Amendment Number 1 to Form 10

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549-1004

 

 

Amendment No. 1

to

Form 10

GENERAL FORM FOR REGISTRATION OF SECURITIES

PURSUANT TO SECTION 12(b) OR 12(g) OF

THE SECURITIES EXCHANGE ACT OF 1934

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)

Registrant’s telephone number, including area code

(313) 556-5000

Securities to be registered pursuant to Section 12(b) of the Act:  None

 

Title of Each Class to be so Registered

 

Name of Each Exchange on

which Each Class is to be Registered

Securities to be registered pursuant to Section 12(g) of the Act:

Title of Each Class to be Registered

 

Common Stock, $0.01 par value

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 “small reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨        Accelerated filer  ¨        Non-accelerated filer  þ        Smaller reporting company  ¨

Do not check if smaller reporting company

 

 

 


GENERAL MOTORS COMPANY AND SUBSIDIARIES

 

General Motors Company was formed by the United States Department of the Treasury (UST) in 2009 originally as a Delaware limited liability company, Vehicle Acquisition Holdings LLC, and subsequently converted to a Delaware corporation, NGMCO, Inc. This company, which on July 10, 2009 acquired substantially all of the assets and assumed certain of the liabilities of General Motors Corporation (363 Sale) and changed its name to General Motors Company, is sometimes referred to in this Registration Statement on Form 10 for the periods on or subsequent to July 10, 2009 as “we,” “our,” “us,” “ourselves,” the “Company,” “General Motors,” or “GM.” General Motors Corporation is sometimes referred to in this Registration Statement on Form 10, for the periods on or before July 9, 2009, as “Old GM.” On July 10, 2009, in connection with the 363 Sale General Motors Corporation changed its name to Motors Liquidation Company, which is sometimes referred to in this Registration Statement on Form 10, for the periods on or after July 10, 2009, as “MLC.”

We are a private company and were not previously subject to the filing requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934. On April 7, 2010, we filed an Annual Report on Form 10-K for the year ended December 31, 2009, a Quarterly Report on Form 10-Q for the quarter ended September 30, 2009 and a Registration Statement on Form 10 (the Form 10) pursuant to an agreement with the SEC Staff, as described in a no-action letter issued to Old GM by the SEC Staff on July 9, 2009 regarding our filing requirements and those of MLC. We are filing this amendment to the Form 10 to reflect certain of the information included within our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010, as filed with the SEC on May 17, 2010, and to make other updating changes. This amendment amends and restates the Form 10 in its entirety.

Prior to July 10, 2009 Old GM operated the business of the Company, and pursuant to the agreement with the SEC Staff, the accompanying consolidated financial statements include the financial statements and related information of Old GM as it is our predecessor entity solely for accounting and financial reporting purposes.

The 363 Sale resulted in a new entity, General Motors Company, which is the successor entity to Old GM solely for accounting and financial reporting purposes. Because we are a new reporting entity, our financial statements are not comparable to the financial statements of Old GM.

Forward-Looking Statements

In this report and in reports we subsequently file with the Securities and Exchange Commission (the SEC) on Forms 10-K and 10-Q and file or furnish on Form 8-K, and in related comments by our management, we use words like “anticipate,” “believe,” “continue,” “could,” “designed,” “effect,” “estimate,” “evaluate,” “expect,” “forecast,” “goal,” “initiative,” “intend,” “may,” “objective,” “outlook,” “plan,” “potential,” “priorities,” “project,” “pursue,” “seek,” “should,” “target,” “when,” “would,” or the negative of any of those words or similar expressions to identify forward-looking statements that represent our current judgment about possible future events. In making these statements we rely on assumptions and analyses based on our experience and perception of historical trends, current conditions and expected future developments as well as other factors we consider appropriate under the circumstances. We believe these judgments are reasonable, but these statements are not guarantees of any events or financial results, and our actual results may differ materially due to a variety of important factors, both positive and negative. These factors, which may be revised or supplemented in subsequent reports on SEC Forms 10-K, 10-Q and 8-K, include among others the following:

 

   

Our ability to realize production efficiencies and to achieve reductions in costs as a result of our restructuring initiatives and labor modifications;

 

   

Our ability to maintain quality control over our vehicles and avoid material vehicle recalls;

 

   

Our ability to maintain adequate liquidity and financing sources and an appropriate level of debt, including as required to fund our planned significant investment in new technology, and, even if funded, our ability to realize successful vehicle applications of new technology;

 

   

The ability of our new executive management team to quickly learn the automotive industry, and adapt and excel in their new management roles;

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

 

   

The effect of business or liquidity difficulties for us or one or more subsidiaries on other entities in our corporate group as a result of our highly integrated and complex corporate structure and operation;

 

   

Our ability to continue to attract customers, particularly for our new products, including cars and crossover vehicles;

 

   

Availability of adequate financing on acceptable terms to our customers, dealers, distributors and suppliers to enable them to continue their business relationships with us;

 

   

The financial viability and ability to borrow of our key suppliers and their ability to provide systems, components and parts without disruption;

 

   

Our ability to take actions we believe are important to our long-term strategy, including our ability to enter into certain material transactions outside of the ordinary course of business, which may be limited due to significant covenants in the VEBA Note Agreement;

 

   

Our ability to manage the distribution channels for our products, including our ability to consolidate our dealer network;

 

   

Our ability to qualify for federal funding of our advanced technology vehicle programs under Section 136 of the Energy Independence and Security Act of 2007 (EISA);

 

   

The ability of our European operations to successfully restructure and receive adequate financial support from various European governments or other sources;

 

   

The continued availability of both wholesale and retail financing from GMAC and its affiliates in the United States, Canada and the other markets in which we operate to support our ability to sell vehicles in those markets, which is dependent on GMAC’s ability to obtain funding and which may be suspended by GMAC if GMAC’s credit exposure to us exceeds certain limitations provided in our operating arrangements with GMAC;

 

   

Overall strength and stability of general economic conditions and of the automotive industry, both in the United States and in global markets;

 

   

Continued economic and automotive industry instability or poor economic conditions in the United States and global markets, including the credit markets, or changes in economic conditions, commodity prices, housing prices, foreign currency exchange rates or political stability in the markets in which we operate;

 

   

Shortages of and increases or volatility in the price of oil;

 

   

Significant changes in the competitive environment, including the effect of competition in our markets, on our pricing policies or use of incentives and the introduction of new and improved vehicle models by our competitors;

 

   

Changes in the existing, or the adoption of new, laws, regulations, policies or other activities of governments, agencies and similar organizations where such actions may affect the production, licensing, distribution or sale of our products, the cost thereof or applicable tax rates;

 

   

Costs and risks associated with litigation;

 

   

Significant increases in our pension expense or projected pension contributions resulting from changes in the value of plan assets, the discount rate applied to value the pension liabilities or other assumption changes;

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

 

   

Changes in accounting principles, or their application or interpretation, and our ability to make estimates and the assumptions underlying the estimates, including the estimates for Delphi pension benefit guarantees, which could have an effect on earnings; and

 

   

Other risks described from time to time in periodic and current reports that we file with the SEC.

We caution readers not to place undue reliance on forward-looking statements. We undertake no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or other factors that affect the subject of these statements, except where we are expressly required to do so by law.

Item 1. Business

The information required by this item is contained within the section entitled “Item 1. Business” in our annual report on Form 10-K for the year ended December 31, 2009 as filed with the SEC on April 7, 2010 and attached hereto as Exhibit 99.l (the 2009 Form 10-K), which section is incorporated herein by reference.

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Item 1A. Risk Factors

The information required by this item is contained within the section entitled “Item 1A. Risk Factors” in the 2009 Form 10-K and the section entitled “Part II—Other Information—Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010, as filed with the SEC on May 17, 2010 and attached hereto as Exhibit 99.3 (the First Quarter 2010 10-Q), which sections are incorporated herein by reference.

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Item 2. Financial Information

The information required by this item is contained within the sections entitled “Item 6. Selected Financial Data,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in the 2009 Form 10-K and the section entitled “Part I—Financial Information—Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the First Quarter 2010 10-Q, which sections are incorporated herein by reference.

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Item 3. Properties

The information required by this item is contained within the section entitled “Item 2. Properties” in the 2009 Form 10-K, which section is incorporated herein by reference.

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Item 4. Security Ownership of Certain Beneficial Owners and Management

The information required by this item is contained within the section entitled “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” in the 2009 Form 10-K, which section is incorporated herein by reference.

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

 

Item 5. Directors and Executive Officers

Cynthia A. Telles, 57, has been a member of our Board of Directors since April 13, 2010. She has been on the faculty of the University of California, Los Angeles School of Medicine Department of Psychiatry since 1986 and the Director of the UCLA Neuropsychiatric Institute Spanish-Speaking Psychosocial Clinic since 1980. Among many corporate and non-profit board memberships, Dr. Telles was recently appointed to the White House Commission on Presidential Scholars by President Obama. She has held several governmental and public service appointments that include serving as a Commissioner for the City of Los Angeles for 13 years. Dr. Telles currently is a member of the board of the Kaiser Foundation Health Plan and Hospitals and Americas United Bank, the largest Hispanic-owned bank based in California. She previously served on the boards of Burlington Northern Santa Fe Corporation from 2009 to 2010 and California United Bank (formerly Sanwa Bank California) from 1994 to 2002. In concluding that Dr. Telles should serve as a director, the Board considered her extensive experience in public and governmental service, as well as public policy and governmental and community relations. In addition, her in-depth understanding of the Hispanic community, which represents the nation’s largest and fastest growing consumer market segment, provides the Board with valuable insight. Moreover, her previous and current board positions in companies in the health care, transportation and financial industries and in non-profit organizations involved with, among other areas, community development, environmental issues, health care reform, and education, have developed her broad perspective on issues related to corporate responsibility and governance.

The remainder of the information required by this item is contained within the section entitled “Item 10. Directors, Executive Officers and Corporate Governance” in the 2009 Form 10-K, which section is incorporated herein by reference.

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Item 6. Executive Compensation

The information required by this item is contained within the section entitled “Item 11. Executive Compensation” in the 2009 Form 10-K, which section is incorporated herein by reference.

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Item 7. Certain Relationships and Related Transactions, and Director Independence

The information required by this item is contained within the section entitled “Item 13. Certain Relationships and Related Transactions and Director Independence” in the 2009 Form 10-K, which section is incorporated herein by reference.

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Item 8. Legal Proceedings

The information required by this item is contained within the section entitled “Item 3. Legal Proceedings” in the 2009 Form 10-K and the section entitled “Part II—Other Information—Item 1. Legal Proceedings” in the First Quarter 2010 10-Q, which sections are incorporated herein by reference.

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Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters

The information required by this item is contained within the section entitled “Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” in the 2009 Form 10-K, which section is incorporated herein by reference.

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

 

Item 10. Recent Sales of Unregistered Securities

The information required by this item is contained within the section entitled “Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” in the 2009 Form 10-K, which section is incorporated herein by reference.

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Item 11. Description of Registrant’s Securities to be Registered

Description of Capital Stock

The following description of our capital stock is based upon our amended and restated certificate of incorporation, as amended (Certificate of Incorporation), our amended and restated bylaws (Bylaws), the Amended and Restated Warrant Agreements dated as of October 16, 2009 between us and U.S. Bank National Association, as Warrant Agent (Warrant Agreements), the Certificate of Designations (Certificate of Designations) for the Series A Preferred Stock and applicable provisions of law, in each case as currently in effect. The following is a description of the material provisions regarding our capital stock contained in our Certificate of Incorporation, our Bylaws, the Warrant Agreements and the Certificate of Designations and is qualified in its entirety by reference to the provisions of those documents. A description of the Stockholders Agreement dated as of October 15, 2009 (Stockholders Agreement) among us, the UST, the New VEBA, Canada Holdings and our previous legal entity prior to our October 2009 holding company reorganization (Prior GM), which includes among other things various voting agreements among the parties thereto, is contained within the section entitled “Item 10. Directors, Executive Officers and Corporate Governance—Stockholders Agreement” in the 2009 Form 10-K, which section is incorporated herein by reference.

Certain provisions of the Delaware General Corporation Law (DGCL), our Certificate of Incorporation and our Bylaws summarized in the following paragraphs may have an anti-takeover effect. This may delay, defer or prevent a tender offer or takeover attempt that a stockholder might consider in its best interests.

Authorized Capital Stock

Our Certificate of Incorporation currently authorizes us to issue 3,500,000,000 shares of capital stock, consisting of:

 

   

2,500,000,000 shares of common stock, par value $0.01 per share; and

 

   

1,000,000,000 shares of preferred stock, par value $0.01 per share

As of May 1, 2010 the following shares of capital stock and warrants to acquire shares of capital stock were issued and outstanding:

 

   

500,000,000 shares of common stock;

 

   

360,000,000 shares of Series A Preferred Stock; and

 

   

Warrants for the purchase of up to 106,060,605 shares of common stock.

Certain Provisions of Our Certificate of Incorporation and Bylaws

Amendments to Our Certificate of Incorporation

Under the DGCL, the affirmative vote of a majority of the outstanding shares entitled to vote thereon and a majority of the outstanding stock of each class entitled to vote thereon is required to amend a corporation’s certificate of incorporation. Under the

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

 

DGCL, the holders of the outstanding shares of a class of our capital stock shall be entitled to vote as a class upon a proposed amendment, whether or not entitled to vote thereon by the certificate of incorporation, if the amendment would:

 

   

Increase or decrease the aggregate number of authorized shares of such class;

 

   

Increase or decrease the par value of the shares of such class; or

 

   

Alter or change the powers, preferences or special rights of the shares of such class so as to affect them adversely.

If any proposed amendment would alter or change the powers, preferences or special rights of one or more series of any class of our capital stock so as to affect them adversely, but shall not so affect the entire class, then only the shares of the series so affected by the amendment shall be considered a separate class for the purposes of this provision.

Vacancies in the Board of Directors

Our Bylaws provide that, subject to limitations, any vacancy occurring in our Board of Directors for any reason may be filled by a majority of the remaining members of our Board of Directors then in office, even if such majority is less than a quorum. Each director so elected shall hold office until the expiration of the term of the other directors. Each such director shall hold office until his or her successor is elected and qualified, or until the earlier of his or her death, resignation or removal.

Special Meetings of Stockholders

Under our Bylaws, special meetings of stockholders may be called at any time by the chairman of the Board of Directors or by a majority of the members of the Board of Directors. Our Bylaws further provide that the Board of Directors shall call a special meeting upon the written request of the record holders of at least 15% of the voting power of the outstanding shares of all classes of stock entitled to vote at such a meeting, subject to certain requirements and limitations set forth in our Bylaws that may be applicable to such a written request.

Under the DGCL, written notice of any special meeting must be given not less than 10 nor more than 60 days before the date of the special meeting to each stockholder entitled to vote at such meeting.

Requirements for Notice of Stockholder Director Nominations and Stockholder Business

Prior to the earlier to occur of (i) the initial public offering of our common stock that is underwritten by a nationally recognized investment bank or (ii) the later of (x) the date on which a Company registration statement filed under the Exchange Act becomes effective and (y) the date of distribution of the shares of our common stock beneficially owned by MLC pursuant to its plan of reorganization (we refer to the earlier to occur of clauses (i) and (ii) as the Public Distribution), nominations for the election of directors may be made only by the Board of Directors, which nominations shall be consistent with the Stockholders Agreement. Following a Public Distribution, nominations for the election of directors may be made by the Board of Directors in accordance with the Stockholders Agreement or by any stockholder entitled to vote for the election of directors who complies with the applicable notice requirements.

Prior to a Public Distribution, a stockholder need not give notice of his, her or its intent to bring any matter before a meeting of stockholders. Following a Public Distribution, if a stockholder wishes to bring any business before an annual or special meeting or nominate a person for election to our Board of Directors, our Bylaws contain certain procedures that must be followed for the advance timing required for delivery of stockholder notice of such business and the information that such notice must contain. The information that may be required in a stockholder notice includes general information regarding the stockholder, a description of the proposed business and, with respect to nominations for the Board of Directors, certain specified information regarding the nominee(s). In addition to the information required in a stockholder notice described above, our Bylaws require under certain circumstances a

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

 

representation that the stockholder is a holder of our voting stock and intends to appear in person or by proxy at the meeting to make the nomination or bring up the matter specified in the notice. For the timing of the stockholder notice, our Bylaws require that the notice must be received by our secretary:

 

   

In the case of an annual meeting, not more than 180 days and not less than 120 days in advance of the annual meeting; and

 

   

In the case of a special meeting, not more than 15 days after the day on which notice of the special meeting is first mailed to stockholders.

Stockholder Action by Written Consent without a Meeting

Our Certificate of Incorporation provides that, following the time of the Public Distribution, no action that is required or permitted to be taken by our stockholders at any annual or special meeting of stockholders may be effected by written consent of stockholders in lieu of a meeting except where such consent is signed by the holders of all shares of stock of the Company then outstanding and entitled to vote. This unanimity requirement does not apply prior to the time of the Public Distribution. Our Bylaws also contain notice and procedural requirements applicable to persons seeking to have the stockholders authorize or take corporate action by written consent without a meeting.

Certain Anti-Takeover Effects of Delaware Law

In general, Section 203 of the DGCL prohibits a publicly held Delaware corporation from engaging in various business combination transactions with any interested stockholder for a period of three years following the time that such person became an interested stockholder, unless:

 

   

The business combination or the transaction which resulted in the stockholder becoming an interested stockholder is approved by the Board of Directors prior to the date the interested stockholder obtained such status;

 

   

Upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced; or

 

   

At or subsequent to such time the business combination is approved by the Board of Directors and authorized at an annual or special meeting of stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.

A “business combination” is defined to include mergers, asset sales, and other transactions resulting in financial benefit to an “interested stockholder.” In general, an “interested stockholder” is a person who owns (or is an affiliate or associate of the corporation and, within the prior three years, did own) 15% or more of a corporation’s voting stock.

As of May 1, 2010, we are not subject to Section 203 of the DGCL because we do not have a class of voting stock that is listed on a national securities exchange or held of record by more than 2,000 stockholders and we have not elected by a provision in our original Certificate of Incorporation or any amendment thereto to be governed by Section 203. Unless we adopt an amendment to our Certificate of Incorporation by action of our stockholders expressly electing not to be governed by Section 203, we would generally become subject to Section 203 of the DGCL at such time that we have a class of voting stock that is either listed on a national securities exchange or held of record by more than 2,000 stockholders, except that the restrictions contained in Section 203 would not apply if the business combination is with an interested stockholder who became an interested stockholder before the time that we have a class of voting stock that is either listed on a national securities exchange or held of record by more than 2,000 stockholders.

Description of Common Stock

Our only class of common stock is our common stock, par value $0.01 per share. There are no redemption or sinking fund provisions applicable to our common stock. All outstanding shares of common stock are fully paid and non-assessable.

 

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Dividends

The DGCL and our Certificate of Incorporation do not require our Board of Directors to declare dividends on our common stock. The declaration of any dividend on our common stock is a matter to be acted upon by our Board of Directors in its sole discretion. We have no current plans to commence payment of a dividend. Our payment of dividends in the future will be determined by our Board of Directors in its sole discretion and will depend on business conditions, our financial condition, earnings and liquidity and other factors.

The DGCL restricts the power of our Board of Directors to declare and pay dividends on our common stock. The amounts which may be declared and paid by our Board of Directors as dividends on our common stock are subject to the amount legally available for the payment of dividends by us under the DGCL. In particular, under the DGCL, we can only pay dividends to the extent that we have surplus—the extent by which the fair market value of our net assets exceeds the amount of our capital—or to the extent of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. In addition, dividends on our common stock are subject to any preferential rights on any outstanding series of preferred stock authorized for issuance by our Board of Directors in accordance with our Certificate of Incorporation.

Voting Rights

Our Certificate of Incorporation provides that, except as may otherwise be provided in a Certificate of Designation relating to any outstanding series of preferred stock or by applicable law, the holders of shares of common stock shall be entitled to one vote for each such share upon each matter presented to the stockholders and the common stock shall have the exclusive right to vote for the election of directors and for all other purposes. Our common stockholders do not possess cumulative voting rights.

Under our Bylaws in uncontested elections of directors, those nominees receiving a majority of the votes cast by holders of shares entitled to vote with respect to that director’s election at the meeting shall be elected. A majority of votes cast means that the number of votes for a director must exceed 50% of the votes cast with respect to that director. Votes against will count as a vote cast with respect to a director, but abstentions will not count as a vote cast with respect to that director. In certain contested elections, the nominees who receive a plurality of votes cast by holders of shares entitled to vote in the election at a meeting shall be elected. Under our Bylaws, any other corporate action put to a stockholder vote shall be decided by the vote of the holders of a majority of the voting power of the shares of stock entitled to vote thereon present in person or by proxy at the meeting, unless otherwise provided by applicable law.

Liquidation Rights

In the event of any liquidation, dissolution or winding up of the Company, the holders of our common stock would be entitled to receive, after payment or provision for payment of all our debts and liabilities, all of our assets available for distribution. Holders of our preferred stock, if any such shares are then outstanding, may have a priority over the holders of common stock in the event of any liquidation or dissolution.

Description of Preferred Stock

Under our Certificate of Incorporation and the DGCL, our Board of Directors has the authority to issue shares of preferred stock from time to time in one or more series. The certificate of designations establishing a series of preferred stock will describe the terms of the series of preferred stock, including:

 

   

The designation of the series;

 

   

The number of shares of the series;

 

   

The amounts payable on, and the preferences, if any, of shares of the series in respect of dividends, and whether such dividends, if any, shall be cumulative or noncumulative;

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

 

   

Dates at which dividends, if any, shall be payable;

 

   

The redemption rights and price or prices, if any, for shares of the series;

 

   

The terms and amount of any sinking fund provided for the purchase or redemption of shares of the series;

 

   

The amounts payable on, and the preferences, if any, of shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company;

 

   

Whether the shares of the series shall be convertible into or exchangeable for shares of any other class or series, or any other security, of the Company or any other corporation and, if so, the specification of such other class or series or such other security, the conversion or exchange price or prices or rate or rates, any adjustments thereof, the date or dates at which such shares shall be convertible or exchangeable and all other terms and conditions upon which such conversion or exchange may be made;

 

   

Restrictions on the issuance of shares of the same series or of any other class or series; and

 

   

The voting rights, if any, of the holders of shares of the series.

Holders of our preferred stock will not be entitled to vote except as may otherwise be provided in the Certificate of Designations establishing a series of preferred stock and except as may otherwise be provided under applicable law.

Description of Series A Preferred Stock

The Certificate of Designations for the Series A Preferred Stock authorizes 360,000,000 shares of Series A Preferred Stock, all of which are outstanding as of May 1, 2010. There are no sinking fund provisions applicable to our Series A Preferred Stock. All outstanding shares of Series A Preferred Stock are fully paid and non-assessable.

Ranking

As described more fully below, the Series A Preferred Stock ranks senior with respect to liquidation preference and dividend rights to any “Junior Stock,” which means the common stock, any preferred stock other than the Series A Preferred Stock and any other class or series of stock that we may issue.

Liquidation Preference

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company’s affairs, a holder of Series A Preferred Stock will be entitled to be paid, before any distribution or payment may be made to any holders of Junior Stock: (1) the liquidation preference amount of $25.00 per share; and (2) the amount of any accrued and unpaid dividends, if any, whether or not declared, prior to such distribution or payment date.

Dividends

Holders of the Series A Preferred Stock are entitled to receive, on each share, if, as and when declared by the Board of Directors or any duly authorized committee of the Board of Directors out of assets legally available, cumulative cash dividends with respect to each quarterly dividend period at a rate of 9.0% per annum on: (1) the liquidation preference amount of $25.00 per share; and (2) the amount of accrued and unpaid dividends for any prior dividend periods on such share, if any. Unless all accrued and unpaid dividends on the Series A Preferred Stock are paid in full, no dividends or distributions may be paid on common stock or any other Junior Stock, and no shares of common stock or any other Junior Stock may be repurchased or redeemed by us (subject to certain exceptions that are specified in the Certificate of Designations for the Series A Preferred Stock). Dividends, if declared, will be payable on March 15, June 15, September 15 and December 15 of each year.

 

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Redemption

We may not redeem the Series A Preferred Stock prior to December 31, 2014. On or after December 31, 2014, the Series A Preferred Stock may be redeemed, in whole or in part, for cash at a price per share equal to the $25.00 per share liquidation amount, plus any accrued and unpaid dividends.

Series A Preferred Stock Directors

Whenever, at any time or times, dividends payable on the shares of Series A Preferred Stock have not been paid for an aggregate of six quarterly dividend periods or more, whether or not consecutive, the authorized number of our directors will automatically be increased by two, and the holders of the Series A Preferred Stock will have the right, voting as a class, to elect two directors to our Board of Directors to fill the newly created directorships at the next annual meeting of stockholders (or at a special meeting called for that purpose prior to the next annual meeting) and at each subsequent annual meeting of stockholders until all accrued and unpaid dividends for all past dividend periods on all outstanding shares of Series A Preferred Stock have been declared and paid in full, at which time such right shall terminate with respect to the Series A Preferred Stock subject to revesting in the event of each and every subsequent payment failure of the character mentioned above. Upon any termination of the rights of the holders of shares of the Series A Preferred Stock as a class to vote for directors as described above, the preferred directors so elected to our Board of Directors shall cease to be qualified as directors and the term of their office shall terminate immediately.

Class Voting Rights on Certain Matters

The vote or consent of the holders of at least 66 2/3% of the shares of the Series A Preferred Stock at the time outstanding, voting as a separate class, shall be necessary for effecting:

 

   

Any amendment or alteration of the Certificate of Designations for the Series A Preferred Stock or our Certificate of Incorporation to authorize or create or increase the authorized amount of, or any issuance of, any shares of, or any securities convertible into or exchangeable or exercisable for shares of, any class or series of our capital stock ranking senior to or pari passu with the Series A Preferred Stock with respect to either or both the payment of dividends and/or the distribution of assets on any liquidation, dissolution or winding up of the Company;

 

   

Any amendment, alteration or repeal of any provision of the Certificate of Designations for the Series A Preferred Stock or our Certificate of Incorporation (subject to certain exceptions) so as to adversely affect the rights, preferences, privileges or voting powers of the Series A Preferred Stock; provided, however, that the vote of 100% of the shares of the Series A Preferred Stock at the time outstanding shall be necessary to: (1) reduce the $25.00 per share liquidation preference amount; (2) reduce the applicable 9.0% dividend rate; (3) provide for the payment of dividends on the Series A Preferred Stock to be made in other than U.S. dollars; (4) change any dividend payment date or the December 31, 2014 first optional redemption date; or (5) make dividends on the Series A Preferred Stock non-cumulative; or

 

   

Any consummation of a binding share exchange or reclassification involving the Series A Preferred Stock, or of a merger or consolidation of us with or into another corporation or other entity, unless in each case: (1) the shares of the Series A Preferred Stock remain outstanding and are not amended in any respect or, in the case of any such merger or consolidation with respect to which we are not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent; and (2) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of the Series A Preferred Stock immediately prior to such consummation, taken as a whole; provided, however, that any increase in the amount of our authorized preferred stock, or the creation and issuance, or an increase in the authorized or issued amount of any other series of our preferred stock, or any securities convertible into or exchangeable or exercisable for any other series of our preferred stock, ranking junior to the Series A Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets

 

10


GENERAL MOTORS COMPANY AND SUBSIDIARIES

 

 

upon liquidation, dissolution or winding up of the Company will not be deemed to adversely affect the rights, preferences, privileges or voting powers, and shall not require the affirmative vote or consent of, the holders of outstanding shares of the Series A Preferred Stock.

Description of the Warrants

Pursuant to the Warrant Agreements, we issued two warrants, each to acquire 45,454,545 shares of common stock, to MLC and one warrant to acquire 15,151,515 shares of common stock to the New VEBA. The first of the MLC Warrants is exercisable at any time prior to July 10, 2016 at an exercise price of $30.00 per share, and the second of the MLC Warrants is exercisable at any time prior to July 10, 2019 at an exercise price of $55.00 per share. The New VEBA Warrant is exercisable at any time prior to December 31, 2015 at an exercise price of $126.92 per share. The number of shares of common stock underlying each of the warrants and the per share exercise price thereof are subject to adjustment as a result of certain events specified in the Warrant Agreements, including stock splits, reverse stock splits and stock dividends.

*  *  *  *  *  *  *

Item 12. Indemnification of Directors and Officers

The information required by this item is contained within the section entitled “Indemnification of Directors and Officers” in our current report on Form 8-K filed with the SEC on August 7, 2009 and attached hereto as Exhibit 99.2, which section is incorporated herein by reference.

*  *  *  *  *  *  *

Item 13. Financial Statements and Supplementary Data

The information required by this item is contained within the section entitled “Item 8. Financial Statements and Supplementary Data” in the 2009 Form 10-K and the section entitled “Part I—Financial Information—Item 1. Condensed Consolidated Financial Statements” in the First Quarter 2010 10-Q, which sections are incorporated herein by reference.

*  *  *  *  *  *  *

Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

None.

*  *  *  *  *  *  *

 

11


GENERAL MOTORS COMPANY AND SUBSIDIARIES

 

Item 15. Financial Statements and Exhibits

 

 

(a) All Financial Statements and Supplemental Information incorporated herein by reference
(b) Exhibits

 

Exhibit
Number

  

Exhibit Name

    
3.1    Amended and Restated Certificate of Incorporation of General Motors Company, as amended, incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K of General Motors Company filed November 16, 2009    Incorporated by Reference
3.2    General Motors Company Amended and Restated Bylaws dated March 2, 2010, incorporated herein by reference to Exhibit 3.2 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
4.1    Certificate of Designations of Series A Fixed Rate Cumulative Perpetual Preferred Stock of General Motors Company, incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K of General Motors Company filed November 16, 2009    Incorporated by Reference
10.1†    Second Amended and Restated Secured Credit Agreement among General Motors Company, as Borrower, the Guarantors, and the United States Department of the Treasury, as Lender, dated August 12, 2009, incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of General Motors Company filed November 16, 2009    Incorporated by Reference
10.2†    Assignment and Assumption Agreement and Third Amendment to Second Amended and Restated Secured Credit Agreement among General Motors LLC, General Motors Holdings LLC, General Motors Company and the United States Department of the Treasury, as Lender, dated as of October 19, 2009, incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K of General Motors Company filed November 16, 2009    Incorporated by Reference
10.3†    Amended and Restated Secured Note Agreement among General Motors Company, as Issuer, the Guarantors and UAW Retiree Medical Benefits Trust, as Noteholder, dated August 14, 2009 (refer also to Exhibit 10.1 which includes Schedule 3.25 referenced herein), incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of General Motors Company filed November 16, 2009    Incorporated by Reference
10.4†    Assignment and Assumption Agreement and Third Amendment to Amended and Restated Secured Note Agreement among General Motors LLC, General Motors Holdings LLC, General Motors Company and UAW Retiree Medical Benefits Trust, as Noteholder, dated as of October 19, 2009, incorporated herein by reference to Exhibit 10.4 to the Current Report on Form 8-K of General Motors Company filed November 16, 2009    Incorporated by Reference
10.5†    Second Amended and Restated Loan Agreement by and among General Motors of Canada Limited, as Borrower, and the other loan parties and Export Development of Canada, as Lender, dated July 10, 2009, incorporated herein by reference to Exhibit 10.8 to the Current Report on Form 8-K of General Motors Company filed August 7, 2009    Incorporated by Reference
10.6    Amendment to Second Amended and Restated Loan Agreement by and among General Motors of Canada Limited, as Borrower, and the other loan parties and Export Development of Canada, as Lender, dated October 15, 2009, incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of General Motors Company filed October 23, 2009    Incorporated by Reference
10.7    Settlement Agreement dated as of September 10, 2009, incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of General Motors Company filed September 17, 2009    Incorporated by Reference

 

12


GENERAL MOTORS COMPANY AND SUBSIDIARIES

 

Exhibit
Number

  

Exhibit Name

    
10.8    Agreement, dated as of October 15, 2009 between General Motors Company (formerly known as General Motors Holding Company), General Motors LLC (formerly known as General Motors Company) and Motors Liquidation Company, incorporated herein by reference to Exhibit 10.7 to the Current Report on Form 8-K of General Motors Company filed November 16, 2009    Incorporated by Reference
10.9    Stockholders Agreement, dated as of October 15, 2009 between General Motors Company, the United States Department of the Treasury, Canada GEN Investment Corporation (formerly known as 7176384 Canada Inc.) and the UAW Retiree Medical Benefits Trust, incorporated herein by reference to Exhibit 10.8 to the Current Report on Form 8-K of General Motors Company filed November 16, 2009    Incorporated by Reference
10.10    Master Disposition Agreement among Delphi Corporation, GM Components Holdings, LLC, General Motors Company, Motors Liquidation Company (fka General Motors Corporation), DIP Holdco 3, LLC, and the other sellers and other buyers party thereto dated July 26, 2009, incorporated herein by reference to Exhibit 10.9 to the Current Report on Form 8-K of General Motors Company filed August 7, 2009    Incorporated by Reference
10.11    Investment Commitment Agreement by and among Silver Point Capital Fund, LP, Silver Point Capital Offshore Fund, Ltd., Elliott Associates, LP, DIP Holdco 3, LLC, and General Motors Company dated July 26, 2009, incorporated herein by reference to Exhibit 10.10 to the Current Report on Form 8-K of General Motors Company filed August 7, 2009    Incorporated by Reference
10.12    UAW Retiree Settlement Agreement, dated July 10, 2009, between General Motors Company and the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (the UAW), with the UAW also entering into the agreement as the authorized representative of certain persons receiving retiree benefits pursuant to collectively bargained plans, programs and/or agreement between General Motors Company and the UAW, incorporated herein by reference to Exhibit 10.12 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
10.13    Amended and Restated Global Settlement Agreement Between Delphi Corporation and General Motors Corporation, Dated September 12, 2008, incorporated by reference to Exhibit 10(b) to the Quarterly Report on Form 10-Q of Motors Liquidation Company filed November 10, 2008    Incorporated by Reference
10.14    Form of Compensation Statement, incorporated herein by reference to Exhibit 10.14 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
10.15    Employment Agreement for Kenneth W. Cole, incorporated herein by reference to Exhibit 10.15 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
10.16    Consulting Agreement for Frederick A. Henderson, incorporated herein by reference to Exhibit 10.16 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
10.17    Summary of Consulting Arrangement between General Motors Company and Stephen J. Girsky, incorporated herein by reference to Item 1.01 of the Current Report on Form 8-K of General Motors Company filed January 15, 2010.    Incorporate by Reference
10.18    General Motors Company 2009 Long-Term Incentive Plan, incorporated herein by reference to Exhibit 10.18 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference

 

13


GENERAL MOTORS COMPANY AND SUBSIDIARIES

 

Exhibit
Number

  

Exhibit Name

    
10.19    General Motors Company Salary Stock Plan, incorporated herein by reference to Exhibit 10.19 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
10.20    Form of Restricted Stock Unit Grant made to top 25 highly compensated employees under General Motors Company 2009 Long-Term Incentive Plan, as Amended March 1, 2010, incorporated herein by reference to Exhibit 10.20 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
10.21    Form of Restricted Stock Unit Grant (Cash Settlement) made to top 25 highly compensated employees under General Motors Company 2009 Long-Term Incentive Plan, as Amended March 1, 2010, incorporated herein by reference to Exhibit 10.21 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
10.22    Form of Restricted Stock Unit Grant made to certain executive officers incorporated by reference to Exhibit 10.a to the Quarterly Report on Form 10-Q of Motors Liquidation Company filed May 8, 2008    Incorporated by Reference
10.23    General Motors Company Vehicle Operations—Senior Management Vehicle Program (SMVP) Supplement, revised December 15, 2005, incorporated herein by reference to Exhibit 10(g) to the Annual Report on Form 10-K of Motors Liquidation Company filed March 28, 2006    Incorporated by Reference
10.24†    Amended and Restated United States Consumer Financing Services Agreement between GMAC LLC and General Motors Corporation dated May 22, 2009 incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of General Motors Company filed August 7, 2009    Incorporated by Reference
10.25†    Amended and Restated Master Services Agreement between GMAC LLC and General Motors Corporation dated May 22, 2009 incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of General Motors Company filed August 7, 2009    Incorporated by Reference
10.26    General Motors Executive Retirement Plan, as amended August 4, 2008, incorporated herein by reference to Exhibit 10(a) to the Quarterly Report on Form 10-Q of Motors Liquidation Company filed November 10, 2008    Incorporated by Reference
10.27    Agreement, dated as of October 22, 2001, between General Motors Corporation and General Motors Acceptance Corporation, incorporated herein by reference to Exhibit 10 to the Annual Report on Form 10-K of Motors Liquidation Company filed March 28, 2006    Incorporated by Reference
10.28    Agreement, dated as of November 30, 2006, between General Motors Corporation and GMAC LLC, incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Motors Liquidation Company filed November 30, 2008    Incorporated by Reference
10.29    Amended and Restated Warrant Agreement, dated as of October 16, 2009, between General Motors Company and U.S. Bank National Association, including Form of Warrant Certificate attached as Exhibit D thereto, relating to warrants with a $30 original exercise price and a July 10, 2016 expiration date, incorporated herein by reference to Exhibit 10.29 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
10.30    Amended and Restated Warrant Agreement, dated as of October 16, 2009, between General Motors Company and U.S. Bank National Association, including Form of Warrant Certificate attached as Exhibit D thereto, relating to warrants with a $55 original exercise price and a July 10, 2019 expiration date, incorporated herein by reference to Exhibit 10.30 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference

 

14


GENERAL MOTORS COMPANY AND SUBSIDIARIES

 

Exhibit
Number

  

Exhibit Name

    
10.31    Amended and Restated Warrant Agreement, dated as of October 16, 2009, between General Motors Company and U.S. Bank National Association, including Form of Warrant Certificate attached as Exhibit D thereto, relating to warrants with a $126.92 original exercise price and a December 31, 2015 expiration date, incorporated herein by reference to Exhibit 10.31 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
10.32    Summary of Employment Arrangement between General Motors Company and Edward E. Whitacre, Jr., incorporated herein by reference to Item 5.02 of the Current Report on Form 8-K of General Motors Company filed February 19, 2010    Incorporated by Reference
10.33    Summary of Employment Arrangement between General Motors Company and Stephen J. Girsky, incorporated herein by reference to Item 1.01 of the Current Report on Form 8-K of General Motors Company filed March 5, 2010    Incorporated by Reference
10.34    Employment Agreement for Christopher P. Liddell, incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q filed May 17, 2010    Incorporated by Reference
10.35    General Motors Executive Retirement Plan, as amended March 1, 2010, incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q filed May 17, 2010    Incorporated by Reference
12    Computation of Ratios of Earnings to Fixed Charges for the Periods July 10, 2009 through December 31, 2009 and January 1, 2009 through July 9, 2009 and for the Years Ended December 31, 2008, 2007, 2006 and 2005, incorporated herein by reference to Exhibit 12 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
21    Subsidiaries of the Registrant as of December 31, 2009, incorporated herein by reference to Exhibit 21 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
99    Consolidated Financial Statements of Ally Financial Inc. (formerly GMAC Inc.) and subsidiaries at December 31, 2009 and 2008 and for each of the three years in the period ended December 31, 2009, incorporated herein by reference to Exhibit 99 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
99.1    Annual Report on Form 10-K of General Motors Company for the year ended December 31, 2009, incorporated herein by reference to Exhibit 99.1 to the Registration Statement on Form 10 of General Motors Company filed April 7, 2010    Incorporated by Reference
99.2    Current Report on Form 8-K of General Motors Company, dated August 7, 2009, incorporated herein by reference to Exhibit 99.2 to the Registration Statement on Form 10 of General Motors Company filed April 7, 2010    Incorporated by Reference
99.3    Quarterly Report on Form 10-Q of General Motors Company for the quarterly period ended March 31, 2010    Filed Herewith

 

Certain confidential portions have been omitted pursuant to a request for confidential treatment, which has been separately filed with the Securities and Exchange Commission.

*  *  *  *  *  *  *

 

15


GENERAL MOTORS COMPANY AND SUBSIDIARIES

 

EXHIBIT INDEX

 

Exhibit
Number

  

Exhibit Name

    
3.1    Amended and Restated Certificate of Incorporation of General Motors Company, as amended, incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K of General Motors Company filed November 16, 2009    Incorporated by Reference
3.2    General Motors Company Amended and Restated Bylaws dated March 2, 2010, incorporated herein by reference to Exhibit 3.2 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
4.1    Certificate of Designations of Series A Fixed Rate Cumulative Perpetual Preferred Stock of General Motors Company, incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K of General Motors Company filed November 16, 2009    Incorporated by Reference
10.1†    Second Amended and Restated Secured Credit Agreement among General Motors Company, as Borrower, the Guarantors, and the United States Department of the Treasury, as Lender, dated August 12, 2009, incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of General Motors Company filed November 16, 2009    Incorporated by Reference
10.2†    Assignment and Assumption Agreement and Third Amendment to Second Amended and Restated Secured Credit Agreement among General Motors LLC, General Motors Holdings LLC, General Motors Company and the United States Department of the Treasury, as Lender, dated as of October 19, 2009, incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K of General Motors Company filed November 16, 2009    Incorporated by Reference
10.3†    Amended and Restated Secured Note Agreement among General Motors Company, as Issuer, the Guarantors and UAW Retiree Medical Benefits Trust, as Noteholder, dated August 14, 2009 (refer also to Exhibit 10.1 which includes Schedule 3.25 referenced herein), incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of General Motors Company filed November 16, 2009    Incorporated by Reference
10.4†    Assignment and Assumption Agreement and Third Amendment to Amended and Restated Secured Note Agreement among General Motors LLC, General Motors Holdings LLC, General Motors Company and UAW Retiree Medical Benefits Trust, as Noteholder, dated as of October 19, 2009, incorporated herein by reference to Exhibit 10.4 to the Current Report on Form 8-K of General Motors Company filed November 16, 2009    Incorporated by Reference
10.5†    Second Amended and Restated Loan Agreement by and among General Motors of Canada Limited, as Borrower, and the other loan parties and Export Development of Canada, as Lender, dated July 10, 2009, incorporated herein by reference to Exhibit 10.8 to the Current Report on Form 8-K of General Motors Company filed August 7, 2009    Incorporated by Reference
10.6    Amendment to Second Amended and Restated Loan Agreement by and among General Motors of Canada Limited, as Borrower, and the other loan parties and Export Development of Canada, as Lender, dated October 15, 2009, incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of General Motors Company filed October 23, 2009    Incorporated by Reference
10.7    Settlement Agreement dated as of September 10, 2009, incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of General Motors Company filed September 17, 2009    Incorporated by Reference
10.8    Agreement, dated as of October 15, 2009 between General Motors Company (formerly known as General Motors Holding Company), General Motors LLC (formerly known as General Motors Company) and Motors Liquidation Company, incorporated herein by reference to Exhibit 10.7 to the Current Report on Form 8-K of General Motors Company filed November 16, 2009    Incorporated by Reference

 

16


GENERAL MOTORS COMPANY AND SUBSIDIARIES

 

Exhibit
Number

  

Exhibit Name

    
10.9    Stockholders Agreement, dated as of October 15, 2009 between General Motors Company, the United States Department of the Treasury, Canada GEN Investment Corporation (formerly known as 7176384 Canada Inc.) and the UAW Retiree Medical Benefits Trust, incorporated herein by reference to Exhibit 10.8 to the Current Report on Form 8-K of General Motors Company filed November 16, 2009    Incorporated by Reference
10.10    Master Disposition Agreement among Delphi Corporation, GM Components Holdings, LLC, General Motors Company, Motors Liquidation Company (fka General Motors Corporation), DIP Holdco 3, LLC, and the other sellers and other buyers party thereto dated July 26, 2009, incorporated herein by reference to Exhibit 10.9 to the Current Report on Form 8-K of General Motors Company filed August 7, 2009    Incorporated by Reference
10.11    Investment Commitment Agreement by and among Silver Point Capital Fund, LP, Silver Point Capital Offshore Fund, Ltd., Elliott Associates, LP, DIP Holdco 3, LLC, and General Motors Company dated July 26, 2009, incorporated herein by reference to Exhibit 10.10 to the Current Report on Form 8-K of General Motors Company filed August 7, 2009    Incorporated by Reference
10.12    UAW Retiree Settlement Agreement, dated July 10, 2009, between General Motors Company and the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (the UAW), with the UAW also entering into the agreement as the authorized representative of certain persons receiving retiree benefits pursuant to collectively bargained plans, programs and/or agreement between General Motors Company and the UAW, incorporated herein by reference to Exhibit 10.12 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
10.13    Amended and Restated Global Settlement Agreement Between Delphi Corporation and General Motors Corporation, Dated September 12, 2008, incorporated by reference to Exhibit 10(b) to the Quarterly Report on Form 10-Q of Motors Liquidation Company filed November 10, 2008    Incorporated by Reference
10.14    Form of Compensation Statement, incorporated herein by reference to Exhibit 10.14 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
10.15    Employment Agreement for Kenneth W. Cole, incorporated herein by reference to Exhibit 10.15 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
10.16    Consulting Agreement for Frederick A. Henderson, incorporated herein by reference to Exhibit 10.16 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
10.17    Summary of Consulting Arrangement between General Motors Company and Stephen J. Girsky, incorporated herein by reference to Item 1.01 of the Current Report on Form 8-K of General Motors Company filed January 15, 2010.    Incorporate by Reference
10.18    General Motors Company 2009 Long-Term Incentive Plan, incorporated herein by reference to Exhibit 10.18 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
10.19    General Motors Company Salary Stock Plan, incorporated herein by reference to Exhibit 10.19 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
10.20    Form of Restricted Stock Unit Grant made to top 25 highly compensated employees under General Motors Company 2009 Long-Term Incentive Plan, as Amended March 1, 2010, incorporated herein by reference to Exhibit 10.20 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference

 

17


GENERAL MOTORS COMPANY AND SUBSIDIARIES

 

Exhibit
Number

  

Exhibit Name

    
10.21    Form of Restricted Stock Unit Grant (Cash Settlement) made to top 25 highly compensated employees under General Motors Company 2009 Long-Term Incentive Plan, as Amended March 1, 2010, incorporated herein by reference to Exhibit 10.21 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
10.22    Form of Restricted Stock Unit Grant made to certain executive officers incorporated by reference to Exhibit 10.a to the Quarterly Report on Form 10-Q of Motors Liquidation Company filed May 8, 2008    Incorporated by Reference
10.23    General Motors Company Vehicle Operations—Senior Management Vehicle Program (SMVP) Supplement, revised December 15, 2005, incorporated herein by reference to Exhibit 10(g) to the Annual Report on Form 10-K of Motors Liquidation Company filed March 28, 2006    Incorporated by Reference
10.24†    Amended and Restated United States Consumer Financing Services Agreement between GMAC LLC and General Motors Corporation dated May 22, 2009 incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of General Motors Company filed August 7, 2009    Incorporated by Reference
10.25†    Amended and Restated Master Services Agreement between GMAC LLC and General Motors Corporation dated May 22, 2009 incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of General Motors Company filed August 7, 2009    Incorporated by Reference
10.26    General Motors Executive Retirement Plan, as amended August 4, 2008, incorporated herein by reference to Exhibit 10(a) to the Quarterly Report on Form 10-Q of Motors Liquidation Company filed November 10, 2008    Incorporated by Reference
10.27    Agreement, dated as of October 22, 2001, between General Motors Corporation and General Motors Acceptance Corporation, incorporated herein by reference to Exhibit 10 to the Annual Report on Form 10-K of Motors Liquidation Company filed March 28, 2006    Incorporated by Reference
10.28    Agreement, dated as of November 30, 2006, between General Motors Corporation and GMAC LLC, incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Motors Liquidation Company filed November 30, 2008    Incorporated by Reference
10.29    Amended and Restated Warrant Agreement, dated as of October 16, 2009, between General Motors Company and U.S. Bank National Association, including Form of Warrant Certificate attached as Exhibit D thereto, relating to warrants with a $30 original exercise price and a July 10, 2016 expiration date, incorporated herein by reference to Exhibit 10.29 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
10.30    Amended and Restated Warrant Agreement, dated as of October 16, 2009, between General Motors Company and U.S. Bank National Association, including Form of Warrant Certificate attached as Exhibit D thereto, relating to warrants with a $55 original exercise price and a July 10, 2019 expiration date, incorporated herein by reference to Exhibit 10.30 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
10.31    Amended and Restated Warrant Agreement, dated as of October 16, 2009, between General Motors Company and U.S. Bank National Association, including Form of Warrant Certificate attached as Exhibit D thereto, relating to warrants with a $126.92 original exercise price and a December 31, 2015 expiration date, incorporated herein by reference to Exhibit 10.31 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference

 

18


GENERAL MOTORS COMPANY AND SUBSIDIARIES

 

Exhibit
Number

  

Exhibit Name

    
10.32    Summary of Employment Arrangement between General Motors Company and Edward E. Whitacre, Jr., incorporated herein by reference to Item 5.02 of the Current Report on Form 8-K of General Motors Company filed February 19, 2010    Incorporated by Reference
10.33    Summary of Employment Arrangement between General Motors Company and Stephen J. Girsky, incorporated herein by reference to Item 1.01 of the Current Report on Form 8-K of General Motors Company filed March 5, 2010    Incorporated by Reference
10.34    Employment Agreement for Christopher P. Liddell, incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q filed May 17, 2010    Incorporated by Reference
10.35    General Motors Executive Retirement Plan, as amended March 1, 2010, incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q filed May 17, 2010    Incorporated by Reference
12    Computation of Ratios of Earnings to Fixed Charges for the Periods July 10, 2009 through December 31, 2009 and January 1, 2009 through July 9, 2009 and for the Years Ended December 31, 2008, 2007, 2006 and 2005, incorporated herein by reference to Exhibit 12 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
21    Subsidiaries of the Registrant as of December 31, 2009, incorporated herein by reference to Exhibit 21 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
99    Consolidated Financial Statements of Ally Financial Inc. (formerly GMAC Inc.) and subsidiaries at December 31, 2009 and 2008 and for each of the three years in the period ended December 31, 2009, incorporated herein by reference to Exhibit 99 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010    Incorporated by Reference
99.1    Annual Report on Form 10-K of General Motors Company for the year ended December 31, 2009, incorporated herein by reference to Exhibit 99.1 to the Registration Statement on Form 10 of General Motors Company filed April 7, 2010    Incorporated by Reference
99.2    Current Report on Form 8-K of General Motors Company, dated August 7, 2009, incorporated herein by reference to Exhibit 99.2 to the Registration Statement on Form 10 of General Motors Company filed April 7, 2010    Incorporated by Reference
99.3    Quarterly Report on Form 10-Q of General Motors Company for the quarterly period ended March 31, 2010    Filed Herewith

 

Certain confidential portions have been omitted pursuant to a request for confidential treatment, which has been separately filed with the Securities and Exchange Commission.

 

19


GENERAL MOTORS COMPANY AND SUBSIDIARIES

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

   

GENERAL MOTORS COMPANY

(Registrant)

Date: May 17, 2010     By:  

/s/ NICK S. CYPRUS

      Nick S. Cyprus
      Vice President, Controller and Chief Accounting Officer

 

20

Quarterly Report on Form 10-Q of General Motors Company
Table of Contents

Exhibit 99.3

 

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549-1004

Form 10-Q

 

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

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 000-53930

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  ¨  No  þ

Indicate by check mark whether the registrant has submitted electronically and posted on its company Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  ¨  No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer   ¨  Accelerated filer  ¨  Non-accelerated filer  þ   Smaller reporting company  ¨  

Do not check if smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨  No  þ

As of May 1, 2010, the number of shares outstanding of $0.01 par value common stock was 500,000,000 shares.

Website Access to Company’s Reports

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

 

 

 


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

INDEX

 

        Page No.
    

Part I — Financial Information

 

Item 1.

  Condensed Consolidated Financial Statements (Unaudited)   1
  Condensed Consolidated Statements of Operations   1
  Condensed Consolidated Balance Sheets   2
  Condensed Consolidated Statements of Equity (Deficit)   3
  Condensed Consolidated Statements of Cash Flows   4
  Notes to Condensed Consolidated Financial Statements   5
 

Note 1.

   Nature of Operations   5
 

Note 2.

   Chapter 11 Proceedings and the 363 Sale   5
 

Note 3.

   Basis of Presentation and Recent Accounting Standards   7
 

Note 4.

   Acquisition and Disposals of Businesses   8
 

Note 5.

   Inventories   10
 

Note 6.

   Equity in Net Assets of Nonconsolidated Affiliates   10
 

Note 7.

   Goodwill   12
 

Note 8.

   Intangible Assets, net   13
 

Note 9.

   Variable Interest Entities   13
 

Note 10.

   Depreciation and Amortization   17
 

Note 11.

   Restricted Cash   18
 

Note 12.

   Short-Term and Long-Term Debt   19
 

Note 13.

   Product Warranty Liability   21
 

Note 14.

   Pensions and Other Postretirement Benefits   22
 

Note 15

   Derivative Financial Instruments and Risk Management   23
 

Note 16.

   Commitments and Contingencies   28
 

Note 17.

   Income Taxes   33
 

Note 18.

   Fair Value Measurements   34
 

Note 19.

   Restructuring and Other Initiatives   39
 

Note 20.

   Impairments   42
 

Note 21.

   Earnings (Loss) Per Share   44
 

Note 22.

   Transactions with GMAC   45
 

Note 23.

   Transactions with MLC   47
 

Note 24.

   Segment Reporting   48
 

Note 25.

   Subsequent Events   50

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations   52

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk   83

Item 4.

  Controls and Procedures   83
    

Part II — Other Information

 

Item 1.

  Legal Proceedings   85

Item 1A.

  Risk Factors   85

Item 6.

  Exhibits   88
  Signature   89


Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

PART I

Item 1. Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share amounts)

(Unaudited)

 

     Successor          Predecessor  
     Three  Months
Ended
March 31, 2010
         Three  Months
Ended
March 31, 2009
 

Net sales and revenue

   $ 31,476          $ 22,431   
                    

Costs and expenses

        

Cost of sales

     27,591            24,611   

Selling, general and administrative expense

     2,684            2,497   

Other expenses, net

     46            985   
                    

Total costs and expenses

     30,321            28,093   
                    

Operating income (loss)

     1,155            (5,662

Equity in loss of GMAC

                (500

Interest expense

     (337         (1,230

Interest income and other non-operating income, net

     485            425   

Gain (loss) on extinguishment of debt

     (1         906   
                    

Income (loss) before income taxes and equity income

     1,302            (6,061

Income tax expense (benefit)

     509            (114

Equity income, net of tax

     403            48   
                    

Net income (loss)

     1,196            (5,899

Less: Net income attributable to noncontrolling interests

     128            76   
                    

Net income (loss) attributable to stockholders

     1,068            (5,975

Less: Cumulative dividends on preferred stock

     203              
                    

Net income (loss) attributable to common stockholders

   $ 865          $ (5,975
                    

Earnings (loss) per share (Note 21)

        

Basic

        

Net income (loss) attributable to common stockholders

   $ 1.73          $ (9.78

Weighted-average common shares outstanding

     500            611   

Diluted

        

Net income (loss) attributable to common stockholders

   $ 1.66          $ (9.78

Weighted-average common shares outstanding

     522            611   

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

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share amounts)

(Unaudited)

 

     Successor  
     March 31,
2010
    December 31,
2009
 
ASSETS     

Current Assets

    

Cash and cash equivalents

   $ 23,310      $ 22,679   

Marketable securities

     153        134   
                

Total cash, cash equivalents and marketable securities

     23,463        22,813   

Restricted cash

     12,741        13,917   

Accounts and notes receivable (net of allowance of $188 and $250)

     8,694        7,518   

Inventories

     11,192        10,107   

Assets held for sale

     60        388   

Equipment on operating leases, net

     2,319        2,727   

Other current assets and deferred income taxes

     1,888        1,777   
                

Total current assets

     60,357        59,247   

Non-Current Assets

    

Equity in net assets of nonconsolidated affiliates

     8,430        7,936   

Assets held for sale

            530   

Property, net

     18,432        18,687   

Goodwill

     30,487        30,672   

Intangible assets, net

     13,690        14,547   

Other assets

     4,625        4,676   
                

Total non-current assets

     75,664        77,048   
                

Total Assets

   $ 136,021      $ 136,295   
                
LIABILITIES AND EQUITY     

Current Liabilities

    

Accounts payable (principally trade)

   $ 20,450      $ 18,725   

Short-term debt and current portion of long-term debt (including debt at GM Daewoo of $1,308
at March 31, 2010; Note 9)

     8,773        10,221   

Liabilities held for sale

     60        355   

Accrued expenses (including derivative liabilities at GM Daewoo of $339 at March 31, 2010; Note 9)

     22,755        23,134   
                

Total current liabilities

     52,038        52,435   

Non-Current Liabilities

    

Long-term debt (including debt at GM Daewoo of $740 at March 31, 2010; Note 9)

     5,401        5,562   

Liabilities held for sale

            270   

Postretirement benefits other than pensions

     8,794        8,708   

Pensions

     26,492        27,086   

Other liabilities and deferred income taxes

     13,245        13,279   
                

Total non-current liabilities

     53,932        54,905   
                

Total Liabilities

     105,970        107,340   

Commitments and contingencies (Note 16)

    

Preferred stock, $0.01 par value (1,000,000,000 shares authorized, 360,000,000 shares issued and outstanding (each with a $25.00 liquidation preference) at March 31, 2010 and December 31, 2009)

     6,998        6,998   

Equity

    

Common stock, $0.01 par value (2,500,000,000 shares authorized, 500,000,000 shares issued and outstanding at March 31, 2010 and December 31, 2009)

     5        5   

Capital surplus (principally additional paid-in capital)

     24,050        24,050   

Accumulated deficit

     (3,529     (4,394

Accumulated other comprehensive income

     1,713        1,588   
                

Total stockholders’ equity

     22,239        21,249   

Noncontrolling interests

     814        708   
                

Total equity

     23,053        21,957   
                

Total Liabilities and Equity

   $ 136,021      $ 136,295   
                

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

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

(In millions)

(Unaudited)

 

    Common Stockholders’                    
    Common
Stock
  Capital
Surplus
  Accumulated
Deficit
    Accumulated
Other
Comprehensive
Income (Loss)
    Noncontrolling
Interests
    Comprehensive
Income
(Loss)
    Total
Equity
(Deficit)
 

Balance December 31, 2008, Predecessor

  $ 1,017   $ 16,489   $ (70,727   $ (32,339   $ 484        $ (85,076

Net income (loss)

            (5,975            76      $ (5,899     (5,899

Other comprehensive income (loss)

             

Foreign currency translation adjustments

                   (261     (27     (288  

Cash flow hedging gains, net

                   248        116        364     

Unrealized loss on securities

                   (2            (2  

Defined benefit plans

             

Net prior service benefit

                   1,683               1,683     

Net actuarial loss

                   (1,276            (1,276  

Net transition asset / obligation

                   1               1     
                               

Other comprehensive income (loss)

                   393        89        482        482   
                   

Comprehensive income (loss)

            $ (5,417  
                   

Dividends declared or paid to noncontrolling interests

                          (25       (25

Other

    1         (1            (2       (2
                                             

Balance March 31, 2009, Predecessor

  $ 1,018   $ 16,489   $ (76,703   $ (31,946   $ 622        $ (90,520
                                             

Balance December 31, 2009, Successor

  $ 5   $ 24,050   $ (4,394   $ 1,588      $ 708        $ 21,957   

Net income (loss)

            1,068               128      $ 1,196        1,196   

Other comprehensive income (loss)

             

Foreign currency translation adjustments

                   27        (12     15     

Cash flow hedging gains, net

                   14               14     

Unrealized loss on securities

                   (4            (4  

Defined benefit plans

             

Net prior service cost

                   (2            (2  

Net actuarial gain

                   90               90     
                               

Other comprehensive income (loss)

                   125        (12     113        113   
                   

Comprehensive income (loss)

            $ 1,309     
                   

Effects of adoption of amendments to ASC 810-10 regarding variable interest entities (Note 3)

                          76          76   

Cash dividends paid to GM preferred stockholders

            (203                     (203

Dividends declared or paid to noncontrolling interests

                          (52       (52

Other

                          (34       (34
                                             

Balance March 31, 2010, Successor

  $ 5   $ 24,050   $ (3,529   $ 1,713      $ 814        $ 23,053   
                                             

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

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

     Successor          Predecessor  
     Three Months
Ended
March  31, 2010
         Three Months
Ended
March  31, 2009
 

Net cash provided by (used in) operating activities

   $ 1,746          $ (9,390

Cash flows from investing activities

        

Expenditures for property

     (755         (1,566

Investments in marketable securities, acquisitions

     (88         (76

Investments in marketable securities, liquidations

     76            82   

Investment in GMAC

                (884

Investment in companies, net of cash acquired

     (50           

Operating leases, liquidations

     134            295   

Change in restricted cash

     1,241            (151

Other

     88            (15
                    

Net cash provided by (used in) investing activities

     646            (2,315

Cash flows from financing activities

        

Net decrease in short-term debt

     (100         (870

Proceeds from debt owed to UST

                10,284   

Proceeds from issuance of long-term debt

     117            62   

Payments on debt owed to UST and EDC

     (1,379           

Payments on long-term debt

     (123         (99

Fees paid for debt modification

                (63

Cash dividends paid to GM preferred stockholders

     (203           
                    

Net cash provided by (used in) financing activities

     (1,688         9,314   

Effect of exchange rate changes on cash and cash equivalents

     (53         (214
                    

Net increase (decrease) in cash and cash equivalents

     651            (2,605

Cash and cash equivalents reclassified as assets held for sale

     (20           

Cash and cash equivalents at beginning of the period

     22,679            14,053   
                    

Cash and cash equivalents at end of the period

   $ 23,310          $ 11,448   
                    

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

 

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Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of Operations

General Motors Company was formed by the United States Department of the Treasury (UST) in 2009 originally as a Delaware limited liability company, Vehicle Acquisition Holdings LLC, and subsequently converted to a Delaware corporation, NGMCO, Inc. This company, which on July 10, 2009 acquired substantially all of the assets and assumed certain liabilities of General Motors Corporation (363 Sale) and changed its name to General Motors Company, is sometimes referred to in this Quarterly Report on Form 10-Q for the periods on or subsequent to July 10, 2009 as “we,” “our,” “us,” “ourselves,” the “Company,” “General Motors,” or “GM,” and is the successor entity solely for accounting and financial reporting purposes (Successor). 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.” Prior to July 10, 2009 Old GM operated the business of the Company, and pursuant to the agreement with the Securities and Exchange Commission (SEC) Staff, the accompanying condensed consolidated financial statements include the financial statements and related information of Old GM as it is our predecessor entity solely for accounting and financial reporting purposes (Predecessor). In connection with the 363 Sale, General Motors Corporation changed its name to Motors Liquidation Company, which is sometimes referred to in this Quarterly Report on Form 10-Q, for the periods on or after July 10, 2009, as “MLC.” MLC continues to exist as a distinct legal entity for the sole purpose of liquidating its remaining assets and liabilities.

We develop, produce and market cars, trucks and parts worldwide. We analyze the results of our business through our three segments: General Motors North America (GMNA), General Motors International Operations (GMIO) and General Motors Europe (GME). Nonsegment operations are classified as Corporate. Corporate includes investments in GMAC Inc. (GMAC), certain centrally recorded income and costs, such as interest, income taxes and corporate expenditures, certain nonsegment specific revenues and expenses, including costs related to the Delphi Benefit Guarantee Agreements (as subsequently defined in Note 16) and a portfolio of automotive retail leases.

Note 2. Chapter 11 Proceedings and the 363 Sale

Background

As a result of historical unfavorable economic conditions and a rapid decline in sales in the three months ended December 31, 2008 Old GM determined that, despite the previous actions it had then taken to restructure its U.S. business, it would be unable to pay its obligations in the normal course of business in 2009 or service its debt in a timely fashion, which required the development of a new plan that depended on financial assistance from the U.S. government.

In December 2008 Old GM requested and received financial assistance from the U.S. government and entered into a loan and security agreement with the UST, which was subsequently amended (UST Loan Agreement). In early 2009 Old GM’s business results and liquidity continued to deteriorate, and, as a result, Old GM obtained additional funding from the UST under the UST Loan Agreement. Old GM also received funding from Export Development Canada (EDC), a corporation wholly-owned by the government of Canada, under a loan and security agreement entered into in April 2009 (EDC Loan Facility).

As a condition to obtaining the loans under the UST Loan Agreement, Old GM was required to submit a plan in February 2009 that included specific actions intended to demonstrate that it was a viable entity and to use its best efforts to achieve certain debt reduction, labor modification and VEBA modification targets.

On March 30, 2009 the President’s Designee determined that the plan was not viable and required substantial revisions. In conjunction with the March 30, 2009 announcement, the administration announced that it would offer Old GM adequate working capital financing for a period of 60 days while it worked with Old GM to develop and implement a more accelerated and aggressive restructuring that would provide a sound long-term foundation.

Old GM made further modifications to its plan in an attempt to satisfy the President’s Designee’s requirement that it undertake a substantially more accelerated and aggressive restructuring plan. The additional significant cost reduction and restructuring actions included reducing Old GM’s indebtedness and VEBA obligations, in addition to other cost reduction and restructuring actions.

 

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Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Our Annual Report on Form 10-K for the year ended December 31, 2009 (2009 Form 10-K) provides additional detail on Old GM’s liquidity constraints, the terms and conditions of its various funding arrangements with U.S. and Canadian governmental entities, and its various cost reduction and restructuring activities.

Chapter 11 Proceedings

Old GM was not able to complete the cost reduction and restructuring actions, including the debt reductions and VEBA modifications, which resulted in extreme liquidity constraints. As a result, on June 1, 2009 Old GM and certain of its direct and indirect subsidiaries filed voluntary petitions for relief under Chapter 11 (Chapter 11 Proceedings) of the U.S. Bankruptcy Code (Bankruptcy Code) in the U.S. Bankruptcy Court for the Southern District of New York (Bankruptcy Court).

In connection with the Chapter 11 Proceedings, Old GM entered into a secured superpriority debtor-in-possession credit agreement with the UST and EDC (DIP Facility) and received additional funding commitments from EDC to support Old GM’s Canadian operations.

363 Sale

On July 10, 2009 we completed the acquisition of substantially all of the assets and assumed certain liabilities of Old GM and certain of its direct and indirect subsidiaries (collectively, the Sellers). The 363 Sale was consummated in accordance with the Amended and Restated Master Sale and Purchase Agreement, dated June 26, 2009, as amended, (Purchase Agreement) between us and the Sellers, and pursuant to the Bankruptcy Court’s sale order dated July 5, 2009.

Accounting for the Effects of the Chapter 11 Proceedings and the 363 Sale

Chapter 11 Proceedings

Accounting Standards Codification (ASC) 852, “Reorganizations,” (ASC 852) is applicable to entities operating under Chapter 11 of the Bankruptcy Code. ASC 852 generally does not affect the application of U.S. GAAP that we and Old GM followed to prepare the consolidated financial statements, but it does require specific disclosures for transactions and events that were directly related to the Chapter 11 Proceedings and transactions and events that resulted from ongoing operations.

Old GM prepared its consolidated financial statements in accordance with the guidance in ASC 852 in the period June 1, 2009 through July 9, 2009. Revenues, expenses, realized gains and losses, and provisions for losses directly related to the Chapter 11 Proceedings were recorded in Reorganization gains, net in the period June 1, 2009 through July 9, 2009. Reorganization gains, net do not constitute an element of operating loss due to their nature and due to the requirement of ASC 852 that they be reported separately. Old GM’s balance sheet prior to the 363 Sale distinguished prepetition liabilities subject to compromise from prepetition liabilities not subject to compromise and from postpetition liabilities. Cash amounts provided by or used in the Chapter 11 Proceedings were separately disclosed in the statement of cash flows.

Application of Fresh-Start Reporting

The Bankruptcy Court did not determine a reorganization value in connection with the 363 Sale. Reorganization value is defined as the value of our assets without liabilities. In order to apply fresh-start reporting, ASC 852 requires that total postpetition liabilities and allowed claims be in excess of reorganization value and prepetition stockholders receive less than 50.0% of our common stock. Based on our estimated reorganization value, we determined that on July 10, 2009 both the criteria of ASC 852 were met and, as a result, we applied fresh-start reporting. In applying fresh-start reporting at July 10, 2009, which generally follows the provisions of ASC 805, “Business Combinations,” (ASC 805) we recorded the assets acquired and the liabilities assumed from Old GM at fair value except for deferred income taxes and certain liabilities associated with employee benefits. Our consolidated balance sheet at July 10, 2009, which includes the adjustments to Old GM’s consolidated balance sheet as a result of the 363 Sale and the application of fresh-start reporting, and related disclosures are discussed in Note 2 to our consolidated financial statements in our 2009 Form 10-K. These adjustments are final and no determinations of fair value are considered provisional.

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Note 3. Basis of Presentation and Recent Accounting Standards

On April 7, 2010 we filed a Registration Statement on Form 10 pursuant to an agreement with the SEC Staff, as described in a no-action letter issued to Old GM by the SEC Staff on July 9, 2009 regarding our filing requirements and those of MLC. After the expiration of 60 days from the filing date we will be subject to the filing requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934. In accordance with the agreement with the SEC Staff, the accompanying unaudited condensed consolidated financial statements include the financial statements and related information of Old GM, for the period prior to July 10, 2009, the entity from whom we purchased substantially all of its assets and assumed certain of its liabilities.

The 363 Sale resulted in a new entity, General Motors Company, which is the successor entity solely for accounting and financial reporting purposes. Because we are a new reporting entity, our financial statements are not comparable to the financial statements of Old GM.

The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The accompanying condensed consolidated financial statements include all adjustments, comprised 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 2009 Form 10-K.

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 reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported 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.

Principles of Consolidation

Our unaudited condensed consolidated financial statements include our accounts and those of our subsidiaries that we control due to ownership of a majority voting interest. In addition, we consolidate variable interest entities (VIEs) when we are the VIE’s primary beneficiary. Our share of earnings or losses of nonconsolidated affiliates are included in our consolidated operating results using the equity method of accounting when we are able to exercise significant influence over their operating and financial decisions. When we are not able to exercise significant influence over such affiliates, we use the cost method of accounting. All intercompany balances and transactions have been eliminated in consolidation. Old GM utilized the same principles of consolidation in its condensed consolidated financial statements.

Recently Adopted Accounting Principles

Transfers of Financial Assets

In January 2010 we adopted certain amendments to ASC 860-10, “Transfers and Servicing.” ASC 860-10 eliminates the concept of a qualifying special-purpose entity (SPE), establishes a new definition of participating interest that must be met for transfers of portions of financial assets to be eligible for sale accounting, clarifies and amends the derecognition criteria for a transfer of financial assets to be accounted for as a sale, and changes the amount that can be recorded as a gain or loss on a transfer accounted for as a sale when beneficial interests are received by the transferor. The adoption of these amendments did not have a material effect on the condensed consolidated financial statements.

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Variable Interest Entities

In January 2010 we adopted amendments to ASC 810-10, “Consolidation” (ASC 810-10). These amendments require an enterprise to qualitatively assess the determination of the primary beneficiary of a VIE based on whether the enterprise: (1) has the power to direct the activities of a VIE that most significantly affect the entity’s economic performance; and (2) has the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. These amendments also require, among other considerations, an ongoing reconsideration of the primary beneficiary. In February 2010 the Financial Accounting Standards Board (FASB) issued guidance that permitted an indefinite deferral of these amendments for entities that have all the attributes of an investment company or that apply measurement principles consistent with those followed by investment companies. An entity that qualifies for the deferral will continue to be assessed under the overall guidance on the consolidation of VIEs in effect prior to the adoption of these amendments. This deferral was applicable to certain investment funds associated with our employee benefit plans and investment funds managing investments on behalf of unrelated third parties.

The amendments were adopted prospectively. Upon adoption, we consolidated General Motors Egypt (GM Egypt). Due to our application of fresh-start reporting on July 10, 2009 and because our investment in GM Egypt was accounted for using the equity method of accounting, there was no difference between the net assets added to the Condensed consolidated balance sheet upon consolidation and the amount of previously recorded interest in GM Egypt. As a result, there is no cumulative effect of a change in accounting principle to Accumulated deficit. However, the consolidation of GM Egypt resulted in an increase in Total assets of $254 million, an increase in Total liabilities of $178 million, and an increase in Noncontrolling interests of $76 million. The effect of these amendments was measured based on the amount at which the asset, liability and noncontrolling interest would have been carried or recorded in the condensed consolidated financial statements if these amendments had been effective since inception of our relationship with GM Egypt. Refer to Note 9 for additional information regarding the effect of the adoption of these amendments.

Accounting Standards Not Yet Adopted

In September 2009 the FASB issued Accounting Standards Update (ASU) 2009-13, “Multiple-Deliverable Revenue Arrangements.” ASU 2009-13 addresses the unit of accounting for multiple-element arrangements. In addition, ASU 2009-13 revises the method by which consideration is allocated among the units of accounting. The overall consideration is allocated to each deliverable by establishing a selling price for individual deliverables based on a hierarchy of evidence, including vendor-specific objective evidence, other third party evidence of the selling price, or the reporting entity’s best estimate of the selling price of individual deliverables in the arrangement. ASU 2009-13 will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. We are currently evaluating the effects, if any, that ASU 2009-13 will have on the condensed consolidated financial statements.

Note 4. Acquisition and Disposals of Businesses

Acquisition of Delphi Businesses

In July 2009 we entered into the Delphi Master Disposition Agreement (DMDA) with Delphi Corporation (Delphi) and other parties, which was consummated in October 2009. Under the DMDA, we agreed to acquire Delphi’s global steering business (Nexteer) and four domestic component manufacturing facilities as well as make an investment in a new entity, New Delphi, which acquired substantially all of Delphi’s remaining assets. At October 6, 2009 the fair value of Nexteer and the four domestic facilities was $287 million and the assets acquired and liabilities assumed were consolidated and included in the results of our GMNA segment. Total assets of $1.2 billion were comprised primarily of accounts and notes receivables, inventories and property, plant and equipment. Total liabilities of $0.9 billion were comprised primarily of accounts payable, accrued expenses, short-term debt and other liabilities.

We funded the acquisitions, transaction related costs and settlements of certain pre-existing arrangements through net cash payments of $2.7 billion. We also assumed liabilities and wind-down obligations of $120 million, waived our claims associated with

 

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the Delphi liquidity support agreements of $850 million and waived our rights to claims associated with previously transferred pension costs for hourly employees. Of these amounts, we contributed $1.7 billion to New Delphi and paid the Pension Benefit Guarantee Corporation (PBGC) $70 million in October 2009. Our investment in New Delphi is accounted for using the equity method.

In January 2010 we announced that we intend to pursue a sale of Nexteer. We continue to pursue this sale and have not entered into a definitive sales agreement.

Sale of India Operations

In December 2009 we and SAIC Motor Hong Kong Investment Limited (SAIC-HK) entered into a joint venture, SAIC GM Investment Limited (HKJV) to invest in automotive projects outside of markets in China, initially focusing on markets in India. On February 1, 2010 we sold certain of our operations in India (India Operations), part of our GMIO segment, in exchange for a promissory note due in 2013. The amount due under the promissory note may be partially reduced, or increased, based on the India Operation’s cumulative earnings before interest and taxes for the three year period ending December 31, 2012. In connection with the sale we recorded net consideration of $194 million and an insignificant gain. The sale transaction resulted in a loss of control and the deconsolidation of the India Operations on February 1, 2010. Accordingly, we removed the assets and liabilities of the India Operations from our consolidated financial statements and recorded an equity interest in HKJV to reflect cash of $50 million we contributed to HKJV and a $123 million commitment to provide additional capital that we are required to make in accordance with the terms of the joint venture agreement. We have recorded a corresponding liability to reflect our obligation to provide additional capital.

Saab Bankruptcy and Sale

In February 2009 Saab Automobile AB (Saab), part of the GME segment, filed for protection under the reorganization laws of Sweden in order to reorganize itself into a stand-alone entity. Old GM determined that the reorganization proceeding resulted in a loss of the elements of control necessary for consolidation and therefore Old GM deconsolidated Saab in February 2009. Old GM recorded a loss of $824 million in Other expenses related to the deconsolidation. The loss reflects the remeasurement of Old GM’s net investment in Saab to its estimated fair value of $0, costs associated with commitments and obligations to suppliers and others, and a commitment to provide up to $150 million of DIP financing. We acquired Old GM’s investment in Saab in connection with the 363 Sale. In August 2009 Saab exited its reorganization proceeding, and we regained the elements of control and consolidated Saab at an insignificant fair value.

In February 2010 we completed the sale of Saab to Spyker Cars NV. Of the negotiated cash purchase price of $74 million, we received $50 million at closing and expect to receive the remaining $24 million in July 2010. We also received preference shares in Saab with a face value of $326 million and an estimated fair value that is insignificant and received $114 million as repayment of the DIP financing that we provided to Saab during 2009. In the three months ended March 31, 2010 we recorded a gain of $123 million in Interest income and other non-operating income, net reflecting cash received of $166 million less net assets with a book value of $43 million.

At March 31, 2010 the assets and liabilities of Saab’s UK sales company (Saab GB) are classified as held for sale. Saab GB’s assets of $60 million include cash, inventory and receivables, and its total liabilities of $60 million primarily include accounts payable. The sale is expected to close in the three months ended June 30, 2010 once the conditions precedent in the share purchase agreement are completed.

Sale of 1% Interest in Shanghai General Motors Co., Ltd.

In February 2010 we sold a 1% ownership interest in Shanghai General Motors Co., Ltd. (SGM) to SAIC-HK, reducing our ownership interest to 49%. The sale of the 1% ownership interest to SAIC was predicated on our ability to work with SAIC to obtain a $400 million loan from a commercial bank to us. We also received a call option to repurchase the 1% which is contingently

 

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exercisable based on events which we do not unilaterally control. As part of the loan arrangement SAIC provided a commitment whereby, in the event of default, SAIC will purchase the ownership interest in SGM that we pledged as collateral for the loan. We recorded an insignificant gain on this transaction in the three months ended March 31, 2010.

Note 5. Inventories

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

 

     Successor
     March 31,
2010
   December  31,
2009

Productive material, work in process, and supplies

   $ 4,761    $ 4,201

Finished product, including service parts

     6,431      5,906
             

Total inventories

   $ 11,192    $ 10,107
             

The following table summarizes adjustments recorded to inventories related to company vehicles and vehicles returned from lease awaiting sale at auction as a result of lower of cost or market (LCM) analyses (dollars in millions):

 

     Successor        Predecessor
     Three Months
Ended

March  31, 2010
       Three Months
Ended

March  31, 2009

LCM adjustments on inventories

   $ 14       $ 19

Note 6. Equity in Net Assets of Nonconsolidated Affiliates

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

The following table summarizes information regarding equity in income (loss) of nonconsolidated affiliates (dollars in millions):

 

     Successor        Predecessor  
     Three  Months
Ended
March 31, 2010
       Three  Months
Ended
March 31, 2009
 

SGM and SGMW (a)

   $ 356       $ 105   

GMAC (b)

             (500

Others

     47         (57
                  

Total equity in income (loss) of nonconsolidated affiliates

   $ 403       $ (452
                  

 

(a) Includes SGM (49%) and (50%) in the three months ended March 31, 2010 and 2009 and SAIC-GM-Wuling Automobile Co., Ltd. (SGMW) (34%). In February 2010 we sold a 1% ownership interest in SGM to SAIC, reducing our ownership interest to 49%. Refer to Note 4 for additional information regarding our ownership interest in SGM.

 

(b) GMAC converted its status to a C corporation effective June 30, 2009. At that date, Old GM began to account for its investment in GMAC using the cost method rather than the equity method as Old GM no longer exercised significant influence over GMAC. In connection with GMAC’s conversion into a C corporation, each unit of each class of GMAC Membership Interests was converted into shares of capital stock of GMAC with substantially the same rights and preferences as such Membership Interests.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Investment in GMAC

The following tables summarize financial information of GMAC for the period GMAC was accounted for as a nonconsolidated affiliate (dollars in millions):

 

     Three  Months
Ended
March 31, 2009
 

Consolidated Statement of Loss

  

Total financing revenue and other interest income

   $ 3,610   

Total interest expense

   $ 2,076   

Depreciation expense on operating lease assets

   $ 1,057   

Gain on extinguishment of debt

   $ 644   

Total other revenue

   $ 1,263   

Total noninterest expense

   $ 1,685   

Loss from continuing operations before income tax benefit

   $ (740

Income tax benefit from continuing operations

   $ (126

Net loss

   $ (675

Net loss available to members

   $ (798

 

     March 31, 2009

Condensed Consolidated Balance Sheet

  

Loans held for sale

   $ 10,357

Total finance receivables and loans, net

   $ 92,357

Investment in operating leases, net

   $ 23,527

Other assets

   $ 23,531

Total assets

   $ 179,552

Total debt

   $ 113,424

Accrued expenses and other liabilities

   $ 35,165

Total liabilities

   $ 157,531

Senior preferred interests

   $ 5,000

Preferred interests

   $ 1,287

Total equity

   $ 22,021

GMAC – Preferred and Common Membership Interests

The following tables summarize the activity with respect to the investment in GMAC Common and Preferred Membership Interests for the period GMAC was accounted for as a nonconsolidated affiliate (dollars in millions):

 

     Predecessor
     GMAC Common
Membership  Interests
    GMAC Preferred
Membership  Interests

Balance at January 1, 2009

   $ 491      $ 43

Old GM’s proportionate share of GMAC’s losses

     (500    

Investment in GMAC Common Membership Interests

     884       

Other, primarily accumulated other comprehensive loss

     (121    
              

Balance at March 31, 2009

   $ 754      $ 43
              

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Transactions with Nonconsolidated Affiliates

Nonconsolidated affiliates are involved in various aspects of the development, production and marketing of cars, trucks and parts. The following tables summarize the effects of transactions with nonconsolidated affiliates which are not eliminated in consolidation (dollars in millions):

 

     Successor          Predecessor
     Three Months
Ended
March  31, 2010
         Three Months
Ended
March  31, 2009

Results of Operations

        

Automotive sales

   $ 430          $ 247

Cost of sales

   $ 752          $ 376

Selling, general and administrative expense

   $ (2       $ 13

Interest income and other non-operating income (expense), net

   $ (4       $ 1

 

     Successor
     March 31,
2010
   December 31,
2009

Financial Position

     

Accounts and notes receivable, net

   $ 620    $ 594

Accounts payable (principally trade)

   $ 350    $ 396

 

     Successor          Predecessor  
     Three Months
Ended
March  31, 2010
         Three Months
Ended
March  31, 2009
 

Cash Flows

        

Operating

   $ (197       $ 389   

Investing

   $ (18       $ 10   

Financing

   $          $ (2

Note 7. Goodwill

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

 

     Successor  
     GMNA    GMIO    GME     Total  

Balance at January 1, 2010

   $ 26,409    $ 928    $ 3,335      $ 30,672   

Effect of foreign currency translation and other

     3      23      (211     (185
                              

Balance at March 31, 2010

   $ 26,412    $ 951    $ 3,124      $ 30,487   
                              

 

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Note 8. Intangible Assets, net

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

 

     Successor
     March 31, 2010    December 31, 2009
     Gross
Carrying
Amount
   Accumulated
Amortization
   Net
Carrying
Amount
   Gross
Carrying
Amount
   Accumulated
Amortization
   Net
Carrying
Amount

Amortizing Intangibles

                 

Technology and intellectual property

   $ 7,749    $ 2,103    $ 5,646    $ 7,741    $ 1,460    $ 6,281

Brands

     5,432      108      5,324      5,508      72      5,436

Dealer network and customer relationships

     2,159      99      2,060      2,205      67      2,138

Favorable contracts

     527      58      469      542      39      503

Other

     20      4      16      17      3      14
                                         

Total amortizing intangible assets

     15,887      2,372      13,515      16,013      1,641      14,372

Non amortizing in-process research and development

     175           175      175           175
                                         

Total intangible assets

   $ 16,062    $ 2,372    $ 13,690    $ 16,188    $ 1,641    $ 14,547
                                         

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

 

     Successor        Predecessor
     Three  Months
Ended
March 31, 2010
       Three  Months
Ended
March 31, 2009

Amortization expense related to intangible assets

   $ 736       $ 22

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

 

     Estimated Amortization
Expense

2011

   $ 1,785

2012

   $ 1,560

2013

   $ 1,227

2014

   $ 610

2015

   $ 313

Note 9. Variable Interest Entities

Consolidated VIEs

VIEs that we do not control through a majority voting interest that are consolidated because we are or Old GM was the primary beneficiary primarily include: (1) previously divested suppliers for which we provide or Old GM provided guarantees or financial support; (2) a program announced by the UST in March 2009 to provide financial assistance to automotive suppliers (Receivables Program); (3) vehicle sales and marketing joint ventures that manufacture, market and sell vehicles in certain markets; (4) leasing SPEs which held real estate assets and related liabilities for which Old GM provided residual guarantees; and (5) an entity which manages certain private equity investments held by our and Old GM’s defined benefit plans, along with six associated general partner entities. Certain creditors and beneficial interest holders of these VIEs have or had limited, insignificant recourse to our general credit or Old GM’s general credit, as a result of which we or Old GM could be held liable for certain of the VIEs’ obligations. GM Daewoo

 

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Auto & Technology Co. (GM Daewoo), a non-wholly owned consolidated subsidiary that we control through a majority voting interest, is also a VIE because in the future it may require additional subordinated financial support. The creditors of GM Daewoo’s short-term debt of $1.3 billion, long-term debt of $740 million and current derivative liabilities of $339 million at March 31, 2010 do not have recourse to our general credit.

The following table summarizes the carrying amount of consolidated VIE assets and liabilities for entities that we do not also control through a majority voting interest (dollars in millions):

 

     Successor
     March 31, 2010 (a)(b)    December 31, 2009 (a)

Assets:

     

Cash and cash equivalents

   $ 103    $ 15

Restricted cash

     73      191

Accounts and notes receivable, net

     104      14

Inventories

     72      15

Other current assets

     23     

Property, net

     50      5

Other assets

     44      33
             

Total assets

   $ 469    $ 273
             

Liabilities:

     

Accounts payable (principally trade)

   $ 161    $ 17

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

     57      205

Accrued expenses

     64      10

Other liabilities and deferred income taxes

     58      23
             

Total liabilities

   $ 340    $ 255
             

 

(a) Amounts exclude GM Daewoo.

 

(b) Amounts at March 31, 2010 reflect the effect of our adoption of amendments to ASC 810-10 in January 2010, which resulted in the consolidation of GM Egypt. At March 31, 2010 GM Egypt had Total assets of $327 million and Total liabilities of $246 million.

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

 

     Successor          Predecessor
     Three  Months
Ended
March 31, 2010 (a)(b)
         Three  Months
Ended
March 31, 2009

Net sales and revenue

   $ 173          $ 9

Cost of sales

     134           

Selling, general and administrative expense

     11            6

Other expenses, net

     1           

Interest expense

     3           

Interest (income) and other non-operating (income), net

     (1        

Income tax expense

     3           
                  

Net income (loss)

   $ 22          $ 3
                  

 

(a) Amounts exclude GM Daewoo.

 

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(b) Amounts recorded in the three months ended March 31, 2010 reflect our adoption of amendments to ASC 810-10 in January 2010, which resulted in the consolidation of GM Egypt. In the three months ended March 31, 2010 GM Egypt recorded Net sales and revenue of $162 million.

General Motors Egypt

GM Egypt is a 31% owned automotive manufacturing organization that was previously accounted for using the equity method. GM Egypt was founded in March 1983 to assemble and manufacture vehicles in Egypt. Certain voting and other rights permit us to direct those activities of GM Egypt that most significantly affect its economic performance. In connection with our adoption of amendments to ASC 810-10, we consolidated GM Egypt in January 2010.

Receivables Program

We determined that the Receivables Program was a VIE and that we are the primary beneficiary. At December 31, 2009 our equity contributions were $55 million and the UST had outstanding loans of $150 million to the Receivables Program. In the three months ended March 31, 2010 we repaid these loans in full. The Receivables Program was terminated in accordance with its terms in April 2010. Upon termination, we shared residual capital of $25 million in the program equally with the UST and paid a termination fee of $44 million.

Nonconsolidated VIEs

VIEs that are not consolidated because we are not or Old GM was not the primary beneficiary primarily include: (1) troubled suppliers for which we provide or Old GM provided guarantees or financial support; (2) vehicle sales and marketing joint ventures that manufacture, market and sell vehicles and related services; (3) leasing entities for which residual value guarantees are made; (4) certain research entities for which annual ongoing funding requirements exist; and (5) GMAC.

Guarantees and financial support are provided to certain current or previously divested suppliers in order to ensure that supply needs for production are not disrupted due to a supplier’s liquidity concerns or possible shutdowns. Types of financial support that we provide and Old GM provided include, but are not limited to: (1) funding in the form of a loan; (2) guarantees of the supplier’s debt or credit facilities; (3) one-time payments to fund prior losses of the supplier; (4) indemnification agreements to fund the suppliers’ future losses or obligations; (5) agreements to provide additional funding or liquidity to the supplier in the form of price increases or change in payment terms; and (6) assisting the supplier in finding additional investors. The maximum exposure to loss related to these VIEs is not expected to be in excess of the amount of accounts and notes receivable recorded with the suppliers and any related guarantees.

We have and Old GM had investments in joint ventures that manufacture, market and sell vehicles in certain markets. These joint ventures are typically self-funded and financed with no contractual terms that require future financial support to be provided by us. However, future funding is required for HKJV, as subsequently discussed. The maximum exposure to loss is not expected to be in excess of the carrying amount of the investments recorded in Equity in net assets of nonconsolidated affiliates.

 

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The following table summarizes the amounts recorded for nonconsolidated VIEs and the related off-balance sheet guarantees and maximum contractual exposure to loss, excluding GMAC (dollars in millions):

 

     Successor
     March 31, 2010     December 31, 2009
     Carrying
Amount
    Maximum Exposure
to Loss (a)
    Carrying
Amount
   Maximum Exposure
to Loss (b)

Assets:

         

Accounts and notes receivable, net

   $ 68      $ 68      $ 8    $ 8

Equity in net assets of nonconsolidated affiliates

     275        228        96      50

Other assets

     71        71        26      26
                             

Total assets

   $ 414      $ 367      $ 130    $ 84
                             

Liabilities:

         

Accounts payable

   $ 46      $ (46   $    $

Accrued expenses

     (11     11            

Other liabilities

     271                   
                             

Total liabilities

   $ 306      $ (35   $    $
                             

Off-Balance Sheet:

         

Residual value guarantees

     $         $ 32

Loan commitments (c)

       115           115

Other guarantees

       10           4

Other liquidity arrangements (d)

       234          
                   

Total guarantees and liquidity arrangements

     $ 359         $ 151
                   

 

(a) Amounts at March 31, 2010 included $136 million related to troubled suppliers.

 

(b) Amounts at December 31, 2009 included $139 million related to troubled suppliers.

 

(c) Amounts at March 31, 2010 and December 31, 2009 included second lien term facility provided to American Axle and Manufacturing Holdings, Inc. (American Axle) of $100 million and other loan commitments of $15 million.

 

(d) Amounts at March 31, 2010 included our future capital funding commitment and other amounts related to HKJV of $223 million.

Stated contractual voting or similar rights for certain of our joint venture arrangements provide various parties with shared power over the activities that most significantly affect the economic performance of certain nonconsolidated VIEs. Such nonconsolidated VIEs are operating joint ventures located in developing international markets.

American Axle

In September 2009 we paid $110 million to American Axle, a former subsidiary and current supplier, to settle and modify existing commercial arrangements and acquire warrants to purchase 4 million shares of American Axle’s common stock. This payment was made in response to the liquidity needs of American Axle and our desire to modify the terms of our ongoing commercial arrangement. Under the new agreement, we also provided American Axle with a second lien term loan facility of up to $100 million. Additional warrants will be granted if amounts are drawn on the second lien term loan facility.

As a result of these transactions, we concluded that American Axle was a VIE for which we were not the primary beneficiary. This conclusion did not change upon our adoption of amendments to ASC 810-10 in January 2010 because we lack the power through voting or similar rights to direct those activities of American Axle that most significantly affect its economic performance. Our variable interests in American Axle include the warrants we received and the second lien term loan facility, which exposes us to

 

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possible future losses depending on the financial performance of American Axle. At March 31, 2010 no amounts were outstanding under the second lien term loan. At March 31, 2010 our maximum contractual exposure to loss related to American Axle was $133 million, which represented the fair value of the warrants of $33 million recorded in Non-current assets and the potential exposure of $100 million related to the second lien term loan facility.

GMAC

We own 16.6% of GMAC’s common stock and preferred stock with a liquidation preference of $1.0 billion. We have previously determined that GMAC is a VIE as it does not have sufficient equity at risk, however we are not the primary beneficiary. This conclusion did not change upon our adoption of amendments to ASC 810-10 in January 2010 because we lack the power through voting or similar rights to direct those activities of GMAC that most significantly affect its economic performance. Refer to Notes 6 and 22 for additional information on our investment in GMAC, our significant agreements with GMAC and our maximum exposure under those agreements.

Saab

In February 2010 we completed the sale of Saab to Spyker Cars NV. Our primary variable interest in Saab is the preference shares that we received in connection with the sale, which have a face value of $326 million and were recorded at an estimated fair value that is insignificant. We concluded that Saab is a VIE as it does not have sufficient equity at risk. We also determined that we are not the primary beneficiary because we lack the power to direct those activities that most significantly affect its economic performance. We continue to be obligated to fund certain Saab related liabilities, primarily warranty obligations related to vehicles sold prior to the disposition of Saab. At March 31, 2010 our maximum exposure to loss related to Saab was $70 million. Refer to Note 4 for additional information on the sale of Saab.

HKJV

In December 2009 we established the HKJV operating joint venture to invest in automotive projects outside of China, initially focusing on markets in India. HKJV purchased our India Operations in February 2010. We determined that HKJV is a VIE because it will require additional subordinated financial support, and we determined that we are not the primary beneficiary because we share the power with SAIC-HK to direct those activities that most significantly affect HKJV’s economic performance. We recorded a liability of $123 million for our future capital funding commitment to HKJV and we have a contingent future funding requirement of up to $223 million should certain conditions be met. Refer to Note 4 for additional information regarding HKJV.

Note 10. Depreciation and Amortization

The following table summarizes depreciation and amortization, including asset impairment charges, included in Cost of sales and Selling, general and administrative expense:

 

     Successor        Predecessor
     Three  Months
Ended
March 31, 2010
       Three  Months
Ended
March 31, 2009

Depreciation and impairment of plants and equipment

   $ 555       $ 1,249

Amortization and impairment of special tools

     394         1,036

Depreciation and impairment of equipment on operating leases

     118         233

Amortization of intangible assets

     736         22
                

Total depreciation, amortization and asset impairment charges

   $ 1,803       $ 2,540
                

Old GM initiated restructuring plans prior to the 363 Sale to reduce the total number of powertrain, stamping and assembly plants and to eliminate certain brands and nameplates. As a result, Old GM recorded incremental depreciation and amortization on certain of

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

these assets as they were expected to be utilized over a shorter period of time than their previously estimated useful lives. We record incremental depreciation and amortization for changes in useful lives subsequent to the initial determination. Old GM recorded incremental depreciation and amortization of approximately $0.4 billion in the three months ended March 31, 2009.

Note 11. Restricted Cash

Cash subject to contractual restrictions and not readily available is classified as restricted cash. Funds held in the UST Credit Agreement (as subsequently defined in Note 12) and Canadian Health Care Trust (HCT) escrow accounts are invested in government securities and money market funds in accordance with the terms of the escrow agreements. The following table summarizes the components of restricted cash (dollars in millions):

 

     Successor
     March 31, 2010    December 31, 2009

Current

     

UST Credit Agreement (a)

   $ 11,286    $ 12,475

Canadian Health Care Trust (b)

     986      955

Receivables Program (c)

     70      187

Securitization trusts

     71      191

Pre-funding disbursements

     181      94

Other (d)

     147      15
             

Total current restricted cash

     12,741      13,917

Non-current (e)

     

Collateral for insurance related activities

     650      658

Other non-current (d)

     671      831
             

Total restricted cash

   $ 14,062    $ 15,406
             

 

(a) In March 2010 we made payments of $1.0 billion and $194 million on the UST Loans (as subsequently defined in Note 12) and Canadian Loan (as subsequently defined in Note 12). Upon making such payments, equivalent amounts were released to us from escrow. At March 31, 2010 per the terms of the UST Credit Agreement, funds were held in escrow and were to be released to us from escrow at our request if certain conditions were met. In April 2010 the UST Loans and Canadian Loan were paid in full and funds remaining in escrow were no longer subject to restrictions. Refer to Notes 12 and 25 for additional information on the UST Credit Agreement.

 

(b) Under the terms of an escrow agreement between General Motors of Canada Limited (GMCL), the EDC and an escrow agent, GMCL established a CAD $1.0 billion (equivalent to $893 million when entered into) escrow to fund certain of its healthcare obligations.

 

(c) The Receivables Program provided financial assistance to automotive suppliers by guaranteeing or purchasing certain receivables payable by us. In April 2010 the Receivable Program was terminated in accordance with its terms. Refer to Note 9 for additional information on the Receivables Program.

 

(d) Includes amounts related to various letters of credit, deposits, escrows and other cash collateral requirements.

 

(e) Non-current restricted cash is recorded in Other assets.

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Note 12. Short-Term and Long-Term Debt

The following table summarizes the components of short-term and long-term debt (dollars in millions):

 

     Successor
     March 31, 2010    December 31, 2009

Short-Term

     

UST Loans (a)

   $ 4,677    $ 5,712

Canadian Loan (a)

     1,078      1,233

Short-term debt — third parties

     1,401      1,475

Short-term debt — related parties (b)

     896      1,077

Current portion of long-term debt

     721      724
             

Total short-term debt and current portion of long-term debt

     8,773      10,221

Long-Term

     

VEBA Notes

     2,858      2,825

Other long-term debt

     2,543      2,737
             

Total debt

   $ 14,174    $ 15,783
             

Available under line of credit agreements (c)

   $ 671    $ 618
             

 

(a) Refer to Note 25 for details regarding the payment of the UST Loans and Canadian Loan.

 

(b) Primarily dealer financing from GMAC for dealerships we own.

 

(c) Commitment fees are paid on credit facilities at rates negotiated in each agreement. Amounts paid and expensed for these commitment fees are insignificant.

UST Loans and VEBA Notes

As previously disclosed in our 2009 Form 10-K, Old GM received total proceeds of $19.4 billion from the UST under the UST Loan Agreement entered into on December 31, 2008. In connection with the Chapter 11 Proceedings, Old GM obtained additional funding of $33.3 billion from the UST and EDC under its DIP Facility. From these proceeds, $11.3 billion remained deposited in escrow at March 31, 2010.

On July 10, 2009 we entered into the UST Credit Agreement and assumed debt of $7.1 billion (UST Loans) maturing on July 10, 2015 which Old GM incurred under its DIP Facility. Immediately after entering into the UST Credit Agreement, we made a partial repayment due to the termination of the U.S. government sponsored warranty program, reducing the UST Loans principal balance to $6.7 billion. In December 2009 and March 2010 we made quarterly payments of $1.0 billion on the UST Loans.

In connection with the 363 Sale, we entered into the VEBA Note Agreement and issued VEBA Notes of $2.5 billion to the UAW Retiree Medical Benefits Trust (New VEBA). The VEBA Notes have an implied interest rate of 9.0% per annum. The VEBA Notes and accrued interest are scheduled to be repaid in three equal installments of $1.4 billion on July 15 of 2013, 2015 and 2017.

The obligations under the UST Credit Agreement and the VEBA Note Agreement are secured by substantially all of our assets, subject to certain exceptions, including our equity interests in certain of our foreign subsidiaries, limited in most cases to 65% of the equity interests of the pledged foreign subsidiaries due to tax considerations.

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

The following table summarizes interest expense and interest paid on the UST Loans in the three months ended March 31, 2010 and the loans under the UST Loan Agreement (UST Loan Facility) in the three months ended March 31, 2009 (dollars in millions):

 

     Successor        Predecessor
     Three  Months
Ended
March 31, 2010
       Three  Months
Ended
March 31, 2009

Interest expense

   $ 99       $ 478

Interest paid

   $ 115       $ 144

The following table summarizes interest expense on the VEBA Notes (dollars in millions):

 

     Successor
     Three  Months
Ended
March 31, 2010

Interest expense

   $ 48

Canadian Loan Agreement and EDC Loan Facility

As previously disclosed in our 2009 Form 10-K, on July 10, 2009 we entered into the Canadian Loan Agreement and assumed a CAD $1.5 billion (equivalent to $1.3 billion when entered into) term loan (Canadian Loan) maturing on July 10, 2015. In March 2010 and December 2009 we made quarterly payments of $194 million and $192 million on the Canadian Loan.

The following table summarizes interest expense and interest paid on the Canadian Loan in the three months ended March 31, 2010 and the EDC Loan Facility in the three months ended March 31, 2009 (dollars in millions):

 

     Successor        Predecessor
     Three  Months
Ended
March 31, 2010
       Three  Months
Ended
March 31, 2009

Interest expense

   $ 22       $

Interest paid

   $ 22       $

Technical Defaults and Covenant Violations

Several of our loan facilities include clauses that may be breached by a change in control, a bankruptcy or failure to maintain certain financial metric limits. The Chapter 11 Proceedings and the change in control as a result of the 363 Sale triggered technical defaults in certain loans for which we have assumed the obligations. The total amount of the two loan facilities in technical default for these reasons at March 31, 2010 was $207 million. We continue to negotiate with the lenders to obtain waivers or reach settlements to cure these defaults. We have classified these loans as short-term debt at March 31, 2010.

Two of our loan facilities had financial covenant violations at December 31, 2009 related to exceeding financial ratios limiting the amount of debt held by the subsidiaries. One of these violations was cured within the 30 day cure period through the combination of an equity injection and the capitalization of intercompany loans. A loan facility of $68 million related to our powertrain subsidiary in Italy remained in default at March 31, 2010. We obtained a waiver on this loan facility in May 2010.

Covenants in our UST Credit Agreement, VEBA Note Agreement, Canadian Loan Agreement and other agreements required us to provide our annual consolidated financial statements by March 31, 2010. We received waivers deferring this requirement for the agreements with the UST, New VEBA and EDC. The April 7, 2010 filing of our 2009 Form 10-K and our Quarterly Report on Form 10-Q for the period ended September 30, 2009 satisfied these deferred requirements.

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Other Debt

In March 2009 Old GM entered into an agreement to amend its $1.5 billion U.S. term loan. Because the terms of the amended U.S. term loan were substantially different than the original terms, primarily due to the revised borrowing rate, Old GM accounted for the amendment as a debt extinguishment. As a result, Old GM recorded the amended U.S. term loan at fair value and recorded a gain on the extinguishment of the original loan facility of $906 million in the three months ended March 31, 2009. The term loan was repaid in full in June 2009 in connection with the Chapter 11 Proceedings.

Note 13. Product Warranty Liability

The following table summarizes activity for policy, product warranty, recall campaigns and certified used vehicle warranty liabilities (dollars in millions):

 

     Successor          Predecessor  
     Three  Months
Ended
March 31, 2010
    July 10, 2009
Through
December 31, 2009
         January 1, 2009
Through
July 9, 2009
    Three  Months
Ended
March 31, 2009
 

Beginning balance

   $ 7,030      $ 7,193          $ 8,491      $ 8,491   

Warranties issued and assumed in period

     614        1,598            1,069        535   

Payments

     (821     (2,232         (1,851     (917

Adjustments to pre-existing warranties

     (19     291            (153     (25

Effect of foreign currency translation

     (34     180            63        (107

Liability adjustment, net due to the deconsolidation of Saab (a)

                       (77     (77
                                    

Ending balance

     6,770        7,030            7,542        7,900   

Effect of application of fresh-start reporting

                       (349       
                                    

Ending balance including effect of application of fresh-start reporting

   $ 6,770      $ 7,030          $ 7,193      $ 7,900   
                                    

 

(a) In August 2009 Saab met the criteria to be classified as held for sale and, as a result, Saab’s warranty liability was classified as held for sale at December 31, 2009.

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Note 14. Pensions and Other Postretirement Benefits

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

 

    U.S. Plans
Pension Benefits
    Non-U.S. Plans
Pension Benefits
    U.S. Other
Benefits
    Non-U.S.
Other Benefits
 
    Successor          Predecessor     Successor          Predecessor     Successor        Predecessor     Successor          Predecessor  
    Three
Months
Ended
March 31,
2010
         Three
Months
Ended
March 31,
2009
    Three
Months
Ended
March 31,
2010
         Three
Months
Ended
March 31,
2009
    Three
Months
Ended
March 31,
2010
       Three
Months
Ended
March 31,
2009
    Three
Months
Ended
March 31,
2010
         Three
Months
Ended
March 31,
2009
 
                         

Components of (income) expense

                               

Service cost

  $ 129          $ 118      $ 96          $ 76      $ 5       $ 33      $ 8          $ 6   

Interest cost

    1,338            1,467        301            277        72         775        49            48   

Expected return on plan assets

    (1,638         (1,824     (245         (160             (212                  

Amortization of prior service cost (credit)

               206                   7                (494     (2         (26

Recognized net actuarial loss

               338        2            83                13                   9   

Curtailments, settlements and other

                      (14         26                (30                  
                                                                             

Net periodic pension and OPEB (income) expense

  $ (171       $ 305      $ 140          $ 309      $ 77       $ 85      $ 55          $ 37   
                                                                             

Significant Plan Amendments, Benefit Modifications and Related Events

Three Months Ended March 31, 2010

Patient Protection and Affordable Care Act

The Patient Protection and Affordable Care Act was signed into law in March 2010 and contains provisions that require all future reimbursement receipts under the Medicare Part D retiree drug subsidy program to be included in taxable income. This taxable income inclusion will not significantly affect us because effective January 1, 2010 we no longer provide actuarially equivalent prescription drug coverage to post-age 65 Medicare-eligible participants and we have a full valuation allowance against our net deferred tax assets in the U.S. We have assessed the other provisions of this new law, based on information known at this time, and we believe that the new law will not have a significant effect on our consolidated financial statements.

Three Months Ended March 31, 2009

2009 Special Attrition Program

In February 2009 Old GM announced the 2009 Special Attrition Program for eligible International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW)-represented employees, offering cash and other incentives for individuals who elected to retire or voluntarily terminate employment. In the three months ended March 31, 2009 7,000 employees accepted this program resulting in Old GM recording postemployment benefit charges of $296 million in Cost of sales. Old GM was not required to remeasure its U.S. hourly defined benefit pension plan in the three months ended March 31, 2009 due to the high proportion of retirement eligible employees accepting the 2009 Special Attrition Program. Refer to Note 19 for additional information on the postemployment benefit charges.

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

U.S. Salaried Benefits Changes

In February 2009 Old GM reduced salaried retiree life insurance benefits for U.S. salaried employees. As a result of this plan amendment and the expectation that the corresponding reduction to operating expense would be significant, Old GM remeasured its U.S. salaried retiree life insurance plan effective February 2009, which reduced the plan’s accumulated postretirement benefit obligation (APBO) by $420 million. Old GM utilized a discount rate of 7.15% for this remeasurement as compared to the discount rate of 7.25% that was utilized at December 31, 2008.

Note 15. Derivative Financial Instruments and Risk Management

Risk Management

Foreign currency exchange risk, interest rate risk and commodity price risk are managed by using derivative instruments, typically including forward contracts, swaps and options, in accordance with our current and Old GM’s previous risk management policies. The objective of these risk management policies is to offset the gains and losses on the underlying exposures resulting from these risks with the related gains and losses on the derivatives used to hedge them. These risk management policies limit the use of derivative instruments to manage these risks and do not allow the use of derivative instruments for speculative purposes.

A risk management control system is used to assist in monitoring the hedging program, derivative positions and hedging strategies. Hedging documentation includes hedging objectives, practices and procedures, and the related accounting treatment. Hedges that receive designated hedge accounting treatment are evaluated for effectiveness at the time they are designated as well as throughout the hedging period.

Counterparty Credit Risk

Derivative financial instruments contain an element of credit risk attributable to the counterparties’ ability to meet the terms of the agreements. The maximum amount of loss due to credit risk that we would incur if the counterparties to the derivative instruments failed completely to perform according to the terms of the contract was $172 million at March 31, 2010. Agreements are entered into with counterparties that allow the set-off of certain exposures in order to manage the risk. The total net derivative asset position for all counterparties with which we were in a net asset position at March 31, 2010 was $149 million.

Counterparty credit risk is managed and monitored by our Risk Management Committee, which establishes exposure limits by counterparty. At March 31, 2010 a majority of all counterparty exposures were with counterparties that were rated A or higher.

Credit Risk Related Contingent Features

Agreements with counterparties to derivative instruments do not contain covenants requiring the maintenance of certain credit rating levels or credit risk ratios that would require the posting of collateral in the event that certain standards are violated or when a derivative instrument is in a liability position. No collateral was posted related to derivative instruments at March 31, 2010. We are currently in negotiations with counterparties to amend or enter into new derivative agreements that will likely require us to provide cash collateral for any net liability positions that we would have with these counterparties.

Derivatives and Hedge Accounting

Our derivative instruments consist of nondesignated derivative contracts or economic hedges. At March 31, 2010 no outstanding derivative contracts were designated in hedging relationships. In the three months ended March 31, 2010 and 2009, we and Old GM accounted for changes in the fair value of all outstanding contracts by recording the gains and losses in earnings.

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Cash Flow Hedges

We are and Old GM was exposed to certain foreign currency exchange risks associated with buying and selling automotive parts and vehicles and foreign currency exposure to long-term debt. We partially manage these risks through the use of nondesignated derivative instruments that we acquired from Old GM. At March 31, 2010 we did not have any financial instruments designated as cash flow hedges for accounting purposes.

Subsequent to the 363 Sale, our ability to manage risks using derivative financial instruments was severely limited as most derivative counterparties were unwilling to enter into forward or swap transactions with us. At the present time, our ability to enter into derivative contracts remains limited as we are currently in negotiations with counterparties for new agreements and credit terms that will enable us to enter into forward contracts or swaps. In December 2009 we began purchasing commodity and foreign currency exchange options to manage these exposures. These nondesignated derivatives have original expiration terms of up to 13 months.

Old GM previously designated certain financial instruments as cash flow hedges to manage its exposure to certain foreign currency exchange risks. For foreign currency transactions, Old GM typically hedged forecasted exposures for up to three years in the future. For foreign currency exposure on long-term debt, Old GM typically hedged exposures for the life of the debt.

For derivatives that were previously designated as qualifying cash flow hedges, the effective portion of the unrealized and realized gains and losses resulting from changes in fair value were recorded as a component of Accumulated other comprehensive income (loss). Subsequently, those cumulative gains and losses were reclassified to earnings contemporaneously with and to the same line item as the earnings effects of the hedged item. However, if it became probable that the forecasted transaction would not occur, the cumulative change in the fair value of the derivative recorded in Accumulated other comprehensive income (loss) was reclassified in earnings immediately.

The following table summarizes total activity in Accumulated other comprehensive income (loss) associated with cash flow hedges, primarily related to the release of previously deferred cash flow hedge gains and losses from Accumulated other comprehensive income (loss) into earnings (dollars in millions):

 

     Predecessor  
     Three  Months
Ended
March 31, 2009
 

Foreign Currency Exchange Contracts

  

Sales

   $ (238

Cost of sales

     20   
        

Total gains (losses) reclassified from accumulated other comprehensive income (loss)

   $ (218
        

The following table summarizes gains and (losses) that were reclassified from Accumulated other comprehensive income (loss) for cash flow hedges associated with these previously forecasted transactions that subsequently became probable not to occur (dollars in millions):

 

     Predecessor  
     Three Months
Ended
March 31, 2009
 
  

Sales

   $ (151

In connection with our investment in New Delphi, which we account for using the equity method, we record our share of New Delphi’s Other comprehensive income (loss) in Accumulated other comprehensive income (loss). In the three months ended March 31, 2010 we recorded a cash flow hedge gain of $14 million related to New Delphi’s derivatives.

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Fair Value Hedges

We are and Old GM was subject to market risk from exposures to changes in interest rates that affect the fair value of long-term, fixed rate debt. At March 31, 2010 we did not have any financial instruments designated as fair value hedges to manage this risk.

Old GM previously used interest rate swaps designated as fair value hedges to manage certain of its exposures associated with these borrowings. Old GM hedged its exposures to the maturity date of the underlying interest rate exposure.

Gains and losses on derivatives designated and qualifying as fair value hedges, as well as the offsetting gains and losses on the debt attributable to the hedged interest rate risk, were recorded in Interest expense to the extent the hedge was effective. The gains and losses related to the hedged interest rate risk were recorded as an adjustment to the carrying amount of the debt. Previously recorded adjustments to the carrying amount of the debt were amortized to Interest expense over the remaining debt term. In the three months ended March 31, 2009 Old GM amortized previously deferred fair value hedge gains and losses of $2 million to Interest expense.

Net Investment Hedges

We are and Old GM was subject to foreign currency exposure related to net investments in certain foreign operations. At March 31, 2010 we did not have any hedges of a net investment in a foreign operation.

Old GM previously used foreign currency denominated debt to hedge this foreign currency exposure. For nonderivative instruments that were designated as, and qualified as, a hedge of a net investment in a foreign operation, the effective portion of the unrealized and realized gains and losses were recorded as a Foreign currency translation adjustment in Accumulated other comprehensive income (loss). At March 31, 2009 Old GM had outstanding Euro denominated debt of $2.0 billion that qualified as a foreign currency net investment hedge.

The following table summarizes the gains and (losses) related to net investment hedges recorded as a Foreign currency translation adjustment in Accumulated other comprehensive income (loss) (dollars in millions):

 

     Predecessor
     Three Months
Ended
March 31, 2009
  

Effective portion of net investment hedge gains (losses)

   $ 125

Derivatives Not Designated for Hedge Accounting

Derivatives not designated in a hedging relationship, such as forward contracts, swaps, and options, are used to economically hedge certain risk exposures. Unrealized and realized gains and losses related to all of our nondesignated derivative hedges, regardless of type of exposure, are recorded in Interest income and other non-operating income, net.

Old GM previously entered into a variety of foreign currency exchange, interest rate and commodity forward contracts and options to maintain a desired level of exposure arising from market risks resulting from changes in foreign currency exchange rates, interest rates and certain commodity prices. Unrealized and realized gains and losses related to Old GM’s nondesignated derivative hedges were recorded in earnings based on the type of exposure, as subsequently discussed.

When an exposure economically hedged with a derivative contract is no longer forecasted to occur, in some cases a new derivative instrument is entered into to offset the exposure related to the existing derivative instrument. In some cases, counterparties are unwilling to enter into offsetting derivative instruments and, as such, there is exposure to future changes in the fair value of these derivatives with no underlying exposure to offset this risk.

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

The following table summarizes gains and (losses) recorded for nondesignated derivatives originally entered into to hedge exposures that subsequently became probable not to occur (dollars in millions):

     Successor        Predecessor
     Three Months
Ended
March 31, 2010
       Three Months
Ended
March 31, 2009

Interest income and other non-operating income, net

   $       $ 86

Commodity Derivatives

Certain raw materials, parts with significant commodity content, and energy comprising various commodities are purchased for use in production. Exposure to commodity price risk may be managed by entering into commodity derivative instruments such as forward and option contracts. We currently manage this exposure using commodity options. At March 31, 2010, we had not entered into any commodity forwards.

Old GM hedged commodity price risk by entering into commodity forward and option contracts. Old GM recorded all commodity derivative gains and losses in Cost of sales.

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

 

          Successor        Predecessor
          Contract Notional        Contract Notional

Commodity

   Units    March 31, 2010    December 31, 2009        March 31, 2009

Aluminum and aluminum alloy

   Metric tons    204    39       398

Copper

   Metric tons    21    4       40

Lead

   Metric tons    38    7       50

Heating oil

   Gallons    80,715    10,797       35,973

Natural gas

   Megatherms             7,396

Natural gas

   MMBTU    8,425    1,355      

Natural gas

   Gigajoules    1,190    150      

Palladium

   Troy ounces             1,225

Platinum

   Troy ounces             192

Rhodium

   Troy ounces             27

Interest Rate Swap Derivatives

At March 31, 2010, we did not have any nondesignated interest rate swap derivatives.

Old GM previously used interest rate swap derivatives to economically hedge exposure to changes in the fair value of fixed rate debt. Gains and losses related to the changes in the fair value of these nondesignated derivatives were recorded in Interest expense.

Foreign Currency Exchange Derivatives

Foreign currency exchange derivatives are used to economically hedge exposure to foreign currency exchange risks associated with: (1) forecasted foreign currency denominated purchases and sales of vehicles and parts; and (2) variability in cash flows related to interest and principal payments on foreign currency denominated debt. At March 31, 2010 we partially managed foreign currency exchange risk through the use of foreign currency options and forward contracts.

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

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

 

     Successor        Predecessor
     March 31, 2010    December 31, 2009        March 31, 2009

Nondesignated foreign currency exchange derivatives

   $ 5,027    $ 6,333       $ 16,113

Old GM recorded gains and losses related to these foreign currency exchange derivatives in: (1) Sales for derivatives that economically hedged sales of parts and vehicles; (2) Cost of sales for derivatives that economically hedged purchases of parts and vehicles; and (3) Cost of sales for derivatives that economically hedged foreign currency risk related to foreign currency denominated debt.

Other Derivatives

In September 2009 in connection with an agreement with American Axle, we received warrants to purchase 4 million shares of American Axle common stock exercisable at $2.76 per share. The fair value of the warrants on the date of receipt was recorded as a Non-current asset. Gains and losses related to these warrants were recorded in Interest income and other non-operating income, net. At March 31, 2010 the fair value of these warrants was $33 million.

On July 10, 2009 in connection with the 363 Sale, we issued warrants to MLC and the New VEBA to acquire shares of our common stock. These warrants are classified in equity and indexed to our common stock.

In connection with the UST Loan Agreement, Old GM granted warrants to the UST for 122 million shares of its common stock exercisable at $3.57 per share. Old GM recorded the warrants as a liability and recorded gains and losses related to this derivative in Interest income and other non-operating income, net. At March 31, 2009 Old GM determined that the fair value of the warrants issued to the UST was $66 million. In connection with the 363 Sale, the UST returned the warrants and they were cancelled.

Fair Value of Nondesignated Derivatives

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

 

     Successor
     March 31, 2010    December 31, 2009
     Asset
Derivatives (a)(b)
   Liability
Derivatives  (c)(d)
   Asset
Derivatives (a)(b)
   Liability
Derivatives  (c)(d)

Current Portion

           

Foreign currency exchange derivatives

   $ 75    $ 348    $ 104    $ 568

Commodity derivatives

     56           11     
                           

Total current portion

   $ 131    $ 348    $ 115    $ 568
                           

Non-Current Portion

           

Foreign currency exchange derivatives

   $ 7    $ 39    $ 19    $ 146

Commodity derivatives

     1               

Other derivatives

     33           25     
                           

Total non-current portion

   $ 41    $ 39    $ 44    $ 146
                           

 

(a) Recorded in Other current assets and deferred income taxes.

 

(b) Recorded in Other assets.

 

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(c) Recorded in Accrued expenses.

 

(d) Recorded in Other liabilities and deferred income taxes.

Gains and (Losses) on Nondesignated Derivatives

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

 

     Successor          Predecessor  
     Three Months
Ended
March 31, 2010
         Three Months
Ended
March 31, 2009
 
      

Foreign Currency Exchange Derivatives

        

Sales

   $          $ 60   

Cost of sales

                (137

Interest income and other non-operating income, net

     128            86   

Interest Rate Swap Derivatives

        

Interest expense

                14   

Commodity Derivative Contracts

        

Cost of sales

                (134

Interest income and other non-operating income, net

     (2           

Other Derivatives

        

Interest income and other non-operating income, net

     8            98   
                    

Total gains (losses) recorded in earnings

   $ 134          $ (13
                    

Note 16. Commitments and Contingencies

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

 

     Successor
     March 31, 2010    December 31, 2009
     Liability
Recorded
   Maximum
Liability  (a)
   Liability
Recorded
   Maximum
Liability  (a)

Guarantees

           

Operating lease residual values (b)

   $    $ 75    $    $ 79

Supplier commitments and other related obligations

   $ 5    $ 43    $ 3    $ 43

GMAC commercial loans (c)

   $    $ 38    $ 2    $ 167

Other product-related claims

   $ 54    $ 553    $ 54    $ 553

 

(a) Calculated as future undiscounted payments.

 

(b) Excludes residual support and risk sharing programs related to GMAC.

 

(c) At March 31, 2010 and December 31, 2009 includes $8 million and $127 million related to a guarantee provided to GMAC in Brazil in connection with dealer floor plan financing. At March 31, 2010 and December 31, 2009 this guarantee is collateralized by certificates of deposit of $8 million and $127 million purchased from GMAC to which we have title and which are recorded in Restricted cash. The purchase of the certificates of deposit was funded in part by contributions from dealers for which we have recorded a corresponding deposit liability of $6 million and $104 million, which is recorded in Other liabilities at March 31, 2010 and December 31, 2009.

 

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     Successor
     March 31, 2010    December 31, 2009
     Liability Recorded    Liability Recorded

Environmental liability (a)

   $ 187    $ 190

Product liability

   $ 372    $ 319

Liability related to contingently issuable shares

   $ 162    $ 162

Other litigation-related liabilities (b)

   $ 1,161    $ 1,192

 

(a) Of the amounts we recorded, $36 million and $28 million were recorded in Accrued expenses at March 31, 2010 and December 31, 2009, and the remainder was recorded in Other liabilities.

 

(b) Consists primarily of tax related litigation not recorded pursuant to ASC 740-10, “Income Taxes,” (ASC 740-10) as well as various non-U.S. labor related items.

Guarantees

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

We have agreements with third parties that guarantee the fulfilment of certain suppliers’ commitments and other related obligations. These guarantees expire in years ranging from 2010 to 2013, or upon the occurrence of specific events.

In some instances, certain assets of the party whose debt or performance we have guaranteed may offset, to some degree, the cost of the guarantee. The offset of certain of our payables to guaranteed parties may also offset certain guarantees, if triggered.

We also provide payment guarantees on commercial loans made by GMAC and outstanding with certain third parties, such as dealers or rental car companies. These guarantees either expire in years ranging from 2010 to 2029 or are ongoing. We determined the value ascribed to the guarantees to be insignificant based on the credit worthiness of the third parties. Refer to Note 22 for additional information on guarantees that we provide to GMAC.

In connection with certain divestitures of assets or operating businesses, we have entered into agreements indemnifying certain buyers and other parties with respect to environmental conditions pertaining to real property we owned. Also, in connection with such divestitures, we have provided guarantees with respect to benefits to be paid to former employees relating to pensions, postretirement health care and life insurance. Aside from indemnifications and guarantees related to Delphi, as subsequently discussed, it is not possible to estimate our maximum exposure under these indemnifications or guarantees due to the conditional nature of these obligations. No amounts have been recorded for such obligations as they are not probable or estimable at this time.

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

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

With respect to other product-related claims involving products manufactured by certain joint ventures, we believe that costs incurred are adequately covered by recorded accruals. These guarantees expire in 2022.

 

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Environmental

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

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

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

The final outcome of environmental matters cannot be predicted with certainty at this time. Accordingly, it is possible that the resolution of one or more environmental matters could exceed the amounts accrued in an amount that could be material to our financial condition and results of operations. At March 31, 2010 we estimate that remediation losses could range from $130 million to $320 million.

Product Liability

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

In accordance with our assumption of dealer sales and service agreements, we indemnify dealers for certain product liability related claims. Our experience related to dealer indemnification obligations for activity on or after July 10, 2009 is limited. Based on management judgments concerning the projected number and value of such claims, we have estimated a product liability given the information that is currently available.

Liability Related to Contingently Issuable Shares

We are obligated to issue additional shares of our common stock to MLC (Adjustment Shares) in the event that allowed general unsecured claims against MLC, as estimated by the Bankruptcy Court, exceed $35.0 billion. The maximum Adjustment Shares equate to 2% (or 10 million shares) of our common stock. The number of Adjustment Shares to be issued is calculated based on the extent to which estimated general unsecured claims exceed $35.0 billion with the maximum number of Adjustment Shares issued if estimated general unsecured claims total $42.0 billion or more. We determined that it is probable that general unsecured claims allowed against MLC will ultimately exceed $35.0 billion by at least $2.0 billion. In that circumstance, under the terms of the Purchase Agreement, we would be required to issue 2.9 million Adjustment Shares to MLC as an adjustment to the purchase price.

 

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Other Litigation-Related Liability

Various legal actions, governmental investigations, claims and proceedings are pending against us or MLC including a number of shareholder class actions, bondholder class actions and class actions under the Employee Retirement Income Security Act of 1974, as amended, and other matters arising out of alleged product defects, including asbestos-related claims; employment-related matters; governmental regulations relating to safety, emissions, and fuel economy; product warranties; financial services; dealer, supplier and other contractual relationships; tax-related matters not recorded pursuant to ASC 740-10 and environmental matters.

With regard to the litigation matters discussed in the previous paragraph, reserves have been established for matters in which it is believed that losses are probable and can be reasonably estimated, the majority of which are associated with tax-related matters not recorded pursuant to ASC 740-10 as well as various non-U.S. labor-related matters. Tax related matters not recorded pursuant to ASC 740-10 are items being litigated globally pertaining to value added taxes, customs, duties, sales, property taxes and other non-income tax related tax exposures. The various non-U.S. labor-related matters include claims from current and former employees related to alleged unpaid wage, benefit, severance, and other compensation matters. Some of the matters may involve compensatory, punitive, or other treble damage claims, environmental remediation programs, or sanctions, that if granted, could require us to pay damages or make other expenditures in amounts that could not be reasonably estimated at March 31, 2010. It is believed that appropriate accruals have been established for such matters based on information currently available. Reserves for litigation losses are recorded in Accrued expenses and Other liabilities and deferred income taxes. These accrued reserves represent the best estimate of amounts believed to be our and Old GM’s liability in a range of expected losses. Litigation is inherently unpredictable, however, and unfavorable resolutions could occur. Accordingly, it is possible that an adverse outcome from such proceedings could exceed the amounts accrued in an amount that could be material to our or Old GM’s financial condition, results of operations and cash flows in any particular reporting period.

Asbestos-Related Liability

In connection with the 363 Sale, MLC retained substantially all of the asbestos-related claims outstanding. At March 31, 2009 Old GM’s liability recorded for asbestos-related matters was $627 million.

Like most automobile manufacturers, Old GM had been subject to asbestos-related claims in recent years. These claims primarily arose from three circumstances:

 

   

A majority of these claims sought damages for illnesses alleged to have resulted from asbestos used in brake components;

 

   

Limited numbers of claims have arisen from asbestos contained in the insulation and brakes used in the manufacturing of locomotives; and

 

   

Claims brought by contractors who allege exposure to asbestos-containing products while working on premises Old GM owned.

Old GM had resolved many of the asbestos-related cases over the years for strategic litigation reasons such as avoiding defense costs and possible exposure to excessive verdicts. The amount expended on asbestos-related matters in any period depended on the number of claims filed, the amount of pre-trial proceedings and the number of trials and settlements in the period.

Old GM recorded the estimated liability associated with asbestos personal injury claims where the expected loss was both probable and could reasonably be estimated. Old GM retained a firm specializing in estimating asbestos claims to assist Old GM in determining the potential liability for pending and unasserted future asbestos personal injury claims. The analyses relied on and included the following information and factors:

 

   

A third party forecast of the projected incidence of malignant asbestos-related disease likely to occur in the general population of individuals occupationally exposed to asbestos;

 

   

Old GM’s Asbestos Claims Experience, based on data concerning claims filed against Old GM and resolved, amounts paid, and the nature of the asbestos-related disease or condition asserted during approximately the four years prior;

 

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The estimated rate of asbestos-related claims likely to be asserted against MLC in the future based on Old GM’s Asbestos Claims Experience and the projected incidence of asbestos-related disease in the general population of individuals occupationally exposed to asbestos;

 

   

The estimated rate of dismissal of claims by disease type based on Old GM’s Asbestos Claims Experience; and

 

   

The estimated indemnity value of the projected claims based on Old GM’s Asbestos Claims Experience, adjusted for inflation.

Old GM reviewed a number of factors, including the analyses provided by the firm specializing in estimating asbestos claims in order to determine a reasonable estimate of the probable liability for pending and future asbestos-related claims projected to be asserted over the next 10 years, including legal defense costs. Old GM monitored actual claims experience for consistency with this estimate and made periodic adjustments as appropriate.

Old GM believed that the analyses were based on the most relevant information available combined with reasonable assumptions, and that Old GM may prudently rely on their conclusions to determine the estimated liability for asbestos-related claims. Old GM noted, however, that the analyses were inherently subject to significant uncertainties. The data sources and assumptions used in connection with the analyses may not prove to be reliable predictors with respect to claims asserted against Old GM. Old GM’s experience in the past included substantial variation in relevant factors, and a change in any of these assumptions — which include the source of the claiming population, the filing rate and the value of claims — could significantly increase or decrease the estimate. In addition, other external factors such as legislation affecting the format or timing of litigation, the actions of other entities sued in asbestos personal injury actions, the distribution of assets from various trusts established to pay asbestos claims and the outcome of cases litigated to a final verdict could affect the estimate.

Delphi Corporation

Benefit Guarantee

In 1999 Old GM spun-off Delphi Automotive Systems Corporation, which became Delphi. At the time of the spin-off, employees of Delphi Automotive Systems Corporation became employees of Delphi. As part of the separation agreements, Delphi assumed the pension and other postretirement benefit obligations for the transferred U.S. hourly employees who retired after October 1, 2000. Additionally at the time of the spin-off, Old GM entered into the Delphi Benefit Guarantee Agreements with the UAW, the International Union of Electronic, Electrical, Salaried, Machine and Furniture Workers — Communication Workers of America (IUE-CWA) and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (USW). The Delphi Benefit Guarantee Agreements provided that in the event that Delphi or its successor companies ceased doing business, terminated its pension plan or ceased to provide credited service or OPEB benefits at certain levels due to financial distress, Old GM could be liable to provide the corresponding benefits for certain covered employees at the required level and to the extent the pension benefits Delphi and the PBGC provided fall short of the guaranteed amount.

In October 2005 Old GM received notice from Delphi it would become obligated to provide benefits pursuant to the Delphi Benefit Guarantee Agreements in connection with Delphi’s commencement in October 2005 of Chapter 11 proceedings under the Bankruptcy Code. In June 2007 Old GM entered into a memorandum of understanding with Delphi and the UAW (Delphi UAW MOU) that included terms relating to the consensual triggering, under certain circumstances, of the Delphi Benefit Guarantee Agreements as well as additional terms relating to Delphi’s restructuring. Under the Delphi UAW MOU, Old GM also agreed to pay for certain health care costs of covered Delphi retirees and their beneficiaries in order to provide a level of benefits consistent with those provided to Old GM’s retirees and their beneficiaries under the Mitigation Plan, if Delphi terminated OPEB benefits. In August 2007 Old GM also entered into memoranda of understanding with Delphi and the IUE-CWA and with Delphi and the USW containing terms consistent with the comprehensive Delphi UAW MOU.

 

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Delphi-GM Settlement Agreements

In September 2007 and as amended at various times through September 2008, Old GM entered into agreements with Delphi. In September 2008 Old GM also entered into agreements with Delphi and the UAW, IUE-CWA and the USW. All of these agreements were intended to resolve, among other items, outstanding issues between Delphi and Old GM, govern certain aspects of Old GM’s ongoing commercial relationship with Delphi, address a limited transfer of pension assets and liabilities, and address the triggering of the Delphi Benefit Guarantee Agreements. In September 2008 these agreements became effective, and as a result, Old GM paid $582 million to Delphi in the three months ended March 31, 2009 in settlement of amounts accrued to date against Old GM’s commitments.

Upon consummation of the DMDA, these agreements were terminated with limited exceptions.

Delphi Liquidity Support Agreements

Beginning in 2008 Old GM entered into various agreements and amendments to such agreements to advance a maximum of $950 million to Delphi, subject to Delphi’s continued satisfaction of certain conditions and milestones. Old GM also agreed to accelerate payment of North American payables to Delphi at various amounts up to a maximum of $300 million. Upon consummation of the DMDA, we waived our rights to advanced amounts and accelerated payments of $850 million that became consideration to Delphi and other parties under the DMDA.

Delphi Master Disposition Agreement

In October 2009 we consummated the transaction contemplated by the DMDA with Delphi, New Delphi, Old GM, and other parties to the DMDA, as described in Note 4. Upon consummation of the DMDA, the Delphi-GM Settlement Agreements and Delphi liquidity support agreements discussed previously were terminated with limited exceptions, and we and Delphi waived all claims against each other. We maintain certain obligations relating to Delphi hourly employees to provide the difference between pension benefits paid by the PBGC according to regulation and those originally guaranteed by Old GM under the Delphi Benefit Guarantee Agreements.

The DMDA established our ongoing commercial relationship with New Delphi. This included the continuation of all existing Delphi supply agreements and purchase orders for GMNA to the end of the related product program and New Delphi agreed to provide us with access rights designed to allow us to operate specific sites on defined triggering events to provide us with protection of supply. In addition, we and a class of New Delphi investors agreed to establish a secured delayed draw term loan facility for New Delphi, with each committing to provide loans of up to $500 million.

Delphi Charges

In the three months ended March 31, 2009 Old GM recorded charges of $274 million. These charges, which were recorded in Cost of sales, reflected the best estimate of obligations associated with the various Delphi agreements.

Note 17. Income Taxes

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

In the three months ended March 31, 2010 income tax expense of $509 million primarily resulted from income tax provisions for profitable entities and a taxable foreign currency exchange gain in Venezuela. As a result of the official devaluation of the Venezuelan currency in the three months ended March 31, 2010, we recorded income tax expense related to the foreign currency exchange gain on the net monetary position of our foreign currency denominated assets.

 

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In the three months ended March 31, 2009 income tax benefit of $114 million primarily resulted from intraperiod tax allocation and other discrete items offset by income tax provisions for profitable entities.

Most of the tax attributes generated by Old GM and its domestic and foreign subsidiaries (net operating loss carryforwards and various income tax credits) survived the Chapter 11 Proceedings and we expect to use these tax attributes to reduce future tax liabilities. The ability to utilize certain of the U.S. tax attributes in future tax periods could be limited by Section 382(a) of the Internal Revenue Code. In Germany, we have net operating loss carryforwards for corporate income tax and trade tax purposes. We have applied for a ruling from the German tax authorities regarding the availability of those losses under the prerequisite that an agreement with the unions as to employment costs will be achieved. If approved, we should be able to continue to carry over those losses despite the reorganizations that have taken place in Germany in 2008 and 2009. In Australia, we have net operating loss carryforwards which are now subject to meeting an annual “Same Business Test” requirement. We will assess our ability to utilize these carryforward losses annually.

We file and Old GM filed income tax returns in multiple jurisdictions, which are subject to examination by taxing authorities throughout the world. We have open tax years from 1999 to 2009 with various significant tax jurisdictions. These open years contain matters that could be subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, timing or inclusion of revenue and expenses or the sustainability of income tax credits for a given audit cycle. We have continuing responsibility for Old GM’s open tax years. We record, and Old GM previously recorded, a tax benefit only for those positions that meet the more likely than not standard.

At March 31, 2010, it is not possible to reasonably estimate the expected change to the total amount of unrecognized tax benefits over the next 12 months.

Note 18. Fair Value Measurements

Fair Value Measurements

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

 

   

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

 

   

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

 

   

Level 3 — Instruments whose significant inputs are unobservable.

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

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

 

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

All derivatives are recorded at fair value. Internal models are used to value a majority of derivatives. The models use, as their basis, readily observable market inputs, such as time value, forward interest rates, volatility factors, and current and forward market prices for commodities and foreign currency exchange rates. Level 2 of the valuation hierarchy includes certain foreign currency derivatives, commodity derivatives, certain interest rate swaps, cross currency swaps and warrants. Derivative contracts that are valued based upon models with significant unobservable market inputs, primarily estimated forward and prepayment rates, are classified in Level 3 of the valuation hierarchy. Level 3 of the valuation hierarchy includes warrants issued to the UST prior to July 10, 2009, certain foreign currency derivatives, certain long-dated commodity derivatives and interest rate swaps with notional amounts that fluctuated over time.

The valuation of derivative liabilities takes into account our and Old GM’s nonperformance risk. For the periods presented after June 1, 2009, our nonperformance risk was not observable through the credit default swap market, and an analysis of comparable industrial companies was used to determine the appropriate credit spread which would be applied to us by market participants. In these periods, all derivatives whose fair values contained a significant credit adjustment based on our nonperformance risk were classified in Level 3 of the valuation hierarchy.

 

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Fair Value Measurements on a Recurring Basis

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

 

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

Assets

           

Cash equivalents

           

United States government and agency

   $    $ 2,305    $    $ 2,305

Certificates of deposit

          3,279           3,279

Money market funds

     3,245                3,245

Commercial paper

          3,067           3,067

Marketable securities

           

Equity

     19      17           36

United States government and agency

          16           16

Mortgage and asset-backed

          24           24

Certificates of deposit

          8           8

Foreign government

          32           32

Corporate debt

          37           37

Restricted cash

           

Money market funds

     11,356                11,356

Government of Canada bonds

          986           986

Other assets

           

Equity

     10                10

Derivatives

           

Commodity

          57           57

Foreign currency

          59      23      82

Other

          33           33
                           

Total assets

   $ 14,630    $ 9,920    $ 23    $ 24,573
                           

Liabilities

           

Other liabilities

           

Options

   $    $    $ 21    $ 21

Derivatives

           

Foreign currency

          9      378      387
                           

Total liabilities

   $    $ 9    $ 399    $ 408
                           

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

     Successor
     Fair Value Measurements on a Recurring Basis at
December 31, 2009
         Level 1          Level 2        Level 3          Total    

Assets

           

Cash equivalents

           

United States government and agency

   $    $ 580    $    $ 580

Certificates of deposit

          2,140           2,140

Money market funds

     7,487                7,487

Commercial paper

          969           969

Marketable securities

           

Equity

     15      17           32

United States government and agency

          19           19

Mortgage and asset-backed

          22           22

Certificates of deposit

          8           8

Foreign government

          24           24

Corporate debt

          29           29

Restricted cash

           

Money market funds

     12,662                12,662

Government of Canada bonds

          955           955

Other assets

           

Equity

     13                13

Derivatives

           

Commodity

          11           11

Foreign currency

          90      33      123

Other

          25           25
                           

Total assets

   $ 20,177    $ 4,889    $ 33    $ 25,099
                           

Liabilities

           

Derivatives

           

Foreign currency

   $    $ 9    $ 705    $ 714
                           

Total liabilities

   $    $ 9    $ 705    $ 714
                           

Fair Value Measurements on a Recurring Basis using Level 3 Inputs

For periods presented after June 1, 2009 nonperformance risk for us and Old GM was not observable through the credit default swap market as a result of the Chapter 11 Proceedings for Old GM and the lack of traded instruments for us. As a result, foreign currency derivatives with a fair market value of $1.6 billion were transferred from Level 2 to Level 3.

In the three months ended March 31, 2009 Old GM determined the credit profile of certain foreign subsidiaries was equivalent to Old GM’s nonperformance risk which was observable through the credit default swap market and bond market based on prices for recent trades. Accordingly, foreign currency derivatives with a fair value of $2.1 billion were transferred from Level 3 into Level 2.

 

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     Successor  
     Level 3 Financial Assets and Liabilities  
     Mortgage-
backed

Securities (a)
   Commodity
Derivatives,
Net (b)
   Foreign
Currency
Derivatives (c)
    Options (d)     Other
Securities (a)
   Total Net
Liabilities
 

Balance at January 1, 2010

   $    $    $ (672   $      $    $ (672

Total realized/unrealized gains (losses)

               

Included in earnings

               155                    155   

Included in Accumulated other comprehensive income (loss)

               (17                 (17

Purchases, issuances, and settlements

               179        (21          158   

Transfer in and/or out of Level 3

                                    
                                             

Balance at March 31, 2010

   $    $    $ (355   $ (21   $    $ (376
                                             

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

   $    $    $ 141      $      $    $ 141   
                                             

 

     Predecessor  
     Level 3 Financial Assets and Liabilities  
     Mortgage-
backed

Securities (a)
    Commodity
Derivatives,
Net (b)
    Foreign
Currency
Derivatives (c)
    UST
Warrant  (a)
    Other
Securities (a)
    Total Net
Liabilities
 

Balance at January 1, 2009

   $ 49      $ (17   $ (2,144   $ (164   $ 17      $ (2,259

Total realized/unrealized gains (losses)

            

Included in earnings

     (1     2               98        (2     97   

Included in Accumulated other comprehensive income (loss)

                                          

Purchases, issuances, and settlements

     (4     2                      (1     (3

Transfer in and/or out of Level 3

                   2,144                      2,144   
                                                

Balance at March 31, 2009

   $ 44      $ (13   $      $ (66   $ 14      $ (21
                                                

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

   $ (1   $ 2      $      $ 98      $ (2   $ 97   
                                                

 

(a) Realized gains (losses) and other than temporary impairments on marketable securities (including the UST warrants outstanding until the closing of the 363 Sale) are recorded in Interest income and other non-operating income, net.

 

(b) Prior to July 10, 2009 realized and unrealized gains (losses) on commodity derivatives were recorded in Cost of sales. Changes in fair value are attributable to changes in base metal and precious metal prices. Beginning July 10, 2009 realized and unrealized gains (losses) on commodity derivatives are recorded in Interest income and other non-operating income, net.

 

(c) Prior to July 10, 2009 realized and unrealized gains (losses) on foreign currency derivatives were recorded in the line item associated with the economically hedged item. Beginning July 10, 2009 realized and unrealized gains (losses) on foreign currency derivatives are recorded in Interest income and other non-operating income, net and foreign currency translation gains (losses) are recorded in Accumulated other comprehensive income (loss).

 

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

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Short-Term and Long-Term Debt

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

The following table summarizes the carrying amount and estimated fair value of short-term and long-term debt, including capital leases, for which it is practicable to estimate fair value (dollars in millions):

 

     Successor
     March 31, 2010    December 31, 2009

Carrying amount (a)

   $ 14,174    $ 15,783

Fair value (a)

   $ 14,510    $ 16,024

 

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

GMAC Common and Preferred Stock

At December 31, 2009 we estimated the fair value of our investment in GMAC common stock using a market approach based on the average price to tangible book value multiples of comparable companies to each of GMAC’s Auto Finance, Commercial Finance, Mortgage, and Insurance operations to determine the fair value of the individual operations. These values were aggregated to estimate the fair value of GMAC common stock. At March 31, 2010 we estimated the fair value of GMAC common stock using a market approach that applies the average price to tangible book value multiples of comparable companies to the consolidated GMAC tangible book value. This approach provides our best estimate of the fair value of our investment in GMAC common stock at March 31, 2010 due to GMAC’s transition to a bank holding company and less readily available information with which to value GMAC’s business operations individually.

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

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

 

     Successor
     March 31, 2010    December 31, 2009

Common stock

     

Carrying amount

   $ 968    $ 970

Fair value

   $ 1,093    $ 970

Preferred stock

     

Carrying amount

   $ 665    $ 665

Fair value

   $ 1,002    $ 665

Note 19. Restructuring and Other Initiatives

We have and Old GM had previously executed various restructuring and other initiatives, and we plan to execute additional initiatives in the future, if necessary, in order to preserve adequate liquidity, to align manufacturing capacity and other costs with prevailing global automotive sales and to improve the utilization of remaining facilities. Related charges are primarily recorded in Cost of sales and Selling, general and administrative expense.

 

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Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Estimates of restructuring and other initiative charges are based on information available at the time such charges are recorded. Due to the inherent uncertainty involved, actual amounts paid for such activities may differ from amounts initially recorded. Accordingly, we may record revisions to previous estimates by adjusting previously established reserves.

Refer to Note 20 for asset impairment charges related to our restructuring initiatives.

GM

The following table summarizes restructuring reserves (excluding restructuring reserves related to dealer wind-down agreements) and charges by segment, including postemployment benefit reserves and charges in the three months ended March 31, 2010 (dollars in millions):

 

     Successor  
     GMNA     GMIO     GME     Total  

Balance at January 1, 2010

   $ 2,088      $ 7      $ 451      $ 2,546   

Additions

     7               273        280   

Interest accretion and other

     10               32        42   

Payments

     (243     (3     (37     (283

Revisions to estimates

     (104                   (104

Effect of foreign currency translation

     24               (33     (9
                                

Balance at March 31, 2010 (a)

   $ 1,782      $ 4      $ 686      $ 2,472   
                                

 

(a) The remaining cash payments related to these restructuring reserves primarily relate to postemployment benefits to be paid.

GMNA

GMNA recorded charges, interest accretion and other and revisions to estimates that decreased the restructuring reserves by $87 million in the three months ended March 31, 2010. This decrease was primarily due to increased production capacity utilization, which resulted in the recall of idled employees to fill added shifts at multiple production sites.

GME

GME recorded charges and interest accretion and other of $305 million for separation programs primarily related to the following initiatives:

 

   

Separation charges of $184 million as the legal minimum for a separation plan related to the closure of the Antwerp, Belgium facility which will affect 2,600 employees. Refer to Note 25 for additional information related to the closure of the Antwerp, Belgium facility.

 

   

Separation charges of $72 million related to separation/layoff plans and an early retirement plan in Spain which will affect 1,200 employees.

 

   

Separation charges of $16 million and interest accretion and other of $29 million related to previously announced programs in Germany.

Dealer Wind-downs

We market vehicles worldwide through a network of independent retail dealers and distributors. As part of achieving and sustaining long-term viability and the viability of our dealer network, we determined that a reduction in the number of GMNA dealerships was necessary. At March 31, 2010 there were approximately 6,100 dealers in GMNA compared to approximately 6,500 at December 31,

 

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

2009. Certain dealers that had signed wind-down agreements with us have elected to file for reinstatement through a binding arbitration process. In response to the arbitration filings we offered certain dealers reinstatement contingent upon compliance with our core business criteria for operation of a dealership. Further reductions in the number of GMNA dealerships will be dependent upon the ongoing reinstatement and arbitration process, which we expect will be fundamentally resolved in 2010.

The following table summarizes GMNA’s restructuring reserves related to dealer wind-down agreements in the three months ended March 31, 2010 (dollars in millions):

 

     Successor  
     U.S.     Canada and Mexico     Total  

Balance at January 1, 2010

   $ 460      $ 41      $ 501   

Additions

     9        9        18   

Payments

     (44     (28     (72

Effect of foreign currency translation

            2        2   
                        

Balance at March 31, 2010

   $ 425      $ 24      $ 449   
                        

Old GM

The following table summarizes Old GM’s restructuring reserves and charges by segment, including postemployment benefit reserves and charges in the three months ended March 31, 2009 (dollars in millions):

 

     Predecessor  
     GMNA     GMIO     GME     Total  

Balance at January 1, 2009

   $ 2,456      $ 58      $ 468      $ 2,982   

Additions

     411        32        10        453   

Interest accret