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EX-32 - EXHIBIT 32-SECTION 1350 CERTIFICATION - General Motors Coex-32x03312016.htm
EX-31.1 - EXHIBIT-SECTION 302 CERTIFICATION OF CEO - General Motors Coex-311x03312016.htm
EX-31.2 - EXHIBIT-SECTION 302 CERTIFICATION OF CFO - General Motors Coex-312x03312016.htm
EX-10.5 - EXHIBIT-FORM OF PSU AWARD AGREEMENT - General Motors Coex-105xformofpsuawardagree.htm
EX-10.6 - EXHIBIT-INDEMNIFICATION AGREEMENT - General Motors Coex-106xindemnificationagre.htm
EX-10.4 - EXHIBIT-FORM OF RSU AWARD AGREEMENT - General Motors Coex-104xformofrsuawardagree.htm


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, 2016
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  þ  No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  þ  Accelerated filer  ¨  Non-accelerated filer  ¨  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 April 14, 2016 the number of shares outstanding of common stock was 1,539,825,376 shares.





INDEX
 
 
 
Page
PART I
Item 1.
Condensed Consolidated Financial Statements
 
Condensed Consolidated Income Statements (Unaudited)
 
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
 
Condensed Consolidated Balance Sheets (Unaudited)
 
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
Condensed Consolidated Statements of Equity (Unaudited)
 
Notes to Condensed Consolidated Financial Statements
 
Note 1.
Nature of Operations and Basis of Presentation
 
Note 2.
Marketable Securities
 
Note 3.
GM Financial Receivables, net
 
Note 4.
Inventories
 
Note 5.
Equity in Net Assets of Nonconsolidated Affiliates
 
Note 6.
Variable Interest Entities
 
Note 7.
Debt
 
Note 8.
Product Warranty and Related Liabilities
 
Note 9.
Pensions and Other Postretirement Benefits
 
Note 10.
Commitments and Contingencies
 
Note 11.
Income Taxes
 
Note 12.
Restructuring and Other Initiatives
 
Note 13.
Stockholders' Equity
 
Note 14.
Earnings Per Share
 
Note 15.
Segment Reporting
 
Note 16.
Subsequent Event
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Item 4.
Controls and Procedures
PART II
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.
Exhibits
Signature
 





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, 2016
 
March 31, 2015
Net sales and revenue
 
 
 
Automotive
$
35,195

 
$
34,364

GM Financial
2,070

 
1,348

Total net sales and revenue
37,265

 
35,712

Costs and expenses
 
 
 
Automotive cost of sales
30,589

 
30,674

GM Financial interest, operating and other expenses
1,886

 
1,168

Automotive selling, general and administrative expense
2,818

 
3,117

Total costs and expenses
35,293

 
34,959

Operating income
1,972

 
753

Automotive interest expense
127

 
110

Interest income and other non-operating income, net
85

 
241

Equity income (Note 5)
560

 
553

Income before income taxes
2,490

 
1,437

Income tax expense (Note 11)
559

 
529

Net income
1,931

 
908

Net loss attributable to noncontrolling interests
22

 
37

Net income attributable to common stockholders
$
1,953

 
$
945

Earnings per share (Note 14)
 
 
 
Basic
 
 
 
Basic earnings per common share
$
1.26

 
$
0.58

Weighted-average common shares outstanding
1,546

 
1,617

Diluted
 
 
 
Diluted earnings per common share
$
1.24

 
$
0.56

Weighted-average common shares outstanding
1,580

 
1,686

 
 
 
 
Dividends declared per common share
$
0.38

 
$
0.30

 
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions) (Unaudited)
 
Three Months Ended
 
March 31, 2016
 
March 31, 2015
Net income
$
1,931

 
$
908

Other comprehensive income (loss), net of tax (Note 13)
 
 
 
Foreign currency translation adjustments and other
84

 
197

Defined benefit plans, net
(122
)
 
554

Other comprehensive income (loss), net of tax
(38
)
 
751

Comprehensive income
1,893

 
1,659

Comprehensive loss attributable to noncontrolling interests
42

 
28

Comprehensive income attributable to stockholders
$
1,935

 
$
1,687


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


1




GENERAL MOTORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share and per share amounts) (Unaudited)
 
March 31, 2016
 
December 31, 2015
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
14,894

 
$
15,238

Marketable securities (Note 2)
6,537

 
8,163

Restricted cash and marketable securities (Note 2; Note 6 at VIEs)
1,716

 
1,590

Accounts and notes receivable, net
8,988

 
8,337

GM Financial receivables, net (Note 3; Note 6 at VIEs)
19,225

 
18,051

Inventories (Note 4)
15,817

 
13,764

Equipment on operating leases, net
2,199

 
2,783

Other current assets
1,658

 
1,482

Total current assets
71,034

 
69,408

Non-current Assets
 
 
 
Restricted cash and marketable securities (Note 2; Note 6 at VIEs)
639

 
583

GM Financial receivables, net (Note 3; Note 6 at VIEs)
19,145

 
18,500

Equity in net assets of nonconsolidated affiliates (Note 5)
9,640

 
9,201

Property, net
32,652

 
31,229

Goodwill and intangible assets, net
5,891

 
5,947

GM Financial equipment on operating leases, net (Note 6 at VIEs)
24,538

 
20,172

Deferred income taxes (Note 1)
36,374

 
36,860

Other assets
3,705

 
2,438

Total non-current assets
132,584

 
124,930

Total Assets
$
203,618

 
$
194,338

LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts payable (principally trade)
$
26,766

 
$
24,062

Short-term debt and current portion of long-term debt (Note 7)
 
 
 
Automotive
832

 
817

GM Financial (Note 6 at VIEs)
20,756

 
18,745

Accrued liabilities
26,633

 
27,593

Total current liabilities
74,987

 
71,217

Non-current Liabilities
 
 
 
Long-term debt (Note 7)
 
 
 
Automotive
9,946

 
7,948

GM Financial (Note 6 at VIEs)
39,615

 
35,601

Postretirement benefits other than pensions (Note 9)
5,720

 
5,685

Pensions (Note 9)
19,245

 
20,911

Other liabilities
12,780

 
12,653

Total non-current liabilities
87,306

 
82,798

Total Liabilities
162,293

 
154,015

Commitments and contingencies (Note 10)


 


Equity (Note 13)
 
 
 
Common stock, $0.01 par value
15

 
15

Additional paid-in capital
27,463

 
27,607

Retained earnings
21,508

 
20,285

Accumulated other comprehensive loss
(8,054
)
 
(8,036
)
Total stockholders’ equity
40,932

 
39,871

Noncontrolling interests
393

 
452

Total Equity
41,325

 
40,323

Total Liabilities and Equity
$
203,618

 
$
194,338


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

2




GENERAL MOTORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions) (Unaudited)
 
Three Months Ended
 
March 31, 2016
 
March 31, 2015
Cash flows from operating activities
 
 
 
Net income
$
1,931

 
$
908

Depreciation, amortization and impairment charges
2,292

 
1,757

Foreign currency remeasurement and transaction losses
162

 
188

Amortization of discount and issuance costs on debt issues
45

 
36

Undistributed earnings of nonconsolidated affiliates, net
(519
)
 
(539
)
Pension contributions and OPEB payments
(1,922
)
 
(393
)
Pension and OPEB (income) expense, net
(151
)
 
43

Provision for deferred taxes
731

 
343

Change in other operating assets and liabilities
(2,733
)
 
(1,968
)
Net cash provided by (used in) operating activities
(164
)
 
375

Cash flows from investing activities

 

Expenditures for property
(2,285
)
 
(1,684
)
Available-for-sale marketable securities, acquisitions
(1,773
)
 
(1,634
)
Trading marketable securities, acquisitions
(104
)
 
(522
)
Available-for-sale marketable securities, liquidations
3,272

 
2,467

Trading marketable securities, liquidations
291

 
386

Acquisition of companies/investments, net of cash acquired
(516
)
 
(1,051
)
Increase in restricted cash and marketable securities
(284
)
 
(221
)
Decrease in restricted cash and marketable securities
95

 
68

Purchases of finance receivables
(4,161
)
 
(4,067
)
Principal collections and recoveries on finance receivables
3,271

 
2,814

Purchases of leased vehicles, net
(5,111
)
 
(2,252
)
Proceeds from termination of leased vehicles
481

 
185

Other investing activities
2

 
43

Net cash used in investing activities
(6,822
)
 
(5,468
)
Cash flows from financing activities

 

Net increase in short-term debt
738

 
98

Proceeds from issuance of debt (original maturities greater than three months)
12,234

 
6,155

Payments on debt (original maturities greater than three months)
(5,550
)
 
(3,109
)
Payments to purchase common stock
(300
)
 
(300
)
Dividends paid
(588
)
 
(488
)
Other financing activities
(51
)
 
3

Net cash provided by financing activities
6,483

 
2,359

Effect of exchange rate changes on cash and cash equivalents
159

 
(444
)
Net decrease in cash and cash equivalents
(344
)
 
(3,178
)
Cash and cash equivalents at beginning of period
15,238

 
18,954

Cash and cash equivalents at end of period
$
14,894

 
$
15,776

Significant Non-cash Investing Activity
 
 
 
Non-cash property additions
$
2,430

 
$
1,649


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

3




GENERAL MOTORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In millions) (Unaudited)
 
Common Stockholders’
 
Noncontrolling Interests
 
Total Equity
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Balance at January 1, 2015
$
16

 
$
28,937

 
$
14,577

 
$
(8,073
)
 
$
567

 
$
36,024

Net income

 

 
945

 

 
(37
)
 
908

Other comprehensive income

 

 

 
742

 
9

 
751

Purchase of common stock

 
(168
)
 
(207
)
 

 

 
(375
)
Exercise of common stock warrants

 
39

 

 

 

 
39

Stock based compensation

 
11

 
(5
)
 

 

 
6

Cash dividends paid on common stock

 

 
(485
)
 

 

 
(485
)
Dividends declared or paid to noncontrolling interests

 

 

 

 
(47
)
 
(47
)
Other

 

 

 

 
2

 
2

Balance at March 31, 2015
$
16

 
$
28,819

 
$
14,825

 
$
(7,331
)
 
$
494

 
$
36,823

 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2016
$
15

 
$
27,607

 
$
20,285

 
$
(8,036
)
 
$
452

 
$
40,323

Net income

 

 
1,953

 


 
(22
)
 
1,931

Other comprehensive loss

 

 

 
(18
)
 
(20
)
 
(38
)
Purchase of common stock

 
(167
)
 
(133
)
 

 

 
(300
)
Exercise of common stock warrants

 
7

 

 

 

 
7

Stock based compensation

 
15

 
(10
)
 

 

 
5

Cash dividends paid on common stock

 

 
(587
)
 

 

 
(587
)
Dividends declared or paid to noncontrolling interests

 

 

 

 
(8
)
 
(8
)
Other

 
1

 

 

 
(9
)
 
(8
)
Balance at March 31, 2016
$
15

 
$
27,463

 
$
21,508

 
$
(8,054
)
 
$
393

 
$
41,325


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


4




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



Note 1. Nature of Operations and Basis of Presentation

General Motors Company (sometimes referred to in this Quarterly Report on Form 10-Q as we, our, us, ourselves, the Company, General Motors or GM) designs, builds and sells cars, trucks, crossovers and automobile parts worldwide. We also provide automotive financing services through General Motors Financial Company, Inc. (GM Financial). We analyze the results of our business through the following segments: 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 certain centrally recorded income and costs, such as interest, income taxes and corporate expenditures and certain nonsegment specific revenues and expenses.

The accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP 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 notes required by U.S. GAAP for complete financial statements. The accompanying condensed consolidated financial statements include all adjustments, which consist of normal recurring adjustments and transactions or events discretely impacting the interim periods, 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 audited consolidated financial statements and notes thereto included in our 2015 Form 10-K. Except for per share amounts or as otherwise specified, dollar amounts presented within tables are stated in millions.

Effective January 1, 2016 we retrospectively adopted Accounting Standards Update (ASU) 2015-17, Balance Sheet Classification of Deferred Taxes, which requires all deferred tax assets and liabilities to be classified as non-current. As a result current Deferred income taxes and Accrued liabilities decreased by $8.6 billion and $249 million and non-current Deferred income taxes increased by $8.4 billion at December 31, 2015 in our condensed consolidated balance sheets.

In February 2016 ASU 2016-02, Leases (ASU 2016-02), was issued which requires the lessee to recognize most leases on the balance sheet thereby resulting in the recognition of lease assets and liabilities for those leases currently classified as operating leases. The accounting for leases where we are the lessor is largely unchanged. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018 with early adoption permitted. We are currently assessing the impact ASU 2016-02 will have on our consolidated financial statements.

Note 2. Marketable Securities

The following table summarizes the fair value of cash equivalents and marketable securities which approximates cost:


5




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

 
Fair Value Level
 
March 31, 2016
 
December 31, 2015
Cash, cash equivalents and time deposits
 
 
$
8,724

 
$
7,730

Available-for-sale securities
 
 
 
 
 
U.S. government and agencies
2
 
$
3,841

 
$
5,329

Corporate debt
2
 
4,784

 
6,267

Money market funds
1
 
2,746

 
2,275

Sovereign debt
2
 
912

 
1,219

Total available-for-sale securities
 
 
12,283

 
15,090

Trading securities – sovereign debt
2
 
424

 
581

Total marketable securities (including securities classified as cash equivalents)
 
 
$
12,707

 
$
15,671

Restricted cash and marketable securities
 
 
 
 
 
Available-for-sale securities, primarily money market funds
1
 
$
1,529

 
$
1,340

Restricted cash, cash equivalents and time deposits
 
 
826

 
833

Total restricted cash and marketable securities
 
 
$
2,355

 
$
2,173

Available-for-sale securities included above with contractual maturities
 
 
 
 
 
Due in one year or less
 
 
$
7,684

 
 
Due between one and five years
 
 
1,901

 
 
Total available-for-sale securities with contractual maturities
 
 
$
9,585

 
 

Marketable securities classified as cash equivalents totaled $6.2 billion and $7.5 billion at March 31, 2016 and December 31, 2015 and consisted of corporate debt, money market funds and sovereign debt. Sales proceeds from investments classified as available-for-sale and sold prior to maturity were $2.6 billion and $1.4 billion in the three months ended March 31, 2016 and 2015. Net unrealized gains and losses on trading securities were insignificant in the three months ended March 31, 2016 and 2015.

Note 3. GM Financial Receivables, net
 
March 31, 2016
 
December 31, 2015
 
Retail
 
Commercial
 
Total
 
Retail
 
Commercial
 
Total
Finance receivables
$
30,272

 
$
8,941

 
$
39,213

 
$
29,124

 
$
8,209

 
$
37,333

Less: allowance for loan losses
(796
)
 
(47
)
 
(843
)
 
(735
)
 
(47
)
 
(782
)
GM Financial receivables, net
$
29,476

 
$
8,894

 
$
38,370

 
$
28,389

 
$
8,162

 
$
36,551

 
 
 
 
 
 
 
 
 
 
 
 
Fair value of GM Financial receivables, net
 
 
 
 
$
38,678

 
 
 
 
 
$
36,707

Allowance for loan losses classified as current
 
 
 
 
$
(661
)
 
 
 
 
 
$
(601
)

GM Financial estimates the fair value of retail finance receivables using observable and unobservable inputs within a cash flow model, a Level 3 input. The inputs reflect assumptions regarding expected prepayments, deferrals, delinquencies, recoveries and charge-offs of the loans within the portfolio. The cash flow model produces an estimated amortization schedule of the finance receivables which is the basis for the calculation of the series of cash flows that derive the fair value of the portfolio. The series of cash flows is calculated and discounted using a weighted-average cost of capital or current interest rates. The weighted-average cost of capital uses unobservable debt and equity percentages, an unobservable cost of equity and an observable cost of debt based on companies with a similar credit rating and maturity profile as the portfolio. Macroeconomic factors could affect the credit performance of the portfolio and therefore could potentially affect the assumptions used in GM Financial's cash flow model. A substantial majority of GM Financial's commercial finance receivables have variable interest rates and maturities of one year or less. Therefore, the carrying amount is considered to be a reasonable estimate of fair value using Level 2 inputs.

6




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

 
Three Months Ended
 
March 31, 2016
 
March 31, 2015
Loan loss allowance at beginning of period
$
782

 
$
695

Provision for loan losses
196

 
155

Charge-offs
(293
)
 
(234
)
Recoveries
150

 
124

Effect of foreign currency
8

 
(12
)
Loan loss allowance at end of period
$
843

 
$
728


The activity for the allowance for commercial loan losses was insignificant in the three months ended March 31, 2016 and 2015.

Credit Quality

Retail Finance Receivables

GM Financial uses proprietary scoring systems in its underwriting process that measure the credit quality of retail finance receivables using several factors, such as credit bureau information, consumer credit risk scores (e.g. FICO scores) and contract characteristics. In addition to GM Financial's proprietary scoring systems GM Financial considers other individual consumer factors such as employment history, financial stability and capacity to pay. Subsequent to origination GM Financial reviews the credit quality of retail receivables based on customer payment activity. At the time of loan origination substantially all of GM Financial's international consumers were considered to be prime credit quality. At March 31, 2016 and December 31, 2015, 57% and 60% of the retail finance receivables in North America were from consumers with sub-prime credit scores, which are defined as FICO scores of less than 620 at the time of loan origination.

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. At March 31, 2016 and December 31, 2015 the accrual of finance charge income had been suspended on delinquent retail finance receivables with contractual amounts due of $667 million and $778 million. The following table summarizes the contractual amount of delinquent contracts, which is not significantly different than the recorded investment of the retail finance receivables:
 
March 31, 2016
 
March 31, 2015
 
Amount
 
Percent of Contractual Amount Due
 
Amount
 
Percent of Contractual Amount Due
31-to-60 days delinquent
$
963

 
3.1
%
 
$
880

 
3.4
%
Greater-than-60 days delinquent
421

 
1.4
%
 
357

 
1.4
%
Total finance receivables more than 30 days delinquent
1,384

 
4.5
%
 
1,237

 
4.8
%
In repossession
48

 
0.2
%
 
42

 
0.2
%
Total finance receivables more than 30 days delinquent or in repossession
$
1,432

 
4.7
%
 
$
1,279

 
5.0
%

At March 31, 2016 and December 31, 2015 retail finance receivables classified as troubled debt restructurings and individually evaluated for impairment were $1.7 billion and $1.6 billion and the allowance for loan losses included $229 million and $220 million of specific allowances on these receivables.

Commercial Finance Receivables

GM Financial's commercial finance receivables consist of dealer financings, primarily for inventory purchases. A proprietary model is used to assign a risk rating to each dealer. A credit review of each dealer is performed at least annually, and if necessary, the dealer's risk rating is adjusted on the basis of the review. The credit lines for Group VI dealers are typically suspended and no further funding is extended to these dealers. At March 31, 2016 and December 31, 2015 the commercial finance receivables on non-accrual status were insignificant. The following table summarizes the credit risk profile by dealer grouping of commercial finance receivables: 

7




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

 
March 31, 2016
 
December 31, 2015
Group I – Dealers with superior financial metrics
$
1,316

 
$
1,298

Group II – Dealers with strong financial metrics
2,775

 
2,573

Group III – Dealers with fair financial metrics
2,872

 
2,597

Group IV – Dealers with weak financial metrics
1,212

 
1,058

Group V – Dealers warranting special mention due to potential weaknesses
618

 
501

Group VI – Dealers with loans classified as substandard, doubtful or impaired
148

 
182

 
$
8,941

 
$
8,209


Note 4. Inventories
 
March 31, 2016
 
GMNA
 
GME
 
GMIO
 
GMSA
 
Total
Total productive material, supplies and work in process
$
3,407

 
$
782

 
$
1,158

 
$
787

 
$
6,134

Finished product, including service parts
5,379

 
2,641

 
1,110

 
553

 
9,683

Total inventories
$
8,786

 
$
3,423

 
$
2,268

 
$
1,340

 
$
15,817

 
December 31, 2015
 
GMNA
 
GME
 
GMIO
 
GMSA
 
Total
Total productive material, supplies and work in process
$
2,705

 
$
713

 
$
1,113

 
$
616

 
$
5,147

Finished product, including service parts
4,884

 
2,166

 
954

 
613

 
8,617

Total inventories
$
7,589

 
$
2,879

 
$
2,067

 
$
1,229

 
$
13,764


Note 5. Equity in Net Assets of Nonconsolidated Affiliates

Nonconsolidated affiliates are entities in which an equity ownership interest is maintained and for which the equity method of accounting is used due to the ability to exert significant influence over decisions relating to their operating and financial affairs. Our nonconsolidated affiliates are involved in various aspects of the development, production and marketing of cars, trucks, crossovers and automobile parts. We enter into transactions with certain nonconsolidated affiliates to purchase and sell component parts and vehicles. Revenue and expenses of our joint ventures are not consolidated into our financial statements; rather, our proportionate share of the earnings of each joint venture is reflected as Equity income. There have been no significant ownership changes in our Automotive China joint ventures (Automotive China JVs) since December 31, 2015. The following table summarizes information regarding Equity income:
 
Three Months Ended
 
March 31, 2016
 
March 31, 2015
Automotive China JVs
$
518

 
$
519

Other joint ventures
42

 
34

Total equity income
$
560

 
$
553

 
 
 
 
Dividends received from nonconsolidated affiliates were insignificant in the three months ended March 31, 2016 and 2015. At March 31, 2016 and December 31, 2015 we had undistributed earnings of $2.6 billion and $2.2 billion related to our nonconsolidated affiliates.
 
 
 
 
Note 6. Variable Interest Entities

GM Financial uses special purpose entities (SPEs) that are considered variable interest entities (VIEs) to issue variable funding notes to third party bank-sponsored warehouse facilities or asset-backed securities to investors in securitization transactions. The debt issued by these VIEs is backed by finance receivables and leasing related assets transferred by GM Financial to the VIEs (Securitized Assets). GM Financial holds variable interests in the VIEs that could potentially be significant to the VIEs. GM Financial determined that it is the primary beneficiary of the SPEs because: (1) the servicing responsibilities for the Securitized

8




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

Assets give GM Financial the power to direct the activities that most significantly impact the performance of the VIEs; and (2) the variable interests in the VIEs give GM Financial the obligation to absorb losses and the right to receive residual returns that could potentially be significant. The assets of the VIEs serve as the sole source of repayment for the debt issued by these entities. Investors in the notes issued by the VIEs do not have recourse to GM Financial or its other assets, with the exception of customary representation and warranty repurchase provisions and indemnities that GM Financial provides as the servicer. GM Financial is not required and does not currently intend to provide additional financial support to these SPEs. While these subsidiaries are included in GM Financial's condensed consolidated financial statements, they are separate legal entities and their assets are legally owned by them and are not available to GM Financial's creditors. The following table summarizes the assets and liabilities related to GM Financial's consolidated VIEs:
 
March 31, 2016
 
December 31, 2015
Restricted cash  current
$
1,478

 
$
1,345

Restricted cash  non-current
$
583

 
$
531

GM Financial receivables, net  current
$
12,567

 
$
12,224

GM Financial receivables, net  non-current
$
12,482

 
$
12,597

GM Financial equipment on operating leases, net
$
15,001

 
$
11,684

GM Financial short-term debt and current portion of long-term debt
$
14,703

 
$
13,545

GM Financial long-term debt
$
16,959

 
$
15,841


GM Financial recognizes finance charge, leased vehicle and fee income on the Securitized Assets and interest expense on the secured debt issued in a securitization transaction and records a provision for loan losses to recognize probable loan losses inherent in the Securitized Assets.

Note 7. Debt

Automotive Debt


March 31, 2016
 
December 31, 2015
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
Total Automotive debt
$
10,778

 
$
11,540

 
$
8,765

 
$
9,088

Fair value utilizing Level 1 inputs
 
 
$
9,387

 
 
 
$
6,972

Fair value utilizing Level 2 inputs
 
 
$
2,153

 
 
 
$
2,116


The fair value of debt measured utilizing Level 1 inputs was based on quoted prices in active markets for identical instruments that a market participant can access at the measurement date. The fair value of debt measured utilizing Level 2 inputs was based on a discounted cash flow model using observable inputs. This model utilizes observable inputs such as contractual repayment terms and benchmark yield curves, plus a spread based on our senior unsecured notes that is intended to represent our nonperformance risk. We obtain the benchmark yield curves and yields on unsecured notes from independent sources that are widely used in the financial industry.

In February 2016 we issued $2.0 billion in aggregate principal amount of senior unsecured notes comprising $1.25 billion of 6.60% notes due in 2036 and $750 million of 6.75% notes due in 2046. These notes contain terms and covenants customary of these types of securities including limitations on the amount of certain secured debt we may incur. The net proceeds from the issuance of these senior unsecured notes were used to fund discretionary contributions to our U.S. hourly pension plan as described in Note 9.

Automotive Financing – GM Financial Debt

9




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

 
March 31, 2016
 
December 31, 2015
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
Secured debt
$
32,733

 
$
32,773

 
$
30,689

 
$
30,671

Unsecured debt
27,638

 
27,999

 
23,657

 
23,726

Total GM Financial debt
$
60,371

 
$
60,772

 
$
54,346

 
$
54,397

 
 
 
 
 
 
 
 
Fair value utilizing Level 2 inputs
 
 
$
54,755

 
 
 
$
48,716

Fair value utilizing Level 3 inputs
 
 
$
6,017

 
 
 
$
5,681


The fair value of debt measured utilizing Level 2 inputs was based on quoted market prices for identical instruments and if unavailable, quoted market prices of similar instruments. For debt that has terms of one year or less or has been priced within the last six months, the carrying amount or par value is considered to be a reasonable estimate of fair value. The fair value of debt measured utilizing Level 3 inputs was based on the discounted future net cash flows expected to be settled using current risk-adjusted rates.

Secured debt consists of revolving credit facilities and securitization notes payable. Most of the secured debt was issued by VIEs and is repayable only from proceeds related to the underlying pledged Securitized Assets. Refer to Note 6 for additional information on GM Financial's involvement with VIEs. In the three months ended March 31, 2016 GM Financial issued securitization notes payable of $3.2 billion and entered into new or renewed credit facilities with substantially the same terms as existing debt and a total net additional borrowing capacity of $366 million.

Unsecured debt consists of senior notes, credit facilities, retail customer deposits and other unsecured debt. In March 2016 GM Financial issued $2.75 billion in aggregate principal amount of senior notes comprising $1.5 billion of 4.20% notes due in March 2021 and $1.25 billion of 5.25% notes due in March 2026. These notes contain terms and covenants customary of these types of securities including limitations on GM Financial's ability to incur certain liens.

GM Financial accepts deposits from retail banking customers in Germany. At March 31, 2016 the outstanding balance of these deposits was $1.6 billion, of which 41% were overnight deposits.

Note 8. Product Warranty and Related Liabilities

The following table summarizes activity for product warranty and related liabilities which include policy, product warranty, recall campaigns and courtesy transportation:
 
Three Months Ended
 
March 31, 2016
 
March 31, 2015
Balance at beginning of period
$
9,279

 
$
9,646

Warranties issued and assumed in period  recall campaigns and courtesy transportation
154

 
183

Warranties issued and assumed in period  policy and product warranty
549

 
562

Payments
(911
)
 
(1,074
)
Adjustments to pre-existing warranties
83

 
86

Effect of foreign currency and other
79

 
(161
)
Balance at end of period
$
9,233

 
$
9,242


Note 9. Pensions and Other Postretirement Benefits

The following table summarizes the components of net periodic pension and other postretirement benefits (OPEB) (income) expense:

10




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

 
Three Months Ended March 31, 2016
 
Three Months Ended March 31, 2015
 
Pension Benefits
 
Global OPEB Plans
 
Pension Benefits
 
Global OPEB Plans
 
U.S.
 
Non-U.S.
 
 
U.S.
 
Non-U.S.
 
Service cost
$
95

 
$
85

 
$
5

 
$
101

 
$
100

 
$
6

Interest cost
553

 
144

 
50

 
689

 
196

 
60

Expected return on plan assets
(945
)
 
(182
)
 

 
(974
)
 
(203
)
 

Amortization of prior service cost (credit)
(1
)
 
3

 
(4
)
 
(1
)
 
4

 
(3
)
Amortization of net actuarial (gains) losses
(6
)
 
47

 
5

 
2

 
58

 
8

Net periodic pension and OPEB (income) expense
$
(304
)
 
$
97

 
$
56

 
$
(183
)
 
$
155

 
$
71

 
 
 
 
 
 
 
 
 
 
 
Effective January 2016 the discount rate used to determine the service cost and interest cost for our pension and OPEB plans was based on individual annual yield curve rates. This refinement is considered a change in estimate and has been applied prospectively. The use of the individual annual yield curve rates has reduced the service cost and interest cost by $191 million in the three months ended March 31, 2016, which will be offset in the actuarial gains and losses upon the next remeasurement of the plans' obligations.

We made discretionary contributions of $1.5 billion to our U.S. hourly pension plan in the three months ended March 31, 2016 and $482 million in April 2016. These discretionary contributions were funded with the net proceeds from the issuance of the senior unsecured notes described in Note 7.

Note 10. Commitments and Contingencies

Litigation-Related Liability and Tax Administrative Matters

In the normal course of business, we are named from time to time as a defendant in various legal actions, including arbitrations, class actions and other litigation, that arise in connection with our business as a global company. We identify below the material individual proceedings and investigatory activity in connection with which we believe a material loss is reasonably possible or probable. For various legal matters we have established reserves when we believe that losses are probable and can be reasonably estimated. In many proceedings, however it is inherently difficult to determine whether any loss is probable or even reasonably possible or to estimate the size or range of the possible loss. Accordingly it is possible that an adverse outcome from such proceedings could exceed the amounts accrued by an amount that could be material to our consolidated financial position, results of operations or cash flows in any particular reporting period. Reserves for losses deemed probable and reasonably estimable were $1.3 billion and $1.2 billion at March 31, 2016 and December 31, 2015 and these reserves are recorded in Accrued liabilities and Other liabilities.

Proceedings Related to Ignition Switch Recall and Other Recalls

In 2014 we announced various recalls relating to safety, customer satisfaction and other matters. Those recalls included recalls to repair ignition switches that could under certain circumstances unintentionally move from the “run” position to the “accessory” or “off” position with a corresponding loss of power, which could in turn prevent airbags from deploying in the event of a crash.

Through April 15, 2016 we were aware of 101 putative class actions pending against GM in various federal and state trial courts in the U.S. and 21 putative class actions pending in various Provincial Courts in Canada alleging that consumers who purchased or leased vehicles manufactured by GM or General Motors Corporation had been economically harmed by one or more of the recalls announced in 2014 and/or the underlying vehicle conditions associated with those recalls (economic-loss cases). In general, these economic-loss cases seek recovery for purported compensatory damages, such as alleged diminution in value of the vehicles, as well as punitive damages, injunctive relief and other relief. There are also two civil actions brought by state governmental entities relating to the 2014 recalls that seek injunctive relief as well as economic damages and attorneys' fees for alleged violations of state consumer protection statutes.

Through April 15, 2016 we were aware of 270 actions pending in various federal and state trial courts in the U.S. and 14 actions pending in various Provincial Courts in Canada alleging injury or death as a result of defects that may be the subject of recalls announced in 2014 (personal injury cases). In general, these personal injury cases seek recovery for purported compensatory damages, punitive damages and other relief.

11




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)


Since June 2014 the United States Judicial Panel on Multidistrict Litigation (JPML) has issued orders from time to time directing that certain pending economic-loss and personal injury federal lawsuits involving faulty or allegedly faulty ignition switches or other defects that may be related to the recalls announced in 2014 be transferred to, and consolidated in, a single federal court, the Southern District of New York (the multidistrict litigation). Through April 15, 2016 the JPML has transferred 289 pending cases to, and consolidated them with, the multidistrict litigation. At the court's suggestion, the parties to the multidistrict litigation engage from time to time in discussions of possible mechanisms to resolve pending litigation. As described below, on September 17, 2015 we announced that we had reached a memorandum of understanding with certain personal injury claimants regarding possible settlement of their claims.

In order to facilitate the resolution of the multidistrict litigation, the Southern District of New York scheduled six bellwether trials (i.e., trials designed to be representative of the group of personal injury cases in the multidistrict litigation). Through April 15, 2016 two of the cases set for bellwether trials were dismissed with prejudice by plaintiffs. In a third bellwether trial, a jury concluded that GM was not liable to plaintiffs. In a fourth case set for a bellwether trial, GM and the plaintiff entered into a confidential settlement term sheet. Each bellwether trial will be tried on its facts and the result of any subsequent bellwether trial may be different from the preceding trials. It is also possible that the court will schedule one or more additional bellwether trials.

Because many plaintiffs in the actions described in the above paragraphs are suing over the conduct of General Motors Corporation or vehicles manufactured by that entity for liabilities not expressly assumed by GM, we moved to enforce the terms of the July 2009 Sale Order and Injunction issued by the United States Bankruptcy Court for the Southern District of New York (Bankruptcy Court) to preclude claims from being asserted against us for, among other things, personal injuries based on pre-sale accidents, any economic-loss claims based on acts or conduct of General Motors Corporation and claims asserting successor liability for obligations owed by General Motors Corporation (successor liability claims). On April 15, 2015 the Bankruptcy Court issued a Decision precluding claims against us based upon pre-sale accidents, claims based upon the acts or conduct by General Motors Corporation and successor liability claims, except for claims asserting liabilities that had been expressly assumed by us in the July 2009 Sale Agreement and claims that could be asserted against us only if they were otherwise viable and arose solely out of our own independent post-closing acts and did not in any way rely on acts or conduct by General Motors Corporation. Plaintiffs have appealed the Bankruptcy Court’s decision and we have cross appealed with respect to certain issues to preserve our rights. The United States Court of Appeals for the Second Circuit (Second Circuit) heard oral argument on the appeals on March 15, 2016. In addition on December 4, 2015 the Bankruptcy Court issued a judgment regarding certain issues left unresolved by its April 15, 2015 decision including the extent to which punitive damages could be asserted against GM based on claims involving vehicles manufactured by General Motors Corporation. Various groups of plaintiffs have appealed that decision to the district court overseeing the multidistrict litigation.

In the putative shareholder class action filed in the United States District Court for the Eastern District of Michigan (Shareholder Class Action), the court appointed the New York State Teachers’ Retirement System as the lead plaintiff. On January 15, 2015 the New York State Teachers’ Retirement System filed a Consolidated Class Action Complaint against GM and several current and former officers and employees (Defendants) on behalf of purchasers of our common stock from November 17, 2010 to July 24, 2014. The Consolidated Class Action Complaint alleges that Defendants made material misstatements and omissions relating to problems with the ignition switch and other matters in SEC filings and other public statements. As described below, on September 17, 2015 we announced that we had entered into a binding term sheet regarding settlement of this matter.

Four shareholder derivative actions pending in the Delaware Chancery Court were consolidated and plaintiffs filed an amended consolidated complaint on October 13, 2014. On June 26, 2015 the Delaware Chancery Court granted our motion to dismiss the amended consolidated complaint. On February 11, 2016 the Delaware Supreme Court affirmed the Chancery Court’s decision. Two shareholder derivative actions pending in the United States District Court for the Eastern District of Michigan have been consolidated and all proceedings, including those related to the motion to dismiss we filed in that court in October 2014, were suspended pending disposition of the parallel action described above that was being litigated in Delaware. In light of the Delaware Supreme Court’s decision, proceedings have resumed in the two shareholder derivative actions in the Eastern District of Michigan. During the three months ended March 31, 2016, an additional shareholder derivative action was filed in the United States District Court for the Eastern District of Michigan against certain current and former GM directors and officers making similar allegations to the two other shareholder derivative actions that are pending in the Eastern District of Michigan. This new derivative action has been transferred to the same judge handling those two other shareholder derivative actions. Two derivative actions filed in the Circuit Court of Wayne County, Michigan, have been consolidated and remain stayed pending disposition of the federal derivative actions.


12




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

In connection with the 2014 recalls, various investigations, inquiries and complaints have been received from the United States Attorney’s Office for the Southern District of New York (the Office), Congress, the SEC, Transport Canada and 50 state attorneys general. In connection with the foregoing we have received subpoenas and requests for additional information and we have participated in discussions with various governmental authorities. We have not received inquiries from the committees in Congress for a substantial period of time and are unaware of any further action they may take. On June 3, 2015 we received notice of an investigation by the Federal Trade Commission (FTC) concerning certified pre-owned vehicle advertising where dealers had certified vehicles that allegedly needed recall repairs. On January 28, 2016 the FTC published a proposed consent agreement for public comment. The public comment period has closed; the matter remains pending before the FTC. We believe we are cooperating fully with all pending requests for information in ongoing investigations. Such matters could in the future result in the imposition of material damages, fines, civil consent orders, civil and criminal penalties or other remedies.

As described more specifically below, we have resolved, partially or totally, several matters relating to the recalls announced in 2014, including the recognition of additional liabilities for such matters.

First, with regard to the investigation by the Office, on September 16, 2015 we entered into a Deferred Prosecution Agreement (the DPA) with the Office regarding its investigation of the events leading up to certain recalls regarding faulty ignition switches. Under the DPA we have paid the United States $900 million as a financial penalty, and we agreed to retain an independent monitor to review and assess our policies, practices or procedures related to statements about motor vehicle safety, the provision of information to those responsible for recall decisions, recall processes and addressing known defects in certified pre-owned vehicles. In addition, the Office agreed to recommend to the U.S. District Court for the Southern District of New York (the Court) that prosecution of GM on the two-count information filed in the Court be deferred for three years. The Office also agreed that if we are in compliance with all of our obligations under the DPA, the Office will, within 30 days after the expiration of the period of deferral (including any extensions thereto), seek dismissal with prejudice of the two-count information filed against GM. For a further description of the terms and conditions of the DPA refer to Note 15 of our 2015 Form 10-K.
 
Second, on September 17, 2015 we announced we had entered into a binding term sheet for the settlement of the Shareholder Class Action described above for $300 million. The court entered preliminary approval of the settlement on November 20, 2015 and held a final settlement fairness hearing on April 20, 2016.

Third, on September 17, 2015 we announced we had reached a memorandum of understanding regarding a $275 million settlement that could potentially cover approximately 1,400 personal injury claimants who have lawsuits pending in the multidistrict litigation or who have otherwise asserted claims related to the Ignition Switch Recall or certain other recalls announced in 2014. In December 2015 the court overseeing the multidistrict litigation established a qualified settlement fund and appointed a special master to administer certain facets of the settlement pursuant to the terms of the memorandum of understanding. The special master commenced his work in the three months ended December 31, 2015 and his work continues.

The total amount accrued at March 31, 2016 for the remaining investigations, claims and/or lawsuits relating to the ignition switch recalls and other related recalls represents a combination of our best estimates and, where no such estimate is determinable, our estimate of the low end of the range of probable loss with regard to such matters. We believe it is probable that we will incur additional liabilities beyond what has already been accrued with regard to at least a portion of the remaining matters, whether through settlement or judgment; however, we are currently unable to estimate an amount or range of loss because these matters involve significant uncertainties. The ultimate resolution of these matters could have a material adverse effect on our financial position, results of operations or cash flows.

The uncertainties referenced above include the legal theory or the nature of the investigations, claims and/or lawsuits, the complexity of the facts, the results of any investigation or litigation and the timing of resolution of the investigations or litigation, including any appeals. For example, the appeal from the Bankruptcy Court’s April 2015 decision is currently pending before the Second Circuit (discussed above), as is the appeal to the district court overseeing the multidistrict litigation from the Bankruptcy Court's December 2015 judgment. The resolution of these appeals could have a substantial impact on the potential liability of GM for acts or conduct of General Motors Corporation and what claims plaintiffs may pursue against GM in the multidistrict litigation and other courts. Further, there have been only limited discussions to date concerning any potential resolution of the SEC investigation, the state attorneys general’s investigations, the various claims for economic loss, or many of the claims concerning death or personal injury not covered by the memorandum of understanding discussed previously. We will continue to consider resolution of pending matters involving ignition switch recalls and other recalls where it makes sense to do so.

GM Canada Dealers' Claim

13




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)


On February 12, 2010 a claim was filed in the Ontario Superior Court of Justice against General Motors of Canada Company (GM Canada) on behalf of a purported class of over 200 former GM Canada dealers (the Plaintiff Dealers) which had entered into wind-down agreements with GM Canada. In May 2009 in the context of the global restructuring of GM's business and the possibility that GM Canada might be required to initiate insolvency proceedings, GM Canada offered the Plaintiff Dealers the wind-down agreements to assist with their exit from the GM Canada dealer network and to facilitate winding down their operations in an orderly fashion. The Plaintiff Dealers allege that their Dealer Sales and Service Agreements were wrongly terminated by GM Canada and that GM Canada 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” Canadian Dollar $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. A number of former dealers opted out of participation in the litigation, leaving 181 dealers in the certified class. On July 8, 2015 the Ontario Superior Court dismissed the Plaintiff Dealers’ claim against GM Canada. The court also dismissed GM Canada’s counterclaim against the Plaintiff Dealers for repayment of the wind-down payments made to them by GM Canada as well as for other relief. All parties have filed notices of appeal. We anticipate that the appeal will be heard in the year ending December 31, 2016.

GM Korea Wage Litigation

Commencing on or about September 29, 2010 current and former hourly employees of GM Korea Company (GM Korea) filed eight separate group actions in the Incheon District Court in Incheon, Korea. The cases, which in aggregate involve more than 10,000 employees, allege that GM Korea failed to include bonuses and certain allowances in its calculation of Ordinary Wages due under the Presidential Decree of the Korean Labor Standards Act. On November 23, 2012 the Seoul High Court (an intermediate level appellate court) affirmed a decision of the Incheon District Court in a case involving five GM Korea employees which was contrary to GM Korea's position. GM Korea appealed to the Supreme Court of the Republic of Korea (Supreme Court). On May 29, 2014 the Supreme Court remanded the case to the Seoul High Court for consideration consistent with earlier Supreme Court precedent holding that while fixed bonuses should be included in the calculation of Ordinary Wages, claims for retroactive application of this rule would be barred under certain circumstances. On reconsideration, the Seoul High Court held in GM Korea’s favor on October 30, 2015, after which plaintiffs appealed to the Supreme Court. In July 2014 GM Korea and its labor union also agreed to include bonuses and certain allowances in Ordinary Wages retroactive to March 1, 2014. Therefore our accrual related to these cases was reclassified from a contingent liability to the Pensions liability. We estimate our reasonably possible loss in excess of amounts accrued to be 591 billion South Korean Won (equivalent to $516 million) at March 31, 2016, which relates to periods before March 1, 2014. We are also party to litigation with current and former salaried employees over allegations relating to Ordinary Wages regulation. On November 26 and 27, 2015 the Supreme Court remanded two salary cases to the Seoul High Court for a review of the merits. Both the scope of claims asserted and GM Korea's assessment of any or all of the individual claim elements may change if new information becomes available. These cases are currently pending before various courts in Korea.

Other Litigation-Related Liability and Tax Administrative Matters

Various other legal actions, governmental investigations, claims and proceedings are pending against us including matters arising out of alleged product defects; employment-related matters; governmental regulations relating to safety, emissions and fuel economy; product warranties; financial services; dealer, supplier and other contractual relationships; government regulations relating to payments to foreign companies; tax-related matters not subject to Accounting Standards Codification 740, Income Taxes (indirect tax-related matters); and environmental matters.

Indirect tax-related matters are 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. Escrow deposits may range from $400 million to $500 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, 2016.We believe that appropriate accruals have been established for losses that are probable and can be reasonably estimated. For indirect tax matters we estimate our reasonably possible loss in excess of amounts accrued to be up to approximately $900 million at March 31, 2016.


14




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

Product Liability

With respect to product liability claims (other than claims relating to the ignition switch recalls discussed above) involving our and General Motors Corporation products, we believe that any judgment against us for actual damages will be adequately covered by our recorded accruals and, where applicable, excess liability insurance coverage. In addition we indemnify dealers for certain product liability related claims including products sold by General Motors Corporation's dealers. At March 31, 2016 and December 31, 2015 liabilities of $688 million and $712 million were recorded in Accrued liabilities and Other liabilities for the expected cost of all known product liability claims plus an estimate of the expected cost for product liability claims that have already been incurred and are expected to be filed in the future for which we are self-insured. In light of vehicle recalls in recent years it is reasonably possible that our accruals for product liability claims may increase in future periods in material amounts, although we cannot estimate a reasonable range of incremental loss based on currently available information.

Ignition Switch Recall Compensation Program

In the three months ended June 30, 2014 we created a compensation program (the Program) for accident victims who died or suffered physical injury (or for their families) as a result of a faulty ignition switch related to the 2.6 million vehicles recalled in the three months ended March 31, 2014. The Program is being administered by an independent administrator and accepted claims for review from August 1, 2014 through January 31, 2015. The Program completed its claims review process in the three months ended September 30, 2015. Accident victims (or their families) that accept a payment under the Program agree to settle all claims against GM related to the accident. The following table summarizes the activity for the Program:
 
Three Months Ended
 
March 31, 2016
 
March 31, 2015
Balance at beginning of period
$
66

 
$
315

Provisions

 
150

Payments
(33
)
 
(115
)
Balance at end of period
$
33

 
$
350


Guarantees

We enter into indemnification agreements for liability claims involving products manufactured primarily by certain joint ventures. We also provide vehicle repurchase guarantees and payment guarantees on commercial loans outstanding with third parties such as dealers. These guarantees terminate in years ranging from 2016 to 2030 or upon the occurrence of specific events or are ongoing and we believe that the related potential costs incurred are adequately covered by recorded accruals. The liability recorded was $70 million and $72 million and the maximum liability, calculated as future undiscounted payments, was $3.9 billion and $2.6 billion for these guarantees at March 31, 2016 and December 31, 2015.

In some instances certain assets of the party whose debt or performance we have guaranteed may offset, to some degree, the amount of certain guarantees. Our payables to the party whose debt or performance we have guaranteed may also reduce the amount of certain guarantees. If vehicles are required to be repurchased under vehicle repurchase obligations, the total exposure would be reduced to the extent vehicles are able to be resold to another dealer.

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. Insignificant amounts have been recorded for such obligations as the majority of them are not probable or estimable at this time and the fair value of the guarantees at issuance was insignificant.

Note 11. Income Taxes

For interim income tax reporting we estimate our annual effective tax rate and apply it to our year to date ordinary income (loss). Tax jurisdictions with a projected or year to date loss for which a tax benefit cannot be realized are excluded. The tax effects 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. We have open tax years from 2006 to 2015 with various significant tax jurisdictions.


15




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

In the three months ended March 31, 2016 income tax expense of $559 million primarily resulted from tax expense attributable to entities included in our effective tax rate calculation of $775 million, partially offset by tax benefits related to tax audit settlements and deductions taken for stock investments in non-U.S. affiliates. In the three months ended March 31, 2015 income tax expense of $529 million primarily resulted from tax expense attributable to entities included in our effective tax rate calculation.

At March 31, 2016 we had $35.8 billion of net deferred tax assets consisting of: (1) net operating losses and income tax credits; (2) capitalized research expenditures; and (3) other timing differences that are available to offset future income tax liabilities.

Note 12. Restructuring and Other Initiatives

We have executed various restructuring and other initiatives and we plan to execute additional initiatives in the future, if necessary, in order to align manufacturing capacity and other costs with prevailing global automotive production and to improve the utilization of remaining facilities. To the extent these programs involve voluntary separations, no liabilities are generally recorded until offers to employees are accepted. If employees are involuntarily terminated, a liability is generally recorded at the communication date. Related charges are recorded in Automotive cost of sales and Automotive selling, general and administrative expense. The following tables summarize the reserves and charges related to restructuring and other initiatives, including postemployment benefit reserves and charges, by segment:
 
GMNA
 
GME
 
GMIO
 
GMSA
 
Total
Balance at January 1, 2016
$
143

 
$
270

 
$
161

 
$
7

 
$
581

Additions, interest accretion and other
241

 
5

 
44

 
15

 
305

Payments
(23
)
 
(85
)
 
(31
)
 
(18
)
 
(157
)
Revisions to estimates and effect of foreign currency
6

 
12

 
6

 

 
24

Balance at March 31, 2016(a)
$
367

 
$
202

 
$
180

 
$
4

 
$
753

 
GMNA
 
GME
 
GMIO
 
GMSA
 
Total
Balance at January 1, 2015
$
459

 
$
751

 
$
166

 
$
2

 
$
1,378

Additions, interest accretion and other
9

 
127

 
37

 
11

 
184

Payments
(19
)
 
(385
)
 
(22
)
 
(11
)
 
(437
)
Revisions to estimates and effect of foreign currency
(11
)
 
(53
)
 
(10
)
 

 
(74
)
Balance at March 31, 2015(a)
$
438

 
$
440

 
$
171

 
$
2

 
$
1,051

________
(a)
Included temporary layoff benefits of $15 million and $353 million at March 31, 2016 and 2015 for GMNA.

In the three months ended March 31, 2016 restructuring and other initiatives related primarily to: (1) charges of $240 million at GMNA related to the cash severance incentive program to qualified U.S. hourly employees under our 2015 labor agreement with the International Union, United Automobile, Aerospace and Agriculture Implement Workers of America (UAW); and (2) separation and other programs in Australia, Korea and India and the withdrawal of the Chevrolet brand from Europe which collectively had a total cost since inception of $738 million and affected a total of approximately 4,560 employees at GMIO through March 31, 2016. We expect to complete these programs in GMIO in 2017 and incur additional related restructuring and other charges of approximately $170 million.

In the three months ended March 31, 2015 restructuring and other initiatives related primarily to: (1) the change in our business model in Russia for which we recorded pre-tax charges of $428 million at GME and GMIO, of which $121 million is reflected in the table above; and (2) separation programs in Australia, Korea, Thailand and Indonesia and the withdrawal of the Chevrolet brand from Europe which collectively had a total cost since inception of $551 million at GMIO through March 31, 2015.

Note 13. Stockholders' Equity

Preferred and Common Stock

We have 2.0 billion shares of preferred stock and 5.0 billion shares of common stock authorized for issuance. At March 31, 2016 and December 31, 2015 we had 1.5 billion shares of common stock issued and outstanding. In each of the three months ended

16




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

March 31, 2016 and 2015 we purchased 10 million shares of our outstanding common stock for $300 million and $375 million as part of the common stock repurchase program announced in March 2015, which our Board of Directors increased and extended in January 2016. Our total dividends declared on common stock were $587 million and $485 million in the three months ended March 31, 2016 and 2015, respectively.

Accumulated Other Comprehensive Loss

The following table summarizes the significant components of Accumulated other comprehensive loss:
 
Three Months Ended
 
March 31, 2016
 
March 31, 2015
Foreign Currency Translation Adjustments
 
 
 
Balance at beginning of period
$
(2,034
)
 
$
(1,064
)
Other comprehensive income before reclassification adjustment, net of tax(a)
71

 
22

Reclassification adjustment, net of tax(a)(b)
(5
)
 
170

Other comprehensive income, net of tax(a)
66

 
192

Other comprehensive income (loss) attributable to noncontrolling interests, net of tax(a)
19

 
(9
)
Balance at end of period
$
(1,949
)
 
$
(881
)
Defined Benefit Plans, Net
 
 
 
Balance at beginning of period
$
(5,999
)
 
$
(7,006
)
Other comprehensive income (loss) before reclassification adjustment, net of tax(a)
(148
)
 
488

Reclassification adjustment, net of tax(a)(c)
26

 
66

Other comprehensive income (loss), net of tax(a)
(122
)
 
554

Balance at end of period
$
(6,121
)
 
$
(6,452
)
_______
(a)
The income tax effect was insignificant in the three months ended March 31, 2016 and 2015.
(b)
Related to the change of our business model in Russia in the three months ended March 31, 2015. Included in Automotive cost of sales.
(c)
Included in the computation of net periodic pension and OPEB (income) expense. Refer to Note 9 for additional information.

Note 14. Earnings Per Share

Basic and diluted earnings per share are computed by dividing Net income attributable to common stockholders by the weighted-average common shares outstanding in the period. Diluted earnings per share is computed by giving effect to all potentially dilutive securities that are outstanding. The following table summarizes basic and diluted earnings per share:
 
Three Months Ended
 
March 31, 2016
 
March 31, 2015
Basic earnings per share
 
 
 
Net income attributable to common stockholders
$
1,953

 
$
945

Weighted-average common shares outstanding
1,546

 
1,617

Basic earnings per common share
$
1.26

 
$
0.58

Diluted earnings per share
 
 
 
Net income attributable to common stockholders – basic
$
1,953

 
$
945

Less: earnings adjustment for dilutive stock compensation rights
(1
)
 

Net income attributable to common stockholders – diluted
$
1,952

 
$
945

 
 
 
 
Weighted-average common shares outstanding – basic
1,546

 
1,617

Dilutive effect of warrants and awards under stock incentive plans
34

 
69

Weighted-average common shares outstanding – diluted
1,580

 
1,686

 
 
 
 
Diluted earnings per common share
$
1.24

 
$
0.56


17




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)


In the three months ended March 31, 2016 and 2015 unvested stock options to purchase 26 million shares and warrants to purchase 46 million shares, respectively, were not included in the computation of diluted earnings per share because the stock options' and warrants' exercise prices were greater than the average market price of the common shares. The stock options had not yet been granted and therefore were not outstanding in the three months ended March 31, 2015 and the warrants expired December 31, 2015.

Note 15. Segment Reporting

We analyze the results of our business through the following segments: GMNA, GME, GMIO, GMSA and GM Financial. The chief operating decision maker evaluates the operating results and performance of our automotive segments through income before interest and income taxes, as adjusted for additional amounts, which is presented net of noncontrolling interests. The chief operating decision maker evaluates GM Financial through income before income taxes-adjusted because he/she believes interest income and interest expense are part of operating results when assessing and measuring the operational and financial performance of the segment. Each segment has a manager responsible for executing our strategies. Our automotive manufacturing operations are integrated within the segments, benefit from broad-based trade agreements and are subject to regulatory requirements. While not all vehicles within a segment are individually profitable on a fully allocated cost basis, those vehicles attract customers to dealer showrooms and help maintain sales volumes for other, more profitable vehicles and contribute towards meeting required fuel efficiency standards. Because of these and other factors, we do not manage our business on an individual brand or vehicle basis.

Substantially all of the cars, trucks, crossovers and automobile parts produced are marketed through retail dealers in North America and through distributors and dealers outside of North America, the substantial majority of which are independently owned. In addition to the products sold to dealers for consumer retail sales, cars, trucks and crossovers are also sold to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies and governments. Fleet sales are completed through the dealer network and in some cases directly with fleet customers. Retail and fleet customers can obtain a wide range of after-sale vehicle services and products through the dealer network, such as maintenance, light repairs, collision repairs, vehicle accessories and extended service warranties.

GMNA primarily meets the demands of customers in North America with vehicles developed, manufactured and/or marketed under the Buick, Cadillac, Chevrolet and GMC brands. The demands of customers outside North America are primarily met with vehicles developed, manufactured and/or marketed under the Buick, Cadillac, Chevrolet, GMC, Holden, Opel and Vauxhall brands. We also have equity ownership stakes directly or indirectly in entities through various regional subsidiaries, primarily in Asia. These companies design, manufacture and/or market vehicles under the Baojun, Buick, Cadillac, Chevrolet, Jiefang and Wuling brands.

Our automotive operations' interest income and interest expense are recorded centrally in Corporate. Corporate assets consist primarily of cash and cash equivalents, marketable securities and intercompany balances. All intersegment balances and transactions have been eliminated in consolidation. The following tables summarize key financial information by segment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

18




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

 
At and For the Three Months Ended March 31, 2016
 
GMNA
 
GME
 
GMIO
 
GMSA
 
Corporate
 
Eliminations
 
Total Automotive
 
GM Financial
 
Eliminations
 
Total
Net sales and revenue
$
26,463

 
$
4,681

 
$
2,679

 
$
1,343

 
$
29

 
 
 
$
35,195

 
$
2,075

 
$
(5
)
 
$
37,265

Income (loss) before automotive interest and taxes-adjusted
$
2,296

 
$
(6
)
 
$
379

 
$
(67
)
 
$
(169
)
 
 
 
$
2,433

 
$
225

 
$
(3
)
 
$
2,655

Adjustments(a)
$

 
$

 
$

 
$

 
$
(60
)
 
 
 
$
(60
)
 
$

 
$

 
(60
)
Automotive interest income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
44

Automotive interest expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(127
)
Net (loss) attributable to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(22
)
Income before income taxes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,490

Income tax expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(559
)
Net loss attributable to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
22

Net income attributable to common stockholders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
1,953

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets(b)
$
95,013

 
$
14,939

 
$
21,234

 
$
7,340

 
$
19,281

 
$
(25,287
)
 
$
132,520

 
$
72,907

 
$
(1,809
)
 
$
203,618

Depreciation and amortization
$
1,021

 
$
103

 
$
108

 
$
57

 
$
5

 
$
(2
)
 
$
1,292

 
$
930

 
$

 
$
2,222

Impairment charges
$
12

 
$
26

 
$
32

 
$

 
$

 
$

 
$
70

 
$

 
$

 
$
70

__________
(a)
Charges for legal related matters in Corporate.
(b)
Includes investment of $500 million in Lyft, Inc. (Lyft), a privately held company, in GMNA, which was accounted for as a cost method investment.
 
At and For the Three Months Ended March 31, 2015
 
GMNA
 
GME
 
GMIO
 
GMSA
 
Corporate
 
Eliminations
 
Total Automotive
 
GM Financial
 
Eliminations
 
Total
Net sales and revenue
$
24,676

 
$
4,449

 
$
3,112

 
$
2,092

 
$
35

 
 
 
$
34,364

 
$
1,354

 
$
(6
)
 
$
35,712

Income (loss) before automotive interest and taxes-adjusted
$
2,182

 
$
(239
)
 
$
371

 
$
(214
)
 
$
(229
)
 
 
 
$
1,871

 
$
214

 
$
(3
)
 
$
2,082

Adjustments(a)
$
32

 
$
(337
)
 
$
(92
)
 
$

 
$
(150
)
 
 
 
$
(547
)
 
$

 
$

 
(547
)
Automotive interest income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
49

Automotive interest expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(110
)
Net (loss) attributable to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(37
)
Income before income taxes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,437

Income tax expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(529
)
Net loss attributable to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
37

Net income attributable to common stockholders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
945

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
94,789

 
$
10,077

 
$
22,961

 
$
9,066

 
$
20,342

 
$
(25,305
)
 
$
131,930

 
$
49,346

 
$
(1,687
)
 
$
179,589

Depreciation and amortization
$
926

 
$
80

 
$
108

 
$
76

 
$
4

 
$
(1
)
 
$
1,193

 
$
345

 
$

 
$
1,538

Impairment charges
$
175

 
$
41

 
$
3

 
$

 
$

 
$

 
$
219

 
$

 
$

 
$
219

__________
(a)
Consists of net insurance recoveries related to flood damage in GMNA; costs related to the change in our business model in Russia in GME and GMIO, which is net of non-controlling interests; and charge related to the ignition switch recall compensation program in Corporate.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note 16. Subsequent Event

We plan to acquire all of the outstanding capital stock of Cruise Automation, Inc., an autonomous vehicle technology company. The transaction is subject to customary closing conditions and we expect to be able to close in the three months ending June 30, 2016.

*  *  *  *  *  *  *

19




GENERAL MOTORS COMPANY AND SUBSIDIARIES


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Basis of Presentation

This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the accompanying condensed consolidated financial statements and the audited consolidated financial statements and notes thereto included in our 2015 Form 10-K.

Forward-looking statements in this MD&A are not guarantees of future performance and may involve risks and uncertainties that could cause actual results to differ materially from those projected. Refer to the "Forward-Looking Statements" section of this MD&A and the "Risk Factors" section of our 2015 Form 10-K for a discussion of these risks and uncertainties. Except for per share amounts or as otherwise specified, dollar amounts presented within tables are stated in millions.

Non-GAAP Measures

Management uses earnings before interest and taxes (EBIT)-adjusted to review the operating results of our automotive segments because it excludes interest income, interest expense and income taxes as well as certain additional adjustments. GM Financial uses income before income taxes-adjusted because management believes interest income and interest expense are part of operating results when assessing and measuring the operational and financial performance of the segment. Examples of adjustments to EBIT and GM Financial's income before income taxes include certain impairment charges related to goodwill, other long-lived assets and investments; certain gains or losses on the settlement/extinguishment of obligations; and gains or losses on the sale of non-core investments. Refer to Note 15 to our condensed consolidated financial statements for our reconciliation of these non-GAAP measures to the most directly comparable financial measure under U.S. GAAP, Net income attributable to common stockholders.

Management uses earnings per share (EPS)-diluted-adjusted to review our consolidated diluted earnings per share results on a consistent basis. EPS-diluted-adjusted is calculated as net income attributable to common stockholders less certain adjustments noted above for EBIT-adjusted on an after-tax basis as well as certain income tax adjustments divided by weighted-average common shares outstanding - diluted.

Management uses return on invested capital (ROIC) to review investment and capital allocation decisions. We define ROIC as EBIT-adjusted for the trailing four quarters divided by average net assets, which is considered to be the average equity balances adjusted for certain assets and liabilities during the same period.

Management uses adjusted free cash flow to review the liquidity of our automotive operations. We measure adjusted free cash flow as cash flow from operations less capital expenditures adjusted for management actions, primarily related to strengthening our balance sheet, such as accrued interest on prepayments of debt and discretionary contributions to employee benefit plans. Refer to the “Liquidity and Capital Resources” section of this MD&A for our reconciliation of this non-GAAP measure to the most directly comparable financial measure under U.S. GAAP, Net cash provided by (used in) operating activities.

Management uses these non-GAAP measures in its financial and operational decision making processes, for internal reporting and as part of its forecasting and budgeting processes as they provide additional transparency of our core operations. These measures allow management and investors to view operating trends, perform analytical comparisons and benchmark performance between periods and among geographic regions. Our calculation of these non-GAAP measures may not be comparable to similarly titled measures of other companies due to potential differences between companies in the method of calculation. As a result the use of these non-GAAP measures has limitations and should not be considered superior to, in isolation from or as a substitute for, related U.S. GAAP measures.

The following table reconciles EPS-diluted-adjusted to its most comparable financial measure under U.S. GAAP diluted earnings per common share:
 
Three Months Ended
 
March 31, 2016
 
March 31, 2015