Document

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, 2018
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to

Commission file number 001-34960
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12207459&doc=13
GENERAL MOTORS COMPANY
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE
27-0756180
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
300 Renaissance Center, Detroit, Michigan
48265-3000
(Address of principal executive offices)
(Zip Code)
(313) 667-1500
(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  þ  No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  þ  No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer  þ  Accelerated filer  ¨  Non-accelerated filer  ¨  Smaller reporting company  ¨ Emerging growth company  ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨  No  þ
As of April 13, 2018 the number of shares outstanding of common stock was 1,409,232,569 shares.





INDEX
 
 
 
Page
PART I
Item 1.
Condensed Consolidated Financial Statements
 
Condensed Consolidated Income Statements (Unaudited)
 
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
 
Condensed Consolidated Balance Sheets (Unaudited)
 
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
Condensed Consolidated Statements of Equity (Unaudited)
 
Notes to Condensed Consolidated Financial Statements
 
Note 1.
Nature of Operations and Basis of Presentation
 
Note 2.
Significant Accounting Policies
 
Note 3.
Revenue
 
Note 4.
Marketable and Other Securities
 
Note 5.
GM Financial Receivables
 
Note 6.
Inventories
 
Note 7.
Equipment on Operating Leases
 
Note 8.
Equity in Net Assets of Nonconsolidated Affiliates
 
Note 9.
Variable Interest Entities
 
Note 10.
Automotive and GM Financial Debt
 
Note 11.
Derivative Financial Instruments
 
Note 12.
Product Warranty and Related Liabilities
 
Note 13.
Pensions and Other Postretirement Benefits
 
Note 14.
Commitments and Contingencies
 
Note 15.
Income Taxes
 
Note 16.
Restructuring and Other Initiatives
 
Note 17.
Stockholders' Equity and Noncontrolling Interests
 
Note 18.
Earnings Per Share
 
Note 19.
Discontinued Operations
 
Note 20.
Segment Reporting
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Item 4.
Controls and Procedures
PART II
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.
Exhibits
Signature
 




Table of Contents
GENERAL MOTORS COMPANY AND SUBSIDIARIES



PART I

Item 1. Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED INCOME STATEMENTS
(In millions, except per share amounts) (Unaudited)
 
Three Months Ended
 
March 31, 2018

March 31, 2017
Net sales and revenue
 
 
 
Automotive
$
32,691

 
$
34,519

GM Financial
3,408

 
2,747

Total net sales and revenue (Note 3)
36,099

 
37,266

Costs and expenses

 

Automotive cost of sales
30,184

 
29,761

GM Financial interest, operating and other expenses
3,014

 
2,566

Automotive selling, general and administrative expense
2,372

 
2,356

Total costs and expenses
35,570

 
34,683

Operating income
529

 
2,583

Automotive interest expense
150

 
147

Interest income and other non-operating income, net
549

 
482

Equity income (Note 8)
648

 
555

Income before income taxes
1,576

 
3,473

Income tax expense (Note 15)
466

 
787

Income from continuing operations
1,110

 
2,686

Loss from discontinued operations, net of tax (Note 19)
70

 
69

Net income
1,040

 
2,617

Net (income) loss attributable to noncontrolling interests
6

 
(9
)
Net income attributable to stockholders
$
1,046

 
$
2,608

 
 
 
 
Net income attributable to common stockholders
$
1,032

 
$
2,608

 
 
 
 
Earnings per share (Note 18)
 
 
 
Basic earnings per common share – continuing operations
$
0.78

 
$
1.78

Basic loss per common share – discontinued operations
$
0.05

 
$
0.05

Basic earnings per common share
$
0.73

 
$
1.73

Weighted-average common shares outstanding – basic
1,408

 
1,505

 
 
 
 
Diluted earnings per common share  continuing operations
$
0.77

 
$
1.75

Diluted loss per common share – discontinued operations
$
0.05

 
$
0.05

Diluted earnings per common share
$
0.72

 
$
1.70

Weighted-average common shares outstanding – diluted
1,430

 
1,532

 
 
 
 
Dividends declared per common share
$
0.38

 
$
0.38

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions) (Unaudited)
 
Three Months Ended
 
March 31, 2018
 
March 31, 2017
Net income
$
1,040

 
$
2,617

Other comprehensive income, net of tax (Note 17)

 

Foreign currency translation adjustments and other
34

 
108

Defined benefit plans
(7
)
 
(29
)
Other comprehensive income, net of tax
27

 
79

Comprehensive income
1,067

 
2,696

Comprehensive (income) loss attributable to noncontrolling interests
7

 
(8
)
Comprehensive income attributable to stockholders
$
1,074

 
$
2,688



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

1

                           

Table of Contents
GENERAL MOTORS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts) (Unaudited)
 
March 31, 2018
 
December 31, 2017
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
14,256

 
$
15,512

Marketable securities (Note 4)
7,110

 
8,313

Accounts and notes receivable, net
10,769

 
8,164

GM Financial receivables, net (Note 5; Note 9 at VIEs)
21,157

 
20,521

Inventories (Note 6)
11,461

 
10,663

Equipment on operating leases, net (Note 7)
789

 
1,106

Other current assets (Note 4; Note 9 at VIEs)
5,893

 
4,465

Total current assets
71,435

 
68,744

Non-current Assets
 
 
 
GM Financial receivables, net (Note 5; Note 9 at VIEs)
22,146

 
21,208

Equity in net assets of nonconsolidated affiliates (Note 8)
9,883

 
9,073

Property, net
37,321

 
36,253

Goodwill and intangible assets, net
5,790

 
5,849

Equipment on operating leases, net (Note 7; Note 9 at VIEs)
43,444

 
42,882

Deferred income taxes
23,538

 
23,544

Other assets (Note 4; Note 9 at VIEs)
5,169

 
4,929

Total non-current assets
147,291

 
143,738

Total Assets
$
218,726

 
$
212,482

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts payable (principally trade)
$
26,039

 
$
23,929

Short-term debt and current portion of long-term debt (Note 10)


 


Automotive
4,341

 
2,515

GM Financial (Note 9 at VIEs)
25,006

 
24,450

Accrued liabilities
27,330

 
25,996

Total current liabilities
82,716

 
76,890

Non-current Liabilities

 

Long-term debt (Note 10)


 


Automotive
10,957

 
10,987

GM Financial (Note 9 at VIEs)
58,514

 
56,267

Postretirement benefits other than pensions (Note 13)
5,927

 
5,998

Pensions (Note 13)
13,209

 
13,746

Other liabilities
11,945

 
12,394

Total non-current liabilities
100,552

 
99,392

Total Liabilities
183,268

 
176,282

Commitments and contingencies (Note 14)


 


Equity (Note 17)

 

Common stock, $0.01 par value
14

 
14

Additional paid-in capital
25,337

 
25,371

Retained earnings
17,028

 
17,627

Accumulated other comprehensive loss
(8,081
)
 
(8,011
)
Total stockholders’ equity
34,298

 
35,001

Noncontrolling interests
1,160

 
1,199

Total Equity
35,458

 
36,200

Total Liabilities and Equity
$
218,726

 
$
212,482






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

2

                           

Table of Contents
GENERAL MOTORS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions) (Unaudited)

 
Three Months Ended
 
March 31, 2018
 
March 31, 2017
Cash flows from operating activities
 
 
 
Income from continuing operations
$
1,110

 
$
2,686

Depreciation, amortization and impairment charges
3,581

 
2,743

Foreign currency remeasurement and transaction losses
243

 
144

Undistributed earnings of nonconsolidated affiliates, net
(648
)
 
(555
)
Pension contributions and OPEB payments
(400
)
 
(382
)
Pension and OPEB income, net
(300
)
 
(200
)
Provision for deferred taxes
365

 
1,036

Change in other operating assets and liabilities
(3,503
)
 
(3,674
)
Net cash provided by operating activities  continuing operations
448

 
1,798

Net cash provided by operating activities  discontinued operations

 
243

Net cash provided by operating activities
448

 
2,041

Cash flows from investing activities

 

Expenditures for property
(2,272
)
 
(1,730
)
Available-for-sale marketable securities, acquisitions
(914
)
 
(1,316
)
Available-for-sale marketable securities, liquidations
2,062

 
2,914

Purchases of finance receivables, net
(4,925
)
 
(5,402
)
Principal collections and recoveries on finance receivables
3,478

 
2,808

Purchases of leased vehicles, net
(4,496
)
 
(4,727
)
Proceeds from termination of leased vehicles
2,379

 
1,079

Other investing activities
(40
)
 
1

Net cash used in investing activities – continuing operations
(4,728
)
 
(6,373
)
Net cash provided by (used in) investing activities – discontinued operations (Note 19)
166

 
(432
)
Net cash used in investing activities
(4,562
)
 
(6,805
)
Cash flows from financing activities

 

Net increase (decrease) in short-term debt
120

 
(360
)
Proceeds from issuance of debt (original maturities greater than three months)
11,334

 
11,280

Payments on debt (original maturities greater than three months)
(6,832
)
 
(5,141
)
Payments to purchase common stock
(100
)
 

Dividends paid
(566
)
 
(573
)
Other financing activities
(187
)
 
(144
)
Net cash provided by financing activities – continuing operations
3,769

 
5,062

Net cash used in financing activities – discontinued operations

 
(15
)
Net cash provided by financing activities
3,769

 
5,047

Effect of exchange rate changes on cash, cash equivalents and restricted cash
44

 
103

Net increase (decrease) in cash, cash equivalents and restricted cash
(301
)
 
386

Cash, cash equivalents and restricted cash at beginning of period
17,848

 
15,160

Cash, cash equivalents and restricted cash at end of period
$
17,547

 
$
15,546

 
 
 
 
Cash, cash equivalents and restricted cash – continuing operations at end of period (Note 4)
$
17,547

 
$
14,955

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

 
$
591

Significant Non-cash Investing and Financing Activity
 
 
 
Non-cash property additions – continuing operations
$
2,675

 
$
1,981

Non-cash property additions – discontinued operations
$

 
$
288






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

3

                           

Table of Contents
GENERAL MOTORS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In millions) (Unaudited)
 
Common Stockholders’
 
Noncontrolling Interests
 
Total Equity
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Balance at January 1, 2017
$
15

 
$
26,983

 
$
26,168


$
(9,330
)

$
239


$
44,075

Net income

 

 
2,608




9


2,617

Other comprehensive income

 

 


80


(1
)

79

Exercise of common stock warrants

 
4

 






4

Stock based compensation

 
24

 
(8
)





16

Cash dividends paid on common stock

 

 
(573
)





(573
)
Other

 
1

 




(5
)

(4
)
Balance at March 31, 2017
$
15

 
$
27,012

 
$
28,195


$
(9,250
)

$
242


$
46,214

 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2018
$
14


$
25,371


$
17,627


$
(8,011
)

$
1,199


$
36,200

Adoption of accounting standards (Note 1)

 

 
(1,046
)
 
(98
)
 

 
(1,144
)
Net income




1,046




(6
)

1,040

Other comprehensive income






28


(1
)

27

Purchase of common stock


(44
)

(56
)





(100
)
Cash dividends paid on common stock




(536
)





(536
)
Dividends to noncontrolling interests








(30
)

(30
)
Other


10


(7
)



(2
)

1

Balance at March 31, 2018
$
14


$
25,337


$
17,028


$
(8,081
)

$
1,160


$
35,458
































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

4

                           

Table of Contents
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

On July 31, 2017 we closed the sale of the Opel and Vauxhall businesses and certain other assets in Europe (the Opel/Vauxhall Business) to Peugeot, S.A. (PSA Group). On October 31, 2017 we closed the sale of the European financing subsidiaries and branches (the Fincos, and together with the Opel/Vauxhall Business, the European Business) to Banque PSA Finance S.A. and BNP Paribas Personal Finance S.A. The European Business is presented as discontinued operations in our condensed consolidated financial statements for all periods presented. Unless otherwise indicated, information in this report relates to our continuing operations. Refer to Note 19 for additional information on our discontinued operations.

The accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information. Accordingly they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying condensed consolidated financial statements include all adjustments, which consist of normal recurring adjustments and transactions or events discretely impacting the interim periods, considered necessary by management to fairly state our results of operations, financial position and cash flows. The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2017 Form 10-K. Except for per share amounts or as otherwise specified, dollar amounts presented within tables are stated in millions.

Principles of Consolidation The Principles of Consolidation supplements information presented in our 2017 Form 10-K for the adoption on January 1, 2018 of Accounting Standards Update (ASU) 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (ASU 2016-01). We consolidate entities that we control due to ownership of a majority voting interest and we consolidate variable interest entities (VIEs) when we have variable interests and are the primary beneficiary. We continually evaluate our involvement with VIEs to determine when these criteria are met. Our share of earnings or losses of nonconsolidated affiliates is included in our consolidated operating results using the equity method of accounting when we are able to exercise significant influence over the operating and financial decisions of the affiliate. Beginning January 1, 2018 we no longer use the cost method of accounting.

Recently Adopted Accounting Standards

Effective January 1, 2018 we adopted ASU 2014-09, "Revenue from Contracts with Customers" as amended (ASU 2014-09), as incorporated into Accounting Standards Codification (ASC) 606, on a modified retrospective basis by recognizing a cumulative effect adjustment to the opening balance of Retained earnings. Under ASU 2014-09 sales incentives will now be recorded at the time of sale rather than at the later of sale or announcement, thereby resulting in the shifting of incentive amounts to an earlier quarter and fixed fee license arrangements will now be recognized when access to intellectual property is granted instead of over the contract period. We currently expect the retiming of quarterly incentive amounts to offset for the year ending December 31, 2018. Actual incentive spending is dependent upon future market conditions.

Beginning January 1, 2018, certain transfers to daily rental companies are accounted for as sales when ownership of the vehicle is not expected to transfer back to us. Such transactions were previously accounted for as operating leases. Transfers that occurred prior to January 2018 continue to be accounted for as operating leases because at the original time of transfer an expectation existed that ownership of the vehicle would transfer back to us.

The following table summarizes the financial statement line items within our condensed consolidated income statement and balance sheet significantly impacted by ASU 2014-09:

5

                           

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

 
Three Months Ended March 31, 2018
 
As Reported
 
Balances without Adoption of ASC 606
 
Effect of Change
Income Statement
 
 
 
 
 
Automotive net sales and revenue
$
32,691

 
$
31,558

 
$
1,133

Automotive cost of sales
$
30,184

 
$
29,465

 
$
719

Income before income taxes
$
1,576

 
$
1,131

 
$
445

Net income attributable to stockholders
$
1,046

 
$
702

 
$
344

 
March 31, 2018
 
As Reported
 
Balances without Adoption of ASC 606
 
Effect of Change
Balance Sheet
 
 
 
 
 
Equipment on operating leases, net
$
789

 
$
1,495

 
$
(706
)
Deferred income taxes
$
23,538

 
$
23,195

 
$
343

Accrued liabilities
$
27,330

 
$
26,113

 
$
1,217

Other liabilities
$
11,945


$
12,191


$
(246
)
Retained earnings
$
17,028

 
$
18,019

 
$
(991
)

Effective January 1, 2018 we adopted ASU 2016-01, on a modified retrospective basis, with a $182 million cumulative effect adjustment recorded to the opening balance of Retained earnings to adjust an investment previously carried at cost to its fair value. ASU 2016-01 requires equity investments that are not accounted for under the equity method of accounting to be measured at fair value with changes recognized in Net income.

In the three months ended March 31, 2018 we adopted ASU 2017-12, "Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities" (ASU 2017-12), on a modified retrospective basis and adopted ASU 2018-02, "Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (ASU 2018-02), on a modified retrospective basis. ASU 2018-02 provides the option to reclassify stranded tax effects related to the U.S. Tax Cuts and Jobs Act of 2017 (the Tax Act) in accumulated other comprehensive income to retained earnings. The adjustment relates to the change in the U.S. corporate income tax rate. The cumulative effect of the adjustments to the opening balance of Retained earnings for these adopted standards was $108 million.
 
The following table summarizes the changes to our condensed consolidated balance sheet for the adoption of ASU 2014-09, ASU 2016-01, ASU 2017-12 and ASU 2018-02:
 
December 31, 2017
 
Adjustment due to ASU 2014-09
 
Adjustment due to ASU 2016-01, ASU 2017-12 and ASU 2018-02
 
January 1, 2018
Deferred income taxes
$
23,544

 
$
444

 
$
(63
)
 
$
23,925

Other assets
$
4,929

 
$
195

 
$
242

 
$
5,366

GM Financial short-term debt and current portion of long-term debt
$
24,450

 
$

 
$
(13
)
 
$
24,437

Accrued liabilities
$
25,996

 
$
2,328

 
$

 
$
28,324

Other liabilities
$
12,394

 
$
(235
)
 
$

 
$
12,159

Retained earnings
$
17,627

 
$
(1,336
)
 
$
290

 
$
16,581

Accumulated other comprehensive loss
$
(8,011
)
 
$

 
$
(98
)
 
$
(8,109
)
 
Effective January 1, 2018, we adopted ASU 2016-15, "Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Payments" (ASU 2016-15), which clarified guidance on the classification of certain cash receipts and payments in the statement of cash flows. The adoption of ASU 2016-15 did not have a material impact on our condensed consolidated financial statements, and prior periods were not restated.


6

                           

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

Effective January 1, 2018, we adopted ASU 2017-07, "Compensation - Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" (ASU 2017-07) on a retrospective basis, which requires that the service cost component of net periodic pension and other postretirement benefits (OPEB) (income) expense be presented in the same income statement line item as other employee compensation costs. The remaining components of net periodic pension and OPEB (income) expense are now presented outside operating income. Amounts previously reflected in Operating income were reclassified to Interest income and other non-operating income, net in accordance with the provisions of ASU 2017-07. Refer to Note 13 for amounts that were reclassified.

Note 2. Significant Accounting Policies

The information presented on Revenue Recognition, Equipment on Operating Leases, Marketable Debt Securities, Equity Investments and Derivative Financial Instruments supplements the Significant Accounting Policies information presented in our 2017 Form 10-K for the adoption of our recently adopted accounting standards which became effective January 1, 2018. See our 2017 Form 10-K for a description of our significant accounting policies in effect prior to the adoption of the new accounting standards.

Revenue Recognition We adopted ASU 2014-09, which requires us to recognize revenue when a customer obtains control rather than when we have transferred substantially all risks and rewards of a good or service. We adopted ASU 2014-09 by applying the modified retrospective method to all noncompleted contracts as of the date of adoption. See Note 1 for additional information pertaining to the adoption of ASU 2014-09. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The following accounting policies became effective upon the adoption of ASU 2014-09.

Automotive Automotive net sales and revenue represents the amount of consideration to which we expect to be entitled in exchange for vehicle, parts and accessories and services and other sales. The consideration recognized represents the amount received, typically shortly after the sale to a customer, net of estimated dealer and customer sales incentives we reasonably expect to pay. Significant factors in determining our estimates of incentives include forecasted sales volume, product type, product mix, customer behavior and assumptions concerning market conditions. Historical experience is also considered when establishing our future expectations. Subsequent adjustments to incentive estimates are possible as facts and circumstances change over time. A portion of the consideration received is deferred for separate performance obligations, such as maintenance and vehicle connectivity, that will be provided to our customers at a future date. Taxes assessed by various government entities, such as sales, use and value-added taxes, collected at the time of the vehicle sale are excluded from Automotive net sales and revenue. Shipping and handling activities that occur after control of the vehicle transfers to the dealer are recognized at the time of sale and presented in Automotive cost of sales.

Vehicle, Parts and Accessories For the majority of vehicle and accessories sales our customers obtain control and we recognize revenue when the vehicle transfers to the dealer, which generally occurs when the vehicle is released to the carrier responsible for transporting it to a dealer. Revenue is recognized on the sale of parts upon delivery to the customer.

Certain transfers to daily rental companies are accounted for as sales, with revenue recognized at the time of transfer. Such transactions were previously accounted for as operating leases. At the time of transfer, we defer revenue for remarketing obligations, record a residual value guarantee and reflect a deposit liability for amounts expected to be returned once the remarketing services are complete. Deferred revenue is recognized in earnings upon completion of the remarketing service. Transfers that occurred prior to January 1, 2018 and future transfers containing a substantive purchase obligation continue to be accounted for as operating leases and rental income is recognized over the estimated term of the lease.

Used Vehicles Proceeds from the auction of vehicles returned from daily rental car companies are recognized in Automotive net sales and revenue upon transfer of control of the vehicle to the customer and the related vehicle carrying value is recognized in Automotive cost of sales.

Services and Other Services and other revenue primarily consists of revenue from vehicle-related service arrangements and after-sale services such as maintenance, vehicle connectivity and extended service warranties. For those service arrangements that are bundled with a vehicle sale, a portion of the revenue from the sale is allocated to the service component and recognized as deferred revenue within Accrued liabilities or Other liabilities. We recognize revenue for bundled services and services sold separately as services are performed, typically over a period of less than three years.


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

Automotive Financing - GM Financial Finance charge income earned on receivables is recognized using the effective interest method. Fees and commissions (including incentive payments) received and direct costs of originating loans are deferred and amortized over the term of the related finance receivables using the effective interest method and are removed from the condensed consolidated balance sheets when the related finance receivables are sold, charged off or paid in full. Accrual of finance charge income on retail finance receivables is generally suspended on accounts that are more than 60 days delinquent, accounts in bankruptcy and accounts in repossession. Payments received on nonaccrual loans are first applied to any fees due, then to any interest due and then any remaining amounts are recorded to principal. Interest accrual generally resumes once an account has received payments bringing the delinquency to less than 60 days past due. Accrual of finance charge income on commercial finance receivables is generally suspended on accounts that are more than 90 days delinquent, upon receipt of a bankruptcy notice from a borrower, or where reasonable doubt exists about the full collectability of contractually agreed upon principal and interest. Payments received on nonaccrual loans are first applied to principal. Interest accrual resumes once an account has received payments bringing the account fully current and collection of contractual principal and interest is reasonably assured (including amounts previously charged off).

Income from operating lease assets, which includes lease origination fees, net of lease origination costs and incentives, is recorded as operating lease revenue on a straight-line basis over the term of the lease agreement.

Equipment on Operating Leases Equipment on operating leases, net consists of vehicle leases to retail customers with lease terms of two to five years and vehicle sales to rental car companies that are expected to be repurchased in an average of seven months. We are exposed to changes in the residual values of these assets. The residual values represent estimates of the values of the leased vehicles at the end of the lease contracts and are determined based on forecasted auction proceeds when there is a reliable basis to make such a determination. Realization of the residual values is dependent on the future ability to market the vehicles under prevailing market conditions. The adequacy of the estimate of the residual value is evaluated over the life of the arrangement and adjustments may be made to the extent the expected value of the vehicle changes. Adjustments may be in the form of revisions to the depreciation rate or recognition of an impairment charge. Impairment is determined to exist if an impairment indicator exists and the expected future cash flows, which include estimated residual values, are lower than the carrying amount of the vehicle's asset group. If the carrying amount is considered impaired an impairment charge is recorded for the amount by which the carrying amount exceeds fair value of the vehicle's asset group. Fair value is determined primarily using the anticipated cash flows, including estimated residual values. In our automotive finance operations when a leased vehicle is returned or repossessed the asset is recorded in Other assets at the lower of cost or estimated selling price, less costs to sell. Upon disposition a gain or loss is recorded in GM Financial interest, operating and other expenses for any difference between the net book value of the leased asset and the proceeds from the disposition of the asset.

Marketable Debt Securities We classify marketable debt securities as either available-for-sale or trading. Various factors, including turnover of holdings and investment guidelines, are considered in determining the classification of securities. Available-for-sale debt securities are recorded at fair value with unrealized gains and losses recorded net of related income taxes in Accumulated other comprehensive loss until realized. Trading debt securities are recorded at fair value with changes in fair value recorded in Interest income and other non-operating income, net. We determine realized gains and losses for all debt securities using the specific identification method.

We measure the fair value of our marketable debt securities using a market approach where identical or comparable prices are available and an income approach in other cases. If quoted market prices are not available, fair values of securities are determined using prices from a pricing service, pricing models, quoted prices of securities with similar characteristics or discounted cash flow models. These prices represent non-binding quotes. Our pricing service utilizes industry-standard pricing models that consider various inputs. We conduct an annual review of our pricing service and believe the prices received from our pricing service are a reliable representation of exit prices.

An evaluation is made quarterly to determine if unrealized losses related to non-trading investments in debt securities are other-than-temporary. Factors considered include the length of time and extent to which the fair value has been below cost, the financial condition and near-term prospects of the issuer and the intent to sell or likelihood to be forced to sell the debt security before any anticipated recovery.

Equity Investments When events and circumstances warrant, equity investments accounted for under the equity method of accounting are evaluated for impairment. An impairment charge is recorded whenever a decline in value of an equity investment below its carrying amount is determined to be other-than-temporary. Impairment charges related to equity method investments are recorded in Equity income. Equity investments that are not accounted for under the equity method of accounting are measured at fair value with changes in fair value recorded in Interest income and other non-operating income, net.

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


Derivative Financial Instruments The following changes to our accounting policies became effective upon adoption of ASU 2017-12.

Automotive Certain foreign currency and commodity forward contracts have been designated as cash flow hedges. The risk being hedged is the foreign currency and commodity price risk related to forecasted transactions. If the contract has been designated as a cash flow hedge, the change in the fair value of the cash flow hedge is deferred in Accumulated other comprehensive loss and is recognized in Automotive cost of sales along with the earnings effect of the hedged item when the hedged item affects earnings.

Automotive Financing - GM Financial Certain interest rate swap and foreign currency swap agreements have been designated as cash flow hedges. The risk being hedged is the foreign currency and interest rate risk related to forecasted transactions. If the contract has been designated as a cash flow hedge, the change in the fair value of the cash flow hedge is deferred in Accumulated other comprehensive loss and is recognized in GM Financial interest, operating and other expenses along with the earnings effect of the hedged item when the hedged item affects earnings. Changes in the fair value of amounts excluded from the assessment of effectiveness are recorded currently in earnings and are presented in the same income statement line as the earnings effect of the hedged item.

Note 3. Revenue
The following table disaggregates our revenue by major source:
 
Three Months Ended March 31, 2018
 
GMNA
 
GMI
 
Corporate
 
Total Automotive
 
GM Financial
 
Eliminations
 
Total
Vehicle, parts and accessories
$
25,882


$
4,605


$
9


$
30,496


$


$
(7
)

$
30,489

Used vehicles
1,155

 
47

 

 
1,202

 

 
(17
)
 
1,185

Services and other
781


196


40


1,017






1,017

Automotive net sales and revenue
27,818


4,848


49


32,715




(24
)

32,691

Leased vehicle income

 

 

 

 
2,447

 

 
2,447

Finance charge income

 

 

 

 
866

 
(2
)
 
864

Other income

 

 

 

 
98

 
(1
)
 
97

GM Financial net sales and revenue








3,411


(3
)

3,408

Net sales and revenue
$
27,818


$
4,848


$
49


$
32,715


$
3,411


$
(27
)

$
36,099


Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Adjustments to sales incentives for previously recognized sales decreased revenue by an insignificant amount during the three months ended March 31, 2018.

Deferred revenue consists primarily of maintenance, extended warranty and other service contracts. We recognized revenue of $383 million related to previously deferred revenue during the three months ended March 31, 2018. We expect to recognize revenue of $1.1 billion in the nine months ending December 31, 2018 and $780 million, $404 million and $476 million in the years ending December 31, 2019, 2020 and thereafter related to deferred revenue as of March 31, 2018.

Note 4. Marketable and Other Securities
The following table summarizes the fair value of cash equivalents and marketable debt and equity securities which approximates cost:

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

 
Fair Value Level
 
March 31, 2018

December 31, 2017
Cash and cash equivalents
 
 




Cash and time deposits
 
 
$
8,405


$
6,962

Available-for-sale debt securities
 
 




U.S. government and agencies
2
 


750

Corporate debt
2
 
2,374


3,032

Sovereign debt
2
 
337


1,954

Total available-for-sale debt securities – cash equivalents
 
 
2,711


5,736

Money market funds
1
 
3,140


2,814

Total cash and cash equivalents
 
 
$
14,256


$
15,512

Marketable debt securities
 
 
 
 


U.S. government and agencies
2
 
$
2,272


$
3,310

Corporate debt
2
 
3,362


3,665

Mortgage and asset-backed
2
 
642


635

Sovereign debt
2
 
834


703

Total available-for-sale debt securities – marketable securities
 
 
$
7,110


$
8,313

Restricted cash
 
 





Cash and cash equivalents
 
 
$
232


$
219

Money market funds
1
 
3,059


2,117

Total restricted cash
 
 
$
3,291


$
2,336

 
 
 
 
 
 
Available-for-sale debt securities included above with contractual maturities(a)
 
 
 
 
Due in one year or less
 
 
$
4,494

 
 
Due between one and five years
 
 
4,685

 
 
Total available-for-sale debt securities with contractual maturities
 
 
$
9,179

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

Sales proceeds from investments classified as available-for-sale and sold prior to maturity were $920 million and $626 million in the three months ended March 31, 2018 and 2017. Net unrealized gains and losses on available-for-sale debt securities were insignificant in the three months ended March 31, 2018 and 2017. Cumulative unrealized gains and losses on available-for-sale debt securities were insignificant at March 31, 2018 and December 31, 2017.

Investments in equity securities where market quotations are not available are accounted for at fair value primarily using Level 3 inputs. The fair value of these securities at March 31, 2018 and unrealized gains and losses recognized in the three months ended March 31, 2018 were insignificant. Refer to Note 1 for additional details on the adoption of ASU 2016-01.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheet to the total shown in the condensed consolidated statement of cash flows:
 
March 31, 2018
Cash and cash equivalents
$
14,256

Restricted cash included in Other current assets
2,713

Restricted cash included in Other assets
578

Total
$
17,547



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

Note 5. GM Financial Receivables

March 31, 2018

December 31, 2017

Retail

Commercial

Total

Retail

Commercial

Total
Finance receivables, collectively evaluated for impairment, net of fees
$
32,020


$
9,973


$
41,993


$
30,486


$
9,935


$
40,421

Finance receivables, individually evaluated for impairment, net of fees
2,199


23


2,222


2,228


22


2,250

GM Financial receivables
34,219


9,996


44,215


32,714


9,957


42,671

Less: allowance for loan losses
(858
)

(54
)

(912
)

(889
)

(53
)

(942
)
GM Financial receivables, net
$
33,361


$
9,942


$
43,303


$
31,825


$
9,904


$
41,729



















Fair value of GM Financial receivables






$
43,035








$
41,735


We estimate the fair value of retail finance receivables using observable and unobservable Level 3 inputs within a cash flow model. The inputs reflect assumptions regarding expected prepayments, deferrals, delinquencies, recoveries and charge-offs of the loans within the portfolio. The cash flow model produces an estimated amortization schedule of the finance receivables. The projected cash flows are then discounted to derive the fair value of the portfolio. Macroeconomic factors could affect the credit performance of the portfolio and therefore could potentially affect the assumptions used in our cash flow model. A substantial majority of our commercial finance receivables have variable interest rates. The carrying amount, a Level 2 input, is considered to be a reasonable estimate of fair value.
 
Three Months Ended
 
March 31, 2018
 
March 31, 2017
Allowance for loan losses at beginning of period
$
942

 
$
805

Provision for loan losses
136

 
211

Charge-offs
(295
)
 
(298
)
Recoveries
123

 
143

Effect of foreign currency
6

 
6

Allowance for loan losses at end of period
$
912

 
$
867


The allowance for loan losses on retail and commercial finance receivables included a collective allowance of $601 million and $611 million and a specific allowance of $311 million and $331 million at March 31, 2018 and December 31, 2017.

Retail Finance Receivables We use proprietary scoring systems in the underwriting process that measure the credit quality of retail finance receivables using several factors, such as credit bureau information, consumer credit risk scores (e.g. FICO scores or their equivalent) and contract characteristics. We also consider other factors such as employment history, financial stability and capacity to pay. Subsequent to origination we review the credit quality of retail finance receivables based on customer payment activity. At March 31, 2018 and December 31, 2017, 31% and 33% of retail finance receivables were from consumers with sub-prime credit scores, which are defined as FICO scores or equivalent scores of less than 620 at the time of loan origination.

An account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date the payment was contractually due. The accrual of finance charge income had been suspended on delinquent retail finance receivables with contractual amounts due of $852 million and $778 million at March 31, 2018 and December 31, 2017. The following table summarizes the contractual amount of delinquent retail finance receivables, which is not significantly different than the recorded investment of the retail finance receivables:

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


March 31, 2018

March 31, 2017

Amount

Percent of Contractual Amount Due

Amount

Percent of Contractual Amount Due
31-to-60 days delinquent
$
1,265


3.7
%

$
995


3.4
%
Greater-than-60 days delinquent
605


1.7
%

430


1.4
%
Total finance receivables more than 30 days delinquent
1,870


5.4
%

1,425


4.8
%
In repossession
53


0.2
%

46


0.2
%
Total finance receivables more than 30 days delinquent or in repossession
$
1,923


5.6
%

$
1,471


5.0
%

Retail finance receivables classified as troubled debt restructurings and individually evaluated for impairment were $2.2 billion and the allowance for loan losses included $307 million and $328 million of specific allowances on these receivables at March 31, 2018 and December 31, 2017.

Commercial Finance Receivables Our commercial finance receivables consist of dealer financings, primarily for inventory purchases. A proprietary model is used to assign a risk rating to each dealer. We perform periodic credit reviews of each dealership and adjust the dealership's risk rating, if necessary. Dealers in Group VI are subject to additional restrictions on funding, including suspension of lines of credit and liquidation of assets. The commercial finance receivables on non-accrual status were insignificant at March 31, 2018 and December 31, 2017. The following table summarizes the credit risk profile by dealer risk rating of the commercial finance receivables: 
 
 
March 31, 2018
 
December 31, 2017
Group I
– Dealers with superior financial metrics
$
1,784


$
1,915

Group II
– Dealers with strong financial metrics
3,670


3,465

Group III
– Dealers with fair financial metrics
3,161


3,239

Group IV
– Dealers with weak financial metrics
1,048


997

Group V
– Dealers warranting special mention due to elevated risks
268


260

Group VI
– Dealers with loans classified as substandard, doubtful or impaired
65


81

 
 
$
9,996


$
9,957


Note 6. Inventories
 
March 31, 2018
 
December 31, 2017
Total productive material, supplies and work in process
$
4,736

 
$
4,203

Finished product, including service parts
6,725

 
6,460

Total inventories
$
11,461

 
$
10,663


Note 7. Equipment on Operating Leases
Equipment on operating leases consists of leases to retail customers that are recorded as operating leases and vehicle sales to daily rental car companies with an expected repurchase obligation.

March 31, 2018

December 31, 2017
Equipment on operating leases
$
54,759


$
53,947

Less: accumulated depreciation
(10,526
)

(9,959
)
Equipment on operating leases, net(a)
$
44,233


$
43,988

__________
(a)
Includes $43.4 billion and $42.9 billion of GM Financial equipment on operating leases, net at March 31, 2018 and December 31, 2017.

Depreciation expense related to equipment on operating leases, net was $1.8 billion and $1.5 billion in the three months ended March 31, 2018 and 2017.

The following table summarizes minimum rental payments due to GM Financial on leases to retail customers:

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

 
Year Ending December 31,
 
2018
 
2019
 
2020
 
2021
 
2022
Minimum rental receipts under operating leases
$
5,241

 
$
5,064

 
$
2,336

 
$
346

 
$
19


Note 8. Equity in Net Assets of Nonconsolidated Affiliates
 
Three Months Ended
 
March 31, 2018
 
March 31, 2017
Automotive China equity income
$
597

 
$
504

Other joint ventures equity income
51

 
51

Total Equity income
$
648

 
$
555

There have been no significant ownership changes in our Automotive China joint ventures (Automotive China JVs) since December 31, 2017.
 
Three Months Ended
 
March 31, 2018
 
March 31, 2017
Summarized Operating Data of Automotive China JVs
 
 
 
Automotive China JVs' net sales
$
13,719

 
$
11,201

Automotive China JVs' net income
$
1,177

 
$
1,046

Dividends received from our nonconsolidated affiliates were insignificant in the three months ended March 31, 2018 and 2017. We had undistributed earnings of $2.8 billion and $2.2 billion related to our nonconsolidated affiliates at March 31, 2018 and December 31, 2017. Refer to Note 10 for information related to borrowing from a nonconsolidated affiliate.

Note 9. Variable Interest Entities
GM Financial uses special purpose entities (SPEs) that are considered VIEs to issue variable funding notes to third party bank-sponsored warehouse facilities or asset-backed securities to investors in securitization transactions. The debt issued by these VIEs is backed by finance receivables and leasing related assets transferred to the VIEs (Securitized Assets). GM Financial determined that it is the primary beneficiary of the SPEs because the servicing responsibilities for the Securitized Assets give GM Financial the power to direct the activities that most significantly impact the performance of the VIEs and the variable interests in the VIEs give GM Financial the obligation to absorb losses and the right to receive residual returns that could potentially be significant. The assets serve as the sole source of repayment for the debt issued by these entities. Investors in the notes issued by the VIEs do not have recourse to GM Financial or its other assets, with the exception of customary representation and warranty repurchase provisions and indemnities that GM Financial provides as the servicer. GM Financial is not required and does not currently intend to provide additional financial support to these SPEs. While these subsidiaries are included in GM Financial's condensed consolidated financial statements, they are separate legal entities and their assets are legally owned by them and are not available to GM Financial's creditors. The following table summarizes the assets and liabilities related to GM Financial's consolidated VIEs:
 
March 31, 2018
 
December 31, 2017
Restricted cash – current
$
2,027

 
$
1,740

Restricted cash – non-current
$
512

 
$
527

GM Financial receivables, net of fees – current
$
15,069

 
$
15,141

GM Financial receivables, net of fees – non-current
$
12,750

 
$
12,944

GM Financial equipment on operating leases, net
$
20,525

 
$
22,222

GM Financial short-term debt and current portion of long-term debt
$
17,674

 
$
18,972

GM Financial long-term debt
$
21,352

 
$
20,356


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


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

Note 10. Automotive and GM Financial Debt


March 31, 2018
 
December 31, 2017
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
Total automotive debt
$
15,298

 
$
16,141

 
$
13,502

 
$
15,088

Fair value utilizing Level 1 inputs
 
 
$
12,484

 
 
 
$
13,202

Fair value utilizing Level 2 inputs
 
 
$
3,657

 
 
 
$
1,886


The fair value of automotive debt measured utilizing Level 1 inputs was based on quoted prices in active markets for identical instruments that a market participant can access at the measurement date. The fair value of automotive debt measured utilizing Level 2 inputs was based on a discounted cash flow model using observable inputs. This model utilizes observable inputs such as contractual repayment terms and benchmark yield curves, plus a spread based on our senior unsecured notes that is intended to represent our nonperformance risk. We obtain the benchmark yield curves and yields on unsecured notes from independent sources that are widely used in the financial industry. At March 31, 2018 and December 31, 2017 the fair value of automotive debt exceeded its carrying amount due primarily to a decrease in bond yields compared to yields at the time of issuance.

In the three months ended March 31, 2018 we borrowed $1.3 billion from SAIC General Motors Corp., Ltd. (SGM) pursuant to a short-term unsecured note payable due in June 2018 to provide additional liquidity to support our operations. Upon repayment, we expect to receive a dividend from SGM.

In April 2018 we amended and restated our two existing revolving credit facilities and entered into a third facility, increasing our aggregate borrowing capacity from $14.5 billion to $16.5 billion. These facilities consist of a 364-day, $2.0 billion facility, a three-year, $4.0 billion facility and a five-year, $10.5 billion facility. The facilities are available to us as well as certain wholly owned subsidiaries, including GM Financial. The three-year, $4.0 billion facility allows for borrowings in U.S. Dollars and other currencies and includes a letter of credit sub-facility of $1.1 billion. The five-year, $10.5 billion facility allows for borrowings in U.S. Dollars and other currencies. The 364-day, $2.0 billion facility allows for borrowing in U.S. Dollars only. We have allocated the 364-day, $2.0 billion facility for exclusive use by GM Financial.

 
March 31, 2018
 
December 31, 2017
 
Carrying Amount

Fair Value

Carrying Amount

Fair Value
Secured debt
$
39,441


$
39,395


$
39,887


$
39,948

Unsecured debt
44,079


44,738


40,830


41,989

Total GM Financial debt
$
83,520


$
84,133


$
80,717


$
81,937

 








Fair value utilizing Level 2 inputs


$
81,931





$
79,623

Fair value utilizing Level 3 inputs


$
2,202





$
2,314


The fair value of GM Financial debt measured utilizing Level 2 inputs was based on quoted market prices for identical instruments and if unavailable, quoted market prices of similar instruments. For debt with original maturity or revolving period of 18 months or less par value is considered to be a reasonable estimate of fair value. The fair value of GM Financial debt measured utilizing Level 3 inputs was based on the discounted future net cash flows expected to be settled using current risk-adjusted rates.

Secured debt consists of revolving credit facilities and securitization notes payable. Most of the secured debt was issued by VIEs and is repayable only from proceeds related to the underlying pledged assets. Refer to Note 9 for additional information on GM Financial's involvement with VIEs. In the three months ended March 31, 2018 we issued $4.7 billion in aggregate principal amount of securitization notes payable with an initial weighted average interest rate of 2.59% and maturity dates ranging from 2022 to 2025.

Unsecured debt consists of senior notes, credit facilities and other unsecured debt. In the three months ended March 31, 2018 we issued $3.4 billion in aggregate principal amount of senior notes with an initial weighted average interest rate of 2.30% and maturity dates ranging from 2021 to 2028.

In April 2018 we issued $2.5 billion in aggregate principal amount of senior notes with an initial weighted average interest rate of 3.80% and maturity dates ranging from 2021 to 2025.

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


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

Note 11. Derivative Financial Instruments
Automotive The following table presents the notional amounts based on asset or liability positions of derivative financial instruments in our automotive operations:
 
Fair Value Level
 
March 31, 2018
 
December 31, 2017
Derivatives not designated as hedges(a)
 
 
 
 
 
Assets
 
 
 
 
 
Foreign currency
2
 
$
2,984


$
2,834

Commodity
2
 
418


606

PSA warrants(b)
2
 
49


48

Total assets
 
 
$
3,451


$
3,488

Liabilities
 
 





Foreign currency
2
 
$
2,102


$
1,188

__________
(a)
The fair value of these derivative instruments at March 31, 2018 and December 31, 2017 and the gains/losses included in our condensed consolidated income statements for the three months ended March 31, 2018 and 2017 were insignificant, unless otherwise noted.
(b)
The fair value of the PSA warrants located in Other assets was $909 million and $764 million at March 31, 2018 and December 31, 2017.

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

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

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

 
Fair Value Level
 
March 31, 2018
 
December 31, 2017
Derivatives designated as hedges(a)
 
 
 
 
 
Assets
 
 
 
 
 
 Fair value hedges – interest rate contracts
2
 
$
833


$
1,250

 Cash flow hedges
 
 





Interest rate contracts
2
 
1,794


2,177

Foreign currency
2
 
1,413


1,574

 Total cash flow hedges
 
 
3,207


3,751

Total assets
 
 
$
4,040


$
5,001

Liabilities
 
 





 Fair value hedges – interest rate contracts(b)(c)
2
 
$
8,947


$
9,860

 Cash flow hedges – foreign currency
2
 
815



Total liabilities
 
 
$
9,762


$
9,860

Derivatives not designated as hedges(a)
 
 
 
 
 
Assets
 
 
 
 
 
Interest rate contracts(d)
2
 
$
51,310


$
55,581

Foreign currency
2
 
1,230


1,201

Total assets
 
 
$
52,540


$
56,782

Liabilities
 
 
 
 
 
Interest rate contracts(c)(e)
2
 
$
39,896


$
26,357

Foreign currency
2
 
738



Total liabilities
 
 
$
40,634


$
26,357

__________
(a)
The fair value of these derivative instruments at March 31, 2018 and December 31, 2017 and the gains/losses included in our condensed consolidated income statements and statements of comprehensive income for the three months ended March 31, 2018 and 2017 were insignificant, unless otherwise noted.
(b)
The fair value of these derivative instruments located in Other liabilities was $396 million and $290 million at March 31, 2018 and December 31, 2017.
(c)
Amounts accrued for interest payments in a net receivable position are included in Other assets.
(d)
The fair value of these derivative instruments located in Other assets was $464 million and $329 million at March 31, 2018 and December 31, 2017.
(e)
The fair value of these derivative instruments located in Other liabilities was $514 million and $207 million at March 31, 2018 and December 31, 2017.

The fair value for Level 2 instruments was derived using the market approach based on observable market inputs including quoted prices of similar instruments and foreign exchange and interest rate forward curves.

The following amounts were recorded in the condensed consolidated balance sheet related to items designated and qualifying as hedged items in fair value hedging relationships:
 
March 31, 2018
 
Carrying Amount of Hedged Items
 
Cumulative Amount of Fair Value Hedging Adjustments(a)
GM Financial long-term debt
$
13,672

 
$
602

__________
(a)
Includes $163 million of hedging adjustments remaining on hedged items for which hedge accounting has been discontinued.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

Note 12. Product Warranty and Related Liabilities
 
Three Months Ended
 
March 31, 2018
 
March 31, 2017
Warranty balance at beginning of period
$
8,332

 
$
9,069

Warranties issued and assumed in period  recall campaigns
183

 
163

Warranties issued and assumed in period  product warranty
521

 
566

Payments
(735
)
 
(809
)
Adjustments to pre-existing warranties
(82
)
 
40

Effect of foreign currency and other
(86
)
 
34

Warranty balance at end of period
$
8,133

 
$
9,063


We estimate our reasonably possible loss in excess of amounts accrued for recall campaigns to be insignificant at March 31, 2018. Refer to Note 14 for reasonably possible losses on Takata Corporation (Takata) matters.

Note 13. Pensions and Other Postretirement Benefits

Three Months Ended March 31, 2018

Three Months Ended March 31, 2017

Pension Benefits

Global OPEB Plans

Pension Benefits

Global OPEB Plans

U.S.

Non-U.S.


U.S.

Non-U.S.

Service cost
$
83


$
66


$
5


$
79


$
46


$
4

Interest cost
513


120


50


536


125


49

Expected return on plan assets
(973
)

(212
)



(919
)

(171
)


Amortization of prior service cost (credit)
(1
)

1


(4
)

(1
)

1


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


37


13


(1
)

47


8

Net periodic pension and OPEB (income) expense
$
(376
)

$
12


$
64


$
(306
)

$
48


$
58


The non-service cost components of the net periodic pension and OPEB income of $421 million and $329 million in the three months ended March 31, 2018 and 2017 are presented in Interest income and other non-operating income, net. We elected to use the 2017 amounts disclosed above as the practical expedient for determining the retrospective presentation. Refer to Note 1 for additional details on the adoption of ASU 2017-07.

We expect to contribute approximately $1.2 billion to our non-U.S. pension plans in 2018, inclusive of the Korea payment of pension obligations for separated employees. Refer to Note 16 for additional information.
 
 
 
 
 
 
Note 14. Commitments and Contingencies
Litigation-Related Liability and Tax Administrative Matters In the normal course of our business, we are named from time to time as a defendant in various legal actions, including arbitrations, class actions and other litigation. We identify below the material individual proceedings and investigations in connection with which we believe a material loss is reasonably possible or probable. We accrue for matters when we believe that losses are probable and can be reasonably estimated. At March 31, 2018 and December 31, 2017 accruals of $941 million and $930 million were recorded in Accrued liabilities and Other liabilities. In many proceedings, it is inherently difficult to determine whether any loss is probable or even reasonably possible or to estimate the size or range of the possible loss. Accordingly an adverse outcome from such proceedings could exceed the amounts accrued by an amount that could be material to our results of operations or cash flows in any particular reporting period.

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

Economic-Loss Claims We are aware of over 100 putative class actions pending against GM in various courts in the U.S. and Canada alleging that consumers who purchased or leased vehicles manufactured by GM or Motors Liquidation Company (formerly

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

known as General Motors Corporation) had been economically harmed by one or more of the 2014 recalls and/or the underlying vehicle conditions associated with those recalls (economic-loss cases). In general, these economic-loss cases seek recovery for purported compensatory damages, such as alleged benefit-of-the-bargain damages or damages related to alleged diminution in value of the vehicles, as well as punitive damages, injunctive relief and other relief.

Many of the pending economic-loss claims have been transferred to, and consolidated in, a single federal court, the U.S. District Court for the Southern District of New York (Southern District). These plaintiffs have asserted economic-loss claims under federal and state laws, including claims relating to recalled vehicles manufactured by GM and claims asserting successor liability relating to certain recalled vehicles manufactured by Motors Liquidation Company. The Southern District has dismissed various of these claims, including claims under the Racketeer Influenced and Corrupt Organization Act, claims for recovery for alleged reduction in the value of plaintiffs' vehicles due to damage to GM’s reputation and brand as a result of the ignition switch matter, and claims of plaintiffs who purchased a vehicle before GM came into existence in July 2009. The Southern District also dismissed certain state law claims at issue.

In August 2017 the Southern District granted our motion to dismiss the successor liability claims of plaintiffs in seven of the sixteen states at issue on the motion and called for additional briefing to decide whether Plaintiffs' claims can proceed in the other nine states. In December 2017 the Southern District granted GM's motion and dismissed successor liability claims of plaintiffs in an additional state, but found that there are genuine issues of material fact that prevent summary judgment for GM in eight other states. In January 2018, GM moved for reconsideration of certain portions of the Southern District's December 2017 summary judgment ruling. That motion was granted in April 2018, holding that plaintiffs cannot advance successor liability claims in any state where New York law applies.

Personal Injury Claims We also are aware of several hundred actions pending in various courts in the U.S. and Canada alleging injury or death as a result of defects that may be the subject of the 2014 recalls (personal injury cases). In general, these cases seek recovery for purported compensatory damages, punitive damages and other relief. Since 2016, several bellwether trials of personal injury cases have taken place in the Southern District and in a Texas state court, which is administering a Texas state multi-district litigation (MDL). None of these trials resulted in a finding of liability against GM. We are currently preparing for two additional bellwether trials in the MDL.

Appellate Litigation Regarding Successor Liability Ignition Switch Claims In 2015 the U.S. Bankruptcy Court for the Southern District of New York (Bankruptcy Court) issued a decision precluding claims against us based upon pre-sale accidents, claims based upon the acts or conduct by Motors Liquidation Company and claims asserting successor liability for obligations owed by Motors Liquidation Company (successor liability claims), except for claims asserting liabilities that had been expressly assumed by us in the Amended and Restated Master Sale and Purchase Agreement, and certain claims arising solely out of our own independent post-sale acts.

In 2016, the United States Court of Appeals for the Second Circuit (Second Circuit) held that the Bankruptcy Court's 2009 order approving the sale of substantially all of the assets of Motors Liquidation Company to GM free and clear of, among other things, successor liability claims could not be enforced to bar claims against GM asserted by either plaintiffs who purchased used vehicles after the sale or against purchasers who asserted claims relating to the ignition switch defect, including pre-sale personal injury claims and economic-loss claims. In 2017, the United States Supreme Court denied our petition for certiorari. Certain of these pre-sale claims were resolved through GM's Compensation Program. Plaintiffs asserting pre-sale claims related to the ignition switch defect that were not resolved by the Compensation Program must still establish their right to assert successor liability claims and demonstrate that their claims have merit.

Contingently Issuable Shares  Under the Amended and Restated Master Sale and Purchase Agreement between us and Motors Liquidation Company we may be obligated to issue additional shares (Adjustment Shares) of our common stock in the event that allowed general unsecured claims against the Motors Liquidation Company GUC Trust (GUC Trust), as estimated by the Bankruptcy Court, exceed $35.0 billion. The maximum number of shares issuable is 30 million shares (subject to adjustment to take into account stock dividends, stock splits and other transactions). On December 31, 2017, the GUC Trust stated in public filings that allowed general unsecured claims were approximately $31.9 billion. In August 2017, a group of plaintiffs’ attorneys alleged that they had an agreement to settle “late claims” against the GUC Trust (i.e., claims filed after the deadline established by the Bankruptcy Court). Although the Bankruptcy Court ruled in January 2018 that the alleged settlement agreement was not binding or enforceable, litigation continues over whether late claims can be asserted against the GUC Trust. On April 25, 2018, the GUC Trust filed a letter with the Bankruptcy Court alleging that it had signed a settlement agreement with certain economic loss plaintiffs and certain of the ignition switch pre-closing accident plaintiffs (the parties seeking to assert late claims). Details of the settlement were not disclosed, and the GUC Trust stated that the settlement agreement would be submitted to the Bankruptcy Court for approval on

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

or before May 2, 2018. If such late claims are allowed by the Bankruptcy Court for certain aggregate amounts sought by plaintiffs, then GM may be required to issue Adjustment Shares to the GUC Trust. We are currently unable to estimate any reasonably possible loss or range of loss that may result from this matter.

Securities and Derivative Matters In a putative shareholder class action filed in the United States District Court for the Eastern District of Michigan (Eastern District) on behalf of purchasers of our common stock from November 17, 2010 to July 24, 2014, the lead plaintiff alleged that GM and several current and former officers and employees made material misstatements and omissions relating to problems with the ignition switch and other matters in SEC filings and other public statements. In 2016 the Eastern District entered a judgment approving a class-wide settlement of the class action for $300 million. One shareholder filed an appeal of the decision approving the settlement. The United States Court of Appeals for the Sixth Circuit affirmed the judgment approving the settlement in November 2017. The objector subsequently filed petitions for rehearing and for en banc review before the entire Sixth Circuit. Both of those petitions were denied.

Three shareholder derivative actions against certain current and former GM directors and officers are pending in the Eastern District. In the first two cases, which are consolidated, the parties are currently briefing a motion to dismiss the plaintiffs' amended complaint. The Eastern District dismissed the third action in March 2018. In addition, two derivative actions filed in the Circuit Court of Wayne County, Michigan, which have been consolidated, are also stayed pending disposition of the federal derivative actions.

Government Matters In connection with the 2014 recalls, we have from time to time received subpoenas and other requests for information related to investigations by agencies or other representatives of U.S. federal, state and the Canadian governments. In March 2018, we conclusively resolved a civil action initiated by the Arizona Attorney General. GM is cooperating with all reasonable pending requests for information. Any existing governmental matters or investigations could in the future result in the imposition of damages, fines, civil consent orders, civil and criminal penalties or other remedies.

Deferred Prosecution Agreement In September 2015, GM entered into the Deferred Prosecution Agreement (DPA) with the U.S. Attorney's Office of the Southern District of New York (U.S. Attorney's Office) regarding its investigation of the events leading up to certain recalls regarding faulty ignition switches.

Pursuant to the DPA we paid the United States $900 million as a financial penalty, and we agreed to retain an independent monitor to review and assess our policies, practices or procedures related to statements about motor vehicle safety, the provision of information to those responsible for recall decisions, recall processes and addressing known defects in certified pre-owned vehicles. In addition, the U.S. Attorney's Office agreed to recommend to the Southern District that prosecution of GM on a two-count information (the Information) filed in the Southern District be deferred for three years. The U.S. Attorney's Office also agreed that if we are in compliance with all of our obligations under the DPA, the U.S. Attorney's Office will, within 30 days after the expiration of the period of deferral (including any extensions thereto), seek dismissal with prejudice of the Information. For a further description of the terms and conditions of the DPA refer to Note 17 of our 2017 Form 10-K.

The total amount accrued for the 2014 recalls at March 31, 2018 reflects amounts for a combination of settled but unpaid matters, and for the remaining unsettled investigations, claims and/or lawsuits relating to the ignition switch recalls and other related recalls to the extent that such matters are probable and can be reasonably estimated. The amounts accrued for those unsettled investigations, claims, and/or lawsuits represent a combination of our best single point estimates where determinable and, where no such single point estimate is determinable, our estimate of the low end of the range of probable loss with regard to such matters, if that is determinable. We believe it is probable that we will incur additional liabilities beyond what has already been accrued for at least a portion of the remaining matters, whether through settlement or judgment; however, we are currently unable to estimate an overall amount or range of loss because these matters involve significant uncertainties, including the legal theory or the nature of the investigations, claims and/or lawsuits, the complexity of the facts, the lack of documentation available to us with respect to particular cases or groups of cases, the results of any investigation or litigation and the timing of resolution of the investigation or litigations, including any appeals. We will continue to consider resolution of pending matters involving ignition switch recalls and other recalls where it makes sense to do so.

GM Korea Wage Litigation GM Korea Company (GM Korea) is party to litigation with current and former hourly employees in the appellate court and Incheon District Court in Incheon, Korea. The group actions, which in the aggregate involve more than 10,000 employees, allege that GM Korea failed to include bonuses and certain allowances in its calculation of Ordinary Wages due under Korean regulations. In 2012 the Seoul High Court (an intermediate level appellate court) affirmed a decision in one of these group actions involving five GM Korea employees which was contrary to GM Korea's position. GM Korea appealed to the Supreme Court of the Republic of Korea (Supreme Court). In 2014, the Supreme Court largely agreed with GM’s legal arguments

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

and remanded the case to the Seoul High Court for consideration consistent with earlier Supreme Court precedent holding that while fixed bonuses should be included in the calculation of Ordinary Wages, claims for retroactive application of this rule would be barred under certain circumstances. In 2015, on reconsideration, the Seoul High Court held in GM Korea’s favor, after which the plaintiffs appealed to the Supreme Court. The Supreme Court has not yet rendered a decision. We estimate our reasonably possible loss in excess of amounts accrued to be approximately $600 million at March 31, 2018. Both the scope of claims asserted and GM Korea's assessment of any or all of the individual claim elements may change if new information becomes available or the legal or regulatory framework change.
 
GM Korea is also party to litigation with current and former salaried employees over allegations relating to ordinary wages regulation and whether to include fixed bonuses in the calculation of ordinary wages. In 2017, the Seoul High Court held that certain workers are not barred from filing retroactive wage claims. GM Korea appealed this ruling to the Supreme Court. The Supreme Court has not yet rendered a decision. We estimate our reasonably possible loss in excess of amounts accrued to be approximately $200 million at March 31, 2018. Both the scope of claims asserted and GM Korea's assessment of any or all of the individual claim elements may change if new information becomes available or the legal or regulatory framework change.

GM Korea is also party to litigation with current and former subcontract workers over allegations that they are entitled to the same wages and benefits provided to full-time employees, and to be hired as full-time employees. At March 31, 2018, we recorded an insignificant accrual covering certain asserted claims. We estimate that the reasonably possible loss in excess of amounts accrued for other current subcontract workers who may assert similar claims to be approximately $150 million at March 31, 2018. We have discussed with other stakeholders our concerns that any additional claims from current or former subcontract workers would significantly jeopardize the success of the viability plan we have proposed for GM Korea. We believe that the stakeholders have a strong incentive to find a solution that will not undermine the viability plan, but cannot be certain how these asserted claims and any additional claims by either current or former subcontract workers will be resolved.

GM Brazil Indirect Tax Claim In March 2017 the Supreme Court of Brazil issued a decision concluding that a certain state value added tax should not be included in the calculation of federal gross receipts taxes. The decision reduces GM Brazil’s gross receipts tax prospectively and, potentially, retrospectively. The retrospective right to recover is under judicial review. If the Supreme Court of Brazil grants retrospective recovery, we estimate potential recoveries of up to $1.4 billion. However, given the remaining uncertainty regarding the ultimate judicial resolution of this matter we are unable to assess the likelihood of any favorable outcome at this time. We have not recorded any amounts relating to the retrospective nature of this matter.

Other Litigation-Related Liability and Tax Administrative Matters Various other legal actions, including class actions, governmental investigations, claims and proceedings are pending against us or our related companies or joint ventures, including matters arising out of alleged product defects; employment-related matters; product and workplace safety, vehicle emissions, including CO2 and nitrogen oxide, fuel economy, and related governmental regulations; product warranties; financial services; dealer, supplier and other contractual relationships; government regulations relating to payments to foreign companies; government regulations relating to competition issues; tax-related matters not subject to the provision of ASC 740, Income Taxes (indirect tax-related matters); product design, manufacture and performance; consumer protection laws; and environmental protection laws, including laws regulating air emissions, water discharges, waste management and environmental remediation.

There are several putative class actions pending against GM in federal courts in the U.S. and in the Provincial Courts in Canada alleging that various vehicles sold including model year 2011-2016 Duramax Diesel Chevrolet Silverado and GMC Sierra vehicles, violate federal and state emission standards. GM also faces a series of additional lawsuits based primarily on allegations in the Duramax suit, including putative shareholder class actions claiming violations of federal securities law. The securities and shareholder demand lawsuits have been voluntarily stayed by the plaintiffs. At this stage of these proceedings, we are unable to provide an evaluation of the likelihood that a loss will be incurred or an estimate of the amounts or range of possible loss.

We believe that appropriate accruals have been established for losses that are probable and can be reasonably estimated. It is possible that the resolution of one or more of these matters could exceed the amounts accrued in an amount that could be material to our results of operations. We also from time to time receive subpoenas and other inquiries or requests for information from agencies or other representatives of U.S. federal, state and foreign governments on a variety of issues.

Indirect tax-related matters are being litigated globally pertaining to value added taxes, customs, duties, sales, property taxes and other non-income tax related tax exposures. The various non-U.S. labor-related matters include claims from current and former employees related to alleged unpaid wage, benefit, severance and other compensation matters. Certain administrative proceedings are indirect tax-related and may require that we deposit funds in escrow or provide an alternative form of security which may range from $250 million to $650 million at March 31, 2018. Some of the matters may involve compensatory, punitive or other treble

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

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, 2018. We believe that appropriate accruals have been established for losses that are probable and can be reasonably estimated. For indirect tax-related matters we estimate our reasonably possible loss in excess of amounts accrued to be up to approximately $1.0 billion at March 31, 2018.

Takata Matters In May 2016 the National Highway Traffic Safety Administration (NHTSA) issued an amended consent order requiring Takata to file defect information reports (DIRs) for previously unrecalled front airbag inflators that contain phased-stabilized ammonium nitrate-based propellant without a moisture absorbing desiccant on a multi-year, risk-based schedule through 2019 impacting tens of millions of vehicles produced by numerous automotive manufacturers. NHTSA concluded that the likely root cause of the rupturing of the airbag inflators is a function of time, temperature cycling and environmental moisture.

Although we do not believe there is a safety defect at this time in any unrecalled GM vehicles within scope of the Takata DIRs, in cooperation with NHTSA we have filed Preliminary DIRs covering certain of our GMT900 vehicles, which are full-size pickup trucks and sport utility vehicles (SUVs). We have also filed petitions for inconsequentiality with respect to the vehicles subject to those Preliminary DIRs. NHTSA has consolidated our petitions and will rule on them at the same time.

While these petitions have been pending, we have provided NHTSA with the results of our long-term studies and the studies performed by third-party experts, all of which form the basis for our determination that the inflators in these vehicles do not present an unreasonable risk to safety and that no repair should ultimately be required.

We believe these vehicles are currently performing as designed and ongoing testing continues to support the belief that the vehicles' unique design and integration mitigates against inflator propellant degradation and rupture risk. For example, the airbag inflators used in the vehicles are a variant engineered specifically for our vehicles, and include features such as greater venting, unique propellant wafer configurations, and machined steel end caps. The inflators are packaged in the instrument panel in such a way as to minimize exposure to moisture from the climate control system. Also, these vehicles have features that minimize the maximum temperature to which the inflator will be exposed, such as larger interior volumes and standard solar absorbing windshields and side glass.

Accordingly, no warranty provision has been made for any repair associated with our vehicles subject to the Preliminary DIRs and amended consent order. However, in the event we are ultimately obligated to repair the vehicles subject to current or future Takata DIRs under the amended consent order in the U.S., we estimate a reasonably possible impact to GM of approximately $1.0 billion.
GM is engaged in discussions with regulators outside the U.S. with respect to Takata inflators. There are significant differences in vehicle and inflator design between the relevant vehicles sold internationally and those sold in the U.S. We continue to gather and analyze evidence about these inflators and to share our findings with regulators. We were required to recall certain vehicles sold outside of the U.S. in the three months ended March 31, 2018 to replace Takata inflators in these vehicles. Additional recalls, if any, could be material to our results of operations and cash flows. We continue to monitor the international situation.
Through April 17, 2018 we are aware of three putative class actions pending against GM in federal court in the U.S., one putative class action in Mexico and three putative class actions pending in various Provincial Courts in Canada arising out of allegations that airbag inflators manufactured by Takata are defective. At this early stage of these proceedings, we are unable to provide an evaluation of the likelihood that a loss will be incurred or an estimate of the amounts or range of possible loss.

Product Liability With respect to product liability claims (other than claims relating to the ignition switch recalls discussed above) involving our and General Motors Corporation products, we believe that any judgment against us for actual damages will be adequately covered by our recorded accruals and, where applicable, excess liability insurance coverage. In addition we indemnify dealers for certain product liability related claims including products sold by General Motors Corporation's dealers. At March 31, 2018 and December 31, 2017 liabilities of $576 million and $595 million were recorded in Accrued liabilities and Other liabilities for the expected cost of all known product liability claims plus an estimate of the expected cost for product liability claims that have already been incurred and are expected to be filed in the future for which we are self-insured. It is reasonably possible that our accruals for product liability claims may increase in future periods in material amounts, although we cannot estimate a reasonable range of incremental loss based on currently available information.

Guarantees We enter into indemnification agreements for liability claims involving products manufactured primarily by certain joint ventures. We also provide vehicle repurchase guarantees and payment guarantees on commercial loans outstanding with third parties such as dealers. These guarantees terminate in years ranging from 2018 to 2032 or upon the occurrence of specific events

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

or are ongoing. We believe that the related potential costs incurred are adequately covered and our recorded accruals are insignificant. The maximum liability, calculated as future undiscounted payments, was $5.1 billion for these guarantees at March 31, 2018 and December 31, 2017, the majority of which relate to the indemnification agreements.

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

We periodically enter into agreements that incorporate indemnification provisions in the normal course of business. It is not possible to estimate our maximum exposure under these indemnifications or guarantees due to the conditional nature of these obligations. Insignificant amounts have been recorded for such obligations as the majority of them are not probable or estimable at this time and the fair value of the guarantees at issuance was insignificant.

Note 15. Income Taxes
For interim income tax reporting we estimate our annual effective tax rate and apply it to our year to date ordinary income (loss). Tax jurisdictions with a projected or year to date loss for which a tax benefit cannot be realized are excluded. The tax effects of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are reported in the interim period in which they occur. We have open tax years from 2008 to 2017 with various significant tax jurisdictions.

In the three months ended March 31, 2018 Income tax expense of $466 million primarily resulted from tax expense attributable to entities included in our effective tax rate calculation. The recorded effective tax rate is higher than the applicable statutory tax rate due primarily to losses incurred in jurisdictions for which a valuation allowance is recorded. In the three months ended March 31, 2017 Income tax expense of $787 million primarily resulted from tax expense attributable to entities included in our effective tax rate calculation of $898 million including tax benefits from foreign dividends, partially offset by tax benefits related to tax settlements.

At March 31, 2018 we had $22.8 billion of net deferred tax assets consisting of net operating losses and income tax credits, capitalized research expenditures and other timing differences that are available to offset future income tax liabilities, partially offset by valuation allowances.

The Tax Act was signed into law on December 22, 2017. The Tax Act changed many aspects of U.S. corporate income taxation and included reduction of the corporate income tax rate from 35% to 21%, implementation of a territorial tax system and imposition of a tax on deemed repatriated earnings of foreign subsidiaries. We recognized the tax effects of the Tax Act in the three months ended December 31, 2017 and recorded $7.3 billion in tax expense. The tax expense relates almost entirely to the remeasurement of deferred tax assets to the 21% tax rate. Upon completion of our 2017 U.S. income tax return later in 2018 we may identify additional remeasurement adjustments to our recorded deferred tax assets. We will continue to assess our provision for income taxes as future guidance is issued but do not currently anticipate significant revisions will be necessary. Any such revisions will be treated in accordance with the measurement period guidance outlined in Staff Accounting Bulletin No. 118.

Note 16. Restructuring and Other Initiatives
We have executed various restructuring and other initiatives and we may execute additional initiatives in the future, if necessary, to streamline manufacturing capacity and other costs to improve the utilization of remaining facilities. To the extent these programs involve voluntary separations, no liabilities are generally recorded until offers to employees are accepted. If employees are involuntarily terminated, a liability is generally recorded at the communication date. Related charges are recorded in Automotive cost of sales and Automotive selling, general and administrative expense. The following table summarizes the reserves and charges related to restructuring and other initiatives, including postemployment benefit reserves and charges:


Three Months Ended

March 31, 2018

March 31, 2017
Balance at beginning of period
$
227


$
268

Additions, interest accretion and other
455


40

Payments
(37
)

(22
)
Revisions to estimates and effect of foreign currency
(12
)

10

Balance at end of period
$
633


$
296



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

In the three months ended March 31, 2018 restructuring and other initiatives primarily included the closure of a facility by the end of May 2018 and other restructuring actions in Korea. We recorded charges of $900 million in GMI consisting of $464 million in non-cash asset impairments, not reflected in the table above, and $436 million in employee separation charges, which are reflected in the table above, in the three months ended March 31, 2018. We expect to incur approximately $100 million in additional employee separation charges and approximately $800 million in cash outflows for employee separations and statutory pension payments, primarily in the three months ending June 30, 2018. Restructuring and other initiatives were insignificant in the three months ended March 31, 2017.

Note 17. Stockholders' Equity and Noncontrolling Interests
We had 2.0 billion shares of preferred stock and 5.0 billion shares of common stock authorized for issuance and 1.4 billion shares of common stock issued and outstanding at March 31, 2018 and December 31, 2017. In the three months ended March 31, 2018 we purchased three million shares of our outstanding common stock for $100 million as part of the common stock repurchase program announced in March 2015, which our Board of Directors increased and extended in January 2016 and January 2017. We did not purchase shares of our outstanding common stock in the three months ended March 31, 2017. Our total dividends paid on common stock were $536 million and $573 million in the three months ended March 31, 2018 and 2017.

The following table summarizes the significant components of Accumulated other comprehensive loss:

Three Months Ended

March 31, 2018

March 31, 2017
Foreign Currency Translation Adjustments



Balance at beginning of period
$
(1,606
)

$
(2,355
)
Other comprehensive income and noncontrolling interests, net of reclassification adjustment, tax and impact of adoption of accounting standards(a)(b)(c)(d)
108

 
91

Balance at end of period
$
(1,498
)
 
$
(2,264
)
 
 
 
 
Defined Benefit Plans



Balance at beginning of period
$
(6,398
)

$
(6,968
)
Other comprehensive loss before reclassification adjustment, net of tax and impact of adoption of accounting standards(c)(d)
(170
)

(77
)
Reclassification adjustment, net of tax(c)
44


48

Other comprehensive loss, net of tax and impact of adoption of accounting standards(c)(d)
(126
)

(29
)
Balance at end of period
$
(6,524
)

$
(6,997
)
__________
(a)
The noncontrolling interests were insignificant in the three months ended March 31, 2018 and 2017.
(b)
The reclassification adjustment was insignificant in the three months ended March 31, 2018 and 2017.
(c)
The income tax effect was insignificant in the three months ended March 31, 2018 and 2017.
(d)
Refer to Note 1 for additional information on adoption of accounting standards.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

Note 18. Earnings Per Share

Three Months Ended

March 31, 2018

March 31, 2017
Basic earnings per share



Income from continuing operations(a)
$
1,116


$
2,677

Less: cumulative dividends on GM Financial preferred stock
(14
)


Income from continuing operations attributable to common stockholders
1,102


2,677

Loss from discontinued operations, net of tax
70


69

Net income attributable to common stockholders
$
1,032


$
2,608





Weighted-average common shares outstanding
1,408


1,505





Basic earnings per common share – continuing operations
$
0.78


$
1.78

Basic loss per common share – discontinued operations
$
0.05


$
0.05

Basic earnings per common share
$
0.73


$
1.73

Diluted earnings per share



Income from continuing operations attributable to common stockholders – diluted(a)
$
1,102


$
2,677

Loss from discontinued operations, net of tax – diluted
$
70


$
69

Net income attributable to common stockholders – diluted
$
1,032


$
2,608







Weighted-average common shares outstanding – basic
1,408


1,505

Dilutive effect of warrants and awards under stock incentive plans
22


27

Weighted-average common shares outstanding – diluted
1,430


1,532







Diluted earnings per common share – continuing operations
$
0.77


$
1.75

Diluted loss per common share – discontinued operations
$
0.05


$
0.05

Diluted earnings per common share
$
0.72


$
1.70

Potentially dilutive securities(b)
4



__________
(a)
Net of Net (income) loss attributable to noncontrolling interests.
(b)
Potentially dilutive securities attributable to outstanding stock options and Restricted Stock Units (RSUs) were excluded from the computation of diluted earnings per share (EPS) because the securities would have had an antidilutive effect.

Note 19. Discontinued Operations
On March 5, 2017 we entered into the Agreement to sell our European Business to PSA Group. On July 31, 2017 we closed the sale of our Opel/Vauxhall Business to PSA Group, and on October 31, 2017 we closed the sale of the Fincos to Banque PSA Finance S.A. and BNP Paribas Personal Finance S.A. For a further description of the terms and conditions of the Agreement refer to Note 3 of our 2017 Form 10-K.

Our wholly owned subsidiary (the Seller) has agreed to indemnify PSA Group for certain losses resulting from any inaccuracy of the representations and warranties or breaches of our covenants included in the Agreement and for certain other liabilities including emissions and product liabilities. The Company has entered into a guarantee for the benefit of PSA Group and pursuant to which the Company has agreed to guarantee the Seller's obligation to indemnify PSA Group. Certain of these indemnification obligations are subject to time limitations, thresholds and/or caps as to the amount of required payments. We are currently unable to estimate any reasonably possible overall amounts or range of loss that may result from claims made under these indemnities, if any.

In 2017, PSA Group provided a number of post-closing working capital and other adjustments under the Agreement and other ancillary agreements. During the three months ended March 31, 2018, we reached final agreement with PSA Group with respect to these adjustments, as well as certain other matters related to the European Business. The cost of resolving these matters is classified in discontinued operations and was insignificant.


24

                           

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

We will purchase from and supply to PSA Group certain vehicles for a period of time following closing. Total net sales and revenue of $607 million and purchases and expenses of $476 million related to transactions with the Opel/Vauxhall Business were included in continuing operations during the three months ended March 31, 2018. Cash payments were $426 million and cash receipts of $811 million were recorded in Net cash provided by (used in) operating activities – continuing operations related to transactions with the Opel/Vauxhall Business during the three months ended March 31, 2018.

The following table summarizes the results of the European Business operations:
 
Three Months Ended
 
March 31, 2018
 
March 31, 2017
Automotive net sales and revenue
$

 
$
4,699

GM Financial net sales and revenue

 
128

Total net sales and revenue

 
4,827

Automotive cost of sales

 
4,560

GM Financial interest, operating and other expenses

 
100

Automotive selling, general, and administrative expense

 
326

Other income items

 
3

Loss from discontinued operations before taxes
</