UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF
-- 1934
For the quarterly period ended September 30, 2001
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF
--- 1934
For the transition period from to
--------------- -------------
Commission file number 1-143
GENERAL MOTORS CORPORATION
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 38-0572515
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 Renaissance Center, Detroit, Michigan 48265-3000
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (313) 556-5000
--------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
--- ---
As of October 31, 2001, there were outstanding 555,504,137 shares of
the issuer's $1-2/3 par value common stock and 877,316,752 shares of GM Class H
$0.10 par value common stock.
- 1 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
INDEX
Page No.
-------
Part I - Financial Information (Unaudited)
Item 1. Financial Statements
Consolidated Statements of Income for the Three and
Nine Months Ended September 30, 2001 and 2000 3
Consolidated Balance Sheets as of September 30, 2001,
December 31, 2000, and September 30, 2000 5
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 2001 and 2000 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Part II - Other Information (Unaudited)
Item 1. Legal Proceedings 21
Item 6. Exhibits and Reports on Form 8-K 23
Signatures 23
Exhibit 99 Hughes Electronics Corporation Financial Statements and
Management's Discussion and Analysis of Financial
Condition and Results of Operations (Unaudited) 24
- 2 -
PART I
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2001 2000 2001 2000
---- ---- ---- ----
(dollars in millions except per share amounts)
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Total net sales and revenues $42,475 $42,690 $131,310 $138,291
------ ------ ------- -------
Cost of sales and other expenses
(Note 7) 34,866 33,678 106,557 108,888
Selling, general, and
administrative expenses 5,926 5,266 17,171 15,604
Interest expense 1,968 2,480 6,438 7,066
------ ------ ------- -------
Total costs and expenses 42,760 41,424 130,166 131,558
------ ------ ------- -------
Income (loss) before income taxes
and minority interests (285) 1,266 1,144 6,733
Income tax expense 76 436 588 2,148
Equity income/(loss) and
minority interests (7) (1) (210) (222)
---- ---- ---- -----
Net income (loss) (368) 829 346 4,363
Dividends on preference stocks (25) (27) (76) (83)
---- ---- ---- -----
Earnings attributable to
common stocks $(393) $802 $270 $4,280
=== === === =====
Basic earnings (losses) per
share attributable to
common stocks (Note 6)
Earnings per share attributable
to $1-2/3 par value $(0.41) $1.57 $1.18 $7.51
==== ==== ==== ====
Earnings per share attributable
to Class H $(0.19) $(0.09) $(0.43) $(0.23)
==== ==== ==== ====
Earnings (losses) per share
attributable to common
stocks assuming dilution (Note 6)
Earnings per share attributable
to $1-2/3 par value $(0.41) $1.55 $1.16 $7.37
==== ==== ==== ====
Earnings per share attributable
to Class H $(0.19) $(0.09) $(0.43) $(0.23)
==== ==== ==== ====
Reference should be made to the notes to consolidated financial statements.
- 3 -
CONSOLIDATED STATEMENTS OF INCOME - concluded
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2001 2000 2001 2000
---- ---- ---- ----
(dollars in millions)
AUTOMOTIVE, COMMUNICATIONS SERVICES, AND OTHER OPERATIONS
Total net sales and revenues $36,297 $36,602 $112,192 $120,667
------ ------ ------- -------
Cost of sales and other expenses
(Note 7) 32,861 31,827 100,537 103,408
Selling, general, and
administrative expenses 4,107 3,765 11,837 11,304
------ ------ ------- -------
Total costs and expenses 36,968 35,592 112,374 114,712
------ ------ ------- -------
Interest expense 216 210 529 648
Net expense from transactions with
Financing and Insurance Operations 97 197 315 508
--- --- ----- -----
Income (loss) before income taxes
and minority interests (984) 603 (1,026) 4,799
Income tax (benefit) expense (181) 193 (194) 1,433
Equity income/(loss) and
minority interests (1) 13 (150) (207)
--- --- --- -----
Net income (loss) - Automotive,
Communications Services,
and Other Operations $(804) $423 $(982) $3,159
=== === === =====
FINANCING AND INSURANCE OPERATIONS
Total revenues $6,178 $6,088 $19,118 $17,624
----- ----- ------ ------
Interest expense 1,752 2,270 5,909 6,418
Depreciation and amortization
expense 1,477 1,474 4,429 4,480
Operating and other expenses 1,774 1,450 5,220 4,147
Provision for financing and
insurance losses 573 428 1,705 1,153
----- ----- ------ ------
Total costs and expenses 5,576 5,622 17,263 16,198
----- ----- ------ ------
Net income from transactions with
Automotive, Communications
Services, and Other Operations 97 197 315 508
--- --- --- -----
Income before income taxes and
minority interests 699 663 2,170 1,934
Income tax expense 257 243 782 715
Equity income/(loss) and
minority interests (6) (14) (60) (15)
--- --- ----- -----
Net income - Financing and
Insurance Operations $436 $406 $1,328 $1,204
=== === ===== =====
The above supplemental consolidating information is explained in Note 1,
"Financial Statement Presentation."
Reference should be made to the notes to consolidated financial statements.
- 4 -
CONSOLIDATED BALANCE SHEETS
Sept.30, Sept.30,
2001 Dec. 31, 2000
GENERAL MOTORS CORPORATION AND SUBSIDIARIES (Unaudited) 2000 (Unaudited)
--------- ----- ---------
ASSETS (dollars in millions)
Automotive, Communications Services,
and Other Operations
Cash and cash equivalents $7,899 $9,119 $9,351
Marketable securities 829 1,161 1,176
----- ------ ------
Total cash and marketable securities 8,728 10,280 10,527
Accounts and notes receivable
(less allowances) 6,200 5,835 5,975
Inventories (less allowances) (Note 2) 10,508 10,945 11,300
Equipment on operating leases
(less accumulated depreciation) 4,974 5,699 5,980
Deferred income taxes and other
current assets 8,751 8,388 9,489
------ ------ ------
Total current assets 39,161 41,147 43,271
Equity in net assets of nonconsolidated
associates 4,913 3,497 3,301
Property - net 34,555 33,977 34,036
Intangible assets - net 7,675 7,622 8,651
Deferred income taxes 15,930 14,870 13,202
Other assets 30,984 32,243 33,015
------- ------- -------
Total Automotive, Communications Services,
and Other Operations assets 133,218 133,356 135,476
Financing and Insurance Operations
Cash and cash equivalents 10,530 1,165 912
Investments in securities 9,598 9,595 9,309
Finance receivables - net 90,190 92,415 87,534
Investment in leases and other receivables 36,441 36,752 37,551
Other assets 33,624 27,846 24,864
Net receivable from Automotive,
Communications Services,
and Other Operations 1,243 1,971 1,599
------- ------- -------
Total Financing and Insurance
Operations assets 181,626 169,744 161,769
------- ------- -------
Total assets $314,844 $303,100 $297,245
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive, Communications Services,
and Other Operations
Accounts payable (principally trade) $19,335 $18,309 $18,190
Loans payable 1,744 2,208 3,321
Accrued expenses 35,417 33,252 31,997
Net payable to Financing and
Insurance Operations 1,243 1,971 1,599
------ ------ ------
Total current liabilities 57,739 55,740 55,107
Long-term debt 9,320 7,410 8,245
Postretirement benefits other than pensions 34,276 34,306 34,376
Pensions 3,443 3,480 3,226
Other liabilities and deferred income taxes 14,183 15,768 16,088
------- ------- -------
Total Automotive, Communications Services,
and Other Operations liabilities 118,961 116,704 117,042
Financing and Insurance Operations
Accounts payable 6,936 7,416 5,316
Debt 144,846 135,037 129,325
Other liabilities and deferred income taxes 14,577 12,922 13,238
------- ------- -------
Total Financing and Insurance
Operations liabilities 166,359 155,375 147,879
Minority interests 700 707 670
General Motors - obligated mandatorily
redeemable preferred securities of
subsidiary trusts holding solely junior
subordinated debentures of General Motors
(Note 4)
Series G - 139 139
Stockholders' equity
$1-2/3 par value common stock (issued,
554,439,259; 548,181,757;
and 565,371,465 shares) (Note 6) 924 914 943
Class H common stock (issued, 877,032,955;
875,286,559; and 874,807,080 shares)
(Note 6) 88 88 87
Capital surplus (principally
additional paid-in capital) 21,330 21,020 21,818
Retained earnings 9,565 10,119 10,335
------ ------ ------
Subtotal 31,907 32,141 33,183
Accumulated foreign currency
translation adjustments (2,825) (2,502) (2,480)
Net unrealized loss on derivatives (392) - -
Net unrealized gains on securities 179 581 933
Minimum pension liability adjustment (45) (45) (121)
----- ----- -----
Accumulated other comprehensive loss (3,083) (1,966) (1,668)
----- ----- -----
Total stockholders' equity 28,824 30,175 31,515
------- ------- -------
Total liabilities and stockholders' equity $314,844 $303,100 $297,245
======= ======= =======
Reference should be made to the notes to consolidated financial statements.
- 5 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
-------------------------------------------------------
2001 2000
------------------------- -------------------------
Automotive, Financing Automotive, Financing
Comm.Serv. and Comm.Serv. and
and Other Insurance and Other Insurance
--------- --------- --------- ---------
(dollars in millions)
Net cash provided by (used in)
operating activities $5,509 $(651) $9,066 $4,746
Cash flows from investing activities
Expenditures for property (6,287) (53) (6,314) (335)
Investments in marketable securities
- acquisitions (840) (25,071) (2,425) (18,198)
Investments in marketable securities
- liquidations 1,172 25,205 2,947 17,998
Mortgage servicing rights - acquisitions - (884) - (698)
Mortgage servicing rights - liquidations - 17 - -
Finance receivables - acquisitions - (166,597) - (140,295)
Finance receivables - liquidations - 103,919 - 88,560
Proceeds from sales of finance receivables - 63,798 - 43,407
Operating leases - acquisitions (4,480) (10,586) (5,342) (12,147)
Operating leases - liquidations 4,783 9,239 4,615 7,313
Investments in companies, net of
cash acquired (679) (446) (3,911) -
Net investing activity with Financing and
Insurance Operations - - (998) -
Other (146) 110 (558) 356
----- ----- ------ ------
Net cash used in investing activities (6,477) (1,349) (11,986) (14,039)
----- ----- ------ ------
Cash flows from financing activities
Net (decrease) increase in loans payable (464) (18,332) 1,255 1,121
Long-term debt - borrowings 4,533 42,791 4,130 19,450
Long-term debt - repayments (2,673) (13,817) (4,213) (11,482)
Net financing activity with Automotive,
Communications Services, and
Other Operations - - - 998
Repurchases of common and preference stocks (264) - (652) -
Proceeds from issuing common stocks 91 - 2,778 -
Proceeds from sales of treasury stocks 222 - - -
Cash dividends paid to stockholders (900) - (989) -
--- ------ ----- ------
Net cash provided by financing activities 545 10,642 2,309 10,087
--- ------ ----- ------
Effect of exchange rate changes on cash and
cash equivalents (69) (5) (365) 3
Net transactions with Automotive/
Financing Operations (728) 728 597 (597)
----- ----- --- ---
Net (decrease) increase in cash and
cash equivalents (1,220) 9,365 (379) 200
Cash and cash equivalents at
beginning of the period 9,119 1,165 9,730 712
----- ------ ----- ---
Cash and cash equivalents at
end of the period $7,899 $10,530 $9,351 $912
===== ====== ===== ===
Reference should be made to the notes to consolidated financial statements.
- 6 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Financial Statement Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the U.S.
for interim financial information. In the opinion of management, all adjustments
(consisting of only normal recurring items), which are necessary for a fair
presentation have been included. The results for interim periods are not
necessarily indicative of results which may be expected for any other interim
period or for the full year. For further information, refer to the December 31,
2000 consolidated financial statements and notes thereto included in General
Motors Corporation's (the "Corporation" or "GM") 2000 Annual Report on Form
10-K, and all other GM, Hughes Electronics Corporation (Hughes), and General
Motors Acceptance Corporation (GMAC) filings with the Securities and Exchange
Commission.
GM presents separate supplemental consolidating statements of income and
other financial information for the following businesses: (1) Automotive,
Communications Services, and Other Operations which consists of the design,
manufacturing, and marketing of cars, trucks, locomotives, and heavy-duty
transmissions and related parts and accessories, as well as the operations of
Hughes; and (2) Financing and Insurance Operations which consists primarily of
GMAC, which 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, vehicle and homeowners' insurance, and asset-based lending.
Transactions between businesses have been eliminated in the Corporation's
consolidated statements of income.
Certain amounts for 2000 were reclassified to conform with the 2001
classifications.
New Accounting Standards
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations." SFAS No. 141 requires that the purchase method of accounting be
used for all business combinations initiated after June 30, 2001. This statement
specifies that certain acquired intangible assets in a business combination be
recognized as assets separately from goodwill and existing intangible assets and
goodwill be evaluated for these new separation requirements. Goodwill and
intangible assets determined to have indefinite useful lives will not be
amortized. The Corporation is evaluating but has not yet determined the impact
that this statement will have on its consolidated financial position or results
of operations.
In June 2001, SFAS No. 142, "Goodwill and Other Intangible Assets" was issued
by the FASB. SFAS No. 142 changes the accounting for goodwill from an
amortization method to an impairment-only approach. Amortization of goodwill,
including goodwill recorded in past business combinations, will cease upon
adoption of this statement. The Corporation is required to implement SFAS No.
142 on January 1, 2002. The Corporation is evaluating but has not yet determined
the impact that this statement will have on its consolidated financial position
or results of operations.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." This statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. The Corporation is required to implement SFAS
No. 143 on January 1, 2002. Management does not expect this statement to have a
material impact on GM's consolidated financial position or results of
operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." This statement supercedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." The statement retains the previously existing accounting
requirements related to the recognition and measurement of the impairment of
long-lived assets to be held and used while expanding the measurement
requirements of long-lived assets to be disposed of by sale to include
discontinued operations. It also expands the previously existing reporting
requirements for discontinued operations to include a component of an entity
that either has been disposed of or is classified as held for sale. The
Corporation is required to implement SFAS No. 144 on January 1, 2002. Management
does not expect this statement to have a material impact on GM's consolidated
financial position or results of operations.
Note 2. Inventories
Inventories included the following for Automotive, Communications Services,
and Other Operations (dollars in millions):
Sept. 30, Dec. 31, Sept. 30,
2001 2000 2000
-------- -------- --------
Productive material, work in process,
and supplies $5,457 $5,555 $6,121
Finished product, service parts, etc. 6,898 7,319 7,062
------ ------ ------
Total inventories at FIFO 12,355 12,874 13,183
Less LIFO allowance 1,847 1,929 1,883
------ ------ ------
Total inventories (less allowances) $10,508 $10,945 $11,300
====== ====== ======
- 7 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
Note 3. Contingent Matters
Litigation is subject to uncertainties and the outcome of individual
litigated matters is not predictable with assurance. Various legal actions,
governmental investigations, claims, and proceedings are pending against the
Corporation, including those arising out of alleged product defects;
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. In
connection with the disposition by Hughes of its satellite systems manufacturing
businesses to The Boeing Company in 2000, there are disputes regarding the
purchase price and other matters that may result in payments by Hughes to The
Boeing Company that could be material to Hughes. 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, 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 September 30, 2001.
After discussion with counsel, it is the opinion of management that such
liability is not expected to have a material adverse effect on the Corporation's
consolidated financial condition or results of operations.
Note 4. Preferred Securities of Subsidiary Trusts
On April 2, 2001, GM redeemed the Series G Trust's sole assets causing the
Series G Trust to redeem the approximately 5 million outstanding Series G 9.87%
Trust Originated Preferred Securitiessm (TOPrSsm). The Series G TOPrS were
redeemed at a price of $25 per share plus accrued and unpaid dividends of $0.42
per share. Also on April 2, 2001, GM redeemed the approximately 5 million
outstanding Series G depositary shares, each of which represents a one-fourth
interest in a GM Series G 9.12% Preference Share, at a price of $25 per share
plus accrued and unpaid dividends of $0.59 per share. The securities together
had a total face value of approximately $252 million.
sm "Trust Originated Preferred Securities" and "TOPrS" are service trademarks of
Merrill Lynch & Co.
Note 5. Comprehensive Income
GM's total comprehensive income (loss) was as follows (dollars in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- -------------------
2001 2000 2001 2000
---- ---- ---- ----
Net income (loss) $(368) $829 $346 $4,363
Other comprehensive (loss) (392) (171) (1,117) (510)
--- --- ----- -----
Total $(760) $658 $(771) $3,853
=== === === =====
Note 6. Earnings Per Share Attributable to Common Stocks
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 impact of potential common shares, unless
the inclusion of the 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):
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- -------------------
2001 2000 2001 2000
---- ---- ---- ----
Earnings (losses) attributable
to common stocks
(Losses) earnings attributable to
$1-2/3 par value $(223) $878 $647 $4,424
(Losses) attributable to Class H $(170) $(76) $(377) $(144)
(Losses) earnings attributable to GM $1-2/3 par value common stock for the
period represent the earnings attributable to all GM common stocks for the
period, reduced by the Available Separate Consolidated Net Income (ASCNI) of
Hughes for the respective period.
- 8 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
Note 6. Earnings Per Share Attributable to Common Stocks (continued)
(Losses) attributable to GM Class H common stock represent the ASCNI of
Hughes, excluding the effects of GM purchase accounting adjustments arising from
GM's acquisition of Hughes Aircraft Company (HAC), reduced by the amount of
dividends accrued on the Series A Preferred Stock of Hughes (as an equivalent
measure of the effect that GM's payment of dividends on the GM Series H 6.25%
Automatically Convertible Preference Stock would have if paid by Hughes). The
calculated losses 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 (877
million and 874 million during the three months ended September 30, 2001 and
2000, respectively, and 876 million and 618 million during the nine months ended
September 30, 2001 and 2000, respectively), 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 1.3 billion for the third quarters of 2001 and 2000, and for the nine
month periods ended September 30, 2001 and 2000.
The reconciliation of the amounts used in the basic and diluted earnings per
share computations was as follows (dollars in millions except per share
amounts):
- 9 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
Note 6. Earnings Per Share Attributable to Common Stocks (concluded)
$1-2/3 Par Value Common Stock Class H Common Stock
------------------------------ ----------------------------
Per Share Per Share
Income Shares Amount ASCNI Shares Amount
------ ------ ------ ----- ------ ------
Three Months Ended September 30, 2001
Net (loss) $(215) $(153)
Less:Dividends on preference
stocks 8 17
--- ---
Basic EPS
(Loss) attributable to
common stocks (223) 551 $(0.41) (170) 877 $(0.19)
==== ====
Effect of Dilutive Securities
Assumed exercise of
dilutive stock options - - - -
--- --- --- ---
Diluted EPS
Adjusted (loss) attributable
to common stocks $(223) 551 $(0.41) $(170) 877 $(0.19)
=== === ==== === === ====
Three Months Ended September 30, 2000
Net income (loss) $889 $(60)
Less:Dividends on preference
stocks 11 16
--- --
Basic EPS
Income (loss) attributable
to common stocks 878 559 $1.57 (76) 874 $(0.09)
==== ====
Effect of Dilutive Securities
Assumed exercise of dilutive
stock options - 8 - -
--- --- -- ---
Diluted EPS
Adjusted income (loss)
attributable to
common stocks $878 567 $1.55 $(76) 874 $(0.09)
=== === ==== == === ====
Nine Months Ended September 30, 2001
Net income (loss) $674 $(328)
Less:Dividends on preference
stocks 27 49
--- ---
Basic EPS
Income (loss) attributable
to common stocks 647 549 $1.18 (377) 876 $(0.43)
==== ====
Effect of Dilutive Securities
Assumed exercise of
dilutive stock options - 7 - -
--- --- --- ---
Diluted EPS
Adjusted income (loss)
attributable to
common stocks $647 556 $1.16 $(377) 876 $(0.43)
=== === ==== === === ====
Nine Months Ended September 30, 2000
Net income (loss) $4,472 $(109)
Less:Dividends on
preference stocks 48 35
----- ---
Basic EPS
Income (loss) attributable
to common stocks 4,424 589 $7.51 (144) 618 $(0.23)
==== ====
Effect of Dilutive Securities
Assumed exercise of
dilutive stock options - 11 - -
----- --- --- ---
Diluted EPS
Adjusted income (loss)
attributable to
common stocks $4,424 600 $7.37 $(144) 618 $(0.23)
===== === ==== === === ====
Note 7. Depreciation and Amortization
Depreciation and amortization included in cost of sales and other expenses
for Automotive, Communications Services, and Other Operations was as follows
(dollars in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -------------------
2001 2000 2001 2000
---- ---- ---- ----
Depreciation $1,123 $1,002 $3,291 $2,964
Amortization of special tools 609 537 1,747 1,852
Amortization of intangible assets 80 57 238 209
----- ----- ----- -----
Total $1,812 $1,596 $5,276 $5,025
===== ===== ===== =====
- 10 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
Note 8. Segment Reporting
GM's reportable operating segments within its Automotive, Communications
Services, and Other Operations (ACO) business consist of General Motors
Automotive (GMA) (which is comprised of four regions: GM North America (GMNA),
GM Europe (GME), GM Latin America/Africa/Mid-East (GMLAAM), and GM Asia Pacific
(GMAP)), Hughes, and Other. GM's reportable operating segments within its
Financing and Insurance Operations (FIO) business consist of GMAC and Other.
Selected information regarding GM's reportable operating segments were as
follows (dollars in millions):
Other
GMNA GME GMLAAM GMAP GMA Hughes Other Total ACO GMAC Financing Total FIO
---- --- ------ ---- --- ------ ----- --------- ---- --------- ---------
For the Three Months Ended
September 30, 2001
Net sales and revenues:
External customers $26,635 $4,987 $1,258 $818 $33,698 $2,108 $491 $36,297 $6,116 $62 $6,178
Intersegment (366) 130 54 182 - 5 (5) - - - -
------ ----- ----- ----- ------ ----- --- ------ ----- -- -----
Total net sales and
revenues $26,269 $5,117 $1,312 $1,000 $33,698 $2,113 $486 $36,297 $6,116 $62 $6,178
====== ===== ===== ===== ====== ===== === ====== ===== == =====
Interest income (a) $303 $95 $(4) $4 $398 $9 $(261) $146 $602 $(89) $513
Interest expense $311 $104 $27 $2 $444 $41 $(269) $216 $1,686 $66 $1,752
Net income (loss) $251 $(287) $(6) $60 $18 $(227)(b) $(595) $(804) $437 $(1) $436
Segment assets $91,767 $18,316 $4,139 $870 $115,092 $19,068 (c) $(942) $133,218 $180,384 $1,242 $181,626
For the Three Months Ended
September 30, 2000
Net sales and revenues:
External customers $26,566 $5,115 $1,471 $834 $33,986 $2,082 $534 $36,602 $6,067 $21 $6,088
Intersegment (395) 224 53 118 - 6 (6) - - - -
------ ----- ----- --- ------ ----- --- ------ ----- -- -----
Total net sales and
revenues $26,171 $5,339 $1,524 $952 $33,986 $2,088 $528 $36,602 $6,067 $21 $6,088
====== ===== ===== === ====== ===== === ====== ===== == =====
Interest income (a) $157 $105 $5 $3 $270 $21 $(153) $138 $587 $(87) $500
Interest expense $323 $100 $15 $1 $439 $66 $(295) $210 $2,158 $112 $2,270
Net income (loss) $728 $(181) $31 $(10) $568 $(88)(b) $(57) $423 $401 $5 $406
Segment assets $91,585 $18,596 $4,580 $1,060 $115,821 $20,248 (c) $(593) $135,476 $160,254 $1,515 $161,769
(a) Interest income is included in net sales and revenues from external
customers.
(b) The amount reported for Hughes excludes amortization of GM purchase
accounting adjustments related to GM's acquisition of HAC of $1 million
and $5 million for 2001 and 2000, respectively.
(c) The amount reported for Hughes excludes the unamortized GM purchase
accounting adjustments of approximately $57 million and $390 million, at
September 30, 2001 and 2000, respectively, related to GM's acquisition of
HAC.
- 11-
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
Note 8. Segment Reporting (concluded)
Other
GMNA GME GMLAAM GMAP GMA Hughes Other Total ACO GMAC Financing Total FIO
---- --- ------ ---- --- ------ ----- --------- ---- --------- ---------
For the Nine Months Ended
September 30, 2001
Net sales and revenues:
External customers $80,824 $16,974 $4,311 $2,583 $104,692 $6,016 $1,484 $112,192 $18,907 $211 $19,118
Intersegment (1,332) 642 135 555 - 17 (17) - - - -
------ ------ ----- ----- ------- ----- ----- ------- ------ --- ------
Total net sales and
revenues $79,492 $17,616 $4,446 $3,138 $104,692 $6,033 $1,467 $112,192 $18,907 $211 $19,118
====== ====== ===== ===== ======= ===== ===== ======= ====== === ======
Interest income (a) $865 $279 $(4) $12 $1,152 $52 $(736) $468 $1,905 $(319) $1,586
Interest expense $1,016 $243 $66 $5 $1,330 $134 $(935) $529 $5,725 $184 $5,909
Net income (loss) $878 $(525) $30 $(82) $301 $(487)(b) $(796) $(982) $1,351 $(23) $1,328
For the Nine Months Ended
September 30, 2000
Net sales and revenues:
External customers $87,094 $18,593 $4,142 $2,357 $112,186 $6,440 $2,041 $120,667 $17,443 $181 $17,624
Intersegment (1,110) 722 140 248 - 26 (26) - - - -
------ ------ ----- ----- ------- ----- ----- ------- ------ --- ------
Total net sales and
revenues $85,984 $19,315 $4,282 $2,605 $112,186 $6,466 $2,015 $120,667 $17,443 $181 $17,624
====== ====== ===== ===== ======= ===== ===== ======= ====== === ======
Interest income (a) $418 $319 $19 $9 $765 $58 $(367) $456 $1,609 $(322) $1,287
Interest expense $879 $293 $77 $2 $1,251 $169 $(772) $648 $6,095 $323 $6,418
Net income (loss) $3,428 $206 $42 $(126) $3,550 $(229)(b) $(162) $3,159 $1,193 $11 $1,204
(a) Interest income is included in net sales and revenues from external
customers.
(b) The amount reported for Hughes excludes amortization of GM purchase
accounting adjustments related to GM's acquisition of HAC of $3 million
and $16 million for 2001 and 2000, respectively.
* * * * * *
- 12-
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - concluded
(Unaudited)
Note 9. Subsequent Events
On October 28, 2001, GM and its subsidiary Hughes together with EchoStar
Communications Corporation (EchoStar) announced the signing of definitive
agreements that provide for the spin-off of Hughes from GM and the merger of
Hughes with EchoStar.
The spin-off of Hughes from GM would result in current holders of GM Class
H common stock receiving one share of new Hughes Class C common stock in
exchange for each share of GM Class H common stock held prior to the spin-off.
The merger of Hughes and EchoStar would result in Hughes being the surviving
entity and taking the name EchoStar Communications Corp. Holders of Class A
EchoStar common stock prior to the merger would receive about 1.3699 shares of
stock of the merged entity in exchange for each share of Class A EchoStar common
stock held prior to the merger.
As part of the transaction, GM would receive up to $4.2 billion in cash for
the reduction of its approximate 30% retained economic interest in Hughes to
about 11% immediately preceding the merger. In addition GM plans to seek to
exchange up to 100 million shares of GM Class H common stock (or after the
transaction 100 million shares of new EchoStar common stock) for GM outstanding
debt, which would further improve GM's net liquidity position. Following these
transactions, GM expects to retain an approximate 3 to 5% interest in the merged
entity.
The transaction is subject to a number of conditions, including approval by a
majority of each class of GM shareholders - GM $1-2/3 and GM Class H - voting
both separately as distinct classes and also together as a single class. The
proposed transaction also is subject to anti-trust clearance and approval by the
Federal Communications Commission. The transaction is also contingent upon the
receipt of a favorable ruling from the Internal Revenue Service that the
separation of Hughes from GM will qualify as tax-free to GM and its stockholders
for U.S. Federal Income Tax purposes. The transaction is currently expected to
close in the second half of 2002.
In connection with the disposition by Hughes of its defense electronics
business to Raytheon Company in 1997, there were disputes regarding the purchase
price adjustments. On October 16, 2001, Hughes reached a settlement of the
dispute with Raytheon. GM's consolidated financial statements include a charge
of $474 million for the quarter ended September 30, 2001 related to this
settlement.
-13-
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following management's discussion and analysis of financial condition and
results of operations (MD&A) should be read in conjunction with the December 31,
2000 consolidated financial statements and notes thereto along with the MD&A
included in General Motors Corporation's (the "Corporation" or "GM") 2000 Annual
Report on Form 10-K, and all other GM, Hughes Electronics Corporation (Hughes),
and General Motors Acceptance Corporation (GMAC) filings with the Securities and
Exchange Commission. All earnings per share amounts included in the MD&A are
reported as diluted.
GM presents separate financial information for the following businesses:
Automotive, Communications Services, and Other Operations (ACO) and Financing
and Insurance Operations.
GM's reportable operating segments within its Automotive, Communications
Services, and Other Operations business consist of:
. GM Automotive (GMA), which is comprised of four regions: GM North America
(GMNA), GM Europe (GME), GM Latin America/Africa/Mid-East (GMLAAM), and GM
Asia Pacific (GMAP);
. Hughes, which includes activities relating to digital entertainment,
information and communications services, and satellite-based private
business networks; and
. Other, which includes the design, manufacturing, and marketing of
locomotives and heavy-duty transmissions, the elimination of intersegment
transactions, certain non-segment specific revenues and expenditures, and
certain corporate activities.
GM's reportable operating segments within its Financing and Insurance
Operations business consist of GMAC and Other Financing, which includes
financing entities operating in the U.S., Canada, Brazil, Germany, Sweden, and
Mexico that are not associated with 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 U.S. (GAAP) and certain expenses (primarily
certain U.S. taxes related to non-U.S. operations) were included in the
Automotive, Communications Services, and Other Operations' Other segment. The
financial results represent the historical information used by management for
internal decision making purposes; therefore, other data prepared to represent
the way in which the business will operate in the future, or data prepared on a
GAAP basis, may be materially different.
RESULTS OF OPERATIONS
For the third quarter of 2001, the Corporation's consolidated net loss was
$368 million, or $(0.41) per share of GM $1-2/3 par value common stock, compared
with consolidated net income of $829 million, or $1.55 per share of GM $1-2/3
par value common stock for the third quarter of 2000. GM's consolidated net
income for the nine months ended September 30, 2001 was $346 million, or $1.16
per share of GM $1-2/3 par value common stock, compared with $4.4 billion, or
$7.37 per share of GM $1-2/3 par value common stock for the nine months ended
September 30, 2000.
The consolidated net loss for the third quarter 2001 included special items
on an after-tax basis. These items are detailed in the schedule on page 15 and
represent the following: (1) The Ste. Therese charge at GMNA relates to the
previously announced closing of the Ste. Therese, Quebec assembly plant. (2) The
Raytheon settlement included in Other ACO relates to Hughes' settlement with the
Raytheon Company on a purchase price adjustment related to Raytheon's 1997
merger with Hughes Defense. (3) The gain on sale of Thomson relates to Hughes'
sale of 4.1 million shares of Thomson Multimedia common stock. (4) The
SkyPerfecTV! writedown relates to Hughes' non-cash charge from the revaluation
of its investment. (5) The severance charge relates to Hughes' 10% company-wide
workforce reduction in the U.S. (6) The DIRECTV Japan adjustment relates to a
favorable adjustment to the expected costs associated with the shutdown of
Hughes' DIRECTV Japan business. GM's consolidated net income for the nine months
ended September 30, 2001 also included special items related to GM's share of
severance payments and asset impairments that were part of the restructuring of
its affiliate Isuzu Motors Ltd. in the second quarter and the net impact of
initially adopting SFAS No. 133, "Accounting for Derivatives and Hedging
Activities" in the first quarter. There were no special items for the third
quarter or first nine months of 2000.
- 14 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
List of Special Items - After Tax
(dollars in millions)
Total Other
GMNA GME GMLAAM GMAP GMA Hughes Other Total ACO GMAC Financing Total GM
---- --- ------ ---- --- ------ ----- --------- ---- --------- --------
For the Three Months Ended September 30, 2001
Reported Net Income (Loss) $251 $(287) $(6) $60 $18 $(227) $(595) $(804) $437 $(1) $(368)
Ste. Therese Charge 194 - - - 194 - - 194 - - 194
Raytheon Settlement - - - - - - 474 474 - - 474
Gain on Sale of Thomson - - - - - (67) - (67) - - (67)
SkyPerfecTV! Writedown - - - - - 133 - 133 - - 133
Severance Charge - - - - - 40 - 40 - - 40
DIRECTV Japan Adjustment - - - - - (21) - (21) - - (21)
--- --- --- --- --- ---- --- -- --- -- ---
Adjusted Net Income (Loss) $445 $(287) $(6) $60 $212 $(142) $(121) $(51) $437 $(1) $385
=== === = == === === === == === = ===
For the Nine Months Ended September 30, 2001
Reported Net Income (Loss) $878 $(525) $30 $(82) $301 $(487) $(796) $(982) $1,351 $(23) $346
Ste. Therese Charge 194 - - - 194 - - 194 - - 194
Raytheon Settlement - - - - - - 474 474 - - 474
Gain on Sale of Thomson - - - - - (67) - (67) - - (67)
SkyPerfecTV! Writedown - - - - - 133 - 133 - - 133
Severance Charge - - - - - 40 - 40 - - 40
DIRECTV Japan Adjustment - - - - - (21) - (21) - - (21)
Isuzu Restructuring - - - 133 133 - - 133 - - 133
SFAS No. 133 14 (2) 1 1 14 8 - 22 (34) - (12)
----- --- --- --- --- --- --- -- ----- --- -----
Adjusted Net Income(Loss) $1,086 $(527) $31 $52 $642 $(394) $(322) $(74) $1,317 $(23) $1,220
===== === == == === === === == ===== == =====
See Results of Operations section on page 14 for further discussion of these
items.
- 15 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Vehicle Unit Deliveries of Cars and Trucks
Three Months Ended September 30,
-----------------------------------------------------
2001 2000
------------------------ -----------------------
GM as GM as
a % of a % of
Industry GM Industry Industry GM Industry
-------- --- -------- -------- --- --------
(units in thousands)
GMNA
United States
Cars 2,042 544 26.6% 2,297 670 29.2%
Trucks 2,126 608 28.6% 2,257 579 25.7%
----- ----- ----- -----
Total United States 4,168 1,152 27.7% 4,554 1,249 27.4%
Canada, Mexico, and Other 687 167 24.2% 695 186 26.8%
----- ----- ----- -----
Total GMNA 4,855 1,319 27.2% 5,249 1,435 27.3%
GME 4,570 414 9.1% 4,697 413 8.8%
GMLAAM 920 159 17.3% 950 159 16.8%
GMAP 3,147 136 4.3% 3,260 125 3.8%
------ ----- ------ -----
Total Worldwide 13,492 2,028 15.0% 14,156 2,132 15.1%
====== ===== ====== =====
Nine Months Ended September 30,
-----------------------------------------------------
2001 2000
------------------------ -----------------------
GM as GM as
a % of a % of
Industry GM Industry Industry GM Industry
-------- --- -------- -------- --- --------
(units in thousands)
GMNA
United States
Cars 6,455 1,757 27.2% 6,974 2,009 28.8%
Trucks 6,584 1,866 28.3% 6,940 1,878 27.1%
------ ----- ------ -----
Total United States 13,039 3,623 27.8% 13,914 3,887 27.9%
Canada, Mexico, and
Other 2,060 515 25.0% 2,054 541 26.3%
------ ----- ------ ------
Total GMNA 15,099 4,138 27.4% 15,968 4,428 27.7%
GME 15,150 1,415 9.3% 15,710 1,460 9.3%
GMLAAM 2,878 497 17.3% 2,661 441 16.6%
GMAP 9,748 381 3.9% 9,781 348 3.6%
------ ----- ------ ------
Total Worldwide 42,875 6,431 15.0% 44,120 6,677 15.1%
====== ===== ====== =====
Wholesale Sales
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2001 2000 2001 2000
-------- -------- -------- -------
(units in thousands)
GMNA
Cars 586 703 1,825 2,240
Trucks 651 625 1,999 2,153
----- ----- ----- -----
Total GMNA 1,237 1,328 3,824 4,393
----- ----- ----- -----
GME
Cars 375 367 1,289 1,332
Trucks 21 29 70 102
--- --- ----- -----
Total GME 396 396 1,359 1,434
--- --- ----- -----
GMLAAM
Cars 106 131 344 328
Trucks 48 50 156 142
--- --- --- ---
Total GMLAAM 154 181 500 470
--- --- --- ---
GMAP
Cars 50 49 154 130
Trucks 71 85 206 215
--- --- --- ---
Total GMAP 121 134 360 345
--- --- --- ---
Total Worldwide 1,908 2,039 6,043 6,642
===== ===== ===== =====
- 16 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
GMA Financial Review
GMA's income and margin, adjusted to exclude special items (adjusted income
and margin), was $212 million and 0.6% on net sales and revenues of $33.7
billion for the third quarter of 2001. This compares with income of $568 million
and a net margin of 1.7% on net sales and revenues of $34.0 billion for the
prior year quarter. The decrease in adjusted income from the prior year quarter
was primarily due to a decrease in wholesale sales volume in North America and
pricing pressures in both North America and Europe. These unfavorable conditions
were partially offset by favorable mix and cost structure improvements. These
factors, in addition to overall unfavorable mix for the nine months ended
September 30, 2001, contributed to a decrease in adjusted income and margin to
$642 million and 0.6% on net sales and revenues of $104.7 billion compared with
income of $3.6 billion and a net margin of 3.2% on net sales and revenues of
$112.2 billion for the prior year nine-month period.
GMNA's adjusted income was $445 million for the third quarter of 2001,
compared with $728 million for the prior year quarter. Adjusted income for the
nine months ended September 30, 2001 totaled $1.1 billion compared with $3.4
billion for the prior year nine-month period. The decrease in GMNA's third
quarter and year-to-date 2001 adjusted income was primarily the result of lower
wholesale sales volumes and unfavorable net price, partially offset by favorable
mix and aggressive cost containment due to manufacturing performance
efficiencies, material cost savings, and engineering productivity. Net price,
which comprehends the percent increase/(decrease) a customer pays in the current
period for the same comparably equipped vehicle produced in the previous year's
period, was unfavorable for the quarter at (2.1)% year-over-year. This decrease
includes a dealer stock adjustment of (0.6)% on units in dealer inventory on
September 30, 2001 related to the Keep America Rolling sales incentive which
offers interest-free automotive financing on U.S. models for retail vehicle
customers.
GME's loss was $287 million for the third quarter of 2001, compared with a
loss of $181 million for the prior year quarter. This increase in the loss from
the prior year quarter was primarily due to a continued unfavorable shift in
sales mix from larger, more profitable vehicles to the smaller, less profitable
entries and a continued increase in competitive pricing pressure. These factors,
in addition to an overall decrease in wholesale sales volumes for the nine
months ended September 30, 2001, contributed to an adjusted loss of $527 million
compared with income of $206 million for the prior year nine-month period.
GMLAAM's loss was $6 million for the third quarter of 2001, compared with
income of $31 million for the prior year quarter. Adjusted income for the nine
months ended September 30, 2001 totaled $31 million compared with $42 million
for the prior year nine-month period. The decrease in third quarter and
year-to-date 2001 adjusted earnings was primarily due to increases in material
and manufacturing costs coupled with mix deterioration. These unfavorable items
were partially offset by nominal price increases, as well as increases in
wholesale sales volumes in the nine months ended September 30, 2001.
GMAP's income for the third quarter of 2001 was $60 million compared with a
loss of $10 million for the prior year quarter. The increase in third quarter
earnings was primarily due to equity income improvements from several joint
ventures in the region, as well as slightly favorable pricing and decreases in
overall costs. These favorable conditions also contributed to adjusted income
for the nine months ended September 30, 2001 totaling $52 million compared with
a loss of $126 million for the prior year nine-month period.
Hughes Financial Review
Total net sales and revenues were $2.1 billion and $6.0 billion in the third
quarter and first nine months of 2001, respectively, compared with $2.1 billion
and $6.5 billion in the comparable periods in 2000. The decrease in year-to-date
2001 net sales and revenues resulted from decreased revenues at PanAmSat
Corporation (PanAmSat) and Hughes Network Systems (HNS), as well as the sale of
the satellite systems manufacturing businesses (Satellite Businesses) to The
Boeing Company on October 6, 2000. The decrease in net sales and revenues at
PanAmSat was primarily due to a decline of new outright sales and sales-type
lease transactions executed during the first nine months of 2001 as compared to
the first nine months of 2000. The decrease in net sales and revenues at HNS was
primarily due to decreased shipments of DIRECTV receiving equipment due
primarily to DIRECTV completing the conversion of PRIMESTAR By DIRECTV customers
to the high-power DIRECTV service in 2000. These decreases were partially offset
by an increase in net sales and revenues at the Direct-To-Home businesses that
resulted from the addition of approximately 1.7 million net new subscribers in
the United States and Latin America since September 30, 2000.
- 17 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Hughes Financial Review (concluded)
Hughes' adjusted loss was $142 million for the third quarter of 2001,
compared with a loss of $88 million for the prior year quarter. The adjusted
loss for the nine months ended September 30, 2001 totaled $394 million compared
with a loss of $229 million for the prior year nine-month period. The increase
in the third quarter and year-to-date 2001 adjusted losses was primarily due
increased costs associated with the rollout of new DIRECTWAY services at HNS,
increased depreciation and amortization expense due to capital expenditures for
property and satellites since the third quarter of 2000 and a change in the
useful life of the Galaxy VIII-i satellite that resulted from the failure of its
primary propulsion system during the third quarter of 2000, the sale of the
Satellite Businesses in October 2000, and the consolidation of Telocity
Delaware, Inc. since its acquisition in April 2001. These increases in expenses
were partially offset by a decrease in interest expense due to a net decrease in
outstanding borrowings of $1.3 billion since September 30, 2000 and the
write-off of the discontinued DIRECTV Japan business in 2000. The increase in
adjusted loss for the first nine months of 2001 was also impacted by a decrease
in income tax benefit of $137 million due to additional tax settlements and
foreign tax credits received in 2000, as well as the additional tax benefit in
2000 associated with the write-off of Hughes' investment in DIRECTV Japan.
On October 28, 2001, GM and its subsidiary Hughes together with EchoStar
Communications Corporation (EchoStar) announced the signing of definitive
agreements that, subject to stockholder approval and regulatory clearance,
provide for the spin-off of Hughes from GM and the merger of Hughes with
EchoStar. See Note 9 - Subsequent Events in the Notes of Consolidated
Financial Statements for further details of this transaction.
GMAC Financial Review
GMAC's income was $437 million for the third quarter of 2001, compared with
$401 million for the prior year quarter. Adjusted income for the nine months
ended September 30, 2001 was $1.3 billion compared with $1.2 billion for the
prior year nine-month period. Income from automotive and other financing
operations totaled $310 million for the third quarter of 2001, compared with
$273 million for the prior year quarter. The strong results can be attributed to
higher asset levels and the positive impact of lower short term interest rates,
partially offset by higher credit losses and lower off-lease residual values.
Income from insurance operations totaled $49 million for the third quarter of
2001, compared with $50 million for the prior year quarter. The decrease was
primarily due to lower investment income and capital gains reflecting general
weakness in the equity markets partially offset by improved underwriting
results. Income from mortgage operations totaled $78 million for the third
quarter of 2001, virtually unchanged from the same quarter in 2000. This was
primarily due to a significant increase in mortgage originations largely offset
by intangibles impairment from higher levels of mortgage prepayments and the
revaluation of retained interest securities from securitizations.
LIQUIDITY AND CAPITAL RESOURCES
Automotive, Communications Services, and Other Operations
---------------------------------------------------------
At September 30, 2001, cash, marketable securities, and $3.0 billion of
assets of the Voluntary Employees' Beneficiary Association (VEBA) trust invested
in fixed-income securities totaled $11.7 billion, compared with $13.3 billion at
December 31, 2000 and $13.5 billion at September 30, 2000. The decrease from
December 31, 2000 was primarily due to GM's purchase of an additional 10% equity
stake in Suzuki, an increase in net capital expenditures, and the redemption of
preferred securities. These items were partially offset by working capital
improvements. Total assets in the VEBA trust used to pre-fund part of GM's other
postretirement benefits liability approximated $4.9 billion at September 30,
2001, compared with $6.7 billion at December 31, 2000 and September 30, 2000,
respectively. GM previously indicated that it had a goal of maintaining $13.0
billion of cash and marketable securities in order to continue funding product
development programs throughout the next downturn in the business cycle. This
$13.0 billion target includes cash to pay certain costs that were pre-funded in
part by VEBA contributions.
Long-term debt was $9.3 billion at September 30, 2001, compared with $7.4
billion at December 31, 2000 and $8.2 billion at September 30, 2000. The ratio
of long-term debt to long-term debt and GM's net assets of Automotive,
Communications Services, and Other Operations was 39.5% at September 30, 2001,
compared with 30.8% at December 31, 2000 and 30.9% at September 30, 2000. The
ratio of long-term debt and short-term loans payable to the total of this debt
and GM's net assets of Automotive, Communications Services, and Other Operations
was 43.7% at September 30, 2001, compared with 36.6% at December 31, 2000 and
38.6% at September 30, 2000.
Net liquidity, calculated as cash and marketable securities less the total
of loans payable and long-term debt, was $(2.3) billion at September 30, 2001,
compared with $662 million at December 31, 2000 and $(1.0) million at
September 30, 2000.
- 18 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Automotive, Communications Services, and Other Operations (concluded)
---------------------------------------------------------------------
In October 2001, GM's credit rating was downgraded by Standard & Poor's,
Fitch, Inc., and Moody's Investors Service. Although the downgrades diminish
GM's access to the commercial paper market, the Corporation's overall financial
flexibility continues to be strong as a result of the Corporation's cash
position, ample contractually committed credit facilities and exceptional
capital markets access.
Financing and Insurance Operations
----------------------------------
At September 30, 2001, GMAC owned assets and serviced automotive receivables
totaling $205.5 billion, compared with $185.6 billion at December 31, 2000 and
$174.9 billion at September 30, 2000. The increase from December 31, 2000 was
primarily the result of increases in cash and cash equivalents, serviced retail
receivables, real-estate mortgages held for sale, other assets, commercial and
other loan receivables, mortgage lending receivables, and due and deferred from
receivable sales. These increases were partially offset by a decline in serviced
wholesale receivables, operating lease assets, receivables due from GM, mortgage
loans held for investment, and factored receivables.
Consolidated automotive and commercial finance receivables serviced by GMAC,
including sold receivables, totaled $117.7 billion at September 30, 2001,
compared with $112.5 billion at December 31, 2000 and $104.9 billion at
September 30, 2000. The increase from December 31, 2000 was primarily the result
of a $7.5 billion increase in serviced retail receivables, a $1.3 billion
increase in commercial and other loan receivables, partially offset by a $3.4
billion decrease in serviced wholesale receivables. Continued GM-sponsored
retail financing incentives contributed to the rise in serviced retail
receivables. The increase in commercial and other loan receivables was primarily
attributable to increases in secured notes as well as continued growth at
Commercial Credit LLC and GMAC Business Credit LLC. The decrease in serviced
wholesale receivables was due to reduced dealer inventory levels at September
30, 2001 compared with December 31, 2000. The on-balance sheet finance
receivables decreased from $93.0 billion at December 30, 2000 to $90.6 billion
at September 30, 2001 primarily due to an increase in securitization activity.
At September 30, 2001, GMAC's total borrowings were $143.2 billion, compared
with $133.4 billion at December 31, 2000 and $127.7 billion at September 30,
2000. GMAC's ratio of total debt to total stockholder's equity at both September
30, 2001 and December 31, 2000 was 9.5:1 compared with 9.4:1 at September 30,
2000.
In October 2001, GMAC's credit rating was downgraded by Standard & Poor's and
Fitch, Inc while Moody's Investors Service affirmed the company's rating. GMAC
has proven its sound operating and financial position, the high quality and
liquidity of its assets, the importance of its auto finance operations to GM,
and the relatively strong position of the finance company's creditors. GMAC has
operated with sound levels of alternative liquidity to support both its
debt-paying ability and its ongoing business operations through market stresses.
The company expects to remain positioned to operate as a prudent finance
company, with more stable business metrics through economic cycles.
Book Value Per Share
Book value per share is determined based on the liquidation rights of the
various classes of common stock. Book value per share of GM $1-2/3 par value
common stock was $37.44 at September 30, 2001, compared with $39.36 at December
31, 2000 and $40.39 at September 30, 2000. Book value per share of GM Class H
common stock, was $7.49 at September 30, 2001, compared with $7.87 at December
31, 2000 and $8.08 at September 30, 2000.
Dividends
Dividends may be paid on common stocks only when, as, and if declared by the
GM Board in its sole discretion. The amount available for the payment of
dividends on each class of common stock will be reduced on occasion by dividends
paid on that class and will be adjusted on occasion for changes to the amount of
surplus attributed to the class resulting from the repurchase or issuance of
shares of that class.
GM's policy is to distribute dividends on its GM $1-2/3 par value common
stock based on the outlook and indicated capital needs of the business. On
August 7, 2001, the GM Board declared a quarterly cash dividend of $0.50 per
share on GM $1-2/3 par value common stock, paid September 10, 2001, to holders
of record on August 17, 2001. With respect to GM Class H common stock, the GM
Board determined that it will not pay any cash dividends at this time in order
to allow the earnings of Hughes to be retained for investment in its business.
A quarterly dividend of $8.7793 per share for the GM Series H 6.25%
Automatically Convertible Preference Stock was paid on November 1, 2001, to the
sole holder of record on October 1, 2001.
- 19 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Employment and Payrolls
Worldwide employment at September 30, (in thousands)
2001 2000
---- ----
GMNA 201 212
GME 74 90
GMLAAM 24 24
GMAP 11 11
GMAC 29 27
Hughes 11 18
Other 13 13
--- ---
Total employees 363 395
=== ===
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2001 2000 2001 2000
---- ---- ---- ----
Worldwide payrolls - (in billions) $4.9 $5.2 $15.0 $16.6
=== === ==== ====
New Accounting Standards
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations." SFAS No. 141 requires that the purchase method of accounting be
used for all business combinations initiated after June 30, 2001. This statement
specifies that certain acquired intangible assets in a business combination be
recognized as assets separately from goodwill and existing intangible assets and
goodwill be evaluated for these new separation requirements. Goodwill and
intangible assets determined to have indefinite useful lives will not be
amortized. The Corporation is evaluating but has not yet determined the impact
that this statement will have on its consolidated financial position or results
of operations.
In June 2001, SFAS No. 142, "Goodwill and Other Intangible Assets" was issued
by the FASB. SFAS No. 142 changes the accounting for goodwill from an
amortization method to an impairment-only approach. Amortization of goodwill,
including goodwill recorded in past business combinations, will cease upon
adoption of this statement. The Corporation is required to implement SFAS No.
142 on January 1, 2002. The Corporation is evaluating but has not yet determined
the impact that this statement will have on its consolidated financial position
or results of operations.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." This statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. The Corporation is required to implement SFAS
No. 143 on January 1, 2002. Management does not expect this statement to have a
material impact on GM's consolidated financial position or results of
operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." This statement supercedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." The statement retains the previously existing accounting
requirements related to the recognition and measurement of the impairment of
long-lived assets to be held and used while expanding the measurement
requirements of long-lived assets to be disposed of by sale to include
discontinued operations. It also expands on the previously existing reporting
requirements for discontinued operations to include a component of an entity
that either has been disposed of or is classified as held for sale. The
Corporation is required to implement SFAS No. 144 on January 1, 2002. Management
does not expect this statement to have a material impact on GM's consolidated
financial position or results of operations.
* * * * * * *
- 20 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
PART II
ITEM 1. LEGAL PROCEEDINGS
(a) Material pending legal proceedings, other than ordinary routine litigation
incidental to the business, to which the Corporation became, or was, a party
during the quarter ended September 30, 2001, or subsequent thereto, but before
the filing of this report are summarized below:
Environmental Matters
By letter dated August 16, 2001, U.S. EPA has alleged that General Motors
Corporation violated the Resource Conservation and Recovery Act (RCRA) by
failing to seek the reissuance of a permit within the time specified in the
permit. The permit covers RCRA corrective action activities in the site of a
former General Motors plant in Anderson, Indiana. U.S. EPA is seeking penalties
in excess of $100,000.
* * *
Other Matters
As previously reported six class actions were filed on behalf of owners of
GM Class H shares alleging that in order to benefit GM in violation of alleged
fiduciary duties, GM and Hughes have favored News Corp. over EchoStar as a
bidder to merge with Hughes. Three additional class actions making essentially
the same allegation having been filed in state courts in California (Brody v.
Hughes Electronics Corp., et al, Lieberman v. Hughes Electronics Corp., et al)
and New York (Krim v. General Motors Corporation, et. al). As indicated under
Management's Discussion and Analysis in this report, GM, Hughes and EchoStar
have entered into definitive agreements relating to a spin-off of Hughes from GM
and the subsequent merger of Hughes and EchoStar. Management of News Corp. has
notified GM that it has withdrawn its offer relating to a possible transaction
involving Hughes. GM, Hughes and the Hughes directors intend to vigorously
defend these actions.
* * *
With respect to the previously reported Oklahoma State Court action filed
on May 18, 2001 by Cable Connections, Inc., TV Options, Inc., Swartzel
Electronics, Inc. and Orbital Satellite, Inc., the Court granted DIRECTV's
motion to stay and compel arbitration.
* * *
In April 2001, Robert Garcia doing business as Direct Satellite TV, a
DIRECTV dealer, instituted arbitration proceedings with DIRECTV with the
American Arbitration Association in Los Angeles, California regarding his
commissions and certain chargeback disputes. The parties have been proceeding
with the arbitration, though no hearing date has been set. On October 4, 2001,
Mr. Garcia filed a class action complaint against DIRECTV and Hughes in Los
Angeles Superior Court asserting the same chargeback/commissions claims and a
Consumer Legal Remedies Act claim. Mr. Garcia alleges $300 million in class-wide
damages and seeks certification of a class of plaintiffs to proceed in
arbitration with court oversight. DIRECTV and Hughes do not believe that the
court has jurisdiction to order or oversee the class-wide arbitration. DIRECTV
and Hughes will vigorously defend against these allegations and seek to enforce
the arbitration agreement.
* * *
On September 19, 2001, the National Rural Telecommunications Cooperation
("NRTC") filed a lawsuit against DIRECTV in the U.S. District Court of the
Central District of California seeking a declaration from the Court that the
NRTC is not required to defend and indemnify DIRECTV for the Pegasus Development
Corporation and Personalized Media Communications v. DIRECTV, et al, lawsuit
pending in the U.S. District Court for the District of Delaware. The NRTC has
been paying and continues to pay DIRECTV's legal fees in that matter under
protest.
* * *
- 21 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 1. LEGAL PROCEEDINGS (concluded)
(b) Previously reported legal proceedings which have been terminated, either
during the quarter ended September 30, 2001, or subsequent thereto, but before
the filing of this report are summarized below:
Environmental Matters
As previously reported, on December 7, 2000, Federal and State (Indiana)
environmental authorities made a settlement demand in excess of $100,000 against
Guide Corporation (not affiliated with GM), Guide's parent corporation, a
subcontractor of Guide and GM, relating to an alleged chemical release from the
Guide operation which occurred more than a year after the Guide Corporation had
acquired a vehicle lighting products operation from GM located in Anderson,
Indiana. This matter has been resolved by a settlement in which GM was not
required to make any contribution.
* * *
As previously reported, General Motors received two Notices of Violation
dated May 25, 2000 and August 23, 2000 from the MDEQ alleging non-compliance at
the Lansing Craft Centre with certain clean air regulations. General Motors
received two additional Notices of Violation; one dated November 17, 2000 from
the MDEQ and another dated October 27, 2000 from the U.S. Environmental
Protection Agency. The facility has modified its air permit. GM has agreed to
pay a penalty of $107,900 to MDEQ, and implemented three supplemental
environmental projects, in settlement of these allegations.
* * *
Other Matters
With regard to the previously reported EchoStar action filed on February
1, 2000 against DIRECTV, Hughes Network Systems and Thompson Consumer
Electronics, Inc. and amended on April 5, 2001 to add Circuit City Stores, Inc.,
Best Buy Co., Inc. and Radio Shack Corporation as defendants, the matter was
dismissed with prejudice against all DIRECTV companies and Hughes Network
Systems on November 1, 2001. All the DIRECTV and Hughes' counterclaims against
Echostar were dismissed with prejudice.
* * * * * * *
- 22 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit
Number Exhibit Name Page No.
------ ----------------------------------------------- --------
99 Hughes Electronics Corporation Financial Statements and
Management's Discussion and Analysis of Financial
Condition and Results of Operations 24
------------------
(b) REPORTS ON FORM 8-K.
Eleven reports on Form 8-K, were filed on July 3, 2001, July 17, 2001,
August 1, 2001, August 7, 2001, August 21, 2001, August 27, 2001, September 4,
2001, September 18, 2001, September 21, 2001, September 25, 2001 and September
26, 2001 during the quarter ended September 30, 2001 reporting matters under
Item 5, Other Events.
* * * * * *
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GENERAL MOTORS CORPORATION
--------------------------
(Registrant)
Date: November 13, 2001 /s/Peter R. Bible
----------------------- ------------------------------------------
(Peter R. Bible, Chief Accounting Officer)
- 23 -