XMEX:GM General Motors Co Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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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 June 30, 2012
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             

Commission file number 001-34960
GENERAL MOTORS COMPANY
(Exact Name of Registrant as Specified in its Charter)
STATE OF DELAWARE
27-0756180
(State or other jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
 
 
300 Renaissance Center, Detroit, Michigan
48265-3000
(Address of Principal Executive Offices)
(Zip Code)
(313) 556-5000
(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  þ  No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  þ  No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  þ  Accelerated filer  ¨  Non-accelerated filer  ¨  Smaller reporting company  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨  No  þ
As of July 27, 2012 the number of shares outstanding of common stock was 1,565,954,484 shares.

Website Access to Company's Reports

General Motors Company's internet website address is www.gm.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act are available free of charge through our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission.




INDEX
 
 
 
Page
 
Item 1.
 
 
 
 
 
 
 
Note 1.
 
Note 2.
 
Note 3.
 
Note 4.
 
Note 5.
 
Note 6.
 
Note 7.
 
Note 8.
 
Note 9.
 
Note 10.
 
Note 11.
 
Note 12.
 
Note 13.
 
Note 14.
 
Note 15.
 
Note 16.
 
Note 17.
 
Note 18.
 
Note 19.
 
Note 20.
 
Note 21.
 
Note 22.
 
Note 23.
Item 2.
Item 3.
Item 4.
 
Item 1.
Item 1A.
Item 6.
 





GENERAL MOTORS COMPANY AND SUBSIDIARIES


PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED INCOME STATEMENTS
(In millions, except per share amounts)
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
June 30, 2012
 
June 30, 2011
 
June 30, 2012
 
June 30, 2011
Net sales and revenue
 
 
 
 
 
 
 
Automotive sales and revenue
$
37,127

 
$
39,043

 
$
74,455

 
$
74,942

GM Financial revenue
487

 
330

 
918

 
625

Total net sales and revenue
37,614

 
39,373

 
75,373

 
75,567

Costs and expenses

 
 
 

 
 
Automotive cost of sales
32,678

 
33,793

 
65,588

 
65,478

GM Financial operating and other expenses
268

 
186

 
516

 
351

Automotive selling, general and administrative expense
2,842

 
2,924

 
5,815

 
5,918

Other automotive expenses, net
5

 
19

 
20

 
25

Goodwill impairment charges

 

 
617

 
395

Total costs and expenses
35,793

 
36,922

 
72,556

 
72,167

Operating income
1,821

 
2,451

 
2,817

 
3,400

Automotive interest expense
118

 
155

 
228

 
304

Interest income and other non-operating income, net
139

 
308

 
414

 
912

Loss on extinguishment of debt

 
10

 
18

 
10

Income before income taxes and equity income
1,842

 
2,594

 
2,985

 
3,998

Income tax expense (benefit)
241

 
(61
)
 
457

 
76

Equity income, net of tax and gain on disposal of investments
300

 
382

 
723

 
2,526

Net income
1,901

 
3,037

 
3,251

 
6,448

Net income attributable to noncontrolling interests
(55
)
 
(45
)
 
(90
)
 
(90
)
Net income attributable to stockholders
$
1,846

 
$
2,992

 
$
3,161

 
$
6,358

Net income attributable to common stockholders
$
1,487

 
$
2,524

 
$
2,491

 
$
5,387

 
 
 
 
 
 
 
 
Earnings per share
 
 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
Basic earnings per common share
$
0.95

 
$
1.68

 
$
1.59

 
$
3.58

Weighted-average common shares outstanding
1,569

 
1,505

 
1,571

 
1,505

Diluted
 
 
 
 
 
 
 
Diluted earnings per common share
$
0.90

 
$
1.54

 
$
1.49

 
$
3.27

Weighted-average common shares outstanding
1,671

 
1,654

 
1,681

 
1,661


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


1



GENERAL MOTORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
June 30, 2012
 
June 30, 2011
 
June 30, 2012
 
June 30, 2011
Net income
$
1,901

 
$
3,037

 
$
3,251

 
$
6,448

Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
Foreign currency translation adjustments
(115
)
 
79

 
(52
)
 
116

Cash flow hedging gains (losses), net
(2
)
 

 
(2
)
 
23

Unrealized gain (loss) on securities
(136
)
 
5

 
(140
)
 
5

Defined benefit plans, net
15

 
(3
)
 
58

 
198

Other comprehensive income (loss), net of tax
(238
)
 
81

 
(136
)
 
342

Comprehensive income
1,663

 
3,118

 
3,115

 
6,790

Less: comprehensive income attributable to noncontrolling interests
(44
)
 
(49
)
 
(88
)
 
(105
)
Comprehensive income attributable to stockholders
$
1,619

 
$
3,069

 
$
3,027

 
$
6,685


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


2


GENERAL MOTORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share amounts)
(Unaudited)


 
June 30, 2012
 
December 31, 2011
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
22,184

 
$
16,071

Marketable securities
11,381

 
16,148

Restricted cash and marketable securities
734

 
1,005

Accounts and notes receivable (net of allowance of $324 and $331)
11,117

 
9,964

GM Financial finance receivables, net (including gross consumer finance receivables transferred to SPEs of $3,359 and $3,295)
3,478

 
3,251

Inventories
15,433

 
14,324

Equipment on operating leases, net
3,819

 
2,464

Other current assets and deferred income taxes
2,087

 
1,696

Total current assets
70,233

 
64,923

Non-current Assets
 
 
 
Restricted cash and marketable securities
1,046

 
1,228

GM Financial finance receivables, net (including gross consumer finance receivables transferred to SPEs of $6,427 and $5,773)
6,552

 
5,911

Equity in net assets of nonconsolidated affiliates
7,058

 
6,790

Property, net
25,026

 
23,005

Goodwill
28,405

 
29,019

Intangible assets, net
9,192

 
10,014

GM Financial equipment on operating leases, net (including assets transferred to SPEs of $478 and $274)
1,324

 
785

Other assets and deferred income taxes
3,151

 
2,928

Total non-current assets
81,754

 
79,680

Total Assets
$
151,987

 
$
144,603

LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts payable (principally trade)
$
26,425

 
$
24,551

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


 


Automotive (including certain debt at GM Korea of $116 and $171; Note 11)
1,360

 
1,682

GM Financial
3,732

 
4,118

Accrued liabilities (including derivative liabilities at GM Korea of $31 and $44; Note 11)
25,134

 
22,875

Total current liabilities
56,651

 
53,226

Non-current Liabilities
 
 
 
Long-term debt
 
 
 
Automotive
3,783

 
3,613

GM Financial
5,918

 
4,420

Postretirement benefits other than pensions
6,732

 
6,836

Pensions
24,558

 
25,075

Other liabilities and deferred income taxes
12,735

 
12,442

Total non-current liabilities
53,726

 
52,386

Total Liabilities
110,377

 
105,612

Commitments and contingencies (Note 17)


 


Equity
 
 
 
Preferred stock, $0.01 par value, 2,000,000,000 shares authorized:
 
 
 
Series A (276,101,695 shares issued and outstanding (each with a $25.00 liquidation preference) at June 30, 2012 and December 31, 2011)
5,536

 
5,536

Series B (100,000,000 shares issued and outstanding (each with a $50.00 liquidation preference) at June 30, 2012 and December 31, 2011)
4,855

 
4,855

Common stock, $0.01 par value (5,000,000,000 shares authorized and 1,565,941,048 shares and 1,564,727,289 shares issued and outstanding at June 30, 2012 and December 31, 2011)
16

 
16

Capital surplus (principally additional paid-in capital)
26,399

 
26,391

Retained earnings
9,889

 
7,183

Accumulated other comprehensive loss
(5,995
)
 
(5,861
)
Total stockholders’ equity
40,700

 
38,120

Noncontrolling interests
910

 
871

Total Equity
41,610

 
38,991

Total Liabilities and Equity
$
151,987

 
$
144,603


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) 
 
Series A
Preferred
Stock
 
Series B
Preferred
Stock
 
Common Stockholders’
 
Noncontrolling
Interests
 
Total
Equity
Common
Stock
 
Capital
Surplus
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Balance December 31, 2010
$
5,536

 
$
4,855

 
$
15

 
$
24,257

 
$
266

 
$
1,251

 
$
979

 
$
37,159

Effect of adoption of amendments in ASU 2010-28 regarding goodwill impairment (Note 9)

 

 

 

 
(1,466
)
 

 

 
(1,466
)
Net income

 

 

 

 
6,358

 

 
90

 
6,448

Other comprehensive income

 

 

 

 

 
327

 
15

 
342

Purchase of noncontrolling interest shares

 

 

 
41

 

 
(7
)
 
(134
)
 
(100
)
Exercise of common stock warrants

 

 

 
7

 

 

 

 
7

Stock based compensation

 

 

 
107

 

 

 

 
107

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

 

 

 

 
(429
)
 

 

 
(429
)
Dividends declared or paid to noncontrolling interest

 

 

 

 

 

 
(31
)
 
(31
)
Deconsolidation of noncontrolling interest shares

 

 

 

 

 

 
(9
)
 
(9
)
Other

 

 

 

 

 

 
4

 
4

Balance June 30, 2011
$
5,536

 
$
4,855

 
$
15

 
$
24,412

 
$
4,729

 
$
1,571

 
$
914

 
$
42,032

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance December 31, 2011
$
5,536

 
$
4,855

 
$
16

 
$
26,391

 
$
7,183

 
$
(5,861
)
 
$
871

 
$
38,991

Net income

 

 

 

 
3,161

 

 
90

 
3,251

Other comprehensive loss

 

 

 

 

 
(134
)
 
(2
)
 
(136
)
Exercise of common stock warrants

 

 

 
3

 

 

 

 
3

Stock based compensation

 

 

 
5

 

 

 

 
5

Cumulative dividends and cash dividends paid on Series A Preferred Stock and cumulative dividends on Series B Preferred Stock

 

 

 

 
(455
)
 

 

 
(455
)
Dividends declared or paid to noncontrolling interest

 

 

 

 

 

 
(37
)
 
(37
)
Other

 

 

 

 

 

 
(12
)
 
(12
)
Balance June 30, 2012
$
5,536

 
$
4,855

 
$
16

 
$
26,399

 
$
9,889

 
$
(5,995
)
 
$
910

 
$
41,610


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


4



GENERAL MOTORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
Six Months Ended
 
June 30, 2012
 
June 30, 2011
Net cash provided by operating activities
$
6,441

 
$
4,687

Cash flows from investing activities
 
 
 
Expenditures for property
(4,059
)
 
(2,498
)
Available-for-sale marketable securities, acquisitions
(2,928
)
 
(12,993
)
Trading marketable securities, acquisitions
(3,997
)
 
(258
)
Available-for-sale marketable securities, liquidations
7,592

 
6,288

Trading marketable securities, liquidations
3,625

 
269

Acquisition of companies, net of cash acquired
54

 
(8
)
Operating leases, liquidations
20

 
27

Proceeds from sale of business units/investments, net
3

 
4,778

Increase in restricted cash and marketable securities
(275
)
 
(311
)
Decrease in restricted cash and marketable securities
724

 
488

Purchases of consumer finance receivables
(2,874
)
 
(2,444
)
Principal collections and recoveries on consumer finance receivables
2,040

 
1,880

Net purchases of leased vehicles
(610
)
 
(410
)
Other investing activities
(140
)
 
5

Net cash used in investing activities
(825
)
 
(5,187
)
Cash flows from financing activities
 
 
 
Net increase (decrease) in short-term debt
(156
)
 
216

Proceeds from issuance of debt (original maturities greater than three months)
5,278

 
5,145

Payments on debt (original maturities greater than three months)
(4,077
)
 
(4,849
)
Payments to acquire noncontrolling interest

 
(100
)
Dividends paid
(459
)
 
(435
)
Proceeds from issuance of stock
3

 

Other financing activities
(23
)
 
(57
)
Net cash provided by (used in) financing activities
566

 
(80
)
Effect of exchange rate changes on cash and cash equivalents
(69
)
 
321

Net increase (decrease) in cash and cash equivalents
6,113

 
(259
)
Cash and cash equivalents at beginning of period
16,071

 
21,256

Cash and cash equivalents at end of period
$
22,184

 
$
20,997


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


5



GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




Note 1. Nature of Operations

General Motors Company, is sometimes referred to in this Quarterly Report on Form 10-Q as “we,” “our,” “us,” “ourselves,” the “Company,” “General Motors,” or “GM.” General Motors Corporation is sometimes referred to in this Quarterly Report on Form 10-Q, for the periods on or before July 9, 2009, as “Old GM.” Old GM was renamed Motors Liquidation Company (MLC), which was dissolved on December 15, 2011 and transferred its remaining assets and liabilities to the Motors Liquidation Company GUC Trust (GUC Trust).

We design, build and sell cars, trucks and automobile parts worldwide. We also provide automotive financing services primarily through General Motors Financial Company, Inc. (GM Financial).

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

Note 2. Basis of Presentation and Recent Accounting Standards

The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information. Accordingly they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying condensed consolidated financial statements include all adjustments, composed of normal recurring adjustments, considered necessary by management to fairly state our results of operations, financial position and cash flows. The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2011 (2011 Form 10-K) as filed with the SEC.

Use of Estimates in the Preparation of the Financial Statements

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

Change in Presentation of Financial Statements

In 2012 we changed the presentation of our condensed consolidated balance sheet, condensed consolidated statements of cash flows and certain notes to the condensed consolidated financial statements to classify the assets and liabilities of GM Financial as current or non-current and to combine line items which were either of a related nature or not individually material. We have made corresponding reclassifications to the comparable information for all periods presented.

Venezuelan Exchange Regulations

Our Venezuelan subsidiaries utilize the U.S. Dollar as their functional currency because of the hyperinflationary status of the Venezuelan economy. The Venezuelan government has introduced foreign exchange control regulations which make it more difficult to convert Bolivar Fuerte (BsF) to U.S. Dollars. These regulations affect our Venezuelan subsidiaries' ability to pay non-BsF denominated obligations that do not qualify to be processed by the Venezuela currency exchange agency at the official exchange rates.

The aggregate net assets of our Venezuelan subsidiaries at June 30, 2012 and December 31, 2011 were $636 million and $438 million. At June 30, 2012 and December 31, 2011 other consolidated entities have receivables from our Venezuelan subsidiaries of $540 million and $380 million. The total amounts pending government approval for settlement at June 30, 2012 and December 31, 2011 were BsF 3.2 billion (equivalent to $751 million) and BsF 2.3 billion (equivalent to $535 million), for which some requests have been pending from 2007.

6


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


Significant Non-Cash Activity

Investing Cash Flows

The following table summarizes the amounts of non-cash property additions that have been excluded from Expenditures for property within the investing activities section of the condensed consolidated statements of cash flows because no cash has been expended (dollars in millions):
 
Six Months Ended
 
June 30, 2012
 
June 30, 2011
Non-cash property additions
$
3,737

 
$
2,989


Recently Adopted Accounting Principles

In 2012 we adopted the provisions of Accounting Standards Update (ASU) 2011-05, “Presentation of Comprehensive Income” (ASU 2011-05) that requires presentation of all non-owner changes in equity in one continuous statement of comprehensive income or in two separate but consecutive statements. We elected to provide a separate statement of comprehensive income for all periods presented. The amendments in this update do not change the items that must be reported in other comprehensive income (OCI) or when an OCI item must be reclassified to net income. The adoption of ASU 2011-05 did not affect our condensed consolidated statements of financial position, results of operations and cash flows.

ASU 2011-05 was modified in December 2011 by the issuance of ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.” This update indefinitely defers certain provisions of ASU 2011-05 that require the disclosure of the amount of reclassifications of items from OCI to net income by component of net income and by component of OCI.

Note 3. Acquisition of Businesses

Acquisition of GMAC South America LLC

In March 2012 we acquired from Ally Financial for cash of $29 million 100% of the outstanding equity interests of GMAC South America LLC whose only asset is GMAC de Venezuela CA (GMAC Venezuela) comprising the business and operations of Ally Financial in Venezuela. This acquisition provides us with a captive finance offering in Venezuela which we believe is important in maintaining market position and will provide continued sources of financing for our Venezuela dealers and customers.

We recorded the fair value of the assets acquired and liabilities assumed as of March 1, 2012, the date we obtained control, and have included GMAC Venezuela's results of operations and cash flows from that date forward. The following table summarizes the amounts recorded in connection with the acquisition of GMAC Venezuela, which are included in our GMSA segment (dollars in millions):
 
March 1, 2012
Cash
$
79

Other assets
11

Liabilities
(11
)
Bargain purchase gain
(50
)
Consideration paid
$
29


We determined the excess of net assets acquired over consideration paid was attributable to the measurement differences between the BsF denominated assets and liabilities valued using the official foreign exchange rate, as required by U.S. GAAP, and the enterprise value which has been discounted to reflect the uncertainty surrounding our ability to convert the BsF to U.S. Dollars and the risks of operating in a politically unstable country. The measurement differences do not qualify to be recorded in the application of the acquisition method of accounting, and we recorded the excess of net assets acquired over the consideration paid as a bargain purchase gain. The bargain purchase gain was recorded in Interest income and other non-operating income, net. We

7


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

did not provide pro forma financial information because we do not believe the information is material.

Acquisition of Additional GM Korea Interests

In March 2011 we completed the acquisition of an additional 6.9% interest in GM Korea Company (GM Korea) for cash of $100 million. The transaction was accounted for as an equity transaction as we retain the controlling financial interest in GM Korea. This transaction reduced our equity attributable to Noncontrolling interests by $134 million and our Accumulated other comprehensive income by $7 million and increased our Capital surplus by $41 million. We now own 77.0% of the outstanding shares of GM Korea.

Note 4. Marketable Securities

We measure the fair value of our marketable securities using a market approach where identical or comparable prices are available and an income approach in other cases. We obtain the majority of the prices used in this valuation from a pricing service. Our pricing service utilizes industry-standard pricing models that consider various inputs, including benchmark yields, reported trades, broker/dealer quotes, issuer spreads and benchmark securities as well as other relevant economic measures. We conduct an annual review of valuations provided by our pricing service, which includes discussion and analysis of the inputs used by the pricing service to provide prices for the types of securities we hold. These inputs include prices for comparable securities, bid/ask quotes, interest rate yields and prepayment spreads. Based on our review we believe the prices received from our pricing service are a reliable representation of exit prices.

At June 30, 2012 the carrying amount of our investment in Peugeot S.A. (PSA) exceeded its fair value. The share prices for comparable European automotive companies are currently experiencing significant volatility stemming, in part, from the eurozone debt crisis and its effect on automotive sales within the eurozone, as well as the uncertainty around future sales. We assessed whether the decline in value represented an other-than-temporary impairment and concluded that the impairment is temporary. We believe that the recent economic uncertainty is weighing heavily on the valuation of PSA. Should market conditions not recover in the near-term, we may conclude the impairment is other-than-temporary, resulting in an impairment charge. We currently have the ability and intent to hold the investment until its fair value recovers.

The following tables summarize information regarding marketable securities (dollars in millions):

8


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

 
June 30, 2012
 
 
 
Unrealized
 
Fair Value
 
Fair Value Measurements on a Recurring Basis
 
Cost
 
Gains
 
Losses
 
 
Level 1
 
Level 2
 
Level 3
Cash and cash equivalents
 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale securities
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agencies
$
8,042

 
$

 
$

 
$
8,042

 
$

 
$
8,042

 
$

Sovereign debt
441

 

 

 
441

 

 
441

 

Certificates of deposit
350

 

 

 
350

 

 
350

 

Money market funds
1,309

 

 

 
1,309

 
1,309

 

 

Corporate debt
4,794

 

 

 
4,794

 

 
4,794

 

Total marketable securities classified as cash equivalents
$
14,936

 
$

 
$

 
14,936

 
$
1,309

 
$
13,627

 
$

Cash, time deposits, and other cash equivalents
 
 
 
 
 
 
7,248

 
 
 
 
 
 
Total cash and cash equivalents
 
 
 
 
 
 
$
22,184

 
 
 
 
 
 
Marketable securities - current
 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale securities
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agencies
$
1,370

 
$

 
$

 
$
1,370

 
$

 
$
1,370

 
$

Sovereign debt
67

 

 

 
67

 

 
67

 

Certificates of deposit
40

 

 

 
40

 

 
40

 

Corporate debt
3,479

 
4

 
2

 
3,481

 

 
3,481

 

Total available-for-sale securities
$
4,956

 
$
4

 
$
2

 
4,958

 

 
4,958

 

Trading securities(a)
 
 
 
 
 
 
 
 
 
 
 
 
 
Sovereign debt
 
 
 
 
 
 
6,423

 

 
6,423

 

Total trading securities
 
 
 
 
 
 
6,423

 

 
6,423

 

Total marketable securities - current
 
 
 
 
 
 
11,381

 

 
11,381

 

Marketable securities - non-current
 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale securities
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity(b)
$
404

 
$

 
$
160

 
244

 
244

 

 

Total marketable securities - non-current
$
404

 
$

 
$
160

 
244

 
244

 

 

Total marketable securities
 
 
 
 
 
 
$
11,625

 
$
244

 
$
11,381

 
$

Restricted cash and marketable securities
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale securities
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
$
1,027

 
$

 
$

 
$
1,027

 
$
1,027

 
$

 
$

Sovereign debt
20

 

 

 
20

 

 
20

 

Other
169

 

 

 
169

 

 
169

 

Total marketable securities classified as restricted cash and marketable securities
$
1,216

 
$

 
$

 
1,216

 
$
1,027

 
$
189

 
$

Restricted cash, time deposits, and other restricted cash equivalents
 
 
 
 
 
 
564

 
 
 
 
 
 
Total restricted cash and marketable securities
 
 
 
 
 
 
$
1,780

 
 
 
 
 
 
________
(a)
Net unrealized losses on trading securities were $111 million and $61 million in the three and six months ended June 30, 2012. Net unrealized gains (losses) were insignificant in the three and six months ended June 30, 2011. Unrealized gains (losses) are primarily related to remeasurement of Canadian Dollar (CAD) denominated securities.
(b)
Represents our seven percent ownership in PSA acquired in connection with our agreement with PSA to create a long-term and strategic alliance. The investment is recorded in Other assets and deferred income taxes.

9


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

 
December 31, 2011
 
 
 
Unrealized
 
Fair Value
 
Fair Value Measurements on a Recurring Basis
 
Cost
 
Gains
 
Losses
 
 
Level 1
 
Level 2
 
Level 3
Cash and cash equivalents
 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale securities
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agencies
$
239

 
$

 
$

 
$
239

 
$

 
$
239

 
$

Sovereign debt
490

 

 

 
490

 

 
490

 

Certificates of deposit
2,028

 

 

 
2,028

 

 
2,028

 

Money market funds
1,794

 

 

 
1,794

 
1,794

 

 

Corporate debt
5,112

 

 

 
5,112

 

 
5,112

 

Total available-for-sale securities
$
9,663

 
$

 
$

 
9,663

 
1,794

 
7,869

 

Trading securities
 
 
 
 
 
 
 
 
 
 
 
 
 
Sovereign debt
 
 
 
 
 
 
497

 

 
497

 

Total trading securities
 
 
 
 
 
 
497

 

 
497

 

Total marketable securities classified as cash equivalents
 
 
 
 
 
 
10,160

 
$
1,794

 
$
8,366

 
$

Cash, time deposits, and other cash equivalents
 
 
 
 
 
 
5,911

 
 
 
 
 
 
Total cash and cash equivalents
 
 
 
 
 
 
$
16,071

 
 
 
 
 
 
Marketable securities - current
 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale securities
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agencies
$
5,214

 
$
2

 
$

 
$
5,216

 
$

 
$
5,216

 
$

Sovereign debt
143

 

 

 
143

 

 
143

 

Certificates of deposit
178

 

 

 
178

 

 
178

 

Corporate debt
4,566

 
3

 
4

 
4,565

 

 
4,565

 

Total available-for-sale securities
$
10,101

 
$
5

 
$
4

 
10,102

 

 
10,102

 

Trading securities
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity
 
 
 
 
 
 
34

 
34

 

 

Sovereign debt
 
 
 
 
 
 
5,936

 

 
5,936

 

Other debt
 
 
 
 
 
 
76

 

 
76

 

Total trading securities
 
 
 
 
 
 
6,046

 
34

 
6,012

 

Total marketable securities - current
 
 
 
 
 
 
$
16,148

 
$
34

 
$
16,114

 
$

Restricted cash and marketable securities
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale securities
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
$
1,363

 
$

 
$

 
$
1,363

 
$
1,363

 
$

 
$

Sovereign debt
15

 

 

 
15

 

 
15

 

Other
161

 
3

 

 
164

 

 
164

 

Total marketable securities classified as restricted cash and marketable securities
$
1,539

 
$
3

 
$

 
1,542

 
$
1,363

 
$
179

 
$

Restricted cash, time deposits, and other restricted cash equivalents

 
 
 
 
 
 
691

 
 
 
 
 
 
Total restricted cash and marketable securities
 
 
 
 
 
 
$
2,233

 
 
 
 
 
 

 
June 30, 2012
 
December 31, 2011
Classification of Restricted cash and marketable securities
 
 
 
Current
$
734

 
$
1,005

Non-current
1,046

 
1,228

Total restricted cash and marketable securities
$
1,780

 
$
2,233


10


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


We maintained securities of $84 million as compensating balances to support letters of credit of $70 million at June 30, 2012 and December 31, 2011. We have access to these securities in the normal course of business; however, the letters of credit may be withdrawn if the minimum collateral balance is not maintained.

Sales proceeds from investments in marketable securities classified as available-for-sale and sold prior to maturity were $551 million and $132 million in the three months ended June 30, 2012 and 2011 and $978 million and $249 million in the six months ended June 30, 2012 and 2011.

The following table summarizes the amortized cost and the fair value of investments classified as available-for-sale within cash equivalents, marketable securities and restricted cash by contractual maturity at June 30, 2012 (dollars in millions):
 
Amortized Cost
 
Fair Value
Due in one year or less
$
17,136

 
$
17,136

Due after one year through five years
1,479

 
1,482

Total contractual maturities of available-for-sale securities
$
18,615

 
$
18,618


Note 5. GM Financial Finance Receivables, net

In April 2012 GM Financial commenced commercial lending activities in the U.S. centered on floorplan financing of dealer vehicle inventory and dealer loans to finance dealer sites, facilities, facility improvements and working capital. These loans are made on a secured basis.

The following table summarizes GM Financial finance receivables, net relating to consumer and commercial activities (dollars in millions):
 
June 30, 2012
 
December 31, 2011
Current
$
3,478

 
$
3,251

Non-current
6,552

 
5,911

Total GM Financial finance receivables, net
$
10,030

 
$
9,162


The following table summarizes the components of GM Financial finance receivables, net (dollars in millions):
 
June 30, 2012
 
December 31, 2011
Pre-acquisition consumer finance receivables, outstanding balance
$
3,100

 
$
4,366

Pre-acquisition consumer finance receivables, carrying amount
$
2,811

 
$
4,027

Post-acquisition finance receivables, net of fees(a)
7,468

 
5,314

Total finance receivables
10,279

 
9,341

Less: allowance for loan losses on post-acquisition finance receivables
(249
)
 
(179
)
Total GM Financial finance receivables, net
$
10,030

 
$
9,162

________
(a) At June 30, 2012 the balance includes finance receivables and loans in connection with the commercial lending program of $128 million.

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

11


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

 
Three Months Ended
 
Six Months Ended
 
June 30, 2012
 
June 30, 2011
 
June 30, 2012
 
June 30, 2011
Pre-acquisition consumer finance receivables, carrying amount, beginning of period
$
3,358

 
$
6,336

 
$
4,027

 
$
7,299

Post-acquisition finance receivables, beginning of period
6,326

 
2,005

 
5,314

 
924

Loans originated or purchased(a)
1,663

 
1,349

 
3,059

 
2,487

Charge-offs
(53
)
 
(6
)
 
(104
)
 
(8
)
Principal collections and other(a)
(978
)
 
(859
)
 
(1,898
)
 
(1,711
)
Change in carrying amount adjustment on the pre-acquisition finance receivables
(37
)
 
(131
)
 
(119
)
 
(297
)
Balance at end of period
$
10,279

 
$
8,694

 
$
10,279

 
$
8,694

________
(a) Includes finance receivables and loans originated of $174 million and principal collections of $46 million in connection with the commercial lending program for the three and six months ended June 30, 2012.

The following table summarizes the carrying amount and estimated fair value of GM Financial finance receivables, net (dollars in millions):
 
June 30, 2012
 
December 31, 2011
 
Carrying
Amount
 
Fair Value
 
Carrying
Amount
 
Fair Value
GM Financial finance receivables, net
$
10,030

 
$
10,330

 
$
9,162

 
$
9,386


GM Financial determined the fair value of consumer finance receivables using Level 2 and Level 3 inputs within a cash flow model. The Level 3 inputs reflect assumptions regarding expected prepayments, deferrals, delinquencies, recoveries and charge-offs of the loans within the finance receivable portfolio. The cash flow model produces an estimated amortization schedule of the finance receivables which is the basis for the calculation of the series of cash flows that derive the fair value of the portfolio. The series of cash flows are calculated and discounted using a weighted-average cost of capital (WACC) using unobservable debt and equity percentages, an unobservable cost of equity and an observable cost of debt based on companies with a similar credit rating and maturity and maturity profile as the portfolio. Macroeconomic factors could negatively affect the credit performance of the portfolio and therefore could potentially affect the assumptions used in our cash flow model.

Substantially all commercial finance receivables have variable interest rates and maturities of one year. Therefore, carrying amount is considered to be a reasonable estimate of fair value which is determined using Level 1 inputs.

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

At June 30, 2012 and December 31, 2011 the accrual of finance charge income has been suspended on delinquent consumer finance receivables based on contractual amounts due of $412 million and $439 million. At June 30, 2012 there were no commercial finance receivables or loans on non-accrual status.

GM Financial reviews its pre-acquisition portfolio for differences between contractual cash flows and the cash flows expected to be collected from its initial investment in the pre-acquisition portfolio to determine if the difference is attributable, at least, in part to credit quality. In the six months ended June 30, 2012 as a result of improvements in credit performance of the pre-acquisition portfolio, which resulted in an increase of expected cash flows of $170 million, GM Financial transferred this excess non-accretable discount to accretable yield. GM Financial will recognize this excess as finance charge income over the remaining life of the portfolio.

The following table summarizes accretable yield (dollars in millions):

12


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

 
Three Months Ended
 
Six Months Ended
 
June 30, 2012
 
June 30, 2011
 
June 30, 2012
 
June 30, 2011
Balance at beginning of period
$
768

 
$
999

 
$
737

 
$
1,201

Accretion of accretable yield
(143
)
 
(181
)
 
(279
)
 
(383
)
Transfer from non-accretable discount
3

 
254

 
170

 
254

Balance at end of period
$
628

 
$
1,072

 
$
628

 
$
1,072


The following table summarizes the allowance for post-acquisition loan losses on consumer finance receivables (dollars in millions):
 
June 30, 2012
 
December 31, 2011
Current
$
189

 
$
136

Non-current
60

 
43

Total allowance for post-acquisition loan losses
$
249

 
$
179


The following table summarizes activity for the allowance for post-acquisition loan losses on consumer finance receivables (dollars in millions):
 
Three Months Ended
 
Six Months Ended
 
June 30, 2012
 
June 30, 2011
 
June 30, 2012
 
June 30, 2011
Balance at beginning of period
$
208

 
$
65

 
$
179

 
$
26

Provision for loan losses
62

 
45

 
110

 
84

Charge-offs
(53
)
 
(6
)
 
(104
)
 
(8
)
Recoveries
32

 
4

 
64

 
6

Balance at end of period
$
249

 
$
108

 
$
249

 
$
108


Credit Quality

Consumer Finance Receivables

Credit bureau scores, generally referred to as FICO scores, are determined during GM Financial's automotive loan origination process. The following table summarizes the credit risk profile of consumer finance receivables by FICO score band, determined at origination (dollars in millions):
 
June 30, 2012
 
December 31, 2011
FICO score less than 540
$
2,631

 
$
2,133

FICO score 540 to 599
4,632

 
4,167

FICO score 600 to 659
2,582

 
2,624

FICO score greater than 660
595

 
756

Balance at end of period(a)
$
10,440

 
$
9,680

__________
(a)
Composed of the sum of pre-acquisition consumer finance receivables - outstanding balance and post-acquisition consumer finance receivables, net of fees.

Commercial Finance Receivables

GM Financial's commercial finance receivables consist of dealer financings. A proprietary model is used to assign a risk rating to each dealer. A credit review of each dealer is performed at least annually and, if necessary, the dealer's risk rating is adjusted on the basis of the review.


13


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

Delinquency

Consumer Finance Receivables

The following summarizes the contractual amount of consumer finance receivables, which is not materially different than the recorded investment, more than 30 days delinquent, but not yet in repossession, and in repossession, but not yet charged off (dollars in millions):
 
June 30, 2012
 
June 30, 2011
 
Amount
 
Percent of Contractual Amount Due
 
Amount
 
Percent of Contractual Amount Due
Delinquent contracts
 
 
 
 
 
 
 
31-to-60 days
$
428

 
4.1
%
 
$
398

 
4.4
%
Greater-than-60 days
158

 
1.5
%
 
158

 
1.7
%
Total finance receivables more than 30 days delinquent
586

 
5.6
%
 
556

 
6.1
%
In repossession
25

 
0.3
%
 
23

 
0.3
%
Total finance receivables more than 30 days delinquent and in repossession
$
611

 
5.9
%
 
$
579

 
6.4
%

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

Commercial Finance Receivables

At June 30, 2012 all commercial finance receivables were current with respect to payment status.

Note 6. Securitizations

The following table summarizes securitization activity and cash flows from consolidated special purpose entities (SPEs) used for securitizations (dollars in millions):
 
Three Months Ended
 
Six Months Ended
 
June 30, 2012
 
June 30, 2011
 
June 30, 2012
 
June 30, 2011
Receivables securitized
$
2,433

 
$
2,069

 
$
4,349

 
$
2,918

Net proceeds from securitization
$
2,300

 
$
1,950

 
$
4,100

 
$
2,750

Servicing fees


 


 


 


Variable interest entities
$
59

 
$
49

 
$
118

 
$
98

Net distributions from trusts


 


 


 


Variable interest entities
$
465

 
$
291

 
$
916

 
$
434


GM Financial retains servicing responsibilities for receivables transferred to certain securitization SPEs. At June 30, 2012 and December 31, 2011 GM Financial serviced finance receivables that have been transferred to certain SPEs of $9.5 billion and $7.9 billion. At June 30, 2012 and December 31, 2011 a Canadian subsidiary of GM Financial serviced leased assets of $802 million and $1.0 billion for a third party.

Note 7. Inventories

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

14


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

 
June 30, 2012
 
December 31, 2011
Productive material, supplies and work in process
$
7,112

 
$
6,486

Finished product, including service parts
8,321

 
7,838

Total inventories
$
15,433

 
$
14,324


Note 8. Equity in Net Assets of Nonconsolidated Affiliates

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

The following table summarizes information regarding Equity income, net of tax and gain on disposal of investments (dollars in millions):
 
Three Months Ended
 
Six Months Ended
 
June 30, 2012
 
June 30, 2011
 
June 30, 2012
 
June 30, 2011
China JVs
$
331

 
$
379

 
$
750

 
$
829

New Delphi (including gain on disposition)

 

 

 
1,727

Others
(31
)
 
3

 
(27
)
 
(30
)
Total equity income, net of tax and gain on disposal of investments
$
300

 
$
382

 
$
723

 
$
2,526


We received dividends from nonconsolidated affiliates of $1.3 billion and $1.1 billion in the three months ended June 30, 2012 and 2011 and $1.4 billion and $1.1 billion in the six months ended June 30, 2012 and 2011. At June 30, 2012 and December 31, 2011 we had undistributed earnings including dividends declared but not received of $909 million and $1.6 billion related to our nonconsolidated affiliates.

Investment in China JVs

The following table summarizes our direct ownership interests in our Chinese joint ventures, collectively referred to as China JVs:
 
June 30, 2012
 
June 30, 2011
Shanghai General Motors Co., Ltd. (SGM)
49
%
 
49
%
Shanghai GM Norsom Motor Co., Ltd. (SGM Norsom)
25
%
 
25
%
Shanghai GM Dong Yue Motors Co., Ltd. (SGM DY)
25
%