pre-tax income declines or if a significant portion of
GMACs U.S. pre-tax income were to no longer be
available to GM, because of the sale of a controlling interest
in GMAC or otherwise, a substantial valuation allowance may be
required.
An additional valuation allowance was recorded in 2005 related
to the 2005 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 (UK) No valuation
allowances have been established for GMs net deferred tax
assets in Germany or the UK. Although GMs German and UK
operations have incurred cumulative losses in recent years, GM
believes other considerations overcome that fact and,
accordingly, that 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 UK, 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.
The Corporation has open tax years from primarily 1998 to 2005
with various significant taxing jurisdictions including the
U.S., 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. The Corporation has established a liability of
$3.6 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.
II-91
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Property net was as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated | |
|
December 31, | |
|
|
Useful Lives | |
|
| |
|
|
(Years) | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
Automotive and Other Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
|
|
|
$ |
1,139 |
|
|
$ |
967 |
|
|
Buildings and land improvements
|
|
|
2-40 |
|
|
|
16,179 |
|
|
|
15,636 |
|
|
Machinery and equipment
|
|
|
3-30 |
|
|
|
48,351 |
|
|
|
45,796 |
|
|
Construction in progress
|
|
|
|
|
|
|
4,099 |
|
|
|
3,807 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, plants, and equipment
|
|
|
|
|
|
|
69,768 |
|
|
|
66,206 |
|
|
|
Less accumulated depreciation
|
|
|
|
|
|
|
(41,554 |
) |
|
|
(39,405 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, plants, and equipment net
|
|
|
|
|
|
|
28,214 |
|
|
|
26,801 |
|
|
|
|
Special tools net
|
|
|
|
|
|
|
10,252 |
|
|
|
10,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property net
|
|
|
|
|
|
$ |
38,466 |
|
|
$ |
37,170 |
|
|
|
|
|
|
|
|
|
|
|
Financing and Insurance Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment and other
|
|
|
2-10 |
|
|
$ |
2,902 |
|
|
$ |
3,086 |
|
|
|
Less accumulated depreciation
|
|
|
|
|
|
|
(1,154 |
) |
|
|
(1,236 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property net (Note 15)
|
|
|
|
|
|
$ |
1,748 |
|
|
$ |
1,850 |
|
|
|
|
|
|
|
|
|
|
|
Total consolidated property net
|
|
|
|
|
|
$ |
40,214 |
|
|
$ |
39,020 |
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense was as follows (dollars in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Automotive and Other Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
$ |
5,502 |
|
|
$ |
5,028 |
|
|
$ |
4,526 |
|
|
Amortization and impairment of special tools
|
|
|
4,495 |
|
|
|
3,563 |
|
|
|
3,391 |
|
|
Amortization of intangible assets
|
|
|
76 |
|
|
|
38 |
|
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
10,073 |
|
|
$ |
8,629 |
|
|
$ |
7,946 |
|
|
|
|
|
|
|
|
|
|
|
Financing and Insurance Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
$ |
5,679 |
|
|
$ |
5,512 |
|
|
$ |
5,556 |
|
|
Amortization of intangible assets
|
|
|
17 |
|
|
|
11 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
5,696 |
|
|
$ |
5,523 |
|
|
$ |
5,567 |
|
|
|
|
|
|
|
|
|
|
|
Total consolidated depreciation and amortization
|
|
$ |
15,769 |
|
|
$ |
14,152 |
|
|
$ |
13,513 |
|
|
|
|
|
|
|
|
|
|
|
II-92
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 14. |
Goodwill and Intangible Assets |
The components of the Corporations intangible assets as of
December 31, 2005 and 2004 were as follows (dollars in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Carrying | |
|
Accumulated | |
|
Net Carrying | |
December 31, 2005 |
|
Amount | |
|
Amortization | |
|
Amount | |
|
|
| |
|
| |
|
| |
Automotive and Other Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizing intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents and intellectual property rights
|
|
$ |
510 |
|
|
$ |
148 |
|
|
$ |
362 |
|
Non-amortizing intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
757 |
|
|
Prepaid pension asset (Note 18)
|
|
|
|
|
|
|
|
|
|
|
743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total goodwill and intangible assets
|
|
|
|
|
|
|
|
|
|
$ |
1,862 |
|
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 15)
|
|
|
|
|
|
|
|
|
|
|
2,477 |
|
|
|
|
|
|
|
|
|
|
|
Total consolidated goodwill and intangible assets
|
|
|
|
|
|
|
|
|
|
$ |
4,339 |
|
|
|
|
|
|
|
|
|
|
|
II-93
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 14. |
Goodwill and Intangible
Assets (concluded) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Carrying | |
|
Accumulated | |
|
Net Carrying | |
December 31, 2004 |
|
Amount | |
|
Amortization | |
|
Amount | |
|
|
| |
|
| |
|
| |
Automotive and Other Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizing intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents and intellectual property rights
|
|
$ |
303 |
|
|
$ |
69 |
|
|
$ |
234 |
|
Non-amortizing intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
600 |
|
|
Prepaid pension asset (Note 18)
|
|
|
|
|
|
|
|
|
|
|
765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total goodwill and intangible assets
|
|
|
|
|
|
|
|
|
|
$ |
1,599 |
|
Financing and Insurance Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizing intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer lists and contracts
|
|
$ |
73 |
|
|
$ |
41 |
|
|
$ |
32 |
|
|
Trademarks and other
|
|
|
40 |
|
|
|
20 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
113 |
|
|
$ |
61 |
|
|
$ |
52 |
|
|
|
|
|
|
|
|
|
|
|
Non-amortizing intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
3,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total goodwill and intangible assets (Note 15)
|
|
|
|
|
|
|
|
|
|
|
3,326 |
|
|
|
|
|
|
|
|
|
|
|
Total consolidated goodwill and intangible assets
|
|
|
|
|
|
|
|
|
|
$ |
4,925 |
|
|
|
|
|
|
|
|
|
|
|
Aggregate amortization expense on existing acquired intangible
assets was $93 million for the year ended December 31,
2005. Estimated amortization expense in each of the next five
years is as follows: 2006 $59 million;
2007 $59 million; 2008
$56 million; 2009 $49 million; and
2010 $23 million.
The changes in the carrying amounts of goodwill were as follows
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total | |
|
|
|
|
|
|
|
|
|
|
Auto & | |
|
|
|
|
|
|
GMNA | |
|
GME | |
|
Other | |
|
GMAC | |
|
Total GM | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Balance as of December 31, 2003
|
|
$ |
154 |
|
|
$ |
413 |
|
|
$ |
567 |
|
|
$ |
3,223 |
|
|
$ |
3,790 |
|
Goodwill acquired during the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16 |
|
|
|
16 |
|
Effect of foreign currency translation
|
|
|
5 |
|
|
|
33 |
|
|
|
38 |
|
|
|
35 |
|
|
|
73 |
|
Other
|
|
|
(5 |
) |
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2004
|
|
|
154 |
|
|
|
446 |
|
|
|
600 |
|
|
|
3,274 |
|
|
|
3,874 |
|
Goodwill acquired during the period
|
|
|
238 |
|
|
|
|
|
|
|
238 |
|
|
|
22 |
|
|
|
260 |
|
Impairment losses/other(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(734 |
) |
|
|
(734 |
) |
Effect of foreign currency translation
|
|
|
(9 |
) |
|
|
(72 |
) |
|
|
(81 |
) |
|
|
(57 |
) |
|
|
(138 |
) |
Transfers to reporting segment held for sale(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(59 |
) |
|
|
(59 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2005
|
|
$ |
383 |
|
|
$ |
374 |
|
|
$ |
757 |
|
|
$ |
2,446 |
|
|
$ |
3,203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
In the fourth quarter of 2005, GMAC recorded a goodwill
impairment pre-tax charge of $734 million, relating
primarily to the goodwill recognized in conjunction with the
1999 acquisition of The Bank of New Yorks commercial
finance business. |
|
(2) |
At December 31, 2005, $59 million in GMAC Commercial
Mortgage goodwill was reclassified to assets held for sale. |
II-94
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
|
Automotive and Other Operations |
Other assets included the following (dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Investments in equity securities
|
|
$ |
435 |
|
|
$ |
350 |
|
Prepaid pension benefit cost (Note 18)
|
|
|
37,576 |
|
|
|
38,919 |
|
Other
|
|
|
3,092 |
|
|
|
1,575 |
|
|
|
|
|
|
|
|
|
Total other assets
|
|
$ |
41,103 |
|
|
$ |
40,844 |
|
|
|
|
|
|
|
|
Investments in equity securities at December 31, 2005 and
2004 include the fair value of investments in equity securities
classified as available-for-sale for all periods presented. It
is GMs intent to hold these securities for longer than one
year. Balances include historical costs of $225 million and
$144 million with unrealized gains of $287 million and
$209 million and unrealized losses of $77 million and
$3 million at December 31, 2005 and 2004,
respectively. Other in the table above includes
restricted cash balances of $157 million and
$57 million at December 31, 2005 and 2004,
respectively.
In the fourth quarter of 2004, GM completed its annual review of
its investment in FAH. As a result of further deterioration in
the performance of Fiat Auto S.p.A. and its current debt
structure, GM recorded a non-cash charge of $220 million
($136 million, after tax) to reduce the carrying value of
GMs investment in FAH to zero.
|
|
|
Financing and Insurance Operations |
Other assets included the following (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Mortgage servicing rights
|
|
$ |
4,015 |
|
|
$ |
3,890 |
|
Premiums and other insurance receivables
|
|
|
1,873 |
|
|
|
1,763 |
|
Deferred policy acquisition costs
|
|
|
1,696 |
|
|
|
1,444 |
|
Derivative assets
|
|
|
3,000 |
|
|
|
9,489 |
|
Repossessed and foreclosed assets, net
|
|
|
689 |
|
|
|
615 |
|
Equity investments
|
|
|
535 |
|
|
|
1,751 |
|
Intangible assets (Note 14)
|
|
|
2,477 |
|
|
|
3,326 |
|
Property (Note 13)
|
|
|
1,748 |
|
|
|
1,850 |
|
Cash deposits held for securitization trusts
|
|
|
2,907 |
|
|
|
1,836 |
|
Restricted cash collections for securitization trusts
|
|
|
1,871 |
|
|
|
2,217 |
|
Accrued interest and rent receivable
|
|
|
1,163 |
|
|
|
1,178 |
|
Real estate investments
|
|
|
1,320 |
|
|
|
1,473 |
|
Debt issuance costs
|
|
|
726 |
|
|
|
753 |
|
Servicer advances
|
|
|
499 |
|
|
|
769 |
|
Inventory (Note 10)
|
|
|
503 |
|
|
|
530 |
|
Other
|
|
|
2,672 |
|
|
|
2,307 |
|
|
|
|
|
|
|
|
|
Total other assets
|
|
$ |
27,694 |
|
|
$ |
35,191 |
|
|
|
|
|
|
|
|
II-95
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 15. |
Other Assets (concluded) |
|
|
|
Reclassification for Consolidated Balance Sheet
Presentation |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Auto & Other other assets, as detailed above
|
|
$ |
41,103 |
|
|
$ |
40,844 |
|
FIO other assets, as detailed above
|
|
|
27,694 |
|
|
|
35,191 |
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
68,797 |
|
|
|
76,035 |
|
Prepaid assets and other
|
|
|
1,837 |
|
|
|
1,874 |
|
Inventory (Note 10)
|
|
|
(503 |
) |
|
|
(530 |
) |
Accounts receivable
|
|
|
(7,820 |
) |
|
|
(14,523 |
) |
Intangible assets (Note 14)
|
|
|
(2,477 |
) |
|
|
(3,326 |
) |
Property (Note 13)
|
|
|
(1,748 |
) |
|
|
(1,850 |
) |
|
|
|
|
|
|
|
|
Total consolidated other assets
|
|
$ |
58,086 |
|
|
$ |
57,680 |
|
|
|
|
|
|
|
|
|
|
Note 16. |
Accrued Expenses, Other Liabilities, and Deferred Income
Taxes |
|
|
|
Automotive and Other Operations |
Accrued expenses, other liabilities, and deferred income taxes
included the following (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Dealer and customer allowances, claims, and discounts
|
|
$ |
11,605 |
|
|
$ |
11,492 |
|
Deferred revenue and deposits from rental car companies
|
|
|
13,611 |
|
|
|
13,239 |
|
Policy, product warranty, and recall campaigns
|
|
|
9,128 |
|
|
|
9,315 |
|
Delphi contingent exposure
|
|
|
5,500 |
|
|
|
0 |
|
Payrolls and employee benefits (excludes postemployment)
|
|
|
3,970 |
|
|
|
4,642 |
|
Unpaid losses under self-insurance programs
|
|
|
1,827 |
|
|
|
1,784 |
|
Taxes
|
|
|
2,485 |
|
|
|
2,993 |
|
Interest
|
|
|
1,011 |
|
|
|
922 |
|
Postemployment benefits Plant idling (Note 5)
|
|
|
2,012 |
|
|
|
237 |
|
Postemployment benefits Extended disability benefits
|
|
|
1,135 |
|
|
|
1,163 |
|
Fiat settlement (Note 2)
|
|
|
|
|
|
|
1,364 |
|
Other
|
|
|
7,418 |
|
|
|
8,211 |
|
|
|
|
|
|
|
|
|
Total accrued expenses and other liabilities
|
|
$ |
59,702 |
|
|
$ |
55,362 |
|
Pensions
|
|
|
90 |
|
|
|
84 |
|
Postretirement benefits
|
|
|
4,154 |
|
|
|
3,890 |
|
Deferred income taxes
|
|
|
742 |
|
|
|
3,072 |
|
|
|
|
|
|
|
|
|
Total accrued expenses, other liabilities, and deferred income
taxes
|
|
$ |
64,688 |
|
|
$ |
62,408 |
|
|
|
|
|
|
|
|
|
Current
|
|
$ |
42,665 |
|
|
$ |
46,202 |
|
|
Non-current
|
|
|
22,023 |
|
|
|
16,206 |
|
|
|
|
|
|
|
|
|
Total accrued expenses, other liabilities, and deferred income
taxes
|
|
$ |
64,688 |
|
|
$ |
62,408 |
|
|
|
|
|
|
|
|
II-96
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 16. Accrued Expenses,
Other Liabilities, and Deferred Income Taxes
(concluded)
Policy, product warranty and recall campaigns liability (dollars
in millions):
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Beginning balance
|
|
$ |
9,315 |
|
|
$ |
8,832 |
|
Payments
|
|
|
(4,696 |
) |
|
|
(4,669 |
) |
Increase in liability (warranties issued during period)
|
|
|
5,159 |
|
|
|
5,065 |
|
Adjustments to liability (pre-existing warranties)
|
|
|
(381 |
) |
|
|
(85 |
) |
Effect of foreign currency translation
|
|
|
(269 |
) |
|
|
172 |
|
|
|
|
|
|
|
|
Ending balance
|
|
$ |
9,128 |
|
|
$ |
9,315 |
|
|
|
|
|
|
|
|
Policy, product warranty, and recall campaigns liability amounts
in the table above include amounts with respect to
certified-used vehicles. The December 31, 2004 disclosure
has been revised accordingly to provide a comparative basis.
|
|
|
Financing and Insurance Operations |
Other liabilities and deferred income taxes included the
following (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Unpaid insurance losses, loss adjustment expenses, and unearned
insurance premiums
|
|
$ |
7,588 |
|
|
$ |
7,232 |
|
Interest
|
|
|
3,057 |
|
|
|
3,413 |
|
Deposits
|
|
|
8,367 |
|
|
|
7,477 |
|
Interest rate derivatives
|
|
|
2,224 |
|
|
|
934 |
|
Other
|
|
|
3,122 |
|
|
|
3,922 |
|
|
|
|
|
|
|
|
|
Total other liabilities
|
|
$ |
24,358 |
|
|
$ |
22,978 |
|
Postretirement benefits
|
|
|
853 |
|
|
|
815 |
|
Deferred income taxes
|
|
|
3,735 |
|
|
|
4,006 |
|
|
|
|
|
|
|
|
|
Total other liabilities and deferred income taxes
|
|
$ |
28,946 |
|
|
$ |
27,799 |
|
|
|
|
|
|
|
|
|
Total consolidated accrued expenses and other liabilities
|
|
$ |
84,060 |
|
|
$ |
78,340 |
|
|
|
|
|
|
|
|
|
Total consolidated deferred income tax liability (Note 12)
|
|
$ |
4,477 |
|
|
$ |
7,078 |
|
|
|
|
|
|
|
|
II-97
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 17. |
Long-Term Debt and Loans Payable |
|
|
|
Automotive and Other Operations |
Long-term debt and loans payable were as follows (dollars in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average | |
|
|
|
|
Interest Rate | |
|
December 31, | |
|
|
| |
|
| |
|
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
Long-term debt and loans payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable within one year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt(1)
|
|
|
5.8% |
|
|
|
5.7% |
|
|
$ |
564 |
|
|
$ |
584 |
|
|
|
All other
|
|
|
7.4% |
|
|
|
3.0% |
|
|
|
955 |
|
|
|
1,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans payable
|
|
|
|
|
|
|
|
|
|
|
1,519 |
|
|
|
2,062 |
|
|
Payable beyond one year(1)
|
|
|
6.9% |
|
|
|
6.8% |
|
|
|
31,084 |
|
|
|
30,425 |
|
|
Unamortized discount
|
|
|
|
|
|
|
|
|
|
|
(97 |
) |
|
|
(103 |
) |
|
Mark-to-market adjustment(2)
|
|
|
|
|
|
|
|
|
|
|
27 |
|
|
|
138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
|
|
|
|
|
|
|
|
31,014 |
|
|
|
30,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt and loans payable
|
|
|
|
|
|
|
|
|
|
$ |
32,533 |
|
|
$ |
32,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The weighted-average interest rates include the impact of
interest rate swap agreements. |
|
(2) |
Effective January 1, 2001 the Corporation has been
recording its hedged debt at fair market value on its balance
sheet due to the adoption of SFAS No. 133,
Accounting for Derivative Instruments and Hedging
Activities. |
Long-term debt payable beyond one year at December 31, 2005
includes scheduled maturities as follows: 2007
$1 billion; 2008 $1.9 billion;
2009 $0.4 billion; 2010
$0.2 billion; 2011 and after
$27.6 billion. Included in the long-term debt payable
beyond one year are certain convertible debentures of
approximately $1.2 billion that may be put to GM for cash
settlement in 2007, ahead of its scheduled maturity after 2011.
To protect against foreign exchange risk, GM has entered into
cross currency swap agreements. The notional amount of such
agreements as of December 31, 2005 and 2004 for
Auto & Other were approximately $2.4 billion and
$2.2 billion, respectively.
Amounts payable beyond one year after cross currency swaps at
December 31, 2005 included $3.9 billion in currencies
other than the U.S. dollar, primarily the Euro
($1.8 billion), the Korean won ($1.5 billion), the
Australian dollar ($239 million), the Brazilian real
($225 million), and the Canadian dollar ($115 million).
At December 31, 2005 and 2004, long-term debt and loans
payable for Auto & Other included $26.0 billion
and $25.3 billion, respectively, of obligations with fixed
interest rates and $6.5 billion and $7.2 billion,
respectively, of obligations with variable interest rates
(predominantly LIBOR), after interest rate swap agreements.
To achieve its desired balance between fixed and variable rate
debt, GM has entered into interest rate swaps. The notional
amount of pay variable swap agreements as of December 31,
2005 and 2004 for Auto & Other was approximately
$5.5 billion and $5.9 billion, respectively.
GMs Auto & Other business maintains substantial
lines of credit with various banks that totaled
$8.0 billion at December 31, 2005, of which
$2.4 billion represented short-term credit facilities and
$5.6 billion represented long-term credit facilities. At
December 31, 2004, bank lines of credit totaled
$9.0 billion, of
II-98
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 17. Long-Term
Debt and Loans Payable (continued)
which $3.4 billion represented short-term credit facilities
and $5.6 billion represented long-term credit facilities.
The unused short-term and long-term portions of the credit lines
totaled $0.9 billion and $5.6 billion at
December 31, 2005, compared with $2.7 billion and
$5.6 billion at December 31, 2004. In addition,
GMs consolidated affiliates with non-GM minority
shareholders, primarily GM Daewoo, have lines of credit with
various banks that totaled $2.5 billion at
December 31, 2005, all of which represented long-term
facilities. The unused portion of the credit lines totaled
$1.5 billion at December 31, 2005. Certain bank lines
of credit contain covenants with which the Corporation and
applicable subsidiaries were in compliance throughout the year
ended December 31, 2005.
In view of GMs recent restatement of its prior financial
statements, GM believes that there is substantial uncertainty as
to whether the bank syndicate would be required to honor a
borrowing request under its $5.6 billion long-term credit
facility, and therefore there is a high risk that GM would not
be able to borrow under this facility. GM believes that issues
also may arise from its restatement under various financing
agreements, which consist principally of obligations under sale/
leaseback transactions and other lease obligations and do not
include GMs public debt indentures, as to which GM is a
party. GM has evaluated the effect of its restatement under
these financing agreements, including its legal rights with
respect to any claims that could be asserted, and believes that
it has sufficient access to liquidity to mitigate any likely
impact of these matters.
|
|
|
Financing and Insurance Operations |
Debt was as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average | |
|
|
|
|
Interest Rate | |
|
December 31, | |
|
|
| |
|
| |
|
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
Payable within one year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt(1)
|
|
|
4.9% |
|
|
|
3.9% |
|
|
$ |
41,733 |
|
|
$ |
37,300 |
|
|
Commercial paper(1)
|
|
|
5.5% |
|
|
|
2.5% |
|
|
|
528 |
|
|
|
8,416 |
|
|
All other
|
|
|
4.6% |
|
|
|
2.8% |
|
|
|
39,793 |
|
|
|
45,327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans payable
|
|
|
|
|
|
|
|
|
|
|
82,054 |
|
|
|
91,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable beyond one year(1)
|
|
|
5.2% |
|
|
|
4.9% |
|
|
|
171,699 |
|
|
|
176,090 |
|
Unamortized discount
|
|
|
|
|
|
|
|
|
|
|
(538 |
) |
|
|
(650 |
) |
Mark to market adjustment
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
1,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt and loans payable
|
|
|
|
|
|
|
|
|
|
|
171,163 |
|
|
|
176,714 |
|
|
|
Total debt
|
|
|
|
|
|
|
|
|
|
$ |
253,217 |
|
|
$ |
267,757 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated notes and loans payable
|
|
|
|
|
|
|
|
|
|
$ |
285,750 |
|
|
$ |
300,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The weighted-average interest rates include the effect of
interest rate swap agreements. |
Debt payable beyond one year at December 31, 2005 included
maturities as follows: 2007 $33.9 billion;
2008 $25.6 billion; 2009
$10.0 billion; 2010 $8.8 billion; 2011 and
after $93.4 billion.
Amounts payable beyond one year after consideration of foreign
currency swaps at December 31, 2005 included
$23.9 billion in currencies other than the
U.S. dollar, primarily the Canadian dollar
($8.1 billion), the euro ($6.6 billion), the
U.K. pound sterling ($6.1 billion), and the Australian
dollar ($1.4 billion).
II-99
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 17. |
Long-Term Debt and Loans Payable (concluded) |
At December 31, 2005 and 2004, debt for FIO included
$93.2 billion and $137 billion, respectively, of
obligations with fixed interest rates and $160.0 billion
and $130.8 billion, respectively, of obligations with
variable interest rates (predominantly LIBOR), after considering
the impact of interest rate swap agreements.
To achieve its desired balance between fixed and variable rate
debt, GM has entered into interest rate swap, cap, and floor
agreements. The notional amounts 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). The notional amounts of such agreements as of
December 31, 2004 for FIO were approximately
$85.9 billion relating to swap agreements
($56.7 billion pay variable and $29.2 billion pay
fixed).
GMs FIO business maintains substantial lines of credit
with various banks that totaled $47.2 billion at
December 31, 2005, of which $11.2 billion represented
short-term credit facilities and $36 billion represented
long-term credit facilities. At December 31, 2004, bank
lines of credit totaled $60.3 billion, of which
$23 billion represented short-term credit facilities and
$37.3 billion represented long-term credit facilities. The
unused short-term and long-term portions of the credit lines
totaled $3.1 billion and $32.2 billion at
December 31, 2005 compared with $8.5 billion and
$35.9 billion at December 31, 2004. Certain bank lines
of credit contain covenants with which the Corporation and
applicable subsidiaries were in compliance throughout the year
ended December 31, 2005.
|
|
Note 18. |
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.
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
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
U.S. hourly and salaried
|
|
$ |
|
|
|
$ |
|
|
|
$ |
18,504 |
|
Other U.S.
|
|
|
125 |
|
|
|
117 |
|
|
|
117 |
|
Non-U.S.
|
|
|
708 |
|
|
|
802 |
|
|
|
442 |
|
In 2006, GM does not have any contributions due for its
U.S. hourly plan. In February 2006, GM contributed
$1.7 million into its salaried pension plan. This
contribution was a required contribution on behalf of GM
employees who were former participants in the Saturn PCRP plan,
which was merged into the salaried pension plan in 2005. GM does
not expect to make any additional contributions into the
salaried pension plan in 2006. During 2006, GM expects to
contribute or pay benefits of approximately $100 million to
its other U.S. pension plans and $500 million to its
primary
non-U.S. pension
plans, which include GM Canada Limited, Adam Opel and Vauxhall.
II-100
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 18. |
Pensions and Other Postretirement Benefits
(continued) |
Additionally, GM maintains hourly and salaried benefit plans
that provide postretirement medical, dental, vision, and life
insurance to most U.S. 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 of the Corporations
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.
In 2004, GM contributed a total of $9.0 billion to plan
assets including $8.8 billion to its U.S. hourly and
salaried Voluntary Employees Beneficiary Association (VEBA)
trusts for OPEB plans (consisting of $8.4 billion in cash
and $0.4 billion in XM Satellite Radio Holdings, Inc.
common stock shares) and $0.2 billion to a salaried 401(h)
account. This was the first such contribution related to the
salaried OPEB plan and 401(h) account. Contributions by
participants to the other OPEB plans were $89 million and
$87 million for the years ended December 31, 2005 and
2004, respectively. In 2005, GM withdrew a total of
$3.2 billion from plan assets of its VEBA trusts for OPEB
plans. GM withdrew $1 billion from its VEBA trust on
February 1, 2006 and another $1 billion from its VEBA
trust on March 1, 2006.
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
non-U.S. pension
plans are November 30, September 30 and
September 30, respectively. GMs measurement dates for
its Canadian and South African
non-U.S. OPEB
plans are December 31.
II-101
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 18. |
Pensions and Other Postretirement Benefits
(continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans | |
|
Non-U.S. Plans | |
|
|
|
Non-U.S. | |
|
|
Pension Benefits | |
|
Pension Benefits | |
|
U.S. Other Benefits | |
|
Other Benefits | |
|
|
| |
|
| |
|
| |
|
| |
|
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
Change in benefit obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
|
$ |
90,760 |
|
|
$ |
87,285 |
|
|
$ |
18,056 |
|
|
$ |
15,088 |
|
|
$ |
73,772 |
|
|
$ |
64,547 |
|
|
$ |
3,702 |
|
|
$ |
2,995 |
|
Service cost
|
|
|
1,117 |
|
|
|
1,097 |
|
|
|
322 |
|
|
|
247 |
|
|
|
702 |
|
|
|
566 |
|
|
|
50 |
|
|
|
39 |
|
Interest cost
|
|
|
4,883 |
|
|
|
5,050 |
|
|
|
965 |
|
|
|
892 |
|
|
|
4,107 |
|
|
|
3,726 |
|
|
|
218 |
|
|
|
201 |
|
Plan participants contributions
|
|
|
22 |
|
|
|
22 |
|
|
|
27 |
|
|
|
26 |
|
|
|
88 |
|
|
|
85 |
|
|
|
1 |
|
|
|
2 |
|
Amendments
|
|
|
(65 |
) |
|
|
54 |
|
|
|
113 |
|
|
|
163 |
|
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
Actuarial losses
|
|
|
(975 |
) |
|
|
3,683 |
|
|
|
2,233 |
|
|
|
1,040 |
|
|
|
6,720 |
|
|
|
8,527 |
|
|
|
(200 |
) |
|
|
288 |
|
Benefits paid
|
|
|
(6,695 |
) |
|
|
(6,605 |
) |
|
|
(911 |
) |
|
|
(806 |
) |
|
|
(4,208 |
) |
|
|
(3,690 |
) |
|
|
(118 |
) |
|
|
(114 |
) |
Exchange rate movements
|
|
|
|
|
|
|
|
|
|
|
(942 |
) |
|
|
1,201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Curtailments, settlements, and other
|
|
|
86 |
|
|
|
174 |
|
|
|
778 |
|
|
|
205 |
|
|
|
|
|
|
|
1 |
|
|
|
107 |
|
|
|
291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year
|
|
|
89,133 |
|
|
|
90,760 |
|
|
|
20,641 |
|
|
|
18,056 |
|
|
|
81,181 |
|
|
|
73,772 |
|
|
|
3,760 |
|
|
|
3,702 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
|
90,886 |
|
|
|
86,169 |
|
|
|
9,023 |
|
|
|
7,560 |
|
|
|
16,016 |
|
|
|
9,998 |
|
|
|
|
|
|
|
|
|
Actual return on plan assets
|
|
|
10,924 |
|
|
|
11,046 |
|
|
|
1,382 |
|
|
|
814 |
|
|
|
2,258 |
|
|
|
981 |
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
125 |
|
|
|
117 |
|
|
|
505 |
|
|
|
802 |
|
|
|
2,008 |
|
|
|
5,037 |
|
|
|
|
|
|
|
|
|
Plan participants contributions
|
|
|
22 |
|
|
|
22 |
|
|
|
27 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits paid
|
|
|
(6,695 |
) |
|
|
(6,605 |
) |
|
|
(911 |
) |
|
|
(806 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange rate movements
|
|
|
|
|
|
|
|
|
|
|
(119 |
) |
|
|
627 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Curtailments, settlements, and other
|
|
|
(12 |
) |
|
|
137 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year
|
|
|
95,250 |
|
|
|
90,886 |
|
|
|
9,925 |
|
|
|
9,023 |
|
|
|
20,282 |
|
|
|
16,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status(1)
|
|
|
6,117 |
|
|
|
126 |
|
|
|
(10,716 |
) |
|
|
(9,033 |
) |
|
|
(60,899 |
) |
|
|
(57,756 |
) |
|
|
(3,760 |
) |
|
|
(3,702 |
) |
Unrecognized actuarial loss
|
|
|
25,538 |
|
|
|
31,604 |
|
|
|
6,554 |
|
|
|
5,411 |
|
|
|
30,592 |
|
|
|
27,345 |
|
|
|
1,698 |
|
|
|
1,326 |
|
Unrecognized prior service cost
|
|
|
4,616 |
|
|
|
5,862 |
|
|
|
770 |
|
|
|
808 |
|
|
|
(714 |
) |
|
|
(445 |
) |
|
|
(584 |
) |
|
|
51 |
|
Unrecognized transition obligation
|
|
|
|
|
|
|
|
|
|
|
28 |
|
|
|
39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer contributions/withdrawals in fourth quarter
|
|
|
|
|
|
|
|
|
|
|
203 |
|
|
|
|
|
|
|
(1,176 |
) |
|
|
4,000 |
|
|
|
|
|
|
|
|
|
Benefits paid in fourth quarter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
846 |
|
|
|
999 |
|
|
|
|
|
|
|
|
|
Business Combination after Measurement Date
|
|
|
|
|
|
|
|
|
|
|
(187 |
) |
|
|
|
|
|
|
|
|
|
|
__ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$ |
36,271 |
|
|
$ |
37,592 |
|
|
$ |
(3,348 |
) |
|
$ |
(2,775 |
) |
|
$ |
(31,351 |
) |
|
$ |
(25,857 |
) |
|
$ |
(2,646 |
) |
|
$ |
(2,325 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the consolidated balance sheets consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid benefit cost
|
|
$ |
37,280 |
|
|
$ |
38,570 |
|
|
$ |
296 |
|
|
$ |
349 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
Accrued benefit liability
|
|
|
(1,177 |
) |
|
|
(1,152 |
) |
|
|
(10,127 |
) |
|
|
(8,303 |
) |
|
|
(31,351 |
) |
|
|
(25,857 |
) |
|
|
(2,646 |
) |
|
$ |
(2,325 |
) |
|
|
Intangible asset
|
|
|
|
|
|
|
|
|
|
|
743 |
|
|
|
765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income
|
|
|
168 |
|
|
|
174 |
|
|
|
5,740 |
|
|
|
4,414 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$ |
36,271 |
|
|
$ |
37,592 |
|
|
$ |
(3,348 |
) |
|
$ |
(2,775 |
) |
|
$ |
(31,351 |
) |
|
$ |
(25,857 |
) |
|
$ |
(2,646 |
) |
|
$ |
(2,325 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Includes overfunded status of the combined U.S. hourly and
salaried pension plans of $7.5 billion as of
December 31, 2005, and $1.6 billion as of
December 31, 2004. |
II-102
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 18. |
Pensions and Other Postretirement Benefits
(continued) |
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 (dollars in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans | |
|
Non-U.S. Plans | |
|
|
| |
|
| |
|
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
Accumulated Benefit Obligation
|
|
$ |
86,885 |
|
|
$ |
88,053 |
|
|
$ |
19,714 |
|
|
$ |
17,097 |
|
Plans with ABO in excess of plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ABO
|
|
$ |
1,207 |
|
|
$ |
1,224 |
|
|
$ |
19,232 |
|
|
$ |
16,631 |
|
|
Fair value of plan assets
|
|
|
30 |
|
|
|
85 |
|
|
|
9,249 |
|
|
|
8,388 |
|
Plans with PBO in excess of plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PBO
|
|
$ |
1,703 |
|
|
$ |
31,176 |
|
|
$ |
20,515 |
|
|
$ |
17,907 |
|
|
Fair value of plan assets
|
|
|
295 |
|
|
|
29,548 |
|
|
|
9,622 |
|
|
|
8,708 |
|
The components of pension and OPEB expense along with the
assumptions used to determine benefit obligations are as follows
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S. Plans | |
|
|
|
Non-U.S. | |
|
|
U.S. Plans Pension Benefits | |
|
Pension Benefits | |
|
U.S. Other Benefits | |
|
Other Benefits | |
|
|
| |
|
| |
|
| |
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
2005 | |
|
2004 | |
|
2003 | |
|
2005 | |
|
2004 | |
|
2003 | |
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Components of expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$ |
1,117 |
|
|
$ |
1,097 |
|
|
$ |
919 |
|
|
$ |
322 |
|
|
$ |
247 |
|
|
$ |
228 |
|
|
$ |
702 |
|
|
$ |
566 |
|
|
$ |
503 |
|
|
$ |
50 |
|
|
$ |
39 |
|
|
$ |
34 |
|
Interest cost
|
|
|
4,883 |
|
|
|
5,050 |
|
|
|
5,162 |
|
|
|
965 |
|
|
|
892 |
|
|
|
803 |
|
|
|
4,107 |
|
|
|
3,726 |
|
|
|
3,630 |
|
|
|
218 |
|
|
|
201 |
|
|
|
168 |
|
Expected return on plan assets
|
|
|
(7,898 |
) |
|
|
(7,823 |
) |
|
|
(6,374 |
) |
|
|
(740 |
) |
|
|
(669 |
) |
|
|
(573 |
) |
|
|
(1,684 |
) |
|
|
(1,095 |
) |
|
|
(444 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost
|
|
|
1,164 |
|
|
|
1,279 |
|
|
|
1,148 |
|
|
|
102 |
|
|
|
93 |
|
|
|
101 |
|
|
|
(70 |
) |
|
|
(87 |
) |
|
|
(19 |
) |
|
|
8 |
|
|
|
8 |
|
|
|
7 |
|
Amortization of transition obligation/(asset)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
7 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized net actuarial loss
|
|
|
2,065 |
|
|
|
1,857 |
|
|
|
1,744 |
|
|
|
281 |
|
|
|
188 |
|
|
|
167 |
|
|
|
2,250 |
|
|
|
1,138 |
|
|
|
722 |
|
|
|
88 |
|
|
|
62 |
|
|
|
46 |
|
Curtailments, settlements, and other
|
|
|
115 |
|
|
|
34 |
|
|
|
27 |
|
|
|
114 |
|
|
|
204 |
|
|
|
49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net expense
|
|
$ |
1,446 |
|
|
$ |
1,494 |
|
|
$ |
2,626 |
|
|
$ |
1,050 |
|
|
$ |
962 |
|
|
$ |
786 |
|
|
$ |
5,305 |
|
|
$ |
4,248 |
|
|
$ |
4,392 |
|
|
$ |
366 |
|
|
$ |
310 |
|
|
$ |
258 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average assumptions used to determine benefit
obligations at December 31(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
% |
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 |
% |
Weighted-average assumptions used to determine net expense
for years ended December 31(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.60 |
% |
|
|
6.00 |
% |
|
|
6.75 |
% |
|
|
5.61 |
% |
|
|
6.12 |
% |
|
|
6.23 |
% |
|
|
5.75 |
% |
|
|
6.25 |
% |
|
|
6.75 |
% |
|
|
6.00 |
% |
|
|
6.75 |
% |
|
|
7.00 |
% |
Expected return on plan assets
|
|
|
9.0 |
% |
|
|
9.0 |
% |
|
|
9.0 |
% |
|
|
8.5 |
% |
|
|
8.4 |
% |
|
|
8.5 |
% |
|
|
8.8 |
% |
|
|
8.0 |
% |
|
|
7.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Rate of compensation increase
|
|
|
5.0 |
% |
|
|
5.0 |
% |
|
|
5.0 |
% |
|
|
3.2 |
% |
|
|
3.4 |
% |
|
|
3.4 |
% |
|
|
3.9 |
% |
|
|
4.2 |
% |
|
|
4.4 |
% |
|
|
4.0 |
% |
|
|
4.0 |
% |
|
|
4.0 |
% |
|
|
(1) |
Determined as of end of year |
|
(2) |
Determined as of beginning of year |
II-103
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 18. |
Pensions and Other Postretirement Benefits
(continued) |
In recent years, 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.
Beginning with 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 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 in the hypothetical described above.
GMs discount rate estimation under this iterative process
involves four steps:
First, GM identifies a bond universe that consists of all
AA-rated or higher bonds with an amount outstanding greater than
$25 million. GM excludes from this universe all callable
and convertible bonds, mortgage-backed and asset-backed
securities and bonds with a negative credit watch. The bond
universe data, including amounts outstanding, market prices,
credit ratings and other relevant data, is obtained from
Bloomberg.
Second, GM creates a defeasance portfolio from the bond universe
by selecting a set of bonds that would yield cash flows (through
coupons, maturation and reinvestment) that are sufficient to
defease its U.S. pension and OPEB obligations.
Reinvestments are assumed to occur at forward rates calculated
using a yield curve developed with the following methodology.
For years during which the bond universe has a sufficient number
of bonds, the yield curve is based on the yields of such bonds.
For future years, when the bond universe does not have a
sufficient number of bonds, the yield curve is extrapolated as
follows:
|
|
|
|
|
GM computes the spread between the yield curve and the swap
curve (a market-based curve), |
|
|
|
To extrapolate the yield curve for the period beginning after
the last year where substantial bonds are available in the bond
universe and ending in year 50, GM adds the spread to the swap
curve, which is observable over 50 years, and |
|
|
|
To extrapolate the yield curve beyond the 50th year, GM
assumes that the last one-year forward rate on the yield curve
(at the 49th year) remains constant for the remaining years. |
Third, GM determines the market value of the defeasance
portfolio using the actual initial market value of the bonds
selected as part of the defeasance portfolio.
Fourth, GM computes the internal rate of return (IRR) of
the defeasance portfolio based on its market value as of the
measurement date and the final net cash flows from the coupons,
maturations and reinvestments. GM uses this IRR as the discount
rate for its U.S. pension and OPEB obligations.
Beginning with 2005 year-end valuations, GM rounds its
discount rates for its U.S. pensions and U.S. OPEB
plans to the nearest 0.05 percentage point, rather than to
the nearest 0.25 percentage point as in prior years.
Using this new methodology, GM has established for its
U.S. pension plans and U.S. OPEB plans discount rates
of 5.70% and 5.45%, respectively, for year-end 2005.
II-104
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 18. |
Pensions and Other Postretirement Benefits
(continued) |
GM sets the discount rate assumption annually for each of its
retirement-related benefit plans at their respective measurement
dates to reflect the yield of a portfolio of high quality,
fixed-income debt instruments matched against the timing and
amounts of projected future benefits.
|
|
|
|
|
|
|
|
|
Assumed Health-care Trend Rates at December 31 |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Initial Health-care Cost Trend Rate
|
|
|
10.0 |
% |
|
|
10.5 |
% |
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. Accumulated Postretirement Benefit Obligation
(APBO) by $9.3 billion at December 31, 2005 and
the U.S. aggregate service and interest cost components of
non-pension postretirement benefit expense for 2005 by
$629 million. A one-percentage point decrease would have
decreased the U.S. APBO by $7.7 billion and the
U.S. aggregate service and interest cost components of
non-pension postretirement benefit expense for 2005 by
$516 million.
GMs long-term strategic mix and expected return on assets
assumptions are derived from detailed periodic studies conducted
by GMs actuaries and GMs asset management group. The
U.S. study includes a review of alternative asset
allocation strategies, anticipated future long-term performance
of individual asset classes, risks (standard deviations) and
correlations for each of the asset classes that comprise the
funds 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.
The capital market assumptions underpinning GMs long-term
strategic mix and long-term expected return assumptions are
reexamined annually. The reexaminations of capital market
assumptions in 2005 reaffirmed both the 9% long-term expected
return assumption and GMs long-term strategic allocation
for the U.S. pension plans.
GMs strategic asset mix for U.S. pension plans is
intended to reduce exposure to equity market risks and to
utilize asset classes which are not highly correlated as well as
asset classes where active management has historically generated
excess returns and places greater emphasis on manager skills to
produce excess return while employing various risk mitigation
strategies to reduce volatility. In 2005, GMs target
allocations for pension assets fell within the following ranges:
global equity, 41%-49%;
global bonds, 30%-36%;
real estate, 8%-12%;
and alternative, 9%-13%.
With the significant contributions made to GMs hourly VEBA
in 2004, a new investment policy was adopted during the year to
manage plan assets under a single investment policy with an
expanded range of assets 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 was created and
funded. It is primarily invested in shorter-term liquid
securities. For 2005, the expected return for the hourly VEBA
was 9.0% and the expected return for the salaried VEBA was 4.5%.
The blended expected rate of return on VEBA assets was 8.8% in
2005.
II-105
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 18. |
Pensions and Other Postretirement Benefits
(concluded) |
U.S. and
non-U.S. pension
plans and OPEB plans have the following asset allocations, as of
their respective measurement dates in 2004 and 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Assets | |
|
|
|
|
Plan Assets | |
|
Primary | |
|
Plan Assets | |
|
|
U.S. Pension | |
|
Non-U.S. Pension | |
|
OPEB | |
|
|
Plans Actual | |
|
Plans Actual | |
|
Actual | |
|
|
Percentage of | |
|
Percentage of | |
|
Percentage of | |
|
|
Plan Assets | |
|
Plan Assets | |
|
Plan Assets | |
|
|
| |
|
| |
|
| |
Asset Category |
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Equity Securities
|
|
|
47 |
% |
|
|
47 |
% |
|
|
61 |
% |
|
|
61 |
% |
|
|
52 |
% |
|
|
41 |
% |
Debt Securities
|
|
|
32 |
% |
|
|
35 |
% |
|
|
31 |
% |
|
|
31 |
% |
|
|
31 |
% |
|
|
48 |
% |
Real Estate
|
|
|
7 |
% |
|
|
8 |
% |
|
|
8 |
% |
|
|
8 |
% |
|
|
3 |
% |
|
|
2 |
% |
Other
|
|
|
14 |
% |
|
|
10 |
% |
|
|
0 |
% |
|
|
0 |
% |
|
|
14 |
% |
|
|
9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities include GM common stock in the amounts of
$11 million (less than 1% of total pension plan assets) and
$29 million (less than 1% of total pension plan assets) at
December 31, 2005 and 2004, respectively. In addition, due
to market-neutral investment strategies in place at some of
GMs external asset managers, the pension plan trusts also
hold short positions in GM common stock which had a value of
$(18) million at December 31, 2005.
On December 8, 2003, President Bush signed into law the
Medicare Prescription Drug Improvement and Modernization Act of
2003. The Act introduces a prescription drug benefit beginning
in 2006 under Medicare (Medicare Part D) as well as a
federal subsidy to sponsors of retiree health care benefit plans
that provide a benefit that is at least actuarially equivalent
to Medicare Part D. Due to the levels of benefits provided
under GMs U.S. health care plans, management has
concluded that GMs U.S. health care plans are at
least actuarially equivalent to Medicare Part D.
GM elected not to defer accounting for the effects of the Act
and remeasured GMs postretirement benefit obligation as of
December 8, 2003. The remeasurement reduced GMs
December 31, 2004 APBO by $4.1 billion, increased plan
assets by $0.4 billion, and decreased the unrecognized
actuarial loss by $4.6 billion. The effect of the Act on
2005 and 2004 OPEB expense is included in the tables above.
The following benefit payments, which reflect estimated future
employee service, as appropriate, are expected to be paid
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
2006
|
|
|
6,794 |
|
|
|
834 |
|
|
|
4,337 |
|
|
|
181 |
|
|
|
128 |
|
|
|
|
|
2007
|
|
|
6,693 |
|
|
|
865 |
|
|
|
4,637 |
|
|
|
271 |
|
|
|
137 |
|
|
|
|
|
2008
|
|
|
6,728 |
|
|
|
905 |
|
|
|
4,916 |
|
|
|
301 |
|
|
|
147 |
|
|
|
|
|
2009
|
|
|
6,744 |
|
|
|
940 |
|
|
|
5,163 |
|
|
|
328 |
|
|
|
157 |
|
|
|
|
|
2010
|
|
|
6,754 |
|
|
|
979 |
|
|
|
5,383 |
|
|
|
353 |
|
|
|
167 |
|
|
|
|
|
2011-2015
|
|
$ |
33,517 |
|
|
$ |
5,443 |
|
|
$ |
29,187 |
|
|
$ |
2,116 |
|
|
$ |
993 |
|
|
$ |
|
|
II-106
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 19. |
Commitments and Contingent Matters |
GM had the following minimum commitments under noncancelable
capital leases having remaining terms in excess of one year,
primarily for property (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 | |
|
|
2006 | |
|
2007 | |
|
2008 | |
|
2009 | |
|
2010 | |
|
and after | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Minimum commitments
|
|
$ |
194 |
|
|
$ |
190 |
|
|
$ |
446 |
|
|
$ |
148 |
|
|
$ |
141 |
|
|
$ |
874 |
|
Sublease income
|
|
|
(19 |
) |
|
|
(19 |
) |
|
|
(19 |
) |
|
|
(19 |
) |
|
|
(19 |
) |
|
|
(301 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net minimum commitments
|
|
$ |
175 |
|
|
$ |
171 |
|
|
$ |
427 |
|
|
$ |
129 |
|
|
$ |
122 |
|
|
$ |
573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GM had the following minimum commitments under noncancelable
operating leases having remaining terms in excess of one year,
primarily for property (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 | |
|
|
2006 | |
|
2007 | |
|
2008 | |
|
2009 | |
|
2010 | |
|
and after | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Minimum commitments
|
|
$ |
1,076 |
|
|
$ |
895 |
|
|
$ |
1,368 |
|
|
$ |
749 |
|
|
$ |
770 |
|
|
$ |
4,073 |
|
Sublease Income
|
|
|
(246 |
) |
|
|
(247 |
) |
|
|
(241 |
) |
|
|
(236 |
) |
|
|
(227 |
) |
|
|
(2,592 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net minimum commitments
|
|
$ |
830 |
|
|
$ |
648 |
|
|
$ |
1,127 |
|
|
$ |
513 |
|
|
$ |
543 |
|
|
$ |
1,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 $1,034 million, $990 million,
and $926 million in 2005, 2004, and 2003, 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 $4.5 billion, $4.5 billion, and
$4.1 billion at December 31, 2005, 2004, and 2003,
respectively.
GM has guarantees related to its performance under operating
lease arrangements and the residual value of leased assets
totaling $639 million (included in table above). Expiration
dates vary, and certain leases contain renewal options. The fair
value of the underlying assets is expected to fully mitigate
GMs obligations under these guarantees. Accordingly, no
liabilities were recorded with respect to such guarantees.
Also, GM has entered into agreements with certain suppliers and
service providers that guarantee the value of the
suppliers assets and agreements with third parties that
guarantee fulfillment of certain suppliers commitments.
The maximum exposure under these commitments amounts to
$106 million.
GMAC has guaranteed certain amounts related to the
securitization of mortgage loans, agency loan programs, loans
sold with recourse, and the repayment of third-party debt. In
addition, GMAC issues financial standby letters of credit as
part of their financing and mortgage operations. At
December 31, 2005, approximately $28 million was
recorded with respect to these guarantees, the maximum exposure
under which is approximately $10.3 billion.
In connection with certain divestitures prior to January 1,
2003, GM has provided guarantees with respect to benefits for
former GM employees relating to pensions, postretirement health
care, and life insurance. Other than items pertaining to the
fourth quarter 2005 charge with respect to the contingent
exposures relating to the Delphi Chapter 11 filing,
including under the benefit guarantees, the maximum exposure
under these agreements cannot be estimated due to the nature of
these indemnities. No amounts have been recorded for such
indemnities as the Corporations obligations under them are
not probable and estimable.
II-107
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 19. |
Commitments and Contingent
Matters (continued) |
In addition to guarantees, GM has entered into agreements
indemnifying certain parties with respect to environmental
conditions pertaining to ongoing or sold GM properties. Due to
the nature of the indemnifications, GMs maximum exposure
under these agreements cannot be estimated. No amounts have been
recorded for such indemnities as the Corporations
obligations under them are not probable and estimable.
In addition to the above, in the normal course of business GM
periodically enters into agreements that incorporate
indemnification provisions. While the maximum amount to which GM
may be exposed under such agreements cannot be estimated, it is
the opinion of management that these guarantees and
indemnifications are not expected to have a material adverse
effect on the Corporations consolidated financial position
or results of operations.
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 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 estimated at December 31, 2005. After
discussion with counsel, it is the opinion of management that
such liability is not expected to have a material adverse effect
on the Corporations consolidated financial condition or
results of operations.
On October 8, 2005, Delphi filed a petition for
Chapter 11 proceedings under the United States 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 will continue to work constructively in the court proceedings
with Delphi, Delphis unions, and other participants in
Delphis restructuring process. GMs goal is to pursue
outcomes that are in the best interests of GM and its
stockholders, and that enable Delphi to continue as an important
supplier to GM.
Delphi has indicated to 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, but there can be no assurance that GM will
be able to realize any benefits.
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 might 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.
II-108
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 19. |
Commitments and Contingent
Matters (continued) |
In addition, various financial obligations Delphi has to GM as
of the date of Delphis Chapter 11 filing, including
the $951 million payable for amounts that Delphi owed to GM
relating to Delphi employees who were formerly GM employees and
subsequently transferred back to GM as job openings became
available to them under certain employee flowback
arrangements as of the date of Delphis filing for
Chapter 11, may be subject to compromise in the bankruptcy
proceedings, which may result in GM receiving payment of only a
portion of the face amount owed by Delphi.
GM will seek to minimize this risk by protecting our right of
setoff against the $1.15 billion we owed to Delphi as of
the date of its Chapter 11 filing. A procedure for
determining setoff claims has been put in place by the
bankruptcy court. 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 fully or partially setoff such
amounts. However, to date setoffs of approximately
$52.5 million have been agreed to by Delphi and taken by
GM. Although GM believes that it is probable that it will be
able to collect all of the amounts due from Delphi, the
financial impact of a substantial compromise of our right of
setoff could have a material adverse impact on our financial
position.
In connection with GMs spin-off of Delphi in 1999, GM
entered into separate agreements with the UAW, the International
Union of Electrical Workers and the United Steel Workers. In
each of these three agreements (Benefit Guarantee Agreement(s)),
GM provided contingent benefit guarantees to make payments for
limited pension and OPEB expenses to certain former GM
U.S. hourly employees who transferred to Delphi as part of
the spin-off and meet the eligibility requirements for such
payments (Covered Employees).
Each Benefit Guarantee Agreement contains separate benefit
guarantees relating to pension, post-retirement health care and
life insurance benefits. These limited benefit guarantees each
have separate triggering events that initiate potential GM
liability if Delphi fails to provide the corresponding benefit
at the required level. Therefore, it is possible that GM could
incur liability under one of the guarantees (e.g., pension)
without triggering the other guarantees (e.g., post-retirement
health care or life insurance). In addition, with respect to
pension benefits, GMs obligation under the pension benefit
guarantees only arises to the extent that the combination of
pension benefits provided by Delphi and the Pension Benefit
Guaranty Corporation (PBGC) falls short of the amounts GM
has guaranteed.
The Chapter 11 filing by Delphi does not by itself trigger
any of the benefit guarantees. In addition, the benefit
guarantees expire on October 18, 2007 if not previously
triggered by Delphis failure to pay the specified
benefits. 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.
The benefit guarantees do not obligate GM to guarantee any
benefits for Delphi retirees in excess of the levels of
corresponding benefits GM provides at any given time to
GMs own hourly retirees. Accordingly, if any of the
benefits GM provides to its hourly retirees are reduced, there
would be a similar reduction in GMs obligations under the
corresponding benefit guarantee.
A separate agreement between GM and Delphi 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. Any
recovery by GM under indemnity claims against Delphi might be
II-109
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 19. |
Commitments and Contingent
Matters (concluded) |
subject to partial or complete discharge in the Delphi
reorganization proceeding. As a result, GMs claims for
indemnity may not be paid in full.
As part of the discussion to attain GMs tentative
health-care agreement with the UAW, GM provided former GM
employees who became Delphi employees 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.
GM believes that it is probable that it has incurred a
contingent liability due to Delphis Chapter 11
filing. GM believes that the range of the contingent exposures
is between $5.5 billion and $12 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. As a result,
GM established a reserve of $5.5 billion ($3.6 billion
after tax) as a non-cash charge in the fourth quarter of 2005.
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. The amount of this charge may
change, depending on the result of discussions among GM, Delphi,
and Delphis unions, and other factors. GM is currently
unable to estimate the amount of additional charges, if any,
which may arise from Delphis Chapter 11 filing. A
consensual agreement to resolve the Delphi matter may cause GM
to incur additional costs in exchange for benefits that would
accrue to GM over time.
With respect to the possible cash flow effect on GM related to
its ability to make either pension or OPEB payments, if any are
required under the benefit guarantees, 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
payable, these payments would be likely to increase over time,
and could have a material effect on GMs liquidity in
coming years. (For reference, Delphis 2004
Form 10-K reported
that its total cash outlay for OPEB for 2004 was
$226 million, which included $154 million for both
hourly and salaried retirees, the latter of whom are not covered
under the benefit guarantees, plus $72 million in payments
to GM for certain former Delphi hourly employees that flowed
back to retire from GM). If benefits to Delphis
U.S. hourly employees under Delphis pension plan are
reduced or terminated, the resulting effect on GM cash flows in
future years due to the Benefit Guarantee Agreements is
currently not reasonably estimable.
See Note 27 for subsequent events.
|
|
Note 20. |
Stockholders Equity |
The following table presents changes in capital stock for the
period from January 1, 2003 to December 31, 2005
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stocks | |
|
|
|
|
| |
|
Total | |
|
|
$12/3 | |
|
|
|
Capital | |
|
|
Par Value | |
|
Class H | |
|
Stock | |
|
|
| |
|
| |
|
| |
Balance at January 1, 2003
|
|
$ |
936 |
|
|
$ |
96 |
|
|
$ |
1,032 |
|
|
Shares issued
|
|
|
1 |
|
|
|
15 |
|
|
|
16 |
|
|
Hughes split-off
|
|
|
|
|
|
|
(111 |
) |
|
|
(111 |
) |
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2003
|
|
|
937 |
|
|
|
|
|
|
|
937 |
|
|
Shares issued
|
|
|
5 |
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2004
|
|
|
942 |
|
|
|
|
|
|
|
942 |
|
|
Shares issued
|
|
|
1 |
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
$ |
943 |
|
|
$ |
|
|
|
$ |
943 |
|
|
|
|
|
|
|
|
|
|
|
II-110
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 20. |
Stockholders Equity (concluded) |
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. All shares of GM Class H
common stock were then cancelled.
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.
|
|
|
Other Comprehensive Income |
The changes in the components of other comprehensive income
(loss) are reported net of income taxes, as follows (dollars in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, | |
|
|
| |
|
|
| |
|
|
| |
|
|
2005 | |
|
|
2004 | |
|
|
2003 | |
|
|
| |
|
|
| |
|
|
| |
|
|
Pre-tax | |
|
Tax Exp. | |
|
Net | |
|
|
Pre-tax | |
|
Tax Exp. | |
|
Net | |
|
|
Pre-tax | |
|
Tax Exp. | |
|
Net | |
|
|
Amount | |
|
(Credit) | |
|
Amount | |
|
|
Amount | |
|
(Credit) | |
|
Amount | |
|
|
Amount | |
|
(Credit) | |
|
Amount | |
|
|
| |
|
| |
|
| |
|
|
| |
|
| |
|
| |
|
|
| |
|
| |
|
| |
Foreign currency translation adjustments
|
|
$ |
(962 |
) |
|
$ |
(434 |
) |
|
$ |
(528 |
) |
|
|
$ |
1,237 |
|
|
$ |
616 |
|
|
$ |
621 |
|
|
|
$ |
1,642 |
|
|
$ |
673 |
|
|
$ |
969 |
|
Unrealized (loss) gain on securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gain gain
|
|
|
216 |
|
|
|
76 |
|
|
|
140 |
|
|
|
|
299 |
|
|
|
114 |
|
|
|
185 |
|
|
|
|
465 |
|
|
|
166 |
|
|
|
299 |
|
|
Reclassification adjustment
|
|
|
(165 |
) |
|
|
(60 |
) |
|
|
(105 |
) |
|
|
|
(80 |
) |
|
|
(28 |
) |
|
|
(52 |
) |
|
|
|
(84 |
) |
|
|
(31 |
) |
|
|
(53 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gain
|
|
|
51 |
|
|
|
16 |
|
|
|
35 |
|
|
|
|
219 |
|
|
|
86 |
|
|
|
133 |
|
|
|
|
381 |
|
|
|
135 |
|
|
|
246 |
|
Minimum pension liability adjustment
|
|
|
(1,320 |
) |
|
|
(562 |
) |
|
|
(758 |
) |
|
|
|
(874 |
) |
|
|
(303 |
) |
|
|
(571 |
) |
|
|
|
33,378 |
|
|
|
12,623 |
|
|
|
20,755 |
|
Net unrealized gain on derivatives
|
|
|
219 |
|
|
|
75 |
|
|
|
144 |
|
|
|
|
701 |
|
|
|
163 |
|
|
|
538 |
|
|
|
|
329 |
|
|
|
73 |
|
|
|
256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
$ |
(2,012 |
) |
|
$ |
(905 |
) |
|
$ |
(1,107 |
) |
|
|
$ |
1,283 |
|
|
$ |
562 |
|
|
$ |
721 |
|
|
|
$ |
35,730 |
|
|
$ |
13,504 |
|
|
$ |
22,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 21. |
Earnings (Loss) Per Share Attributable to Common Stock |
Earnings per share (EPS) attributable to each class of GM
common stock was determined based on the attribution of earnings
to each such class of common stock for the period divided by the
weighted-average number of common shares for each such class
outstanding during the period. Diluted EPS attributable to each
class of GM common stock considers the effect of potential
common shares, unless the inclusion of the
II-111
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 21. Earnings (Loss)
Per Share Attributable to Common Stock
(continued)
potential common shares would have an antidilutive effect. The
attribution of earnings to each class of GM common stock was as
follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Earnings (loss)attributable to common stocks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$12/3
par value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$ |
(10,458 |
) |
|
$ |
2,804 |
|
|
$ |
2,899 |
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(48 |
) |
|
|
Gain on sale of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
1,249 |
|
|
|
Cumulative effect of accounting change
|
|
|
(109 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) attributable to
$12/3
par value
|
|
$ |
(10,567 |
) |
|
$ |
2,804 |
|
|
$ |
4,100 |
|
|
Earnings (loss) from discontinued operations attributable to
Class H
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(241 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total earnings (loss) attributable to common stocks
|
|
$ |
(10,567 |
) |
|
$ |
2,804 |
|
|
$ |
3,859 |
|
|
|
|
|
|
|
|
|
|
|
For the period prior to December 22, 2003, the date GM
completed its split-off of Hughes, earnings attributable to GM
$12/3
par value common stock represent the earnings
attributable to all GM common stocks, reduced by the Available
Separate Consolidated Net Income (ASCNI) of Hughes for the
period for which GM Class H common stock was outstanding.
The calculated loss used for computation of the ASCNI of Hughes
are then multiplied by a fraction, the numerator of which is
equal to the weighted-average number of shares of GM
Class H common stock outstanding (1.1 billion as of
December 22, 2003) and the denominator of which is a number
equal to the weighted-average number of shares of GM
Class H common stock which if issued and outstanding would
represent a 100% interest in the earnings of Hughes (the
Average Class H dividend base). The Average
Class H dividend base was 1.4 billion at
December 22, 2003, the date GM completed its split-off of
Hughes and the GM Class H common stock ceased to be
outstanding.
II-112
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 21. Earnings (Loss)
Per Share Attributable to Common Stock
(continued)
The reconciliation of the amounts used in the basic and diluted
earnings per share computations for income from continuing
operations was as follows (dollars in millions except per share
amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$12/3 Par Value Common Stock | |
|
|
| |
|
|
|
|
Per Share | |
|
|
Income | |
|
Shares | |
|
Amount | |
|
|
| |
|
| |
|
| |
Year ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations attributable to common
stocks
|
|
$ |
(10,458 |
) |
|
|
565 |
|
|
$ |
(18.50 |
) |
Effect of Dilutive Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumed exercise of dilutive stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted income (loss) attributable to common stocks
|
|
$ |
(10,458 |
) |
|
|
565 |
|
|
$ |
(18.50 |
) |
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to common stocks
|
|
$ |
2,804 |
|
|
|
565 |
|
|
$ |
4.97 |
|
Effect of Dilutive Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumed exercise of dilutive stock options
|
|
|
|
|
|
|
2 |
|
|
|
(0.03 |
) |
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted income attributable to common stocks
|
|
$ |
2,804 |
|
|
|
567 |
|
|
$ |
4.94 |
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to common stocks
|
|
$ |
2,899 |
|
|
|
561 |
|
|
$ |
5.17 |
|
Effect of Dilutive Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumed exercise of dilutive stock options
|
|
|
|
|
|
|
8 |
|
|
|
(0.08 |
) |
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted income attributable to common stocks
|
|
$ |
2,899 |
|
|
|
569 |
|
|
$ |
5.09 |
|
|
|
|
|
|
|
|
|
|
|
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 111 million, 88 million, and
176 million as of December 31, 2005, 2004, and 2003,
respectively. In addition, for periods in which there was a loss
attributable to common stocks, 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 reduced the net loss
per share.
As of December 31, 2005 GM had $8.1 billion of
convertible debentures outstanding, including $1.2 billion
principal amount of 4.5% Series A convertible senior
debentures due 2032 (Series A), $2.6 billion principal
amount of 5.25% Series B convertible senior debentures due
2032 (Series B), and $4.3 billion principal amount of
6.25% Series C convertible senior debentures due 2033
(Series C). In October 2004, the
II-113
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 21. |
Earnings (Loss) Per Share Attributable to Common
Stocks (concluded) |
FASB ratified the consensus of the EITF with respect to Issue
No. 04-8, The Effect of Contingently Convertible Debt
on Diluted Earnings per Share. On November 5, 2004,
GM unilaterally and irrevocably waived, and relinquished, its
right (the waiver) to use stock, and has committed to use cash,
to settle the principal amount of the securities if
(1) holders ever choose to convert the securities or
(2) GM is ever required by holders to repurchase the
securities. GM retains the right to use either cash or stock to
settle any amount that might become due to security holders in
excess of the principal amount (the
in-the-money amount).
The various circumstances under which conversion of the
securities may occur are described in the paragraphs 1-4
below, while paragraph 5 describes the circumstances under
which GM might be required to repurchase the securities.
|
|
|
|
1) |
If the closing sale price of GMs
$12/3
par value common stock exceeds 120% of the conversion
price of that security (which closing prices are $70.20 for the
Series A securities, $64.90 for the Series B
securities, and $47.62 for the Series C securities) for at
least 20 trading days in the 30 consecutive trading days ending
on the last trading day of the preceding fiscal quarter; or |
|
|
2) |
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 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 |
|
|
3) |
If the debentures have been called for redemption (Series A
on March 6, 2007, Series B on March 6, 2009 and
Series C on July 20, 2010); or |
|
|
4) |
Upon the occurrence of specified corporate events; or |
|
|
5) |
If the investor requires GM to repurchase the debentures on the
specified repurchase dates for each security (Series A:
March 6 of 2007, 2012, 2017, 2022, and 2027, or, if any of those
days is not a business day, the next succeeding business day;
Series B: March 6 of 2014, 2019, 2024, and 2029, or, if any
of those days is not a business day, the next succeeding
business day; Series C: July 15 of 2018, 2023 and 2028 or,
if any of those days is not a business day, the next succeeding
business day). |
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, 2005, as the
convertible debentures have not met the requirements for
conversion.
|
|
Note 22. |
Derivative Financial Instruments and Risk Management |
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 minimizing
exposure arising from these risks. A risk management control
system is utilized to monitor foreign exchange, interest rate,
commodity, and related hedge positions.
GM uses financial instruments designated as cash flow hedges to
hedge the Corporations 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 prices of
commodities used in its automotive business, primarily
nonferrous metals used in the manufacture of automotive
components and to hedge exposure to variability in cash flows
related to floating rate and foreign currency financial
instruments. For transactions denominated in foreign currencies,
GM typically hedges forecasted and firm commitment exposures up
to three years in the future. For
II-114
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 22. |
Derivative Financial Instruments and Risk
Management (concluded) |
commodities, GM typically hedges exposures up to three years in
the future. For the year ended December 31, 2005, hedge
ineffectiveness associated with instruments designated as cash
flow hedges decreased cost of sales and other expenses by
$37 million. For the year ended December 31, 2004,
hedge ineffectiveness associated with instruments designated as
cash flow hedges decreased cost of sales and other expenses by
$26 million. Derivative gains and losses included in other
comprehensive income are reclassified into earnings at the time
that the associated hedged transactions impact the income
statement. For the year ended December 31, 2005, net
derivative losses of $208 million were reclassified to cost
of sales and other expenses and net derivative gains of
$200 million were reclassified to revenue. For the year
ended December 31, 2004, net derivative gains of
$245 million were reclassified to cost of sales and other
expenses. These net losses/gains were offset by net gains/losses
on the transactions being hedged. Approximately
$103 million of net derivative gains included in other
comprehensive income at December 31, 2005, is expected to
be reclassified into earnings within 12 months from that
date. For the years ended December 31, 2005 and 2004, there
were net gains of approximately $47 million and
$26 million, respectively, which were reclassified into
earnings as a result of discontinuance of certain commodity cash
flow hedges because it was probable that the original forecasted
transactions will not occur.
GM uses financial instruments designated as fair value hedges to
manage certain of the Corporations 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 is used to
hedge GMs exposure associated with its fixed rate debt and
mortgage servicing rights (MSRs). For the year ended
December 31, 2005, hedge ineffectiveness associated with
instruments designated as fair value hedges, primarily due to
hedging of MSRs, decreased selling, general, and administrative
expenses by $34 million and decreased selling, general, and
administrative expenses by $104 million in 2004. Changes in
time value of the instruments (which are excluded from the
assessment of hedge effectiveness) decreased selling, general,
and administrative expenses by $59 million in 2005 and
$180 million in 2004.
GM uses foreign currency denominated debt to hedge the foreign
currency exposure of its net investments in foreign operations.
Foreign currency translation gains and losses related to these
debt instruments are recorded in Other Comprehensive Loss as a
foreign currency translation adjustment. For the years ended
December 31, 2005 and 2004, a $142 million and
$64 million unrealized loss were recorded in accumulated
foreign currency translation.
|
|
|
Undesignated Derivative Instruments |
Forward contracts and options not designated as hedging
instruments under SFAS No. 133 may also be used to
hedge certain foreign currency, commodity, and interest rate
exposures. Unrealized gains and losses on such instruments are
recognized currently in earnings.
|
|
Note 23. |
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.
II-115
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 23. |
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, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
|
Book Value | |
|
Fair Value | |
|
Book Value | |
|
Fair Value | |
AUTOMOTIVE AND OTHER OPERATIONS |
|
| |
|
| |
|
| |
|
| |
ASSETS |
|
Other assets(1)
|
|
$ |
1,830 |
|
|
$ |
1,310 |
|
|
$ |
841 |
|
|
$ |
520 |
|
|
Derivative assets
|
|
$ |
1,767 |
|
|
$ |
1,767 |
|
|
$ |
2,089 |
|
|
$ |
2,089 |
|
|
LIABILITIES |
|
Long-term debt(2)
|
|
$ |
31,014 |
|
|
$ |
20,837 |
|
|
$ |
30,460 |
|
|
$ |
31,276 |
|
|
Other liabilities(1)
|
|
$ |
535 |
|
|
$ |
447 |
|
|
$ |
537 |
|
|
$ |
591 |
|
|
Derivative liabilities
|
|
$ |
859 |
|
|
$ |
859 |
|
|
$ |
724 |
|
|
$ |
724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING AND INSURANCE OPERATIONS |
|
|
|
|
|
|
|
|
ASSETS |
|
Finance receivables net(3)
|
|
$ |
180,793 |
|
|
$ |
181,090 |
|
|
$ |
199,600 |
|
|
$ |
199,827 |
|
|
Derivative assets
|
|
$ |
3,000 |
|
|
$ |
3,000 |
|
|
$ |
9,489 |
|
|
$ |
9,489 |
|
|
LIABILITIES |
|
Debt(2)
|
|
$ |
253,217 |
|
|
$ |
244,956 |
|
|
$ |
267,757 |
|
|
$ |
268,813 |
|
|
Derivative liabilities
|
|
$ |
2,444 |
|
|
$ |
2,444 |
|
|
$ |
953 |
|
|
$ |
953 |
|
|
Other liabilities
|
|
$ |
5,930 |
|
|
$ |
5,830 |
|
|
$ |
4,230 |
|
|
$ |
4,106 |
|
|
|
(1) |
Other assets include various financial instruments (e.g.,
long-term receivables and certain investments) that have fair
values based on discounted cash flows, market quotations, and
other appropriate valuation techniques. The fair values of
retained subordinated interests in trusts and excess servicing
assets (net of deferred costs) were derived by discounting
expected cash flows using current market rates. Estimated values
of Industrial Development Bonds, included in other liabilities,
were based on quoted market prices for the same or similar
issues. |
|
(2) |
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. |
|
(3) |
The fair value was estimated by discounting the future cash
flows using applicable spreads to approximate current rates
applicable to each category of finance receivables. |
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 periods ending December 31, 2005
and 2004.
|
|
Note 24. |
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), and the General Motors 2002
Long Term Incentive Plan (GMLTIP). The GMSIP and the GMLTIP are
administered by the Executive Compensation Committee of the GM
Board. The GMSSOP is administered by the Vice President of
Global Human Resources.
II-116
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 24. |
Stock Incentive Plans (continued) |
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,
2005. Any shares granted and undelivered under the GMSIP, due
primarily to expiration or termination, become again available
for grant. Options granted prior to 1997 under the GMSIP
generally are exercisable one-half after one year and one-half
after two years from the dates of grant. Stock option grants
awarded since 1997 vest ratably over three years from the date
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.
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. Approximately 0.8 million shares
of GM
$12/3
par value common stock were available for grants at
December 31, 2005. Stock options vest one year following
the date of grant and are exercisable two years from the date of
grant. Option prices are 100% of fair market value on the dates
of grant and the options generally expire 10 years and two
days from the dates of grant subject to earlier termination
under certain conditions.
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 three plans is a minimum percentile ranking of GMs
Total Shareholder Return among the companies in the
S&P 500.
As of December 31, 2005, approximately 4.8 million
target shares were outstanding under the GMLTIP. Of these
outstanding shares, a total of 2.8 million were granted in
2003 and 2004 at a grant-date fair value of $37.28, and $49.33,
respectively. Management intends to settle these awards with GM
$12/3
par value common stock. Of the remaining outstanding
shares, approximately 2.0 million shares were granted in
2005 at a fair value of $39.13. Management intends to settle
these awards in cash. The preceding is the targeted number of
shares that would finally be granted 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 of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
GM | |
|
GM | |
|
GM | |
|
GM | |
|
GM | |
|
GM | |
|
|
SIP | |
|
SSOP | |
|
SIP | |
|
SSOP | |
|
SIP | |
|
SSOP | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Interest rate
|
|
|
3.8 |
% |
|
|
|
% |
|
|
3.1 |
% |
|
|
3.1 |
% |
|
|
2.9 |
% |
|
|
2.9 |
% |
Expected life (years)
|
|
|
6.0 |
|
|
|
|
|
|
|
5.0 |
|
|
|
5.0 |
|
|
|
5.0 |
|
|
|
5.0 |
|
Expected volatility
|
|
|
32.5 |
% |
|
|
|
% |
|
|
33.9 |
% |
|
|
33.9 |
% |
|
|
35.4 |
% |
|
|
35.4 |
% |
Dividend yield
|
|
|
5.5 |
% |
|
|
|
% |
|
|
3.7 |
% |
|
|
3.7 |
% |
|
|
5.0 |
% |
|
|
5.0 |
% |
II-117
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 24. |
Stock Incentive Plans (continued) |
Changes in the status of outstanding options were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GMSIP | |
|
GMSSOP | |
|
|
$12/3 Par Value Common | |
|
$12/3 Par Value Common | |
|
|
| |
|
| |
|
|
|
|
Weighted- | |
|
|
|
Weighted- | |
|
|
Shares | |
|
Average | |
|
Shares | |
|
Average | |
|
|
under | |
|
Exercise | |
|
under | |
|
Exercise | |
|
|
Option | |
|
Price | |
|
Option | |
|
Price | |
|
|
| |
|
| |
|
| |
|
| |
Options outstanding at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2003
|
|
|
65,822,160 |
|
|
$ |
56.45 |
|
|
|
18,957,199 |
|
|
$ |
59.91 |
|
Granted
|
|
|
11,148,605 |
|
|
$ |
40.06 |
|
|
|
5,666,127 |
|
|
$ |
40.05 |
|
Exercised
|
|
|
1,489,170 |
|
|
$ |
42.28 |
|
|
|
|
|
|
|
|
|
Terminated
|
|
|
996,029 |
|
|
$ |
55.06 |
|
|
|
233,270 |
|
|
$ |
56.92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at
December 31, 2003
|
|
|
74,485,566 |
|
|
$ |
54.38 |
|
|
|
24,390,056 |
|
|
$ |
55.33 |
|
Granted
|
|
|
8,055,460 |
|
|
$ |
53.83 |
|
|
|
3,315,479 |
|
|
$ |
53.92 |
|
Exercised
|
|
|
1,346,996 |
|
|
$ |
40.77 |
|
|
|
31,320 |
|
|
$ |
47.92 |
|
Terminated
|
|
|
1,738,737 |
|
|
$ |
55.26 |
|
|
|
83,589 |
|
|
$ |
54.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at
December 31, 2004
|
|
|
79,455,293 |
|
|
$ |
54.53 |
|
|
|
27,590,626 |
|
|
$ |
55.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
8,024,090 |
|
|
$ |
36.33 |
|
|
|
|
|
|
$ |
|
|
Exercised
|
|
|
337,324 |
|
|
$ |
33.14 |
|
|
|
|
|
|
$ |
|
|
Terminated
|
|
|
3,011,473 |
|
|
$ |
48.20 |
|
|
|
376,991 |
|
|
$ |
53.51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at
December 31, 2005
|
|
|
84,130,586 |
|
|
$ |
53.11 |
|
|
|
27,213,635 |
|
|
$ |
55.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at
December 31, 2003
|
|
|
48,932,216 |
|
|
$ |
58.56 |
|
|
|
13,825,058 |
|
|
$ |
63.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2004
|
|
|
59,445,049 |
|
|
$ |
56.69 |
|
|
|
18,667,303 |
|
|
$ |
59.94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
|
|
68,207,480 |
|
|
$ |
55.55 |
|
|
|
23,953,781 |
|
|
$ |
55.37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted-average grant-date fair value was $7.23, $12.82 and
$8.58 for GMSIP options granted in 2005, 2004, and 2003,
respectively. The grant-date fair value was $12.85 in 2004 and
$8.58 in 2003 for GMSSOP options granted.
II-118
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 24. |
Stock Incentive Plans (concluded) |
The following table summarizes information about GMs stock
option plans at December 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- | |
|
|
|
|
|
|
|
|
|
|
Average | |
|
Weighted- | |
|
|
|
Weighted- | |
|
|
|
|
Remaining | |
|
Average | |
|
|
|
Average | |
Range of |
|
Options | |
|
Contractual | |
|
Exercise | |
|
Options | |
|
Exercise | |
Exercise Prices |
|
Outstanding | |
|
Life (yrs.) | |
|
Price | |
|
Exercisable | |
|
Price | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
GMSIP
$12/3
Par Value Common |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$20.00 to $39.99
|
|
|
7,608,141 |
|
|
|
9.1 |
|
|
$ |
36.34 |
|
|
|
100,334 |
|
|
$ |
36.58 |
|
40.00 to 49.99
|
|
|
22,255,719 |
|
|
|
4.0 |
|
|
$ |
42.66 |
|
|
|
18,812,269 |
|
|
$ |
43.13 |
|
50.00 to 59.99
|
|
|
34,561,835 |
|
|
|
6.1 |
|
|
$ |
51.96 |
|
|
|
29,589,986 |
|
|
$ |
51.63 |
|
60.00 to 83.50
|
|
|
19,704,891 |
|
|
|
3.5 |
|
|
$ |
73.40 |
|
|
|
19,704,891 |
|
|
$ |
73.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$20.00 to $83.50
|
|
|
84,130,586 |
|
|
|
5.2 |
|
|
$ |
53.11 |
|
|
|
68,207,480 |
|
|
$ |
55.55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GMSSOP
$12/3
Par Value Common |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$40.05
|
|
|
5,513,298 |
|
|
|
7.1 |
|
|
$ |
40.05 |
|
|
|
5,513,298 |
|
|
$ |
40.05 |
|
46.59
|
|
|
2,218,613 |
|
|
|
2.0 |
|
|
$ |
46.59 |
|
|
|
2,218,613 |
|
|
$ |
46.59 |
|
50.46
|
|
|
4,828,683 |
|
|
|
6.0 |
|
|
$ |
50.46 |
|
|
|
4,828,683 |
|
|
$ |
50.46 |
|
52.35
|
|
|
3,763,918 |
|
|
|
5.0 |
|
|
$ |
52.35 |
|
|
|
3,763,918 |
|
|
$ |
52.35 |
|
53.92
|
|
|
3,259,854 |
|
|
|
8.1 |
|
|
$ |
53.92 |
|
|
|
|
|
|
$ |
|
|
71.53
|
|
|
3,689,049 |
|
|
|
3.0 |
|
|
$ |
71.53 |
|
|
|
3,689,049 |
|
|
$ |
71.53 |
|
75.50
|
|
|
3,940,220 |
|
|
|
4.0 |
|
|
$ |
75.50 |
|
|
|
3,940,220 |
|
|
$ |
75.50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$40.05 to $75.50
|
|
|
27,213,635 |
|
|
|
5.3 |
|
|
$ |
55.19 |
|
|
|
23,953,781 |
|
|
$ |
55.37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 25. Other Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Automotive and Other Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$ |
883 |
|
|
$ |
816 |
|
|
$ |
1,389 |
|
|
Rental car lease revenue
|
|
|
1,483 |
|
|
|
2,112 |
|
|
|
1,460 |
|
|
Claims, commissions, and grants
|
|
|
968 |
|
|
|
1,097 |
|
|
|
916 |
|
|
Gain on sale of GM Defense
|
|
|
|
|
|
|
|
|
|
|
814 |
|
|
Other
|
|
|
538 |
|
|
|
792 |
|
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income
|
|
$ |
3,872 |
|
|
$ |
4,817 |
|
|
$ |
4,979 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Financing and Insurance Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$ |
1,671 |
|
|
$ |
807 |
|
|
$ |
684 |
|
|
Insurance premiums
|
|
|
3,762 |
|
|
|
3,528 |
|
|
|
3,178 |
|
|
Mortgage banking revenue
|
|
|
3,268 |
|
|
|
2,969 |
|
|
|
4,204 |
|
|
Automotive securitization income
|
|
|
752 |
|
|
|
753 |
|
|
|
760 |
|
|
Other
|
|
|
3,435 |
|
|
|
3,280 |
|
|
|
2,303 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income
|
|
$ |
12,888 |
|
|
$ |
11,337 |
|
|
$ |
11,129 |
|
|
|
|
|
|
|
|
|
|
|
II-119
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 26: |
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 Auto & Other reportable operating segment
consists of GMs four automotive regions: GM North
America (GMNA), GM Europe (GME), GM Latin
America/Africa/Mid-East
(GMLAAM), and GM Asia Pacific (GMAP), which constitute
GM Automotive (GMA); and Other. GMNA designs, manufactures,
and/or markets vehicles primarily in North America under the
following nameplates: Chevrolet, Pontiac, GMC, Buick, Cadillac,
Saturn, and HUMMER. GME, GMLAAM, and GMAP primarily meet the
demands of customers outside North America with vehicles
designed, manufactured, and marketed under the following
nameplates: Opel, Vauxhall, Holden, Saab, Buick, Chevrolet, GMC,
Cadillac, and Daewoo. 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. GMs FIO reportable
operating segment consists of GMAC 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.
The accounting policies of the operating segments are the same
as those described in the summary of significant accounting
policies except that 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.
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.
II-120
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 26: |
Segment Reporting (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto & | |
|
|
|
Other | |
|
Total | |
|
|
GMNA | |
|
GME | |
|
GMLAAM | |
|
GMAP | |
|
GMA | |
|
Other | |
|
Other | |
|
GMAC | |
|
Financing | |
|
Financing | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured products sales and revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External customers
|
|
$ |
105,452 |
|
|
$ |
29,607 |
|
|
$ |
10,896 |
|
|
$ |
8,446 |
|
|
$ |
154,401 |
|
|
$ |
(52 |
) |
|
$ |
154,349 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Intersegment
|
|
|
(4,261 |
) |
|
|
1,499 |
|
|
|
715 |
|
|
|
2,050 |
|
|
|
3 |
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total manufactured products
|
|
|
101,191 |
|
|
|
31,106 |
|
|
|
11,611 |
|
|
|
10,496 |
|
|
|
154,404 |
|
|
|
(55 |
) |
|
|
154,349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,299 |
|
|
|
196 |
|
|
|
21,495 |
|
Other income
|
|
|
3,564 |
|
|
|
613 |
|
|
|
134 |
|
|
|
397 |
|
|
|
4,708 |
|
|
|
(836 |
) |
|
|
3,872 |
|
|
|
12,738 |
|
|
|
150 |
|
|
|
12,888 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenues
|
|
$ |
104,755 |
|
|
$ |
31,719 |
|
|
$ |
11,745 |
|
|
$ |
10,893 |
|
|
$ |
159,112 |
|
|
$ |
(891 |
) |
|
$ |
158,221 |
|
|
$ |
34,037 |
|
|
$ |
346 |
|
|
$ |
34,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$ |
7,605 |
|
|
$ |
1,743 |
|
|
$ |
329 |
|
|
$ |
379 |
|
|
$ |
10,056 |
|
|
$ |
17 |
|
|
$ |
10,073 |
|
|
$ |
5,548 |
|
|
$ |
148 |
|
|
$ |
5,696 |
|
Interest income(a)
|
|
$ |
1,347 |
|
|
$ |
406 |
|
|
$ |
57 |
|
|
$ |
47 |
|
|
$ |
1,857 |
|
|
$ |
(974 |
) |
|
$ |
883 |
|
|
$ |
2,185 |
|
|
$ |
(514 |
) |
|
$ |
1,671 |
|
Interest expense
|
|
$ |
3,166 |
|
|
$ |
543 |
|
|
$ |
197 |
|
|
$ |
107 |
|
|
$ |
4,013 |
|
|
$ |
(1,140 |
) |
|
$ |
2,873 |
|
|
$ |
12,930 |
|
|
$ |
(35 |
) |
|
$ |
12,895 |
|
Income tax expense (benefit)
|
|
$ |
(2,540 |
) |
|
$ |
(709 |
) |
|
$ |
622 |
|
|
$ |
(165 |
) |
|
$ |
(2,792 |
) |
|
$ |
(4,392 |
) |
|
$ |
(7,184 |
) |
|
$ |
1,311 |
|
|
$ |
(5 |
) |
|
$ |
1,306 |
|
Earnings (losses) of nonconsolidated associates
|
|
$ |
(30 |
) |
|
$ |
102 |
|
|
$ |
15 |
|
|
$ |
534 |
|
|
$ |
621 |
|
|
$ |
19 |
|
|
$ |
640 |
|
|
$ |
(6 |
) |
|
$ |
|
|
|
$ |
(6 |
) |
Net income (loss) from continuing operations
|
|
$ |
(8,156 |
) |
|
$ |
(1,177 |
) |
|
$ |
(569 |
) |
|
$ |
(217 |
) |
|
$ |
(10,119 |
) |
|
$ |
(2,697 |
) |
|
$ |
(12,816 |
) |
|
$ |
2,383 |
|
|
$ |
(25 |
) |
|
$ |
2,358 |
|
Investments in nonconsolidated affiliates
|
|
$ |
60 |
|
|
$ |
359 |
|
|
$ |
155 |
|
|
$ |
2,597 |
|
|
$ |
3,171 |
|
|
$ |
120 |
|
|
$ |
3,291 |
|
|
$ |
308 |
|
|
$ |
(308 |
) |
|
$ |
|
|
Segment assets
|
|
$ |
126,876 |
|
|
$ |
20,954 |
|
|
$ |
4,722 |
|
|
$ |
10,141 |
|
|
$ |
162,693 |
|
|
$ |
(1,040 |
) |
|
$ |
161,653 |
|
|
$ |
320,487 |
|
|
$ |
(1,610 |
) |
|
$ |
318,877 |
|
Expenditures for property
|
|
$ |
5,555 |
|
|
$ |
1,259 |
|
|
$ |
229 |
|
|
$ |
839 |
|
|
$ |
7,882 |
|
|
$ |
14 |
|
|
$ |
7,896 |
|
|
$ |
279 |
|
|
$ |
4 |
|
|
$ |
283 |
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured products sales and revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External customers
|
|
$ |
112,881 |
|
|
$ |
29,126 |
|
|
$ |
8,045 |
|
|
$ |
5,775 |
|
|
$ |
155,827 |
|
|
$ |
901 |
|
|
$ |
156,728 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Intersegment
|
|
|
(2,602 |
) |
|
|
1,030 |
|
|
|
673 |
|
|
|
903 |
|
|
|
4 |
|
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total manufactured products
|
|
|
110,279 |
|
|
|
30,156 |
|
|
|
8,718 |
|
|
|
6,678 |
|
|
|
155,831 |
|
|
|
897 |
|
|
|
156,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,331 |
|
|
|
304 |
|
|
|
20,635 |
|
Other income
|
|
|
4,266 |
|
|
|
664 |
|
|
|
74 |
|
|
|
300 |
|
|
|
5,304 |
|
|
|
(487 |
) |
|
|
4,817 |
|
|
|
10,857 |
|
|
|
480 |
|
|
|
11,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenues
|
|
$ |
114,545 |
|
|
$ |
30,820 |
|
|
$ |
8,792 |
|
|
$ |
6,978 |
|
|
$ |
161,135 |
|
|
$ |
410 |
|
|
$ |
161,545 |
|
|
$ |
31,188 |
|
|
$ |
784 |
|
|
$ |
31,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$ |
6,381 |
|
|
$ |
1,779 |
|
|
$ |
195 |
|
|
$ |
235 |
|
|
$ |
8,590 |
|
|
$ |
39 |
|
|
$ |
8,629 |
|
|
$ |
5,299 |
|
|
$ |
224 |
|
|
$ |
5,523 |
|
Interest income(a)
|
|
$ |
1,026 |
|
|
$ |
392 |
|
|
$ |
20 |
|
|
$ |
13 |
|
|
$ |
1,451 |
|
|
$ |
(635 |
) |
|
$ |
816 |
|
|
$ |
1,117 |
|
|
$ |
(310 |
) |
|
$ |
807 |
|
Interest expense
|
|
$ |
2,729 |
|
|
$ |
403 |
|
|
$ |
74 |
|
|
$ |
21 |
|
|
$ |
3,227 |
|
|
$ |
(747 |
) |
|
$ |
2,480 |
|
|
$ |
9,535 |
|
|
$ |
(35 |
) |
|
$ |
9,500 |
|
Income tax expense (benefit)
|
|
$ |
(599 |
) |
|
$ |
(640 |
) |
|
$ |
31 |
|
|
$ |
(11 |
) |
|
$ |
(1,219 |
) |
|
$ |
(1,221 |
) |
|
$ |
(2,440 |
) |
|
$ |
1,544 |
|
|
$ |
(20 |
) |
|
$ |
1,524 |
|
Earnings (losses) of nonconsolidated associates
|
|
$ |
40 |
|
|
$ |
102 |
|
|
$ |
(3 |
) |
|
$ |
666 |
|
|
$ |
805 |
|
|
$ |
(16 |
) |
|
$ |
789 |
|
|
$ |
(6 |
) |
|
$ |
|
|
|
$ |
(6 |
) |
Net income (loss) from continuing operations
|
|
$ |
1,409 |
|
|
$ |
(925 |
) |
|
$ |
60 |
|
|
$ |
730 |
|
|
$ |
1,274 |
|
|
$ |
(1,419 |
) |
|
$ |
(145 |
) |
|
$ |
2,968 |
|
|
$ |
(19 |
) |
|
$ |
2,949 |
|
Investments in nonconsolidated affiliates
|
|
$ |
482 |
|
|
$ |
1,476 |
|
|
$ |
276 |
|
|
$ |
4,541 |
|
|
$ |
6,775 |
|
|
$ |
1 |
|
|
$ |
6,776 |
|
|
$ |
179 |
|
|
$ |
(179 |
) |
|
$ |
|
|
Segment assets
|
|
$ |
126,982 |
|
|
$ |
26,586 |
|
|
$ |
4,192 |
|
|
$ |
4,923 |
|
|
$ |
162,683 |
|
|
$ |
(3,140 |
) |
|
$ |
159,543 |
|
|
$ |
324,217 |
|
|
$ |
(1,413 |
) |
|
$ |
322,804 |
|
Expenditures for property
|
|
$ |
5,163 |
|
|
$ |
1,331 |
|
|
$ |
158 |
|
|
$ |
496 |
|
|
$ |
7,148 |
|
|
$ |
136 |
|
|
$ |
7,284 |
|
|
$ |
470 |
|
|
$ |
(1 |
) |
|
$ |
469 |
|
See notes on next page
II-121
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 26: |
Segment Reporting (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto & | |
|
|
|
Other | |
|
Total | |
|
|
GMNA | |
|
GME | |
|
GMLAAM | |
|
GMAP | |
|
GMA | |
|
Other | |
|
Other | |
|
GMAC | |
|
Financing | |
|
Financing | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured products sales and revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External customers
|
|
$ |
114,756 |
|
|
$ |
25,960 |
|
|
$ |
4,755 |
|
|
$ |
4,578 |
|
|
$ |
150,049 |
|
|
$ |
803 |
|
|
$ |
150,852 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Intersegment
|
|
|
(2,044 |
) |
|
|
946 |
|
|
|
555 |
|
|
|
543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total manufactured products
|
|
|
112,712 |
|
|
|
26,906 |
|
|
|
5,310 |
|
|
|
5,121 |
|
|
|
150,049 |
|
|
|
803 |
|
|
|
150,852 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,247 |
|
|
|
630 |
|
|
|
18,877 |
|
Other income
|
|
|
3,598 |
|
|
|
572 |
|
|
|
77 |
|
|
|
217 |
|
|
|
4,464 |
|
|
|
515 |
|
|
|
4,979 |
|
|
|
11,101 |
|
|
|
28 |
|
|
|
11,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenues
|
|
$ |
116,310 |
|
|
$ |
27,478 |
|
|
$ |
5,387 |
|
|
$ |
5,338 |
|
|
$ |
154,513 |
|
|
$ |
1,318 |
|
|
$ |
155,831 |
|
|
$ |
29,348 |
|
|
$ |
658 |
|
|
$ |
30,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$ |
6,199 |
|
|
$ |
1,211 |
|
|
$ |
248 |
|
|
$ |
233 |
|
|
$ |
7,891 |
|
|
$ |
55 |
|
|
$ |
7,946 |
|
|
$ |
5,279 |
|
|
$ |
288 |
|
|
$ |
5,567 |
|
Interest income(a)
|
|
$ |
1,445 |
|
|
$ |
375 |
|
|
$ |
36 |
|
|
$ |
4 |
|
|
$ |
1,860 |
|
|
$ |
(471 |
) |
|
$ |
1,389 |
|
|
$ |
937 |
|
|
$ |
(253 |
) |
|
$ |
684 |
|
Interest expense
|
|
$ |
1,762 |
|
|
$ |
343 |
|
|
$ |
119 |
|
|
$ |
11 |
|
|
$ |
2,235 |
|
|
$ |
(455 |
) |
|
$ |
1,780 |
|
|
$ |
7,564 |
|
|
$ |
120 |
|
|
$ |
7,684 |
|
Income tax expense (benefit)
|
|
$ |
224 |
|
|
$ |
(378 |
) |
|
$ |
(149 |
) |
|
$ |
44 |
|
|
$ |
(259 |
) |
|
$ |
(595 |
) |
|
$ |
(854 |
) |
|
$ |
1,555 |
|
|
$ |
9 |
|
|
$ |
1,564 |
|
Earnings (losses) of nonconsolidated associates
|
|
$ |
113 |
|
|
$ |
102 |
|
|
$ |
7 |
|
|
$ |
560 |
|
|
$ |
782 |
|
|
$ |
(48 |
) |
|
$ |
734 |
|
|
$ |
(3 |
) |
|
$ |
(4 |
) |
|
$ |
(7 |
) |
Net income (loss) from continuing operations
|
|
$ |
879 |
|
|
$ |
(466 |
) |
|
$ |
(329 |
) |
|
$ |
576 |
|
|
$ |
660 |
|
|
$ |
(523 |
) |
|
$ |
137 |
|
|
$ |
2,728 |
|
|
$ |
34 |
|
|
$ |
2,762 |
|
Investments in nonconsolidated affiliates
|
|
$ |
462 |
|
|
$ |
1,139 |
|
|
$ |
431 |
|
|
$ |
3,944 |
|
|
$ |
5,976 |
|
|
$ |
56 |
|
|
$ |
6,032 |
|
|
$ |
50 |
|
|
$ |
(50 |
) |
|
$ |
|
|
Segment assets
|
|
$ |
130,372 |
|
|
$ |
23,951 |
|
|
$ |
3,038 |
|
|
$ |
3,302 |
|
|
$ |
160,663 |
|
|
$ |
1,247 |
|
|
$ |
161,910 |
|
|
$ |
288,350 |
|
|
$ |
51 |
|
|
$ |
288,401 |
|
Expenditures for property
|
|
$ |
4,650 |
|
|
$ |
1,202 |
|
|
$ |
110 |
|
|
$ |
576 |
|
|
$ |
6,538 |
|
|
$ |
78 |
|
|
$ |
6,616 |
|
|
$ |
473 |
|
|
$ |
2 |
|
|
$ |
475 |
|
|
|
(a) |
Interest income is included in net sales and revenues from
external customers. |
II-122
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 26: |
Segment Reporting (concluded) |
Information concerning principal geographic areas was as follows
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
Net | |
|
Long | |
|
Net | |
|
Long | |
|
Net | |
|
Long | |
|
|
Sales & | |
|
Lived | |
|
Sales & | |
|
Lived | |
|
Sales & | |
|
Lived | |
|
|
Revenues | |
|
Assets(1) | |
|
Revenues | |
|
Assets(1) | |
|
Revenues | |
|
Assets(1) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
North America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$ |
127,316 |
|
|
$ |
49,540 |
|
|
$ |
134,380 |
|
|
$ |
46,712 |
|
|
$ |
133,955 |
|
|
$ |
47,354 |
|
|
Canada and Mexico
|
|
|
16,769 |
|
|
|
12,739 |
|
|
|
15,484 |
|
|
|
10,443 |
|
|
|
14,667 |
|
|
|
8,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total North America
|
|
|
144,085 |
|
|
|
62,279 |
|
|
|
149,864 |
|
|
|
57,155 |
|
|
|
148,622 |
|
|
|
55,884 |
|
Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
France
|
|
|
2,612 |
|
|
|
333 |
|
|
|
2,669 |
|
|
|
262 |
|
|
|
2,429 |
|
|
|
216 |
|
|
Germany
|
|
|
7,384 |
|
|
|
4,090 |
|
|
|
6,710 |
|
|
|
4,479 |
|
|
|
5,945 |
|
|
|
3,996 |
|
|
Spain
|
|
|
2,847 |
|
|
|
1,182 |
|
|
|
2,661 |
|
|
|
1,181 |
|
|
|
2,143 |
|
|
|
1,256 |
|
|
United Kingdom
|
|
|
7,859 |
|
|
|
1,958 |
|
|
|
7,563 |
|
|
|
2,273 |
|
|
|
6,480 |
|
|
|
2,244 |
|
|
Other
|
|
|
12,944 |
|
|
|
3,798 |
|
|
|
13,622 |
|
|
|
3,805 |
|
|
|
12,356 |
|
|
|
3,537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Europe
|
|
|
33,646 |
|
|
|
11,361 |
|
|
|
33,225 |
|
|
|
12,000 |
|
|
|
29,353 |
|
|
|
11,249 |
|
Latin America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brazil
|
|
|
3,813 |
|
|
|
784 |
|
|
|
2,987 |
|
|
|
609 |
|
|
|
2,328 |
|
|
|
584 |
|
|
Other Latin America
|
|
|
3,729 |
|
|
|
158 |
|
|
|
2,611 |
|
|
|
180 |
|
|
|
1,685 |
|
|
|
186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Latin America
|
|
|
7,542 |
|
|
|
942 |
|
|
|
5,598 |
|
|
|
789 |
|
|
|
4,013 |
|
|
|
770 |
|
All Other
|
|
|
7,331 |
|
|
|
3,819 |
|
|
|
4,830 |
|
|
|
3,290 |
|
|
|
3,849 |
|
|
|
2,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
192,604 |
|
|
$ |
78,401 |
|
|
$ |
193,517 |
|
|
$ |
73,234 |
|
|
$ |
185,837 |
|
|
$ |
70,723 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Consists of property (Note 13), equipment on operating
leases (Note 11), net of accumulated depreciation. |
|
|
Note 27. |
Subsequent Events |
GM withdrew $1 billion from its hourly VEBA trust on
February 1, 2006, and an additional $1 billion from
its hourly VEBA trust on March 1, 2006.
On February 6, 2006, the Board declared a quarterly cash
dividend of $0.25 per share, a reduction from the quarterly
rate of $0.50 per share that had been followed since the
first quarter of 1997.
On March 7, 2006, GM sold 92.36 million shares of its
investment in Suzuki for approximately $2.0 billion in cash,
reducing its equity stake from 20.4% to approximately 3.7%
(16.3 million shares). GM expects a pre-tax gain in the
range of $600 million to $650 million.
On March 22, 2006, GM announced that GM, Delphi and the UAW
reached a tentative agreement intended to reduce the number of
U.S. hourly employees at GM and Delphi through an accelerated
attrition program. The agreement is subject to approval by the
bankruptcy court of Delphis participation in the
agreement. If so approved, the agreement will provide for a
combination of early retirement programs and other incentives
designed to help reduce employment levels at both GM and Delphi.
The agreement also calls for the flowback of 5,000
UAW-represented Delphi
employees to GM by September 2007 (subject to extension).
Eligible
UAW-represented Delphi
employees may elect to retire from Delphi or flow back to GM
II-123
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
Note 27. |
Subsequent Events (concluded) |
and retire. Under the agreement, GM has agreed to assume the
financial obligations relating to the lump sum payments to be
made to eligible Delphi U.S. hourly employees accepting normal
or voluntary retirement incentives and certain
post-retirement
employee benefit obligations relating to Delphi employees who
flow back to GM under the agreement. GM expects to record the
costs associated with eligible GM employees under this attrition
program in 2006 as employees agree to participate. The estimated
costs associated with those eligible UAW-represented Delphi
employees who elect to flow back to GM were included in the
reserve recorded by GM in 2005 related to contingent liabilities
associated with Delphis Chapter 11 filing.
On March 23, 2006, GMAC sold 78% of its equity in GMAC
Commercial Mortgage for approximately $1.5 billion in cash.
At the closing, GMAC Commercial Mortgage repaid to GMAC
approximately $7.3 billion of intercompany loans, bringing
GMACs total cash proceeds to $8.8 billion.
Furthermore, at the closing, GMAC Commercial Mortgage changed
its name to Capmark Financial Group Inc. (Capmark). GMAC will
also invest an additional $250 million in Capmark trust
preferred stock. GMACs remaining interest in GMAC
Commercial Mortgage will be reflected as an equity method
investment.
II-124
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION
Selected Quarterly Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 Quarters(1) | |
|
|
| |
|
|
1st(3) | |
|
2nd(4) | |
|
3rd(5) | |
|
4th(6) | |
|
|
| |
|
| |
|
| |
|
| |
|
|
As Previously | |
|
|
|
As Previously | |
|
|
|
As Previously | |
|
|
|
As Previously | |
|
|
|
|
Reported | |
|
Restated | |
|
Reported | |
|
Restated | |
|
Reported | |
|
Restated | |
|
Announced | |
|
Revised | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(Dollars in millions except per share amounts) | |
Total net sales and revenues
|
|
$ |
45,773 |
|
|
$ |
45,773 |
|
|
$ |
48,469 |
|
|
$ |
48,469 |
|
|
$ |
47,182 |
|
|
$ |
47,182 |
|
|
$ |
51,180 |
|
|
$ |
51,180 |
|
Income (losses) from continuing operations before income taxes
and minority interests
|
|
$ |
(2,108 |
) |
|
$ |
(2,294 |
) |
|
$ |
(1,577 |
) |
|
$ |
(1,405 |
) |
|
$ |
(2,722 |
) |
|
$ |
(2,871 |
) |
|
$ |
(7,293 |
) |
|
$ |
(10,361 |
) |
Income tax expense (benefit)
|
|
|
(935 |
) |
|
|
(972 |
) |
|
|
(330 |
) |
|
|
(245 |
) |
|
|
(989 |
) |
|
|
(1,107 |
) |
|
|
(2,372 |
) |
|
|
(3,554 |
) |
Minority interests
|
|
|
(16 |
) |
|
|
(16 |
) |
|
|
(18 |
) |
|
|
(18 |
) |
|
|
(37 |
) |
|
|
(37 |
) |
|
|
32 |
|
|
|
32 |
|
Earnings of nonconsolidated associates
|
|
|
85 |
|
|
|
85 |
|
|
|
191 |
|
|
|
191 |
|
|
|
137 |
|
|
|
137 |
|
|
|
221 |
|
|
|
221 |
|
Cumulative effect of accounting change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(109 |
) |
|
|
(109 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
(1,104 |
) |
|
$ |
(1,253 |
) |
|
$ |
(1,074 |
) |
|
$ |
(987 |
) |
|
$ |
(1,633 |
) |
|
$ |
(1,664 |
) |
|
$ |
(4,777 |
) |
|
$ |
(6,663 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (losses) per share attributable to
$12/3
par value
|
|
$ |
(1.95 |
) |
|
$ |
(2.22 |
) |
|
$ |
(1.90 |
) |
|
$ |
(1.75 |
) |
|
$ |
(2.89 |
) |
|
$ |
(2.94 |
) |
|
$ |
(8.45 |
) |
|
$ |
(11.78 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of shares of common stock outstanding
basic (in millions)
$12/3
par value
|
|
|
565 |
|
|
|
565 |
|
|
|
565 |
|
|
|
565 |
|
|
|
566 |
|
|
|
566 |
|
|
|
566 |
|
|
|
566 |
|
Earnings (loss) per share attributable to common stock assuming
dilution
$12/3
par value
|
|
$ |
(1.95 |
) |
|
$ |
(2.22 |
) |
|
$ |
(1.90 |
) |
|
$ |
(1.75 |
) |
|
$ |
(2.89 |
) |
|
$ |
(2.94 |
) |
|
$ |
(8.45 |
) |
|
$ |
(11.78 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of shares of common stock outstanding
diluted (in millions)
$12/3
par value
|
|
|
565 |
|
|
|
565 |
|
|
|
565 |
|
|
|
565 |
|
|
|
566 |
|
|
|
566 |
|
|
|
566 |
|
|
|
566 |
|
Net income by reportable operating segment/ region Automotive
and Other Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GMNA
|
|
$ |
(1,560 |
) |
|
$ |
(1,704 |
) |
|
$ |
(1,194 |
) |
|
$ |
(1,121 |
) |
|
$ |
(2,095 |
) |
|
$ |
(2,165 |
) |
|
$ |
(2,832 |
) |
|
$ |
(3,249 |
) |
|
GME
|
|
|
(525 |
) |
|
|
(547 |
) |
|
|
(89 |
) |
|
|
(112 |
) |
|
|
(382 |
) |
|
|
(363 |
) |
|
|
(220 |
) |
|
|
(176 |
) |
|
GMLAAM
|
|
|
46 |
|
|
|
31 |
|
|
|
33 |
|
|
|
25 |
|
|
|
(74 |
) |
|
|
(68 |
) |
|
|
(599 |
) |
|
|
(559 |
) |
|
GMAP
|
|
|
60 |
|
|
|
70 |
|
|
|
(612 |
) |
|
|
(605 |
) |
|
|
114 |
|
|
|
126 |
|
|
|
159 |
|
|
|
189 |
|
|
Other Operations
|
|
|
146 |
|
|
|
168 |
|
|
|
(20 |
) |
|
|
18 |
|
|
|
122 |
|
|
|
145 |
|
|
|
(1,874 |
) |
|
|
(3,028 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) Automotive and
Other Operations
|
|
|
(1,833 |
) |
|
|
(1,982 |
) |
|
|
(1,882 |
) |
|
|
(1,795 |
) |
|
|
(2,315 |
) |
|
|
(2,325 |
) |
|
|
(5,366 |
) |
|
|
(6,823 |
) |
Financing and Insurance Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income Financing and Insurance Operations
|
|
|
729 |
|
|
|
729 |
|
|
|
808 |
|
|
|
808 |
|
|
|
682 |
|
|
|
661 |
|
|
|
589 |
|
|
|
160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
(1,104 |
) |
|
$ |
(1,253 |
) |
|
$ |
(1,074 |
) |
|
$ |
(987 |
) |
|
$ |
(1,633 |
) |
|
$ |
(1,664 |
) |
|
$ |
(4,777 |
) |
|
$ |
(6,663 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
II-125
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION
Selected Quarterly Data
(Unaudited) (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 Year-to-Date(2) | |
|
|
| |
|
|
3 Months Ended | |
|
6 Months Ended | |
|
9 Months Ended | |
|
|
March 31, 2005 | |
|
June 30, 2005 | |
|
September 30, 2005 | |
|
|
| |
|
| |
|
| |
|
|
As Previously | |
|
|
|
As Previously | |
|
|
|
As Previously | |
|
|
|
|
Reported | |
|
Restated | |
|
Reported | |
|
Restated | |
|
Reported | |
|
Restated | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) continuing operating activities
|
|
$ |
(4,137 |
) |
|
|
(6,148 |
) |
|
$ |
2,489 |
|
|
|
(1,781 |
) |
|
$ |
3,676 |
|
|
|
(7,256 |
) |
Net cash provided by (used in) continuing investing activities
|
|
|
(2,016 |
) |
|
|
(5 |
) |
|
|
1,257 |
|
|
|
5,527 |
|
|
|
(179 |
) |
|
|
10,753 |
|
Net cash provided by (used in) continuing financing activities
|
|
$ |
(3,007 |
) |
|
|
(3,007 |
) |
|
|
(7,066 |
) |
|
|
(7,066 |
) |
|
|
(3,772 |
) |
|
|
(3,772 |
) |
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(444 |
) |
|
|
(444 |
) |
|
|
(412 |
) |
|
|
(412 |
) |
|
|
(120 |
) |
|
|
(120 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
$ |
(9,604 |
) |
|
$ |
(9,604 |
) |
|
$ |
(3,732 |
) |
|
$ |
(3,732 |
) |
|
$ |
(395 |
) |
|
$ |
(395 |
) |
Automotive and Other Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) continuing operating activities
|
|
$ |
(2,555 |
) |
|
$ |
(2,555 |
) |
|
$ |
(2,138 |
) |
|
$ |
(2,138 |
) |
|
$ |
(2,482 |
) |
|
$ |
(1,715 |
) |
Net cash provided by (used in) continuing investing activities
|
|
|
154 |
|
|
|
154 |
|
|
|
1,817 |
|
|
|
1,817 |
|
|
|
2,871 |
|
|
|
2,871 |
|
Net cash provided by (used in) continuing financing activities
|
|
|
(47 |
) |
|
|
(47 |
) |
|
|
(519 |
) |
|
|
(519 |
) |
|
|
(779 |
) |
|
|
(779 |
) |
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(369 |
) |
|
|
(369 |
) |
|
|
(283 |
) |
|
|
(283 |
) |
|
|
(36 |
) |
|
|
(36 |
) |
Net transactions with Financing and Insurance
|
|
|
(126 |
) |
|
|
(126 |
) |
|
|
420 |
|
|
|
420 |
|
|
|
973 |
|
|
|
206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
$ |
(2,943 |
) |
|
$ |
(2,943 |
) |
|
$ |
(703 |
) |
|
$ |
(703 |
) |
|
$ |
547 |
|
|
$ |
547 |
|
Financing and Insurance Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) continuing operating activities
|
|
$ |
(1,582 |
) |
|
|
(3,593 |
) |
|
$ |
4,627 |
|
|
|
357 |
|
|
$ |
6,158 |
|
|
|
(5,541 |
) |
Net cash provided by (used in) continuing investing activities
|
|
|
(1,670 |
) |
|
|
341 |
|
|
|
440 |
|
|
|
4,710 |
|
|
|
(1,550 |
) |
|
|
9,382 |
|
Net cash provided by (used in) continuing financing activities
|
|
|
(3,460 |
) |
|
|
(3,460 |
) |
|
|
(7,547 |
) |
|
|
(7,547 |
) |
|
|
(4,493 |
) |
|
|
(4,493 |
) |
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(75 |
) |
|
|
(75 |
) |
|
|
(129 |
) |
|
|
(129 |
) |
|
|
(84 |
) |
|
|
(84 |
) |
Net transactions with Automotive and Other
|
|
|
126 |
|
|
|
126 |
|
|
|
(420 |
) |
|
|
(420 |
) |
|
|
(973 |
) |
|
|
(206 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
$ |
(6,661 |
) |
|
$ |
(6,661 |
) |
|
$ |
(3,029 |
) |
|
$ |
(3,029 |
) |
|
$ |
(942 |
) |
|
$ |
(942 |
) |
II-126
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION
Selected Quarterly Data
(Unaudited) (continued)
(1) Restatement of quarterly results
Previously announced restatements
GM previously disclosed in a Current Report on
Form 8-K dated
November 9, 2005, that it would restate its financial
statements to correct the accounting for credits and other lump
sum payments from suppliers. Additionally, GM has subsequently
chosen to restate its financial statements for errors it has
identified in all periods presented in this filing. The
restatement of GMs previously reported financial results
for the years ended December 31, 2004, 2003, and 2002 have
been reflected in our Annual Report on
Form 10-K/A for
the year ended December 31, 2004. The restatement effects
for the first three quarters of 2005 and previously announced
fourth quarter and calendar year 2005 results are summarized
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 Quarters | |
|
2005 | |
|
|
| |
|
Calendar | |
|
|
1st | |
|
2nd | |
|
3rd | |
|
4th | |
|
Year | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
(Dollars in millions) | |
|
|
Net (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As originally reported/announced:(a) Quarterly results
|
|
$ |
(1,104 |
) |
|
$ |
(1,074 |
) |
|
$ |
(1,633 |
) |
|
$ |
(4,777 |
) |
|
|
|
|
|
Calendar year results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(8,554 |
) |
Adjustments, net of tax, for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplier credits: quarterly basis(b)
|
|
|
4 |
|
|
|
11 |
|
|
|
11 |
|
|
|
10 |
|
|
|
|
|
|
|
annual
basis(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
Disposal loss adjustment(c)
|
|
|
(107 |
) |
|
|
49 |
|
|
|
17 |
|
|
|
31 |
|
|
|
(10 |
) |
|
Benefit plans economic assumptions(d)
|
|
|
(16 |
) |
|
|
(16 |
) |
|
|
(16 |
) |
|
|
(16 |
) |
|
|
(64 |
) |
Other, net-of-tax(e)
|
|
|
(30 |
) |
|
|
43 |
|
|
|
(43 |
) |
|
|
137 |
|
|
|
107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total of above adjustments
|
|
|
(149 |
) |
|
|
87 |
|
|
|
(31 |
) |
|
|
162 |
|
|
|
35 |
|
Delphi contingent exposures(f)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,248 |
) |
|
|
(1,248 |
) |
GMNA restructuring(g)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(361 |
) |
|
|
(361 |
) |
Goodwill impairment(h)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(439 |
) |
|
|
(439 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As restated
|
|
$ |
(1,253 |
) |
|
$ |
(987 |
) |
|
$ |
(1,664 |
) |
|
$ |
(6,663 |
) |
|
$ |
(10,567 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Quarterly results previously reported for the first three
quarters of 2005 do not include adjustments for the estimated
effect of supplier credits, discussed below, that are included
in announced fourth quarter and calendar year 2005 results.
Accordingly, the sum of the above quarterly results does not
equal the announced calendar year results. |
|
(b) |
GM erroneously recorded as a reduction to cost of sales certain
payments and credits received from suppliers prior to completion
of the earnings process. GM concluded that the payments and
credits received were associated with agreements for the award
of future services or products or other rights and privileges
and should be recognized when subsequently earned. The
quarterly basis adjustments above reflect the
totals, net of tax, to correct the original accounting for such
credits for each quarter of 2005. Calendar year results for
2005, as previously announced, included an estimate of such
effects; accordingly, only the final adjustment to this estimate
is shown above on an annual basis. |
|
(c) |
GMs portfolio of vehicles on operating lease with daily
rental car entities, which was impaired at lease inception, was
prematurely revalued in 2005 to reflect increased anticipated
proceeds upon disposal. |
II-127
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION
Selected Quarterly Data
(Unaudited) (continued)
|
|
(d) |
GM originally estimated its discount rate for the
U.S. Hourly pension plan referencing certain indicators
which, in view of evolving guidance, did not provide the best
estimate to defease the pension liability. The above adjustments
represent the amounts, net of tax, to correct the original
accounting estimates. |
|
(e) |
For quarters covered by this filing, GM has recorded other
accounting adjustments it has identified that were not recorded
in the proper period. These
out-of-period
adjustments were not material to the financial statements as
originally reported; however, as part of the restatement, they
are being recognized in the period in which the underlying
transactions occurred. The effect of these adjustments,
net-of-tax, was
$(30) million, $43 million, $(43) million, and
$137 million for each quarter of 2005, respectively. The
significant
out-of-period
adjustments were related to the following matters:
(1) Engineering and facility-related expenses recorded in
improper periods. (2) Over-depreciation of certain fixed
assets. (3) Reconciliation of prior year tax provisions to
actual tax returns. Of the $(43) million adjustment in the
third quarter, $96 million relates to engineering and
facility-related expenses, and $(113) relates to
over-depreciation of certain fixed assets. Of the
$137 million adjustment in the fourth quarter,
$118 million relates to tax matters. |
Adjustments to Preliminary Results reported on
Form 8-K dated
January 26, 2006
In addition to the above restatement adjustments, GMs
fourth quarter and calendar year 2005 preliminary results
reported on
Form 8-K dated
January 26, 2006 have been adjusted for the following items:
|
|
(f) |
Delphi Contingent Exposures Range of contingent
exposures reported in preliminary results refined to reflect
further developments. GM believes that the range of the
contingent exposures is between $5.5 billion and
$12 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. |
|
(g) |
GMNA Restructuring Restructuring charges as reported
in preliminary results were revised to include GMs best
estimate of costs to be incurred after the expiration of the
current labor agreement in September 2007. |
|
(h) |
Goodwill Impairment Recognition of goodwill
impairment charges relating to GMACs Commercial Finance
operating segment. The impairment charges pertain primarily to
the goodwill recognized in connection with the
1999 acquisition of The Bank of New Yorks commercial
finance business. |
(2) Restatement of interim statements of cash flows
GM has restated its statements of cash flows to correct for the
erroneous classification of cash flows from certain mortgage
transactions within our financing and insurance operations.
Certain mortgage loan originations and purchases were not
appropriately classified as either operating cash flows or
investing cash flows consistent with the original designation as
loans held for sale or loans held for investment. In addition,
proceeds from sales and repayments related to certain mortgage
loans, which initially were classified as mortgage loans held
for investment and subsequently transferred to mortgage loans
held for sale, were reported as operating cash flows instead of
investing cash flows in our consolidated statements of cash
flows. Finally, certain non-cash proceeds and transfers were not
appropriately presented in the statements of cash
II-128
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION
Selected Quarterly Data
(Unaudited) (continued)
flows. The effects of the restatement adjustments on GMs
previously reported interim statements of cash flows for 2005
are summarized below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 Year-To-Date | |
|
|
| |
|
|
3 Months Ended | |
|
6 Months Ended | |
|
9 Months Ended | |
|
|
March 31, 2005 | |
|
June 30, 2005 | |
|
September 30, 2005 | |
|
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
Financing and Insurance Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
As originally reported
|
|
$ |
(1,582 |
) |
|
$ |
4,627 |
|
|
$ |
6,158 |
|
Adjustments for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restatement Mortgage related activity
|
|
|
(2,011 |
) |
|
|
(4,270 |
) |
|
|
(10,932 |
) |
|
Reclassification Net transactions with
Automotive/Financing Operations
|
|
|
|
|
|
|
|
|
|
|
(767 |
) |
|
|
|
|
|
|
|
|
|
|
As restated
|
|
$ |
(3,593 |
) |
|
$ |
357 |
|
|
$ |
(5,541 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
As originally reported
|
|
$ |
(1,670 |
) |
|
$ |
440 |
|
|
$ |
(1,550 |
) |
Adjustments for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restatement Mortgage related activity
|
|
|
2,011 |
|
|
|
4,270 |
|
|
|
10,932 |
|
|
|
|
|
|
|
|
|
|
|
As restated
|
|
$ |
341 |
|
|
$ |
4,710 |
|
|
$ |
9,382 |
|
|
|
|
|
|
|
|
|
|
|
(3) First quarter 2005 results include the following
after-tax items:
|
|
|
|
|
A charge of $148 million for a salaried attrition program
relating to voluntary early retirement and other separation
programs in the U.S. |
|
|
|
A charge of $84 million for plant and facility impairments
relating to the write-down to fair market value of various plant
assets in connection with action to discontinue production at
the Lansing assembly plant. |
|
|
|
A charge of $422 million for the GME restructuring plan,
announced in the fourth quarter of 2004, targeting a reduction
in annual structural costs of an estimated $600 million by
2006. A total reduction of 12,000 employees, including 10,000 in
Germany, from 2005-2007 through separation programs, early
retirements, and selected outsourcing initiatives is expected.
The charge in the first quarter of 2005 covers approximately
5,650 people, of whom 4,900 are in Germany. |
(4) Second quarter 2005 results include the following
after-tax items:
|
|
|
|
|
A charge of $788 million related to the write-down to fair
market value, as of June 30, 2005, of GMs investment
in approximately 20% of the common stock of Fuji Heavy
Industries (FHI). |
|
|
|
An additional charge of $126 million, related to the GME
restructuring plan noted above and costs related to dissolving
GMs powertrain and purchasing joint ventures with Fiat.
The charge covers approximately 600 additional separations, as
well as charges related to previous separations that are
required to be amortized over future periods. |
II-129
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION
Selected Quarterly Data
(Unaudited) (continued)
(5) Third quarter 2005 results include the following
after-tax items:
|
|
|
|
|
A charge of $788 million ($468 million at GMNA,
$176 million at GME, $99 million at GMLAAM, and
$45 million at GMAP) for plant and facility impairments
reflecting the results of third quarter reviews of the carrying
value of long-lived assets held and used, other than goodwill
and intangible assets with indefinite lives. The impairments
consist of $672 million, after tax, related to
product-specific assets that were written down and
$116 million, after tax, related to office and production
facilities, which were still in service at year-end 2005. There
were no employee idling or separation costs and no lease
contracts were terminated. |
|
|
|
An additional charge, related to the GME restructuring plan
noted above, of $56 million for approximately 500
additional separations, as well as charges related to previous
separations that are required to be amortized over future
periods. |
(6) 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 pre-tax $5.5 billion, $3.6 billion after
tax, 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. GM believes that the range
of the contingent exposures is between $5.5 billion and
$12 billion. |
|
|
|
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 (after
tax) related to FHI, resulting in a net adjustment of
$51 million in the fourth quarter. |
|
|
|
Restructuring charges totaling $114 million, as follows: An
additional after-tax 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. Amount is
included in equity income. |
|
|
|
The recognition of a valuation allowance of $617 million
against deferred tax assets at GM do Brasil. |
II-130
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION
Selected Quarterly Data
(Unaudited) (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 Quarters | |
|
|
| |
|
|
1st | |
|
2nd | |
|
3rd | |
|
4th (1) | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(Dollars in millions except per share amounts) | |
Total net sales and revenues
|
|
$ |
47,862 |
|
|
$ |
49,293 |
|
|
$ |
44,934 |
|
|
$ |
51,428 |
|
Income (losses) from continuing operations before income taxes
and minority interests
|
|
$ |
1,216 |
|
|
$ |
1,449 |
|
|
$ |
94 |
|
|
$ |
(1,573 |
) |
Income tax expense (benefit)
|
|
|
243 |
|
|
|
223 |
|
|
|
(39 |
) |
|
|
(1,343 |
) |
Minority interests
|
|
|
(23 |
) |
|
|
(23 |
) |
|
|
(12 |
) |
|
|
(23 |
) |
Earnings of nonconsolidated associates
|
|
|
275 |
|
|
|
236 |
|
|
|
162 |
|
|
|
110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
1,225 |
|
|
$ |
1,439 |
|
|
$ |
283 |
|
|
$ |
(143 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (losses) per share attributable to
$12/3
par value
|
|
$ |
2.17 |
|
|
$ |
2.55 |
|
|
$ |
0.50 |
|
|
$ |
(0.25 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of shares of common stock outstanding
basic (in millions)
$12/3
par value
|
|
|
564 |
|
|
|
565 |
|
|
|
565 |
|
|
|
565 |
|
Earnings (loss) per share attributable to common stock assuming
dilution
$12/3
par value
|
|
$ |
2.15 |
|
|
$ |
2.53 |
|
|
$ |
0.50 |
|
|
$ |
(0.25 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of shares of common stock outstanding
diluted (in millions)
$12/3
par value
|
|
|
569 |
|
|
|
568 |
|
|
|
567 |
|
|
|
565 |
|
Net income (loss) by reportable operating segment/region
Automotive and Other Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GMNA
|
|
$ |
344 |
|
|
$ |
366 |
|
|
$ |
(166 |
) |
|
$ |
865 |
|
|
GME
|
|
|
(109 |
) |
|
|
(62 |
) |
|
|
(207 |
) |
|
|
(547 |
) |
|
GMLAAM
|
|
|
(17 |
) |
|
|
18 |
|
|
|
17 |
|
|
|
42 |
|
|
GMAP
|
|
|
272 |
|
|
|
253 |
|
|
|
74 |
|
|
|
131 |
|
|
Other Operations
|
|
|
(22 |
) |
|
|
65 |
|
|
|
(85 |
) |
|
|
(1,377 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) Automotive and Other Operations
|
|
|
468 |
|
|
|
640 |
|
|
|
(367 |
) |
|
|
(886 |
) |
Financing and Insurance Operations Net income
Financing and Insurance Operations
|
|
|
757 |
|
|
|
799 |
|
|
|
650 |
|
|
|
743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
1,225 |
|
|
$ |
1,439 |
|
|
$ |
283 |
|
|
$ |
(143 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Fourth quarter 2004 results include the following: |
|
|
|
|
|
An after-tax gain of $118 million resulting from the
contribution of 11 million shares of XM Satellite Radio
Holdings Inc. Class A common stock valued at
$432 million to GMs Voluntary Employees
Beneficiary Association (VEBA); |
|
|
|
A $78 million after-tax charge related primarily to
previously announced facilities rationalization actions at
GMs Baltimore, MD and Linden, NJ plants; |
|
|
|
A $383 million after-tax charge related to the results of
GMs annual review of the carrying value of its long-lived
assets held and used, other than goodwill and intangible assets
with indefinite lives; |
|
|
|
A $136 million after-tax charge related to the write-off of
GMs remaining investment balance in Fiat Auto Holdings,
B.V. and reflects completion of an impairment study relating to
the carrying value of that investment; |
II-131
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION
Selected Quarterly Data
(Unaudited) (concluded)
|
|
|
|
|
A $540 million after-tax favorable adjustment for various
adjustments resulting from changes in tax laws both in the U.S.
and overseas and capital loss carryforwards; and |
|
|
|
An after-tax charge of $886 million related to the
February 13, 2005 GM and Fiat agreement under which GM will
pay Fiat approximately $2.0 billion and will return its 10%
equity interest in FAH to settle various disputes and terminate
the Master Agreement (including the Put Option) entered into in
March 2000, and acquire an interest in key strategic diesel
engine assets, and other important rights with respect to diesel
engine technology and know-how. |
This Item 8 should also be read in conjunction with
Part II, Item 8 (Financial Statements and
Supplementary Data) of the GMAC Annual Report on
Form 10-K for the
period ended December 31, 2005, filed separately with the
SEC, which is incorporated into this document by reference.
|
|
Item 9. |
Changes in and disagreements with accountants on
accounting and financial disclosure |
None
* * * * * *
|
|
Item 9A. |
Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
The Corporation maintains disclosure controls and procedures
designed to ensure that information required to be disclosed in
reports filed under the Securities Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported within
the specified time periods.
GMs management, with the participation of its chief
executive officer and its chief financial officer, evaluated the
effectiveness of our disclosure controls and procedures (as
defined in the Securities Exchange Act of 1934
Rules 13a-15(e) or
15d-15(e)) as of the
end of the period covered by this report. Based on that
evaluation, GMs chief executive officer and chief
financial officer concluded that, as of that date, GMs
disclosure controls and procedures required by
paragraph (b) of Exchange Act
Rules 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.
As discussed in Selected Quarterly Data, GM is making certain
adjustments to restate previously reported 2005 quarterly
financial results. In order to analyze the internal control
considerations associated with the adjustments underlying the
restatements, GM management evaluated (1) each adjustment
as to whether it was caused by an internal control deficiency
and (2) the effectiveness of actions that had been taken to
remediate identified internal control deficiencies.
Among other matters, managements assessment identified the
following material weaknesses and significant deficiency:
|
|
|
|
(A) |
A material weakness was identified related to our design and
maintenance of adequate controls over the preparation, review,
presentation and disclosure of amounts included in our
consolidated statements of cash flows, which resulted in
misstatements therein. Cash outflows related to certain mortgage
loan originations and purchases were not appropriately
classified as either operating cash flows or investing cash
flows consistent with our original description as loans held for
sale or loans held for investment. In addition, proceeds from
sales and repayments related to certain mortgage loans, which
initially were classified as mortgage loans held for investment
and subsequently transferred to mortgage loans held for sale,
were reported as operating cash flows instead of |
II-132
|
|
|
|
|
investing cash flows in our consolidated statements of cash
flows, as required by Statement of Financial Accounting
Standards No. 102 Statement of Cash Flows
Exemption of Certain Enterprises and Classification of Cash
Flows from Certain Securities Acquired for Resale. Finally,
certain non-cash proceeds and transfers were not appropriately
presented in the Statements of Cash Flows. |
GM management is in the process of remediating this material
weakness through the design and implementation of enhanced
controls to aid in the correct preparation, review, presentation
and disclosures of our consolidated statement of cash flows.
Management will monitor, evaluate and test the operating
effectiveness of these controls.
|
|
|
|
(B) |
A material weakness was identified related to the fact that
GMs management did not adequately design the control
procedures used to account for GMs portfolio of vehicles
on operating lease with daily rental car entities, which was
impaired at lease inception, and prematurely revalued to reflect
increased anticipated proceeds upon disposal. This material
weakness was identified in January, 2006, and remediated by
discontinuing the premature revaluation of previously recognized
impairments. |
|
|
(C) |
In the third quarter of 2005, GM management reported a material
weakness in internal controls related to the ineffective
operation of the procedures to determine whether an impairment
was necessary with respect to the Corporations foreign
investments accounted for under the equity method which resulted
in the failure to timely reduce the carrying value of GMs
investment in the common stock of Fuji Heavy Industries to fair
value. GM fully remediated its related controls and procedures
related to this matter prior to December 31, 2005. Details
of the remediation actions were included in Item 4 of
GMs Amendment No. 1 on
Form 10-Q/A for
the second quarter of 2005. |
|
|
|
|
(D) |
GM management also identified a significant deficiency in
internal controls related to accounting for complex contracts.
This deficiency was identified as a result of certain contracts
being accounted for incorrectly and without appropriate
consideration of the economic substance of the contracts. GM
management is in the process of remediating this significant
deficiency by implementing a delegation of authority for
approval of the accounting for complex contracts that requires
formal review and approval by experienced accounting personnel. |
Other than indicated above, there were no changes in the
Corporations internal control over financial reporting
that occurred during the last fiscal quarter that have
materially affected, or are reasonably likely to materially
affect, the Corporations internal control over financial
reporting.
* * * * * *
|
|
Item 9B. |
Other Information |
None
II-133
PART III
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 10. |
Code of Ethics for Senior Executives |
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, 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 Internet website at
http://investor.gm.com at Investor Information
Corporate Governance.
* * * * * *
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 2006 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 2005 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
executive officers of the Registrant is included in Item 4A
of Part I of this report.
* * * * * *
III-1
PART IV
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 15. Exhibits and
Financial Statement Schedule
|
|
|
|
|
(a) |
|
1. All Financial Statements and Supplemental Information |
|
See Part II |
|
|
2. Financial Statement Schedule II
Allowances for the Years Ended December 31, 2005, 2004, and
2003 |
|
IV-3 |
|
|
3. 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
February 29, 2004 |
|
|
(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. |
|
|
(10)
|
|
Agreement, dated as of October 22, 2001, between General
Motors Corporation and General Motors Acceptance Corporation. |
|
|
(10)(a)*
|
|
General Motors 2002 Annual Incentive Plan, incorporated herein
by reference to Exhibit A to the Proxy Statement of General
Motors Corporation filed April 21, 2002. |
|
|
(10)(b)*
|
|
General Motors 2002 Stock Incentive Plan, incorporated herein by
reference to Exhibit A to the Proxy Statement of General Motors
Corporation filed April 21, 2002. |
|
|
(10)(c)*
|
|
General Motors 2002 Long-term Incentive Plan, incorporated
herein by reference to Exhibit A to the Proxy Statement of
General Motors Corporation filed April 21, 2002. |
|
|
IV-1
PART IV
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Exhibits and Financial Statement
Schedule (concluded)
|
|
|
|
|
(10)(d)*
|
|
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(e)*
|
|
Employment Agreement, dated as of December 5, 2000, between
General Motors Corporation and John M. Devine, incorporated
herein by reference to Exhibit 10(e) to General Motors
Corporationss annual report on Form 10-K filed
march 7, 2001. |
|
|
(10)(f)*
|
|
Extension to Employment Agreement, dated as of December 5,
2005 between General Motors Corporation and John M. Devine
incorporated herein by reference to Exhibit 99.1 to the Current
Report on Form 8-K of General Motors Corporation filed
December 9, 2005. |
|
|
(10)(g)*
|
|
General Motors Company Vehicle Operations Senior
Management Vehicle Program (SMVP) Supplement, revised
December 15, 2005. |
|
|
(10)(h)*
|
|
Compensation Statement for G.R. Wagoner, Jr. commencing
January 1, 2003. |
|
|
(10)(i)*
|
|
Compensation Statement for John M. Devine commencing
January 1, 2003. |
|
|
(10)(j)*
|
|
Compensation Statement for Robert A. Lutz commencing
January 1, 2003. |
|
|
(10)(k)*
|
|
Compensation Statement for G.L. Cowger commencing
February 1, 2004. |
|
|
(10)(l)*
|
|
Compensation Statement for Thomas A. Gottschalk commencing
January 1, 2005 and description of retirement program. |
|
|
(10)(m)*
|
|
GM Supplemental Executive Retirement Plan as amended through
October 18, 2005. |
|
|
(10)(n)*
|
|
General Motors Benefit Equalization Plan for Salaried Employees,
amended as of October 18, 2005. |
|
|
(10)(o)*
|
|
Description of Executive and Board Compensation Reductions. |
|
|
(12)
|
|
Computation of Ratios of Earnings to Fixed Charges for the Years
Ended December 31, 2005, 2004, and 2003. |
|
|
(13)
|
|
General Motors Acceptance Corporation Annual Report on
Form 10-K, File No. 001-03754, for the fiscal year ended
December 31, 2005. |
|
|
(21)
|
|
Subsidiaries of the Registrant as of December 31, 2005. |
|
|
(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.
IV-2
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SCHEDULE II ALLOWANCES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowances Deducted from Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses
|
|
$ |
3,419 |
|
|
$ |
1,088 |
|
|
$ |
|
|
|
$ |
1,391 |
(b) |
|
$ |
3,116 |
|
|
|
Accounts and notes receivable (for doubtful receivables)
|
|
|
303 |
|
|
|
73 |
|
|
|
|
|
|
|
38 |
(b) |
|
|
338 |
|
|
|
Inventories (principally for obsolescence of service parts)
|
|
|
338 |
|
|
|
70 |
(c) |
|
|
|
|
|
|
|
|
|
|
408 |
|
|
|
Other investments and miscellaneous assets (receivables and
other)
|
|
|
10 |
|
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
17 |
|
|
Miscellaneous allowances (mortgage and other)
|
|
|
161 |
|
|
|
25 |
|
|
|
21 |
|
|
|
123 |
|
|
|
84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Allowances Deducted from Assets
|
|
$ |
4,231 |
|
|
$ |
1,256 |
|
|
$ |
28 |
|
|
$ |
1,552 |
|
|
$ |
3,963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowances Deducted from Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses
|
|
$ |
3,042 |
|
|
$ |
1,944 |
|
|
$ |
|
|
|
$ |
1,567 |
(b) |
|
$ |
3,419 |
|
|
|
Accounts and notes receivable (for doubtful receivables)
|
|
|
212 |
|
|
|
112 |
|
|
|
5 |
(a) |
|
|
26 |
(b) |
|
|
303 |
|
|
|
Inventories (principally for obsolescence of service parts)
|
|
|
393 |
|
|
|
|
|
|
|
|
|
|
|
55 |
(c) |
|
|
338 |
|
|
|
Other investments and miscellaneous assets (receivables and
other)
|
|
|
84 |
|
|
|
|
|
|
|
|
|
|
|
74 |
|
|
|
10 |
|
|
Miscellaneous allowances (mortgage and other)
|
|
|
193 |
|
|
|
28 |
|
|
|
163 |
|
|
|
223 |
|
|
|
161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Allowances Deducted from Assets
|
|
$ |
3,924 |
|
|
$ |
2,084 |
|
|
$ |
168 |
|
|
$ |
1,945 |
|
|
$ |
4,231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowances Deducted from Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses
|
|
$ |
2,991 |
|
|
$ |
1,721 |
|
|
$ |
|
|
|
$ |
1,670 |
(b) |
|
$ |
3,042 |
|
|
|
Accounts and notes receivable (for doubtful receivables)
|
|
|
166 |
|
|
|
63 |
|
|
|
15 |
(a) |
|
|
32 |
(b) |
|
|
212 |
|
|
|
Inventories (principally for obsolescence of service parts)
|
|
|
255 |
|
|
|
138 |
(c) |
|
|
|
|
|
|
|
|
|
|
393 |
|
|
|
Other investments and miscellaneous assets (receivables and
other)
|
|
|
26 |
|
|
|
|
|
|
|
58 |
|
|
|
|
|
|
|
84 |
|
|
Miscellaneous allowances (mortgage and other)
|
|
|
153 |
|
|
|
78 |
|
|
|
15 |
|
|
|
53 |
|
|
|
193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Allowances Deducted from Assets
|
|
$ |
3,591 |
|
|
$ |
2,000 |
|
|
$ |
88 |
|
|
$ |
1,755 |
|
|
$ |
3,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Primarily reflects the recovery of accounts previously
written-off. |
|
(b) |
|
Accounts written off. |
|
(c) |
|
Represents net change of inventory allowances. |
Reference should be made to the notes to the GM consolidated
financial statements.
IV-3
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
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 28, 2006
|
|
|
|
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
28th day
of March 2006 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/ PAUL W. SCHMIDT
(Paul W. Schmidt) |
|
Controller |
|
|
|
/s/ PETER R. BIBLE
(Peter R. Bible) |
|
Chief Accounting Officer |
|
|
IV-4
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SIGNATURES
|
|
|
|
|
|
|
Signature |
|
Title |
|
|
|
|
|
|
|
|
/s/ PERCY BARNEVIK
(Percy Barnevik) |
|
Director |
|
|
|
/s/ ERSKINE BOWLES
(Erskine Bowles) |
|
Director |
|
|
|
/s/ JOHN H. BRYAN
(John H. Bryan) |
|
Director |
|
|
|
/s/ ARMANDO M. CODINA
(Armando Codina) |
|
Director |
|
|
|
/s/ GEORGE M.C. FISHER
(George M.C. Fisher) |
|
Director |
|
|
|
/s/ KAREN KATEN
(Karen Katen) |
|
Director |
|
|
|
/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 |
|
|
|
/s/ JEROME B. YORK
(Jerome York) |
|
Director |
|
|
IV-5