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EX-10.1 - EXHIBIT 10.1 - AMENDMENT 2 TO MASTER AGREEMENT - General Motors Coex-101x07302017_amendmentt.htm
EX-32 - EXHIBIT 32 - SECTION 1350 CERTIFICATION - General Motors Coex-32x09302017.htm
EX-31.2 - EXHIBIT 31.2 - SECTION 302 CERTIFICATION OF CFO - General Motors Coex-312x09302017.htm
EX-31.1 - EXHIBIT 31.1 - SECTION 302 CERTIFICATION OF CEO - General Motors Coex-311x09302017.htm


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
Form 10-Q
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to

Commission file number 001-34960
gmmainlogoa12.jpg
GENERAL MOTORS COMPANY
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE
27-0756180
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
300 Renaissance Center, Detroit, Michigan
48265-3000
(Address of principal executive offices)
(Zip Code)
(313) 667-1500
(Registrant’s telephone number, including area code)

Not applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  þ  No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  þ  No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer  þ  Accelerated filer  ¨  Non-accelerated filer  ¨  Smaller reporting company  ¨ Emerging growth company  ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨  No  þ
As of October 17, 2017 the number of shares outstanding of common stock was 1,420,407,560 shares.





INDEX
 
 
 
Page
PART I
Item 1.
Condensed Consolidated Financial Statements
 
Condensed Consolidated Income Statements (Unaudited)
 
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
 
Condensed Consolidated Balance Sheets (Unaudited)
 
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
Condensed Consolidated Statements of Equity (Unaudited)
 
Notes to Condensed Consolidated Financial Statements
 
Note 1.
Nature of Operations and Basis of Presentation
 
Note 2.
Discontinued Operations
 
Note 3.
Marketable Securities
 
Note 4.
GM Financial Receivables
 
Note 5.
Inventories
 
Note 6.
Equipment on Operating Leases
 
Note 7.
Equity in Net Assets of Nonconsolidated Affiliates
 
Note 8.
Variable Interest Entities
 
Note 9.
Automotive and GM Financial Debt
 
Note 10.
Derivative Financial Instruments
 
Note 11.
Product Warranty and Related Liabilities
 
Note 12.
Pensions and Other Postretirement Benefits
 
Note 13.
Commitments and Contingencies
 
Note 14.
Income Taxes
 
Note 15.
Restructuring and Other Initiatives
 
Note 16.
Stockholders' Equity and Noncontrolling Interests
 
Note 17.
Earnings Per Share
 
Note 18.
Acquisition of Business
 
Note 19.
Segment Reporting
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Item 4.
Controls and Procedures
PART II
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.
Exhibits
Signature
 

During the three months ended September 30, 2017 we closed the sale of the Opel and Vauxhall business and certain other assets in Europe (the Opel/Vauxhall Business) to Peugeot, S.A. (PSA Group). The Opel/Vauxhall Business and our European financing subsidiaries and branches (the Fincos, and together with the Opel/Vauxhall Business, the European Business) are presented as discontinued operations in our condensed consolidated financial statements for all periods presented. The transfer of the Fincos is expected to close by the end of the year subject to the receipt of the necessary regulatory approvals and satisfaction of other closing conditions. The assets and liabilities of the Fincos are presented as held for sale as of September 30, 2017, and the assets and liabilities of the European Business are presented as held for sale as of December 31, 2016 in our condensed consolidated financial statements.


GENERAL MOTORS COMPANY AND SUBSIDIARIES



PART I

Item 1. Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED INCOME STATEMENTS
(In millions, except per share amounts) (Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
September 30, 2016
 
September 30, 2017
 
September 30, 2016
Net sales and revenue
 
 
 
 
 
 
 
Automotive
$
30,466

 
$
36,530

 
$
98,983

 
$
102,862

GM Financial
3,157

 
2,359

 
8,890

 
6,426

Total net sales and revenue
33,623

 
38,889

 
107,873

 
109,288

Costs and expenses
 
 
 
 
 
 
 
Automotive cost of sales
26,511

 
31,139

 
85,161

 
87,761

GM Financial interest, operating and other expenses
2,892

 
2,202

 
8,133

 
5,938

Automotive selling, general and administrative expense
2,304

 
2,400

 
7,141

 
7,378

Total costs and expenses
31,707

 
35,741

 
100,435

 
101,077

Operating income
1,916

 
3,148

 
7,438

 
8,211

Automotive interest expense
151

 
145

 
430

 
413

Interest income and other non-operating income, net
165

 
109

 
277

 
295

Equity income (Note 7)
500

 
497

 
1,585

 
1,717

Income before income taxes
2,430

 
3,609

 
8,870

 
9,810

Income tax expense (Note 14)
2,316

 
902

 
3,637

 
2,436

Income from continuing operations
114

 
2,707

 
5,233

 
7,374

Income (loss) from discontinued operations, net of tax (Note 2)
(3,096
)
 
5

 
(3,935
)
 
119

Net income (loss)
(2,982
)
 
2,712

 
1,298

 
7,493

Net (income) loss attributable to noncontrolling interests
1

 
61

 
(11
)
 
99

Net income (loss) attributable to stockholders
$
(2,981
)
 
$
2,773

 
$
1,287

 
$
7,592

 
 
 
 
 
 
 
 
Net income (loss) attributable to common stockholders
$
(2,983
)
 
$
2,773

 
$
1,285

 
$
7,592

 
 
 
 
 
 
 
 
Earnings per share (Note 17)
 
 
 
 
 
 
 
Basic earnings per common share – continuing operations
$
0.08

 
$
1.79

 
$
3.52

 
$
4.83

Basic earnings (loss) per common share – discontinued operations
$
(2.14
)
 
$

 
$
(2.65
)
 
$
0.07

Basic earnings (loss) per common share
$
(2.06
)
 
$
1.79

 
$
0.87

 
$
4.90

Weighted-average common shares outstanding – basic
1,445

 
1,550

 
1,483

 
1,548

 
 
 
 
 
 
 
 
Diluted earnings per common share  continuing operations
$
0.08

 
$
1.76

 
$
3.46

 
$
4.73

Diluted earnings (loss) per common share – discontinued operations
$
(2.11
)
 
$

 
$
(2.61
)
 
$
0.08

Diluted earnings (loss) per common share
$
(2.03
)
 
$
1.76

 
$
0.85

 
$
4.81

Weighted-average common shares outstanding – diluted
1,472

 
1,574

 
1,507

 
1,578

 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.38

 
$
0.38

 
$
1.14

 
$
1.14

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions) (Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
September 30, 2016
 
September 30, 2017
 
September 30, 2016
Net income (loss)
$
(2,982
)
 
$
2,712

 
$
1,298

 
$
7,493

Other comprehensive income (loss), net of tax (Note 16)
 
 
 
 
 
 
 
Foreign currency translation adjustments and other
371

 
(92
)
 
572

 
(27
)
Defined benefit plans
1,213

 
30

 
973

 
79

Other comprehensive income (loss), net of tax
1,584

 
(62
)
 
1,545

 
52

Comprehensive income (loss)
(1,398
)
 
2,650

 
2,843

 
7,545

Comprehensive (income) loss attributable to noncontrolling interests
3

 
75

 
(9
)
 
130

Comprehensive income (loss) attributable to stockholders
$
(1,395
)
 
$
2,725

 
$
2,834

 
$
7,675


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

1

GENERAL MOTORS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts) (Unaudited)
 
September 30, 2017
 
December 31, 2016
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
12,792

 
$
12,574

Marketable securities (Note 3)
8,454

 
11,841

Accounts and notes receivable, net
10,013

 
8,700

GM Financial receivables, net (Note 4; Note 8 at VIEs)
19,399

 
16,127

Inventories (Note 5)
11,789

 
11,040

Equipment on operating leases, net (Note 6)
1,632

 
1,110

Other current assets (Note 8 at VIEs)
4,909

 
3,633

Current assets held for sale (Note 2)
7,630

 
11,178

Total current assets
76,618

 
76,203

Non-current Assets
 
 
 
GM Financial receivables, net (Note 4; Note 8 at VIEs)
21,021

 
17,001

Equity in net assets of nonconsolidated affiliates (Note 7)
8,820

 
8,996

Property, net
35,178

 
32,603

Goodwill and intangible assets, net
5,854

 
6,149

Equipment on operating leases, net (Note 6; Note 8 at VIEs)
41,775

 
34,342

Deferred income taxes
30,723

 
33,172

Other assets (Note 8 at VIEs)
5,005

 
3,849

Non-current assets held for sale (Note 2)
4,508

 
9,375

Total non-current assets
152,884

 
145,487

Total Assets
$
229,502

 
$
221,690

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts payable (principally trade)
$
23,265

 
$
23,333

Short-term debt and current portion of long-term debt (Note 9)
 
 
 
Automotive
1,127

 
1,060

GM Financial (Note 8 at VIEs)
24,480

 
22,737

Accrued liabilities
26,603

 
25,893

Current liabilities held for sale (Note 2)
6,374

 
12,158

Total current liabilities
81,849

 
85,181

Non-current Liabilities
 
 
 
Long-term debt (Note 9)
 
 
 
Automotive
12,508

 
9,500

GM Financial (Note 8 at VIEs)
54,558

 
41,826

Postretirement benefits other than pensions (Note 12)
5,758

 
5,803

Pensions (Note 12)
14,119

 
15,264

Other liabilities
12,743

 
12,415

Non-current liabilities held for sale (Note 2)
4,490

 
7,626

Total non-current liabilities
104,176

 
92,434

Total Liabilities
186,025

 
177,615

Commitments and contingencies (Note 13)


 


Equity (Note 16)
 
 
 
Common stock, $0.01 par value
14

 
15

Additional paid-in capital
25,782

 
26,983

Retained earnings
24,230

 
26,168

Accumulated other comprehensive loss
(7,783
)
 
(9,330
)
Total stockholders’ equity
42,243

 
43,836

Noncontrolling interests
1,234

 
239

Total Equity
43,477

 
44,075

Total Liabilities and Equity
$
229,502

 
$
221,690



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

2

GENERAL MOTORS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions) (Unaudited)
 
Nine Months Ended
 
September 30, 2017
 
September 30, 2016
Cash flows from operating activities
 
 
 
Income from continuing operations
$
5,233

 
$
7,374

Depreciation, amortization and impairment charges
9,084

 
7,125

Foreign currency remeasurement and transaction (gains) losses
(12
)
 
143

Undistributed earnings of nonconsolidated affiliates, net
370

 
400

Pension contributions and OPEB payments
(1,109
)
 
(3,097
)
Pension and OPEB income, net
(646
)
 
(587
)
Provision for deferred taxes
3,517

 
2,194

Change in other operating assets and liabilities
(6,061
)
 
(1,271
)
Net cash provided by operating activities  continuing operations
10,376

 
12,281

Net cash provided by operating activities  discontinued operations
64

 
308

Net cash provided by operating activities
10,440

 
12,589

Cash flows from investing activities

 

Expenditures for property
(6,353
)
 
(6,102
)
Available-for-sale marketable securities, acquisitions
(4,499
)
 
(8,613
)
Trading marketable securities, acquisitions

 
(249
)
Available-for-sale marketable securities, liquidations
7,901

 
8,090

Trading marketable securities, liquidations

 
846

Acquisition of companies/investments, net of cash acquired
(5
)
 
(802
)
Purchases of finance receivables, net
(15,134
)
 
(10,389
)
Principal collections and recoveries on finance receivables
9,363

 
7,368

Purchases of leased vehicles, net
(14,809
)
 
(14,959
)
Proceeds from termination of leased vehicles
4,649

 
1,799

Other investing activities
98

 
200

Net cash used in investing activities  continuing operations
(18,789
)
 
(22,811
)
Net cash used in investing activities  discontinued operations (Note 2)
(3,972
)
 
(1,188
)
Net cash used in investing activities
(22,761
)
 
(23,999
)
Cash flows from financing activities

 

Net decrease in short-term debt
(374
)
 
(289
)
Proceeds from issuance of debt (original maturities greater than three months)
43,048

 
30,598

Payments on debt (original maturities greater than three months)
(26,034
)
 
(15,294
)
Payments to purchase common stock
(2,994
)
 
(1,501
)
Proceeds from issuance of GM Financial preferred stock
985

 

Dividends paid
(1,701
)
 
(1,782
)
Other financing activities
(271
)
 
(172
)
Net cash provided by financing activities – continuing operations
12,659

 
11,560

Net cash provided by financing activities – discontinued operations
20

 
585

Net cash provided by financing activities
12,679

 
12,145

Effect of exchange rate changes on cash, cash equivalents and restricted cash
362

 
52

Net increase in cash, cash equivalents and restricted cash
720

 
787

Cash, cash equivalents and restricted cash at beginning of period
15,160

 
17,332

Cash, cash equivalents and restricted cash at end of period
$
15,880

 
$
18,119

 
 
 
 
Cash, cash equivalents and restricted cash – continuing operations at end of period (Note 3)
$
15,315

 
$
17,392

Cash, cash equivalents and restricted cash – discontinued operations at end of period
$
565

 
$
727

Significant Non-cash Investing and Financing Activity
 
 
 
Non-cash property additions – continuing operations
$
3,833

 
$
3,841

Non-cash property additions – discontinued operations
$

 
$
847

Non-cash business acquisition – continuing operations (Note 18)
$

 
$
290

Non-cash proceeds on sale of discontinued operations (Note 2)
$
808

 
$

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

3

GENERAL MOTORS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In millions) (Unaudited)
 
Common Stockholders’
 
Noncontrolling Interests
 
Total Equity
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Balance at January 1, 2016
$
15

 
$
27,607

 
$
20,285

 
$
(8,036
)
 
$
452

 
$
40,323

Net income

 

 
7,592

 

 
(99
)
 
7,493

Other comprehensive income

 

 

 
83

 
(31
)
 
52

Issuance of common stock

 
290

 

 

 

 
290

Purchase of common stock

 
(820
)
 
(681
)
 

 

 
(1,501
)
Exercise of common stock warrants

 
59

 

 

 

 
59

Stock based compensation

 
105

 
(16
)
 

 

 
89

Cash dividends paid on common stock

 

 
(1,763
)
 

 

 
(1,763
)
Dividends to noncontrolling interests

 

 

 

 
(25
)
 
(25
)
Other

 

 

 

 
(2
)
 
(2
)
Balance at September 30, 2016
$
15

 
$
27,241

 
$
25,417

 
$
(7,953
)
 
$
295

 
$
45,015

 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2017
$
15

 
$
26,983

 
$
26,168

 
$
(9,330
)
 
$
239

 
$
44,075

Net income

 

 
1,287

 

 
11

 
1,298

Other comprehensive income

 

 

 
1,547

 
(2
)
 
1,545

Purchase of common stock
(1
)
 
(1,476
)
 
(1,517
)
 

 

 
(2,994
)
Exercise of common stock warrants

 
42

 

 

 

 
42

Issuance of GM Financial preferred stock

 

 

 

 
985

 
985

Stock based compensation

 
293

 
(25
)
 

 

 
268

Cash dividends paid on common stock

 

 
(1,683
)
 

 

 
(1,683
)
Dividends to noncontrolling interests

 

 

 

 
(18
)
 
(18
)
Other

 
(60
)
 

 

 
19

 
(41
)
Balance at September 30, 2017
$
14

 
$
25,782

 
$
24,230

 
$
(7,783
)
 
$
1,234

 
$
43,477


























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

4

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of Operations and Basis of Presentation
General Motors Company (sometimes referred to in this Quarterly Report on Form 10-Q as we, our, us, ourselves, the Company, General Motors or GM) designs, builds and sells cars, trucks, crossovers and automobile parts worldwide. We also provide automotive financing services through General Motors Financial Company, Inc. (GM Financial). We analyze the results of our continuing operations through the following segments: GM North America (GMNA), GM International Operations (GMIO), GM South America (GMSA) and GM Financial. Nonsegment operations and Maven, our ride- and car-sharing business, are classified as Corporate. Corporate includes certain centrally recorded income and costs such as interest, income taxes, corporate expenditures including autonomous vehicle-related engineering costs and certain nonsegment specific revenues and expenses.

On July 31, 2017 we closed the sale of the Opel and Vauxhall business and certain other assets in Europe (the Opel/Vauxhall Business) to Peugeot S.A. (PSA Group). Both the Opel/Vauxhall Business and our European financing subsidiaries and branches (the Fincos, and together with the Opel/Vauxhall Business, the European Business) are presented as discontinued operations in our condensed consolidated financial statements for all periods presented. The assets and liabilities of the Fincos are presented as held for sale as of September 30, 2017, and the assets and liabilities of the European Business are presented as held for sale as of December 31, 2016 in our condensed consolidated financial statements. Unless otherwise indicated, information in these notes to the condensed consolidated financial statements relates to our continuing operations. Refer to Note 2 for additional details regarding the disposal of the Opel/Vauxhall Business and the planned disposals of the Fincos.

The accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information. Accordingly they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying condensed consolidated financial statements include all adjustments, which consist of normal recurring adjustments and transactions or events discretely impacting the interim periods, considered necessary by management to fairly state our results of operations, financial position and cash flows. The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2016 Form 10-K. Except for per share amounts or as otherwise specified, dollar amounts presented within tables are stated in millions.

In May 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, “Revenue from Contracts with Customers” (ASU 2014-09), which requires us to recognize revenue when a customer obtains control rather than when we have transferred substantially all risks and rewards of a good or service and requires expanded disclosures. ASU 2014-09, as amended, is effective for us beginning January 1, 2018. ASU 2014-09 will affect the amount and timing of certain revenue related transactions primarily resulting from the earlier recognition of certain sales incentives and fixed fee license arrangements. Upon adoption of ASU 2014-09 sales incentives will be recorded at the time of sale rather than at the later of sale or announcement and fixed fee license arrangements will be recognized when the customer is granted access to intellectual property instead of over the contract period. Certain transactions with daily rental car companies may also qualify to be accounted for as a sale as opposed to the current accounting as an operating lease. We expect to adopt the provisions of ASU 2014-09 on a modified retrospective basis through a cumulative adjustment to equity. Upon adoption of ASU 2014-09 we estimate a reduction to Equity of up to $1.0 billion. This estimate is subject to change as a result of future changes in market conditions, incentive program offerings, and dealer inventory levels. We continue to assess the overall impact the adoption of ASU 2014-09 will have on our consolidated financial statements and are continuing to test and refine our processes designed to comply with ASU 2014-09 to permit adoption by January 1, 2018.

In January 2016 the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (ASU 2016-01), which requires equity investments that are not accounted for under the equity method of accounting to be measured at fair value with changes recognized in net income and which updates certain presentation and disclosure requirements. ASU 2016-01 is effective for us beginning January 1, 2018 and requires a cumulative-effect adjustment for certain items upon adoption. At September 30, 2017 the carrying value of equity investments that are not accounted for under the equity method of accounting totaled approximately $500 million and unrealized gains or losses were insignificant. We do not believe the adoption of ASU 2016-01 will be material to our consolidated financial statements.
 
In March 2017 the FASB issued ASU 2017-07, "Compensation – Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" (ASU 2017-07), which requires that the service cost component of net periodic pension and other postretirement benefits (OPEB) (income) expense be presented in the same income statement line item as other employee compensation costs, while the remaining components of net periodic pension and OPEB (income) expense are to be presented outside operating income. ASU 2017-07 is effective for us on a retrospective basis beginning

5

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

January 1, 2018 and will result in the reclassification of non-service cost components from primarily Automotive cost of sales to Interest income and other non-operating income, net. We expect a resulting decrease to Operating income and an increase to Interest income and other non-operating income, net of approximately $1.3 billion for the year ended December 31, 2016.

In August 2017 the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities" (ASU 2017-12), which simplifies the application of hedge accounting and more closely aligns hedge accounting with companies' risk management strategies thereby making more hedging strategies eligible for hedge accounting. Unlike current guidance, ASU 2017-12 permits hedge accounting for specific risks in hedging relationships involving nonfinancial risk and interest rate risk. ASU 2017-12 is effective for us beginning January 1, 2019, with early adoption permitted. ASU 2017-12 requires a cumulative-effect adjustment for certain items upon adoption. We are currently evaluating the impact the adoption of ASU 2017-12 will have on our consolidated financial statements. The simplifications to the application of hedge accounting may result in the future expansion of our use of hedge accounting.
    
Note 2. Discontinued Operations
On March 5, 2017 we entered into a Master Agreement (the Agreement) to sell our European Business to PSA Group for net consideration with an estimated value of approximately $2.5 billion. On July 31, 2017 we closed the sale of our Opel/Vauxhall Business to PSA Group. The transfer of the Fincos is expected to close by the end of the year subject to the receipt of the necessary regulatory approvals and satisfaction of other closing conditions.

The net consideration paid at closing for the Opel/Vauxhall Business was $1.4 billion, consisting of (1) $1.1 billion in cash; and (2) $808 million in warrants in PSA Group; partially offset by (3) the $478 million de-risking premium payment made to PSA Group for assuming certain underfunded pension liabilities. The warrants are not exercisable for five years and do not include any governance or voting rights with respect to PSA Group. In addition, we agreed to sell the shares of PSA Group received upon exercise of the warrants within 35 days after exercise. The net consideration to be paid for the Fincos will be 0.8 times their book value at closing, which we estimate will be approximately $1.1 billion based on exchange rates at September 30, 2017, subject to foreign currency fluctuations. The purchase price is subject to certain working capital adjustments as provided in the Agreement.

The total charge from the sale of the European Business is expected to be approximately $6.3 billion, net of tax. During the three months ended September 30, 2017 the Company recorded a charge of $5.4 billion, of which $3.1 billion is recorded in Income (loss) from discontinued operations, net of tax and $2.3 billion is recorded in Income tax expense, as a result of the sale of the Opel/Vauxhall Business. The charge relates to: (1) $4.3 billion of deferred tax assets that will no longer be realizable or that transferred to PSA Group; (2) $1.5 billion related to previously deferred pension losses and payment of the de-risking premium to PSA Group for its assumption of certain underfunded pension liabilities; and (3) other net charges primarily related to contract cancellations, working capital adjustments and certain transitional services and other costs to support the separation of operations to be provided for a period of time following closing; partially offset by proceeds. During the three months ended June 30, 2017 we recognized, on a pre-tax basis, a charge of $836 million in Income (loss) from discontinued operations consisting of (1) a charge of $421 million for the cancellation of production programs resulting from the convergence of vehicle platforms between the European Business and PSA Group; (2) a disposal loss of $324 million as a result of the Fincos being classified as held for sale; and (3) other insignificant charges. We expect to record a disposal loss of approximately $300 million upon sale of the Fincos.

Our wholly-owned subsidiary (the Seller) has agreed to indemnify PSA Group for certain losses resulting from any inaccuracy of the representations and warranties or breaches of our covenants included in the Agreement and for certain other liabilities, including emissions and product liabilities. The Company has entered into a guarantee for the benefit of PSA Group and pursuant to which the Company has agreed to guarantee the Seller's obligation to indemnify PSA Group for certain losses resulting from any inaccuracy of certain representations and warranties or breaches of our covenants in the Agreement and for certain other liabilities. Certain of these indemnification obligations are subject to time limitations, thresholds and/or caps as to the amount of required payments.

We retained net underfunded pension liabilities of $6.8 billion owed primarily to current pensioners and former employees of the European Business with vested pension rights. PSA Group assumed approximately $3.1 billion of net underfunded pension liabilities primarily with respect to active employees of the Opel/Vauxhall Business, and during the three months ended September 30, 2017 the Seller made payments to PSA Group, or one or more pension funding vehicles, of $3.4 billion in respect of these assumed liabilities, which includes pension funding payments for active employees and the de-risking premium payment of $478 million discussed above. At closing we drew upon our three-year unsecured revolving credit facility to fund these payments. We issued debt securities, as described in Note 9, thereafter to repay the amount drawn on our credit facility.


6

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

As part of the retained pension liabilities described above, we retained the United Kingdom defined benefit pension plans in existence at signing related to the Opel/Vauxhall Business, including responsibility for service cost accruals through the closing date. Those plans with active participants closed to future accrual as of July 30, 2017. Any future service cost accruals on and from the closing date will be the responsibility of PSA Group.

We have agreed to purchase from and supply to PSA Group certain vehicles for a period of time following closing. During the three and nine months ended September 30, 2017 Total net sales and revenue from continuing operations include $362 million and purchases and expenses incurred by our continuing operations were insignificant related to transactions with the Opel/Vauxhall Business that would have been eliminated in consolidation prior to the sale of the Opel/Vauxhall Business. During the nine months ended September 30, 2017 cash payments were insignificant and cash receipts of $558 million were recorded in Net cash provided by operating cash flows - continuing operations related to transactions with the Opel/Vauxhall Business.

The following table summarizes the results of the discontinued operations:
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
September 30, 2016
 
September 30, 2017
 
September 30, 2016
Automotive net sales and revenue
$
1,553

 
$
4,444

 
$
11,257

 
$
15,011

GM Financial net sales and revenue
147

 
132

 
414

 
418

Total net sales and revenue
1,700

 
4,576

 
11,671

 
15,429

Automotive cost of sales
1,583

 
4,279

 
11,049

 
14,287

GM Financial interest, operating and other expenses
99

 
104

 
301

 
317

Automotive selling, general, and administrative expense
134

 
324

 
813

 
1,011

Other income and (expense) items
(74
)
 
10

 
(72
)
 
75

Loss from discontinued operations before taxes
190

 
121

 
564

 
111

Loss on sale of discontinued operations before taxes(a)(b)
1,150

 

 
1,986

 

Total loss from discontinued operations before taxes
1,340

 
121

 
2,550

 
111

Income tax expense (benefit)(b)(c)
1,756

 
(126
)
 
1,385

 
(230
)
Income (loss) from discontinued operations, net of tax
$
(3,096
)
 
$
5

 
$
(3,935
)
 
$
119

__________
(a)
Includes contract cancellation charges associated with the disposal in the nine months ended September 30, 2017.
(b)
Total loss on sale of discontinued operations, net of tax was $3.1 billion and $3.7 billion for the three and nine months ended September 30, 2017.
(c)
Includes $2.0 billion of deferred tax assets that transferred to PSA Group in the three and nine months ended September 30, 2017.


7

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

The following table summarizes the assets and liabilities of the Fincos at September 30, 2017 and the European Business at December 31, 2016:
 
September 30, 2017
 
December 31, 2016
Current Assets
 
 
 
Cash and cash equivalents
$
242

 
$
386

Accounts and notes receivable, net
65

 
938

GM Financial receivables, net
6,995

 
5,938

Inventories

 
2,748

Equipment on operating leases, net

 
786

Other current assets
328

 
382

Total current assets held for sale
7,630

 
11,178

Non-current Assets
 
 
 
GM Financial receivables, net
4,308

 
3,723

Property, net
65

 
3,217

Deferred income taxes
122

 
1,920

Other assets
13

 
515

Total non-current assets held for sale
4,508

 
9,375

Total Assets Held for Sale
$
12,138

 
$
20,553

 
 
 
 
Current Liabilities
 
 
 
Accounts payable (principally trade)
$
178

 
$
3,628

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

 

Automotive

 
107

GM Financial
6,014

 
5,124

Accrued liabilities
182

 
3,299

Total current liabilities held for sale
6,374

 
12,158

Non-current Liabilities
 
 
 
Long-term debt

 

Automotive

 
85

GM Financial
4,327

 
4,189

Pensions
126

 
2,687

Other liabilities
37

 
665

Total non-current liabilities held for sale
4,490

 
7,626

Total Liabilities Held for Sale
$
10,864

 
$
19,784


Note 3. Marketable Securities
The following table summarizes the fair value of cash equivalents and marketable securities which approximates cost:

8

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

 
Fair Value Level
 
September 30, 2017
 
December 31, 2016
Cash and cash equivalents
 
 
 
 
 
Cash, cash equivalents and time deposits
 
 
$
6,124

 
$
5,692

Available-for-sale securities
 
 
 
 
 
U.S. government and agencies
2
 
160

 
1,158

Corporate debt
2
 
1,770

 
2,524

Money market funds
1
 
2,983

 
1,801

Sovereign debt
2
 
1,755

 
1,399

Total available-for-sale securities – cash equivalents
 
 
6,668

 
6,882

Total cash and cash equivalents
 
 
$
12,792

 
$
12,574

Marketable securities
 
 
 
 


U.S. government and agencies
2
 
$
3,285

 
$
5,886

Corporate debt
2
 
3,720

 
3,611

Mortgage and asset-backed
2
 
584

 
197

Sovereign debt
2
 
865

 
2,147

Total available-for-sale securities – marketable securities
 
 
$
8,454

 
$
11,841

Restricted cash
 
 
 
 
 
Cash, cash equivalents and time deposits
 
 
$
199

 
$
248

Available-for-sale securities, primarily money market funds
1
 
2,324

 
1,665

Total restricted cash
 
 
$
2,523

 
$
1,913

 
 
 
 
 
 
Available-for-sale securities included above with contractual maturities(a)
 
 
 
 
Due in one year or less
 
 
$
6,417

 
 
Due between one and five years
 
 
5,138

 
 
Total available-for-sale securities with contractual maturities
 
 
$
11,555

 
 
__________
(a)
Excludes mortgage and asset-backed securities.

Sales proceeds from investments classified as available-for-sale and sold prior to maturity were $3.7 billion and $1.6 billion in the three months ended September 30, 2017 and 2016 and $5.1 billion and $5.8 billion in the nine months ended September 30, 2017 and 2016. Net unrealized gains and losses on available-for-sale securities and realized gains and losses on trading securities were insignificant in the three and nine months ended September 30, 2017 and 2016. Cumulative unrealized gains and losses on available-for-sale securities were insignificant at September 30, 2017 and December 31, 2016.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheet to the total shown in the condensed consolidated statement of cash flows:
 
September 30, 2017
Cash and cash equivalents
$
12,792

Restricted cash included in Other current assets
1,940

Restricted cash included in Other assets
583

Total
$
15,315



9

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

Note 4. GM Financial Receivables
 
September 30, 2017
 
December 31, 2016
 
Retail
 
Commercial
 
Total
 
Retail
 
Commercial
 
Total
Finance receivables, collectively evaluated for impairment, net of fees
$
30,052

 
$
9,119

 
$
39,171

 
$
24,480

 
$
7,506

 
$
31,986

Finance receivables, individually evaluated for impairment, net of fees
2,170

 
27

 
2,197

 
1,920

 
27

 
1,947

GM Financial receivables
32,222

 
9,146

 
41,368

 
26,400

 
7,533

 
33,933

Less: allowance for loan losses
(899
)
 
(49
)
 
(948
)
 
(765
)
 
(40
)
 
(805
)
GM Financial receivables, net
$
31,323

 
$
9,097

 
$
40,420

 
$
25,635

 
$
7,493

 
$
33,128

 
 
 
 
 
 
 
 
 
 
 
 
Fair value of GM Financial receivables
 
 
 
 
$
40,513

 
 
 
 
 
$
33,181


We estimate the fair value of retail finance receivables using observable and unobservable Level 3 inputs within a cash flow model. The inputs reflect assumptions regarding expected prepayments, deferrals, delinquencies, recoveries and charge-offs of the loans within the portfolio. The cash flow model produces an estimated amortization schedule of the finance receivables. The projected cash flows are then discounted to derive the fair value of the portfolio. Macroeconomic factors could affect the credit performance of the portfolio and therefore could potentially affect the assumptions used in our cash flow model. A substantial majority of our commercial finance receivables have variable interest rates. The carrying amount, a Level 2 input, is considered to be a reasonable estimate of fair value.
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
September 30, 2016
 
September 30, 2017
 
September 30, 2016
Allowance for loan losses at beginning of period
$
893

 
$
828

 
$
805

 
$
749

Provision for loan losses
204

 
167

 
573

 
501

Charge-offs
(287
)
 
(284
)
 
(858
)
 
(826
)
Recoveries
135

 
128

 
420

 
403

Effect of foreign currency
3

 
(2
)
 
8

 
10

Allowance for loan losses at end of period
$
948

 
$
837

 
$
948

 
$
837


The allowance for loan losses on retail and commercial finance receivables included a collective allowance of $617 million and $525 million and a specific allowance of $331 million and $280 million at September 30, 2017 and December 31, 2016.

Retail Finance Receivables We use proprietary scoring systems in the underwriting process that measure the credit quality of retail finance receivables using several factors, such as credit bureau information, consumer credit risk scores (e.g. FICO scores or its equivalent) and contract characteristics. We also consider other factors such as employment history, financial stability and capacity to pay. Subsequent to origination we review the credit quality of retail finance receivables based on customer payment activity. In North America, while we historically focused on consumers with lower than prime credit scores, we have expanded our prime lending programs. At September 30, 2017 and December 31, 2016, 39% and 48% of the retail finance receivables in North America were from consumers with sub-prime credit scores, which are defined as FICO scores or its equivalent of less than 620 at the time of loan origination.

An account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date such payment was contractually due. At September 30, 2017 and December 31, 2016 the accrual of finance charge income had been suspended on delinquent retail finance receivables with contractual amounts due of $797 million and $798 million. The following table summarizes the contractual amount of delinquent retail finance receivables, which is not significantly different than the recorded investment of the retail finance receivables:

10

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

 
September 30, 2017
 
September 30, 2016
 
Amount
 
Percent of Contractual Amount Due
 
Amount
 
Percent of Contractual Amount Due
31-to-60 days delinquent
$
1,176

 
3.6
%
 
$
1,112

 
4.4
%
Greater-than-60 days delinquent
521

 
1.6
%
 
491

 
1.9
%
Total finance receivables more than 30 days delinquent
1,697

 
5.2
%
 
1,603

 
6.3
%
In repossession
55

 
0.2
%
 
57

 
0.2
%
Total finance receivables more than 30 days delinquent or in repossession
$
1,752

 
5.4
%
 
$
1,660

 
6.5
%

At September 30, 2017 and December 31, 2016 retail finance receivables classified as troubled debt restructurings and individually evaluated for impairment were $2.2 billion and $1.9 billion and the allowance for loan losses included $328 million and $276 million of specific allowances on these receivables.

Commercial Finance Receivables Our commercial finance receivables consist of dealer financings, primarily for inventory purchases. A proprietary model is used to assign a risk rating to each dealer. We perform periodic credit reviews of each dealership and adjust the dealership's risk rating, if necessary. Dealers in Group VI are subject to additional restrictions on funding, including suspension of lines of credit and liquidation of assets. At September 30, 2017 and December 31, 2016 the commercial finance receivables on non-accrual status were insignificant. The following table summarizes the credit risk profile by dealer risk rating of commercial finance receivables: 
 
 
September 30, 2017
 
December 31, 2016
Group I
– Dealers with superior financial metrics
$
1,547

 
$
1,372

Group II
– Dealers with strong financial metrics
3,465

 
2,526

Group III
– Dealers with fair financial metrics
2,913

 
2,598

Group IV
– Dealers with weak financial metrics
881

 
613

Group V
– Dealers warranting special mention due to elevated risks
238

 
334

Group VI
– Dealers with loans classified as substandard, doubtful or impaired
102

 
90

 
 
$
9,146

 
$
7,533


Note 5. Inventories
 
September 30, 2017
 
GMNA
 
GMIO
 
GMSA
 
Total
Total productive material, supplies and work in process
$
3,587

 
$
720

 
$
649

 
$
4,956

Finished product, including service parts
4,572

 
1,425

 
836

 
6,833

Total inventories
$
8,159

 
$
2,145

 
$
1,485

 
$
11,789

 
December 31, 2016
 
GMNA
 
GMIO
 
GMSA
 
Total
Total productive material, supplies and work in process
$
3,277

 
$
970

 
$
761

 
$
5,008

Finished product, including service parts
4,119

 
1,208

 
705

 
6,032

Total inventories
$
7,396

 
$
2,178

 
$
1,466

 
$
11,040


Note 6. Equipment on Operating Leases
Equipment on operating leases consists of leases to retail customers that are recorded as operating leases and vehicle sales to daily rental car companies with a guaranteed repurchase obligation.

11

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

 
September 30, 2017
 
December 31, 2016
Equipment on operating leases
$
52,632

 
$
41,851

Less: accumulated depreciation
(9,225
)
 
(6,399
)
Equipment on operating leases, net(a)
$
43,407

 
$
35,452

__________
(a)
Includes $41.8 billion and $34.3 billion of GM Financial equipment on operating leases, net at September 30, 2017 and December 31, 2016.

Depreciation expense related to equipment on operating leases, net was $1.8 billion and $1.3 billion in the three months ended September 30, 2017 and 2016 and $4.9 billion and $3.3 billion in the nine months ended September 30, 2017 and 2016.

The following table summarizes minimum rental payments due to GM Financial on leases to retail customers:
 
Year Ending December 31,
 
2017
 
2018
 
2019
 
2020
 
2021
Minimum rental receipts under operating leases
$
1,800

 
$
6,256

 
$
3,861

 
$
1,182

 
$
110


Note 7. Equity in Net Assets of Nonconsolidated Affiliates
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
September 30, 2016
 
September 30, 2017
 
September 30, 2016
Automotive China equity income
$
459

 
$
459

 
$
1,472

 
$
1,448

Other joint ventures equity income
41

 
38

 
113

 
269

Total Equity income
$
500

 
$
497

 
$
1,585

 
$
1,717

There have been no significant ownership changes in our Automotive China joint ventures (Automotive China JVs) since December 31, 2016.
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
September 30, 2016
 
September 30, 2017
 
September 30, 2016
Summarized Operating Data of Automotive China JVs
 
 
 
 
 
 
 
Automotive China JVs' net sales
$
12,161

 
$
10,945

 
$
34,177

 
$
32,417

Automotive China JVs' net income
$
964

 
$
956

 
$
2,912

 
$
3,021


Dividends received from our nonconsolidated affiliates were $382 million and an insignificant amount in the three months ended September 30, 2017 and 2016 and $2.0 billion in the nine months ended September 30, 2017 and 2016. At September 30, 2017 and December 31, 2016 we had undistributed earnings of $1.8 billion and $2.2 billion related to our nonconsolidated affiliates.

Note 8. Variable Interest Entities
GM Financial uses special purpose entities (SPEs) that are considered variable interest entities (VIEs) to issue variable funding notes to third party bank-sponsored warehouse facilities or asset-backed securities to investors in securitization transactions. The debt issued by these VIEs is backed by finance receivables and leasing related assets transferred to the VIEs (Securitized Assets). GM Financial determined that it is the primary beneficiary of the SPEs because the servicing responsibilities for the Securitized Assets give GM Financial the power to direct the activities that most significantly impact the performance of the VIEs and the variable interests in the VIEs give GM Financial the obligation to absorb losses and the right to receive residual returns that could potentially be significant. The assets serve as the sole source of repayment for the debt issued by these entities. Investors in the notes issued by the VIEs do not have recourse to GM Financial or its other assets, with the exception of customary representation and warranty repurchase provisions and indemnities that GM Financial provides as the servicer. GM Financial is not required and does not currently intend to provide additional financial support to these SPEs. While these subsidiaries are included in GM Financial's condensed consolidated financial statements, they are separate legal entities and their assets are legally owned by them and are not available to GM Financial's creditors. The following table summarizes the assets and liabilities related to GM Financial's consolidated VIEs:

12

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

 
September 30, 2017
 
December 31, 2016
Restricted cash – current
$
1,768

 
$
1,302

Restricted cash – non-current
$
523

 
$
478

GM Financial receivables, net of fees – current
$
13,782

 
$
12,437

GM Financial receivables, net of fees – non-current
$
12,411

 
$
11,917

GM Financial equipment on operating leases, net
$
23,751

 
$
19,341

GM Financial short-term debt and current portion of long-term debt
$
19,207

 
$
17,526

GM Financial long-term debt
$
20,981

 
$
16,659


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

Note 9. Automotive and GM Financial Debt


September 30, 2017
 
December 31, 2016
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
Total automotive debt
$
13,635

 
$
14,798

 
$
10,560

 
$
11,399

Fair value utilizing Level 1 inputs
 
 
$
12,877

 
 
 
$
9,515

Fair value utilizing Level 2 inputs
 
 
$
1,921

 
 
 
$
1,884


The fair value of automotive debt measured utilizing Level 1 inputs was based on quoted prices in active markets for identical instruments that a market participant can access at the measurement date. The fair value of automotive debt measured utilizing Level 2 inputs was based on a discounted cash flow model using observable inputs. This model utilizes observable inputs such as contractual repayment terms and benchmark yield curves, plus a spread based on our senior unsecured notes that is intended to represent our nonperformance risk. We obtain the benchmark yield curves and yields on unsecured notes from independent sources that are widely used in the financial industry. At September 30, 2017 and December 31, 2016 the fair value of automotive debt exceeded its carrying amount due primarily to a decrease in bond yields compared to yields at the time of issuance.

In August 2017 we issued $3.0 billion in aggregate principal amount of senior unsecured notes with an initial weighted average interest rate of 4.5% and maturity dates ranging from 2020 to 2048. The indentures governing these notes contain terms and covenants customary of these types of securities including limitation on the amount of certain secured debt we may incur. The net proceeds from the issuance of these senior unsecured notes were used to repay the $3.0 billion drawn on our three-year unsecured revolving credit facility in the three months ended September 30, 2017 to fund the payments to PSA Group, or one or more pension funding vehicles, for the assumed net underfunded pension liabilities in connection with the sale of the Opel/Vauxhall Business as described in Note 2.

 
September 30, 2017
 
December 31, 2016
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
Secured debt
$
40,775

 
$
40,889

 
$
35,087

 
$
35,162

Unsecured debt
38,263

 
39,411

 
29,476

 
30,045

Total GM Financial debt
$
79,038

 
$
80,300

 
$
64,563

 
$
65,207

 
 
 
 
 
 
 
 
Fair value utilizing Level 2 inputs
 
 
$
78,293

 
 
 
$
62,951

Fair value utilizing Level 3 inputs
 
 
$
2,007

 
 
 
$
2,256


The fair value of GM Financial debt measured utilizing Level 2 inputs was based on quoted market prices for identical instruments and if unavailable, quoted market prices of similar instruments. For debt with original maturity or revolving period of eighteen months or less par value is considered to be a reasonable estimate of fair value. The fair value of GM Financial debt measured utilizing Level 3 inputs was based on the discounted future net cash flows expected to be settled using current risk-adjusted rates.


13

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

Secured debt consists of revolving credit facilities and securitization notes payable. Most of the secured debt was issued by VIEs and is repayable only from proceeds related to the underlying pledged Securitized Assets. Refer to Note 8 for additional information on GM Financial's involvement with VIEs. In the nine months ended September 30, 2017 we entered into new or renewed credit facilities with a total net additional borrowing capacity of $1.7 billion, which had substantially the same terms as existing debt and we issued $18.8 billion in aggregate principal amount of securitization notes payable with an initial weighted average interest rate of 2.09% and maturity dates ranging from 2019 to 2025.

Unsecured debt consists of senior notes, credit facilities and other unsecured debt. In the nine months ended September 30, 2017 we issued $10.6 billion in aggregate principal amount of senior notes with an initial weighted average interest rate of 2.87% and maturity dates ranging from 2019 to 2027.

Each of the revolving credit facilities and the indentures governing GM Financial's notes contain terms and covenants including limitations on GM Financial's ability to incur certain liens.

Note 10. Derivative Financial Instruments
Automotive The following table presents the notional amounts based on asset or liability positions of derivative financial instruments in our automotive operations:
 
Fair Value Level
 
September 30, 2017
 
December 31, 2016
Derivatives designated as hedges(a)
 
 
 
 
 
Assets
 
 
 
 
 
 Cash flow hedges
 
 
 
 
 
Foreign currency
2
 
$

 
$
803

Commodity
2
 
73

 
106

Total assets
 
 
$
73

 
$
909

Derivatives not designated as hedges(a)
 
 
 
 
 
Assets
 
 
 
 
 
Foreign currency
2/3
 
$
3,671

 
$
4,483

Commodity
2
 
553

 
1,061

PSA warrants(b)
2
 
47

 

Total assets
 
 
$
4,271

 
$
5,544

Liabilities
 
 
 
 
 
Foreign currency
2/3
 
$
2,025

 
$
470

Commodity
2
 
70

 
181

Total liabilities
 
 
$
2,095

 
$
651

__________
(a)
The fair value of these derivative instruments at September 30, 2017 and December 31, 2016 and the gains/losses included in our condensed consolidated income statements and statements of comprehensive income for the three and nine months ended September 30, 2017 and 2016 were insignificant.
(b)
The fair value of the PSA warrants was $903 million at September 30, 2017.

We estimate the fair value of the PSA warrants using a Black-Scholes valuation model. The significant inputs to the model include the PSA stock price and the estimated dividend yield. The estimated dividend yield is adjusted based on the terms of the Agreement. Under the terms of the Agreement we are entitled to the dividends distributed by PSA since the warrants issuance date. Gains or losses as a result of the change in the fair value of the PSA warrants are recorded in Interest income and other non-operating income, net.

GM Financial The following table presents the notional amounts based on asset or liability positions of GM Financial's derivative financial instruments:

14

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

 
Fair Value Level
 
September 30, 2017
 
December 31, 2016
Derivatives designated as hedges(a)
 
 
 
 
 
Assets
 
 
 
 
 
 Fair value hedges – interest rate swaps
2
 
$
3,500

 
$

 Cash flow hedges
 
 
 
 
 
Interest rate swaps
2/3
 
2,561

 
3,070

Foreign currency
2
 
1,356

 

 Total cash flow hedges
 
 
3,917

 
3,070

Total assets
 
 
$
7,417

 
$
3,070

Liabilities
 
 
 
 
 
 Fair value hedges – interest rate swaps(b)
2
 
$
7,860

 
$
7,700

 Cash flow hedges
 
 
 
 
 
Interest rate swaps
2/3
 

 
500

Foreign currency
2
 

 
791

 Total cash flow hedges
 
 

 
1,291

Total liabilities
 
 
$
7,860

 
$
8,991

Derivatives not designated as hedges(a)
 
 
 
 
 
Assets
 
 
 
 
 
Interest rate swaps
2/3
 
$
33,218

 
$
7,959

Interest rate caps and floors
2
 
16,810

 
9,698

Foreign currency
2
 
1,182

 

Total assets
 
 
$
51,210

 
$
17,657

Liabilities
 
 
 
 
 
Interest rate swaps
2/3
 
$
12,823

 
$
6,170

Interest rate caps and floors
2
 
18,467

 
12,146

Total liabilities
 
 
$
31,290

 
$
18,316

__________
(a)
The fair value of these derivative instruments at September 30, 2017 and December 31, 2016 and the gains/losses included in our condensed consolidated income statements and statements of comprehensive income for the three and nine months ended September 30, 2017 and 2016 were insignificant.
(b)
The fair value of these derivative instruments was $260 million and $276 million at September 30, 2017 and December 31, 2016.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note 11. Product Warranty and Related Liabilities
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
September 30, 2016
 
September 30, 2017
 
September 30, 2016
Warranty balance at beginning of period
$
8,890

 
$
8,639

 
$
9,069

 
$
8,550

Warranties issued and assumed in period  recall campaigns
173

 
306

 
527

 
627

Warranties issued and assumed in period  product warranty
481

 
631

 
1,586

 
1,717

Payments
(787
)
 
(861
)
 
(2,382
)
 
(2,524
)
Adjustments to pre-existing warranties
(317
)
 
101

 
(405
)
 
390

Effect of foreign currency and other
39

 
5

 
84

 
61

Warranty balance at end of period
$
8,479

 
$
8,821

 
$
8,479

 
$
8,821


We estimate our reasonably possible loss in excess of amounts accrued for recall campaigns to be insignificant at September 30, 2017. Refer to Note 13 for reasonably possible losses on Takata Corporation (Takata) matters.

15

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


Note 12. Pensions and Other Postretirement Benefits
 
Three Months Ended September 30, 2017
 
Three Months Ended September 30, 2016
 
Pension Benefits
 
Global OPEB Plans
 
Pension Benefits
 
Global OPEB Plans
 
U.S.
 
Non-U.S.
 
 
U.S.
 
Non-U.S.
 
Service cost
$
79

 
$
45

 
$
4

 
$
96

 
$
80

 
$
4

Interest cost
536

 
115

 
51

 
553

 
127

 
50

Expected return on plan assets
(919
)
 
(185
)
 

 
(945
)
 
(179
)
 

Amortization of prior service cost (credit)
(1
)
 
2

 
(3
)
 
(1
)
 
4

 
(3
)
Amortization of net actuarial (gains) losses
(2
)
 
29

 
8

 
(6
)
 
34

 
5

Net periodic pension and OPEB (income) expense
$
(307
)
 
$
6

 
$
60

 
$
(303
)
 
$
66

 
$
56


 
Nine Months Ended September 30, 2017
 
Nine Months Ended September 30, 2016
 
Pension Benefits
 
Global OPEB Plans
 
Pension Benefits
 
Global OPEB Plans
 
U.S.
 
Non-U.S.
 
 
U.S.
 
Non-U.S.
 
Service cost
$
237

 
$
131

 
$
14

 
$
287

 
$
195

 
$
13

Interest cost