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EX-32.1 - EXHIBIT 32.1 OFFICERS' CERTIFICATIONS OF PERIODIC REPORT PURSUANT TO SECTION 906 - General Motors Financial Company, Inc.gmfexhibit321officerscerti.htm
EX-31.1 - EXHIBIT 31.1 OFFICERS' CERTIFICATIONS OF PERIODIC REPORT PURSUANT TO SECTION 302 - General Motors Financial Company, Inc.gmfexhibit311officerscerti.htm
EX-23.1 - EXHIBIT 23.1 CONSENT OF INDEPENDENT REGISTERED ACCOUNTING FIRM - General Motors Financial Company, Inc.gmfexhibit231consentofinde.htm
EX-12.1 - EXHIBIT 12.1 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES - General Motors Financial Company, Inc.gmfexhibit12112312016.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________________ 
FORM 10-K
(Mark One)
ý
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period ________________ to ________________
Commission file number 1-10667
______________________________________________ 
General Motors Financial Company, Inc.
(Exact name of registrant as specified in its charter)
Texas
 
75-2291093
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
801 Cherry Street, Suite 3500, Fort Worth, Texas 76102
(Address of principal executive offices, including Zip Code)
(817) 302-7000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each Exchange on which registered
5.250% Senior Notes due 2026
 
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
(Title of each class)
 ______________________________________________ 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes    ý    No    ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes    ¨    No    ý
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    ý   No    ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 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    ý    No    ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K.  ý
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 the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
    Large accelerated filer  o
 
    Accelerated filer  o
 
Non-accelerated filer  x
 
Smaller Reporting Company  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes    ¨    No    ý
As of February 6, 2017, there were 505 shares of the registrant's common stock, par value $1.00 per share, outstanding. All of the registrant's common stock is owned by General Motors Holdings LLC.

DOCUMENTS INCORPORATED BY REFERENCE
NONE

The registrant is a wholly-owned subsidiary of General Motors Company and meets the conditions set forth in General Instructions (I)(1)(a) and (b) of Form 10-K and is therefore filing this Form 10-K with a reduced disclosure format as permitted by Instruction I(2).




INDEX
 
 
 
Page
 
Forward-Looking Statements
 
PART I
 
Item 1.
Business
Item 1A.
Risk Factors
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4.
Mine Safety Disclosures
 
PART II
 
Item 5.
Market for Registrant's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.
Selected Financial Data
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
 
Consolidated Balance Sheets
 
Consolidated Statements of Income and Comprehensive Income
 
Consolidated Statements of Shareholder's Equity
 
Consolidated Statements of Cash Flows
 
Notes to Consolidated Financial Statements
 
Note 1. Summary of Significant Accounting Policies
 
Note 2. Related Party Transactions
 
Note 3. Acquisition of Equity Interest
 
Note 4. Finance Receivables
 
Note 5. Leased Vehicles
 
Note 6. Goodwill
 
Note 7. Equity in Net Assets of Non-consolidated Affiliates
 
Note 8. Debt
 
Note 9. Variable Interest Entities
 
Note 10. Derivative Financial Instruments and Hedging Activities
 
Note 11. Commitments and Contingencies
 
Note 12. Parent Company Stock-Based Compensation
 
Note 13. Employee Benefit Plans
 
Note 14. Income Taxes
 
Note 15. Supplemental Cash Flow Information
 
Note 16. Segment Reporting and Geographic Information
 
Note 17. Accumulated Other Comprehensive Loss
 
Note 18. Regulatory Capital and Other Regulatory Matters
 
Note 19. Quarterly Financial Data (unaudited)
 
Note 20. Guarantor Consolidating Financial Statements
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
 
 
 
 
 
 



 
PART III
 
Directors and Executives Officers and Corporate Governance
Executive and Director Compensation
Security Ownership of Certain Beneficial Owners and Management
Certain Relationships, Related Transactions and Director Independence
Principal Accounting Fees and Services
 
PART IV
 
Item 15.
Exhibits and Financial Statement Schedules
 
Signatures
 
Index to Exhibits


GENERAL MOTORS FINANCIAL COMPANY, INC.

Forward-Looking Statements
This Form 10-K contains several "forward-looking statements." Forward-looking statements are those that use words such as "believe," "expect," "intend," "plan," "may," "likely," "should," "estimate," "continue," "future" or "anticipate" and other comparable expressions. These words indicate future events and trends. Forward-looking statements are our current views with respect to future events and financial performance. These forward-looking statements are subject to many assumptions, risks and uncertainties that could cause actual results to differ significantly from historical results or from those anticipated by us. The most significant risks are detailed from time to time in our filings and reports with the Securities and Exchange Commission ("SEC"), including this Annual Report on Form 10-K for the year ended December 31, 2016. It is advisable not to place undue reliance on our forward-looking statements. We undertake no obligation to, and do not, publicly update or revise any forward-looking statements, except as required by federal securities laws, whether as a result of new information, future events or otherwise.
The following factors are among those that may cause actual results to differ materially from historical results or from the forward-looking statements:
General Motors Company's ("GM") ability to sell new vehicles that we finance in the markets we serve in North America, Latin America, China and Europe, particularly the United Kingdom where automobile sales may be negatively impacted due to the passage of the referendum to discontinue its membership in the European Union;
the viability of GM-franchised dealers that are commercial loan customers;
the availability and cost of sources of financing;
the level of net charge-offs, delinquencies and prepayments on the loans and leases we originate;
the effect, interpretation or application of new or existing laws, regulations, court decisions and accounting pronouncements;
the prices at which used cars are sold in the wholesale auction markets;
vehicle return rates and the residual value performance on vehicles we lease;
interest rate and currency exchange rate fluctuations;
competition;
our ability to manage risks related to security breaches and other disruptions to our networks and systems;
changes in general economic and business conditions; and
changes in business strategy, including expansion of product lines and credit risk appetite, acquisitions and divestitures.
If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected, estimated or projected.

PART I
Item 1. Business
General General Motors Financial Company, Inc. (sometimes referred to as "we," "us," "our," the "Company," or "GM Financial"), the wholly-owned captive finance subsidiary of GM, is a global provider of automobile finance solutions. We were acquired by GM in October 2010 to provide captive financing capabilities in support of GM’s U.S. and Canadian markets. In 2013, we expanded the markets we serve by acquiring Ally Financial Inc.'s ("Ally Financial") auto finance operations in Europe and Latin America. In January 2015, we completed the acquisition of an equity interest in SAIC-GMAC Automotive Finance Company Limited (“SAIC-GMAC”), a joint venture that conducts auto finance operations in China, from Ally Financial. Our global footprint now covers over 85% of GM’s worldwide market, and we provide auto finance solutions around the world. Except as otherwise specified, amounts presented within the tables are stated in millions.
We offer substantially similar products and services throughout many different regions, subject to local regulations and market conditions. We evaluate our business in two operating segments: North America ("the North America Segment") and international ("the International Segment"). The North America Segment includes our operations in the U.S. and Canada. The International Segment includes our operations in all other countries.
North America Segment Our North America Segment includes operations in the U.S. and Canada. We have been operating in the automobile finance business in the U.S. since September 1992. Our retail automobile finance programs include prime and sub-prime lending and full credit spectrum leasing offered through GM-franchised dealers under the "GM Financial" brand. We also offer a sub-prime lending product through non-GM-franchised and select independent dealers under the "AmeriCredit" brand. Our sub-prime lending program is designed to serve customers who have limited access to automobile financing through banks and credit unions. We therefore generally charge higher rates than those charged by banks and credit unions and expect to sustain

1

GENERAL MOTORS FINANCIAL COMPANY, INC.

a higher level of credit losses than on prime lending. Our commercial lending programs are offered primarily to our GM-franchised dealer customers and their affiliates.
International Segment Our International Segment includes operations in the United Kingdom (U.K), Germany, Mexico and Brazil, as well as other countries across Europe and Latin America and in China through our joint venture relationship with SAIC-GMAC. The international operations were originally a part of General Motors Acceptance Corporation, the former captive finance subsidiary of GM. Due to this longstanding relationship, the international operations have substantial business related to GM and its dealer network. The retail lending and leasing programs in our International Segment focus on financing new GM vehicles and select used vehicles, predominantly for customers with prime credit scores. We also offer finance and/or car-related insurance products through third parties, such as payment protection insurance, gap, extended warranty, and motor insurance.
Refer to Note 16 to our consolidated financial statements for more information relating to our operating segments.
Retail Finance In our retail finance business, use of the term "loan" refers to retail installment contracts we purchase from automobile dealers or other vehicle financing products.
Marketing As an indirect auto finance provider, we focus our marketing activities on automobile dealers. We primarily pursue franchised dealerships with new and used car operations; however, we also conduct business with a limited number of independent dealerships. We generally finance new GM vehicles, moderately-priced new vehicles from other manufacturers, and later-model, low-mileage used vehicles.
In both segments, we maintain non-exclusive relationships with the dealers and actively monitor our dealer relationships with the objective of maximizing the volume of retail financing applications received from dealerships with whom we do business that meet our underwriting standards and profitability objectives. Due to the non-exclusive nature of our relationships with dealers, the dealers retain discretion to determine whether to obtain financing from us or from another source for a customer seeking to make a vehicle purchase.
Subvention Programs GM offers subvention programs, under which GM provides us cash payments in order for us to be able to provide for lower payments on finance and lease contracts we purchase from GM's dealership network, making credit more affordable to customers purchasing vehicles manufactured by GM.
Origination Data Our business strategy is to help GM sell vehicles while earning an appropriate risk-adjusted return. This includes increasing new GM automobile sales by offering a broad spectrum of competitive financing programs. Our increasing linkage with GM in our North America Segment is evidenced by the percentage of loans and leases we originate for new GM vehicles, which increased to 88% of our total retail originations volume in 2016, up from 84% in 2015 and 65% in 2014.
The following table sets forth the retail loan and lease origination levels for the North America and International Segments:
 
Years Ended December 31,
 
2016
 
2015
 
2014
 
North America
 
International(a)
 
Total
 
North America
 
International(a)
 
Total
 
North America
 
International
 
Total
New GM
$
32,150

 
$
5,916

 
$
38,066

 
$
26,178

 
$
5,700

 
$
31,878

 
$
8,380

 
$
7,261

 
$
15,641

Other
4,510

 
855

 
5,365

 
4,874

 
984

 
5,858

 
4,560

 
1,053

 
5,613

Total
$
36,660

 
$
6,771

 
$
43,431

 
$
31,052

 
$
6,684

 
$
37,736

 
$
12,940

 
$
8,314

 
$
21,254

________________  
(a) Originations trends in the International Segment were negatively impacted by foreign currency translation.
Underwriting We utilize proprietary credit scoring systems to support our credit approval process. The credit scoring systems were developed through statistical analysis of customer demographics, credit bureau attributes and portfolio databases and are tailored to each country where we conduct business. Credit scoring is used to differentiate credit applications and to statistically rank-order credit risk in terms of expected default rates, which enables us to evaluate credit applications for approval, contract pricing and structure.
In addition to our proprietary credit scoring systems, we utilize other underwriting guidelines. These underwriting guidelines are comprised of numerous evaluation criteria, including, but not limited to: (i) identification and assessment of the applicant's willingness and capacity to repay the loan or lease, including consideration of credit history and performance on past and existing obligations; (ii) credit bureau data; (iii) collateral identification and valuation; (iv) payment structure and debt ratios; (v) insurance information; (vi) employment, income and residency verifications, as considered appropriate; and (vii) in certain cases, the creditworthiness of a co-obligor. These underwriting guidelines, and the minimum credit risk profiles of applicants we will approve

2

GENERAL MOTORS FINANCIAL COMPANY, INC.

as rank-ordered by our credit scorecards, are subject to change from time to time based on economic, competitive and capital market conditions as well as our overall origination strategies.
Servicing Our business strategy includes increasing the loyalty and retention of GM customers through our customer service activities. Our servicing activities include collecting and processing customer payments, responding to customer inquiries, initiating contact with customers who are delinquent, maintaining our security interest in financed vehicles, monitoring physical damage insurance coverage of financed vehicles, arranging for the repossession of financed vehicles, liquidation of collateral and pursuit of deficiencies when appropriate.
Operating Leases Most of our operating leases are closed-end leases; therefore, we assume the residual risk on the leased vehicle. The lessee may purchase the leased vehicle at lease end by paying the purchase price stated in the lease contract, which equals the contract residual value determined at origination of the lease, plus any fees and all other amounts owed under the lease. If the lessee decides not to purchase the leased vehicle, the lessee must return it to the dealer by the lease's scheduled lease maturity date. Extensions may be granted to the lessee for up to six months. If the lessee extends the maturity date on their lease contract, the lessee is responsible for additional monthly payments until the leased vehicle is returned or purchased.
A lessee may terminate a lease prior to the original scheduled lease maturity date. In order to terminate the lease prior to the scheduled lease maturity date, the lessee must pay the lesser of (i) all remaining monthly payments due under the lease, plus any charges for excess mileage, wear and use or (ii) the amount by which the carrying value of the lease exceeds the net sale proceeds received when the leased vehicle is sold.
We seek to maximize net sales proceeds on returned leased vehicles. Net sales proceeds equal gross proceeds less fees and costs for reconditioning and transporting the leased vehicles. We sell returned leased vehicles through our exclusive online channel, which is available to the dealer receiving the returned vehicle and other GM dealerships prior to broader dealer access and, if necessary, by disposition through our nationwide wholesale auction partners.
We have expanded our leasing and prime lending programs through GM-franchised dealerships in the U.S.; therefore, leasing and prime lending have become a larger percentage of our originations and retail portfolio balance. We have been the exclusive subvented lease provider for GM in the U.S. since April 2015 and the exclusive subvented loan provider for GM in the U.S. since January 2016. We define prime lending as lending to customers with FICO scores or equivalents of 680 and greater, near-prime lending as lending to customers with FICO scores or equivalents of 620 to 679, and sub-prime lending as lending to customers with FICO scores or equivalents of less than 620. The following table presents our retail loan and lease originations in the North America Segment by FICO score band or equivalents:
 
Years ended December 31,
 
2016
 
2015
 
2014
 
Amount
 
Percentage
 
Amount
 
Percentage
 
Amount
 
Percentage
Prime
$
25,801

 
70.4
%
 
$
19,978

 
64.3
%
 
$
5,060

 
39.1
%
Near-prime
4,671

 
12.7

 
4,628

 
14.9

 
1,904

 
14.7

Sub-prime
6,188

 
16.9

 
6,446

 
20.8

 
5,976

 
46.2

Total originations
$
36,660

 
100.0
%
 
$
31,052

 
100.0
%
 
$
12,940

 
100.0
%
The following table summarizes the number of vehicles included in leased vehicles, net by vehicle type at December 31, 2016 and 2015 (in thousands):
 
December 31,
 
2016
 
2015
Cars
430

 
271

Trucks
224

 
121

Crossovers
681

 
401

Total
1,335

 
793


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GENERAL MOTORS FINANCIAL COMPANY, INC.

The following table summarizes additional information for operating leases (in thousands):
 
Years ended December 31,
 
2016
 
2015
 
2014
Operating leases originated(a)
680

 
553

 
178

Operating leases terminated(b)
138

 
62

 
30

Operating lease vehicles returned(c)
69

 
25

 
12

Return rate(d)
50
%
 
41
%
 
39
%
________________ 
(a)
Operating leases originated represents the number of operating leases we purchased during a given period.
(b)
Operating leases terminated represents the number of vehicles for which the lease has ended during a given period.
(c)
Operating lease vehicles returned represents the number of vehicles returned to us for remarketing at the end of the lease term.
(d)
Return rates are calculated as the number of operating leases returned divided by the number of operating leases terminated.
Operating leases originated has increased due to our exclusive subvention arrangement with GM, which was implemented during 2015. Operating leases terminated and operating lease vehicles returned increased due to the growth of the lease portfolio. Due to the current age and size of our lease portfolio, the current return rate is lower than we expect it to be in future periods as our lease portfolio grows and matures.
Commercial Finance Commercial lending products include floorplan financing, also known as wholesale or inventory financing, which is lending to finance vehicle inventory, as well as dealer loans, which are loans to finance improvements to dealership facilities, to provide working capital, and to purchase and/or finance dealership real estate. Other commercial products include financing for parts and accessories, dealer fleets and storage centers.
Floorplan Financing We support the financing of new and used vehicle inventory primarily for our GM-franchised dealerships and their affiliates before sale or lease to the retail customer. Financing is provided through lines of credit extended to individual dealerships. In general, each floorplan line is secured by all financed vehicles and by other dealership assets and, when available, the continuing personal guarantee of the dealership's owners. Under certain circumstances, such as repossession of dealership inventory, GM and other manufacturers may be obligated by applicable law, or under agreements with us, to reassign or to repurchase new vehicle inventory within certain mileage and model year parameters, further minimizing our risk. The amount we advance to a dealership for new vehicles purchased through the manufacturer is equal to 100% of the wholesale invoice price of new vehicles, which includes destination and other miscellaneous charges, and a price rebate, known as a holdback, from the manufacturer to the dealer in varying amounts stated as a percentage of the invoice price. We advance the loan proceeds directly to the manufacturer. To support a dealership's used car inventory needs, we advance funds to the dealership or auction to purchase used vehicles for inventory based on the appropriate wholesale book value for the region in which the dealer is located.
Floorplan lending is typically structured to yield interest at a floating rate indexed to an appropriate benchmark rate. The rate for a particular dealership is based on, among other things, the dealership's creditworthiness, the amount of the credit line, the dealer's risk rating and whether or not the dealership is in default. Interest on floorplan loans is generally payable monthly. GM offers floorplan interest subvention, under which GM makes payments to us to cover certain periods of interest on certain floorplan loans.
Dealer Loans We also make loans to finance parts and accessories as well as improvements to dealership facilities, to provide working capital and to purchase and finance dealership real estate. These loans are typically secured by mortgages or deeds of trust on dealership land and buildings, security interests in other dealership assets and often the continuing personal guarantees from the owners of the dealerships and/or the real estate, as applicable. Dealer loans are structured to yield interest at fixed or floating rates, which are indexed to an appropriate benchmark rate. Interest on dealer loans is generally payable monthly.
Underwriting Each dealership is assigned a risk rating based on various factors, including, but not limited to, capital sufficiency, operating performance, financial outlook and credit and payment history, if available. The risk rating affects loan pricing and guides management of the account. We monitor the level of borrowing under each dealership's account daily. When a dealer's outstanding balance exceeds the availability on any given credit line with that dealership, we may reallocate balances across existing lines, temporarily suspend the granting of additional credit, increase the dealer's credit line or take other actions following an evaluation and analysis of the dealer's financial condition and the cause of the excess or overline. Under the terms of the credit agreement with the dealership, we may call the floorplan loans due and payable and receive payment typically within 60 days of the call.

4

GENERAL MOTORS FINANCIAL COMPANY, INC.

Servicing Commercial loan servicing activities include dealership customer service, account maintenance, exception processing, credit line monitoring and adjustment and insurance monitoring. In the North America Segment, our commercial lending servicing operations are centrally located, while in our International Segment, they are conducted primarily in-country, usually located within retail lending and servicing centers.
Upon the sale or lease of a financed vehicle, the dealer must repay the advance on the vehicle according to the repayment terms. These repayment terms may vary based on the dealer's risk rating. As a result, funds advanced may be repaid in a short time period, depending on the length of time the dealer holds the vehicle until its sale. We periodically inspect and verify that the financed vehicles are on the dealership lot and available for sale. The timing of the verifications varies and no advance notice is given to the dealer. Among other things, verifications are intended to determine dealer compliance with its credit agreement as to repayment terms and to determine the status of our collateral.
Sources of Financing We primarily finance our loan, lease and commercial origination volume through the use of our secured and unsecured credit facilities, through public and private securitization transactions where such markets are developed, through the issuance of unsecured debt in the public markets and by accepting deposits from retail banking customers in Germany. Generally, we seek to fund our operations through local sources of funding to minimize currency and country risk, although we may issue debt globally in order to enhance funding source diversification and support financing needs for the U.S. As such, the mix of funding sources varies from country to country, based on the characteristics of our earning assets and the relative development of the capital markets in each country. Our operations in the U.S., Canada, Latin America and China are generally funded locally. Our European operations obtain most of their funding from local sources and also borrow funds from affiliated companies. We actively monitor the capital markets and seek to optimize our mix of funding sources to minimize our cost of funds.
Secured Credit Facilities Some loans and leases are funded using secured credit facilities with participating banks providing financing either directly or through institutionally-managed conduits. Under these funding agreements, we transfer financial assets to special purpose finance subsidiaries. These subsidiaries, in turn, issue notes to the bank participants or agents, collateralized by such financial assets. The bank participants or agents provide funding under the notes to the subsidiaries pursuant to an advance formula, and the subsidiaries forward the funds to us in consideration for the transfer of financial assets. While these subsidiaries are included in our consolidated financial statements, these subsidiaries are separate legal entities and the assets held by these subsidiaries are legally owned by them and are not available to our creditors or creditors of our other subsidiaries. Advances under our funding agreements bear interest at commercial paper, London Interbank Offered Rates ("LIBOR"), Canadian Dollar Offered Rate ("CDOR"), Euro Interbank Offered Rate ("EURIBOR"), The Interbank Equilibrium Interest Rate ("TIIE") or prime rates plus a credit spread and specified fees, depending upon the source of funds provided by the bank participants or agents. In certain markets in the International Segment, we also finance loans through the sale of receivables to banks under a full recourse arrangement.
Unsecured Credit Facilities The International Segment uses unsecured bank credit facilities as a source of funding. Both committed and uncommitted credit facilities are utilized. The financial institutions providing the uncommitted facilities are not obligated to advance funds under them.
Securitizations We also fund loans and leases through public and private securitization transactions. Proceeds from securitizations are used primarily to fund initial cash credit enhancement requirements in the securitization and to pay down borrowings under our credit facilities, thereby increasing availability thereunder for further originations.
In our securitizations, we transfer loans or lease-related assets to securitization trusts ("Trusts"), which issue one or more classes of asset-backed securities. The asset-backed securities are in turn sold to investors. When we transfer loans or lease-related assets to a Trust, we make certain representations and warranties regarding the loans and lease-related assets. These representations and warranties pertain to specific aspects of the loans or leases, including the origination of the loans or leases, the obligors of the loans or leases, the accuracy and legality of the records, schedules containing information regarding the loans or leases, the financed vehicles securing the loans or leases, the security interests in the loans or leases, specific characteristics of the loans or leases, and certain matters regarding our servicing of the loans or leases, but do not pertain to the underlying performance of the loans or leases. Upon the breach of one of these representations or warranties (subject to any applicable cure period) that materially and adversely affects the noteholders' interest in any loan or lease, we are obligated to repurchase the loan or lease from the Trust. Historically, repurchases due to a breach of a representation or warranty have been insignificant.
We utilize senior-subordinated securitization structures which involve the public and private sale of subordinated asset-backed securities to provide credit enhancement for the senior, or highest rated, asset-backed securities. The level of credit enhancement in future senior-subordinated securitizations will depend, in part, on the net interest margin, collateral characteristics and credit performance trends of the assets transferred, as well as our credit trends and overall auto finance industry credit trends. Credit enhancement levels may also be impacted by our financial condition, the economic environment and our ability to sell lower-rated subordinated bonds at rates we consider acceptable.

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GENERAL MOTORS FINANCIAL COMPANY, INC.

The credit enhancement requirements in our securitization transactions may include restricted cash accounts that are generally established with an initial deposit and may subsequently be funded through excess cash flows from securitized assets. An additional form of credit enhancement is provided in the form of overcollateralization, whereby the value of the loans or lease-related assets transferred to the Trusts is greater than the amount due on asset-backed securities issued by the Trusts. In the International Segment, our securitization transactions may contain portfolio performance ratios which could increase the minimum credit enhancement levels. In the North America Segment, our securitization transactions typically do not contain these performance ratios.
Senior Notes, Retail Customer Deposits and Other Unsecured Debt We also access the capital markets in the North America and International Segments through the issuance of senior unsecured notes in the public markets. In Germany, we accept deposits from retail banking customers. In Latin America, we issue, to a limited extent, other unsecured debt through commercial paper offerings and other non-bank funding instruments.
GM also provides us with financial resources through a $1.0 billion unsecured intercompany revolving credit facility (the "Junior Subordinated Revolving Credit Facility").
Trade Names We and GM have obtained federal trademark protection for the "AmeriCredit," "GM Financial" and "GMAC" names and the logos that incorporate those names. Certain other names, logos and phrases we use in our business operations have also been trademarked. The trademarks that GM and we hold are very important to our identity and recognition in the marketplace.
Regulation Our operations are subject to regulation, supervision and licensing by governmental authorities under various national, state and local laws and regulations.
North America Segment In the U.S., we are subject to extensive federal regulation, including the Truth in Lending Act, the Equal Credit Opportunity Act and the Fair Credit Reporting Act. Additionally, we are subject to the Gramm-Leach-Bliley Act, which requires us to maintain the privacy of certain consumer data in our possession and to periodically communicate with consumers on privacy matters, and the Servicemembers Civil Relief Act, which has limitations on the interest rate charged to customers who have subsequently entered military service, and provides other protections such as early lease termination and restrictions on repossession.
The primary federal agency responsible for ensuring compliance with these consumer protection laws is the Consumer Financial Protection Bureau (“CFPB”). The CFPB has broad rule-making, examination and enforcement authority over non-bank automobile finance companies such as us. On August 31, 2015, we became subject to supervision and examination by the CFPB as a “larger participant” in the automobile finance market.
In most states and other jurisdictions in which we operate, a consumer credit regulatory agency regulates and enforces laws relating to sales finance companies and consumer lenders or lessors like us. These laws and regulations generally provide for licensing as a sales finance company or consumer lender or lessor, limitations on the amount, duration and charges, including interest rates, requirements as to the form and content of finance contracts and other documentation, and restrictions on collection practices and creditors' rights. In certain jurisdictions, we are subject to periodic examination by regulatory authorities.
In Canada, we are subject to both federal and provincial laws and regulations, including the Interest Act, the Consumer Protection Acts and Cost of Credit Disclosure regulations.  Additionally, we are subject to certain provincial Consumer Reporting Acts and the Personal Information Protection and Electronic Documents Act, as well as provincial counterparts, which regulates how we can collect, use, and/or disclose consumers' personal information. 
International Segment In certain countries in the International Segment, we operate in local markets as either banks or regulated finance companies and are subject to legal and regulatory restrictions which vary country to country and which may change from time to time.  The regulatory restrictions, among other things, may require that the regulated entities meet certain minimum capital requirements, may restrict dividend distributions and ownership of certain assets, and may require certain disclosures to prospective purchasers and lessees and restrict certain practices related to the servicing of consumer accounts. 
Competition The automobile finance market is highly fragmented and is served by a variety of financial entities, including the captive finance affiliates of other major automotive manufacturers, banks, thrifts, credit unions, leasing companies and independent finance companies. Many of these competitors have substantial financial resources, highly competitive funding costs and significant scale and efficiency. Capital inflows from investors to support the growth of new entrants in the automobile finance market, as well as growth initiatives from more established market participants has resulted in generally increasing competitive conditions. While we have a competitive advantage when GM-sponsored subvention programs are offered exclusively through us to targeted GM dealers and their customers, when no subvention programs are offered our competitors can often provide financing on terms more favorable to customers or dealers than we may offer. Many of these competitors also have long standing relationships with

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automobile dealerships and may offer the dealerships or their customers other products and services, which we may not currently provide.
Employees At December 31, 2016, we employed 9,000 people, excluding SAIC-GMAC employees. We participate in mandatory national collective bargaining agreements where they are required, and maintain satisfactory working relationships with works councils and trade union representatives where they exist. 
As of February 7, 2017, the names and ages of our executive officers and their positions with GM Financial are as follows: 
Name (Age)
 
Present GMF Position (Effective Date)
 
Position Held During the Past Five Years
if other than present GMF position (Effective Date)
Daniel E. Berce (63)
 
President and Chief Executive Officer (2005)
 
 
Kyle R. Birch (56)
 
Executive Vice President and Chief Operating Officer - North America (2013)
 
Executive Vice President of Dealer Services (2003)
Mark F. Bole (53)
 
President, International Operations (2013)
 
Executive Vice President, International Operations for Ally Financial Inc. (2005)
Steven P. Bowman (49)
 
Executive Vice President and Chief Credit and Risk Officer (2005)
 
 
Chris A. Choate (54)
 
Executive Vice President and Chief Financial Officer (2005)
 
 
Connie Coffey (45)
 
Executive Vice President, Corporate Controller and Chief Accounting Officer (2014)
 
Executive Vice President, Corporate Controller (2012); and Senior Vice President, Accounting and Reporting (2002)
Michael S. Kanarios (46)
 
Executive Vice President and Chief Operating Officer, International Operations (2015)
 
Executive Vice President and Chief Financial Officer, International Operations (2013), Vice President and Chief Financial Officer, International Dealer Finance, Ally Financial Inc. (2008)
Susan B. Sheffield (50)
 
Executive Vice President and Treasurer (2014)
 
Executive Vice President, Corporate Finance (2008)
Available Information We make available free of charge through our website, www.gmfinancial.com, our public securitization information and all materials that we file electronically with the SEC, including our reports on Form 10-K, Form 10-Q, Form 8-K, and amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practical after filing or furnishing such material with or to the SEC. We encourage the public to visit our website, as we frequently update and post new information about our company on our website and it is possible that this information could be deemed to be material information. Our website and information included or linked to our website are not part of this Form 10-K.
The public may read and copy any materials we file with or furnish to the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet website, www.sec.gov, which contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
Item 1A. Risk Factors
The profitability and financial condition of our operations are dependent upon the operations of our parent, GM.
A material portion of our retail finance business, and substantially all our commercial lending activities, consist of financing associated with the sale and lease of new GM vehicles and our relationship with GM-franchised dealerships. If there were significant changes in GM's liquidity and capital position and access to the capital markets, the production or sales of GM vehicles to retail customers, the quality or resale value of GM vehicles, GM's operations that may require restructuring or rationalization actions, or other factors impacting GM or its products, such changes could significantly affect our profitability, financial condition, and access to the capital markets. In addition, GM sponsors special-rate financing programs available through us. Under these programs, GM makes interest supplements or other support payments to us. These programs increase our financing volume and our share of financed GM vehicle sales. If GM were to adopt marketing strategies in the future that de-emphasized such programs in favor of other incentives, our financing volume could be reduced.
There is no assurance that the global automotive market or GM's share of that market will not suffer downturns in the future, and any negative impact could in turn have a material adverse effect on our financial position, liquidity and results of operations.

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We depend on the financial condition of GM dealers.
Our profitability is dependent on the financial condition of the GM-franchised dealerships in our commercial lending portfolio, including the levels of inventory dealers carry in response to retail demand for new GM vehicles and used vehicles, and the level of wholesale borrowing required by dealers for inventory acquisitions, construction projects to dealership facilities and working capital. Our business may be negatively affected if, during periods of economic slowdown or recession, dealers reduce borrowing for inventory purchases or for other purposes, or are unable to sell or otherwise liquidate vehicle inventories and repay their wholesale, real estate and other loans to us. Decreased retail demand for GM vehicles can also adversely impact the overall financial condition of GM-franchised dealerships, possibly increasing defaults and net loss rates in our commercial lending portfolio and adversely impacting our ability to grow and, ultimately, our financial condition, liquidity and results of operations.
Our ability to continue to fund our business and service our debt is dependent on a number of financing sources and requires a significant amount of cash.
We depend on various financing sources, including secured financings, securitization programs and unsecured debt issuances, to finance our loan and lease originations and commercial lending business. Additionally, our ability to make payments on or to refinance our indebtedness depends on our access to the capital markets in the future and our ability to generate cash. Our access to financing sources depends upon our financial position, general market conditions, availability of bank liquidity and the bank regulatory environment, our compliance with covenants imposed under our financing agreements, the credit quality of the collateral we can pledge to support secured financings, and other factors. Changes in GM's and our credit ratings may also impact our access to and cost of financing. There can be no assurance that funding will be available to us through these financing sources or, if available, that the funding will be on acceptable terms. If these financing sources are not available to us on a regular basis for any reason, or we are not otherwise able to generate significant amounts of cash, then we would not have sufficient funds and would be required to revise the scale of the business, including the possible reduction or discontinuation of origination activities, which would have a material adverse effect on our financial position, liquidity and results of operations. In addition, certain of our revolving credit facilities contain various covenants. If an event of default occurs under these agreements, the lenders could elect to declare all amounts outstanding under these agreements to be immediately due and payable, enforce their interests against collateral pledged under these agreements or restrict our ability to obtain additional borrowings under these facilities.
Our substantial indebtedness could adversely affect our financial health and prevent us from fulfilling our obligations under existing indebtedness.
We currently have a substantial amount of outstanding indebtedness. In addition, we have guaranteed a substantial amount of indebtedness incurred by operating subsidiaries in our International Segment and Canada. Additionally, we have entered into intercompany loan agreements with several of our subsidiaries in Europe and Latin America, providing these companies with access to liquidity to support originations and other activities. Our ability to make payments of principal and interest on, or to refinance, our indebtedness will depend on our future operating performance, and our ability to enter into additional credit facilities and securitization transactions as well as other debt financings, which, to a certain extent, are subject to economic, financial, competitive, regulatory, capital markets and other factors beyond our control.
If we are unable to generate sufficient cash flows in the future to service our debt, we may be required to refinance all or a portion of our existing debt or to obtain additional financing. There can be no assurance that any refinancing will be possible or that any additional financing could be obtained on acceptable terms. The inability to service or refinance our existing debt or to obtain additional financing would have a material adverse effect on our financial position, liquidity and results of operations.
The degree to which we are leveraged creates risks, including:
we may be unable to satisfy our obligations under our outstanding indebtedness;
we may find it more difficult to fund future credit enhancement requirements, operating costs, tax payments, capital expenditures or general corporate expenditures;
we may have to dedicate a substantial portion of our cash resources to payments on our outstanding indebtedness, thereby reducing the funds available for operations and future business opportunities; and
we may be vulnerable to adverse general economic, capital markets and industry conditions.
Our credit facilities may require us to comply with certain financial ratios and covenants, including minimum asset quality maintenance requirements. These restrictions may interfere with our ability to obtain financing or to engage in other necessary or desirable business activities.
If we cannot comply with the requirements in our credit facilities, then our lenders may increase our borrowing costs, remove us as servicer or declare the outstanding debt immediately due and payable. If our debt payments were accelerated, any assets pledged to secure these facilities might not be sufficient to fully repay the debt. These lenders may foreclose upon their collateral,

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including the restricted cash in these credit facilities. These events may also result in a default under our senior note indentures. We may not be able to obtain a waiver of these provisions or refinance our debt, if needed. In such case, our financial condition, liquidity and results of operations would materially suffer.
Defaults and prepayments on loans and leases purchased or originated by us could adversely affect our operations.
Our financial condition, liquidity and results of operations depend, to a material extent, on the performance of loans and leases in our portfolio. Obligors under contracts acquired or originated by us, including dealer obligors in our commercial lending portfolio, may default during the term of their loan or lease. Generally, we bear the full risk of losses resulting from defaults. In the event of a default, the collateral value of the financed vehicle or, in the case of a commercial obligor, the value of the inventory and other commercial assets we finance usually does not cover the outstanding amount due to us, including the costs of recovery and asset disposition.
The amounts owed to us by any given dealership or dealership group in our commercial lending portfolio can be significant. The amount of potential loss resulting from the default of a dealer in our commercial lending portfolio can, therefore, be material even after liquidating the dealer's inventory and other assets to offset the defaulted obligation. Additionally, because the receivables in our commercial lending portfolio may include complex arrangements including guarantees, inter-creditor agreements, mortgages and other liens, our ability to recover and dispose of the underlying inventory and other collateral may be time-consuming and expensive, thereby increasing our potential loss.
We maintain an allowance for loan losses on our finance receivables which reflects management's estimates of inherent losses for these receivables. If the allowance is inadequate, we would recognize the losses in excess of that allowance as an expense and results of operations would be adversely affected. A material adjustment to our allowance for loan losses and the corresponding decrease in earnings could limit our ability to enter into future securitizations and other financings, thus impairing our ability to finance our business.
An increase in defaults would reduce the cash flows generated by us, and distributions of cash to us from our secured debt facilities would be delayed and the ultimate amount of cash distributable to us would be less, which would have an adverse effect on our liquidity.
Customer prepayments and dealer repayments on commercial obligations, which are generally revolving in nature, affect the amount of finance charge income we receive over the life of the loans. If prepayment levels increase for any reason and we are not able to replace the prepaid receivables with newly-originated loans, we will receive less finance charge income and our results of operations may be adversely affected.
A substantial portion of our origination and servicing activities in the North America Segment have historically involved sub-prime automobile receivables. Sub-prime borrowers are associated with higher-than-average delinquency and default rates. The actual rates of delinquencies, defaults, repossessions and losses with respect to those borrowers could also be more dramatically affected by a general economic downturn. While we believe that we effectively manage these risks with our proprietary credit scoring system, risk-based pricing and other underwriting policies, and our servicing and collection methods, no assurance can be given that our methods will be effective in the future. In the event that we underestimate the default risk or underprice contracts that we purchase, our financial position, liquidity and results of operations would be adversely affected.
Our operations are subject to regulation, supervision and licensing under various federal, state and local laws and regulations.
As an entity operating in the financial services sector, we are required to comply with a wide variety of laws and regulations that may be costly to adhere to and may affect both our operating results and our ability to service our earning assets. Compliance with these laws and regulations requires that we maintain forms, processes, procedures, controls and the infrastructure to support these requirements and these laws and regulations often create operational constraints both on our ability to implement servicing procedures and on pricing. Laws in the financial services industry are designed primarily for the protection of consumers. The failure to comply with these laws could result in significant statutory civil and criminal penalties for us, monetary damages, attorneys’ fees and costs, possible revocation of licenses and damage to reputation, brand and valued customer relationships.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") is extensive and significant legislation that, among other things, strengthens the regulatory oversight of securities and capital markets activities by the SEC and increases the regulation of the securitization markets in the U.S. The various requirements of the Dodd-Frank Act may substantially impact the origination, servicing and securitization program of our subsidiaries.
The Dodd-Frank Act also created the CFPB, a federal agency that has extensive rulemaking and enforcement authority. The CFPB has indicated an intention to review the actions of indirect auto finance companies such as us with regard to pricing activities

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and issued a bulletin to such lenders on how to limit fair lending risk under the Equal Credit Opportunity Act. We are subject to supervision and examination by the CFPB as a “larger participant” in the automobile finance market. Supervisory and examination powers over nonbank lenders such as us allow the agency to conduct comprehensive and rigorous on-site examinations that could result in enforcement actions, fines, and mandated process, procedure or product-related changes or consumer refunds if violations of law or unfair lending practices are found, which could have a material adverse effect on our financial condition and results of operations.
In July 2014, we were served with a subpoena by the U.S. Department of Justice directing us to produce certain documents relating to our and our subsidiaries’ and affiliates’ origination and securitization of sub-prime automobile loans since 2007 in connection with an investigation by the U.S. Department of Justice in contemplation of a civil proceeding for potential violations of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. Among other matters, the subpoena requests information relating to the underwriting criteria used to originate these automobile loans and the representations and warranties relating to those underwriting criteria that were made in connection with the securitization of the automobile loans. We have subsequently been served with additional investigative subpoenas to produce documents from state attorneys general and other governmental offices relating to our retail auto loan business and securitization of auto loans. These investigations are ongoing and could in the future result in the imposition of damages, fines or civil or criminal claims and/or penalties. No assurance can be given that the ultimate outcome of the investigations or any resulting proceedings would not materially and adversely affect us or any of our subsidiaries and affiliates.
Our profitability is dependent upon retail demand for automobiles and related automobile financing and the ability of customers to repay loans and leases, and our business may be negatively affected during times of low automobile sales, fluctuating wholesale prices and lease residual values, rising interest rates, volatility in currency exchange rates and high unemployment.
General We are subject to changes in general economic conditions that are beyond our control. During periods of economic slowdown or recession, delinquencies, defaults, repossessions and losses generally increase. These periods also may be accompanied by increased unemployment rates, decreased demand for automobiles and declining values of automobiles securing outstanding loans and leases, which weakens collateral coverage and increases the amount of a loss in the event of default. Additionally, higher gasoline prices, declining stock market values, unstable real estate values, increasing unemployment levels, general availability of consumer credit and other factors that impact consumer confidence or disposable income could increase loss frequency and decrease demand for automobiles as well as weaken collateral values on certain types of automobiles. In addition, during an economic slowdown or recession, our servicing costs may increase without a corresponding increase in our revenue. While we seek to manage these risks through the underwriting criteria and collection methods we employ, no assurance can be given that these criteria or methods will afford adequate protection against these risks. Any sustained period of increased delinquencies, defaults, repossessions or losses or increased servicing costs could adversely affect our financial position, liquidity, results of operations and our ability to enter into future securitizations and credit facilities.
Wholesale Auction Values We sell repossessed automobiles at wholesale auction markets located throughout the countries where we have operations. Auction proceeds from the sale of repossessed vehicles and other recoveries are usually not sufficient to cover the outstanding balance of the contract, and the resulting deficiency is charged off. We also sell automobiles returned to us at the end of lease terms. Decreased auction proceeds resulting from the depressed prices at which used automobiles may be sold during periods of economic slowdown or low retail demand will result in higher losses for us. Furthermore, depressed wholesale prices for used automobiles may result from significant liquidations of rental or fleet inventories, financial difficulties of new vehicle manufacturers, discontinuance of vehicle brands and models and increased volume of trade-ins due to promotional programs offered by new vehicle manufacturers. Additionally, higher gasoline prices may decrease the wholesale auction values of certain types of vehicles.
Leased Vehicle Residual Values and Return Rates We project expected residual values and return volumes of the vehicles we lease. At the inception of a lease, we determine the amount of lease payments we charge our lease customer based, in part, on our estimated residual value. Actual proceeds realized by us upon the sale of a returned leased vehicle at lease termination may be lower than the amount projected, which reduces the profitability of the lease transaction to us. Among the factors that can affect the value of returned lease vehicles are the volume of vehicles returned, economic conditions and the quality or perceived quality, safety or reliability of the vehicles. Actual return volumes may be higher than expected and can be influenced by contractual lease-end values relative to then-existing market values, marketing programs for new vehicles and general economic conditions. All of these, alone or in combination, have the potential to adversely affect the profitability of our lease program and financial results.
Interest Rates Our profitability may be directly affected by the level of and fluctuations in interest rates, which affect the gross interest rate spread we earn on our portfolio. As the level of interest rates change, our net interest margin on new originations

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either increases or decreases since the rates charged on our loans and leases are generally fixed rates and are limited by market and competitive conditions, restricting our opportunity to pass on increased interest costs to the customer.
Foreign Currency Exchange Rates We are exposed to the effects of changes in foreign currency exchange rates and availability of currencies. Changes in currency exchange rates cannot always be predicted or hedged. As a result, unfavorable changes in exchange rates could have an adverse effect on our financial condition, liquidity and results of operations.
Labor Market Conditions Competition to hire and retain personnel possessing the skills and experience required by us could contribute to an increase in our employee turnover rate. High turnover or an inability to attract and retain qualified personnel could have an adverse effect on our delinquency, default and net loss rates, our ability to grow and, ultimately, our financial condition, liquidity and results of operations.
We do not control the operations of SAIC-GMAC, and we are subject to the risks of operating in China.
We do not control the operations of SAIC-GMAC, as it is a joint venture, and we do not have a majority interest in the joint venture. In the joint venture, we share ownership and management with other parties who may not have the same goals, strategies, priorities, or resources as we do and may compete with us outside the joint venture. Joint ventures are intended to be operated for the equal benefit of all co-owners, rather than for our exclusive benefit. Operating a business as a joint venture often requires additional organizational formalities, as well as time-consuming procedures for sharing information and making decisions. We are required to pay more attention to our relationship with our co-owners as well as with the joint venture, and if a co-owner changes or relationships deteriorate, our success in the joint venture may be materially adversely affected. The benefits from a successful joint venture are shared among the co-owners, and as such, we do not receive the full benefits from a successful joint venture. As a result of having limited control over the actions of the joint venture, we may be unable to prevent misconduct or other violations of applicable laws. Moreover, the joint venture may not follow the same requirements regarding internal controls and internal control over financial reporting that we follow. To the extent another party makes decisions that negatively impact the joint venture or internal control issues arise within the joint venture, we may have to take responsive or other actions or we may be subject to penalties, fines or other related actions for these activities that could have a material adverse impact on our business, financial condition and results of operations. In addition, we are subject to the risks of operating in China. The automotive finance market in China is highly competitive and subject to significant governmental regulation. As the Chinese market continues to develop, we anticipate that additional competitors, both international and domestic, will seek to enter the Chinese market and that existing market participants will act aggressively to increase their market share. Increased competition may result in reduced margins and our inability to gain or hold market share. In addition, business in China is sensitive to economic and market conditions that drive sales volume in China. If SAIC-GMAC is unable to maintain its position in the Chinese market or if vehicle sales in China decrease or do not continue to increase, our business and financial results could be materially adversely affected.
A security breach or a cyber-attack could adversely affect our business.
A security breach or cyber-attack of our computer systems could interrupt or damage our operations or harm our reputation. Risks of security breaches and cyber-attacks may increase in the future as we increase our web-based product offerings, such as online payment options, and expand our internal usage of web-based products and applications. If third parties or our employees are able to penetrate our network security or otherwise misappropriate our customers' personal information or contract information, or if we give third parties or our employees improper access to our customers' personal information or contract information, we could be subject to liability. This liability could include identity theft or other similar fraud-related claims. This liability could also include claims for other misuses or losses of personal information, including for unauthorized marketing purposes. Other liabilities could include claims alleging misrepresentation of our privacy and data security practices. We could also be subject to regulatory action in certain jurisdictions, particularly in North America and Europe.
We rely on encryption and authentication technology licensed from third parties to provide the security and authentication necessary to effect secure online transmission of confidential consumer information. Advances in computer capabilities, new discoveries in the field of cryptography or other events or developments may result in a compromise or breach of the algorithms that we use to protect sensitive customer transaction data. A party who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations. We may be required to expend capital and other resources to protect against such security breaches or cyber-attacks or to alleviate problems caused by such breaches or attacks and our insurance coverage may not be adequate to cover all the costs related to such breaches or attacks. Our security measures are designed to protect against security breaches and cyber-attacks, but our failure to prevent such security breaches and cyber-attacks could subject us to liability, decrease our profitability and damage our reputation.
Our operations outside the U.S. expose us to additional risks.
The international operations are subject to many of the same risks as our U.S. operations. In addition to those risks, the international operations, including the operations of SAIC-GMAC, are subject to certain additional risks, such as the following:

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economic downturns in foreign countries or geographic regions where we have significant operations, such as Europe, Brazil and China;
multiple foreign regulatory requirements that are subject to change;
difficulty in establishing, staffing and managing foreign operations;
differing labor regulations;
consequences from changes in tax laws;
restrictions on the ability to repatriate profits or transfer cash into or out of foreign countries and the tax consequences of such repatriations and transfers;
fluctuations in foreign currencies;
political and economic instability, natural calamities, war, and terrorism; and
compliance with laws and regulations applicable to international operations, including anti-corruption laws such as the Foreign Corrupt Practices Act and international trade and economic sanctions laws.
The effects of these risks may, individually or in the aggregate, adversely affect our business.
Item 2. Properties
Our executive offices are located in Fort Worth, Texas. We operate credit centers, collections and customer service centers and administrative offices in leased facilities in North America, Europe and Latin America. SAIC-GMAC operates in offices located in China.

Item 3. Legal Proceedings
Refer to Note 11 to our consolidated financial statements for information relating to legal proceedings.

Item 4. Mine Safety Disclosure
Not applicable.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
All of our issued and outstanding equity securities are owned by a single holder, GM, and there is not an established public trading market for our common stock. We have never paid cash dividends on our common stock. We presently intend to retain future earnings, if any, for use in the operation of the business and do not anticipate paying any cash dividends in the foreseeable future; provided, however, that we may reexamine this policy with our sole shareholder at any time.
Item 6. Selected Financial Data
Omitted in accordance with General Instruction I to Form 10-K.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
This MD&A should be read in conjunction with the accompanying consolidated financial statements.
Critical Accounting Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial statements and the amount of revenue and expenses during the reporting periods. Actual results could differ from those estimates, due to inherent uncertainties in making estimates, and those differences may be material. Refer to Note 1 to our consolidated financial statements for our significant accounting policies related to our critical accounting estimates. The accounting estimates that we believe are the most critical to understanding and evaluating our reported financial results include the following:
Retail Finance Receivables and the Allowance for Loan Losses Our retail finance receivables portfolio consists of smaller-balance, homogeneous loans which are carried at amortized cost, net of allowance for loan losses. These loans are divided

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among pools based on common risk characteristics, such as internal credit score, origination period, delinquent status and geography. An internal credit score, of which FICO is an input in North America, is created by using algorithms or statistical models contained in origination scorecards. The scorecards are used to evaluate a consumer’s ability to pay based on statistical modeling of their prior credit usage, structure of the loan and other information. The output of the scorecards rank-order consumers from those that are most likely to pay to those that are least likely to pay. By further dividing the portfolio into pools based on internal credit scores we are better able to distinguish expected credit performance for different credit risks. These pools are collectively evaluated for impairment based on a statistical calculation, which is supplemented by management judgment. The allowance is aggregated for each of the pools.
We use a combination of forecasting methodologies to determine the allowance for loan losses, including roll rate modeling and static pool modeling techniques. A roll rate model is generally used to project near term losses and static pool models are generally used to project losses over the remaining life. Probable losses are estimated for groups of accounts aggregated by past-due status and origination month. Generally, up to the last 10 years of loss experience is evaluated. Recent performance is more heavily weighted when determining the allowance to result in an estimate that is more reflective of the current internal and external environments. Factors that are considered when estimating the allowance include historical delinquency migration to loss, probability of default ("PD") and loss given default ("LGD"). PD and LGD are specifically estimated for each monthly vintage (i.e., group of originations) in cases where vintage models are used. PD is estimated based on expectations that are aligned with internal credit scores. LGD is projected based on historical trends experienced over the last 10 years, weighted toward more recent performance in order to consider recent market supply and demand factors that impact wholesale used vehicle pricing. While forecasted probable losses are quantitatively derived, we assess the recent internal operating and external environments and may qualitatively adjust certain assumptions to result in an allowance that is more reflective of losses that are expected to occur in the current environment.
We also use historical charge-off experience to determine a loss confirmation period ("LCP"). The LCP is a key assumption within our models and represents the average amount of time between when a loss event first occurs to when the receivable is charged-off. This LCP is the basis of our allowance and is applied to the forecasted probable credit losses to determine the amount of losses we believe exist at the balance sheet date.
We believe these factors are relevant in estimating incurred losses and also consider an evaluation of overall portfolio credit quality based on indicators such as changes in our credit evaluation, underwriting and collection management policies, changes in the legal and regulatory environment, general economic conditions and business trends and uncertainties in forecasting and modeling techniques used in estimating our allowance. We update our retail loss forecast models and portfolio indicators on a quarterly basis to incorporate information reflective of the current economic environment.
Assumptions regarding credit losses and LCPs are reviewed periodically and may be impacted by actual performance of finance receivables and changes in any of the factors discussed above. Should the credit loss assumption or LCPs increase, there would be an increase in the amount of allowance for loan losses required, which would decrease the net carrying value of finance receivables and increase the amount of provision for loan losses.
Finance receivables that are considered impaired, including troubled debt restructurings ("TDRs"), are individually evaluated for impairment. In assessing the risk of individually impaired loans such as TDRs, among the factors we consider are the financial condition of the borrower, geography, collateral performance, historical loss experience, and industry-specific information that management believes is relevant in determining the occurrence of a loss event and measuring impairment. These factors are based on an evaluation of historical and current information, and involve subjective assessment and interpretation.
We believe that the allowance for loan losses on retail finance receivables is adequate to cover probable losses inherent in our retail finance receivables; however, because the allowance for loan losses is based on estimates, there can be no assurance that the ultimate charge-off amount will not exceed such estimates or that our credit loss assumptions will not increase. A 10% and 20% increase in cumulative charge-offs after recoveries on the portfolio over the LCP would increase the allowance for loan losses at December 31, 2016 by $79 million and $159 million. 
Commercial Finance Receivables and Allowance for Loan Losses Commercial finance receivables are carried at amortized cost, net of allowance for loan losses. Provisions for loan losses are charged to operations in amounts sufficient to maintain the allowance for loan losses at levels considered adequate to cover probable credit losses inherent in the commercial finance receivables. For the International Segment, we established the allowance for loan losses based on historical loss experience. Since we began offering commercial lending in the North America Segment in 2012, we performed an analysis of the experience of comparable commercial lenders in order to estimate probable credit losses inherent in our portfolio. The commercial finance receivables are aggregated into loan-risk pools, which are determined based on our internally-developed risk rating system. Based upon our risk ratings, we also determine if any specific dealer loan is considered impaired. If impaired loans are identified, specific reserves are established, as appropriate, and the loan is segregated for separate monitoring.

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We believe that the allowance for loan losses for commercial finance receivables is adequate to cover probable losses inherent in our portfolio; however, because the allowance for loan losses is based on estimates, there can be no assurance that the ultimate charge-off amount will not exceed such estimates or that our credit loss assumptions will not increase. A 10% and 20% increase in cumulative charge-offs on the commercial finance receivable portfolio over the LCP would increase the allowance for loan losses at December 31, 2016 by $5 million and $10 million.
Expected losses on our commercial loans are lower than expected losses on our retail loans because commercial loans are secured not only by the financed vehicles, but also other dealership assets and often the continuing personal guarantee of the dealers' owners. In addition, automotive manufacturers are typically obligated to repurchase new vehicle inventory within certain mileage and model year parameters set by applicable state law in the event that we repossess the dealership’s inventory, thus potentially reducing any loss due to dealer default.
Residual Value of Leased Vehicles We have investments in leased vehicles recorded as operating leases. Each leased asset in our portfolio represents a vehicle that we own and have leased to a customer. At the time we purchase a lease, we establish an expected residual value for the vehicle at the end of the lease term, which typically ranges from two to five years. The customer is obligated to make payments during the term of the lease for the difference between the purchase price and the contract residual value plus a money factor. However, since the customer is not obligated to purchase the vehicle at the end of the contract, we are exposed to a risk of loss to the extent the customer returns the vehicle at the end of the lease term and the value of the vehicle is lower than the residual value estimated at contract inception.
At December 31, 2016, the estimated residual value of our leased vehicles at the end of the lease term was $23.6 billion. Depreciation reduces the carrying value of each leased asset in our operating lease portfolio over time from its original acquisition value to its expected residual value at the end of the lease term. We periodically perform a review of the adequacy of the depreciation rates. If we believe that the expected residual values for our leased assets have changed, we revise the depreciation rate to ensure that our net investment in operating leases will be adjusted to reflect our revised estimate of the expected residual value at the end of the lease term. Such adjustments to the depreciation rate would result in a change in the depreciation expense on the leased assets, which is recorded prospectively on a straight-line basis. The effect of a 1% change in our assumption regarding residual values would increase or decrease depreciation expense on the operating lease portfolio over the remaining term of the leases as follows:
 
Impact to Depreciation Expense
Cars
$
53

Trucks
52

Crossovers
131

Total
$
236

In addition to estimating the residual value at lease termination, we also evaluate the carrying value of the operating lease assets, check for indicators of impairment and test for impairment to the extent necessary in accordance with applicable accounting standards. A leased asset is considered impaired if impairment indicators exist and the undiscounted expected future cash flows (including the expected residual value) are lower than the carrying value of the asset. We believe no impairment indicators existed during 2016, 2015 or 2014.
Goodwill The excess of the purchase price of the merger with GM over the fair value of the net assets acquired was recorded as goodwill, and was attributed to the North America reporting unit, which was our only reporting unit at that time. With the acquisition of the international operations, we added two additional reporting units: Latin America and Europe. The excess of the purchase price of the acquisition of the international operations over the fair value of the net assets acquired was all attributed to the Latin America reporting unit. We performed our annual goodwill impairment testing as of October 1, 2016 for each reporting unit.   
For the North America reporting unit, which represents 92% of our goodwill balance, we determined the fair value with consideration to valuations under the income approach, weighted 75%, and the market approach, weighted 25%. The income approach evaluates the cash flow of the reporting unit over a specified time, discounted at an appropriate market rate to arrive at an indication of the most probable selling price. Factors contributing to the determination of the reporting unit's operating performance were historical performance and management's estimates of future performance. The market approach considers trading prices of securities issued by comparable companies as multiples of historical earnings and forecast earnings. The results of the first step of the impairment test indicated that the fair value exceeded the carrying value; therefore, it was not necessary to perform the second step analysis.  

14

GENERAL MOTORS FINANCIAL COMPANY, INC.

If actual market conditions are less favorable than those we and the industry have projected, or if events occur or circumstances change that would reduce the fair value of our goodwill below the amount reflected in the balance sheet, we may be required to conduct an interim test and possibly recognize impairment charges, which could be material, in future periods.
Income Taxes We account for income taxes on a separate return basis using an asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences attributable to differences between financial statements' carrying amounts of existing assets and liabilities and their respective tax basis, net operating loss and tax credit carryforwards.
We are subject to income tax in the U.S. and various other state and foreign jurisdictions. Since October 1, 2010, we have been included in GM's consolidated U.S. federal income tax returns. As referred to in Note 14 - "Income Taxes," we have a tax sharing agreement with GM for our U.S. operations.
In the ordinary course of business, there may be transactions, calculations, structures and filing positions where the ultimate tax outcome is uncertain. At any point in time, multiple tax years are subject to audit by various taxing jurisdictions and we record liabilities for estimated tax results based on the requirements of the accounting for uncertainty in income taxes. Management believes that the estimates it records are reasonable. However, due to expiring statutes of limitations, audits, settlements, changes in tax law or new authoritative rulings, no assurance can be given that the final outcome of these matters will be comparable to what was reflected in the historical income tax provisions and accruals. We may need to adjust our accrued tax assets or liabilities if actual results differ from estimated results or if we adjust the assumptions used in the computation of the estimated tax results in the future. These adjustments could materially impact the effective tax rate, earnings, accrued tax balances and cash.
The ability to realize deferred tax assets depends on the ability to generate sufficient taxable income within the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction. The assessment regarding whether a valuation allowance is required or should be adjusted is based on an evaluation of possible sources of taxable income and also considers all available positive and negative evidence factors. Our accounting for deferred tax consequences represents our best estimate of future events. Changes in our current estimates, due to unanticipated market conditions or events, could have a material effect on our ability to utilize deferred tax assets.


15

GENERAL MOTORS FINANCIAL COMPANY, INC.

Results of Operations
In our tabular presentation of the changes in results between financial periods, we provide the following information:  (i) the amount of change excluding the impact of foreign currency translation (“FX”); (ii) the amount of the impact of foreign currency translation; and (iii) the total change. The amount of the impact of foreign currency translation is derived by translating current year results at the average of prior year exchange rates, and is driven by the change in the U.S. Dollar against the currencies used by our foreign operations. We believe the amount of change excluding the foreign currency translation impact facilitates a better comparison of results. In our discussion below, we discuss changes in relevant items excluding any foreign currency translation impact. Average balances are calculated using daily balances, where available. Otherwise average balances are calculated using monthly ending balances.
In June 2016, the United Kingdom ("U.K.") completed its referendum on continued membership in the European Union and voted to leave. This result did not have a material impact on the results of operations for the year ended December 31, 2016; however, this result has adversely impacted the British Pound and the uncertainty has put strain on the U.K. automotive industry. While we anticipate the impacts of Brexit to continue through 2017, we do not expect such impacts to have a material impact on our results of operations.
Year Ended December 31, 2016 compared to    Year Ended December 31, 2015
Average Earning Assets
 
Years Ended December 31,
 
 
 
2016
 
2015
 
2016 vs. 2015
 
North America
 
International
 
Total
 
North America
 
International
 
Total
 
Change excluding FX
 
FX
 
Total change
 
%
Average retail finance receivables
$
19,783

 
$
11,233

 
$
31,016

 
$
15,688

 
$
11,509

 
$
27,197

 
$
4,732

 
$
(913
)
 
$
3,819

 
14.0
%
Average commercial finance receivables
4,934

 
4,484

 
9,418

 
3,465

 
4,364

 
7,829

 
1,926

 
(337
)
 
1,589

 
20.3
%
Average finance receivables
24,717

 
15,717

 
40,434

 
19,153

 
15,873

 
35,026

 
6,658

 
(1,250
)
 
5,408

 
15.4
%
Average leased vehicles, net
27,787

 
161

 
27,948

 
13,033

 
57

 
13,090

 
14,932

 
(74
)
 
14,858

 
113.5
%
Average earning assets
$
52,504

 
$
15,878

 
$
68,382

 
$
32,186

 
$
15,930

 
$
48,116

 
$
21,590

 
$
(1,324
)
 
$
20,266

 
42.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail finance receivables purchased
$
11,509

 
$
6,545

 
$
18,054

 
$
10,931

 
$
6,606

 
$
17,537

 
$
1,129

 
$
(612
)
 
$
517

 
2.9
%
Average new retail loan size (in dollars)
$
28,226

 
$
11,407

 
 
 
$
26,523

 
$
11,861

 
 
 
 
 
 
 
 
 
 
Leased vehicles purchased
$
25,151

 
$
226

 
$
25,377

 
$
20,121

 
$
78

 
$
20,199

 
$
5,233

 
$
(55
)
 
$
5,178

 
25.6
%
Average new lease size (in dollars)
$
37,540

 
$
21,978

 
 
 
$
36,627

 
$
20,449

 
 
 
 
 
 
 
 
 
 
Average finance receivables increased in the North America Segment as a result of the continued increase of our share of GM's business in that segment. Average finance receivables in the International Segment decreased solely due to the impact of foreign currency translation. The increase in average leased vehicles, net primarily resulted from our exclusive lease subvention arrangement in the U.S. with GM, which was implemented on a brand-by-brand basis between February and April 2015.
In the North America Segment, the average annual percentage rate for retail finance receivables purchased during 2016 decreased to 7.0% from 8.0% during the prior period, and the average new retail loan size increased. These changes are due primarily to the expansion of our prime lending program and our exclusive loan subvention arrangement in the U.S. with GM, resulting in higher volumes of originations of loans for new vehicles, which typically are for higher amounts and have lower contractual rates due to the rate subvention support provided by GM.

16

GENERAL MOTORS FINANCIAL COMPANY, INC.

Revenue
 
Years Ended December 31,
 
 
 
 
2016
 
2015
 
2016 vs. 2015
 
North America
 
International
 
Total
 
North America
 
International
 
Total
 
Change excluding FX
 
FX
 
Total change
 
%
Finance charge income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail finance receivables
$
1,826

 
$
1,063

 
$
2,889

 
$
1,803

 
$
1,174

 
$
2,977

 
$
3

 
$
(91
)
 
$
(88
)
 
(3.0
)%
Commercial finance receivables
$
156

 
$
284

 
$
440

 
$
103

 
$
301

 
$
404

 
$
63

 
$
(27
)
 
$
36

 
8.9
 %
Leased vehicle income
$
5,886

 
$
39

 
$
5,925

 
$
2,794

 
$
13

 
$
2,807

 
$
3,137

 
$
(19
)
 
$
3,118

 
111.1
 %
Other income
$
80

 
$
224

 
$
304

 
$
77

 
$
189

 
$
266

 
$
73

 
$
(35
)
 
$
38

 
14.3
 %
Effective yield - retail finance receivables
9.2
%
 
9.5
%
 
9.3
%
 
11.5
%
 
10.2
%
 
11.0
%
 
 
 
 
 
 
 
 
Effective yield - commercial finance receivables
3.2
%
 
6.3
%
 
4.7
%
 
3.0
%
 
6.9
%
 
5.2
%
 
 
 
 
 
 
 
 
In the North America Segment, finance charge income on retail finance receivables increased slightly for 2016, compared to 2015, as the growth in the portfolio was substantially offset by a decrease in effective yield. The effective yield on our retail finance receivables decreased due primarily to a decrease in the average annual percentage rate on new originations as we have increased our prime lending. The effective yield represents finance charges and fees recorded in earnings during the period as a percentage of average retail finance receivables. The effective yield, as a percentage of average retail finance receivables, is higher than the contractual rates of our auto finance contracts primarily because the effective yield includes, in addition to the contractual rates and fees, the impact of rate subvention provided by GM.
The increase in leased vehicle income reflects the increase in the size of the leased asset portfolio.
Costs and Expenses
 
Years Ended December 31,
 
 
 
 
 
 
 
 
 
2016
 
2015
 
2016 vs. 2015
 
North America
 
International
 
Total
 
North America
 
International
 
Total
 
Change excluding FX
 
FX
 
Total change
 
%
Operating expenses
$
891

 
$
599

 
$
1,490

 
$
735

 
$
558

 
$
1,293

 
$
229

 
$
(32
)
 
$
197

 
15.2
%
Leased vehicle expenses
$
4,499

 
$
30

 
$
4,529

 
$
2,190

 
$
10

 
$
2,200

 
$
2,342

 
$
(13
)
 
$
2,329

 
105.9
%
Provision for loan losses
$
566

 
$
103

 
$
669

 
$
466

 
$
158

 
$
624

 
$
52

 
$
(7
)
 
$
45

 
7.2
%
Interest expense(a)
$
1,481

 
$
627

 
$
2,108

 
$
921

 
$
695

 
$
1,616

 
$
544

 
$
(52
)
 
$
492

 
30.4
%
Average debt outstanding
$
50,216

 
$
13,944

 
$
64,160

 
$
31,130

 
$
13,489

 
$
44,619

 
$
20,562

 
$
(1,021
)
 
$
19,541

 
43.8
%
Effective rate of interest on debt
2.9
%
 
4.5
%
 
3.3
%
 
3.0
%
 
5.2
%
 
3.6
%
 
 
 
 
 
 
 
 
_________________ 
(a)Amounts do not reflect allocation of senior note interest expense, and therefore do not agree with amounts presented in Note 16 - "Segment Reporting and Geographic Information" in our consolidated financial statements in this Form 10-K.
Operating Expenses The increase in operating expenses relates to the growth in earning assets and investments to support the prime lending program and enhance lease origination and servicing capabilities in the North America Segment. Operating expenses as a percentage of average earning assets decreased to 2.2% for 2016 from 2.7% for 2015, primarily due to efficiency gains achieved through higher earning asset levels.
Leased Vehicle Expenses Leased vehicle expenses, which are primarily comprised of depreciation of leased vehicles, increased due to the growth of the leased asset portfolio.
Provision for Loan losses The provision for retail loan losses increased due primarily to the growth in the retail finance receivables portfolio. As a percentage of average retail finance receivables, the provision for retail loan losses was 2.1% and 2.3% for 2016 and 2015. The provision for commercial loan losses was insignificant for 2016 and 2015.

17

GENERAL MOTORS FINANCIAL COMPANY, INC.

Interest Expense Interest expense increased due primarily to an increase in the average debt outstanding resulting from growth in the loan and lease portfolios, partially offset by a decrease in the effective rate of interest on debt.
Taxes Our consolidated effective income tax rate was 20.9% and 26.5% of income before income taxes and equity income for 2016 and 2015. The decrease in the effective tax rate is due primarily to the recognition of currency losses arising from the ownership realignment of certain wholly-owned foreign subsidiaries and an increase in certain U.S. federal tax credits.
Other Comprehensive Loss
Foreign Currency Translation Adjustment Foreign currency translation adjustments included in other comprehensive loss were $144 million and $669 million for 2016 and 2015. Most of the international operations use functional currencies other than the U.S. Dollar. Translation adjustments result from changes in the values of our international currency-denominated assets and liabilities as the value of the U.S. Dollar changes in relation to international currencies.
Credit Quality
Retail Finance Receivables
December 31, 2016
 
December 31, 2015
 
North America
 
International
 
Total
 
North America
 
International
 
Total
Retail finance receivables, net of fees
$
21,786

 
$
11,124

 
$
32,910

 
$
18,148

 
$
10,976

 
$
29,124

Less: allowance for loan losses
(666
)
 
(127
)
 
(793
)
 
(618
)
 
(117
)
 
(735
)
Retail finance receivables, net
$
21,120

 
$
10,997

 
$
32,117

 
$
17,530

 
$
10,859

 
$
28,389

Number of outstanding contracts
1,097,207

 
1,611,276

 
2,708,483

 
955,094

 
1,563,831

 
2,518,925

Average amount of outstanding contracts (in dollars)(a)
$
19,856

 
$
6,904

 
$
12,151

 
$
19,001

 
$
7,019

 
$
11,562

Allowance for loan losses as a percentage of retail finance receivables, net of fees
3.1
%
 
1.1
%
 
2.4
%
 
3.4
%
 
1.1
%
 
2.5
%
_________________ 
(a)
Average amount of outstanding contracts consists of retail finance receivables, net of fees, divided by number of outstanding contracts. The decrease in the average amount of outstanding contracts in the International Segment is due primarily to changes in foreign currency exchange rates.
At December 31, 2016, the allowance for loan losses for the North America Segment as a percentage of retail finance receivables, net of fees, decreased from the level at December 31, 2015 consistent with the improved credit mix in our portfolio resulting from our expansion of prime lending.
Delinquency The following is a summary of the contractual amounts of delinquent retail finance receivables, which is not materially different than the recorded investment, that are (i) more than 30 days delinquent, but not yet in repossession, and (ii) in repossession, but not yet charged off:
 
December 31, 2016
 
December 31, 2015
 
North America
 
International
 
Total
 
Percent of Contractual Amount Due
 
North America
 
International
 
Total
 
Percent of Contractual Amount Due
31 - 60 days
$
1,150

 
$
85

 
$
1,235

 
3.7
%
 
$
1,150

 
$
87

 
$
1,237

 
4.2
%
Greater than 60 days
432

 
110

 
542

 
1.7

 
389

 
92

 
481

 
1.6

Total finance receivables more than 30 days delinquent
1,582

 
195

 
1,777

 
5.4

 
1,539

 
179

 
1,718

 
5.8

In repossession
43

 
8

 
51

 
0.1

 
42

 
4

 
46

 
0.2

Total finance receivables more than 30 days delinquent or in repossession
$
1,625

 
$
203

 
$
1,828

 
5.5
%
 
$
1,581

 
$
183

 
$
1,764

 
6.0
%

18

GENERAL MOTORS FINANCIAL COMPANY, INC.

Deferrals In accordance with our policies and guidelines in the North America Segment, we, at times, offer payment deferrals to retail consumers, whereby the borrower is allowed to move up to two delinquent payments to the end of the loan generally by paying a fee (approximately the interest portion of the payment deferred, except where state law provides for a lesser amount). Our policies and guidelines limit the number and frequency of deferments that may be granted. Additionally, we generally limit the granting of deferments on new accounts until a requisite number of payments have been received. Contracts receiving a payment deferral as an average quarterly percentage of average retail finance receivables outstanding were 5.1% and 5.9% for 2016 and 2015. Deferrals in the International Segment are insignificant.
Troubled Debt Restructurings Refer to Note 4 - "Finance Receivables" to our consolidated financial statements for further discussion of TDRs.
Net Charge-offs The following table presents charge-off data with respect to our retail finance receivables portfolio:  
 
Years Ended December 31,
 
2016
 
2015
 
2014
 
North America
 
International
 
Total
 
North America
 
International
 
Total
 
North America
 
International
 
Total
Charge-offs
$
1,019

 
$
152

 
$
1,171

 
$
859

 
$
137

 
$
996

 
$
776

 
$
138

 
$
914

Less: recoveries
(508
)
 
(51
)
 
(559
)
 
(439
)
 
(47
)
 
(486
)
 
(417
)
 
(53
)
 
(470
)
Net charge-offs
$
511

 
$
101

 
$
612

 
$
420

 
$
90

 
$
510

 
$
359

 
$
85

 
$
444

Net charge-off percentage(a)
2.6
%
 
0.9
%
 
2.0
%
 
2.7
%
 
0.8
%
 
1.9
%
 
2.9
%
 
0.7
%
 
1.8
%
Recovery percentage(b)
52.7
%
 
 
 
 
 
56.4
%
 
 
 
 
 
57.3
%
 
 
 
 
_________________ 
(a)
Net charge-off percentage is calculated as a percentage of average retail finance receivables.
(b)
Recovery percentage is a percentage of gross repossession charge-offs. Charge-offs for the International Segment primarily include the write-down of receivables to net realizable value. As a result, a calculation of recoveries as a percentage of gross charge-offs is not meaningful.
Commercial Finance Receivables 
December 31, 2016
 
December 31, 2015
 
North America
 
International
 
Total
 
North America
 
International
 
Total
Commercial finance receivables, net of fees
$
6,527

 
$
4,596

 
$
11,123

 
$
4,051

 
$
4,388

 
$
8,439

Less: allowance for loan losses
(30
)
 
(20
)
 
(50
)
 
(23
)
 
(24
)
 
(47
)
Total commercial finance receivables, net
$
6,497

 
$
4,576

 
$
11,073

 
$
4,028

 
$
4,364

 
$
8,392

Number of dealers
792

 
2,150

 
2,942

 
656

 
2,139

 
2,795

Average carrying amount per dealer
$
8

 
$
2

 
$
4

 
$
6

 
$
2

 
$
3

Allowance for loan losses as a percentage of commercial finance receivables, net of fees
0.5
%
 
0.4
%
 
0.4
%
 
0.6
%
 
0.5
%
 
0.6
%
There were insignificant charge-offs of commercial finance receivables during 2016, 2015, and 2014. At December 31, 2016 and 2015, substantially all of our commercial finance receivables were current with respect to payment status and none were classified as TDRs.
Leased Vehicles At December 31, 2016 and 2015, 98.8% and 98.7% of our operating leases were current with respect to payment status.
Liquidity and Capital Resources
General Our primary sources of cash are finance charge income, leasing income and proceeds from the sale of terminated leased vehicles, servicing fees, net distributions from secured debt facilities, including securitizations, secured and unsecured borrowings and collections and recoveries on finance receivables. Our primary uses of cash are purchases of retail finance receivables and leased vehicles, the funding of commercial finance receivables, repayment of secured and unsecured debt, funding credit enhancement requirements in connection with securitizations and secured debt facilities, operating expenses and interest costs.

19

GENERAL MOTORS FINANCIAL COMPANY, INC.

In the North America Segment, our purchase and funding of retail and commercial finance receivables and leased vehicles are financed initially utilizing cash and borrowings on our secured credit facilities. Subsequently, our strategy is to obtain long-term financing for finance receivables and leased vehicles through securitization transactions and the issuance of unsecured debt.
In the International Segment, our purchase and funding of finance receivables are typically financed with borrowings on secured and unsecured credit facilities. In certain countries where the debt capital and securitization markets are sufficiently developed, such as in Germany and the U.K., we obtain long-term financing through securitization transactions. In addition, we raise unsecured debt in the international capital markets through the issuance of notes under our Euro medium term note program and accept deposits from retail banking customers in Germany.
Cash Flow During 2016, net cash provided by operating activities increased compared to 2015 due primarily to increased lease vehicle income resulting from growth in the leased vehicle portfolio, partially offset by increased interest expense and increased operating expenses.
During 2016, net cash used in investing activities increased compared to 2015 due to an increase in purchases of leased vehicles of $4.3 billion and an increase in net fundings of commercial finance receivables of $2.0 billion, partially offset by increased collections on retail finance receivables of $1.4 billion, and an increase in proceeds received on terminated leases of $1.5 billion. Additionally, $924 million of net cash was used for the purchase of our equity interest in SAIC-GMAC in 2015.
During 2016, net cash provided by financing activities increased compared to 2015 due primarily to an increase in borrowings, net of repayments, of $767 million offset by a $649 million capital contribution received from GM in 2015.
Liquidity
December 31, 2016
 
December 31, 2015
Cash and cash equivalents(a)
$
3,201

 
$
3,061

Borrowing capacity on unpledged eligible assets
9,506

 
9,697

Borrowing capacity on committed unsecured lines of credit
445

 
904

Borrowing capacity on the Junior Subordinated Revolving Credit Facility
1,000

 
1,000

Available liquidity
$
14,152

 
$
14,662

_________________
(a)
Includes $839 million and $756 million in unrestricted cash outside of the U.S. at December 31, 2016 and 2015. This cash is considered to be indefinitely invested based on specific plans for reinvestment of these earnings.
During 2016 available liquidity decreased due primarily to increased credit facility utilization due to asset growth.
We have the ability to borrow up to $1.0 billion under GM's three-year, $4.0 billion unsecured revolving credit facility and up to $3.0 billion under GM's five-year, $10.5 billion unsecured revolving credit facility, subject to available capacity. Our borrowings under GM's facilities are limited by GM's ability to borrow the entire amount available under the facilities. Therefore, we may be able to borrow up to $4.0 billion in total or may be unable to borrow depending on GM's borrowing activity. If we do borrow under these facilities, we expect such borrowings would be short-term in nature and, except in extraordinary circumstances, would not be used to fund our operating activities in the ordinary course of business. Neither we, nor any of our subsidiaries, guarantee any obligations under these facilities and none of our assets secure these facilities. Liquidity available to us under the GM unsecured revolving credit facilities is not included in the table above. At December 31, 2016, we had no amounts borrowed under either of GM's unsecured revolving credit facilities.
Credit Ratings We receive ratings from four independent credit rating agencies: DBRS Limited, Fitch Rating (“Fitch”), Moody’s Investor Service (“Moody’s”) and Standard & Poor’s (“S&P”). The credit ratings assigned to us from all the credit rating agencies are closely associated with their opinions on GM. The following table summarizes our credit ratings at February 1, 2017:
 
 
Company Rating
 
Bond Rating
 
Outlook
DBRS Limited
 
BBB
 
BBB
 
Stable
Fitch
 
BBB-
 
BBB-
 
Positive
Moody’s
 
Baa3
 
Baa3
 
Stable
S&P
 
BBB
 
BBB
 
Stable
Ratings actions taken by each of the credit rating agencies from January 1, 2016 through February 1, 2017 were as follows: (i) DBRS Limited upgraded our company rating and bond rating to BBB from BBB(low) and revised their outlook to Stable from Positive in March 2016; (ii) Fitch revised their outlook to Positive from Stable in June 2016; (iii) Moody’s revised their outlook to Positive from Stable in February 2016, and upgraded our company rating and bond rating to Baa3 from Ba1 and revised their

20

GENERAL MOTORS FINANCIAL COMPANY, INC.

outlook to Stable in January 2017; and (iv) S&P revised their outlook to Positive from Stable in April 2016, and upgraded our company and bond rating to BBB from BBB- and revised their outlook to Stable in January 2017.
Credit Facilities In the normal course of business, in addition to using our available cash, we utilize borrowings under our credit facilities, which may be secured and/or structured as securitizations, or may be unsecured, and we repay these borrowings as appropriate under our liquidity management strategy.
At December 31, 2016, credit facilities consist of the following:
Facility Type
 
Facility Amount
 
Advances Outstanding
Revolving retail asset-secured facilities(a)
 
$
21,473

 
$
8,981

Revolving commercial asset-secured facilities(b)
 
4,305

 
836

Total secured
 
25,778

 
9,817

Unsecured committed facilities(c)
 
1,431

 
986

Unsecured uncommitted facilities(d)
 
2,368

 
2,368

Total unsecured
 
3,799

 
3,354

Junior Subordinated Revolving Credit Facility
 
1,000

 

Total
 
$
30,577

 
$
13,171

_________________
(a)
Includes committed and uncommitted revolving credit facilities backed by retail finance receivables and leases. The financial institutions providing the uncommitted facilities are not contractually obligated to advance funds under them.  We had $329 million in advances outstanding and $633 million in unused borrowing capacity on these facilities at December 31, 2016.
(b)
Includes revolving credit facilities backed by loans to dealers for floorplan financing.
(c)
Does not include $4.0 billion in liquidity available to us under GM's unsecured revolving credit facilities.
(d)
The financial institutions providing the uncommitted facilities are not contractually obligated to advance funds under them. We had $1.0 billion in unused borrowing capacity on these facilities at December 31, 2016.
Refer to Note 8 - "Debt" to our consolidated financial statements for further discussion of the terms of our revolving credit facilities.
Securitization Notes Payable We periodically finance our retail and commercial finance receivables and leases through public and private term securitization transactions, where the securitization markets are sufficiently developed. A summary of securitization notes payable is as follows:
Year of Transaction
Maturity Date (a)
 
Original Note Issuance (b)
 
Note Balance
At December 31, 2016
2012
February 2020
-
May 2020
 
$
2,300

 
291

2013
July 2020
-
October 2021
 
$
5,655

 
1,054

2014
April 2019
-
September 2022
 
$
10,005

 
3,370

2015
July 2019
-
December 2023
 
$
14,348

 
9,056

2016
April 2018
-
November 2024
 
$
17,786

 
15,745

Total active securitizations
 
 
 
 
 
 
$
29,516

Debt issuance costs
 
 
 
 
 
 
(63
)
 
 
 
 
 
 
 
$
29,453

_________________ 
(a)
Maturity dates represent legal final maturity of issued notes. The notes are expected to be paid based on amortization of the finance receivables and leases pledged.
(b)
At historical foreign currency exchange rates at the time of issuance.
Our securitizations utilize special purpose entities which are also variable interest entities ("VIEs") that meet the requirements to be consolidated in our financial statements. See Note 9 - "Variable Interest Entities" to our consolidated financial statements for further discussion.
Senior Notes, Retail Customer Deposits and Other Unsecured Debt We periodically access the debt capital markets through the issuance of senior unsecured notes, predominantly from registered shelves in the U.S. and Europe. At December 31, 2016, the par value of our outstanding senior notes was $29.0 billion.

21

GENERAL MOTORS FINANCIAL COMPANY, INC.

We issue other unsecured debt through commercial paper offerings and other non-bank funding sources primarily in the International Segment. At December 31, 2016, we had $780 million of this type of unsecured debt outstanding. During 2015, we began accepting deposits from retail banking customers in Germany. At December 31, 2016, the outstanding balance of these deposits was $1.9 billion, of which 42% were overnight deposits.
Support Agreement In September 2016, in order to maintain our leverage ratio in line with the applicable ratio set in the GM Support Agreement, we borrowed $415 million on the Junior Subordinated Revolving Credit Facility. We repaid this borrowing plus interest during the fourth quarter of 2016. At December 31, 2016, our earning assets leverage ratio was 10.4 and the applicable ratio was 11.5. Refer to Note 2 - "Related Party Transactions" to our consolidated financial statements for more information.
Contractual Obligations The following table presents the expected scheduled principal and interest payments under our contractual debt and lease obligations:
 
Years Ending December 31,
 
2017
 
2018
 
2019
 
2020
 
2021
 
Thereafter
 
Total
Operating leases
$
38

 
$
45

 
$
41

 
$
37

 
$
35

 
$
161

 
$
357

Secured debt
21,268

 
11,573

 
4,880

 
1,264

 
348

 

 
39,333

Unsecured debt
7,328

 
4,167

 
6,351

 
4,650

 
4,750

 
7,791

 
35,037

Interest payments(a)
1,624

 
1,204

 
799

 
573

 
376

 
793

 
5,369

 
$
30,258

 
$
16,989

 
$
12,071

 
$
6,524

 
$
5,509

 
$
8,745

 
$
80,096

_________________ 
(a)
Interest payments were determined using the interest rate in effect at December 31, 2016 for floating rate debt and the contractual rates for fixed rate debt. Interest payments on floating rate tranches of the securitization notes payable were converted to a fixed rate based on the floating rate plus any expected hedge payments.
At December 31, 2016, we had liabilities associated with uncertain tax positions of $142 million, including penalties and interest. The table above does not include these liabilities since it is impracticable to estimate the future cash flows associated with these amounts.
Under our tax sharing arrangement with GM, we are responsible for our tax liabilities as if we filed separate returns. As of December 31, 2016, we have no accrued liability to GM. Refer to Note 14 - "Income Taxes" to our consolidated financial statements for more information.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Overview We are exposed to a variety of risks in the normal course of our business. Our financial condition depends on the extent to which we effectively identify, assess, monitor and manage these risks. The principal types of risk to our business include:
Market risk - the possibility that changes in interest and currency exchange rates will adversely affect our cash flow and economic value;
Counterparty risk - the possibility that a counterparty may default on a derivative contract or cash deposit or will fail to meet its lending commitments to us;
Credit risk - the possibility of loss from a customer's failure to make payments according to contract terms;
Residual risk - the possibility that the actual proceeds we receive at lease termination will be lower than our projections or return volumes will be higher than our projections;
Liquidity risk - the possibility that we may be unable to meet all of our current and future obligations in a timely manner; and
Operating risk - the possibility of errors relating to transaction processing and systems, actions that could result in compliance deficiencies with regulatory standards or contractual obligations and the possibility of fraud by our employees or outside persons.
We manage each of these types of risk in the context of its contribution to our overall global risks. We make business decisions on a risk-adjusted basis and price our services consistent with these risks. A discussion of market risk (including interest and currency rate risk), counterparty risk, and operating risk follows.
Market Risk We seek to minimize volatility in our earnings from changes in interest rates and foreign currency exchange rates. Our strategies to manage market risk are approved by our International and North America Asset Liability Committees (“ALCO”).

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GENERAL MOTORS FINANCIAL COMPANY, INC.

In 2015, we expanded our ALCO to incorporate more asset liability management strategies as the composition of sources of debt evolved to support growth in our earning assets. Our Corporate Treasury group is responsible for the development of our interest rate and liquidity management policies as presented to the ALCO.
Interest Rate Risk We depend on accessing the capital markets to fund asset originations. We are exposed to interest rate risks as our financial assets and liabilities have different behavioral characteristics that may impact our financial performance. These differences may include tenor, yield, re-pricing timing, and prepayment expectations.
Our assets are primarily comprised of fixed-rate retail installment loans and operating lease contracts under which customers typically make equal monthly payments over the life of the contracts. Our commercial finance receivables are primarily originated to finance new and used vehicles held in dealers’ inventory and generally require dealers to pay a floating rate of interest. These balances expand and contract with car sales and are revolving in nature.
Our debt includes long-term unsecured debt and securitization notes payable. Our senior note unsecured debt issuances have tenors of up to ten years. The majority of these debt instruments are fixed-rate and pay equal interest payments over the life of the debt and a single principal payment at maturity. Our securitization notes payable are primarily fixed-rate and amortize as the underlying assets pay down.
We manage interest rate risk with the objective of optimizing earnings performance while avoiding excessive financial risks and market-related earnings volatility. We measure and monitor interest rate risk primarily through key risk metrics such as duration gap, economic value of equity sensitivity and net interest income sensitivity. When appropriate, we use derivatives to manage interest rate risk; however, we do not engage in any speculative trading in derivatives.
Swap Agreements We utilize interest rate swap agreements to convert certain floating rate exposures to fixed rate or certain fixed-rate exposures to floating rate in order to manage our interest rate exposure within levels established by the ALCO.
Management monitors our hedging activities to ensure that the value of derivative financial instruments, their correlation to the contracts being hedged and the amounts being hedged continue to provide effective protection against interest rate risk. However, there can be no assurance that our strategies will be effective in minimizing interest rate risk or that increases in interest rates will not have an adverse effect on our profitability.


23

GENERAL MOTORS FINANCIAL COMPANY, INC.

The following table provides information about our interest rate-sensitive financial instruments by expected maturity date as of December 31, 2016: 
 
 
2017
 
2018
 
2019
 
2020
 
2021
 
Thereafter
 
Fair Value
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail finance receivables
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal amounts
 
$
12,978

 
$
9,169

 
$
5,866

 
$
3,189

 
$
1,425

 
$
559

 
$
32,067

Weighted-average annual percentage rate
 
8.26
%
 
8.17
%
 
8.10
%
 
8.05
%
 
8.28
%
 
10.51
%
 
 
Commercial finance receivables
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal amounts
 
$
10,754

 
$
116

 
$
115

 
$
107

 
$
161

 
$
144

 
$
11,073

Weighted-average annual percentage rate
 
5.07
%
 
4.13
%
 
4.13
%
 
4.17
%
 
4.20
%
 
4.16
%
 
 
Interest rate swaps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notional amounts
 
$
2,626

 
$
5,891

 
$
2,830

 
$
851

 
$
10

 
$
1

 
$
67

Average pay rate
 
1.27
%
 
1.27
%
 
1.18
%
 
1.11
%
 
4.38
%
 
3.05
%
 
 
Average receive rate
 
1.49
%
 
1.77
%
 
1.72
%
 
1.67
%
 
5.85
%
 
3.86
%
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revolving credit facilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal amounts
 
$
8,582

 
$
873

 
$
314

 
$
41

 
$
7

 
$

 
$
9,812

Weighted-average interest rate
 
2.60
%
 
5.56
%
 
5.78
%
 
9.48
%
 
8.65
%
 
%
 
 
Securitization notes payable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal amounts
 
$
12,686

 
$
10,700

 
$
4,566

 
$
1,223

 
$
341

 
$

 
$
29,545

Weighted-average interest rate
 
1.94
%
 
2.10
%
 
2.38
%
 
2.85
%
 
2.80
%
 
%
 
 
Unsecured debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior notes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal amounts
 
$
2,854

 
$
3,086

 
$
5,877

 
$
4,650

 
$
4,750

 
$
7,791

 
$
29,182

Weighted-average interest rate
 
3.48
%
 
3.08
%
 
2.65
%
 
3.02
%
 
3.83
%
 
3.81
%
 
 
Credit facilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal amounts
 
$
2,633

 
$
433

 
$
288

 
$

 
$

 
$

 
$
3,354

Weighted-average interest rate
 
7.59
%
 
6.42
%
 
3.08
%
 
%
 
%
 
%
 
 
Retail customer deposits
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal amounts
 
$
1,342

 
$
400

 
$
153

 
$

 
$

 
$

 
$
1,902

Weighted-average interest rate
 
1.21
%
 
1.39
%
 
1.17
%
 
%
 
%
 
%
 
 
Other unsecured debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal amounts
 
$
499

 
$
248

 
$
33

 
$

 
$

 
$

 
$
782

Weighted-average interest rate
 
12.52
%
 
13.22
%
 
11.18
%
 
%
 
%
 
%
 
 
Interest rate swaps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notional amounts
 
$
1,299

 
$
5,410

 
$
2,219

 
$
1,631

 
$
3,558

 
$
3,200

 
$
315

Average pay rate
 
2.45
%
 
3.25
%
 
4.03
%
 
4.62
%
 
3.83
%
 
5.63
%
 
 
Average receive rate
 
2.37
%
 
2.90
%
 
3.40
%
 
3.68
%
 
3.42
%
 
4.58
%
 
 
The impact of the discount rate, prepayment and credit loss assumptions is consistent with assumptions applied to interest rate sensitive assets and liabilities reported at December 31, 2015. Finance receivables, both retail and commercial, are estimated to be realized by us in future periods using discount rate, prepayment and credit loss assumptions similar to our historical experience. Notional amounts on interest rate swap agreements are based on contractual terms. Revolving credit facilities and securitization notes payable amounts have been classified based on expected payoff. Senior notes, credit facilities, retail customer deposits and other unsecured debt principal amounts have been classified based on maturity.
Interest rates are primarily fixed on retail finance receivables and floating on commercial finance receivables. Interest rates on securitization notes payable and unsecured senior notes are primarily fixed.  Interest rates are primarily floating on credit facilities, deposits and other unsecured debt.
The notional amounts of interest rate swap agreements, which are used to calculate the contractual payments to be exchanged under the contracts, represent average amounts that will be outstanding for each of the years included in the table. Notional amounts do not represent amounts exchanged by parties and, thus, are not a measure of our exposure to loss through our use of these agreements.

24

GENERAL MOTORS FINANCIAL COMPANY, INC.

Foreign Currency Exchange Rate Risk We primarily finance receivables and lease assets with debt in the same currency, minimizing exposure to exchange rate movements. When a different currency is used, we may use foreign currency derivatives to minimize any impact to earnings. Exchange rate movements can impact our net investment in foreign subsidiaries, which impacts our tangible equity through other comprehensive income/loss.
The following table summarizes the amounts of foreign currency translation and transaction and remeasurement losses:
 
Years Ended December 31,
 
2016
 
2015
 
2014
Foreign currency translation losses recorded in accumulated other comprehensive loss
$
144

 
$
669

 
$
430

Losses resulting from foreign currency transactions and remeasurement recorded in earnings
$
167

 
$
58

 
$
170

Gains resulting from foreign currency exchange swaps recorded in earnings
(154
)
 
(42
)
 
(163
)
Net losses resulting from foreign currency exchange recorded in earnings
$
13

 
$
16

 
$
7

Most of the international operations use functional currencies other than the U.S. Dollar. Translation adjustments result from changes in the values of our international currency-denominated assets and liabilities as the value of the U.S. Dollar changes in relation to international currencies. The foreign currency translation losses in 2016 were primarily due to decreases in the values of the British Pound and the Euro in relation to the U.S. Dollar. The foreign currency translation losses in 2015 were due primarily to decreases in the values of the Brazilian Real, the Canadian Dollar and the Euro in relation to the U.S Dollar.
Counterparty Risk Counterparty risk relates to the financial loss we could incur if an obligor or counterparty to a transaction is unable to meet its financial obligations. Typical sources of exposure include balances maintained in bank accounts, investments, and derivative contracts. Investments are typically securities representing high quality monetary instruments which are easily accessible and derivative contracts are used for managing interest rate and foreign currency exchange rate risk. We, together with GM, establish exposure limits for each counterparty to minimize risk and provide counterparty diversification.
We maintain a policy of requiring that all derivative contracts be governed by an International Swaps and Derivatives Association Master Agreement. We enter into arrangements with individual counterparties that we believe are creditworthy and generally settle on a net basis. In addition, we perform a quarterly assessment of our counterparty credit risk, including a review of credit ratings, credit default swap rates and potential nonperformance of the counterparty.
Operating Risk We operate in many locations and rely on the abilities of our employees and computer systems to process a large number of transactions. Improper employee actions, improper operation of systems, or unforeseen business interruptions could result in financial loss, regulatory action and damage to our reputation, and breach of contractual obligations. To address this risk, we maintain internal control processes that identify transaction authorization requirements, safeguard assets from misuse or theft, protect the reliability of financial and other data, and minimize the impact of a business interruption on our customers. We also maintain system controls to maintain the accuracy of information about our operations. These controls are designed to manage operating risk throughout our operation.



25

GENERAL MOTORS FINANCIAL COMPANY, INC.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholder of
General Motors Financial Company, Inc.:
We have audited the accompanying consolidated balance sheets of General Motors Financial Company, Inc. and subsidiaries (the "Company") as of December 31, 2016 and 2015, and the related consolidated statements of income and comprehensive income, shareholder's equity, and cash flows for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of General Motors Financial Company, Inc. and subsidiaries at December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.


/s/ Deloitte & Touche LLP       
Fort Worth, Texas
February 7, 2017

26

GENERAL MOTORS FINANCIAL COMPANY, INC.

Item 8. Financial Statements and Supplementary Data

CONSOLIDATED BALANCE SHEETS
(dollars in millions) 
 
December 31, 2016
 
December 31, 2015
ASSETS
 
 
 
Cash and cash equivalents
$
3,201

 
$
3,061

Finance receivables, net (Note 4; Note 9 VIEs)
43,190

 
36,781

Leased vehicles, net (Note 5; Note 9 VIEs)
34,526

 
20,172

Goodwill (Note 6)
1,196

 
1,189

Equity in net assets of non-consolidated affiliates (Note 7)
944

 
986

Property and equipment, net of accumulated depreciation of $127 and $91
279

 
219

Deferred income taxes (Note 14)
274

 
231

Related party receivables (Note 2)
510

 
573

Other assets (Note 9 VIEs)
3,645

 
2,692

Total assets
$
87,765

 
$
65,904

LIABILITIES AND SHAREHOLDER'S EQUITY
 
 
 
Liabilities