Attached files

file filename
EX-32.2 - CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 - General Motors Codex322.htm
EX-31.1 - SECTION 302 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER - General Motors Codex311.htm
EX-31.2 - SECTION 302 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER - General Motors Codex312.htm
EX-32.1 - CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 - General Motors Codex321.htm
Table of Contents

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549-1004

Form 10-Q

 

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 000-53930

GENERAL MOTORS COMPANY

(Exact Name of Registrant as Specified in its Charter)

 

STATE OF DELAWARE   27-0756180

(State or other jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

300 Renaissance Center, Detroit, Michigan   48265-3000
(Address of Principal Executive Offices)   (Zip Code)

(313) 556-5000

Registrant’s telephone number, including area code

Not applicable

(former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its company Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  ¨  No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨  Accelerated filer  ¨  Non-accelerated filer  þ  Smaller reporting company  ¨

Do not check if smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨  No  þ

As of November 1, 2010, the number of shares outstanding of $0.01 par value common stock was 1,500,000,000 shares.

Website Access to Company’s Reports

General Motors Company’s internet website address is www.gm.com. Our annual report 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.

 

 

 


Table of Contents

 

GENERAL MOTORS COMPANY AND SUBSIDIARIES

INDEX

 

              Page No.  
     Part I — Financial Information   

Item 1.

 

Condensed Consolidated Financial Statements (Unaudited)

     1   
 

Condensed Consolidated Statements of Operations

     1   
 

Condensed Consolidated Balance Sheets

     2   
 

Condensed Consolidated Statements of Equity (Deficit)

     3   
 

Condensed Consolidated Statements of Cash Flows

     5   
 

Notes to Condensed Consolidated Financial Statements

     6   
 

Note 1.

  

Nature of Operations

     6   
 

Note 2.

  

Chapter 11 Proceedings and the 363 Sale

     6   
 

Note 3.

  

Basis of Presentation and Recent Accounting Standards

     8   
 

Note 4.

  

Acquisition and Disposals of Businesses

     12   
 

Note 5.

  

Marketable Securities

     14   
 

Note 6.

  

Inventories

     15   
 

Note 7.

  

Equity in Net Assets of Nonconsolidated Affiliates

     15   
 

Note 8.

  

Goodwill

     20   
 

Note 9.

  

Intangible Assets, net

     21   
 

Note 10.

  

Variable Interest Entities

     22   
 

Note 11.

  

Depreciation and Amortization

     26   
 

Note 12.

  

Restricted Cash and Marketable Securities

     26   
 

Note 13.

  

Short-Term and Long-Term Debt

     27   
 

Note 14.

  

Product Warranty Liability

     31   
 

Note 15.

  

Pensions and Other Postretirement Benefits

     31   
 

Note 16.

  

Derivative Financial Instruments and Risk Management

     38   
 

Note 17.

  

Commitments and Contingencies

     44   
 

Note 18.

  

Income Taxes

     50   
 

Note 19.

  

Fair Value Measurements

     51   
 

Note 20.

  

Restructuring and Other Initiatives

     58   
 

Note 21.

  

Impairments

     63   
 

Note 22.

  

Earnings (Loss) Per Share

     67   
 

Note 23.

  

Transactions with Ally Financial

     69   
 

Note 24.

  

Transactions with MLC

     71   
 

Note 25.

  

Segment Reporting

     72   
 

Note 26.

  

Stock Incentive Plans

     77   
 

Note 27.

  

Subsequent Events

     81   

Item 2

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     84   

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

     147   

Item 4.

 

Controls and Procedures

     147   
     Part II — Other Information   

Item 1.

 

Legal Proceedings

     149   

Item 1A.

 

Risk Factors

     152   

Item 6.

 

Exhibits

     167   
 

Signature

     168   


Table of Contents

 

GENERAL MOTORS COMPANY AND SUBSIDIARIES

PART I

Item 1. Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share amounts)

(Unaudited)

 

    Successor           Predecessor  
    Three Months
Ended
September 30, 2010
    Nine Months
Ended
September 30, 2010
    July 10, 2009
Through
September 30, 2009
          July 1,  2009
Through
July 9, 2009
    January 1,  2009
Through
July 9, 2009
 

Net sales and revenue

  $ 34,060      $ 98,710      $ 25,147          $ 1,637      $ 47,115   
                                           

Costs and expenses

             

Cost of sales

    29,468        85,818        23,554            1,819        55,814   

Selling, general and administrative expense

    2,710        8,017        2,636            728        6,161   

Other expenses (income), net

    30        115        (40         81        1,235   
                                           

Total costs and expenses

    32,208        93,950        26,150            2,628        63,210   
                                           

Operating income (loss)

    1,852        4,760        (1,003         (991     (16,095

Equity in income of and disposition of interest in Ally Financial

                                    1,380   

Interest expense

    (263     (850     (365         (823     (5,428

Interest income and other non-operating income, net

    258        802        454            19        852   

Loss on extinguishment of debt

           (1                       (1,088

Reorganization gains, net (Note 2)

                             129,312        128,155   
                                           

Income (loss) before income taxes and equity income

    1,847        4,711        (914         127,517        107,776   

Income tax expense (benefit)

    (25     845        (139         (607     (1,166

Equity income, net of tax

    351        1,165        204            15        61   
                                           

Net income (loss)

    2,223        5,031        (571         128,139        109,003   

Less: Net income (loss) attributable to noncontrolling interests

    61        265        287            141        (115
                                           

Net income (loss) attributable to stockholders

    2,162        4,766        (858         127,998        109,118   

Less: Cumulative dividends on preferred stock

    203        608        50                     
                                           

Net income (loss) attributable to common stockholders

  $ 1,959      $ 4,158      $ (908       $ 127,998      $ 109,118   
                                           

Earnings (loss) per share (Note 22)

             

Basic

             

Net income (loss) attributable to common stockholders

  $ 1.31      $ 2.77      $ (0.73       $ 209.49      $ 178.63   

Weighted-average common shares outstanding

    1,500        1,500        1,238            611        611   

Diluted

             

Net income (loss) attributable to common stockholders

  $ 1.20      $ 2.62      $ (0.73       $ 209.38      $ 178.55   

Weighted-average common shares outstanding

    1,630        1,588        1,238            611        611   

Pro forma earnings (loss) per share (Note 27)

             

Basic

             

Net income attributable to common stockholders

  $ 0.85      $ 2.32             

Weighted average common shares outstanding

    1,500        1,500             

Diluted

             

Net income attributable to common stockholders

  $ 0.79      $ 2.19             

Weighted-average common shares outstanding

    1,630        1,588             

Reference should be made to the notes to the condensed consolidated financial statements.

 

1


Table of Contents

 

GENERAL MOTORS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share amounts)

(Unaudited)

 

     Successor  
     September 30,
2010
    December 31,
2009
 
ASSETS     

Current Assets

    

Cash and cash equivalents

   $ 27,466      $ 22,679   

Marketable securities

     6,010        134   
                

Total cash, cash equivalents and marketable securities

     33,476        22,813   

Restricted cash and marketable securities

     1,323        13,917   

Accounts and notes receivable (net of allowance of $279 and $250)

     8,725        7,518   

Inventories

     13,044        10,107   

Assets held for sale

            388   

Equipment on operating leases, net

     2,942        2,727   

Other current assets and deferred income taxes

     2,074        1,777   
                

Total current assets

     61,584        59,247   

Non-Current Assets

    

Equity in net assets of nonconsolidated affiliates

     8,691        7,936   

Assets held for sale

            530   

Property, net

     19,116        18,687   

Goodwill

     30,556        30,672   

Intangible assets, net

     12,454        14,547   

Other assets

     4,837        4,676   
                

Total non-current assets

     75,654        77,048   
                

Total Assets

   $ 137,238      $ 136,295   
                
LIABILITIES AND EQUITY     

Current Liabilities

    

Accounts payable (principally trade)

   $ 22,137      $ 18,725   

Short-term debt and current portion of long-term debt (including debt at GM Daewoo of $1,072 at September 30, 2010; Note 10)

     5,621        10,221   

Liabilities held for sale

            355   

Accrued expenses (including derivative liabilities at GM Daewoo of $217 at September 30, 2010; Note 10)

     24,811        23,134   
                

Total current liabilities

     52,569        52,435   

Non-Current Liabilities

    

Long-term debt (including debt at GM Daewoo of $798 at September 30, 2010; Note 10)

     2,945        5,562   

Liabilities held for sale

            270   

Postretirement benefits other than pensions

     8,721        8,708   

Pensions

     28,965        27,086   

Other liabilities and deferred income taxes

     13,322        13,279   
                

Total non-current liabilities

     53,953        54,905   
                

Total Liabilities

     106,522        107,340   

Commitments and contingencies (Note 17)

    

Preferred stock, $0.01 par value (2,000,000,000 shares authorized, 360,000,000 shares issued and outstanding (each with a $25.00 liquidation preference) at September 30, 2010 and December 31, 2009)

     6,998        6,998   

Equity

    

Common stock, $0.01 par value (5,000,000,000 shares authorized, 1,500,000,000 shares issued and outstanding at September 30, 2010 and December 31, 2009)

     15        15   

Capital surplus (principally additional paid-in capital)

     24,041        24,040   

Accumulated deficit

     (236     (4,394

Accumulated other comprehensive income (loss)

     (1,073     1,588   
                

Total stockholders’ equity

     22,747        21,249   

Noncontrolling interests

     971        708   
                

Total equity

     23,718        21,957   
                

Total Liabilities and Equity

   $ 137,238      $ 136,295   
                

Reference should be made to the notes to the condensed consolidated financial statements.

 

2


Table of Contents

 

GENERAL MOTORS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

(In millions)

(Unaudited)

 

    Common Stockholders’                    
    Common
Stock (a)
    Capital
Surplus (a)
    Accumulated
Deficit
    Accumulated
Other
Comprehensive
Income (Loss)
    Noncontrolling
Interests
    Comprehensive
Income
(Loss)
    Total
Equity
(Deficit)
 

Balance December 31, 2009, Successor

  $ 15      $ 24,040      $ (4,394   $ 1,588      $ 708        $ 21,957   

Net income (loss)

                  4,766               265      $ 5,031        5,031   

Other comprehensive income (loss)

             

Foreign currency translation adjustments

                         134        2        136     

Cash flow hedging loss, net

                         (20            (20  

Unrealized gain on securities

                         29               29     

Defined benefit plans

             

Net prior service cost

                         (8            (8  

Net actuarial loss

                         (2,796            (2,796  
                               

Other comprehensive income (loss)

                         (2,661     2        (2,659     (2,659
                   

Comprehensive income (loss)

            $ 2,372     
                   

Effects of adoption of amendments to ASC 810-10 regarding variable interest entities (Note 3)

                                76          76   

Cash dividends paid to GM preferred stockholders

                  (608                     (608

Dividends declared or paid to noncontrolling interests

                                (61       (61
             

Repurchase of noncontrolling interest shares

           1                      (7       (6
             

Other

                                (12       (12
                                                 

Balance September 30, 2010, Successor

  $ 15      $ 24,041      $ (236   $ (1,073   $ 971        $ 23,718   
                                                 

 

(a) Common stock and Capital surplus at December 31, 2009 and September 30, 2010 are restated to reflect a three-for-one stock split effected on November 1, 2010.

Reference should be made to the notes to the condensed consolidated financial statements.

 

3


Table of Contents

 

GENERAL MOTORS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

(In millions)

(Unaudited)

 

    Common Stockholders’                    
    Common
Stock (a)
    Capital
Surplus  (a)
    Accumulated
Equity
(Deficit)
    Accumulated
Other
Comprehensive
Income (Loss)
    Noncontrolling
Interests
    Comprehensive
Income
(Loss)
    Total
Equity
(Deficit)
 

Balance December 31, 2008, Predecessor

  $ 1,017      $ 16,489      $ (70,727   $ (32,339   $ 484        $ (85,076

Net income (loss)

                  109,118               (115   $ 109,003        109,003   

Other comprehensive income (loss)

             

Foreign currency translation adjustments

                         232        (85     147     

Cash flow hedging gains, net

                         99        177        276     

Unrealized gain on securities

                         46               46     

Defined benefit plans

             

Net prior service costs

                         2,828               2,828     

Net actuarial loss

                         (6,237            (6,237  

Net transition asset/obligation

                         1               1     
                               

Other comprehensive income (loss)

                         (3,031     92        (2,939     (2,939
                   

Comprehensive income (loss)

            $ 106,064     
                   

Effects of Ally Financial adoption of ASC 820-10 and ASC 825-10

                  (1                     (1

Dividends declared or paid to noncontrolling interests

                                (26       (26

Other

    1        5                      (27       (21
                                                 

Balance July 9, 2009, Predecessor

    1,018        16,494        38,390        (35,370     408          20,940   

Fresh-start reporting adjustments:

             

Elimination of predecessor common stock, capital surplus and accumulated earnings

    (1,018     (16,494     (38,390                     (55,902

Elimination of predecessor accumulated other comprehensive loss

                         35,370                 35,370   

Issuance of common stock

    12        18,779                               18,791   
                                                 

Balance July 10, 2009, Successor

    12        18,779                      408          19,199   

Net loss

                  (858            287      $ (571     (571

Other comprehensive income (loss)

             

Foreign currency translation adjustments

                         184        (33     151     

Unrealized gain on securities

                         10               10     

Defined benefit plans

             

Net actuarial gain

                         483               483     
                               

Other comprehensive income (loss)

                         677        (33     644        644   
                   

Comprehensive income (loss)

            $ 73     
                   

Cash dividends paid to GM preferred stockholders

                  (41                     (41

Other

                                14          14   
                                                 

Balance September 30, 2009, Successor

  $ 12      $ 18,779      $ (899   $ 677      $ 676        $ 19,245   
                                                 

 

(a) Common stock and Capital surplus at July 10, 2009 and September 30, 2009 are restated to reflect a three-for-one stock split effected on November 1, 2010.

Reference should be made to the notes to the condensed consolidated financial statements.

 

4


Table of Contents

 

GENERAL MOTORS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

     Successor           Predecessor  
     Nine Months
Ended
September 30, 2010
    July 10, 2009
Through
September 30, 2009
          January 1,  2009
Through
July 9, 2009
 

Net cash provided by (used in) operating activities

   $ 8,319      $ 2,959          $ (18,303

Cash flows from investing activities

          

Expenditures for property

     (3,112     (881         (3,517

Investments in available-for-sale marketable securities, acquisitions

     (8,682                (202

Investment in trading marketable securities, acquisitions

     (271     (81           

Investments in available-for-sale marketable securities, liquidations

     2,822                   185   

Investment in trading marketable securities, liquidations

     259        94              

Investment in Ally Financial

                       (884

Investment in companies, net of cash acquired

     (59     (78           

Operating leases, liquidations

     337        346            1,307   

Change in restricted cash and marketable securities

     12,688        (9         (18,043

Increase in cash due to consolidation of Saab in August 2009

            222              

Distributions from Ally Financial received on Ally Financial common shares

            72              

Other

     164        (31         20   
                            

Net cash provided by (used in) investing activities

     4,146        (346         (21,134

Cash flows from financing activities

          

Net decrease in short-term debt

     (83     (290         (2,364

Proceeds from debt owed to the UST, EDC and German government

            4,788            53,604   

Proceeds from other debt

     652        294            345   

Payments on debt owed to UST, EDC and German government

     (7,153     (799           

Payments on other debt

     (751     (583         (6,072

Payments to acquire noncontrolling interest

     (6                (5

Fees paid for debt modification

                       (63

Dividends paid to GM preferred stockholders

     (608     (41           

Cash, cash equivalents and restricted cash retained by MLC

                       (1,216
                            

Net cash provided by (used in) financing activities

     (7,949     3,369            44,229   

Effect of exchange rate changes on cash and cash equivalents

     (120     374            168   
                            

Net increase in cash and cash equivalents

     4,396        6,356            4,960   

Cash and cash equivalents reclassified (to) from assets held for sale

     391        (277           

Cash and cash equivalents at beginning of the period

     22,679        19,013            14,053   
                            

Cash and cash equivalents at end of the period

   $ 27,466      $ 25,092          $ 19,013   
                            

Reference should be made to the notes to the condensed consolidated financial statements.

 

5


Table of Contents

 

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of Operations

General Motors Company was formed by the United States Department of the Treasury (UST) in 2009 originally as a Delaware limited liability company, Vehicle Acquisition Holdings LLC, and subsequently converted to a Delaware corporation, NGMCO, Inc. This company, which on July 10, 2009 acquired substantially all of the assets and assumed certain liabilities of General Motors Corporation (363 Sale) and changed its name to General Motors Company, is sometimes referred to in this Quarterly Report on Form 10-Q for the periods on or subsequent to July 10, 2009 as “we,” “our,” “us,” “ourselves,” the “Company,” “General Motors,” or “GM,” and is the successor entity solely for accounting and financial reporting purposes (Successor). General Motors Corporation is sometimes referred to in this Quarterly Report on Form 10-Q, for the periods on or before July 9, 2009, as “Old GM.” In connection with the 363 Sale, General Motors Corporation changed its name to Motors Liquidation Company, which is sometimes referred to in this Quarterly Report on Form 10-Q, for the periods on or after July 10, 2009, as “MLC.” MLC continues to exist as a distinct legal entity for the sole purpose of liquidating its remaining assets and liabilities. Prior to July 10, 2009 Old GM operated the business of the Company, and pursuant to the agreement with the Securities and Exchange Commission (SEC) Staff, as described in a no-action letter issued to Old GM by the SEC Staff on July 9, 2009, regarding our filing requirements and those of MLC, the accompanying condensed consolidated financial statements include the financial statements and related information of Old GM as it is our predecessor entity solely for accounting and financial reporting purposes (Predecessor).

We develop, produce and market cars, trucks and parts worldwide. We analyze the results of our business through our three segments: General Motors North America (GMNA), General Motors International Operations (GMIO) and General Motors Europe (GME). Nonsegment operations are classified as Corporate. Corporate includes investments in Ally Financial Inc., formerly GMAC Inc. (Ally Financial), certain centrally recorded income and costs, such as interest, income taxes and corporate expenditures, certain nonsegment specific revenues and expenses, including costs related to the Delphi Benefit Guarantee Agreements (as subsequently defined in Note 17) and a portfolio of automotive retail leases.

In the three months ended June 30, 2010 we changed our managerial reporting structure so that certain entities geographically located within Russia and Uzbekistan were transferred from our GME segment to our GMIO segment. We have retrospectively adjusted our condensed consolidated financial statements for the period ended September 30, 2010 herein and our consolidated financial statements for the year ended December 31, 2009 to reflect the change in reportable segments in our Registration Statement on Form S-1, as filed with the SEC on August 18, 2010, and amendments thereto (Form S-1). Our Form S-1 relates to an offering of shares of our common stock and an offering of our Series B Mandatory Convertible Junior Preferred Stock (Series B Preferred Stock).

Note 2. Chapter 11 Proceedings and the 363 Sale

Background

As a result of historical unfavorable economic conditions and a rapid decline in sales in the three months ended December 31, 2008 Old GM determined that, despite the previous actions it had then taken to restructure its U.S. business, it would be unable to pay its obligations in the normal course of business in 2009 or service its debt in a timely fashion, which required the development of a new plan that depended on financial assistance from the U.S. government.

In December 2008 Old GM requested and received financial assistance from the U.S. government and entered into a loan and security agreement with the UST, which was subsequently amended (UST Loan Agreement). In early 2009 Old GM’s business results and liquidity continued to deteriorate, and, as a result, Old GM obtained additional funding from the UST under the UST Loan Agreement. Old GM, through its wholly-owned subsidiary General Motors of Canada Limited (GMCL), also received funding from Export Development Canada (EDC), a corporation wholly owned by the Government of Canada, under a loan and security agreement entered into in April 2009 (EDC Loan Facility).

As a condition to obtaining the loans under the UST Loan Agreement, Old GM was required to submit a plan in February 2009 that included specific actions intended to demonstrate that it was a viable entity and to use its best efforts to achieve certain debt reduction, labor modification and VEBA modification targets.

 

6


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

On March 30, 2009 the Presidential Task Force on the Auto Industry (Auto Task Force) determined that the plan was not viable and required substantial revisions. In conjunction with the March 30, 2009 announcement, the administration announced that it would offer Old GM adequate working capital financing for a period of 60 days while it worked with Old GM to develop and implement a more accelerated and aggressive restructuring that would provide a sound long-term foundation.

Old GM made further modifications to its plan in an attempt to satisfy the Auto Task Force requirement that Old GM undertake a substantially more accelerated and aggressive restructuring plan. The additional significant cost reduction and restructuring actions included reducing Old GM’s indebtedness and VEBA obligations in addition to other cost reduction and restructuring actions.

Our Registration Statement on Form S-1 provides additional detail on Old GM’s liquidity constraints, the terms and conditions of its various funding arrangements with U.S. and Canadian governmental entities, and its various cost reduction and restructuring activities.

Chapter 11 Proceedings

Old GM was not able to complete the cost reduction and restructuring actions, including the debt reductions and VEBA modifications, which resulted in extreme liquidity constraints. As a result, on June 1, 2009 Old GM and certain of its direct and indirect subsidiaries filed voluntary petitions for relief under Chapter 11 (Chapter 11 Proceedings) of the U.S. Bankruptcy Code (Bankruptcy Code) in the U.S. Bankruptcy Court for the Southern District of New York (Bankruptcy Court).

In connection with the Chapter 11 Proceedings, Old GM entered into a secured superpriority debtor-in-possession credit agreement with the UST and EDC (DIP Facility) and received additional funding commitments from EDC to support Old GM’s Canadian operations.

363 Sale

On July 10, 2009 we completed the acquisition of substantially all of the assets and assumed certain liabilities of Old GM and certain of its direct and indirect subsidiaries (collectively, the Sellers). The 363 Sale was consummated in accordance with the Amended and Restated Master Sale and Purchase Agreement, dated June 26, 2009, as amended, (Purchase Agreement) between us and the Sellers, and pursuant to the Bankruptcy Court’s sale order dated July 5, 2009.

Accounting for the Effects of the Chapter 11 Proceedings and the 363 Sale

Chapter 11 Proceedings

Accounting Standards Codification (ASC) 852, “Reorganizations,” (ASC 852) is applicable to entities operating under Chapter 11 of the Bankruptcy Code. ASC 852 generally does not affect the application of U.S. GAAP that we and Old GM followed to prepare the consolidated financial statements, but it does require specific disclosures for transactions and events that were directly related to the Chapter 11 Proceedings and transactions and events that resulted from ongoing operations.

Old GM prepared its consolidated financial statements in accordance with the guidance in ASC 852 in the period June 1, 2009 through July 9, 2009. Revenues, expenses, realized gains and losses, and provisions for losses directly related to the Chapter 11 Proceedings were recorded in Reorganization gains, net. Reorganization gains, net do not constitute an element of operating loss due to their nature and due to the requirement of ASC 852 that they be reported separately. Old GM’s balance sheet prior to the 363 Sale distinguished prepetition liabilities subject to compromise from prepetition liabilities not subject to compromise and from postpetition liabilities. Cash amounts provided by or used in the Chapter 11 Proceedings were separately disclosed in the consolidated statement of cash flows in our Form S-1 for the periods January 1, 2009 through July 9, 2009.

Application of Fresh-Start Reporting

The Bankruptcy Court did not determine a reorganization value in connection with the 363 Sale. Reorganization value is defined as the value of our assets without liabilities. In order to apply fresh-start reporting, ASC 852 requires that total postpetition liabilities and

 

7


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

allowed claims be in excess of reorganization value and prepetition stockholders receive less than 50.0% of our common stock. Based on our estimated reorganization value, we determined that on July 10, 2009 both the criteria of ASC 852 were met and, as a result, we applied fresh-start reporting. In applying fresh-start reporting at July 10, 2009, which generally follows the provisions of ASC 805, “Business Combinations,” (ASC 805) we recorded the assets acquired and the liabilities assumed from Old GM at fair value except for deferred income taxes and certain liabilities associated with employee benefits. Our consolidated balance sheet at July 10, 2009, which includes the adjustments to Old GM’s consolidated balance sheet as a result of the 363 Sale and the application of fresh-start reporting, and related disclosures are discussed in Note 2 to our consolidated financial statements included in our Form S-1. These adjustments were final and no determinations of fair value were considered provisional.

Reorganization gains, net

The following table summarizes Old GM’s Reorganization gains, net, arising from the 363 Sale and fresh-start reporting that primarily resulted from the adjustments discussed in Note 2 to our consolidated financial statements included in our Form S-1 (dollars in millions):

 

     Predecessor  
     July 1,  2009
Through
July 9, 2009
    January 1,  2009
Through
July 9, 2009
 

Change in net assets resulting from the application of fresh-start reporting

   $ 33,829      $ 33,829   

Fair value of our Series A Preferred Stock, common shares and warrants issued in 363 Sale

     20,532        20,532   

Gain from the conversion of debt owed to UST to equity

     31,561        31,561   

Gain from the conversion of debt owed to EDC to equity

     5,964        5,964   

Gain from the modification and measurement of our VEBA obligation

     7,731        7,731   

Gain from the modification and measurement of other employee benefit plans

     4,585        4,585   

Gain from the settlement of net liabilities retained by MLC via the 363 Sale

     25,177        25,177   

Income tax benefit for release of valuation allowances and other tax adjustments

     710        710   

Other 363 Sale adjustments

     (21     (21
                

Total adjustment from 363 Sale Transaction and fresh-start reporting

     130,068        130,068   

Adjustment recorded to Income tax benefit for release of valuation allowances and other tax adjustments

     (710     (710

Other losses, net

     (46     (1,203
                

Total Reorganization gains, net

   $ 129,312      $ 128,155   
                

Other losses, net of $1.2 billion in the period January 1, 2009 through July 9, 2009 primarily relate to costs incurred during Old GM’s Chapter 11 Proceedings, including:

 

   

Losses of $958 million on extinguishments of debt resulting from Old GM’s repayment of its secured revolving credit facility, its U.S. term loan, and its secured credit facility;

 

   

Losses of $398 million on contract rejections, settlements of claims and other lease terminations;

 

   

Professional fees of $38 million; and

 

   

Gain of $247 million related to the release of Accumulated other comprehensive income (loss) associated with previously designated derivative financial instruments.

Note 3. Basis of Presentation and Recent Accounting Standards

We filed a Registration Statement on Form 10 on April 7, 2010, as amended on May 17, 2010, pursuant to an agreement with the SEC Staff, as described in a no-action letter issued to Old GM by the SEC Staff on July 9, 2009 regarding our filing requirements and those of MLC. On June 7, 2010 our Registration Statement on Form 10 became effective and we became subject to the filing requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934. In accordance with the agreement with the SEC Staff,

 

8


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

the accompanying unaudited condensed consolidated financial statements include the financial statements and related information of Old GM, for the period prior to July 10, 2009, our predecessor entity solely for accounting and financial purposes and the entity from whom we purchased substantially all of its assets and assumed certain of its liabilities.

The 363 Sale resulted in a new entity, General Motors Company, which is the successor entity solely for accounting and financial reporting purposes. Because we are a new reporting entity, our financial statements are not comparable to the financial statements of Old GM.

The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The accompanying condensed consolidated financial statements include all adjustments, comprised of normal recurring adjustments, considered necessary by management to fairly state our results of operations, financial position and cash flows. The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Form S-1.

In the nine months ended September 30, 2010 we changed our managerial reporting structure so that certain entities geographically located within Russia and Uzbekistan were transferred from our GME segment to our GMIO segment. We have revised the segment presentation for all periods presented. Beginning in the fourth quarter of 2010, we are creating a new regional organization in South America. The new organization, GM South America, will include existing sales and manufacturing operations in Brazil, Argentina, Colombia, Ecuador, and Venezuela, as well as sales activities in those countries and Bolivia, Chile, Paraguay, Peru and Uruguay.

On October 5, 2010 our Board of Directors recommended a three-for-one stock split on shares of our common stock, which was approved by our stockholders on November 1, 2010. The stock split was effected on November 1, 2010.

Each stockholder’s percentage ownership in us and proportional voting power remained unchanged after the stock split. All applicable Successor share, per share and related information in the condensed consolidated financial statements and notes thereto have been adjusted retroactively to give effect to the three-for-one stock split.

On October 5, 2010, our Board of Directors recommended that we amend our Certificate of Incorporation to increase the number of shares of common stock that we are authorized to issue from 2,500,000,000 shares to 5,000,000,000 shares and to increase the number of preferred shares that we are authorized to issue from 1,000,000,000 shares to 2,000,000,000 shares. Our stockholders approved these amendments on November 1, 2010, and they were effected on November 1, 2010.

Use of Estimates in the Preparation of the Financial Statements

The condensed consolidated financial statements are prepared in conformity with U.S. GAAP, which requires the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses in the periods presented. We believe that the accounting estimates employed are appropriate and the resulting balances are reasonable; however, due to the inherent uncertainties in making estimates actual results could differ from the original estimates, requiring adjustments to these balances in future periods.

Principles of Consolidation

Our condensed consolidated financial statements include our accounts and those of our subsidiaries that we control due to ownership of a majority voting interest. In addition, we consolidate variable interest entities (VIEs) when we are the VIE’s primary beneficiary. Our share of earnings or losses of nonconsolidated affiliates are included in our consolidated operating results using the equity method of accounting when we are able to exercise significant influence over their operating and financial decisions. When we are not able to exercise significant influence over such affiliates, we use the cost method of accounting. All intercompany balances and transactions have been eliminated in consolidation. Old GM utilized the same principles of consolidation in its condensed consolidated financial statements.

 

9


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

Correction of Presentation in Condensed Consolidated Financial Statements

In the three months ended June 30, 2010 we identified several items which had not been properly classified in our condensed consolidated statement of cash flows for the three months ended March 31, 2010. We determined that we had not properly classified the effects of the devaluation of the Venezuelan Bolivar Fuerte (BsF), which reduced our cash balance by $199 million. This reduction should have been presented as part of the Effect of exchange rate changes on cash and cash equivalents rather than a reduction of Net cash provided by operating activities. Additionally, the change in the cash component of the Saab Automobile AB (Saab) assets classified as held for sale of $330 million should have been presented as part of Cash and cash equivalents reclassified (to) from assets held for sale rather than an increase in Net cash flows from operating activities. The net effects of the remaining corrections are included in the table below. For the nine months ended September 30, 2010, we have correctly presented these items in our condensed consolidated statement of cash flows. Although we do not consider the effects of these errors to be material, we intend to correct our condensed consolidated statement of cash flows for the three months ended March 31, 2010 in our Quarterly Report on Form 10-Q for the three months ending March 31, 2011 when filed. The originally reported and corrected amounts for the three months ended March 31, 2010 are summarized in the following table (dollars in millions):

 

     As  Originally
Reported
    Adjustments     As
Corrected
 

Net cash provided by (used in) operating activities

   $ 1,746      $ 104      $ 1,850   

Net cash provided by (used in) investing activities

     646        (195     451   

Net cash provided by (used in) financing activities

     (1,688     (50     (1,738

Effect of exchange rate changes on cash and cash equivalents

     (53     (250     (303

Cash and cash equivalents reclassified (to) from assets held for sale

     (20     391        371   

Cash and cash equivalents at beginning of the period

     22,679               22,679   
                        

Cash and cash equivalents at end of the period

   $ 23,310      $      $ 23,310   
                        

In addition, in the three months ended June 30, 2010, we identified several items that had not been properly classified in the condensed consolidated statement of cash flows for the period July 10, 2009 through September 30, 2009 (Successor). Although we do not consider the effects of these errors to be material, we have corrected our condensed consolidated statement of cash flows to properly reflect these items. These errors primarily relate to reclassifications within the respective sections of the condensed consolidated statement of cash flows. The originally reported and corrected amounts for the period July 10, 2009 through September 30, 2009 (Successor) are summarized in the following table (dollars in millions):

 

     As  Originally
Reported
    Adjustments     As
Corrected
 

Net cash provided by (used in) operating activities

   $ 2,857      $ 102      $ 2,959   

Cash flows from investing activities

      

Other (a)

     (107     76        (31

Net cash provided by (used in) investing activities

     (422     76        (346

Cash flows from financing activities

      

Net decrease in short-term debt

     (588     298        (290

Payments on long-term debt

     (130     (453     (583

Net cash provided by (used in) financing activities

     3,523        (154     3,369   

Effect of exchange rate changes on cash and cash equivalents

     398        (24     374   

Cash and cash equivalents reclassified (to) from assets held for sale

     (277            (277

Cash and cash equivalents at beginning of the period

     19,013               19,013   

Cash and cash equivalents at end of the period

   $ 25,092      $      $ 25,092   

 

(a) Amount of ($107) million was originally reported as ($160) million in our condensed consolidated statement of cash flows for the period July 10, 2009 through September 30, 2009 (Successor). This amount was adjusted by $53 million due to a change in presentation in the condensed consolidated statement of cash flows for the nine months ended September 30, 2010.

 

10


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

In addition, we have corrected certain amounts disclosed in the notes to the condensed consolidated financial statements included in our 2009 Form 10-Q for the nine-month period ended September 30, 2009 (2009 Form 10-Q). Although we do not consider the effects of these disclosure errors to be material, we have corrected the amounts in the notes to the condensed consolidated financial statements. Originally reported and corrected amounts are included in the affected notes to the condensed consolidated financial statements which follow.

Venezuelan Exchange Regulations

Our Venezuelan subsidiaries changed their functional currency from the BsF, the local currency, to the U.S. Dollar, our reporting currency, on January 1, 2010 because of the hyperinflationary status of the Venezuelan economy. Further, pursuant to the official devaluation of the Venezuelan currency and establishment of the dual fixed exchange rates in January 2010, we remeasured the BsF denominated monetary assets and liabilities held by our Venezuelan subsidiaries at the nonessential rate of 4.30 BsF to $1.00. The remeasurement resulted in a charge of $25 million recorded in Cost of sales in the nine months ended September 30, 2010. In the nine months ended September 30, 2010 all BsF denominated transactions have been remeasured at the nonessential rate of 4.30 BsF to $1.00.

In June 2010, the Venezuelan government introduced additional foreign currency exchange control regulations, which imposed restrictions on the use of the parallel foreign currency exchange market, thereby making it more difficult to convert BsF to U.S. Dollars. We periodically accessed the parallel exchange market, which historically enabled entities to obtain foreign currency for transactions that could not be processed by the Commission for the Administration of Currency Exchange (CADIVI). The restrictions on the foreign currency exchange market could affect our Venezuelan subsidiaries’ ability to pay its non-BsF denominated obligations that do not qualify to be processed by CADIVI at the official exchange rates as well as our ability to benefit from those operations.

The following tables provide condensed financial information for our Venezuelan subsidiaries at and for the three and nine months ended September 30, 2010, which includes amounts receivable from and payable to, and transactions with, affiliated entities (dollars in millions):

 

     September 30, 2010  

Total assets (a)

   $ 1,408   

Total liabilities (b)

   $ 1,147   

 

     Three Months
Ended
September 30, 2010
     Nine Months
Ended
September 30, 2010
 

Revenue

   $ 347       $ 789   

Net income attributable to stockholders (c)

   $ 29       $ 244   

 

(a) Includes BsF denominated and non-BsF denominated monetary assets of $360 million and $672 million.

 

(b) Includes BsF denominated and non-BsF denominated monetary liabilities of $621 million and $491 million.

 

(c) Includes a gain of $119 million related to the devaluation of the Bolivar in January 2010 and gains of $82 million and $207 million in the three and nine months ended September 30, 2010 due to favorable foreign currency exchanges that were processed by CADIVI. The $119 million gain on the devaluation was offset by a $144 million loss recorded in the U.S. on BsF denominated assets, which is not included in Net income attributable to stockholders reported above.

In addition, the total amount pending government approval for settlement is BsF 1.1 billion (equivalent to $347 million), for which some requests have been pending from 2007. The amount includes payables to affiliated entities of $250 million, which includes dividends payable of $144 million.

Recently Adopted Accounting Principles

Transfers of Financial Assets

In January 2010 we adopted certain amendments to ASC 860-10, “Transfers and Servicing” (ASC 860-10). ASC 860-10 eliminates the concept of a qualifying special-purpose entity (SPE), establishes a new definition of participating interest that must be met for transfers of portions of financial assets to be eligible for sale accounting, clarifies and amends the derecognition criteria for a transfer

 

11


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

of financial assets to be accounted for as a sale, and changes the amount that can be recorded as a gain or loss on a transfer accounted for as a sale when beneficial interests are received by the transferor. The adoption of these amendments did not have a material effect on the condensed consolidated financial statements.

Variable Interest Entities

In January 2010 we adopted amendments to ASC 810-10, “Consolidation” (ASC 810-10). These amendments require an enterprise to qualitatively assess the determination of the primary beneficiary of a VIE based on whether the enterprise: (1) has the power to direct the activities of a VIE that most significantly affect the entity’s economic performance; and (2) has the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. These amendments also require, among other considerations, an ongoing reconsideration of the primary beneficiary. In February 2010 the Financial Accounting Standards Board (FASB) issued guidance that permitted an indefinite deferral of these amendments for entities that have all the attributes of an investment company or that apply measurement principles consistent with those followed by investment companies. An entity that qualifies for the deferral will continue to be assessed under the overall guidance on the consolidation of VIEs in effect prior to the adoption of these amendments. This deferral was applicable to certain investment funds associated with our employee benefit plans and investment funds managing investments on behalf of unrelated third parties.

The amendments were adopted prospectively. Upon adoption, we consolidated General Motors Egypt (GM Egypt) which resulted in an increase in Total assets of $254 million, an increase in Total liabilities of $178 million, and an increase in Noncontrolling interests of $76 million. Due to our application of fresh-start reporting on July 10, 2009 and because our investment in GM Egypt was accounted for using the equity method of accounting, there was no difference between the net assets added to the condensed consolidated balance sheet upon consolidation and the amount of previously recorded interest in GM Egypt. As a result, there was no cumulative effect of a change in accounting principle to Accumulated deficit. The effect of these amendments was measured based on the amount at which the asset, liability and noncontrolling interest would have been carried or recorded in the condensed consolidated financial statements if these amendments had been effective since inception of our relationship with GM Egypt. Refer to Note 10 for additional information on the effect of the adoption of these amendments.

Accounting Standards Not Yet Adopted

In September 2009 the FASB issued Accounting Standards Update (ASU) 2009-13, “Multiple-Deliverable Revenue Arrangements” (ASU 2009-13). ASU 2009-13 addresses the unit of accounting for multiple-element arrangements. In addition, ASU 2009-13 revises the method by which consideration is allocated among the units of accounting. The overall consideration is allocated to each deliverable by establishing a selling price for individual deliverables based on a hierarchy of evidence, including vendor-specific objective evidence, other third party evidence of the selling price, or the reporting entity’s best estimate of the selling price of individual deliverables in the arrangement. ASU 2009-13 will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. We are currently evaluating the effects, if any, that ASU 2009-13 will have on the condensed consolidated financial statements.

Note 4. Acquisition and Disposals of Businesses

Acquisition of Delphi Businesses

In July 2009 we entered into the Delphi Master Disposition Agreement (DMDA) with Delphi Corporation (Delphi) and other parties, which was consummated in October 2009. Under the DMDA, we agreed to acquire Delphi’s global steering business (Nexteer) and four domestic component manufacturing facilities as well as make an investment in a new entity, New Delphi, which acquired substantially all of Delphi’s remaining assets. At October 6, 2009 the fair value of Nexteer and the four domestic facilities was $287 million and the assets acquired and liabilities assumed were consolidated and included in the results of our GMNA segment. Total assets of $1.2 billion were comprised primarily of accounts and notes receivables, inventories and property, plant and equipment. Total liabilities of $0.9 billion were comprised primarily of accounts payable, accrued expenses, short-term debt and other liabilities.

 

12


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

We funded the acquisitions, transaction related costs and settlements of certain pre-existing arrangements through net cash payments of $2.7 billion. We also assumed liabilities and wind-down obligations of $120 million, waived our claims associated with the Delphi liquidity support agreements of $850 million and waived our rights to claims associated with previously transferred pension costs for hourly employees. Of these amounts, we contributed $1.7 billion to New Delphi and paid the Pension Benefit Guarantee Corporation (PBGC) $70 million in October 2009. Our investment in New Delphi is accounted for using the equity method.

In July 2010 we entered into a definitive agreement to sell Nexteer to an unaffiliated party. The transaction is subject to customary closing conditions, regulatory approvals and review by government agencies in the U.S. and China. At September 30, 2010 Nexteer had total assets of $857 million, total liabilities of $376 million, and recorded revenue of $1.4 billion in the nine months ended September 30, 2010, of which $765 million were sales to us and our affiliates. Nexteer did not qualify for held for sale classification at September 30, 2010. Once consummated, we do not expect the sale of Nexteer to have a material effect on our consolidated financial statements.

Sale of India Operations

In December 2009 we and SAIC Motor Hong Kong Investment Limited (SAIC-HK) entered into a joint venture, SAIC GM Investment Limited (HKJV) to invest in automotive projects outside of markets in China, initially focusing on markets in India. On February 1, 2010 we sold certain of our operations in India (India Operations), part of our GMIO segment, in exchange for a promissory note due in 2013. The amount due under the promissory note may be partially reduced, or increased, based on the India Operation’s cumulative earnings before interest and taxes for the three year period ending December 31, 2012. In connection with the sale we recorded net consideration of $190 million and an insignificant gain. The sale transaction resulted in a loss of control and the deconsolidation of the India Operations on February 1, 2010. Accordingly, we removed the assets and liabilities of the India Operations from our consolidated financial statements and recorded an equity interest in HKJV to reflect cash of $50 million we contributed to HKJV and a $123 million commitment to provide additional capital that we are required to make in accordance with the terms of the joint venture agreement. We have recorded a corresponding liability to reflect our obligation to provide additional capital.

Saab Bankruptcy and Sale

In February 2009 Saab, part of the GME segment, filed for protection under the reorganization laws of Sweden in order to reorganize itself into a stand-alone entity. Old GM determined that the reorganization proceeding resulted in a loss of the elements of control necessary for consolidation and therefore Old GM deconsolidated Saab in February 2009. Old GM recorded a loss of $824 million in Other expenses, net related to the deconsolidation. The loss reflects the remeasurement of Old GM’s net investment in Saab to its estimated fair value of $0, costs associated with commitments and obligations to suppliers and others, and a commitment to provide up to $150 million of DIP financing. We acquired Old GM’s investment in Saab in connection with the 363 Sale. In August 2009 Saab exited its reorganization proceeding, and we regained the elements of control and consolidated Saab at an insignificant fair value.

In February 2010 we completed the sale of Saab and in May 2010 we completed the sale of Saab Automobile GB (Saab GB) to Spyker Cars NV. Of the negotiated cash purchase price of $74 million, we received $50 million at closing and received the remaining $24 million in July 2010. We also received preference shares in Saab with a face value of $326 million and an estimated fair value that is insignificant and received $114 million as repayment of the DIP financing that we provided to Saab during 2009. In the nine months ended September 30, 2010 we recorded a gain of $123 million in Interest income and other non-operating income, net reflecting cash received of $166 million less net assets with a book value of $43 million.

Sale of 1% Interest in Shanghai General Motors Co., Ltd.

In February 2010 we sold a 1% ownership interest in Shanghai General Motors Co., Ltd. (SGM) to SAIC-HK, reducing our ownership interest to 49%. The sale of the 1% ownership interest to Shanghai Automotive Industry Corporation (SAIC) was predicated on our ability to work with SAIC to obtain a $400 million line of credit from a commercial bank to us. We also received a

 

13


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

call option to repurchase the 1% which is contingently exercisable based on events which we do not unilaterally control. As part of the loan arrangement SAIC provided a commitment whereby, in the event of default, SAIC will purchase the ownership interest in SGM that we pledged as collateral for the loan. We recorded an insignificant gain on this transaction in the nine months ended September 30, 2010.

Acquisition of AmeriCredit Corp.

Refer to Note 27 for information on the acquisition of AmeriCredit Corp. (AmeriCredit).

Note 5. Marketable Securities

The following table summarizes information regarding trading securities gains and losses, which are recorded in Interest income and other non-operating income, net on securities still held at the reporting date (dollars in millions):

 

     Successor  
     Three Months
Ended
September 30, 2010
     Nine Months
Ended
September 30, 2010
     July 10, 2009
Through
September 30, 2009
     September 30, 2010      December 31, 2009  
     Unrealized      Unrealized      Unrealized      Fair
Value
     Fair
Value
 
     Gains      Losses      Gains      Losses      Gains      Losses        

Trading securities (a)

                       

Equity

   $ 5       $ 2       $ 2       $ 2       $ 4       $ 2       $ 35       $ 32   

United States government and agencies

                                                     6         17   

Mortgage and asset-backed

             2                 1         1         3         28         22   

Foreign government

     2                 2                 3                 36         24   

Corporate debt

     1                                 1         1         29         29   
                                                                       

Total trading securities

   $ 8       $ 4       $ 4       $ 3       $ 9       $ 6       $ 134       $ 124   
                                                                       

 

(a) Old GM had no marketable securities classified as trading for the period January 1, 2009 through July 9, 2009.

We maintained $73 million and $79 million of the above trading securities as compensating balances to support letters of credit of $61 million and $66 million at September 30, 2010 and December 31, 2009. We have access to these securities in the normal course of business; however, the letters of credit may be withdrawn if the minimum collateral balance is not maintained.

The following table summarizes information regarding available-for-sale securities, including unrealized gains and losses which are recorded in Accumulated other comprehensive income (loss) on securities still held at the reporting date (dollars in millions):

 

     Successor  
     September 30, 2010      December 31, 2009  
            Unrealized      Fair
Value
            Unrealized      Fair
Value
 
     Cost      Gains      Losses         Cost      Gains      Losses     

Available-for-sale securities

                       

United States government and agencies

   $ 2,254       $       $       $ 2,254       $ 2       $       $       $ 2   

Certificates of deposit

     1,448                         1,448         8                         8   

Corporate debt

     2,173         1                 2,174                                   
                                                                       

Total available-for-sale securities

   $ 5,875       $ 1       $       $ 5,876       $ 10       $       $       $ 10   
                                                                       

 

14


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

In addition to the securities previously discussed, securities of $15.5 billion and $11.2 billion with original maturities of 90 days or less were classified as cash equivalents and securities of $1.5 billion and $14.2 billion were classified as Restricted cash and marketable securities at September 30, 2010 and December 31, 2009. Additionally, we held equity securities that are classified as available-for-sale and recorded in Other assets. These securities had a fair value of $40 million and $13 million at September 30, 2010 and December 31, 2009.

The following table summarizes proceeds from and realized gains and losses on disposals of investments in marketable securities classified as available-for-sale and sold prior to maturity (dollars in millions):

 

     Successor           Predecessor  
     Three Months
Ended
September 30, 2010
     Nine Months
Ended
September 30, 2010
     July 10, 2009
Through
September 30, 2009
          July 1, 2009
Through
July 9, 2009
     January 1,  2009
Through
July 9, 2009
 

Sales proceeds

   $ 5       $ 6       $          $       $ 185   

Realized gains

   $       $       $          $       $ 3   

Realized losses

   $       $       $          $       $ 10   

The following table summarizes the fair value of investments classified as available-for-sale securities by contractual maturity at September 30, 2010 (dollars in millions):

 

     Successor  
     Amortized
Cost
     Fair
Value
 

Due in one year or less

   $ 5,874       $ 5,875   

Due after one year through five years

     1         1   

Due after five years through ten years

               

Due after ten years

               
                 

Total contractual maturities of available-for-sale securities

   $ 5,875       $ 5,876   
                 

Refer to Note 21 for the amounts recorded as a result of other than temporary impairments on debt and equity securities.

Note 6. Inventories

The following table summarizes the components of our Inventories (dollars in millions):

 

     Successor  
     September 30,
2010
     December 31,
2009
 

Productive material, work in process, and supplies

   $ 5,736       $ 4,201   

Finished product, including service parts

     7,308         5,906   
                 

Total inventories

   $ 13,044       $ 10,107   
                 

Note 7. Equity in Net Assets of Nonconsolidated Affiliates

Nonconsolidated affiliates are entities in which an equity ownership interest is maintained and for which the equity method of accounting is used, due to the ability to exert significant influence over decisions relating to their operating and financial affairs.

 

15


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

The following table summarizes information regarding equity in income of and disposition of interest in nonconsolidated affiliates (dollars in millions):

 

     Successor            Predecessor  
     Three Months
Ended
September 30, 2010
     Nine Months
Ended
September 30, 2010
     July 10, 2009
Through
September 30, 2009
           July 1, 2009
Through
July 9, 2009
     January 1,  2009
Through
July 9, 2009
 

SGM and SGMW (a)

   $ 336       $ 1,071       $ 195           $ 8       $ 298   
                                                

Ally Financial (b)

                                         (1,097

Gain on conversion of UST Ally Financial Loan (c)

                                         2,477   
                                                

Total equity in income of and disposition of interest in Ally Financial (b)

                                         1,380   

New United Motor Manufacturing, Inc. (d)

                                         (243

Others

     15         94         9             7         6   
                                                

Total equity in income of nonconsolidated affiliates

   $ 351       $ 1,165       $ 204           $ 15       $ 1,441   
                                                

 

(a) Includes SGM (49%) in the three and nine months ended September 30, 2010 and (50%) in the periods July 10, 2009 through September 30, 2009, July 1, 2009 through July 9, 2009 and January 1, 2009 through July 9, 2009 and SAIC-GM-Wuling Automobile Co., Ltd. (SGMW) (34%).

 

(b) Ally Financial converted its status to a C corporation effective June 30, 2009. At that date, Old GM began to account for its investment in Ally Financial using the cost method rather than the equity method as Old GM could not exercise significant influence over Ally Financial. Prior to converting to a C corporation, Old GM’s investment in Ally Financial was accounted for in a manner similar to an investment in a limited partnership and the equity method was applied because Old GM’s influence was more than minor. In connection with Ally Financial’s conversion into a C corporation, each unit of each class of Ally Financial Membership Interests was converted into shares of capital stock of Ally Financial with substantially the same rights and preferences as such Membership Interests.

 

(c) In May 2009 the UST exercised its option to convert the outstanding amounts owed on the UST Ally Financial Loan (as subsequently defined) into shares of Ally Financial’s Class B Common Membership Interests.

 

(d) New United Motor Manufacturing, Inc. (NUMMI) (50%) was retained by MLC as a part of the 363 Sale.

Investment in Chinese Joint Ventures

Our Chinese operations, which we established beginning in 1997, are primarily composed of three joint ventures: SGM, SGMW and FAW-GM. Sales and income of these joint ventures are not consolidated into our financial statements; rather, our proportionate share of the earnings of each joint venture is reflected as Equity in income of nonconsolidated affiliates.

SGM is a joint venture established by SAIC (51%) and us (49%) in 1997. SGM has interests in three other joint ventures in China — Shanghai GM (Shenyang) Norsom Motor Co., Ltd (SGM Norsom), Shanghai GM Dong Yue Motors Co., Ltd (SGM DY) and Shanghai GM Dong Yue Powertrain (SGM DYPT). These three joint ventures are jointly held by SGM (50%), SAIC (25%) and us (25%). The four joint ventures (SGM Group) are engaged in the production, import, and sale of a comprehensive range of products under the brands of Buick, Chevrolet, and Cadillac.

SGMW, of which we own 34%, SAIC owns 50% and Liuzhou Wuling Motors Co., Ltd (Wuling) owns 16%, produces mini-commercial vehicles and passenger cars utilizing local architectures under the Wuling and Chevrolet brands. FAW-GM, of which we

 

16


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

own 50% and China FAW Group Corporation (FAW) owns 50%, produces light commercial vehicles under the Jiefang brand and medium vans under the FAW brand. Our joint venture agreements allow for significant rights as a member.

In the three months ended September 30, 2010 we entered into an equity transfer agreement to purchase an additional 10% interest in SGMW from the Wuling Group for $51 million in cash plus an agreement to provide technical services to the Wuling Group through 2013. The transaction is subject to regulatory approval in China. After completing this transaction, we will own 44% of the outstanding stock of SGMW.

The following tables summarize certain key financial data for the SGM Group, which excludes SGMW and FAW-GM (dollars in millions):

 

     Three Months
Ended
September 30, 2010
     Nine Months
Ended
September 30, 2010
     Three Months
Ended
September 30, 2009
     Nine Months
Ended
September 30, 2009
 

Total net sales and revenue

   $ 4,788       $ 13,881       $ 3,590       $ 8,657   

Net income

   $ 611       $ 1,915       $ 382       $ 838   
                   September 30, 2010      December 31, 2009  

Cash and cash equivalents

  

   $ 3,601       $ 2,995   

Debt

  

   $ 7       $ 7   

Investment in Ally Financial

As part of the approval process for Ally Financial to obtain Bank Holding Company status in December 2008, Old GM agreed to reduce its ownership in Ally Financial to less than 10% of the voting and total equity of Ally Financial by December 24, 2011. At September 30, 2010 our equity ownership in Ally Financial was 16.6% as subsequently discussed.

In December 2008 Old GM and FIM Holdings, an assignee of Cerberus ResCap Financing LLC, entered into a subscription agreement with Ally Financial under which each agreed to purchase additional Common Membership Interests in Ally Financial, and the UST committed to provide Old GM with additional funding in order to purchase the additional interests. In January 2009 Old GM entered into the UST Ally Financial Loan Agreement pursuant to which Old GM borrowed $884 million (UST Ally Financial Loan) and utilized those funds to purchase 190,921 Class B Common Membership Interests in Ally Financial. The UST Ally Financial Loan was scheduled to mature in January 2012 and bore interest, payable quarterly, at the same rate of interest as the UST Loans (as subsequently defined in Note 13). The UST Ally Financial Loan Agreement was secured by Old GM’s Common and Preferred Membership Interests in Ally Financial. As part of this loan agreement, the UST had the option to convert outstanding amounts into a maximum of 190,921 shares of Ally Financial’s Class B Common Membership Interests on a pro rata basis.

In May 2009 the UST exercised this option, the outstanding principal and interest under the UST Ally Financial Loan was extinguished, and Old GM recorded a net gain of $483 million. The net gain was comprised of a gain on the disposition of Ally Financial Common Membership Interests of $2.5 billion recorded in Equity in income of and disposition of interest in Ally Financial and a loss on extinguishment of the UST Ally Financial Loan of $2.0 billion recorded in Loss on extinguishment of debt. After the exchange, Old GM’s ownership was reduced to 24.5% of Ally Financial’s Common Membership Interests.

Ally Financial converted its status to a C corporation effective June 30, 2009. At that date, Old GM began to account for its investment in Ally Financial using the cost method rather than the equity method as Old GM could not exercise significant influence over Ally Financial. Prior to converting to a C corporation, Old GM’s investment in Ally Financial was accounted for in a manner similar to an investment in a limited liability partnership and the equity method was applied because Old GM’s influence was more than minor. In connection with Ally Financial’s conversion into a C corporation, each unit of each class of Ally Financial Membership Interests was converted into shares of capital stock of Ally Financial with substantially the same rights and preferences as such

 

17


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Membership Interests. On July 10, 2009 we acquired the investment in Ally Financial’s common and preferred stocks in connection with the 363 Sale.

In December 2009 the UST made a capital contribution to Ally Financial of $3.8 billion consisting of the purchase of trust preferred securities of $2.5 billion and mandatory convertible preferred securities of $1.3 billion. The UST also exchanged all of its existing Ally Financial non-convertible preferred stock for newly issued mandatory convertible preferred securities valued at $5.3 billion. In addition the UST converted mandatory convertible preferred securities valued at $3.0 billion into Ally Financial common stock. These actions resulted in the dilution of our investment in Ally Financial common stock from 24.5% to 16.6%, of which 6.7% is held directly and 9.9% is held in an independent trust. Pursuant to previous commitments to reduce influence over and ownership in Ally Financial, the trustee, who is independent of us, has the sole authority to vote and is required to dispose of our 9.9% ownership in Ally Financial common stock held in the trust by December 24, 2011.

The following tables summarize financial information of Ally Financial for the period Ally Financial was accounted for as a nonconsolidated affiliate (dollars in millions):

 

     Six Months
Ended
June 30, 2009
 

Consolidated Statement of Loss

  

Total financing revenue and other interest income

   $ 6,916   

Total interest expense

   $ 3,936   

Depreciation expense on operating lease assets

   $ 2,113   

Gain on extinguishment of debt

   $ 657   

Total other revenue

   $ 2,117   

Total noninterest expense

   $ 3,381   

Loss from continuing operations before income tax expense

   $ (2,260

Income tax expense from continuing operations

   $ 972   

Net loss from continuing operations

   $ (3,232

Loss from discontinued operations, net of tax

   $ (1,346

Net loss

   $ (4,578
     June 30, 2009  

Condensed Consolidated Balance Sheet

  

Loans held for sale

   $ 11,440   

Total finance receivables and loans, net

   $ 87,520   

Investment in operating leases, net

   $ 21,597   

Other assets

   $ 22,932   

Total assets

   $ 181,248   

Total debt

   $ 105,175   

Accrued expenses and other liabilities

   $ 41,363   

Total liabilities

   $ 155,202   

Preferred stock held by UST

   $ 12,500   

Preferred stock

   $ 1,287   

Total equity

   $ 26,046   

 

18


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

Ally Financial – Preferred and Common Membership Interests

The following tables summarize the activity with respect to the investment in Ally Financial Common and Preferred Membership Interests for the period Ally Financial was accounted for as a nonconsolidated affiliate (dollars in millions):

 

     Predecessor  
     Ally
Financial

Common
Membership
Interests
    Ally
Financial

Preferred
Membership
Interests
 

Balance at January 1, 2009

   $ 491      $ 43   

Old GM’s proportionate share of Ally Financial’s losses

     (500       

Investment in Ally Financial Common Membership Interests

     884          

Other, primarily accumulated other comprehensive loss

     (121       
                

Balance at March 31, 2009

     754        43   
                

Old GM’s proportionate share of Ally Financial’s losses (a)

     (630     (7

Gain on disposition of Ally Financial Common Membership Interests (b)

     2,477          

Conversion of Ally Financial Common Membership Interests (b)

     (2,885       

Other, primarily accumulated other comprehensive loss

     284          
                

Balance at June 30, 2009

   $      $ 36   
                

 

(a) Due to impairment charges and Old GM’s proportionate share of Ally Financial’s losses, the carrying amount of Old GM’s investments in Ally Financial Common Membership Interests was reduced to $0. Old GM recorded its proportionate share of Ally Financial’s remaining losses to its investment in Ally Financial Preferred Membership Interests.

 

(b) Due to the exercise of the UST’s option to convert the UST Ally Financial Loan into Ally Financial Common Membership Interests, in connection with the UST Ally Financial Loan conversion, Old GM recorded a gain of $2.5 billion on disposition of Ally Financial Common Membership Interests and a $2.0 billion loss on extinguishment based on the carrying amount of the UST Ally Financial Loan and accrued interest of $0.9 billion.

Transactions with Nonconsolidated Affiliates

Nonconsolidated affiliates are involved in various aspects of the development, production and marketing of cars, trucks and parts, and we purchase component parts and vehicles from certain nonconsolidated affiliates for resale to dealers. The following tables summarize the effects of transactions with nonconsolidated affiliates, excluding transactions with Ally Financial which are disclosed in Note 23, which are not eliminated in consolidation (dollars in millions):

 

     Successor           Predecessor  
     Three Months
Ended
September 30, 2010
     Nine Months
Ended
September 30, 2010
     July 10, 2009
Through
September 30, 2009
          July 1,  2009
Through
July 9, 2009
     January 1,  2009
Through
July 9, 2009
 

Results of Operations

                 

Net sales and revenue

   $ 672       $ 2,093       $ 401       $ 29       $ 596   

Cost of sales

   $ 782       $ 2,411       $ 297       $ 32       $ 737   

Selling, general and administrative expense

   $ 1       $ 3       $ (9       $       $ (19

Interest income and other non-operating income (expense), net

   $ 2       $ 6       $ 2          $       $ (9

 

* Amounts originally reported as $289 and $276 in our 2009 Form 10-Q. Refer to Note 3.

 

19


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

     Successor  
     September 30,
2010
     December 31,
2009
 

Financial Position

     

Accounts and notes receivable, net

   $ 411       $ 771   

Accounts payable (principally trade)

   $ 616       $ 579   

 

     Successor           Predecessor  
     Nine Months
Ended
September 30, 2010
    July 10, 2009
Through
September 30, 2009
          January 1,  2009
Through
July 9, 2009
 

Cash Flows

          

Operating

   $ 547      $ 421       $ 546   

Investing

   $ (24   $ (1       $   

Financing

   $      $          $   

 

* Amount originally reported as $297 in our 2009 Form 10-Q. Refer to Note 3.

Note 8. Goodwill

The following table summarizes the changes in the carrying amount of Goodwill (dollars in millions):

 

     Successor  
     GMNA      GMIO      GME     Total  

Balance at January 1, 2010

   $ 26,409       $ 928       $ 3,335      $ 30,672   

Reporting unit reorganization

             82         (82       

Effect of foreign currency translation and other

     1         40         (157     (116
                                  

Balance at September 30, 2010

   $ 26,410       $ 1,050       $ 3,096      $ 30,556   
                                  

We recorded Goodwill of $30.5 billion upon application of fresh-start reporting. If all identifiable assets and liabilities had been recorded at fair value upon application of fresh-start reporting, no goodwill would have resulted. However, when applying fresh-start reporting, certain accounts, primarily employee benefit plan and income tax related, were recorded at amounts determined under specific U.S. GAAP rather than fair value and the difference between the U.S. GAAP and fair value amounts gave rise to goodwill, which is a residual. Our employee benefit related accounts were recorded in accordance with ASC 712, “Compensation — Nonretirement Postemployment Benefits” and ASC 715, “Compensation — Retirement Benefits” and deferred income taxes were recorded in accordance with ASC 740, “Income Taxes.” Further, we recorded valuation allowances against certain of our deferred tax assets, which under ASC 852 also resulted in Goodwill. These valuation allowances were due in part to Old GM’s history of recurring operating losses, and our projections at the 363 Sale date of continued near-term operating losses in certain jurisdictions. While the 363 Sale constituted a significant restructuring that eliminated many operating and financing costs, Old GM had undertaken significant restructurings in the past that failed to return certain jurisdictions to profitability. At the 363 Sale date, we concluded that there was significant uncertainty as to whether the restructuring actions would return these jurisdictions to sustained profitability, thereby necessitating the establishment of a valuation allowance against certain deferred tax assets. None of the goodwill from this transaction is deductible for tax purposes.

In the three months ended June 30, 2010 there were event-driven changes in circumstances within our GME reporting unit that warranted the testing of goodwill for impairment. Anticipated competitive pressure on our margins in the near- and medium-term led us to believe that the goodwill associated with our GME reporting unit may be impaired. Utilizing the best available information at June 30, 2010 we performed a step one goodwill impairment test for our GME reporting unit, and concluded that goodwill was not impaired. The fair value of our GME reporting unit was estimated to be approximately $325 million over its carrying amount. If we had not passed step one, we believe the amount of any goodwill impairment would approximate $140 million representing the net

 

20


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

decrease, from July 9, 2009 through June 30, 2010, in the fair value-to-U.S. GAAP differences attributable to those assets and liabilities that gave rise to goodwill.

We utilized a discounted cash flow methodology to estimate the fair value of our GME reporting unit. The valuation methodologies utilized were consistent with those used in our application of fresh-start reporting on July 10, 2009, as discussed in Note 2 to our consolidated financial statements included in our Form S-1, and in our 2009 annual and event driven GME impairment tests and result in Level 3 measures within the valuation hierarchy. Assumptions used in our discounted cash flow analysis that had the most significant effect on the estimated fair value of our GME reporting unit include:

 

   

Our estimated weighted-average cost of capital (WACC);

 

   

Our estimated long-term growth rates; and

 

   

Our estimate of industry sales and our market share.

We used a WACC of 22.0% that considered various factors including bond yields, risk premiums, and tax rates; a terminal value that was determined using a growth model that applied a long-term growth rate of 0.5% to our projected cash flows beyond 2015; and industry sales of 18.4 million vehicles and a market share for Opel/Vauxhall of 6.45% based on vehicle sales volume in 2010 increasing to industry sales of 22.0 million vehicles and a market share of 7.4% in 2015.

Our fair value estimate assumes the achievement of the future financial results contemplated in our forecasted cash flows, and there can be no assurance that we will realize that value. The estimates and assumptions used are subject to significant uncertainties, many of which are beyond our control, and there is no assurance that anticipated financial results will be achieved.

Note 9. Intangible Assets, net

The following table summarizes the components of Intangible assets, net (dollars in millions):

 

     Successor  
     September 30, 2010      December 31, 2009  
     Gross
Carrying
Amount
     Accumulated
Amortization
     Net
Carrying
Amount
     Gross
Carrying
Amount
     Accumulated
Amortization
     Net
Carrying
Amount
 

Amortizing intangible assets

                 

Technology and intellectual property

   $ 7,747       $ 3,191       $ 4,556       $ 7,741       $ 1,460       $ 6,281   

Brands

     5,454         184         5,270         5,508         72         5,436   

Dealer network and customer relationships

     2,179         167         2,012         2,205         67         2,138   

Favorable contracts

     529         100         429         542         39         503   

Other

     19         7         12         17         3         14   
                                                     

Total amortizing intangible assets

     15,928         3,649         12,279         16,013         1,641         14,372   

Non amortizing in-process research and development

     175                 175         175                 175   
                                                     

Total intangible assets

   $ 16,103       $ 3,649       $ 12,454       $ 16,188       $ 1,641       $ 14,547   
                                                     

The following table summarizes amortization expense related to Intangible assets, net (dollars in millions):

 

     Successor           Predecessor  
     Three Months
Ended
September 30, 2010
     Nine Months
Ended
September 30, 2010
     July 10, 2009
Through
September 30, 2009
          July 1,  2009
Through
July 9, 2009
     January 1,  2009
Through
July 9, 2009
 

Amortization expense related to intangible assets

   $ 604       $ 2,007       $ 775          $ 1       $ 44   

 

21


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

The following table summarizes estimated amortization expense related to Intangible assets, net in each of the next five fiscal years (dollars in millions):

 

     Estimated  Amortization
Expense
 

2011

   $ 1,785   

2012

   $ 1,560   

2013

   $ 1,227   

2014

   $ 611   

2015

   $ 314   

Note 10. Variable Interest Entities

Consolidated VIEs

VIEs that we do not control through a majority voting interest that are consolidated because we are or Old GM was the primary beneficiary primarily include: (1) previously divested suppliers for which we provide or Old GM provided guarantees or financial support; (2) a program announced by the UST in March 2009 to provide financial assistance to automotive suppliers (Receivables Program); (3) vehicle sales and marketing joint ventures that manufacture, market and sell vehicles in certain markets; (4) leasing special purpose entities (SPEs) which held real estate assets and related liabilities for which Old GM provided residual guarantees; and (5) an entity which manages certain private equity investments held by our and Old GM’s defined benefit plans, along with six associated general partner entities.

Certain creditors and beneficial interest holders of these VIEs have or had limited, insignificant recourse to our general credit or Old GM’s general credit. In the event that creditors or beneficial interest holders were to have such recourse to our or Old GM’s general credit, we or Old GM could be held liable for certain of the VIEs’ obligations. GM Daewoo Auto & Technology Co. (GM Daewoo), a non-wholly owned consolidated subsidiary that we control through a majority voting interest, is also a VIE because in the future it may require additional subordinated financial support. The creditors of GM Daewoo’s short-term debt of $1.1 billion, long-term debt of $798 million and current derivative liabilities of $217 million at September 30, 2010 do not have recourse to our general credit.

The following table summarizes the carrying amount of consolidated VIEs that we do not also control through a majority voting interest (dollars in millions):

 

     Successor  
     September 30, 2010 (a)(b)      December 31, 2009 (a)  

Assets

     

Cash and cash equivalents

   $ 119       $ 15   

Restricted cash

     1         191   

Accounts and notes receivable, net

     123         14   

Inventories

     90         15   

Other current assets

     20           

Property, net

     50         5   

Other assets

     40         33   
                 

Total assets

   $ 443       $ 273   
                 

Liabilities

     

Accounts payable (principally trade)

   $ 232       $ 17   

Short-term debt and current portion of long-term debt

             205   

Accrued expenses

     12         10   

Other liabilities and deferred income taxes

     52         23   
                 

Total liabilities

   $ 296       $ 255   
                 

 

22


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

(a) Amounts exclude GM Daewoo.

 

(b) Amounts at September 30, 2010 reflect the effect of our adoption of amendments to ASC 810-10 in January 2010, which resulted in the consolidation of GM Egypt. At September 30, 2010 GM Egypt had Total assets of $383 million and Total liabilities of $264 million.

The following table summarizes the amounts recorded in earnings related to consolidated VIEs that we do not also control through a majority voting interest (dollars in millions):

 

    Successor           Predecessor  
    Three Months
Ended
September 30, 2010 (a)(b)
    Nine Months
Ended
September 30, 2010 (a)(b)
    July 10, 2009
Through
September 30, 2009 (a)
          July 1,  2009
Through
July 9, 2009 (a)
    January 1,  2009
Through
July 9, 2009 (a)
 

Net sales and revenue

  $ 190      $ 560      $ 19          $ 1      $ 31   

Cost of sales

    165        452        (1         (7     (1

Selling, general and administrative expense

    9        26        8            (23     5   

Other expenses, net

           2        1            8        10   

Interest expense

    1        5        14            21        22   

Interest (income) and other non-operating (income), net

    (1     (4                         

Reorganization expenses, net

                             26        26   

Income tax expense

    2        10                            
                                           

Net income (loss)

  $ 14      $ 69      $ (3       $ (24   $ (31
                                           

 

(a) Amounts exclude GM Daewoo.

 

(b) Amounts recorded in the three and nine months ended September 30, 2010 reflect our adoption of amendments to ASC 810-10 in January 2010, which resulted in the consolidation of GM Egypt. In the three and nine months ended September 30, 2010 GM Egypt recorded Net sales and revenue of $181 million and $530 million.

GM Egypt

GM Egypt is a 31% owned automotive manufacturing organization that was previously accounted for using the equity method. GM Egypt was founded in March 1983 to assemble and manufacture vehicles in Egypt. Certain voting and other rights permit us to direct those activities of GM Egypt that most significantly affect its economic performance. In connection with our adoption of amendments to ASC 810-10, we consolidated GM Egypt in January 2010.

Receivables Program

We determined that the Receivables Program was a VIE and that we and Old GM were the primary beneficiary. At December 31, 2009 our equity contributions were $55 million and the UST had outstanding loans of $150 million to the Receivables Program. In the three months ended March 31, 2010 we repaid these loans in full. The Receivables Program was terminated in accordance with its terms in April 2010. Upon termination, we shared residual capital of $25 million in the program equally with the UST and paid a termination fee of $44 million.

Nonconsolidated VIEs

VIEs that are not consolidated because we are not or Old GM was not the primary beneficiary primarily include: (1) troubled suppliers for which we provide or Old GM provided guarantees or financial support; (2) vehicle sales and marketing joint ventures that manufacture, market and sell vehicles and related services; (3) leasing entities for which residual value guarantees were made; (4) certain research entities for which annual ongoing funding requirements exist; and (5) Ally Financial.

 

23


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

Guarantees and financial support are provided to certain current or previously divested suppliers in order to ensure that supply needs for production are not disrupted due to a supplier’s liquidity concerns or possible shutdowns. Types of financial support that we provide and Old GM provided include, but are not limited to: (1) funding in the form of a loan; (2) guarantees of the supplier’s debt or credit facilities; (3) one-time payments to fund prior losses of the supplier; (4) indemnification agreements to fund the suppliers’ future losses or obligations; (5) agreements to provide additional funding or liquidity to the supplier in the form of price increases or changes in payment terms; and (6) assisting the supplier in finding additional investors. The maximum exposure to loss related to these VIEs is not expected to be in excess of the amount of net accounts and notes receivable recorded with the suppliers and any related guarantees and loan commitments.

We have and Old GM had investments in joint ventures that manufacture, market and sell vehicles in certain markets. The majority of these joint ventures are typically self-funded and financed with no contractual terms that require us to provide future financial support. However, future funding is required for HKJV, as subsequently discussed. The maximum exposure to loss is not expected to be in excess of the carrying amount of the investments recorded in Equity in net assets of nonconsolidated affiliates, and any related capital funding requirements.

The following table summarizes the amounts recorded for nonconsolidated VIEs and the related off-balance sheet guarantees and maximum contractual exposure to loss, excluding Ally Financial, which is disclosed in Note 23 (dollars in millions):

 

     Successor  
     September 30, 2010      December 31, 2009  
     Carrying
Amount
     Maximum Exposure
to Loss (a)
     Carrying
Amount
     Maximum Exposure
to Loss (b)
 

Assets

           

Accounts and notes receivable, net

   $ 76       $ 62       $ 8       $ 8   

Equity in net assets of nonconsolidated affiliates

     280         280         96         50   

Other assets

     43         43         26         26   
                                   

Total assets

   $ 399       $ 385       $ 130       $ 84   
                                   

Liabilities

           

Accounts payable

   $ 15       $       $       $   

Accrued expenses

     22                           

Other liabilities

     212                           
                                   

Total liabilities

   $ 249       $       $       $   
                                   

Off-Balance Sheet

           

Residual value guarantees

      $          $ 32   

Loan commitments (c)

        102            115   

Other guarantees

        3            4   

Other liquidity arrangements (d)

        227              
                       

Total guarantees and liquidity arrangements

      $ 332          $ 151   
                       

 

(a) Amounts at September 30, 2010 included $134 million related to troubled suppliers.

 

(b) Amounts at December 31, 2009 included $139 million related to troubled suppliers.

 

(c) Amounts at September 30, 2010 and December 31, 2009 included undrawn loan commitments, primarily $100 million related to American Axle and Manufacturing Holdings, Inc. (American Axle).

 

(d) Amounts at September 30, 2010 included capital funding requirements, primarily an additional contingent future funding requirement of up to $223 million related to HKJV.

 

24


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

Stated contractual voting or similar rights for certain of our joint venture arrangements provide various parties with shared power over the activities that most significantly affect the economic performance of certain nonconsolidated VIEs. Such nonconsolidated VIEs are operating joint ventures located in developing international markets.

American Axle

In September 2009 we paid $110 million to American Axle, a former subsidiary and current supplier, to settle and modify existing commercial arrangements and acquire warrants to purchase 4 million shares of American Axle’s common stock. Under the new agreement, we also provided American Axle with a second lien term loan facility of up to $100 million. Additional warrants will be granted if amounts are drawn on the second lien term loan facility.

As a result of these transactions, we concluded that American Axle was a VIE for which we were not the primary beneficiary. This conclusion did not change upon our adoption of amendments to ASC 810-10 in January 2010 because we lack the power through voting or similar rights to direct those activities of American Axle that most significantly affect its economic performance. Our variable interests in American Axle include the warrants we received and the second lien term loan facility, which expose us to possible future losses depending on the financial performance of American Axle. At September 30, 2010 no amounts were outstanding under the second lien term loan facility. At September 30, 2010 our maximum contractual exposure to loss related to American Axle was $129 million, which represented the fair value of the warrants of $29 million recorded in Non-current assets and the potential exposure of $100 million related to the second lien term loan facility.

Ally Financial

We own 16.6% of Ally Financial’s common stock and preferred stock with a liquidation preference of $1.0 billion. We have previously determined that Ally Financial is a VIE as it does not have sufficient equity at risk; however, we are not the primary beneficiary. This conclusion did not change upon our adoption of amendments to ASC 810-10 in January 2010 because we lack the power through voting or similar rights to direct those activities of Ally Financial that most significantly affect its economic performance. Refer to Notes 7 and 23 for additional information on our investment in Ally Financial, our significant agreements with Ally Financial and our maximum exposure under those agreements.

Saab

In February 2010 we completed the sale of Saab and in May 2010 we completed the sale of Saab GB to Spyker Cars NV. Our primary variable interest in Saab is the preference shares that we received in connection with the sale, which have a face value of $326 million and were recorded at an estimated fair value that is insignificant. We concluded that Saab is a VIE as it does not have sufficient equity at risk. We also determined that we are not the primary beneficiary because we lack the power to direct those activities that most significantly affect its economic performance. We continue to be obligated to fund certain Saab related liabilities, primarily warranty obligations related to vehicles sold prior to the disposition of Saab. At September 30, 2010 our maximum exposure to loss related to Saab was $61 million. Refer to Note 4 for additional information on the sale of Saab.

HKJV

In December 2009 we established the HKJV operating joint venture to invest in automotive projects outside of China, initially focusing on markets in India. HKJV purchased our India Operations in February 2010. We determined that HKJV is a VIE because it will require additional subordinated financial support, and we determined that we are not the primary beneficiary because we share the power with SAIC-HK to direct those activities that most significantly affect HKJV’s economic performance. We recorded a liability of $123 million for our future capital funding commitment to HKJV and we have an additional contingent future funding requirement of up to $223 million should certain conditions be met. Refer to Note 4 for additional information on HKJV.

 

25


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

Note 11. Depreciation and Amortization

The following table summarizes depreciation and amortization, including asset impairment charges, included in Cost of sales and Selling, general and administrative expense (dollars in millions):

 

    Successor           Predecessor  
    Three Months
Ended
September 30, 2010
    Nine Months
Ended
September 30, 2010
    July 10, 2009
Through
September 30, 2009
          July 1,  2009
Through
July 9, 2009
    January 1,  2009
Through
July 9, 2009
 

Depreciation and impairment of plants and equipment

  $ 480      $ 1,490      $ 606          $ 481      $ 4,352   

Amortization and impairment of special tools

    554        1,341        394            68        2,139   

Depreciation and impairment of equipment on operating leases

    100        353        210            19        338   

Amortization of intangible assets

    604        2,007        775            1        44   
                                           

Total depreciation, amortization and asset impairment charges

  $ 1,738      $ 5,191      $ 1,985          $ 569      $ 6,873   
                                           

Old GM initiated restructuring plans prior to the 363 Sale to reduce the total number of powertrain, stamping and assembly plants and to eliminate certain brands and nameplates. As a result, Old GM recorded incremental depreciation and amortization on certain of these assets as they were expected to be utilized over a shorter period of time than their previously estimated useful lives. We record incremental depreciation and amortization for changes in useful lives subsequent to the initial determination. Old GM recorded incremental depreciation and amortization of approximately $0.3 billion and $2.8 billion in the periods July 1, 2009 through July 9, 2009 and January 1, 2009 through July  9, 2009.

Note 12. Restricted Cash and Marketable Securities

Cash and marketable securities subject to contractual restrictions and not readily available are classified as Restricted cash and marketable securities. Restricted cash and marketable securities are invested in accordance with the terms of the underlying agreements. Funds previously held in the UST Credit Agreement (as subsequently defined in Note 13) and currently held in the Canadian Health Care Trust (HCT) escrow and other accounts have been invested in government securities and money market funds in accordance with the terms of the escrow agreements. At September 30, 2010 and December 31, 2009 we held securities of $1.5 billion and $14.2 billion that were classified as Restricted cash and marketable securities. Refer to Note 19 for additional information. The following table summarizes the components of Restricted cash and marketable securities (dollars in millions):

 

     Successor  
     September 30, 2010      December 31, 2009  

Current

     

UST Credit Agreement (a)

   $       $ 12,475   

Canadian Health Care Trust (b)

     978         955   

Receivables Program (c)

             187   

Securitization trusts

     11         191   

Pre-funding disbursements

     104         94   

Other (d)

     230         15   
                 

Total current restricted cash and marketable securities

     1,323         13,917   

Non-current (e)

     

Collateral for insurance related activities

     629         658   

Other non-current (d)

     679         831   
                 

Total restricted cash and marketable securities

   $ 2,631       $ 15,406   
                 

 

26


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

(a) In April 2010 the UST Loans and Canadian Loan (as subsequently defined in Note 13) were paid in full and funds remaining in escrow were no longer subject to restrictions.

 

(b) Under the terms of an escrow agreement between GMCL, the EDC and an escrow agent, GMCL established a CAD $1.0 billion (equivalent to $893 million when entered into) escrow to fund certain of its healthcare obligations.

 

(c) The Receivables Program provided financial assistance to automotive suppliers by guaranteeing or purchasing certain receivables payable by us. In April 2010 the Receivable Program was terminated in accordance with its terms.

 

(d) Includes amounts related to various letters of credit, deposits, escrows and other cash collateral requirements.

 

(e) Non-current restricted cash and marketable securities is recorded in Other assets.

Note 13. Short-Term and Long-Term Debt

The following table summarizes the components of short-term and long-term debt (dollars in millions):

 

     Successor  
     September 30, 2010      December 31, 2009  

Short-Term

     

UST Loans (a)

   $       $ 5,712   

Canadian Loan (a)

             1,233   

VEBA Notes (b)

     2,960           

GM Daewoo Revolving Credit Facility (d)

     986         1,179   

Short-term debt — third parties

     47         296   

Short-term debt — related parties (c)

     1,141         1,077   

Current portion of long-term debt

     487         724   
                 

Total short-term debt and current portion of long-term debt

     5,621         10,221   

Long-Term

     

VEBA Notes

             2,825   

Other long-term debt

     2,945         2,737   
                 

Total debt

   $ 8,566       $ 15,783   
                 

Available under GM Daewoo Revolving Credit Facility (d)

   $ 219       $   

Available under other line of credit agreements (e)

   $ 1,100       $ 618   

 

(a) In April 2010 the UST Loans and Canadian Loan were paid in full.

 

(b) In October 2010 the VEBA Notes were paid in full.

 

(c) Dealer financing from Ally Financial for dealerships we own.

 

(d) During the three months ending December 31, 2010 we expect to convert any remaining amounts outstanding under this credit facility to a term loan.

 

(e) Commitment fees are paid on credit facilities at rates negotiated in each agreement. Amounts paid and expensed for these commitment fees are insignificant.

New Secured Revolving Credit Facility

On October 27, 2010 we entered into a five-year, $5.0 billion secured revolving credit facility, which includes a $500 million letter of credit sub-facility. Refer to Note 27 for additional information on the secured revolving credit facility.

 

27


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

UST Loans and UST Loan Agreement

As previously disclosed in our Form S-1, Old GM received total proceeds of $19.4 billion from the UST under the UST Loan Agreement entered into on December 31, 2008. In connection with the Chapter 11 Proceedings, Old GM obtained additional funding of $33.3 billion from the UST and EDC under its DIP Facility. From these proceeds, there was no deposit remaining in escrow at September 30, 2010.

On July 10, 2009 we entered into the UST Credit Agreement and assumed debt of $7.1 billion (UST Loans) maturing on July 10, 2015 which Old GM incurred under its DIP Facility. Immediately after entering into the UST Credit Agreement, we made a partial repayment due to the termination of the U.S. government sponsored warranty program, reducing the UST Loans principal balance to $6.7 billion. In March 2010 and December 2009 we made quarterly payments of $1.0 billion on the UST Loans. In April 2010 we repaid the full outstanding amount of $4.7 billion using funds from our escrow account.

While we have repaid the UST Loans in full, certain of the covenants in the UST Credit Agreement and the executive compensation and corporate governance provisions of Section 111 of the Emergency Stabilization Act of 2008, as amended (the EESA), including the Interim Final Rule implementing Section 111 (the Interim Final Rule), remain in effect until the earlier to occur of the UST ceasing to own direct or indirect equity interests in us or our ceasing to be a recipient of Exceptional Financial Assistance, as determined pursuant to the Interim Final Rule, and impose obligations on us with respect to, among other things, certain expense policies, executive privileges and compensation requirements.

The following table summarizes interest expense and interest paid on the UST Loans, the loans under the UST Loan Agreement (UST Loan Facility) and the DIP Facility (dollars in millions):

 

     Successor           Predecessor  
     Nine Months
Ended
September 30, 2010 (a)
     July 10, 2009
Through
September 30, 2009 (a)
          July 1,  2009
Through
July 9, 2009 (b)
     January 1,  2009
Through
July 9, 2009 (b)
 

Interest expense

   $ 117       $ 108          $ 670       $ 4,006   

Interest paid

   $ 206       $          $       $ 144   

 

(a) Interest expense and interest paid on UST Loans.

 

(b) Interest expense and interest paid on the UST Loan Facility and the DIP Facility.

VEBA Notes

In connection with the 363 Sale, we entered into the VEBA Note Agreement and issued VEBA Notes of $2.5 billion to the UAW Retiree Medical Benefits Trust (New VEBA). The VEBA Notes have an implied interest rate of 9.0% per annum. The VEBA Notes and accrued interest are contractually scheduled to be repaid in three equal installments of $1.4 billion on July 15 of 2013, 2015 and 2017; however, we may prepay the VEBA Notes at any time prior to maturity.

The obligations under the VEBA Note Agreement are secured by substantially all of our U.S. assets, subject to certain exceptions, including our equity interests in certain of our foreign subsidiaries, limited in most cases to 65% of the equity interests of the pledged foreign subsidiaries due to tax considerations.

At September 30, 2010 we have classified the VEBA Notes as short-term debt in the amount of $3.0 billion (including unamortized premium of $201 million).

On October 26, 2010 we repaid in full the outstanding amount (together with accreted interest thereon) of the VEBA Notes of $2.8 billion. Refer to Note 27 for additional information.

 

28


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

The following table summarizes interest expense on the VEBA Notes (dollars in millions):

 

     Successor  
     Three Months
Ended
September 30, 2010
     Nine Months
Ended
September 30, 2010
 

Interest expense

   $ 52       $ 151   

Canadian Loan Agreement and EDC Loan Facility

As previously disclosed in our Form S-1, on July 10, 2009 we entered into the Canadian Loan Agreement and assumed a CAD $1.5 billion (equivalent to $1.3 billion when entered into) term loan (Canadian Loan) maturing on July 10, 2015. In March 2010 and December 2009 we made quarterly payments of $194 million and $192 million on the Canadian Loan. In April 2010 GMCL repaid in full the outstanding amount of the Canadian Loan of $1.1 billion.

The following table summarizes interest expense and interest paid on the Canadian Loan and the EDC Loan Facility (dollars in millions):

 

     Successor           Predecessor  
     Nine Months
Ended
September 30, 2010 (a)
     July 10, 2009
Through
September 30, 2009 (a)
          July 1,  2009
Through
July 9, 2009 (b)
     January 1,  2009
Through
July 9, 2009 (b)
 

Interest expense

   $ 26       $ 22          $ 111       $ 173   

Interest paid

   $ 26       $ 22          $       $ 6   

 

(a) Interest expense and interest paid on the Canadian Loan.

 

(b) Interest expense and interest paid on the EDC Loan Facility.

GM Daewoo Revolving Credit Facility

At September 30, 2010 GM Daewoo’s revolving credit facility was our largest credit facility. The borrowings under this Korean Won denominated facility are secured by substantially all of GM Daewoo’s property, plant, and equipment located in Korea. Amounts borrowed under this facility accrue interest based on the Korean Won denominated 91-day certificate of deposit rate. The average interest rate on outstanding amounts under this facility at September 30, 2010 was 5.5%. The facility is used by GM Daewoo for general corporate purposes, including working capital needs. We expect to convert any remaining amounts outstanding under this credit facility to a term-loan during the three months ending December 31, 2010. Prior to conversion into a term-loan, amounts borrowed under this facility are classified as short-term debt. These amounts will be repaid in four equal annual installments beginning in November 2011 and ending in October 2014. In April 2010 GM Daewoo repaid KRW 250 billion (equivalent to $225 million at the time of payment) of its KRW 1.4 trillion (equivalent of $1.2 billion at the time of payment) revolving credit facility.

German Revolving Bridge Facility

In May 2009 Old GM entered into a revolving bridge facility with the German government and certain German states (German Facility) with a total commitment of up to Euro 1.5 billion (equivalent to $2.1 billion when entered into). In November 2009 the debt was paid in full and extinguished.

 

29


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

The following table summarizes interest expense and interest paid on the German Facility, including amortization of related discounts (dollars in millions):

 

     Successor           Predecessor  
     July 10, 2009
Through
September 30, 2009
          July 1,  2009
Through
July 9, 2009
     January 1,  2009
Through
July 9, 2009
 

Interest expense

   $ 23          $ 2       $ 5   

Interest paid

   $ 12          $       $   

Contingent Convertible Debt

Old GM adopted the provisions of ASC 470-20, “Debt with Conversion and Other Options” (ASC 470-20) in January 2009, with retrospective application to prior periods. At July 9, 2009 Old GM’s contingent convertible debt outstanding was $7.4 billion, comprised of principal of $7.9 billion and unamortized discounts of $551 million. Upon adoption of ASC 470-20, the effective interest rate on Old GM’s outstanding contingent convertible debt ranged from 7.0% to 7.9%. In connection with the 363 Sale, MLC retained the contingent convertible debt.

The following table summarizes the components of Interest expense related to contingent convertible debt (dollars in millions):

 

     Predecessor  
     July 1,  2009
Through
July 9, 2009
     January 1,  2009
Through
July 9, 2009
 

Interest accrued or paid (a)

   $       $ 176   

Amortization of discounts

             51   
                 

Interest expense

   $       $ 227   
                 

 

(a) Contractual interest expense not accrued or recorded on pre-petition debt as a result of the Chapter 11 Proceedings totaled $10 million and $44 million in the periods July 1, 2009 through July 9, 2009 and January 1, 2009 through July 9, 2009.

Other Debt

In March 2009 Old GM entered into an agreement to amend its $1.5 billion U.S. term loan. Because the terms of the amended U.S. term loan were substantially different than the original terms, primarily due to the revised borrowing rate, Old GM accounted for the amendment as a debt extinguishment. As a result, Old GM recorded the amended U.S. term loan at fair value and recorded a gain on the extinguishment of the original loan facility of $906 million in the period January 1, 2009 through July 9, 2009.

In connection with the Chapter 11 Proceedings, Old GM’s $4.5 billion secured revolving credit facility, $1.5 billion U.S. term loan and $125 million secured credit facility were paid in full on June 30, 2009. Old GM recorded a loss of $958 million in Reorganization gains, net related to the extinguishments of the debt primarily due to the face value of the U.S. term loan exceeding the carrying amount.

Contractual interest expense not accrued or recorded on pre-petition debt was $46 million and $200 million in the periods July 1, 2009 through July 9, 2009 and January 1, 2009 through July 9, 2009 (includes contractual interest expense related to contingent convertible debt of $10 million and $44 million).

Technical Defaults and Covenant Violations

Several of our loan facilities include clauses that may be breached by a change in control, a bankruptcy or failure to maintain certain financial metric limits. The Chapter 11 Proceedings and the change in control as a result of the 363 Sale triggered technical defaults in certain loans for which we have assumed the obligations. The total amount of the two loan facilities in technical default for

 

30


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

these reasons was $203 million. In July 2010 we executed an agreement with the lenders of the $150 million loan facility, which resulted in early repayment of the loan. Additionally, in July 2010 we executed an amendment with the lender of the second loan facility of $53 million which cured the default.

Two of our loan facilities had financial covenant violations at December 31, 2009 related to exceeding financial ratios limiting the amount of debt held by the subsidiaries. One of these violations was cured within the 30 day cure period through the combination of an equity injection and the capitalization of intercompany loans. In May 2010 we obtained a waiver and cured the remaining financial covenant violation on a loan facility of $70 million related to our 50% owned powertrain subsidiary in Italy.

Note 14. Product Warranty Liability

The following table summarizes activity for policy, product warranty, recall campaigns and certified used vehicle warranty liabilities (dollars in millions):

 

     Successor           Predecessor  
     Nine Months
Ended
September 30, 2010
    July 10, 2009
Through
September 30, 2009
          January 1,  2009
Through
July 9, 2009
 

Beginning balance

   $ 7,030      $ 7,193          $ 8,491   

Warranties issued and assumed in period

     2,312        545            1,069   

Payments

     (2,680     (905         (1,851

Adjustments to pre-existing warranties

     100        89            (153

Effect of foreign currency translation

     (6     140            63   

Liability adjustment, net due to the deconsolidation of Saab

                       (77
                            

Ending balance

     6,756        7,062            7,542   

Effect of application of fresh-start reporting

                       (349
                            

Ending balance including effect of application of fresh-start reporting

   $ 6,756      $ 7,062          $ 7,193   
                            

Note 15. Pensions and Other Postretirement Benefits

The following tables summarize the components of pension and other postretirement benefits (OPEB) (income) expense (dollars in millions):

 

     U.S. Plans
Pension Benefits
 
     Successor           Predecessor  
     Three Months
Ended
September 30, 2010
    Nine Months
Ended
September 30, 2010
    July 10, 2009
Through
September 30, 2009
          July 1,  2009
Through
July 9, 2009
    January 1,  2009
Through
July 9, 2009
 

Components of (Income) expense

              

Service cost

   $ 128      $ 387      $ 119          $ 10      $ 243   

Interest cost

     1,338        4,014        1,235            143        3,077   

Expected return on plan assets

     (1,639     (4,914     (1,437         (169     (3,810

Amortization of prior service cost (credit)

            (1                18        429   

Amortization of transition obligation

                                       

Recognized net actuarial loss

                              39        715   

Curtailments, settlements and other

                   209            2        1,720   
                                            

Net periodic pension (income) expense

   $ (173   $ (514   $ 126          $ 43      $ 2,374   
                                            

 

31


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

     Non-U.S. Plans  
     Pension Benefits  
     Successor           Predecessor  
     Three Months
Ended
September 30, 2010
    Nine Months
Ended
September 30, 2010
    July 10, 2009
Through
September 30, 2009
          July 1,  2009
Through
July 9, 2009
    January 1,  2009
Through
July 9, 2009
 

Components of (Income) expense

              

Service cost

   $ 98      $ 287      $ 73          $ 4      $ 155   

Interest cost

     287        883        280            30        596   

Expected return on plan assets

     (242     (733     (203         (22     (364

Amortization of prior service cost (credit)

            (1                (5     (12

Amortization of transition obligation

                              1        2   

Recognized net actuarial loss

     7        12                   11        193   

Curtailments, settlements and other

     (9     30        3            5        97   
                                            

Net periodic pension expense

   $ 141      $ 478      $ 153          $ 24      $ 667   
                                            

 

     U.S. Plans  
     Other Benefits  
     Successor           Predecessor  
     Three Months
Ended
September 30, 2010
     Nine Months
Ended
September 30, 2010
     July 10, 2009
Through
September 30, 2009
          July 1,  2009
Through
July 9, 2009
    January 1,  2009
Through
July 9, 2009
 

Components of (Income) expense

                

Service cost

   $ 8       $ 18       $ 28          $ 3      $ 69   

Interest cost

     72         216         412            74        1,615   

Expected return on plan assets

                     (197         (21     (444

Amortization of prior service cost (credit)

                                (59     (1,051

Amortization of transition obligation

                                         

Recognized net actuarial loss

                                3        32   

Curtailments, settlements and other

                     10            2        21   
                                              

Net periodic OPEB expense

   $ 80       $ 234       $ 253          $ 2      $ 242   
                                              

 

     Non-U.S. Plans  
     Other Benefits  
     Successor           Predecessor  
     Three Months
Ended
September 30, 2010
    Nine Months
Ended
September 30, 2010
    July 10, 2009
Through
September 30, 2009
          July 1,  2009
Through
July 9, 2009
    January 1,  2009
Through
July 9, 2009
 

Components of (Income) expense

              

Service cost

   $ 6      $ 22      $ 7          $ 1      $ 12   

Interest cost

     51        149        43            4        102   

Expected return on plan assets

                                       

Amortization of prior service cost (credit)

     (2     (6                (4     (63

Amortization of transition obligation

                                       

Recognized net actuarial loss

                              2        23   

Curtailments, settlements and other

            3                          (123
                                            

Net periodic OPEB (income) expense

   $ 55      $ 168      $ 50          $ 3      $ (49
                                            

 

32


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

Significant Plan Amendments, Benefit Modifications and Related Events

Three and Nine Months Ended September 30, 2010

Remeasurements

In September 2010 the U.S. hourly defined benefit pension plan was amended to create a legally separate new defined benefit pension plan for the participants who are covered by the cash balance benefit formula. The underlying benefits offered to plan participants were unchanged. The remeasurement used a discount rate of 4.56% and increased the projected benefit obligations (PBO) by $5.8 billion. A discount rate of 5.49% was used at December 31, 2009. Additionally, higher than expected asset returns partially offset the discount rate effects and the remeasurement resulted in an increase of $2.4 billion to Pensions and a pretax increase to Other comprehensive loss. The remeasurement of the plan did not affect net periodic pension expense for the three and nine months ended September 30, 2010.

In July 2010 GMIO remeasured a pension plan due to a partial plan settlement resulting in a gain of $18 million.