UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF
--- 1934
For the fiscal year ended December 31, 2001
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF
--- 1934
For the transition period from to
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Commission file number 1-143
GENERAL MOTORS CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
STATE OF DELAWARE 38-0572515
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
300 Renaissance Center, Detroit, Michigan 48265-3000
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (313) 556-5000
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Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
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Common, $1-2/3 par value (559,421,886 shares
outstanding as of February 28, 2002) New York Stock Exchange, Inc.
Class H Common, $0.10 par value (877,600,541
shares outstanding as of February 28, 2002) New York Stock Exchange, Inc.
Note: The $1-2/3 par value common stock of the Registrant is also listed for
trading on:
Chicago Stock Exchange, Inc. Chicago, Illinois
Pacific Exchange, Inc. San Francisco, California
Philadelphia Stock Exchange, Inc. Philadelphia, Pennsylvania
Montreal Stock Exchange Montreal, Quebec, Canada
Toronto Stock Exchange Toronto, Ontario, Canada
Borse Frankfurt am Main Frankfurt on the Main, Germany
Borse Dusseldorf Dusseldorf, Germany
Bourse de Bruxelles Brussels, Belgium
Courtiers en Valeurs Mobilieres Paris, France
The London Stock Exchange London, England
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 .
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 registrant's 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. ( )
The aggregate market value (based upon the average of the highest and lowest
sales prices on the Composite Tape on February 28, 2002) of General Motors
Corporation $1-2/3 par value and GM Class H common stocks held by nonaffiliates
on February 28, 2002 was approximately $30.0 billion and $12.9 billion,
respectively.
GM's Class H common stock is a "tracking stock" designed to provide holders with
financial returns based on the financial performance of Hughes. However, in the
event of a GM liquidation, insolvency or similar event, GM Class H stockholders
would have no direct claim against the assets of Hughes. Rather, GM Class H
stockholders would only have rights in the assets of GM as common stockholders
of GM.
We determine the earnings per share and the amounts available for the payment of
dividends on the GM Class H common stock by a fraction which reflects the
portion of Hughes' earnings that is allocated to the GM Class H common stock. We
sometimes refer to this fraction as the "Class H fraction." The numerator and
denominator of the Class H fraction are determined as follows:
- The numerator of the Class H fraction is the weighted average number of
shares of GM Class H common stock outstanding during the applicable
period.
- The denominator of the Class H fraction is the notional number of shares
of GM Class H common stock which, if outstanding, would represent 100% of
the tracking stock interest in the earnings of Hughes.
We sometimes also refer to the denominator of the Class H fraction as the
"Average Class H dividend base." It can be adjusted by the GM board of directors
in specified circumstances, including to reflect contributions by GM to Hughes.
Documents incorporated by reference are as follows:
Part and Item Number of Form
Document 10-K 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 4, 2002 Part III, Items 10 through 13
COVER PAGE
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 the "Registrant", the
"Corporation", "General Motors", or "GM."
ITEM 1. Business
General
The following information is incorporated herein by reference to the
indicated pages in Part II:
Item Page(s)
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Wholesale Sales II-6
Employment and Payrolls II-13
Note 24 of Notes to the GM Consolidated
Financial Statements
(Segment Reporting) II-54 through II-57
GM presents separate supplemental consolidating statements of income and
other financial information for the following businesses: (1) Automotive,
Communications Services, and Other Operations and (2) Financing and Insurance
Operations. GM participates in the automotive industry through the activities of
its automotive business operating segment: 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). GMNA designs,
manufactures, and/or markets vehicles primarily in North America under the
following nameplates: Chevrolet, Pontiac, GMC, Oldsmobile, Buick, Cadillac,
Saturn, and Hummer. GME, GMLAAM, and GMAP meet the demands of customers outside
North America with vehicles designed, manufactured, and marketed under the
following nameplates: Opel, Vauxhall, Holden, Isuzu, Saab, Buick, Chevrolet,
GMC, and Cadillac. GM's communications services relate to its Hughes Electronics
Corporation subsidiary (Hughes) which includes digital entertainment,
information and communications services, and satellite-based private business
networks. GM's other operations 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 Financing and Insurance Operations primarily
relate to General Motors Acceptance Corporation (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, vehicle,
and homeowners' insurance, and asset-based lending.
Substantially all automotive-related products are marketed through retail
dealers and through distributors and jobbers in the United States, Canada, and
Mexico, and through distributors and dealers overseas. At December 31, 2001,
there were approximately 7,800 GM vehicle dealers in the United States, 830 in
Canada, and 162 in Mexico. Additionally, there were a total of approximately
11,710 outlets overseas which include dealers and authorized sales, service, and
parts outlets.
Raw Materials and Services
GM purchases materials, parts, supplies, freight transportation, energy, and
other services from numerous unaffiliated firms. Interruptions in production or
delivery of these goods or services could adversely affect GM.
Backlog of Orders
Shipments of GM automotive products are made as promptly as possible after
receipt of firm sales orders; therefore, no significant backlog of unfilled
orders accumulates. Hughes had a $5.3 billion and $6.7 billion backlog of
commercial contracts relating to its telecommunications business at the end of
2001 and 2000, respectively.
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GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Competitive Position
GM's principal competitors in passenger cars and trucks in the United States
and Canada include Ford Motor Company, DaimlerChrysler Corporation, Toyota
Corporation, Nissan Motor Corporation, Ltd., Honda Motor Company, Ltd., Mazda
Motor Corporation, Mitsubishi Motors Corporation, Volkswagen A.G. (Volkswagen),
Hyundai Motor Company, Ltd. (Hyundai), and Bayerische Motoren Werke AG (BMW).
All but Volkswagen and Hyundai currently operate vehicle manufacturing
facilities in the United States or Canada. Toyota and GM operate the New United
Motor Manufacturing, Inc. facility in Fremont, California as a joint venture
which currently builds passenger cars and light-duty trucks. Wholesale unit
sales of GM passenger cars and trucks during the three years ended December 31,
2001 are summarized in Management's Discussion and Analysis of Financial
Condition and Results of Operations in Part II.
Total industry new motor vehicle (passenger cars, trucks, and buses)
registrations of domestic and foreign makes and GM's competitive position during
the years ended December 31, 2001, 2000, and 1999 were as follows:
2001(1) 2000 1999
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(units in thousands)
Total industry registrations
In the United States 17,475 17,814 17,418
In Canada and Mexico 2,544 2,474 2,231
In other countries 36,608 37,009 35,863
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Total industry registrations - all countries 56,627 57,297 55,512
====== ====== ======
2001(1) 2000 1999
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(percent of total industry)
GM's registrations
In the United States 28% 28% 29%
In Canada and Mexico 27 28 29
In other countries 8 8 8
Total GM's registrations - all countries 15 15 16
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(1) Preliminary
The above information on registrations of new cars, trucks, and buses was
obtained from outside sources and that pertaining to GM's registrations includes
units which are manufactured overseas by other companies and which are imported
and sold by GM and affiliates.
Research and Development
In 2001, GM spent $6.2 billion 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. In addition, $82
million was spent for customer-sponsored activities. Comparably, $6.6 billion
and $6.8 billion were spent on company-sponsored activities in 2000 and 1999,
respectively, and $278 million and $295 million were spent on customer-sponsored
activities in 2000 and 1999, respectively.
Environmental Matters
Automotive Emissions Control
Both the federal and California governments currently impose stringent
emission control requirements on motor 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 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 great emphasis on compliance testing of
customer-owned vehicles. Failure to comply with the emission standards or
defective emission control systems or components discovered during such testing
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 vehicle's emission performance.
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GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Automotive Emissions Control - (concluded)
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, will begin
phasing in for California vehicles in the 2004 model year. Similar federal "Tier
2" standards will also start in 2004. In addition, both CARB and 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 starts at 10% in model year 2003
and increases in future years. Manufacturers have the option of meeting a
portion of this requirement with partial ZEV credits, which are vehicles that
meet very stringent 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.
The Clean Air Act permits states that have areas with air quality problems 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
done so. To provide states an alternative to the adoption of California
standards, GM and other auto manufacturers began selling LEVs in the remaining
45 states in 2001, under the provisions of the National Low Emission Vehicle
Program.
In addition to the above-mentioned exhaust emission programs, onboard
diagnostic (OBD) devices, 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 meet lower emission standards, and new diagnostics are required.
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 federal 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.
Starting in the 2001 model year, the test procedure for exhaust emissions
have become more complex with vehicles required to meet two additional test
requirements: 1) measuring exhaust emissions over a new test cycle with the air
conditioner operating; and 2) measuring exhaust emissions over a new high speed
(80 mph) and high load cycle. Both of these requirements have the potential of
adding hardware (and thus costs) to many vehicles.
Industrial Environmental Control
GM is subject to various laws relating to the protection of the environment
including laws regulating air emissions, water discharges, waste management, and
environmental cleanup.
GM is in various stages of investigation or remediation for sites where
contamination has been alleged, and recorded a liability of $253 million at
December 31, 2001 and $316 million at December 31, 2000 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 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 is
verified. The total liability for sites involving GM was estimated to be
$85 million at December 31, 2001. This compares with $97 million at
December 31, 2000.
. For closed or closing plants owned by the Corporation, an estimated
liability for environmental investigation and remediation is typically
recognized at the time of the closure decision. Such liability, which is
based on an environmental assessment of the plant property, was estimated
at $56 million at December 31, 2001. This compares with $74 million at
December 31, 2000.
. GM is involved in investigation and remediation activities at additional
locations worldwide with an estimated liability of approximately $112
million at December 31, 2001. This compares with $145 million at December
31, 2000.
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GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Industrial Environmental Control (concluded)
The cost impact of the Clean Air Act Amendments under Title V is the annual
emission fees of approximately $9 million per year. Additional programs under
the Clean Air Act, including Hazardous Air Pollutant standards, and Compliance
Assurance Monitoring and periodic monitoring requirements are estimated to cost
$500 million to $700 million in aggregate through the year 2005.
For the years ended December 31, 2001, 2000, and 1999, expenditures by GM in
the U.S. for industrial environmental control facilities were $65 million, $85
million, and $71 million, respectively. The Corporation currently estimates that
future expenditures for industrial environmental control facilities through 2005
will be approximately $157 million. Specific environmental expenses are
difficult to isolate since expenditures may be made for more than one purpose,
making precise classification difficult.
Vehicular Noise Control
Federal Truck Regulations preempt all state/local noise regulations for
trucks over 10,000 lbs. Gross Vehicle Weight Rating (GVWR). All jurisdictions
regulating noise levels of school buses which are built on medium-duty truck
chassis have adopted standards compatible with federal regulations for
medium-duty trucks. Federal Truck Regulations contain label and owner's manual
requirements.
Passenger cars and light-duty trucks are subject to state and local motor
vehicle noise regulations. The current standard for vehicles in these classes is
80 dB as measured at 50 feet. Future implementation of more stringent exhaust
emission regulations and more stringent fuel economy regulations will require an
assessment of increased costs of noise control.
Safety Regulations & Consumer Information
Expenditures to maintain and improve the operational safety, occupant
protection, and vehicle security and theft deterrence capability of new GMNA
models continue. These expenditures include amounts for the study of alternative
approaches for meeting the needs of all three areas.
GM continues to meet the government requirement for passive restraints by
installing driver and passenger air bags on all passenger cars and many light
trucks and vans. Since 1998, these have been less aggressive air bags to address
concerns about inflation injuries to children and smaller adult passengers who
are not properly positioned. GM also continues to make available air bag on-off
switches for customers eligible to request them under the requirements of the
National Highway Traffic Safety Administration (NHTSA).
In 2000, the NHTSA adopted extensive modifications to Federal Motor Vehicle
Safety Standard (FMVSS) 208, to require advanced air bags. The amendment entails
a substantial increase in the number of crash test configurations and test dummy
occupant sizes for which certification compliance performance will be required
beginning September 1, 2003. It also adds a large number of static air bag
suppression or low risk deployment test requirements. A significant amount of
engineering design and development is already underway, with more anticipated.
For cars and certain light trucks and vans, side structure and interior trim
designs continue to be affected by the NHTSA's consumer information dynamic side
impact crash test program at elevated impact speeds.
A new government requirement for vehicle interior impact protection continues
to significantly affect upper body structure and interior trim designs of
passenger cars and light trucks and vans. The phase-in for this requirement
began on September 1, 1998, and will apply to all these vehicles by September 1,
2002.
NHTSA has proposed changing the existing fuel system crash integrity
requirements of FMVSS 301. The potentially significant changes associated with
the substantially increased rear impact crash test energy would compel some
undetermined redesign, cost, and weight increases for some of GM's vehicles.
The new FMVSS 225 requirement for universal child restraint anchorages in
motor vehicles continues to have mass and cost implications for many near-future
GM vehicles. Unless ongoing auto industry actions can convince the NHTSA to
modify certain FMVSS 225 test procedures and requirements, these implications
will continue to affect many GM vehicles.
Vehicle parts marking, required by the Anti-Car Theft Act of 1992, currently
affects approximately 22 passenger car and 4 light-duty truck plants.
Anticipated NHTSA rulemaking likely will expand parts marking to remaining
passenger cars and light-duty vehicles currently deemed to be "low theft"
vehicles. Approximately 10 additional vehicle lines and 4 additional assembly
plants would be affected. This would result in increased vehicle piece and
tooling costs for the affected plants.
The Transportation Recall Enhancement, Accountability and Documentation
(TREAD) Act requires certain significant regulatory and consumer information
actions by the NHTSA. Some undetermined redesign and cost implications likely
will result from these changes. Among other items, beginning in 2002 the NHTSA
must:
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GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Safety Regulations & Consumer Information (concluded)
.Upgrade tire regulations, and require a vehicle Tire Pressure Monitoring
(warning) System (TPMS), at an approximate $50 per vehicle variable cost
if direct pressure monitoring technology is required.
.Expand its New Car Assessment Program (NCAP) to implement consumer
information programs for vehicle rollover resistance (based on dynamic
driving maneuvers), and for child restraints. (Although not required by
the TREAD Act, the NHTSA also plans a vehicle stopping distance addition
to NCAP.) These additions to this consumer information program likely
will result in additional testing and design costs for GM vehicles to
assure favorable ratings.
.Implement extensive early warning defect reporting requirements,
including information from foreign countries. This likely will result in
an administrative burden increase.
In 2002, the NHTSA is expected to amend FMVSS 108 to reduce allowable light
output from daytime running lamps, and has begun rulemaking to reduce consumer
complaints of glare from other exterior front lamps. Considerations include
reduced headlamp mounting heights, revised photometric requirements,
vehicle-based (as opposed to lamp-based) photometric specifications, headlamp
cleaners, automatic lamp leveling, etc. These rulemaking activities could
necessitate moderate to extensive redesign of front lighting systems.
Automotive Fuel Economy
The Energy Policy and Conservation Act passed in 1975 provided for
production-weighted average fuel economy standards for passenger cars for 1978
and thereafter. Based on EPA combined city-highway test data, the GM 2001 model
year domestic passenger car fleet attained a Corporate Average Fuel Economy
(CAFE) of 28.3 miles per gallon (mpg) versus the standard of 27.5 mpg. The CAFE
estimate for 2002 model year domestic passenger cars is projected at 28.6 mpg
versus the standard of 27.5 mpg.
For GM's imported passenger cars, 2001 model year CAFE attained 28.4 mpg
versus a standard of 27.5 mpg. The CAFE estimate for 2002 model year import
passenger cars is 27.7 mpg versus the standard of 27.5 mpg.
Fuel economy standards for light-duty trucks became effective in 1979.
General Motors' light truck CAFE fleet average for the 2001 model year is 20.7
mpg versus a standard of 20.7 mpg. GM's 2002 model year truck CAFE is projected
at 21.2 mpg versus a standard of 20.7 mpg.
GM's ability to meet increased CAFE standards is contingent on various future
economic, consumer, legislative, and regulatory factors that GM cannot control
and cannot predict with certainty. If GM could not comply with any new CAFE
standards, GM could be subject to sizeable civil penalties and could have to
close plants or severely restrict product offerings to remain in compliance.
End of Life Vehicles
During September 2000, the European parliament passed a directive requiring
member states to adopt legislation regarding end-of-life vehicles and the
responsibility of manufacturers for dismantling and recycling vehicles they have
sold. European Union member states are required to transform the concepts
detailed in the directive into national law by April 2002. Under the directive,
manufacturers are financially responsible for at least a portion of the cost of
the take-back of vehicles placed into service after July 2002 and all vehicles
placed in service prior to July 2002 that are still in operation in January
2007. The laws developed in the individual local legislatures throughout Europe
will have a significant impact on the amount ultimately paid by the
manufacturers for this issue. GME is currently assessing the impact of this
potential legislation on its results of operations and financial position.
Seasonal Nature of Business
In the automotive business, there are retail sales fluctuations of a seasonal
nature, so that production varies from month to month. Certain changeovers occur
throughout the year for reasons such as new market entries and new vehicle
changes; however, the changeover period related to the annual new model
introduction has traditionally occurred in the third quarter of each year. For
this reason, third quarter operating results are, in general, less favorable
than those in the other three quarters of the year, depending on the magnitude
of the changeover needed to commence production of new models incorporating, 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.
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GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Segment Reporting Data
Operating segment and principal geographic area data for 2001, 2000, and 1999
are summarized in Note 24 to the GM Consolidated Financial Statements in Part
II.
* * * * * *
The Registrant makes no attempt herein to predict the future trend of its
business and earnings or the effect thereon of the results of changes in general
economic, industrial, regulatory, and international conditions.
ITEM 2. Properties
The Corporation, excluding its Financing and Insurance Operations, has 294
locations operating in 36 states and 148 cities in the United States. Of these,
22 are engaged in the final assembly of GM cars and trucks; 39 are service parts
operations responsible for distribution or warehousing; 10 major plants,
offices, and research facilities relate to the operations of Hughes Electronics
Corporation; 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 20 locations in Canada and assembly,
manufacturing, distribution, or warehousing operations in 51 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 Germany, the United Kingdom, Brazil, Mexico,
Australia, Sweden, Belgium, Spain, China, Thailand, Argentina, Portugal, and
Poland.
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 the Registrant 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 24 to the GM Consolidated Financial Statements in
Part II.
ITEM 3. 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 year ended December 31, 2001, or subsequent thereto, but
before the filing of this report are summarized below:
Other Matters
Nine purported class actions are pending in state courts, five in Delaware
(Wurzel v. Cornelius, et al., Selden Realty Association, Inc. v. Hughes
Electronics Corporation, et al., Weilheimer v. Cornelius, et al., Kopelman v.
Cornelius, et al., Lerner v. Cornelius, et al.), three in California (Salamone
v. Hughes Electronics Corporation, et al., Brody v. Hughes Electronics
Corporation, et al., Lieberman v. Hughes Electronics Corporation et al.) and one
in New York (Krim v. General Motors Corporation, et al.) on behalf of owners of
GM Class H shares, against Hughes Electronics Corporation ("Hughes") and the
Hughes directors. General Motors Corporation ("GM") is also a defendant in the
Delaware cases. The lawsuits allege that The News Corporation Limited had been
favored as a bidder to purchase Hughes over EchoStar Communications Corporation
("EchoStar") to benefit GM in violation of alleged fiduciary duties.
Subsequently, an agreement, subject to regulatory approvals, was reached to
merge Hughes and EchoStar. The five Delaware cases have been consolidated, two
of the California cases have been stayed and plaintiff has requested dismissal
of the third. None of the cases has been certified as a class action. GM, Hughes
and the Hughes directors intend to vigorously defend these cases.
* * *
Seven putative nationwide and statewide class actions are pending in state
and federal courts alleging that the paint or paint application process used on
some GM vehicles was defective due to the omission of a primer surfacer layer.
Generally, plaintiffs allege that GM's failure to disclose the alleged paint
defect is a fraudulent omission and a violation of various states' consumer
protection laws. No determination has been made that any case may proceed as a
class action.
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GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Other Matters (continued)
Christian Amedee and Louis Fuxan v. General Motors Corporation, et al.,
Civil District Court for the Parish of New Orleans, State of Louisiana filed
March 24, 1995, Cherise Miller, et al., v. General Motors Corporation, United
States District Court for the Northern District of Illinois, filed on April 8,
1998, and Rose Ann Hayes v. General Motors Corporation et al. filed on May 22,
2001 in the Circuit Court for Madison County Illinois are purported nationwide
class actions. Eddie Glorioso v. General Motors Corporation and Scott Arnold v.
General Motors Corporation, consolidated in Superior Court for the City and
County of San Francisco, California, both filed in July 1998, are purported
California statewide class actions. Scott Haverdink v. General Motors
Corporation, Court of Common Pleas of Philadelphia County, Pennsylvania, filed
on May 16, 1999, is a putative Pennsylvania statewide class action. In Darryl
Oshanek v. General Motors Corporation and General Motors of Canada, Limited,
Supreme Court of British Columbia, Canada, filed on June 2, 1999, a putative
class action on behalf of residents of British Columbia, on January 5, 2001,
General Motors Corporation was dismissed as a defendant. Plaintiff has appealed.
GM intends to vigorously oppose class certification and defend these cases.
* * *
On June 3, 1999, the National Rural Telecommunications Cooperative
("NRTC") filed a lawsuit against DIRECTV, Inc. and Hughes Communications Galaxy,
Inc., which GM refers to together in this description as "DIRECTV," in the U.S.
District Court for the Central District of California, alleging that DIRECTV
breached its DBS Distribution Agreement with the NRTC. The DBS Distribution
Agreement provides the NRTC with certain distribution rights, in certain
specified portions of the United States, for a specified period of time, with
respect to DIRECTV(R) programming delivered over 27 of the 32 frequencies at the
101(degree) west longitude orbital location. The NRTC claims that DIRECTV has
wrongfully deprived it of the exclusive right to distribute programming formerly
provided by United States Satellite Broadcasting Company, Inc. ("USSB") over the
other five frequencies at 101(degree), and seeks recovery of related revenues
from the date USSB was acquired by Hughes. DIRECTV denies that the NRTC is
entitled to exclusive distribution rights to the former USSB(R) programming
because, among other things, the NRTC's exclusive distribution rights are
limited to programming distributed over 27 of the 32 frequencies at 101(degree).
The NRTC also pleads, in the alternative, the right to distribute former USSB
programming on a non-exclusive basis, but stipulated to dismiss this claim
without prejudice on August 25, 2000. DIRECTV maintains that the NRTC's right
under the DBS Distribution Agreement is to market and sell the former USSB
programming as its non-exclusive sales agent and that NRTC is not entitled to
the additional claimed revenues. DIRECTV intends to vigorously defend against
the NRTC claims. DIRECTV also filed a counterclaim against the NRTC seeking a
declaration of the parties' rights under the DBS Distribution Agreement.
On August 26, 1999, the NRTC filed a second lawsuit in the U.S. District
Court for the Central District of California against DIRECTV alleging that
DIRECTV has breached the DBS Distribution Agreement. In this lawsuit, the NRTC
is asking the Court to require DIRECTV to pay the NRTC a proportionate share of
unspecified financial benefits that DIRECTV derives from programming providers
and other third parties. DIRECTV denies that it owes any sums to the NRTC on
account of the allegations in these matters and plans to vigorously defend
itself against these claims or this claim. On June 21, 2001, the Court permitted
the NRTC to amend the action to also seek an exclusive right to distribute in
its territories, and to retain revenues from, "Advanced Services," which the
NRTC defines to include services such as Wink, TiVo, Ultimate TV and AOL-TV.
DIRECTV denies that the NRTC is entitled to exclusive distribution rights to the
so-called Advanced Services because, among other things, the services are not
services transmitted by DIRECTV over the 27 frequencies as to which the NRTC has
contractual rights.
Pegasus Satellite Television, Inc. ("Pegasus") and Golden Sky Systems,
Inc. ("Golden Sky"), the two largest NRTC affiliates, filed an action on January
11, 2000 against DIRECTV in the U.S. District Court for the Central District of
California. The plaintiffs alleged, among other things, that DIRECTV has
interfered with their contractual relationship with the NRTC. The plaintiffs
alleged that their rights and damages are derivative of the rights and damages
asserted by the NRTC in its two cases against DIRECTV. The plaintiffs also
alleged that DIRECTV misused their subscriber information, and interfered with
their contractual relationships with manufacturers and distributors by
preventing those parties from selling receiving equipment to the plaintiffs'
dealers. On October 19, 2000, Golden Sky agreed to dismiss its equipment-related
claims with prejudice. DIRECTV denies that it has wrongfully interfered with any
of the plaintiffs' business relationships and will vigorously defend the
lawsuit. DIRECTV filed a counterclaim on March 9, 2001, seeking judicial
declarations that the contracts between Pegasus and the NRTC, and Golden Sky and
the NRTC, do not include rights of first refusal and will terminate when the
DIRECTV-1 satellite is removed from orbit. On June 21, 2001, the Court permitted
Pegasus and Golden Sky to amend their complaint to seek an exclusive right, also
derivative from the NRTC's claimed right, to distribute in their territories,
and to retain revenues from, the "Advanced
I-7
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Other Matters (continued)
Services." DIRECTV denies that Pegasus and Golden Sky are entitled to exclusive
distribution rights to the so-called Advanced Services because, among other
things, the services are not services transmitted by DIRECTV over the 27
frequencies as to which the NRTC and derivatively, Pegasus and Golden Sky, have
contractual rights.
A class action suit was filed in the U.S District Court for the Central
District of California against DIRECTV on behalf of the NRTC's participating
members on February 29, 2000. The Court certified a class on December 29, 2000.
The class asserted claims identical to the claims that were asserted by Pegasus
and Golden Sky in their lawsuit against DIRECTV, described in the preceding
paragraph. Similar to Golden Sky, however, the class has dismissed its
equipment-related claims without prejudice. DIRECTV filed counterclaims against
the class identical to those filed against Pegasus and Golden Sky as described
above. On June 21, 2001, the class was also permitted to amend its complaint to
seek an exclusive right, derivative from the NRTC's claimed right, to distribute
in their territories, and to retain revenues from, the "Advanced Services."
DIRECTV denies that the class is entitled to exclusive distribution rights to
the so-called Advanced Services because, among other things, the services are
not services transmitted by DIRECTV over the 27 frequencies as to which the NRTC
and derivatively, the class, have contractual rights.
On February 1, 2001, the NRTC filed a third lawsuit in the U.S. District
Court for the Central District of California against DIRECTV, seeking a
declaration from the court that it is not required to defend and indemnify
DIRECTV for the Pegasus and Golden Sky and class action lawsuits. The NRTC has
been paying and continues to pay DIRECTV's legal fees in those matters under
protest. DIRECTV filed a counterclaim on February 21, 2001 seeking a declaratory
judgment that the NRTC is indeed responsible for the defense and indemnity of
DIRECTV.
On September 19, 2001, the NRTC filed a fourth 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, LLC ("PMC") 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. DIRECTV
filed a counterclaim on October 26, 2001 seeking a declaratory judgment that the
NRTC is indeed responsible for the defense and indemnity of DIRECTV.
The U.S. District Court for the Central District of California has
consolidated for purposes of discovery each of the NRTC, Pegasus and Golden Sky
and class action lawsuits, but has not determined if the cases will be
consolidated for trial. A trial date in December 2002 has been set in the first
NRTC case. An amount of loss, if any, cannot be estimated at this time in the
NRTC, Pegasus and class action litigation.
* * *
General Electric Capital Corporation ("GECC") and DIRECTV entered into a
contract on July 31, 1995, in which GECC agreed to establish and manage a
private label consumer credit program for consumer purchases of hardware and
related DIRECTV(R) programming. Under the contract, GECC also agreed to provide
certain related services to DIRECTV, including credit risk scoring, billing and
collections services. DIRECTV agreed to act as a surety for loans complying with
the terms of the contract. Hughes guaranteed DIRECTV's performance under the
contract. A complaint and counterclaim were filed by the parties in the U.S.
District Court for the District of Connecticut concerning GECC's performance and
DIRECTV's obligation to act as a surety. A trial commenced on June 12, 2000 with
GECC presenting evidence to the jury for damages of $157 million. DIRECTV sought
damages from GECC of $45 million. On July 21, 2000, the jury returned a verdict
in favor of GECC and awarded contract damages in the amount of $133 million. The
trial judge issued an order granting GECC $49 million in interest under
Connecticut's offer-of-judgment statute. With this order, the total judgment
entered in GECC's favor was $182 million. Hughes and DIRECTV filed a notice of
appeal on December 29, 2000. Oral argument on the appeal was heard on October
15, 2001 by the Second Circuit Court of Appeals. While the appeal is pending,
post-judgment interest on the total judgment is accruing at a rate of 6.241% per
year, compounded annually, from the date judgment was entered in October 2000.
Hughes and DIRECTV believe that it is reasonably possible that the jury verdict
will be overturned and a new trial granted.
* * *
I-8
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Other Matters (continued)
There had been a pending grand jury investigation into whether Hughes
should be accused of criminal violations of United States export control laws
arising out of the participation of two of its employees on a committee formed
to review the findings of Chinese engineers regarding the failure of a Long
March rocket in China in 1996. On January 7, 2002, the U.S. Department of
Justice advised Hughes that it would not prosecute Hughes or any of its current
or former employees in connection with the activities of the committee or any
other matters that were under investigation by the Grand Jury. As a result,
Hughes is no longer at risk of criminal prosecution for any of these matters.
However, Hughes remains subject to the authority of the U.S. State Department to
impose sanctions for non-criminal violations of the Arms Export Control Act. The
possible civil sanctions could include fines as well as debarment from various
export privileges and participating in government contracts. On October 6, 2000,
Hughes completed the sale of its satellite systems manufacturing businesses
("Satellite Businesses") to The Boeing Company ("Boeing"). In that transaction,
Hughes retained liability for certain possible fines and penalties and the
financial consequences of debarment related to the business now owned by Boeing
should the State Department impose such sanctions against the Satellite
Businesses. Hughes does not expect sanctions imposed by the State Department, if
any, to have a material adverse effect on Hughes.
* * *
On September 7, 2000, a putative class action was commenced against
DIRECTV, Inc., Thomson Consumer Electronics, Inc., Best Buy Co., Inc., Circuit
City Stores, Inc. and Tandy Corporation, Inc. in the U.S. District Court in Los
Angeles. The named plaintiffs purport to represent a class of all consumers who
purchased DIRECTV equipment and services at any time from March 1996 to
September 1, 2000. The plaintiffs allege that the defendants have violated
federal and California antitrust statutes by entering into agreements to exclude
competition and force retailers to boycott competitors' products and services.
The plaintiffs seek declaratory and injunctive relief, as well as unspecified
damages, including treble damages. DIRECTV believes that the complaint is
without merit and intends to vigorously defend against the allegations raised
therein. DIRECTV successfully stayed the case pending resolution of relevant
issues in the antitrust suit brought by EchoStar as described below. Since the
EchoStar case was dismissed, the stay of this lawsuit was lifted. DIRECTV's
motion to compel arbitration pursuant to the DIRECTV customer agreement is now
pending before the court. An amount of loss, if any, cannot be estimated at this
time.
* * *
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, and will
move to dismiss the complaint. DIRECTV and Hughes will vigorously defend against
these allegations and seek to enforce the arbitration agreement. An amount of
loss, if any, cannot be estimated at this time.
* * *
On May 18, 2001, in Oklahoma State Court, plaintiffs Cable Connection,
Inc., TV Options, Inc., Swartzel Electronics, Inc. and Orbital Satellite, Inc.
filed a class action complaint against DIRECTV and Hughes. All four plaintiffs
are DIRECTV dealers (three residential and one commercial), who allege claims
ranging from breach of contract to fraud, promissory estoppel, antitrust and
unfair competition claims. The plaintiffs seek unspecified damages and
injunctive relief. They claim to be bringing the complaint on behalf of all
DIRECTV dealers, including former PRIMESTAR and USSB dealers. On August 17,
2001, DIRECTV and Hughes successfully stayed the case and the court ordered the
individual plaintiffs to pursue their claims in arbitration pursuant to the
arbitration clause in each of the dealer's contracts with DIRECTV. None of the
plaintiffs has yet instituted arbitration proceedings.
* * *
I-9
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Other Matters (continued)
On December 5, 2000, PMC and Pegasus Development Corporation filed suit in
U.S. District Court for the District of Delaware against DIRECTV, Hughes,
Thomson Consumer Electronics, Inc. and Philips Electronics North American
Corporation, alleging infringement of seven U.S. patents. Based in part on the
successful defense by Hughes against an earlier action brought by PMC on one of
the subject patents, Hughes expects that strong defenses of invalidity and
non-infringement exist, in addition to numerous other defenses including
license, laches and estoppel, and patent misuse. Hughes answered the complaint
on January 21, 2001 raising these defenses and related counterclaims and intends
to vigorously defend the lawsuit and pursue counterclaims against Pegasus
Development Corporation and PMC.
* * *
Following the discontinuation of DIRECTV Japan's operations in September
2000, Global Japan, Inc. ("Global") commenced an action in the New York Supreme
Court on October 5, 2000 against Hughes Electronics, DIRECTV Japan Management
Company, Inc., DIRECTV International, Inc., DIRECTV, Inc., and the
Hughes-appointed directors of DIRECTV Japan for alleged breach of contract and
fiduciary duty, fraudulent conveyance and tortious interference in connection
with the termination of two direct broadcast satellite distribution agreements
between Global and DIRECTV Japan. Global seeks, among other things, damages of
approximately $100 million. Hughes contends that Global is entitled to $2
million as its sole and exclusive remedy under the termination provisions of the
distribution agreements and intends to vigorously defend against the allegations
raised.
* * *
Hughes Communications Galaxy, Inc. ("HCGI") filed a lawsuit on March 22,
1991 against the U.S. Government based upon the National Aeronautics and Space
Administration's breach of contract to launch ten satellites on the Space
Shuttle. The U.S. Court of Federal Claims granted HCGI's motion for summary
judgment on the issue of liability on November 30, 1995. A trial was held on May
1, 1998 on the issue of damages. On June 30, 2000, a final judgment was entered
in favor of HCGI in the amount of $103 million. On November 13, 2001, the U.S.
Court of Appeals for the Federal Circuit affirmed the lower court decision. On
December 26, 2001, Hughes filed a Combined Petition for Panel Rehearing and
Rehearing en Banc, seeking to increase the award, which was denied in January of
2002. Both parties have until April 25, 2002 to seek Supreme Court Review. As a
result of the uncertainty regarding the outcome of this matter, no amount has
been recorded in the consolidated financial statements to reflect the award.
* * *
DIRECTV filed suit in California State Court, Los Angeles County, on June
22, 2001 against Pegasus and Golden Sky (referred to together as "Defendants")
to recover monies (currently approximately $60 million) that Defendants owe
DIRECTV under the parties' Seamless Marketing Agreement, which provides for
reimbursement to DIRECTV of certain subscriber acquisition costs incurred by
DIRECTV on account of new subscriber activations in Defendants' territory.
Defendants had ceased making payments altogether, and indicated that it did not
intend to make any further payments due under the Agreement. On July 13, 2001,
Defendants sent notice of termination of the Agreement and on July 16, 2001,
Defendants answered DIRECTV's complaint and filed a cross complaint alleging
counts of fraud in the inducement, breach of contract, breach of the covenant of
good faith and fair dealing, intentional interference with contractual
relations, intentional interference with prospective economic advantage and
violation of California Bus. and Prof. Code 17200. The latter three counts
duplicate claims already asserted by Defendants in the above-referenced federal
court litigation. Defendants seek an unstated amount of damages and punitive
damages. DIRECTV denies any liability to Defendants, and intends to vigorously
pursue its damages claim against Defendants and defend against Defendants' cross
claims. Defendants removed the action to federal district court, Central
District of Los Angeles, where it has been transferred to the judge hearing the
other, above-referenced litigation, and consolidated therewith for purposes of
discovery.
* * *
I-10
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Other Matters (concluded)
In connection with the 2000 sale by Hughes of its satellite systems
manufacturing businesses to Boeing, the stock purchase agreement provides for
potential adjustment to the purchase price based upon the value of the final
closing net assets of the satellite systems manufacturing businesses. The stock
purchase agreement also provides for an arbitration process to resolve any
disputes that arise in determining the purchase price adjustment. Based upon the
final closing net assets of the satellite systems manufacturing businesses
derived from the closing date financial statements that were prepared by Hughes,
Boeing is owed a purchase price adjustment of $164 million plus interest from
the date of sale, the total amount of which has been provided for in GM's
financial statements. However, Boeing has submitted additional proposed
adjustments totaling about $750 million, which remain unresolved. Hughes
believes that these additional proposed adjustments are without merit and
intends to vigorously contest the matter in the arbitration process which will
result in a binding decision unless the matter is otherwise settled. Although GM
believes it has adequately provided for the disposition of this matter, the
impact of its disposition cannot be determined at this time.
* * *
(b) Previously reported legal proceedings which have been terminated, either
during the year ended December 31, 2001, or subsequent thereto, but before
the filing of this report are summarized below:
EchoStar and others commenced an action in the U.S. District Court in
Colorado on February 1, 2000 against DIRECTV, Hughes Network Systems ("HNS") and
Thomson Consumer Electronics, Inc. seeking, among other things, injunctive
relief and unspecified damages, including treble damages, in connection with
allegations that the defendants have entered into agreements with retailers and
program providers and engaged in other conduct that violates the antitrust laws
and constitutes unfair competition. Following the announcement of the proposed
merger with EchoStar, this lawsuit was dismissed in its entirety with prejudice
in early November 2001.
* * *
In October 2001, Hughes reached a settlement with Raytheon on a purchase
price adjustment related to the 1997 spin-off of Hughes' defense electronics
business and the subsequent merger of that business with Raytheon. Under the
terms of the settlement, Hughes agreed to reimburse Raytheon $636 million of the
original $9.5 billion purchase price. Hughes paid $500 million of the settlement
amount in October 2001 and the remainder was paid subsequent to December 31,
2001.
* * * * * * * * *
I-11
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 4. Submission of Matters to a Vote of Security Holders
NONE
ITEM 4A. Executive Officers of the Registrant
The names and ages of all executive officers of the Registrant at February
28, 2002 and their positions and offices with the Registrant on that date are as
follows:
Name and (Age) Positions and Offices
-------------- -----------------------------------------
John F. Smith, Jr. (63) Chairman of the Board; Member,
Investment Funds Committee
G. Richard Wagoner, Jr. (49) President and Chief Executive Officer
John M. Devine (57) Vice Chairman and Chief Financial Officer
Robert A. Lutz (70) Vice Chairman of Product Development and
Chairman of GM North America
John D. Finnegan (53) Executive Vice President; President, GMAC
Thomas A. Gottschalk (59) Executive Vice President, Law and
Public Policy
There are no family relationships, as defined, between any of the above
executive officers, and there is no arrangement or understanding between any of
the above executive officers and any other person pursuant to which he was
selected as an officer. Each of the above executive officers was elected by the
Board of Directors to hold office until the next annual election of officers and
until his successor is elected and qualified or until his earlier resignation or
removal. The Board of Directors elects the officers in conjunction with each
annual meeting of the stockholders.
I-12
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 4A. Executive Officers of the Registrant - concluded
Mr. John F. Smith, Jr. has been associated with General Motors since 1961.
He was elected Executive Vice President in charge of International Operations in
1988. Effective August 1990, he was elected Vice Chairman of the Board of
Directors. On April 6, 1992, Mr. Smith was elected President and Chief Operating
Officer. Effective November 1992, he was elected Chief Executive Officer and
President. He served as President until October 1998 and Chief Executive Officer
until June 2000. On January 1, 1996, Mr. Smith became Chairman of the Board of
Directors.
Mr. G. Richard Wagoner, Jr. has been associated with General Motors since
1977. He was elected Vice President in charge of finance for General Motors
Europe in June 1989. In July 1991, he was elected President and Managing
Director of General Motors do Brasil. Effective November 1992, he was elected
Executive Vice President and Chief Financial Officer of General Motors. In July
1994, he was named President of North American Operations. In October 1998, he
was elected a director, President and Chief Operating Officer of General Motors.
Effective June 1, 2000, he was elected Chief Executive Officer.
Mr. John M. Devine was named Vice Chairman and Chief Financial Officer of
General Motors Corporation, effective January 1, 2001. He has responsibility for
GM's Worldwide Financial Operations and GM Asset Management. He is a member of
the GM Automotive Strategy Board and serves as its global process leader for
finance. Mr. Devine was Chairman and Chief Executive Officer of Fluid Ventures,
LLC, immediately prior to his GM appointment. He retired from Ford Motor Company
in October 1999, after a 32 year career, as the company's Executive Vice
President and Chief Financial Officer.
Mr. Robert A. Lutz was named Vice Chairman of Product Development of General
Motors Corporation, effective September 1, 2001. He was named Chairman of GM
North America on November 13, 2001. He is a member of the Automotive Strategy
Board and the North American Strategy Board. Mr. Lutz was Chairman and Chief
Executive Officer of Exide Technologies, immediately prior to his GM
appointment. He retains the Chairman position. He also has held a number of
executive positions with Ford Motor Company until 1986 and the former Chrysler
Corporation from which he retired in 1998.
Mr. John D. Finnegan has been associated with General Motors since 1976. In
1992, he was elected as Executive Vice President and Chief Financial Officer of
General Motors Acceptance Corporation. During 1994, he added the
responsibilities of Chairman and President of GMAC Mortgage Corporation.
Effective December 1995, he was named Vice President and Treasurer of General
Motors. In November 1997, he was elected Vice President and Group Executive of
General Motors and President of General Motors Acceptance Corporation. Effective
May 1999, he was elected Chairman of General Motors Acceptance Corporation and
Executive Vice President of General Motors.
Mr. 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. He is a member of the Automotive Strategy Board
and is the global process leader for Law and Public Policy. Prior to General
Motors, he was a partner and member of the management committee of the law firm
of Kirkland and Ellis in Washington, D.C.
I-13
PART II
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
General Motors' (GM's) common stocks are listed on the stock exchanges
specified on the cover page of this Form 10-K under the trading symbols "GM" and
"GMH". GM's Dividend Policy is described in the Management's Discussion and
Analysis (MD&A) in Part II. As of December 31, 2001, there were 444,739 holders
of record of GM $1-2/3 par value common stock and 185,553 holders of record of
GM Class H common stock. As of December 31, 2000, there were 464,399 holders of
record of GM $1-2/3 par value common stock and 192,813 holders of record of GM
Class H common stock. The following table sets forth the high and low sale
prices of GM's common stocks as reported on the Composite Tape and the quarterly
dividends declared for the last two years.
2001 Quarters
----------------------------------------
1st 2nd 3rd 4th
----- ----- ----- ------
Cash dividends per share of
common stocks
$1-2/3 par value $0.50 $0.50 $0.50 $0.50
Class H $- $- $- $-
Price range of common stocks
$1-2/3 par value (1): High $59.48 $64.89 $67.80 $53.22
Low $50.25 $50.20 $39.17 $40.52
Class H (1): High $28.00 $25.09 $21.65 $15.80
Low $17.90 $17.50 $11.50 $12.12
2000 Quarters
----------------------------------------
1st 2nd 3rd 4th
----- ----- ----- -----
Cash dividends per share of
common stocks
$1-2/3 par value $0.50 $0.50 $0.50 $0.50
Class H $- $- $- $-
Price range of common stocks
$1-2/3 par value (1): High $88.13 $94.63 $76.63 $68.25
Low $70.75 $57.25 $56.94 $48.44
Class H (1)(2): High $47.00 $41.58 $37.61 $38.00
Low $30.50 $27.33 $24.63 $21.33
(1) The principal market is the New York Stock Exchange, and prices are based on
the Composite Tape. GM $1-2/3 par value common stock is also listed on the
Chicago and Philadelphia stock exchanges and on the Pacific Exchange.
(2) The stock prices have been adjusted to reflect the three-for-one stock split
of the GM Class H common stock, in the form of a 200% stock dividend, paid
on June 30, 2000.
II-1
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 6. Selected Financial Data (Unaudited)
Years Ended December 31
-----------------------------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
(dollars in millions except per share amounts)
Total net sales and revenues $177,260 $184,632 $176,558 $155,445 $172,580
======= ======= ======= ======= =======
Income from continuing
operations $601 $4,452 $5,576 $3,049 $6,483
Income (loss) from
discontinued operations - - 426 (93) 215
--- ----- ----- ----- -----
Net income $601 $4,452 $6,002 $2,956 $6,698
=== ===== ===== ===== =====
$1-2/3 par value common stock
Basic earnings per share (EPS)
from continuing operations $1.78 $6.80 $8.70 $4.40 $8.52
Basic earnings (losses)
per share from
discontinued operations $ - $ - $0.66 $(0.14) $0.18
Diluted EPS from continuing
operations $1.77 $6.68 $8.53 $4.32 $8.45
Diluted earnings (losses)
per share from
discontinued operations $ - $ - $0.65 $(0.14) $0.17
Cash dividends declared
per share $2.00 $2.00 $2.00 $2.00 $2.00
Class H common stock (1) (3)
Basic EPS from continuing
operations $ - $ - $ - $ - $0.77
Basic EPS from discontinued
operations $ - $ - $ - $ - $0.29
Diluted EPS from continuing
operations $ - $ - $ - $ - $0.77
Diluted EPS from discontinued
operations $ - $ - $ - $ - $0.29
Cash dividends declared
per share $ - $ - $ - $ - $0.33
Class H common stock (1) (4)
Basic earnings (losses)
per share from
continuing operations $(0.55) $0.56 $(0.26) $0.23 $0.01
Diluted earnings (losses)
per share from
continuing operations $(0.55) $0.55 $(0.26) $0.23 $0.01
Cash dividends declared
per share $ - $ - $ - $ - $ -
Total assets $323,969 $303,100 $274,730 $246,688 $221,767
Long-term debt (2) $10,726 $7,410 $7,415 $7,118 $5,669
GM-obligated mandatorily
redeemable preferred
securities of subsidiary
trusts $ - $139 $218 $220 $222
Stockholders' equity $19,707 $30,175 $20,644 $15,052 $17,584
Reference should be made to the notes to GM's consolidated financial statements
and Management's Discussion and Analysis of Financial Condition and Results of
Operations.
(1) Adjusted to reflect the three-for-one stock split of the GM Class H common
stock, in the form of a 200% stock dividend, paid on June 30, 2000.
(2) Automotive, Communications Services, and Other Operations only.
(3) Prior to its recapitalization on December 17, 1997.
(4) Subsequent to its recapitalization on December 17, 1997.
* * * * * *
II-2
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 7. 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 Hughes
Electronics Corporation (Hughes) consolidated financial statements and MD&A for
the period ended December 31, 2001, included as Exhibit 99 to this GM Annual
Report on Form 10-K for the period ended December 31, 2001, and related Hughes
Annual Report on Form 10-K filed separately with the Securities and Exchange
Commission (SEC); and the General Motors Acceptance Corporation (GMAC) Annual
Report on Form 10-K for the period ended December 31, 2001, filed separately
with the SEC. 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 ACO 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, 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 ACO
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.
II-3
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
RESULTS OF OPERATIONS
For the year ended December 31, 2001, income from continuing operations for
the Corporation was $601 million, or $1.77 per share of GM $1-2/3 par value
common stock, compared with $4.5 billion and $5.6 billion, or $6.68 and $8.53
per share of GM $1-2/3 par value common stock, for 2000 and 1999, respectively.
Income from continuing operations includes the special items on an after-tax
basis outlined below:
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 Year Ended December 31, 2001
Reported Net Income (Loss) $1,270 $(765) $(81) $(57) $367 $(618) $(916) $(1,167) $1,786 $(18) $601
Ste. Therese Charge (A) 194 - - - 194 - - 194 - - 194
Raytheon Settlement (B) - - - - - - 474 474 - - 474
Gain on Sale of Thomson (C) - - - - - (67) - (67) - - (67)
SkyPerfecTV! Writedown (D) - - - - - 133 - 133 - - 133
Severance Charge (E) - - - - - 40 - 40 - - 40
DIRECTV Japan Adjustment (F) - - - - - (21) - (21) - - (21)
Isuzu Restructuring (G) - - - 133 133 - - 133 - - 133
SFAS 133 Adjustment (H) 14 (2) 1 1 14 8 - 22 (34) - (12)
----- ---- --- ---- --- ----- ------ ---- ----- -- -----
Adjusted Income (Loss) $1,478 $(767) $(80) $77 $708 $(525) $(442) $(259) $1,752 $(18) $1,475
===== === == == === === === === ===== == =====
For Year Ended December 31, 2000
Reported Net Income (Loss) $3,174 $(676) $26 $(233) $2,291 $829 $(281) $2,839 $1,602 $11 $4,452
Phase-out of Oldsmobile Charge (I) 939 - - - 939 - - 939 - - 939
Postemployment Benefits Charge (J) 294 - - - 294 - - 294 - - 294
Capacity Reduction Adjustment (K) - 419 - - 419 - - 419 - - 419
Satellite Businesses Gain (L) - - - - - (1,132) - (1,132) - - (1,132)
----- --- -- --- ----- ----- --- ----- ----- -- -----
Adjusted Income (Loss) $4,407 $(257) $26 $(233) $3,943 $(303) $(281) $3,359 $1,602 $11 $4,972
===== === == === ===== ===== === ===== ===== == =====
For Year Ended December 31, 1999
Reported Net Income (Loss) $4,857 $423 $(81) $(218) $4,981 $(270) $(669) $4,042 $1,527 $7 $5,576
Postemployment Benefits
Adjustment (M) (553) - - - (553) - - (553) - - (553)
Hourly Retiree Benefits Charge (N) 257 - - - 257 - 151 408 - - 408
Termination Benefits Charge (O) 39 - - - 39 - 35 74 16 - 90
Wireless Business Charge (P) - - - - - 165 - 165 - - 165
----- --- -- --- ----- --- --- ----- ----- -- -----
Adjusted Income (Loss) $4,600 $423 $(81) $(218) $4,724 $(105) $(483) $4,136 $1,543 $7 $5,686
===== === == === ===== === === ===== ===== == =====
See footnotes on next page for further discussion of these items.
II-4
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Footnotes:
---------
A) The Ste. Therese Charge relates to asset impairments and postemployment
costs for termination and other postemployment benefits associated with
the announcement of the closing of the Ste. Therese, Quebec assembly
plant.
B) The Raytheon Settlement relates to Hughes' settlement with the Raytheon
Company on a purchase price adjustment related to Raytheon's 1997 merger
with Hughes Defense.
C) The Gain on Sale of Thomson relates to Hughes' sale of 4.1 million shares
of Thomson Multimedia common stock.
D) The SkyPerfecTV! Writedown relates to Hughes' non-cash charge from the
revaluation of its investment.
E) The Severance Charge relates to Hughes' 10% company-wide workforce
reduction in the U.S.
F) The DIRECTV Japan Adjustment relates to a favorable adjustment to the
expected costs associated with the shutdown of Hughes' DIRECTV Japan
business.
G) The Isuzu Restructuring charges include GM's portion of severance payments
and asset impairments that were part of the restructuring of its affiliate
Isuzu Motors Ltd.
H) The SFAS 133 Adjustment represents the net impact during the first quarter
of 2001 from the initial adoption of SFAS No. 133, "Accounting for
Derivatives and Hedging Activities."
I) The Phase-out of Oldsmobile Charge relates to the costs associated with
GM's decision to phase-out the Oldsmobile division as the current model
lineup product lifecycles come to an end, or when the models are no longer
economically viable.
J) The Postemployment Benefits Charge relates to postemployment costs for
termination and other postemployment benefits associated with four North
American manufacturing facilities slated for conversion and capacity
reduction (Oklahoma City, Oklahoma; Delta Engine, Lansing, Michigan;
Spring Hill, Tennessee; and Wilmington, Delaware).
K) The Capacity Reduction Adjustment relates to costs associated with the
reduction in production capacity, including the restructuring of Vauxhall
Motors Limited's manufacturing operations in the U.K.
L) The Satellite Businesses Gain relates to the sale of Hughes' satellite
systems manufacturing businesses to The Boeing Company.
M) The Postemployment Benefits Adjustment relates to the reversal of a
liability for benefits payable to excess U.S. hourly employees.
N) The Hourly Retiree Benefits Charge relates to the benefit increase granted
to hourly retirees in connection with the 1999 UAW agreement.
O) The Termination Benefits Charge relates to a U.S. salaried early
retirement program. Approximately 1,700 people (100 executives) elected
participation in this program.
P) The Wireless Business Charge relates to Hughes' decision to discontinue
certain of its wireless manufacturing operations at Hughes Network
Systems.
II-5
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Vehicle Unit Deliveries of Cars and Trucks - GMA
Years Ended December 31,
--------------------------------------------------------------------------------
2001 2000 1999
------------------------- ------------------------- --------------------------
GM as GM as GM as
a % of a % of a % of
Industry GM Industry Industry GM Industry Industry GM Industry
-------- ----- -------- -------- ----- -------- -------- ------ --------
(units in thousands)
United States
Cars 8,455 2,272 26.9% 8,857 2,532 28.6% 8,700 2,591 29.8%
Trucks 9,020 2,632 29.2% 8,957 2,421 27.0% 8,718 2,426 27.8%
------- ----- ----- ----- ----- -----
Total United States 17,475 4,904 28.1% 17,814 4,953 27.8% 17,418 5,017 28.8%
Canada, Mexico, and Other 2,775 686 24.7% 2,781 707 25.4% 2,525 666 26.4%
------ ----- ------ ----- ------ -----
Total GMNA 20,250 5,590 27.6% 20,595 5,660 27.5% 19,943 5,683 28.5%
GME 19,632 1,801 9.2% 20,158 1,856 9.2% 20,252 1,974 9.7%
GMLAAM 3,861 663 17.2% 3,664 605 16.5% 3,342 539 16.1%
GMAP 12,884 506 3.9% 12,880 476 3.7% 11,975 455 3.8%
------ ----- ------ ----- ------ -----
Total Worldwide 56,627 8,560 15.1% 57,297 8,597 15.0% 55,512 8,651 15.6%
Wholesale Sales
Years Ended December 31,
-----------------------------------
2001 2000 1999
----- ----- -----
(units in thousands)
GMNA
Cars 2,441 2,933 2,992
Trucks 2,746 2,842 2,882
----- ----- -----
Total GMNA 5,187 5,775 5,874
----- ----- -----
GME
Cars 1,666 1,744 1,824
Trucks 94 135 144
----- ----- -----
Total GME 1,760 1,879 1,968
----- ----- -----
GMLAAM
Cars 463 438 350
Trucks 203 196 173
--- --- ---
Total GMLAAM 666 634 523
--- --- ---
GMAP
Cars 202 175 162
Trucks 258 283 259
--- --- ---
Total GMAP 460 458 421
--- --- ---
Total Worldwide 8,073 8,746 8,786
===== ===== =====
GMA Financial Review
GMA's income and margin adjusted to exclude special items (adjusted income
and margin) was $708 million and 0.5% for 2001, $3.9 billion and 2.7% for 2000,
and $4.7 billion and 3.2% for 1999. The decrease in 2001 adjusted income and
margin, compared with 2000, was primarily due to a decrease in wholesale sales
volume and pricing pressures in North America and Europe. These unfavorable
conditions were partially offset by cost structure improvements, also primarily
in North America and Europe. The decrease in 2000 adjusted income and margin,
compared with 1999, was primarily due to an increase in spending for product
development activities, pricing pressures in North America and Europe, a
decrease in wholesale sales volume, and unfavorable product mix, primarily in
Europe. These unfavorable conditions were partially offset by cost structure
improvements, primarily in North America.
GMA's total net sales and revenues adjusted to exclude special items
(adjusted total net sales and revenues) were $140.7 billion, $148.1 billion, and
$146.1 billion for 2001, 2000, and 1999, respectively. The decrease in 2001
adjusted total net sales and revenues, compared with 2000, was largely due to
lower wholesale volumes and unfavorable net price in North America and Europe.
Net price comprehends the percent increase/(decrease) a customer pays in the
current period for the same comparably equipped vehicle over the price paid in
the previous year's period. The increase in 2000 adjusted total net sales and
revenues, compared with 1999, was largely due to growth initiatives, including
OnStar and Service Parts Operations, which were partially offset by lower
wholesale volumes and unfavorable net price in North America and Europe.
II-6
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
GMA Financial Review (continued)
GMNA's adjusted income was $1.5 billion, $4.4 billion, and $4.6 billion for
2001, 2000, and 1999, respectively. The decrease in 2001 adjusted income from
2000 was primarily due to unfavorable net price of (1.3)% year-over-year and
lower wholesale sales volumes. The decrease was partially offset by favorable
product mix and improvements in manufacturing costs due to performance
efficiencies, material cost savings, and engineering productivity. The decrease
in 2000 adjusted income from 1999 was primarily due to unfavorable net price of
(0.7)% year-over-year and lower wholesale sales volumes. The decrease was
partially offset by improvements in manufacturing costs due to performance
efficiencies and material cost savings.
GME's adjusted loss was $767 million for 2001, compared with an adjusted
loss of $257 million and adjusted income of $423 million for 2000 and 1999,
respectively. The increase in GME's 2001 adjusted loss from 2000 was due to a
continued shift in sales mix from larger, more profitable vehicles to smaller,
less profitable entries, as well as a decrease in wholesale sales volume and
continued competitive pricing pressures. These decreases were partially offset
by improved material and structural cost performance. The decrease in GME's 2000
adjusted income from 1999 was due to the weakening of the European industry,
unfavorable sales mix, an increase in competitive pricing pressure, and a
decrease in wholesale sales volume which was further impacted by the reduced
availability of the new Corsa during the launch period.
GMLAAM's adjusted loss was $80 million for 2001, compared with adjusted
income of $26 million and an adjusted loss of $81 million for 2000 and 1999,
respectively. The decrease in 2001 adjusted earnings, compared with 2000, was
primarily due to material cost increases reflecting supplier cost pressures,
manufacturing cost increases, and the devaluation of the currency in Argentina.
These decreases were partially offset by nominal price increases and an increase
in wholesale sales volumes. The increase in 2000 adjusted income, compared with
1999, was primarily due to nominal price increases and an increase in wholesale
sales volumes. This was partially offset by an increase in manufacturing costs
and material costs.
GMAP's adjusted income was $77 million for 2001 compared with adjusted losses
of $233 million and $218 million for 2000 and 1999, respectively. The increase
in 2001 adjusted earnings, compared with 2000, was primarily due to GMAP's
suspension of recording its share of Isuzu's losses. GM reduced its investment
balance in Isuzu to zero in the second quarter of 2001 and GM does not intend to
invest any additional capital in Isuzu or guarantee any obligation of Isuzu. In
addition, there were equity income improvements from several joint ventures in
the region, as well as slightly favorable price increases and increased
wholesale sales volume. Increased adjusted losses for 2000 compared with 1999
were primarily due to increased equity losses at Isuzu which were partially
offset by increased wholesale sales volumes.
GMA's effective income tax rate on an adjusted basis was 28.7%, 30.9%, and
31.7% for 2001, 2000, and 1999, respectively. GMA's effective income tax rate on
a reported basis was 25.1%, 26.6%, and 32.0% for 2001, 2000, and 1999,
respectively.
Hughes Financial Review
Total adjusted net sales and revenues were $8.3 billion, $8.7 billion, and
$7.6 billion for 2001, 2000, and 1999, respectively. The decrease in adjusted
net sales and revenues in 2001, compared with 2000, was due to decreased
revenues at PanAmSat Corporation (PanAmSat) and Hughes Network Systems (HNS),
and as a result of the sale of the satellite systems manufacturing businesses to
The Boeing Company on October 6, 2000. The decrease in adjusted net sales and
revenues at PanAmSat was primarily due to a decline of new outright sales and
sales-type lease transactions executed during 2001 compared to 2000. The
decrease in adjusted 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
adjusted net sales and revenues at the Direct-To-Home businesses that resulted
from the addition of approximately 1.5 million net new subscribers in the United
States and Latin America since December 31, 2000. The increase in adjusted net
sales and revenues in 2000 compared with 1999 resulted from growth in the
DIRECTV businesses from the addition of more than 2.3 million net new
subscribers in the United States and Latin America from December 31, 1999 to
December 31, 2000. PanAmSat also contributed to the increase in adjusted net
sales and revenues primarily due to increased revenues from outright sales and
sales-type lease transactions executed during 2000.
II-7
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Hughes Financial Review (continued)
Hughes' adjusted losses were $525 million, $303 million, and $105 million for
2001, 2000, and 1999, respectively. The increase in 2001 adjusted loss, compared
with 2000, was primarily due to lower profits in 2001 from sales and sales-type
lease transactions and higher operating costs at PanAmSat, increased costs
associated with the rollout of new DIRECWAY services, lower profits resulting
from decreased shipments of DIRECTV receiving equipment at HNS, the added cost
of DIRECTV Broadband, and increased depreciation and amortization expense due to
various acquisitions in 2001 and capital expenditures for satellites and
property. The increase in 2000 adjusted loss, compared with 1999, was primarily
due to higher marketing costs at the Direct-To-Home businesses, increased
depreciation and amortization expense due to 1999 acquisitions and additions to
satellites and property, as well as increased interest expense as a result of
increased average outstanding borrowings throughout the year.
GMAC Financial Review
GMAC's adjusted income was $1.8 billion, $1.6 billion, and $1.5 billion for
2001, 2000, and 1999, respectively. Income from automotive and other financing
operations totaled $1.3 billion, $1.1 billion, and $1.1 billion in 2001, 2000,
and 1999, respectively. The increase in adjusted income in 2001, compared with
2000, was primarily due to lower market interest rates and increased asset
levels. These increases were partially offset by weakness in off-lease residual
values, higher credit losses, and wider borrowing spreads that occurred in the
wake of negative rating agency actions. In 2000, compared to 1999, increased
financing volumes and asset levels were offset by the negative impact from the
higher level of market interest rates. Income from insurance operations totaled
$200 million, $220 million, and $210 million in 2001, 2000, and 1999,
respectively. The decrease in income in 2001, compared with 2000, was primarily
due to a reduction in capital gains reflecting the general weakness in the
equity markets. This decrease was partially offset by improved underwriting
results. The increase in income in 2000, compared with 1999, was primarily due
to improved operating results, higher investment income, and capital gains.
Income from mortgage operations totaled $331 million, $327 million, and $260
million in 2001, 2000, and 1999, respectively. The increase in income in 2001,
compared with 2000, was primarily due to strong origination volumes and
securitizations which kept pace with the large run-off of home mortgages that
occurred during periods of high refinancing activity. Revenue growth during 2001
associated with strong residential loan originations, increases in the servicing
portfolio, and realized gains on the sale and securitization of mortgage loans,
were largely offset by impairment charges recorded on mortgage servicing rights
due to higher mortgage prepayment experience. Pre-tax gains on securitizations
of mortgage loans were $1.0 billion, 37.6% and 65.0% higher than the gains in
2000 and 1999, respectively. The strong year-over-year performance in 2000,
compared with 1999, reflects the benefit of strong international growth, lower
cost of servicing, and increased mortgage originations during the second half of
2000.
Automotive and other financing revenue totaled $15.1 billion in 2001,
compared with $15.5 billion and $13.8 billion for 2000 and 1999, respectively.
The decrease in revenue in 2001 was primarily due to a decline in asset earning
rates during 2001, operating lease assets, and wholesale receivables, which were
partially offset by an increase in retail receivables. The increase in 2000,
compared with 1999, was mainly due to higher average retail, wholesale, and
commercial and other loan receivable balances. Net premiums earned from
insurance operations totaled $2.0 billion, $1.9 billion, and $1.8 billion in
2001, 2000, and 1999, respectively. The increase in 2001, compared with 2000,
was primarily due to expanding customer relationships in assumed reinsurance
business and strong volume in dealer vehicle inventory insurance. The increase
in 2000, compared with 1999, was due to premium growth across all business
lines. Mortgage revenue totaled $5.3 billion, $3.9 billion, and $3.0 billion in
2001, 2000, and 1999, respectively. The increase in revenue in 2001, compared
with 2000 and 1999, was primarily attributed to stronger lending volumes, loan
originations, securitizations, and an increase in the servicing portfolio
reflecting significant refinancing activity prompted by the decline in interest
rates observed throughout most of 2001. Other income, including gains and fees
related to sold finance receivables, totaled $3.0 billion, $2.4 billion, and
$1.7 billion in 2001, 2000, and 1999, respectively. The increase in 2001,
compared with 2000, was primarily the result of increased income from increased
securitization levels of retail and wholesale receivables. Additionally,
interest income increased due to the increase in cash and cash equivalents in
2001. The increase in 2000, compared to 1999, was primarily attributable to
increases in interest and servicing fees, factoring commissions, and other
servicing fees.
LIQUIDITY AND CAPITAL RESOURCES
Financing Structure
In 2001, GM and GMAC experienced excellent access to the capital markets as
GM and GMAC were able to issue various securities to raise capital and extend
borrowing terms consistent with GM's need for financial flexibility. Although
downgrades to GM's and GMAC's credit ratings have reduced GM's and GMAC's access
to the commercial paper market, the amount of commercial paper available to GM
and GMAC remains sufficient to meet the Corporation's capital needs. Moreover,
the downgrades have not had a significant adverse effect on GM's and GMAC's
ability to issue long-term public debt, to obtain bank debt, or to sell
asset-backed securities. Accordingly, GM and GMAC expect that they will continue
to have excellent access to the capital markets sufficient to meet the
Corporation's needs for financial flexibility.
II-8
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Financing Structure (continued)
As an additional source of funds, GM currently has unrestricted access to a
$5.6 billion line of credit with a syndicate of banks which is committed through
June 2006. Similarly, GMAC has a $7.4 billion line of credit, committed through
June 2002, and an additional $7.4 billion committed through June 2006. GMAC
currently plans to seek renewal of the line of credit committed through June
2002.
On March 6, 2002, GM issued $3.8 billion of convertible debt securities as
part of a comprehensive effort to improve the Corporation's financial
flexibility. The offering includes $1.2 billion principal amount of 4.5% Series
A Convertible Senior Debentures due 2032 and $2.6 billion principal amount of
5.25% Series B Convertible Senior Debentures due 2032. The securities mature in
30 years and are convertible into GM $1-2/3 common stock once specific
conditions are satisfied. The proceeds of the offering, combined with other cash
generation initiatives, will be used to rebuild GM's liquidity position, reduce
its underfunded pension liability, and fund its postretirement health care
obligations.
Automotive, Communications Services, and Other Operations
At December 31, 2001, cash, marketable securities, and $3.0 billion of assets
of the Voluntary Employees' Beneficiary Association (VEBA) trust invested in
fixed-income securities totaled $12.2 billion, compared with $13.3 billion at
December 31, 2000. The decrease from December 31, 2000 was primarily due to
capital expenditures, GM's purchase of an additional 10% equity stake in Suzuki
for $493 million, an equity injection into GMAC of $500 million, and an overall
decrease in earnings. These items were partially offset by improvements in
managed working capital. Total assets in the VEBA trust used to pre-fund part of
GM's other postretirement benefits liability approximated $4.9 billion and $6.7
billion at December 31, 2001 and 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.
Net liquidity excluding Hughes was $1.0 billion as cash, marketable
securities, and $3.0 billion of assets of the VEBA trust invested in
fixed-income securities exceeded loans payable and long term debt at December
31, 2001, a decrease of $2.5 billion from the prior year.
In order to provide financial flexibility to GM and its suppliers, GM
maintains a two-part financing program through General Electric Capital
Corporation (GECC) pursuant to a Trade Payables Agreement with GM wherein GECC
(1) purchases GM receivables at a discount from GM suppliers prior to the due
date of those receivables, and pays on behalf of GM the amount due on other
receivables which have reached their due date (the first part) and (2) from time
to time allows GM to defer payment to GECC with respect to all or a portion of
receivables which it has purchased or paid on behalf of GM, which deferral lasts
generally up to 40 days.
To the extent GECC can realize favorable economics from transactions arising
in the first part of the program, they are shared with GM. Whenever GECC and GM
agree that GM will defer payment beyond the normal due date for receivables
under the second part of the program, GM becomes obligated to pay interest for
the period of such deferral. Outstanding balances of GM receivables held by GECC
are classified as accounts payable in GM's financial statements. If any of GM's
long-term unsecured debt obligations become subject to a rating by S&P of BBB-
(GM's current rating is BBB+) with a negative outlook or below BBB-, or a rating
by Moody's of Baa3 (GM's current rating is A3) with a negative outlook or below
Baa3, the first part of the program would be unavailable to GM and its
suppliers. If any of GM's long-term unsecured debt obligations become subject to
a rating by S&P of BBB or lower, or a rating by Moody's of Baa2 or lower, the
second part of the program would be unavailable to GM. The maximum amount
permitted under the program is $2 billion. At December 31, 2001, the outstanding
balance under the first part of the program amounted to approximately $495
million, and the outstanding balance under the second part of the program was
$1.2 billion.
Long-term debt was $10.7 billion and $7.4 billion at December 31, 2001 and
2000, respectively. The ratio of long-term debt to long-term debt and GM's net
assets of Automotive, Communications Services, and Other Operations was 72.6%
and 30.8% at December 31, 2001 and 2000, respectively. 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 76.5% and 36.6%
at December 31, 2001 and 2000, respectively.
Beginning January 2004, Fiat S.p.A. (Fiat) has the right to exercise a put
option to require GM to purchase 80% of Fiat Auto B.V. (Fiat Auto) at fair
market value. The put expires on July 24, 2009. The process for establishing the
value that would be paid by GM to Fiat involves the determination of "Fair
Market Value" by investment banks that would be retained by the parties pursuant
to provisions set out in the Master Agreement between GM and Fiat, which has
been made public in filings with the SEC. As a result of GM's purchase of the
initial 20% investment in Fiat Auto for $2.4 billion in the July 2000
transaction, some have suggested a valuation of $9.6 billion for the other 80%
of Fiat Auto. However, Exhibit 8.03(a)(iii) to the Master Agreement states that
"in determining the Fair Market Value of the Put Shares, the price [$2.4
billion] paid by General Motors for its initial 20% interest in Fiat Auto shall
not be considered."
II-9
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Automotive, Communications Services, and Other Operations (continued)
Until a valuation is actually performed in accordance with provisions of the
Master Agreement, the amount that GM may pay for 80% of Fiat Auto is not
quantifiable. This is due in large part to the fact that there are many
variables that could cause such a determination to rise or fall, including, but
not limited to, the operating results and prospects of Fiat Auto, such factors
as the timing of any possible exercise of the put, regional and global economic
developments and those in the automotive industry, developments specific to the
business of Fiat Auto, the resolution of any antitrust issues arising in the
context of such a transaction and other legislative developments in the
countries in which Fiat Auto and GM conduct their business operations. Fiat Auto
has recently announced a major restructuring, including a significant write-off,
all of which may be relevant to any prospective valuation of Fiat Auto.
Recently, Fiat stated that it expects Fiat Auto to return to profitability by
the end of 2002 and that it does not plan to sell Fiat Auto to GM.
If the put were exercised, GM would have the option to pay for the 80%
interest in Fiat Auto entirely in shares of GM $1-2/3 par value common stock,
entirely in cash, or in whatever combination thereof GM may choose. To the
extent GM chooses to pay in cash, that portion of the purchase price may be paid
to Fiat in four installments over a three-year period. GM would expect to fund
any such payments from normal operating cash flows or financing activities. At
this time it cannot be determined what the effects of the exercise of the put
would be, if it ever occurs during the next eight years; however, if it is
exercised, it could have a material effect on GM at or after the time of
exercise.
Financing and Insurance Operations
At December 31, 2001, GMAC owned assets and serviced automotive receivables
totaling $220.1 billion, compared with $185.7 billion at December 31, 2000.
Total consolidated assets of GMAC at December 31, 2001 were $192.7 billion,
compared with $168.5 billion at December 31, 2000. The increases were primarily
due to increases in serviced retail receivables, cash and cash equivalents,
mortgages held for sale, other assets, mortgage lending receivables, mortgage
loans held for investment, due and deferred from receivable sales, and mortgage
servicing rights. These increases were partially offset by decreases in serviced
wholesale receivables, operating lease assets, receivables due from ACO, and
factored receivables.
Total automotive and commercial finance receivables serviced by GMAC,
including sold receivables, amounted to $130.6 billion and $112.5 billion at
December 31, 2001 and 2000, respectively. The year-to-year increase was
primarily due to a $24.3 billion increase in serviced retail receivables, which
was partially offset by a $5.3 billion decrease in serviced wholesale
receivables. Continued increased GM-sponsored retail financing incentives
contributed to the rise in serviced retail receivables. The decrease in serviced
wholesale receivables was due to lower dealer inventory levels. Principal
balances of active trusts of sold wholesale receivables (including retained
subordinated interests) increased $6.2 billion, due to the completion of three
sales in 2001. Additionally, outstanding principal balances of sold retail
automotive receivables (including retained subordinated interests) increased by
$3.5 billion due to the completion of five sales during 2001.
GMAC's liquidity, as well as its ability to profit from ongoing acquisition
activity, is in large part dependent on its timely access to capital and the
costs associated with raising funds in different segments of the capital
markets. In this regard, GMAC regularly accesses the short-term, medium-term,
long-term debt, and asset-backed securitization markets principally through
commercial paper, notes, and underwritten transactions.
As of December 31, 2001, GMAC's total borrowings were $152.0 billion compared
with $133.4 billion at December 31, 2000. The higher year-to-year debt balances
were principally used to fund increased asset levels. Approximately 84% of this
debt represented funding for operations in the United States, and the remaining
16% represented borrowings for operations in Canada (7%), the United Kingdom
(3%), Germany (2%), and other countries (4%). GMAC's 2001 year-end ratio of
total debt to total stockholder's equity was 9.4:1 compared to 9.5:1 at December
31, 2000. Total short-term debt outstanding at December 31, 2001 amounted to
$36.2 billion compared with $56.9 billion at year-end 2000.
Off-Balance Sheet Arrangements
GM and GMAC use off-balance sheet special purpose entities ("SPEs") where the
economics and sound business principles warrant their use. GM's principal use of
SPEs occurs in connection with the securitization and sale of financial assets
generated or acquired in the ordinary course of business by GM's wholly-owned
subsidiary 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 GM's
dealer network. The assets sold by GM consist of trade receivables. GM and GMAC
use SPEs in a manner consistent with conventional practices in the
securitization industry, the purpose of which is to isolate the receivables for
the benefit of securitization investors. The use of SPEs enables GM and GMAC to
access the highly liquid and efficient markets for the sale of these types of
financial assets when they are packaged in securitized forms.
II-10
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Off-Balance Sheet Arrangements (continued)
GM leases real estate and equipment from various SPEs which 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. All of the SPEs established to facilitate
property leases to GM are owned by institutions which are truly independent of,
and not affiliated with, GM. These institutions maintain substantial equity
investments in their SPEs. No officers, directors or employees of GM, GMAC, or
their affiliates hold any direct or indirect equity interests in such SPEs.
Assets in SPEs were as follows (dollars in millions):
December 31,
------------------
2001 2000
------ ------
Automotive, Communications Services, and Other Operations
Assets leased under operating leases $2,412 $1,729
Trade receivables sold 868 897
----- ------
Total $3,280 $2,626
===== =====
Financing and Insurance Operations
Receivables sold or securitized:
- Mortgage loans $104,678 $86,344
- Retail finance receivables 11,978 6,957
- Wholesale finance receivables 16,227 9,988
------- -------
Total $132,883 $103,289
======= =======
Book Value Per Share
Book value per share was 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 decreased to $24.79 at December 31, 2001, from $39.36 at December
31, 2000. Book value per share of GM Class H common stock decreased to $4.96 at
December 31, 2001, from $7.87 at December 31, 2000.
Dividends
Dividends may be paid on common stocks only when, as, and if declared by GM's
Board of Directors 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.
At December 31, 2001, the amount available for the payment of dividends on GM
$1-2/3 par value and GM Class H common stocks was $10.1 billion and $19.4
billion, respectively. GM's policy is to distribute dividends on its $1-2/3 par
value common stock based on the outlook and indicated capital needs of the
business. Cash dividends per share of GM $1-2/3 par value common stock were
$2.00 in 2001, 2000, and 1999. 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 the business of
Hughes.
The dividends per share for the GM Series H 6.25% Automatically Convertible
Preference Stock were $35.1172 in 2001. On April 2, 2001, GM redeemed
approximately 5 million outstanding Series G 9.12% Depository Shares, each of
which represented a one-fourth interest in a GM Series G Preference Stock, and 5
million outstanding Series G 9.87% Trust Originated Preferred Securities(sm)
(TOPrS(sm)) at a total redemption price that included accrued and unpaid
dividends. The Series D preference stock was redeemed on May 2, 2000, and as a
result, the amount paid on that date to the Series D shareholders of record
included accrued and unpaid dividends as part of the total redemption price.
--------------------
sm "Trust Originated Preferred Securities" and "TOPrS" are service trademarks
of Merrill Lynch & Co.
II-11
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Euro Conversion
On January 1, 1999, 11 of 15 member countries of the European Union
established fixed conversion rates between their existing currencies and adopted
the euro as their new common currency. The euro traded on currency exchanges and
the legacy currencies remained legal tender in the participating countries for a
transition period until January 1, 2002. Beginning on January 1, 2002,
euro-denominated bills and coins were issued and on February 28, 2002 legacy
currencies were withdrawn from circulation.
The Corporation has reviewed and has made required modifications to
applicable information technology systems and contracts based on the new
currency. At December 31, 2001, the conversion to the euro has not resulted in
any material adverse impact on GM's financial position or results of operations.
European Matters
During 2001, GM Europe announced its intention to turn around its business
with the implementation of Project Olympia. The initial stages of Project
Olympia sought to identify initiatives that could deliver:
. Solid and profitable business performance as of 2003
. A strengthened and optimized sales structure
. A revitalized Opel/Vauxhall brand
. Further market growth opportunities
. Continuous improvement by refocusing the organizational structure
The project identified several initiatives which aim to address the goals
mentioned above. These initiatives, which include, among other things, reducing
GM Europe's manufacturing capacity, restructuring the dealer network in Germany,
and redefining the way vehicles are marketed, are in varying stages of planning
and execution. The impact that such initiatives may have on the financial
position and results of operations of GM is currently being assessed, and may
include a charge to earnings in 2002.
During September 2000, the European parliament passed a directive requiring
member states to adopt legislation regarding end-of-life vehicles and the
responsibility of manufacturers for dismantling and recycling vehicles they have
sold. European Union member states are required to transform the concepts
detailed in the directive into national law by April 2002. Under the directive,
manufacturers are financially responsible for at least a portion of the cost of
the take-back of vehicles placed in service after July 2002 and all vehicles
placed in service prior to July 2002 that are still in operation in January
2007. The laws developed in the individual national legislatures throughout
Europe will have a significant impact on the amount ultimately paid by the
manufacturers for this issue. Management is currently assessing the impact of
this potential legislation on GM's financial position and results of operations,
and may include a charge to earnings in 2002.
The European Commission has adopted a draft block exemption regulation that
provides for a reform of the rules governing automotive distribution and service
in Europe. The European Commission's proposal would eliminate the current block
exemption in place since 1985 that permits manufacturers to control where their
dealerships are located and the brands that they sell. The current block
exemption expires in October 2002, however there is a transition period until
the end of September 2003 for existing agreements with dealers. GM is presently
evaluating the effect this proposed regulation would have on its present
distribution and aftermarket strategies.
Hughes/EchoStar Transactions
On October 28, 2001, GM and its wholly owned subsidiary Hughes, together with
EchoStar Communications Corporation (EchoStar), announced the signing of
definitive agreements that, subject to stockholder approval, regulatory
clearance, and certain other conditions, provide for the split-off of Hughes
from GM and the subsequent merger of the Hughes business with EchoStar. These
transactions are designed to address strategic challenges currently facing the
Hughes business and to provide liquidity and value to GM, which would help to
support the credit position of GM after the transactions.
The split-off of Hughes from GM would occur by means of a distribution to the
holders of GM Class H common stock of one share of Class C common stock of a
Hughes holding company (that will own all of the stock of Hughes at the time of
the split-off) in exchange for each share of GM Class H common stock held
immediately prior to the split-off. Immediately following the split-off, the
businesses of Hughes and EchoStar would be combined in the Hughes/EchoStar
merger to form New EchoStar. Each share of the Hughes holding company Class C
common stock shares would remain outstanding and become a share of Class C
common stock of New EchoStar. Holders of Class A and Class B common stock of
EchoStar would receive 1/0.73, or about 1.3699 shares of stock of the merged
entity in exchange for each share of Class A or Class B common stock of EchoStar
held prior to the Hughes/EchoStar merger.
The transactions are structured in a manner that will not result in the
recapitalization of GM Class H common stock into GM $1-2/3 par value common
stock at a 120% exchange ratio, as currently provided for under certain
circumstances in the General Motors Restated Certificate of Incorporation, as
amended. The GM $1-2/3 par value common stock would remain outstanding and would
be GM's only class of common stock after the transactions.
II-12
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Hughes/EchoStar Transactions (continued)
As part of the transactions, GM would receive a dividend from Hughes of up
to $4.2 billion in cash and its approximately 30% retained economic interest in
Hughes would be reduced by a commensurate amount. In addition, GM may achieve
additional liquidity with respect to a portion of its retained economic
interest in Hughes represented by up to 100 million shares of GM Class H
common stock (or, after the transactions, New EchoStar Class C common
stock), including by exchanging such shares for GM outstanding obligations.
Following these transactions, subject to IRS approval, and based on a number of
assumptions, GM may retain an interest in the merged entity.
The transactions are subject to a number of conditions, including approval by
a majority of each class of GM stockholders - GM $1-2/3 and GM Class H - each
voting separately as distinct classes and also voting together as a single class
based on their respective per share voting power. The proposed transactions also
are subject to antitrust clearance and approval by the Federal Communications
Commission. In addition, the transactions are contingent upon the receipt of a
favorable ruling from the IRS that the separation of Hughes from GM will be
tax-free to GM and its stockholders for U.S. federal income tax purposes. The
transactions are currently expected to close in the second half of 2002.
GM, Hughes, and EchoStar have agreed that, in the event that the
transactions do not occur because certain specified regulatory-related
conditions have not been satisfied, EchoStar will be required to purchase
Hughes' interest in PanAmSat Corporation for an aggregate purchase price of
approximately $2.7 billion, which is payable, depending on the circumstances,
solely in cash or in a combination of cash and either debt or equity securities
of EchoStar. In addition, in the event that the transactions do not occur
because certain of the specified regulatory clearances or approvals relating to
United States antitrust and or federal communication commission matters have not
been satisfied, EchoStar will be required to pay a $600 million termination fee
to Hughes.
If the GM stockholders approve the transactions, and if GM receives the IRS
ruling and the above-mentioned regulatory approvals, the financial results of
Hughes will be reported as discontinued operations in GM's consolidated
financial statements. GM would record a dividend of up to $4.2 billion as a
reduction in GM's investment in Hughes. GM would record the split-off of Hughes
at fair value and would recognize a gain based on an implied exchange ratio of
0.73 shares of EchoStar Class A common stock in exchange for each share of GM
Class H common stock, which is the inverse of the exchange ratio in the
Hughes/EchoStar merger of 1/0.73, or about 1.3699, shares of New EchoStar Class
A or Class B common stock in exchange for each share of EchoStar Class A or
Class B common stock. Based upon the closing price of EchoStar Class A common
stock of $27.47 per share on December 31, 2001, the transaction would value
Hughes' equity at $27.6 billion, with a resulting after-tax gain of
approximately $14.0 billion based on the net book value of Hughes at December
31, 2001. In addition, GM currently anticipates that as a result of the
split-off there would be a reduction of GM stockholders' equity of approximately
$3.6 billion based on stock prices at December 31, 2001. The actual gain or
loss, as well as the actual impact to stockholders' equity, would be higher or
lower depending on the actual EchoStar Class A common stock price and the net
book value of Hughes at the time the transactions close. Depending upon whether
shares of GM Series H 6.25% Automatically Convertible Preference Stock held by
America Online, Inc. (AOL) have converted to GM Class H common stock prior to
the closing, as they would mandatorily at June 24, 2002, the gain, assuming the
same December 31, 2001 stock prices, could be increased by approximately 10%.
Employment and Payrolls
Worldwide employment at December 31,
(in thousands) 2001 2000 1999
---- ---- ----
GMNA 202 212 217
GME 73 89 91
GMLAAM 23 24 23
GMAP 11 11 10
GMAC 29 29 27
Hughes 14 12 (1) 11 (1)
Other 13 12 12
--- --- ---
Total employees 365 389 391
=== === ===
Worldwide payrolls - continuing operations
(in billions) $19.8 $20.9 (1) $21.1 (1)
U.S. hourly payrolls (in billions) (2)(4) $8.5 $9.4 $10.0
Average labor cost per active hour worked
U.S. hourly (3) (4) $57.76 $52.16 $50.51
------------------------
(1) Amounts have been adjusted to exclude Hughes' employees transferred to The
Boeing Company.
(2) Includes employees "at work" (excludes laid-off employees receiving
benefits).
(3) Includes U.S. hourly wages and benefits divided by the number of hours
worked.
(4) Amounts have been adjusted to exclude Hughes employees.
II-13
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Significant Accounting Principles
The consolidated financial statements of GM are prepared in conformity with
accounting principles generally accepted in the United States. The preparation
of these financial statements 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. GM believes that of its significant
accounting policies, the following may involve a higher degree of judgments,
estimates, and complexity:
Sales Allowances
At the time of sale, 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. This
estimate is based upon the assumption that a certain number of vehicles in
dealer stock will have a specific incentive applied against them. If the actual
number of vehicles differs from this estimate, or if a different mix of
incentives occurs, the sales allowances could be affected.
Policy and Warranty
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. Management believes that
the warranty reserve is appropriate; however, actual claims incurred could
differ from the original estimates, requiring adjustments to the reserve.
Impairment of Long-Lived Assets
GM periodically reviews the carrying value of its long-lived assets held and
used and assets to be disposed of, including goodwill and other intangible
assets, 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. Management believes that the estimates of future cash flows and fair
value are reasonable; however, changes in estimates of such cash flows and fair
value could affect the evaluations.
Employee Costs
Pension and other postretirement benefits costs and obligations are dependent
on assumptions used in calculating such amounts. These assumptions include
discount rates, health care cost trend rates, benefits earned, interest cost,
expected return on plan assets, mortality rates, and other factors. In
accordance with accounting principles generally accepted in the United States,
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 GM's pension and other postretirement obligations and
future expense.
Postemployment Benefits
GM establishes reserves for termination and other postemployment benefit
liabilities to be paid pursuant to union or other contractual agreements in
connection with closed plants. The reserve is based on a comprehensive study
that considers the impact of the annual production and labor forecast
assumptions as well as redeployment scenarios. Management believes the
assumptions used in the reserve are appropriate; however, changes in assumptions
may affect the postemployment benefit liability.
Allowance for Credit Losses
The allowance for credit losses generally is established by GMAC during the
period in which receivables are acquired and is maintained at a level considered
appropriate by management based on historical and other factors that affect
collectibility. These factors include the historical trends of repossessions,
charge-offs, recoveries, and credit losses; the careful monitoring of portfolio
credit quality, including the impact of acquisitions; and current and projected
economic and market conditions. Different assumptions or changes in economic
circumstances could result in changes to the allowance for credit losses.
II-14
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Significant Accounting Principles (continued)
Investments in Operating Leases
GMAC's investments in residual values of its leasing portfolio represent an
estimate of the values of the assets at the end of the lease contract and are
initially recorded based on appraisals and estimates. 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 GMAC's
future ability to market the vehicles under prevailing market conditions may
impact the realization of residual values.
Accounting for Derivatives and Other Contracts at Fair Value
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. Effective January 1, 2001, the Corporation accounts for its
derivatives on the Consolidated Balance Sheet as assets or liabilities at fair
value in accordance with Statement of Financial Accounting Standards (SFAS) No.
133, "Accounting for Derivative Instruments and Hedging Activities". Such
accounting is complex, evidenced by significant interpretations of the primary
accounting standard, which continues to evolve, as well as the significant
judgments and estimates involved in the estimating of fair value in the absence
of quoted market values. These estimates are based upon valuation methodologies
deemed appropriate in the circumstances, however, the use of different
assumptions may have a material effect on the estimated fair value amounts.
New Accounting Standards
In June 2001, the Financial Accounting Standards Board (FASB) issued
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 that
existing intangible assets and goodwill be evaluated for these new separation
requirements. Management does not expect this statement to have a material
impact on GM's consolidated financial position or results of operations.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." 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. In addition, this statement requires that goodwill be tested for
impairment at least annually at the reporting unit level. The Corporation
implemented SFAS No. 142 on January 1, 2002. In accordance with this statement,
GM is not required to complete the transitional goodwill impairment test until
June 30, 2002. The Corporation is evaluating but has not yet determined whether
adoption of this statement will result in an impairment of goodwill. Management
estimates that goodwill and indefinite lived intangible asset amortization
required under previous accounting standards of $383 million pre-tax ($302
million after-tax) will not be charged to the income statement in 2002.
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, 2003. 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 supersedes 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 implemented 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.
II-15
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Forward-Looking Statements
In this report, in reports subsequently filed by GM with the SEC on Forms
10-Q and 8-K, and in related comments by management of GM and Hughes, our use of
the words "expect," "anticipate," "estimate," "forecast," "objective," "plan,"
"goal," and similar expressions is intended to identify forward-looking
statements. While these statements represent our current judgments on what the
future may hold, and we believe these judgments are reasonable, actual results
may differ materially due to numerous important factors that are described below
and other factors that may be described in subsequent reports which GM may file
with the SEC on Forms 10-Q and 8-K:
. Changes in economic conditions, currency exchange rates, significant
terrorist acts, or political instability in the major markets where the
Corporation procures material, components, and supplies for the production
of its principal products or where its products are produced, distributed,
or sold (i.e., North America, Europe, Latin America, and Asia Pacific).
. Shortages of fuel or interruptions in transportation systems, labor
strikes, work stoppages, or other interruptions to or difficulties in the
employment of labor in the major markets where the Corporation purchases
material, components, and supplies for the production of its products or
where its products are produced, distributed, or sold.
. Significant changes in the competitive environment in the major markets
where the Corporation purchases material, components, and supplies for the
production of its products or where its products are produced, distributed,
or sold.
. Changes in the laws, regulations, policies, or other activities of
governments, agencies, and similar organizations where such actions may
affect the production, licensing, distribution, or sale of the
Corporation's products, the cost thereof, or applicable tax rates.
. The ability of the Corporation to achieve reductions in cost and employment
levels, to realize production efficiencies, and to implement capital
expenditures, all at the levels and times planned by management.
. With respect to Hughes, additional risk factors include: economic
conditions, product demand and market acceptance, government action, local
political or economic developments in or affecting countries where Hughes
has operations, ability to obtain export licenses, competition, ability to
achieve cost reductions, ability to timely perform material contracts,
technological risk, limitations on access to distribution channels, the
success and timeliness of satellite launches, in-orbit performance of
satellites, loss of uninsured satellites, ability of customers to obtain
financing, and Hughes' ability to access capital to maintain its financial
flexibility. Additionally, the in-orbit satellites of Hughes and its 81%
owned subsidiary, PanAmSat Corporation, are subject to the risk of failing
prematurely due to, among other things, mechanical failure, collision with
objects in space, or an inability to maintain proper orbit. Satellites are
subject to the risk of launch delay and failure, destruction and damage
while on the ground or during launch, and failure to become fully
operational once launched. Delays in the production or launch of a
satellite, or the complete or partial loss of a satellite, in-orbit or
during launch, could have a material adverse impact on the operation of
Hughes' businesses. With respect to both in-orbit and launch problems,
insurance carried by Hughes and PanAmSat, if any, generally does not
compensate for business interruption or loss of future revenues or
customers. Hughes has, in the past, experienced technical anomalies on some
of its satellites. Service interruptions caused by these anomalies,
depending on their severity, could result in claims by affected customers
for termination of their transponder agreements, cancellation of other
service contracts or the loss of other customers.
* * * * * *
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
GM is exposed to market risk from changes in foreign currency exchange rates,
interest rates, and certain commodity and equity 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 GM's accounting policies for derivative financial instruments
is included in Note 1 to the GM consolidated financial statements. Further
information on GM's exposure to market risk is included in Notes 19 and 20 to
the GM consolidated financial statements.
The following analyses provide quantitative information regarding GM's
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
non-linear 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. In addition, the analyses are unable to reflect the complex
market reactions that normally would arise from the market shifts modeled.
II-16
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
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 to as the
result of operating cash flows and various financial instruments that are
denominated in foreign currencies. At December 31, 2001 and 2000, the net fair
value liability of financial instruments with exposure to foreign currency risk
was approximately $15.0 billion and $13.6 billion, respectively. The potential
loss in fair value for such financial instruments from a 10% adverse change in
quoted foreign currency exchange rates would be approximately $1.5 billion and
$1.2 billion for 2001 and 2000, respectively.
Interest Rate Risk
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 securitization. In
addition, GM is exposed to prepayment risk associated with its capitalized
mortgage servicing rights and its retained assets. This risk is managed with
U.S. Treasury options and futures, which exposes GM to basis risk since the
derivative instruments do not have identical characteristics to the underlying
mortgage servicing rights. At December 31, 2001 and 2000, the net fair value
liability of financial instruments held for purposes other than trading with
exposure to interest rate risk was approximately $5.3 billion and $18.1 billion,
respectively. The potential loss in fair value resulting from a 10% adverse
shift in quoted interest rates would be approximately $1.6 billion and $385
million for 2001 and 2000, respectively. At December 31, 2001, the net fair
value liability of financial instruments held for trading purposes with exposure
to interest rate risk was approximately $3.6 billion compared to a net fair
value asset of approximately $3.2 billion at December 31, 2000. The potential
loss in fair value resulting from a 10% adverse shift in quoted interest rates
would be approximately $182 million and $217 million for 2001 and 2000,
respectively. This analysis excludes GM's 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
impact to the fair value of financial instruments from a hypothetical change in
interest rates may be overstated.
Commodity Price Risk
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, 2001, the net fair
value liability of such contracts was approximately $78 million, compared to a
net fair value asset of approximately $51 million at December 31, 2000. The
potential loss in fair value resulting from a 10% adverse change in the
underlying commodity prices would be approximately $150 million and $152 million
for 2001 and 2000, respectively. This amount excludes the offsetting impact of
the price risk inherent in the physical purchase of the underlying commodities.
Equity Price Risk
GM is exposed to changes in prices of various available-for-sale equity
securities in which it invests. At December 31, 2001 and 2000, the fair value of
such investments was approximately $2.3 billion and $3.3 billion, respectively.
The potential loss in fair value resulting from a 10% adverse change in equity
prices would be approximately $231 million and $330 million for 2001 and 2000,
respectively.
* * * * * *
II-17
RESPONSIBILITIES FOR CONSOLIDATED FINANCIAL STATEMENTS
The following consolidated financial statements of General Motors Corporation
and subsidiaries were prepared by management, which is responsible for their
integrity and objectivity. The statements have been prepared in conformity with
accounting principles generally accepted in the United States of America and, as
such, include amounts based on judgments of management.
Management is further responsible for maintaining internal control designed
to provide reasonable assurance that the books and records reflect the
transactions of the companies and that established policies and procedures are
carefully followed. From a stockholder's point of view, perhaps the most
important feature in internal control is that it is continually reviewed for
effectiveness and is augmented by written policies and guidelines, the careful
selection and training of qualified personnel, and a strong program of internal
audit.
Deloitte & Touche LLP, an independent auditing firm, is engaged to audit the
consolidated financial statements of General Motors Corporation and subsidiaries
and issue reports thereon. The audit is conducted in accordance with auditing
standards generally accepted in the United States of America that comprehend the
consideration of internal control and tests of transactions to the extent
necessary to form an independent opinion on the financial statements prepared by
management. The Independent Auditors' Report appears on the next page.
The Board of Directors, through the Audit Committee (composed entirely of
independent Directors), is responsible for assuring that management fulfills its
responsibilities in the preparation of the consolidated financial statements.
The Audit Committee annually recommends to the Board of Directors the selection
of the independent auditors in advance of the Annual Meeting of Stockholders and
submits the selection for ratification at the Meeting. In addition, the Audit
Committee reviews the scope of the audits and the accounting principles being
applied in financial reporting. The independent auditors, representatives of
management, and the internal auditors meet regularly (separately and jointly)
with the Audit Committee to review the activities of each, to ensure that each
is properly discharging its responsibilities, and to assess the effectiveness of
internal control. It is management's conclusion that internal control at
December 31, 2001 provides reasonable assurance that the books and records
reflect the transactions of the companies and that established policies and
procedures are complied with. To reinforce complete independence, Deloitte &
Touche LLP has full and free access to meet with the Audit Committee, without
management representatives present, to discuss the results of the audit, the
adequacy of internal control, and the quality of financial reporting.
/s/John F. Smith, Jr. /s/G. Richard Wagoner, Jr. /s/John M. Devine
John F. Smith, Jr. G. Richard Wagoner, Jr. John M. Devine
Chairman President and Vice Chairman and
Chief Executive Officer Chief Financial Officer
II-18
Independent Auditors' Report
General Motors Corporation, its Directors, and Stockholders:
We have audited the Consolidated Balance Sheets of General Motors Corporation
and subsidiaries as of December 31, 2001 and 2000, and the related Consolidated
Statements of Income, Cash Flows, and Stockholders' Equity for each of the three
years in the period ended December 31, 2001. Our audits also included the
financial statement schedule listed at Item 14. These financial statements and
the financial statement schedule are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 financial statements present fairly, in all material
respects, the financial position of General Motors Corporation and subsidiaries
at December 31, 2001 and 2000, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2001 in
conformity with accounting principles generally accepted in the United States of
America. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
/s/DELOITTE & TOUCHE LLP
------------------------
DELOITTE & TOUCHE LLP
Detroit, Michigan
January 16, 2002
(March 6, 2002 as to Note 25)
II-19
ITEM 8
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
--------------------------------
2001 2000 1999
---- ---- ----
(dollars in millions except per share amounts)
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Total net sales and revenues
(Notes 1, 2, and 23) $177,260 $184,632 $176,558
------- ------- -------
Cost of sales and other expenses
(Notes 2, 3, and 23) 143,850 145,664 140,708
Selling, general, and administrative
expenses 23,302 22,252 19,053
Interest expense (Note 13) 8,590 9,552 7,750
------- ------- -------
Total costs and expenses 175,742 177,468 167,511
------- ------- -------
Income from continuing operations
before income taxes
and minority interests 1,518 7,164 9,047
Income tax expense (Note 8) 768 2,393 3,118
Equity income (loss) and minority
interests (149) (319) (353)
----- ----- -----
Income from continuing operations 601 4,452 5,576
Income from discontinued operations
(Note 1) - - 426
---- ----- -----
Net income 601 4,452 6,002
Dividends on preference stocks (Note 17) ( 99) (110) (80)
--- ----- -----
Earnings attributable to common stocks $502 $4,342 $5,922
=== ===== =====
Basic earnings (losses) per
share attributable to
common stocks (Note 18)
$1-2/3 par value
Continuing operations $1.78 $6.80 $8.70
Discontinued operations (Note 1) - - 0.66
---- ---- ----
Earnings per share attributable
to $1-2/3 par value $1.78 $6.80 $9.36
==== ==== ====
Earnings per share attributable
to Class H $(0.55) $0.56 $(0.26)
==== ==== ====
Earnings (losses) per share
attributable to common
stocks assuming dilution (Note 18)
$1-2/3 par value
Continuing operations $1.77 $6.68 $8.53
Discontinued operations (Note 1) - - 0.65
---- ---- ----
Earnings per share attributable
to $1-2/3 par value $1.77 $6.68 $9.18
==== ==== ====
Earnings per share attributable
to Class H $(0.55) $0.55 $(0.26)
==== ==== ====
Reference should be made to the notes to consolidated financial statements.
II-20
CONSOLIDATED STATEMENTS OF INCOME - concluded
Years Ended December 31,
--------------------------------
2001 2000 1999
---- ---- ----
(dollars in millions)
AUTOMOTIVE, COMMUNICATIONS SERVICES, AND OTHER OPERATIONS
Total net sales and revenues
(Notes 1, 2, and 23) $151,491 $160,627 $156,107
Cost of sales and other expenses
(Notes 2, 3, and 23) 135,620 138,303 134,111
Selling, general, and administrative
expenses 16,043 16,246 14,324
------- ------- -------
Total costs and expenses 151,663 154,549 148,435
------- ------- -------
Interest expense (Note 13) 751 815 828
Net expense from transactions with
Financing and Insurance Operations
(Note 1) 435 682 308
----- ----- -----
Income (loss) from continuing
operations before income
taxes and minority interests (1,358) 4,581 6,536
Income tax (benefit) expense (Note 8) (270) 1,443 2,167
Equity income (loss) and minority
interests (79) (299) (327)
----- ----- -----
Income (loss) from continuing operations (1,167) 2,839 4,042
Income from discontinued operations
(Note 1) - - 426
----- ----- -----
Net income (loss) - Automotive,
Communications Services,
and Other Operations $(1,167) $2,839 $4,468
===== ===== =====
Years Ended December 31,
--------------------------------
2001 2000 1999
---- ---- ----
(dollars in millions)
FINANCING AND INSURANCE OPERATIONS
Total revenues $25,769 $24,005 $20,451
------ ------ ------
Interest expense (Note 13) 7,839 8,737 6,922
Depreciation and amortization expense
(Note 9) 5,857 5,982 5,445
Operating and other expenses 7,105 5,805 4,595
Provisions for financing and insurance
losses (Notes 1 and 23) 2,527 1,580 1,286
------ ------ ------
Total costs and expenses 23,328 22,104 18,248
------ ------ ------
Net income from transactions with
Automotive, Communications Services,
and Other Operations (Note 1) (435) (682) (308)
----- ----- -----
Income before income taxes and
minority interests 2,876 2,583 2,511
Income tax expense (Note 8) 1,038 950 951
Equity income (loss) and minority
interests (70) (20) (26)
----- ----- -----
Net income - Financing and
Insurance Operations $1,768 $1,613 $1,534
===== ===== =====
The above supplemental consolidating information is explained in Note 1, "Nature
of Operations."
Reference should be made to the notes to consolidated financial statements.
II-21
CONSOLIDATED BALANCE SHEETS
December 31,
GENERAL MOTORS CORPORATION AND SUBSIDIARIES 2001 2000
---- ----
ASSETS (dollars in millions)
Automotive, Communications Services, and Other Operations
Cash and cash equivalents (Note 1) $8,432 $9,119
Marketable securities (Note 4) 790 1,161
------- -------
Total cash and marketable securities 9,222 10,280
Accounts and notes receivable (less allowances) 5,406 5,835
Inventories (less allowances) (Note 6) 10,034 10,945
Equipment on operating leases - net (Note 7) 4,524 5,699
Deferred income taxes and other current assets (Note 8) 7,877 8,388
------- -------
Total current assets 37,063 41,147
Equity in net assets of nonconsolidated associates 4,950 3,497
Property - net (Note 9) 34,908 33,977
Intangible assets - net (Notes 1 and 10) 13,721 7,622
Deferred income taxes (Note 8) 22,294 14,870
Other assets (Note 11) 17,274 32,243
------- -------
Total Automotive, Communications Services, and
Other Operations assets 130,210 133,356
Financing and Insurance Operations
Cash and cash equivalents (Note 1) 10,123 1,165
Investments in securities (Note 4) 10,669 9,595
Finance receivables - net (Note 5) 99,813 92,415
Investment in leases and other receivables (Note 7) 34,618 36,752
Other assets (Note 11) 36,979 27,846
Net receivable from Automotive, Communications
Services, and Other Operations (Note 1) 1,557 1,971
------- -------
Total Financing and Insurance Operations assets 193,759 169,744
------- -------
Total assets $323,969 $303,100
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive, Communications Services, and Other Operations
Accounts payable (principally trade) $18,297 $18,309
Loans payable (Note 13) 2,402 2,208
Accrued expenses (Note 12) 34,090 33,252
Net payable to Financing and Insurance Operations
(Note 1) 1,557 1,971
------ ------
Total current liabilities 56,346 55,740
Long-term debt (Note 13) 10,726 7,410
Postretirement benefits other than pensions (Note 14) 34,515 34,306
Pensions (Note 14) 10,790 3,480
Other liabilities and deferred income taxes (Note 12) 13,794 15,768
------- -------
Total Automotive, Communications Services,
and Other Operations liabilities 126,171 116,704
Financing and Insurance Operations
Accounts payable 7,900 7,416
Debt (Note 13) 153,186 135,037
Other liabilities and deferred income taxes (Note 12) 16,259 12,922
------- -------
Total Financing and Insurance Operations liabilities 177,345 155,375
------- -------
Total liabilities 303,516 272,079
Minority interests 746 707
General Motors - obligated mandatorily redeemable
preferred securities of subsidiary
trusts holding solely junior subordinated
debentures of General Motors (Note 16)
Series G - 139
Stockholders' equity (Note 17)
$1-2/3 par value common stock (issued,
559,044,427 and 548,181,757 shares) 932 914
Class H common stock (issued, 877,505,382
and 875,286,559 shares) 88 88
Capital surplus (principally additional
paid-in capital) 21,519 21,020
Retained earnings 9,463 10,119
------ ------
Subtotal 32,002 32,141
Accumulated foreign currency translation adjustments (2,919) (2,502)
Net unrealized loss on derivatives (307) -
Net unrealized gains on securities 512 581
Minimum pension liability adjustment (9,581) (45)
------- -------
Accumulated other comprehensive loss (12,295) (1,966)
------- -------
Total stockholders' equity 19,707 30,175
------- -------
Total liabilities and stockholders' equity $323,969 $303,100
======= =======
Reference should be made to the notes to consolidated financial statements.
II-22
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended December 31,
-----------------------------------------------------------------------------------------
2001 2000 1999
------------------------- ------------------------- -------------------------
Automotive, Financing Automotive, Financing Automotive, Financing
Comm.Serv., and Comm.Serv., and Comm.Serv., and
and Other Insurance and Other Insurance and Other Insurance
--------- --------- --------- --------- --------- ---------
Cash flows from operating activities (dollars in millions)
Income (loss) from continuing
operations $(1,167) $1,768 $2,839 $1,613 $4,042 $1,534
Adjustments to reconcile income
(loss) from continuing
operations to net cash provided
by operating activities
Depreciation and amortization
expenses 7,051 5,857 7,429 5,982 6,873 5,445
Postretirement benefits other
than pensions, net of payments
and VEBA contributions 1,861 20 772 27 (1,057) 21
Pension expense, net of
contributions 148 - 128 - (808) -
Originations and purchases of
mortgage loans - (103,821) - (51,202) - (53,006)
Proceeds on sales of mortgage loans - 99,580 - 51,444 - 55,777
Originations and purchases of
mortgage securities - (1,636) - (1,571) - (1,309)
Proceeds on sales of mortgage
securities - 859 - 994 - 1,545
Change in other investments and
miscellaneous assets 959 (958) 1,154 (1,692) 522 (127)
Change in other operating assets
and liabilities (Note 1) (2,056) 850 724 2,505 7,523 (23)
Other (911) 762 (2,175) 779 (951) 944
----- ----- ------ ----- ------ ------
Net cash provided by operating
activities $5,885 $3,281 $10,871 $8,879 $16,144 $10,801
----- ----- ------ ----- ------ ------
Cash flows from investing activities
Expenditures for property (8,611) (20) (9,200) (522) (7,061) (323)
Investments in marketable
securities - acquisitions (857) (34,198) (2,520) (24,599) (4,149) (21,257)
Investments in marketable
securities - liquidations 1,228 33,124 3,057 24,114 2,886 20,593
Mortgage servicing rights
- acquisitions - (2,226) - (1,096) - (1,424)
Mortgage servicing rights
- liquidations - 20 - 12 - 35
Finance receivables - acquisitions - (236,723) - (214,666) - (186,379)
Finance receivables - liquidations - 131,447 - 143,242 - 130,293
Proceeds from sales of finance
receivables - 96,029 - 58,369 - 48,178
Operating leases - acquisitions (5,214) (12,826) (6,709) (15,174) (6,415) (16,750)
Operating leases - liquidations 5,943 11,780 6,149 9,844 4,243 7,836
Investments in companies, net of
cash acquired (743) (542) (4,302) (2,077) (2,706) (2,402)
Net investing activity with
Financing and Insurance
Operations (500) - (1,069) - 75 -
Other 176 (458) 3,281 93 (924) 732
----- ------ ------ ------ ------ ------
Net cash used in investing
activities (8,578) (14,593) (11,313) (22,460) (14,051) (20,868)
----- ------ ------ ------ ------ ------
Cash flows from financing activities
Net increase (decrease) in
loans payable 194 (20,238) 142 7,723 140 (2,500)
Long-term debt - borrowings 5,850 58,498 5,279 22,414 9,090 26,471
Long-term debt - repayments (2,602) (18,882) (6,196) (16,196) (8,281) (13,078)
Net financing activity with
Automotive, Communications
Services, and Other Operations - 500 - 1,069 - (75)
Repurchases of common and
preference stocks (264) - (1,613) - (3,870) -
Proceeds from issuing common stocks 100 - 2,792 - 2,090 -
Proceeds from sales of treasury
stocks 417 - - - - -
Cash dividends paid to
stockholders (1,201) - (1,294) - (1,367) -
----- ------ ----- ------ ----- ------
Net cash provided by (used in)
financing activities 2,494 19,878 (890) 15,010 (2,198) 10,818
----- ------ --- ------ ----- ------
Effect of exchange rate
changes on cash and
cash equivalents (74) (22) (249) (6) (206) -
Net transactions with Automotive
/Financing Operations (414) 414 970 (970) 185 (185)
--- --- --- --- --- ---
Net cash (used in) provided by
continuing operations (687) 8,958 (611) 453 (126) 566
Net cash provided by discontinued
operations (Note 1) - - - - 128 -
--- ----- --- --- --- ---
Net (decrease) increase in cash
and cash equivalents (687) 8,958 (611) 453 2 566
Cash and cash equivalents at
beginning of the year 9,119 1,165 9,730 712 9,728 146
----- ------ ----- ----- ----- ---
Cash and cash equivalents at
end of the year $8,432 $10,123 $9,119 $1,165 $9,730 $712
===== ====== ===== ===== ===== ===
Reference should be made to the notes to consolidated financial statements.
II-23
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, and 1999
Accumulated
Total Other Total
Capital Capital Comprehensive Retained Comprehensive Stockholders'
Stock Surplus Income (Loss) Earnings Loss Equity
------- ------- ------------- -------- ------------- ------------
(dollars in millions)
Balance at January 1, 1999 $1,104 $12,661 $6,984 $(5,697) $15,052
Shares reacquired (76) (3,794) - - (3,870)
Shares issued 19 3,588 - - 3,607
Comprehensive income:
Net income - - $6,002 6,002 - 6,002
-----
Other comprehensive income (loss):
Foreign currency translation adjustments - - (944) - - -
Unrealized gains on securities - - 515 - - -
Minimum pension liability adjustment - - 4,968 - - -
-----
Other comprehensive income - - 4,539 - 4,539 4,539
------
Comprehensive income - - $10,541 - - -
======
Cash dividends - - (1,367) - (1,367)
Delphi initial public offering (Note 1) - 1,244 - 1,244
Delphi spin-off (Note 1) - 95 (4,658) - (4,563)
----- ------ ----- ----- ------
Balance at December 31, 1999 1,047 13,794 6,961 (1,158) 20,644
Shares reacquired (184) (9,626) - - (9,810)
Shares issued 139 16,852 - - 16,991
Comprehensive income:
Net income - - $4,452 4,452 - 4,452
-----
Other comprehensive income (loss):
Foreign currency translation adjustments - - (469) - - -
Unrealized losses on securities - - (415) - - -
Minimum pension liability adjustment - - 76 - - -
---
Other comprehensive loss - - (808) - (808) (808)
---
Comprehensive income - - $3,644 - - -
=====
Cash dividends - - (1,294) - (1,294)
----- ------ ------ ----- ------
Balance at December 31, 2000 1,002 21,020 10,119 (1,966) 30,175
Shares reacquired - (125) - - (125)
Shares issued 18 624 - - 642
Comprehensive income:
Net income - - $601 601 - 601
---
Other comprehensive income (loss):
Foreign currency translation adjustments - - (417) - - -
Unrealized loss on derivatives - - (307) - - -
Unrealized losses on securities - - (69) - - -
Minimum pension liability adjustment - - (9,536) - - -
-----
Other comprehensive loss - - (10,329) - (10,329) (10,329)
------
Comprehensive loss - - $(9,728) -
======
Delphi spin-off adjustment (a) - - (56) - (56)
Cash dividends - - (1,201) - (1,201)
----- ------ ----- ------ ------
Balance at December 31, 2001 $1,020 $21,519 $9,463 $(12,295) $19,707
===== ====== ===== ====== ======
(a) Resolution of workers' compensation, pension, and other postemployment
liabilities owed to GM by Delphi Automotive Systems, which GM spun-off in
1999.
Reference should be made to the notes to consolidated financial statements.
II-24
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) and
Hughes Electronics Corporation and Subsidiaries (Hughes), (collectively referred
to as the "Corporation", "General Motors" or "GM"). 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. The financial
data related to Delphi Automotive Systems Corporation (Delphi) is presented as
discontinued operations for the period ended December 31, 1999. GM encourages
reference to the GMAC and Hughes Annual Reports on Form 10-K for the period
ended December 31, 2001, filed separately with the Securities and Exchange
Commission, and the Hughes consolidated financial statements included as Exhibit
99 to this GM Annual Report on Form 10-K for the period ended December 31, 2001.
Certain amounts for 2000 and 1999 have been reclassified to conform with the
2001 classifications.
Special purpose entities (SPEs) used in connection with the securitization or
sale of finance receivables and mortgage loans are not consolidated when GM and
GMAC have surrendered control over those financial assets. SPEs used in
connection with the leasing of property are not consolidated when the owner of
the SPE has made a substantial investment that is at risk for the life of the
SPE. Assets in unconsolidated SPEs were as follows (dollars in millions):
December 31,
------------------
2001 2000
------ ------
Automotive, Communications Services, and Other Operations
---------------------------------------------------------
Assets leased under operating leases $2,412 $1,729
Trade receivables sold 868 897
------ ------
Total $3,280 $2,626
===== =====
Financing and Insurance Operations
----------------------------------
Receivables sold or securitized:
- Mortgage loans $104,678 $86,344
- Retail finance receivables 11,978 6,957
- Wholesale finance receivables 16,227 9,988
------- -------
Total $132,883 $103,289
======= =======
Nature of Operations
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. These transactions consist principally of
borrowings and other financial services provided by Financing and Insurance
Operations to Automotive, Communications Services, and Other Operations.
Use of Estimates in the Preparation of the Financial Statements
The preparation of financial statements in conformity with accounting
principles generally accepted in the U.S. requires management to make estimates
and assumptions that affect amounts reported therein. Due to the inherent
uncertainty involved in making estimates, actual results reported in future
periods may differ from those estimates.
II-25
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 1. Significant Accounting Policies (continued)
Revenue Recognition
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, allowances, and rebates are made at the time of vehicle sales.
Incentives, allowances, and rebates related to vehicles previously sold are
recognized as reductions of sales when announced.
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. The liability for
losses and loss expenses includes a provision for unreported losses, based on
past experience, net of the estimated salvage and subrogation recoverable.
Product-Related Expenses
Advertising and sales promotion, research and development, and other
product-related costs are charged to expense as incurred. Provisions for
estimated expenses related to product warranties are made at the time the
products are sold. Advertising expense was $4.0 billion in 2001, $4.3 billion in
2000, and $4.5 billion in 1999. Research and development expense was $6.2
billion in 2001, $6.6 billion in 2000, and $6.8 billion in 1999.
Depreciation and Amortization
As of January 1, 2001, the Corporation adopted the straight-line method of
depreciation for real estate, plants, and equipment placed in service after
January 1, 2001. Assets placed in service before January 1, 2001 continue to be
generally 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 depreciation method for assets placed into service
after January 1, 2001 better reflects the consistent utilization of the asset
over its useful life. The effect of this change on the results of operations for
the year ended December 31, 2001 was not material.
Equipment on operating leases is depreciated on a straight-line basis over
the term of the lease agreement. 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 the provision for depreciation.
Expenditures for special tools 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.
Goodwill is amortized on a straight-line basis over periods ranging from 20
to 40 years.
Valuation of Long-Lived Assets
GM periodically evaluates the carrying value of long-lived assets to be held
and used and long-lived assets to be disposed of, including goodwill and other
intangible assets, when events and circumstances warrant such review. These
evaluations and reviews are generally done 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 of the long-lived asset for assets
to be held and used, or the amount by which the carrying value exceeds the fair
market value less cost to dispose for assets to be disposed. Fair market value
is determined primarily using the anticipated cash flows discounted at a rate
commensurate with the risk involved.
Foreign Currency Translation
Foreign currency exchange transaction and translation losses on an after-tax
basis included in consolidated net income in 2001, 2000, and 1999, pursuant to
Statement of Financial Accounting Standards (SFAS) No. 52, "Foreign Currency
Translation," amounted to $107 million, $100 million, and $162 million,
respectively.
Stock-Based Compensation
As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation," GM
applies the recognition and measurement principles of Accounting Principles
Board Opinion No. 25 to its stock options and other stock-based employee
compensation awards.
II-26
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.
Statement of Cash Flows Supplementary Information
Years Ended December 31,
-------------------------
Automotive, Communications Services, and
Other Operations 2001 2000 1999
---------------------------------------- ---- ---- ----
(dollars in millions)
Increase (decrease) in cash due to changes
in other operating assets and liabilities
were as follows:
Accounts receivable $111 $(625) $(659)
Prepaid expenses and other deferred charges (254) 66 (623)
Inventories 522 (297) (66)
Accounts payable 558 1,254 5,606
Deferred taxes and income taxes payable (1,444) (629) (160)
Accrued expenses and other liabilities (1,549) 955 3,425
----- --- -----
Total $(2,056) $724 $7,523
===== === =====
Cash paid for interest and income taxes
was as follows:
Interest $1,259 $968 $526
Income taxes $1,149 $2,310 $2,166
During 2000, Automotive, Communications Services, and Other Operations made
investments in companies, net of cash acquired of approximately $4.3 billion.
This amount consists primarily of GM's purchase of a 20% equity interest in Fuji
Heavy Industries Ltd. (Fuji) for approximately $1.3 billion and GM's acquisition
of a 20% interest in Fiat Auto Holdings, B.V. (Fiat Auto) for $2.4 billion. In
addition during 2000, Fiat S.p.A. purchased approximately 32 million shares of
GM $1-2/3 par value common stock for $2.4 billion which is included in proceeds
from issuing common stocks.
Years Ended December 31,
-------------------------
Financing and Insurance Operations 2001 2000 1999
---------------------------------- ---- ---- ----
(dollars in millions)
Increase (decrease) in cash due to changes
in other operating assets and liabilities
were as follows:
Other receivables $(2,622) $(726) $(269)
Other assets 49 (29) (83)
Accounts payable 483 3,155 114
Deferred taxes and other liabilities 2,940 105 215
----- ----- ---
Total $850 $2,505 $(23)
=== ===== ==
Cash paid for interest and income taxes
was as follows:
Interest $7,239 $8,511 $6,618
Income taxes $694 $475 $214
Derivative Instruments
GM is party to a variety of foreign exchange, interest rate and commodity
forward contracts and options entered into in connection with the management of
its exposure to fluctuations in foreign exchange, 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 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 loss
on derivatives, a separate component of accumulated other comprehensive loss.
Amounts are reclassified from accumulated other comprehensive loss when the
underlying hedged item impacts earnings and 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.
II-27
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 1. Significant Accounting Policies (continued)
New Accounting Standards
In June 2001, the Financial Accounting Standards Board (FASB) issued 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 that existing
intangible assets and goodwill be evaluated for these new separation
requirements. Management does not expect this statement to have a material
impact on GM's consolidated financial position or results of operations.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." 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. In addition, this statement requires that goodwill be tested for
impairment at least annually at the reporting unit level. The Corporation
implemented SFAS No. 142 on January 1, 2002. In accordance with this statement,
GM is not required to complete the transitional goodwill impairment test until
June 30, 2002. The Corporation is evaluating but has not yet determined whether
adoption of this statement will result in an impairment of goodwill. Management
estimates that goodwill and indefinite lived intangible asset amortization
required under previous accounting standards of $383 million pre-tax ($302
million after-tax) will not be charged to the income statement in 2002.
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, 2003. 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 implemented 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.
Discontinued Operations
On February 5, 1999, Delphi completed an initial public offering (IPO) of 100
million shares of its common stock, which represented 17.7% of its outstanding
common shares. On April 12, 1999, the GM Board of Directors (GM Board) approved
the complete separation of Delphi from GM by means of a spin-off (which was
tax-free to GM and its stockholders for U.S. federal income tax purposes). On
May 28, 1999, GM distributed to holders of its $1-2/3 par value common stock
80.1% of the outstanding shares of Delphi, which resulted in 0.69893 shares of
Delphi common stock being distributed for each share of GM $1-2/3 par value
common stock outstanding on the record date of May 25, 1999. In addition, GM
contributed the remaining 2.2% of Delphi shares (around 12.4 million shares) to
a Voluntary Employee Beneficiary Association (VEBA) trust established by GM to
fund benefits to its hourly retirees. In total, the complete separation of
Delphi in the year ended December 31, 1999 resulted in a reduction to
stockholders' equity of approximately $3.3 billion.
The financial data related to GM's investment in Delphi through May 28, 1999
is classified as discontinued operations for the period ended December 31, 1999.
Delphi net sales (including sales to GM) included in discontinued operations
totaled $12.5 billion for the year ended December 31, 1999. Income from Delphi
discontinued operations of $426 million for the year ended December 31, 1999, is
reported net of income tax expense of $314 million.
II-28
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 2. Asset Impairments
GM recorded pre-tax charges against income for asset impairments of $140
million ($90 million after-tax, or $0.16 per share of GM $1-2/3 par value common
stock) in 2001 and $917 million ($587 million after-tax, or $0.99 per share of
GM $1-2/3 par value common stock) in 2000. GM did not record any such pre-tax
charges against income in 1999. These charges are components of the following
line items in the income statement:
Years Ended December 31,
------------------------
2001 2000
---- ----
(dollars in millions)
Total net sales and revenues $ - $315
Cost of sales and other expenses 140 602
--- ---
Total $140 $917
=== ===
The 2001 charges related to the write-down of equipment as a result of the
announcement of the closing of the Ste. Therese, Quebec assembly plant in 2002
and the write-down of certain equipment on operating leases that was determined
to be impaired in GM North America (GMNA).
In 2000, the pre-tax charges were comprised of $572 million ($356 million
after-tax) for GMNA , and $345 million ($231 million after-tax) for GM Europe
(GME). The amount related to the write-down of special tools and equipment on
operating leases as a result of the phase-out of the Oldsmobile division as the
current model lineup product lifecycles come to an end, or until the models are
no longer economically viable, and the reduction in production capacity at GME,
including the restructuring of Vauxhall Motors Limited's manufacturing
operations in the U.K.
NOTE 3. Postemployment Benefit Costs
GM records liabilities for termination and other postemployment benefits to
be paid pursuant to union or other contractual agreements in connection with
closed plants in North America. 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.
In 2001, GM recognized postemployment benefit liabilities related to the
announced closing of the Ste. Therese, Quebec assembly plant in 2002. The 2001
charge relates to 1,350 employees and increased cost of sales by $137 million
($89 million after-tax, or $0.16 per share of GM $1-2/3 par value common stock).
In 2000, GM recognized postemployment benefit liabilities associated with
reductions in production capacity and conversions at the following U.S. plants:
Oklahoma City, Oklahoma; Delta Engine, Lansing, Michigan; Spring Hill,
Tennessee; and Wilmington, Delaware. The 2000 charge relates to approximately
4,000 U.S. employees and increased cost of sales by $473 million ($294 million
after-tax, or $0.50 per share of GM $1-2/3 par value common stock).
II-29
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 3. Postemployment Benefit Costs (concluded)
The liability for postemployment benefits as of December 31, 2001 totals
approximately $626 million, with anticipated spending of approximately 97% over
the next three years. The following tables summarize the activity from December
31, 1999 through December 31, 2001 for this liability (dollars in millions):
December 31, 2000 2001 Activity December 31, 2001
------------------ ------------------------------- ------------------
Excess Interest Excess
Plant Employees Balance Spending Accretion Adjustment Balance Employees
----- --------- ------- -------- --------- ---------- ------- ---------
Buick City/Flint V-6 313 $34 $(24) $2 $ - $12 214
Kalamazoo 289 27 (18) 1 - 10 78
Flint V-8 106 7 (4) - - 3 41
Van Nuys 329 78 (19) 4 - 63 308
Tarrytown 61 4 (4) - - - -
Framingham 37 13 (2) 1 - 12 37
Danville 7 3 - - - 3 7
Delta Engine 664 26 (16) 1 - 11 206
Oklahoma City 2,080 221 (81) 13 - 153 1,971
Spring Hill 444 107 (4) 6 - 109 444
Wilmington 879 119 (39) 6 - 86 330
Ste. Therese - - - 3 137 140 1,350
Other 572 26 (3) 1 - 24 569
----- --- ---- -- --- --- -----
Total 5,781 $665 $(214) $38 $137 $626 5,555
===== === === == === === =====
December 31, 1999 2000 Activity December 31, 2000
------------------ ------------------------------- ------------------
Excess Interest Excess
Plant Employees Balance Spending Accretion Adjustment Balance Employees
----- --------- ------- -------- --------- ---------- ------- ---------
Buick City/Flint V-6 403 $50 $(19) $3 $ - $34 313
Kalamazoo 459 43 (18) 2 - 27 289
Flint V-8 659 51 (46) 2 - 7 106
Van Nuys 366 96 (23) 5 - 78 329
Tarrytown 61 6 (2) - - 4 61
Framingham 91 16 (4) 1 - 13 37
Danville 16 4 (1) - - 3 7
Delta Engine - - - - 26 26 664
Oklahoma City - - - - 221 221 2,080
Spring Hill - - - - 107 107 444
Wilmington - - - - 119 119 879
Other 615 29 (3) - - 26 572
----- ---- ---- -- --- --- ---
Total 2,670 $295 $(116) $13 $473 $665 5,781
===== === === == === === =====
NOTE 4. 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 and held to maturity 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.
II-30
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 4. Marketable Securities (continued)
Automotive, Communications Services, and Other Operations
Investments in marketable securities were as follows (dollars in millions):
December 31, 2001
--------------------------------------
Book/
Fair Unrealized Unrealized
Cost Value Gains Losses
------ ------ ---------- ----------
Type of security
Bonds, notes, and other securities
Corporate debt securities and other $777 $790 $13 $ -
--- --- -- ---
Total marketable securities $777 $790 $13 $ -
=== === == ===
December 31, 2000
--------------------------------------
Book/
Fair Unrealized Unrealized
Cost Value Gains Losses
------ ------ ---------- ----------
Type of security
Bonds, notes, and other securities
United States government and agencies $90 $91 $ 1 $ -
States and municipalities 9 9 - -
Corporate debt securities and other 1,063 1,061 - 2
----- ----- -- --
Total marketable securities $1,162 $1,161 $ 1 $ 2
===== ===== == ==
Debt securities totaling $265 million mature within one year and $504 million
mature after one through five years, and $21 million mature after ten years.
Proceeds from sales of marketable securities totaled $373 million in 2001, $1.3
billion in 2000, and $2.0 billion in 1999. The gross gains related to sales of
marketable securities were $6 million, $1 million, and $21 million in 2001,
2000, and 1999, respectively. The gross losses related to sales of marketable
securities were $5 million, $12 million, and $6 million in 2001, 2000, and 1999,
respectively.
Financing and Insurance Operations
Investments in securities were as follows (dollars in millions):
December 31, 2001
--------------------------------------
Book/
Fair Unrealized Unrealized
Cost Value Gains Losses
------ ------ ---------- ----------
Type of security
Bonds, notes, and other securities
United States government and agencies $615 $626 $14 $3
States and municipalities 931 970 43 4
Mortgage-backed securities 924 913 17 28
Corporate debt securities and other 2,725 2,749 50 26
----- ----- ---- --
Total debt securities available-for-sale 5,195 5,258 124 61
Mortgage-backed securities held to
maturity 371 371 - -
Mortgage-backed securities held for
trading purposes 4,305 3,722 - 583
----- ----- --- ---
Total debt securities 9,871 9,351 124 644
Equity securities 1,214 1,318 246 142
------ ------ --- ---
Total investment in securities $11,085 $10,669 $370 $786
====== ====== === ===
II-31
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 4. Marketable Securities (concluded)
December 31, 2000
----------------------------------
Book/
Fair Unrealized Unrealized
Cost Value Gains Losses
------ ------ ---------- ----------
Type of security
Bonds, notes, and other securities
United States government and agencies $556 $565 $10 $ 1
States and municipalities 1,492 1,567 81 6
Mortgage-backed securities 387 384 14 17
Corporate debt securities and other 2,520 2,506 47 61
----- ----- --- --
Total debt securities available-for-sale 4,955 5,022 152 85
Mortgage-backed securities held to
maturity 218 218 - -
Mortgage-backed securities held for
trading purposes 3,445 3,298 - 147
----- ----- ---- ---
Total debt securities 8,618 8,538 152 232
Equity securities 766 1,057 395 104
----- ----- --- ---
Total investment in securities $9,384 $9,595 $547 $336
===== ===== === ===
Debt securities available-for-sale totaling $896 million mature within one
year, $2.3 billion mature after one through five years, $716 million mature
after five years through 10 years, and $1.4 billion mature after 10 years.
Proceeds from sales of marketable securities totaled $5.1 billion in 2001, $3.5
billion in 2000, and $2.9 billion in 1999. The gross gains related to sales of
marketable securities were $228 million, $315 million, and $292 million in 2001,
2000, and 1999, respectively. The gross losses related to sales of marketable
securities were $145 million, $147 million, and $126 million in 2001, 2000, and
1999, respectively.
NOTE 5. Finance Receivables and Securitizations
Finance Receivables - Net
Finance receivables - net included the following (dollars in millions):
December 31,
----------------------
2001 2000
------- -------
Retail $71,845 $51,337
Wholesale 15,537 26,993
Commercial 5,743 5,546
Leasing and lease financing 1,862 2,178
Term loans to dealers and others 12,652 12,565
------- ------
Total finance receivables 107,639 98,619
Less - Unearned income (5,766) (4,872)
Allowance for financing losses (2,060) (1,332)
------ -------
Total finance receivables - net $99,813 $92,415
====== ======
Finance receivables that originated outside the U.S. are $20.7 billion and
$21.4 billion at December 31, 2001 and 2000, respectively. The aggregate amount
of total finance receivables maturing in each of the five years following
December 31, 2001 is as follows: 2002-$47.6 billion; 2003-$23.7 billion;
2004-$18.1 billion; 2005-$10.5 billion; 2006-$5.6 billion and 2007 and
thereafter-$2.1 billion.
Securitizations of Finance Receivables and Mortgage Loans
The Corporation has sold retail finance receivables through special purpose
subsidiaries with principal aggregating $8.4 billion in 2001, $5.2 billion in
2000, and $5.1 billion in 1999. These subsidiaries generally retain a
subordinated investment of no greater than 5.25% of the total receivables pool
and sell the remaining portion. Net pre-tax gains relating to such sales
amounted to $210 million in 2001, $14 million in 2000, and $64 million in 1999.
The Corporation's sold retail finance receivable servicing portfolio amounted to
$12.0 billion and $7.0 billion at December 31, 2001 and 2000, respectively.
II-32
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 5. Finance Receivables and Securitizations (continued)
Securitizations of Finance Receivables and Mortgage Loans (continued)
The Corporation has sold wholesale receivables on a revolving basis resulting
in decreases in wholesale outstandings of $16.2 billion and $10.0 billion at
December 31, 2001 and 2000, respectively. The Corporation is committed to sell
eligible wholesale receivables arising in certain dealer accounts. During the
years 2001, 2000, and 1999, there were no gains recorded on the sale of
wholesale receivables. Due to the short-term nature of wholesale receivables,
the fair value of retained interests in wholesale securitizations is assumed to
approximate cost.
When the Corporation securitizes retail and wholesale receivables, it retains
interest-only strips, all or a portion of senior and subordinated tranches,
servicing rights, and cash reserve accounts, all of which are retained interests
in the securitized receivables. Interest-only strip receivables, cash deposits,
and other related amounts are generally restricted assets and subject to limited
recourse provisions. With respect to retained servicing responsibilities, the
Corporation receives annual servicing fees approximating 2% (for retail
receivables) and 1% (for wholesale receivables) of the outstanding balance.
Additionally, the Corporation receives the rights to future cash flows arising
after the investors in the securitization trust have received their contracted
return.
During 2001, GM sold residential, commercial, and other mortgage loans in
securitization transactions, generally retaining servicing responsibilities and,
in some cases, subordinated interests. In 2001, 2000, and 1999, GM recognized
pre-tax gains of $995 million, $723 million, and $603 million, respectively, on
the securitization of residential and commercial mortgages.
At December 31, 2001, total mortgage loans owned or securitized totaled
$103.4 billion, of which $89.6 billion had been securitized, $10.4 billion was
held for sale, and $3.4 billion was held for investment (see Note 11). At that
date, mortgage loans owned or securitized which were 60 days or more past due
totaled $3.1 billion.
The investors and the securitization trusts associated with the sales of
finance receivables and mortgage loans have no recourse to GM's other assets for
failure of debtors to pay when due. The Corporation's retained interests are
subordinate to the investors' interests. Their fair value is subject to credit,
prepayment, and interest rate risks on the transferred assets.
The resulting gain or loss on securitization transactions is determined by
allocating the carrying amount of the loans or finance receivables between the
securities sold and the interests retained based on their relative fair value at
the date of sale. Fair values are based on quoted market prices, if available.
Otherwise, the fair values of the retained interests are estimated based on the
present value of expected future cash flows.
Key economic assumptions used in measuring the fair value of retained
interests at the date of the securitization, for securitizations completed
during 2001, were as follows:
Mortgage Loans
Retail Finance ---------------------------
Receivables Residential Commercial
-------------- ------------- ------------
Prepayment speed 0.8% to 1.3% 9.8% to 38.0% 0.0% to 50.0%
Weighted-average life (in years) 1.5 to 1.8 1.7 to 8.2 1.2 to 13.3
Residual cash flows discounted at 9.5% to 12.0% 6.5% to 13.5% 6.9% to 54.7%
Variable returns to transferees One month LIBOR Forward benchmark
plus contractual interest rate yield curve
spread ranging from plus contractual spread
4 to 35 basis points
Expected credit losses used in measuring the fair value of retained interests
in residential and commercial mortgage loans securitized during 2001 were 0.0%
to 22.9% and 0.0% to 1.9%, respectively, at the date of securitization.
At December 31, 2001, key economic assumptions and the sensitivity of the
current fair value of residual cash flows to immediate 10% and 20% adverse
changes in those assumptions were as follows (dollars in millions):
II-33
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 5. Finance Receivables and Securitizations (concluded)
Securitizations of Finance Receivables and Mortgage Loans (concluded)
Mortgage Loans
Retail Finance -----------------------------
Receivables Residential Commercial
-------------- ------------- -------------
Carrying amount/fair value of
retained interests $1,678 $2,675 $782
Prepayment speed (annual rate) 0.6% to 1.8% 9.9% to 47.0% 0.0% to 50.0%
Reduction in fair value due to
10% adverse change $2 $199 $2
Reduction in fair value due to
20% adverse change $4 $387 $2
Residual cash flows discount rate
(annual rate) 7.7% to 12.0% 6.5% to 13.5% 6.9% to 58.4%
Reduction in fair value due to
10% adverse change $7 $78 $40
Reduction of fair value due to
20% adverse change $15 $152 $75
Variable returns to transferees
Reduction in fair value due to
10% adverse change $30 $17 $ -
Reduction in fair value due to
20% adverse change $61 $31 $ -
Expected credit losses used in the calculation of the fair value of residual
cash flows at December 31, 2001 for residential and commercial mortgage loans
were 0.0% to 22.9% and 0.0% to 2.3%, respectively. An immediate 10% adverse
change in these assumptions would reduce the fair value of such cash flows by
$136 million and $8 million for residential and commercial mortgage loans,
respectively. An immediate 20% adverse change in these assumptions would reduce
the fair value of such cash flows by $271 million and $11 million for
residential and commercial mortgage loans, respectively.
These sensitivities are hypothetical and should be used with caution. As the
figures indicate, changes in fair value based on a 10% variation in assumptions
generally cannot be extrapolated because the relationship of the change in
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 (for example,
increases in market interest rates may result in lower prepayments and increased
credit losses), which might magnify or counteract the sensitivities. Further,
these sensitivities show only the change in the asset balances and do not show
any expected changes in the fair value of derivative financial instruments used
to manage the interest rate and prepayment risks associated with these assets,
as discussed in Note 19.
The following summarizes cash flows received from (paid to) securitization
trusts during the year ended December 31, 2001 (dollars in millions):
Mortgage Loans
Retail Finance -----------------------
Receivables Residential Commercial
-------------- ----------- ----------
Proceeds from new securitizations $7,354 $34,803 $3,262
Servicing fees received 292 255 16
Other cash flows received on retained
interests 1,560 763 64
Pool buybacks and purchases of
delinquent assets (510) (320) -
Servicing advances (88) (616) (95)
Repayments of servicing advances 66 613 71
Mortgage Servicing Rights
The fair value of GM's mortgage servicing rights totaled $5.4 billion and
$4.1 billion at December 31, 2001 and 2000, respectively. The key economic
assumptions used in the calculation of such fair values are prepayment speeds
and discount rates. At December 31, 2001, a prepayment speed of 12.4% and a
discount rate of 9.1% were used in the calculation of fair value. At that date,
an immediate 10% and 20% adverse change in the assumed prepayment speed would
reduce the fair value of mortgage servicing rights by $162 million and $310
million, respectively. An immediate 10% and 20% adverse change in the assumed
discount rate would reduce the fair value of mortgage servicing rights by $162
million and $314 million, respectively. These sensitivities are hypothetical and
should be used with caution for reasons similar to those discussed above.
II-34
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 6. Inventories
Inventories included the following for Automotive, Communications Services,
and Other Operations (dollars in millions):
December 31,
-------------------
2001 2000
------ ------
Productive material, work in process, and supplies $5,069 $5,544
Finished product, service parts, etc. 6,779 7,257
------ ------
Total inventories at FIFO 11,848 12,801
Less LIFO allowance 1,814 1,856
------ ------
Total inventories (less allowances) $10,034 $10,945
====== ======
Inventories are stated generally at cost, which is not in excess of market.
The cost of approximately 90% 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.
NOTE 7. Equipment on Operating Leases
The Corporation has significant investments in the residual values of its
leasing portfolios. The residual values represent the estimate of the values of
the assets at the end of the lease contracts and are initially recorded based on
appraisals and estimates. Realization of the residual values is dependent on the
Corporation's future ability to market the vehicles under then prevailing market
conditions. Management reviews residual values periodically to determine that
recorded amounts are appropriate.
Automotive, Communications Services, and Other Operations
Equipment on operating leases included in equipment on operating leases and
other assets was as follows (dollars in millions):
December 31,
--------------------
2001 2000
-------- --------
Equipment on operating leases $11,107 $11,268
Less accumulated depreciation (1,767) (1,335)
------ ------
Net book value $9,340 $9,933
===== =====
Current $4,524 $5,699
Noncurrent (Note 11) 4,816 4,234
----- -----
Net book value $9,340 $9,933
===== =====
Financing and Insurance Operations
Equipment on operating leases included in investment in leases and other
receivables was as follows (dollars in millions):
December 31,
--------------------
2001 2000
-------- --------
Equipment on operating leases $36,534 $41,295
Less accumulated depreciation (8,544) (8,762)
------- -------
Net book value $27,990 $32,533
====== ======
The lease payments to be received related to equipment on operating leases
maturing in each of the five years following December 31, 2001 are as follows:
Automotive, Communications Services, and Other Operations - 2002-$1.8 billion;
2003-$644 million; 2004-$607 million; 2005 - $556 million, and 2006 - $516
million. Financing and Insurance Operations - 2002-$6.5 billion; 2003-$3.6
billion; 2004-$1.6 billion; 2005 - $265 million, and 2006 - $8 million.
II-35
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 8. Income Taxes
Income from continuing operations before income taxes and minority interests
included the following (dollars in millions):
Years Ended December 31,
------------------------------
2001 2000 1999
---- ---- ----
U.S. income (loss) $(1,190) $3,019 $4,156
Foreign income 2,708 4,145 4,891
----- ----- -----
Total $1,518 $7,164 $9,047
===== ===== =====
The provision for income taxes was estimated as follows (dollars in
millions):
Years Ended December 31,
------------------------------
2001 2000 1999
---- ---- ----
Income taxes estimated to be payable currently
U.S. federal $34 $45 $156
Foreign 1,347 971 1,368
U.S. state and local (9) 72 308
------- ------ ------
Total payable currently 1,372 1,088 1,832
----- ----- -----
Deferred income tax expense (credit) - net
U.S. federal (246) 742 1,008
Foreign (401) 281 244
U.S. state and local 43 282 34
---- ------ ------
Total deferred (604) 1,305 1,286
--- ----- -----
Total income taxes $768 $2,393 $3,118
=== ===== =====
Annual tax provisions include amounts considered sufficient to pay
assessments that may result from examination of prior year tax returns; however,
the amount ultimately paid upon resolution of issues raised may differ
materially from the amount accrued.
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 Corporation's share of subsidiaries' undistributed earnings not deemed to be
permanently invested. Taxes have not been provided on foreign subsidiaries'
earnings, which are deemed essentially permanently reinvested, of $13.1 billion
at December 31, 2001 and $13.4 billion at December 31, 2000. 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,
------------------------------
2001 2000 1999
---- ---- ----
Tax at U.S. federal statutory income tax rate $485 $2,507 $3,166
Foreign rates other than 35% 134 78 (109)
Taxes on unremitted earnings of subsidiaries 29 - 138
Tax credits (50) (45) (207)
Raytheon settlement (1) 180 - -
Other adjustments (10) (147) 130
---- ------ ------
Total income tax $768 $2,393 $3,118
=== ===== =====
(1) Non-tax deductible settlement with the Raytheon Company on a purchase price
adjustment related to Raytheon's 1997 merger with Hughes Defense.
Deferred income tax assets and liabilities for 2001 and 2000 reflect the
impact 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-36
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 8. Income Taxes (concluded)
Temporary differences and carryforwards that gave rise to deferred tax assets
and liabilities included the following (dollars in millions):
December 31,
2001 2000
---- ----
Deferred Tax Deferred Tax
------------------- -------------------
Assets Liabilities Assets Liabilities
------ ----------- ------ -----------
Postretirement benefits other
than pensions $15,057 $ - $14,393 $ -
Employee benefit plans 8,721 8,046 2,884 8,182
Warranties, dealer and customer
allowances, claims, and discounts 4,376 - 4,952 -
Depreciation and amortization 412 3,671 652 3,742
Tax carryforwards 3,993 - 3,125 -
Lease transactions - 4,044 - 3,911
Miscellaneous foreign 4,465 1,463 4,150 1,372
Other 7,683 4,948 7,287 4,493
------ ------ ------ ------
Subtotal 44,707 22,172 37,443 21,700
Valuation allowances (604) - (640) -
------ ------ ------ ------
Total deferred taxes $44,103 $22,172 $36,803 $21,700
====== ====== ====== ======
Of the tax carryforwards, approximately 20% relates to the alternative
minimum tax credit (which can be carried forward indefinitely) and approximately
14% relates to the U.S. state net operating loss carryforwards, which will
expire in the years 2002-2021 if not used. However, a substantial portion of the
U.S. state net operating loss carryforwards will not expire until after the year
2005. The other tax credit carryforwards, consisting primarily of research and
experimentation credits, will expire in the years 2004, 2011-2012, and 2018-2021
if not used.
NOTE 9. Property - Net
Property - net included the following for Automotive, Communications
Services, and Other Operations (dollars in millions):
Estimated December 31,
Useful -----------------
Lives (Years) 2001 2000
------------- ------- ------
Land - $899 $924
Buildings and land improvements 2-40 13,294 12,997
Machinery and equipment 3-30 41,091 40,900
Construction in progress - 4,464 4,664
------- -------
Real estate, plants, and equipment 59,748 59,485
Less accumulated depreciation (33,404) (32,875)
------ ------
Real estate, plants, and equipment - net 26,344 26,610
Special tools - net 8,564 7,367
------- -------
Total property - net $34,908 $33,977
====== ======
Financing and Insurance Operations had net property of $1.5 billion and $1.4
billion recorded in other assets at December 31, 2001 and 2000, respectively.
Depreciation and amortization expense was as follows (dollars in millions):
Years Ended December 31,
Automotive, Communications Services, and ----------------------------
Other Operations 2001 2000 1999
---------------------------------------- ------ ------ ------
Depreciation $4,383 $4,368 $4,155
Amortization of special tools 2,360 2,753 2,492
Amortization of intangible assets (Note 10) 308 308 226
----- ------ ------
Total $7,051 $7,429 $6,873
===== ===== =====
Financing and Insurance Operations
Depreciation and amortization expense $5,857 $5,982 $5,445
===== ===== =====
II-37
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 10. Intangible Assets - Net
Automotive, Communications Services, and Other Operations had net intangible
assets of $13.7 billion and $7.6 billion at December 31, 2001 and December 31,
2000, respectively. At December 31, 2001, net intangible assets consisted
primarily of goodwill ($6.8 billion) and pension intangible assets ($6.2
billion). Goodwill is the cost of acquired businesses in excess of the fair
value of their identifiable net assets. The pension intangible asset resulted
from the U.S. hourly pension plan becoming underfunded in 2001. At December 31,
2000, net intangible assets consisted primarily of goodwill ($6.8 billion).
Financing and Insurance Operations had net intangible assets of $3.2 billion
recorded in other assets, consisting primarily of goodwill, at December 31, 2001
and 2000.
NOTE 11. Other Assets
Automotive, Communications Services, and Other Operations
---------------------------------------------------------
Other assets included the following (dollars in millions):
December 31,
--------------------
2001 2000
------ ------
Equipment on operating leases - noncurrent (Note 7) $4,816 $4,234
Investments in equity securities 3,408 4,666
U.S. prepaid pension assets (Note 14) 7,006 20,184
Other 2,044 3,159
------ ------
Total other assets $17,274 $32,243
====== ======
The balance in Investments in equity securities at December 31, 2001 and 2000
includes GM's 20% interest in Fiat Auto of $2.4 billion. In connection with GM's
acquisition of a 20% interest in Fiat Auto, GM did not acquire the ability or
right to appoint any directors to the board of Fiat Auto, its controlling
stockholder, Fiat S.p.A., or any of the companies in the Fiat group. In fact, no
officer, director, or employee of GM or any controlled affiliate of GM serves as
a director, officer, or employee of Fiat Auto, Fiat S.p.A., or any of the
companies in the Fiat group. Accordingly, because GM is not able to exercise
significant influence over the operating and financial decisions of Fiat Auto,
this investment is accounted for using the cost method of accounting. (See Note
15 for further discussion.)
The balance in Investments in equity securities at December 31, 2001 and 2000
also includes the fair value of investments in equity securities classified as
available-for-sale for all periods presented. It is GM's intent to hold these
securities for longer than one year. Balances include historical costs of $704
million and $1.9 billion with unrealized gains of $311 million and $495 million
and unrealized losses of $38 million and $146 million at December 31, 2001 and
2000, respectively.
Financing and Insurance Operations
----------------------------------
Other assets included the following (dollars in millions):
December 31,
--------------------
2001 2000
------ ------
Mortgage servicing rights $4,840 $3,985
Real estate mortgages - held for sale 10,187 5,759
- held for investment 3,384 1,895
- lending receivables 4,521 2,960
Other mortgage - related assets 1,800 1,451
Receivables purchased from factoring clients 1,419 2,291
Due and deferred from receivables sales 2,260 1,097
Rental car buybacks 235 826
Intangible assets 3,206 3,188
Other 5,127 4,394
------ ------
Total other assets $36,979 $27,846
====== ======
II-38
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 12. Accrued Expenses, Other Liabilities, and Deferred Income Taxes
Automotive, Communications Services, and Other Operations
Accrued expenses, other liabilities, and deferred income taxes included the
following (dollars in millions):
December 31,
--------------------
2001 2000
------ ------
Warranties, dealer and customer allowances, claims,
and discounts $16,421 $15,993
Deferred revenue (1) 8,331 9,974
Payrolls and employee benefits (excludes
postemployment) 6,069 4,609
Unpaid losses under self-insurance programs 2,016 2,031
Taxes, other than income taxes 1,082 1,009
Interest 904 1,401
Deferred income taxes 2,420 2,430
Postemployment benefits (including extended
disability benefits) 2,218 2,380
Other 8,423 9,193
------ ------
Total accrued expenses, other liabilities, and
deferred income taxes $47,884 $49,020
====== ======
Financing and Insurance Operations
Other liabilities and deferred income taxes included the following (dollars
in millions):
December 31,
--------------------
2001 2000
------ ------
Unpaid insurance losses, loss adjustment expenses,
and unearned insurance premiums 4,375 $3,870
Postemployment benefits 766 761
Income taxes 483 571
Deferred income taxes 4,305 4,021
Interest 2,428 1,828
Interest rate derivatives (2) 2,942 -
Other 960 1,871
------ ------
Total other liabilities and deferred income taxes $16,259 $12,922
====== ======
------------------------
(1) Principally relates to sales of vehicles to rental companies.
(2) Effective January 1, 2001, the Corporation began recording the fair
market value of its derivatives on the balance sheet due to the
implementation of SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." (See Note 1 for further discussion.)
NOTE 13. Long-Term Debt and Loans Payable
Automotive, Communications Services, and Other Operations
Long-term debt and loans payable were as follows (dollars in millions):
Weighted-Average
Interest Rate December 31,
---------------- ------------------
2001 2000 2001 2000
---- ---- ------ ------
Long-term debt and loans payable
Payable within one year
Current portion of long-term
debt (1) 2.5% 6.3% $64 $415
Commercial paper (1) 2.7% 5.8% 129 519
All other 3.8% 4.8% 2,209 1,274
----- -----
Total loans payable - - 2,402 2,208
Payable beyond one year (1) 8.2% 8.1% 10,720 7,438
Unamortized discount (27) (28)
Mark to Market Adjustment 33 -
------ -----
Total long-term debt and loans payable 13,128 9,618
====== =====
---------------
(1) The weighted-average interest rates include the impact of interest rate
swap agreements.
II-39
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 13. Long-Term Debt and Loans Payable (continued)
Long-term debt payable beyond one year at December 31, 2001 included
maturities as follows: 2003 - $767 million; 2004 - $620 million; 2005 - $796
million; 2006 - $311 million; 2007 and after - $8.2 billion.
Amounts payable beyond one year after consideration of foreign currency swaps
at December 31, 2001 included $840 million in currencies other than the U.S.
dollar, primarily the Japanese yen ($601 million), the Brazilian real ($149
million), and the Canadian dollar ($65 million).
At December 31, 2001 and 2000, long-term debt and loans payable for
Automotive, Communications Services, and Other Operations included $10.9 billion
and $8.3 billion, respectively, of obligations with fixed interest rates and
$2.2 billion and $1.3 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 and cap agreements. The notional amounts of such
agreements as of December 31, 2001 for Automotive, Communications Services, and
Other Operations were approximately $1.7 billion ($239 million pay fixed and
$1.5 billion pay variable) and $90 million, respectively. The notional amounts
of such agreements as of December 31, 2000 for Automotive, Communications
Services, and Other Operations were approximately $1.2 billion ($200 million pay
fixed and $1.0 billion pay variable) and $90 million, respectively.
GM and its subsidiaries maintain substantial lines of credit with various
banks that totaled $11.0 billion at December 31, 2001, of which $2.3 billion
represented short-term credit facilities and $8.7 billion represented long-term
credit facilities. At December 31, 2000, bank lines of credit totaled $11.6
billion, of which $4.3 billion represented short-term credit facilities and $7.3
billion represented long-term credit facilities. The unused short-term and
long-term portions of the credit lines totaled $1.8 billion and $6.7 billion at
December 31, 2001, compared with $3.1 billion and $6.2 billion at December 31,
2000. Certain bank lines of credit contain covenants with which the Corporation
and applicable subsidiaries were in compliance during the year ended December
31, 2001.
Financing and Insurance Operations
----------------------------------
Debt was as follows (dollars in millions):
Weighted-Average
Interest Rate December 31,
---------------- ------------------
2001 2000 2001 2000
---- ---- ------ ------
Debt
Payable within one year
Current portion of debt (1) 4.3% 6.5% $22,014 $18,603
Commercial paper (1) 2.7% 6.5% 16,620 43,634
All other 3.1% 4.6% 20,640 14,506
------ ------
Total loans payable - - 59,274 76,743
Payable beyond one year (1) 5.5% 6.4% 93,717 58,846
Unamortized discount (693) (552)
Mark to Market Adjustment (2) 888 -
------- -------
Total debt $153,186 $135,037
======= =======
----------------------
(1) The weighted-average interest rates include the impact of interest rate
swap agreements.
(2) Effective January 1, 2001, the Corporation began recording its hedged
debt at fair market value on the balance sheet due to the implementation
of SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities."
Debt payable beyond one year at December 31, 2001 included maturities as
follows: 2003 - $23.5 billion; 2004 - $18.5 billion; 2005 - $7.5 billion; 2006 -
$15.7 billion; 2007 and after - $28.5 billion.
Amounts payable beyond one year after consideration of foreign currency swaps
at December 31, 2001 included $12.0 billion in currencies other than the U.S.
dollar, primarily the Canadian dollar ($6.3 billion), the Euro ($3.1 billion),
the G.B. pound sterling ($995 million), and the Australian dollar ($769
million).
At December 31, 2001 and 2000, debt for Financing and Insurance Operations
included $65.7 billion and $86.1 billion, respectively, of obligations with
fixed interest rates and $87.3 billion and $48.9 billion, respectively, of
obligations with variable interest rates (predominantly LIBOR), after
considering the impact of interest rate swap agreements.
II-40
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 13. Long-Term Debt and Loans Payable (concluded)
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, 2001 for Financing and Insurance
Operations were approximately $46.2 billion ($41.3 billion pay variable and $4.9
billion pay fixed), $23 million, and $73 million, respectively. The notional
amounts of such agreements as of December 31, 2000 for Financing and Insurance
Operations were approximately $35.2 billion ($24.0 billion pay variable and
$11.2 billion pay fixed), $74 million, and $83 million, respectively.
GM's financing and insurance subsidiaries maintain substantial lines of
credit with various banks that totaled $49.8 billion at December 31, 2001, of
which $26.4 billion represented short-term credit facilities and $23.4 billion
represented long-term credit facilities. At December 31, 2000, bank lines of
credit totaled $48.5 billion, of which $17.5 billion represented short-term
credit facilities and $31.0 billion represented long-term credit facilities. The
unused short-term and long-term portions of the credit lines totaled $15.7
billion and $23.3 billion at December 31, 2001 compared with $8.1 billion and
$30.5 billion at December 31, 2000. Certain bank lines of credit contain
covenants with which the Corporation and applicable subsidiaries were in
compliance during the year ended December 31, 2001.
NOTE 14. Pensions and Other Postretirement Benefits
GM has a number of defined benefit pension plans covering substantially all
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 foreign
locations are generally based on years of service and salary history. GM also
has certain nonqualified pension plans covering executives that are based on
targeted wage replacement percentages and are unfunded.
Pension plan assets are primarily invested in U.S. Government obligations,
equity and fixed income securities, commingled pension trust funds, insurance
contracts, GM $1-2/3 par value common stock (valued at December 31, 2001 at $50
million), and GM Class H common stock (valued at December 31, 2001 at $2.3
billion).
GM's funding policy with respect to its qualified pension plans is to
contribute annually not less than the minimum required by applicable law and
regulations. GM made no pension contributions to the U.S. hourly and salary
plans in 2001 and made contributions of $5.0 billion in 2000 (consisting
entirely of GM Class H common stock contributed during the second quarter of
2000), and $794 million in 1999. In addition, GM made pension contributions to
all other U.S. plans of $99 million, $69 million, and $67 million in 2001, 2000,
and 1999, respectively.
Additionally, GM maintains hourly and salary 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. Postretirement plan assets in GM's VEBA trust are invested primarily in
fixed income securities and GM Class H common stock (valued at December 31, 2001
at $296 million).
Certain of the Corporation's non-U.S. subsidiaries have postretirement plans,
although most participants are covered by government-sponsored or administered
programs. The cost of such programs generally is not significant to GM.
II-41
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 14. Pensions and Other Postretirement Benefits (continued)
U.S. Plans Non-U.S. Plans
Pension Benefits Pension Benefits Other Benefits
----------------- ---------------- ------------------
2001 2000 2001 2000 2001 2000
-------- -------- ------- ------- -------- --------
(dollars in millions)
Change in benefit obligations
Benefit obligation at beginning of year $76,131 $73,269 $9,911 $9,728 49,889 $44,683
Service cost 901 900 176 177 480 448
Interest cost 5,294 5,425 638 630 3,733 3,346
Plan participants' contributions 25 32 24 25 50 47
Amendments 33 5 2 3 - (49)
Actuarial losses 152 4,269 346 251 1,582 4,392
Benefits paid (6,321) (6,299) (549) (503) (3,173) (2,805)
Divestitures - Hughes' satellite systems - (1,263) - - - -
Curtailment charges and other 168 (207) (598) (400) (72) (173)
------ ------ ----- ----- ------ ------
Benefit obligation at end of year 76,383 76,131 9,950 9,911 52,489 49,889
------ ------ ----- ----- ------ ------
Change in plan assets
Fair value of plan assets at beginning
of year 77,866 80,462 7,397 7,062 6,724 6,291
Actual return on plan assets (4,444) 634 (391) 821 (479) 421
Employer contributions 99 5,031 92 187 - 743
Plan participants' contributions 25 32 24 25 - -
Benefits paid (6,321) (6,299) (417) (386) (1,300) (731)
Divestitures - Hughes' satellite systems - (1,841) - - - -
Settlement charges and other 97 (153) (365) (312) - -
----- ----- --- --- ----- ---
Fair value of plan assets at end
of year 67,322 77,866 6,340 7,397 4,945 6,724
------ ------ ----- ----- ------ -------
Funded status (9,061) 1,735 (3,610) (2,514) (47,544) (43,165)
Unrecognized actuarial loss 21,207 9,195 1,808 555 8,902 6,444
Unrecognized prior service cost 7,174 8,442 740 909 249 207
Unrecognized transition obligation - 1 54 63 - -
------ ------ ----- --- ------ ------
Net amount recognized $19,320 $19,373 $(1,008) $(987) (38,393) $(36,514)
====== ====== ===== === ====== ======
Amounts recognized in the consolidated
balance sheets consist of:
Prepaid benefit cost $7,006 $20,184 $521 $1,676 $ - $ -
Accrued benefit liability (7,613) (936) (3,209) (2,668) 38,393) (36,514)
Intangible asset 5,625 56 606 1 - -
Accumulated other comprehensive
income 14,302 69 1,074 4 - -
------ ------ ----- --- ------ ------
Net amount recognized $19,320 $19,373 $(1,008) $(987) $(38,393) $(36,514)
====== ====== ===== === ====== ======
The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for pension plans with accumulated benefit obligations in
excess of plan assets were $59.3 billion, $58.8 billion, and $48.2 billion,
respectively, as of December 31, 2001, and $4.0 billion, $3.4 billion, and $0,
respectively, as of December 31, 2000.
U.S. Plans Non-U.S. Plans
Pension Benefits Pension Benefits Other Benefits
------------------------ ---------------------- ----------------------
2001 2000 1999 2001 2000 1999 2001 2000 1999
------- ------- ------ ------ ------ ------ ------ ------ ------
(dollars in millions)
Components of expense
Service cost $901 $900 $1,007 $176 $177 $202 $480 $448 $502
Interest cost 5,294 5,425 4,722 638 630 604 3,733 3,346 2,802
Expected return on plan assets (7,521) (7,666) (6,726) (605) (578) (526) (542) (650) (377)
Amortization of prior service cost 1,325 1,416 926 93 97 99 (45) (42) (104)
Amortization of transition asset 82 (48) (37) 3 (17) (17) - - -
Recognized net actuarial loss/(gain) - 8 348 (1) 2 79 96 70 124
Curtailments, settlements, and other 65 235 2,351 100 24 22 - - -
Discontinued operations - - (2,349) - - - - - -
--- --- ----- --- --- --- ----- ----- -----
Net expense $146 $270 $242 $404 $335 $463 $3,722 $3,172 $2,947
=== === === === === === ===== ===== =====
II-42
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 14. Pensions and Other Postretirement Benefits (concluded)
Non-US
U.S. Plans Plans Pension
Pension Benefits Benefits Other Benefits
---------------- -------------- --------------
2001 2000 1999 2001 2000 1999 2001 2000 1999
---- ---- ---- ---- ---- ---- ---- ---- ----
Weighted-average assumptions
Discount rate 7.3% 7.3% 7.8% 6.8% 7.1% 7.1% 7.3% 7.7% 7.7%
Expected return on plan assets 10.0% 10.0% 10.0% 8.9% 9.0% 9.0% 7.9% 8.1% 8.3%
Rate of compensation increase 5.0% 5.0% 5.0% 3.8% 4.0% 4.0% 4.7% 4.3% 4.4%
For measurement purposes, an approximate 6% annual rate of increase in the
per capita cost of covered health care benefits was assumed for 2002 and 7.3%
was assumed for 2003. The rate was assumed to decrease on a linear basis to 5.0%
through 2008 and remain at that level thereafter. The lower assumed rate for
2002 and 2003 compared to the assumed rate for 2001 of 8.6% reflects the impact
of various initiatives put in place in 2001 to lower 2002 claims experience.
A one percentage point increase in the assumed health care trend rate would
have increased the Accumulated Projected Benefit Obligation (APBO) by $5.4
billion at December 31, 2001 and increased the aggregate service and interest
cost components of non-pension postretirement benefit expense for 2001 by $472
million. A one percentage point decrease would have decreased the APBO by $4.5
billion and decreased the aggregate service and interest cost components of
non-pension postretirement benefit expense for 2001 by $394 million.
GM's asset return assumption is derived from a detailed study conducted by
GM's actuaries and GM's asset management group and is based on long-term
historical data. Although in 2000 and 2001 asset returns have been below GM's
long-term asset return assumption, in any 10 year period over the last 15 years,
GM has achieved pension asset returns of 10% per annum or greater.
NOTE 15. Commitments and Contingent Matters
Commitments
GM had the following minimum commitments under noncancelable operating leases
having remaining terms in excess of one year, primarily for property: 2002-$630
million; 2003-$566 million; 2004-$464 million; 2005-$411 million; 2006-$468
million and $2.1 billion in 2007 and thereafter. Certain of these minimum
commitments fund the obligations of non-consolidated SPEs. Certain of the leases
contain escalation clauses and renewal or purchase options. Rental expenses
under operating leases were $849 million, $861 million, and $825 million in
2001, 2000, and 1999, respectively.
GM sponsors a credit card program, entitled the GM Card program, that
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 $3.9 billion, $3.8 billion, and $3.7 billion at
December 31, 2001, 2000, and 1999, respectively. As part of a marketing
agreement entered into with America Online, Inc. (AOL) on June 21, 1999, Hughes
committed to increase its sales and marketing expenditures through 2002 by
approximately $1.5 billion related to DirecPC/AOL-Plus, DIRECTV, DIRECTV/AOL TV,
and DirecDuo. At December 31, 2001, Hughes' remaining commitment under this
agreement was approximately $1.0 billion.
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 would be material to Hughes. In connection with a dispute
between Hughes and General Electric Capital Corporation ("GECC"), a judgment,
currently being appealed by Hughes, was entered into in GECC's favor that, if
not overturned, 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 December 31, 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.
II-43
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 15. Commitments and Contingent Matters (concluded)
Beginning January 2004, Fiat S.p.A. (Fiat) has the right to exercise a put
option to require GM to purchase 80% of Fiat Auto B.V. (Fiat Auto) at fair
market value. The put expires on July 24, 2009. The process for establishing the
value that would be paid by GM to Fiat involves the determination of "Fair
Market Value" by investment banks that would be retained by the parties pursuant
to provisions set out in the Master Agreement between GM and Fiat, which has
been made public in filings with the SEC. If the put were exercised, GM would
have the option to pay for the 80% interest in Fiat Auto entirely in shares of
GM $1-2/3 common stock, entirely in cash, or in whatever combination thereof GM
may choose. To the extent GM chooses to pay in cash, that portion of the
purchase price may be paid to Fiat in four installments over a three-year
period.
NOTE 16. Preferred Securities of Subsidiary Trust
General Motors - Obligated Mandatorily Redeemable Preferred Securities
of Subsidiary Trust
In July 1997, the General Motors Capital Trust G (Trust) issued approximately
$143 million of its 9.87% Trust Originated Preferred Securities sm (TOPrS sm),
Series G (Series G Preferred Securities), in a one-for-one exchange for
approximately 5 million of the outstanding GM Series G 9.12% Depositary Shares,
each representing one-fourth of a share of GM Series G Preference Stock, $0.10
par value per share.
Concurrently with the exchange and the related purchase by GM from the Trust
of the common securities of the Trust, which represent approximately 3% of the
total assets of the Trust, GM issued to the wholly-owned Trust, as the Trust's
sole assets, its 9.87% Junior Subordinated Deferrable Interest Debentures,
Series G, due July 1, 2012 (the "Series G Debentures"), having an aggregate
principal amount equal to the aggregate stated liquidation amount of the Series
G Preferred Securities and the related common securities ($131 million with
respect to the Series G Debentures).
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%
TOPrS. 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 9.12% Depositary Shares, each of
which represents a one-fourth interest in a GM Series G Preference Stock, 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 17. Stockholders' Equity
The following table presents changes in capital stock for the period from
January 1, 1999 to December 31, 2001 (dollars in millions):
Common Stocks
------------------- Total
Preference $1-2/3 Capital
Stocks par value Class H Stock
---------- --------- ------- -------
Balance at January 1, 1999 $ 1 $1,092 $11 $1,104
Shares reacquired (1) (75) - (76)
Shares issued - 16 3 19
-- ----- --- -----
Balance at December 31, 1999 - 1,033 14 1,047
Shares reacquired - (184) - (184)
Shares issued - 65 74 139
-- ----- -- -----
Balance at December 31, 2000 - 914 88 1,002
Shares reacquired - - - -
Shares issued - 18 - 18
-- --- ---- -----
Balance at December 31, 2001 $ - $932 $88 $1,020
== === == =====
II-44
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 17. Stockholders' Equity (continued)
Preference Stocks
On June 24, 1999, as part of a strategic alliance with Hughes, AOL invested
$1.5 billion in return for approximately 2.7 million shares of GM Series H 6.25%
Automatically Convertible Preference Stock, par value $0.10 per share. This
preference stock will automatically convert into GM Class H common stock in June
2002, based upon a variable conversion factor linked to the GM Class H common
stock price at the time of conversion, and accrues quarterly dividends at a rate
of 6.25% per year. It may be converted earlier in certain limited circumstances.
GM immediately invested the $1.5 billion received from AOL into shares of Hughes
Series A Preferred Stock designed to correspond to the financial terms of the GM
Series H 6.25% Automatically Convertible Preference Stock. Dividends on the
Hughes Series A Preferred Stock are payable to GM quarterly at an annual rate of
6.25%. Upon conversion of the GM Series H 6.25% Automatically Convertible
Preference Stock into GM Class H common stock, Hughes will redeem the Series A
Preferred Stock through a cash payment to GM equal to the fair market value of
GM Class H common stock issuable upon the conversion. Simultaneous with GM's
receipt of the cash redemption proceeds, GM will make a capital contribution to
Hughes of the same amount.
Common Stocks
During the second quarter of 2000, GM completed an exchange offer in which GM
repurchased 86 million shares of GM $1-2/3 par value common stock and issued 92
million shares of GM Class H common stock. In addition, on June 12, 2000, GM
contributed approximately 54 million shares and approximately 7 million shares
of GM Class H common stock to the U.S. Hourly-Rate Employees Pension Plan and
VEBA trust, respectively. The total value of the contributions was approximately
$5.6 billion. As a result of the exchange offer and employee benefit plan
contributions, the economic interest in Hughes attributable to GM $1-2/3 par
value common stock decreased from approximately 62% to approximately 30% and the
economic interest in Hughes attributable to GM Class H common stock increased
from approximately 38% to 70% on a fully diluted basis.
On June 6, 2000, the GM Board declared a three-for-one stock split of the GM
Class H common stock. The stock split was in the form of a 200% stock dividend,
paid on June 30, 2000 to GM Class H common stockholders of record on June 13,
2000. All GM Class H common stock per share amounts and numbers of shares for
all periods presented have been adjusted to reflect the stock split.
Furthermore, as a result of this stock split, the voting and liquidation rights
of the GM Class H common stock were reduced from 0.6 votes per share and 0.6
liquidation units per share, to 0.2 votes per share and 0.2 liquidation units
per share in order to avoid dilution in the aggregate voting or liquidation
rights of any class. The voting and liquidation rights of the GM $1-2/3 par
value common stock were not changed. The voting and liquidation rights of GM
$1-2/3 par value common stock are one vote per share and one liquidation unit
per share.
On July 24, 2000, Fiat S.p.A. purchased for $2.4 billion approximately 32
million shares of GM $1-2/3 par value common stock, or approximately 5.4% of
GM's $1-2/3 par value common stock outstanding as of that date.
The liquidation rights of the GM $1-2/3 par value and GM Class H common
stocks are subject to certain adjustments if outstanding common stock is
subdivided, by stock split or otherwise, or if shares of one class of common
stock are issued as a dividend to holders of another class of common stock.
Holders of GM Class H common stock have no direct rights in the equity or assets
of Hughes, but rather have rights in the equity and assets of GM (which includes
100% of the stock of Hughes).
The outstanding shares of GM Class H common stock may be recapitalized as
shares of GM $1-2/3 par value common stock at any time after December 31, 2002,
at the sole discretion of the GM Board, or automatically, if at any time the
Corporation should sell, liquidate, or otherwise dispose of 80% or more of the
business of Hughes, based on the fair market value of the assets, both tangible
and intangible, of Hughes as of the date that such proposed transaction is
approved by the GM Board. In the event of any recapitalization, all outstanding
shares of GM Class H common stock will automatically be converted into GM's
$1-2/3 par value common stock at an exchange rate that would provide GM Class H
common stockholders with that number of shares of GM $1-2/3 par value common
stock that would have a value equal to 120% of the value of their GM Class H
common stock, on such date. A recapitalization of the type described in the
prior sentence would occur if any of the triggering events took place unless the
holders of GM common stock (including the holders of GM $1-2/3 par value common
stock and holders of the GM Class H common stock voting separately as individual
classes) vote to approve an alternative proposal from the GM Board.
II-45
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 17. Stockholders' Equity (concluded)
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,
--------------------------------------------------------------------------------
2001 2000 1999
------------------------- ------------------------- -------------------------
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 $(565) $(148) $(417) $(741) $(272) (469) $(1,519) $(575) $(944)
Unrealized (loss) gain on securities:
Unrealized holding (loss) gain (41) (26) (15) (481) (179) (302) 998 372 626
Reclassification adjustment (81) (27) (54) (175) (62) (113) (171) (60) (111)
--- -- --- --- --- --- --- --- ---
Net unrealized (loss) gain (122) (53) (69) (656) (241) (415) 827 312 515
--- -- --- --- --- --- --- --- ---
Minimum pension liability adjustment (15,303) (5,767) (9,536) 118 42 76 7,980 3,012 4,968
Net unrealized loss on derivatives (387) (80) (307) - - - - - -
------ ----- ----- --- --- --- ----- ----- -----
Other comprehensive (loss) income
from continuing operations $(16,377) (6,048) $(10,329) $(1,279) $(471) $(808) $7,288 $2,749 $4,539
====== ===== ====== ===== === === ===== ===== =====
NOTE 18. 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.
All GM Class H common stock per share amounts and numbers of shares for 2000 and
1999 have been adjusted to reflect the three-for-one stock split, in the form of
a 200% stock dividend, paid on June 30, 2000.
The attribution of earnings to each class of GM common stock was as follows
(dollars in millions):
Years Ended December 31,
----------------------------
2001 2000 1999
---- ---- ----
Earnings attributable to common stocks
$1-2/3 par value
Continuing operations $984 $3,957 $5,592
Discontinued operations - - 426
--- ----- -----
Earnings attributable to $1-2/3 par value $984 $3,957 $6,018
=== ===== =====
Earnings (losses) attributable to Class H $(482) $385 $(96)
=== === ==
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.
Earnings (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, 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 earnings (losses) used for computation of the ASCNI of Hughes is 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 (876
million, 681 million, and 374 million, for 2001, 2000, and 1999, 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 during 2001,
2000, and 1999, respectively. Upon conversion of the GM Series H 6.25%
Automatically Convertible Preference Stock into GM Class H common stock, and the
redemption of Series A Preferred Stock and simultaneous capital contribution to
Hughes, both the numerator and the denominator used in the computation of ASCNI
will increase by the number of shares of the GM Class H common stock issued.
..
II-46
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 18. Earnings Per Share Attributable to Common Stocks (concluded)
In addition, the denominator used in determining the ASCNI of Hughes may be
adjusted on occasion as deemed appropriate by the GM Board to reflect
subdivisions or combinations of the GM Class H common stock, certain transfers
of capital to or from Hughes, the contribution of shares of capital stock of GM
to or for the benefit of Hughes employees, and the retirement of GM Class H
common stock purchased by Hughes. The GM Board's discretion to make such
adjustments is limited by criteria set forth in GM's Restated Certificate of
Incorporation.
Shares of GM Class H common stock delivered by GM in connection with the
award of such shares to and the exercise of stock options by employees of Hughes
increase the numerator and denominator of the fraction referred to above. On
occasion, in anticipation of exercises of stock options, Hughes purchases GM
Class H common stock from the open market. Upon purchase, these shares are
retired and therefore decrease the numerator and denominator of the fraction
referred to above
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):
$1-2/3 Par Value Common Stock Class H Common Stock
----------------------------- --------------------------
Per Share Per Share
Income Shares Amount ASCNI Shares Amount
------ ------ --------- ----- ------ ---------
Year ended December 31, 2001
Income (loss) from continuing operations $1,018 $(417)
Less:Dividends on preference stocks 34 65
------ ----
Basic EPS
Income (loss) from continuing operations
attributable to common stocks $984 551 $1.78 $(482) 876 $(0.55)
==== ----
Effect of Dilutive Securities
Assumed exercise of dilutive stock options - 5 - -
--- --- --- ---
Diluted EPS
Adjusted income (loss) from continuing
operations attributable to common stocks $984 556 $1.77 $(482) 876 $(0.55)
=== === ==== === === ====
Year ended December 31, 2000
Income from continuing operations $4,016 $436
Less:Dividends on preference stocks 59 51
----- ---
Basic EPS
Income from continuing operations
attributable to common stocks $3,957 582 $6.80 $385 681 $0.56
==== ====
Effect of Dilutive Securities
Assumed exercise of dilutive stock options (7) 9 7 27
----- --- --- ---
Diluted EPS
Adjusted income from continuing
operations attributable to common stocks $3,950 591 $6.68 $392 708 $0.55
===== === ==== === === ====
Year ended December 31, 1999
Income (loss) from continuing operations $5,657 $(81)
Less:Dividends on preference stocks 65 15
----- --
Basic EPS
Income (loss) from continuing operations
attributable to common stocks 5,592 643 $8.70 (96) 374 $(0.26)
==== ====
Effect of Dilutive Securities
Assumed exercise of dilutive stock options - 12 - -
----- --- --- ---
Diluted EPS
Adjusted income (loss) from continuing
operations attributable to common stocks $5,592 655 $8.53 $(96) 374 $(0.26)
===== === ==== === === ====
II-47
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 19. Derivative Financial Instruments and Risk Management
Effective January 1, 2001, GM adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended, which requires that
all derivatives be recorded at fair value on the balance sheet and establishes
criteria for designation and effectiveness of derivative transactions for which
hedge accounting is applied. GM assesses the initial and ongoing effectiveness
of its hedging relationships in accordance with its documented policies. The
adoption of this standard did not have a material impact on GM's consolidated
financial position or results of operations.
GM is exposed to market risk from changes in foreign currency exchange rates,
interest rates, and certain commodity and equity security 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 equity
price risks, and related hedge positions.
Cash Flow Hedges
GM uses financial instruments designated as cash flow hedges to hedge the
Corporation's exposure to foreign currency exchange risk associated with buying,
selling, and financing in currencies other than the local currencies in which it
operates, and its exposure to commodity price risk associated with changes in
prices of commodities used in its automotive business, primarily non-ferrous
metals used in the manufacture of automotive components. For transactions
denominated in foreign currencies GM typically hedges forecasted and firm
commitment exposures up to one year in the future. For commodities, GM hedges
exposures up to 6 years in the future. For the year ended December 31, 2001,
hedge ineffectiveness associated with instruments designated as cash flow
hedges, and changes in the time value of the instruments (which are excluded
from the assessment of hedge effectiveness), increased cost of sales and other
expenses by $5 million and $101 million, respectively. 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, 2001, net derivative gains of $2 million were
reclassified to cost of sales and other expenses. These net gains were offset by
net losses on the transactions being hedged. Approximately $139 million of net
derivative losses included in other comprehensive income at December 31, 2001
will be reclassified into earnings within twelve months from that date.
Fair Value Hedges
GM uses financial instruments designated as fair value hedges to manage
certain of the Corporation's exposure to interest rate risk. GM is subject to
market risk from exposures to changes in interest rates due to its financing,
investing, and cash management activities. A variety of instruments are used to
hedge GM's exposure associated with its fixed rate debt and mortgage servicing
rights (MSR's). For the year ended December 31, 2001, hedge ineffectiveness
associated with instruments designated as fair value hedges, primarily due to
the hedging of MSR's, increased selling, general, and administrative expenses by
$218 million. During the same period, no fair value hedges were derecognized.
Undesignated Derivative Instruments
Forward contracts and options not designated as hedging instruments under
SFAS No. 133 are also used to hedge certain foreign currency, commodity, and
interest rate exposures. Unrealized gains and losses on such instruments are
recognized currently in earnings.
II-48
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 20. 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.
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,
-----------------------------------
2001 2000
----------------- ----------------
Book Fair Book Fair
Value Value Value Value
------- ------- ------- -------
Automotive, Communications Services,
and Other Operations
------------------------------------
Assets
Other assets (1) $4,076 $4,040 $5,431 $5,433
Derivative assets $187 $187 $46 $144
Liabilities
Long-term debt (2) $10,726 $11,817 $7,410 $7,019
Other liabilities (1) $487 $510 $516 $548
Derivative liabilities $281 $281 $30 $106
Preferred securities of subsidiary
trusts (3) (Note 16) $ - $ - $139 $136
Financing and Insurance Operations
----------------------------------
Assets
Finance receivables - net (4) $99,813 $101,368 $92,415 $92,343
Other assets (1) $21,770 $21,971 $14,260 $14,285
Derivative assets $1,673 $1,673 $408 $1,290
Liabilities
Debt (payable beyond one year) (2) $93,024 $93,398 $58,295 $57,863
Derivative liabilities $2,942 $2,942 $987 $1,840
(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 of the GM-obligated mandatorily redeemable preferred
securities of subsidiary trusts (see Note 16) was determined based on
quoted market prices.
(4) 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), Automotive, Communications Services, and
Other Operations' loans payable and Financing and Insurance Operations' debt
payable within one year for the periods ending December 31, 2001 and 2000.
II-49
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 21. Stock Incentive Plans
Stock-Based Compensation
If compensation cost for stock options and other stock-based employee
compensation awards had been determined based on the fair value at the grant
date, consistent with the method prescribed by SFAS No. 123, GM's pro forma net
income, earnings attributable to common stocks, and basic and diluted earnings
per share attributable to common stocks would have been as follows (dollars in
millions except per share amounts):
2001 2000 1999
---- ---- ----
Net income - as reported $601 $4,452 $6,002
- pro forma $227 $4,125 $5,788
Earnings (losses) attributable
to common stocks
$1-2/3 - as reported $984 $3,957 $6,018
- pro forma $769 $3,709 $5,823
Class H - as reported $(482) $385 $(96)
- pro forma $(642) $306 $(115)
Basic earnings (losses) per share
attributable to common stocks
$1-2/3 - as reported $1.78 $6.80 $9.36
- pro forma $1.39 $6.38 $9.06
Class H - as reported $(0.55) $0.56 $(0.26)
- pro forma $(0.73) $0.45 $(0.31)
Diluted earnings (losses) per share
attributable to common stocks
$1-2/3 - as reported $1.77 $6.68 $9.18
- pro forma $1.38 $6.26 $8.88
Class H - as reported $(0.55) $0.55 $(0.26)
- pro forma $(0.73) $0.44 $(0.31)
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:
2001 2000 1999
------------------ ------------------ ------------------
GM Hughes GM GM Hughes GM GM Hughes GM
SIP Plan SSOP SIP Plan SSOP SIP Plan SSOP
----- ------ ----- ----- ------ ----- ----- ------ -----
Interest rate 4.6% 5.1% 4.6% 6.4% 6.5% 6.5% 4.8% 5.2% 4.8%
Expected life (years) 5.0 7.0 5.0 5.0 6.9 5.0 5.0 7.0 5.0
Expected volatility 31.2% 51.3% 31.1% 27.8% 42.1% 27.6% 27.9% 38.0% 27.9%
Dividend yield 3.8% - 3.8% 2.7% - 2.7% 2.3% - 2.3%
The effects of the Delphi spin-off adjustment on the number of options and
related exercise prices, as described below, are considered, under SFAS No. 123,
to be modifications of the terms of the outstanding options. Accordingly, the
pro forma disclosure includes compensation cost for the incremental fair value,
under SFAS No. 123, resulting from such modifications. The pro forma amounts for
compensation cost are not indicative of the effects on operating results for
future periods.
GM's stock incentive plans consist of the General Motors 1997 Stock Incentive
Plan, formerly the General Motors Amended Stock Incentive Plan (the "GMSIP"),
the Hughes Electronics Corporation Incentive Plan (the "Hughes Plan"), and the
General Motors 1998 Salaried Stock Option Plan (the "GMSSOP"). The GMSIP and
GMSSOP are administered by the Executive Compensation Committee of the GM Board.
The Hughes Plan is administered by the Executive Compensation Committee of the
Board of Directors of Hughes.
Under the GMSIP, 60 million shares of GM $1-2/3 par value and 7.5 million
shares of GM Class H common stocks may be granted from June 1, 1997 through May
31, 2002, of which approximately 15.3 million and 6.9 million were available for
grants at December 31, 2001. 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.
II-50
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 21. Stock Incentive Plans - (continued)
Under the Hughes Plan, Hughes may grant shares, rights, or options to acquire
up to 233 million shares of GM Class H common stock through December 31, 2001,
of which 75 million were available for grants at December 31, 2001. Option
prices are 100% of fair market value on the dates of grant and the options
generally vest over two to five years and expire 10 years from the dates of
grant, subject to earlier termination under certain conditions.
Under the GMSSOP, 50 million shares of GM $1-2/3 par value common stock may
be granted from January 1, 1998 through December 31, 2007, of which
approximately 34 million were available for grants at December 31, 2001. 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.
In connection with the Delphi spin-off, the number of options and related
exercise prices for outstanding options under the affected plans were adjusted
to reflect the change in the fair market value of GM $1-2/3 par value common
stock that resulted from this transaction. The number of shares under option and
the exercise price were adjusted such that the aggregate intrinsic value of the
options immediately before and immediately after the transaction remained
unchanged. Class H common stock share amounts and numbers of shares for 2000 and
1999 have been adjusted to reflect the three-for-one stock split in the form of
a 200% stock dividend paid on June 30, 2000.
II-51
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 21. Stock Incentive Plans (concluded)
Changes in the status of outstanding options were as follows:
GMSIP and
GMSIP Hughes Plan GMSSOP
$1-2/3 Par Value Common Class H Common $1-2/3 Par Value Common
-------------------------------------------------------------------------
Weighted- Weighted- Weighted
Shares Average Shares Average Shares Average
under Exercise under Exercise under Exercise
Option Price Option Price Option Price
-------------------------------------------------------------------------------------------------
Options outstanding at
January 1,1999 33,524,280 $50.72 50,080,851 $11.62 4,295,623 $56.00
-------------------------------------------------------------------------------------------------
Granted 9,811,209 $85.79 15,277,260 $16.05 4,764,052 $85.97
Exercised 7,902,380 $46.04 10,798,119 $9.83 - $ -
Terminated 3,198,739 $55.25 4,294,746 $13.49 2,285,969 $73.56
Delphi Spin-Off
adjustment 6,774,777 $ - - $ - 1,288,914 $ -
-------------------------------------------------------------------------------------------------
Options outstanding at
December 31, 1999 39,009,147 $51.30 50,265,246 $13.10 8,062,620 $58.73
-------------------------------------------------------------------------------------------------
Granted 11,231,004 $74.14 35,641,517 $37.05 4,182,955 $75.50
Exercised 6,831,078 $42.95 6,545,206 $11.45 1,635,248 $46.59
Terminated 283,967 $64.48 11,249,673 $30.96 242,863 $63.46
-------------------------------------------------------------------------------------------------
Options outstanding at
December 31, 2000 43,125,106 $58.49 68,111,884 $22.76 10,367,464 $67.30
-------------------------------------------------------------------------------------------------
Granted 13,141,725 $52.49 38,029,467 $23.34 3,902,862 $52.35
Exercised 1,682,731 $39.66 2,068,506 $11.25 37,655 $46.59
Terminated 1,641,974 $61.08 6,565,541 $27.66 154,690 $66.27
-------------------------------------------------------------------------------------------------
Options outstanding at
December 31, 2001 52,942,126 $57.52 97,507,304 $22.90 14,077,981 $63.22
-------------------------------------------------------------------------------------------------
Options exercisable at
December 31, 2001 29,890,175 $53.93 38,333,135 $15.75 6,148,695 $61.97
-------------------------------------------------------------------------------------------------
The following table summarizes information about GM's stock option plans at
December 31, 2001:
Weighted-Average
Remaining Weighted-Avg. Weighted-Average
Range of Options Contractual Exercise Options Exercise
Exercise Prices Outstanding Life (yrs.) Price Exercisable Price
-------------------------------------------------------------------------------------------------
GMSIP $1-2/3 Par
Value Common
$19.00 to $39.99 1,858,662 2.3 $31.23 1,858,662 $31.23
40.00 to 49.99 17,356,656 5.1 $44.85 17,225,726 $44.85
50.00 to 83.50 33,726,808 8.1 $65.48 10,805,787 $72.31
-------------------------------------------------------------------------------------------------
$19.00 to $83.50 52,942,126 6.9 $57.52 29,890,175 $53.93
-------------------------------------------------------------------------------------------------
GMSIP and
Hughes Plan
Class H Common
$3.00 to $8.99 2,024,462 2.5 $6.95 2,024,462 $6.95
9.00 to 16.99 29,837,702 5.5 $12.57 26,096,895 $12.21
17.00 to 24.99 23,729,349 8.5 $19.61 6,150,151 $18.32
25.00 to 32.99 18,055,604 8.9 $27.81 266,599 $30.23
33.00 to 41.50 23,860,187 7.9 $37.11 3,795,028 $40.67
------------------------------------------------------------------------------------------------
$3.00 to $42.50 97,507,304 7.4 $22.90 38,333,135 $15.75
-------------------------------------------------------------------------------------------------
GMSSOP $1-2/3 Par
Value Common
$46.59 2,356,590 6.0 $46.59 2,356,590 $46.59
52.35 3,872,111 9.0 $52.35 - $-
71.53 3,792,105 7.0 $71.53 3,792,105 $71.53
75.50 4,057,175 8.0 $75.50 - $-
-------------------------------------------------------------------------------------------------
$46.59 to $75.50 14,077,981 7.7 $63.22 6,148,695 $61.97
-------------------------------------------------------------------------------------------------
II-52
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 22: Hughes/EchoStar Transactions
On October 28, 2001, GM and its wholly owned subsidiary Hughes, together with
EchoStar Communications Corporation (EchoStar), announced the signing of
definitive agreements that, subject to stockholder approval, regulatory
clearance, and certain other conditions, provide for the split-off of Hughes
from GM and the subsequent merger of the Hughes business with EchoStar. These
transactions are designed to address strategic challenges currently facing the
Hughes business and to provide liquidity and value to GM, which would help to
support the credit position of GM after the transactions.
The split-off of Hughes from GM would occur by means of a distribution to the
holders of GM Class H common stock of one share of Class C common stock of a
Hughes holding company (that will own all of the stock of Hughes at the time of
the split-off) in exchange for each share of GM Class H common stock held
immediately prior to the split-off. Immediately following the split-off, the
businesses of Hughes and EchoStar would be combined in the Hughes/EchoStar
merger to form New EchoStar. Each share of the Hughes holding company Class C
common stock shares would remain outstanding and become a share of Class C
common stock of New EchoStar. Holders of Class A and Class B common stock of
EchoStar would receive 1/0.73, or about 1.3699 shares of stock of the merged
entity in exchange for each share of Class A or Class B common stock of EchoStar
held prior to the Hughes/EchoStar merger.
The transactions are structured in a manner that will not result in the
recapitalization of GM Class H common stock into GM $1-2/3 par value common
stock at a 120% exchange ratio, as currently provided for under certain
circumstances in the General Motors Restated Certificate of Incorporation, as
amended. The GM $1-2/3 par value common stock would remain outstanding and would
be GM's only class of common stock after the transactions.
As part of the transactions, GM would receive a dividend from Hughes of up
to $4.2 billion in cash and its approximately 30% retained economic interest in
Hughes would be reduced by a commensurate amount. In addition, GM may achieve
additional liquidity with respect to a portion of its retained economic interest
in Hughes represented by up to 100 million shares of GM Class H common stock
(or, after the transactions, New EchoStar Class C common stock), including by
exchanging such shares for GM outstanding obligations. Following these
transactions, subject to IRS approval, and based on a number of assumptions, GM
may retain an interest in the merged entity.
GM, Hughes, and EchoStar have agreed that, in the event that the
transactions do not occur because certain specified regulatory-related
conditions have not been satisfied, EchoStar will be required to purchase
Hughes' interest in PanAmSat Corporation for an aggregate purchase price of
approximately $2.7 billion, which is payable, depending on the circumstances,
solely in cash or in a combination of cash and either debt or equity securities
of EchoStar. In addition, in the event that the transactions do not occur
because certain of the specified regulatory clearances or approvals relating to
United States antitrust and or federal communication commission matters have not
been satisfied, EchoStar will be required to pay a $600 million termination fee
to Hughes.
II-53
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 23. Other Income and Other Expenses
Other income (included in Total net sales and revenues) and other expenses
(included in Cost of sales and other expenses) consisted of the following
(dollars in millions):
Years Ended December 31,
------------------------
2001 2000 1999
----- ----- ----
Automotive, Communications Services, and
Other Operations
----------------------------------------
Other income
Interest income $771 $619 $769
Rental car lease revenue 1,424 1,584 1,632
Gain on sale of Hughes' satellite systems (1) - 2,036 -
Claims, commissions, and grants 767 756 782
Other 369 247 289
--- --- ---
Total other income $3,331 $5,242 $3,472
===== ===== =====
Total other expenses $316 $348 $503
=== === ===
(1) Represents the gain on the sale of Hughes' satellite systems manufacturing
businesses to The Boeing Company for $3.8 billion in cash.
Financing and Insurance Operations
----------------------------------
Other income
Interest income $2,269 $1,794 $1,479
Insurance premiums 1,524 1,394 1,339
Mortgage operations investment income and
servicing fees 4,800 3,445 2,742
Other 1,082 870 157
----- ------ ------
Total other income $9,675 $7,503 $5,717
===== ===== =====
Other expenses
Provision for financing losses 1,347 $552 $404
Insurance losses and loss adjustment expenses 1,180 1,028 882
----- ----- ------
Total other expenses $2,527 $1,580 $1,286
===== ===== =====
NOTE 24: 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. GM's
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.
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: GMNA, GME, GMLAAM, GMAP),
Hughes, and Other. GMNA designs, manufactures, and/or markets vehicles primarily
in North America under the following nameplates: Chevrolet, Pontiac, GMC,
Oldsmobile, Buick, Cadillac, Saturn, and Hummer. GME, GMLAAM, and GMAP meet the
demands of customers outside North America with vehicles designed, manufactured,
and marketed under the following nameplates: Opel, Vauxhall, Holden, Isuzu,
Saab, Buick, Chevrolet, GMC, and Cadillac. Hughes includes activities relating
to digital entertainment, information and communications services, and
satellite-based private business networks. The Other segment 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. 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, vehicle and homeowners' insurance,
and asset-based lending. The Financing and Insurance Operations' Other segment
includes financing entities operating in the U.S., Canada, Brazil, and Mexico
which are not associated with GMAC.
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-54
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 24. Segment Reporting (continued)
Other Total
GMNA GME GMLAAM GMAP GMA Hughes Other ACO GMAC Financing Financing
-------- ------- ------ ------ --------- ----------- ------- --------- ------- --------- ---------
(dollars in millions)
2001
Manufactured products
sales and revenues:
External customers $105,859 $22,249 $5,615 $3,262 $136,985 $8,236 $2,939 $148,160 $ - $ - $ -
Intersegment (1,772) 820 200 752 - 25 (25) - - - -
------- ------ ----- ----- ------- ----- ----- ------- ------ ----- ------
Total manufactured
products 104,087 23,069 5,815 4,014 136,985 8,261 2,914 148,160 - - -
Financing revenue - - - - - - - - 15,083 1,011 16,094
Other income 2,851 631 49 187 3,718 57 (444) 3,331 10,389 (714) 9,675
------- ------ ----- ----- ------- ----- ----- ------- ------ ----- ------
Total net sales
and revenues $106,938 $23,700 $5,864 $4,201 $140,703 $8,318 $2,470 $151,491 $25,472 $297 $25,769
======= ====== ===== ===== ======= ===== ===== ======= ====== === ======
Depreciation and
amortization $4,515 $994 $146 $117 $5,772 $1,144(a) $135 $7,051 $5,305 $552 $5,857
Interest income $831 $369 $27 $14 $1,241 $57 $(527) $771 $2,696 $(427) $2,269
Interest expense $969 $349 $95 $8 $1,421 $196 $(866) $751 $7,606 $233 $7,839
Income tax expense
(benefit) $423 $(282) $(18) $24 $147 $(326) $(91) $(270) $1,075 $(37) $1,038
(Losses) earnings of
nonconsolidated
associates $(37) $41 $(6) $(61) $(63) $(61) $(5) $(129) $(5) $3 $(2)
Net income (loss) $1,270 $(765) $(81) $(57) $367 $(618)(a) $(916) $(1,167) $1,786 $(18) $1,768
Investments in
nonconsolidated
affiliates $665 $886 $614 $2,700 $4,865 $55 $30 $4,950 $1,062 $(1,062) $ -
Segment assets $89,501 $18,552 $4,181 $896 $113,130 $19,154 $(2,074) $130,210 $192,721 $1,038 $193,759
Expenditures for
property $5,771 $1,477 $125 $194 $7,567 $799(b) $245 $8,611 $13 $7 $20
2000
Manufactured products
sales and revenues:
External customers $111,481 $23,815 $5,470 $2,999 $143,765 $8,514 $3,106 $155,385 $ - $ - $ -
Intersegment (1,659) 1,040 184 435 - 34 (34) - - - -
------- ------ ----- ----- ------- ----- ----- ------- -- -- --
Total manufactured
products 109,822 24,855 5,654 3,434 143,765 8,548 3,072 155,385 - - -
Financing revenue - - - - - - - - 15,493 1,009 16,502
Other income 2,901 503 59 172 3,635 2,141 (534) 5,242 8,168 (665) 7,503
------- ------ ----- ----- ------- ------ ------ ------- ------ --- ------
Total net sales and
revenues $112,723 $25,358 $5,713 $3,606 $147,400 $10,689 $2,538 $160,627 $23,661 $344 $24,005
======= ====== ===== ===== ======= ====== ===== ======= ====== === ======
Depreciation and
amortization $4,564 $1,357 $272 $107 $6,300 $996(a)(c) $133 $7,429 $5,505 $477 $5,982
Interest income $633 $403 $22 $13 $1,071 $106 $(558) $619 $2,231 $(437) $1,794
Interest expense $1,175 $408 $101 $4 $1,688 $218 $(1,091) $815 $8,295 $442 $8,737
Income tax expense
(benefit) $1,218 $(209) $(122) $17 $904 $577 $(38) $1,443 $954 $(4) $950
(Losses) earnings of
nonconsolidated
associates $(74) $7 $69 $(195) $(193) $(142) $(1) $(336) $- $4 $4
Net income (loss) $3,174 $(676) $26 $(233) $2,291 $829(a)(c) $(281) $2,839 $1,602 $11 $1,613
Investments in
nonconsolidated
affiliates $780 $170 $436 $1,915 $3,301 $82 $114 $3,497 $982 $(982) $-
Segment assets $90,502 $18,857 $4,166 $1,108 $114,633 $19,220 $(497) $133,356 $168,410 $1,334 $169,744
Expenditures for
property $6,073 $1,517 $233 $168 $7,991 $993(b) $216 $9,200 $518 $4 $522
See notes on next page
II-55
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 24. Segment Reporting (continued)
Other Total
GMNA GME GMLAAM GMAP GMA Hughes Other ACO GMAC Financing Financing
-------- ------- ------ ------ --------- ----------- ------- --------- ------- --------- ---------
(dollars in millions)
1999
Manufactured products
sales and revenues:
External customers $110,388 $24,646 $4,445 $2,706 $142,185 $7,325 $3,125 $152,635 $ - $ - $ -
Intersegment (1,595) 1,025 234 336 - 16 (16) - - - -
------- ------ ----- ----- ------- ----- ----- ------- --- --- ---
Total manufactured
products 108,793 25,671 4,679 3,042 142,185 7,341 3,109 152,635 - - -
Financing revenue - - - - - - - - 13,778 956 14,734
Other income 3,142 554 30 145 3,871 253 (652) 3,472 6,440 (723) 5,717
------- ------ ----- ----- ------- ----- ----- ------- ------ --- ------
Total net sales
and revenues $111,935 $26,225 $4,709 $3,187 $146,056 $7,594 $2,457 $156,107 $20,218 $233 $20,451
======= ====== ===== ===== ======= ===== ===== ======= ====== === ======
Depreciation and
amortization $4,457 $1,086 $228 $154 $5,925 $706(a) $242 $6,873 $5,136 $309 $5,445
Interest income $929 $433 $45 $8 $1,415 $27 $(673) $769 $1,744 $(265) $1,479
Interest expense $1,223 $337 $95 $11 $1,666 $123 $(961) $828 $6,526 $396 $6,922
Income tax expense
(benefit) $2,361 $220 $(156) $(7) $2,418 $(194) $(57) $2,167 $960 $(9) $951
(Losses) earnings of
nonconsolidated
associates $(30) $1 $45 $(149) $(133) $(189) $(3) $(325) $(1) $1 $ -
Net income (loss) $4,857 $423 $(81) $(218) $4,981 $(270)(a) $(243)(d) $4,468 $1,527 $7 $1,534
Investments in
nonconsolidated
affiliates $539 $52 $332 $926 $1,849 $(11) $(127) $1,711 $2,257 $(2,257) $-
Segment assets $82,851 $18,156 $4,102 $1,343 $106,452 $18,841 $268 $125,561 $148,789 $380 $149,169
Expenditures for
property $4,604 $1,228 $358 $150 $6,340 $472(b) $249 $7,061 $321 $2 $323
(a) The amount reported for Hughes excludes amortization of GM purchase
accounting adjustments related to GM's acquisition of Hughes Aircraft
Company of approximately $3 million, $16 million ($3 million related to
PanAmSat and $13 million related to the satellite systems manufacturing
businesses prior to the sale to The Boeing Company on October 6, 2000),
and $21 million for 2001, 2000, and 1999, respectively. These adjustments
were allocated to GM's Other segment which is consistent with the basis
upon which segments are evaluated.
(b) Excludes satellite expenditures totaling $936 million, $766 million, and
$789 million in 2001, 2000, and 1999, respectively. Also excludes
expenditures related to the early buy-out of satellite sale-leasebacks
totaling $0, $0, and $370 million in 2001, 2000, and 1999, respectively.
(c) The amount reported for Hughes includes the write-off of approximately $329
million of unamortized goodwill related to the satellite systems
manufacturing businesses at the time of the sale to The Boeing Company.
(d) Other includes income (loss) from discontinued operations related to Delphi
of $426 million for the year ended December 31, 1999.
II-56
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 24. Segment Reporting (concluded)
Information concerning principal geographic areas was as follows (dollars in
millions):
2001 2000 1999
------------------ ------------------ ------------------
Net Sales Net Sales Net Sales
& Net & Net & Net
Revenues Property Revenues Property Revenues Property
--------- -------- --------- -------- --------- --------
North America
United States $132,004 $25,123 $136,399 $22,798 $130,073 $20,634
Canada and Mexico 11,769 3,400 13,986 3,687 12,661 3,760
------- ------ ------- ------ ------- ------
Total North
America 143,773 28,523 150,385 26,485 142,734 24,394
Europe
France 1,829 130 1,986 139 2,130 151
Germany 6,133 2,640 6,582 2,687 8,968 2,912
Spain 1,772 713 1,650 709 2,001 542
United Kingdom 5,024 582 5,035 834 5,390 1,070
Other 11,139 1,905 11,935 2,397 9,407 1,635
------ ----- ------ ----- ------- -----
Total Europe 25,897 5,970 27,188 6,766 27,896 6,310
Latin America
Brazil 2,889 946 3,395 1,047 2,830 1,409
Other Latin
America 2,249 273 1,843 380 1,686 403
----- ----- ----- ----- ----- -----
Total Latin
America 5,138 1,219 5,238 1,427 4,516 1,812
All Other 2,452 728 1,821 698 1,412 759
------- ------ ------- ------ ------- ------
Total $177,260 $36,440 $184,632 $35,376 $176,558 $33,275
======= ====== ======= ====== ======= ======
Note 25: Subsequent Events
In February 2002, Hughes completed a series of financing activities to fund
certain future anticipated cash requirements and to expand available borrowing
capacity. Hughes, through its consolidated subsidiary PanAmSat, borrowed $1.8
billion, consisting of a private placement debt offering in the amount of $800
million and $1.0 billion borrowed under a new $1.25 billion bank facility. The
notes issued in the private placement bear interest at an annual rate of 8.5%,
are payable semi-annually, mature in 2012, and are unsecured. The $1.25 billion
bank facility is comprised of a $250 million revolving credit facility, a
Tranche A Term Loan in the amount of $300 million, and a Tranche B Term Loan in
the amount of $700 million. The revolving credit facility and the Tranche A Term
Loan bear interest at LIBOR plus a 3.00% spread. The Tranche B Term Loan bears
interest at LIBOR plus a 3.5% spread. The interest rate spreads on the revolving
credit facility and Tranche A Term Loan may be increased or decreased based upon
the terms of the credit agreement. The facilities are secured ratably by
substantially all of PanAmSat's operating assets, including its satellites. The
revolving credit facility will terminate in 2007, the Tranche A Term Loan
matures in 2007, and the Tranche B Term Loan matures in 2008. Principal payments
under the Tranche A Term Loan are due in varying amounts from 2004 to 2007.
Principal payments under the Tranche B Term Loan are due primarily at maturity.
Also in February 2002, Hughes utilized $1.7 billion of the proceeds from a
$1.9 billion loan obtained from GMAC to repay (1) all amounts outstanding under
an existing $750 million unsecured revolving credit facility, (2) the DIRECTV
Latin America ("DLA") $450 million revolving credit facility and, (3) $613
million of SurFin revolving credit facilities. Hughes' existing $750 million
multi-year revolving credit facility was amended and expanded to $1.2 billion
and is secured by substantially all of Hughes' assets other than the assets of
DLA and PanAmSat. In March 2002, Hughes was in the process of adding a term
loan to the $1.2 billion multi-year revolving credit facility that would
increase the total funding available to at least $1.8 billion. The term loan
is expected to close in March 2002. Hughes secured the loan from GMAC with a
$1.5 billion cash deposit. Hughes and GMAC intend to offset against each other
the $1.5 billion cash deposit and amounts owed by Hughes to GMAC, and
accordingly, these amounts will be offset in the ACO and Finance and Insurance
Operations balance sheets.
On March 6, 2002, GM issued $3.8 billion of convertible debt securities as
part of a comprehensive effort to improve the Corporation's financial
flexibility. The offering includes $1.2 billion principal amount of 4.5% Series
A Convertible Senior Debentures due 2032 and $2.6 billion principal amount of
5.25% Series B Convertible Senior Debentures due 2032. The securities mature in
30 years and are convertible into GM $1-2/3 common stock once specific
conditions are satisfied. The proceeds of the offering, combined with other cash
generation initiatives, will be used to rebuild GM's liquidity position, reduce
its underfunded pension liability, and fund its postretirement health care
obligations.
* * * * * * * *
II-57
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION
Selected Quarterly Data (Unaudited)
2001 Quarters
--------------------------------------
1st (1) 2nd (2) 3rd (3) 4th
--- ---- --- ---
(dollars in millions except per share amounts)
Total net sales and revenues $42,615 $46,220 $42,475 $45,950
Income (losses) before income taxes
and minority interests $504 $925 $(285) $374
Income tax expense 208 304 76 180
Minority interests (2) 7 (10) (13)
Earnings (losses) of nonconsolidated
associates (57) (151) 3 74
--- --- --- ---
Net income (loss) 237 477 (368) 255
Dividends on preference stocks (28) (23) (25) (23)
--- --- --- ---
Earnings (losses) attributable to
common stocks $209 $454 $(393) $232
=== === === ===
Earnings (losses) attributable to
$1-2/3 par value $296 $574 $(223) $337
Losses attributable to Class H $(87) $(120) $(170) $(105)
Basic earnings (losses) per
share attributable to
$1-2/3 par value $0.54 $1.05 $(0.41) $0.61
Basic losses per share
attributable to Class H $(0.10) $(0.14) $(0.19) $(0.12)
Average number of shares of common stocks
outstanding - basic (in millions)
$1-2/3 par value 548 549 551 556
Class H 875 876 877 877
Diluted earnings (losses) per
share attributable to
$1-2/3 par value $0.53 $1.03 $(0.41) $0.60
Diluted losses per share
attributable to Class H $(0.10) $(0.14) $(0.19) $(0.12)
Average number of shares of common stocks
outstanding - diluted (in millions)
$1-2/3 par value 554 559 551 559
Class H 875 876 877 877
II-58
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION - continued
Selected Quarterly Data (Unaudited) - continued
(1) First quarter 2001 results include a $12 million increase to income on
an after-tax basis for the net impact from initially adopting SFAS No.
133, "Accounting for Derivatives and Hedging Activities".
(2) Second quarter 2001 results include a $133 million after-tax restructuring
charge related to General Motors' portion of severance payments and asset
impairments that were part of the second quarter restructuring of its
affiliate Isuzu Motors Ltd.
(3) Third quarter 2001 results include the following:
- a $194 million after-tax charge for the announced closing of the Ste.
Therese, Quebec assembly plant;
- a $474 million after-tax charge related to Hughes' settlement with
Raytheon on a purchase price adjustment related to Raytheon's 1997
merger with Hughes defense;
- a $67 million after-tax gain related to Hughes' sale of 4.1 million
shares of Thomson Multimedia common stock;
- a $133 million after-tax charge related to Hughes' non-cash charge from
the revaluation of its SkyPerfecTV! investment;
- a $40 million after-tax severance charge related to Hughes' 10%
company-wide workforce reduction in the U.S.; and
- a $21 million after-tax favorable adjustment for the expected costs
associated with the shutdown of Hughes' DIRECTV Japan business.
II-59
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION
Selected Quarterly Data (Unaudited)
2000 Quarters
--------------------------------------
1st 2nd 3rd 4th(4)
--- --- --- ---
(dollars in millions except per share amounts)
Total net sales and revenues $46,858 $48,743 $42,690 $46,341
====== ====== ====== ======
Income before income taxes
and minority interests $2,632 $2,835 $1,266 $431
Income tax expense 783 929 436 245
Minority interests 2 2 (2) 11
Earnings (losses) of nonconsolidated
associates (68) (157) 1 (108)
----- ----- ----- ---
Net income 1,783 1,751 829 89
Dividends on preference stocks (29) (27) (27) (27)
----- ----- ----- --
Earnings attributable to
common stocks $1,754 $1,724 $802 $62
===== ===== === ==
Earnings (losses) attributable to
$1-2/3 par value $1,786 $1,762 $878 $(635)
Earnings (losses) attributable to
Class H $(32) $(38) $(76) $697
Basic earnings (losses) per
share attributable to
$1-2/3 par value $2.88 $2.99 $1.57 $(1.14)
Basic earnings (losses) per
share attributable
to Class H (5) $(0.08) $(0.07) $(0.09) $0.80
Average number of shares of common stocks
outstanding - basic (in millions)
$1-2/3 par value 620 590 559 559
Class H (5) 413 563 874 875
Diluted earnings (losses) per
share attributable to
$1-2/3 par value $2.80 $2.93 $1.55 $(1.16)
Diluted earnings (losses)
per share attributable
to Class H (5) $(0.08) $(0.07) $(0.09) $0.76
Average number of shares of common stocks
outstanding - diluted (in millions)
$1-2/3 par value 637 602 567 559
Class H (5) 413 563 874 962
II-60
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION - continued
Selected Quarterly Data (Unaudited) - continued
(4) Fourth quarter 2000 results include: a $939 million after-tax charge for
the phase-out of Oldsmobile; an after-tax charge of $294 million related
to postemployment costs for termination and other postemployment benefits
associated with the four North American manufacturing facilities slated
for conversion and capacity reduction; a $419 million after-tax charge
related to the reduction in production capacity at GME, including the
restructuring of Vauxhall Motors Limited's manufacturing operations in the
UK; and a $1.1 billion after-tax gain at Hughes related to the sale of its
satellite systems manufacturing businesses to The Boeing Company for $3.8
billion in cash.
(5) Adjusted to reflect the three-for-one stock split of the GM Class H common
stock, in the form of a 200% stock dividend, paid on June 30, 2000.
II-61
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 9. Changes in and disagreements with accountants on accounting and
financial disclosure
None
II-62
PART III
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEMS 10, 11, 12, AND 13
Information required by Part III (Items 10, 11, 12, and 13) of this Form 10-K
is incorporated by reference from General Motors Corporation's definitive Proxy
Statement for its 2002 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 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 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
Page
Number
------
(a) 1. All Financial Statements See Part II
2. Financial Statement Schedule II - Allowances for
the Years Ended December 31, 2001, 2000, and 1999 IV-3
3. Exhibits (Including Those Incorporated by Reference)
Exhibit
Number
------
(3)(a) Restated Certificate of Incorporation, as amended, filed as
Exhibit 3(i) to the Current Report on Form 8-K of General
Motors Corporation dated June 6, 2000, and Amendment to
Article Four of the Certificate of Incorporation -
Division III - Preference Stock, by reason of the
Certificates of Designations filed with the Secretary
of State of the State of Delaware on September 14, 1987 and
the Certificate of Decrease filed with the Secretary of
State of the State of Delaware on September 29, 1987
(pertaining to the Six Series of Preference Stock
contributed to the General Motors pension trusts),
incorporated by reference to Exhibit 19 to the Quarterly
Report on Form 10-Q of General Motors Corporation for
the quarter ended June 30, 1990 in the Form SE of General
Motors Corporation dated August 6, 1990; as further
amended by the Certificate of Designations filed with
the Secretary of State of the State of Delaware on
June 28, 1991 (pertaining to Series A Conversion
Preference Stock), incorporated by reference to Exhibit
4(a) to Form S-8 Registration Statement No. 33-43744
in the Form SE of General Motors Corporation dated
November 1, 1991; as further amended by the Certificate
of Designations filed with the Secretary of State of the
State of Delaware on December 9, 1991 (pertaining to
Series B 9-1/8% Preference Stock), incorporated by
reference to Exhibit 4(a) to Form S-3 Registration
Statement No. 33-45216 in the Form SE of General
Motors Corporation dated January 27, 1992; as further
amended by the Certificate of Designations filed with
the Secretary of State of the State of Delaware on
February 14, 1992 (pertaining to Series C Convertible
Preference Stock), incorporated by reference to Exhibit
(3)(a) to the Annual Report on Form 10-K of General Motors
Corporation for the year ended December 31, 1991 in
the Form SE of General Motors Corporation dated March 20,
1992; as further amended by the Certificate of Designations
filed with the Secretary of State of the State of Delaware
on July 15, 1992 (pertaining to Series D 7.92% Preference
Stock), incorporated by reference to Exhibit 3(a)(2) to
the Quarterly Report on Form 10-Q of General Motors
Corporation for the quarter ended June 30, 1992 in the
Form SE of General Motors Corporation dated August 10,
1992; as further amended by the Certificate of
Designations filed with the Secretary of State of the
State of Delaware on December 15, 1992 (pertaining to
Series G 9.12% Preference Stock), incorporated by
reference to Exhibit 4(a) to Form S-3 Registration
Statement No. 33-49309 in the Form SE of General Motors
Corporation dated January 25, 1993; and as further amended
by the Certificate of Designations filed with the Secretary
of State of the State of Delaware on June 24, 1999
(pertaining to Series H 6.25% Automatically Convertible
Preference Stock), incorporated by reference to Exhibit
4(a) to Form S-8 Registration Statement No. 333-31846 in
the Form SE of General Motors Corporation dated March 6, 2000. N/A
(3)(b) By-Laws, of General Motors Corporation, as amended,
incorporated by reference to Exhibit 3(ii) to the Current
Report on Form 8-K of General Motors Corporation dated
March 2, 1998; as further amended, incorporated by
reference to Exhibit 3(ii) to the Current Reports on
Form 8-K of General Motors Corporation dated June 24, 1999,
August 2, 1999, March 6, 2000, June 6, 2000, October 3, 2000,
June 5, 2001, and December 4, 2001. N/A
(4)(a) Form of Indenture relating to the $500,000,000 8-1/8%
Debentures Due April 15, 2016 dated as of April 1, 1986
between General Motors Corporation and Citibank, N.A.,
Trustee, incorporated by reference to Exhibit 4 to
Amendment No. 1 to Form S-3 Registration Statement No.
33-4452 and resolutions adopted by the Special
Committee on April 15, 1986, incorporated by reference
to Exhibit 4(a) to the Current Report on Form 8-K of
General Motors Corporation dated April 24, 1986. N/A
IV-1
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
PART IV - continued
ITEM 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
(continued)
Exhibit Page
Number Number
------ ------
(4)(c) Form of Indenture relating to the $377,377,000 7.75%
Debentures Due March 15, 2036 dated as of December 7,
1995 between General Motors Corporation and Citibank,
N.A., Trustee, filed as Exhibit 4(a) to Amendment No. 1
to Form S-3 Registration Statement No. 33-64229. N/A
(4)(d) Instruments defining the rights of holders of nonregistered
debt of the Registrant have been omitted from this exhibit
index because the amount of debt authorized under any such
instrument does not exceed 10% of the total assets of the
Registrant and its subsidiaries. The Registrant agrees
to furnish a copy of any such instrument to the Commission
upon request. N/A
(4)(f)(i)Indenture between General Motors Corporation and
Wilmington Trust Company, incorporated by reference to
Exhibit 4(d)(i) to the Current Report on Form 8-K of
General Motors Corporation dated July 1, 1997. N/A
(4)(f)(ii)First Supplemental Indenture, dated March 4, 2002, between
General Motors Corporation and Citibank, N.A. With Respect
To The 4.50% Series A Convertible Senior Debentures due
2032 and 5.25% Series B Convertible Senior Debentures due
2032, incorporated by reference to Exhibit 2 to the
Current Report on Form 8-K of General Motors Corporation
dated March 6, 2002. N/A
(10)(a)**General Motors 1997 Annual Incentive Plan, incorporated by
reference to Exhibit B to the Proxy Statement of General
Motors Corporation dated April 16,1997. N/A
(10)(b)**General Motors 1997 Stock Incentive Plan, incorporated
by reference to Exhibit B to the Proxy Statement of
General Motors Corporation dated April 16, 1997. N/A
(10)(c)**General Motors 1997 Performance Achievement Plan,
incorporated by reference to Exhibit B to the Proxy
Statement of General Motors Corporation dated April 16, 1997. N/A
(10)(d)**Compensation Plan for Nonemployee Directors, incorporated by
reference to Exhibit A to the Proxy Statement of General
Motors Corporation dated April 16, 1997. N/A
(10)(e) Employment Contract with John M. Devine dated December 12,
2000, incorporated by reference to Exhibit (10)(e) to the
Annual Report on Form 10-K for the Year Ended December 31,
2000. N/A
(10)(f) Employment Contract with Robert A. Lutz dated September 1, 2001. IV-6
(12) Computation of Ratios of Earnings to Fixed Charges for the
Years Ended December 31, 2001, 2000, and 1999. IV-9
(21) Subsidiaries of the Registrant as of December 31, 2001 IV-10
(23) Consent of Independent Auditors IV-17
(99) Hughes Electronics Corporation Financial Statements and
Management's Discussion and Analysis of Financial Condition
and Results of Operations IV-18
* The registrant hereby undertakes to furnish supplementally a copy of any
omitted schedule or other attachment to the Securities and Exchange
Commission upon request.
** Required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
(b) Reports on Form 8-K
Fourteen reports on Form 8-K, were filed October 2, 2001, October 3, 2001,
October 15, 2001, October 18, 2001, October 18, 2001*, October 19, 2001, October
24, 2001 (2), October 31, 2001, November 1, 2001, November 13, 2001, November
14, 2001*, December 3, 2001, and December 6, 2001 during the quarter ended
December 31, 2001 reporting matters under Item 5, Other Events, reporting
certain agreements under Item 7, Financial Statements, Pro Forma Financial
Information, and Exhibits.
--------------------------
* Reports submitted to the Securities and Exchange Commission under Item 9,
Regulation FD Disclosure. Pursuant to General Instruction B of Form 8-K the
reports submitted under Item 9 are not deemed to be "filed" for the purpose of
Section 18 of the Securities Exchange Act of 1934 and we are not subject to the
liabilities of that section. We are not incorporating, and will not incorporate
by reference these reports into a filing under the Securities Act or the
Exchange Act.
IV-2
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SCHEDULE II - ALLOWANCES
Additions Additions
Balance at charged to charged to
beginning costs and other Balance at
Description of year expenses accounts Deductions end of year
----------- ---------- ---------- ---------- ---------- -----------
(dollars in millions)
For the Year Ended December 31, 2001
Allowances Deducted from Assets
Finance receivables (unearned income) $4,872 $ - $7,624(a) $6,730(b) $5,766
Allowance for credit losses 1,332 1,346 159(c) 777(d) 2,060
Accounts and notes receivable (for doubtful
receivables) 241 227 83(c) 281(d) 270
Inventories (principally for obsolescence of
service parts) 300 - - 53(e) 247
Other investments and miscellaneous assets
(receivables and other) 6 - 2 - 8
Miscellaneous allowances (mortgage and other) 186 225 3 74 340
----- ----- ----- ----- -----
Total Allowances Deducted from Assets $6,937 $1,798 $7,871 $7,915 $8,691
===== ===== ===== ===== =====
For the Year Ended December 31, 2000
Allowances Deducted from Assets
Finance receivables (unearned income) $4,153 $ - $3,942 $3,223 $4,872
Allowance for credit losses 1,114 552 169(c) 503(d) 1,332
Accounts and notes receivable (for doubtful
receivables) 301 173 44(c) 277(d) 241
Inventories (principally for obsolescence of
service parts) 364 - - 64(e) 300
Other investments and miscellaneous assets
(receivables and other) 5 - 1 - 6
Miscellaneous allowances (mortgage and other) 225 35 1 75 186
----- --- ----- ----- -----
Total Allowances Deducted from Assets $6,162 $760 $4,157 $4,142 $6,937
===== === ===== ===== =====
For the Year Ended December 31, 1999
Allowances Deducted from Assets
Finance receivables (unearned income) $4,027 $ - $3,411 $3,285 $4,153
Allowance for credit losses 1,021 404 109(c) 420(d) 1,114
Accounts and notes receivable (for doubtful
receivables) 309 75 29(c) 112(d) 301
Inventories (principally for obsolescence of
service parts) 257 107(e) - - 364
Other investments and miscellaneous assets
(receivables and other) 14 - - 9 5
Miscellaneous allowances (mortgage and other) 252 54 1 82 225
----- --- ----- ----- -----
Total Allowances Deducted from Assets $5,880 $640 $3,550 $3,908 $6,162
===== === ===== ===== =====
-------------------------
Notes:(a) Represents additional unearned income on newly originated finance
receivables.
(b) Represents income recognized.
(c) Primarily reflects the recovery of accounts previously written-off.
(d) Accounts written off.
(e) 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, 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 4, 2002 By
/s/JOHN F. SMITH, JR.
----------------------------------
(John F. Smith, Jr.
Chairman of the Board of Directors)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on this 4th day of March 2002 by the following
persons on behalf of the Registrant and in the capacities indicated.
Signature Title
-------------------------- -----------------------------------
/s/JOHN F. SMITH, JR. Chairman of the Board of Directors
---------------------
(John F. Smith, Jr.)
/s/G. RICHARD WAGONER, JR. President, Chief Executive Officer,
------------------------- and Director
(G. Richard Wagoner, Jr.)
/s/JOHN M. DEVINE Vice Chairman and )
----------------- Chief Financial Officer )
(John M. Devine) )Principal
)Financial
)Officers
/s/ERIC A. FELDSTEIN Vice President and )
-------------------- Treasurer )
(Eric A. Feldstein) )
/s/WALLACE W. CREEK Controller )
------------------- )
(Wallace W. Creek) )Principal
)Accounting
)Officers
/s/PETER R. BIBLE Assistant Controller and )
----------------- Chief Accounting Officer )
(Peter R. Bible) )
IV-4
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SIGNATURES - concluded
Signature Title
-------------------------- ---------------------
/s/PERCY BARNEVIK Director
-----------------
(Percy Barnevik)
/s/JOHN H. BRYAN Director
----------------
(John H. Bryan)
/s/ARMANDO M. CODINA Director
--------------------
(Armando Codina)
/s/THOMAS E. EVERHART Director
---------------------
(Thomas E. Everhart)
/s/GEORGE M. C. FISHER Director
----------------------
(George M. C. Fisher)
/s/ Director
---------------------
(Nobuyuki Idei)
/s/KAREN KATEN Director
--------------
(Karen Katen)
/s/ALAN G. LAFLEY Director
-----------------
(Alan G. Lafley)
/s/J. WILLARD MARRIOTT, JR. Director
---------------------------
(J. Willard Marriott, Jr.)
/s/E. STANLEY O'NEAL Director
-------------------
(E. Stanley O'Neal)
/s/ECKHARD PFEIFFER Director
-------------------
(Eckhard Pfeiffer)
/s/LLOYD D. WARD Director
----------------
(Lloyd D. Ward)
IV-5