UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT
-- OF 1934
For the quarterly period ended September 30, 2002
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT
--- OF 1934
For the transition period from to
--------------- -------------
Commission file number 1-143
GENERAL MOTORS CORPORATION
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 38-0572515
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 Renaissance Center, Detroit, Michigan 48265-3000
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (313) 556-5000
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X . No .
As of October 31, 2002, there were outstanding 560,441,241 shares of the
issuer's $1-2/3 par value common stock and 958,155,056 shares of GM Class H
$0.10 par value common stock.
- 1 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
INDEX
Page No.
--------
Part I - Financial Information (Unaudited)
Item 1. Financial Statements
Consolidated Statements of Income for the Three and
Nine Months Ended September 30, 2002 and 2001 3
Consolidated Balance Sheets as of September 30, 2002,
December 31, 2001, and September 30, 2001 5
Condensed Consolidated Statements of Cash Flows for
the Nine Months Ended September 30, 2002 and 2001 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17
Item 4. Controls and Procedures 30
Part II - Other Information (Unaudited)
Item 1. Legal Proceedings 30
Item 6. Exhibits and Reports on Form 8-K 31
Signatures 31
Certifications 32
Exhibit 99 Hughes Electronics Corporation Financial Statements and
Management's Discussion and Analysis of Financial
Condition and Results of Operations (Unaudited) 34
Exhibit 99.1 Certification of the Chief Executive Officer Pursuant
to 18 U.S.C. Section 1350, As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. 96
Exhibit 99.2 Certification of the Chief Financial Officer Pursuant
to 18 U.S.C. Section 1350, As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. 97
- 2 -
PART I
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months End Nine Months Ended
September 30, September 30,
---------------- -----------------
2002 2001 2002 2001
---- ---- ---- ----
(dollars in millions except per share amounts)
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Total net sales and revenues $43,578 $42,475 $138,107 $131,310
------ ------ ------- -------
Cost of sales and other expenses
(Notes 10 and 11) 36,774 34,946 113,517 106,757
Selling, general, and administrative
expenses (Note 11) 6,173 5,926 17,944 17,171
Interest expense 2,036 1,888 5,916 6,238
------ ------ ------- -------
Total costs and expenses 44,983 42,760 137,377 130,166
------ ------ ------- -------
Income (loss) before income
taxes and minority interests (1,405) (285) 730 1,144
Income tax expense/(benefit)
(Note 11) (551) 76 137 588
Equity income/(loss) and
minority interests 50 (7) 123 (210)
--- --- --- ---
Net income (loss) (804) (368) 716 346
Dividends on preference stocks - (25) (47) (76)
---- ---- --- ---
Earnings attributable to
common stocks $(804) $(393) $669 $270
=== === === ===
Basic earnings (losses) per
share attributable to
common stocks (Note 9)
Earnings per share attributable
to $1-2/3 par value $(1.42) $(0.41) $1.65 $1.18
==== ==== ==== ====
Earnings per share attributable
to Class H $(0.01) $(0.19) $(0.28) $(0.43)
==== ==== ==== ====
Earnings (losses) per share
attributable to common
stocks assuming dilution (Note 9)
Earnings per share attributable
to $1-2/3 par value $(1.42) $(0.41) $1.63 $1.16
==== ==== ==== ====
Earnings per share attributable
to Class H $(0.01) $(0.19) $(0.28) $(0.43)
==== ==== ==== ====
Reference should be made to the notes to consolidated financial statements.
- 3 -
CONSOLIDATED STATEMENTS OF INCOME - concluded
(Unaudited)
Three Months End Nine Months Ended
September 30, September 30,
---------------- -----------------
2002 2001 2002 2001
---- ---- ---- ----
(dollars in millions)
AUTOMOTIVE, COMMUNICATIONS SERVICES, AND OTHER OPERATIONS
Total net sales and revenues $36,657 $36,297 $118,148 $112,192
------ ------ ------- -------
Cost of sales and other expenses
(Notes 10 and 11) 34,868 32,861 107,540 100,537
Selling, general, and administrative
expenses (Note 11) 3,645 4,107 11,153 11,837
------ ------ ------- -------
Total costs and expenses 38,513 36,968 118,693 112,374
------ ------ ------- -------
Interest expense 242 216 706 529
Net expense from transactions with
Financing and Insurance Operations 72 97 208 315
----- ---- ----- ------
Loss before income taxes and
minority interests (2,170) (984) (1,459) (1,026)
Income tax expense/(benefit)
(Note 11) (835) (181) (684) (194)
Equity income/(loss) and
minority interests 88 (1) 179 (150)
----- --- --- ---
Net loss - Automotive,
Communications Services,
and Other Operations $(1,247) $(804) $(596) $(982)
===== === === ===
FINANCING AND INSURANCE OPERATIONS
Total revenues $6,921 $6,178 $19,959 $19,118
----- ----- ------ ------
Interest expense 1,794 1,672 5,210 5,709
Depreciation and amortization
expense 1,395 1,477 4,109 4,429
Operating and other expenses 2,267 1,854 6,231 5,420
Provision for financing and
insurance losses 772 573 2,428 1,705
----- ----- ------ ------
Total costs and expenses 6,228 5,576 17,978 17,263
----- ----- ------ ------
Net income from transactions with
Automotive, Communications
Services, and Other Operations (72) (97) (208) (315)
--- --- ----- -----
Income before income taxes
and minority interests 765 699 2,189 2,170
Income tax expense/(benefit) 284 257 821 782
Equity income/(loss) and
minority interests (38) (6) (56) (60)
--- --- ----- -----
Net income - Financing and
Insurance Operations $443 $436 $1,312 $1,328
=== === ===== =====
The above supplemental consolidating information is explained in Note 1,
"Financial Statement Presentation."
Reference should be made to the notes to consolidated financial statements.
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CONSOLIDATED BALANCE SHEETS
Sept. 30, Sept. 30,
2002 Dec. 31, 2001
GENERAL MOTORS CORPORATION AND SUBSIDIARIES (Unaudited) 2001 (Unaudited)
--------- ---- ---------
(dollars in millions)
ASSETS
Automotive, Communications Services,
and Other Operations
Cash and cash equivalents $14,670 $8,432 $7,899
Marketable securities 1,360 790 829
------ ------ ------
Total cash and marketable securities 16,030 9,222 8,728
Accounts and notes receivable
(less allowances) 5,649 5,406 6,200
Inventories (less allowances) (Note 2) 10,673 10,034 10,508
Equipment on operating leases
(less accumulated depreciation) 4,524 4,524 4,974
Deferred income taxes and other current assets 9,061 7,877 8,751
------ ------ ------
Total current assets 45,937 37,063 39,161
Equity in net assets of
nonconsolidated associates 5,045 4,950 4,913
Property - net 35,071 34,908 34,555
Intangible assets - net 13,796 13,721 7,675
Deferred income taxes 22,884 22,294 15,930
Other assets 14,610 17,274 30,984
------- ------- -------
Total Automotive, Communications Services,
and Other Operations assets 137,343 130,210 133,218
Financing and Insurance Operations
Cash and cash equivalents 7,338 10,123 10,530
Investments in securities 12,828 10,669 9,598
Finance receivables - net 107,808 99,813 90,190
Investment in leases and other receivables 35,964 34,618 36,441
Other assets 46,395 36,979 33,624
Net receivable from Automotive, Communications
Services, and Other Operations 529 1,557 1,243
------- ------- -------
Total Financing and Insurance
Operations assets 210,862 193,759 181,626
------- ------- -------
Total assets $348,205 $323,969 $314,844
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive, Communications Services,
and Other Operations
Accounts payable (principally trade) $19,851 $18,297 $19,335
Loans payable 1,472 2,402 1,744
Accrued expenses 36,817 34,090 35,417
Net payable to Financing and
Insurance Operations 529 1,557 1,243
------ ------ ------
Total current liabilities 58,669 56,346 57,739
Long-term debt 16,794 10,726 9,320
Postretirement benefits other than pensions 34,138 34,515 34,276
Pensions 9,742 10,790 3,443
Other liabilities and deferred income taxes 15,764 13,794 14,183
------- ------- -------
Total Automotive, Communications Services,
and Other Operations liabilities 135,107 126,171 118,961
Financing and Insurance Operations
Accounts payable 8,558 7,900 6,936
Debt 168,265 153,186 144,846
Other liabilities and deferred income taxes 16,326 16,259 14,577
------- ------- -------
Total Financing and Insurance
Operations liabilities 193,149 177,345 166,359
------- ------- -------
Total liabilities 328,256 303,516 285,320
Minority interests 817 746 700
Stockholders' equity
$1-2/3 par value common stock (issued,
561,337,257; 559,044,427;
and 554,439,259 shares) (Note 9) 936 932 924
Class H common stock (issued,
958,121,496; 877,505,382; and
877,032,955 shares) (Notes 6 and 9) 96 88 88
Capital surplus (principally additional
paid-in capital) 21,561 21,519 21,330
Retained earnings 9,291 9,463 9,565
------- ------- -------
Subtotal 31,884 32,002 31,907
Accumulated foreign currency translation
adjustments (3,009) (2,919) (2,825)
Net unrealized loss on derivatives (Note 8) (286) (307) (392)
Net unrealized gains on securities 141 512 179
Minimum pension liability adjustment (9,598) (9,581) (45)
------ ------ ------
Accumulated other comprehensive loss (12,752) (12,295) (3,083)
------ ------ ------
Total stockholders' equity 19,132 19,707 28,824
------- ------- -------
Total liabilities and stockholders'
equity $348,205 $323,969 $314,844
======= ======= =======
Reference should be made to the notes to consolidated financial statements.
- 5 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
-------------------------------
2002 2001
------------------------- ------------------------
Automotive, Financing Automotive, Financing
Comm.Serv. and Comm.Serv. and
and Other Insurance and Other Insurance
---------- --------- ----------- ---------
(dollars in millions)
Net cash provided by operating activities $7,931 $8,946 $5,509 $1,670
Cash flows from investing activities
Expenditures for property (4,920) (70) (6,287) (53)
Investments in marketable securities
- acquisitions (1,391) (33,491) (840) (23,691)
Investments in marketable securities
- liquidations 821 31,636 1,172 23,785
Mortgage loans held for investment - net - (8,812) - 501
Mortgage servicing rights - acquisitions - (1,292) - (1,612)
Mortgage servicing rights - liquidations - 1 - 17
Finance receivables - acquisitions - (181,246) - (166,597)
Finance receivables - liquidations - 87,051 - 103,919
Proceeds from sales of finance receivables - 85,684 - 63,798
Operating leases - acquisitions (4,215) (13,200) (4,480) (10,586)
Operating leases - liquidations 4,017 11,105 4,783 9,239
Investments in companies, net of
cash acquired (156) (150) (679) (446)
Other 672 (169) (146) (391)
----- ------ ----- -----
Net cash used in investing activities (5,172) (22,953) (6,477) (2,117)
----- ------ ----- -----
Cash flows from financing activities
Net (decrease) increase in loans payable (930) 8,437 (464) (19,885)
Long-term debt - borrowings 6,149 19,582 3,990 42,791
Long-term debt - repayments (183) (17,826) (2,130) (13,817)
Repurchases of common and preference stocks (97) - (264) -
Proceeds from issuing common stocks 64 - 91 -
Proceeds from sales of treasury stocks 19 - 222 -
Cash dividends paid to stockholders (887) - (900) -
----- ------ --- -----
Net cash provided by financing activities 4,135 10,193 545 9,089
----- ------ --- -----
Effect of exchange rate changes on cash and
cash equivalents 372 1 (69) (5)
Net transactions with Automotive/
Financing Operations (1,028) 1,028 (728) 728
----- ----- ----- ------
Net increase (decrease) in cash and
cash equivalents 6,238 (2,785) (1,220) 9,365
Cash and cash equivalents at beginning
of the period 8,432 10,123 9,119 1,165
------ ------ ----- ------
Cash and cash equivalents at end
of the period $14,670 $7,338 $7,899 $10,530
====== ===== ===== ======
Reference should be made to the notes to consolidated financial statements.
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GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Financial Statement Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the U.S.
for interim financial information. In the opinion of management, all adjustments
(consisting of only normal recurring items), which are necessary for a fair
presentation have been included. The results for interim periods are not
necessarily indicative of results which may be expected for any other interim
period or for the full year. For further information, refer to the December 31,
2001 consolidated financial statements and notes thereto included in General
Motors Corporation's (the "Corporation", "General Motors", or "GM") 2001 Annual
Report on Form 10-K, and all other GM, Hughes Electronics Corporation (Hughes),
and General Motors Acceptance Corporation (GMAC) filings with the Securities and
Exchange Commission.
GM presents separate supplemental consolidating statements of income and
other financial information for the following businesses: (1) Automotive,
Communications Services, and Other Operations which consists of the design,
manufacturing, and marketing of cars, trucks, locomotives, and heavy-duty
transmissions and related parts and accessories, as well as the operations of
Hughes; and (2) Financing and Insurance Operations which consists primarily of
GMAC, which provides a broad range of financial services, including consumer
vehicle financing, full-service leasing and fleet leasing, dealer financing, car
and truck extended service contracts, residential and commercial mortgage
services, vehicle and homeowners' insurance, and asset-based lending.
Transactions between businesses have been eliminated in the Corporation's
consolidated statements of income. Certain amounts for 2001 were reclassified to
conform with the 2002 classifications.
New Accounting Standards
Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and
Other Intangible Assets," changes the accounting for goodwill and indefinite
lived intangible assets from an amortization method to an impairment-only
approach. Goodwill, including goodwill recorded in past business combinations,
is no longer amortized, but is tested for impairment at least annually at the
reporting unit level. The Corporation implemented SFAS No. 142 on January 1,
2002. GM then completed step one of the transitional impairment test in the
second quarter of 2002. In step one of the two-part transitional impairment
test, GM compared the fair value of each reporting unit (which are different
from the reporting units of GM's wholly owned subsidiaries GMAC and Hughes) with
its respective carrying amount, including goodwill as of January 1, 2002. Since
the fair value of each reporting unit exceeded the respective carrying amount,
goodwill was not considered impaired. Accordingly, completion of step two of the
transitional impairment test is not necessary.
GM's reported net income and earnings per share information exclusive of
amortization expense recognized related to goodwill and amortization of
intangibles with indefinite lives required under previous accounting standards
on an after-tax basis is as follows (dollars in millions except per share
amounts):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2002 2001 2002 2001
---- ---- ---- ----
Reported net income/(loss) $(804) $(368) $716 $346
Add:
Goodwill amortization - 89 - 247
Amortization of intangibles
with indefinite lives - 2 - 6
--- --- --- ---
Adjusted net income/(loss) $(804) $(277) $716 $599
=== === === ===
Basic (losses) earnings per share
attributable to common stocks
EPS attributable
to GM $1-2/3 par value:
Reported $(1.42) $(0.41) $1.65 $1.18
==== ==== ==== ====
Adjusted $(1.42) $(0.32) $1.65 $1.43
==== ==== ==== ====
EPS attributable to GM Class H:
Reported $(0.01) $(0.19) $(0.28) $(0.43)
==== ==== ==== ====
Adjusted $(0.01) $(0.15) $(0.28) $(0.30)
==== ==== ==== ====
(Losses) earnings per share
attributable to common stocks
assuming dilution
EPS attributable to GM $1-2/3 par value:
Reported $(1.42) $(0.41) $1.63 $1.16
==== ==== ==== ====
Adjusted $(1.42) $(0.32) $1.63 $1.41
==== ==== ==== ====
EPS attributable to GM Class H:
Reported $(0.01) $(0.19) $(0.28) $(0.43)
==== ==== ==== ====
Adjusted $(0.01) $(0.15) $(0.28) $(0.30)
==== ==== ==== ====
- 7 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
Note 1. Financial Statement Presentation - (concluded)
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. This statement did not
have a material impact on GM's consolidated financial position or results of
operations.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." This statement eliminates the required classification of gain or
loss on extinguishment of debt as an extraordinary item of income and states
that such gain or loss be evaluated for extraordinary classification under the
criteria of Accounting Principles Board Opinion No. 30, "Reporting Results of
Operations." This statement also requires sale-leaseback accounting for certain
lease modifications that have economic effects that are similar to
sale-leaseback transactions, and makes various other technical corrections to
existing pronouncements. The Corporation is required to implement SFAS No. 145
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 June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This statement nullifies Emerging Issues Task
Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." This statement requires that a liability
for a cost associated with an exit or disposal activity be recognized when the
liability is incurred rather than the date of an entity's commitment to an exit
plan. The Corporation is required to implement SFAS No. 146 on January 1, 2003
for transactions that occur after December 31, 2002. Management does not expect
this statement to have a material impact on GM's consolidated financial position
or results of operations.
Note 2. Inventories
Inventories included the following for Automotive, Communications Services,
and Other Operations (dollars in millions):
Sept. 30, Dec. 31, Sept. 30,
2002 2001 2001
--------- -------- ---------
Productive material, work in process,
and supplies $5,274 $5,069 $5,457
Finished product, service parts, etc. 7,236 6,779 6,898
------- ------- -------
Total inventories at FIFO 12,510 11,848 12,355
Less LIFO allowance 1,837 1,814 1,847
------- ------- -------
Total inventories (less allowances) $10,673 $10,034 $10,508
====== ====== ======
Note 3. Goodwill and Acquired Intangible Assets
The components of the Corporation's acquired intangible assets as of
September 30, 2002 were as follows (dollars in millions):
Gross Carrying Accumulated Net Carrying
Amount Amortization Amount
-------------- ------------ -------------
Amortized intangible assets:
Customer lists and contracts $76 $25 $51
Trademarks and other 108 12 96
Covenants not to compete 18 18 -
--- -- ---
Total $202 $55 $147
=== == ===
Unamortized intangible assets:
License fees - orbital slots $436
===
- 8 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
Note 3. Goodwill and Acquired Intangible Assets (concluded)
Aggregate amortization expense on acquired intangible assets was $11 million
and $20 million for the third quarter and nine months ended September 30, 2002,
respectively. Estimated amortization expense in each of the next five years is
as follows: 2003 - $23 million; 2004 - $18 million; 2005 - $17 million; 2006 -
$17 million; and 2007 - $17 million.
The changes in the carrying amounts of goodwill for the nine months ended
September 30, 2002 were as follows (dollars in millions):
Total
GMNA GME Other (b) Hughes (b) ACO GMAC Total GM
---- ----- --------- ---------- ----- ---- --------
For Nine Months Ended Sept. 30, 2002
Balance as of December 31, 2001 $29 $283 $57 $6,440 $6,809 $3,144 $9,953
Goodwill acquired during the
period - - - - - 65 65
Goodwill written off related
to sale of business units (8) - - - (8) - (8)
Effect of foreign currency
translation - 35 - - 35 24 59
Reclassifications (a) - - - 210 210 - 210
Other - - - 9 9 - 9
-- --- -- ----- ----- ----- ------
Balance as of Sept. 30, 2002 $21 $318 $57 $6,659 $7,055 $3,233 $10,288
== === == ===== ===== ===== ======
(a) In accordance with SFAS No. 142, Hughes completed a review of its intangible
assets and determined that previously recorded intangible assets related to
subscriber base and dealer networks did not meet the contractual legal criteria
or separability criteria as described in SFAS No. 141. As a result, in the first
quarter of 2002, Hughes reclassified $210 million, net of $146 million
accumulated amortization, of previously reported intangible assets to goodwill.
(b) The amount recorded for Hughes excludes GM's purchase accounting adjustments
related to GM's acquisition of Hughes Aircraft Company. The carrying value of
$57 million in goodwill associated with the purchase is reported in the Other
segment.
Note 4. 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 that may result in payments by Hughes to The Boeing
Company that could be material to Hughes. GM has established reserves for
matters in which losses are probable and can be reasonably estimated. Some of
the matters may involve compensatory, punitive, or other treble damage claims,
or demands for recall campaigns, environmental remediation programs, or
sanctions, that if granted, could require the Corporation to pay damages or make
other expenditures in amounts that could not be estimated at September 30, 2002.
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.
In July 2000, GM acquired from Fiat S.p.A. (Fiat) 20% of the common stock of
Fiat Auto Holdings, B.V. (FAH), which is the sole shareholder of Fiat Auto
S.p.A. (Fiat Auto). Beginning January 2004, Fiat has the right to require GM to
purchase Fiat's remaining 80% interest in FAH, at fair market value. This right
is referred to as a "put". 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. That agreement has been made public in a GM filing 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 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 before July 24, 2009; however, if it is exercised, it could have a
material effect on GM at or after the time of exercise.
- 9 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
Note 5. Preferred Securities of Subsidiary Trusts
On April 2, 2001, GM redeemed the Series G Trust's sole assets causing the
Series G Trust to redeem the approximately 5 million outstanding Series G 9.87%
Trust Originated Preferred Securitiessm (TOPrSsm). The Series G TOPrS were
redeemed at a price of $25 per share plus accrued and unpaid dividends of $0.42
per share. Also on April 2, 2001, GM redeemed the approximately 5 million
outstanding Series G depositary shares, each of which represents a one-fourth
interest in a GM Series G 9.12% Preference Share, at a price of $25 per share
plus accrued and unpaid dividends of $0.59 per share. The securities together
had a total face value of approximately $252 million.
Note 6. America Online's Investment in GM Preference Stock
On June 24, 2002, approximately 2.7 million shares of GM Series H 6.25%
Automatically Convertible Preference Stock held by AOL Time Warner (AOL)
mandatorily converted into approximately 80 million shares of GM Class H common
stock as provided for pursuant to the terms of the preference stock. GM
originally issued the shares of preference stock to AOL in 1999 in connection
with AOL's $1.5 billion investment in, and its strategic alliance with, Hughes.
The preference stock accrued quarterly dividends at a rate of 6.25% per year. 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
preference stock. Dividends on the Hughes Series A Preferred Stock were payable
to GM quarterly at an annual rate of 6.25%. The underwriting discount on the
Hughes Series A Preferred Stock was amortized over three years.
The original terms of Hughes Series A Preferred Stock required Hughes to
redeem the Series A preferred stock through a cash payment to GM immediately
upon the conversion of the preference stock held by AOL into shares of GM Class
H common stock. Simultaneous with GM's receipt of the cash redemption proceeds,
GM was committed to make a capital contribution to Hughes of the same amount.
In connection with this capital contribution, the denominator of the fraction
used in the computation of the Available Separate Consolidated Net Income
(ASCNI) of Hughes was to be increased by the corresponding number of shares of
GM Class H common stock issued. Accordingly, upon conversion of the GM Series H
6.25% Automatically Convertible Preference Stock into GM Class H common stock,
both the numerator and denominator used in the computation of ASCNI increased by
the amount of the GM Class H common stock issued.
On June 24, 2002, prior to the conversion of the preference stock on such
date, and prior to the time that the Hughes Series A Preferred Stock would have
been redeemed on such date, GM, as approved by the GM and Hughes boards of
directors, contributed the Hughes Series A Preferred Stock to Hughes. In
connection with the contribution of the Hughes Series A Preferred Stock to
Hughes, Hughes issued to GM shares of Hughes Series B Convertible Preferred
Stock. The Hughes Series B Convertible Preferred Stock does not accrue dividends
and is not redeemable. The Hughes Series B Convertible Preferred Stock does not
affect the net income of Hughes or the allocation of the earnings per share and
amounts available for the payment of dividends on the GM Class H common stock.
This contribution by GM had the same effect with respect to the numerator and
the denominator of the fraction used in the computation of ASCNI of Hughes that
a cash redemption by Hughes of its Series A preferred stock and a cash
contribution by GM of the redemption amount would have had.
The Hughes Series B Convertible Preferred Stock is expected to be
contributed to Hughes just prior to the Hughes/EchoStar merger. If the
Hughes/EchoStar merger does not occur, all or any of the Hughes Series B
Convertible Preferred Stock may be converted to Hughes Class B common stock at
the option of GM any time after June 24, 2003.
Note 7. Comprehensive Income
GM's total comprehensive income (loss) was as follows (dollars in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2002 2001 2002 2001
---- ---- ---- ----
Net income (loss) $(804) $(368) $716 $346
Other comprehensive income (loss) (478) (392) (457) (1,117)
------ --- ------ -----
Total $(1,282) $(760) $259 $(771)
===== === === ===
-10-
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
Note 8. Derivative Financial Instruments
Effective January 1, 2001, GM adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", as amended and interpreted,
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. As a result of the adoption of this standard as of January
1, 2001, GM recorded a transition adjustment representing a one-time after-tax
charge to income totaling $23 million, as well as an after-tax unrealized gain
of $4 million to other comprehensive income.
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.
Note 9. 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 effect of potential common shares, unless
the inclusion of the potential common shares would have an antidilutive effect.
The attribution of earnings to each class of GM common stock was as follows
(dollars in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2002 2001 2002 2001
---- ---- ---- ----
Earnings attributable to common stocks
(Losses) earnings attributable to
GM $1-2/3 par value $(795) $(223) $922 $647
(Losses) attributable to GM Class H $(9) $(170) $(253) $(377)
Earnings attributable to GM $1-2/3 par value common stock for the period
represent the earnings attributable to all GM common stocks, reduced by the
ASCNI of Hughes for the respective period.
In 2001 and prior years, 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). Beginning in 2002, losses attributable to GM Class H common stock were
not adjusted for the effects of GM purchase accounting, mentioned above, because
the related goodwill is no longer being amortized in accordance with SFAS No.
142, "Goodwill and Other Intangible Assets."
The calculated losses used for computation of the ASCNI of Hughes are then
multiplied by a fraction, the numerator of which is equal to the
weighted-average number of shares of GM Class H common stock outstanding (958
million and 877 million during the three months ended September 30, 2002 and
2001, respectively, and 907 million and 876 million during the nine months ended
September 30, 2002 and 2001, 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 1.4 billion and 1.3 billion for the
third quarters of 2002 and 2001, respectively, and 1.3 billion for the nine
month periods ended September 30, 2002 and 2001.
The reconciliation of the amounts used in the basic and diluted earnings per
share computations was as follows (dollars in millions except per share
amounts):
- 11 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
Note 9. Earnings Per Share Attributable to Common Stocks (concluded)
$1-2/3 Par Value Common Stock Class H Common Stock
----------------------------- ---------------------------
Per Share Per Share
Income Shares Amount ASCNI Shares Amount
------ ------ --------- ----- ------ ---------
Three Months Ended September 30, 2002
Net loss $(795) $(9)
Less:Dividends on preference stocks - -
--- --
Basic EPS
Loss attributable to common stocks (795) 560 $(1.42) (9) 958 $(0.01)
==== ===
Effect of Dilutive Securities
Assumed exercise of dilutive
stock options - - - -
--- --- -- ---
Diluted EPS
Adjusted loss attributable to
common stocks $(795) 560 $(1.42) $(9) 958 $(0.01)
=== === ==== = === ====
Three Months Ended September 30, 2001
Net loss $(215) $(153)
Less:Dividends on preference stocks 8 17
--- ---
Basic EPS
Loss attributable to common stocks (223) 551 $(0.41) (170) 877 $(0.19)
==== ===
Effect of Dilutive Securities
Assumed exercise of dilutive
stock options - - - -
--- --- --- ---
Diluted EPS
Adjusted loss attributable to
common stocks $(223) 551 $(0.41) $(170) 877 $(0.19)
=== === ==== === === ====
Nine Months Ended September 30, 2002
Net income (loss) $937 $(221)
Less:Dividends on preference stocks 15 32
--- ---
Basic EPS
Income (loss) attributable to
common stocks 922 560 $1.65 (253) 907 $(0.28)
====
Effect of Dilutive Securities
Assumed exercise of dilutive
stock options - 5 - -
--- --- --- ---
Diluted EPS
Adjusted income (loss) attributable to
to common stocks $922 565 $1.63 $(253) 907 $(0.28)
=== === ==== === === ====
Nine Months Ended September 30, 2001
Net income (loss) $674 $(328)
Less:Dividends on preference stocks 27 49
--- ---
Basic EPS
Income (loss) attributable to
common stocks 647 549 $1.18 (377) 876 $(0.43)
==== ===
Effect of Dilutive Securities
Assumed exercise of dilutive
stock options - 7 - -
--- --- --- ---
Diluted EPS
Adjusted income (loss) attributable
to common stocks $647 556 $1.16 $(377) 876 $(0.43)
=== === ==== === === ====
Certain stock options were not included in the computation of diluted
earnings per share for the periods presented since the options' underlying
exercise prices were greater than the average market prices of the GM $1-2/3 par
value common stock and GM Class H common stock. In addition, for periods in
which there was an adjusted loss attributable to common stocks, options to
purchase shares of GM $1-2/3 par value common stock and GM Class H common stock
with underlying exercise prices less than the average market prices were
outstanding, but were excluded from the calculations of diluted loss per share,
as inclusion of these securities would have been antidilutive to the net loss
per share.
- 12 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
Note 10. Depreciation and Amortization
Depreciation and amortization included primarily in cost of sales and other
expenses for Automotive, Communications Services, and Other Operations was as
follows (dollars in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2002 2001 2002 2001
---- ---- ---- ----
Depreciation $1,166 $1,128 $3,441 $3,311
Amortization of special tools 645 609 1,896 1,747
Amortization of intangible assets 3 75 6 218
----- ----- ----- -----
Total $1,814 $1,812 $5,343 $5,276
===== ===== ===== =====
Note 11. European Matters
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 in 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. GM recorded, in cost of sales and other expenses
in the GME segment, an after-tax charge of $55 million ($0.10 per share of GM
$1-2/3 par value common stock) in the first nine months of 2002 for those member
states that have passed national laws through September 30, 2002. Management is
assessing the impact of this potential legislation on GM's financial position
and results of operations, and may include charges to earnings in the fourth
quarter of 2002 and in future periods as additional national laws are passed.
During 2001, GM Europe (GME) announced its plan 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 include, among other things, reducing GME's
manufacturing capacity, restructuring the dealer network in Germany, and
redefining the way vehicles are marketed. These initiatives resulted in a
decrease to GM's pre-tax earnings and were recorded in the GME segment in the
first quarter of 2002 as follows: (1) $298 million related to employee
separation costs for approximately 4,000 employees; (2) $235 million related to
asset writedowns; and (3) $108 million related to the dealer network
restructuring in Germany. The net income impact of these charges in the first
quarter of 2002 was $407 million, or $0.72 diluted earnings per share of GM
$1-2/3 par value common stock ($553 million included in cost of sales and other
expenses; $88 million included in selling, general, and administrative expenses;
and $(234) million included in income tax expense).
In July 2000, GM acquired 20% of the common stock of Fiat Auto Holdings, B.V.
(FAH), the entity which is the sole shareholder of Fiat Auto for $2.4 billion.
Subsequent to that acquisition, the European market for new vehicles has
experienced a continued decrease in volumes, and manufacturers have experienced
increased pricing and general competitive pressures. Those market conditions and
other factors have led to deterioration in the performance of Fiat Auto.
Accordingly, GM commenced a review of the appropriate carrying value of GM's
investment in FAH. The review of the carrying value of GM's investment in FAH
was completed during the third quarter of 2002 and resulted in a non-cash charge
of $2.2 billion ($1.4 billion after tax), recorded in cost of sales and other
expenses in the ACO Other segment. This write-down brings the carrying value of
GM's investment in FAH from $2.4 billion to $220 million. The carrying value is
based on GM's 20% interest in the estimated market value of FAH equity, which
comprises FAH's ownership of Fiat Auto, including a 50% stake in the purchasing
and powertrain joint ventures between GM and Fiat Auto.
- 13 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
Note 12. Segment Reporting
GM's reportable operating segments within its Automotive, Communications
Services, and Other Operations (ACO) business consist of General Motors
Automotive (GMA) (which is comprised of four regions: GM North America (GMNA),
GM Europe (GME), GM Latin America/Africa/Mid-East (GMLAAM), and GM Asia Pacific
(GMAP)), Hughes, and Other. GM's reportable operating segments within its
Financing and Insurance Operations (FIO) business consist of GMAC and Other.
Selected information regarding GM's reportable operating segments were as
follows (dollars in millions):
Total Other Total
GMNA GME GMLAAM GMAP GMA Hughes Other ACO GMAC Financing FIO
------ ----- ------ ---- ----- ------ ----- ------- ---- --------- -------
For the Three Months Ended
September 30, 2002
Net sales and revenues:
External customers $26,846 $5,326 $1,064 $1,002 $34,238 $2,174 $245 $36,657 $6,799 $122 $6,921
Intersegment (491) 238 97 156 - 4 (4) - - - -
------ ----- ----- ----- ------ ----- --- ------ ----- --- -----
Total net sales and
revenues $26,355 $5,564 $1,161 $1,158 $34,238 $2,178 $241 $36,657 $6,799 $122 $6,921
====== ===== ===== ===== ====== ===== === ====== ===== === =====
Interest income (a) $165 $80 $7 $4 $256 $5 $(108) $153 $852 $(42) $810
Interest expense $210 $92 $78 $2 $382 $76 $(216) $242 $1,707 $87 $1,794
Net income (loss) $394 $(180) $(61) $76 $229 $(13) $(1,463)(d) $(1,247) $476 $(33) $443
Segment assets $99,157 $18,815 $3,104 $1,265 $122,341 $18,708(c) $(3,706) $137,343 $210,988 $(126) $210,862
For the Three Months Ended
September 30, 2001
Net sales and revenues:
External customers $26,635 $4,987 $1,258 $818 $33,698 $2,108 $491 $36,297 $6,116 $62 $6,178
Intersegment (366) 130 54 182 - 5 (5) - - - -
------ ----- ----- ----- ------ ----- --- ------ ----- -- -----
Total net sales and
revenues $26,269 $5,117 $1,312 $1,000 $33,698 $2,113 $486 $36,297 $6,116 $62 $6,178
====== ===== ===== ===== ====== ===== === ====== ===== == =====
Interest income (a) $303 $95 $(4) $4 $398 $9 $(261) $146 $602 $(89) $513
Interest expense $311 $104 $27 $2 $444 $41 $(269) $216 $1,606 $66 $1,672
Net income (loss) $251 $(287) $(6) $60 $18 $(227)(b) $(595) $(804) $437 $(1) $436
Segment assets $91,767 $18,316 $4,139 $870 $115,092 $19,068(c) $(942) $133,218 $180,384 $1,242 $181,626
(a) Interest income is included in net sales and revenues from external
customers.
(b) The amount reported for Hughes excludes amortization of GM
purchase accounting adjustments related to GM's acquisition of Hughes
Aircraft Company (HAC) of $1 million for 2001. There is no comparable
adjustment in 2002 because the related goodwill is no longer being
amortized effective January 1, 2002 in accordance with SFAS No. 142,
"Goodwill and Other Intangible Assets."
(c) The amount reported for Hughes excludes the unamortized GM purchase
accounting adjustments of approximately $57 million at September 30, 2002
and 2001 related to GM's acquisition of HAC.
(d) Net income (loss) for ACO Other includes a non-cash charge of $1.4 billion
after tax related to the write-down of GM's investment in FAH. See Note 11
in the Notes to Consolidated Financial Statements.
- 14 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
Note 12. Segment Reporting (concluded)
Total Other Total
GMNA GME GMLAAM GMAP GMA Hughes Other ACO GMAC Financing FIO
------ ----- ------ ---- ----- ------ ----- ------- ---- --------- -------
For the Nine Months Ended
September 30, 2002
Net sales and revenues:
External customers $86,928 $16,451 $3,547 $2,915 $109,841 $6,418 $1,889 $118,148 $19,727 $232 $19,959
Intersegment (1,348) 698 221 429 - 13 (13) - - - -
------ ------ ----- ----- ------- ----- ----- ------- ------ --- ------
Total net sales and
revenues $85,580 $17,149 $3,768 $3,344 $109,841 $6,431 $1,876 $118,148 $19,727 $232 $19,959
====== ====== ===== ===== ======= ===== ===== ======= ====== === ======
Interest income (a) $415 $211 $19 $9 $654 $17 $(297) $374 $2,291 $(171) $2,120
Interest expense $591 $213 $136 $6 $946 $275 $(515) $706 $5,018 $192 $5,210
Net income (loss) $2,267 $(882) $(174) $122 $1,333 $(325) $(1,604)(c) $(596) $1,346 $(34) $1,312
For the Nine Months Ended
September 30, 2001
Net sales and revenues:
External customers $80,824 $16,974 $4,311 $2,583 $104,692 $6,016 $1,484 $112,192 $18,907 $211 $19,118
Intersegment (1,332) 642 135 555 - 17 (17) - - - -
------ ------ ----- ----- ------- ----- ----- ------- ------ --- ------
Total net sales and
revenues $79,492 $17,616 $4,446 $3,138 $104,692 $6,033 $1,467 $112,192 $18,907 $211 $19,118
====== ====== ===== ===== ======= ===== ===== ======= ====== === ======
Interest income (a) $865 $279 $(4) $12 $1,152 $52 $(736) $468 $1,905 $(319) $1,586
Interest expense $1,016 $243 $66 $5 $1,330 $134 $(935) $529 $5,525 $184 $5,709
Net income (loss) $878 $(525) $30 $(82) $301 $(487)(b) $(796) $(982) $1,351 $(23) $1,328
(a) Interest income is included in net sales and revenues from external
customers.
(b) The amount reported for Hughes excludes amortization of GM
purchase accounting adjustments related to GM's acquisition of HAC of
$3 million for 2001.
(c) Net income (loss) for ACO Other includes a non-cash charge of $1.4 billion
after tax related to the write-down of GM's investment in FAH. See Note 11
in the Notes to Consolidated Financial Statements.
- 15 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - concluded
(Unaudited)
Note 13. Subsequent Event
On October 17, 2002, GM announced that the transfer of certain assets of
Daewoo Motor Company had been completed, leading to the creation GM Daewoo Auto
& Technology Company (GM Daewoo). The asset transfer marks the beginning of GM
Daewoo, following definitive agreements signed April 30, 2002, and the approval
of the Reorganization Plan of Daewoo Motor Company by the Incheon Court on
September 30, 2002. GM, Suzuki Motor Corporation, Shanghai Automotive Industry
Corporation (SAIC), and creditors of Daewoo Motor Company will be the
stockholders in GM Daewoo.
GM Daewoo will own and operate three manufacturing plants and nine
subsidiaries in South Korea, Europe, and Puerto Rico. Included in GM Daewoo are
design, engineering, research and development, sales, marketing, and
administration assets located in Bupyung, South Korea.
Daewoo Motors' manufacturing facility in Bupyung, South Korea, will be formed
into a new company, Daewoo Incheon Motor Company, and will continue to supply GM
Daewoo with vehicles, engines, transmissions and components for at least six
years. The agreements give GM Daewoo an option to acquire this company any time
within the next six years.
As of October 28, 2002, GM invested $251 million of capital and it is
intended that GM will own 42.1 percent of GM Daewoo and Daewoo's creditors will
own 33 percent. Suzuki and SAIC will have a 14.9 percent and 10 percent equity
interest, respectively, in GM Daewoo. GM will account for this investment under
the equity method of accounting.
* * * * * *
- 16 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following management's discussion and analysis of financial condition and
results of operations (MD&A) should be read in conjunction with the December 31,
2001 consolidated financial statements and notes thereto along with the MD&A
included in General Motors Corporation's (the "Corporation", "General Motors",
or "GM") 2001 Annual Report on Form 10-K, and all other GM, Hughes Electronics
Corporation (Hughes), and General Motors Acceptance Corporation (GMAC) filings
with the Securities and Exchange Commission. All earnings per share amounts
included in the MD&A are reported as diluted.
GM presents separate financial information for the following businesses:
Automotive, Communications Services, and Other Operations (ACO) and Financing
and Insurance Operations.
GM's reportable operating segments within its 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
business. 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.
- 17 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
RESULTS OF OPERATIONS
For the third quarter of 2002, the Corporation's consolidated net loss was
$804 million, or $(1.42) per share of GM $1-2/3 par value common stock, compared
with a net loss of $368 million, or $(0.41) per share of GM $1-2/3 par value
common stock for the third quarter of 2001. GM's consolidated net income for the
nine months ended September 30, 2002 was $716 million, or $1.63 per share of GM
$1-2/3 par value common stock, compared with $346 million, or $1.16 per share of
GM $1-2/3 par value common stock for the nine months ended September 30, 2001.
The consolidated net income (loss) included special items on an after-tax basis
as follows:
List of Special Items - After Tax
(dollars in millions)
Total Total Other Total
GMNA GME GMLAAM GMAP GMA Hughes Other ACO GMAC Financing GM
------ ----- ------ ---- ----- ------ ----- ------- ---- --------- -------
For the Three Months Ended
September 30, 2002
Reported Net Income (Loss) $394 $(180) $(61) $76 $229 $(13) $(1,463) $(1,247) $476 $(33) $(804)
Write-down of Fiat
Investment (A) - - - - - - 1,371 1,371 - - 1,371
GMNA Production
Footprint (B) 116 - - - 116 - - 116 - - 116
Hughes Sale of Equity
Interests (C) - - - - - (68) - (68) - - (68)
--- --- -- -- --- -- -- --- --- -- ---
Adjusted Income (Loss) $510 $(180) $(61) $76 $345 $(81) $(92) $172 $476 $(33) $615
=== === == == === == == === === == ===
For the Three Months Ended
September 30, 2001
Reported Net Income (Loss) $251 $(287) $(6) $60 $18 $(227) $(595) $(804) $437 $(1) $(368)
Ste. Therese Charge (I) 194 - - - 194 - - 194 - - 194
Raytheon Settlement (J) - - - - - - 474 474 - - 474
Gain on Sale of Thomson (K) - - - - - (67) - (67) - - (67)
SkyPerfecTV! Writedown (L) - - - - - 133 - 133 - - 133
Severance Charge (M) - - - - - 40 - 40 - - 40
DIRECTV Japan Adjustment(N) - - - - - (21) - (21) - - (21)
--- --- -- -- --- --- --- -- -- -- --
Adjusted Income (Loss) $445 $(287) $(6) $60 $212 $(142) $(121) $(51) $437 $(1) $385
=== === = == === === === == === = ===
See Footnotes on page 20.
- 18 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
List of Special Items - After Tax - concluded
(dollars in millions)
Total Total Other Total
GMNA GME GMLAAM GMAP GMA Hughes Other ACO GMAC Financing GM
------ ----- ------ ---- ----- ------ ----- ------- ---- --------- -------
For the Nine Months Ended
September 30, 2002
Reported Net Income
(Loss) $2,267 $(882) $(174) $122 $1,333 $(325) $(1,604) $(596) $1,346 $(34) $716
Write-down of Fiat
Investment (A) - - - - - - 1,371 1,371 - - 1,371
GMNA Production
Footprint (B) 116 - - - 116 - - 116 - - 116
Hughes Sale of Equity
Interests (C) - - - - - (68) - (68) - - (68)
GME End of Life Vehicle
Charge (D) - 55 - - 55 - - 55 - - 55
GME Restructuring Charge(E) - 407 - - 407 - - 407 - - 407
Hughes Space Shuttle
Settlement (F) - - - - - (59) - (59) - - (59)
Hughes GECC Contractual
Dispute (G) - - - - - 51 - 51 - - 51
Hughes Loan Guarantee
Charge (H) - - - - - 18 - 18 - - 18
----- --- --- --- ----- --- --- ----- ----- -- -----
Adjusted Income (Loss) $2,383 $(420) $(174) $122 $1,911 $(383) $(233) $1,295 $1,346 $(34) $2,607
===== === === === ===== === === ===== ===== == =====
For the Nine Months Ended
September 30, 2001
Reported Net Income (Loss) $878 $(525) $30 $(82) $301 $(487) $(796) $(982) $1,351 $(23) $346
Ste. Therese Charge (I) 194 - - - 194 - - 194 - - 194
Raytheon Settlement (J) - - - - - - 474 474 - - 474
Gain on Sale of Thomson (K) - - - - - (67) - (67) - - (67)
SkyPerfecTV! Writedown (L) - - - - - 133 - 133 - - 133
Severance Charge (M) - - - - - 40 - 40 - - 40
DIRECTV Japan Adjustment(N) - - - - - (21) - (21) - - (21)
Isuzu Restructuring (O) - - - 133 133 - - 133 - - 133
SFAS No. 133 Adjustment (P) 14 (2) 1 1 14 8 - 22 (34) - (12)
----- --- -- --- --- --- --- -- ----- -- -----
Adjusted Income (Loss) $1,086 $(527) $31 $52 $642 $(394) $(322) $(74) $1,317 $(23) $1,220
===== === == == === === === == ===== == =====
See Footnotes on page 20.
- 19 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Footnotes:
(A) The Write-down of Fiat Investment relates to the completion of the
previously announced impairment study of the carrying value of Fiat Auto
Holdings, B.V. This non-cash charge reduced the value of the Fiat
investment from $2.4 billion to $220 million. See Note 11 in the Notes to
Consolidated Financial Statements.
(B) The GMNA Production Footprint charge primarily relates to costs associated
with the transfer of commercial truck production from Janesville,
Wisconsin, to Flint, Michigan.
(C) The Hughes Sale of Equity Interests relates primarily to a gain on the sale
of 8.8 million shares of Thomson Multimedia common stock.
(D) The GME End of Life Vehicle Charge relates to the European Union's
directive requiring member states to enact legislation regarding
end-of-life vehicles and the responsibility of manufacturers for
dismantling and recycling vehicles they have sold. This charge of $55
million relates to those member states that have passed national laws by
June 30, 2002. See Note 11 in the Notes to Consolidated Financial
Statements.
(E) The GME Restructuring Charge relates to the initiative implemented in the
first quarter of 2002 to improve the competitiveness of GM's automotive
operations in Europe. See Note 11 in the Notes to Consolidated Financial
Statements.
(F) The Space Shuttle Settlement relates to the favorable resolution of a
lawsuit that was filed against the U.S. government on March 22, 1991, based
upon the National Aeronautics and Space Administration's (NASA) breach of
contract to launch ten satellites on the Space Shuttle.
(G) The GECC Contractual Dispute relates to an expected loss associated with a
contractual dispute with General Electric Capital Corporation.
(H) The Loan Guarantee Charge relates to a loan guarantee for a Hughes Network
Systems' affiliate in India.
(I) The Ste. Therese Charge relates to the closing of the Ste. Therese, Quebec
assembly plant.
(J) The Raytheon Settlement relates to Hughes' settlement with the Raytheon
Company of a purchase price adjustment related to Raytheon's 1997 merger
with Hughes Defense.
(K) The Gain on Sale of Thomson relates to Hughes' sale of 4.1 million shares
of Thomson Multimedia common stock.
(L) The SkyPerfecTV! Writedown relates to Hughes' non-cash charge from the
revaluation of its investment.
(M) The Severance Charge relates to Hughes' 10% company-wide workforce
reduction in the U.S.
(N) The DirecTV Japan Adjustment relates to a favorable adjustment to the
expected costs associated with the shutdown of Hughes' DirecTV Japan
business.
(O) The Isuzu Restructuring charges include General Motors' portion of
severance payments and asset impairments that were part of the second
quarter 2001 restructuring of its affiliate Isuzu Motors Ltd.
(P) The SFAS No. 133 Adjustment represents the net impact during the first
quarter 2001 from initially adopting SFAS No. 133, Accounting for
Derivatives and Hedging Activities. See Note 8 in the Notes to Consolidated
Financial Statements.
- 20 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Vehicle Unit Sales (1)
Three Months Ended September 30,
------------------------------------------------------
2002 2001
------------------------- -------------------------
GM as GM as
a % of a % of
Industry GM Industry Industry GM Industry
-------- --- -------- -------- --- --------
(units in thousands)
GMNA
United States
Cars 2,181 548 25.1% 2,042 544 26.6%
Trucks 2,357 723 30.6% 2,124 608 28.6%
----- --- ----- ------
Total United States 4,538 1,271 28.0% 4,166 1,152 27.7%
Canada, Mexico, and
Other 727 183 25.2% 683 166 24.3%
--- --- ------ ------
Total GMNA 5,265 1,454 27.6% 4,849 1,318 27.2%
GME 4,527 387 8.6% 4,634 418 9.0%
GMLAAM 932 169 18.2% 1,006 159 15.8%
GMAP 3,652 171 4.7% 3,257 137 4.2%
----- --- ------- ------
Total Worldwide 14,376 2,181 15.2% 13,746 2,032 14.8%
====== ===== ====== =====
Nine Months Ended September 30,
------------------------------------------------------
2002 2001
------------------------- -------------------------
GM as GM as
a % of a % of
Industry GM Industry Industry GM Industry
-------- --- -------- -------- --- --------
(units in thousands)
GMNA
United States
Cars 6,325 1,608 25.4% 6,455 1,757 27.2%
Trucks 6,790 2,077 30.6% 6,582 1,866 28.4%
----- ----- ------- -----
Total United States 13,115 3,685 28.1% 13,037 3,623 27.8%
Canada, Mexico, and
Other 2,223 572 25.7% 2,047 514 25.1%
------- ----- ------- ------
Total GMNA 15,338 4,257 27.8% 15,084 4,137 27.4%
GME 14,645 1,267 8.7% 15,265 1,421 9.3%
GMLAAM 2,769 483 17.4% 2,989 498 16.7%
GMAP 10,808 449 4.2% 9,958 387 3.9%
------ ------ ------- ------
Total Worldwide 43,560 6,456 14.8% 43,296 6,443 14.9%
====== ===== ====== =====
Wholesale Sales
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2002 2001 2002 2001
------- ------- ------ -------
(units in thousands)
GMNA
Cars 564 594 1,880 1,843
Trucks 709 662 2,312 2,027
----- ----- ----- -----
Total GMNA 1,273 1,256 4,192 3,870
----- ----- ----- -----
GME
Cars 341 375 1,154 1,289
Trucks 23 21 71 70
--- --- ----- -----
Total GME 364 396 1,225 1,359
--- --- ----- -----
GMLAAM
Cars 116 106 339 344
Trucks 46 48 137 156
---- --- --- ---
Total GMLAAM 162 154 476 500
--- --- --- ---
GMAP
Cars 50 50 144 154
Trucks 69 71 169 206
--- --- --- ---
Total GMAP 119 121 313 360
--- --- --- ---
Total Worldwide 1,918 1,927 6,206 6,089
===== ===== ===== =====
(1) Consistent with industry practice, vehicle unit sales information employs
estimates of sales in certain countries where public reporting is not legally
required or otherwise available on a consistent basis.
- 21 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
GMA Financial Review
GMA's income and net margin, adjusted to exclude special items (adjusted
income and margin), was $345 million and 1.0% on net sales and revenues of $34.2
billion for the third quarter of 2002. This compares with income of $212 million
and a net margin of 0.6% on net sales and revenues of $33.7 billion for the
prior year quarter. The increase in adjusted third quarter income and net
sales and revenues was primarily due to favorable mix, material cost savings,
and structural cost reductions, partially offset by pricing pressures in North
America. These factors, as well as an increase in wholesale volumes,
contributed to adjusted income and margin for the nine months ended September
30, 2002 of $1.9 billion and 1.7% on net sales and revenues of $109.8 billion,
compared with income of $642 million and net margin of 0.6% on net sales and
revenues of $104.7 billion for the prior year nine month period.
GMNA's adjusted income was $510 million for the third quarter of 2002,
compared with adjusted income of $445 million for the prior year quarter.
Adjusted income for the nine months ended September 30, 2002, was $2.4 billion
compared with adjusted income of $1.1 billion for the prior nine month period.
The increase in GMNA's third quarter and year-to-date 2002 income was primarily
the result of higher wholesale sales volumes, favorable mix, material costs
savings, and structural cost reductions. These favorable conditions more than
offset pricing pressures and increased OPEB and pension costs. Net price, which
comprehends the percent increase/(decrease) a retailer/distributor pays in the
current period over the price paid in the previous year's period for a similar
vehicle, was unfavorable for the quarter at (2.2)% year-over-year.
GME's loss was $180 million for the third quarter of 2002, compared with a
loss of $287 million for the prior year quarter. The decrease in third quarter
adjusted loss was primarily due to material, structural, and other cost
improvements. This was partially offset by a decrease in wholesale sales volumes
driven by a weak European industry and continuing competitive pricing pressures.
These factors, as well as reduced sales of the Vectra due to the changeover to
the new model contributed to an adjusted loss of $420 million for the nine
months ended September 30, 2002, compared to an adjusted loss of $527 million
for the prior year nine month period.
GMLAAM's loss was $61 million for the third quarter of 2002, compared with a
loss of $6 million for the prior year quarter. Losses for the nine months ended
September 30, 2002 totaled $174 million, compared to adjusted income of $31
million for the prior year nine month period. The decrease in third quarter and
year-to-date 2002 earnings was primarily due to political unrest and economic
uncertainty in Argentina, Brazil, and Venezuela, which have caused a significant
deterioration to the 2002 industry outlook for the region.
GMAP's income for the third quarter of 2002 was $76 million, compared to
income of $60 million for the prior year quarter. Income for the nine months
ended September 30, 2002, was $122 million compared to an adjusted income of $52
million for the prior year nine month period. The increase in third quarter and
year-to-date 2002 earnings was primarily due to equity income improvements from
several joint ventures in the region, led by significantly improved results at
the GM-Shanghai joint venture. These improvements were partially offset by
decreased wholesales sales volumes, slightly unfavorable pricing, and increases
in structural costs.
Hughes Financial Review
Total net sales and revenues increased to $2.2 billion and $6.5 billion for
the third quarter and first nine months of 2002, respectively, compared with
$2.1 billion and $6.0 billion in the comparable periods in 2001. The increase in
third quarter and year-to-date net sales and revenues resulted primarily from
increased revenues at DIRECTV U.S. due to continued subscriber growth. The
increased revenues at DIRECTV U.S. were partially offset by a decrease in
revenues at Hughes Network Systems, which was principally due to lower sales
resulting from the substantial completion of two contracts in late 2001.
PanAmSat also reported a decrease in revenues due to a large sales-type lease
transaction executed during the third quarter of 2001 for which there was no
comparable transaction in 2002. Hughes' adjusted loss was $81 million for the
third quarter of 2002 compared with a loss of $142 million in the prior year
period. Adjsuted losses for the nine months ended September 30, 2002 totaled
$383 million compared to adjusted losses of $394 million for the first nine
months of 2001. The decrease in quarterly and year-to-date adjusted losses was
primarily due to additional gross profits gained from the DIRECTV U.S. revenue
growth discussed above, lower expenses resulting from cost saving initiatives,
and the discontinuation of the minority interest adjustment in 2001 related to
DIRECTV Latin America, due to the accumulation of operating losses in excess of
the minority investors investment. These favorable factors were partially offset
by a decrease in interest income due to lower average cash and cash equivalent
balances in the current year, an increase in interest expense which included a
$74 million charge in 2002 for losses associated with the final settlement of a
contractual dispute with General Electric Capital Corporation, and a decrease
in income tax benefit resulting from lower pre-tax losses recorded in the first
nine months of 2002.
- 22 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
GMAC Financial Review
GMAC's income was $476 million on net sales and revenues of $6.8 billion for
the third quarter of 2002, compared with $437 million on net sales and revenues
of $6.1 billion for the prior year quarter. Income for the first nine months of
2002, was $1.3 billion on net sales and revenues of $19.7 billion, compared with
adjusted income of $1.3 billion on net sales and revenues of $18.9 billion for
the prior year period (dollars in millions).
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2002 2001 2002 2001
------ ------ ------ ------
Automotive and other
financing operations $303 $310 $904 $961
Insurance operations 20 49 83 132
Mortgage operations 153 78 359 224
--- --- ----- -----
Adjusted consolidated
income $476 $437 $1,346 $1,317
=== === ===== =====
Income from automotive and other financing operations totaled $303 million
for the third quarter of 2002, compared with $310 million for the prior year
quarter. For the nine months ended September 30, 2002, income from automotive
and other financing operations totaled $904 million compared to $961 million for
the prior year period. The decrease in income reflects higher credit losses
which more than offset the positive effect of higher retail asset levels in
North America. Income from insurance operations totaled $20 million for the
third quarter of 2002, compared with $49 million for the prior year quarter. For
the nine months ended September 30, 2002, income from insurance operations
totaled $83 million compared to $132 million for the prior year period. The
decrease in income was attributable to securities with losses in value
determined to be other than temporary primarily due to the prolonged decline in
equity markets. Income from mortgage operations totaled $153 million for the
third quarter of 2002, compared with $78 million for the prior year quarter. For
the nine months ended September 30, 2002, income from mortgage operations
totaled $359 million compared to $224 million for the prior year period. The
increase reflects increased production volumes and higher servicing fees. The
results also reflect an improvement in hedge performance related to mortgage
servicing rights.
Investment in Fiat Auto Holdings
In July 2000, GM acquired 20% of the common stock of FAH, the entity which is
the sole shareholder of Fiat Auto for $2.4 billion. Subsequent to that
acquisition, the European market for new vehicles has experienced a continued
decrease in volumes, and manufacturers have experienced increased pricing and
general competitive pressures. Those market conditions and other factors have
led to deterioration in the performance of Fiat Auto. Accordingly, GM commenced
a review of the appropriate carrying value of GM's investment in FAH. The review
of the carrying value of GM's investment in FAH was completed during the third
quarter of 2002 and resulted in a non-cash charge of $2.2 billion ($1.4 billion
after tax). This write-down brings the carrying value of GM's investment in FAH
from $2.4 billion to $220 million. The carrying value is based on GM's 20%
interest in the estimated market value of FAH equity, which includes FAH's 50%
stake in GM's and FAH's purchasing and powertrain joint ventures.
LIQUIDITY AND CAPITAL RESOURCES
Financing Structure
In the first nine months of 2002, GM and GMAC experienced adequate 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. Downgrades to GM's and GMAC's credit ratings in 2001 and October
2002 have reduced GM's long term credit rating by Standard & Poor's to BBB and
A3 by Moody's. Despite these downgrades GM's and GMAC's access to the commercial
paper market 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 adequate access to the capital markets sufficient to meet the
Corporation's needs for financial flexibility. 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 2003, and an additional $7.4
billion committed through June 2006.
- 23 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Financing Structure (concluded)
On February 15, 2002, GM issued $875 million of 7.250% Senior Notes due
February 15, 2052. The bonds mature in 50 years and are redeemable by GM, in
whole or part, prior to 2052 if certain circumstances are satisfied. On March 6,
2002, GM also 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 par value common stock once specific conditions
are satisfied. The proceeds of the offerings, combined with other cash
generation initiatives, will be used to rebuild GM's liquidity position, reduce
its under funded pension liability, and fund its postretirement health care
obligations.
Automotive, Communications Services, and Other Operations
At September 30, 2002, cash , marketable securities, and $3.0 billion of
short-term assets of the Voluntary Employees' Beneficiary Association (VEBA)
trust invested in fixed-income securities (for ACO including Hughes) totaled
$19.0 billion, compared with $12.2 billion at December 31, 2001 and $11.7
billion at September 30, 2001. The increase from December 31, 2001 was primarily
due to proceeds from the bond and convertible debt offerings, and strong
operating cash flow from automotive operations. Total assets in the VEBA trust
used to pre-fund part of GM's other postretirement benefits liability
approximated $5.8 billion at September 30, 2002, compared with $4.9 billion at
December 31, 2001 and $4.9 billion at September 30, 2001. GM previously
indicated that it had a goal of maintaining at least $13.0 billion of cash and
marketable securities in order to continue funding product development programs
throughout the next downturn in the business cycle. This $13.0 billion target
includes cash to pay certain costs that were pre-funded in part by VEBA
contributions.
Long-term debt was $16.8 billion at September 30, 2002, compared with $10.7
billion at December 31, 2001 and $9.3 billion at September 30, 2001. The ratio
of long-term debt to long-term debt and GM's net assets of Automotive,
Communications Services, and Other Operations was 88.3% at September 30, 2002,
compared with 72.6% at December 31, 2001 and 39.5% at September 30, 2001. 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 89.1% at September 30, 2002, compared with 76.5% at December 31, 2001 and
43.7% at September 30, 2001.
Net liquidity excluding Hughes, calculated as cash, marketable securities,
and $3.0 billion of short-term assets of the VEBA trust invested in fixed-income
securities less the total of loans payable and long-term debt, was $3.3 billion
at September 30, 2002, compared with $1.0 billion at December 31, 2001 and $1.8
billion at September 30, 2001.
In order to provide financial flexibility to GM and its suppliers, GM
maintains a two-part financing program through GECC which was renewed October 2,
2002 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 could last from 10 days
and 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 program would be unavailable to GM and its
suppliers. The maximum amount permitted under the program is $2 billion. At
September 30, 2002, the outstanding balance under the first part of the program
amounted to approximately $845 million, and there was no outstanding balance
under the second part of the program.
Beginning January 2004, Fiat has the right to exercise a put option to
require GM to purchase 80% of FAH 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 noted elsewhere in this report, GM has, in order to satisfy
applicable accounting principles, recently reviewed the appropriate carrying
value of its 20% investment in FAH and written it down from $2.4 billion to $220
million. That action reflects GM's current perspective on the fair market value
of FAH, based on the information relating to the business and operations of FAH
available to GM. GM will continue to review the appropriate carrying value of
its investment in FAH and make further adjustments to the carrying value as and
when appropriate.
- 24 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Automotive, Communications Services, and Other Operations (concluded)
Until a valuation is actually performed in accordance with provisions of the
Master Agreement, the amount that GM may pay for 80% of FAH 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.
If the put were exercised, GM would have the option to pay for the 80%
interest in FAH 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 before July 24, 2009; however, if it is exercised,
it could have a material effect on GM at or after the time of exercise. See Note
4 in the Notes to Consolidated Financial Statements and "Investment in Fiat Auto
Holdings," in this MD&A.
Financing and Insurance Operations
At September 30, 2002, GMAC owned assets and serviced automotive receivables
totaling $239.0 billion, compared with $220.1 billion at December 31, 2001 and
$205.5 billion at September 30, 2001. The increase from December 31, 2001 was
primarily the result of an increase in serviced retail receivables, serviced
wholesale receivables, mortgage loans held for investment, other assets, and
investments in securities. These increases were partially offset by a decrease
in cash and cash equivalents, mortgage servicing rights, commercial and other
loan receivables, notes receivable from GM, and operating lease assets.
Total automotive and commercial finance receivables serviced by GMAC,
including sold receivables, totaled $140.0 billion at September 30, 2002,
compared with $130.6 billion at December 31, 2001 and $117.7 billion at
September 30, 2001. The increase from December 31, 2001 was primarily the result
of a $11.0 billion increase in serviced retail receivables due to increased GM
sponsored low rate retail financial programs.
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.
At September 30, 2002, GMAC's total borrowings were $168.0 billion, compared
with $152.0 billion at December 31, 2001 and $143.2 billion at September 30,
2001. GMAC's ratio of total debt to total stockholder's equity at September 30,
2002 was 9.6:1, compared with 9.4:1 at December 31, 2001 and 9.5:1 at September
30, 2001.
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.
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 independent of,
- 25 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Off Balance Sheet Arrangements (concluded)
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):
Sept. 30 Dec. 31,
2002 2001
-------- --------
Automotive, Communications Services, and Other Operations
Assets leased under operating leases $2,648 $2,412
Trade receivables sold 422 868
----- -----
Total $3,070 $3,280
===== =====
Financing and Insurance Operations
Receivables sold or securitized:
- Mortgage loans $110,497 $104,678
- Retail finance receivables 15,181 11,978
- Wholesale finance receivables 13,986 16,227
------- -------
Total $139,664 $132,883
======= =======
U.S. Pension Plans
During 2002, actual asset returns for GM's U.S. Hourly Employees and U.S.
Salaried Employees Defined Benefit Pension Plans (the Hourly and Salaried plans)
have been adversely affected by continued deterioration in the equity markets.
For the nine months ended September 30, 2002, the asset returns on the Hourly
and Salaried plans were approximately negative 10%. During the same time,
corporate bond yields, which are used in determining the discount rate for
future pension obligations, have continued to decline. The negative asset
returns and declining discount rates are expected to unfavorably affect GM's
2002 year-end SFAS No. 87, "Employers' Accounting for Pensions," funded status
and 2003 pension expense. 2003 pension expense would be further unfavorably
affected to the extent the company lowers its expected return on asset
assumption from its current level of 10% per annum. However, additional
contributions would favorably impact the pension funded status and pension
expense. Additionally, pension funding requirements will be unfavorably affected
by lower asset returns in 2002. If 2003 to 2006 actual asset returns are 10% to
8% per annum, it is anticipated that present value contributions of $14 billion
to $17 billion would be required in order for the Hourly and Salaried plans to
avoid paying Pension Benefit Guarantee Corporation (PBGC) Variable Rate
Premiums. Despite the significant contribution requirements forecast for the
2003 to 2007 period, no contributions are required prior to 2004 to avoid
payment of PBGC Variable Rate Premiums.
BOOK VALUE PER SHARE
Book value per share is determined based on the liquidation rights of the
various classes of common stock. Book value per share of GM $1-2/3 par value
common stock was $25.41 at September 30, 2002, compared with $24.79 at December
31, 2001 and $37.44 at September 30, 2001. Book value per share of GM Class H
common stock, adjusted to reflect the GM Class H common stock split, was $5.08
at September 30, 2002, compared with $4.96 at December 31, 2001 and $7.49 at
September 30, 2001.
DIVIDENDS
Dividends may be paid on common stocks only when, as, and if declared by the
GM Board in its sole discretion. The amount available for the payment of
dividends on each class of common stock will be reduced on occasion by dividends
paid on that class and will be adjusted on occasion for changes to the amount of
surplus attributed to the class resulting from the repurchase or issuance of
shares of that class.
GM's policy is to distribute dividends on its $1-2/3 par value common stock
based on the outlook and indicated capital needs of the business. On August 6,
2002, the GM Board declared a quarterly cash dividend of $0.50 per share on GM
$1-2/3 par value common stock, paid September 10, 2002, to holders of record on
August 16, 2002. With respect to GM Class H common stock, the GM Board
determined that it will not pay any cash dividends at this time in order to
allow the earnings of Hughes to be retained for investment in its business.
- 26 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
EUROPEAN MATTERS
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 in 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. GM has recorded after-tax charges of $55 million
($0.10 per share of GM $1-2/3 par value common stock) in the first nine months
2002 for those member states that have passed national laws as of September 30,
2002. Management is assessing the impact of this potential legislation on GM's
financial position and results of operations, and may include charges to
earnings in the fourth quarter of 2002 and in future periods as additional
national laws are passed.
The European Commission has approved a new 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. In order to
implement both the new regulatory changes as well as desired commercial
strategies, GME issued a termination letter to all EU dealers (excluding those
already under termination notice) while simultaneously also offering an
unconditional Letter of Intent to remain part of GME's network. Dealer and
authorized repairers are expected to sign new agreements until September 30,
2003 when the new regulation becomes fully effective. GME has maintained regular
dialogue with its network partners throughout this process, and an extensive
internal training and communication program was developed to support a
successful implementation.
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.
GM, Hughes, and EchoStar have agreed that, in the event that the transactions
do not occur because of a failure to obtain certain specified regulatory
clearances or financing to complete the Hughes/Echostar merger, 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 federal, state or local antitrust and/or Federal
Communication Commission ("FCC") matters have not been satisfied, EchoStar will
be required to pay a $600 million termination fee to Hughes. GM, Hughes, and
EchoStar have also agreed that, if the Hughes/EchoStar merger is not completed
for certain limited reasons involving a competing transaction or a withdrawal by
GM's Board of Directors of their recommendation of the EchoStar transaction,
then Hughes will pay a termination fee of $600 million to EchoStar.
On October 10, 2002, the FCC announced that it declined to approve the
transfer of the licenses necessary to allow the Hughes/EchoStar merger to close
without a public hearing. Accordingly, the application has been designated for
hearing by an administrative law judge. The FCC, however, has given the parties
until November 27, 2002 to file an amended application to address the FCC's
concerns and to file a petition to suspend the hearing. On October 31, 2002, the
U.S. Department of Justice ("DOJ"), twenty-three states, the District of
Columbia and Puerto Rico filed a complaint for permanent injunctive relief in
the United States District Court for the District of Columbia against EchoStar,
GM, Hughes and DIRECTV Enterprises LLC. The suit seeks to permanently enjoin the
Hughes/EchoStar merger and a declaration that the proposed Hughes/Echostar
merger violates Section 7 of the Clayton Act. On November 5, 2002, the District
Court denied the defendants' petition for an expedited trial indicating that a
trial would not be held before any merger termination date provided for in the
merger agreement. GM and Hughes have not agreed to any extension of any merger
termination date. GM and Hughes will continue to coordinate their efforts with
EchoStar to proceed in accordance with the terms of the merger agreement.
No assurances can be given that the required regulatory clearances and
approvals will be obtained from the DOJ and the FCC within the timeframes
required by the merger agreement, or if so obtained, that all other conditions
to the transactions will be satisfied such that the merger can be completed.
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GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ISUZU RESTRUCTURING
On October 25, 2002, GM confirmed that it had finalized details on agreements
with Isuzu Motors Ltd. relating to Isuzu's previously announced three-year
business plan. In addition to the GM agreements, Isuzu announced that it had
reached agreement on broad financial restructuring with its banks, including
Mizuho Corporate Bank. GM, Isuzu and the banks expect to finalize all
transactions by the end of 2002. Under the restructuring package, GM would spend
a total of Y60 billion (U.S. $500 million). The investment would be used to
acquire a majority interest in certain of Isuzu's diesel engine businesses and
complete ownership of certain diesel engine technologies. GM also would acquire
a majority interest in a new diesel engine engineering joint venture with Isuzu
as well as rights to use various related technologies. In addition, GM would
have its existing equity in the company retired as part of Isuzu's financial
restructuring plan, and GM would then purchase new equity in the company,
leaving GM with a 12-percent ownership stake in Isuzu.
EMPLOYMENT AND PAYROLLS
Worldwide employment at September 30, (in thousands)
2002 2001
---- ----
GMNA 194 202
GME 68 74
GMLAAM 23 24
GMAP 11 11
GMAC 31 29
Hughes 12 11
Other 12 13
--- ---
Total employees 351 364
=== ===
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------
30,
2002 2001 2002 2001
---- ---- ---- ----
Worldwide payrolls - (in billions) $5.1 $4.9 $15.5 $15.0
=== === ==== ====
SIGNIFICANT ACCOUNTING POLICIES
GM has identified significant accounting policies that, as a result of the
judgments, uncertainties, uniqueness and complexities of the underlying
accounting standards and operations involved, could result in material changes
to its financial condition or results of operations under different conditions
or using different assumptions. The Corporation's most significant accounting
policies are related to the following areas: sales allowances, policy and
warranty, impairment of long-lived assets, employee costs, post employment
benefits, allowance for credit losses, investments in operating leases, and
accounting for derivatives and other contracts at fair value. Details regarding
the Corporation's use of these policies and the related estimates are described
fully in the Corporation's 2001 Annual Report on Form 10-K filed with the
Securities and Exchange Commission. There have been no material changes to the
Corporation's significant accounting policies that affected the Corporation's
financial condition or results of operations in the third quarter of 2002.
On August 6, 2002, GM announced that the Corporation will expense the fair
market value of newly granted stock options granted to employees beginning in
January 2003, pursuant to SFAS No. 123, "Accounting for Stock-Based
Compensation." In 2003, GM expects the expense associated with stock options
will be about $85 million, or $0.15 per share of GM $1-2/3 par value common
stock for the year, assuming continuing option grants and values similar to
recent years. SFAS No. 123 requires amortizing the expense of options over their
vesting period. The cost of GM's annual option grants is expected to grow to
about $130 million, or $0.24 per share, in 2005.
- 28 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ADDITIONAL MATTERS
Asbestos Matters
Like most domestic and foreign automobile manufacturers, over the years GM
has used some brake products incorporating small amounts of encapsulated
asbestos. These products, generally brake linings, are known as asbestos
containing friction products. There is a significant body of scientific data
demonstrating that these asbestos containing friction products are safe and do
not create an increased risk of asbestos related disease. GM believes that the
use of asbestos in these products was appropriate.
As with other companies that have used products containing asbestos, there
has been an increase in the number of claims against GM related to allegations
concerning the use of friction products in recent years. A growing number of
auto mechanics are filing suit seeking recovery as a result of exposure to the
small amount of asbestos used in brake components. These claims almost always
identify numerous other potential sources for the claimant's exposure to
asbestos which do not involve GM or even asbestos containing friction products
and many of which place users at much greater risk. Many of these claimants do
not have an asbestos related illness and may never develop one. This is
consistent with the experience reported by other automotive manufacturers and
other end users of asbestos.
GM and the other domestic automobile manufacturers sought to have the
asbestos brake claims against them transferred and consolidated with asbestos
brake litigation in the Delaware bankruptcy court where the Federal Mogul
bankruptcy is pending. The bankruptcy court in Delaware declined to consolidate
the automobile manufacturers' cases, and the Court of Appeals affirmed that
decision. The manufacturers are attempting to have that decision reviewed by the
U.S. Supreme Court. That attempt to consolidate and the bankruptcy court's
decision to decline to do so are procedural and do not affect any defenses
available in these cases.
Two other types of claims related to alleged asbestos exposure are being
asserted against GM, representing a significantly lower alleged exposure than
the automotive friction claims. Like other locomotive manufacturers, GM used a
limited amount of asbestos in locomotive brakes and in the insulation used in
some locomotives resulting in lawsuits being filed against it by railroad
workers seeking relief based on their exposure to asbestos. These claims usually
identify numerous other potential sources for the claimant's exposure to
asbestos which do not involve GM or even locomotives. Many of these claimants do
not have an asbestos related illness and may never develop one. In addition,
like many other manufacturers, a relatively small number of claims are brought
by contractors who are seeking recovery based on exposure to asbestos containing
products while working on premises owned by GM. These claims almost always
identify numerous other potential sources for the claimant's exposure to
asbestos which do not involve GM. Many of these claimants do not have an
asbestos related illness and may never develop one.
While General Motors has resolved many of these cases over the years and
continues to do so for conventional strategic litigation reasons (avoiding
defense costs and possible exposure to runaway verdicts), GM, as stated above,
believes that the vast majority of such claims against GM are without merit. In
this regard GM believes that it has very strong defenses based upon a number of
published epidemiological studies prepared by highly respected scientists. GM
believes there is compelling evidence warranting the dismissal of virtually all
of these claims against GM. GM will vigorously press this evidence before judges
and juries whenever possible. Additionally, GM believes there is strong
statutory and judicial precedent supporting federal preemption of the asbestos
tort claims asserted on behalf of railroad workers. Such preemption would mean
that federal law entirely eliminates the possibility that such individuals could
bring tort claims against GM.
GM's aggregate expense associated with resolution of these claims in 2001 was
approximately $10 million. This figure may grow in future years because of the
number of claims, the many years it can take to resolve any given claim, and the
increasing rate at which claims are being filed. Nevertheless, it is
management's belief, based upon consultation with legal counsel, that these
claims will not result in a material adverse effect on the consolidated
financial condition or results of operations of GM.
* * * * * * *
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GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 4. CONTROLS AND PROCEDURES
The Corporation maintains disclosure controls and procedures designed to
ensure that information required to be disclosed in reports filed under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported within the specified time periods. Within 90 days prior to the date
of this report, the Corporation's Chief Executive Officer and Chief Financial
Officer evaluated, with the participation of GM's management, the effectiveness
of the Corporation's disclosure controls and procedures. Based on the
evaluation, which disclosed no significant deficiencies or material weaknesses,
the Corporation's Chief Executive Officer and Chief Financial Officer concluded
that the Corporation's disclosure controls and procedures are effective. There
were no significant changes in the Corporation's internal controls or in other
factors that could significantly affect internal controls subsequent to the
evaluation.
* * * * * * *
PART II
ITEM 1. LEGAL PROCEEDINGS
(a) Material pending legal proceedings, other than ordinary routine litigation
incidental to the business, to which the Corporation became a party during the
quarter ended September 30, 2002, or subsequent thereto, but before the filing
of this report are summarized below together with material developments relating
to previously reported matters:
Other Matters
-------------
DIRECTV, Inc. has filed a lawsuit against NDS Limited, the provider of
DIRECTV's conditional access system. The lawsuit, which was filed under seal in
U.S District Court in Los Angeles on September 6, alleges, among other things,
breach of contract, fraud, breach of warranty and misappropriation of trade
secrets. DIRECTV is seeking relief from the court that includes compensatory and
other damages, delivery of software technology required by the contract, and a
preliminary and permanent injunction that would enjoin NDS from engaging in
further breaches of contract and misappropriation of trade secrets. NDS filed a
Counterclaim against DIRECTV and a chip manufacturer, alleging that DIRECTV and
the Chip manufacturer misappropriated NDS's intellectual property and infringed
NDS's patents in developing new conditional access cards. NDS is seeking
injunctive relief as well as an unspecified amount in restitution, disgorgement
of profits and punitive damages. DIRECTV disputes these allegations, believes
that counterclaim is without merit, and will vigorously defend the claims made
by NDS.
* * * * * * *
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GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit
Number Exhibit Name Page No.
------ ----------------------------------------------- --------
99 Hughes Electronics Corporation Financial Statements and
Management's Discussion and Analysis of Financial
Condition and Results of Operations 34
99.1 Certification of the Chief Executive Officer Pursuant to
18 U.S.C. Section 1350, As Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. 96
99.2 Certification of the Chief Financial Officer Pursuant to
18 U.S.C. Section 1350, As Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. 97
(b) Reports on Form 8-K
Fourteen reports on Form 8-K, were filed July 2, 2002, July 3, 2002, July 11,
2002, July 16, 2002 (2), July 31, 2002*, August 1, 2002, August 6, 2002, August
14, 2002*(2), August 14, 2002, August 21, 2002*, September 4, 2002 and September
25, 2002* during the quarter ended September 30, 2002 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.
* * * * * *
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GENERAL MOTORS CORPORATION
(Registrant)
Date: November 14, 2002 /s/ Peter R. Bible
----------------------- ----------------------------------------
(Peter R. Bible, Chief Accounting Officer)
- 31 -
CERTIFICATION
I, G. Richard Wagoner, Jr., President and Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of General Motors
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002
/s/ G. RICHARD WAGONER, JR.
---------------------------
G. Richard Wagoner, Jr.
President and Chief Executive Officer
- 32 -
CERTIFICATION
I, John M. Devine, Vice Chairman and Chief Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of General Motors
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002
/s/ JOHN M. DEVINE
-----------------------------------------
John M. Devine
Vice Chairman and Chief Financial Officer
- 33 -