e10vq
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, DC
20549-1004
FORM 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
June 30, 2006
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OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission file number 1-143
GENERAL MOTORS
CORPORATION
(Exact Name of Registrant as
Specified in its Charter)
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|
|
STATE OF DELAWARE
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|
38-0572515
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(State or other jurisdiction
of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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|
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|
300 Renaissance Center,
Detroit, Michigan
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48265-3000
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(Address of Principal Executive
Offices)
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|
(Zip
Code)
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Registrants 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 (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated
filer þ Accelerated
filer o Non-accelerated
filer o
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No þ
As of July 31, 2006, there were outstanding
565,607,779 shares of the issuers
$12/3
par value common stock.
Website
Access to Companys Reports
General Motors (GMs) internet website address is
www.gm.com. Our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
and amendments to those reports filed or furnished pursuant to
section 13(a) or 15(d) of the Exchange Act are available
free of charge through our website as soon as reasonably
practicable after they are electronically filed with, or
furnished to, the Securities and Exchange Commission.
THIS
PAGE LEFT BLANK INTENTIONALLY
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Explanatory
Note
General Motors Corporations (GM) net loss for the second
quarter of 2006, previously announced as $3.2 billion in
its earning release furnished in a
Form 8-K
dated August 1, 2006, has been increased by
$200 million to $3.4 billion. The increase is
attributable to the estimated tax provision relating to the loss
related to the announced sale of 51% of GMs interest in
GMAC LLC (GMAC) to a consortium of investors. The previously
estimated after-tax charge of $490 million has been
increased to $690 million as the tax provision was adjusted
to reflect the book to tax basis differences at several GMAC
subsidiaries.
The tax increase does not result in a current cash cost to
either GM or GMAC.
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
INDEX
PART I
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 1.
|
Condensed
Consolidated Financial Statements
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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Three Months Ended
|
|
|
Six Months Ended
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June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions except per share amounts)
|
|
|
Net sales and revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive sales
|
|
$
|
44,602
|
|
|
$
|
40,178
|
|
|
$
|
87,362
|
|
|
$
|
77,481
|
|
Financial services and insurance
revenues
|
|
|
9,067
|
|
|
|
8,291
|
|
|
|
17,922
|
|
|
|
16,761
|
|
Other income
|
|
|
726
|
|
|
|
|
|
|
|
1,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenues
|
|
$
|
54,395
|
|
|
$
|
48,469
|
|
|
$
|
106,640
|
|
|
$
|
94,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive cost of sales
|
|
|
46,851
|
|
|
|
37,908
|
|
|
|
86,365
|
|
|
|
75,054
|
|
Selling, general, and
administrative expenses
|
|
|
6,069
|
|
|
|
6,645
|
|
|
|
13,267
|
|
|
|
12,969
|
|
Interest expense
|
|
|
4,531
|
|
|
|
3,712
|
|
|
|
8,760
|
|
|
|
7,391
|
|
Provisions for financing and
insurance operations credit and insurance losses
|
|
|
938
|
|
|
|
797
|
|
|
|
1,670
|
|
|
|
1,715
|
|
Other expenses
|
|
|
1,208
|
|
|
|
812
|
|
|
|
1,208
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|
|
|
812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
59,597
|
|
|
|
49,874
|
|
|
|
111,270
|
|
|
|
97,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax benefit,
equity income (loss) and minority interests
|
|
|
(5,202
|
)
|
|
|
(1,405
|
)
|
|
|
(4,630
|
)
|
|
|
(3,699
|
)
|
Income tax benefit
|
|
|
(1,655
|
)
|
|
|
(245
|
)
|
|
|
(1,461
|
)
|
|
|
(1,217
|
)
|
Equity income (loss) and minority
interests
|
|
|
168
|
|
|
|
173
|
|
|
|
235
|
|
|
|
242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,379
|
)
|
|
$
|
(987
|
)
|
|
$
|
(2,934
|
)
|
|
$
|
(2,240
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share attributable to
common stock, basic and diluted
|
|
$
|
(5.97
|
)
|
|
$
|
(1.75
|
)
|
|
$
|
(5.19
|
)
|
|
$
|
(3.96
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding basic and diluted (millions)
|
|
|
566
|
|
|
|
565
|
|
|
|
566
|
|
|
|
565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reference should be made to the notes to condensed consolidated
financial statements.
I-1
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2005
|
|
|
|
(Dollars in millions,
|
|
|
|
except share information)
|
|
|
ASSETS
|
Current
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
19,997
|
|
|
$
|
15,187
|
|
|
$
|
12,445
|
|
Marketable securities
|
|
|
115
|
|
|
|
1,416
|
|
|
|
3,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash and marketable securities
|
|
|
20,112
|
|
|
|
16,603
|
|
|
|
16,074
|
|
Accounts and notes receivable (less
allowances)
|
|
|
10,302
|
|
|
|
7,758
|
|
|
|
8,087
|
|
Inventories (less allowances)
|
|
|
14,449
|
|
|
|
13,851
|
|
|
|
12,818
|
|
Net equipment on operating
leases (less accumulated depreciation)
|
|
|
6,892
|
|
|
|
6,993
|
|
|
|
6,723
|
|
Deferred income taxes and other
current assets
|
|
|
10,260
|
|
|
|
8,877
|
|
|
|
10,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
62,015
|
|
|
|
54,082
|
|
|
|
54,218
|
|
Financing and Insurance
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
2,848
|
|
|
|
15,539
|
|
|
|
19,816
|
|
Investments in securities
|
|
|
199
|
|
|
|
18,310
|
|
|
|
19,384
|
|
Finance receivables net
|
|
|
4,284
|
|
|
|
180,793
|
|
|
|
178,137
|
|
Loans held for sale
|
|
|
|
|
|
|
21,865
|
|
|
|
26,903
|
|
Assets held for sale (less
allowance)
|
|
|
274,294
|
|
|
|
19,030
|
|
|
|
|
|
Net equipment on operating leases
(less accumulated depreciation)
|
|
|
16,533
|
|
|
|
31,194
|
|
|
|
29,353
|
|
Other assets
|
|
|
3,925
|
|
|
|
27,694
|
|
|
|
33,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Financing and Insurance
Operations assets
|
|
|
302,083
|
|
|
|
314,425
|
|
|
|
306,821
|
|
Non-Current
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in net assets of
nonconsolidated affiliates
|
|
|
1,901
|
|
|
|
3,291
|
|
|
|
4,156
|
|
Property net
|
|
|
38,535
|
|
|
|
38,466
|
|
|
|
38,480
|
|
Intangible assets net
|
|
|
1,662
|
|
|
|
1,862
|
|
|
|
1,658
|
|
Deferred income taxes
|
|
|
23,083
|
|
|
|
22,849
|
|
|
|
19,253
|
|
Other assets
|
|
|
41,227
|
|
|
|
41,103
|
|
|
|
41,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
106,408
|
|
|
|
107,571
|
|
|
|
104,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
470,506
|
|
|
$
|
476,078
|
|
|
$
|
466,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable (principally trade)
|
|
$
|
27,674
|
|
|
$
|
26,182
|
|
|
$
|
25,361
|
|
Loans payable
|
|
|
1,254
|
|
|
|
1,519
|
|
|
|
1,563
|
|
Accrued expenses
|
|
|
48,441
|
|
|
|
42,665
|
|
|
|
44,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
77,369
|
|
|
|
70,366
|
|
|
|
71,441
|
|
Financing and Insurance
Operations Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
23
|
|
|
|
3,731
|
|
|
|
3,333
|
|
Liabilities related to assets held
for sale
|
|
|
267,551
|
|
|
|
10,941
|
|
|
|
|
|
Debt
|
|
|
12,849
|
|
|
|
253,217
|
|
|
|
251,015
|
|
Other liabilities and deferred
income taxes
|
|
|
4,804
|
|
|
|
28,946
|
|
|
|
32,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Financing and Insurance
Operations liabilities
|
|
|
285,227
|
|
|
|
296,835
|
|
|
|
286,821
|
|
Non-Current
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
31,275
|
|
|
|
31,014
|
|
|
|
31,043
|
|
Postretirement benefits other than
pensions
|
|
|
30,668
|
|
|
|
28,990
|
|
|
|
25,882
|
|
Pensions
|
|
|
11,502
|
|
|
|
11,214
|
|
|
|
9,619
|
|
Other liabilities and deferred
income taxes
|
|
|
21,744
|
|
|
|
22,023
|
|
|
|
16,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
95,189
|
|
|
|
93,241
|
|
|
|
82,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
457,785
|
|
|
|
460,442
|
|
|
|
441,253
|
|
Minority interests
|
|
|
1,081
|
|
|
|
1,039
|
|
|
|
902
|
|
Stockholders
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
$12/3
par value common stock (outstanding, 565,607,779; 565,518,106;
and 565,503,422 shares)
|
|
|
943
|
|
|
|
943
|
|
|
|
943
|
|
Capital surplus (principally
additional paid-in capital)
|
|
|
15,306
|
|
|
|
15,285
|
|
|
|
15,255
|
|
Retained earnings (accumulated
deficit)
|
|
|
(869
|
)
|
|
|
2,361
|
|
|
|
11,252
|
|
Accumulated other comprehensive loss
|
|
|
(3,740
|
)
|
|
|
(3,992
|
)
|
|
|
(3,604
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
11,640
|
|
|
|
14,597
|
|
|
|
23,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
470,506
|
|
|
$
|
476,078
|
|
|
$
|
466,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reference should be made to the notes to condensed consolidated
financial statements.
I-2
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
Net cash used in operating
activities
|
|
$
|
(1,989
|
)
|
|
$
|
(1,781
|
)
|
Cash flows from investing
activities
|
|
|
|
|
|
|
|
|
Expenditures for property
|
|
|
(3,274
|
)
|
|
|
(2,944
|
)
|
Investments in marketable
securities acquisitions
|
|
|
(11,580
|
)
|
|
|
(10,830
|
)
|
Investments in marketable
securities liquidations
|
|
|
11,909
|
|
|
|
10,269
|
|
Net change in mortgage servicing
rights
|
|
|
(55
|
)
|
|
|
(185
|
)
|
Increase in finance receivables
|
|
|
(169
|
)
|
|
|
(2,569
|
)
|
Proceeds from sales of finance
receivables
|
|
|
15,213
|
|
|
|
17,692
|
|
Proceeds from sale of business
units/equity investments
|
|
|
10,518
|
|
|
|
|
|
Operating leases
acquisitions
|
|
|
(9,135
|
)
|
|
|
(8,378
|
)
|
Operating leases
liquidations
|
|
|
3,411
|
|
|
|
3,258
|
|
Investments in companies, net of
cash acquired
|
|
|
(345
|
)
|
|
|
1,355
|
|
Other
|
|
|
(1,615
|
)
|
|
|
(2,141
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing
activities
|
|
|
14,878
|
|
|
|
5,527
|
|
Cash flows from financing
activities
|
|
|
|
|
|
|
|
|
Net decrease in loans payable
|
|
|
(7,185
|
)
|
|
|
(8,411
|
)
|
Long-term debt
borrowings
|
|
|
42,651
|
|
|
|
30,440
|
|
Long-term debt
repayments
|
|
|
(43,584
|
)
|
|
|
(32,144
|
)
|
Cash dividends paid to stockholders
|
|
|
(283
|
)
|
|
|
(570
|
)
|
Other
|
|
|
1,918
|
|
|
|
3,619
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing
activities
|
|
|
(6,483
|
)
|
|
|
(7,066
|
)
|
Effect of exchange rate changes on
cash and cash equivalents
|
|
|
171
|
|
|
|
(412
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
and cash equivalents
|
|
|
6,577
|
|
|
|
(3,732
|
)
|
Cash and cash equivalents
reclassified to assets held for sale
|
|
|
(14,458
|
)
|
|
|
|
|
Cash and cash equivalents at
beginning of the period
|
|
|
30,726
|
|
|
|
35,993
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at
end of the period (a)
|
|
$
|
22,845
|
|
|
$
|
32,261
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Consists of cash and cash equivalents of $19,997 million
classified as current assets and $2,848 million from
Financing and Insurance Operations as of June 30, 2006, and
$12,445 million classified as current assets and
$19,816 million from Financing and Insurance Operations as
of June 30, 2005.
|
Reference should be made to the notes to condensed consolidated
financial statements.
I-3
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
(Unaudited)
|
|
Note 1.
|
Financial
Statement Presentation
|
The accompanying unaudited condensed 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) that 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. The condensed consolidated financial
statements include the accounts of General Motors Corporation
and domestic and foreign subsidiaries that are more than 50%
owned, principally GMAC LLC (GMAC, formerly known as General
Motors Acceptance Corporation) (collectively referred to as the
Corporation, General Motors, GM, we, or us). In addition, GM
consolidates variable interest entities (VIEs) for which it is
deemed to be the primary beneficiary. GMs share of
earnings or losses of affiliates that are less than 50% owned
are included in the consolidated operating results using the
equity method of accounting when GM is able to exercise
significant influence over the operating and financial decisions
of the investee. GM encourages reference to the GM Annual Report
on
Form 10-K
for the period ended December 31, 2005, filed separately
with the United States Securities and Exchange Commission (SEC).
All material inter-company accounts and transactions have been
eliminated.
GMs Automotive and Other Operations (Auto &
Other) reportable operating segment consists of:
|
|
|
|
|
GMs four automotive regions: GM North America (GMNA),
GM Europe (GME), GM Latin
America/Africa/Mid-East
(GMLAAM), and GM Asia Pacific (GMAP), which constitute GM
Automotive (GMA); and
|
|
|
|
Other, which includes the elimination of intersegment
transactions, certain non-segment specific revenues and
expenditures, including legacy costs related to postretirement
benefits for certain retirees of Delphi Corporation (Delphi) and
other companies, and certain corporate activities.
|
GMs Financing and Insurance Operations (FIO) reportable
operating segment consists of GMAC and Other Financing, which
includes financing entities that are not consolidated by GMAC.
Consolidation
of GM Daewoo
On February 3, 2005, GM completed the purchase of
16.6 million newly issued shares of common stock in GM
Daewoo Auto & Technology Company (GM Daewoo) for
approximately $49 million, which increased GMs
ownership in GM Daewoo to 48.2% from 44.6%. No other
shareholders in GM Daewoo participated in the issue. On
June 28, 2005, GM purchased from Suzuki Motor Corporation
(Suzuki) 6.9 million shares of outstanding common stock in
GM Daewoo for approximately $21 million. This increased
GMs ownership in GM Daewoo to 50.9%. Accordingly, as of
June 30, 2005, GM began consolidating GM Daewoo.
The following unaudited financial information for the three and
six months ended June 30, 2006 and 2005 represents amounts
attributable to GM Daewoo on a basis consistent with giving
effect to the increased ownership and consolidation as of
January 1, 2005. The pro forma effect on net income (loss)
is not significant compared to equity income recognized.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
Actual
|
|
Pro Forma
|
|
Actual
|
|
Pro Forma
|
|
|
(Dollars in millions)
|
|
Automotive sales
|
|
$
|
1,786
|
|
|
$
|
1,497
|
|
|
$
|
3,404
|
|
|
$
|
2,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
I-4
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 1.
|
Financial
Statement Presentation (continued)
|
Change
in Accounting Principle
On January 1, 2006, GM adopted Statement of Financial
Accounting Standards No. 156, Accounting for
Servicing of Financial Assets (SFAS No. 156),
which (1) provides revised guidance on when a servicing
asset and servicing liability should be recognized,
(2) requires all separately recognized servicing assets and
liabilities to be initially measured at fair value, if
practicable, (3) permits an entity to elect to measure
servicing assets and liabilities at fair value each reporting
date and report changes in fair value in earnings in the period
in which the changes occur, (4) provides that upon initial
adoption, a one time reclassification of
available-for-sale
securities to trading securities for securities which are
identified as offsetting an entitys exposure to changes in
the fair value of servicing assets or liabilities that a
servicer elects to subsequently measure at fair value, and
(5) requires separate presentation of servicing assets and
liabilities subsequently measured at fair value in the balance
sheet and additional disclosures. GM recorded a reduction to
retained earnings as of January 1, 2006 of
$13 million, net of tax, as a cumulative effect of a change
in accounting principle for the adoption of
SFAS No. 156.
New
Accounting Standards
In December 2005, the Financial Accounting Standard Board (FASB)
released FASB Staff Position (FSP)
SFAS No. 123R-3,
Transition Election Related to Accounting for the Tax
Effects of Share-Based Payment Awards, which provides a
practical transition election related to accounting for the tax
effects of share-based payment awards to employees. The
Corporation is currently reviewing the transition alternatives
and will elect the appropriate alternative no later than
January 1, 2007.
In February 2006, the FASB issued SFAS No. 155,
Accounting for Certain Hybrid Financial Instruments,
which amends SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities
(SFAS No. 133) and SFAS No. 140,
Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities
(SFAS No. 140). This statement amends
SFAS No. 133 to permit fair value remeasurement for
any hybrid instrument that contains an embedded derivative that
otherwise would require bifurcation. This statement also
eliminates the interim guidance in SFAS No. 133
Implementation Issue D-1, which provides that beneficial
interests in securitized financial assets are not subject to the
provisions of SFAS No. 133. Finally, this statement
amends SFAS No. 140 to eliminate the restriction on
the passive derivative instruments that a qualifying
special-purpose entity (SPE) may hold. This statement is
effective for all financial instruments acquired or issued in
first fiscal years beginning after September 15, 2006.
Management is assessing the potential impact on GMs
financial condition and results of operations.
In April 2006, the FASB issued FSP
FIN 46R-6,
Determining the Variability to Be Considered in Applying
FASB Interpretation No. 46R, which requires the
variability of an entity to be analyzed based on the design of
the entity. The nature and risks in the entity, as well as the
purpose for the entitys creation are examined to determine
the variability in applying FIN 46R, Consolidation of
Variable Interest Entities. The variability is used in
applying FIN 46R to determine whether an entity is a VIE,
which interests are variable interests in the entity, and who is
the primary beneficiary of the VIE. This statement is effective
for all reporting periods beginning after June 15, 2006.
Management does not expect this statement to have a significant
impact on GMs financial condition and results of
operations.
In June 2006, the FASB issued Interpretation No. 48,
Accounting for Uncertainty in Income Taxes
(FIN 48), which supplements SFAS No. 109,
Accounting for Income Taxes, by defining the
confidence level that a tax position must meet in order to be
recognized in the financial statements. The Interpretation
requires that the tax effects of a position be recognized only
if it is more-likely-than-not to be sustained based
solely on its technical merits as of the reporting date. The
more-likely-than-not threshold represents a positive assertion
by management that a company is entitled to the economic
benefits of a tax position. If a tax position is not considered
more-likely-than-not to be sustained based solely on its
technical merits, no benefits of the position are to be
recognized.
I-5
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 1. |
Financial Statement
Presentation (concluded)
|
Moreover, the more-likely-than-not threshold must continue to be
met in each reporting period to support continued recognition of
a benefit. At adoption, companies must adjust their financial
statements to reflect only those tax positions that are
more-likely-than-not to be sustained as of the adoption date.
Any necessary adjustment would be recorded directly to retained
earnings in the period of adoption and reported as a change in
accounting principle. This Interpretation is effective as of the
beginning of the first fiscal year beginning after
December 15, 2006. Management is assessing the potential
impact on GMs financial condition and results of
operations.
In July 2006, the FASB issued FSP
No. 13-2
Accounting for a Change or Projected Change in the Timing
of Cash Flows Relating to Income Taxes Generated by a Leveraged
Lease Transaction, (FSP 13-2), which amends
SFAS No. 13, Accounting for Leases, by
requiring lessors to recalculate the rate of return and periodic
income allocation for leveraged-lease transactions when there is
a change or projected change in the timing of income tax cash
flows related to the lease. FSP 13-2 requires lessors to use the
model in FIN 48 to determine the timing and amount of
expected tax cash flows in leveraged-lease calculations and
recalculations. FSP 13-2 is effective in the same period as
FIN 48. At the date of adoption, the lessor is required to
reassess projected income tax cash flows related to leveraged
leases using the FIN 48 model for recognition and
measurement. Revisions to the net investment in a leverage lease
required when FSP 13-2 is adopted would be recorded as an
adjustment to the beginning balance of retained earnings in the
period of adoption and reported as a change in accounting
principle. Management is assessing the potential impact on
GMs financial condition and results of operations.
Change
in Presentation of Financial Statements
In periods presented prior to June 30, 2006, GM presented
separate supplemental financial information for its reportable
operating segments. GMs pending sale of a controlling
interest in GMAC has resulted in certain GMAC assets and
liabilities being presented as held for sale at June 30,
2006, therefore the supplemental statements were no longer
meaningful.
|
|
Note 2.
|
Assets
Held for Sale
|
Loss
on Controlling Interest in GMAC Held for
Sale
On April 2, 2006, GM and its wholly owned subsidiaries,
GMAC and GM Finance Co. Holdings Inc., entered into a definitive
agreement pursuant to which GM will sell a 51% controlling
interest in GMAC for a purchase price of $7.4 billion to
FIM Holdings LLC (FIM Holdings). FIM Holdings is a consortium of
investors including Cerberus, and Citigroup Inc., Aozora Bank
Ltd., and a subsidiary of The PNC Financial Services Group, Inc.
GM and the consortium will invest $1.9 billion of cash in
new GMAC limited liability company interest, with
$1.4 billion to be invested by GM and $500 million to
be invested by the consortium. The transaction is subject to a
number of U.S. and international regulatory and other approvals.
GM expects to close the transaction in the fourth quarter of
2006, but it is possible that delays in obtaining the required
approvals or in satisfying other required conditions could defer
the closing until 2007. See Note 17.
I-6
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 2.
|
Assets
Held for Sale (continued)
|
For the three and six months ended June 30, 2006,
GMACs earnings and cash flows are fully consolidated in
GMs Condensed Consolidated Statements of Operations and
Statements of Cash Flows. However, as a result of the agreement
to sell a 51% equity interest, certain assets and liabilities of
GMAC have been classified as held for sale in GMs
Condensed Consolidated Balance Sheet at June 30, 2006.
Pursuant to the requirements of SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets, GM has ceased depreciation on the GMAC long-lived
assets that are classified as held for sale in GMs
consolidated financial statements. The following table presents
GMACs major classes of assets and liabilities classified
as held for sale as of June 30, 2006 (dollars in millions):
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
14,458
|
|
Marketable securities
|
|
|
18,808
|
|
Finance receivables net
|
|
|
174,009
|
|
Loans held for sale
|
|
|
20,455
|
|
Account and notes receivable
|
|
|
7,733
|
|
Inventories (less allowances)
|
|
|
558
|
|
Net equipment on operating leases
(less accumulated depreciation)
|
|
|
18,805
|
|
Other assets
|
|
|
20,676
|
|
Allowance to reflect assets held
for sale at fair value less cost to sell
|
|
|
(1,208
|
)
|
|
|
|
|
|
Total assets held for sale
|
|
$
|
274,294
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
3,805
|
|
Notes and loans payable
|
|
|
233,801
|
|
Deferred income taxes
|
|
|
1,392
|
|
Accrued expenses and other
liabilities
|
|
|
28,553
|
|
|
|
|
|
|
Total liabilities related to
assets held for sale
|
|
$
|
267,551
|
|
|
|
|
|
|
The table above represents 100% of the respective assets and
liabilities that are held for sale as of June 30, 2006,
which excludes the asset and liability balances as of
June 30, 2006 relating to items (i) through
(vi) below, which will be retained by GM. The transaction
will result in the divesture of a 51% interest in GMAC. The held
for sale asset and liability balances at June 30, 2006 may
differ from the respective balances at closing.
Prior to consummation of the transaction, (i) certain
assets with respect to automotive leases and retail installment
sales contracts owned by GMAC and its affiliates having a net
book value of approximately $4 billion will be dividended
to GM, (ii) GM will assume certain of GMACs
postemployment benefit obligations, (iii) GMAC will
transfer to GM certain entities that hold a fee interest in
certain real properties, (iv) GMAC will pay dividends to GM
in an amount up to the amount of GMAC net income prior to the
acquisition, (v) GM will repay certain indebtedness owing
to GMAC and specified intercompany unsecured obligations owing
to GMAC shall be no greater than $1.5 billion and
(vi) GMAC will make a one-time distribution to GM of
approximately $2.7 billion of cash to reflect the increase
in GMACs equity value resulting from the transfer of a
portion of GMACs net deferred tax liabilities arising from
the conversion of GMAC and certain of its subsidiaries to
limited liability company form. The total value of the cash
proceeds and distributions to GM before it purchases preferred
limited liability company interests of GMAC and repays any
intercompany unsecured obligations will be approximately
$14 billion over three years, comprised of the
$7.4 billion purchase price, the $4 billion of
retained assets and the $2.7 billion cash dividend.
I-7
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 2. |
Assets Held for Sale (concluded)
|
GM recognized a non-cash pre-tax impairment charge of
approximately $1.2 billion in other expenses in the
Condensed Consolidated Statements of Operations for the three
and six months ended June 30, 2006 to reflect the GMAC
assets classified as held for sale at the lower of carrying
value or fair value less costs to sell. The charge is comprised
of impairment of the carrying value of GMAC assets held for sale
partially offset by 51% of the effects of unrecognized net gains
reflected in GMACs other comprehensive income. After the
sale of the 51% controlling interest, the remaining 49% interest
in GMAC, with carrying value based on GMs historical cost,
will be reflected in GMs financial statements using the
equity method of accounting.
As part of the transaction, GM and GMAC will enter into a number
of agreements that will require GMAC to continue to allocate
capital to automotive financing consistent with historical
practice, thereby continuing to provide critical financing
support to a significant share of GMs global sales. While
GMAC will retain the right to make individual credit decisions,
GMAC will commit to fund a broad spectrum of customers and
dealers consistent with historical practice in the relevant
jurisdiction. Subject to GMACs fulfillment of certain
conditions, GM will grant GMAC exclusivity for 10 years for
U.S., Canadian, and international GM-sponsored retail and
wholesale marketing incentives around the world, with the
exception of Saturn branded products.
As part of the agreement, GM will retain an option, for
10 years after the closing of the transaction, to
repurchase from GMAC certain assets related to the automotive
finance business of the North American Operations and
International Operations of GMAC. GMs exercise of the
option is conditional on GMs credit rating being
investment grade or higher than GMACs credit rating. The
call option price will be calculated as the higher of
(i) fair market value or (ii) 9.5 times the
consolidated net income of GMACs automotive finance
business in either the calendar year the call option is
exercised or the calendar year immediately following the year
the call option is exercised.
The agreement is subject to the satisfaction or waiver of
customary and other closing conditions, including, among other
things, (i) receipt of ratings for the senior unsecured
long-term indebtedness of GMAC and Residential Capital
Corporation, a wholly owned subsidiary of GMAC, (ResCap) after
giving effect to the transactions contemplated by the agreement,
of at least BB and BBB- (or their respective equivalents),
respectively, and an A.M. Best rating for GMACs
significant insurance subsidiaries of at least B++,
(ii) that no material adverse effect will have occurred
with respect to the business, financial condition or results of
operations of GMAC, which includes any actual downgrading by any
of the major rating agencies of GMs unsecured long-term
indebtedness rating below CCC or its equivalent, and
(iii) the receipt of required regulatory approvals and
licenses. The agreement may be terminated upon the occurrence of
certain events, including the failure to complete the
transaction by March 31, 2007.
Sale
of GMAC Commercial Mortgage
On March 23, 2006, GM (through GMAC) sold approximately 78%
of its equity in GMAC Commercial Mortgage for approximately
$1.5 billion in cash. Subsequent to the sale, the remaining
interest in GMAC Commercial Mortgage is reflected under the
equity method. At December 31, 2005, GMAC Commercial
Mortgages assets and liabilities had been classified as
held for sale in GMs Consolidated Balance Sheet.
I-8
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Inventories included the following (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
Dec. 31,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2005
|
|
|
Auto & Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Productive material, work in
process, and supplies
|
|
$
|
6,281
|
|
|
$
|
5,471
|
|
|
$
|
5,364
|
|
Finished product, service parts,
etc.
|
|
|
9,659
|
|
|
|
9,871
|
|
|
|
8,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total inventories at FIFO
|
|
|
15,940
|
|
|
|
15,342
|
|
|
|
14,121
|
|
Less LIFO allowance
|
|
|
(1,491
|
)
|
|
|
(1,491
|
)
|
|
|
(1,303
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total inventories (less allowances)
|
|
$
|
14,449
|
|
|
$
|
13,851
|
|
|
$
|
12,818
|
|
Financing and Insurance Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-lease vehicles
|
|
|
|
|
|
|
503
|
|
|
|
532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated inventories
(less allowances)
|
|
$
|
14,449
|
|
|
$
|
14,354
|
|
|
$
|
13,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2006, FIO off-lease vehicles totaling $558
million are presented as held for sale.
|
|
Note 4.
|
Goodwill
and Acquired Intangible Assets
|
The components of the Corporations intangible assets were
as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Carrying
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
June 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto & Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizing intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents and intellectual property
rights
|
|
$
|
521
|
|
|
$
|
172
|
|
|
$
|
349
|
|
Non-amortizing
intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
768
|
|
Pension intangible asset
|
|
|
|
|
|
|
|
|
|
|
545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total goodwill and intangible
assets
|
|
|
|
|
|
|
|
|
|
$
|
1,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
Auto & Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizing intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents and intellectual property
rights
|
|
$
|
510
|
|
|
$
|
93
|
|
|
$
|
417
|
|
Non-amortizing
intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
526
|
|
Pension intangible asset
|
|
|
|
|
|
|
|
|
|
|
715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total goodwill and intangible
assets
|
|
|
|
|
|
|
|
|
|
$
|
1,658
|
|
Financing and Insurance Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizing intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer lists and contracts
|
|
$
|
74
|
|
|
$
|
45
|
|
|
|
29
|
|
Trademarks and other
|
|
|
40
|
|
|
|
22
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
114
|
|
|
|
67
|
|
|
|
47
|
|
Non-amortizing
intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
3,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total goodwill and intangible
assets
|
|
|
|
|
|
|
|
|
|
|
3,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated goodwill and
intangible assets
|
|
|
|
|
|
|
|
|
|
$
|
4,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
I-9
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 4. |
Goodwill and Acquired Intangible
Assets (concluded)
|
At June 30, 2006, FIO goodwill and intangible assets
totaling $2,542 million and $81 million, respectively,
are presented as held for sale.
Estimated amortization expense, excluding FIO, in each of the
next five years is as follows: 2007
$56 million; 2008 $52 million;
2009 $45 million; 2010
$23 million; and 2011 $16 million.
The changes in the carrying amounts of goodwill for the quarters
ended June 30, 2006, and 2005, were as follows (dollars in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
GMNA
|
|
|
GME
|
|
|
Auto & Other
|
|
|
GMAC
|
|
|
Total GM
|
|
|
Balance as of December 31,
2005
|
|
$
|
383
|
|
|
$
|
374
|
|
|
$
|
757
|
|
|
$
|
2,446
|
|
|
$
|
3,203
|
|
Goodwill acquired during the period
|
|
|
10
|
|
|
|
|
|
|
|
10
|
|
|
|
73
|
|
|
|
83
|
|
Other
|
|
|
(23
|
)
|
|
|
|
|
|
|
(23
|
)
|
|
|
|
|
|
|
(23
|
)
|
Reclassification of GMAC goodwill
to assets held for sale(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,542
|
)
|
|
|
(2,542
|
)
|
Transfer of business unit (See
Note 16)
|
|
|
(63
|
)
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency
translation and other
|
|
|
(5
|
)
|
|
|
29
|
|
|
|
24
|
|
|
|
23
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2006
|
|
$
|
302
|
|
|
$
|
466
|
|
|
$
|
768
|
|
|
$
|
|
|
|
$
|
768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31,
2004
|
|
$
|
154
|
|
|
$
|
446
|
|
|
$
|
600
|
|
|
$
|
3,274
|
|
|
$
|
3,874
|
|
Goodwill acquired during the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
3
|
|
Effect of foreign currency
translation and other
|
|
|
(7
|
)
|
|
|
(67
|
)
|
|
|
(74
|
)
|
|
|
(35
|
)
|
|
|
(109
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2005
|
|
$
|
147
|
|
|
$
|
379
|
|
|
$
|
526
|
|
|
$
|
3,242
|
|
|
$
|
3,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Included in Other Assets in table of assets and related
liabilities of GMAC, held for sale in Note 2. |
|
|
Note 5.
|
Investment
in Nonconsolidated Affiliates
|
Nonconsolidated affiliates of GM identified herein are those
entities in which GM owns an equity interest and for which GM
uses the equity method of accounting, because GM has the ability
to exert significant influence over decisions relating to their
operating and financial affairs. GMs significant
affiliates, and the percent of GMs current equity
ownership, or voting interest, in them include the following:
Japan Fuji Heavy Industries Ltd. (sold during fourth
quarter of 2005, 20.1% at June 30, 2005), Suzuki (3.7% at
June 30, 2006, and 20.2% at June 30, 2005);
China Shanghai General Motors Co., Ltd (50% at
June 30, 2006 and 2005), SAIC GM Wuling Automobile Co., Ltd
(34% at June 30, 2006 and 2005); Korea GM
Daewoo (fully consolidated 50.9% at June 30,
2006 and 2005). Information regarding GMs share of income
(loss) for all nonconsolidated affiliates (as described
above) in the following countries is included in the table below
(in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Italy
|
|
$
|
|
|
|
$
|
11
|
|
|
$
|
|
|
|
$
|
32
|
|
Japan
|
|
$
|
|
|
|
$
|
45
|
|
|
$
|
21
|
|
|
$
|
95
|
|
China
|
|
$
|
100
|
|
|
$
|
99
|
|
|
$
|
170
|
|
|
$
|
132
|
|
Korea
|
|
$
|
|
|
|
$
|
25
|
|
|
$
|
|
|
|
$
|
17
|
|
I-10
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 5. |
Investment in Nonconsolidated
Affiliates (concluded)
|
In April 2006, GMAC signed a definitive agreement to sell its
entire interest in a regional home builder. In the second
quarter of 2006, GMAC recognized a pre-tax gain of
$415 million on the sale of its equity interest. Under the
equity method of accounting, GMACs share of pretax income
recorded from this investment was approximately
$22.5 million and $21.8 million for the three months
ended June 30, 2006 and 2005, respectively, and
$42.4 million and $35.2 million for the six months
ended June 30, 2006 and 2005, respectively.
In March 2006, GM sold 92.36 million shares of its
investment in Suzuki, reducing GMs equity stake in Suzuki
from 20.4% to 3.7% (16.3 million shares). The sale of
GMs interest generated cash proceeds of $2.0 billion
and a pretax gain on sale of $630 million for the six
months ended June 30, 2006. Effective with completion of
the sale, GMs remaining investment in Suzuki is accounted
for as an equity security, rather than as an equity-method
investment, and GM will no longer recognize equity income with
respect to it.
In the second quarter of 2005, GM recorded an after tax
impairment charge of $788 million associated with its
investment in the common stock of Fuji Heavy Industries Ltd.,
which is reflected in Other Expenses in the Consolidated
Statement of Operations for the three and six months ended
June 30, 2005.
|
|
Note 6.
|
Product
Warranty Liability
|
Policy, product warranty, recall campaigns and certified used
vehicles liability included the following (dollars in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Twelve Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30, 2006
|
|
|
Dec. 31, 2005
|
|
|
June 30, 2005
|
|
|
Beginning balance
|
|
$
|
9,128
|
|
|
$
|
9,315
|
|
|
$
|
9,315
|
|
Payments
|
|
|
(2,193
|
)
|
|
|
(4,696
|
)
|
|
|
(2,366
|
)
|
Increase in liability (warranties
issued during period)
|
|
|
2,223
|
|
|
|
5,159
|
|
|
|
2,867
|
|
Adjustments to liability
(pre-existing warranties)
|
|
|
(420
|
)
|
|
|
(381
|
)
|
|
|
(264
|
)
|
Effect of foreign currency
translation
|
|
|
113
|
|
|
|
(269
|
)
|
|
|
(263
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
8,851
|
|
|
$
|
9,128
|
|
|
$
|
9,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to the liability are made as Management reviews
these estimates on a regular basis and adjusts the policy,
product warranty and recall campaigns provisions as actual
experience differs from historical estimates or other
information becomes available.
|
|
Note 7.
|
GMNA
Postemployment Benefit Costs
|
Costs to idle, consolidate or close facilities and provide
postemployment benefits to employees idled on an other than
temporary basis are accrued based on managements best
estimate of the wage and benefits costs that will be incurred
for qualified employees under the JOBS bank provisions of the
current labor agreement through the date of its expiration in
September 2007, plus estimated costs expected to be paid
thereafter taking into account policy changes that GM intends to
negotiate into the JOBS program after the expiration of the
current collective bargaining agreement. Costs related to the
idling of employees that are expected to be temporary are
expensed as incurred. GM reviews the adequacy and continuing
need for these liabilities on an annual basis in conjunction
with its year-end production and labor forecasts. Furthermore,
GM reviews the reasonableness of the liabilities on a quarterly
basis.
In 2005, GM recognized a pre-tax charge of $1.9 billion, or
$1.2 billion after tax, for postemployment benefits related
to the restructuring of its North American operations announced
in November 2005 (the GMNA restructuring). Approximately 17,500
employees were included in the charge for locations included in
this action, some leaving the company through attrition and some
transferring to other sites.
I-11
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 7.
|
GMNA
Postemployment Benefit
Costs (concluded)
|
On March 22, 2006, GM, Delphi and the International Union,
United Automobile, Aerospace and Agricultural Implement Workers
of America (UAW) reached an agreement (UAW Attrition Agreement)
intended to reduce the number of U.S. hourly employees
through an accelerated attrition program (Attrition Program), as
detailed in our Current Reports on
Form 8-K
filed on March 22 and April 7, 2006. The agreement provided
for a combination of early retirement programs and other
incentives designed to help reduce employment levels at GM. GM
hourly employees had until June 23, 2006 to accept the
terms of the Attrition Program followed by a seven-day
rescission period from the date of acceptance. Approximately
34,400 GM hourly employees have agreed to the terms of the
Attrition Program. As a result of the Attrition Program, in the
second quarter of 2006, GM recorded a pre-tax charge of
approximately $2.1 billion to recognize the wage and
benefits cost of those accepting normal and voluntary
retirements, buy-outs or pre-retirement leaves. Due to a higher
than anticipated level of participation by employees at idled
facilities and facilities to be idled that were previously
accrued for under the JOBS bank provisions mentioned above in
the second quarter of 2006, we adjusted the JOBS bank accrual by
$853 million. These employees wage and benefit costs
were then included in the accrual made in the second quarter of
2006 under the Attrition Program. This favorable adjustment,
when combined with the favorable adjustment of $136 million
made to the postemployment benefits reserve in the first quarter
of 2006 results in a total favorable adjustment to the
postemployment benefits reserve for the six months ended
June 30, 2006 of $989 million. In addition, in the
first quarter of 2006 a pre-tax charge of $81 million was
recorded to reflect GMs commitment under the Attrition
Program to pay a lump-sum to certain UAW-represented GM retirees
with recent retirements.
In the second quarter of 2006, GM announced plans to idle a
shift at its Lordstown Assembly Plant in 2006 and to idle its
service parts operations location at its Drayton Plains facility
in 2008. A pre-tax charge of $13 million was recorded to
recognize future wage and benefit obligations associated with
these two facilities. Total additions to the postemployment
benefits reserve for the six months ended June 30, 2006
were approximately $2.2 billion.
The postemployment benefits reserve as of June 30, 2006 was
approximately $2.8 billion. This reserve reflects estimated
future wages and benefits relating to approximately 12,300
employees, primarily at idled facilities and facilities to be
idled as a result of previous announcements and 32,500 employees
under the terms of the Attrition Program. The postemployment
benefits reserve as of December 31, 2005 was approximately
$2.0 billion related to the estimated future wages and
benefits of approximately 18,400 employees, primarily at idled
facilities and facilities to be idled as a result of previous
announcements in 2005. The postemployment benefits reserve was
$188 million related to numerous facilities and
approximately 2,000 employees as of June 30, 2005. The
following table summarizes the activity for this reserve
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Twelve Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30, 2006
|
|
|
Dec. 31, 2005
|
|
|
June 30, 2005
|
|
|
Beginning balance
|
|
$
|
2,012
|
|
|
$
|
237
|
|
|
$
|
237
|
|
Payments
|
|
|
(447
|
)
|
|
|
(91
|
)
|
|
|
(52
|
)
|
Interest accretion
|
|
|
16
|
|
|
|
12
|
|
|
|
6
|
|
Additions
|
|
|
2,213
|
|
|
|
1,891
|
|
|
|
|
|
Adjustments
|
|
|
(989
|
)
|
|
|
(37
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
2,805
|
|
|
$
|
2,012
|
|
|
$
|
188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
I-12
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 8.
|
Commitments
and Contingent Matters
|
Commitments
GM has guarantees related to its performance under operating
lease arrangements and the residual value of lease assets
totaling $639 million. Expiration dates vary, and certain
leases contain renewal options. The fair value of the underlying
assets is expected to fully mitigate GMs obligations under
these guarantees. Accordingly, no liabilities were recorded with
respect to such guarantees.
Also, GM has entered into agreements with certain suppliers and
service providers that guarantee the value of the
suppliers assets and agreements with third parties that
guarantee fulfillment of certain suppliers commitments.
The maximum exposure under these commitments amounts to
$129 million.
GMAC has guaranteed certain amounts related to the
securitization of mortgage loans, agency loan programs, loans
sold with recourse, and the repayment of third-party debt. In
addition, GMAC issues financial standby letters of credit as
part of their financing and mortgage operations. At
June 30, 2006 approximately $10 million was recorded
with respect to these guarantees, the maximum exposure under
which is approximately $7.5 billion.
In addition to guarantees, GM has entered into agreements
indemnifying certain parties with respect to environmental
conditions pertaining to ongoing or sold GM properties. Due to
the nature of the indemnifications, GMs maximum exposure
under these agreements cannot be estimated. No amounts have been
recorded for such indemnities.
In connection with certain divestitures prior to January 1,
2003, GM has provided guarantees with respect to benefits for
former GM employees relating to pensions, postretirement health
care, and life insurance. Other than items pertaining to the
change in the fourth quarter of 2005 charge with respect to the
contingent exposures relating to the Delphi Chapter 11
filing, including under the benefit guarantees, the maximum
exposure under these agreements cannot be estimated due to the
nature of these indemnities. No amounts have been recorded for
such indemnities as the Corporations obligations under
them are not probable and reasonably estimable.
In addition to the above, in the normal course of business GM
periodically enters into agreements that incorporate
indemnification provisions. While the maximum amount to which GM
may be exposed under such agreements cannot be estimated, it is
the opinion of management that these guarantees and
indemnifications are not expected to have a material adverse
effect on the Corporations consolidated financial position
or results of operations.
Contingent
Matters
Litigation is subject to uncertainties, and the outcome of
individual litigated matters is not predictable with assurance.
Various legal actions, governmental investigations, claims, and
proceedings are pending against the Corporation, including a
number of shareholder class actions, bondholder class actions,
shareholder derivative suits and ERISA class action and other
matters arising out of alleged product defects including
asbestos-related claims; employment-related matters;
governmental regulations relating to safety, emissions, and fuel
economy; product warranties; financial services; dealer,
supplier, and other contractual relationships; and environmental
matters. GM has established reserves for matters in which losses
are probable and can be reasonably estimated.
Some of the Corporations litigation may involve
compensatory, punitive, or other treble damage claims, or
demands for recall campaigns, incurred but not reported
asbestos-related claims, environmental remediation programs, or
sanctions, that if granted, could require the Corporation to pay
damages or make other expenditures in amounts that could not be
estimated at June 30, 2006. After discussion with counsel,
it is the opinion of management that such liability is not
expected to have a material adverse effect on the
Corporations consolidated financial condition or results
of operations.
I-13
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 8.
|
Commitments
and Contingent Matters (continued)
|
Delphi
Bankruptcy
On October 8, 2005, Delphi filed a petition for
Chapter 11 proceedings under the United States Bankruptcy
Code for itself and many of its U.S. subsidiaries. Delphi
is GMs largest supplier of automotive systems, components
and parts, and GM is Delphis largest customer.
GM has worked and will continue to work constructively in the
court proceedings with Delphi, Delphis unions, and other
participants in Delphis restructuring process. GMs
goal is to pursue outcomes that are in the best interests of GM
and its stockholders, and, to the extent conducive to those
goals, that enable Delphi to continue as an important supplier
to GM.
Delphi continues to assure GM that it expects no disruption in
its ability to supply GM with the systems, components and parts
it needs as Delphi pursues a restructuring plan under the
Chapter 11 process. Although the challenges faced by Delphi
during its restructuring process could create operating and
financial risks for GM, that process is also expected to present
opportunities for GM. These opportunities include reducing, over
the long term, the significant cost penalty GM incurs in
obtaining parts from Delphi, as well as improving the quality of
systems, components and parts GM procures from Delphi as a
result of the restructuring of Delphi through the
Chapter 11 process. However, there can be no assurance that
GM will be able to realize any benefits.
Delphi filed, on March 31, 2006, motions under the
U.S. Bankruptcy Code seeking authority to reject its
U.S. labor agreements and modify retiree welfare benefits.
The unions and certain other parties have filed objections to
these motions. Hearings on these motions were adjourned until
August 11, 2006, to allow Delphi, its unions, and GM
additional time to focus on reaching comprehensive consensual
agreements. While Delphi has indicated to us that it expects no
disruptions in its ability to continue supplying us with the
systems, components, and parts we need as Delphi pursues its
bankruptcy restructuring plan, labor disruptions at Delphi
resulting from Delphis pursuit of a restructuring plan
could seriously disrupt our North American operations, prevent
us from executing our GMNA turnaround initiatives, and
materially adversely impact our business. Accordingly,
resolution of the Delphi related issues remains a critical near
term priority.
Delphi also filed a motion on March 31, 2006 under the
U.S. Bankruptcy Code seeking authority to reject certain
supply contracts with GM. A hearing on this motion was adjourned
by the court until after the hearings related to Delphis
U.S. labor agreements and retiree welfare benefits are
completed or otherwise resolved. Although Delphi has not
rejected any GM contracts as of this time and has assured GM
that it does not intend to disrupt production at GM assembly
facilities, there is a risk that Delphi or one or more of its
affiliates may reject or threaten to reject individual contracts
with GM, either for the purpose of exiting specific lines of
business or in an attempt to increase the price GM pays for
certain parts and components. As a result, GM could be
materially adversely affected by disruption in the supply of
automotive systems, components and parts that could force the
suspension of production at GM assembly facilities.
Various financial obligations Delphi has to GM as of the date of
Delphis Chapter 11 filing, including the
$739 million payable for amounts that Delphi owed to GM
relating to Delphi employees who were formerly GM employees and
subsequently transferred back to GM as job openings became
available to them under certain employee flowback
arrangements, may be subject to compromise in the bankruptcy
proceedings, which may result in GM receiving payment of only a
portion, if any, of the face amount owed by Delphi.
GM is seeking to minimize this risk by protecting our right of
setoff against the $1.15 billion we owed to Delphi as of
the date of its Chapter 11 filing. A procedure for
determining setoff claims has been put in place by the
bankruptcy court. However, the extent to which these obligations
are covered by our right to setoff may be subject to dispute by
Delphi, the creditors committee, or Delphis other
creditors, and limitation by the court. GM cannot provide any
assurance that it will be able to fully or partially setoff such
amounts. However, to date setoffs of approximately
$53.6 million have been agreed to by Delphi and taken by
GM. Although GM believes that it is
I-14
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 8.
|
Commitments
and Contingent Matters (continued)
|
probable that it will be able to collect all of the amounts due
from Delphi, the financial impact of a substantial compromise of
our right of setoff could have a material adverse impact on our
financial position. In addition, the basis, amounts, and
priority of any claims against Delphi that GM currently has or
may have in the future may be challenged by other parties in
interest in Delphis bankruptcy proceeding. The scope and
results of such challenges cannot be predicted with certainty.
In connection with GMs spin-off of Delphi in 1999, GM
entered into separate agreements with the UAW, the International
Union of Electronics Workers Communication Workers
of America (IUE-CWA) and the United Steel Workers. In each of
these three agreements (Benefit Guarantee Agreement(s)), GM
provided contingent benefit guarantees to make payments for
limited pension and postretirement health care expenses and life
insurance (referred to as Other Postretirement Employee Benefits
or OPEB) to certain former GM U.S. hourly employees who
transferred to Delphi as part of the spin-off and meet the
eligibility requirements for such payments (Covered Employees).
Each Benefit Guarantee Agreement contains separate benefit
guarantees relating to pension and OPEB. These limited benefit
guarantees each have separate triggering events that initiate
potential GM liability if Delphi fails to provide the
corresponding benefit at the required level. Therefore, it is
possible that GM could incur liability under one of the
guarantees (e.g., pension) without triggering the other
guarantees (e.g., postretirement health care or life insurance).
In addition, with respect to pension benefits, GMs
obligation under the pension benefit guarantees only arises to
the extent that the combination of pension benefits provided by
Delphi and the Pension Benefit Guaranty Corporation (PBGC) falls
short of the amounts GM has guaranteed.
The Chapter 11 filing by Delphi does not by itself trigger
any of the benefit guarantees. Moreover, Delphis filing of
motions under the U.S. Bankruptcy Code to reject its
U.S. labor agreements and modify retiree welfare benefits
do not trigger any of the benefit guarantees. In addition, the
benefit guarantees expire on October 18, 2007 if not
previously triggered by Delphis failure to pay the
specified benefits. If a benefit guarantee is triggered before
its expiration date, GMs obligation could extend for the
lives of affected Covered Employees, subject to the applicable
terms of the pertinent benefit plans or other relevant
agreements.
The benefit guarantees do not obligate GM to guarantee any
benefits for Delphi retirees in excess of the levels of
corresponding benefits GM provides at any given time to
GMs own hourly retirees. Accordingly, if any of the
benefits GM provides to its hourly retirees are reduced, there
would be a similar reduction in GMs obligations under the
corresponding benefit guarantee.
A separate agreement between GM and Delphi requires Delphi to
indemnify GM if and to the extent GM makes payments under the
benefit guarantees to the UAW employees or retirees. GM received
a notice from Delphi, dated October 8, 2005, that it was
more likely than not that GM would become obligated to provide
benefits pursuant to the benefit guarantees to the UAW employees
or retirees. The notice stated that Delphi was unable at that
time to estimate the timing and scope of any benefits GM might
be required to provide under the benefit guarantees. Any
recovery by GM under indemnity claims against Delphi might be
subject to partial or complete discharge in the Delphi
reorganization proceeding. As a result, GMs claims for
indemnity may not be paid in part or in full.
As part of GMs health-care agreement negotiations with the
UAW, GM provided former GM employees who became Delphi employees
the potential to earn up to seven years of credited service for
purposes of eligibility for certain health-care benefits under
the GM/UAW benefit guarantee agreement.
As discussed in Note 7, GM together with Delphi and the UAW
announced on March 22, 2006 that they had entered into the
UAW Attrition Agreement, which is intended to reduce the number
of U.S. hourly employees at GM and Delphi through the
Attrition Program. When originally executed, Delphis
participation in the UAW Attrition Agreement was subject to
approval by the U.S. Bankruptcy Court for the Southern
District of New York (Bankruptcy Court), which has jurisdiction
over Delphis Chapter 11 proceedings. On April 7,
2006, the Bankruptcy Court declared in a hearing that
Delphis participation in the UAW Attrition Agreement was
approved. The UAW
I-15
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 8.
|
Commitments
and Contingent Matters (continued)
|
Attrition Agreement provides for a combination of early
retirement programs and other incentives designed to help reduce
employment levels at both GM and Delphi.
In the UAW Attrition Agreement, GM has agreed to assume certain
costs regarding UAW-represented Delphi employees. Specifically,
GM agreed to: (1) pay lump sums of $35,000 to certain
employees who participate in the Attrition Program;
(2) allow Delphi employees who agree to retire under the
Attrition Program to flowback to GM for purposes of retirement
whereby GM will assume all OPEB obligations to such retiree;
(3) subsidize, for an interim period of time, health care
and life insurance coverage for Delphi employees participating
in a special voluntary pre-retirement program if Delphi reduces
or eliminates its health care
and/or life
insurance coverage provided to active UAW employees; and
(4) accept 5,000 active flowback employees, and as a result
after they flow back, pay such employees wages and
benefits and incur pension and OPEB obligations for such
employees. The UAW Attrition Agreement provides that for such
costs, other than the $35,000 lump sum payment, GM will have a
prepetition, general unsecured claim assertable against the
bankruptcy estate of Delphi under certain existing agreements.
This claim is subject to the rights of parties in interest to
object to allowance on any grounds other than the claim did not
arise under the terms of the pre-existing contractual agreements
between GM and Delphi. GM believes that the UAW Attrition
Agreement will enhance the prospects for GM, the UAW and Delphi
to reach a broad-based consensual resolution of issues relating
to the Delphi restructuring, but significant obstacles remain.
As of June 30, 2006 approximately 12,500 Delphi employees
had elected one of the retirement options available under the
UAW Attrition Agreement.
On June 29, 2006 the Bankruptcy Court approved a motion by
Delphi to offer similar attrition packages and a buyout program
to approximately 8,500 hourly employees represented by the
IUE-CWA and a buyout program to hourly employees represented by
the UAW, many of whom were not eligible for the earlier offer.
GM and Delphi will share the cost of these programs. GM will
have an allowed prepetition, general unsecured claim against the
estate of Delphi for payments that it makes under the buyout
program and a prepetition, general unsecured claim for costs,
other than the $35,000 lump-sum payment, incurred in the IUE-CWA
attrition program assertable against the estate of Delphi under
certain existing agreements. This claim is subject to the rights
of parties in interest to object to allowance on any grounds
other than that the claim did not arise under the terms of the
pre-existing contractual agreements between GM and Delphi. In
addition, the basis, amounts, and priority of any claims against
Delphi that GM currently has or may have in the future may be
challenged by other parties in interest in Delphis
bankruptcy proceeding. The scope and results of such challenges
cannot be predicted with certainty. The estimated cost to GM of
these programs is comprehended in the pre-tax charge of
$5.5 billion recorded by GM in the fourth quarter of 2005
related to GMs contingent exposure related to
Delphis bankruptcy filing.
GM believes that it is probable that it has incurred a
contingent liability due to Delphis Chapter 11
filing. GM believes that the range of the contingent exposures
is between $5.5 billion and $12 billion, with amounts
near the low end of the range considered more possible than
amounts near the high end of the range. GM established a
liability of $5.5 billion ($3.6 billion after tax) for
this contingent exposure in the fourth quarter of 2005, and has
made no adjustments to that liability as of June 30, 2006.
These views reflect GMs current assessment that it is
unlikely that a Chapter 11 process will result in both a
termination of Delphis pension plan and complete
elimination of its OPEB plans. The amount of this charge may
change, depending on the result of discussions among GM, Delphi,
and Delphis unions, and other factors. GM is currently
unable to estimate the amount of additional charges, if any,
which may arise from Delphis Chapter 11 filing. A
consensual agreement to resolve the Delphi matter may cause GM
to incur additional costs in exchange for benefits that would
accrue to GM over time.
With respect to the possible cash flow effect on GM related to
its ability to make either pension or OPEB payments to Delphi
retirees, if any are required under the benefit guarantees, GM
would expect to make such payments from ongoing operating cash
flow and financings. Such payments, if any, are not expected to
have a material effect on GMs cash flows in the
short-term. However, if payable, these payments would be likely
to increase over time, and could have a material effect on
GMs liquidity in coming years. (For reference,
Delphis 2005 Annual Report on
Form 10-K
reported that its benefits paid for 2005 was $231 million,
which included
I-16
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 8. |
Commitments and Contingent
Matters (concluded)
|
$182 million for both hourly and salaried retirees, the
latter of whom are not covered under the Benefit Guarantee
Agreements, plus $54 million in payments to GM for certain
former Delphi hourly employees who flowed back to retire from
GM, net of $5 million of payments from GM related to
employees who flowed from GM to Delphi after the Delphi
spin-off). If benefits to Delphis U.S. hourly
employees under Delphis pension plan are reduced or
terminated, the resulting effect on GMs cash flows in
future years due to the Benefit Guarantee Agreements is
currently not reasonably estimable.
|
|
Note 9.
|
Comprehensive
Income (Loss)
|
GMs total comprehensive income (loss), net of tax, was as
follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Net loss
|
|
$
|
(3,379
|
)
|
|
$
|
(987
|
)
|
|
$
|
(2,934
|
)
|
|
$
|
(2,240
|
)
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated foreign currency
translation
|
|
$
|
15
|
|
|
$
|
139
|
|
|
$
|
43
|
|
|
$
|
(451
|
)
|
Net gain/loss on derivatives
|
|
|
40
|
|
|
|
(281
|
)
|
|
|
416
|
|
|
|
(258
|
)
|
Net unrealized gains (losses) on
securities
|
|
|
(323
|
)
|
|
|
152
|
|
|
|
(153
|
)
|
|
|
(64
|
)
|
Minimum pension liability
adjustment
|
|
|
(6
|
)
|
|
|
(3
|
)
|
|
|
(54
|
)
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income
(loss)
|
|
|
(274
|
)
|
|
|
7
|
|
|
|
252
|
|
|
|
(719
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
$
|
(3,653
|
)
|
|
$
|
(980
|
)
|
|
$
|
(2,682
|
)
|
|
$
|
(2,959
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 10.
|
Earnings
(Loss) Per Share Attributable to Common Stock
|
Earnings per share (EPS) attributable to GM common stock was
determined based on earnings for the period divided by the
weighted-average number of common shares outstanding during the
period. Diluted EPS attributable to GM common stock considers
the effect of potential common shares, unless the inclusion of
the potential common shares would have an antidilutive effect.
Due to the net losses for all periods presented, loss per share,
basic and diluted are the same since the effect of potential
common shares would have an antidilutive effect.
Certain stock options and convertible securities were not
included in the computation of diluted EPS are for the periods
presented since the instruments underlying exercise prices
were greater than the average market prices of GM
$12/3
par value common stock and inclusion would be antidilutive. Such
shares not included in the computation of diluted EPS were
107 million and 112 million as of June 30, 2006
and 2005, respectively.
|
|
Note 11.
|
Depreciation
and Amortization
|
Depreciation and amortization, including asset impairment
charges, included in cost of sales and selling, general and
administrative expenses were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
|
Ended June 30,
|
|
|
Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Depreciation
|
|
$
|
1,709
|
|
|
$
|
2,693
|
|
|
$
|
4,328
|
|
|
$
|
5,358
|
|
Amortization of special tools
|
|
|
1,112
|
|
|
|
803
|
|
|
|
1,845
|
|
|
|
1,619
|
|
Amortization of intangible assets
|
|
|
20
|
|
|
|
16
|
|
|
|
40
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,841
|
|
|
$
|
3,512
|
|
|
$
|
6,213
|
|
|
$
|
7,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
I-17
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 12.
|
Pensions
and Other Postretirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
Non-U.S. Plans
|
|
|
U.S. Other
|
|
|
Non-U.S.
|
|
|
|
Pension Benefits
|
|
|
Pension Benefits
|
|
|
Benefits
|
|
|
Other Benefits
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
Ended June 30,
|
|
|
Ended June 30,
|
|
|
Ended June 30,
|
|
|
Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
Components of expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
172
|
|
|
$
|
279
|
|
|
$
|
128
|
|
|
$
|
70
|
|
|
$
|
168
|
|
|
$
|
176
|
|
|
$
|
13
|
|
|
$
|
12
|
|
Interest cost
|
|
|
1,237
|
|
|
|
1,221
|
|
|
|
217
|
|
|
|
235
|
|
|
|
1,043
|
|
|
|
1,026
|
|
|
|
48
|
|
|
|
53
|
|
Expected return on plan assets
|
|
|
(2,044
|
)
|
|
|
(1,974
|
)
|
|
|
(177
|
)
|
|
|
(182
|
)
|
|
|
(375
|
)
|
|
|
(421
|
)
|
|
|
|
|
|
|
|
|
Amortization of prior service cost
|
|
|
184
|
|
|
|
291
|
|
|
|
26
|
|
|
|
26
|
|
|
|
(105
|
)
|
|
|
(17
|
)
|
|
|
(21
|
)
|
|
|
2
|
|
Recognized net actuarial loss
|
|
|
280
|
|
|
|
517
|
|
|
|
96
|
|
|
|
69
|
|
|
|
617
|
|
|
|
562
|
|
|
|
34
|
|
|
|
22
|
|
Curtailments, settlements, and
other
|
|
|
4,367
|
|
|
|
21
|
|
|
|
18
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net expense
|
|
$
|
4,196
|
|
|
$
|
355
|
|
|
$
|
308
|
|
|
$
|
243
|
|
|
$
|
1,348
|
|
|
$
|
1,326
|
|
|
$
|
74
|
|
|
$
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
Non-U.S. Plans
|
|
|
U.S. Other
|
|
|
Non-U.S.
|
|
|
|
Pension Benefits
|
|
|
Pension Benefits
|
|
|
Benefits
|
|
|
Other Benefits
|
|
|
|
Six Months
|
|
|
Six Months
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended June 30,
|
|
|
Ended June 30,
|
|
|
Ended June 30,
|
|
|
Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
Components of expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
425
|
|
|
$
|
559
|
|
|
$
|
241
|
|
|
$
|
142
|
|
|
$
|
344
|
|
|
$
|
352
|
|
|
$
|
26
|
|
|
$
|
24
|
|
Interest cost
|
|
|
2,456
|
|
|
|
2,442
|
|
|
|
428
|
|
|
|
476
|
|
|
|
2,120
|
|
|
|
2,053
|
|
|
|
95
|
|
|
|
107
|
|
Expected return on plan assets
|
|
|
(4,058
|
)
|
|
|
(3,948
|
)
|
|
|
(351
|
)
|
|
|
(367
|
)
|
|
|
(750
|
)
|
|
|
(842
|
)
|
|
|
|
|
|
|
|
|
Amortization of prior service cost
|
|
|
457
|
|
|
|
582
|
|
|
|
50
|
|
|
|
53
|
|
|
|
(133
|
)
|
|
|
(35
|
)
|
|
|
(41
|
)
|
|
|
4
|
|
Recognized net actuarial loss
|
|
|
686
|
|
|
|
1,033
|
|
|
|
190
|
|
|
|
138
|
|
|
|
1,236
|
|
|
|
1,124
|
|
|
|
66
|
|
|
|
44
|
|
Curtailments, settlements, and
other
|
|
|
4,390
|
|
|
|
112
|
|
|
|
31
|
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net expense
|
|
$
|
4,356
|
|
|
$
|
780
|
|
|
$
|
589
|
|
|
$
|
526
|
|
|
$
|
2,817
|
|
|
$
|
2,652
|
|
|
$
|
146
|
|
|
$
|
181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On February 7, 2006, GM announced it would increase the
U.S. salaried workforces participation in the cost of
health care, capping GMs contributions to salaried retiree
health care at the level of 2006 expenditures. On March 7,
2006, GM announced it would modify the terms of the
U.S. salaried pension plan. The remeasurement of the
U.S. salaried OPEB plans as of February 9, 2006 as a
result of these benefit modifications generated a
$0.1 billion reduction in OPEB expense for the three and
six months ended June 30, 2006. The remeasurement of
GMs U.S. salaried pension plan as of March 31,
2006 as a result of these benefit modifications generated a
$0.1 billion reduction in pension expense for the three and
six months ended June 30, 2006. Both of these impacts are
reflected in the table above.
Effective March 31, 2006, the U.S. District Court for
the Eastern District of Michigan approved the tentative
settlement agreement with the UAW (UAW Settlement Agreement)
related to reductions in hourly retiree health care; this
approval is now under appeal. Given the significance of these
events, the plans were remeasured. The remeasurement of the
U.S. hourly OPEB plans as of March 31, 2006 due to the
previously announced UAW Settlement Agreement will generate a
change in OPEB expense beginning three months subsequent to the
remeasurement date. Accordingly, the second quarter of 2006 OPEB
expense in the tables above does not reflect
I-18
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 12.
|
Pensions
and Other Postretirement
Benefits (continued)
|
any amount associated with this hourly plan remeasurement. The
effect of the hourly retiree health care remeasurement will be
reflected in U.S. OPEB expense in the third quarter of 2006.
GM will account for the reduced health care coverage provisions
of the UAW Settlement Agreement as an amendment of GMs
Health Care Program for Hourly Employees (the Modified Plan).
The reduced healthcare coverage provisions of the UAW Settlement
Agreement negotiated earlier this year were previously estimated
to result in an approximately $15 billion reduction of
GMs OPEB obligations related to the Modified Plan. In
conjunction with the measurement of the Modified Plan as of
March 31, 2006, the estimated reduction of GMs OPEB
obligations increased from $15 billion to $17 billion
attributable primarily to an increase in the discount rate
utilized in the March 31, 2006 measurement. The reduction
will be amortized on a straight-line basis over the remaining
service lives of active UAW hourly employees (7.4 years) as
a reduction of OPEB expense. This reduction of expense will be
partially offset by the amortization of approximately
$3 billion related to contributions to the Mitigation Plan
as discussed below, and the expense related to previously
negotiated wage increases for active employees now diverted to
the Mitigation Plan.
The Settlement Agreement also provides that GM will make
contributions to a new independent Voluntary Employees
Beneficiary Association (the Mitigation Plan). The assets of the
Mitigation Plan will be used to mitigate the effect of reduced
GM health care coverage on individual UAW retirees and,
depending on the level of mitigation, are expected to be
available for a number of years. The new independent Mitigation
Plan will be partially funded by GM contributions of
$1 billion in each of 2006, 2007, and 2011. The 2011
contribution may be accelerated under specified circumstances.
GM will also make future contributions subject to provisions of
the Settlement Agreement that relate to profit sharing payments,
increases in the value of a notional number of shares of
GMs
$12/3
par value common stock, as well as wage deferral payments, and
dividend payments. During the second quarter of 2006, as
required in the UAW Settlement Agreement, GM made a
$1 billion contribution to the independent Voluntary
Employees Beneficiary Association (VEBA).
As detailed in Note 7, GM, Delphi, and the UAW reached an
agreement on March 22, 2006 intended to reduce the number
of U.S. hourly employees through the Attrition Program. As
a result of the Attrition Program, GM will recognize curtailment
losses under SFAS No. 88, Employers
Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits and
SFAS No. 106, Employers Accounting for
Postretirement Benefits Other than Pensions, due to the
significant reduction in the expected aggregate years of future
service of the employees in the U.S. hourly pension and
OPEB plans, respectively. The curtailment losses will include
recognition of the change in the projected benefit obligation
(PBO) or accumulated postretirement benefit obligation (APBO)
and a portion of the previously unrecognized prior service cost
reflecting the reduction in expected future service. GM
recognized a curtailment loss related to the U.S. hourly
pension plan measured at April 30, 2006 of approximately
$4.4 billion, which is recorded in Automotive cost of sales
in GMs Condensed Consolidated Statements of Operations for
the three and six months ended June 30, 2006. The impact of
the curtailment loss related to the U.S. hourly OPEB plans
measured at May 31, 2006 as a result of the Attrition
Program is expected to be approximately $0.3 billion. This
U.S. hourly OPEB curtailment loss will be recorded in the
third quarter of 2006 resulting from the use of a measurement
date of September 30 as compared to GMs
December 31 year end.
The remeasurement of GMs U.S. hourly pension plan as
of April 30, 2006 as a result of the Attrition Program
generated a $0.2 billion reduction in pension expense for
the three and six months ended June 30, 2006. The
remeasurement included a change in retirement assumptions
including an increase in the average remaining service life for
the remaining active employees. This impact is reflected in the
table above. The remeasurement of the U.S. hourly OPEB
plans as of May 31, 2006 as a result of the Attrition
Program will generate a change in OPEB expense beginning three
months subsequent to the remeasurement date. Accordingly, the
second quarter of 2006 OPEB expense in the tables above does not
reflect any amount associated with this hourly plan
remeasurement. The effect of the Attrition Program remeasurement
will be reflected in U.S. OPEB expense in the third quarter
of 2006.
I-19
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 12. |
Pensions and Other Postretirement
Benefits (concluded)
|
The remeasurements of the U.S. salaried and hourly pension
plans reduced the U.S. pension PBO by $3.9 billion.
The weighted average discount rate used to determine the benefit
obligation was 6.15%. This represents a 45 basis point increase
from the 5.70% weighted average discount rate used at year-end
2005. The remeasurements for U.S. salaried and hourly OPEB
for health care benefit modifications reduced the U.S. OPEB
APBO by $19.3 billion. The weighted average discount rate
used to determine the benefit obligation was 5.95%. This
represents a 50 basis point increase from the 5.45%
weighted average discount rate used at year-end 2005.
During the second quarter of 2006, GM had no withdrawals from
the VEBA trust. During the first quarter of 2006, GM made a
$2 billion withdrawal from the VEBA trust. On July 31,
2006, GM withdrew $2 billion from the VEBA trust to
reimburse GM payments for hourly retiree health-care and life
insurance. On a quarterly basis, GM evaluates the need for
additional VEBA withdrawals.
|
|
Note 13.
|
Impairments,
Restructuring and Other Initiatives
|
Impairments
In the second quarter of 2006, GM recorded impairment charges
totaling $363 million ($234 million after tax) related
to product specific assets. Of this, $303 million
($197 million after tax) was at GMNA and $60 million
($37 million after tax) was at GME. In addition, GM
recorded an asset impairment charge of $84 million pre-tax
($57 million after tax), in connection with the announced
closure of GMs Portugal assembly plant, which is scheduled
to close in December 2006. Asset impairment charges are recorded
in Automotive cost of sales in the Condensed Consolidated
Statements of Operations.
GMNA results in the first quarter of 2005 include a charge of
$84 million after tax, for the write-down to fair market
value of various plant assets in connection with the first
quarter 2005 announcement to discontinue production at the
Lansing assembly plant during the second quarter of 2005.
GM assesses the carrying value of long-lived assets held and
used, other than goodwill and intangible assets with indefinite
lives, in connection with the annual business planning cycle or
when events and circumstances indicate the need for such
reviews. An impairment analysis is performed by comparing
projected cash flows to the carrying value of specific
product-related assets. As a result of the lack of improved
performance on particular product related assets, these reviews
resulted in certain assets not being recoverable.
Restructuring
and Other Initiatives
GMNA results in the first quarter of 2006 include a charge of
$65 million after tax, related to costs expected to be
incurred in 2006 under a new salaried severance program, which
allows involuntarily terminated employees to receive continued
salary and benefits for a period of time after termination. See
Note 7.
GME results for the three- and six-month periods ended
June 30, 2006 include after-tax charges for separations and
contract cancellations of $88 million and
$128 million, respectively. The charges in the second
quarter of 2006 relate to the restructuring plan announced in
the fourth quarter of 2004 as well as to the closure of
GMs Portugal assembly plant and to the reduction of one
shift at the Ellesmere Port plant in the U.K. The charge in the
second quarter of 2006 for the restructuring plan announced in
2004 was $39 million, after tax. The original plan targeted
a total reduction of 12,000 employees over the period 2005
through 2007 through separation programs, early retirements, and
selected outsourcing initiatives. As of June 30, 2006
approximately 10,300 employees have left GM under this
restructuring program and the program is on target to achieve
the total headcount reduction, as well as the targeted annual
structural cost reduction of $600 million by 2006.
Additional charges related to this program of about
$70 million, after tax, are expected through the end of
2007. The charge in the second quarter for the closure of the
Portugal plant was $23 million, after tax, and was related
to separations and contract cancellations. The plant is
scheduled to close in December 2006, resulting in a total
separation of approximately 1,100 employees.
I-20
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 13. |
Impairments, Restructuring and Other
Initiatives (concluded)
|
Further charges are expected in the coming quarters of 2006 as
the restructuring activities develop. The charge in the second
quarter for the shift reduction in Ellesmere Port was
$26 million, after tax. The shift reduction is targeted to
reduce the work force in the U.K. by approximately 1,100
employees by the end of 2006. Additional separation charges will
be recorded in the coming quarters of 2006 as further employees
sign up for this separation program. The estimated total cost of
the program is approximately $90 million, after tax. For
the three- and six-month periods ended June 30, 2005 the
after-tax charge was $126 million and $548 million,
respectively. These charges were mainly related to the
restructuring plan announced in the fourth quarter of 2004 (as
discussed further above) and covered about 6,250 people for the
six-month period. The charge in the second quarter of 2005 also
included costs related to the dissolution of the Powertrain
joint ventures with Fiat.
Results for the three-and six-month periods ended June 30,
2006 include after tax restructuring charges recognized at
GMLAAM of $15 million and $42 million, respectively.
These restructuring charges relate to the costs of voluntary
employee separations at GM do Brasil.
Results in the first quarter of 2005 include after tax charges
of $140 million in GMNA and $8 million in Other
Operations related to voluntary early retirement and other
separation programs with respect to certain salaried employees
in the U.S.
|
|
Note 14.
|
Stock
Incentive Plans
|
GMs stock incentive plans consist of the General Motors
2002 Stock Incentive Plan, formerly the 1997 General Motors
Amended Stock Incentive Plan (GMSIP), the General Motors 1998
Salaried Stock Option Plan (GMSSOP), the General Motors 2002
Long Term Incentive Plan (GMLTIP) and the General Motors 2006
Cash-Based Restricted Stock Unit Plan (GMCRSU), collectively the
Plans. The GMSIP, the GMLTIP and the GMCRSU are administered by
the Executive Compensation Committee of GMs Board of
Directors. The GMSSOP is administered by the Vice President of
Global Human Resources.
The compensation cost that has been charged against income for
the above plans was approximately $51.6 million and
$25.5 million for the three months ended June 30, 2006
and 2005, respectively and $84 million and
$50.9 million for the six months ended June 30, 2006
and 2005, respectively. The total income tax benefit recognized
in the statement of operations for share-based compensation
arrangements was approximately $18.1 million and
$9.6 million for the three months ended June 30, 2006
and 2005, respectively and $28 million and
$19.3 million for the six months ended June 30, 2006
and 2005, respectively.
GMSIP
and GMSSOP
Under the GMSIP, 27.4 million shares of GM
$12/3
par value common stock may be granted from June 1, 2002,
through May 31, 2007, of which approximately 4 million
were available for grants at June 30, 2006. Any shares
granted and undelivered under the GMSIP, due primarily to
expiration or termination, become again available for grant.
Options granted prior to 1997 under the GMSIP generally are
exercisable one-half after one year and one-half after two years
from the dates of grant. Stock option grants awarded since 1997
are generally exercisable one-third after one year, one-third
after two years and fully after three years from the dates of
grant. Option prices are 100% of fair market value on the dates
of grant and the options generally expire 10 years from the
dates of grant, subject to earlier termination under certain
conditions.
Under the GMSSOP, which commenced January 1, 1998 and ends
December 31, 2007, the number of shares of GM
$12/3
par value common stock that may be granted each year is
determined by management. Approximately 1.2 million shares
of GM
$12/3
par value common stock were available for grants at
June 30, 2006. Stock options vest one year following the
date of grant and are exercisable two years from the date of
grant. Option prices are 100% of fair market value on the dates
of grant and the options generally expire 10 years and two
days from the dates of grant subject to earlier termination
under certain conditions.
I-21
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 14.
|
Stock
Incentive Plans (continued)
|
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the
weighted-average assumptions noted in the following table.
Expected volatilities are based on both the implied and
historical volatility of the Corporations stock. The
Corporation uses historical data to estimate option exercise and
employee termination within the valuation model. The expected
term of options represents the period of time that options
granted are expected to be outstanding. The interest rate for
periods during the expected life of the option is based on the
U.S. Treasury yield curve in effect at the time of the
grant.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
GMSIP
|
|
|
GMSIP
|
|
|
Interest rate
|
|
|
4.63
|
%
|
|
|
3.74
|
%
|
Expected life (years)
|
|
|
6
|
|
|
|
6
|
|
Expected volatility
|
|
|
48.37
|
%
|
|
|
32.37
|
%
|
Dividend yield
|
|
|
4.78
|
%
|
|
|
5.5
|
%
|
Changes in the status of outstanding options were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GMSIP
|
|
|
|
$12/3 Par
Value Common
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Shares under
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Option
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
|
Options outstanding at
January 1, 2006
|
|
|
84,130,586
|
|
|
$
|
53.11
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
2,702,796
|
|
|
|
20.90
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminated
|
|
|
3,906,131
|
|
|
$
|
45.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at
June 30, 2006
|
|
|
82,927,251
|
|
|
$
|
52.41
|
|
|
|
5.0
|
|
|
$
|
23,824,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at
June 30, 2006
|
|
|
72,722,297
|
|
|
$
|
54.64
|
|
|
|
4.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GMSSOP
|
|
|
|
$12/3 Par
Value Common
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Shares under
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Option
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
|
Options outstanding at
January 1, 2006
|
|
|
27,213,635
|
|
|
$
|
55.19
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminated
|
|
|
442,235
|
|
|
$
|
53.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at
June 30, 2006
|
|
|
26,771,400
|
|
|
$
|
55.22
|
|
|
|
5.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at
June 30, 2006
|
|
|
26,771,400
|
|
|
$
|
55.22
|
|
|
|
5.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted-average grant-date fair value was $7.06 and $7.21
for the GMSIP options granted during the three- and six-month
periods ended June 30, 2006 and 2005, respectively. There
were no options granted or exercised under the GMSSOP during the
three and six month periods ended June 30, 2006 and 2005.
I-22
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
GMLTIP
The GMLTIP consists of award opportunities granted to
participants that are based on the achievement of specific
corporate business criteria. The target number of shares of GM
$12/3
par value common stock that may be granted each year is
determined by management. These grants are subject to a
three-year performance period and the final award payout may
vary based on the achievement of those criteria. The condition
for all three plans is a minimum percentile ranking of GMs
TSR among the companies in the S&P 500.
At June 30, 2006, approximately 5.8 million target
shares were outstanding under the GMLTIP. Of these outstanding
shares, a total of 1.3 million were granted in 2004 at a
grant-date fair value of $53.92. Management intends to settle
these awards with GM
$12/3
par value common stock. Of the remaining outstanding shares,
approximately 2.0 million were granted in 2005 at a fair
value of $36.37, and 2.5 million were granted for the six
month period ended June 30, 2006 at a fair value of $24.81.
Management is required to settle these awards in cash. As a
result, these cash-settled awards are recorded as a liability
until the date of final award payout. In accordance with
SFAS No. 123R, the fair value of each cash-settled
award is recalculated at the end of each reporting period and
the liability and expense adjusted based on the change in fair
value. The preceding is the targeted number of shares that would
be used in the final award calculation should the targeted
performance condition be achieved. Final payout is subject to
approval by the Executive Compensation Committee of the Board of
Directors. The fair value at June 30, 2006 was $42.92 for
the awards granted during the three month period ended
June 30, 2006 and $22.39 for the awards granted in 2005.
Prior to the adoption of SFAS No. 123R, the fair value
of each award under the GMLTIP was equal to the fair market
value of the underlying shares on the date of grant. Beginning
January 1, 2006 in accordance with the adoption of
SFAS No. 123R, the fair value of each cash-settled
award under the GMLTIP is estimated on the date of grant, and
each subsequent reporting period, using a lattice-based option
valuation model that uses the assumptions noted in the following
table. Because lattice-based valuation models incorporate ranges
of assumptions for inputs, those ranges are disclosed. Expected
volatilities are based on the implied volatility from GMs
tradable options. The expected term of these target awards
represent the remaining time in the performance period. The
risk-free rate for periods during the contractual life of the
performance shares is based on the U.S. Treasury yield
curve in effect at the time of valuation. Because the payout
depends on the Corporations performance ranked with the
S&P 500, the valuation also depends on the performance of
other stocks in the S&P 500 from the grant date to the
exercise date as well as estimates of the correlations among
their future performances.
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30, 2006
|
|
|
Expected volatility
|
|
|
50.3
|
%
|
Expected dividends
|
|
|
N/A
|
|
Expected term (years)
|
|
|
2
|
|
Risk-free interest rate
|
|
|
5.72
|
%
|
The weighted average remaining contractual term was
1.71 years for target awards outstanding at June 30,
2006. There were no shares delivered or cash paid during the
three- and six-month periods ended June 30, 2006 and 2005.
GMCRSU
In 2006, the Corporation established a cash-based restricted
stock unit plan that provides restricted share units to certain
global executives. Awards under the plan vest and are paid in
one-third increments on each anniversary date of the award over
a three-year period. Compensation expense is recognized on a
straight-line basis over the requisite service period for each
separately vesting portion of the award. Since the awards are
settled in cash, these cash-settled awards are recorded as a
liability until the date of exercise. In accordance with
SFAS No. 123(R), the
I-23
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 14. |
Stock Incentive Plans (concluded)
|
fair value of each cash-settled award is recalculated at the end
of each reporting period and the liability and expense adjusted
based on the new fair value.
The fair value of each RSU is based on the Corporations
stock price on the date of grant and each subsequent reporting
period until date of settlement. There were 4.2 million
RSUs granted during the six month period ended June 30,
2006 with a fair value of $20.90 per share. The fair value
at June 30, 2006 was $29.79 per share.
The weighted average remaining contractual term was
2.5 years for the RSUs outstanding June 30, 2006.
There were no share units vested or delivered during the three
and six-month period ended June 30, 2006.
Summary
A summary of the status of the Corporations options as of
June 30, 2006 and the changes during the six month period
then ended, is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant-Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Nonvested at January 1, 2006
|
|
|
15,923,106
|
|
|
$
|
9.28
|
|
Granted
|
|
|
2,702,796
|
|
|
|
7.06
|
|
Vested
|
|
|
8,267,541
|
|
|
|
9.47
|
|
Forfeited
|
|
|
153,407
|
|
|
|
8.54
|
|
|
|
|
|
|
|
|
|
|
Nonvested at June 30, 2006
|
|
|
10,204,954
|
|
|
$
|
8.55
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2006, there was $31.4 million of total
unrecognized compensation cost related to nonvested share-based
compensation arrangements granted under the Plans. That cost is
expected to be recognized over a weighted-average period of
0.7 years.
Cash received from option exercise under all share-based payment
arrangements for the six months ended June 30, 2006 and
2005 was $0 and $2.1 million, respectively. The tax benefit
from the exercise of the share-based payment arrangements
totaled $0 and $0.8 million, respectively, for the
six-months ended June 30, 2006 and 2005.
|
|
Note 15.
|
Other
Income and Other Expenses
|
Other income included the following (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Gain on sale of Isuzu interest
|
|
$
|
311
|
|
|
$
|
|
|
|
$
|
311
|
|
|
$
|
|
|
Gain on sale of Suzuki interest
(See Note 5)
|
|
|
|
|
|
|
|
|
|
|
630
|
|
|
|
|
|
Gain on sale of GMAC investment in
a regional homebuilder
(See Note 5)
|
|
|
415
|
|
|
|
|
|
|
|
415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Income
|
|
$
|
726
|
|
|
$
|
|
|
|
$
|
1,356
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
I-24
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 15.
|
Other
Income and Other Expenses (concluded)
|
In April 2006, GM sold its 7.9% equity interest
(90.09 million shares) in Isuzu Motors Ltd. (Isuzu). The
sale of GMs interest in Isuzu generated cash proceeds of
$311 million and a pretax gain on sale of $311 million
($212 million after tax), which is reflected in Other
Income in the Condensed Consolidated Statements of Operations
for the three and six months ended June 30, 2006. GMs
basis in its investment was written down to zero in 2001.
Other expenses included the following (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Month
|
|
|
|
Ended June 30,
|
|
|
Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Impairment loss on controlling
interest of GMAC (See Note 2)
|
|
$
|
1,208
|
|
|
$
|
|
|
|
$
|
1,208
|
|
|
$
|
|
|
FHI impairment loss (See
Note 5)
|
|
|
|
|
|
|
812
|
|
|
|
|
|
|
|
812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses
|
|
$
|
1,208
|
|
|
$
|
812
|
|
|
$
|
1,208
|
|
|
$
|
812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 16.
|
Segment
Reporting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GM
|
|
|
|
|
|
Total
|
|
|
|
|
|
Auto &
|
|
|
|
|
|
Financing
|
|
|
Total
|
|
|
|
|
|
|
GMNA
|
|
|
GME
|
|
|
LAAM
|
|
|
GMAP
|
|
|
GMA
|
|
|
Other
|
|
|
Other
|
|
|
GMAC
|
|
|
(d)
|
|
|
Financing
|
|
|
Total
|
|
|
|
(Dollars in millions)
|
|
|
For the Three Months Ended
June 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External customers
|
|
$
|
30,178
|
|
|
$
|
8,237
|
|
|
$
|
3,687
|
|
|
$
|
2,831
|
|
|
$
|
44,933
|
|
|
$
|
(331
|
)
|
|
$
|
44,602
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
44,602
|
|
Intersegment
|
|
|
(1,588
|
)
|
|
|
506
|
|
|
|
133
|
|
|
|
949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total automotive sales
|
|
|
28,590
|
|
|
|
8,743
|
|
|
|
3,820
|
|
|
|
3,780
|
|
|
|
44,933
|
|
|
|
(331
|
)
|
|
|
44,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,602
|
|
Financial services and insurance
revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,027
|
|
|
|
40
|
|
|
|
9,067
|
|
|
|
9,067
|
|
Other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
311
|
|
|
|
311
|
|
|
|
|
|
|
|
311
|
|
|
|
415
|
|
|
|
|
|
|
|
415
|
|
|
|
726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenues
|
|
$
|
28,590
|
|
|
$
|
8,743
|
|
|
$
|
3,820
|
|
|
$
|
4,091
|
|
|
$
|
45,244
|
|
|
$
|
(331
|
)
|
|
$
|
44,913
|
|
|
$
|
9,442
|
|
|
$
|
40
|
|
|
$
|
9,482
|
|
|
$
|
54,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income(a)
|
|
$
|
293
|
|
|
$
|
125
|
|
|
$
|
26
|
|
|
$
|
26
|
|
|
$
|
470
|
|
|
$
|
(291
|
)
|
|
$
|
179
|
|
|
$
|
701
|
|
|
$
|
(157
|
)
|
|
$
|
544
|
|
|
$
|
723
|
|
Interest expense
|
|
$
|
823
|
|
|
$
|
159
|
|
|
$
|
73
|
|
|
$
|
52
|
|
|
$
|
1,107
|
|
|
$
|
(384
|
)
|
|
$
|
723
|
|
|
$
|
3,819
|
|
|
$
|
(11
|
)
|
|
$
|
3,808
|
|
|
$
|
4,531
|
|
Net income (loss)(c)
|
|
$
|
(3,941
|
)
|
|
$
|
(58
|
)
|
|
$
|
140
|
|
|
$
|
379
|
|
|
$
|
(3,480
|
)
|
|
$
|
(108
|
)
|
|
$
|
(3,588
|
)
|
|
$
|
898
|
|
|
$
|
(689
|
)
|
|
$
|
209
|
|
|
$
|
(3,379
|
)
|
Segment assets
|
|
$
|
128,653
|
|
|
$
|
24,206
|
|
|
$
|
4,615
|
|
|
$
|
11,662
|
|
|
$
|
169,136
|
|
|
$
|
(713
|
)
|
|
$
|
168,423
|
|
|
$
|
308,372
|
|
|
$
|
(6,289
|
)
|
|
$
|
302,083
|
|
|
$
|
470,506
|
|
For the Three Months Ended
June 30, 2005(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External customers
|
|
$
|
27,967
|
|
|
$
|
8,096
|
|
|
$
|
2,742
|
|
|
$
|
1,640
|
|
|
$
|
40,445
|
|
|
$
|
(267
|
)
|
|
$
|
40,178
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
40,178
|
|
Intersegment
|
|
|
(969
|
)
|
|
|
494
|
|
|
|
193
|
|
|
|
282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total automotive sales
|
|
|
26,998
|
|
|
|
8,590
|
|
|
|
2,935
|
|
|
|
1,922
|
|
|
|
40,445
|
|
|
|
(267
|
)
|
|
|
40,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,178
|
|
Financial services and insurance
revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,319
|
|
|
|
(28
|
)
|
|
|
8,291
|
|
|
|
8,291
|
|
Other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenues
|
|
$
|
26,998
|
|
|
$
|
8,590
|
|
|
$
|
2,935
|
|
|
$
|
1,922
|
|
|
$
|
40,445
|
|
|
$
|
(267
|
)
|
|
$
|
40,178
|
|
|
$
|
8,319
|
|
|
$
|
(28
|
)
|
|
$
|
8,291
|
|
|
$
|
48,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income(a)
|
|
$
|
318
|
|
|
$
|
112
|
|
|
$
|
10
|
|
|
$
|
2
|
|
|
$
|
442
|
|
|
$
|
(252
|
)
|
|
$
|
190
|
|
|
$
|
432
|
|
|
$
|
(70
|
)
|
|
$
|
362
|
|
|
$
|
552
|
|
Interest expense
|
|
$
|
752
|
|
|
$
|
135
|
|
|
$
|
38
|
|
|
$
|
9
|
|
|
$
|
934
|
|
|
$
|
(263
|
)
|
|
$
|
671
|
|
|
$
|
3,050
|
|
|
$
|
(9
|
)
|
|
$
|
3,041
|
|
|
$
|
3,712
|
|
Net income (loss)
|
|
$
|
(1,137
|
)
|
|
$
|
(96
|
)
|
|
$
|
25
|
|
|
$
|
(605
|
)
|
|
$
|
(1,813
|
)
|
|
$
|
18
|
|
|
$
|
(1,795
|
)
|
|
$
|
816
|
|
|
$
|
(8
|
)
|
|
$
|
808
|
|
|
$
|
(987
|
)
|
Segment assets
|
|
$
|
123,941
|
|
|
$
|
24,594
|
|
|
$
|
4,869
|
|
|
$
|
9,356
|
|
|
$
|
162,760
|
|
|
$
|
(3,580
|
)
|
|
$
|
159,180
|
|
|
$
|
309,984
|
|
|
$
|
(3,163
|
)
|
|
$
|
306,821
|
|
|
$
|
466,001
|
|
I-25
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 16.
|
Segment
Reporting (concluded)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GM
|
|
|
|
|
|
Total
|
|
|
|
|
|
Auto &
|
|
|
|
|
|
Financing
|
|
|
Total
|
|
|
|
|
|
|
GMNA
|
|
|
GME
|
|
|
LAAM
|
|
|
GMAP
|
|
|
GMA
|
|
|
Other
|
|
|
Other
|
|
|
GMAC
|
|
|
(d)
|
|
|
Financing
|
|
|
Total
|
|
|
|
(Dollars in millions)
|
|
|
For the Six Months Ended
June 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External customers
|
|
$
|
60,048
|
|
|
$
|
15,838
|
|
|
$
|
6,649
|
|
|
$
|
5,463
|
|
|
$
|
87,998
|
|
|
$
|
(636
|
)
|
|
$
|
87,362
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
87,362
|
|
Intersegment
|
|
|
(2,927
|
)
|
|
|
996
|
|
|
|
311
|
|
|
|
1,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total automotive sales
|
|
|
57,121
|
|
|
|
16,834
|
|
|
|
6,960
|
|
|
|
7,083
|
|
|
|
87,998
|
|
|
|
(636
|
)
|
|
|
87,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87,362
|
|
Financial services and insurance
revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,849
|
|
|
|
73
|
|
|
|
17,922
|
|
|
|
17,922
|
|
Other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
941
|
|
|
|
941
|
|
|
|
|
|
|
|
941
|
|
|
|
415
|
|
|
|
|
|
|
|
415
|
|
|
|
1,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenues
|
|
$
|
57,121
|
|
|
$
|
16,834
|
|
|
$
|
6,960
|
|
|
$
|
8,024
|
|
|
$
|
88,939
|
|
|
$
|
(636
|
)
|
|
$
|
88,303
|
|
|
$
|
18,264
|
|
|
$
|
73
|
|
|
$
|
18,337
|
|
|
$
|
106,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income(a)
|
|
$
|
598
|
|
|
$
|
232
|
|
|
$
|
46
|
|
|
$
|
51
|
|
|
$
|
927
|
|
|
$
|
(556
|
)
|
|
$
|
371
|
|
|
$
|
1,306
|
|
|
$
|
(311
|
)
|
|
$
|
995
|
|
|
$
|
1,366
|
|
Interest expense
|
|
$
|
1,621
|
|
|
$
|
312
|
|
|
$
|
101
|
|
|
$
|
107
|
|
|
$
|
2,141
|
|
|
$
|
(734
|
)
|
|
$
|
1,407
|
|
|
$
|
7,381
|
|
|
$
|
(28
|
)
|
|
$
|
7,353
|
|
|
$
|
8,760
|
|
Net income (loss)(c)
|
|
$
|
(4,444
|
)
|
|
$
|
(10
|
)
|
|
$
|
169
|
|
|
$
|
832
|
|
|
$
|
(3,453
|
)
|
|
$
|
(328
|
)
|
|
$
|
(3,781
|
)
|
|
$
|
1,535
|
|
|
$
|
(688
|
)
|
|
$
|
847
|
|
|
$
|
(2,934
|
)
|
For the Six Months Ended
June 30, 2005(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External customers
|
|
$
|
53,968
|
|
|
$
|
15,753
|
|
|
$
|
4,876
|
|
|
$
|
3,175
|
|
|
$
|
77,772
|
|
|
$
|
(291
|
)
|
|
$
|
77,481
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
77,481
|
|
Intersegment
|
|
|
(1,743
|
)
|
|
|
945
|
|
|
|
358
|
|
|
|
441
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total automotive sales
|
|
|
52,225
|
|
|
|
16,698
|
|
|
|
5,234
|
|
|
|
3,616
|
|
|
|
77,773
|
|
|
|
(292
|
)
|
|
|
77,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77,481
|
|
Financial services and insurance
revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,540
|
|
|
|
221
|
|
|
|
16,761
|
|
|
|
16,761
|
|
Other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenues
|
|
$
|
52,225
|
|
|
$
|
16,698
|
|
|
$
|
5,234
|
|
|
$
|
3,616
|
|
|
$
|
77,773
|
|
|
$
|
(292
|
)
|
|
$
|
77,481
|
|
|
$
|
16,540
|
|
|
$
|
221
|
|
|
$
|
16,761
|
|
|
$
|
94,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income(a)
|
|
$
|
614
|
|
|
$
|
203
|
|
|
$
|
29
|
|
|
$
|
5
|
|
|
$
|
851
|
|
|
$
|
(452
|
)
|
|
$
|
399
|
|
|
$
|
909
|
|
|
$
|
(164
|
)
|
|
$
|
745
|
|
|
$
|
1,144
|
|
Interest expense
|
|
$
|
1,507
|
|
|
$
|
249
|
|
|
$
|
62
|
|
|
$
|
16
|
|
|
$
|
1,834
|
|
|
$
|
(478
|
)
|
|
$
|
1,356
|
|
|
$
|
6,051
|
|
|
$
|
(16
|
)
|
|
$
|
6,035
|
|
|
$
|
7,391
|
|
Net income (loss)
|
|
$
|
(2,874
|
)
|
|
$
|
(610
|
)
|
|
$
|
56
|
|
|
$
|
(535
|
)
|
|
$
|
(3,963
|
)
|
|
$
|
186
|
|
|
$
|
(3,777
|
)
|
|
$
|
1,544
|
|
|
$
|
(7
|
)
|
|
$
|
1,537
|
|
|
$
|
(2,240
|
)
|
|
|
|
(a) |
|
Interest income is included in net sales and revenues from
external customers. |
|
(b) |
|
Effective January 1, 2006, four powertrain entities were
transferred from GMNA to GME for management reporting.
Accordingly, second quarter of 2005 amounts have been revised
for comparability by reclassifying $127 million of revenue,
$16 million of net income and $383 million of segment
assets from GMNA to GME. For the six months ended June 30,
2005, amounts have been revised by reclassifying
$278 million of revenue and $49 million of net income
from GMNA to GME. |
|
(c) |
|
In the second quarter of 2006, GM recognized a non-cash pretax
impairment charge of $1.2 billion on the pending sale of a
controlling interest in GMAC which is reflected in the column
Other Financing. Refer to Note 2. |
|
(d) |
|
Other Financing includes the elimination from total assets of
net receivables from Auto & Other. Receivables
eliminated were $4.6 billion and $2.8 billion at
June 30, 2006 and 2005, respectively. |
|
|
Note 17.
|
Subsequent
Events
|
Amended
and Restated Credit Agreement
On July 20, 2006, GM executed a $4.63 billion amended
and restated credit agreement with a syndicate of banks, which
replaced GMs $5.6 billion unsecured line of credit.
The amended and restated credit agreement removes the
uncertainty that the Corporation previously reported as to
whether the bank syndicate would be required to honor a
borrowing request.
The amended and restated credit agreement provides additional
available liquidity that GM anticipates to draw on from time to
time to fund working capital and other needs. The facility is
comprised of a $4.48 billion secured line of credit that
terminates in July 2011 and a $0.15 billion unsecured line
of credit that terminates in June 2008. Under the
$4.48 billion secured facility, borrowings are limited to
an amount based on the value of the underlying collateral, which
consists of certain North American accounts receivable and
inventory of General Motors
I-26
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Concluded)
|
|
Note 17.
|
Subsequent
Events (concluded)
|
Corporation, Saturn Corporation, and General Motors of Canada,
Limited, certain plants, property and equipment of General
Motors of Canada, Limited, and a pledge of 65% of the stock of
the holding company for GMs indirect subsidiary GM de
Mexico. In addition to the $4.48 billion secured line of
credit, the collateral also secures certain lines of credit,
automatic clearinghouse and overdraft arrangements and letters
of credit provided by the same secured lenders of approximately
$1.5 billion. At GMs current credit rating, all-in
cost of borrowings from the secured line of credit would be
LIBOR (London InterBank Offered Rate) plus 225 basis
points, while all-in costs of borrowings from the unsecured line
of credit would be LIBOR plus 200 basis points. In
addition, secured lenders received a consent fee of
40 basis points. In the event of certain work stoppages,
the secured facility would be temporarily reduced to
$3.5 billion.
Conditions
and Approvals on the Pending Sale of the Controlling Interest in
GMAC
As disclosed in Note 2, the Purchase and Sale Agreement
(the Agreement) by GM, GMAC, and the consortium sets
forth a number of conditions to the Purchasers obligation
to consummate the GMAC transaction. These conditions include,
among others, reasonable satisfaction by the consortium, from
the Pension Benefit Guaranty Corporation (PBGC),
that after the closing of the GMAC transaction, GMAC and its
subsidiaries will not have any liability with respect to benefit
plans of GM that are subject to the Employee Retirement Income
Security Act of 1974 (ERISA).
The consortium has informed GM and GMAC that they deem this
condition has been satisfied by a letter from the PBGC stating
that it will not as a result of the GMAC Transaction take action
under ERISA to terminate GMs pension plans or impose
liability on the Purchaser, any of the LLC Members, GMAC, or any
of its subsidiaries.
On July 28, 2006, the Federal Deposit Insurance Corporation
(the FDIC) announced a six-month moratorium on final decisions
on notices filed under the Change in Bank Control Act with
regard to industrial loan companies (ILC). In connection with
the sale of the controlling interest in GMAC, a notice was
submitted to the FDIC. It appears the timing of any approval by
the FDIC is likely to be affected by the moratorium. GM and GMAC
are now working with the consortium to consider ways to try to
avoid delaying the targeted closing date until 2007, since FDIC
regulatory approval is a condition of the Agreement.
VEBA
On July 31, 2006, GM withdrew $2 billion from the VEBA
trust to reimburse GM payments for hourly retiree health-care
and life insurance.
* * * * *
I-27
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 2.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
Overview
General Motors Corporation (together with its subsidiaries, the
Corporation, General Motors, GM, we or us) is primarily engaged
in automotive production and marketing and financing and
insurance operations. GM designs, manufactures, and markets
vehicles worldwide, having its largest operating presence in
North America. GMs finance and insurance operations
primarily relate to GMAC LLC (formerly known as General Motors
Acceptance Corporation GMAC), a wholly owned subsidiary of GM,
which provides a broad range of financial services, including
automotive finance and mortgage products and services. As
discussed below, the sale of a 51% interest in GMAC to a
consortium of investors is pending.
Financial
Results
GMs consolidated net sales and revenues increased to
$54.4 billion in the second quarter of 2006 compared to
$48.5 billion in the second quarter of 2005. The second
quarter 2006 revenue levels were a record quarterly high for GM,
representing an increase of more than 12% from the second
quarter of 2005. GM recorded a consolidated net loss of
$3.4 billion in the second quarter of 2006, compared to a
net loss of $987 million in the second quarter of 2005.
GMACs net income in the second quarter of 2006 increased
by $82 million to $898 million, compared to
$816 million in the second quarter of 2005.
For the first six months of 2006, GMs consolidated net
sales and revenues were $106.6 billion, an increase of
$12.4 billion, or more than 13%, over the
$94.2 billion in the first half of 2005. GM has experienced
two consecutive quarters of record revenue for the first half of
2006. GM incurred a net loss of $2.9 billion for the first
six months of 2006 as compared to a net loss of
$2.2 billion for the same period in 2005.
GMs results of operations for the first half of 2006 were
most significantly affected by the following trends and
significant events:
Automotive
Operations
Total Automotive revenues were $88.9 billion for the first
half of 2006, which includes two consecutive quarters of record
revenue. GM experienced revenue improvements from all regions.
Notably GMNAs revenues increased 9.4% from the same period
in 2005 due to favorable net price obtained through a reduction
in sales incentive spending, as well as improvements in pricing
on recently launched full size utility vehicles such as the
Chevrolet Tahoe, GMC Yukon and Cadillac Escalade. GMAPs
revenues doubled from the previous period due to the
consolidation of GM Daewoo Auto & Technology Company
(GM Daewoo) beginning in June 2005. During the first half of
2006, GM achieved certain cost cutting measures that were
previously communicated as part of its turnaround plan.
Specifically, we continued to experience better vehicle quality
than our accrual rate for warranty claims per car which allowed
us to decrease our warranty accruals by $0.3 billion
after-tax. In addition we achieved savings of $0.3 billion
after tax due to the Attrition Program and other changes to our
salaried pension and OPEB plans that were previously announced.
Other structural costs were reduced by $0.5 billion
after-tax in such areas as engineering and marketing expense.
GMNA is increasing its target for reduction of structural costs
from the amount previously stated in GMs 2005 Annual
Report on
Form 10-K
by $2 billion to $9 billion on a running rate basis by
the end of 2006. Running rate basis refers to the average
annualized cost savings into the foreseeable future anticipated
to result from cost savings actions when fully implemented. GM
expects $6 billion of the structural cost reduction to be
realized during 2006, exceeding the $4 billion of
structural cost reductions previously estimated for calendar
year 2006 in GMs 2005 Annual Report on
Form 10-K.
This improvement is due to the financial impact of the UAW
Attrition Agreement, including the effect of the pension
remeasurement, and with the impact of the previously disclosed
change in accounting treatment for the contributions related to
the independent VEBA established under the UAW Settlement
Agreement. The expected total annual cash savings from
structural cost reductions remains $5 billion.
I-28
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Financial
Results (continued)
GM-UAW-Delphi
Special Attrition Program Agreement
As part of the initiatives to accelerate cost reductions and
bring our structural cost and employment levels in line with
revenues and demand for our vehicles, GM together with Delphi
and the International Union, United Automobile, Aerospace and
Agricultural Implement Workers of America (UAW) announced on
March 22, 2006 that they had entered into the UAW-GM-Delphi
Special Attrition Program Agreement (UAW Attrition Agreement),
which was intended to reduce the number of U.S. hourly
employees at GM and Delphi through the Attrition Program. When
originally executed, Delphis participation in the UAW
Attrition Agreement was subject to approval by the
U.S. Bankruptcy Court for the Southern District of New York
(Bankruptcy Court), which has jurisdiction over Delphis
Chapter 11 proceedings, and such approval was granted on
April 7, 2006. The UAW Attrition Agreement provides for a
combination of early retirement programs and other incentives
designed to help reduce employment levels at both GM and Delphi,
and by which GM will be able to reduce the number of employees
who are and will be in the JOBS bank in a cost effective manner.
In the UAW Attrition Agreement, GM agreed to assume certain
costs regarding UAW-represented Delphi employees. Specifically,
GM agreed to (1) pay lump sums of $35,000 to certain
employees who participate in the UAW Attrition Agreement;
(2) allow Delphi employees who agree to retire under the
UAW Attrition Agreement to flowback to GM for purposes of
retirement whereby GM will assume all OPEB obligations to such
retiree; (3) subsidize, for an interim period of time,
health care and life insurance coverage for Delphi employees
participating in a special voluntary pre-retirement program if
Delphi reduces or eliminates its health care
and/or life
insurance coverage provided to active UAW employees; and
(4) accept 5,000 active flowback employees, and as a result
after their flow-back, pay such employees wages and
benefits and incur pension and OPEB obligations for such
employees. The UAW Attrition Agreement provides that for such
costs, other than the $35,000 lump sum payment, GM will have a
prepetition, general unsecured claim assertable against the
bankruptcy estate of Delphi under certain existing agreements.
This claim is subject to the rights of parties in interest to
object to allowance on any grounds other than the claim did not
arise under the terms of the pre-existing contractual agreements
between GM and Delphi. GM believes that the UAW Attrition
Agreement will enhance the prospects for GM, the UAW and Delphi
to reach a broad-based consensual resolution of issues relating
to the Delphi restructuring, but significant obstacles remain.
Refer to our discussion of issues related to the Delphi
restructuring in the GM North America Restructuring
Plan Update section.
Also under the UAW Attrition Agreement, GM provided certain
UAW-represented employees at GM with (i) a lump sum payment
of $35,000 for normal or early voluntary retirements retroactive
to October 1, 2005; (ii) a mutually satisfactory
retirement for employees 50 years of age or older with at
least 10 years of credited service; (iii) payment of
gross monthly wages ranging from $2,750 to $2,900 to those
employees who participate in a special voluntary pre-retirement
program depending on years of credited service and plant work
location; and (iv) a buyout of $140,000 for employees with
ten or more years of seniority, or of $70,000 for employees with
less than 10 years seniority, provided such employees sever
all ties with GM and Delphi except for any vested pension
benefits.
GM employees had until June 23, 2006 to accept and
participate in the terms established under the UAW Attrition
Agreement followed by a seven day rescission period from the
date of acceptance. Approximately 34,400 GM hourly employees
(33,100 UAW-represented and 1,300 represented by the IUE-CWA)
have agreed to participate in the program. Employees who chose
to leave GM will retire or leave no later than January 1,
2007. GM will use temporary employees as necessary while
permanent replacements are put in place.
In addition, as of June 30, 2006, approximately 12,500
Delphi employees had chosen to participate in the Attrition
Program. On June 29, 2006, the Bankruptcy Court approved a
motion by Delphi to offer attrition packages and a buyout
program to approximately 8,500 hourly employees represented
by the IUE-CWA, and a buyout program to hourly employees
represented by the UAW, many of whom were not eligible for the
earlier offer. GM and Delphi will share the cost of these
programs. GM will have an allowed prepetition, general unsecured
claim against the bankruptcy estate of Delphi for payment that
it makes under the buyout programs and a prepetition, general
unsecured claim for costs, other than the $35,000 lump sum
payment, incurred in the IUE-CWA attrition
I-29
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Financial
Results (continued)
program assertable against the bankruptcy estate of Delphi under
certain existing agreements. The estimated cost to GM of these
programs is comprehended in the pretax charge of
$5.5 billion recorded by GM in the fourth quarter of 2005
related to GMs contingent exposure related to
Delphis bankruptcy filing.
GMNA recorded an after-tax charge of $3.7 billion in the
second quarter of 2006 related to the UAW Attrition Agreement.
This charge was comprised of the following: (1) an
after-tax charge of approximately $1.4 billion associated
with the $35,000 lump sum payments for normal or early voluntary
retirements between June 30, 2006 and the October 1,
2005 retroactive agreement date described above;
(2) curtailment loss of $2.9 billion after tax with
respect to its pension plan in conjunction with termination of a
significant number of employees as part of the plan to reduce
its workforce; and (3) a favorable offset of
$0.6 billion after tax for reduction in capacity action
charges taken in the fourth quarter 2005 due to lower than
anticipated JOBS expense. The impact of the UAW Attrition
Agreement on other postretirement benefits will be shown in our
results for the third quarter of 2006 and is expected to be
approximately $0.3 billion.
GMAC
Pending Sale of 51% Controlling Interest
On April 2, 2006, GM and its wholly owned subsidiaries,
GMAC and GM Finance Co. Holdings Inc., entered into a definitive
agreement pursuant to which GM will sell a 51% controlling
interest in GMAC for a purchase price of $7.4 billion to
FIM Holdings LLC (FIM Holdings). FIM Holdings is a consortium of
investors including Cerberus, FIM Investors LLC, the sole
managing member, and Citigroup Inc., Aozora Bank Ltd. and a
subsidiary of the PNC Financial Services Group, Inc. GM will
retain a 49% equity interest in GMAC. In addition, GM and the
consortium will invest $1.9 billion of cash in new GMAC
preferred equity, with $1.4 billion to be invested by GM
and $500 million to be invested by the consortium. The
transaction is subject to a number of U.S. and international
regulatory and other approvals.
This agreement is an important element in GMs current
turnaround efforts, and is expected to provide the following:
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Strong long term services agreement between GM and
GMAC As part of the transaction, GM and GMAC will
enter into a number of agreements that will require that GMAC
continue to allocate capital to automotive financing consistent
with historical practices, thereby continuing to provide
critical financing support to a significant share of GMs
global sales. While GMAC will retain the right to make
individual credit decisions, GMAC will commit to fund a broad
spectrum of customers and dealers consistent with historical
practice in the relevant jurisdictions. Subject to GMACs
fulfillment of certain conditions, GM will grant GMAC
exclusivity for 10 years for U.S., Canadian and
international GM-sponsored consumer and wholesale marketing
incentives, with the exception of Saturn branded products.
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Improved Liquidity Significant upfront sales
proceeds to bolster GM liquidity, strengthening GMs
balance sheet and funding the turnaround plan.
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Enhanced stockholder value through a stronger GMAC
GM will retain a 49% equity interest in GMAC, and will be able
to continue to participate in GMACs strong profitability
levels.
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Expected delinkage of GMACs credit rating from
GM GM expects the introduction of a new controlling
investor for GMAC, new capital at GMAC, and significantly
reduced intercompany exposures to GM will provide GMAC with a
solid foundation to improve its current credit rating, and
delink the GMAC credit ratings from GM.
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As part of the agreement, GM will retain an option, for
10 years after the closing of the transaction, to
repurchase from GMAC certain assets related to the automotive
finance business of the North American Operations and
International Operations of GMAC. GMs exercise of the
option is conditional on GMs credit rating being
investment grade or higher than GMACs credit rating. The
call option price will be calculated as the higher of
(i) fair market value or (ii) 9.5 times the
consolidated net income of GMACs automotive finance
business in either
I-30
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Financial
Results (continued)
the calendar year the call option is exercised or the calendar
year immediately following the year the call option is exercised.
GMAC expects to arrange two asset-backed funding facilities that
total up to $25 billion that will support GMACs
ongoing business and enhance GMACs liquidity position. A
$10 billion facility is expected to be available before
closing and the other facility is expected to be available on or
after closing. Citigroup has committed $12.5 billion in the
aggregate to those two facilities. The funding facilities are in
addition to Citigroups initial equity investment in GMAC.
Prior to consummation of the agreement, (i) certain assets
with respect to automotive leases and retail installment sales
contracts owned by GMAC and its affiliates having a net book
value of approximately $4 billion, will be dividended to
GM, (ii) GM will assume certain of GMACs
postemployment benefit obligations, (iii) GMAC will
transfer to GM certain entities that hold a fee interest in
certain real properties, (iv) GMAC will pay dividends to GM
in an amount up to the amount of GMAC net income prior to the
consummation of the transaction, (v) GM will repay certain
indebtedness owing to GMAC and specified intercompany unsecured
obligations owing to GMAC shall be no greater than
$1.5 billion and (vi) GMAC will make a one-time
distribution to GM of approximately $2.7 billion of cash to
reflect the increase in GMACs equity value resulting from
the transfer of a portion of GMACs net deferred tax
liabilities arising from the conversion of GMAC and certain of
its subsidiaries to limited liability company form. The total
value of the cash proceeds and distributions to GM before it
purchases preferred limited liability company interests of GMAC
and repays any intercompany unsecured obligations will be
approximately $14 billion over three years, comprised of
the $7.4 billion purchase price, the $4 billion of
retained assets and the $2.7 billion cash dividend. From
the proceeds GM will invest $1.4 billion of cash in new
preferred limited liability company interests of GMAC.
For the first half of 2006, GMACs earnings and cash flows
are fully consolidated with GMs operating results.
However, as a result of the agreement to sell a 51% controlling
interest, certain assets and liabilities of GMAC have been
presented as held for sale at June 30, 2006. GM recognized
a non-cash pre-tax impairment charge of $1.2 billion in the
second quarter of 2006 in conjunction with the pending sale of
51% equity interest. After the sale of the 51% controlling
interest, the remaining 49% interest in GMAC will be reflected
in GMs financial statements using the equity method of
accounting.
Approximately $433 million of the $1.2 billion pre-tax
charge is attributable to differences between tangible book
value to be paid by the consortium of investors and GMACs
actual book value, partially offset by 51% of the effects of
unrecognized net gains reflected in GMACs other
comprehensive income. The remaining $775 million of the
pre-tax charge is attributable to GMAC operating lease assets
classified as held for sale. Pursuant to the requirements of
Statement of Financial Accounting Standards No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets (SFAS No. 144) GM is required to
cease depreciation on long lived assets classified as held for
sale in GMs consolidated financial statements.
Accordingly, pre-tax income in the second quarter was higher by
$775 million as reported in the Selling, general and
administrative expenses line item in the Condensed
Consolidated Statement of Operations. However, because that
higher income amount is not recoverable at close in the sales
price or from a dividend prior to closing, a corresponding
increase of $775 million was recorded as part of the
$1.2 billion pre-tax charge, thereby impairing the carrying
value of the operating lease assets held for sale as of
June 30, 2006. As the transaction progresses towards
closing, similar benefits from ceasing depreciation will not be
recoverable in the sales price. Therefore, GM expects to
increase the pre-tax charge in the third quarter and any other
subsequent quarter until closing related to further operating
lease asset impairments. However these increases are expected to
be offset by the favorable impacts of ceasing depreciation on
GMAC assets held for sale and therefore will not have any impact
on earnings. In addition, the pre-tax charge will be adjusted
each quarter until closing for any changes in fair value of the
assets.
While GM expects to record tax benefits associated with the
pre-tax impairment charge of $1.2 billion, these benefits
in the second quarter will be offset by approximately
$409 million of incremental tax costs created
I-31
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Financial
Results (continued)
primarily by book to tax differences now recognized due to the
pending sale. Both of these items are recorded in the
Income Tax Benefit line item of the Condensed
Consolidated Statement of Operations.
The agreement is subject to the satisfaction or waiver of
customary and other closing conditions, including, among other
things, (i) receipt of ratings for the senior unsecured
long-term indebtedness of GMAC and Rescap, an indirect wholly
owned subsidiary of GMAC, after giving effect to the
transactions contemplated by the agreement, of at least BB and
BBB− (or their respective equivalents), respectively, and
an A.M. Best rating for GMACs significant insurance
subsidiaries of at least B++; and (ii) that no material
adverse effect will have occurred with respect to the business,
financial condition or results of operations of GMAC, which
includes any actual downgrading by any of the major rating
agencies of GMs unsecured long-term indebtedness rating
below CCC or its equivalent, and (iii) the receipt of
required regulatory approvals and licenses. The agreement may be
terminated upon the occurrence of certain events, including the
failure to complete the transaction by March 30, 2007.
There can be no assurance that the transaction will be completed
or if it is completed, that the terms of the transaction will
not be different from those set forth in the definitive
agreement. Furthermore, even if the sale transaction is
completed on the agreed-upon terms, there is no assurance that
it will delink GMACs credit rating from GMs credit
rating or maintain ResCaps credit rating at investment
grade.
On July 28, 2006, the Federal Deposit Insurance Corporation
(the FDIC) announced a six-month moratorium on the
acceptance of, or final decisions on, notices filed under the
Change in Bank Control Act with regard to industrial loan
companies (ILCs). In connection with the proposed
sale of a controlling interest in GMAC, the consortium and its
members have submitted such notices with respect to GMACs
ILC, GMAC Automotive Bank. GM and GMAC are currently evaluating
the effect of the FDICs action on these pending notices,
but it appears that the timing of any approval of the notices is
likely to be affected by the moratorium. Since FDIC approval of
the Change in Bank Control Act notices with regard to GMAC
Automotive Bank is a condition to closing the transaction, GM
expects to close the transaction in the fourth quarter of 2006,
but it is possible that delays in obtaining such approvals or in
satisfying other required conditions could defer the closing.
The sale of a controlling interest in GMAC will reduce a
significant portion of the GMAC U.S. pre-tax income
available to GM. Given this anticipated decline in
U.S. pre-tax income as a result of the transaction, we have
reassessed the need for a valuation allowance against our
U.S. net deferred tax assets balance of $24.4 billion
as of June 30, 2006. At this time, we consider it more
likely than not that we will have U.S. taxable income in
the future that will allow us to realize these deferred tax
assets. However, it is possible that some or all of these
deferred tax assets could ultimately expire unused, especially
if our GMNA turnaround plan is not successful or if GMACs
income declines.
Sale of
Isuzu Investment
In April 2006, GM sold its 7.9% equity interest
(90.09 million shares) in Isuzu Motors Ltd (Isuzu) to
Isuzus strategic business partners and major shareholders,
Mitsubishi Corp., Itochu Corp. and Mizuho Corporate Bank. The
sale of GMs interest in Isuzu generated cash proceeds of
$311 million and a pre-tax gain on sale of
$311 million ($212 million after tax). GMs basis
in its investment was written down to zero in 2001. The proceeds
were used to support the GMNA turnaround plan, finance future
growth initiatives, strengthen the balance sheet and fund other
corporate priorities.
Sale of
Regional Homebuilder
In April 2006 GMAC signed a definitive agreement to sell its
entire interest in a regional home builder. In the second
quarter of 2006, GMAC recognized a pre-tax gain of
$415 million ($259 million after tax) on the sale of
its equity interest. Under the equity method of accounting,
GMACs share of pretax income recorded from this investment
was approximately $22.5 million and $21.8 million for
the three months ended June 30, 2006 and 2005, respectively
and $42.4 million and $35.2 million for the six months
ended June 30, 2006 and 2005, respectively.
I-32
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Financial
Results (concluded)
Sale of
Suzuki Investment
During the first quarter of 2006, GM reduced its equity stake in
Suzuki Motor Corporation (Suzuki) from 20.4% to 3.7%. The sale
of the investment resulted in an after-tax gain of
$372 million recognized by GMAP. In addition to the
favorable net income impact, the transaction generated cash
proceeds of approximately $2.0 billion which enhance
GMs liquidity position as well as the strength of its
balance sheet. GM maintains a 3.7% equity ownership in Suzuki
after the transaction, and will continue its strategic alliance
with Suzuki.
Strategy
GMs primary focus continues to be the return of its North
American operations to profitability and positive cash flow. The
2006 second quarter results demonstrate initial steps towards
this goal, although additional progress will be required to
implement the plan fully. GM remains committed to the turnaround
efforts not only to return GM to profitability, but to position
GM to be competitive in the long term through managing our
business cost, revenue, and liquidity.
With regard to costs, our primary goals were to address our
legacy cost burden and reduce our structural costs in line with
current levels of revenue. Legacy costs are primarily related to
the cost of benefits provided to retired employees and their
dependents, and costs associated with employees and their
dependents of businesses divested by GM. Structural costs, such
as the cost of unionized employees, are those costs that do not
vary with production and include all costs other than material,
freight, and policy and warranty costs. Some of these costs are
within our control, while others such as interest rates or
return on investments (which influence our pension and OPEB
expenses) are more dependent on outside factors. To reduce
legacy costs and structural costs, GM has taken action in a
number of areas. To contain legacy health care costs for retired
hourly employees, GM entered into the UAW Health Care Settlement
Agreement, which received court approval on March 31, 2006,
and a tentative agreement with the IUE-CWA providing similar
terms, which was announced on April 10, 2006. In addition,
on February 7, 2006 GM announced it would cap its
contributions to salaried retiree health care at the level of
2006 expenditures. To control pension costs, GM announced on
March 7, 2006 that it would freeze accrued pension benefits
for U.S. salaried employees and implement a new benefit
structure for future accruals. GM has also taken actions to
reduce hourly headcount, beginning in November 2005 when GM
announced plans to idle 12 facilities and reduce manufacturing
employment levels by approximately 30,000 employees by the end
of 2008. GM now expects to reach the reduced employment level by
January 1, 2007, about two years ahead of the previously
announced target. During the first quarter of 2006, two assembly
plants referred to in the original announcement stopped
production. On March 22, 2006, GM, the UAW, and Delphi
announced they had entered into the UAW Attrition Agreement to
reduce the number of hourly employees of GM and of Delphi
through the a special attrition program, and in late June, GM
announced that approximately 34,400 hourly employees
(33,100 UAW-represented and 1,300
IUE-CWA-represented)
would participate in the program.
Revenues in the second quarter of 2006 were strengthened by
sales of vehicles recently launched by GMNA, such as the
Chevrolet Tahoe, GMC Yukon, and Cadillac Escalade full size
utility trucks, as well as the Chevrolet HHR, the Buick Lucerne
and the Pontiac G6 and Torrent. Market share is down from the
same period a year earlier, which we believe is due to strategic
reductions in incentives and daily rentals, but GM is seeing
benefits associated with the Total Value Promise
initiative announced in January 2006, which reduced GMNA
incentive levels while increasing vehicle transaction prices. We
will continue to introduce an array of new vehicles throughout
2006, including the Saturn AURA, all-new Chevrolet Silverado and
GMC Sierra full-size pickups, the fuel-efficient Saturn Vue
Green Line Hybrid, and GMC Acadia and Saturn Outlook crossover
vehicles. In addition, we experienced growth in revenue in each
of our geographic regions and improved profitability in three of
our four regions, a continuation of progress made in the first
quarter.
GM has also taken actions to improve liquidity. In February
2006, GMs Board of Directors reduced the quarterly
dividend by 50%, which will conserve about $500 million on
an annual basis. Since the fourth quarter of 2005, we have sold
all or part of our equity stakes in each of Fuji Heavy
Industries, Isuzu and Suzuki, adding more
I-33
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Strategy (concluded)
than $3 billion to GMs liquidity. In addition to
these actions, on July 20, 2006, GM executed a
$4.63 billion amended and restated credit agreement with a
syndicate of banks restating and amending the $5.6 billion
unsecured line of credit. This agreement provides additional
available liquidity that GM anticipates to draw on from time to
time to fund working capital and other needs. Also, on
April 2, 2006 GM entered into a definitive agreement to
sell a 51% controlling interest in GMAC to a consortium of
investors. GMs goal in selling the 51% interest in GMAC
was improving GMACs current credit rating position for
GMACs long term growth and provide a stronger foundation
to support GM sales and dealers. The transaction also improves
liquidity and results in total value of cash proceeds and
distributions to GM of approximately $14 billion over three
years, comprised of $7.4 billion purchase price,
$4 billion of retained assets and $2.7 billion cash
dividend. We expect to receive approximately $10 billion at
closing. $1.4 billion will be invested by GM in new GMAC
preferred equity.
In addition to restoring GMNA operations to profitability, GM
needs to address near term issues associated with its largest
supplier, Delphi. On March 31, 2006 Delphi filed motions
under the U.S. Bankruptcy Code seeking authority to reject
its U.S. labor agreements and modify retiree welfare
benefits. The unions and certain other parties have filed
objections to these motions. Hearings on these motions were
adjourned until August 11, 2006, to allow Delphi, its
unions and GM additional time to focus on reaching comprehensive
consensual agreements. While Delphi has indicated to us that it
expects no disruptions in its ability to continue supplying us
with the systems, components, and parts that we need as Delphi
pursues its bankruptcy restructuring plan, labor disruptions at
Delphi resulting from Delphis pursuit of a restructuring
plan could seriously disrupt our North American operations,
prevent us from executing our GMNA turnaround initiatives, and
materially adversely impact our business. Accordingly,
resolution of the Delphi related issues remains a critical near
term priority.
Delphi also filed on March 31, 2006 a motion under the
U.S. Bankruptcy Code seeking authority to reject certain
supply contracts with GM. A hearing on this motion was adjourned
by the court until after the hearings related to Delphis
U.S. labor agreements and retiree welfare benefits are
completed or otherwise resolved. Although Delphi has not
rejected any GM contracts as of this time and has assured GM
that it does not intend to disrupt production at GM assembly
facilities, there is a risk that Delphi or one or more of its
affiliates may reject or threaten to reject individual contracts
with GM, either for the purpose of exiting specific lines of
business or in an attempt to increase the price GM pays for
certain parts and components. As a result, GM could be
materially adversely affected by disruption in the supply of
automotive systems, components and parts that could force the
suspension of production at GM assembly facilities.
Please refer to the Key Factors Affecting Future Results section
below for further discussion on the above topics.
Basis of
Presentation
This managements discussion and analysis of financial
condition and results of operations (MD&A) should be read in
conjunction with the December 31, 2005 consolidated
financial statements and notes thereto (the 2005 Consolidated
Financial Statements), along with the MD&A included in
General Motors Corporations (the Corporation, General
Motors, or GM) 2005 Annual Report on
Form 10-K,
filed separately with the U.S. Securities and Exchange
Commission (SEC). All earnings per share amounts included in the
MD&A are reported on a fully diluted basis. See related
discussion in Item 2 of the General Motors Acceptance
Corporation (GMAC)
Form 10-Q
for the quarterly period ended June 30, 2006, which is
herein incorporated by reference.
GMs Auto & Other Reportable Operating Segment
Consists of:
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GMs four automotive regions: GM North America (GMNA),
GM Europe (GME), GM Latin America/Africa/Mid-East (GMLAAM), and
GM Asia Pacific (GMAP), which constitute GM Automotive
(GMA); and
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I-34
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Basis of
Presentation (concluded)
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Other, which includes the elimination of intersegment
transactions, certain non-segment specific revenues and
expenditures, including legacy costs related to postretirement
benefits for certain Delphi Corporation (Delphi) and other
retirees, and certain corporate activities.
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GMs FIO reportable operating segment consists of GMAC and
Other Financing, which includes financing entities that are not
consolidated by GMAC.
The disaggregated financial results for GMA have been prepared
using a management approach, which is consistent with the basis
and manner in which GM management internally disaggregates
financial information for the purpose of assisting in making
internal operating decisions. In this regard, certain common
expenses were allocated among regions less precisely than would
be required for stand-alone financial information prepared in
accordance with accounting principles generally accepted in the
U.S. (GAAP). The financial results represent the historical
information used by management for internal decision-making
purposes; therefore, other data prepared to represent the way in
which the business will operate in the future, or data prepared
in accordance with GAAP, may be materially different.
Consistent with industry practice, market share information
employs estimates of sales in certain countries where public
reporting is not legally required or otherwise available on a
consistent basis.
Consolidated
Results of Operations
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Three Months Ended
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Six Months Ended
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June 30,
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June 30,
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2006
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2005
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2006
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2005
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(Dollars in millions)
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Consolidated:
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Total net sales and revenues
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$
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54,395
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|
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$
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48,469
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$
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106,640
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|
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$
|
94,242
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Net income (loss)
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$
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(3,379
|
)
|
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$
|
(987
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)
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$
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(2,934
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)
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$
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(2,240
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)
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Net margin
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(6.2
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)%
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(2.0
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)%
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(2.8
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)%
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(2.4
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)%
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Automotive and Other Operations:
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Total net sales and revenues
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$
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44,913
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$
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40,178
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$
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88,303
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$
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77,481
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Net income (loss)
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$
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(3,588
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)
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$
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(1,795
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)
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$
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(3,781
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)
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$
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(3,777
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)
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Financing and Insurance Operations:
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Total revenues
|
|
$
|
9,482
|
|
|
$
|
8,291
|
|
|
$
|
18,337
|
|
|
$
|
16,761
|
|
GMAC net income
|
|
$
|
898
|
|
|
$
|
816
|
|
|
$
|
1,535
|
|
|
$
|
1,544
|
|
Other financing net income
|
|
$
|
(689
|
)
|
|
$
|
(8
|
)
|
|
$
|
(688
|
)
|
|
$
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total FIO net income
|
|
$
|
209
|
|
|
$
|
808
|
|
|
$
|
847
|
|
|
$
|
1,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in second quarter 2006 total net sales and revenues
of 12%, compared with second quarter 2005, was due to higher GMA
revenue of $4.8 billion, primarily driven by an increase in
global production volume of 4%, with all regions showing
increases, and increased FIO revenue of $1.2 billion, more
than 14% over 2005. Similarly, year to date total net sales and
revenues were $12 billion higher, an increase of 13% over
2005.
Consolidated results declined by about $2.4 billion to net
loss of $3.4 billion in the second quarter of 2006,
compared to a net loss of $987 million in the second
quarter of 2005. The deterioration was more than accounted for
by the $3.7 billion charge for the UAW Attrition Agreement
previously discussed. For the first six months of 2006, GM
reported a consolidated net loss of $2.9 billion,
$694 million greater than the loss of $2.2 billion in
2005.
Second quarter 2006 results included:
|
|
|
|
|
Consolidated net loss of $3.4 billion;
|
I-35
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Consolidated
Results of Operations (concluded)
|
|
|
|
|
Announcement of agreement to sell 51% controlling interest in
GMAC, resulting in a loss of $690 million, after tax;
|
|
|
|
Implementation of the Attrition Program, resulting in a charge
of $3.7 billion;
|
|
|
|
Strong revenue and cost performance at GMNA;
|
|
|
|
Continued profitability at GMLAAM and GMAP;
|
|
|
|
Continued profitability at GMAC; and
|
|
|
|
Strengthened liquidity position at Auto & Other.
|
More detailed discussions on the results of operations for the
automotive regions, other operations, and GMAC can be found in
the following sections.
GM
Automotive and Other Operations Financial Review
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
Auto & Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenues
|
|
$
|
44,913
|
|
|
$
|
40,178
|
|
|
$
|
88,303
|
|
|
$
|
77,481
|
|
Net income (loss)
|
|
$
|
(3,588
|
)
|
|
$
|
(1,795
|
)
|
|
$
|
(3,781
|
)
|
|
$
|
(3,777
|
)
|
GMA net income (loss) by region:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GMNA
|
|
$
|
(3,941
|
)
|
|
$
|
(1,137
|
)
|
|
$
|
(4,444
|
)
|
|
$
|
(2,874
|
)
|
GME
|
|
|
(58
|
)
|
|
|
(96
|
)
|
|
|
(10
|
)
|
|
|
(610
|
)
|
GMLAAM
|
|
|
140
|
|
|
|
25
|
|
|
|
169
|
|
|
|
56
|
|
GMAP
|
|
|
379
|
|
|
|
(605
|
)
|
|
|
832
|
|
|
|
(535
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(3,480
|
)
|
|
$
|
(1,813
|
)
|
|
$
|
(3,453
|
)
|
|
$
|
(3,963
|
)
|
Net margin
|
|
|
(7.7
|
)%
|
|
|
(4.5
|
)%
|
|
|
(3.9
|
)%
|
|
|
(5.1
|
)%
|
GM global automotive market share
|
|
|
13.8
|
%
|
|
|
15.1
|
%
|
|
|
13.5
|
%
|
|
|
14.3
|
%
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(108
|
)
|
|
$
|
18
|
|
|
$
|
(328
|
)
|
|
$
|
186
|
|
GM Auto & Others net sales and revenues increased
$4.7 billion, or nearly 12%, in the second quarter of 2006,
compared to the same quarter of 2005. The improvement was driven
by a $1.6 billion or 6% increase at GMNA and an increase at
GMAP of more than $2 billion from 2005, largely due to the
consolidation of GM Daewoo, which was reported under the equity
method of accounting in the second quarter of 2005.
GMLAAMs revenue increased 30%, while GMEs revenue
increased slightly. For the first six months of 2006, net sales
and revenues at Auto & Other increased
$10.8 billion over 2005, or 14%, again led by GMNA and
GMAP, with increases of $4.9 billion and $4.4 billion,
respectively.
GMs global market share was 13.8% and 15.1% for the second
quarters of 2006 and 2005, respectively. GMNAs market
share decreased 3.3 percentage points, to 24.0% for the
quarter, compared to 2005. Market share increased in GMAP, while
GME and GMLAAM declined. In the first six months of 2006, global
market share declined 0.8 percentage point to 13.5%, from
14.3% at June 30, 2005. The decrease was driven by declines
at GMNA and GME, partly offset by increases at GMLAAM and GMAP.
GMA reported a net loss of $3.5 billion in the second
quarter 2006, a decline of $1.7 billion compared to a net
loss of $1.8 billion in 2005, with all regions except GMNA
showing improved results. GMAs net loss of
$3.5 billion for the first six months of 2006 was an
improvement of $510 million over 2005.
I-36
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
GM
Automotive Regional Results
GM
North America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
GMNA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales and revenues
|
|
$
|
28,590
|
|
|
$
|
26,998
|
|
|
$
|
57,121
|
|
|
$
|
52,225
|
|
Net income (loss)
|
|
$
|
(3,941
|
)
|
|
$
|
(1,137
|
)
|
|
$
|
(4,444
|
)
|
|
$
|
(2,874
|
)
|
Net margin
|
|
|
(13.8
|
)%
|
|
|
(4.2
|
)%
|
|
|
(7.8
|
)%
|
|
|
(5.5
|
)%
|
Production volume
|
|
(Volume in thousands)
|
Cars
|
|
|
462
|
|
|
|
458
|
|
|
|
958
|
|
|
|
928
|
|
Trucks
|
|
|
775
|
|
|
|
789
|
|
|
|
1,534
|
|
|
|
1,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GMNA
|
|
|
1,237
|
|
|
|
1,247
|
|
|
|
2,492
|
|
|
|
2,429
|
|
Vehicle unit sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industry North America
|
|
|
5,400
|
|
|
|
5,634
|
|
|
|
10,163
|
|
|
|
10,322
|
|
GM as a percentage of industry
|
|
|
24.0
|
%
|
|
|
27.3
|
%
|
|
|
23.8
|
%
|
|
|
26.4
|
%
|
Industry U.S.
|
|
|
4,571
|
|
|
|
4,802
|
|
|
|
8,626
|
|
|
|
8,803
|
|
GM as a percentage of industry
|
|
|
24.2
|
%
|
|
|
27.8
|
%
|
|
|
24.0
|
%
|
|
|
26.7
|
%
|
GM cars
|
|
|
20.0
|
%
|
|
|
23.5
|
%
|
|
|
20.3
|
%
|
|
|
23.4
|
%
|
GM trucks
|
|
|
27.9
|
%
|
|
|
31.3
|
%
|
|
|
27.1
|
%
|
|
|
29.4
|
%
|
North American industry vehicle unit sales decreased 4% to
5.4 million in the second quarter of 2006 compared to 2005,
driven by lower U.S. industry volume, of 4.6 million
units, compared to 4.8 million units in the second quarter
of 2005.
U.S. industry volume in the second quarter of 2006
represents a seasonally adjusted annual rate of
17.4 million, compared to 17.2 million in the second
quarter of 2005. GMs U.S. market share decreased by
3.6 percentage points, to 24.2%, compared to the second
quarter of 2005, reflecting a decline in vehicle unit deliveries
of approximately 233 thousand units, or 17.4%. GMs
U.S. car market share declined by 3.5 percentage
points to 20.0%, while GMs U.S. truck market share
declined to 27.9%, down 3.4 percentage points. GMs
sales in the second quarter of 2005 were particularly strong, in
part the result of marketing programs, including employee
pricing offers and other incentives, that were not offered in
2006.
GMNA production volumes were slightly lower in 2006, by
approximately 10 thousand units, at 1.237 million units for
the quarter, compared to the second quarter of 2005. Dealer
inventories in the U.S. increased year over year by
approximately 151 thousand units, to 1.169 million units at
June 30, 2006 from 1.018 million units at
June 30, 2005. Year to date production increased 63
thousand units, to 2.492 million in 2006.
North American industry vehicle unit sales decreased 1.5% to
10.2 million in the first six months of 2006 from
10.3 million in the first six months of 2005, while
GMNAs market share decreased by 2.6 percentage points
to 23.8% in
2006 year-to-date,
compared to 26.4% in 2005.
For the first six months of 2006, industry vehicle unit sales in
the United States decreased 2.0% to 8.6 million units from
8.8 million units in the first six months of 2005.
GMs
2006 year-to-date
U.S. market share declined 2.7 percentage points, to
24.0%. U.S. car market share declined by
3.1 percentage points to 20.3%, while U.S. truck
market share decreased to 27.1%, down 2.3 percentage points
from 2005.
I-37
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
GM
Automotive Regional
Results (continued)
GM
North America (concluded)
In the second quarter of 2006, GMNA incurred a net loss of
$3.9 billion as compared to a net loss of $1.1 billion
for the comparable period of 2005. The decline in results was
due primarily to the following factors:
|
|
|
|
|
The charge of $3.7 billion, after tax, related to the UAW
Attrition Agreement, which is more fully discussed in the
section titled GM-UAW-Delphi Special Attrition Program
Agreement above. This charge included the favorable
impact of $0.6 billion after tax for the reduction in
capacity action charges reflected in the fourth quarter of 2005
due to lower than anticipated expense related to the JOBS bank.
|
|
|
|
An impairment charge of $303 million (after-tax charge of
$197 million), for the write-down of product specific
assets.
|
|
|
|
A favorable adjustment of approximately $300 million after
tax related to a decrease in the liability for policy, product
warranty and recall campaigns due to lower spending as a result
of better vehicle quality.
|
|
|
|
Lower pension and OPEB costs of approximately $300 million,
primarily due to the effects of the changes in salaried retiree
benefits plans announced in the first quarter of 2006, and the
hourly pension savings as a result of the Attrition Program.
|
|
|
|
Savings in other structural costs of approximately
$500 million, including engineering, marketing and other
cost reductions of $0.4 billion, and a $0.1 billion
reduction to the product liability reserve, partially offset by
higher freight costs of approximately $150 million. The
contribution margins were lower in the second quarter and the
first six months of 2006 primarily due to the previously
mentioned freight costs and, to a much lesser extent, an
increase in material costs and product mix considerations.
|
For the first six months of 2006, GMNA incurred a net loss of
$4.4 billion, compared to a net loss of $2.9 billion
in the 2005 period. In addition to the second quarter 2006
charges and other items noted above, 2006 results were affected
by:
|
|
|
|
|
Increased production volumes primarily in the first quarter,
which contributed approximately $470 million to GMNA
results for the first half of 2006.
|
|
|
|
Favorable pricing, primarily in the first quarter, which
contributed approximately $390 million to the first half of
2006 results.
|
|
|
|
Estimated charges of $65 million after tax related to other
separations of U.S. salaried employees.
|
In addition, first half of 2005 results included after-tax
charges of $84 million related to the write-down of various
plant assets in connection with the cessation of production at
the Lansing assembly plant and $148 million related to
voluntary early retirement and other separation programs with
respect to certain U.S. salaried employees.
GM
Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
Total net sales and revenues
|
|
$
|
8,743
|
|
|
$
|
8,590
|
|
|
$
|
16,834
|
|
|
$
|
16,698
|
|
GME net loss
|
|
$
|
(58
|
)
|
|
$
|
(96
|
)
|
|
$
|
(10
|
)
|
|
$
|
(610
|
)
|
GME net margin
|
|
|
(0.7
|
)%
|
|
|
(1.1
|
)%
|
|
|
(0.1
|
)%
|
|
|
(3.7
|
)%
|
|
|
(Volume in thousands)
|
Production volume
|
|
|
502
|
|
|
|
501
|
|
|
|
996
|
|
|
|
1,003
|
|
Vehicle unit sales Industry
|
|
|
5,887
|
|
|
|
5,755
|
|
|
|
11,450
|
|
|
|
11,041
|
|
GM as a percentage of industry
|
|
|
9.3
|
%
|
|
|
9.6
|
%
|
|
|
9.3
|
%
|
|
|
9.7
|
%
|
GM market share Germany
|
|
|
10.2
|
%
|
|
|
11.2
|
%
|
|
|
10.2
|
%
|
|
|
11.1
|
%
|
GM market share United
Kingdom
|
|
|
15.1
|
%
|
|
|
15.6
|
%
|
|
|
14.8
|
%
|
|
|
15.2
|
%
|
I-38
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
GM
Automotive Regional
Results (continued)
GM
Europe (concluded)
Industry vehicle unit sales increased in Europe during the
second quarter of 2006 by approximately 2.3% compared to the
second quarter of 2005. GME vehicle unit deliveries decreased by
approximately 7 thousand units in the second quarter of 2006
versus the same period in 2005 leading to a decline in
GMEs market share to 9.3%, representing a
0.3 percentage point reduction versus the same period in
2005. GME experienced market share losses for the two largest
markets in Europe, Germany and the United Kingdom, in the second
quarter of 2006 compared to the second quarter of 2005.
For the first six months of 2006, European industry vehicle unit
sales increased 3.7% over 2005, while GME sales were essentially
flat, up 2 thousand units over 2005. This resulted in a decline
in GMEs first half market share, to 9.3%, down
0.4 percentage point from 2005.
GME recorded a net loss of $58 million in the second
quarter of 2006, compared to a net loss of $96 million in
the second quarter of 2005. The improved results were affected
in part by the following factors:
|
|
|
|
|
Restructuring charges for separation and contract cancellation
charges totaling $88 million, after tax, were recognized.
The charge in the second quarter of 2006 relates to the
restructuring plan announced in the fourth quarter of 2004 as
well as to the closure of GMs Portugal assembly plant and
to the reduction of one shift at the Ellesmere Port plant in the
U.K. These items are further discussed in Note 13,
Impairments, Restructuring and Other Initiatives.
|
|
|
|
Product-specific asset impairment charge of $37 million,
after tax, was recorded in the second quarter of 2006.
|
|
|
|
Asset impairment charge of $57 million, after tax, in
connection with the announced closure of GMs Portugal
assembly plant was recorded in the second quarter of 2006. The
plant is scheduled to close in December 2006.
|
|
|
|
Results for the second quarter of 2005 included an after-tax
restructuring charge of $126 million related to separations
and to costs incurred in dissolving GMs Powertrain and
Fiat S.p.A (Fiat) joint ventures.
|
|
|
|
Material cost reductions as well as favorable pricing of
approximately $100 million improvement.
|
For the first six months of 2006, GME incurred a net loss of
$10 million, representing a significant improvement from
the loss of $610 million for the first half of 2005.
Factors affecting results included:
|
|
|
|
|
Total restructuring and impairment charges for the first six
months of 2006 of $222 million, after tax. The second
quarter charge of $182 million consists of the charges for
separations, contract cancellations and asset impairments
discussed above. The first quarter 2006 charge of
$40 million, after tax, primarily relates to the
restructuring plan announced in the fourth quarter of 2004,
discussed further above. Total restructuring charges for the
first half of 2005 were $548 million, after tax. These
charges were related mainly to the restructuring plan announced
in the fourth quarter of 2004 and covered about 6,250 people for
the six-month period. The charge in the second quarter of 2005
also included costs related to the dissolution of the Powertrain
joint ventures with Fiat.
|
|
|
|
For the first half of 2006 material cost reductions and
favorable structural cost performance improved, contributing
approximately $200 million compared to the first half of
2005.
|
Effective January 1, 2006, four powertrain entities were
transferred from GMNA to GME for management reporting.
Accordingly, second quarter 2005 amounts have been revised for
comparability by reclassifying $127 million of revenue and
$16 million of net income from GMNA to GME. Year to date
2005 amounts have been revised by reclassifying
$278 million of revenue and $49 million of net income
from GMNA to GME.
I-39
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
GM
Automotive Regional
Results (continued)
GM
Latin America/Africa/Mid-East
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
Total net sales and revenues
|
|
$
|
3,820
|
|
|
$
|
2,935
|
|
|
$
|
6,960
|
|
|
$
|
5,234
|
|
GMLAAM net income
|
|
$
|
140
|
|
|
$
|
25
|
|
|
$
|
169
|
|
|
$
|
56
|
|
GMLAAM net margin
|
|
|
3.7
|
%
|
|
|
0.9
|
%
|
|
|
2.4
|
%
|
|
|
1.1
|
%
|
|
|
(Volume in thousands)
|
Production volume
|
|
|
207
|
|
|
|
195
|
|
|
|
401
|
|
|
|
380
|
|
Vehicle unit sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industry
|
|
|
1,401
|
|
|
|
1,285
|
|
|
|
2,766
|
|
|
|
2,473
|
|
GM as a percentage of industry
|
|
|
17.5
|
%
|
|
|
17.6
|
%
|
|
|
17.2
|
%
|
|
|
16.5
|
%
|
GM market share Brazil
|
|
|
21.6
|
%
|
|
|
21.9
|
%
|
|
|
21.5
|
%
|
|
|
20.6
|
%
|
Industry vehicle unit sales in the GMLAAM region increased 9% in
the second quarter of 2006, to 1.401 million units,
compared to the second quarter of 2005. GMLAAMs vehicle
unit sales increased by 8.4%, resulting in a slight decrease in
market share to 17.5% in the second quarter of 2006. The market
share loss was primarily the result of a 0.3 percentage
point decrease in Brazil as well as 1.1 percentage points
decrease in Argentina market share, both of which had increases
in sales but experienced strong local industry growth.
In the first six months of 2006, the regions industry grew
by almost 12%, while GMLAAMs vehicle unit sales increased
more than 16%, driving a 0.7 percentage point increase in
GMLAAMs market share over 2005, to 17.2%.
GMLAAM had net income of $140 million in the second quarter
of 2006, compared to net income of $25 million in the
second quarter of 2005. Favorable pricing contributed
approximately $130 million of the improvement, and higher
production volumes and improved product mix contributed
approximately $80 million. This performance was partially
offset by unfavorable currency movement and other factors of
approximately $95 million.
Second quarter results for 2006 also included a $15 million
charge for restructuring while the first quarter of 2006 results
include a restructuring charge of $27 million. Both
restructuring charges relate to the costs of voluntary employee
separations at GM do Brasil.
For the first six months of 2006, GMLAAM earned
$169 million compared to $56 million for the first six
months of 2005.
I-40
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
GM
Automotive Regional
Results (continued)
GM
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
Total net sales and revenues
|
|
$
|
4,091
|
|
|
$
|
1,922
|
|
|
$
|
8,024
|
|
|
$
|
3,616
|
|
GMAP net income
|
|
$
|
379
|
|
|
$
|
(605
|
)
|
|
$
|
832
|
|
|
$
|
(535
|
)
|
GMAP net margin
|
|
|
9.3
|
%
|
|
|
(31.5
|
)%
|
|
|
10.4
|
%
|
|
|
(14.8
|
)%
|
|
|
(Volume in thousands)
|
Production volume
|
|
|
489
|
|
|
|
398
|
|
|
|
961
|
|
|
|
733
|
|
Vehicle unit sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industry
|
|
|
4,693
|
|
|
|
4,526
|
|
|
|
9,840
|
|
|
|
9,180
|
|
GM as a percentage of industry
|
|
|
6.7
|
%
|
|
|
6.2
|
%
|
|
|
6.5
|
%
|
|
|
5.6
|
%
|
GM market share
Australia
|
|
|
14.7
|
%
|
|
|
17.9
|
%
|
|
|
15.6
|
%
|
|
|
18.2
|
%
|
GM market share China
|
|
|
12.0
|
%
|
|
|
11.3
|
%
|
|
|
12.5
|
%
|
|
|
10.8
|
%
|
Industry vehicle unit sales in the Asia Pacific region increased
by nearly 4%, to 4.7 million units, in the second quarter
of 2006 compared to the second quarter of 2005, by significant
gains in China. GMAP increased its vehicle unit sales in this
region by approximately 33 thousand units, or almost 12%, in the
second quarter of 2006, primarily due to a nearly 26% increase
in China. GMAP sales volume includes Wuling sales in China.
GMAPs second quarter of 2006 market share increased to
6.7%, from 6.2% in the second quarter of 2005. In China, GMAP
increased its market share to 12.0%, up from 11.3% in the second
quarter of 2005.
In the first six months of 2006, industry vehicle unit sales in
the region increased 660 thousand units, or more than 7%, to
9.8 million, from the same period of 2005. GMAPs
sales increased by 124 thousand units, or 24%, to 637 thousand
from the same period in 2005. GMAPs sales growth was
primarily due to the increase in China, where sales were up 47%
and market share grew 1.7 percentage points to 12.5% for
the first half of 2006. Overall in the region, GMAPs
market share increased 0.9 percentage point, to 6.5%, in
the period.
Net income from GMAP was $379 million in the second quarter
of 2006 compared to a net loss of $605 million in 2005. The
increase in GMAPs 2006 net income was primarily due
to the following factors:
|
|
|
|
|
An after-tax gain of $212 million, from the sale of
approximately 90 million shares of Isuzu stock in the
second quarter of 2006, as discussed above.
|
|
|
|
A loss of $788 million, recognized in the second quarter of
2005, from the write-down to fair market value of GMs
investment in approximately 20% of the common stock of Fuji
Heavy Industries (FHI).
|
For the first six months of 2006, GMAP earned net income of
$832 million, compared to a net loss of $535 million
for the first half of 2005. In addition to the second quarter
items noted above, the following contributed to the improved
performance in 2006:
|
|
|
|
|
An after-tax gain of $372 million from the sale of
approximately 85% of GMs investment in Suzuki, discussed
above.
|
|
|
|
Improved results at GM Daewoo and GMs joint ventures in
China, partially offset by unfavorable results at Holden and
Thailand.
|
GMAP results reflect the consolidation of GM Daewoo beginning on
June 30, 2005.
I-41
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Other
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales, revenues, and
eliminations
|
|
$
|
(331
|
)
|
|
$
|
(267
|
)
|
|
$
|
(636
|
)
|
|
$
|
(292
|
)
|
Net income (loss)
|
|
$
|
(108
|
)
|
|
$
|
18
|
|
|
$
|
(328
|
)
|
|
$
|
186
|
|
Other Operations reflect a net loss of $108 million in the
second quarter of 2006 as compared to net income of
$18 million for the comparable period in 2005. Second
quarter of 2005 results included tax benefits that contributed
$389 million. Other Operations also include after-tax
legacy costs of $114 million and $129 million for the
second quarters of 2006 and 2005, respectively, related to
employee benefit costs of divested businesses, primarily Delphi,
for which GM has retained responsibility.
For the first half of 2006, Other Operations reflect a net loss
of $328 million as compared to net income of
$186 million in the same period of 2005. 2005 included tax
benefits of $547 million. The results for the first half of
2006 also include an after-tax charge of $3 million related
to curtailment charges with respect to U.S. salaried
pension changes, while 2005 results include an $8 million
after-tax charge related to early retirement and other
separation programs for certain U.S. salaried employees.
Other Operations also include after-tax legacy costs of
$253 million and $241 million for the six months of
2006 and 2005, respectively.
GMAC
Financial Review
GMAC earned a record $898 million in the second quarter of
2006, an increase of $82 million from second quarter 2005
earnings of $816 million. Gross revenues increased to
$9.4 billion in the second quarter of 2006 from
$8.3 billion in 2005. The increase in second quarter
earnings was due to strong earnings at ResCap that more than
offset lower earnings from Automotive Finance and Insurance.
GMAC also provided a significant source of cash flow to GM
through the payment of a $1.4 billion dividend in the
second quarter of 2006. For the first six months of 2006, net
income declined $9 million to $1.535 billion.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
Automotive financing operations
|
|
$
|
251
|
|
|
$
|
366
|
|
|
$
|
510
|
|
|
$
|
600
|
|
ResCap
|
|
|
547
|
|
|
|
300
|
|
|
|
745
|
|
|
|
622
|
|
Insurance operations
|
|
|
80
|
|
|
|
100
|
|
|
|
209
|
|
|
|
195
|
|
Other / eliminations
|
|
|
20
|
|
|
|
50
|
|
|
|
71
|
|
|
|
127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
898
|
|
|
$
|
816
|
|
|
$
|
1,535
|
|
|
$
|
1,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results for Automotive Finance were $251 million in the
second quarter of 2006, down $115 million from
$366 million earned in the same period in the prior year.
The decrease is due to a combination of continued margin
pressures, lower remarketing results in the U.S. and Canada and
higher consumer credit provisions, slightly offset by certain
favorable
non-U.S. tax
rate changes and increases in investment income. The lower
second quarter 2006 results compared to 2005 more than offset
increased first quarter income, resulting in a decline of
$90 million for the first six months of 2006, compared to
2005.
ResCap earnings were $547 million in the second quarter of
2006, up $247 million from $300 million earned in
2005. The increase in earnings was due primarily to a
$259 million gain on sale of GMACs equity investment
in a regional homebuilder. Absent the effect of the equity sale,
ResCap earnings declined slightly in comparison to the same
period last year. For the first six months of 2006,
ResCaps net income increased $123 million over 2005,
to $745 million. The decline in income excluding the gain
noted above was due primarily to lower net margins
I-42
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
GMAC
Financial Review (continued)
resulting from both pricing pressures and higher funding costs,
despite increased revenues from higher asset levels. Mortgage
originations were $47.0 billion and $88.6 billion for
the second quarter and first six months of 2006, respectively,
compared to $42.6 billion and $79.0 billion in the
2005 periods.
GMACs Insurance operations earned $80 million in the
second quarter of 2006, down $20 million from earnings of
$100 million in the second quarter of 2005, which was
primarily due to a combination of lower capital gains and
wholesale losses related to hail storms in the Midwest. Strong
underwriting results and the acquisition of MEEMIC Insurance Co.
in the first quarter of 2006 contributed to an increase in
Insurance earnings of $14 million for the first six months
of 2006, compared to the first half of 2005. In addition, GMAC
Insurance maintained a strong investment portfolio with a market
value of $7.7 billion at June 30, 2006, including
after-tax net unrealized capital gains of $545 million.
In addition, second quarter 2006 earnings for GMACs Other
segment, which includes the Commercial Finance business unit and
GMACs equity investment in Capmark (formerly GMAC
Commercial Mortgage) were $20 million, down
$30 million from $50 million earned in the same period
of 2005. For the first six months of 2006, Other segment income
declined $56 million, to $71 million, from
$127 million in 2005. In the first quarter of 2006, GMAC
completed the sale of approximately 78% of Capmark. Cash
proceeds from the sale were approximately $1.5 billion. At
the closing, Capmark also repaid to GMAC approximately
$7.3 billion in intercompany loans, bringing the total cash
from the sale to $8.8 billion.
GMAC continues to maintain adequate liquidity with cash reserve
balances at June 30, 2006 of $22.7 billion, comprised
of $17.2 billion in cash and cash equivalents and
$5.5 billion invested in marketable securities.
GM expects to close the GMAC transaction in the fourth quarter
of 2006, but it is possible that delays in obtaining required
approvals or in satisfying other required conditions could defer
the closing until 2007. In addition to continuing to enable GMAC
to support the sale of GM vehicles, the transaction is intended
to support GMACs strategic goal of a stable investment
grade rating and profitable growth.
GM
North America Restructuring Plan
Update
Over the past year, one of our top priorities has been improving
our business in North America, thus positioning GM for long-term
success. GM has been systematically and aggressively
implementing its turnaround plan for GMNAs business to
return the operations to profitability and positive cash flow as
soon as possible. This plan is built on four elements:
|
|
|
|
|
Product Excellence
|
|
|
|
Revitalize Sales and Marketing Strategy
|
|
|
|
Accelerate Cost Reductions and Quality Improvements
|
|
|
|
Address Health Care Burden
|
The following update describes what we have done so far to
achieve these elements:
Product
Excellence
GM continues to focus significant attention on introducing new
vehicles, such as the Chevy HHR, Saturn Sky, Pontiac G-6
convertible, GMC Yukon, Buick Lucerne, Saab 9-3 SportCombi,
Hummer H3, and the Cadillac DTS, and in 2006 we anticipate that
approximately 30% of GMNAs sales volume will come from
recently launched cars and trucks, increasing to approximately
40% in 2007. In support of new car and truck programs, GM
anticipates total capital spending on product development in
2006 of $8.7 billion, of which $5.7 billion will be
devoted to GMNA. GMNA is also allocating capital and engineering
to support more fuel-efficient vehicles, including hybrid
vehicles in the United States, and is increasing production of
active fuel management engines and six-speed transmissions. In
addition, GM is undertaking a major initiative in alternate
fuels through sustainable technologies
I-43
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
GM
North America Restructuring Plan
Update (continued)
such as ethanol/gasoline blended (E85) FlexFuel vehicles. In
fact, GM has 1.9 million E85 vehicles on the road today,
with plans to build over two million more in the next five
years. GM is also adding five more E85-capable models to our
lineup for 2007, raising GMs total flex-fuel offerings to
14 vehicles.
Revitalize
Sales and Marketing Strategy
GM is pursuing a revised sales and marketing strategy by
focusing on clearly differentiating our brands, optimizing our
distribution network, growing in key metropolitan markets, and
re-focusing our marketing efforts on the strength and value of
our products.
In this regard, in January 2006 GM significantly lowered
manufacturers suggested retail prices on vehicles that
account for about 80% of its 2006 model year automotive sales
volume. GMs promotion strategy now emphasizes its brands
and vehicles, rather than price incentives. In addition, GM has
increased advertising in support of new products and specific
marketing initiatives to improve GMs sales performance in
certain metropolitan markets. Since introducing this fundamental
shift in sales and marketing, GM has experienced an increase in
average sales price per vehicle.
Accelerate
Cost Reductions and Quality Improvements
Following our November 2005 announcement of our strategy to
reduce structural costs in the manufacturing area, GM has
introduced a variety of initiatives to accomplish that strategy.
In November 2005, GM announced the cessation of operations at 12
manufacturing facilities by 2008, and a reduction in
manufacturing employment levels of approximately 30,000
employees by the end of 2008. GM now expects to reach the
reduced employment levels by January 1, 2007. To support
the structural cost initiatives further, on March 22, 2006
GM, the UAW and Delphi announced they had entered into the UAW
Attrition Agreement designed to reduce the number of hourly
employees of GM and of the Delphi through a special attrition
program in which approximately 34,400 employees will
participate. See the GM-UAW-Delphi Special Attrition
Program Agreement section for a further description of the
UAW Attrition Agreement. GM believes these actions collectively
will reduce our excess capacity by one million units, in
addition to the one million unit capacity we eliminated between
2002 and 2005, and by reducing structural costs to assist in
closing the cost gap with other vehicle manufacturers. To
achieve further cost reductions, GMs management is putting
a high priority on negotiating a more competitive collective
bargaining agreement with the UAW in 2007.
In the first quarter of 2006, GM announced plans to
substantially alter pension benefits for current
U.S. salaried employees by freezing accrued benefits in the
current plan and implementing a new benefit structure for future
accruals, which will include a reduced defined benefit plan for
some salaried employees and a new defined contribution plan for
the other salaried employees. These pension plan changes will
not affect retirees or surviving spouses who are currently
drawing benefits from the Salaried Retirement Program.
In addition to the structural cost reductions, GMNA was also
targeting a net reduction in material costs in 2006 of
$1.0 billion, prior to factoring in the cost of government
mandated product improvements. Reducing material costs remains a
critical part of GMNAs overall long-term cost reduction
plans. Attainment of this target, however, has been challenged
by higher commodity prices and troubled supplier situations.
GMNA will continue its aggressive pursuit of material cost
reduction via improvements in its global processes for product
development, which will enable further part commonization and
reuse among architectures, as well as through the continued use
of the most competitive supply sources globally.
GMNA is also seeking cost efficiencies in most other areas of
the business including engineering, advertising, salaried
employments levels, and indirect material costs. Engineering
will seek to reduce development costs through the use of common
vehicle architectures that can be used on a global basis.
Advertising will seek more efficient and focused spending in
line with brand focus.
I-44
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
GM
North America Restructuring Plan
Update (concluded)
Address
Health-Care Burden
In October 2005, we announced an agreement with the UAW that
will reduce GMs hourly retiree health-care obligations. GM
will commence recognition of the benefit from the UAW Settlement
Agreement in the third quarter of 2006. Refer to Note 12
for the financial impact of the UAW Settlement Agreement.
The UAW Settlement Agreement will remain in effect until at
least September 2011, after which either GM or the UAW may
cancel the agreement upon 90 days written notice.
Similarly, GMs contractual obligations to provide health
care benefits to UAW hourly retirees extends to at least
September 2011 and will continue thereafter until terminated by
either GM or the UAW. As a result, the provisions of the UAW
Settlement Agreement will continue in effect for the UAW
retirees beyond the expiration in September 2007 of the current
collective bargaining agreement between GM and the UAW.
On April 10, 2006, GM and the IUE-CWA also reached a
tentative agreement to reduce health-care costs that is similar
to the UAW Settlement Agreement. Court approval of the
agreement, which was ratified by the IUE-CWA membership on
April 21, 2006, is expected during 2006, and GM will begin
recognizing the benefits of the agreement 90 days after the
approval date. The savings achieved under the IUE-CWA agreement,
while not significant, will contribute to the reduction of OPEB
liabilities and annual employee health-care expenses in the next
year.
GM is also increasing the U.S. salaried workforces
participation in the cost of health care. On February 7,
2006, GM announced that beginning January 1, 2007, it will
cap its contributions to salaried retiree health care at the
level of its 2006 expenditures. This change affects employees
and retirees who are eligible for the salaried postretirement
health-care benefit, their surviving spouses, and their eligible
dependents. Salaried employees who were hired after
January 1, 1993, are not eligible for retiree health-care
benefits, so they are not affected by these changes. After 2006,
when average costs exceed established limits, additional plan
changes that affect cost-sharing features of program coverage
will occur, effective with the start of the next calendar year.
Program changes may include, but are not limited to, higher
monthly contributions, deductibles, coinsurance,
out-of-pocket
maximums, and prescription drug payments. Plan changes may be
implemented in medical, dental, vision, and prescription drug
plans.
General
Based on the cost savings initiatives described above, GMNA is
increasing its target for reduction of structural costs from the
amount previously stated in GMs 2005 Annual Report on
Form 10-K
by $2 billion to $9 billion on a running rate basis by
the end of 2006. Running rate basis refers to the average
annualized cost savings into the foreseeable future anticipated
to result from cost savings actions when fully implemented. GM
expects $6 billion of the structural cost reduction to be
realized during 2006, exceeding the $4 billion of
structural cost reductions previously estimated for calendar
year 2006 in GMs 2005 Annual Report on
Form 10-K.
This improvement is due to the Attrition Program, including the
effect of the pension remeasurement, and a reduction by
$1 billion in previously-expected charges associated with
the UAW healthcare settlement agreement in the first quarter of
2006, partially offset by an increase in the prior service cost
amortization component of OPEB expense related to the
$1 billion and future contributions associated with the
independent VEBA established under the UAW health care
settlement agreement. The expected total annual cash savings
from structural cost reductions remains $5 billion.
Delphi
Bankruptcy
On October 8, 2005, Delphi filed a petition for
Chapter 11 proceedings under the United States Bankruptcy
Code for itself and many of its U.S. subsidiaries. Delphi
is GMs largest supplier of automotive systems, components
and parts, and GM is Delphis largest customer.
I-45
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Delphi
Bankruptcy (continued)
GM has worked and will continue to work constructively in the
court proceedings with Delphi, Delphis unions, and other
participants in Delphis restructuring process. GMs
goal is to pursue outcomes that are in the best interests of GM
and its stockholders, and that enable Delphi to continue as an
important supplier to GM.
Delphi continues to assure GM that it expects no disruption in
its ability to supply GM with the systems, components and parts
it needs as Delphi pursues a restructuring plan under the
Chapter 11 process. Although the challenges faced by Delphi
during its restructuring process could create operating and
financial risks for GM that process is also expected to present
opportunities for GM. These opportunities include reducing, over
the long term, the significant cost penalty GM incurs in
obtaining parts from Delphi, as well as improving the quality of
systems, components and parts GM procures from Delphi as a
result of the restructuring of Delphi through the
Chapter 11 process. However, there can be no assurance that
GM will be able to realize any benefits.
Delphi filed, on March 31, 2006, motions under the
U.S. Bankruptcy Code seeking authority to reject its
U.S. labor agreements and modify retiree welfare benefits.
The unions and certain other parties have filed objections to
these motions. Hearings on these motions were adjourned until
August 11, 2006, to allow Delphi, its unions, and GM
additional time to focus on reaching comprehensive consensual
agreements. While Delphi has indicated to us that it expects no
disruptions in its ability to continue supplying us with the
systems, components, and parts we need as Delphi pursues its
bankruptcy restructuring plan, labor disruptions at Delphi
resulting from Delphis pursuit of a restructuring plan
could seriously disrupt our North American operations, prevent
us from executing our GMNA turnaround initiatives, and
materially adversely impact our business. Accordingly,
resolution of the Delphi related issues remains a critical near
term priority.
On March 31, 2006, Delphi also filed a motion under the
U.S. Bankruptcy Code seeking authority to reject certain
supply contracts with GM. A hearing on this motion was adjourned
by the court until after the hearings related to Delphis
U.S. labor agreements and retiree welfare benefits are
completed or otherwise resolved. Although Delphi has not
rejected any GM contracts as of this time and has assured GM
that it does not intend to disrupt production at GM assembly
facilities, there is a risk that Delphi or one or more of its
affiliates may reject or threaten to reject individual contracts
with GM, either for the purpose of exiting specific lines of
business or in an attempt to increase the price GM pays for
certain parts and components. As a result, GM might be
materially adversely affected by disruption in the supply of
automotive systems, components and parts that could force the
suspension of production at GM assembly facilities.
Various financial obligations Delphi has to GM as of the date of
Delphis Chapter 11 filing, including the
$739 million payable for amounts that Delphi owed to GM
relating to Delphi employees who were formerly GM employees and
subsequently transferred back to GM as job openings became
available to them under certain employee flowback
arrangements, may be subject to compromise in the bankruptcy
proceedings, which may result in GM receiving payment of only a
portion, if any, of the face amount owed by Delphi.
GM is seeking to minimize this risk by protecting our right of
setoff against the $1.15 billion we owed to Delphi as of
the date of its Chapter 11 filing. A procedure for
determining setoff claims has been put in place by the
bankruptcy court. However, the extent to which these obligations
are covered by our right to setoff may be subject to dispute by
Delphi, the creditors committee, or Delphis other
creditors, and limitation by the court. GM cannot provide any
assurance that it will be able to fully or partially setoff such
amounts. However, to date setoffs of approximately
$53.6 million have been agreed to by Delphi and taken by
GM. Although GM believes that it is probable that it will be
able to collect all of the amounts due from Delphi, the
financial impact of a substantial compromise of our right of
setoff, however, could have a material adverse impact on our
financial position. In addition, the basis, amounts, and
priority of any claims against Delphi that GM currently has or
may have in the future may be challenged by other parties in
interest in Delphis bankruptcy proceeding. The scope and
results of such challenges cannot be predicted with certainty.
In connection with GMs spin-off of Delphi in 1999, GM
entered into separate agreements with the UAW, the IUE-CWA and
the United Steel Workers. In each of these three agreements
(Benefit Guarantee Agreement(s)), GM
I-46
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Delphi
Bankruptcy (continued)
provided contingent benefit guarantees to make payments for
limited pension and OPEB expenses to certain former GM
U.S. hourly employees who transferred to Delphi as part of
the spin-off and meet the eligibility requirements for such
payments (Covered Employees).
Each Benefit Guarantee Agreement contains separate benefit
guarantees relating to pension, postretirement health care and
life insurance benefits. These limited benefit guarantees each
have separate triggering events that initiate potential GM
liability if Delphi fails to provide the corresponding benefit
at the required level. Therefore, it is possible that GM could
incur liability under one of the guarantees (e.g., pension)
without triggering the other guarantees (e.g., postretirement
health care or life insurance). In addition, with respect to
pension benefits, GMs obligation under the pension benefit
guarantees only arises to the extent that the combination of
pension benefits provided by Delphi and the Pension Benefit
Guaranty Corporation (PBGC) falls short of the amounts GM has
guaranteed.
The Chapter 11 filing by Delphi does not by itself trigger
any of the benefit guarantees. Moreover, Delphis filing of
motions under the U.S. Bankruptcy Code to reject its
U.S. labor agreements and modify retiree welfare benefits
does not by itself trigger any of the benefit guarantees. In
addition, the benefit guarantees expire on October 18, 2007
if not previously triggered by Delphis failure to pay the
specified benefits. If a benefit guarantee is triggered before
its expiration date, GMs obligation could extend for the
lives of affected Covered Employees, subject to the applicable
terms of the pertinent benefit plans or other relevant
agreements.
The benefit guarantees do not obligate GM to guarantee any
benefits for Delphi retirees in excess of the levels of
corresponding benefits GM provides at any given time to
GMs own hourly retirees. Accordingly, if any of the
benefits GM provides to its hourly retirees are reduced, there
would be a similar reduction in GMs obligations under the
corresponding benefit guarantee.
A separate agreement between GM and Delphi requires Delphi to
indemnify GM if and to the extent GM makes payments under the
benefit guarantees to the UAW employees or retirees. GM received
a notice from Delphi, dated October 8, 2005, that it was
more likely than not that GM would become obligated to provide
benefits pursuant to the benefit guarantees to the UAW employees
or retirees. The notice stated that Delphi was unable at that
time to estimate the timing and scope of any benefits GM might
be required to provide under those benefit guarantees. Any
recovery by GM under indemnity claims against Delphi might be
subject to partial or complete discharge in the Delphi
reorganization proceeding. As a result, GMs claims for
indemnity may not be paid partially or in full.
As part of GMs health-care agreement negotiations with the
UAW, GM provided former GM employees who became Delphi employees
the potential to earn up to seven years of credited service for
purposes of eligibility for certain health-care benefits under
the GM/UAW Benefit Guarantee Agreement.
As discussed above, GM together with Delphi and the UAW
announced on March 22, 2006 that they had entered into the
UAW Attrition Agreement which is intended to reduce the number
of U.S. hourly employees at GM and Delphi through the
Agreement. When originally executed, Delphis participation
in the UAW Attrition Agreement was subject to approval by the
Bankruptcy Court, which has jurisdiction over Delphis
Chapter 11 proceedings. On April 7, 2006, the
Bankruptcy Court declared in a hearing that Delphis
participation in the UAW Attrition Agreement was approved. The
UAW Attrition Agreement provides for a combination of early
retirement programs and other incentives designed to help reduce
employment levels at both GM and Delphi.
In the UAW Attrition Agreement, GM has agreed to assume certain
costs regarding UAW-represented Delphi employees. Specifically,
GM agreed to (1) pay lump sums of $35,000 to certain
employees who participate in the UAW Attrition Agreement;
(2) allow Delphi employees who agree to retire under the
UAW Attrition Agreement to flowback to GM for purposes of
retirement whereby GM will assume all OPEB obligations to such
retiree; (3) subsidize, for an interim period of time,
health care and life insurance coverage for Delphi employees
participating in a special voluntary pre-retirement program if
Delphi reduces or eliminates its health care
and/or life
insurance coverage provided to active UAW employees; and
(4) accept 5,000 active flowback employees, and as a
I-47
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Delphi
Bankruptcy (continued)
result after they flow back, pay such employees wages and
benefits and incur pension and OPEB obligations for such
employees. The UAW Attrition Agreement provides that for such
costs, other than the $35,000 lump sum payment, GM will have a
prepetition, general unsecured claim assertable against the
bankruptcy estate of Delphi under certain existing agreements.
This claim is subject to the rights of parties in interest to
object to allowance on any grounds other than the claim did not
arise under the terms of the pre-existing contractual agreements
between GM and Delphi. GM believes that the UAW Attrition
Agreement will enhance the prospects for GM, the UAW and Delphi
to reach a broad-based consensual resolution of issues relating
to the Delphi restructuring, but significant obstacles remain.
As of June 30, 2006 approximately 12,500 Delphi employees
had elected one of the retirement options available under the
UAW Attrition Agreement.
On June 29, 2006 the Bankruptcy Court approved a motion by
Delphi to offer similar attrition packages and a buyout program
to approximately 8,500 hourly employees represented by the
IUE-CWA and a buyout program to hourly employees represented by
the UAW, many of whom were not eligible for the earlier offer.
GM and Delphi will share the cost of these programs. GM will
have an allowed prepetition, general unsecured claim against the
estate of Delphi for payments that it makes under the buyout
program and a prepetition, general unsecured claim for costs,
other than the $35,000 lump-sum payment, incurred in the IUE-CWA
attrition program assertable against the estate of Delphi under
certain existing agreements. This claim is subject to the rights
of parties in interest to object to allowance on any grounds
other than that the claim did not arise under the terms of the
pre-existing contractual agreements between GM and Delphi. In
addition, the basis, amounts, and priority of any claims against
Delphi that GM currently has or may have in the future may be
challenged by other parties in interest in Delphis
bankruptcy proceeding. The scope and results of such challenges
cannot be predicted with certainty. The estimated cost to GM of
these programs is comprehended in the pretax charge of
$5.5 billion recorded by GM in the fourth quarter of 2005
related to GMs contingent exposure related to
Delphis bankruptcy filing.
GM believes that it is probable that it has incurred a
contingent liability due to Delphis Chapter 11
filing. GM believes that the range of the contingent exposures
is between $5.5 billion and $12 billion, with amounts
near the low end of the range considered more possible than
amounts near the high end of the range. GM established a reserve
of $5.5 billion ($3.6 billion after tax) for this
contingent liability in the fourth quarter of 2005 and has made
no adjustments to that reserve balance as of June 30, 2006.
These views reflect GMs current assessment that it is
unlikely that a Chapter 11 process will result in both a
termination of Delphis pension plan and complete
elimination of its OPEB plans. The amount of this charge may
change, depending on the result of discussions among GM, Delphi,
and Delphis unions, and other factors. GM is currently
unable to estimate the amount of additional charges, if any,
which may arise from Delphis Chapter 11 filing. A
consensual agreement to resolve the Delphi matter may cause GM
to incur additional costs in exchange for benefits that would
accrue to GM over time.
With respect to the possible cash flow effect on GM related to
its ability to make either pension or OPEB payments, if any are
required under the benefit guarantees, GM would expect to make
such payments from ongoing operating cash flow and financings.
Such payments, if any, are not expected to have a material
effect on GMs cash flows in the short-term. However, if
payable, these payments would be likely to increase over time,
and could have a material effect on GMs liquidity in
coming years. (For reference, Delphis 2005
Form 10-K
reported that its total cash outlay for benefits for 2005 was
$231 million, which included $182 million for both
hourly and salaried retirees, the latter of whom are not covered
under the benefit guarantees, plus $54 million in payments
to GM for certain former Delphi hourly employees who flowed back
to retire from GM, net of $5 million of payments from GM
related to employees who flowed from GM to Delphi after the
Delphi spin-off). If benefits to Delphis U.S. hourly
employees under Delphis pension plan are reduced or
terminated, the resulting effect on GM cash flows in future
years due to the Benefit Guarantee Agreements is currently not
reasonably estimable.
Investigations
As previously reported, GM has been cooperating with the
government in connection with a number of investigations.
I-48
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Investigations (concluded)
The SEC has issued subpoenas to GM in connection with various
matters involving GM that it has under investigation. These
matters include GMs financial reporting concerning pension
and OPEB, certain transactions between GM and Delphi, supplier
price reductions or credits, and any obligation GM may have to
fund pension and OPEB costs in connection with Delphis
proceedings under Chapter 11 of the U.S. Bankruptcy
Code. In addition, the SEC has issued a subpoena in connection
with an investigation of our transactions in precious metal raw
materials used in our automotive manufacturing operations, and a
federal grand jury issued a subpoena in connection with supplier
credits.
Separately, SEC and federal grand jury subpoenas have been
served on GMAC entities in connection with industry wide
investigations into practices in the insurance industry relating
to loss mitigation insurance products such as finite risk
insurance.
Liquidity
and Capital Resources
Investors or potential investors in GM and GMAC securities
consider cash flows of each reportable operating segment as a
relevant measure in the analysis of GMs and GMACs
various securities that trade in public markets. Accordingly, GM
provides supplemental condensed reportable operating segment
statements of cash flows to aid users of GMs consolidated
financial statements in the analysis of performance and
liquidity and capital resources.
This information reconciles to the Condensed Consolidated
Statements of Cash Flows after the elimination of Net
investing activity with Financing and Insurance Operations
and Net financing activity with Automotive and Other
line items shown in the table below. Following are such
statements for the six months ended June 30, 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive and Other
|
|
|
Financing and Insurance
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
Net cash provided by (used in)
operating activities
|
|
$
|
5,468
|
|
|
$
|
(2,138
|
)
|
|
$
|
(7,457
|
)
|
|
$
|
357
|
|
Cash flows from investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures for property
|
|
|
(3,139
|
)
|
|
|
(2,813
|
)
|
|
|
(135
|
)
|
|
|
(131
|
)
|
Investments in marketable
securities acquisitions
|
|
|
(62
|
)
|
|
|
(271
|
)
|
|
|
(11,518
|
)
|
|
|
(10,559
|
)
|
Investments in marketable
securities liquidations
|
|
|
1,663
|
|
|
|
3,137
|
|
|
|
10,246
|
|
|
|
7,132
|
|
Net change in mortgage servicing
rights
|
|
|
|
|
|
|
|
|
|
|
(55
|
)
|
|
|
(185
|
)
|
Increase (decrease) in finance
receivables
|
|
|
|
|
|
|
|
|
|
|
(169
|
)
|
|
|
(2,569
|
)
|
Proceeds from sales of finance
receivables
|
|
|
|
|
|
|
|
|
|
|
15,213
|
|
|
|
17,692
|
|
Proceeds from the sale of business
units/equity investments
|
|
|
1,968
|
|
|
|
|
|
|
|
8,550
|
|
|
|
|
|
Operating leases
acquisitions
|
|
|
|
|
|
|
|
|
|
|
(9,135
|
)
|
|
|
(8,378
|
)
|
Operating leases
liquidations
|
|
|
|
|
|
|
|
|
|
|
3,411
|
|
|
|
3,258
|
|
Net investing activity with
Financing and Insurance Operations
|
|
|
1,411
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
Investments in companies, net of
cash acquired
|
|
|
(21
|
)
|
|
|
1,355
|
|
|
|
(324
|
)
|
|
|
|
|
Other
|
|
|
(1,035
|
)
|
|
|
(591
|
)
|
|
|
(580
|
)
|
|
|
(1,550
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities
|
|
|
785
|
|
|
|
1,817
|
|
|
|
15,504
|
|
|
|
4,710
|
|
I-49
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Liquidity
and Capital Resources (concluded)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive and Other
|
|
|
Financing and Insurance
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
(Dollars in millions)
|
|
|
Cash flows from financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in loans
payable
|
|
|
(332
|
)
|
|
|
46
|
|
|
|
(6,853
|
)
|
|
|
(8,457
|
)
|
Long-term debt
borrowings
|
|
|
425
|
|
|
|
25
|
|
|
|
42,226
|
|
|
|
30,415
|
|
Long-term debt
repayments
|
|
|
(379
|
)
|
|
|
(20
|
)
|
|
|
(43,205
|
)
|
|
|
(32,124
|
)
|
Net financing activity with
Automotive & Other
|
|
|
|
|
|
|
|
|
|
|
(1,411
|
)
|
|
|
(1,000
|
)
|
Cash dividends paid to stockholders
|
|
|
(283
|
)
|
|
|
(570
|
)
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
1,918
|
|
|
|
3,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities
|
|
|
(569
|
)
|
|
|
(519
|
)
|
|
|
(7,325
|
)
|
|
|
(7,547
|
)
|
Effect of exchange rate changes on
cash and cash equivalents
|
|
|
73
|
|
|
|
(283
|
)
|
|
|
98
|
|
|
|
(129
|
)
|
Net transactions with
Automotive/Financing Operations
|
|
|
(947
|
)
|
|
|
420
|
|
|
|
947
|
|
|
|
(420
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
and cash equivalents
|
|
|
4,810
|
|
|
|
(703
|
)
|
|
|
1,767
|
|
|
|
(3,029
|
)
|
Cash and cash equivalents
reclassified to assets held for sale
|
|
|
|
|
|
|
|
|
|
|
(14,458
|
)
|
|
|
|
|
Cash and cash equivalents at
beginning of the period
|
|
|
15,187
|
|
|
|
13,148
|
|
|
|
15,539
|
|
|
|
22,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at
end of the period
|
|
$
|
19,997
|
|
|
$
|
12,445
|
|
|
$
|
2,848
|
|
|
$
|
19,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive
and Other Operations
Available
Liquidity
GM believes it has sufficient liquidity and financial
flexibility to meet its capital requirements over the short and
medium-term under reasonably foreseeable circumstances. Over the
long term, GM believes its ability to meet its capital
requirements will primarily depend on the execution of its
turnaround plan and the return of its North American operations
to profitability and positive cash flow. GM Auto &
Others available liquidity includes its cash balances,
marketable securities and readily-available assets of its VEBA
trusts. At June 30, 2006, GM Auto & Others
available liquidity was $22.9 billion compared with
$21.6 billion at March 31, 2006, $20.4 billion at
December 31, 2005 and $20.2 billion at June 30,
2005. The amount of GMs consolidated cash and marketable
securities is subject to intra-month and seasonal fluctuations,
with a significant portion of GMs trade accounts payable
due shortly after the beginning of each month, and such amounts
include balances held by various GM business units and
subsidiaries worldwide that are needed to fund their operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2006
|
|
|
Dec. 31, 2005
|
|
|
June 30, 2005
|
|
|
|
(Dollars in billions)
|
|
|
Cash and cash equivalents
|
|
$
|
20.0
|
|
|
$
|
15.2
|
|
|
$
|
12.4
|
|
Other marketable securities
|
|
|
0.1
|
|
|
|
1.4
|
|
|
|
3.6
|
|
Readily-available assets of VEBA
trusts
|
|
|
2.8
|
|
|
|
3.8
|
|
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available Liquidity
|
|
$
|
22.9
|
|
|
$
|
20.4
|
|
|
$
|
20.2
|
|
In addition to the $2.8 billion of readily-available GM
VEBA trust assets included in available liquidity, GM expects to
have access to additional VEBA trust assets over time to fund
its future OPEB plan costs. These additional VEBA trust assets,
which are not currently available, totaled approximately
$15.6 billion as of June 30, 2006, making the total
VEBA trust assets $18.4 billion as of June 30, 2006.
At December 31, 2005, the total VEBA trust assets were
$19.1 billion, $3.8 billion of which was
readily-available and $15.3 billion of which was not
readily-available. GM did not withdraw any funds from its VEBA
trusts during the second quarter of 2006. The decline in the
VEBA balances since December 31, 2005 was primarily driven
by a $2 billion withdrawal in the first quarter of 2006,
partially offset by asset returns over the six month period.
Since June 30, 2006, GM has withdrawn
I-50
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Automotive
and Other Operations (continued)
Available
Liquidity (continued)
$2 billion of funds from the VEBA trusts to reimburse GM
payments for hourly retiree health care and life insurance.
As an additional source of available liquidity, GM negotiated a
$4.63 billion amended and restated credit agreement with a
syndicate of banks restating and amending the $5.6 billion
unsecured line of credit on July 20, 2006. This agreement
provides additional available liquidity that GM anticipates to
draw on from time to time to fund working capital and other
needs. The facility is comprised of a $4.48 billion secured
line of credit that terminates in July 2011 and a
$0.15 billion unsecured line of credit that terminates in
June 2008. Under the $4.48 billion secured facility,
borrowings are limited to an amount based on the value of the
underlying collateral, which consists of certain North American
accounts receivable and inventory of General Motors Corporation,
Saturn Corporation, and General Motors of Canada, Limited,
certain plants, property and equipment of General Motors of
Canada, Limited, and a pledge of 65% of the stock of the holding
company for GMs indirect subsidiary GM de Mexico. In
addition to the $4.48 billion secured line of credit, the
collateral also secures certain lines of credit, automatic
clearinghouse and overdraft arrangements and letters of credit
provided by the same secured lenders totaling approximately
$1.5 billion. At GMs current credit ratings, all-in
cost of borrowings from the secured line of credit will be LIBOR
(London InterBank Offered Rate) plus 225 basis points,
while all-in costs of borrowings from the unsecured line of
credit will be LIBOR plus 200 basis points. In addition, secured
lenders received a consent fee of 40 basis points. In the event
of certain work stoppages, the secured facility would be
temporarily reduced to $3.5 billion. This amended and
restated credit agreement removed the uncertainty previously
reported as to whether the bank syndicate would be required to
honor a borrowing request.
GM also has an additional $0.3 billion in undrawn committed
facilities with various maturities and undrawn uncommitted lines
of credit of $0.5 billion. In addition, GMs
consolidated affiliates with non-GM minority shareholders,
primarily GM Daewoo, have a combined $1.5 billion in
undrawn committed facilities.
GM had previously reported its belief that issues may arise from
its restatement of its prior financial statements under various
financing agreements, which consist principally of obligations
in connection with sale/leaseback transactions and other lease
obligations (but not GMs public debt indentures) to which
GM is party. In March 2006, GM evaluated the effect of its
restatement under these agreements, including its legal rights
(such as its ability to cure) with respect to any claims that
could be asserted. While noting that the amounts that might be
subject to possible claims of acceleration, termination or other
remedies under some or all of these agreements were uncertain,
GM stated in its 2005 Annual Report on
Form 10-K
that such amounts would likely not exceed approximately
$3 billion. Based on further analysis of the underlying
portfolio, GM subsequently reduced that amount to
$2 billion based on further analysis of the underlying
portfolio in its Quarterly Report on
Form 10-Q
for the first quarter of 2006. Following these disclosures, GM
received a small number of inquiries from parties to some of
these agreements, but has not received any claims under these
agreements resulting from the restatements, and is not aware of
any indication that any party plans to make a claim. GM believes
that it has sufficient liquidity over the short and medium term,
regardless of the resolution of these matters.
On April 3, 2006, GM announced that it had entered into a
definitive agreement to sell a controlling interest in GMAC to a
consortium of investors, FIM Holdings. The transaction is
subject to a number of U.S., international and other approvals.
The total value of cash proceeds and distributions to GM before
it purchases preferred limited liability company interests of
GMAC and repays any intercompany unsecured obligations will be
approximately $14 billion in cash from this transaction
over three years, comprised of the $7.4 billion purchase
price, $4 billion of retained assets and a
$2.7 billion cash dividend. From the proceeds GM will
invest $1.4 billion of cash in new preferred limited
liability company interests of GMAC.
I-51
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Automotive
and Other Operations (concluded)
Available
Liquidity (concluded)
Cash
Flow
The $2.5 billion increase in available liquidity to
$22.9 billion at June 30, 2006 from $20.4 billion
at December 31, 2005 was primarily the result of
Auto & Others positive operating cash flow and
cash proceeds from asset sales, partially offset by the
significant capital expenditures required to support the
business.
The charge of $3.7 billion (after tax) recognized in the
second quarter as a result of the UAW Attrition Agreement
includes $1.4 billion (after tax) for cash payments to
employees, the majority expected to be paid in 2006, with the
remainder spread over the next three years. These payments will
be funded using cash flow from operations. The remaining
$2.3 billion of the charge is non-cash and
consequently will have no cash flow impact.
For the six months ending on June 30, 2006, Auto &
Others operating cash flow was $5.5 billion compared
with a negative $2.1 billion for the same period in the
prior year.
Auto & Others investing cash flows for the six
months ending on June 30, 2006 consisted primarily of
capital expenditures (a use of investing cash flow) of
$3.1 billion, compared with $2.8 billion in the same
period in the prior year, and liquidation of marketable
securities (a source of investing cash flow) of
$1.7 billion, compared to $3.1 billion in the same
period in the prior year and dividends received from GMAC (a
source of investing cash flow) of $1.4 billion compared
with $1.0 billion in the same period in the prior year. In
April 2006, GM sold its interests in Suzuki and Isuzu common
stock for approximately $2.3 billion in cash (of which
$1.7 billion is included in the liquidation of marketable
securities), positively impacting investing cash flow by the
same amount. Capital expenditures were incurred primarily for
real estate, plants, equipment, machinery and tooling to support
new products and powertrain investments, as well as GMs
existing asset base.
Debt
GM Auto & Others total debt at June 30, 2006
was $32.5 billion, of which $1.2 billion was
classified as short-term and $31.3 billion was classified
as long-term. At December 31, 2005, total debt was
$32.5 billion, of which $1.5 billion was short-term
and $31.0 billion was long-term, and at June 30, 2005,
total debt was $32.6 billion, of which $1.6 billion
was short-term and $31.0 billion was long-term.
Separate from the $1.2 billion of short-term debt,
near-term North American term debt maturities include up to
approximately $1.2 billion in 2007, related to
approximately $1.2 billion of convertible debentures that
may be put to GM for cash settlement in March 2007, and
approximately $1.3 billion of various term-debt maturities
in 2008.
In order to provide financial flexibility to GM and its
suppliers, GM maintains a trade payables program through GMAC
Commercial Finance (GMACCF). Under the terms of the transaction
to sell 51% of GMAC to FIM Holdings, GM will be permitted
to continue administering the program through GMACCF so long as
GM provides the funding of advance payments to suppliers under
the program. As of May 1, 2006, GM commenced funding of the
advance payments, and as a result, at June 30, 2006 there
was no outstanding balance owed by GM to GMACCF under the
program.
Net
Liquidity
Net liquidity, calculated as cash, marketable securities, and
$2.8 billion ($3.8 billion at December 31,
2005) of readily-available assets of the VEBA trust less
the total of loans payable and long-term debt, was a negative
$9.6 billion at June 30, 2006, compared with a
negative $10.6 billion at March 31, 2006 and a
negative $12.1 billion at December 31, 2005.
I-52
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Financing
and Insurance Operations
At June 30, 2006, GMACs consolidated assets totaled
$308.4 billion, compared with $320.5 billion at
December 31, 2005 and $310.0 billion at June 30,
2005. The decrease from December 31, 2005 was primarily
attributable to the sale of approximately 78% of GMACs
equity in Capmark in the first quarter of 2006.
GMACs total debt decreased to $246.6 billion at
June 30, 2006, compared with $253.2 billion at
December 31, 2005 and $250.9 billion at June 30,
2005. GMACs ratio of total debt to total
stockholders equity at June 30, 2006 was 11.2:1,
compared with 11.9:1 at December 31, 2005, and 11.1:1 at
June 30, 2005. GMACs liquidity, as well as its
ability to profit from ongoing activity, is in large part
dependent upon its timely access to capital and the costs
associated with raising funds in different segments of the
capital markets. Part of GMACs strategy in managing
liquidity risk has been to develop diversified funding sources
across a global investor base. As an important part of its
overall funding and liquidity strategy, GMAC maintains
substantial bank lines of credit. These bank lines of credit,
which totaled $44.4 billion at June 30, 2006, provide
back-up liquidity and represent additional funding
sources, if required.
GMAC currently has a $3.2 billion syndicated line of credit
committed through June 2007, $4.4 billion committed through
June 2008, and committed and uncommitted lines of credit of
$2.9 billion and $9.1 billion, respectively. In
addition, at June 30, 2006, New Center Asset Trust (NCAT)
and Mortgage Interest Networking Trust (MINT) had
$18.3 billion and $3.0 billion in committed liquidity
facilities, respectively. NCAT is a special purpose entity
administered by GMAC for the purpose of funding assets as part
of GMACs securitization funding programs. This entity
funds the purchase of assets through the issuance of
asset-backed commercial paper and represents an important source
of liquidity to GMAC. At June 30, 2006, NCAT had commercial
paper outstanding of $11.8 billion, which is not
consolidated in the Corporations Consolidated Balance
Sheet. In addition, GMAC has been able to diversify its
unsecured funding through the formation of ResCap. ResCap, which
was formed as the holding company of GMACs residential
mortgage businesses, has a $3.5 billion syndicated line of
credit consisting of a $1.75 billion syndicated term loan,
a $0.9 billion syndicated line of credit committed through
July 2008, and a $0.9 billion syndicated line of credit
committed through July 2007. Finally, GMAC has
$109.3 billion in committed secured funding facilities with
third-parties, including commitments with third-party
asset-backed commercial paper conduits, as well as forward flow
sale agreements with third-parties and repurchase facilities.
This includes five year commitments that GMAC entered into in
2005 with remaining capacity to sell up to $48 billion of
retail automotive receivables to third party purchasers through
2010. The unused portion of these committed and uncommitted
facilities totaled $67.5 billion at June 30, 2006.
Status of
Debt Ratings
Standard & Poors, Moodys, and Fitch
currently rate GMs and GMACs credit at
non-investment grade. Dominion Bond Rating Services (DBRS) rates
GMs credit at non-investment grade and maintains an
investment grade rating for GMAC. All major rating agencies rate
ResCap at investment grade. The following table summarizes
GMs, GMACs and ResCaps credit ratings as of
July 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Unsecured Debt
|
|
|
Commercial Paper
|
Rating Agency
|
|
GM
|
|
GMAC
|
|
ResCap
|
|
|
GM
|
|
GMAC
|
|
ResCap
|
DBRS
|
|
B
|
|
BBB(Low)
|
|
BBB
|
|
|
R-3(Low)
|
|
R-2(Low)
|
|
R-2(Mid)
|
Fitch
|
|
B
|
|
BB
|
|
BBB-
|
|
|
Withdrawn
|
|
B
|
|
F3
|
Moodys
|
|
Caa1
|
|
Ba1
|
|
Baa3
|
|
|
Not Prime
|
|
Not Prime
|
|
P3
|
S&P
|
|
B-
|
|
BB
|
|
BBB-
|
|
|
B-3
|
|
B-1
|
|
A-3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
I-53
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Status of
Debt Ratings (continued)
|
|
|
|
|
|
|
|
|
Outlook
|
Rating Agency
|
|
GM
|
|
GMAC
|
|
ResCap
|
|
DBRS
|
|
Negative
|
|
Developing
|
|
Developing
|
Fitch
|
|
Rating Watch
|
|
Positive
|
|
Positive
|
|
|
Negative
|
|
|
|
|
Moodys
|
|
Negative
|
|
Review for
|
|
Review for
|
|
|
|
|
Possible
|
|
Possible
|
|
|
|
|
Downgrade
|
|
Downgrade
|
S&P
|
|
Credit Watch
|
|
Developing
|
|
Developing
|
|
|
Negative
|
|
|
|
|
|
|
|
|
|
|
|
While GM experienced limited access to the capital markets in
the second quarter of 2006 as a result of deterioration in its
credit ratings, GM was able to utilize available liquidity to
meet its capital requirements. Similarly, due to the downgrade
of GMACs unsecured debt to non-investment grade,
GMACs access to the unsecured capital markets was limited.
GMAC was able to meet its capital requirements by accessing
alternative funding sources, with a focus on secured funding and
automotive whole loan sales.
Each of Moodys, Fitch, Standard & Poors and
DBRS downgraded GMs unsecured debt.
On February 21, 2006, Moodys downgraded GMs
senior unsecured debt to B2 with a negative outlook from B1
under review for a possible downgrade. On March 16, 2006,
Moodys placed the senior unsecured ratings of GM, GMAC and
ResCap under review for a possible downgrade. At the same time,
Moodys changed the review status of ResCaps
short-term
P-3 ratings
to review for possible downgrade from direction uncertain. On
March 29, 2006 Moodys downgraded GMs senior
unsecured debt to B3 with a negative outlook leaving the ratings
of GMAC and ResCap on review for possible downgrade. On
May 5, 2006, Moodys placed GMs senior unsecured
debt rating under review for a possible downgrade. GMs
corporate rating and the ratings of GMAC and ResCap were
unaffected. On June 20, 2006, Moodys assigned a B2
rating to GMs secured credit facility, affirmed the
companys B3 corporate rating and lowered its unsecured
credit rating to Caa1. The rating outlook is negative. Credit
ratings of GMAC and ResCap were unaffected.
On March 1, 2006, Fitch downgraded GMs senior
unsecured rating from B+ to B. Following GMs April 2,
2006 entry into a definitive agreement to sell 51% of its stake
in GMAC, Fitch changed GMACs and ResCaps
rating-watch outlook from evolving to positive. On June 20,
2006, Fitch assigned a BB rating to GMs secured credit
facility. GMs issuer rating remained unchanged at B, on
Rating Watch Negative. Credit ratings of GMAC and ResCap were
unaffected.
On March 29, 2006, Standard and Poors placed both
GMs long term B and short term B-3 corporate credit
ratings on CreditWatch with negative implications. The ratings
for GMAC and ResCap were affirmed as BB and BBB minus,
respectively. Both GMAC and ResCaps ratings were left on
CreditWatch with developing implications. On June 20, 2006,
Standard and Poors assigned a B+ credit rating on the
proposed GM senior bank loan facility with a recovery rating of
1 signifying that lenders can expect full recovery
of principal in the event of a payment default. At the same
time, Standard & Poors affirmed the
companys B corporate credit rating and lowered the senior
unsecured debt rating on GM to B- as a result of the proposed
secured bank transaction. All ratings remain on credit watch
with negative implications. The credit ratings of GMAC and
ResCap were unaffected by the ratings actions.
On July 24, 2006 DBRS downgraded GMs senior unsecured
rating to B from B (high) and commercial paper rating to R-3
(low) from R-3 (middle) following the completion of the
aforementioned secured credit transaction. The trend remained
negative. Credit ratings of GMAC, ResCap and their related
subsidiaries were unaffected.
I-54
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Status of
Debt Ratings (concluded)
While the aforementioned ratings actions have increased
borrowing costs and limited access to unsecured debt markets,
these outcomes have been mitigated by actions taken by GM and
GMAC over the past few years to focus on an increased use of
liquidity sources other than institutional unsecured markets
that are not directly affected by ratings on unsecured debt,
including secured funding sources beyond traditional asset
classes and geographical markets, automotive whole loan sales,
and use of bank and conduit facilities. Further reductions of
GMs
and/or
GMACs credit ratings could increase the possibility of
additional terms and conditions contained in any new or
replacement financing arrangements. As a result of specific
funding actions taken over the past few years, management
believes that GM and GMAC will continue to have access to
sufficient capital to meet the Corporations ongoing
funding needs over the short and medium-term. Notwithstanding
the foregoing, management believes that the current ratings
situation and outlook increase the level of risk for achieving
the Corporations funding strategy and GMACs ability
to sustain current level of asset originations over the
long-term. In addition, the ratings situation and outlook
increase the importance of successfully executing the
Corporations plans for improvement of operating results.
On April 2, 2006, GM entered into a definitive agreement to
sell 51% of its stake in GMAC. One of the goals of this
transaction is to delink GMACs credit rating from
GMs credit rating and renew its access to low-cost
financing.
Line of
Credit Between GM and GMAC
GM has a $4 billion revolving line of credit from GMAC that
expires in September 2006. This credit line is used for general
operating and seasonal working capital purposes and to reduce
external liquidity requirements, given the differences in the
timing of GMs and GMACs peak funding requirements.
The line was not utilized in the second quarter of 2006 and at
June 30, 2006, no amounts were outstanding on the revolving
line of credit. In the second quarter of 2005, the maximum
amount outstanding on this line was $1.4 billion. Interest
is payable on amounts advanced under the arrangements based on
market interest rates, adjusted to reflect the credit rating of
GM or GMAC in its capacity as borrower.
Off-Balance
Sheet Arrangements
GM and GMAC use off-balance sheet arrangements where economics
and sound business principles warrant their use. GMs
principal use of off-balance sheet arrangements occurs in
connection with the securitization and sale of financial assets
generated or acquired in the ordinary course of business by GMAC
and its subsidiaries and, to a lesser extent, by GM. The assets
securitized and sold by GMAC and its subsidiaries consist
principally of mortgages, and wholesale and retail loans secured
by vehicles sold through GMs dealer network. The assets
sold by GM consist principally of trade receivables.
In addition, GM leases real estate and equipment from various
off-balance sheet entities that have been established to
facilitate the financing of those assets for GM by nationally
prominent lessors that GM believes are creditworthy. These
assets consist principally of office buildings, warehouses, and
machinery and equipment. The use of such entities allows the
parties providing the financing to isolate particular assets in
a single entity and thereby syndicate the financing to multiple
third parties. This is a conventional financing technique used
to lower the cost of borrowing and, thus, the lease cost to a
lessee such as GM.
There is a well-established market in which institutions
participate in the financing of such property through their
purchase of ownership interests in these entities and each is
owned by institutions that are independent of, and not
affiliated with, GM. GM believes that no officers, directors or
employees of GM, GMAC, or their affiliates hold any direct or
indirect equity interests in such entities.
I-55
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Off-Balance
Sheet Arrangements (concluded)
Assets in off-balance sheet entities were as follows (dollars in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
Dec. 31,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2005
|
|
|
Automotive and Other Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets leased under operating
leases
|
|
$
|
2,298
|
|
|
$
|
2,430
|
|
|
$
|
2,455
|
|
Trade receivables sold(1)
|
|
|
713
|
|
|
|
708
|
|
|
|
1,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,011
|
|
|
$
|
3,138
|
|
|
$
|
3,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing and Insurance Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables sold or securitized:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans
|
|
$
|
95,687
|
|
|
$
|
99,084
|
|
|
$
|
90,309
|
|
Retail finance
receivables
|
|
|
7,151
|
|
|
|
6,014
|
|
|
|
7,675
|
|
Wholesale
finance receivables
|
|
|
21,624
|
|
|
|
21,421
|
|
|
|
21,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
124,462
|
|
|
$
|
126,519
|
|
|
$
|
119,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In addition, trade receivables sold to GMAC were
$590 million, $525 million and $590 million for
the periods ended June 30, 2006, December 31, 2005,
and June 30, 2005, respectively. |
Book
Value Per Share
Book value per share was determined based on the liquidation
rights of the common stockholders. Book value per share of GM
$12/3
par value common stock (Common Stock) was $20.58 at
June 30, 2006, $25.81 at December 31, 2005, and $42.17
at June 30, 2005.
Book value per share is a meaningful financial measure for GM,
as it provides investors an objective metric based on GAAP that
can be compared to similar metrics for competitors and other
industry participants. The book value per share can vary
significantly from the trading price of common stock since the
latter is driven by investor expectations about a variety of
factors, including the present value of future cash flows, which
may or may not warrant financial statement recognition under
GAAP.
Dividends
Dividends may be paid on the Common Stock only when, as, and if
declared by GMs Board of Directors in its sole discretion
out of amounts available for dividends under applicable law. At
June 30, 2006, the amount of our capital surplus less
accumulated deficit on a GAAP basis was approximately
$14.4 billion. Under Delaware law, our board may declare
dividends only to the extent of our statutory
surplus (which is defined as total assets minus
total liabilities, in each case at fair market value, minus
statutory capital), or if there is no such surplus, out of our
net profits for the then current
and/or
immediately preceding fiscal year.
GMs policy is to distribute dividends on the Common Stock
based on the outlook and indicated capital needs of the
business. Cash dividends per share of the Common Stock were
$2.00 in 2005, 2004, and 2003. At the February 6, 2006
meeting of the GM Board of Directors, the board approved the
reduction of the quarterly dividend on the Common Stock from
$0.50 per share to $0.25 per share, effective for the
first quarter of 2006. On August 1, 2006, the GM Board
declared a quarterly cash dividend of $0.25 per share on
the Common Stock, payable September 9, 2006, to holders of
record on August 11, 2006.
I-56
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Employment
And Payrolls
|
|
|
|
|
|
|
|
|
Worldwide employment for GM and its consolidated subsidiaries
at June 30, (in thousands)
|
|
2006
|
|
|
2005
|
|
|
GMNA
|
|
|
167
|
|
|
|
177
|
|
GME(1)
|
|
|
63
|
|
|
|
58
|
|
GMLAAM
|
|
|
32
|
|
|
|
32
|
|
GMAP(2)
|
|
|
34
|
|
|
|
14
|
|
GMAC
|
|
|
31
|
|
|
|
34
|
|
Other
|
|
|
2
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Total employees
|
|
|
329
|
|
|
|
319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Worldwide payrolls (in
billions)
|
|
$
|
5.4
|
|
|
$
|
5.2
|
|
|
$
|
10.7
|
|
|
$
|
10.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Approximately 7,000 employees were added in the fourth quarter
of 2005 from a former powertrain joint venture with Fiat. |
|
(2) |
|
Approximately 13,000 employees were added as a result of the GM
Daewoo consolidation in the third quarter of 2005. |
Critical
Accounting Estimates
The condensed consolidated financial statements of GM are
prepared in conformity with GAAP, which requires the use of
estimates, judgments, and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the periods presented. GMs accounting policies and
critical accounting estimates are consistent with those
described in Note 1 to the 2005 Consolidated Financial
Statements and the MD&A section in our 2005 Annual Report on
Form 10-K.
Management believes that the accounting estimates employed are
appropriate and resulting balances are reasonable; however,
actual results could differ from the original estimates,
requiring adjustments to these balances in future periods. The
Corporation has discussed the development, selection and
disclosures of its critical accounting estimates with the Audit
Committee of GMs Board of Directors, and the Audit
Committee has reviewed the Corporations disclosures
relating to these estimates.
Pension
and Other Postretirement Employee Benefits (OPEB)
Pension and OPEB costs and liabilities are dependent on
assumptions used in calculating such amounts. The primary
assumptions include factors such as discount rates, health care
cost trend rates, expected return on plan assets, mortality
rates, retirement rates, and rate of compensation increase,
discussed below:
|
|
|
|
|
Discount rates. Our discount rates are based
on creating a hypothetical portfolio of high quality bonds
(rated AA or higher by a recognized rating agency) for which the
timing and amount of cash inflows approximates the estimated
cash outflows of the defined benefit plan.
|
|
|
|
Health care cost trend rate. Our health-care
cost trend rate is based on historical retiree cost data, near
term health care outlook, including appropriate cost control
measures implemented by GM, and industry benchmarks and surveys.
|
|
|
|
Expected return on plan assets. Our expected
return on plan assets is derived from detailed periodic studies,
which include a review of asset allocation strategies,
anticipated future long-term performance of
|
I-57
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Critical
Accounting Estimates (continued)
individual asset classes, risk and correlations for each of the
asset classes that comprise the funds asset mix, and
recent and long-term historical performance.
|
|
|
|
|
Mortality rates. Mortality rates are based on
actual and projected plan experience.
|
|
|
|
Retirement rates. Retirement rates are based
on actual and projected plan experience.
|
|
|
|
Rate of compensation increase. The rate of
compensation increase for final pay plans reflects our long-term
actual experience and our outlook, including contractually
agreed upon wage rate increases for represented hourly employees.
|
In accordance with GAAP, actual results that differ from the
assumptions are accumulated and amortized over future periods
and, therefore, generally affect recognized expense and the
recorded obligation in future periods. While management believes
that the assumptions used are appropriate, differences in actual
experience or changes in assumptions may affect GMs
pension and other postretirement obligations and future expense.
GM remeasured its U.S. hourly pension plan as of
April 30, 2006 as a result of the UAW Attrition Program and
its U.S. salaried pension plan as of March 31, 2006 as
a result of previously announced benefit modifications resulting
in a reduction in the U.S. pension PBO by
$3.9 billion. The weighted average discount rate used to
determine the benefit obligation was 6.15%. This represents a
45 basis point increase from the 5.70% weighted average
discount rate used at year-end 2005. The U.S. hourly plan
remeasurement also included a change in retirement assumptions
for the remaining active employees which resulted in an increase
in the average remaining service life for the remaining active
employees.
GMs U.S. pre-tax SFAS No. 87 pension
expense is estimated to decrease by approximately
$1.2 billion from approximately $0.6 billion
previously projected for 2006.
GM remeasured the U.S. salaried OPEB plans as of
February 9, 2006 as a result of previously announced
benefit modifications and its U.S. hourly OPEB plans as of
March 31, 2006 as a result of the previously announced
settlement agreement with the UAW related to reductions in
hourly retiree health care. The remeasurements for
U.S. salaried and hourly OPEB for health care benefit
modifications reduced the U.S. OPEB accumulated
postretirement benefit obligation (APBO) by $19.3 billion.
The aggregate weighted average discount rate used to determine
the benefit obligation was 5.95%.
GM also remeasured its U.S. hourly OPEB plans as of
May 31, 2006 as a result of the UAW Attrition Program. This
remeasurement will generate a change in the APBO beginning three
months subsequent to the remeasurement date. As a result, the
second quarter 2006 OPEB sensitivity below does not reflect any
amount associated with this hourly plan remeasurement. The
effect of the hourly retiree health care and UAW Attrition
Program remeasurements will be reflected in U.S. OPEB
expense in the third quarter of 2006.
The following information illustrates the sensitivity to a
change in certain assumptions for U.S. pension plans. As of
March 31, 2006 for the U.S. salaried plan,
April 30, 2006 for the U.S. hourly plan, and
December 31, 2005 for the other U.S. plans, the
projected benefit obligation (PBO) for these pension plans was
$85 billion and the minimum pension liability charged to
equity with respect to these pension plans was
$114 million, net of tax:
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Effect on 2006
|
|
Effect on
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Change in Assumption
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Pre-Tax Pension Expense
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PBO
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25 basis point decrease in
discount rate
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|
+$120 million
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+$2.1 billion
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25 basis point increase in
discount rate
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-$120 million
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-$2.0 billion
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25 basis point decrease in
expected return on assets
|
|
+$230 million
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|
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25 basis point increase in
expected return on assets
|
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-$230 million
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|
|
GMs U.S. pension plans generally provide covered
U.S. hourly employees with pension benefits of negotiated,
flat dollar amounts for each year of credited service earned by
an individual employee. Formulas providing for such stated
amounts are contained in the prevailing labor contract.
Consistent with GAAP, pre-tax
I-58
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Critical
Accounting Estimates (concluded)
pension expense and PBO do not comprehend any future benefit
increases or decreases from one contract to the next. The
current cycle for negotiating new labor contracts is every four
years. There is no past practice of maintaining a consistent
level of benefit increases or decreases from one contract to the
next. However, the following data illustrates the sensitivity of
pension expense and PBO to hypothetical assumed changes in
future basic benefits. A 1% increase in the basic benefit for
U.S. hourly employees would result in an $80 million
increase in 2006 pre-tax pension expense and a $420 million
increase in the April 30, 2006 U.S. hourly plan PBO.
A 1% decrease in the same benefit would result in an
$80 million decrease in 2006 pre-tax pension expense and a
$390 million decrease in the same PBO.
The following table illustrates the sensitivity to a change in
the discount rate assumption related to GMs U.S. OPEB
plans after the remeasurement for the U.S. salaried OPEB
plans as of February 9, 2006 as well as the remeasurement
for the U.S. hourly plans as of March 31, 2006:
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Effect on 2006
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Effect on
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Change in Assumption
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Pre-Tax OPEB Expense
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APBO
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25 basis point decrease in
discount rate
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+$150 million
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+$1.7 billion
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25 basis point increase in
discount rate
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-$140 million
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-$1.6 billion
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GM assumes a 10% initial U.S. health-care cost trend rate
for the 2006 calendar year and a 5.0% ultimate
U.S. health-care cost trend rate projected for calendar
year 2012 and beyond as of December 31, 2005. Considering
the remeasurement for the U.S. salaried OPEB plans as of
February 9, 2006 as well as the remeasurement for the
U.S. hourly OPEB plans as of March 31, 2006, then a
one percentage point increase in the assumed U.S. health
care trend rates for all periods would have increased the
U.S. APBO by $5.4 billion, and the aggregate service
and interest cost components of non-pension postretirement
benefit expense on an annualized basis by $412 million. A
one-percentage point decrease would have decreased the
U.S. APBO by $5.2 billion and the aggregate service
and interest cost components of non-pension postretirement
benefit expense on an annualized basis by $396 million.
The above sensitivities reflect the effect of changing one
assumption at a time. It should be noted that economic factors
and conditions often affect multiple assumptions simultaneously
and the effects of changes in key assumptions are not
necessarily linear.
New
Accounting Standards
In December 2005, the Financial Accounting Standard Board (FASB)
released FASB Staff Position (FSP)
SFAS No. 123R-3,
Transition Election Related to Accounting for the Tax
Effects of Share-Based Payment Awards, which provides a
practical transition election related to accounting for the tax
effects of share-based payment awards to employees. The
Corporation is currently reviewing the transition alternatives
and will elect the appropriate alternative no later than
January 1, 2007.
In February 2006, the FASB issued SFAS No. 155,
Accounting for Certain Hybrid Financial Instruments,
which amends SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities
(SFAS No. 133) and SFAS No. 140,
Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities
(SFAS No. 140). This statement amends
SFAS No. 133 to permit fair value remeasurement for
any hybrid instrument that contains an embedded derivative that
otherwise would require bifurcation. This statement also
eliminates the interim guidance in SFAS No. 133
Implementation Issue D-1, which provides that beneficial
interests in securitized financial assets are not subject to the
provisions of SFAS No. 133. Finally, this statement
amends SFAS No. 140 to eliminate the restriction on
the passive derivative instruments that a qualifying
special-purpose entity (SPE) may hold. This statement is
effective for all financial instruments acquired or issued in
first fiscal years beginning after September 15, 2006.
Management is assessing the potential impact on GMs
financial condition and results of operations.
In April 2006, the FASB issued FSP
FIN 46R-6,
Determining the Variability to Be Considered in Applying
FASB Interpretation No. 46R which requires the
variability of an entity to be analyzed based on the design of
the
I-59
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
New
Accounting Standards (concluded)
entity. The nature and risks in the entity, as well as the
purpose for the entitys creation are examined to determine
the variability in applying FIN 46R, Consolidation of
Variable Interest Entities. The variability is used in
applying FIN 46R to determine whether an entity is a
variable interest entity, which interests are variable interests
in the entity, and who is the primary beneficiary of the
variable interest entity. This statement is effective for all
reporting periods beginning after June 15, 2006. Management
does not expect this statement to have a significant impact on
GMs financial condition and results of operations.
In June 2006, the FASB issued Interpretation No. 48,
Accounting for Uncertainty in Income Taxes
(FIN 48) which supplements SFAS No. 109,
Accounting for Income Taxes, by defining the
confidence level that a tax position must meet in order to be
recognized in the financial statements. The Interpretation
requires that the tax effects of a position be recognized only
if it is more-likely-than-not to be sustained based
solely on its technical merits as of the reporting date. The
more-likely-than-not threshold represents a positive assertion
by management that a company is entitled to the economic
benefits of a tax position. If a tax position is not considered
more-likely-than-not to be sustained based solely on its
technical merits, no benefits of the position are to be
recognized. Moreover, the more-likely-than-not threshold must
continue to be met in each reporting period to support continued
recognition of a benefit. At adoption, companies must adjust
their financial statements to reflect only those tax positions
that are more-likely-than-not to be sustained as of the adoption
date. Any necessary adjustment would be recorded directly to
retained earnings in the period of adoption and reported as a
change in accounting principle. This Interpretation is effective
as of the beginning of the first fiscal year beginning after
December 15, 2006. Management is assessing the potential
impact on GMs financial condition and results of
operations.
In July 2006, the FASB issued FASB Staff Position
No. 13-2
Accounting for a Change or Projected Change in the Timing
of Cash Flows Relating to Income Taxes Generated by a Leveraged
Lease Transaction, (Staff Position 13-2), which amends
SFAS No. 13, Accounting for Leases, by
requiring lessors to recalculate the rate of return and periodic
income allocation for leveraged-lease transactions when there is
a change or projected change in the timing of income tax cash
flows related to the lease. FSP 13-2 requires lessors to use the
model in FIN 48 to determine the timing and amount of
expected tax cash flows in leveraged-lease calculations and
recalculations. FSP 13-2 is effective in the same period as
FIN 48. At the date of adoption, the lessor is required to
reassess projected income tax cash flows related to leveraged
leases using the FIN 48 model for recognition and
measurement. Revisions to the net investment in a leverage lease
required when FSP 13-2 is adopted would be recorded as an
adjustment to the beginning balance of retained earnings in the
period of adoption and reported as a change in accounting
principle. Management is assessing the potential impact on
GMs financial condition and results of operations.
Forward-Looking
Statements
In this report, in reports subsequently filed by GM with the SEC
on
Form 10-K
and
Form 10-Q
and filed or furnished on
Form 8-K,
and in related comments by General Motors management, we
will use words like expect, anticipate,
estimate, forecast,
initiative, objective, plan,
goal, project, outlook,
priorities, target, intend,
evaluate, pursue, seek,
may, would, could,
should, believe, potential,
continue, designed, or
impact to identify forward-looking statements that
represent our current judgments about possible future events. We
believe these judgments are reasonable, but GMs actual
results may differ materially due to a variety of important
factors.
Among other items, such factors might include:
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Our ability to achieve reductions in costs as a result of the
turnaround restructuring, health care cost reductions and the
Attrition Program, to realize production efficiencies and to
implement capital expenditures at levels and times planned by
management;
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The pace of product introductions and market acceptance of our
new products;
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I-60
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Forward-Looking
Statements (continued)
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Changes in the competitive environment and the effect of
competition in our markets, including on our pricing policies;
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Our ability to maintain adequate liquidity and financing sources
and an appropriate level of debt;
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|
Restrictions on GMACs and ResCaps ability to pay
dividends and prepay subordinated debt obligations to us;
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The final results of investigations and inquiries by the SEC and
other government agencies;
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|
Changes in relations with unions and employees/retirees and the
legal interpretations of the agreements with those unions with
regard to employees/retirees;
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|
Our ability to complete the timely sale of a 51-percent
controlling interest in GMAC and the effect of that sale on the
results of GMs and GMACs operations and liquidity;
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|
Labor strikes or work stoppages at GM or its key suppliers such
as Delphi or financial difficulties at those key suppliers;
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|
Negotiations and bankruptcy court actions with respect to our
relationship with Delphi;
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|
Additional credit rating downgrades and their effects;
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Costs and risks associated with litigation;
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|
Changes in the existing, or the adoption of new, laws,
regulations, policies or other activities of governments,
agencies and similar organizations;
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Shortages of and price increases for fuel;
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Changes in economic conditions, commodity prices, currency
exchange rates or political stability in the markets in which we
operate; and
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|
Other factors affecting financing and insurance operating
segments results of operations and financial condition
such as credit ratings, adequate access to the market, changes
in the residual value of off-lease vehicles, changes in
U.S. government-sponsored mortgage programs or disruptions
in the markets in which its mortgage subsidiaries operate, and
changes in its contractual servicing rights; and price increases
or shortages of fuel.
|
In addition to these factors, GMACs actual results may
differ materially due to a variety of other important factors
that are described in GMACs most recent Annual Report on
Form 10-K,
which may be revised or supplemented in subsequent reports on
SEC
Forms 10-Q
and 8-K.
Such factors include, among others, the following:
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Changes in the competitive environment and the effect of
competition in GMACs markets, including on GMACs
pricing policies;
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|
GMACs ability to maintain adequate financing sources and
an appropriate level of debt;
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|
The profitability and financial condition of GM, including
changes in production or sales of GM vehicles and risks based on
GMs contingent benefit guarantees;
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|
Changes in GMACs accounting assumptions that may require
or that result from changes in the accounting rules or their
application, which could result in an impact on
earnings; and
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The threat of natural calamities.
|
We caution investors not to place undue reliance on
forward-looking statements, and do not undertake any obligation
to update publicly or otherwise revise any forward-looking
statements, whether as a result of new
I-61
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Forward-Looking
Statements (concluded)
information, future events or other such factors that affect the
subject of these statements, except where expressly required by
law.
* * * * * *
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Item 3.
|
Quantitative
And Qualitative Disclosures About Market Risk
|
There have been no significant changes in the Corporations
exposure to market risk since December 31, 2005. See
Item 7A in GMs Annual Report on
Form 10-K
for the year ended December 31, 2005.
* * * * * * *
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|
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.
GMs management, with the participation of its chief
executive officer and its chief financial officer, evaluated the
effectiveness of GMs disclosure controls and procedures
(as defined in the Securities Exchange Act of 1934
Rules 13a-15(e)
or
15d-15(e))
as of June 30, 2006. Based on that evaluation, GMs
chief executive officer and chief financial officer concluded
that, as of that date, GMs disclosure controls and
procedures required by paragraph (b) of Exchange Act
Rules 13a-15
or 15d-15,
were not effective at the reasonable assurance level.
As discussed in GMs Annual Report on
Form 10-K
for the year ended December 31, 2005, managements
assessment identified the following material weakness and
significant deficiency:
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(A)
|
A material weakness was identified related to our design and
maintenance of adequate controls over the preparation, review,
presentation and disclosure of amounts included in our
previously-reported condensed consolidated statements of cash
flows for certain prior periods, which resulted in misstatements
therein and our previous restatements thereof. Cash outflows
related to certain mortgage loan originations and purchases were
not appropriately classified as either operating cash flows or
investing cash flows consistent with our original description as
loans held for sale or loans held for investment. In addition,
proceeds from sales and repayments related to certain mortgage
loans, which initially were classified as mortgage loans held
for investment and subsequently transferred to mortgage loans
held for sale, were reported as operating cash flows instead of
investing cash flows in our condensed consolidated statements of
cash flows, as required by Statement of Financial Accounting
Standards No. 102 Statement of Cash Flows
Exemption of Certain Enterprises and Classification of Cash
Flows from Certain Securities Acquired for Resale.
Finally, certain non-cash proceeds and transfers were not
appropriately presented in the condensed consolidated statements
of cash flows.
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|
GM management is continuing in the process of remediating this
material weakness through the design and implementation of
enhanced controls to aid in the correct preparation, review,
presentation and disclosures of our condensed consolidated
statements of cash flows. Management will continue to monitor,
evaluate and test the operating effectiveness of these controls.
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(B)
|
GM management also identified a significant deficiency in
internal controls related to accounting for complex contracts.
This deficiency was identified as a result of certain contracts
being accounted for incorrectly and without appropriate
consideration of the economic substance of the contracts. GM
management is in the process of remediating this significant
deficiency and has implemented a delegation of authority for
approval of the accounting for complex contracts that requires
formal review and approval by experienced accounting personnel.
While procedures have been updated to prevent recurrence,
management will continue to monitor the effectiveness of the
remediation.
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I-62
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Controls
and Procedures (concluded)
In June 2006 GM commenced the transition of some of its
information technology support services between existing
suppliers for its systems, including a portion of its financial
systems. Management is closely monitoring the transition to
ensure there is no adverse effect to its financial reporting and
related internal controls.
Other than indicated above, there were no changes in the
Corporations internal control over financial reporting
that occurred during the quarter ended June 30, 2006, that
have materially affected, or are reasonably likely to materially
affect, the Corporations internal control over financial
reporting.
Limitations
on the Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief
Financial Officer, does not expect that our disclosure controls
will prevent or detect all errors and all fraud. A control
system, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance that the control
systems objectives will be met. Further, the design of a
control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in
all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of
fraud, if any, within General Motors have been detected. These
inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur
because of simple error or mistake. Controls can also be
circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of
the controls. The design of any system of controls is based in
part upon certain assumptions about the likelihood of future
events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future
conditions. Over time, controls may become inadequate because of
changes in conditions or deterioration in the degree of
compliance with associated policies or procedures. Because of
the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be
detected.
* * * * * * *
I-63
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
PART II
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|
|
Legal
Proceedings (continued)
|
Stockholder
and Bondholder Class Actions
In the previously reported ERISA class action In re General
Motors ERISA Litigation, on July 17, 2006, plaintiffs
filed in the United States District Court for the Eastern
District of Michigan a First Amended Consolidated
Class Action Complaint, which principally adds allegations
about GMs restated earnings and reclassification of cash
flows, but which does not name any additional defendants or
assert any new claims. No determination has been made that the
case may be maintained as a class action. The GM defendants
intend to defend this action vigorously.
In the previously reported ERISA class action In re Delphi
Securities, Derivative, and ERISA Litigation on
April 12, 2006, General Motors Investment Management
Corporation (GMIMCo), a wholly owned subsidiary of GM, filed a
motion to dismiss plaintiffs complaint against it in the
United States District Court for the Eastern District of
Michigan. No determination has been made that the case may be
maintained as a class action. GMIMCo intends to defend this
action vigorously.
In the previously reported shareholder derivative actions
Bouth v. Barnevik, et al. and
Salisbury v. Barnevik, et al., on July 21,
2006, the United States District Court for the Eastern District
of Michigan entered an order staying the actions for
180 days pending the disposition of the defendants
motion to dismiss in In re General Motors Securities
Litigation.
In the previously reported bondholder class action
Zielezienski, et al. v. General Motors,
et al. on April 3, 2006, the court entered an
order transferring the case to the United States District Court
for the Eastern District of Michigan from the United States
District Court for the Southern District of Florida, and by
order entered on May 26, 2006 the case was consolidated
with J&R Marketing et al. v. General Motors,
et al., and Mager v. General Motors
Corporation, et al., both of which have been previously
reported under the caption J&R Marketing
et al. v. General Motors, et al. Lead
plaintiffs counsel have been appointed by the court. On
July 28, 2006, plaintiffs filed a Consolidated Amended
Complaint, which mainly differs from the initial complaint in
that it asserts claims for GMAC debt securities purchased during
a different time period (July 28, 2003 through
November 9, 2005), and adds additional underwriter
defendants. No determination has been made that the case may be
maintained as a class action. The GM and GMAC defendants intend
to defend this action vigorously.
Canadian
Export Antitrust Class Actions
In the previously reported antitrust class actions In re New
Market Vehicle Canadian Export Antitrust Litigation Cases,
the United States District Court for the District of Maine ruled
that it will certify a class action for damages for six exemplar
states under federal rule 23(b) (3) after further
discovery to determine the scope of the classes. GM intends to
appeal the ruling certifying the damages classes to the United
States Court of Appeals for the First Circuit and expects that
appeal will be consolidated with its pending appeal from a prior
order certifying a class for the six exemplar states for
injunctive relief only.
Health
Care Litigation
In the previously reported putative class action UAW,
et al. v. General Motors Corporation, which
challenged GMs ability to modify the health care plan for
certain hourly retirees and surviving spouses, the decision of
the U.S. District Court for the Eastern District of
Michigan on March 31, 2006 approving a settlement agreement
has been appealed by the putative plaintiff class to the
U.S. Court of Appeals for the Sixth Circuit.
Coolant
System Product Litigation
Kenneth Stewart v. General Motors of Canada Limited and
General Motors Corporation, a complaint filed in the
Superior Court of Ontario dated April 24, 2006, alleges a
class action covering Canadian residents, except residents of
British Columbia and Quebec, who purchased 1995 to 2003 GM
vehicles with 3.1, 3.4, 3.8 and 4.3 liter
II-1
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Legal
Proceedings (concluded)
engines. Plaintiffs allege that defects in the engine cooling
systems allow coolant to leak into the engine and cause engine
damage. The complaint alleges violation of the Business
Practices and Competition Acts, failure to warn and negligence,
and seeks compensatory damages, punitive damages, fees and
costs. Similar complaints have been filed in 14 putative class
actions against GM and General Motors of Canada Limited (GM
Canada), in eight provinces; in all cases where the complaint
has been served, GM Canada is conducting investigations and GM
and GM Canada are preparing to file their defenses.
As previously reported, in Gutzler v. General Motors
Corporation, initially filed on April 11, 2003, the
Circuit Court of Jackson County, Missouri certified a class on
January 9, 2006, comprised of all consumers who
purchased or leased a GM vehicle in Missouri that was
factory-equipped with Dex-Cool, coolant, included as
original equipment in GM vehicles manufactured since 1995. The
Court also certified two sub-classes comprised of (i) class
members who purchased or leased a vehicle with a 4.3-liter
engine, and (ii) class members who purchased or leased a
vehicle with a 3.1, 3.4 or 3.8-liter engine. On
March 6, 2006, the Missouri Court of Appeals for the
Western District declined to hear GMs appeal of the class
certifications. GMs petition to transfer the matter to the
Missouri Supreme Court for further review was denied on
May 30, 2006. GM has been named as the defendant in 20
similar putative class actions in various different federal and
state courts in the U.S. alleging defects in the engine
cooling systems in GM vehicles; 14 cases are still pending in
U.S. courts including six cases that have been consolidated,
either finally or conditionally, for pre-trial proceedings in a
federal multi-district proceeding in the District Court for the
Southern District of Illinois.
Environmental
Matters
With respect to the previously reported matter in which the
Environmental Protection Agency (EPA) had issued an
Administrative complaint on October 17, 2003 against
General Motors in connection with the Corporations
assembly facilities in Moraine, Ohio, Pontiac, Michigan, and
Orion, Michigan, the EPA Administrative Law Judge has issued a
preliminary determination that GM is liable for multiple
violations of the hazardous waste rules as applied to GMs
painting and purge operations. The Judge has ordered GM to pay
$568,116 in penalties. GM believes that the case was wrongly
decided because the purge material in question is not a
waste, but instead is being used as intended in
enclosed systems to clean, suspend paint solids, and transport
fluids. The purge material is thereafter captured, reclaimed,
and reused by GM in its processes. GM has appealed this decision
to the Environmental Appeals Board on the grounds that the purge
material in question is not a waste.
* * * * * * *
The risk factors immediately following, which were disclosed in
our 2005 Annual Report on
Form 10-K,
have been modified to provide additional disclosure related to
changes since we filed our 2005 Annual Report on
Form 10-K.
See our 2005 Annual Report on
Form 10-K
for an expanded description of other risks facing the
Corporation listed below under Other Risk Factors.
Our
ability to achieve structural and material cost reductions and
to realize production efficiencies for our automotive operations
is critical to our ability to achieve our turnaround plan and
return to profitability.
We currently are in the process of implementing a number of
structural (fixed) and material cost reduction and productivity
improvement initiatives in our automotive operations, including
substantial restructuring initiatives for our GMNA operations as
more fully discussed in our Managements Discussion and
Analysis of Financial Condition and Results of Operations
section. Continued success in implementing these restructuring
initiatives throughout our automotive operations, and in GMNA in
particular, is critical to our future competitiveness. However,
there can be no assurance that these initiatives will continue
to be successful in this regard. In addition,
II-2
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Risk
Factors (continued)
while some of the elements of structural cost reduction are
within our control, others such as interest rates or return on
investments (which influence our pension and OPEB expense) are
more dependent on outside factors, and there can be no assurance
that such outside factors will not disrupt our plans for
structural cost reductions.
Financial
difficulties, labor stoppages or work slowdowns at key
suppliers, including Delphi, could result in a disruption in our
operations and have a material adverse effect on our
business.
We rely on many suppliers to provide us with the systems,
components and parts that we need to manufacture our automotive
products and operate our business. In recent years, some of
these suppliers have experienced severe financial difficulties
and solvency problems. Financial difficulties or solvency
problems at those suppliers could materially adversely affect
their ability to supply us with the systems, components and
parts that we need to operate our business, resulting in a
disruption in our operations. Similarly, many of these suppliers
utilize workforces with substantial union representation.
Workforce disputes resulting in work stoppages or slowdowns at
these suppliers could also have a material adverse effect on
their ability to continue supplying us.
In particular, our largest supplier, Delphi, filed a
Chapter 11 bankruptcy petition in October 2005. On
March 31, 2006 Delphi filed motions under the U.S.
Bankruptcy Code seeking authority to reject its U.S. labor
agreements and modify retiree welfare benefits. The unions and
certain other parties have filed objections to these motions.
Hearings on these motions were adjourned until August 11,
2006, to allow Delphi, its unions, and GM additional time to
fully focus on reaching comprehensive consensual agreements.
However, the Delphi employees represented by the UAW have given
the UAW authorization to strike if Delphi voids its labor
contracts pursuant to these motions While Delphi has indicated
to us that it expects no disruptions in its ability to continue
supplying us with the systems, components and parts we need as
Delphi pursues its bankruptcy restructuring plan, labor
disruptions at Delphi resulting from Delphis pursuit of a
restructuring plan could seriously disrupt our North American
operations, prevent us from executing our GMNA turnaround
initiatives, and materially adversely impact our business.
Delphi
may seek to reject or compromise its obligations to us through
its Chapter 11 bankruptcy proceedings.
In connection with its Chapter 11 bankruptcy restructuring,
Delphi filed a motion under the U.S. Bankruptcy Code on
March 31, 2006 seeking authority to reject certain supply
contracts with GM. A hearing on this motion was adjourned by the
court until after the hearings related to Delphis
U.S. labor agreements and retiree welfare benefits are
completed or otherwise resolved. Although Delphi has not
rejected any GM contracts as of this time and has assured GM
that it does not intend to disrupt production at GM assembly
facilities, there is a risk that Delphi or one more of its
affiliates may reject or threaten to reject individual contracts
with GM, either for the purpose of exiting specific lines of
business or in an attempt to increase the price GM pays for
certain parts and components. As a result, we could experience a
material disruption in our supply of automotive systems,
components and parts that could force the suspension of
production at GM assembly facilities, which could materially
adversely affect our business, including implementation of our
GMNA turnaround initiatives. It is also difficult for us to
quickly switch to a different supplier for some of the systems,
components and parts we purchase from Delphi as a result of the
extended validation and production lead times for these items.
Various financial obligations Delphi has to GM as of the date of
Delphis Chapter 11 filing, including the
$739 million payable for amounts that Delphi owed to GM
relating to Delphi employees who were formerly GM employees and
subsequently transferred back to GM as job openings became
available to them under certain employee flowback
arrangements, may be subject to compromise in the bankruptcy
proceedings, which may result in GM receiving payment of only a
portion of the face amount owed by Delphi. GM is seeking to
minimize this risk by protecting our right of setoff against the
$1.15 billion we owed to Delphi as of the date of its
Chapter 11 filing. A procedure for determining setoff
claims has been put in place by the bankruptcy court. However,
the extent to which these obligations are covered by our right
to setoff may be subject to dispute by Delphi, the creditors
committee, or Delphis other creditors, and limitation by
the court. GM cannot provide any assurance that it will be
II-3
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Risk
Factors (continued)
able to fully or partially setoff such amounts. To date setoffs
of approximately $53.6 million have been agreed to by
Delphi and taken by GM. Although GM believes that it is probable
that it will be able to collect all of the amounts due from
Delphi, the financial impact of a substantial compromise of our
right of setoff, however, could have a material adverse impact
on our financial position. In addition, the basis, amounts and
priority of any claims against Delphi that GM currently has or
may have in the future may be challenged by other parties in
interest in Delphis bankruptcy proceeding. The scope and
results of such challenges cannot be predicted with certainty.
Continued
failure to achieve profitability may cause some or all of our
deferred tax assets to expire.
As of June 30, 2006, we had approximately
$24.4 billion in U.S. net deferred tax assets. These
deferred tax assets include net operating loss carryovers that
can be used to offset taxable income in future periods and
reduce our income taxes payable in those future periods.
However, many of these deferred tax assets will expire if they
are not utilized within certain time periods. At this time, we
consider it more likely than not that we will have
U.S. taxable income in the future that will allow us to
realize these deferred tax assets. However, it is possible that
some or all of these deferred tax assets could ultimately expire
unused, especially if our GMNA restructuring initiatives are not
successful or if GMs share of GMACs income declines.
On April 2, 2006, GM entered into a definitive agreement to
sell a 51% controlling interest in GMAC to a consortium of
investors. While this will not directly affect GMs ability
to realize our deferred tax assets, it will result in a
significant portion of GMACs U.S. pre-tax income to
no longer be available to GM. Therefore, unless we are able to
generate sufficient U.S. taxable income from our automotive
operations, a substantial valuation allowance may be required,
which would materially increase our expenses in the period taken
and adversely affect our business. If we were required to record
a valuation allowance against all of our U.S. deferred tax
assets as of June 30, 2006, our resulting total
stockholders equity would have been negative.
Restrictions
in our labor agreements, including the JOBS bank provisions in
the UAW agreement, could limit our ability to pursue or achieve
cost savings through restructuring initiatives, and labor
strikes, work stoppages or similar difficulties could
significantly disrupt our operations.
Substantially all of the hourly employees in our U.S., Canadian
and European automotive operations are represented by labor
unions and are covered by collective bargaining agreements,
which usually have a multi-year duration. Many of these
agreements include provisions that limit our ability to realize
cost savings from restructuring initiatives such as plant
closings and reductions in work force. Our current collective
bargaining agreement with the UAW will expire in September 2007.
Any UAW strikes, threats of strikes, or other resistance in
connection with the negotiation of a new agreement could impair
our ability to implement further measures to reduce structural
costs and improve production efficiencies in furtherance of our
GMNA initiatives.
We
have reached an agreement to sell a controlling interest in
GMAC. There is a risk that this transaction may not be
completed. In addition, this transaction, if completed, would
reduce our interest in GMACs earnings going
forward.
On April 2, 2006, GM entered into a definitive agreement to
sell a 51% controlling interest in GMAC to a consortium of
investors. There can be no assurance that the sale transaction
will be completed or if it is completed, that the terms of the
sale will not be different from those set forth in the
definitive agreement.
Failure to complete the sale transaction will place further
pressure on both GMs and GMACs credit profiles,
potentially resulting in further downgrades with GMACs
credit ratings explicitly re-linked to those of GM. Moreover,
any reduction in the automotive finance capacity of GMAC could
materially adversely affect GMs business to the extent
that third party financing is not available to
fund GMs automotive sales. In the absence of a
transaction:
|
|
|
|
|
GMACs access to capital may be seriously constrained, as
most unsecured funding sources may decline, including bank
funding;
|
II-4
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Risk
Factors (concluded)
|
|
|
|
|
The cost of funds related to borrowings that are secured by
assets may increase, leading to a reduction in liquidity for
certain asset classes;
|
|
|
|
It may be increasingly difficult to securitize assets, resulting
in reduced capacity to support overall automotive loan
originations;
|
|
|
|
Uncompetitive funding costs may result in a lower return on
capital and significantly lower earnings and dividends; and
|
|
|
|
GMAC may need to consider divesting certain businesses in order
to maintain adequate liquidity to fund new originations or
otherwise preserve the value of its businesses.
|
In addition, the sale transaction, if completed, would reduce
our interest in the earnings of GMAC and ResCap, although the
financial effects would be reduced by the value of the
consideration we would receive from the purchasers.
Our
pension and OPEB expenses are affected by factors outside our
control, including the performance of plan assets, interest
rates, actuarial data and experience, and changes in laws and
regulations.
Our future funding obligations for our IRS-qualified
U.S. defined benefit pension plans and OPEB plans depend
upon changes in the level of benefits provided for by the plans,
the future performance of assets set aside in trusts for these
plans, the level of interest rates used to determine minimum
ERISA funding levels, actuarial data and experience, and any
changes in government laws and regulations. In addition, our
employee benefit plans hold a significant amount of equity
securities. If the market values of these securities decline to
a point where our pension obligations are not fully funded, our
pension and OPEB expenses would increase and, as a result, could
materially adversely affect our business. Any decreases in
interest rates, if and to the extent not offset by contributions
and asset returns, could also increase our obligations under
such plans. We may be legally required to make contributions to
the pension plans in the future, and those contributions could
be material.
In addition, on March 31, 2006, the FASB issued an exposure
draft detailing proposed changes in the accounting rules for
pensions and other postretirement benefits, which would require
a company to include on its balance sheet an additional net
asset or net liability to reflect the funded or unfunded status,
as the case may be, of its retirement plans. FASB has indicated
that its goal is to issue a final statement by September 2006.
In light of the unrecognized losses associated with our pension
and OPEB liabilities under existing accounting rules, if these
expected proposed rules had been in effect as of
December 31, 2005, the substantial additional liability
that we would have had to include on our balance sheet would
have caused our total stockholders equity to be negative.
Further, the U.S. Congress has passed legislation that, if
adopted, would affect the manner in which GM administers its
pensions. This proposed legislation is designed, among other
things, to increase the amount by which companies fund their
pension plans and to require companies that sponsor defined
benefit plans to pay higher premiums to the PBGC. GM could
become subject to additional material funding requirements if
GMs U.S. hourly and salaried pension plans become
underfunded.
Exploratory
discussions with Nissan and Renault regarding a possible
alliance are preliminary and may not result in a
transaction
On July 7, 2006, GMs Board of Directors endorsed the
recommendation of our senior management team that it engage in
exploratory discussions with Renault S.A. and Nissan Motor Co.
Ltd. regarding GMs potential participation in an alliance
among the three companies. The companies have agreed to
cooperate in an expeditious, confidential review of the
potential benefits of such an alliance and the feasibility of
achieving them. This review, which is now underway, is expected
to take approximately 90 days, and following it, the
companies will consider whether further exploration of the
alliance concept is warranted. There can be no assurance that
these exploratory discussions will result in any transaction.
II-5
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Other
Risk Factors
The following risk factors, which were disclosed in our 2005
Annual Report on
Form 10-K,
have not materially changed since we filed our 2005 Annual
Report on
Form 10-K.
See our 2005 Annual Report on
Form 10-K
for a complete discussion of these risk factors.
Risks
related to GM and its automotive business
|
|
|
|
|
Our ability to maintain or grow structural and material cost
savings and to realize production efficiencies for our
automotive operations is critical to our ability to achieve our
turnaround plan and return to profitability.
|
|
|
|
We have guaranteed a significant amount of Delphis
financial obligations to its unionized workers. If Delphi fails
to satisfy these obligations, we would be obligated to pay some
of these obligations.
|
|
|
|
Our health-care cost burden is one of our biggest competitive
challenges, and if we do not make progress on structurally
fixing this issue, it will continue to be a long-term threat to
GM.
|
|
|
|
Our extensive pension and OPEB obligations to retirees are a
competitive disadvantage for us.
|
|
|
|
We have recently experienced a series of credit rating actions
that have downgraded our credit ratings to historically low
levels. Further reduction of our credit ratings, or failure to
restore our credit ratings to higher levels, could have a
material adverse effect on our business.
|
|
|
|
Our liquidity position could be negatively affected by a variety
of factors, which in turn could have a material adverse effect
on our business.
|
|
|
|
The government is currently investigating certain of our
accounting practices. The final outcome of these investigations
could require us to restate prior financial results.
|
|
|
|
We operate in a highly competitive industry that has excess
manufacturing capacity.
|
|
|
|
The bankruptcy or insolvency of a major competitor could result
in further competitive disadvantages for us in relation to that
competitor.
|
|
|
|
Shortages and increases in the price of fuel can result in
diminished profitability due to shifts in consumer vehicle
demand.
|
|
|
|
A decline in consumer demand for our higher margin vehicles
could result in diminished profitability.
|
|
|
|
Our indebtedness and other obligations of our automotive
operations are significant and could materially adversely affect
our business.
|
|
|
|
The pace of introduction and market acceptance of new vehicles
is important to our success.
|
|
|
|
Economic and industry conditions constantly change and could
have a material adverse effect on our business and results of
operations.
|
|
|
|
Changes in existing, or the adoption of new, laws, regulations
or policies of governmental organizations may have a significant
negative impact on how we do business.
|
|
|
|
Our businesses outside the United States expose us to additional
risks that may cause our revenues and profitability to decline.
|
|
|
|
A failure of or interruption in the communications and
information systems on which we rely to conduct our operations
could adversely affect our business.
|
|
|
|
We could be materially adversely affected by changes in currency
exchange rates, commodity prices, equity prices and interest
rates.
|
|
|
|
We are subject to significant risks of litigation.
|
II-6
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Risks
related to GMs finance, mortgage and insurance
businesses
|
|
|
|
|
Our finance, mortgage and insurance businesses require
substantial capital, and if we are unable to maintain adequate
financing sources, our business, results of operations and
financial condition will suffer and jeopardize our ability to
continue operations.
|
|
|
|
We are exposed to credit risk which could affect the business,
results of operations and financial condition of our finance,
mortgage and insurance operations.
|
|
|
|
Our earnings may decrease because of increases or decreases in
interest rates.
|
|
|
|
Our hedging strategies may not be successful in mitigating our
risks associated with changes in interest rates.
|
|
|
|
ResCaps ability to pay dividends and to prepay
subordinated debt obligations to GMAC is restricted by
contractual arrangements.
|
|
|
|
We use estimates and assumptions in determining the fair value
of certain of our assets, in determining our allowance for
credit losses, in determining lease residual values and in
determining our reserves for insurance losses and loss
adjustment expenses. If our estimates or assumptions prove to be
incorrect, the business, results of operations and financial
condition of our finance, mortgage and insurance operations
could be materially adversely affected.
|
|
|
|
General business and economic conditions of the industries and
geographic areas in which we operate affect the business,
results of operations and financial condition of our finance,
mortgage and insurance operations.
|
|
|
|
Our business, results of operations and financial condition may
be materially adversely affected by decreases in the residual
value of off-lease vehicles.
|
|
|
|
Fluctuations in valuation of investment securities or
significant fluctuations in investment market prices could
negatively affect revenues.
|
|
|
|
Changes in existing U.S. government-sponsored mortgage
programs, or disruptions in the secondary markets in the United
States or in other countries in which our mortgage subsidiaries
operate, could materially adversely affect the business, results
of operations and financial condition of our mortgage business.
|
|
|
|
GMAC may be required to repurchase contracts and provide
indemnification if GMAC breaches representations and warranties
from its securitization and whole loan transactions, which could
harm our business, results of operations and financial condition.
|
|
|
|
Significant indemnification payments or contract, lease or loan
repurchase activity of retail contracts or leases or mortgage
loans could harm our business, results of operations and
financial condition.
|
|
|
|
A loss of contractual servicing rights could have a material
adverse effect on our operations.
|
|
|
|
The regulatory environment in which GMAC operates could have a
material adverse effect on its business.
|
The worldwide financial services industry is highly competitive.
If we are unable to compete successfully or if there is
increased competition in the automotive financing, mortgage
and/or
insurance markets or generally in the markets for
securitizations or asset sales, our margins could be materially
adversely affected.
* * * * * * * *
Item 2(c). Purchases
of Equity Securities
GM made no purchases of GM
$12/3
par value common stock during the three months ended
June 30, 2006.
* * * * * * * *
II-7
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
The annual meeting of stockholders of the Registrant was held on
June 6, 2006. At that meeting, the following matters were
submitted to a vote of the stockholders of General Motors
Corporation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Final Voting Results
|
|
|
|
|
Votes
|
|
Percent
|
|
Item No. 1
|
|
|
|
|
|
|
|
|
|
|
Nomination and election of
directors
|
|
The following nominees for
directors received the number of votes set opposite their
respective names and were elected to serve on the Board of
Directors:
|
|
|
|
|
|
|
|
|
|
|
|
Percy N. Barnevik
|
|
For
|
|
|
456,857,908
|
|
|
|
96.9
|
|
|
|
Withheld
|
|
|
14,592,254
|
|
|
|
3.1
|
|
Erskine B. Bowles
|
|
For
|
|
|
456,918,449
|
|
|
|
96.9
|
|
|
|
Withheld
|
|
|
14,531,713
|
|
|
|
3.1
|
|
John H. Bryan
|
|
For
|
|
|
456,599,774
|
|
|
|
96.9
|
|
|
|
Withheld
|
|
|
14,850,388
|
|
|
|
3.1
|
|
Armando M. Codina
|
|
For
|
|
|
456,934,490
|
|
|
|
96.9
|
|
|
|
Withheld
|
|
|
14,515,672
|
|
|
|
3.1
|
|
George M.C. Fisher
|
|
For
|
|
|
456,914,451
|
|
|
|
96.9
|
|
|
|
Withheld
|
|
|
14,535,711
|
|
|
|
3.1
|
|
Karen Katen
|
|
For
|
|
|
457,079,357
|
|
|
|
97.0
|
|
|
|
Withheld
|
|
|
14,370,805
|
|
|
|
3.0
|
|
Kent Kresa
|
|
For
|
|
|
455,078,065
|
|
|
|
96.5
|
|
|
|
Withheld
|
|
|
16,372,097
|
|
|
|
3.5
|
|
Ellen J. Kullman
|
|
For
|
|
|
457,357,397
|
|
|
|
97.0
|
|
|
|
Withheld
|
|
|
14,092,765
|
|
|
|
3.0
|
|
Philip A. Laskawy
|
|
For
|
|
|
455,326,418
|
|
|
|
96.6
|
|
|
|
Withheld
|
|
|
16,123,744
|
|
|
|
3.4
|
|
Eckhard Pfeiffer
|
|
For
|
|
|
455,230,673
|
|
|
|
96.6
|
|
|
|
Withheld
|
|
|
16,219,489
|
|
|
|
3.4
|
|
G. Richard Wagoner, Jr.
|
|
For
|
|
|
456,642,694
|
|
|
|
96.9
|
|
|
|
Withheld
|
|
|
14,807,468
|
|
|
|
3.1
|
|
Jerome B. York
|
|
For
|
|
|
456,800,093
|
|
|
|
96.9
|
|
|
|
Withheld
|
|
|
14,650,069
|
|
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
In addition, 2,221 votes were cast
for each of the following: James Dollinger, John Lauve, and Lucy
Kessler; and 2,021 votes were cast for each of the following:
John Chevedden, Dean Fitzpatrick, Louis Lauve III, Steve
Mahac, Erik Nielsen, Larry Parks, Danny Taylor, William Walde,
and William Woodward, M.D.
|
|
|
|
|
|
|
0.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Item No. 2
|
|
|
|
|
|
|
|
|
|
|
Ratification of the selection of
|
|
For
|
|
|
456,464,395
|
|
|
|
96.8
|
|
Deloitte & Touche LLP as
independent
|
|
Not in favor
|
|
|
|
|
|
|
|
|
public accountants for the year
2006
|
|
Against
|
|
|
6,707,225
|
|
|
|
1.4
|
|
|
|
Abstain
|
|
|
8,278,542
|
|
|
|
1.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
14,985,767
|
|
|
|
3.2
|
|
|
|
Broker Non-Vote
|
|
|
|
|
|
|
|
|
II-8
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
Submission
of Matters to a Vote of Security
Holders (concluded)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Final Voting Results
|
|
|
|
|
Votes
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
|
|
Item No. 3
|
|
|
|
|
|
|
|
|
|
|
Stockholder proposal regarding
|
|
For
|
|
|
23,749,450
|
|
|
|
6.3
|
|
prohibition on awarding,
repricing, or
|
|
Not in favor
|
|
|
|
|
|
|
|
|
renewing stock options
|
|
Against
|
|
|
344,238,781
|
|
|
|
91.2
|
|
|
|
Abstain
|
|
|
9,490,427
|
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
353,729,208
|
|
|
|
93.7
|
|
|
|
Broker Non-Vote
|
|
|
93,971,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item No. 4
|
|
|
|
|
|
|
|
|
|
|
Stockholder proposal regarding
|
|
For
|
|
|
10,632,805
|
|
|
|
2.8
|
|
publication of a report on global
|
|
Not in favor
|
|
|
|
|
|
|
|
|
warming/cooling
|
|
Against
|
|
|
352,097,988
|
|
|
|
93.3
|
|
|
|
Abstain
|
|
|
14,747,865
|
|
|
|
3.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
366,845,853
|
|
|
|
97.2
|
|
|
|
Broker Non-Vote
|
|
|
93,971,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item No. 5
|
|
|
|
|
|
|
|
|
|
|
Stockholder proposal regarding
|
|
For
|
|
|
67,948,685
|
|
|
|
18.0
|
|
separation of roles of Chairman
|
|
Not in favor
|
|
|
|
|
|
|
|
|
and Chief Executive Officer
|
|
Against
|
|
|
299,778,495
|
|
|
|
79.4
|
|
|
|
Abstain
|
|
|
9,751,478
|
|
|
|
2.6
|
|
|
|
Total
|
|
|
309,529,973
|
|
|
|
82.0
|
|
|
|
Broker Non-Vote
|
|
|
93,971,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item No. 6
|
|
|
|
|
|
|
|
|
|
|
Stockholder proposal regarding
|
|
For
|
|
|
158,230,828
|
|
|
|
41.9
|
|
recouping unearned incentive
|
|
Not in favor
|
|
|
|
|
|
|
|
|
bonuses
|
|
Against
|
|
|
209,854,694
|
|
|
|
55.6
|
|
|
|
Abstain
|
|
|
9,393,136
|
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
219,247,830
|
|
|
|
58.1
|
|
|
|
Broker Non-Vote
|
|
|
93,971,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item No. 7
|
|
|
|
|
|
|
|
|
|
|
Stockholder proposal regarding
|
|
For
|
|
|
203,042,562
|
|
|
|
53.8
|
|
cumulative voting
|
|
Not in favor
|
|
|
|
|
|
|
|
|
|
|
Against
|
|
|
163,193,010
|
|
|
|
43.2
|
|
|
|
Abstain
|
|
|
11,243,086
|
|
|
|
3.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
174,436,096
|
|
|
|
46.2
|
|
|
|
Broker Non-Vote
|
|
|
93,971,504
|
|
|
|
|
|
Item No. 8
|
|
|
|
|
|
|
|
|
|
|
Stockholder proposal regarding
|
|
For
|
|
|
221,981,430
|
|
|
|
58.8
|
|
majority voting for election of
|
|
Not in favor
|
|
|
|
|
|
|
|
|
directors
|
|
Against
|
|
|
144,786,499
|
|
|
|
38.4
|
|
|
|
Abstain
|
|
|
10,710,729
|
|
|
|
2.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
155,497,228
|
|
|
|
41.2
|
|
|
|
Broker Non-Vote
|
|
|
93,971,504
|
|
|
|
|
|
* * * * * * * *
II-9
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit Name
|
|
|
4
|
|
|
Amended and Restated Credit
Agreement, dated July 20, 2006, among General Motors
Corporation, General Motors Canada Limited, Saturn Corporation,
and a syndicate of lenders.
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
General Motors Acceptance
Corporation Quarterly Report on
Form 10-Q,
File
No. 000-03754,
for the quarterly period ended June 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
31
|
.1
|
|
Section 302 Certification of
the Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
31
|
.2
|
|
Section 302 Certification of
the Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
32
|
.1
|
|
Certification of the Chief
Executive Officer Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
|
|
|
|
|
|
|
|
|
|
|
32
|
.2
|
|
Certification of the Chief
Financial Officer Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
* * * * * * * *
II-10
GENERAL
MOTORS CORPORATION AND SUBSIDIARIES
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: August 8, 2006
(Paul W. Schmidt,
Controller)
II-11