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EX-32.2 - CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 - General Motors Codex322.htm
EX-10.1 - THE GENERAL MOTORS COMPANY DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS - General Motors Codex101.htm
EX-32.1 - CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 - General Motors Codex321.htm
EX-31.2 - SECTION 302 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER - General Motors Codex312.htm
EX-31.1 - SECTION 302 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER - General Motors Codex311.htm
EX-10.2 - REDEMPTION AGREEMENT, DATED AS OF MARCH 31, 2011 - General Motors Codex102.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 March 31, 2011

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 001-34960

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 corporate 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 May 2, 2011, the number of shares outstanding of common stock was 1,560,786,154 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 Income Statements      1   
  Condensed Consolidated Balance Sheets      2   
  Condensed Consolidated Statements of Equity      3   
  Condensed Consolidated Statements of Cash Flows      4   
 

Notes to Condensed Consolidated Financial Statements

     5   
 

Note 1.

   Nature of Operations      5   
 

Note 2.

   Basis of Presentation and Recent Accounting Standards      5   
 

Note 3.

   Acquisition and Disposals of Businesses      8   
 

Note 4.

   Marketable Securities      9   
 

Note 5.

   Finance Receivables, net      10   
 

Note 6.

   Securitizations      12   
 

Note 7.

   Inventories      12   
 

Note 8.

   Equity in Net Assets of Nonconsolidated Affiliates      12   
 

Note 9.

   Goodwill      15   
 

Note 10.

   Intangible Assets, net      16   
 

Note 11.

   Variable Interest Entities      17   
 

Note 12.

   Depreciation and Amortization      21   
 

Note 13.

   Debt      21   
 

Note 14

   Product Warranty Liability      22   
 

Note 15.

   Pensions and Other Postretirement Benefits      23   
 

Note 16.

   Derivative Financial Instruments and Risk Management      23   
 

Note 17.

   Commitments and Contingencies      27   
 

Note 18.

   Income Taxes      30   
 

Note 19.

   Fair Value Measurements      31   
 

Note 20.

   Restructuring and Other Initiatives      37   
 

Note 21.

   Impairments      40   
 

Note 22.

   Earnings Per Share      41   
 

Note 23.

   Stock Incentive Plans      43   
 

Note 24.

   Transactions with Ally Financial      45   
 

Note 25.

   Segment Reporting      47   

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      50   

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk      84   

Item 4.

  Controls and Procedures      84   
     Part II — Other Information   

Item 1.

  Legal Proceedings      86   

Item 1A.

  Risk Factors      86   

Item 6.

  Exhibits      88   
  Signature      89   


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

 

PART I

Item 1. Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED INCOME STATEMENTS

(In millions, except per share amounts)

(Unaudited)

 

     Three Months
Ended
March  31, 2011
    Three Months
Ended
March  31, 2010
 

Net sales and revenue

    

Automotive sales

   $ 35,879      $ 31,422   

GM Financial revenue

     295          

Other automotive revenue

     20        54   
                

Total net sales and revenue

     36,194        31,476   
                

Costs and expenses

    

Automotive cost of sales

     31,685        27,553   

GM Financial operating and other expenses

     165          

Automotive selling, general and administrative expense

     2,994        2,684   

Other automotive expenses, net

     6        46   
                

Total costs and expenses

     34,850        30,283   

Goodwill impairment charges

     395          
                

Operating income

     949        1,193   

Automotive interest expense

     149        337   

Interest income and other non-operating income, net

     604        447   

Loss on extinguishment of debt

            (1
                

Income before income taxes and equity income

     1,404        1,302   

Income tax expense

     137        509   

Equity income, net of tax and gain on disposal of investments

     2,144        403   
                

Net income

     3,411        1,196   

Net income attributable to noncontrolling interests

     (45     (128
                

Net income attributable to stockholders

     3,366        1,068   

Less: Cumulative dividends on preferred stock

     215        203   
                

Net income attributable to common stockholders

   $ 3,151      $ 865   
                

Earnings per share

    

Basic

    

Net income attributable to common stockholders

   $ 2.09      $ 0.58   

Weighted-average common shares outstanding

     1,504        1,500   

Diluted

    

Net income attributable to common stockholders

   $ 1.77      $ 0.55   

Weighted-average common shares outstanding

     1,817        1,567   

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)

 

    March 31, 2011     December 31, 2010  
ASSETS    

Automotive Current Assets

   

Cash and cash equivalents

  $ 20,975      $ 21,061   

Marketable securities

    8,618        5,555   
               

Total cash, cash equivalents and marketable securities

    29,593        26,616   

Accounts and notes receivable (net of allowance of $336 and $252)

    12,990        8,699   

Inventories

    13,991        12,125   

Equipment on operating leases, net

    3,099        2,568   

Other current assets and deferred income taxes

    3,276        3,045   
               

Total current assets

    62,949        53,053   

Automotive Non-current Assets

   

Equity in net assets of nonconsolidated affiliates

    6,937        8,529   

Property, net

    19,944        19,235   

Goodwill

    28,752        30,513   

Intangible assets, net

    11,488        11,882   

Other assets and deferred income taxes

    4,249        4,754   
               

Total non-current assets

    71,370        74,913   
               

Total Automotive Assets

    134,319        127,966   

GM Financial Assets

   

Finance receivables, net (including gross finance receivables transferred to special purpose entities of $8,603 and $7,156)

    8,276        8,197   

Restricted cash

    1,201        1,090   

Goodwill

    1,265        1,265   

Other assets (including leased assets transferred to special purpose entities of $188 at March 31, 2011)

    785        380   
               

Total GM Financial Assets

    11,527        10,932   
               

Total Assets

  $ 145,846      $ 138,898   
               
LIABILITIES AND EQUITY    

Automotive Current Liabilities

   

Accounts payable (principally trade)

  $ 24,739      $ 21,497   

Short-term debt and current portion of long-term debt (including debt at GM Korea of $117 and $70; Note 11)

    1,743        1,616   

Accrued liabilities (including derivative liabilities at GM Korea of $49 and $111; Note 11)

    25,200        24,044   
               

Total current liabilities

    51,682        47,157   

Automotive Non-current Liabilities

   

Long-term debt (including certain debt at GM Korea of $8 and $835; Note 11)

    3,268        3,014   

Postretirement benefits other than pensions

    9,396        9,294   

Pensions

    21,660        21,894   

Other liabilities and deferred income taxes

    12,851        13,021   
               

Total non-current liabilities

    47,175        47,223   
               

Total Automotive Liabilities

    98,857        94,380   

GM Financial Liabilities

   

Securitization notes payable

    6,061        6,128   

Credit facilities

    1,412        832   

Other liabilities

    430        399   
               

Total GM Financial Liabilities

    7,903        7,359   
               

Total Liabilities

    106,760        101,739   

Commitments and contingencies (Note 17)

   

Equity

   

Preferred stock, $0.01 par value, 2,000,000,000 shares authorized:

   

Series A (276,101,695 shares issued and outstanding (each with a $25.00 liquidation preference) at March 31, 2011 and December 31, 2010)

    5,536        5,536   

Series B (100,000,000 shares issued and outstanding (each with a $50.00 liquidation preference) at March 31, 2011 and December 31, 2010)

    4,855        4,855   

Common stock, $0.01 par value (5,000,000,000 shares authorized, 1,560,755,989 and 1,500,149,928 shares issued and outstanding at March 31, 2011 and 1,500,136,998 shares issued and outstanding at December 31, 2010)

    15        15   

Capital surplus (principally additional paid-in capital)

    24,347        24,257   

Retained earnings

    1,951        266   

Accumulated other comprehensive income

    1,494        1,251   
               

Total stockholders’ equity

    38,198        36,180   

Noncontrolling interests

    888        979   
               

Total Equity

    39,086        37,159   
               

Total Liabilities and Equity

  $ 145,846      $ 138,898   
               

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

(In millions)

(Unaudited)

 

                Common Stockholders’                    
    Series A
Preferred
Stock
    Series B
Preferred
Stock
    Common
Stock
    Capital
Surplus
    Retained
Earnings
(Accumulated
Deficit)
    Accumulated
Other
Comprehensive
Income
    Noncontrolling
Interests
    Comprehensive
Income
    Total
Equity
 

Balance December 31, 2009

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

Net income

                                1,068               128      $ 1,196        1,196   

Other comprehensive income

                 

Foreign currency translation adjustments

                                       27        (12     15     

Cash flow hedging gains, net

                                       14               14     

Unrealized loss on securities

                                       (4            (4  

Defined benefit plans

                 

Net prior service cost

                                       (2            (2  

Net actuarial gain

                                       90               90     
                                   

Other comprehensive income

                                       125        (12     113        113   
                       

Comprehensive income

                $ 1,309     
                       

Effects of adoption of amendments to ASC 810-10 regarding variable interest entities

                                              76          76   

Cash dividends paid on Series A Preferred Stock

                                (203                     (203

Dividends declared or paid to noncontrolling interests

                                              (52       (52

Other

                                              (34       (34
                                                                 

Balance March 31, 2010

  $      $      $ 15      $ 24,040      $ (3,529   $ 1,713      $ 814        $ 23,053   
                                                                 

Balance December 31, 2010

  $ 5,536      $ 4,855      $ 15      $ 24,257      $ 266      $ 1,251      $ 979        $ 37,159   

Effect of adoption of amendments in ASU 2010-28 regarding goodwill impairment (Notes 2 and 9)

                                (1,466                     (1,466

Net income

                                3,366               45      $ 3,411        3,411   

Other comprehensive     income

                 

Foreign currency translation adjustments

                                       23        11        34     

Cash flow hedging gains, net

                                       13               13     

Defined benefit plans

                 

Net prior service cost

                                       2               2     

Net actuarial gain

                                       254               254     

Sale of interest in nonconsolidated affiliate

                                       (42            (42  
                                   

Other comprehensive income

                                       250        11        261        261   
                       

Comprehensive income

                                                   $ 3,672     
                       

Purchase of noncontrolling interest shares

                         41               (7     (134       (100

Stock based compensation

                         49                               49   

Cash dividends on Series A Preferred Stock and cumulative dividends on Series B Preferred Stock

                                (215                     (215

Dividends declared or paid to noncontrolling interests

                                              (18       (18

Other

                                              5          5   
                                                                 

Balance March 31, 2011

  $ 5,536      $ 4,855      $ 15      $ 24,347      $ 1,951      $ 1,494      $ 888        $ 39,086   
                                                                 

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 CASH FLOWS

(In millions)

(Unaudited)

 

     Three Months
Ended
March 31, 2011
    Three Months
Ended
March 31, 2010
 

Net cash provided by (used in) operating activities — Automotive

   $ (596   $ 1,850   

Net cash provided by operating activities — GM Financial

     219          
                

Net cash provided by (used in) operating activities

     (377     1,850   

Cash flows from investing activities

    

Expenditures for property

     (1,322     (840

Available-for-sale marketable securities, acquisitions

     (7,287       

Trading marketable securities, acquisitions

     (157     (88

Available-for-sale marketable securities, liquidations

     4,262          

Trading marketable securities, liquidations

     159        76   

Acquisition of companies, net of cash acquired

     (1     (50

Operating leases, liquidations

     3        134   

Proceeds from sale of business units/investments, net

     4,805        (103

Increase in restricted cash and marketable securities

     (85     (389

Decrease in restricted cash and marketable securities

     222        1,630   

Other investing activities

     39        81   
                

Net cash provided by investing activities — Automotive

     638        451   
                

Purchase of receivables

     (1,135       

Principal collections and recoveries on receivables

     954          

Other investing activities

     (418       
                

Net cash used in investing activities — GM Financial

     (599       
                

Net cash provided by investing activities

     39        451   

Cash flows from financing activities

    

Net increase (decrease) in short-term debt

     119        (80

Proceeds from issuance of debt (original maturities greater than three months)

     144        138   

Payments on debt (original maturities greater than three months)

     (253     (1,593

Payments to acquire noncontrolling interest

     (100       

Dividends paid

     (221     (203
                

Net cash used in financing activities — Automotive

     (311     (1,738
                

Proceeds from issuance of debt (original maturities greater than three months)

     1,997          

Payments on debt (original maturities greater than three months)

     (1,461       

Other financing activities

     (18       
                

Net cash provided by financing activities — GM Financial

     518          
                

Net cash provided by (used in) financing activities

     207        (1,738
                

Effect of exchange rate changes on cash and cash equivalents Automotive

     183        (303
                

Net increase (decrease) in cash and cash equivalents — Automotive

     (86     260   
                

Net increase in cash and cash equivalents — GM Financial

     138          

Cash and cash equivalents reclassified as assets held for sale — Automotive

            371   
                

Cash and cash equivalents at beginning of period — Automotive

     21,061        22,679   
                

Cash and cash equivalents at beginning of period — GM Financial

     195          
                

Cash and cash equivalents at end of period — Automotive

   $ 20,975      $ 23,310   
                

Cash and cash equivalents at end of period — GM Financial

   $ 333      $   
                

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

 

4


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of Operations

General Motors Company is sometimes referred to in this Quarterly Report on Form 10-Q as “we,” “our,” “us,” “ourselves,” the “Company,” “General Motors” or “GM.” 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.” On July 10, 2009 in connection with the 363 Sale relating to Old GM’s Chapter 11 bankruptcy proceedings, 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 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.

We design, build and sell cars, trucks and parts worldwide. We also conduct finance operations through General Motors Financial Company, Inc. (GM Financial). These financing operations consist principally of financing automobile purchases and leases for retail customers.

We analyze the results of our business through our five segments, which are GM North America (GMNA), GM Europe (GME), GM International Operations (GMIO), GM South America (GMSA) and GM Financial. Nonsegment operations are classified as Corporate. Corporate includes investments in Ally Financial, Inc. (Ally Financial), certain centrally recorded income and costs, such as interest, income taxes and corporate expenditures and certain nonsegment specific revenues and expenses.

We own a 9.9% equity interest in Ally Financial, which is accounted for as a cost method investment because we are not able to exercise significant influence. Ally Financial provides a broad range of financial services, including consumer vehicle financing, automotive dealership and other commercial financing, residential mortgage services and automobile service contracts.

Note 2. Basis of Presentation and Recent Accounting Standards

The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (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, composed 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 Annual Report on Form 10-K for the year ended December 31, 2010 (2010 Form 10-K) as filed with the SEC.

Principles of Consolidation

The condensed consolidated financial statements include our accounts and those of our subsidiaries that we control due to ownership of a majority voting interest. We continually evaluate our involvement with variable interest entities (VIEs) to determine whether we have variable interests and are the primary beneficiary of the VIE. When this criteria is met, we are required to consolidate the VIE. Our share of earnings or losses of nonconsolidated affiliates is included in our consolidated operating results using the equity method of accounting when we are able to exercise significant influence over the operating and financial decisions of the affiliate. We use the cost method of accounting if we are not able to exercise significant influence over the operating and financial decisions of the affiliate. All intercompany balances and transactions have been eliminated in consolidation.

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 amounts of assets and liabilities at the reporting date and the 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.

 

5


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

GM Financial

The assets and liabilities of GM Financial, our automotive finance operations, are presented on a non-classified basis. The amounts presented for GM Financial have been adjusted to include the effect of our tax attributes on GM Financial’s deferred tax positions and provision for income taxes since the date of acquisition, which are not applicable to GM Financial on a stand-alone basis, and to eliminate the effect of transactions between GM Financial and the other members of the consolidated group. Accordingly, the amounts presented will differ from those presented by GM Financial on a stand-alone basis.

Prior Period Financial Statements Conformed to Current Period Presentation

In the three months ended March 31, 2011 we have recorded foreign currency exchange gains and losses on debt as non-operating items. This is a change from prior period presentations in which foreign currency exchange gains and losses on debt were recorded in Automotive cost of sales. We have reclassified the prior periods of General Motors Company to conform to our current presentation. The effects of this reclassification will decrease Automotive cost of sales and Interest income and other non-operating income, net by $34 million from July 10, 2009 through December 31, 2009 and $38 million in the quarter ended March 31, 2010 while increasing Automotive cost of sales and Interest income and other non-operating income, net by $107 million for the year ended December 31, 2010.

Venezuelan Exchange Regulations

Our Venezuelan subsidiaries changed their functional currency from Bolivar Fuerte (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. Pursuant to the official devaluation of the Venezuelan currency and establishment of the dual fixed exchange rates (essential rate of BsF 2.60 to $1.00 and nonessential rate of BsF 4.30 to $1.00) 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 Automotive cost of sales in the three months ended March 31, 2010.

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 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.

In December 2010 another official devaluation of the Venezuelan currency was announced that eliminated the essential rate effective January 1, 2011. The devaluation did not have an effect on the 2010 consolidated financial statements, however, it will affect results of operations in subsequent years because our Venezuelan subsidiaries will no longer realize gains that result from favorable foreign currency exchanges processed by CADIVI at the essential rate for the requests submitted subsequent to the devaluation date.

The following tables provide financial information for our Venezuelan subsidiaries at March 31, 2011 and December 31, 2010 and for the three months ended March 31, 2011 and 2010 which include amounts receivable from and payable to, and transactions with, affiliated entities (dollars in millions):

 

     March 31, 2011      December 31, 2010  

Total automotive assets (a)

   $ 1,320       $ 1,322   

Total automotive liabilities (b)

   $ 980       $ 985   
     Three Months
Ended
March 31, 2011
     Three Months
Ended
March 31, 2010
 

Total net sales and revenue

   $ 372       $ 245   

Net income attributable to stockholders (c)

   $ 2       $ 106   

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

(a) Includes BsF denominated and non-BsF denominated monetary assets of $271 million and $639 million at March 31, 2011 and $393 million and $527 million at December 31, 2010.

 

(b) Includes BsF denominated and non-BsF denominated monetary liabilities of $528 million and $452 million at March 31, 2011 and $661 million and $324 million at December 31, 2010.

 

(c) In the three months ended March 31, 2010 a gain of $119 million is included related to the devaluation of the BsF in January 2010 which was offset by a $144 million loss recorded by U.S. entities on BsF denominated assets, which is not included in the Net income attributable to stockholders reported above. Included in the three months ended March 31, 2011 and 2010 are gains of $5 million and $15 million due to favorable foreign currency exchanges that were processed by CADIVI at the essential rate. The gain in the three months ended March 31, 2011 is related to requests for foreign currency exchanges submitted to CADIVI prior to the devaluation effective January 1, 2011.

The total amount pending government approval for settlement at March 31, 2011 and December 31, 2010 was BsF 2.4 billion (equivalent to $554 million) and BsF 1.9 billion (equivalent to $432 million), for which some requests have been pending from 2007. The amounts outstanding at March 31, 2011 and December 31, 2010 include payables to affiliated entities of $364 million and $263 million, each of which include dividends payable of $144 million.

Significant Non-Cash Activity—Investing Cash Flows

The following table summarizes accrued expenditures for property. These amounts are excluded from Expenditures for property within the investing section of the condensed consolidated statements of cash flows because no cash has been expended (dollars in millions):

 

     Three Months
Ended
March 31, 2011
     Three Months
Ended
March 31, 2010
 

Accrued expenditures for property

   $ 2,172       $ 1,874   

Correction of Presentation in Condensed Consolidated Financial Statements

As disclosed in previous filings, 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 consider the effects of these errors to be immaterial. 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 — Automotive

   $ 1,746      $ 104      $ 1,850   

Net cash provided by (used in) investing activities — Automotive

     646        (195     451   

Net cash provided by (used in) financing activities — Automotive

     (1,688     (50     (1,738

Effect of exchange rate changes on cash and cash equivalents — Automotive

     (53     (250     (303

Cash and cash equivalents reclassified as assets held for sale — Automotive

     (20     391        371   

Cash and cash equivalents at beginning of period — Automotive

     22,679               22,679   
                        

Cash and cash equivalents at end of period — Automotive

   $ 23,310      $      $ 23,310   
                        

In addition, we have corrected certain amounts disclosed in the notes to the consolidated financial statements included in our 2010 Form 10-K and our condensed consolidated financial statements included in our Quarterly Report for the period ended March 31, 2010. 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.

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Recently Adopted Accounting Principles

In September 2009 the FASB issued Accounting Standard 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. Specifically, the overall consideration is allocated to each deliverable by establishing a selling price for individual deliverables based on a hierarchy of evidence, involving 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 was effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The adoption of ASU 2009-13 did not have a material effect on the condensed consolidated financial statements.

In December 2010 the FASB issued ASU 2010-28, “Intangibles — Goodwill and Other: When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts” (ASU 2010-28). The amendments in ASU 2010-28 modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. ASU 2010-28 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. Any resulting goodwill impairment is recorded as a cumulative-effect adjustment to beginning Retained earnings at the date of adoption with future impairments recorded to earnings. Refer to Note 9 for additional information on the adoption of ASU 2010-28 and its effect on the condensed consolidated financial statements.

Note 3. Acquisition and Disposals of Businesses

Acquisition of Additional GM Korea Interests

On March 31, 2011 we completed the acquisition of an additional 6.9% interest in GM Korea Company, formerly GM Daewoo Auto & Technology Co. (GM Korea) for a cash purchase price of $100 million. The transaction was accounted for as an equity transaction as we retain the controlling financial interest in GM Korea. As a result of this transaction we reduced our equity attributable to Noncontrolling interests by $134 million and our Accumulated other comprehensive income by $7 million, and increased our Capital surplus by $41 million. After completing this transaction, we now own 77.0% of the outstanding shares of GM Korea.

Saab Sale

In February 2010 we completed the sale of Saab Automobile AB (Saab) and in May 2010 we completed the sale of Saab Automobile 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 debtor-in-possession financing that we provided to Saab during 2009. In the three months March 31, 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.

Acquisition of GM Financial

In October 2010 we acquired 100% of the outstanding equity interests of GM Financial (formerly AmeriCredit Corp.), an automotive finance company, for cash of $3.5 billion. The results of GM Financial are included in our results beginning October 1, 2010. The following table summarizes the actual amounts of revenue and earnings of GM Financial included in our condensed consolidated financial statements for the three months ended March 31, 2011 and the supplemental pro forma revenue and earnings of the combined entity as if the acquisition had occurred on January 1, 2010 (dollars in millions):

 

     GM Financial
Amounts Included In
Results For
Three Months
Ended March 31, 2011
     Pro  Forma-Combined
Three Months Ended
March 31, 2010
 

Total net sales and revenue

   $ 295       $ 31,824   

Net income attributable to stockholders

   $ 59       $ 1,188   

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Note 4. Marketable Securities

Automotive

The following table summarizes information regarding marketable securities (dollars in millions):

 

     March 31, 2011      December 31, 2010  
     Cost      Unrealized      Fair
Value
     Cost      Unrealized      Fair
Value
 
        Gains      Losses            Gains      Losses     

Marketable Securities

                       

Available-for-sale securities

                       

United States government and agencies

   $ 5,834       $ 1       $ 1       $ 5,834       $ 2,023       $       $       $ 2,023   

Sovereign debt

     623                         623         773                         773   

Certificates of deposit

     329                         329         954                         954   

Corporate debt

     1,699                 2         1,697         1,670         1         2         1,669   
                                                                       

Total available-for-sale securities

     8,485         1         3         8,483         5,420         1         2         5,419   

Total trading securities

     132         5         2         135         129         10         3         136   
                                                                       

Total marketable securities

   $ 8,617       $ 6       $ 5       $ 8,618       $ 5,549       $ 11       $ 5       $ 5,555   
                                                                       

We maintained $89 million of the above trading securities as compensating balances to support letters of credit of $74 million at March 31, 2011 and December 31, 2010. 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 securities classified as Cash and cash equivalents and restricted cash and marketable securities (dollars in millions):

 

     March 31, 2011      December 31, 2010  

Securities classified as cash and cash equivalents

   $ 13,898       $ 12,964   

Securities classified as restricted cash and marketable securities (a)

   $ 1,481       $ 1,474   

 

(a) Securities classified as restricted cash and marketable securities are recorded in Other current assets and deferred income taxes.

Refer to Note 19 for classes of securities underlying Cash and cash equivalents and restricted cash and marketable securities.

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):

 

     Three Months
Ended
March 31, 2011
     Three Months
Ended
March 31, 2010
 

Sales proceeds

   $ 117       $   

Realized gains

   $       $   

Realized losses

   $ 1       $   

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

The following table summarizes the fair value of investments classified as available-for-sale securities by contractual maturity at March 31, 2011 (dollars in millions):

 

     Amortized Cost      Fair Value  

Due in one year or less

   $ 7,789       $ 7,789   

Due after one year through five years

     696         694   
                 

Total contractual maturities of available-for-sale securities

   $ 8,485       $ 8,483   
                 

Note 5. Finance Receivables, net

Automotive Financing

The following table summarizes the components of Finance receivables, net (dollars in millions):

 

     March 31, 2011     December 31, 2010  

Pre-acquisition finance receivables

   $ 6,745      $ 7,724   

Post-acquisition finance receivables

     2,005        924   
                

Total finance receivables

     8,750        8,648   

Purchase price premium

     355        423   

Less non-accretable discount on pre-acquisition finance receivables

     (764     (848

Less allowance for loan losses on post-acquisition receivables

     (65     (26
                

Total finance receivables, net

   $ 8,276      $ 8,197   
                

The following table summarizes activity for finance receivables (dollars in millions):

 

     Three Months
Ended
March 31, 2011
 

Balance at beginning of period

   $ 8,648   

Loans purchased

     1,138   

Charge-offs

     (184

Principal collections and other

     (852
        

Balance at end of period

   $ 8,750   
        

Finance contracts are purchased by GM Financial from automobile dealers without recourse, and accordingly, the dealer has no liability to GM Financial if the consumer defaults on the contract. Finance receivables are collateralized by vehicle titles and GM Financial has the right to repossess the vehicle in the event the consumer defaults on the payment terms of the contract.

At March 31, 2011 and December 31, 2010 the accrual of finance charge income has been suspended on delinquent finance receivables of $355 million and $491 million.

The following table summarizes activity for purchase price premium (dollars in millions):

 

     Three Months
Ended
March 31, 2011
 

Balance at beginning of period

   $ 423   

Amortization of premium

     (68
        

Balance at end of period

   $ 355   
        

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

The following table summarizes activity for non-accretable discount (dollars in millions):

 

     Three Months
Ended
March 31, 2011
 

Balance at beginning of period

   $ 848   

Recoveries

     98   

Charge-offs

     (182
        

Balance at end of period

   $ 764   
        

The following table summarizes activity for the allowance for loan losses (dollars in millions):

 

     Three Months
Ended
March 31, 2011
 

Balance at beginning of period

   $ 26   

Provision for loan losses

     39   

Recoveries

     2   

Charge-offs

     (2
        

Balance at end of period

   $ 65   
        

Credit Quality

Credit bureau scores, generally referred to as FICO scores, are determined during GM Financial’s automotive loan origination process. The following table summarizes the credit risk profile of finance receivables by FICO score band, determined at origination (dollars in millions):

 

     March 31, 2011      December 31, 2010  

FICO score less than 540

   $ 1,477       $ 1,328   

FICO score 540 to 599

     3,551         3,396   

FICO score 600 to 659

     2,681         2,758   

FICO score 660 and greater

     1,041         1,166   
                 

Total finance receivables

   $ 8,750       $ 8,648   
                 

Delinquency

The following summarizes finance receivables more than 30 days delinquent, but not yet in repossession, and in repossession, but not yet charged-off (dollars in millions):

 

     March 31, 2011      December 31, 2010  
     Amount      Percent      Amount      Percent  

Delinquent contracts

           

31 to 60 days

   $ 333         3.8%       $ 535         6.2%   

Greater-than-60 days

     135         1.5%         212         2.4%   
                                   

Total finance receivables more than 30 days delinquent

     468         5.3%         747         8.6%   

In repossession

     26         0.3%         28         0.3%   
                                   

Total finance receivables more than 30 days delinquent and in repossession

   $ 494         5.6%       $ 775         8.9%   
                                   

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

An account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date such payment was contractually due. Delinquencies may vary from period to period based upon the average age of the portfolio, seasonality within the calendar year and economic factors.

Note 6. Securitizations

Automotive Financing

The following table summarizes securitization activity and cash flows from special purpose entities (SPEs) used for securitizations (dollars in millions):

 

     Three Months
Ended
March 31, 2011
 

Receivables securitized

   $ 849   

Net proceeds from securitization

   $ 800   

Servicing fees

   $ 49   

Distributions from trusts

   $ 143   

GM Financial retains servicing responsibilities for receivables transferred to certain SPEs. At March 31, 2011 and December 31, 2010 GM Financial serviced finance receivables that have been transferred to certain SPEs of $7.0 billion and $7.2 billion.

Note 7. Inventories

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

 

     March 31, 2011      December 31, 2010  

Productive material, work in process and supplies

   $ 6,367       $ 5,487   

Finished product, including service parts

     7,624         6,638   
                 

Total inventories

   $ 13,991       $ 12,125   
                 

Note 8. Equity in Net Assets of Nonconsolidated Affiliates

Automotive

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.

The following table summarizes the components of Equity income, net of tax and gain on disposal of investments (dollars in millions):

 

     Three Months
Ended
March 31, 2011
    Three Months
Ended
March 31, 2010
 

China JVs

   $ 448      $ 349   

New Delphi (including gain on disposition)

     1,727        35   

Others

     (31     19   
                

Total equity income, net of tax and gain on disposal of investments

   $ 2,144      $ 403   
                

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Sale of New Delphi

In March 2011 we sold our Class A Membership Interests in Delphi Automotive LLP (New Delphi) to New Delphi for $3.8 billion. The Class A Membership Interests sold represented 100% of our direct and indirect interests in New Delphi and 100% of New Delphi’s Class A Membership Interests issued and outstanding. The sale terminated any direct and indirect obligation to loan New Delphi up to $500 million under a term loan facility established in October 2009 when New Delphi was created and the Class A Membership Interests were issued. New Delphi had not borrowed under this loan facility. We recorded a gain of $1.6 billion related to the sale in Equity income, net of tax and gain on disposal of investments in the three months ended March 31, 2011. Our existing supply contracts with New Delphi were not affected by this transaction.

Impairment of Investment in HKJV

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 (GM India), part of our GMIO segment to HKJV, in exchange for a promissory note due in 2013. The amount due under the promissory note may be partially reduced, or increased, based on GM India’s cumulative earnings before interest and taxes (EBIT) for the three year period ending December 31, 2012. In connection with the sale we recorded net consideration of $185 million and an insignificant gain. The sale transaction resulted in a loss of control and the deconsolidation of GM India on February 1, 2010. Accordingly, we removed the assets and liabilities of GM India 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 recorded a corresponding liability to reflect our obligation to provide additional capital.

In March 2011 there was a change in the local tax regulations which significantly extended the period of time over which GM India will receive certain value added tax based investment incentives. The delay in recovery of these incentives significantly affected GM India’s cash flow and EBIT forecasts, resulting in a decrease in the fair value of HKJV. The fair value of our investment in HKJV at March 31, 2011 was determined to be $112 million compared to a carrying amount of $151 million. The loss in value was considered to be other than temporary and, therefore, we recorded an impairment charge of $39 million in the three months ended March 31, 2011. In addition, we recorded other charges totaling $67 million related to our investment in the HKJV in the three months ended March 31, 2011.

Investment in China JVs

The following table summarizes our ownership interests in our Chinese joint ventures, collectively referred to as China JVs:

 

     Ownership Interest  
     Three Months
Ended
March 31, 2011
     Three Months
Ended
March 31, 2010
 

Shanghai General Motors Co. Ltd. (SGM) (a)

     49%         49%   

Shanghai GM (Shenyang) Norsom Motor Co., Ltd. (SGM Norsom)

     25%         25%   

Shanghai GM Dong Yue Motors Co., Ltd. (SGM DY)

     25%         25%   

Shanghai GM Dong Yue Powertrain (SGM DYPT)

     25%         25%   

SAIC-GM-Wuling Automobile Co., Ltd. (SGMW)

     44%         34%   

FAW-GM Light Duty Commercial Vehicle, Ltd. (FAW-GM)

     50%         50%   

Pan Asia Technical Automotive Center Co., Ltd. (PATAC)

     50%         50%   

Shanghai OnStar Telematics Co., Ltd. (Shanghai OnStar)

     50%         50%   

Shanghai Chengxin Used Car Operation and Management Co., Ltd. (Used Car JV)

     33%         33%   

 

(a) Ownership interest in SGM was 49% in the period February 1, 2010 through March 31, 2010 and 50% in the month of January 2010.

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Sales and income of our China JVs are not consolidated into our financial statements; rather, our proportionate share of the earnings of each joint venture is reflected as Equity income, net of tax and gain on disposal of investments.

SGM is a joint venture established by Shanghai Automotive Industry Corporation (SAIC) (51%) and us (49%) in 1997. SGM has interests in three other joint ventures in China — SGM Norsom, SGM DY and 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.

In February 2010 we sold a 1% ownership interest in SGM to SAIC-HK, reducing our ownership interest to 49%. The sale of the 1% ownership interest to 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 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 November 2010 we purchased an additional 10% interest in SGMW from the Liuzhou Wuling Motors Co., Ltd. and Liuzhou Mini Vehicles Factory, collectively the Wuling Group, for cash of $52 million plus an agreement to provide technical services to the Wuling Group for a period of three years. As a result of this transaction, we own 44%, SAIC owns 50.1% and certain Liuzhou investors own 5.9% of the outstanding stock of SGMW.

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, which are not eliminated in consolidation (dollars in millions):

 

     Three Months
Ended
March  31, 2011
    Three Months
Ended
March  31, 2010
 

Results of Operations

    

Automotive sales

   $ 835      $ 779

Automotive purchases, net

   $ 792      $ 615

Automotive selling, general and administrative expense

   $ 8      $ (2

Automotive interest expense

   $ 5      $ 3   

Automotive interest income and other non-operating income (expense), net

   $ (2   $ 2

 

* Amounts originally reported as $430, $752 and $(4) in our Quarterly Report on Form 10-Q for the three months ended March 31, 2010. Refer to Note 2.

 

     March 31, 2011      December 31, 2010  

Financial Position

     

Accounts and notes receivable, net

   $ 1,662       $ 1,618   

Accounts payable (principally trade)

   $ 249       $ 641   

Deferred revenue and customer deposits

   $ 84       $ 9   

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

     Three Months
Ended
March  31, 2011
     Three Months
Ended
March  31, 2010
 

Cash Flows

     

Operating

   $ 63       $ 14

Investing

   $       $ (18

Financing

   $       $   

 

* Amount originally reported as $(197) in our Quarterly Report on Form 10-Q for the three months ended March 31, 2010. Refer to Note 2.

Note 9. Goodwill

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

 

     GMNA      GME     GMIO      GMSA      Total
Automotive
    GM
Financial
     Total  

Balance at January 1, 2011

   $ 26,394       $ 3,053      $ 901       $ 165       $ 30,513      $ 1,265       $ 31,778   

Effect of adoption of ASU 2010-28

             (1,466                     (1,466             (1,466

Impairment charges

             (395                     (395             (395

Effect of foreign currency translation and other

             74        23         3         100                100   
                                                            

Balance at March 31, 2011

   $ 26,394       $ 1,266      $ 924       $ 168       $ 28,752      $ 1,265       $ 30,017   
                                                            

Accumulated impairment charges

   $       $ (1,861   $       $       $ (1,861   $       $ (1,861

We adopted the provisions of ASU 2010-28 on January 1, 2011. GME has a negative carrying amount and despite the fair value of GME’s equity being greater than its carrying amount, we performed Step 2 of the goodwill impairment testing analysis. The adoption of ASU 2010-28 resulted in the recognition of a cumulative-effect adjustment to beginning Retained earnings of $1.5 billion for our GME reporting unit. In addition, because GME continued to have a negative carrying amount and it was more likely than not that a further goodwill impairment existed at March 31, 2011, an impairment charge of $395 million was recorded in Goodwill impairment charges during the three months ended March 31, 2011. Refer to Note 2 for additional information on ASU 2010-28.

The valuation methodologies utilized to perform our goodwill impairment testing for GME 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 contained in our 2010 Form 10-K, and in our 2010 annual goodwill impairment testing at October 1, 2010. The fair value measures used in our analyses were Level 3 measures. Because the fair value of goodwill can be measured only as a residual amount and cannot be determined directly, we calculated GME’s implied goodwill in the same manner that goodwill is recognized in a business combination pursuant to Accounting Standards Codification (ASC) 805 “Business Combinations” (ASC 805).

In performing our Step 2 analyses, we utilized a discounted cash flow methodology to estimate the fair values of GME at January 1, 2011 and March 31, 2011. These fair value estimates utilized a weighted-average cost of capital of 17.0% and 16.5 % at January 1, 2011 and March 31, 20011 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 and a market share for GME of 6.56% in 2011 increasing to industry sales of 22.0 million vehicles and a 7.42% market share in 2015. The fair value of property was determined based on its highest and best use utilizing a combination of the market or sales comparison approach, the cost approach and/or the income approach. The fair values of GME’s brands were determined based on a relief from royalty method and the fair value of GME’s dealer network was determined on a cost approach. Based on these fair value measures, we determined GME’s implied goodwill represents only the fair-value-to-U.S. GAAP differences attributable to those assets and liabilities that gave rise to goodwill upon application of fresh-start reporting.

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Our Step 2 analyses indicated GME’s implied goodwill was less that its recorded goodwill; therefore, goodwill was adjusted at January 1, 2011 and March 31, 2011. The adjustments to goodwill represent the net decreases, from July 10, 2009 through January 1, 2011 and from January 1, 2011 through March 31, 2011, in the fair-value-to-U.S. GAAP differences attributable to those assets and liabilities that gave rise to goodwill upon our application of fresh-start reporting. The net decreases resulted primarily from: (1) a decrease in our nonperformance risk and an improvement in our incremental borrowing rates since July 10, 2009; (2) an increase in high quality corporate bond rates utilized to measure our employee benefit plan obligations since January 1, 2011; and (3) a decrease in credit spreads between high quality corporate bond rates and market interest rates for companies with similar nonperformance risk.

Future goodwill impairments could occur within GME should the fair-value-to-U.S. GAAP differences decrease, GME continues to have a negative carrying amount, and the fair value of the GME reporting unit does not increase sufficiently to offset such decreases or such increase in fair value results in a corresponding increase in the fair value of other identifiable assets without giving rise to additional implied goodwill. The difference between these fair-value-to-U.S. GAAP differences would decrease upon an improvement in our credit rating or a decrease in credit spreads between high quality corporate bond rates and market interest rates, thus resulting in a decrease in the spread between our employee benefit related obligations under U.S. GAAP and their fair values. The fair-value-to-U.S. GAAP differences that gave rise to goodwill upon our application of fresh-start reporting within GME also included deferred tax asset valuation allowances. Similarly, a decrease would also occur upon reversal of our deferred tax asset valuation allowances within GME. Should the fair-value-to-U.S. GAAP differences decrease for these reasons, without an increase in the fair value of the GME reporting unit sufficient to offset such decreases, the implied goodwill balance will decline and future goodwill impairments would occur and may be material. Any declines would have a negative effect on our earnings and would be included in Goodwill impairment charges. Future goodwill impairments could also occur within our other reporting units, including GMNA, should we first fail Step 1 of the goodwill impairment testing analysis and the fair-value-to-U.S. GAAP differences noted above also decrease.

We believe future goodwill impairment charges could occur in 2011 related to GME because GME has a negative carrying amount and it is possible: (1) a decrease in the credit spreads between high quality corporate bond rates and market interest rates for companies with similar nonperformance risk could occur and/or (2) a decrease in our nonperformance risk or improvement in our credit rating could occur.

Note 10. Intangible Assets, net

The following table summarizes the components of intangible assets (dollars in millions):

 

     March 31, 2011      December 31, 2010  
     Gross
Carrying
Amount
     Accumulated
Amortization
     Net
Carrying
Amount
     Gross
Carrying
Amount
     Accumulated
Amortization
     Net
Carrying
Amount
 

Intangibles

                 

Technology and intellectual property

   $ 7,762       $ 4,066       $ 3,696       $ 7,751       $ 3,650       $ 4,101   

Brands

     5,491         261         5,230         5,439         222         5,217   

Dealer network and customer relationships

     2,222         234         1,988         2,172         199         1,973   

Favorable contracts

     530         140         390         526         120         406   

Other

     19         10         9         19         9         10   
                                                     

Total amortizing intangible assets

     16,024         4,711         11,313         15,907         4,200         11,707   

Non amortizing in-process research and development

     175                 175         175                 175   
                                                     

Total intangible assets

   $ 16,199       $ 4,711       $ 11,488       $ 16,082       $ 4,200       $ 11,882   
                                                     

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

The following table summarizes amortization expense related to intangible assets (dollars in millions):

 

     Three Months
Ended
March 31, 2011
     Three Months
Ended
March 31, 2010
 

Amortization expense related to intangible assets

   $ 501       $ 736   

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

 

     Estimated
Amortization

Expense
 

2012

   $ 1,561   

2013

   $ 1,228   

2014

   $ 612   

2015

   $ 314   

2016

   $ 314   

Note 11. Variable Interest Entities

Consolidated VIEs

Automotive

VIEs that we do not control through a majority voting interest that are consolidated because we are the primary beneficiary primarily include certain vehicles sales and marketing joint ventures, the most significant of which is GM Egypt, and certain other automotive or financial support entities.

Liabilities recognized as a result of consolidating VIEs generally do not represent claims to us and assets recognized generally are for the benefit of the VIE operations and cannot be used to satisfy our obligations. GM Korea, 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 Korea’s short-term debt of $117 million and $70 million, current derivative liabilities of $49 million and $111 million and long-term debt of $8 million and $835 million at March 31, 2011 and December 31, 2010 do not have recourse to our general credit. In February 2011 we provided a guarantee to Korean Development Bank, a minority shareholder in GM Korea, to redeem GM Korea’s preferred shares should GM Korea not have sufficient legally distributable earnings. This guarantee decreased the amount of long-term debt which did not have recourse to our general credit in the three months ended March 31, 2011.

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

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

 

     March 31, 2011      December 31, 2010  

Assets

     

Cash and cash equivalents

   $ 133       $ 145   

Restricted cash and marketable securities

     1         1   

Accounts and notes receivable, net

     50         121   

Inventories

     108         108   

Other current assets

     13         14   

Property, net

     40         44   

Other assets

     51         48   
                 

Total assets

   $ 396       $ 481   
                 

Liabilities

     

Accounts payable (principally trade)

   $ 151       $ 226   

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

             5   

Accrued liabilities

     18         34   

Other liabilities

     50         42   
                 

Total liabilities

   $ 219       $ 307   
                 

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

 

     Three Months
Ended
March 31, 2011
     Three Months
Ended
March 31, 2010
 

Total net sales and revenue

   $ 110       $ 173   

Automotive cost of sales

     99         134   

Automotive selling, general and administrative expense

     7         11   

Other automotive expenses, net

     2         1   

Automotive interest expense

     1         3   

Interest income and other non-operating income, net

     2         1   

Income tax expense

             3   
                 

Net income

   $ 3       $ 22   
                 

Automotive Financing

GM Financial finances its loan and lease origination volume through the use of credit facilities and securitization trusts that issue asset-backed securities to investors. GM Financial retains an interest in these credit facilities and securitization trusts which are structured without recourse.

GM Financial’s continuing involvement with the credit facilities and securitization trusts includes servicing loans and leases held by the SPEs and holding a residual interest in the SPE. The SPEs are considered VIEs because they do not have sufficient equity at risk, and are consolidated because GM Financial is the primary beneficiary and has the power over those activities that most significantly affect the economic performance of the SPEs, and has an obligation to absorb losses or the right to receive benefits from the SPEs which are potentially significant.

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

GM Financial is not required to provide any additional financial support to its sponsored credit facilities and securitization SPEs. The finance receivables, leased assets and other assets held by these subsidiaries are not available to our creditors or creditors of our other subsidiaries.

Refer to Notes 5, 6 and 13 for additional information on GM Financial’s involvement with the SPEs and disclosures related to the amounts held by the consolidated SPEs as of the balance sheet dates.

Nonconsolidated VIEs

Automotive

VIEs that are not consolidated because we are not the primary beneficiary primarily include certain vehicle sales and marketing joint ventures and other automotive or financial support entities, including American Axle and Manufacturing Holdings, Inc. (American Axle), Ally Financial, Saab and HKJV.

Variable interests in nonconsolidated VIEs include guarantees and financial support 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. 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. Investments in joint ventures that manufacture, market and sell vehicles in certain markets are typically self-funded and financed with no contractual terms that require us to provide future financial support. 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 in any related capital funding requirements.

The following table summarizes the amounts recorded for nonconsolidated VIEs and the related off-balance sheet guarantees and maximum exposure to loss, excluding Ally Financial that is disclosed in Note 24 (dollars in millions):

 

     March 31, 2011      December 31, 2010  
     Carrying
Amount
     Maximum
Exposure

to Loss
     Carrying
Amount
     Maximum
Exposure

to Loss
 

Assets

           

Accounts and notes receivable, net

   $ 3       $ 3       $ 108       $ 108   

Equity in net assets of nonconsolidated affiliates

     235         233         274         274   

Other assets

                     60         59   
                                   

Total assets

   $ 238       $ 236       $ 442       $ 441   
                                   

Liabilities

           

Accounts payable (principally trade)

   $       $       $ 1       $   

Other liabilities

     185                 44           
                                   

Total liabilities

   $ 185       $       $ 45       $   
                                   

Off-Balance Sheet

           

Loan commitments (a)

      $ 115          $ 100   

Other guarantees

        2            3   

Other liquidity arrangements (b)

        231            223   
                       

Total guarantees and liquidity arrangements

      $ 348          $ 326   
                       

 

 

(a) Amounts at March 31, 2011 and December 31, 2010 included undrawn loan commitments, primarily $100 million related to American Axle.

 

(b) Amounts at March 31, 2011 and December 31, 2010 included capital funding requirements, primarily an additional contingent future funding requirement of up to $231 million and $223 million related to HKJV.

 

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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

We concluded that American Axle was a VIE for which we were not the primary beneficiary and we currently lack the power through voting or similar rights to direct those activities of American Axle that most significantly affect its economic performance. Our variable interest in American Axle is a second lien term loan facility in which American Axle can borrow up to $100 million. Warrants to purchase American Axle common stock will be granted if amounts are drawn on the second lien term loan facility. At March 31, 2011 no amounts were outstanding under the second lien term loan facility. Refer to Note 16 for additional information on previously granted and sold American Axle warrants.

Ally Financial

We own 9.9% of Ally Financial’s common stock. Ally Financial is a VIE as it does not have sufficient equity at risk; however, we are not the primary beneficiary and we currently 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 19 and 24 for additional information on Ally Financial, including our investment, sale of our Ally Financial preferred stock in March 2011 and our maximum exposure under agreements with Ally Financial.

Saab

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. Refer to Note 3 for additional information on the sale of Saab.

HKJV

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.

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Note 12. Depreciation and Amortization

Automotive

The following table summarizes depreciation and amortization, including asset impairment charges, included in Automotive cost of sales, Automotive selling, general and administrative expense and Other automotive expenses, net (dollars in millions):

 

     Three Months
Ended
March 31, 2011
     Three Months
Ended
March 31, 2010
 

Depreciation and impairment of plants and equipment

   $ 499       $ 555   

Amortization and impairment of special tools

     453         394   

Depreciation and impairment of equipment on operating leases

     109         118   

Amortization of intangible assets

     501         736   
                 

Total depreciation, amortization and asset impairment charges

   $ 1,562       $ 1,803   
                 

Note 13. Debt

Automotive Financing

Credit Facilities

The following table summarizes amounts outstanding under GM Financial credit facilities (dollars in millions):

 

     March 31, 2011      December 31, 2010  

Syndicated warehouse facility

   $ 827       $ 278   

Medium-term note facility

     439         490   

Lease warehouse facility

     95           

Bank funding facilities

     51         64   
                 

Total credit facilities

   $ 1,412       $ 832   
                 

The following table summarizes further details regarding terms and availability of GM Financial credit facilities at March 31, 2011 (dollars in millions):

 

     Facility
Amount
     Advances
Outstanding
     Assets
Pledged
     Restricted
Cash
Pledged (a)
 

Syndicated warehouse facility (b)

   $ 2,000       $ 827       $ 1,091       $ 22   

Lease warehouse facility (c)

   $ 600         95         188           

Medium-term note facility (d)

        439         478         85   

Bank funding facilities (e)

        51                   
                             
      $ 1,412       $ 1,757       $ 107   
                             

 

(a) These amounts do not include cash collected on finance receivables pledged of $45 million which is included in GM Financial Restricted cash at March 31, 2011.

 

(b) In February 2011 GM Financial extended the maturity date of the syndicated warehouse facility to May 2012 and increased the borrowing capacity to $2.0 billion from $1.3 billion.

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

(c) In January 2011 GM Financial entered into a lease warehouse facility for lease originations in the U.S. Borrowings on the facility are collateralized by leased assets.

 

(d) The revolving period under this facility has ended and the outstanding debt balance will be repaid over time based on the amortization of the receivables pledged until October 2016 when any remaining amount outstanding will be due and payable.

 

(e) The outstanding debt balance under the bank funding facilities is secured by asset-backed securities of $53 million.

Securitization Notes Payable

Securitization notes payable represents debt issued by GM Financial in securitization transactions. Debt issuance costs are amortized over the expected term of the securitizations on an effective yield basis.

The following table summarizes Securitization notes payable at March 31, 2011 (dollars in millions):

 

Year of Transactions

  

Maturity Dates (a)

   Original
Note
Amounts
     Original
Weighted
Average
Interest
Rates
     Total
Receivables
Pledged
     Note
Balance
 

2006

   May 2013 – January 2014    $ 945 - 1,350         5.2% - 5.6%       $ 472       $ 430   

2007

   October 2013 – March 2016    $ 1,000 - 1,500         5.2% - 5.5%         1,453         1,379   

2008 (b)

   October 2014 – April 2015    $ 500 - 750         6.0% - 10.5%         790         405   

2009

   January 2016 – July 2017    $ 227 - 725         2.7% - 7.5%         630         442   

2010

   June 2016 – January 2018    $ 200 - 850         2.2% - 3.8%         2,752         2,419   

2011

   February 2017    $ 800         2.5%         807         770   

BV2005 (c)

   February 2014 – June 2014    $ 186 - 220         4.6% - 5.1%         17         17   

LB2006/LB2007 (c)

   September 2013 – January 2014    $ 486 - 500         5.0% - 5.2%         113         114   
                          
            $ 7,034         5,976   
                    

Purchase accounting premium

  

     85   
                    

Total securitization notes payable

  

   $ 6,061   
                    

 

(a) Maturity date represents final legal maturity of Securitization notes payable. Securitization notes payable are expected to be paid based on amortization of the finance receivables pledged to the trusts.

 

(b) Note balance does not include asset-backed securities of $53 million pledged to the bank funding facilities.

 

(c) Transactions relate to certain SPEs acquired by GM Financial.

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):

 

     Three Months
Ended
March 31, 2011
    Three Months
Ended
March 31, 2010
 

Balance at beginning of period

   $ 6,789      $ 7,030   

Warranties issued and assumed in period

     725        614   

Payments

     (941     (821

Adjustments to pre-existing warranties

     117        (19

Effect of foreign currency translation

     78        (34
                

Balance at end of period

   $ 6,768      $ 6,770   
                

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Note 15. Pensions and Other Postretirement Benefits

Contributions

In January 2011 we completed the previously announced voluntary contribution of 61 million shares of our common stock to our U.S. hourly and salaried pension plans. At the time of contribution, the fair value was $2.2 billion for funding purposes. This was a voluntary contribution that is above our minimum funding requirements of the pension plans. The contributed shares qualify as a plan asset for funding purposes immediately, and will qualify as a plan asset for accounting purposes when certain transfer restrictions are removed, which is expected in 2011. We are evaluating whether we will make additional voluntary contributions to our U.S. pension plans in 2011.

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

 

    U.S. Plans
Pension Benefits
    Non-U.S. Plans
Pension Benefits
    U.S. Other
Benefits
    Non-U.S.
Other Benefits
 
    Three
Months
Ended

March  31,
2011
    Three
Months

Ended
March 31,
2010
    Three
Months

Ended
March 31,
2011
    Three
Months

Ended
March 31,
2010
    Three
Months

Ended
March 31,
2011
    Three
Months
Ended
March 31,
2010
    Three
Months

Ended
March 31,
2011
    Three
Months
Ended
March 31,
2010
 

Components of (income) expense

               

Service cost

  $ 158      $ 129      $ 96      $ 96      $ 6      $ 5      $ 9      $ 8   

Interest cost

    1,229        1,338        301        301        67        72        52        49   

Expected return on plan assets

    (1,674     (1,638     (230     (245                            

Amortization of prior service credit

                                              (2     (2

Recognized net actuarial loss

                         2        1                        

Curtailments, settlements and other

                  3        (14                            
                                                               

Net periodic pension and OPEB (income) expense

  $ (287   $ (171   $ 170      $ 140      $ 74      $ 77      $ 59      $ 55   
                                                               

Significant Plan Amendments, Benefit Modifications and Related Events

In the three months ended March 31, 2011 certain pension plans in GME were remeasured as part of our Goodwill impairment analysis, resulting in a decrease of $272 million in the Pensions liability and a pre-tax increase in the net actuarial gain component of Accumulated other comprehensive income. Refer to Notes 2 and 9 for additional information on our Goodwill impairment.

Note 16. Derivative Financial Instruments and Risk Management

Automotive

Derivatives and Hedge Accounting

In accordance with our risk management policy, we enter into a variety of foreign currency exchange rate and commodity derivative contracts in connection with the management of exposure to fluctuations in foreign currency exchange rates and certain commodity prices.

Our derivative instruments consist primarily of forward contracts and options. At March 31, 2011 and December 31, 2010 no outstanding derivative contracts were designated in hedging relationships other than those derivative contracts designated in a hedging relationship by GM Financial. Refer to Note 19 for additional information on the fair value measurements of our derivative instruments.

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Counterparty Credit Risk

Derivative financial instruments contain an element of credit risk attributable to the counterparties’ ability to meet the terms of the agreements. Certain of our agreements with counterparties require, under certain circumstances, that the counterparty post collateral with us for net asset positions. Agreements are entered into with counterparties that allow the set-off of certain exposures in order to manage the risk. The following table summarizes our counterparty credit risk related to derivative positions (dollars in millions):

 

     March 31, 2011      December 31, 2010  

Collateral held from counterparties (a)

   $ 76       $ 74   

Gross derivative asset position exposed to loss (b)

   $ 85       $ 143   

Net derivative asset position exposed to loss (c)

   $ 64       $ 108   

 

(a) Related obligation recorded in Accrued liabilities.

 

(b) Represents the maximum exposure to loss on derivative asset positions calculated as the gross derivative asset position less collateral we held (excluding embedded derivatives).

 

(c) Net exposure to loss calculated as net derivative asset position for all counterparties with which we were in a net asset position, less the collateral we held (excluding embedded derivatives).

At March 31, 2011 substantially all derivative counterparty exposures were with counterparties that were rated A- or higher.

Credit Risk Related Contingent Features

Certain of our agreements with counterparties require that we provide cash collateral for net liability positions that we may have with such counterparty. At March 31, 2011 no collateral was posted related to derivative instruments, and we did not have any agreements with counterparties to derivative instruments containing covenants requiring the maintenance of certain credit rating levels or credit risk ratios that would require the posting of collateral in the event that such covenants are violated.

Fair Value of Derivatives

The following table summarizes the fair value of our derivative instruments (dollars in millions):

 

     March 31, 2011      December 31, 2010  
     Asset
Derivatives  (a)(b)
     Liability
Derivatives  (c)(d)
     Asset
Derivatives  (a)(b)
     Liability
Derivatives  (c)(d)
 

Derivative Instruments

           

Current Portion

           

Foreign currency exchange

   $ 74       $ 50       $ 80       $ 113   

Embedded foreign currency exchange

     7                           

Commodity

     87         2         93         2   
                                   

Total current portion

   $ 168       $ 52       $ 173       $ 115   
                                   

Non-Current Portion

           

Embedded foreign currency exchange

   $ 56       $       $       $   

Commodity

             7                 7   

Warrants

                     44           
                                   

Total non-current portion

   $ 56       $ 7       $ 44       $ 7   
                                   

 

(a) Current portion recorded in Other current assets and deferred income taxes.

 

(b) Non-current portion recorded in Other assets.

 

(c) Current portion recorded in Accrued liabilities.

 

(d) Non-current portion recorded in Other liabilities and deferred income taxes.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Gains and (Losses) on Derivatives

The following table summarizes gains and (losses) on derivatives recorded in earnings (dollars in millions):

 

     Three Months
Ended
March 31, 2011
    Three Months
Ended
March 31, 2010
 

Derivative Instruments

    

Foreign currency exchange

   $ (10   $ 128   

Embedded foreign currency exchange

     59          

Commodity derivatives

            (2

Warrants

     4        8   
                

Total gains (losses) recorded in interest income and other non-operating income, net

   $ 53      $ 134   
                

Commodity Notionals

The following table summarizes the notional amounts of our commodity derivative contracts (units in thousands):

 

    

Units

   March 31, 2011      December 31, 2010  

Commodity

        

Aluminum and aluminum alloy

   Metric tons      501         448   

Copper

   Metric tons      48         44   

Lead

   Metric tons      74         69   

Heating oil

   Gallons      127,092         125,160   

Palladium

   Troy ounce      470         444   

Platinum

   Troy ounce      90         91   

Electricity (embedded derivative)

   MWh      1,340         1,304   

Foreign Currency Exchange Notionals

The following table summarizes the notional amounts of our foreign currency exchange derivatives (dollars in millions):

 

     March 31, 2011      December 31, 2010  

Foreign currency exchange derivatives

   $ 5,911       $ 5,910   

Embedded foreign currency exchange derivatives

   $ 1,502       $ 1,421   

In 2010 we entered into a long-term supply agreement which provides for pricing to be partially denominated in a currency other than the functional currency of the parties to the contract. This pricing feature was determined to be an embedded derivative which we have bifurcated for valuation and accounting purposes. The fair value of this embedded derivative was $57 million at March 31, 2011 and insignificant at December 31, 2010.

Other Derivatives

In February 2011 we exercised our warrants to purchase American Axle common stock. The shares acquired upon exercise were sold in February 2011 and we received proceeds of $48 million. At December 31, 2010 the fair value of these warrants was $44 million.

 

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In connection with our investment in New Delphi, which we accounted for using the equity method, we recorded our share of New Delphi’s other comprehensive income (loss) in Accumulated other comprehensive income. In the three months ended March 31, 2011 and 2010 we recorded cash flow hedging gains of $13 million and $14 million related to our share of New Delphi’s hedging gains. In the three months ended March 31, 2011 we sold our interests in New Delphi. As a result, previously recorded cash flow hedging losses of $10 million in Accumulated other comprehensive income were reclassified to earnings and recorded in the gain on sale of New Delphi. Refer to Note 8 for additional information on the sale of New Delphi.

Automotive Financing

GM Financial is exposed to market risks arising from adverse changes in interest rates due to floating interest rate exposure on its credit facilities and on certain securitization notes payable.

The effect of derivative instruments on earnings and Accumulated other comprehensive income was insignificant for the three months ended March 31, 2011.

The following table summarizes interest rate swaps, caps and foreign currency exchange derivatives (dollars in millions):

 

     March 31, 2011      December 31, 2010  
     Notional      Fair Value      Notional      Fair Value  

Assets (a)

           

Interest rate swaps

   $ 1,005       $ 18       $ 1,227       $ 23   

Interest rate caps

     1,550         19         946         8   
                                   

Total assets

   $ 2,555       $ 37       $ 2,173       $ 31   
                                   

Liabilities (b)

           

Interest rate swaps

   $ 1,005       $ 34       $ 1,227       $ 47   

Interest rate caps

     1,466         20         832         8   

Foreign currency exchange derivatives (c)

     41         2         49         2   
                                   

Total liabilities

   $ 2,512       $ 56       $ 2,108       $ 57   
                                   

 

(a) Recorded in GM Financial Other assets.

 

(b) Recorded in GM Financial Other liabilities.

 

(c) Notional has been translated from Canadian Dollars to U.S. Dollars at the March 31, 2011 and December 31, 2010 rates.

Credit Risk Related Contingent Features

Under the terms of the above derivative financial instruments, GM Financial is required to pledge certain funds to be held in restricted cash accounts as collateral for the outstanding derivative transactions. At March 31, 2011 and December 31, 2010 these restricted cash accounts totaled $37 million and $33 million and are included in GM Financial Restricted cash.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Note 17. Commitments and Contingencies

The following tables summarize information related to commitments and contingencies (dollars in millions):

 

     March 31, 2011      December 31, 2010  
     Liability
Recorded
     Maximum
Liability  (a)
     Liability
Recorded
     Maximum
Liability  (a)
 

Guarantees (b)

           

Operating leases

   $       $ 29       $ 7       $ 59   

Ally Financial commercial loans

   $       $ 18       $       $ 17   

Supplier commitments, third party commercial loans and other obligations

   $ 5       $ 123       $       $ 119

Other product-related claims

   $ 52       $ 870       $ 50       $ 841

 

 * Amounts originally reported as $63 and $442 in our 2010 Form 10-K. Refer to Note 2.

 

(a) Calculated as future undiscounted payments.

 

(b) Excludes residual support and risk sharing programs and vehicle repurchase of obligations related to Ally Financial.

 

     March 31, 2011      December 31, 2010  
     Liability Recorded      Liability Recorded  

Environmental liability (a)

   $ 190       $ 195   

Product liability

   $ 402       $ 365   

Other litigation-related liabilities and tax administrative matters (b)

   $ 1,493       $ 1,471   

 

(a) Includes $38 million and $45 million recorded in Accrued liabilities at March 31, 2011 and December 31, 2010, and the remainder was recorded in Other liabilities and deferred income taxes.

 

(b) Consists primarily of tax related litigation and administrative matters not recorded pursuant to ASC 740, “Income Taxes” (ASC 740) as well as various non-U.S. labor related matters.

Guarantees

We have provided guarantees related to the residual value of certain operating leases. These guarantees terminate in years ranging from 2011 to 2035. Certain leases contain renewal options.

We provide payment guarantees on commercial loans made by Ally Financial and outstanding with certain third parties, such as dealers or rental car companies. These guarantees either expire in years ranging from 2012 to 2029 or are ongoing. We determined the value ascribed to the guarantees to be insignificant based on the credit worthiness of the third parties. Refer to Note 24 for additional information on guarantees that we provide to Ally Financial.

We have agreements with third parties that guarantee the fulfillment of certain suppliers’ commitments, third party commercial loans and other obligations. These guarantees expire in years ranging from 2011 to 2018 or upon the occurrence of specific events.

In some instances, certain assets of the party whose debt or performance we have guaranteed may offset, to some degree, the cost of the guarantee. The offset of certain of our payables to guaranteed parties may also offset certain guarantees, if triggered. At March 31, 2011 any proceeds we would receive from collateral were insignificant.

In connection with certain divestitures of assets or operating businesses, we have entered into agreements indemnifying certain buyers and other parties with respect to environmental conditions pertaining to real property we owned. We have provided guarantees with respect to benefits to be paid to former employees of divested businesses relating to pensions, postretirement healthcare and life

 

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insurance. We periodically enter into agreements that incorporate indemnification provisions in the normal course of business. It is not possible to estimate our maximum exposure under these indemnifications or guarantees due to the conditional nature of these obligations. No amounts have been recorded for such obligations as they are not probable or estimable at this time, and the fair value of the guarantees at issuance was insignificant.

In addition to the guarantees and indemnifying agreements mentioned previously, we periodically enter into agreements that incorporate indemnification provisions in the normal course of business. Due to the nature of these agreements, the maximum potential amount of future undiscounted payments to which we may be exposed cannot be estimated. No amounts have been recorded for such indemnities as our obligations under them are not probable or estimable at this time, and the fair value of the guarantees at issuance was insignificant.

In addition to the guarantees and indemnifying agreements previously discussed, we indemnify dealers for certain product liability related claims as subsequently discussed.

With respect to other product-related claims involving products manufactured by certain joint ventures, we believe that costs incurred are adequately covered by recorded accruals. These guarantees terminate in years ranging from 2020 to 2026.

Environmental Liability

Automotive operations, like operations of other companies engaged in similar businesses, are subject to a wide range of environmental protection laws, including laws regulating air emissions, water discharges, waste management and environmental remediation. We are in various stages of investigation or remediation for sites where contamination has been alleged. We are involved in a number of actions to remediate hazardous wastes as required by federal and state laws. Such statutes require that responsible parties fund remediation actions regardless of fault, legality of original disposal or ownership of a disposal site.

The future effect of environmental matters, including potential liabilities, is often difficult to estimate. An environmental reserve is recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. This practice is followed whether the claims are asserted or unasserted. Liabilities have been recorded for the expected costs to be paid over the periods of remediation for the applicable sites, which typically range from 5 to 30 years.

For many sites, the remediation costs and other damages for which we ultimately may be responsible may vary because of uncertainties with respect to factors such as the connection to the site or to materials there, the involvement of other potentially responsible parties, the application of laws and other standards or regulations, site conditions and the nature and scope of investigations, studies and remediation to be undertaken (including the technologies to be required and the extent, duration and success of remediation).

The final outcome of environmental matters cannot be predicted with certainty at this time. Accordingly, it is possible that the resolution of one or more environmental matters could exceed the amounts accrued in an amount that could be material to our financial condition, results of operations and cash flows. At March 31, 2011 we estimate the remediation losses could range from $150 million to $370 million.

Product Liability

With respect to product liability claims involving our and Old GM’s products, it is believed that any judgment against us for actual damages will be adequately covered by our recorded accruals and, where applicable, excess insurance coverage. Although punitive damages are claimed in some of these lawsuits, and such claims are inherently unpredictable, accruals incorporate historic experience with these types of claims. Liabilities have been recorded for the expected cost of all known product liability claims plus an estimate of the expected cost for all product liability claims that have already been incurred and are expected to be filed in the future for which we are self-insured. These amounts were recorded in Accrued liabilities.

 

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In accordance with our assumption of dealer sales and service agreements, we indemnify dealers for certain product liability related claims. Our experience related to dealer indemnification obligations where we are not a party arising from incidents prior to July 10, 2009 is limited. We monitor actual claims experience for consistency with this estimate and make periodic adjustments as appropriate. Since July 10, 2009, the volume of product liability claims against us has been less than projected. In addition, as of this time due to the relatively short period for which we have been directly responsible for such claims, we have fewer pending matters than Old GM had in the past and than we expect in the future. Based on both management judgments concerning the projected number and value of both dealer indemnification obligations and product liability claims against us, we have estimated the associated liability. We expect our product liability reserve to rise in future periods as new claims arise from incidents subsequent to July 9, 2009.

Other Litigation-Related Liability and Tax Administrative Matters

Various legal actions, governmental investigations, claims and proceedings are pending against us including matters arising out of alleged product defects, including asbestos-related claims; employment-related matters; governmental regulations relating to safety, emissions, and fuel economy; product warranties; financial services; dealer, supplier and other contractual relationships; tax-related matters not recorded pursuant to ASC 740 and environmental matters.

With regard to the litigation matters discussed in the previous paragraph, reserves have been established for matters in which it is believed that losses are probable and can be reasonably estimated, the majority of which are associated with tax-related matters not recorded pursuant to ASC 740 as well as various non-U.S. labor-related matters. Tax related matters not recorded pursuant to ASC 740 (indirect tax-related matters) are items being litigated globally pertaining to value added taxes, customs, duties, sales, property taxes and other non-income tax related tax exposures. The various non-U.S. labor-related matters include claims from current and former employees related to alleged unpaid wage, benefit, severance, and other compensation matters. Certain South American administrative proceedings are indirect tax-related and may require that we deposit funds in escrow; such escrow deposits may range from $590 million to $780 million. Some of the matters may involve compensatory, punitive, or other treble damage claims, environmental remediation programs, or sanctions, that if granted, could require us to pay damages or make other expenditures in amounts that could not be reasonably estimated at March 31, 2011. We believe that appropriate accruals have been established for such matters based on information currently available. Reserves for litigation losses are recorded in Accrued liabilities and Other liabilities and deferred income taxes. These accrued reserves represent the best estimate of amounts believed to be our liability in a range of expected losses. Litigation is inherently unpredictable, however, and unfavorable resolutions could occur. Accordingly, it is possible that an adverse outcome from such proceedings could exceed the amounts accrued in an amount that could be material to our financial condition, results of operations and cash flows in any particular reporting period.

Commencing on or about September 29, 2010, current and former hourly employees of GM Korea, our majority-owned affiliate in the Republic of Korea, filed six separate group actions in the Incheon District Court in Incheon, Korea. The cases allege that GM Korea failed to include certain allowances in its calculation of Ordinary Wages due under the Presidential Decree of the Korean Labor Standards Act. Similar cases have been brought against other large employers in the Republic of Korea. GM Korea’s accrual balance at March 31, 2011 was 122 billion Korean Won (equivalent to $110 million) in connection with these cases. At September 30, 2010 GM Korea initially recorded the accrual (70% of which was recorded in Net income attributable to stockholders, based on our ownership interest in GM Korea at that time). The current estimate of the value of plaintiffs’ claim, if allowed in full, exceeds the accrual by 447 billion Korean Won (equivalent to $404 million). GM Korea believes the claims in excess of the accrual are without merit but, given the inherent uncertainties of the litigation process and further uncertainties arising because this litigation is at its earliest stages, this amount represents the high end of the range of reasonably possible liability exposure. Both the scope of claims asserted and GM Korea’s assessment of any or all of individual claim elements may change. This accrual is included in the reserves for non-U.S. labor-related matters.

On February 12, 2010 a claim was filed in the Ontario Superior Court of Justice against General Motors of Canada Limited (GMCL) on behalf of a purported class of over 200 former Canadian GMCL dealers (the Plaintiff Dealers) which had entered into wind-down agreements with GMCL. In May 2009, in the context of the global restructuring of the business and the possibility that GMCL might be required to initiate insolvency proceedings, GMCL offered the Plaintiff Dealers the wind-down agreements to assist

 

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with their exit from the GMCL Canadian dealer network and to facilitate winding down their operations in an orderly fashion by December 31, 2009 or such other date as GMCL approved but no later than upon the expiration of the Plaintiff Dealers’ Dealer Sales and Service Agreements (DSSAs) on October 31, 2010. The Plaintiff Dealers allege that the DSSAs were wrongly terminated by GMCL and that GMCL failed to comply with certain disclosure obligations, breached its statutory duty of fair dealing and unlawfully interfered with the Plaintiff Dealers’ statutory right to associate in an attempt to coerce the Plaintiff Dealers into accepting the wind-down agreements. The Plaintiff Dealers seek damages and assert that the wind-down agreements are rescindable. The Plaintiff Dealers’ initial pleading makes reference to a claim “not exceeding” CAD $750 million, without explanation of any specific measure of damages. On March 1, 2011 the Court approved certification of a class for the purpose of deciding a number of specifically defined issues, including: (1) whether GMCL breached its obligation of “good faith” in offering the wind-down agreements; (2) whether GMCL interfered with the Plaintiff Dealers’ rights of free association; (3) whether GMCL was obligated to provide a disclosure statement and/or disclose more specific information regarding its restructuring plans in connection with proffering the wind-down agreements; and (4) assuming liability, whether the Plaintiff Dealers can recover damages in the aggregate (as opposed to proving individual damages). GMCL has sought permission to appeal the class certification decision and is vigorously defending the Plaintiff Dealer claims. At this juncture, the prospects for liability are uncertain, but because liability is not deemed probable, we have no accrual relating to this litigation. In addition, we cannot estimate the range of reasonably possible loss in the event of liability, as the case presents a variety of different legal theories, none of which GMCL believes are valid, on behalf of a large number of Plaintiff Dealers, each of which presents substantial differences in underlying facts and circumstances which GMCL believes should affect both potential liability and recoverable damages, if any, on an individual basis.

Liability Related to Contingently Issuable Shares

Under the Amended and Restated Master Sale and Purchase Agreement, as amended between us and Old GM and certain of its direct and indirect subsidiaries, we are obligated to issue additional shares of our common stock to MLC (Adjustment Shares) in the event that allowed general unsecured claims against MLC, as estimated by the U.S. Bankruptcy Court for the Southern District of New York, exceed $35.0 billion. The maximum number of Adjustment Shares issuable is 30 million shares (subject to adjustment to take into account stock dividends, stock splits and other transactions). The number of Adjustment Shares to be issued is calculated based on the extent to which estimated general unsecured claims exceed $35.0 billion with the maximum number of Adjustment Shares issued if estimated general unsecured claims total $42.0 billion or more. At March 31, 2011 and December 31, 2010 we concluded it was not probable that general unsecured claims would exceed $35.0 billion. We believe it is reasonably possible that general unsecured claims allowed against MLC will range between $32.5 billion and $36.0 billion.

GME Planned Spending Guarantee

As part of our Opel/Vauxhall restructuring plan agreed to with European labor representatives, we have committed to achieving specified milestones associated with planned spending from 2011 to 2014 on certain product programs. If we fail to accomplish the requirements set out under the agreement, we will be required to pay certain amounts up to Euro 265 million for each of those years, and/or interest on those amounts, to our employees. Certain inventory with a carrying amount of $192 million and $193 million at March 31, 2011 and December 31, 2010 was pledged as collateral under the agreement. Management has the intent and believes it has the ability to meet the requirements under the agreement.

Note 18. Income Taxes

For interim income tax reporting we estimate our annual effective tax rate and apply it to year-to-date ordinary income/loss. The tax effect of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are reported in the interim period in which they occur. Tax jurisdictions with a projected or year-to-date loss for which a tax benefit cannot be realized are excluded.

In the three months ended March 31, 2011 income tax expense of $137 million primarily resulted from tax expense attributable to entities included in our effective tax rate calculation. The recorded effective tax rate is lower than the applicable statutory tax rate, primarily due to income earned in jurisdictions for which a full valuation allowance is recorded.

 

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In the three months ended March 31, 2010 income tax expense of $509 million primarily resulted from tax expense attributable to entities included in our effective tax rate calculation and a taxable foreign currency exchange gain in Venezuela.

We file income tax returns in multiple jurisdictions and are subject to examination by taxing authorities throughout the world. We have open tax years from 2001 to 2010 with various significant tax jurisdictions. These open years contain matters that could be subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, character, timing or inclusion of revenue and expenses or the sustainability of income tax credits for a given audit cycle. In addition the global nature of our operations creates a risk that transfer pricing disputes may arise.

Based on an unfavorable Brazilian Supreme court decision rendered to an unrelated Brazilian taxpayer on a similar income tax matter, it is likely we will settle a contested income tax matter for $246 million in the next 12 months. This amount was fully reserved in a prior period.

At March 31, 2011, aside from the Brazilian matter, it is not possible to reasonably estimate the expected change to the total amount of unrecognized tax benefits in the next 12 months.

Note 19. Fair Value Measurements

Fair Value Measurements

A three-level valuation hierarchy is used for fair value measurements. The three-level valuation hierarchy is based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions based on the best evidence available. These two types of inputs create the following fair value hierarchy:

 

   

Level 1 — Quoted prices for identical instruments in active markets;

 

   

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose significant inputs are observable; and

 

   

Level 3 — Instruments whose significant inputs are unobservable.

Financial instruments are transferred in and/or out of Level 3 at the beginning of the accounting period based upon the significance of the unobservable inputs to the overall fair value measurement. Level 3 financial instruments typically include, in addition to the unobservable inputs, observable components that are validated to external sources.

Securities are classified in Level 1 when quoted prices in an active market for identical securities are available. If quoted market prices are not available, fair values of securities are determined using prices from a pricing vendor, pricing models, quoted prices of securities with similar characteristics or discounted cash flow models and are generally classified in Level 2. These prices represent non-binding quotes. U.S. government and agency securities, certificates of deposit, commercial paper and corporate debt securities are classified in Level 2. Our pricing vendor utilizes industry-standard pricing models that consider various inputs, including benchmark yields, reported trades, broker/dealer quotes, issuer spreads and benchmark securities as well as other relevant economic measures. Securities are classified in Level 3 in certain cases where there are significant unobservable inputs to the valuation in the marketplace.

We conduct an annual review of our pricing vendor. This review includes discussion and analysis of the inputs used by the pricing vendor to provide prices for the types of securities we hold. These inputs include interest rate yields, bid/ask quotes, prepayment speeds and prices for comparable securities. Based on our review we believe the prices received from our pricing vendor are a reliable representation of exit prices.

All derivatives are recorded at fair value. Internal models are used to value a majority of derivatives. The models use as their basis readily observable market inputs, such as time value, forward interest rates, volatility factors and current and forward market prices

 

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for commodities and foreign currency exchange rates. Level 2 includes certain foreign currency derivatives, commodity derivatives, certain interest rate swaps, and warrants. Derivative contracts and other liabilities that are valued based upon models with significant unobservable market inputs are classified in Level 3.

Automotive

Fair Value Measurements on a Recurring Basis

The following tables summarize the financial instruments measured at fair value on a recurring basis (dollars in millions):

 

     Fair Value Measurements on a Recurring Basis
at March 31, 2011
 
         Level 1              Level 2              Level 3              Total      

Assets

           

Cash equivalents (a)

           

United States government and agency

   $       $ 405       $       $ 405   

Sovereign debt

             136                 136   

Certificates of deposit

             1,961                 1,961   

Money market funds

     6,763                         6,763   

Commercial paper

             4,633                 4,633   

Marketable securities

           

Trading securities

           

Equity

     40                         40   

Debt

             95                 95   

Available–for–sale securities

           

United States government and agency

             5,834                 5,834   

Sovereign debt

             623                 623   

Certificates of deposit

             329                 329   

Corporate debt

             1,697                 1,697   

Other assets (a)(b)

           

United States government and agency

             98                 98   

Money market funds

     320                         320   

Sovereign debt

             1,042                 1,042   

Corporate debt

             21                 21   

Equity

     5                         5   

Convertible debt

                     10         10   

Derivatives

           

Commodity

             87                 87   

Foreign currency

             74                 74   

Embedded derivatives

             6         57         63   
                                   

Total assets

   $ 7,128       $ 17,041       $ 67       $ 24,236   
                                   

Liabilities

           

Other liabilities (c)

           

Options

   $       $       $ 77       $ 77   

Derivatives

           

Commodity

             9                 9   

Foreign currency

             50                 50   
                                   

Total liabilities

   $       $ 59       $ 77       $ 136   
                                   

 

(a) Cash and time deposits, including those classified as restricted cash, have been excluded from this table.

 

(b) Other assets are recorded in Other current assets and deferred income taxes and Other assets and deferred income taxes.

 

(c) Other liabilities are recorded in Accrued liabilities and Other liabilities and deferred income taxes.

 

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     Fair Value Measurements on a Recurring Basis
at December 31, 2010
 
         Level 1              Level 2              Level 3              Total      

Assets

           

Cash equivalents (a)

           

United States government and agency

   $       $ 1,085       $       $ 1,085   

Sovereign debt

             523                 523   

Certificates of deposit

             2,705                 2,705   

Money market funds

     4,844                         4,844   

Commercial paper

             3,807                 3,807   

Marketable securities

           

Trading securities

           

Equity

     21         17                 38   

Debt

             98                 98   

Available–for–sale securities

           

United States government and agency

             2,023                 2,023   

Sovereign debt

             773                 773   

Certificates of deposit

             954                 954   

Corporate debt

             1,669                 1,669   

Other assets (a)(b)

           

United States government and agency

             99                 99   

Money market funds

     345                         345   

Sovereign debt

             1,011                 1,011   

Corporate debt

             19                 19   

Equity

     5                         5   

Convertible debt

                     10         10   

Derivatives

           

Commodity

             93                 93   

Foreign currency

             80                 80   

Other

             44                 44   
                                   

Total assets

   $ 5,215       $ 15,000       $ 10       $ 20,225   
                                   

Liabilities

           

Other liabilities (c)

           

Options

   $       $       $ 24       $ 24   

Derivatives

           

Commodity

             9                 9   

Foreign currency

             113                 113   
                                   

Total liabilities

   $       $ 122       $ 24       $ 146   
                                   

 

(a) Cash and time deposits, including those classified as restricted cash, have been excluded from this table.

 

(b) Other assets are recorded in Other current assets and deferred income taxes and Other assets and deferred income taxes.

 

(c) Other liabilities are recorded in Accrued liabilities and Other liabilities and deferred income taxes.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Fair Value Measurements on a Recurring Basis using Level 3 Inputs

The following table summarizes the activity for financial instruments classified in Level 3 (dollars in millions):

 

     Level 3 Financial Assets and Liabilities  
     Foreign
Currency
Derivatives (a)
     Embedded
Derivatives  (a)
     Options (b)     Other
Securities  (c)
     Total Net
Liabilities
 

Balance at January 1, 2011

   $       $       $ (24   $ 10       $ (14

Transfer in and/or out of Level 3

                                      

Total realized/unrealized gains (losses)

             

Included in earnings

             53         (53               

Included in other comprehensive income

             4                        4   

Purchases

                                      

Sales

                                      

Issuances

                                      

Settlements

                                      
                                           

Balance at March 31, 2011

   $       $ 57       $ (77   $ 10       $ (10
                                           

Amount of total gains and (losses) in the period included in earnings attributable to the change in unrealized gains or (losses) relating to assets/liabilities still held at the reporting date

   $       $ 53       $ (53   $       $   
                                           

 

     Level 3 Financial Assets and Liabilities  
     Foreign
Currency
Derivatives (a)
    Embedded
Derivatives  (a)
     Options (b)     Other
Securities  (c)
     Total Net
Liabilities
 

Balance at January 1, 2010

   $ (672   $       $      $       $ (672

Transfer in and/or out of Level 3

                                     

Total realized/unrealized gains (losses)

            

Included in earnings

     155                               155   

Included in other comprehensive income

     (17                            (17

Purchases, issuances, and settlements

     179                (21             158   
                                          

Balance at March 31, 2010

   $ (355   $       $ (21   $       $ (376
                                          

Amount of total gains and (losses) in the period included in earnings attributable to the change in unrealized gains or (losses) relating to assets/liabilities still held at the reporting date

   $ 141      $       $      $       $ 141   
                                          

 

(a) Realized and unrealized gains (losses) on foreign currency and embedded derivatives are recorded in Interest income and other non-operating income, net and foreign currency translation gains (losses) are recorded in Accumulated other comprehensive income.

 

(b) Realized and unrealized gains (losses) on options are recorded in Interest income and other non-operating income, net.

 

(c) Realized gains (losses) and other than temporary impairments on marketable securities are recorded in Interest income and other non-operating income, net.

Short-Term and Long-Term Debt

We determined the fair value of debt based on a discounted cash flow model which used benchmark yield curves plus a spread that represented the yields on traded bonds of companies with comparable credit ratings.

 

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Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

The following table summarizes the carrying amount and estimated fair values of short-term and long-term debt (dollars in millions):

 

     March 31, 2011      December 31, 2010  

Carrying amount (a)

   $ 5,011       $ 4,630   

Fair value (a)

   $ 5,213       $ 4,840   

 

(a) Accounts and notes receivable, net and Accounts payable (principally trade) are not included because the carrying amount approximates fair value due to their short-term nature.

Ally Financial Common and Preferred Stock

We estimated the fair value of Ally Financial common stock using a market approach that applies the average price to tangible book value multiples of comparable companies to the consolidated Ally Financial tangible book value. The significant inputs used in our fair value analysis were Ally Financial’s March 31, 2011 and December 31, 2010 financial statements, as well as the financial statements and price to tangible book value multiples of comparable companies in the banking and finance industry.

We calculated the fair value of our investment in Ally Financial preferred stock as of December 31, 2010 using a discounted cash flow approach. The present value of the cash flows was determined using assumptions regarding the expected receipt of dividends on Ally Financial preferred stock and the expected call date.

On March 25, 2011 our investment in Ally Financial preferred stock was sold through a public offering for net proceeds of $1.0 billion. The gain of $0.3 billion related to the sale was recorded in Interest income and other non-operating income, net.

The following table summarizes the carrying amount and estimated fair value of Ally Financial common and preferred stock (dollars in millions):

 

     March 31, 2011      December 31, 2010  

Common stock

     

Carrying amount (a)

   $ 959       $ 964