L:\secdraft\version4\jun-97.doc 13
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
Commission file number 1-143
GENERAL MOTORS CORPORATION
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 38-0572515
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Renaissance Center, Detroit, Michigan 48243-7301
3044 West Grand Boulevard, Detroit, Michigan 48202-3091
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (313) 556-5000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X . No .
As of June 30, 1997, there were outstanding 720,199,762 shares of the
issuer's $1-2/3 par value common stock and 101,446,357 shares of Class H $0.10
par value common stock.
- 1 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
INDEX
Page No.
Part I - Financial Information (Unaudited)
Item 1. Financial Statements
Consolidated Statements of Income for the Three and Six
Months Ended June 30, 1997 and 1996 3
Consolidated Balance Sheets as of June 30, 1997,
December 31, 1996 and June 30, 1996 4
Condensed Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Part II - Other Information (Unaudited)
Item 1. Legal Proceedings 27
Item 4. Submission of Matters to a Vote of Security Holders 29
Item 6. Exhibits and Reports on Form 8-K 31
Signature 32
Exhibit 3(ii) By-Laws of General Motors Corporation, as amended 33
Exhibit 11 Computation of Earnings Per Share Attributable to
Common Stocks for the Three and Six Months Ended
June 30, 1997 and 1996 62
Exhibit 12 Computation of Ratios of Earnings to Fixed Charges
for the Six Months Ended June 30, 1997 and 1996 66
Exhibit 99 Hughes Electronics Corporation and Subsidiaries
Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and
Results of Operations 67
Exhibit 27 Financial Data Schedule (for SEC information only)
- 2 -
<PAGE>
PART I
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1977 1996 1997 1996
------- -------- -------- -------
(Dollars in Millions Except Per Share Amounts)
Net sales and revenues
Manufactured products $39,724 $40,169 $77,164 $74,826
Financial services 3,204 3,125 6,401 6,304
Other income (Note 4) 2,218 1,486 3,822 2,892
------- ------- ------- -------
Total net sales and revenues 45,146 44,780 87,387 84,022
------ ------ ------ ------
Costs and expenses
Cost of sales and other operating charges,
exclusive of items listed below 33,008 33,116 64,038 63,247
Selling, general, and administrative
expenses 3,984 3,578 7,575 6,648
Depreciation and amortization expenses 3,101 3,018 6,166 5,990
Interest expense 1,500 1,414 2,961 2,835
Plant closing expense - - 80 -
Other deductions (Note 4) 320 452 568 866
-------- -------- -------- -------
Total costs and expenses 41,913 41,578 81,388 79,586
------ ------ ------ ------
Income from continuing operations
before income taxes and minority
interests 3,233 3,202 5,999 4,436
Income taxes 1,153 1,098 2,142 1,530
Minority interests 18 (8) 37 (10)
------- --------- ------- ---------
Income from continuing operations 2,098 2,096 3,894 2,896
Income (loss) from discontinued
operations (Note 3) - (209) - 10
------- ------ ------- -------
Net income 2,098 1,887 3,894 2,906
Dividends on preference stocks 20 20 40 40
------- ------- ------- -------
Earnings on common stocks $2,078 $1,867 $3,854 $2,866
===== ===== ===== =====
Earnings attributable to common stocks (Note 10)
$1-2/3 par value from continuing
operations $1,941 $2,001 $3,658 $2,705
Loss from discontinued operations - (15) - (5)
--------- ------- --------- -------
Net earnings attributable to
$1-2/3 par value $1,941 $1,986 $3,658 $2,700
========= ====== ======== ======
Income (loss) from discontinued
operations attributable to
Class E $ - $(194) $ - $ 15
===== === ===== ====
Net earnings attributable to
Class H $137 $75 $196 $151
=== == === ===
Average number of shares of common
stocks outstanding (in millions)
$1-2/3 par value 724 756 736 756
Class E - 479 - 470
Class H 101 98 101 98
Earnings per share attributable to
common stocks (Note 10)
$1-2/3 par value from continuing
operations $2.68 $2.65 $4.98 $3.58
Loss from discontinued operations - (0.02) - (0.01)
------- ---- ------- ----
Net earnings attributable to
$1-2/3 par value $2.68 $2.63 $4.98 $3.57
===== ===== ===== =====
Income (loss) from discontinued
operations attributable to
Class E $ - $(0.41) $ - $0.04
===== ==== ===== ====
Net earnings attributable to
Class H $1.35 $0.77 $1.94 $1.55
==== ==== ==== ====
Cash dividends per share of common
stocks
$1-2/3 par value $0.50 $0.40 $1.00 $0.80
Class E $ - $0.15 $ - $0.30
Class H $0.25 $0.24 $0.50 $0.48
Reference should be made to the notes to consolidated financial statements.
- 3 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, June 30,
1997 Dec. 31, 1996
(Unaudited) 1996 (Unaudited)
(Dollars in Millions)
ASSETS
Cash and cash equivalents $11,674 $14,063 $12,461
Other marketable securities 9,343 8,199 5,903
------- ------- -------
Total cash and marketable securities 21,017 22,262 18,364
Finance receivables - net 60,357 57,550 58,432
Accounts and notes receivable (less allowances) 7,461 6,557 7,249
Inventories (less allowances) (Note 5) 13,528 11,898 11,755
Contracts in process (less advances and
progress payments) 2,264 2,187 2,440
Deferred income taxes 19,291 19,510 20,415
Equipment on operating leases (less accumulated
depreciation) 32,300 30,112 28,944
Property
Real estate, plants, and equipment 69,671 69,770 68,386
Less accumulated depreciation (40,911) (41,298) (41,299)
------ ------ ------
Net real estate, plants, and equipment 28,760 28,472 27,087
Special tools - net 8,893 9,032 8,324
------- ------- -------
Total property 37,653 37,504 35,411
Intangible assets - net 15,029 12,691 10,282
Other assets - net 23,005 21,871 19,605
-------- -------- --------
Total assets $231,905 $222,142 $212,897
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable (principally trade) $14,197 $14,221 $13,231
Notes and loans payable 89,918 85,300 80,756
Deferred income taxes 4,199 3,207 3,424
Postretirement benefits other than
pensions (Note 6) 44,007 43,190 42,393
Pensions 7,774 7,599 6,442
Other liabilities and deferred credits 46,661 45,115 45,628
-------- -------- -------
Total liabilities 206,756 198,632 191,874
------- ------- -------
Minority interests 716 92 163
Redeemable preferred stock of subsidiary
(Note 11) 402 - -
Stockholders' equity
Preference stocks 1 1 1
Common stocks
$1-2/3 par value (Note 9; issued, 721,480,932;
756,619,625; and 756,619,913 shares) 1,202 1,261 1,261
Class H (Note 2; issued, 101,641,092;
100,075,000 and 98,853,477 shares) 10 10 10
Capital surplus (principally additional
paid-in capital) 17,250 19,189 19,080
Retained earnings 9,201 6,137 4,773
------- ------- ------
Subtotal 27,664 26,598 25,125
Minimum pension liability adjustment (3,490) (3,490) (4,742)
Accumulated foreign currency translation
adjustments (642) (113) 44
Net unrealized gains on investments in
certain debt and equity securities 499 423 433
------- ------- --------
Total stockholders' equity 24,031 23,418 20,860
------ ------ ------
Total liabilities and stockholders'
equity $231,905 $222,142 $212,897
======= ======= =======
Reference should be made to the notes to consolidated financial statements.
- 4 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
1997 1996
(Dollars in Millions)
Net cash provided by operating activities $9,773 $9,583
------ -----
Cash flows from investing activities
Expenditures for property (4,268) (4,313)
Investments in companies, net of cash acquired (1,652) (54)
Investments in other marketable securities
- acquisitions (18,147) (10,177)
Investments in other marketable securities
- liquidations 17,595 9,862
Finance receivables - acquisitions (79,997) (73,871)
Finance receivables - liquidations 63,304 56,095
Proceeds from sales of finance receivables 12,930 18,466
Operating leases - acquisitions (10,649) (9,724)
Operating leases - liquidations 6,227 5,701
Special inter-company payment from EDS - 500
Other 954 798
Net cash used in investing activities (13,703) (6,717)
------ ------
Cash flows from financing activities
Net increase (decrease) in loans payable 3,269 (3,610)
Increase in long-term debt 8,485 10,155
Decrease in long-term debt (7,061) (6,862)
Proceeds from issuing common stocks 281 191
Repurchases of common stocks (2,292) -
Cash dividends paid to stockholders (829) (837)
Proceeds from sale of minority interest in
DIRECTV(R) - 138
------ ------
Net cash provided by (used in) financing activities 1,853 (825)
----- ------
Effect of exchange rate changes on cash and
cash equivalents (312) (179)
----- -----
Net cash (used in) provided by continuing operations (2,389) 1,862
Net cash provided by discontinued operations - 103
------ ------
Net (decrease) increase in cash and cash equivalents (2,389) 1,965
Cash and cash equivalents at beginning of the period 14,063 10,496
------ ------
Cash and cash equivalents at end of the period $11,674 $12,461
====== ======
Reference should be made to the notes to consolidated financial statements.
- 5 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Significant Accounting Policies
Financial Statement Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. The consolidated financial statements include the
accounts of General Motors Corporation (hereinafter referred to as the
Corporation) and domestic and foreign subsidiaries that are more than 50% owned,
principally General Motors Acceptance Corporation and Subsidiaries (GMAC) and
Hughes Electronics Corporation and Subsidiaries (Hughes) (collectively referred
to as General Motors or GM). In the opinion of management, all adjustments
(consisting of only normal recurring items), which are necessary for a fair
presentation have been included. The results for interim periods are not
necessarily indicative of results which may be expected for any other interim
period or for the full year. For further information, refer to the consolidated
financial statements and notes thereto included in the GM 1996 Annual Report on
Form 10-K filed with the Securities and Exchange Commission.
Certain amounts for 1996 were reclassified to conform with the 1997
classifications.
Derivative Instruments
GM is party to a variety of foreign exchange, interest rate, and commodity
forward contracts and options entered into in connection with the management of
its exposure to fluctuations in foreign exchange rates, interest rates, and
certain commodities prices. These financial exposures are managed in accordance
with corporate policies and procedures.
GM established the Risk Management Committee to develop and monitor the
Corporation's financial risk strategies, policies and procedures. The Committee
reviews and approves all new risk management strategies, establishes approval
authority guidelines for approved programs and monitors compliance and
performance of existing risk management programs. GM does not enter into
derivative transactions for trading purposes.
As part of the hedging program approval process, GM's management is
required to identify the specific financial risk which the derivative
transaction will minimize, the appropriate hedging instrument to be used to
reduce the risk, and the correlation between the financial risk and the hedging
instrument. Purchase orders, letters of intent, vehicle production forecasts,
capital planning forecasts, and historical data are used as the basis for
determining the anticipated values of the transactions to be hedged. If it is
determined that the correlation between the financial exposure and the hedging
instrument is below a specified level, the transaction is generally not
approved. In those infrequent instances in which approval is received for a
hedging transaction that does not meet the correlation requirement, the
derivative is marked to market for accounting purposes. The hedge positions, as
well as the correlation between the transaction risks and the hedging
instruments, are reviewed by management on an ongoing basis.
Foreign exchange forward and option contracts are accounted for as hedges
to the extent they are designated, and are effective as, hedges of firm foreign
currency commitments. Additionally, certain foreign exchange option contracts
receive hedge accounting treatment to the extent such contracts hedge certain
anticipated foreign currency transactions. Other such foreign exchange contracts
and options are marked to market on a current basis.
Interest rate swaps that are designated, and effective as, hedges of
underlying debt obligations are not marked to market, but are used to adjust
interest expense recognized over the lives of the underlying debt agreements.
Gains and losses from terminated contracts are deferred and amortized over the
remaining period of the original swap or the remaining term of the underlying
exposure, whichever is shorter. Open interest rate swaps are reviewed regularly
to ensure that they remain effective as hedges of interest rate exposure.
Written options (including swaptions, interest rate caps and collars, and swaps
with embedded swaptions) and other swaps that do not qualify for hedge
accounting are marked to market on a current basis.
GM also enters into commodity forward and option contracts. Since GM has the
discretion to settle these transactions either in cash or by taking physical
delivery, these contracts are not considered financial instruments for
accounting purposes. Commodity forward contracts and options are accounted for
as hedges to the extent they are designated, and are effective as, hedges of
firm or anticipated commodity purchase contracts. Other commodity forward
contracts and options are marked to market on a current basis.
- 6 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
Note 1. Significant Accounting Policies (concluded)
New Accounting Standards
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income,
and SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information. SFAS No. 130 establishes standards for reporting and displaying
comprehensive income and its components in a financial statement that is
displayed with the same prominence as other financial statements. SFAS No. 130
requires that an entity classify items of other comprehensive income by their
nature in that financial statement. In addition, the accumulated balance of
other comprehensive income must be displayed separately from retained earnings
and additional paid-in capital in the equity section of the statement of
financial position. Reclassification of financial statements for earlier
periods, provided for comparative purposes, is required. SFAS No. 131
establishes standards for reporting information about operating segments in
annual financial statements and requires selected information about operating
segments in interim financial reports issued to stockholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. Operating segments are defined as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. SFAS No. 131
requires reporting segment profit or loss, certain specific revenue and expense
items and segment assets. It also requires reconciliations of total segment
revenues, total segment profit or loss, total segment assets, and other amounts
disclosed for segments to corresponding amounts reported in the financial
statements. Restatement of comparative information for earlier periods presented
is required in the initial year of application. Interim information is not
required until the second year of application, at which time comparative
information is required. GM will adopt SFAS No. 130 and No. 131 on January 1,
1998, as required.
Note 2. Hughes Transactions
On January 16, 1997, GM and Hughes announced a series of planned transactions
designed to address strategic challenges and unlock stockholder value in the
three Hughes business segments. The transactions would include the tax-free
spin-off of the Hughes defense business to holders of $1-2/3 par value and Class
H common stocks, followed immediately by the tax-free merger of that business
with Raytheon Company. The spin-off will not be proposed in a manner that would
result in the recapitalization of Class H common stock into $1-2/3 par value
common stock at a 120% exchange ratio, as currently provided for under certain
circumstances in the GM Restated Certificate of Incorporation, as amended. At
the same time, Delco Electronics, the automotive electronics subsidiary of
Hughes, would be transferred from Hughes to GM's Delphi Automotive Systems unit.
Finally, Class H common stock would be recapitalized into a GM tracking stock
linked to the telecommunications and space business of Hughes.
On July 14, 1997, GM received a ruling from the Internal Revenue Service that
it's contemplated spin-off of the Hughes defense business would be tax-free to
GM and its stockholders. The planned transactions must be approved by holders of
$1-2/3 par value and Class H common stocks, among a number of other conditions.
In addition, the merger of the Hughes defense business and Raytheon is subject
to antitrust clearance and approval by Raytheon stockholders. No assurance can
be given that the above transactions will be completed. GM expects to solicit
stockholders' approval of the planned transactions during the fourth quarter of
1997, after certain conditions are satisfied.
In May 1997, Hughes and PanAmSat Corporation (PAS) completed the merger of
their respective satellite service operations into a new publicly-held company.
Hughes contributed its Galaxy(R) satellite services business in exchange for a
71.5% interest in the new company. Existing PAS stockholders received a 28.5%
interest in the new company and $1.5 billion in cash.
For accounting purposes, the merger was treated by Hughes as an acquisition of
71.5% of PAS and was accounted for using the purchase method. Accordingly, the
purchase price was allocated to the net assets acquired, including intangible
assets, based on estimated fair values at date of acquisition. In addition, the
merger was treated as a partial sale of the Galaxy business by Hughes and
resulted in a one-time pre-tax gain of $490 million ($318 million after-tax or
$0.33 per share of $1-2/3 par value common stock and $0.80 per share of Class H
common stock).
- 7 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
Note 3. EDS Split-Off
On June 7, 1996, GM split-off Electronic Data Systems Corporation (EDS) to
former Class E stockholders on a tax-free basis for U.S. federal income tax
purposes. The financial data related to EDS for the three and six month periods
ended June 30, 1996 are classified as discontinued operations. The GM unaudited
consolidated financial statements for 1997 exclude the assets, liabilities and
operating results of EDS.
EDS systems and other contracts revenues from outside customers included in
income (loss) from discontinued operations totaled $1.9 billion and $4.3 billion
for the three and six month periods ended June 30, 1996, respectively. Income
(loss) from discontinued operations of $(209) million and $10 million for the
three and six month periods ended June 30, 1996 is reported net of an income tax
benefit of $109 million and income tax expense of $14 million, respectively.
Note 4. Other Income and Other Deductions
Other income and other deductions consisted of the following (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Other income
Nonfinancing interest $483 $406 $949 $779
Gain on PAS merger (Note 2) 490 - 490 -
Insurance premiums 261 232 516 475
Mortgage servicing and processing
fees 196 130 367 236
Mortgage investment and other income 177 85 307 168
Claims and commissions 137 138 258 333
Gain on sale of interest in Avis
Europe (1) 128 - 128 -
Income from sales of receivables
programs 85 128 213 256
Insurance capital and investment gains 73 112 210 208
VW Settlement (2) - - 88 -
Gain on sale of interest in DIRECTV (3) - - - 120
Other 188 255 296 317
------ ------ ----- -----
Total other income $2,218 $1,486 $3,822 $2,892
===== ===== ===== =====
Other deductions
Insurance losses and loss adjustment
expenses $153 $191 $292 $334
Provision for financing losses 127 135 257 290
Other 40 126 19 242
---- --- ---- ----
Total other deductions $320 $452 $568 $866
=== === === ===
(1) During the 1997 second quarter, the sale of GM Europe's equity interest in
Avis Europe resulted in a pre-tax gain of $128 million ($103 million
after-tax or $0.14 per share of $1-2/3 par value common stock).
(2) During the 1997 first quarter, an agreement with Volkswagen A.G. (VW) that
settled a civil lawsuit GM brought against VW resulted in a pre-tax gain of
$88 million ($55 million after-tax or $0.07 per share of $1-2/3 par value
common stock), after deducting certain legal expenses.
(3) During the 1996 first quarter, the sale of a 2.5% interest in DIRECTV to
AT&T resulted in a pre-tax gain of $120 million ($72 million after-tax or
$0.07 per share of $1-2/3 par value common stock and $0.18 per share of
Class H common stock).
Note 5. Inventories
Major classes of inventories were as follows (in millions):
June 30, Dec. 31, June 30,
1997 1996 1996
Productive material, work in process,
and supplies $6,789 $6,590 $6,428
Finished product, service parts, etc. 6,739 5,308 5,327
------- ------- -------
Total inventories (less allowances) $13,528 $11,898 $11,755
====== ====== ======
- 8 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
Note 6. Postretirement Benefits Other Than Pensions
GM has disclosed in the consolidated financial statements certain amounts
associated with estimated future postretirement benefits other than pensions and
characterized such amounts as "accumulated postretirement benefit obligations,"
"liabilities," or "obligations." Notwithstanding the recording of such amounts
and the use of these terms, GM does not admit or otherwise acknowledge that such
amounts or existing postretirement benefit plans of GM (other than pensions)
represent legally enforceable liabilities of GM.
Note 7. Plant Closings and Restructuring
GM previously recorded charges to realign its North American plant capacity
and to provide for a reduction of Hughes' worldwide employment, a major
facilities consolidation, and a reevaluation of certain non-strategic
businesses.
The following table summarizes the activity in the GM plant closings
(excluding environmental) and Hughes restructuring reserves for the period from
January 1, 1997 to June 30, 1997 (in millions):
Balance at January 1, 1997 $1,397
1997 first quarter charges against reserves (44)
Interest expense 16
------
Balance at March 31, 1997 $1,369
-----
1997 second quarter charges against reserves (52)
Interest expense 16
-----
Balance at June 30, 1997 $1,333
=====
GM and Hughes periodically evaluate the adequacy of reserve balances and
estimated future expenditures, including assumptions used and the period over
which costs are expected to be incurred.
Note 8. Contingent Matters
Hughes has maintained a suit against the U.S. Government since September 1973
regarding the Government's infringement and use of a Hughes patent (the
"Williams Patent") covering "Velocity Control and Orientation of a Spin
Stabilized Body," principally satellites. On June 17, 1994, the U.S. Court of
Claims awarded Hughes damages of $114 million. Because Hughes believed that the
record supported a higher royalty rate, it appealed that decision. The U.S.
Government, contending that the award was too high, also appealed. On June 19,
1996, the Court of Appeals for the Federal Circuit (CAFC) affirmed the decision
of the Court of Claims which awarded Hughes $114 million in damages, together
with interest. The U.S. Government petitioned the CAFC for a rehearing. That
petition was denied in October 1996. The U.S. Government then filed a petition
with the U.S. Supreme Court seeking certiorari. On April 21, 1997 the U.S.
Supreme Court, citing a recent decision it had rendered in Warner-Jenkinson v.
Hilton Davis, remanded Hughes' suit over the Williams Patent back to the CAFC in
order to have the CAFC determine whether the ruling in the Williams Patent
matter was consistent with the U.S. Supreme Court's decision in the
Warner-Jenkinson case. The previous liability decision of the Court of Claims in
the Williams Patent matter, and its $114 million damage award to Hughes,
currently remain in effect pending reconsideration of the case by the CAFC.
Hughes is unable to estimate the duration of this reconsideration process. While
no amount has been recorded in the financial statements of Hughes to reflect the
$114 million award or the interest accumulating thereon, a resolution of this
matter could result in a gain that would be material to the earnings of GM
attributable to Class H common stock.
The Corporation and its subsidiaries are subject to potential liability under
government regulations and various claims and legal actions which are pending or
may be asserted against them. Some of the pending actions purport to be class
actions. The aggregate ultimate liability of the Corporation and its
subsidiaries under these government regulations, and under these claims and
actions, was not determinable at June 30, 1997. After discussion with counsel,
it is the opinion of management that such liability is not expected to have a
material adverse effect on the Corporation's consolidated operations or
financial position.
Note 9. Common Stock Repurchases
During the first six months of 1997, GM used $2 billion to acquire 35.5
million shares of $1-2/3 par value common stock, completing 80 percent of the
Corporation's $2.5 billion stock repurchase program announced in January 1997.
GM also used approximately $300 million to repurchase shares of $1-2/3 par value
common stock for certain employee benefit plans during the first six months of
1997. Subsequently, on August 4, 1997, GM announced that it had completed the
$2.5 billion stock repurchase program that began in the first half of 1997 and
announced an additional $2.5 billion stock repurchase program of $1-2/3 par
value common stock to be completed over a 12 month period. The stock repurchases
to be made under the second repurchase program would represent about 5% of the
outstanding shares of $1-2/3 par value common stock based on the New York Stock
Exchange's closing price of $64.44 per share on Friday, August 1, 1997.
- 9 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
Note 10. Earnings Per Share Attributable to Common Stocks
Earnings per share attributable to each class of GM common stock was
determined based on the attribution of earnings to each such class of common
stock for the period divided by the weighted average number of common shares for
each such class outstanding during the period, respectively. Common stock
equivalents were not included in the calculation of earnings per share
attributable to common stocks, as they were not material. In February 1997, the
Financial Accounting Standards Board issued SFAS No. 128, Earnings Per Share,
and SFAS No. 129, Disclosure of Information about Capital Structure. SFAS No.
128 specifies the computation, presentation and disclosure requirements for
earnings per share for entities with publicly-held common stock or potential
common stock. SFAS No. 129 requires an entity to explain the permanent rights
and privileges of outstanding securities. GM has determined that the impact of
adopting these new accounting standards will require it to provide additional
information in its consolidated financial statements concerning basic and
diluted earnings per share. The effects of adopting these new accounting
standards will not be material to GM's consolidated financial statements, when
adopted in the fourth quarter of 1997, as required.
Net earnings attributable to $1-2/3 par value common stock for the period
represent the earnings attributable to all GM common stocks for the period,
reduced by the Available Separate Consolidated Net Income (ASCNI) of Hughes and
EDS (Note 3) for the period.
Net earnings attributable to Class H common stock for the period represent
the ASCNI of Hughes for the period. The ASCNI of Hughes for any quarterly period
represents the separate consolidated net income of Hughes for such period,
excluding the effects of purchase accounting adjustments arising at the time of
the Corporation's acquisition of Hughes, calculated for such period and
multiplied by a fraction, the numerator of which is a number equal to the
weighted average number of shares of Class H common stock outstanding during the
quarter (101 million and 98 million during the second quarters of 1997 and 1996,
respectively) and the denominator of which was 400 million during the second
quarters of 1997 and 1996.
During the time that EDS was an indirect wholly-owned subsidiary of the
Corporation, net earnings attributable to Class E common stock for the period
represented the ASCNI of EDS for such period. The ASCNI of EDS for any quarterly
period represented the separate consolidated net income of EDS for such period,
excluding the effects of purchase accounting adjustments relating to the
Corporation's acquisition of EDS, calculated for each such quarterly period and
multiplied by a fraction, the numerator of which represented the weighted
average number of shares of Class E common stock outstanding during the period
(479 million for the second quarter of 1996) and the denominator of which was
479 million for the second quarter of 1996.
Note 11. Preferred Stock
Redeemable Preferred Stock of Subsidiary
The preferred stock of PAS outstanding at the time of the merger (Note 2) is
included in the accompanying consolidated balance sheet as redeemable preferred
stock of subsidiary. Dividends on such redeemable preferred stock are payable
quarterly in arrears. On or after April 15, 2000, the preferred stock is
redeemable at the option of PAS, in whole or in part from time to time at a
redemption price of 106.375% declining to 100% of liquidation value plus accrued
and unpaid dividends. The redeemable preferred stock is subject to mandatory
redemption in whole on April 15, 2005, at a price equal to the liquidation
preference thereof plus accrued and unpaid dividends. Subject to certain
conditions, PAS will be required to exchange all of the outstanding shares of
redeemable preferred stock into 12 3/4% Senior Subordinated Notes due 2005. PAS
currently expects the redeemable preferred stock to be exchanged for senior
subordinated notes in the second half of 1997.
Company Obligated Mandatorily Redeemable Preferred Securities of Subsidiary
Trusts
During July 1997, the General Motors Capital D Trust ("Series D Trust")
issued $76 million in aggregate stated liquidation amount of its 8.67% Trust
Originated Preferred Securities ("TOPrS") Series D ("Series D Preferred
Securities") in a one-for-one exchange for 3,055,255 of the outstanding GM
Series D 7.92% Depositary Shares, each representing one-fourth of a share of GM
Series D Preference Stock, $0.10 par value per share. In addition, the General
Motors Capital G Trust ("Series G Trust") issued $127 million in aggregate
stated liquidation amount of its 9.87% TOPrS Series G ("Series G Preferred
Securities") in a one-for-one exchange for 5,064,489 of the outstanding GM
Series G 9.12% Depositary Shares, each representing one-fourth of a share of GM
Series G Preference Stock, $0.10 par value per share.
Concurrently with the exchanges and the related purchases by GM from the
Series D and Series G Trusts (the "Trusts") of the common securities of such
Trusts, representing approximately 3 percent of the total assets of such Trusts,
GM issued to the wholly-owned Trusts, as the Trusts' sole assets, its 8.67% and
9.87% Junior Subordinated Deferrable Interest Debentures, Series D and Series G,
due July 1, 2012 (the "Series D Debentures" and "Series G Debentures" or
collectively the "Debentures"), having aggregate principal amounts equal to the
aggregate stated liquidation amounts of the Series D and Series G Preferred
Securities and the related common securities, respectively.
- 10 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Concluded
(Unaudited)
Note 11. Preferred Stock (concluded)
The Series D Debentures are redeemable, in whole or in part, at GM's option
on or after August 1, 1999, at a redemption price equal to 100% of the
outstanding principal of the Series D Debentures plus accrued and unpaid
interest, or, under certain circumstances, prior to August 1, 1999, at a
redemption price equal to 105% of the outstanding principal of the Series D
Debentures from the Series D expiration date through July 31, 1998, declining
ratably on each August 1 thereafter to 100% on August 1, 1999, plus accrued and
unpaid interest.
The Series G Debentures are redeemable, in whole or in part, at GM's option
on or after January 1, 2001, at a redemption price equal to 100% of the
outstanding principal of the Series G Debentures plus accrued and unpaid
interest, or, under certain circumstances, prior to January 1, 2001, at a
redemption price equal to 114% of the outstanding principal of the Series G
Debentures from the Series G expiration date through December 31, 1997,
declining ratably on each January 1 thereafter to 100% on January 1, 2001, plus
accrued and unpaid interest.
GM has guaranteed the payment in full to the holders of the Series D and
Series G Preferred Securities (collectively the "Preferred Securities") of all
distributions and other payments on the Preferred Securities to the extent not
paid by the Trusts only if and to the extent that the Trusts have assets
therefor i.e., GM has made payments of interest or principal on the related
Debentures. These guarantees, when taken together with GM's obligations under
the Debentures and the Indentures relating thereto and the obligations under the
Declaration of Trusts of the Trusts, including the obligations to pay certain
costs and expenses of the Trusts, constitute full and unconditional guarantees
by GM of each Trust's obligations under its Preferred Securities.
* * * * * *
- 11 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following management's discussion and analysis of financial condition and
results of operations (MD&A) should be read in conjunction with the MD&A
included in the General Motors (GM) 1996 Annual Report on Form 10-K (the 1996
Form 10-K), the Hughes Electronics Corporation (Hughes) consolidated financial
statements and MD&A for the period ended December 31, 1996, included as Exhibit
99 to the 1996 Form 10-K, the GMAC Annual Report on Form 10-K for the period
ended December 31, 1996, the Hughes consolidated financial statements and MD&A
for the period ended June 30, 1997, included as Exhibit 99 to this GM 1997
Quarterly Report on Form 10-Q, and the GMAC Quarterly Report on Form 10-Q for
the period ended June 30, 1997, filed with the Securities and Exchange
Commission.
The disaggregated financial results for GM's automotive sectors (GM's North
American Operations (GM-NAO), Delphi Automotive Systems (Delphi) and GM's
International Operations (GMIO)) have been prepared using a management approach,
which is consistent with the basis and manner in which GM management internally
disaggregates financial information for the purposes of assisting in making
internal operating decisions. In this regard, certain common expenses were
allocated among sectors less precisely than would be required for standalone
financial information prepared in accordance with generally accepted accounting
principles (GAAP) and certain expenses (primarily certain U.S. taxes related to
non-U.S. operations) were included in GM's "Other" sector. The financial results
represent the historical information used by management for internal decision
making purposes; therefore, other data prepared to represent the way in which
the business will operate in the future, or data prepared on a GAAP basis, may
be materially different.
GM-NAO Financial Highlights
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(Dollars in Millions)
Net sales and revenues $25,823 $26,929 $50,682 $48,612
------ ------ ------ ------
Pre-tax income 683 1,074 1,810 557
Income taxes 225 387 603 165
Earnings of nonconsolidated affiliates 16 18 31 34
---- ---- ------ ----
Net income $474 $705 $1,238 $426
=== === ===== ===
Net profit margin (1) 1.8% 2.6% 2.4% 0.9%
- --------------------
(1) Net profit margin represents net income as a percentage of net sales and
revenues.
Vehicle Unit Deliveries of Cars and Trucks - GM-NAO
Three Months Ended June 30,
1997 1996
GM as GM as
a % of a % of
Industry GM Industry Industry GM Industry
(Units in Thousands)
United States
Cars 2,211 712 32.2% 2,424 842 34.7%
Trucks 1,893 540 28.5% 1,863 532 28.5%
----- ----- ----- -----
Total United States 4,104 1,252 30.5% 4,287 1,374 32.0%
Canada and Mexico 524 162 30.9% 422 131 31.2%
------ ------ ------ ------
Total North America 4,628 1,414 30.6% 4,709 1,505 32.0%
===== ===== ===== =====
Wholesale Sales - GM-NAO
Cars 803 888
Trucks 612 638
------ ------
Total 1,415 1,526
===== =====
- 12 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Vehicle Unit Deliveries of Cars and Trucks - GM-NAO (concluded)
Six Months Ended June 30,
1997 1996
GM as GM as
a % of a % of
Industry GM Industry Industry GM Industry
(Units in Thousands)
United States
Cars 4,238 1,351 31.9% 4,475 1,503 33.6%
Trucks 3,585 1,024 28.6% 3,506 1,023 29.2%
----- ----- ----- -----
Total United States 7,823 2,375 30.4% 7,981 2,526 31.6%
Canada and Mexico 908 283 31.2% 751 234 31.3%
------ ------ ------ ------
Total North America 8,731 2,658 30.4% 8,732 2,760 31.6%
===== ===== ===== =====
Wholesale Sales - GM-NAO
Cars 1,589 1,544
Trucks 1,228 1,148
----- -----
Total 2,817 2,692
===== =====
GM-NAO Financial Review
GM-NAO reported net income of $474 million for the 1997 second quarter
compared with net income of $705 million in the prior year quarter. The decrease
in net income was primarily due to lower production volumes associated with the
current year work stoppages at two assembly plants in Oklahoma City, Oklahoma,
and Pontiac, Michigan, as discussed below, combined with higher retail
incentives ($1,060 per unit in the second quarter of 1997 compared with $695 per
unit in the second quarter of 1996) and increased commercial spending to support
the numerous vehicle launches in progress. Lower material and manufacturing
costs and sales of more profitable vehicles partially offset these increased
costs. Excluding the effect of the current year work stoppages, GM-NAO's
wholesale sales volumes would have been essentially unchanged at approximately
1.5 million units, while net income would have increased by approximately $144
million or more than 20% in the 1997 second quarter compared with the 1996
second quarter. Net income for the six months ended June 30, 1997 totaled $1.2
billion compared with $426 million for the prior year six month period. The
increase in net income for the first six months of 1997 primarily reflected
higher wholesale sales volumes and lower material and manufacturing costs. With
all major industry participants increasing their focus on efficiency and cost
improvements and with the announced increases in capacity by certain
manufacturers, competition in the North American automotive industry will
continue to intensify. In order to maintain and accelerate the positive product,
operating, and earnings momentum it has experienced in recent years, GM-NAO is
currently studying the long-term competitiveness of each of its lines of
business. The findings of this study may result in changes to or the
restructuring of those activities of GM-NAO that are not performing as
effectively as necessary to help meet GM-NAO's objective of increasing market
share, customer satisfaction, and profitability. The study is expected to be
completed in late 1997 or early 1998. Presently, GM-NAO cannot estimate the
impact that the findings of this study may have on its operations and on its and
GM's results of operations.
Local union members in Oklahoma City, Oklahoma, and Pontiac, Michigan, ceased
production at two assembly plants on April 4 and April 22, 1997, respectively,
where new local union agreements had not been completed. The work stoppage at
the Oklahoma City facility ended on May 27, 1997, after GM and representatives
of the local union reached a tentative agreement, that was subsequently ratified
by the members of the local union. A tentative agreement between GM and
representatives of the local union at the Pontiac facility was ratified on July
18, 1997 and production resumed on July 21, 1997. The work stoppages in Oklahoma
City and Pontiac resulted in a loss of 96,000 units of production which had an
aggregate unfavorable after-tax impact of approximately $490 million, or $0.67
per share of $1-2/3 par value common stock, on the 1997 second quarter results.
The above estimated unfavorable after-tax impact represents the combined effects
for GM-NAO ($375 million), Delphi ($85 million), and the Delco Electronics unit
of Hughes ($30 million) and does not take into account the effect of possible
recoveries that may occur through truck production increases that GM is likely
to pursue in future periods. To the extent that future work stoppages disrupt
the production and shipment of vehicles, the resulting deferral or decline in
revenues may have an unfavorable impact on GM's results of operations.
Net sales and revenues for the 1997 second quarter were $25.8 billion, which
represented a decrease of approximately $1.1 billion or 4.1% compared with the
prior year quarter. The decrease in net sales and revenues resulted from lower
wholesale sales volumes primarily due to the current year work stoppages
previously discussed. While sales of new models are gaining strong consumer
acceptance, 1997 second quarter wholesale sales volumes were also somewhat
constrained by restricted availability of certain new models. Net sales and
revenues for the six months ended June 30, 1997 totaled $50.7 billion, which
represented an increase of approximately $2.1 billion or 4.3% compared with the
prior year six month period and was primarily due to a 125,000 increase in
wholesale sales volumes. Wholesale sales volumes for the first six months of
1996 reflected the unfavorable impact of the 17-day work stoppages at the two
component plants in Dayton, Ohio.
Pre-tax income in the second quarter of 1997 decreased by $391 million
compared with the prior year quarter primarily due to lower wholesale sales
volumes and higher retail incentives, partially offset by lower material and
manufacturing costs and sales of more profitable vehicle models. Pre-tax income
for the six months ended June 30, 1997 increased by approximately $1.3 billion
over the prior year period primarily due to increased wholesale sales volumes
and lower material and manufacturing costs.
- 13 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
GM-NAO Financial Review (concluded)
GM vehicle deliveries in North America were 1,414,000 units in the 1997
second quarter, which represented a market share of 30.6% compared with 32.0% in
the prior year quarter. The decrease was primarily due to restricted
availability of certain models during the 1997 second quarter and the fact that
vehicle deliveries in the 1996 second quarter included volumes for certain
models that have since been discontinued. GM's North American market share for
the six months ended June 30, 1997 was 30.4% compared with 31.6% in the prior
year period. Although GM's market share was down compared with the second
quarter of 1996, even with the impact of the current year work stoppages, the
second quarter 1997 market share of 30.6% represented an increase over the first
quarter 1997 market share of 30.3%. Increased market penetration is anticipated
in the second half of 1997 with improved inventory of high demand products.
Delphi Financial Highlights
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(Dollars in Millions)
Net sales and revenues $6,778 $7,307 $13,442 $13,496
----- ----- ------ ------
Pre-tax income 468 528 705 649
Income taxes 170 184 242 231
Minority interests 5 (5) 6 (4)
Earnings of nonconsolidated affiliates 7 16 21 20
---- ---- ---- ----
Net income $310 $355 $490 $434
=== === === ===
Net profit margin (1) 4.6% 4.9% 3.6% 3.2%
- --------------------
(1) Net profit margin represents net income as a percentage of net sales and
revenues.
Delphi Financial Review
Delphi reported net income of $310 million for the 1997 second quarter
compared with $355 million in the prior year quarter. The 1997 second quarter
net income decreased primarily due to lower production volume at GM-NAO related
to the current year work stoppages previously discussed. Excluding the $85
million after-tax effect of these work stoppages, Delphi's net income would have
increased by approximately $40 million or 11.3% in the 1997 second quarter
compared with the 1996 second quarter. Net income for the six months ended June
30, 1997 increased to $490 million compared with $434 million for the prior year
six month period. The increase in net income for the first six months of 1997
primarily reflected low 1996 net income due to the unfavorable impact of the
work stoppages in the 1996 first quarter.
Net sales and revenues for the 1997 second quarter were $6.8 billion, a
decrease of $529 million or 7.2% compared with the prior year quarter, due to
the current year work stoppages. Delphi's 1997 second quarter sales to customers
outside the GM-NAO vehicle groups increased more than $170 million compared with
the prior year period and represented approximately 37% of total sales,
including all joint ventures. Net sales and revenues for the six months ended
June 30, 1997 totaled $13.4 billion, compared with $13.5 billion in the prior
year six month period.
Pre-tax income in the second quarter of 1997 decreased by $60 million
compared with the prior year quarter primarily due to the work stoppages,
partially offset by lower material and manufacturing costs. Pre-tax income for
the six months ended June 30, 1997 increased to $705 million from the prior year
amount of $649 million reflecting higher production volume at GM-NAO and lower
material and manufacturing costs.
During the second quarter of 1997, Delphi continued its drive to
strategically grow its operations worldwide through acquisitions, alliances, and
joint ventures in Central and Eastern Europe, Asia, and the United States.
On January 16, 1997, GM and Hughes announced a series of planned transactions
that would include the transfer of Delco Electronics from Hughes to Delphi. See
the Hughes Transactions section on page 22 for additional information.
Delphi, with 63% of its consolidated and non-consolidated operations' sales
to GM-NAO, is GM-NAO's principal supplier of automotive components and systems.
Delphi also supplies 26 other original equipment manufacturers (OEMs) worldwide.
Various factors impact Delphi sales to GM-NAO including production of vehicles
in North America, the level of Delphi-supplied content per GM-NAO vehicle, the
price of such automotive components and systems, and the competitiveness of
Delphi's product offerings. Delphi's strategy is to supplement its existing
strong supplier relationship with GM-NAO with additional OEM relationships
around the world related to the design, development, and production of
automotive components and systems. The global automotive components and systems
market is highly competitive
- 14 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Delphi Financial Review (concluded)
and is presently undergoing significant restructuring and consolidation
activities. As a result, Delphi is reviewing the adequacy of its strategy which
focuses on the competitiveness of its operations, growth opportunities and
increasing market share through technology leadership, quality, cost and
responsiveness. In connection with this ongoing review, Delphi will continue to
study the outlook for some of its major product lines and their capacity to
achieve Delphi's goal of increased growth and profitability. The findings of
this study may result in the modifying, selling or closing of certain lines of
business that are not performing as effectively as necessary to enable Delphi to
meet its strategic plans, while further expanding and growing product lines
which will help to meet corporate objectives. The study is expected to be
completed in late 1997 or early 1998. Presently, Delphi cannot estimate the
impact the findings of this study may have on its existing lines of business and
Delphi's and GM's results of operations.
GMIO Financial Highlights
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(Dollars in Millions)
Net sales and revenues $9,711 $9,101 $17,994 $18,098
----- ----- ------ ------
Pre-tax income 727 629 1,200 1,209
Income taxes 233 209 397 379
Minority interests 7 (3) 10 (6)
Earnings (loss) of nonconsolidated
affiliates (13) 7 (8) 32
---- ---- ----- ----
Net income
GM Europe 312 319 461 604
Other International 176 105 344 252
--- --- --- ---
Total net income $488 $424 $805 $856
=== === === ===
Net profit margin (1) 5.0% 4.7% 4.5% 4.7%
(1) Net profit margin represents net income as a percentage of net sales and
revenues.
Vehicle Unit Deliveries of Cars and Trucks - GMIO
Three Months Ended June 30,
1997 1996
GM as GM as
a % of a % of
Industry GM Industry Industry GM Industry
(Units in Thousands)
International
Europe 4,769 492 10.3% 4,415 491 11.1%
Latin America, Africa and
the Middle East 1,195 203 17.0% 997 168 16.9%
Asia and Pacific 3,126 134 4.3% 3,273 152 4.6%
----- --- ----- ---
Total International 9,090 829 9.1% 8,685 811 9.3%
===== === ===== ===
Wholesale Sales - GMIO
Cars 634 602
Trucks 202 186
--- ---
Total 836 788
=== ===
- 15 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Vehicle Unit Deliveries of Cars and Trucks - GMIO (concluded)
Six Months Ended June 30,
1997 1996
GM as GM as
a % of a % of
Industry GM Industry Industry GM Industry
(Units in Thousands)
International
Europe 9,265 958 10.3% 8,912 980 11.0%
Latin America, Africa and
the Middle East 2,208 365 16.5% 1,928 328 17.0%
Asia and Pacific 6,951 294 4.2% 6,873 310 4.5%
----- ---- ----- ----
Total International 18,424 1,617 8.8% 17,713 1,618 9.1%
====== ===== ====== =====
Wholesale Sales - GMIO
Cars 1,188 1,190
Trucks 431 390
------ ------
Total 1,619 1,580
===== =====
GMIO Financial Review
GMIO's 1997 second quarter net income was $488 million or 5.0% of net sales
and revenues compared with $424 million or 4.7% of net sales and revenues in the
prior year quarter. The increase in 1997 second quarter net income was primarily
due to a gain related to the sale of GM Europe's (GME) interest in Avis Europe
and higher sales volumes in Latin America, partially offset by higher sales
incentives and marketing expenses across Europe. Net income for the six months
ended June 30, 1997 totaled $805 million compared with $856 million for the
prior year period. The decrease in net income for the first six months of 1997
was primarily due to lower net income for GME.
Pre-tax income for the 1997 second quarter was $727 million compared with
$629 million in the prior year quarter with the increase primarily due to a gain
on the sale of GME's interest in Avis Europe and higher wholesale sales volumes
in Latin America.
Net sales and revenues for the 1997 second quarter increased by 6.7% to $9.7
billion compared with $9.1 billion in the prior year quarter. The increased net
sales and revenues in the 1997 second quarter mainly reflected higher wholesale
sales volumes in Latin America, partially offset by the impact of translating
foreign currencies against a stronger U.S. dollar. Net sales and revenues for
the six months ended June 30, 1997 totaled $18 billion, which represented a
decrease of approximately $100 million or 0.6% compared with the prior year six
month period.
Net income for GME totaled $312 million in the 1997 second quarter, which
included a $103 million after-tax gain related to the sale of GME's interest in
Avis Europe, compared with $319 million in the prior year quarter. Net income
for GME for the six months ended June 30, 1997 decreased $143 million compared
with the prior year period. The lower net income for the three and six months
ended June 30, 1997 was due primarily to higher sales incentives and marketing
expenses in a highly competitive European market. With the continued excess
industry capacity, most competitors have significantly reduced prices. In
response to this ongoing industry capacity overhang and the more aggressive
pricing environment, GME is currently studying the long-term competitiveness of
each of its operations. The findings of this study may result in changes to or
the realignment of those activities of GME that are not performing as
effectively as necessary to help meet GME's long-term goal of increased
profitability. The study is expected to be completed in late 1997 or early 1998.
Presently, GME cannot estimate the impact that the findings of this study may
have on its operations and on its and GM's results of operations.
Net income from the remainder of GMIO's operations, which include the Latin
American and Asia and Pacific Operations, totaled $176 million in the second
quarter of 1997 compared with $105 million in the prior year quarter. The
increased 1997 second quarter net income resulted from higher wholesale sales
volumes in Latin America, which was partially offset by lower earnings from
nonconsolidated affiliates due to lower sales volumes at Isuzu. Net income from
the remainder of GMIO's operations for the six months ended June 30, 1997,
totaled $344 million compared with $252 million in the prior year period,
primarily reflecting higher wholesale sales volumes in Latin America.
During the second quarter of 1997, two joint ventures in China, Shanghai GM
and Pan Asia Technical Automotive Center (PATAC), held their stone laying and
company formation ceremonies. Shanghai GM and PATAC are 50/50 joint venture
companies between Shanghai Automotive Industry Corporation and GM.
- 16 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
General Motors Acceptance Corporation (GMAC) Financial Highlights
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(Dollars in Millions)
Financing revenue
Retail and lease financing $890 $956 $1,830 $1,913
Operating leases 1,817 1,785 3,619 3,523
Wholesale and term loans 470 384 903 868
------ ---- ------ ----
Total financing revenue 3,177 3,125 6,352 6,304
Interest and discount (1,312) (1,225) (2,578) (2,464)
Depreciation on operating leases (1,154) (1,123) (2,312) (2,274)
----- ----- ----- -----
Net financing revenue 711 777 1,462 1,566
Other income and insurance premiums
earned 915 829 1,847 1,573
------ ---- ----- -----
Net financing revenue and other 1,626 1,606 3,309 3,139
Expenses 1,043 1,045 2,096 2,071
----- ----- ----- -----
Pre-tax income 583 561 1,213 1,068
Income taxes 245 211 503 409
--- --- --- ---
Net income $338 $350 $710 $659
=== === === ===
Net income from financing operations(1) $296 $318 $589 $590
Net income from insurance operations 42 32 121 69
-- --- --- ---
Net income $338 $350 $710 $659
=== === === ===
Return on average equity (2) 16.1% 16.7% 17.0% 15.7%
(1) Includes GMAC Mortgage Group, Inc. (GMACMG).
(2) Return on average equity represents net income as a percentage of average
stockholder's equity outstanding for each month in the period.
- 17 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
GMAC Financial Review
GMAC's consolidated second quarter net income for 1997 totaled $338 million,
a 3% decrease from the second quarter of 1996. For the same period, a 7% decline
in net income from financing operations was attributed to reduced net financing
margins on automotive financing operations. Net income from insurance operations
during the second quarter of 1997 totaled $42 million, up 33% compared with the
second quarter of 1996. The increase was primarily attributable to improved
claim experience in mechanical service agreements (sometimes referred to as
`extended warranties') and commercial insurance.
During the three months ended June 30, 1997, GMAC financed 24% of new GM
vehicles delivered in the U.S., down from 25.7% during the same period last
year. Penetration for the first six months of 1997 was 25% compared with 25.9%
for the same 1996 period. The 1997 decreases in retail market share were
attributable to a reduction of GM sponsored leasing incentives, a continued
decline in fleet transaction participation and increased competitive market
conditions.
U.S. wholesale inventory financing was provided on 831,000 and 1,672,000 new
GM vehicles during the respective three and six month periods ended June 30,
1997, compared with 961,000 and 1,681,000 during the same 1996 periods. This
financing represented 67.8% and 69.9% of GM's U.S. vehicle sales to dealers
during the first six months of 1997 and 1996, respectively. Wholesale financing
revenue during the second quarter and first six months of 1997 was up from 1996
due to increased earning asset levels.
GMAC's worldwide cost of borrowing for the second quarter and first six
months of 1997 averaged 6.31% and 6.28%, respectively, 15 and 32 basis points
below the comparable prior year levels. Total borrowing costs for U.S.
operations averaged 6.38% and 6.35% for the three and six month periods ended
June 30, 1997, compared with 6.36% and 6.50% for the respective 1996 periods.
The lower average borrowing costs for the first six months of 1997 were
attributable to a greater proportion of floating rate short-term borrowings in
GMAC's funding mix.
The $20 million increase in consolidated net financing revenue and other
income during the second quarter of 1997 over the same period in 1996 was
primarily attributable to higher wholesale receivable balances and mortgage
income partially offset by lower retail receivable revenues and increased debt
expense incurred to fund the higher wholesale balances.
In June 1997, GMAC announced an agreement providing for Integon, a
non-standard automotive insurance provider, to merge with a wholly-owned
subsidiary of GMAC. Subject to obtaining all necessary regulatory approvals and
the approval of Integon shareholders, the transaction is expected to be
completed by year-end 1997 for a cash price of approximately $525 million and
the assumption of approximately $150 million and $100 million of Senior Notes
and Capital Securities, respectively. The merger will enable GMAC to continue
its growth strategy in the financial services industry.
- 18 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Hughes Financial Highlights
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(Dollars in Millions Except Per Share Amounts)
Net sales
Outside customers $2,932 $2,531 $5,698 $4,970
GM and affiliates 1,334 1,502 2,696 2,676
----- ----- ----- -----
Total net sales 4,266 4,033 8,394 7,646
Other income-net 490 18 500 137
----- ------ ----- -----
Total revenues 4,756 4,051 8,894 7,783
Income before income taxes and
minority interests 775 436 1,075 904
Income taxes 275 172 385 364
Minority interests in net losses
of subsidiaries 11 12 26 17
--- --- --- ---
Net income $511 $276 $716 $557
=== === === ===
Earnings used for computation
of available separate
consolidated net income (1) $542 $306 $777 $618
=== === === ===
Net earnings per share attributable
to Class H common stock $1.35 $0.77 $1.94 $1.55
Cash dividends per share of Class H
common stock $0.25 $0.24 $0.50 $0.48
- ----------------
Certain 1996 amounts have been reclassified to conform with the 1997
presentation.
(1) Excludes amortization of GM purchase accounting adjustments of $30 million
for the second quarters of 1997 and 1996, and $61 million for the six-month
periods ended June 30, 1997 and 1996, related to GM's acquisition of Hughes
Aircraft Company.
Segment Highlights
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(Dollars in Millions)
Telecommunications and Space
Revenues $1,619 $941 $2,628 $1,874
Net sales $1,138 $950 $2,157 $1,771
Operating profit (1) $40 $57 $47 $131
Operating profit margin (2) 3.5% 6.0% 2.2% 7.4%
Automotive Electronics
Revenues $1,461 $1,554 $2,907 $2,825
Net sales $1,457 $1,540 $2,891 $2,800
Operating profit (1) $134 $236 $280 $396
Operating profit margin (2) 9.2% 15.3% 9.7% 14.1%
Aerospace and Defense Systems
Revenues $1,638 $1,510 $3,284 $3,022
Net sales $1,635 $1,512 $3,280 $3,014
Operating profit (1) $163 $161 $336 $319
Operating profit margin (2) 10.0% 10.7% 10.3% 10.6%
Certain 1996 amounts have been reclassified to conform with the 1997
presentation.
(1) Operating profit represents net sales less total costs and expenses
other than interest expense and amortization of purchase accounting
adjustments related to GM's acquisition of Hughes Aircraft Company.
(2) Operating profit margin represents operating profit as a percentage of
net sales.
- 19 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Hughes Financial Review
Hughes Electronics reported net income of $511 million for the second quarter
of 1997 compared with $276 million for the second quarter of 1996. Excluding
amortization of purchase accounting adjustments related to GM's acquisition of
Hughes Aircraft Company, Hughes' earnings used for computation of available
separate consolidated net income was $542 million for the second quarter of 1997
compared with $306 million for the same period in 1996. The 1997 second quarter
included the $318 million after-tax gain ($0.80 per share of Class H common
stock) recognized in connection with the PanAmSat Corporation (PAS) merger.
Excluding the one-time gain, earnings for the second quarter of 1997 decreased
26.8% from the $306 million reported in the same period in 1996, and earnings
per share of Class H common stock decreased $0.22 from $0.77 per share in the
second quarter of 1996. The declines were principally due to lower operating
margins at Delco Electronics as a result of reduced GM production volumes
related to work stoppages at two key GM assembly plants, and continued price
reductions.
Second quarter revenues (excluding the $490 million pre-tax gain recognized
in connection with the PAS merger) increased 17.4% between 1996 and 1997, due to
revenue increases in both the Telecommunications and Space and Aerospace and
Defense Systems segments which more than offset the decline in revenues in
Automotive Electronics due to the work stoppages. On the same basis, the
increase in revenues in the Telecommunications and Space segment was due to
continued expansion of the DIRECTV subscriber base in the United States and
Latin America, partially offset by lower sales of wireless telecommunications
equipment particularly related to the BellSouth Cellular Corp. contract. The
8.5% increase in revenues in the Aerospace and Defense Systems segment was
principally due to additional revenues resulting from the build-up of newer
programs, particularly information systems and services programs such as Desktop
V, Wide Area Augmentation System, and Hughes Air Warfare Center, and the
acquisition in March 1997 of the Marine Systems Group of Alliant Techsystems,
Inc. The 6.0% decrease in revenues for the Automotive Electronics segment was
principally due to a 6.9% decrease in GM vehicles produced in the United States
and Canada (excluding joint ventures) and a 2.2% decline in Delco-supplied
electronic content, partially offset by a 10.8% increase in international and
non GM-NAO sales.
Operating profit, excluding amortization of purchase accounting adjustments
related to GM's acquisition of Hughes Aircraft Company, declined 24.7% between
the second quarter of 1996 and the second quarter of 1997. The operating profit
margin on the same basis was 8.0% for the second quarter of 1997 compared with
11.2% for the same period in 1996. These reductions were primarily a result of
the lower margins in the Automotive Electronics segment driven by decreased
production volumes and price reductions resulting from competitive pricing in
connection with GM's global sourcing initiative. Also contributing to the
declines were lower wireless telecommunications equipment sales and margins, and
start-up operating losses from the Company's Latin American DIRECTV subsidiary,
Galaxy Latin America, within the Telecommunications and Space segment.
On January 16, 1997, GM and Hughes announced a series of planned transactions
designed to address strategic challenges and unlock stockholder value in the
three Hughes business segments. See the Hughes Transactions section on page 22
for additional information regarding the planned transactions.
- 20 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
To facilitate analysis, the following sections present the financial
statements for the Corporation's manufacturing, wholesale marketing, defense,
and electronics operations with the financing and insurance operations
(primarily GMAC) reflected on an equity basis. This is the same basis and format
used in years prior to the Corporation's adoption of SFAS No. 94, Consolidation
of All Majority-Owned Subsidiaries.
Consolidated Statements of Income With Financing and Insurance Operations on
an Equity Basis (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(Dollars in Millions)
Net sales and revenues $39,741 $40,182 $77,198 $74,854
------ ------ ------ ------
Costs and expenses
Cost of sales and other operating charges,
exclusive of items listed below 32,998 33,127 64,022 63,251
Selling, general, and administrative
expenses 3,290 2,955 6,174 5,403
Depreciation and amortization expenses 1,918 1,849 3,797 3,637
Plant closing expense - - 80 -
------ ------ ------ -------
Total costs and expenses 38,206 37,931 74,073 72,291
------ ------ ------ ------
Operating income 1,535 2,251 3,125 2,563
Other income less income deductions 1,330 583 2,069 1,152
Interest expense (219) (229) (438) (425)
------ ------ ------ ------
Income from continuing operations
before income taxes, minority
interests, and earnings
of nonconsolidated affiliates 2,646 2,605 4,756 3,290
Income taxes 909 886 1,639 1,120
------ ------ ----- -----
Income from continuing operations before
minority interests and earnings of
nonconsolidated affiliates 1,737 1,719 3,117 2,170
Minority interests 18 (8) 37 (10)
Earnings of nonconsolidated affiliates 343 385 740 736
------ ------ ------ ------
Income from continuing operations 2,098 2,096 3,894 2,896
Income (loss) from discontinued
operations - (209) - 10
------ ----- ------ ------
Net income $2,098 $1,887 $3,894 $2,906
===== ===== ===== =====
Net profit margin (1) 5.3% 4.7% 5.0% 3.9%
(1) Net profit margin represents net income as a percentage of net sales and
revenues.
Results of Operations With Financing and Insurance Operations on an Equity
Basis
In the second quarter of 1997, GM's income from continuing operations totaled
$2.1 billion or $2.68 per share of $1-2/3 par value common stock. GM's 1997
second quarter income from continuing operations included a $490 million
after-tax unfavorable impact from the current year work stoppages previously
discussed. GM's income from continuing operations for the six months ended June
30, 1997 was $3.9 billion, or $4.98 per share of $1-2/3 par value common stock,
compared with $2.9 billion or $3.58 per share of $1-2/3 par value common stock,
for the first six months ended June 30, 1996.
Highlights of financial performance by GM's major business sectors for the
three months and six months ended June 30 were as follows (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
GM-NAO $474 $705 $1,238 $426
Delphi 310 355 490 434
GMIO 488 424 805 856
GMAC 338 350 710 659
Hughes 542 306 777 618
Other (54) (44) (126) (97)
---- ----- ----- -----
Income from continuing
operations $2,098 $2,096 $3,894 $2,896
===== ===== ===== =====
- 21-
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Results of Operations With Financing and Insurance Operations on an Equity
Basis (concluded)
Reference should be made to the GM sectors' financial reviews that are
presented on pages 12 through 20 and incorporated by reference to supplement the
information presented herein.
Second quarter 1997 net sales and revenues were $39.7 billion, which
represented a decrease of $441 million compared with the prior year quarter. The
decrease in net sales and revenues was primarily due to lower wholesale sales
volumes in North America due to the current year work stoppages. Net sales and
revenues for the six months ended June 30, 1997 were $77.2 billion compared with
$74.9 billion for the first six months of 1996, reflecting higher wholesales
sales volumes. Wholesale sales volumes for the first six months of 1996 reflect
the unfavorable impact of the 17-day work stoppages at two component plants in
Dayton, Ohio.
The gross margin percentage for the 1997 second quarter was 17.0% compared
with 17.6% in the prior year quarter. The gross margin percentage for the six
months ended June 30, 1997 was 17.1%, compared with 15.5% for the first six
months of 1996. The decrease in the second quarter 1997 gross margin primarily
resulted from the decrease in wholesale sales volumes and higher sales
incentives in North America, partially offset by lower material and
manufacturing costs.
Selling, general, and administrative expenses increased to $3.3 billion in
the second quarter of 1997 compared with $3 billion in the prior year quarter
and to $6.2 billion for the six months ended June 30, 1997 compared with $5.4
billion in the prior year period. The increases for the 1997 three and six month
periods primarily reflected higher consumer influence spending associated with
the launches of new vehicles and increased expenses related to continued efforts
to grow the business in all of GM's business sectors. Depreciation and
amortization expenses increased in the second quarter of 1997 and for the six
months ended June 30, 1997 compared with the prior year periods, in connection
with expenditures for expansion initiatives and production and quality
improvements worldwide.
Other income less income deductions increased to $1.3 billion for the 1997
second quarter compared with $583 million in the prior year quarter primarily
due to a $490 million pre-tax gain ($318 million after-tax or $0.33 per share of
$1-2/3 par value common stock and $0.80 per share of Class H common stock)
related to the merger of the satellite service operations of Hughes and PAS and
a $128 million pre-tax gain ($103 million after-tax or $0.14 per share of $1-2/3
par value common stock) related to the sale of GME's equity interest in Avis
Europe. Other income less income deductions for the six months ended June 30,
1997 was $2.1 billion compared with $1.2 billion for the first six months of
1996 primarily due to the previously discussed gains related to the PAS merger
and the sale of GME's equity interest in Avis Europe, combined with favorable
settlements of legal claims and higher interest income.
GM completed the split-off of Electronic Data Systems Corporation (EDS) on
June 7, 1996, and accordingly, the financial results of EDS for the three and
six months ended June 30, 1996 have been reported as discontinued operations.
GM's 1996 second quarter net income, which included a loss from discontinued
operations of $209 million, totaled $1.9 billion or $2.63 per share of $1-2/3
par value common stock.
Hughes Transactions
On January 16, 1997, GM and Hughes announced a series of planned transactions
designed to address strategic challenges and unlock stockholder value in the
three Hughes business segments. The transactions would include the tax-free
spin-off of the Hughes defense business to holders of $1-2/3 par value and Class
H common stocks, followed immediately by the tax-free merger of that business
with Raytheon Company. The spin-off will not be proposed in a manner that would
result in the recapitalization of Class H common stock into $1-2/3 par value
common stock at a 120% exchange ratio, as currently provided for under certain
circumstances in the GM Restated Certificate of Incorporation, as amended. At
the same time, Delco Electronics, the automotive electronics subsidiary of
Hughes, would be transferred from Hughes to Delphi. Finally, Class H common
stock would be recapitalized into a GM tracking stock linked to the
telecommunications and space business of Hughes.
The distribution of the Hughes defense business to holders of $1-2/3 par value
common stock and Class H common stock would be recorded at fair value with a
gain of approximately $3.9 billion to $4.5 billion recognized and reported as
"other income" in GM's consolidated financial statements. On July 14, 1997, GM
received a ruling from the Internal Revenue Service that it's contemplated
spin-off of the Hughes defense business would be tax-free to GM and its
stockholders. The planned transactions must be approved by holders of $1-2/3 par
value and Class H common stocks, among a number of other conditions. In
addition, the merger of the Hughes defense business and Raytheon is subject to
antitrust clearance and approval by Raytheon stockholders. No assurance can be
given that the above transactions will be completed. GM expects to solicit
stockholders' approval of the planned transactions during the fourth quarter of
1997, after certain conditions are satisfied.
- 22 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets With Financing and Insurance Operations on an
Equity Basis
(Unaudited)
June 30, Dec. 31, June 30,
1997 1996 1996
(Dollars in Millions)
ASSETS
Cash and cash equivalents $10,855 $13,320 $11,501
Other marketable securities 4,062 3,642 1,538
------- ------- -------
Total cash and marketable securities 14,917 16,962 13,039
Accounts and notes receivable (less
allowances)
Trade 5,887 4,909 5,846
Nonconsolidated affiliates 1,478 927 2,413
Inventories (less allowances) 13,528 11,898 11,755
Contracts in process (less advances
and progress payments) 2,264 2,187 2,440
Equipment on operating leases (less
accumulated depreciation) 4,047 3,918 3,747
Deferred income taxes and other 3,161 3,140 5,412
------- ------- -------
Total current assets 45,282 43,941 44,652
Equity in net assets of nonconsolidated
affiliates 10,061 9,855 9,761
Deferred income taxes 19,692 20,075 17,981
Other investments and miscellaneous
assets 13,586 11,712 12,225
Property - net 37,211 37,156 35,200
Intangible assets -net 14,864 12,523 10,116
-------- -------- --------
Total assets $140,696 $135,262 $129,935
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $11,235 $11,527 $10,559
Loans payable 1,281 1,214 1,155
Accrued liabilities and customer deposits 31,431 29,822 29,011
------ ------ ------
Total current liabilities 43,947 42,563 40,725
Long-term debt 5,967 5,192 5,264
Capitalized leases 188 198 175
Postretirement benefits other than
pensions 41,393 40,578 39,791
Pensions 5,822 5,966 5,349
Other liabilities and deferred
income taxes 16,385 15,650 15,959
Deferred credits 1,845 1,605 1,649
-------- -------- --------
Total liabilities 115,547 111,752 108,912
------- ------- -------
Minority interests 716 92 163
Redeemable preferred stock of subsidiary 402 - -
Stockholders' equity 24,031 23,418 20,860
-------- -------- --------
Total liabilities and stockholders'
equity $140,696 $135,262 $129,935
======= ======= =======
Liquidity and Capital Resources With Financing and Insurance Operations on an
Equity Basis
GM's cash and marketable securities totaled $14.9 billion at June 30, 1997,
compared with $17 billion at December 31, 1996 and $13 billion at June 30, 1996.
The decrease in cash and marketable securities from December 31, 1996 to June
30, 1997 was primarily due to approximately $2 billion in cash used to acquire
35.5 million shares of $1-2/3 par value common stock under the stock repurchase
program announced in January 1997. Subsequently, on August 4, 1997, GM announced
that it had completed the $2.5 billion stock repurchase program that began in
the first half of 1997 and announced an additional $2.5 billion stock repurchase
program of $1-2/3 par value common stock to be completed over a 12 month period.
The stock repurchases to be made under the second repurchase program would
represent about 5% of the outstanding shares of $1-2/3 par value common stock
based on the New York Stock Exchange's closing price of $64.44 per share on
Friday, August 1, 1997. The increase in cash and marketable securities from June
30, 1996 to June 30, 1997 was due primarily to higher cash levels generated from
continuing operations for the period.
During the second quarter of 1997, loans payable and long-term debt increased
by over $800 million to $7.2 billion at June 30, 1997 from balances of $6.4
billion at December 31, 1996 and June 30, 1996, respectively. The increases were
primarily due to an increase of more than $600 million in long-term debt assumed
in the PAS merger previously discussed and other funding used for worldwide
growth initiatives. Net liquidity, calculated as cash and marketable securities
less the total of loans payable, long-term debt and capitalized leases was $7.5
billion at June 30, 1997, compared with $10.4 billion at December 31, 1996 and
$6.4 billion at June 30, 1996.
Book value per share of $1-2/3 par value common stock increased to $29.99 at
June 30, 1997, from $27.95 at December 31, 1996 and $24.79 at June 30, 1996.
Book value per share of Class H common stock increased to $14.99 at June 30,
1997, from $13.97 at December 31, 1996 and $12.40 at June 30, 1996.
- 23 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Liquidity and Capital Resources for GMAC
At June 30, 1997, GMAC owned assets and serviced automotive receivables
totaling $111.7 billion, $3.6 billion above year-end 1996, and $4.8 billion
above June 30, 1996. Earning assets totaled $100.9 billion at June 30, 1997,
compared with $95.7 billion and $93.3 billion at December 31 and June 30, 1996,
respectively. The increase over year-end 1996 was primarily attributable to
higher outstanding balances for wholesale receivables. Year-to-year increases in
asset levels were attributed to growth of operating leases and greater wholesale
and real estate mortgage balances.
As of June 30, 1997, GMAC's total borrowings were $82.5 billion, an increase
of $3.8 billion and $8.1 billion from December 31, 1996 and June 30, 1996,
respectively. The higher borrowings outstanding were used to fund increased
earning asset levels. GMAC's ratio of debt to total stockholder's equity at June
30, 1997 was 9.7:1, compared with 9.5:1 at December 31, 1996 and 8.9:1 at June
30, 1996. Continuing to utilize its asset securitization program, GMAC sold
additional retail finance receivables totaling $1.5 billion (net) during the
second quarter of 1997.
GMAC and its subsidiaries maintain substantial bank lines of credit which
totaled $40.2 billion at June 30, 1997, compared with $40.7 billion at year-end
1996 and $40.4 billion at June 30, 1996. The unused portion of these credit
lines totaled $31.5 billion at June 30, 1997, $900 million and $100 million
higher than December 31 and June 30, 1996, respectively.
Condensed Consolidated Statements of Cash Flows With Financing and Insurance
Operations on an Equity Basis (Unaudited)
Six Months Ended
June 30,
1997 1996
(Dollars in Millions)
Net cash provided by operating activities $7,582 $6,048
----- -----
Cash flows from investing activities
Expenditures for property (4,070) (4,176)
Investments in companies, net of cash acquired (1,652) (54)
Investments in other marketable securities
- acquisitions (7,963) (5,261)
Investments in other marketable securities
- liquidations 7,543 4,917
Operating leases - acquisitions (2,610) (2,065)
Operating leases - liquidations 1,667 2,826
Special inter-company payment from EDS - 500
Other (29) 202
------ ------
Net cash used in investing activities (7,114) (3,111)
----- -----
Cash flows from financing activities
Net increase (decrease) in loans payable 66 (1,034)
Increase in long-term debt 195 1,898
Decrease in long-term debt (37) (760)
Proceeds from issuing common stocks 281 191
Repurchases of common stocks (2,292) -
Cash dividends paid to stockholders (829) (837)
Proceeds from sale of minority interest in DIRECTV - 138
------ -----
Net cash used in financing activities (2,616) (404)
----- ----
Effect of exchange rate changes on cash and cash
equivalents (317) (182)
Net cash (used in) provided by continuing operations (2,465) 2,351
Net cash provided by discontinued operations - 103
Net (decrease) increase in cash and cash equivalents (2,465) 2,454
Cash and cash equivalents at beginning of the period 13,320 9,047
Cash and cash equivalents at end of the period $10,855 $11,501
Cash Flows With Financing and Insurance Operations on an Equity Basis
Net cash provided by operating activities was approximately $7.6 billion for
the six months ended June 30, 1997, compared with net cash provided by operating
activities of over $6 billion in the prior year period. The increase was
primarily the result of an increase in cash generated from higher income from
continuing operations.
- 24 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Cash Flows With Financing and Insurance Operations on an Equity Basis
(concluded)
Net cash used in investing activities amounted to $7.1 billion for the six
months ended June 30, 1997 compared with $3.1 billion in the prior year period.
The increase in net cash used in investing activities during the 1997 period was
primarily due to approximately $1.5 billion of cash consideration used to
consummate the merger of the satellite service operations of Hughes and PAS (see
Note 2 to the GM consolidated financial statements), combined with a $1.7
billion net increase in cash used for operating leases.
Net cash used in financing activities totaled $2.6 billion for the six months
ended June 30, 1997, compared with $404 million for the prior year period. The
increase was primarily due to the use of $2 billion during the first half of
1997 to acquire 35.5 million shares of $1-2/3 par value common stock, completing
80 percent of the Corporation's $2.5 billion stock repurchase program announced
in January 1997. GM also used approximately $300 million to repurchase shares of
$1-2/3 par value common stock for certain employee benefit plans.
A second quarter cash dividend on $1-2/3 par value common stock of $0.50 per
share was paid on June 10, 1997. This dividend declaration raises cash dividends
in the first six months of 1997 to $1.00 per share compared with $0.80 per share
in the same 1996 period. A second quarter cash dividend on Class H common stock
of $0.25 per share was paid on June 10, 1997. This continues the level
established in the first quarter of 1997 and raises cash dividends in the first
six months of 1997 to $0.50 per share compared with $0.48 per share in the same
1996 period. On August 4, 1997, the GM Board of Directors declared a cash
dividend for the third quarter of 1997 on $1-2/3 par value and Class H common
stocks of $0.50 and $0.25, respectively, payable September 10, 1997.
Cash Flows for GMAC
Cash provided by operating activities during the six months ended June 30,
1997 totaled $3.2 billion, a decrease from the $3.9 billion provided during the
comparable 1996 period. The decrease was attributed mainly to increased net
purchases of both mortgage loans and mortgage trading securities, offset
primarily by increases in payables to GM for vehicle shipments to dealers under
GMAC wholesale finance agreements.
Cash used for investing activities during the first six months of 1997
totaled $7.2 billion, compared with $3.6 billion during the same period in 1996.
The period-to-period increase was primarily attributable to lower sale of
receivable proceeds resulting from decreased asset securitization activity.
During the first six months of 1997, cash provided by financing activities
totaled $4 billion, compared with approximately $900 million of cash used by
financing activities during the first six months of 1996. The $4.9 billion
change was primarily attributable to increased proceeds from the issuance of
short term debt used to fund increases in wholesale receivable balances.
Security Ratings
On April 24, 1997, Standard and Poor's Ratings Services, a division of
McGraw-Hill Companies, Inc. (S&P), affirmed its security ratings of GM, GMAC,
and various overseas affiliates of GMAC. S&P also revised the ratings outlook
from stable to positive based on GM's generation of very strong overall earnings
and cash flows over the past three years, which S&P indicated reflects the
effectiveness of restructuring measures at GM's North American automotive
operations.
In addition, S&P affirmed its security ratings of Hughes and indicated that
the security ratings outlook for Hughes remains developing.
On June 18, 1997, Fitch Investors Services (Fitch) upgraded GM's senior debt
rating to A from A- and its preference shares rating to A- from BBB+. In
addition, GM's Capital Trust D and Capital Trust G Trust Originated Preferred
Securities (TOPrS) were rated A- (see Note 11 to the GM consolidated financial
statements) .
Fitch also upgraded GMAC's outstanding senior debt rating to A from A- and
all of its commercial paper ratings were affirmed at F-1. The senior debt
ratings of certain GMAC affiliates, which included GMAC Australia (Finance)
Limited, GMAC of Canada Limited, and GMAC International Finance B.V., were
upgraded to A from A-, while commercial paper and other short-term obligations
ratings of other GMAC affiliates, which included GMAC Nederland N.V. and GMAC
(U.K.) Finance plc., were affirmed at F-1.
Fitch's A and A- ratings are the sixth and seventh highest within the 10
investment grade ratings available from Fitch for long-term debt, with such debt
considered to be investment grade and of high credit quality based on the
obligor's strong ability to pay interest and repay principal. The debt may be
more vulnerable to adverse changes in economic conditions and circumstances than
debt with higher ratings.
Fitch's A- and BBB+ ratings are the seventh and eighth highest within the 10
investment grade ratings available from Fitch for preferred or preference
stocks. Preferred or preference stocks in the "A" category are of good quality
with asset protection and coverages of related dividends considered adequate and
expected to be maintained, while preferred or preference stocks in the "BBB"
category are considered to be reasonably safe but lack the protection of the "A"
to "AAA" categories.
Fitch's F-1 rating for commercial paper and other short-term obligations is
the second highest of four investment grade ratings available from Fitch and is
assigned to short-term issues that possess a very strong credit quality based
primarily on the existence of liquidity necessary to meet the obligation in a
timely manner.
The outlook, which indicates the likely direction of the rating, was revised
by Fitch to stable from improving for both GM and GMAC.
- 25-
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Employment and Payrolls
1997 1996
Worldwide Employment at June 30, (in thousands)
GM-NAO 243 256
Delphi 176 179
GMIO 114 109
GMAC 18 17
Hughes 88 84
Other 10 11
--- ----
Employees associated with continuing operations 649 656
=== ===
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Worldwide payrolls - continuing operations
(in billions) $7,631 $7,432 $15,364 $14,972
===== ===== ====== ======
New Accounting Standards
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income,
and SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information. SFAS No. 130 establishes standards for reporting and displaying
comprehensive income and its components in a financial statement that is
displayed with the same prominence as other financial statements. SFAS No. 130
requires that an entity classify items of other comprehensive income by their
nature in that financial statement. In addition, the accumulated balance of
other comprehensive income must be displayed separately from retained earnings
and additional paid-in capital in the equity section of the statement of
financial position. Reclassification of financial statements for earlier
periods, provided for comparative purposes, is required. SFAS No. 131
establishes standards for reporting information about operating segments in
annual financial statements and requires selected information about operating
segments in interim financial reports issued to stockholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. Operating segments are defined as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. SFAS No. 131
requires reporting segment profit or loss, certain specific revenue and expense
items and segment assets. It also requires reconciliations of total segment
revenues, total segment profit or loss, total segment assets, and other amounts
disclosed for segments to corresponding amounts reported in the financial
statements. Restatement of comparative information for earlier periods presented
is required in the initial year of application. Interim information is not
required until the second year of application, at which time comparative
information is required. GM will adopt SFAS No. 130 and No. 131 on January 1,
1998, as required.
* * * * * *
- 26-
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
PART II
ITEM 1. LEGAL PROCEEDINGS
(a) Material pending legal proceedings, other than ordinary routine litigation
incidental to the business, to which the Corporation became, or was, a party
during the quarter ended June 30, 1997 or subsequent thereto, but before the
filing of this report are summarized below.
Environmental Matters
On May 16, 1997, GM reached a tentative settlement of a claim by the State of
North Dakota that GM had disposed of hazardous waste in a non-hazardous waste
landfill in North Dakota. The state alleged that 99 drums of an aluminum
grinding waste that were disposed of by GM's Powertrain Group Bay City facility
over several years exceeded the hazardous waste regulatory threshold for lead,
and, therefore, had been improperly disposed of in the non-hazardous landfill.
GM's internal assessment determined that the aluminum grinding waste had been
part of a much larger ferrous metal grinding waste stream which had been tested
and shown to be non-hazardous and that other aluminum grinding waste streams at
the facility had been tested and also been shown to be non-hazardous. When the
aluminum grinding waste was segregated from the ferrous metal grinding waste,
the facility, relying on a permissible method called "generator knowledge",
considered the waste to be non-hazardous and it was accepted as such by the
landfill. As part of the settlement, GM will undertake a good faith effort to
remove the drums of aluminum grinding waste and to make a voluntary contribution
of $120,000 to the state's Environmental Quality Restoration Fund.
* * *
As previously reported, several actions seeking compensatory and punitive
damages in unspecified amounts were filed against Hughes by plaintiffs alleging
that they suffered injuries as a result of the migration into the Tucson,
Arizona water supply of alleged toxic substances that were disposed of at a
facility owned by the United States Government which Hughes operates under a
contract with the U.S. Air Force. These actions included a putative class action
filed in Arizona State Court, Cordova v. Hughes Aircraft Company, an individual
action filed on behalf of approximately 800 plaintiffs in Federal District Court
in Arizona, Yslava v. Hughes Aircraft Company, and a class action filed in
Federal District Court in Arizona, Lanier v. Hughes Aircraft Company. Other
governmental and private entities are known to have also been sources of
substances which may have migrated into the Tucson water supply. Hughes believes
that it has strong defenses to the claims asserted against it and that it may
have claims for contribution against the other entities. In July, 1996, the
Cordova court denied plaintiff's motion for class certification and,
subsequently, an amended complaint in intervention on behalf of more than 400
plaintiffs asserting individual claims was filed.
The facts alleged in these cases are similar to the facts alleged in the
previously reported action entitled Valenzuela v. Hughes Aircraft Company. As
previously reported, the Valenzuela action was settled pursuant to an agreement
under which Hughes' principal insurers provided $70.7 million and Hughes
provided $13.8 million. At the time of such settlement, Hughes and its insurers
were litigating in the United States District Court in Arizona their respective
ultimate liability to one another for the amounts paid in connection with the
Valenzuela claims. This litigation, entitled Smith, et al. v. Hughes Aircraft
Company and related cases, was commenced in 1988 by various insurers seeking a
declaratory judgment that the Valenzuela claims are not covered under the terms
of the insurance policies issued to Hughes. These and other insurers have taken
a similar position with respect to the more recently filed actions and are also
litigating that position against Hughes regarding insurance coverage for the
Valenzuela claims in the Arizona and California federal and state courts. In
September, 1991, the Smith court entered summary judgment in favor of Hughes'
insurers who issued policies from 1971 to 1985, based upon "pollution
exclusions" contained in those policies. In November, 1993, the Ninth Circuit
affirmed in substantial part this particular ruling. Further proceedings
continue in the District Court.
The contract under which Hughes has operated the Air Force facility contains
provisions under which indemnification from the Air Force may be provided for
certain liabilities which Hughes may incur in connection with its operation of
the facility to the extent such liabilities are not covered by insurance. Hughes
intends to prosecute all appropriate claims it may have for insurance coverage
and, if necessary, to pursue all appropriate claims for indemnification or
contribution relating to the actions described above.
* * *
- 27 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Other Matters
With respect to the previously reported matter in which a jury in California
State Court awarded two former Hughes employees, Lane and Villalpando, a total
of $89.5 million in damages against Hughes based principally on allegations of
racial discrimination and retaliation, which award, as also previously reported,
had been reduced by the Court of Appeal to $17.33 million, the California
Supreme Court on March 19, 1997 granted Hughes' request for a review of the
$17.33 million judgment, and ordered the Court of Appeal to vacate its decision
and reconsider the case. On March 27, 1997 the Court of Appeal issued such an
order and requested supplemental briefs. On July 28, 1997 the Court of Appeal
reissued essentially the same opinion and award. Hughes' petition for
reconsideration is pending and, if necessary, it will request review by the
California Supreme Court.
* * *
Hughes has maintained a suit against the U.S. Government since September 1973
regarding the Government's infringement and use of a Hughes patent (the
"Williams Patent") covering "Velocity Control and Orientation of a Spin
Stabilized Body," principally satellites. On June 17, 1994, the U.S. Court of
Claims awarded Hughes damages of $114 million. Because Hughes believed that the
record supported a higher royalty rate, it appealed that decision. The U.S.
Government, contending that the award was too high, also appealed. On June 19,
1996, the Court of Appeals for the Federal Circuit (CAFC) affirmed the decision
of the Court of Claims which awarded Hughes $114 million in damages, together
with interest. The U.S. Government petitioned the CAFC for a rehearing. That
petition was denied in October 1996. The U.S. Government then filed a petition
with the U.S. Supreme Court seeking certiorari. On April 21, 1997 the U.S.
Supreme Court, citing a recent decision it had rendered in Warner-Jenkinson v.
Hilton Davis, remanded Hughes' suit over the Williams Patent back to the CAFC in
order to have the CAFC determine whether the ruling in the Williams case was
consistent with the U.S. Supreme Court's decision in the Warner-Jenkinson case.
The previous liability decision of the Court of Claims in the Williams Patent
matter, and its $114 million damage award to Hughes, currently remain in effect
pending reconsideration of the case by the CAFC. Hughes is unable to estimate
the duration of this reconsideration process. While no amount has been recorded
in the financial statements of Hughes to reflect the $114 million award or the
interest accumulating thereon, a resolution of this matter could result in a
gain that would be material to the earnings of GM attributable to Class H common
stock.
The Corporation and its subsidiaries are subject to potential liability under
government regulations and various claims and legal actions which are pending or
may be asserted against them. Some of the pending actions purport to be class
actions. The aggregate ultimate liability of the Corporation and its
subsidiaries under these government regulations, and under these claims and
actions, was not determinable at June 30, 1997. After discussion with counsel,
it is the opinion of management that such liability is not expected to have a
material adverse effect on the Corporation's consolidated operations or
financial position.
* * *
With respect to three previously reported class actions filed against General
Motors, as well as a number of other vehicle and parts manufacturers and
dealers, claiming that the front seat air bags installed in 1993 to 1997 model
vehicles are defective: Eloisa Rodriquez, et al. v. General Motors Corporation,
Ford Motor Company, Chrysler Corporation, Volvo of North America, Inc.,
Armadillo Motor Company, Inc. and Wickstrom Chevrolet Co., Inc., filed on April
11, 1997, in the District Court of Maverick County, Texas; Ellen Smith, et al.
v. General Motors Corporation, Ford Motor Corporation, Chrysler Corporation,
Sylacauga Auto Plex, et al., filed on April 25, 1997, in Circuit Court of Coosa
County, Alabama; and Frederick Lewis, et al. v. Volvo of North America, Inc.,
General Motors Corporation, Ford Motor Corporation, Chrysler Corporation, and
Spinato Chrysler Plymouth, Inc. dba Bergeron Volvo filed in Civil District Court
for the Parish of Orleans, Louisiana, the Alabama matter has been remanded to
state court. GM intends to vigorously defend these actions.
* * *
With respect to the previously reported matter In Re General Motors Anti-Lock
Brake Products Liability Litigation, plaintiffs filed a consolidated complaint
which GM successfully moved to dismiss. The court granted dismissal on June 11,
1997, without leave to amend. Plaintiffs are seeking reconsideration and are
expected to appeal if they are not successful.
* * *
(b) Previously reported legal proceedings which have been terminated, either
during the quarter ended June 30, 1997, or subsequent thereto, but before the
filing of this report are summarized below:
Environmental Matters
With regard to the previously reported Civil Administrative Complaint, In the
Matter of: General Motors Corporation, U.S. EPA Docket NO. RUST 002-93, issued
by EPA against the Corporation alleging that 65 petroleum and hazardous
substance underground storage tanks (USTs) operated at its Technical Center in
Warren, Michigan, have been in violation of certain EPA UST regulations, GM and
EPA entered into a Consent Agreement and Final Order on June 27, 1997, resolving
all EPA claims pertaining to the matter. The Consent Agreement and Final Order
requires GM to pay a civil penalty of $58,000.
* * *
- 28-
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Environmental Matters (concluded)
With regard to the previously reported notice given by the Wayne County
Department of Health Air Pollution Division ("Wayne County") in November of
1996, to General Motors that Wayne County was seeking fines in excess of
$100,000 in connection with alleged intermittent emissions of offensive odors
since 1993 at GM's Oil Reclamation Facility at Clark Street in Detroit,
Michigan, GM and Wayne County have resolved the matter with GM's agreement to
pay $99,000 to Wayne County and donate $50,000 to three local schools. GM has
also decided to close the oil reclamation facility.
* * * * * *
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The annual meeting of stockholders of the Registrant was held on
May 23, 1997.
At that meeting, the following matters were submitted to a vote of the
stockholders of General Motors Corporation:
1997 General Motors Annual Meeting
Final Voting Results
(All classes of common stock)
Proposal Voting Results
Votes* Percent**
Item No. 1
Nomination and Election of Directors
The Judges subscribed and delivered a certificate reporting that the
following nominees for directors had received the number of votes* set opposite
their respective names.
Anne L. Armstrong For 579,268,355 98.6%
Withheld 8,070,167 1.4
Percy N. Barnevik For 579,581,429 98.7
Withheld 7,757,094 1.3
John H. Bryan For 579,585,425 98.7
Withheld 7,753,098 1.3
Thomas E. Everhart For 579,448,463 98.7
Withheld 7,890,059 1.3
Charles T. Fisher, III For 579,503,112 98.7
Withheld 7,835,410 1.3
George M. C. Fisher For 579,615,820 98.7
Withheld 7,722,703 1.3
J. Willard Marriott, Jr. For 579,492,184 98.7
Withheld 7,846,339 1.3
Ann D. McLaughlin For 577,145,659 98.3
Withheld 10,192,864 1.7
Harry J. Pearce For 579,596,955 98.7
Withheld 7,741,568 1.3
Eckhard Pfeiffer For 579,595,574 98.7
Withheld 7,742,948 1.3
John G. Smale For 579,413,865 98.7
Withheld 7,924,657 1.3
John F. Smith, Jr. For 579,493,833 98.7
Withheld 7,844,689 1.3
Louis W. Sullivan For 579,246,115 98.6
Withheld 8,092,407 1.4
Dennis Weatherstone For 579,547,572 98.7
Withheld 7,790,951 1.3
Thomas H. Wyman For 579,424,155 98.7
Withheld 7,914,367 1.3
Item No. 2
A proposal of the Board of For 582,169,751 99.1%
Directors that the stockholders Against 2,465,960 0.4
ratify the selection of Abstain 2,702,811 0.5
Deloitte & Touche LLP as
independent public accountants
for the year 1997.
Item No. 3
A proposal of the Board of For 466,747,447 92.4%
Directors that the stockholders Against 31,983,852 6.3
ratify the approval of the Abstain 6,352,263 1.3
Non-Employee Director Long-Term
Stock Incentive Plan.
- 29 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - Concluded
Proposal Voting Results
Votes* Percent**
Item No. 4
A proposal of the Board of For 449,163,964 89.0%
Directors that the stockholders Against 49,586,470 9.8
ratify to approve the incentive Abstain 6,191,111 1.2
program consisting of the
1997 Annual Incentive Plan, the 1997
Stock Incentive Plan, and the 1997
Performance Achievement Plan.
Item No. 5
A stockholder proposal to limit For 21,790,160 4.3%
the number of years future Against 473,736,648 93.8
outside Directors serve. Abstain 9,421,320 1.9
Item No. 6
A proposal by stockholders that For 138,371,961 27.4%
the Board of Directors provide Against 358,946,216 71.1
for cumulative voting in the Abstain 7,621,860 1.5
election of directors.
Item No. 7
A stockholder proposal to For 34,724,542 6.9%
re-start separate chief executive Against 459,112,730 91.1
and independent board chairman Abstain 9,911,924 2.0
positions.
Item No. 8
A stockholder proposal to For 32,751,863 6.5%
require 90% of directors be Against 463,332,897 91.8
independent. Abstain 8,854,727 1.7
Item No. 9
A stockholder proposal regarding For 27,460,081 5.4%
stock options for directors. Against 466,997,267 92.5
Abstain 10,479,741 2.1
* Numbers represent the aggregate voting power of all votes cast with holders
of $1-2/3 par value common stock casting one vote per share and holders of
Class H common stock casting one-half of a vote per share.
** Percentages represent the aggregate voting power of both classes of GM common
stock cast for each item.
* * * * * *
- 30 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS (Including Those Incorporated by Reference).
Exhibit
Number Exhibit Name Page No.
2(a) Agreement and Plan of Merger by and between
HE Holdings, Inc. and Raytheon Company dated
as of January 16, 1997, filed as Exhibit 2(a) to
the Current Report on Form 8-K of General Motors
Corporation dated January 16, 1997 N/A
2(b) Implementation Agreement by and between General
Motors Corporation and Raytheon Company dated as
of January 16, 1997, filed as Exhibit 2(b) to
the Current Report on Form 8-K of General Motors
Corporation dated January 16, 1997 N/A
2(c) Form of Agreement and Plan of Merger by and between
General Motors Corporation and _____________ Corporation
(included as Exhibit A to the Implementation
Agreement attached as Exhibit 2(b) to the Current
Report on Form 8-K dated January 16, 1997), filed as
Exhibit 2(c) to the Current Report on
Form 8-K of General Motors Corporation dated
January 16, 1997 N/A
2(d)* List of Omitted Schedules and Other Attachments,
filed as Exhibit 2(d) to the Current Report on Form 8-K
of General Motors Corporation dated January 16, 1997 N/A
3(ii)** By-Laws of General Motors Corporation as amended to
August 4, 1997 33
4(e)(i) Amended and Restated Declaration of Trust of General
Motors Capital Trust D, incorporated by reference to
Exhibit 4(c)(i) to the Current Report on Form 8-K
of General Motors Corporation dated July 1, 1997 N/A
4(e)(ii) Amended and Restated Declaration of Trust of General
Motors Capital Trust G, incorporated by reference to
Exhibit 4(c)(ii) to the Current Report on Form 8-K
of General Motors Corporation dated July 1, 1997 N/A
4(f)(i) Indenture between General Motors Corporation and
Wilmington Trust Company, incorporated by reference
to Exhibit 4(d)(i) to the Current Report on Form 8-K
of General Motors Corporation dated July 1, 1997 N/A
4(f)(ii) First Supplemental Indenture between General Motors
Corporation and Wilmington Trust Company With Respect
To The Series D Junior Subordinated Debentures,
incorporated by reference to Exhibit 4(d)(ii) to the
Current Report on Form 8-K of General Motors Corporation
dated July 1, 1997 N/A
4(f)(iii) Second Supplemental Indenture between General Motors
Corporation and Wilmington Trust Company With Respect
To The Series G Junior Subordinated Debentures,
incorporated by reference to Exhibit 4(d)(iii) to
the Current Report on Form 8-K of General Motors
Corporation dated July 1, 1997 N/A
4(g)(i) Series D Preferred Securities Guarantee Agreement,
General Motors Capital Trust D, incorporated by
reference to Exhibit 4(g)(i) to the Current Report on
Form 8-K of General Motors Corporation dated July 1, 1997 N/A
4(g)(ii) Series G Preferred Securities Guarantee Agreement,
General Motors Capital Trust G, incorporated by reference
to Exhibit 4(g)(ii) to the Current Report on
Form 8-K of General Motors Corporation dated July 1, 1997 N/A
11 Computation of Earnings Per Share Attributable to
Common Stocks for the Three and Six Month Periods
Ended June 30, 1997 and 1996 62
- 31 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (concluded)
12 Computation of Ratios of Earnings to Fixed Charges
for the Six Month Periods Ended June 30, 1997 and 1996 66
99 Hughes Electronics Corporation and Subsidiaries
Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and
Results of Operations 67
27 Financial Data Schedule (for SEC information only)
* The registrant hereby undertakes to furnish supplementally a copy of any
omitted schedule or other attachment to the Securities and Exchange
Commission upon request.
** Amendment to Section 1.1 of Article I to revise the date of the annual
meeting of stockholders.
(b) REPORTS ON FORM 8-K.
Three reports on Form 8-K, dated April 14, 1997, May 23, 1997, and May 27,
1997, were filed during the quarter ended June 30, 1997 reporting matters under
Item 5, Other Events, and Item 7, Financial Statements, Pro Forma Financial
Information, and Exhibits.
* * * * * *
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GENERAL MOTORS CORPORATION
(Registrant)
Date August 14, 1997 /s/Peter R. Bible
- -------------------- --------------------------------------
(Peter R. Bible,
Chief Accounting Officer)
- 32-
l:\secfiles\10q\1997\2ndqtr\by-law.doc 29
EXHIBIT 3(ii)
G E N E R A L M O T O R S C O R P O R A T I O N
--------------------------------------------------------
BY-LAWS
As Amended to
August 4, 1997
- 33 -
<PAGE>
GENERAL MOTORS CORPORATION
BY-LAWS
INDEX
Page
ARTICLE I -- MEETINGS OF STOCKHOLDERS
1.1. Annual.........................................................1
1.2. Special........................................................1
1.3. Notice of Meetings.............................................1
1.4. List of Stockholders Entitled to Vote..........................1
1.5. Quorum.........................................................2
1.6. Organization...................................................2
1.7. Voting; Proxies................................................2
1.8. Fixing Date for Determination of Stockholders of Record........2
1.9. Adjournments...................................................3
1.10. Judges.........................................................3
ARTICLE II -- BOARD OF DIRECTORS
2.1. Responsibility and Number......................................3
2.2. Election; Resignation; Vacancies...............................3
2.3. Regular Meetings...............................................4
2.4. Special Meetings...............................................4
2.5. Quorum; Vote Required for Action ..............................4
2.6. Organization...................................................4
2.7. Transactions with Corporation..................................5
2.8. Ratification...................................................5
2.9. Informal Action by Directors...................................5
2.10. Telephonic Meetings Permitted..................................6
2.11. Notice of Stockholder Nomination and Stockholder Business......6
2.12. Independent Directors..........................................7
ARTICLE III -- COMMITTEES
3.1. Committees of the Board of Directors...........................8
3.2. Election and Vacancies.........................................8
3.3. Procedure; Quorum..............................................8
3.4. Executive Committee............................................9
3.5. Investment Funds Committee.....................................9
3.6. Audit Committee................................................9
3.7. Executive Compensation Committee...............................9
3.8. Public Policy Committee........................................10
3.9. Committee on Director Affairs..................................10
3.10. Capital Stock Committee.......................................11
i
- 34 -
<PAGE>
Page
ARTICLE IV -- OFFICERS
4.1. Elected Officers ..............................................11
4.2. Chief Executive Officer........................................11
4.3. President......................................................12
4.4. Treasurer......................................................12
4.5. Secretary......................................................12
4.6. Comptroller....................................................12
4.7. General Counsel................................................12
4.8. General Auditor................................................12
4.9. Chief Tax Officer..............................................13
4.10. Subordinate Officers...........................................13
4.11. Resignation, Removal, Suspension and Vacancies.................13
ARTICLE V -- INDEMNIFICATION
5.1. Right to Indemnification of Directors and Officers ............14
5.2. Advancement of Expenses of Directors and Officers..............14
5.3. Claims by Officers or Directors................................14
5.4. Indemnification of Employees...................................15
5.5. Advancement of Expenses of Employees...........................15
5.6. Non-Exclusivity of Rights......................................15
5.7. Other Indemnification..........................................15
5.8. Insurance......................................................15
5.9. Amendment or Repeal............................................16
ARTICLE VI -- MISCELLANEOUS
6.1. Offices........................................................16
6.2. Stock Certificates.............................................16
6.3. Seal...........................................................16
6.4. Dividends on Preferred Stock...................................17
6.5. Fiscal Year....................................................17
6.6. Annual Report..................................................17
6.7. Notice.........................................................17
6.8. Waiver of Notice...............................................17
6.9. Voting of Stocks Owned by the Corporation......................17
6.10. Form of Records................................................18
6.11. Amendment of By-Laws...........................................18
6.12. Anti-Greenmail.................................................18
6.13. Gender Pronouns................................................19
ii
- 35 -
<PAGE>
Page
DEFINITION OF CERTAIN TERMS USED IN AND GUIDELINES
FOR THE APPLICATION OF BY-LAW 2.12 OF GENERAL MOTORS
CORPORATION..........................................................i
SECURITIES ACT AND EXCHANGE ACT PARAGRAPH 2 OF INSTRUCTIONS TO
PARAGRAPH (b) OF ITEM 404 OF REGULATION S-K AS IN EFFECT ON
JANUARY 7, 1991 (REFERRED TO IN PARAGRAPH (i) OF GUIDELINES
FOR APPLICATION OF BY-LAW 2.12 OF GENERAL MOTORS
CORPORATION).........................................................iv
DEFINITION OF CERTAIN TERMS USED IN BY-LAW 6.12......................v
iii
- 36 -
<PAGE>
GENERAL MOTORS CORPORATION
BY-LAWS
ARTICLE I
MEETINGS OF STOCKHOLDERS
1.1. Annual.
The annual meeting of stockholders for the election of directors, ratification
or rejection of the selection of auditors and the transaction of such other
business as may properly be brought before the meeting shall be held on the
first Monday in June in each year, or on such other date and such place and time
as the chairman of the board or the board of directors shall designate.
1.2. Special.
Special meetings of stockholders may be called by the board of directors or the
chairman of the board of directors at such place, date and time and for such
purpose or purposes as shall be set forth in the notice of such meeting.
1.3. Notice of Meetings.
Written notice of each meeting of stockholders shall be given by the chairman
of the board and/or the secretary in compliance with the provisions of
Delaware law.
1.4. List of Stockholders Entitled to Vote.
The secretary shall prepare, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof and may be inspected by any stockholder who is
present.
1
- 37 -
<PAGE>
1.5. Quorum.
At each meeting of stockholders, except where otherwise provided by law or the
certificate of incorporation or these by-laws, the holders of one-third of the
voting power of the outstanding shares of stock entitled to vote at the meeting,
present in person or by proxy, shall constitute a quorum. In the absence of a
quorum, the stockholders so present may, by majority vote, adjourn the meeting
from time to time in the manner provided in Section 1.9 of these by-laws until a
quorum shall attend. Shares of its own stock belonging to the corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors of such other corporation is held, directly or indirectly,
by the corporation, shall neither be entitled to vote nor be counted for quorum
purposes; provided, however, that the foregoing shall not limit the right of the
corporation to vote stock, including but not limited to its own stock, held by
it in a fiduciary capacity.
1.6. Organization.
The chairman or, if he so designates or is absent, the chief executive officer
or, in their absence, an executive vice president or vice president designated
by the board of directors, shall preside at meetings of the stockholders. The
secretary of the corporation shall act as secretary, but in his absence the
presiding officer may appoint a secretary.
1.7. Voting; Proxies.
Each stockholder shall be entitled to vote in accordance with the number of
shares and voting powers of the voting shares held of record by him. Each
stockholder entitled to vote at a meeting of stockholders may authorize another
person or persons to act for him by proxy, but such proxy, whether revocable or
irrevocable, shall comply with the requirements of Delaware law. Voting at
meetings of stockholders, on other than the election of directors, need not be
by written ballot unless the holders of a majority of the outstanding shares of
all classes of stock entitled to vote thereon present in person or by proxy at
such meeting shall so determine. At all meetings of stockholders for the
election of directors a plurality of the voting power of the shares of stock
present in person or represented by proxy and entitled to vote shall be
sufficient. All other elections and questions shall, unless otherwise provided
by law or by the certificate of incorporation or these by-laws, be decided by
the vote of the holders of a majority of the voting power of the shares of stock
entitled to vote thereon present in person or by proxy at the meeting.
1.8. Fixing Date for Determination of Stockholders of Record.
In order that the corporation may determine the stockholders entitled: (a) to
notice of or to vote at any meeting of stockholders or any adjournment thereof;
(b) to express consent to corporate action in writing without a meeting; (c) to
receive payment of any dividend or other distribution or allotment of any
rights; or (d) to exercise any rights in respect of any change, conversion or
exchange of stock or for the purpose of any other lawful action, the board of
directors may fix a record date. The record date shall not precede the date upon
which the resolution fixing the record date is adopted by the board of directors
and which record date: (a) in the case of determination of stockholders entitled
to vote at any meeting of stockholders or adjournment thereof, shall not be more
than sixty nor less than ten days before the date of such meeting; (b) in the
case of determination of stockholders entitled to express consent to corporate
action in writing without a meeting, shall not be more than ten days from the
date upon which the resolution fixing the record date is adopted by the board of
directors; and (c) in the case of any other action, shall not be more than sixty
days prior to such other action. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the board of directors may
fix a new record date for the adjourned meeting.
2
- 38 -
<PAGE>
1.9. Adjournments.
Any meeting of stockholders, annual or special, may adjourn from time to time to
reconvene at the same or some other place, and notice need not be given of any
such adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken. At the adjourned meeting the
corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
1.10. Judges.
All votes by ballot at any meeting of stockholders shall be conducted by two
judges appointed for the purpose, either by the directors or by the chairman of
the meeting. The judges shall decide upon the qualifications of voters, count
the votes and declare the result.
ARTICLE II
BOARD OF DIRECTORS
2.1. Responsibility and Number.
The business and affairs of the corporation shall be managed by or under the
direction of a board of directors. The number of directors shall be determined
from time to time by resolution of the board of directors, but the total number
of directors shall not be less than twelve or more than twenty.
2.2. Election; Resignation; Vacancies.
At each annual meeting of stockholders, the stockholders shall elect directors
each of whom shall hold office for a term commencing on the date of the annual
meeting of stockholders, or such later date as shall be determined by the board
of directors, and ending on the next annual meeting of stockholders, or until
his successor is elected and qualified. Any director may resign at any time upon
written notice to the chairman of the board or to the secretary. Any vacancy
occurring in the board of directors for any cause may be filled by a majority of
the remaining members of the board of directors, although such majority is less
than a quorum. Each director so elected shall hold office concurrent with the
term of other directors or until his successor is elected and qualified.
3
- 39 -
<PAGE>
2.3. Regular Meetings.
Unless otherwise determined by resolution of the board of directors, a meeting
of the board of directors for the election of officers and the transaction of
such other business as may come before it shall be held as soon as practicable
following the annual meeting of stockholders, and other regular meetings of the
board of directors shall be held either on the first Monday of each month, and
if that be a legal holiday, then on the next Monday not a legal holiday, or such
other days as may from time to time be designated by the chairman of the board
of directors.
2.4. Special Meetings.
Special meetings of the board of directors may be called by the chairman of the
board of directors, the chief executive officer, the president or a vice
chairman, and shall be called by the secretary at the request in writing of
one-third of the directors then in office. Notice of a special meeting of the
board of directors shall be given at least twenty-four hours before the special
meeting.
2.5. Quorum; Vote Required for Action.
At all meetings of the board of directors, one-third of the whole board shall
constitute a quorum for the transaction of business. Except in cases in which
applicable law, the certificate of incorporation or these by-laws otherwise
provide, the vote of a majority of the directors present at a meeting at which a
quorum is present shall be the act of the board of directors.
2.6. Organization.
The board of directors shall annually elect one of its members to be chairman of
the board and shall fill any vacancy in the position of chairman of the board at
such time and in such manner as the board of directors shall determine. The
chairman of the board may but need not be an officer of or employed in an
executive or any other capacity by the corporation.
The chairman of the board of directors shall preside at meetings of the board of
directors and lead the board in fulfilling its responsibilities as defined in
section 2.1 and, in particular, its responsibilities to oversee the performance
of the corporation and of the executive management of the corporation.
The board of directors may also elect one of its members as vice chairman of the
board of directors who shall have such duties and responsibilities as are
provided by these by-laws or may be directed by the board of directors, the
chairman of the board, or the chairman of the executive committee of the board
of directors.
In the absence of the chairman of the board of directors, the vice chairman, or
in his absence, the chairman of the executive committee of the board of
directors, or in his absence, a member of the board selected by the members
present, shall preside at meetings of the board. The secretary of the
corporation shall act as secretary of the meetings of the board of directors,
but in his absence, the presiding officer may appoint a secretary for the
meeting.
4
- 40 -
<PAGE>
2.7. Transactions with Corporation.
No contract or transaction between the corporation and one or more of its
directors, or between the corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable for this reason, or solely because the director or officer is
present at or participates in the meeting of the board or committee thereof
which authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose: (1) if the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the board of directors or the committee, and the board or committee
in good faith authorizes the contract or transaction by the affirmative votes of
a majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or (2) if the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or (3) if the contract or transaction is fair as to the corporation as of the
time it is authorized, approved or ratified, by the board of directors, a
committee thereof, or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the board of directors or of a committee which authorizes
the contract or transaction.
2.8. Ratification.
Any transaction questioned in any stockholders' derivative suit on the ground of
lack of authority, defective or irregular execution, adverse interest of
director, officer or stockholder, non-disclosure, miscomputation, or the
application of improper principles or practices of accounting may be ratified
before or after judgment, by the board of directors or by the stockholders in
case less than a quorum of directors are qualified; and, if so ratified, shall
have the same force and effect as if the questioned transaction had been
originally duly authorized, and said ratification shall be binding upon the
corporation and its stockholders and shall constitute a bar to any claim or
execution of any judgment in respect of such questioned transaction.
2.9. Informal Action by Directors.
Unless otherwise restricted by the certificate of incorporation or these
by-laws, any action required or permitted to be taken at any meeting of the
board of directors, or of any committee thereof, may be taken without a meeting
if all members of the board or such committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the board or committee.
5
- 41 -
<PAGE>
2.10. Telephonic Meetings Permitted.
Members of the board of directors, or any committee designated by the board, may
participate in a meeting of such board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this by-law shall constitute presence in person at such meeting.
2.11. Notice of Stockholder Nomination and Stockholder Business.
At a meeting of the stockholders, only such business shall be conducted as shall
have been properly brought before the meeting. Nominations for the election of
directors may be made by the board of directors or by any stockholder entitled
to vote for the election of directors. Other matters to be properly brought
before the meeting must be: (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the board of directors,
including matters covered by rule 14a-8 of the Securities and Exchange
Commission; (b) otherwise properly brought before the meeting by or at the
direction of the board of directors; or (c) otherwise properly brought before
the meeting by a stockholder.
A notice of the intent of a stockholder to make a nomination or to bring any
other matter before the meeting shall be made in writing and received by the
secretary of the corporation not more than 180 days and not less than 120 days
in advance of the annual meeting or, in the event of a special meeting of
stockholders, such notice shall be received by the secretary of the corporation
not later than the close of the fifteenth day following the day on which notice
of the meeting is first mailed to stockholders.
Every such notice by a stockholder shall set forth:
(a) the name and residence address of the stockholder of the corporation who
intends to make a nomination or bring up any other matter;
(b) a representation that the stockholder is a holder of the corporation's
voting stock and intends to appear in person or by proxy at the meeting to make
the nomination or bring up the matter specified in the notice;
(c) with respect to notice of an intent to make a nomination, a description of
all arrangements or understandings among the stockholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder;
(d) with respect to notice of an intent to make a nomination, such other
information regarding each nominee proposed by such stockholder as would have
been required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had each nominee been nominated
by the board of directors of the corporation; and
6
- 42 -
<PAGE>
(e) with respect to notice of an intent to bring up any other matter, a
description of the matter, and any material interest of the stockholder in the
matter.
Notice of intent to make a nomination shall be accompanied by the written
consent of each nominee to serve as director of the corporation if so elected.
At the meeting of stockholders, the chairman shall declare out of order and
disregard any nomination or other matter not presented in accordance with this
section.
2.12. Independent Directors.
(a) Majority of Board's Nominees in Annual Proxy Statement for Election to Board
of Directors to be Independent. A majority of the individuals to constitute the
nominees of the board of directors for the election of whom the board will
solicit proxies from the stockholders for use at the corporation's annual
meeting shall consist of individuals who, on the date of their selection as the
nominees of the board of directors, would be Independent Directors.
(b) Directors Elected by Board of Directors. In the event the board of directors
elects directors between annual meetings of stockholders, the number of such
directors who qualify as Independent Directors on the date of their nomination
shall be such that the majority of all directors holding office immediately
thereafter shall have been Independent Directors on the date of the first of
their nomination or selection as nominees of the board of directors.
(c) Definition of Independent Director. For purposes of this by-law, the term
"Independent Director" shall mean a director who: (i) is not and has not been
employed by the corporation or its subsidiaries in an executive capacity within
the five years immediately prior to the annual meeting at which the nominees of
the board of directors will be voted upon; (ii) is not (and is not affiliated
with a company or a firm that is) a significant advisor or consultant to the
corporation or its subsidiaries; (iii) is not affiliated with a significant
customer or supplier of the corporation or its subsidiaries; (iv) does not have
significant personal services contract(s) with the corporation or its
subsidiaries; (v) is not affiliated with a tax-exempt entity that receives
significant contributions from the corporation or its subsidiaries; and (vi) is
not a spouse, parent, sibling or child of any person described by (i) through
(v).
(d) Interpretation and Application of This By-Law. The board of directors shall
have the exclusive right and power to interpret and apply the provisions of this
by-law, including, without limitation, the adoption of written definitions of
terms used in and guidelines for the application of this by-law (any such
definitions and guidelines shall be filed with the Secretary, and such
definitions and guidelines as may prevail shall be made available to any
stockholder upon written request); any such definitions or guidelines and any
other interpretation or application of the provisions of this by-law made in
good faith shall be binding and conclusive upon all holders of GM Equity
Securities, provided that, in the case of any interpretation or application of
this by-law by the board of directors to a specific person which results in such
person being classified as an Independent Director, the board of directors shall
have determined that such person is independent of management and free from any
relationship that, in the opinion of the board of directors, would interfere
with such person's exercise of independent judgment as a board member.
7
- 43 -
<PAGE>
ARTICLE III
COMMITTEES
3.1. Committees of the Board of Directors.
The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, consisting of one or more of the
directors of the corporation, to be committees of the board of directors
("committees of the board"). All committees of the board may authorize the seal
of the corporation to be affixed to any papers which may require it. To the
extent provided in any resolution of the board of directors or these by-laws,
and to the extent permissible under the laws of the State of Delaware and the
certificate of incorporation, any such committee shall have and may exercise all
the powers and authority of the board of directors in the management of the
business and affairs of the corporation.
The following committees shall be standing committees of the board: the
executive committee, the investment funds committee, the audit committee, the
executive compensation committee, the public policy committee, the committee on
director affairs and the capital stock committee. The board of directors may
designate, by resolution adopted by a majority of the whole board, additional
committees of the board and may prescribe for each such committee such powers
and authority as may properly be granted to such committees in the management of
the business and affairs of the corporation.
3.2. Election and Vacancies.
The members and chairmen of each standing committee of the board shall be
elected annually by the board of directors at its first meeting after each
annual meeting of stockholders or at any other time the board of directors shall
determine. The members of other committees of the board may be elected at such
time as the board may determine. Vacancies in any committee of the board may be
filled at such time and in such manner as the board of directors shall
determine. No officer or other employee of the corporation shall be a member of
any standing committee of the board, with the exception of the investment funds
committee.
3.3. Procedure; Quorum.
Except to the extent otherwise provided in these by-laws or any resolution of
the board of directors, each committee of the board and each committee of the
corporation may fix its own rules of procedure.
The members necessary to constitute a quorum of any committee of the board or
committee of the corporation shall be one-third of the members thereof, or such
larger number as shall be set forth in the by-laws, or as shall be determined
from time to time by resolution of the board of directors. The vote of a
majority of the members present at a meeting of a committee of the board or
committee of the corporation at which meeting a quorum is present shall be the
act of the committee unless the certificate of incorporation, the by-laws or a
resolution of the board of directors shall require the vote of a greater number.
8
- 44 -
<PAGE>
3.4. Executive Committee.
The members of the executive committee shall be the chairman of the other
standing committees of the board of directors and the chairman of the executive
committee, who shall be a director designated by the board of directors. The
chairman of the executive committee shall not concurrently be the chairman of
any of the standing committees of the board of directors and shall not be an
officer or employee of the corporation. The chairman of the executive committee
shall be an ex officio member of each standing committee of the board of
directors. The executive committee of the board of directors shall have and may
exercise, between meetings of the board of directors, all of the powers and
authority which the board of directors may exercise in the direction and
management of the business and affairs of the corporation, except as prohibited
by the law of the State of Delaware or the certificate of incorporation.
3.5. Investment Funds Committee.
The board of directors shall select the members of the investment funds
committee and shall designate the chairman of the committee. Except for powers
hereinafter assigned to the audit committee and the executive compensation
committee, or as otherwise provided by the board of directors, the investment
funds committee shall have and may exercise the powers, authority and
responsibilities of the board of directors for the determination of the
financial policies of the corporation and the management of the financial
affairs of the corporation.
3.6. Audit Committee.
The board of directors shall select the members of the audit committee and shall
designate the chairman of the committee. The members of the audit committee
shall not be eligible to participate in any incentive compensation plan for
employees of the corporation or any of its subsidiaries. The selection by the
committee of accountants for the ensuing calendar year shall be made annually in
advance of the annual meeting of stockholders and shall be submitted to the
stockholders for ratification or rejection at such meeting. The audit committee
shall have and may exercise such powers, authority and responsibilities as are
normally incident to the functions of an audit committee or as may be determined
by the board of directors.
3.7. Executive Compensation Committee.
The board of directors shall select the members of the executive compensation
committee and shall designate the chairman of the committee. No member of the
committee shall be eligible to participate in any plan falling within the
jurisdiction of the committee. The committee shall have and may exercise the
powers and authority granted to it by any incentive compensation plan for
employees of the corporation or any of its subsidiaries, and such other powers,
authority and responsibilities as may be determined by the board of directors.
The committee shall determine the compensation of: (a) employees of the
corporation who are directors of the corporation; and (b) after receiving and
considering the recommendation of the chief executive officer and the president
of the corporation, all other employees of the corporation who are officers of
the corporation or who occupy such other positions as may be designated by the
committee.
9
- 45 -
Where compensation is payable to an employee of any subsidiary and such employee
is also a director or officer of the corporation or one of its subsidiaries, or
where such employee occupies such other position as may be designated by the
committee and such compensation is determined by or on behalf of such
subsidiary, the amount so determined shall first be submitted to the committee
for its review. No such determination shall be effective if it would result in
compensation which, in the aggregate or with respect to any one or more of such
employees, would exceed amounts or rates established or approved by the
committee.
Where any employee benefit or incentive compensation plan affects employees of
the corporation or its subsidiaries and the compensation of such employees is
determined or subject to review by the committee, such plan shall first be
submitted to the committee for its review. Any such plan or amendment or
modification shall be made effective with respect to such employees only if and
to the extent approved by the committee.
3.8. Public Policy Committee.
The board of directors shall select the members of the public policy committee,
and shall designate the chairman of the committee. The committee shall, upon its
own initiative or otherwise, inquire into all phases of the corporation's
business activities that relate to matters of public policy. The committee may
make recommendations to the board of directors to assist it in the formulation
and adoption of basic policies calculated to promote the best interests of the
corporation and the community. The public policy committee shall have and may
exercise such other powers, authority and responsibilities as may be determined
by the board of directors.
3.9. Committee on Director Affairs.
The board of directors shall select the members of the committee on director
affairs, and shall designate the chairman of the committee. The committee shall
be responsible for matters related to service on the board of directors of the
corporation, and associated issues of corporate governance. The committee from
time to time shall conduct studies of the size and composition of the board of
directors. Prior to each annual meeting of stockholders, the committee shall
recommend to the board the individuals to constitute the nominees of the board
of directors, the election of whom the board will solicit proxies. The committee
shall review the qualifications of individuals for consideration as director
candidates and shall recommend to the board, for its consideration, the names of
individuals for election by the board. In addition, the committee shall from
time to time conduct studies and make recommendations to the board regarding
compensation of directors. The committee shall have and may exercise such other
powers, authority and responsibilities as may be determined by the board of
directors.
10
- 46 -
3.10. Capital Stock Committee.
The board of directors shall select the members of the capital stock committee
and shall designate the chairman of the committee. The committee shall be
responsible for reviewing the policies, programs and practices of the
corporation relating to: (a) the business and financial relationships between
the corporation or any of its units with Hughes Electronics Corporation; (b)
dividends in respect of, disclosures to stockholders and the public concerning,
and transactions by the corporation or any of its subsidiaries in, shares of
Class H Common Stock; and (c) any matters arising in connection therewith, all
to the extent the committee may deem appropriate, and to recommend such changes
in such policies, programs and practices as the committee may deem appropriate.
In performing this function, the committee's role is not to make decisions
concerning matters referred to its attention, but rather to oversee the process
by which decisions concerning such matters are made. The committee shall have
and may exercise such other powers, authority and responsibilities as may be
determined by the board of directors.
ARTICLE IV
OFFICERS
4.1. Elected Officers.
The officers of the corporation shall be elected by the board of directors.
There shall be a chief executive officer, a president, one or more executive
vice presidents, one or more vice presidents, a secretary, a treasurer, a
comptroller, a general counsel, a general auditor and a chief tax officer. The
chief executive officer and the president shall be members of the board of
directors and shall have the other powers, authority and responsibilities
provided by these by-laws. The officers, other than the chief executive officer
and the president, shall each have, in addition to the powers, authority and
responsibilities of those officers otherwise provided by the by-laws, such
powers, authority and responsibilities as the board of directors or the chief
executive officer may determine. The board of directors may also elect persons
to hold such other offices as the board of directors shall determine, including
one or more vice chairmen of the board. A person may hold any number of offices.
Elected officers shall hold their offices at the pleasure of the board of
directors, or until their earlier resignation.
4.2. Chief Executive Officer.
The chief executive officer shall have the general executive responsibility for
the conduct of the business and affairs of the corporation. If the chairman so
designates or is absent, the chief executive officer shall preside at meetings
of the stockholders. He shall exercise such other powers, authority and
responsibilities as the board of directors may determine.
In the absence of or during the physical disability of the chief executive
officer, the board of directors shall designate an officer who shall have and
exercise the powers, authority and responsibilities of the chief executive
officer.
11
- 47 -
4.3. President.
The president shall have and exercise such powers, authority and
responsibilities as the board of directors may determine.
4.4. Treasurer.
The treasurer shall have custody of all funds and securities of the corporation
and shall perform all acts incident to the position of treasurer. He shall
render such accounts and reports as may be required by the board of directors.
The records, books and accounts of the office of the treasurer shall, during the
usual hours for business at the office of the treasurer, be open to the
examination of any director.
4.5. Secretary.
The secretary shall keep the minutes of all meetings of stockholders and
directors and of such committees of the board of directors as to which he may be
so directed. He shall give all required notices and shall have charge of such
books and papers as the board of directors may require. He shall submit such
reports to the board of directors or to any of the committees of the board or
committees of the corporation as the board of directors or any such committee
may require. Any action or duty required to be performed by the secretary may be
performed by an assistant secretary.
4.6. Comptroller.
The comptroller shall be in charge of the accounts of the corporation and shall
perform all acts incident to the position of comptroller. He shall submit such
reports and records to the board of directors or to any of the committees of the
board or committees of the corporation as the board of directors or any such
committee may require.
4.7. General Counsel.
The board of directors shall elect a general counsel who shall be the chief
legal officer of the corporation. He shall have general control of all matters
of legal import concerning the corporation and shall have such other powers,
authority and responsibilities as may be determined by the board of directors or
the chief executive officer.
4.8. General Auditor.
The general auditor shall have such powers, authority and responsibilities as
are incident to the position of general auditor in the performance of an
independent audit activity of the corporation and shall have direct access to
the audit committee.
12
- 48 -
<PAGE>
4.9. Chief Tax Officer.
The chief tax officer shall have responsibility for all tax matters involving
the corporation, with authority to sign and to delegate to others authority to
sign all returns, reports, agreements and documents involving the administration
of the corporation's tax affairs.
4.10. Subordinate Officers.
The board of directors may from time to time appoint one or more assistant
secretaries, assistant treasurers, assistant comptrollers, and such other
subordinate officers as the board of directors may deem advisable. Such
subordinate officers shall have such powers, authority and responsibilities as
the board of directors may from time to time determine. The board of directors
may grant to any committee of the board or the chief executive officer the power
and authority to appoint subordinate officers and to prescribe their respective
terms of office, powers, authority and responsibilities. Each subordinate
officer shall hold his position at the pleasure of the board of directors, the
committee of the board appointing him, the chief executive officer and any other
officer to whom such subordinate officer reports.
In the interval between annual organizational meetings of the board of
directors, the chief executive officer shall have the power and authority to
appoint such subordinate officers. Such subordinate officers shall serve until
the first meeting of the board of directors immediately following the annual
meeting of stockholders.
4.11. Resignation, Removal, Suspension and Vacancies.
Any officer may resign at any time by giving written notice to the chief
executive officer, the president or the secretary. Unless stated in the notice
of resignation, the acceptance thereof shall not be necessary to make it
effective. It shall take effect at the time specified therein or, in the absence
of such specification, it shall take effect upon the receipt thereof.
Any officer elected by the board of directors may be suspended or removed at any
time by the affirmative vote of a majority of the whole board. Any subordinate
officer of the corporation appointed by the board of directors or a committee of
the board, or the chief executive officer, may be suspended or removed at any
time by a majority vote of a quorum of the board of directors or committee
appointing such subordinate officer, or by the chief executive officer or any
other officer to whom such subordinate officer reports.
The chief executive officer may suspend the powers, authority, responsibilities
and compensation of any elected officer or appointed subordinate officer for a
period of time sufficient to permit the board or the appropriate committee of
the board a reasonable opportunity to consider and act upon a resolution
relating to the reinstatement, further suspension or removal of such person.
As appropriate, the board of directors, a committee of the board, and/or the
chief executive officer may fill any vacancy created by the resignation, death,
retirement or removal of an officer in the same manner as provided for the
election or appointment of such person.
13
- 49 -
<PAGE>
ARTICLE V
INDEMNIFICATION
5.1. Right to Indemnification of Directors and Officers.
Subject to the other provisions of this article, the corporation shall indemnify
and advance expenses to every director and officer (and to such person's heirs,
executors, administrators or other legal representatives) in the manner and to
the full extent permitted by applicable law as it presently exists, or may
hereafter be amended, against any and all amounts (including judgments, fines,
payments in settlement, attorneys' fees and other expenses) reasonably incurred
by or on behalf of such person in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative ("a proceeding"), in which such director or officer was or is made
or is threatened to be made a party or is otherwise involved by reason of the
fact that such person is or was a director or officer of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee, fiduciary or member of any other corporation, partnership, joint
venture, trust, organization or other enterprise. The corporation shall not be
required to indemnify a person in connection with a proceeding initiated by such
person if the proceeding was not authorized by the board of directors of the
corporation.
5.2. Advancement of Expenses of Directors and Officers.
The corporation shall pay the expenses of directors and officers incurred in
defending any proceeding in advance of its final disposition ("advancement of
expenses"); provided, however, that the payment of expenses incurred by a
director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the director or officer to repay
all amounts advanced if it should be ultimately determined that the director or
officer is not entitled to be indemnified under this article or otherwise.
5.3. Claims by Officers or Directors.
If a claim for indemnification or advancement of expenses by an officer or
director under this article is not paid in full within ninety days after a
written claim therefor has been received by the corporation, the claimant may
file suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action the corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification or advancement of
expenses under applicable law.
14
- 50 -
<PAGE>
5.4. Indemnification of Employees.
Subject to the other provisions of this article, the corporation may indemnify
and advance expenses to every employee who is not a director or officer (and to
such person's heirs, executors, administrators or other legal representatives)
in the manner and to the full extent permitted by applicable law as it presently
exists, or may hereafter be amended against any and all amounts (including
judgments, fines, payments in settlement, attorneys' fees and other expenses)
reasonably incurred by or on behalf of such person in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative ("a proceeding"), in which such
employee was or is made or is threatened to be made a party or is otherwise
involved by reason of the fact that such person is or was an employee of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary or member of any other corporation,
partnership, joint venture, trust, organization or other enterprise. The
ultimate determination of entitlement to indemnification of employees who are
not officers and directors shall be made in such manner as is provided by
applicable law. The corporation shall not be required to indemnify a person in
connection with a proceeding initiated by such person if the proceeding was not
authorized by the board of directors of the corporation.
5.5. Advancement of Expenses of Employees.
The advancement of expenses of an employee who is not an officer or director
shall be made by or in the manner provided by resolution of the board of
directors or by a committee of the board of directors or of the corporation.
5.6. Non-Exclusivity of Rights.
The rights conferred on any person by this Article V shall not be exclusive of
any other rights which such person may have or hereafter acquire under any
statute, provision of the certificate of incorporation, these by-laws,
agreement, vote of stockholders or disinterested directors or otherwise.
5.7. Other Indemnification.
The corporation's obligation, if any, to indemnify any person who was or is
serving at its request as a director, officer or employee of another
corporation, partnership, joint venture, trust, organization or other enterprise
shall be reduced by any amount such person may collect as indemnification from
such other corporation, partnership, joint venture, trust, organization or other
enterprise.
5.8. Insurance.
The board of directors may, to the full extent permitted by applicable law as it
presently exists, or may hereafter be amended from time to time, authorize an
appropriate officer or officers to purchase and maintain at the corporation's
expense insurance: (a) to indemnify the corporation for any obligation which it
incurs as a result of the indemnification of directors, officers and employees
under the provisions of this Article V; and (b) to indemnify or insure
directors, officers and employees against liability in instances in which they
may not otherwise be indemnified by the corporation under the provisions of this
Article V.
15
- 51 -
<PAGE>
5.9. Amendment or Repeal.
Any repeal or modification of the foregoing provisions of this Article V shall
not adversely affect any right or protection hereunder of any person in respect
of any act or omission occurring prior to the time of such repeal or
modification.
ARTICLE VI
MISCELLANEOUS
6.1. Offices.
The registered office of the corporation shall be located at 1209 Orange Street,
Wilmington, New Castle County, Delaware, and the name of the registered agent in
charge thereof shall be The Corporation Trust Company. The corporation may also
have other offices without as well as within the State of Delaware. The books of
the corporation may be kept outside the State of Delaware.
6.2. Stock Certificates.
Every holder of stock shall be entitled to have a certificate signed by or in
the name of the corporation by the chairman or a vice chairman of the board of
directors, or the president or a vice president, and by the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
corporation, certifying the number of shares owned by him in the corporation.
The form of such certificates and the signatures thereon shall comply with the
requirements of Delaware law. The corporation shall maintain a record of the
holders of each certificate and transfer stock and issue new certificates to
replace lost, stolen or destroyed certificates only pursuant to the applicable
requirements of Delaware law as they presently exist, or may be amended from
time to time.
6.3. Seal.
The corporate seal shall have inscribed upon it the name of the corporation, the
year of its organization and the words "Corporate Seal," and "Delaware." The
seal shall be in the charge of the secretary. The board of directors or the
finance committee may authorize a duplicate seal to be kept and used by any
other officer.
16
- 52 -
<PAGE>
6.4. Dividends on Preferred Stock.
All dividends declared upon the preferred stock shall be payable quarterly upon
the first day of February, May, August and November in each year, but if that is
a legal holiday, then on the next day not a legal holiday.
6.5. Fiscal Year.
The fiscal year of the corporation shall begin on January 1st and terminate on
December 31st in each year.
6.6. Annual Report.
At least fifteen days in advance of the annual meeting of stockholders, the
board of directors shall publish and submit to the stockholders consolidated
financial statements for the previous fiscal year. The board of directors shall
also publish consolidated financial statements for each of the first three
quarters of each fiscal year.
6.7. Notice.
Any notice required to be given by these by-laws may be given personally or in
writing by delivery to the United States postal system in a postpaid envelope
directed to such address as appears in the records of the corporation, or, in
default of other address, to the general post office in Wilmington, New Castle
County, Delaware. Such notice shall be deemed to be given at the time of
mailing, except as otherwise provided in these by-laws. In addition, except as
otherwise required by law or these by-laws, notice need not be given of any
adjourned meeting other than by announcement at the meeting which is being
adjourned.
6.8. Waiver of Notice.
Whenever any notice is required to be given, a waiver thereof in writing, signed
by the person or persons entitled to the notice, whether before or after the
time stated therein, shall be deemed equivalent thereto. Attendance of a person
at a meeting shall constitute a waiver of notice of such meeting, except when
the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders,
directors, or members of a committee of directors need be specified in any
written waiver of notice.
6.9. Voting of Stocks Owned by the Corporation.
The board of directors, the finance committee or the chairman of the board may
authorize any person, and delegate to one or more other officers, the authority
to authorize any person in behalf of the corporation to attend, vote and grant
proxies to be used at any meeting of stockholders of any corporation in which
General Motors Corporation may hold stock.
17
- 53 -
<PAGE>
6.10. Form of Records.
Any records maintained by the corporation in the regular course of its business,
including its stock ledger, books of account, and minute books, may be kept on,
or be in the form of, punch cards, magnetic tape, photographs, microphotographs,
or any other information storage device, provided that the records so kept can
be converted into clearly legible form within a reasonable time. The corporation
shall so convert any records so kept upon the request of any person entitled to
inspect the same.
6.11. Amendment of By-Laws.
The board of directors shall have power to adopt, amend or repeal the by-laws at
any regular or special meeting of the directors. The stockholders shall also
have power to adopt, amend or repeal the by-laws at any annual or special
meeting, subject to compliance with the notice provisions provided in section
2.11.
6.12. Anti-Greenmail.
(a) Vote Required for Certain Acquisitions of Securities. Except as set forth in
Subsection (b) hereof, in addition to any affirmative vote of stockholders
required by any provision of law, the certificate of incorporation or by-laws of
the corporation, or any policy adopted by the board of directors, neither the
corporation nor any subsidiary shall knowingly effect any direct or indirect
purchase or other acquisition of any GM Equity Security of any class or classes
issued by the corporation at a price which is in excess of the highest Market
Price of such GM Equity Security on the largest principal national securities
exchange in the United States on which such security is listed for trading on
the date that the understanding to effect such transaction is entered into by
the corporation (whether or not such transaction is concluded or a written
agreement relating to such transaction is executed on such date, such date to be
conclusively established by determination of the board of directors), from any
Interested Person (i.e., any person who is the direct or indirect beneficial
owner of more than three percent (3%) of the aggregate voting power of the
Voting Shares of the corporation) who has beneficially owned such GM Equity
Securities for less than two years prior to such date, without the affirmative
vote of the holders of the Voting Shares which represent at least a majority of
the aggregate voting power of the corporation, excluding Voting Shares
beneficially owned by such Interested Person, voting together as a single class.
Such affirmative vote shall be required notwithstanding the fact that no vote
may be required, or that a lesser percentage may be specified, by law or any
agreement with any national securities exchange, or otherwise.
(b) When A Vote Is Not Required. The provisions of Section (a) hereof shall
not be applicable with respect to:
18
- 54 -
<PAGE>
(i) any purchase, acquisition, redemption or exchange of GM Equity
Securities, the purchase, acquisition, redemption or exchange of which,
at the time any such transaction is entered into, is provided for in
the corporation's certificate of incorporation (including any
resolution or resolutions of the board of directors providing for the
issuance of Preferred Stock or Preference Stock by the corporation);
(ii) any purchase or other acquisition of GM Equity Securities made as
part of a tender or exchange offer by the corporation to purchase
securities of the same class made on the same terms to all holders of
such securities and complying with the applicable requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the rules and regulations thereunder (or any successor provisions to
such Act, rules or regulations);
(iii) any purchase or acquisition of GM Equity Securities made pursuant
to an open market purchase program which has been approved by the board
of directors; or
(iv) any purchase or acquisition of GM Equity Securities made from, or
any purchase or acquisition of GM Equity Securities made pursuant to or
on behalf of, an employee benefit plan maintained by the corporation,
or any subsidiary or any trustee of, or fiduciary with respect to any
such plan when acting in such capacity.
(c) Interpretation of This By-Law. The board of directors shall have the
exclusive right and power to interpret the provisions of this by-law, including,
without limitation, the adoption of written definitions of terms used in this
by-law (any such definitions shall be filed with the Secretary, and such
definitions as may prevail shall be made available to any stockholder upon
written request); any such interpretation made in good faith shall be binding
and conclusive upon all holders of GM Equity Securities.
6.13. Gender Pronouns.
Whenever the masculine pronoun is used herein it shall be deemed to refer to
either the masculine or the feminine gender.
19
- 55 -
<PAGE>
DEFINITIONS OF CERTAIN TERMS
USED IN
AND
GUIDELINES FOR THE APPLICATION
OF
BY-LAW 2.12
OF
GENERAL MOTORS CORPORATION
Certain Definitions.
For the purposes of Section 2.12 of the By-Laws of General Motors Corporation,
(the "Corporation") the board of directors has adopted the following
definitions, effective January 7, 1991.
(i) "Affiliate" of a person, or a person "affiliated with," a specified
person, shall mean a person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common
control with, the specified person.
(ii) The term "control" (including the terms "controlling," "controlled
by" and "under common control with") shall mean the possession, direct
or indirect, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting securities, by contract, or otherwise; provided, however, that a
person shall not be deemed to control another person solely because he
or she is a director of such other person.
(iii) "GM Equity Security" shall mean any security described in Section
3(a)(11) of the Exchange Act, as of the effective date hereof, which is
issued by GM and traded on a national securities exchange or the NASDAQ
National Market System.
(iv) A "subsidiary" of the Corporation shall mean any corporation a
majority of the voting stock of which is owned, directly or indirectly
through one or more other subsidiaries, by the Corporation.
(v) The employment of a person by the Corporation or its subsidiaries
shall be deemed to be in an "executive capacity" during the period that
such person (A) served as an elected officer of the Corporation or one
of its subsidiaries, or (B) reported directly to a person who served as
an elected officer of the Corporation or one of its subsidiaries.
(vi) A person shall be deemed to be, or to be affiliated with, a
company or firm that is a "significant advisor or consultant to the
corporation or its subsidiaries" if he, she or it, as the case may be,
received or would receive fees or similar compensation from the
Corporation or a subsidiary of the Corporation in excess of the lesser
of (A) three percent (3%) of the consolidated gross revenues which the
Corporation and its subsidiaries received for the sale of their
products and services during the last fiscal year of the Corporation;
(B) five percent (5%) of the gross revenues of the person during the
last calendar year, if such person is a self-employed individual, or
(C) five percent (5%) of the consolidated gross revenues received by
such company or firm for the sale of its products and services during
its last fiscal year, if the person is a company or firm; provided,
however, that directors' fees and expense reimbursements shall not be
included in the gross revenues of an individual for purposes of this
determination.
i
- 56 -
<PAGE>
(vii) A "significant customer of the corporation and its subsidiaries"
shall mean a customer from which the Corporation and its subsidiaries
collectively in the last fiscal year of the Corporation received
payments in consideration for the products and services of the
Corporation and its subsidiaries which are in excess of three percent
(3%) of the consolidated gross revenues of the Corporation and its
subsidiaries during such fiscal year.
(viii) A "significant supplier of the corporation and its subsidiaries"
shall mean a supplier to which the Corporation and its subsidiaries
collectively in the last fiscal year of the Corporation made payments
in consideration for the supplier's products and services in excess of
three percent (3%) of the consolidated gross revenues of the
Corporation and its subsidiaries during such fiscal year.
(ix) The Corporation and its subsidiaries shall be deemed a
"significant customer of a company" if the Corporation and its
subsidiaries collectively were the direct source during such company's
last fiscal year of in excess of five percent (5%) of the gross
revenues which such company received for the sale of its products and
services during that year.
(x) The Corporation and its subsidiaries shall be deemed a "significant
supplier of a company" if the Corporation and its subsidiaries
collectively received in such company's last fiscal year payments from
such company in excess of five percent (5%) of the gross revenues which
such company received during that year for the sale of its products and
services.
(xi) A person shall be deemed to have "significant personal services
contract(s) with the corporation or its subsidiaries" if the fees and
other compensation received by the person pursuant to personal services
contract(s) with the Corporation or its subsidiaries exceeded or would
exceed five percent (5%) of his or her gross revenues during the last
calendar year.
(xii) A tax-exempt entity shall be deemed to receive "significant
contributions" from the Corporation or its subsidiaries if such
tax-exempt entity received during its last fiscal year, or expects to
receive during its current fiscal year, contributions from the
Corporation or its subsidiaries in excess of the lesser of either (A)
three percent (3%) of the consolidated gross revenues of the
Corporation and its subsidiaries during its last fiscal year, or (B)
five percent (5%) of the contributions received by the tax-exempt
entity during its last fiscal year.
ii
- 57 -
<PAGE>
Guidelines for Application.
(i) For purposes of identifying payments for products and services
contemplated by the definitions set forth above, and performing the
related calculations, the board of directors may exclude payments such
as those described in paragraph 2 of the Instructions to Paragraph (b)
of Item 404 of Regulation S-K, as promulgated by the Securities and
Exchange Commission as of the effective date hereof.
(ii) The board of directors shall be entitled to rely upon the
completeness and accuracy of directors' responses to written
questionnaires circulated for the purpose of enabling the board of
directors to make the determinations of independence required by the
provisions of By-Law 2.12.
iii
- 58 -
<PAGE>
SECURITIES ACT AND EXCHANGE ACT
PARAGRAPH 2 OF INSTRUCTIONS TO
PARAGRAPH (b) OF ITEM 404 OF REGULATION S-K
AS IN EFFECT ON JANUARY 7, 1991
(REFERRED TO IN PARAGRAPH (i) OF
GUIDELINES FOR APPLICATION OF BY-LAW 2.12 OF
GENERAL MOTORS CORPORATION)
2. In calculating payments for property and services the following may be
excluded:
A. Payments where the rates or charges involved in the transaction are
determined by competitive bids, or the transaction involves the
rendering of services as a common contract carrier, or public utility,
at rates or charges fixed in conformity with law or governmental
authority;
B. Payments that arise solely from the ownership of securities of
the registrant and no extra or special benefit not shared on a pro
rata basis by all holders of the class of securities is received; or
C. Payments made or received by subsidiaries other than significant
subsidiaries as defined in Rule 1-02(v) of Regulation S-X, provided
that all such subsidiaries making or receiving payments, when
considered in the aggregate as a single subsidiary, would not
constitute a significant subsidiary as defined in Rule 1-02(v).*
- ------------------------------------------------------------
* The General Motors Legal Staff notes that Rule 1-02(v) of Regulation
S-X provides, generally, that a significant subsidiary of General
Motors Corporation would be one which, together with its subsidiaries,
meets any of the following conditions:
(1) General Motors' and its other subsidiaries' investments in and
advances to the subsidiary exceed ten percent (10%) of the total assets
of General Motors and its consolidated subsidiaries.
(2) General Motors' and its other subsidiaries' proportionate share of
the total assets (after intercompany eliminations) of the subsidiary
exceeds ten percent (10%) of the total assets of General Motors and its
consolidated subsidiaries.
(3) General Motors' and its other subsidiaries' equity in the income
from continuing operations before income taxes, extraordinary items and
cumulative effect of a change in accounting principle of the subsidiary
exceeds ten percent (10%) of such income of General Motors and its
consolidated subsidiaries.
iv
- 59 -
<PAGE>
DEFINITION OF CERTAIN TERMS
USED IN BY-LAW 6.12
OF
GENERAL MOTORS CORPORATION
Certain Definitions.
For the purposes of Section 6.12 of the By-Laws of General Motors Corporation,
the board of directors has adopted the following definitions, effective March 5,
1990:
(i) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as in effect on January 1, 1990.
(ii) "Beneficial Owner" and "Beneficial Ownership" shall have the
meanings ascribed to such terms in Rule 13d-3 and Rule 13d-5 of the
General Rules and Regulations under the Exchange Act, as in effect on
January 1, 1990.
(iii) "GM Equity Security" shall mean any security described in Section
3(a) (11) of the Exchange Act, as in effect on January 1, 1990, which
is issued by GM and traded on a national securities exchange or the
NASDAQ National Market System.
(iv) "Interested Person" shall mean any person (other than the
Corporation or any Subsidiary) that is the direct or indirect
Beneficial Owner of more than three percent (3%) of the aggregate
voting power of the Voting Shares, and any affiliate or associate of
any such person. For the purpose of determining whether a Person is an
Interested Person, the outstanding Voting Shares shall include unissued
shares of voting stock of the corporation of which the Interested
Person is the Beneficial Owner, but shall not include any other shares
of voting stock of the corporation which may be issuable pursuant to
any agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise, to any Person who
is not the Interested Person.
(v) "Market Price" of shares of a class of GM Equity Security on any
day shall mean the highest sale price (regular way) of shares of such
class of GM Equity Security on such day, or, if that day is not a
trading day, on the trading day immediately preceding such day, on the
largest principal national securities exchange on which such class of
stock is then listed or admitted to trading, or if not listed or
admitted to trading on any national securities exchange, then the
highest reported sale price for such shares in the over-the-counter
market as reported on the NASDAQ National Market System, or if such
sale prices shall not be reported thereon, the highest bid price so
reported, or, if such price shall not be reported thereon, as the same
shall be reported by the National Quotation Bureau Incorporated; in the
case of any GM Equity Security which is the Preferred Stock or
Preference Stock of the corporation (of any series), the Market Price
thereof shall be the Market Price, as hereinabove defined, of the
Voting Shares which the holder of such Preferred Stock or Preference
Stock may then acquire by reason of the redemption, exchange,
conversion or exercise of other rights as may be provided for in the
terms of such securities.
v
- 60 -
<PAGE>
(vi) "Person" shall mean any individual, partnership, firm,
corporation, association, trust, unincorporated organization or other
entity, as well as any syndicate or group deemed to be a person
pursuant to Section 13(d)(3) of the Exchange Act, as in effect on
January 1, 1990.
(vii) "Subsidiary" shall mean any company of which the corporation
owns, directly or indirectly, (A) a majority of the outstanding shares
of equity securities, or (B) shares having a majority of the voting
power represented by all of the outstanding voting stock of such
company. For the purpose of determining whether a company is a
Subsidiary, the outstanding voting stock and shares of equity
securities thereof shall include unissued shares of which the
corporation is the Beneficial Owner but, except for the purpose of
determining whether a company is a Subsidiary for purposes of the
definition of Interested Person as used in By-Law Section 6.12, shall
not include any other shares which may be issuable pursuant to any
agreement, arrangement or understanding, or upon the exercise of
conversion rights, warrants or options, or otherwise, to any Person who
is not the corporation.
(viii) "Voting Shares" shall mean the outstanding shares of capital
stock of the corporation entitled to vote generally in the election of
directors.
vi
- 61 -
L:\secdraft\version4\exhib11.doc 4
EXHIBIT 11
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
ATTRIBUTABLE TO COMMON STOCKS
(Unaudited)
Three Months Ended
June 30, 1997
$1-2/3
Par Value Class H
Common Common
Stock Stock
(Dollars in Millions
Except Per Share Amounts)
Net income $1,961 $137
Dividends on preference stocks 20 -
------ -----
Earnings on common stocks 1,941 137
Dividends on common stocks 362 25
----- ----
Net earnings retained $1,579 $112
===== ===
Weighted average shares outstanding (in millions) 724 101
Per Share Data
Net earnings retained per share $2.18 $1.10
Cash dividends per share 0.50 0.25
---- ----
Net earnings per share $2.68 $1.35
==== ====
Note: The difference between fully diluted and primary earnings per share is
immaterial.
- 62 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
ATTRIBUTABLE TO COMMON STOCKS - Continued
(Unaudited)
Three Months Ended
June 30, 1996
$1-2/3
Par Value Class E Class H
Common Common Common
Stock Stock Stock
(Dollars in Millions
Except Per Share Amounts)
Income from continuing operations $2,021 $ - $75
Loss from discontinued operations (15) (194) -
------ ----- ----
Net income (loss) 2,006 (194) 75
Dividends on preference stocks 20 - -
------ ----- ----
Earnings (loss) on common stocks 1,986 (194) 75
Dividends on common stocks 300 73 23
------ ---- --
Net earnings retained (loss accumulated) $1,686 $(267) $52
===== === ==
Net earnings retained from continuing
operations $1,701 $ - $52
===== ==== ==
Loss accumulated from discontinued operations $(15) $(267) $ -
== === ===
Weighted average shares outstanding (in millions) 756 479 98
=== === ==
Per Share Data
Net earnings retained per share from
continuing operations $2.25 $ - $0.53
Loss accumulated per share from
discontinued operations (0.02) (0.56) -
Cash dividends per share 0.40 0.15 0.24
---- ---- ----
Net earnings (loss) per share $2.63 $(0.41) $0.77
==== ==== ====
Note: The difference between fully diluted and primary earnings per share is
immaterial.
- 63 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
ATTRIBUTABLE TO COMMON STOCKS - Continued
(Unaudited)
Six Months Ended
June 30, 1997
$1-2/3
Par Value Class H
Common Common
Stock Stock
(Dollars in Millions
Except Per Share Amounts)
Net income $3,698 $196
Dividends on preference stocks 40 -
------- -----
Earnings on common stocks 3,658 196
Dividends on common stocks 739 50
------ ----
Net earnings retained $2,919 $146
===== ===
Weighted average shares outstanding (in millions) 736 101
Per Share Data
Net earnings retained per share $3.98 $1.44
Cash dividends per share 1.00 0.50
---- ----
Net earnings per share $4.98 $1.94
==== ====
Note: The difference between fully diluted and primary earnings per share is
immaterial.
- 64 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
ATTRIBUTABLE TO COMMON STOCKS - Concluded
(Unaudited)
Six Months Ended
June 30, 1996
$1-2/3
Par Value Class E Class H
Common Common Common
Stock Stock Stock
(Dollars in Millions
Except Per Share Amounts)
Income from continuing operations $2,745 $ - $151
Income (loss) from discontinued operations (5) 15 -
------- -- -----
Net income 2,740 15 151
Dividends on preference stocks 40 - -
------ ----- -----
Earnings on common stocks 2,700 15 151
Dividends on common stocks 606 145 46
------ --- ----
Net earnings retained (loss accumulated) $2,094 $(130) $105
===== === ===
Net earnings retained from continuing
operations $2,099 $ - $105
===== ==== ===
Loss accumulated from discontinued operations $(5) $(130) $ -
== === ===
Weighted average shares outstanding (in millions) 756 470 98
=== === ==
Per Share Data
Net earnings retained per share from continuing
operations $2.78 $ - $1.07
Loss accumulated per share from
discontinued operations (0.01) (0.26) -
Cash dividends per share 0.80 0.30 0.48
---- ---- ----
Net earnings per share $3.57 $0.04 $1.55
==== ==== ====
Note: The difference between fully diluted and primary earnings per share is
immaterial.
- 65 -
L:\secdraft\version4\exhib12.doc
EXHIBIT 12
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(Unaudited)
Six Months Ended
June 30,
1997 1996
(Dollars in Millions)
Income from continuing operations $3,894 $2,896
Income taxes 2,142 1,530
Equity in income of associates (23) (64)
Cash dividends received from associates 12 25
Amortization of capitalized interest 29 14
----- -----
Income from continuing operations before
income taxes, undistributed income of
associates, and amortization of
capitalized interest 6,054 4,401
Fixed charges included in income from
continuing operations
Interest and related charges on debt 2,928 2,835
Portion of rentals deemed to be interest 148 132
Total fixed charges included in income
from continuing operations 3,076 2,967
----- -----
Earnings available for fixed charges $9,130 $7,368
===== =====
Fixed charges
Fixed charges included in income from
continuing operations $3,076 $2,967
Interest capitalized in the period 35 27
Total fixed charges $3,111 $2,994
===== =====
Ratios of earnings to fixed charges 2.93 2.46
==== ====
- 66 -
L:\secdraft\version4\exhib99.doc
EXHIBIT 99
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AND
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONSOLIDATED STATEMENT OF INCOME AND
AVAILABLE SEPARATE CONSOLIDATED NET INCOME
(Unaudited)
Six Months Ended
Second Quarter June 30,
1997 1996 1997 1996
(Dollars in Millions Except Per Share Amounts)
Revenues
Net sales
Outside customers $2,931.8 $2,531.2 $5,697.5 $4,970.1
General Motors and affiliates 1,333.8 1,501.4 2,696.3 2,676.1
Other income - net 490.1 18.0 500.0 136.4
------- ------- -------- --------
Total revenues 4,755.7 4,050.6 8,893.8 7,782.6
------- ------- ------- --------
Costs and expenses
Cost of sales and other operating charges,
exclusive of items listed below 3,325.0 3,094.6 6,541.8 5,891.1
Selling, general, and administrative
expenses 436.0 358.0 876.5 658.3
Depreciation and amortization 165.5 129.6 311.6 261.2
Amortization of GM purchase accounting
adjustments related to Hughes
Aircraft Company 30.6 30.6 61.2 61.2
Interest expense - net 23.8 1.4 27.7 6.6
------- ------- -------- --------
Total costs and expenses 3,980.9 3,614.2 7,818.8 6,878.4
------- ------- ------- -------
Income before income taxes and
minority interests 774.8 436.4 1,075.0 904.2
Income taxes 275.1 172.3 385.3 363.7
Minority interests in net losses
of subsidiaries 11.1 11.9 25.7 16.6
------ ----- ------- ------
Net income 510.8 276.0 715.4 557.1
Adjustments to exclude the effect of
GM purchase accounting adjustments
related to Hughes Aircraft Company 30.6 30.6 61.2 61.2
---- ---- ---- ----
Earnings Used for Computation of
Available Separate Consolidated
Net Income $541.4 $306.6 $776.6 $618.3
===== ===== ===== =====
Available Separate Consolidated Net Income
Average number of shares of General
Motors Class H Common Stock outstanding
(in millions) (numerator) 101.0 98.2 100.7 97.8
Class H dividend base (in millions)
(denominator) 399.9 399.9 399.9 399.9
Available Separate Consolidated
Net Income $136.7 $75.2 $195.8 $151.2
===== ==== ===== =====
Earnings Per Share Attributable to General
Motors Class H Common Stock $1.35 $0.77 $1.94 $1.55
==== ==== ==== ====
Certain 1996 amounts have been reclassified to conform with the 1997
presentation.
Reference should be made to the Notes to Consolidated Financial Statements.
- 67 -
<PAGE>
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 30,
1997 December 31,
(Unaudited) 1996
(Dollars in Millions
Except Per Share Amount)
ASSETS
Current assets
Cash and cash equivalents $1,308.5 $1,161.3
Accounts and notes receivable
Trade receivables (less allowances) 1,366.8 1,200.6
General Motors and affiliates 106.2 113.4
Contracts in process, (less advances and
progress payments) 2,264.0 2,186.5
Inventories (less allowances)
Productive material, work in process, and supplies 1,600.3 1,383.1
Finished product 179.5 145.4
Prepaid expenses, including deferred income taxes 704.9 568.1
Total current assets 7,530.2 6,758.4
Property-net 2,940.9 2,886.6
Telecommunications and other equipment - net 2,289.9 1,133.5
Intangible assets - net 5,820.1 3,466.0
Investments and other assets - principally at
cost (less allowances) 2,564.1 2,235.6
Total assets $21,145.2 $16,480.1
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable
Outside $983.9 $896.4
General Motors and affiliates 13.4 27.5
Advances on contracts 711.0 868.9
Notes and loans payable 801.4 248.1
Income taxes payable 216.1 132.9
Accrued liabilities 1,799.6 2,025.8
------- -------
Total current liabilities 4,525.4 4,199.6
------- -------
Long-term debt and capitalized leases 2,405.8 34.5
Postretirement benefits other than pensions 1,680.8 1,658.9
Other liabilities and deferred credits 1,788.1 1,386.4
Minority interests 644.0 20.8
Redeemable preferred stock of subsidiary 401.5 -
Stockholder's equity
Capital stock (outstanding, 1,000 shares,
$0.10 par value) and additional paid-in capital 6,357.1 6,347.2
Net income retained for use in the business 3,484.2 2,968.8
------- -------
Subtotal 9,841.3 9,316.0
Minimum pension liability adjustment (113.5) (113.5)
Accumulated foreign currency translation adjustments (28.2) (22.6)
Total stockholder's equity 9,699.6 9,179.9
------- -------
Total liabilities and stockholder's equity $21,145.2 $16,480.1
Certain 1996 amounts have been reclassified to conform with the 1997
presentation.
Reference should be made to the Notes to Consolidated Financial Statements.
- 68 -
<PAGE>
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1997 1996
(Dollars in Millions)
Net cash (used in) provided by operating activities $(33.3) $357.6
----- -----
Cash flows from investing activities
Investment in companies, net of cash acquired (1,609.5) (28.7)
Expenditures for property and special tools (231.9) (293.9)
Increase in telecommunications and other equipment (123.5) (91.2)
Proceeds from sale and leaseback of satellite
transponders with GMAC - 252.0
Proceeds from disposal of property 26.1 31.4
Decrease in notes receivable 12.4 0.7
Net cash used in investing activities (1,926.4) (129.7)
------- -----
Cash flows from financing activities
Net increase (decrease) in notes and loans payable 549.0 (311.6)
Increase in long-term debt 1,761.2 15.3
Decrease in long-term debt (3.3) (16.5)
Proceeds from sale of minority interest in subsidiary - 137.5
Cash dividends paid to General Motors (200.0) (192.0)
Net cash provided by (used in) financing activities 2,106.9 (367.3)
------- -----
Net increase (decrease) in cash and cash equivalents 147.2 (139.4)
Cash and cash equivalents at beginning of the period 1,161.3 1,139.5
------- -------
Cash and cash equivalents at end of the period $1,308.5 $1,000.1
======= =======
Reference should be made to the Notes to Consolidated Financial Statements.
- 69 -
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. In the opinion of management, all adjustments (consisting
of only normal recurring items) which are necessary for a fair presentation have
been included. The results for interim periods are not necessarily indicative of
results which may be expected for any other interim period or for the full year.
For further information, refer to the consolidated financial statements and
notes thereto included in General Motors' (GM) 1996 Annual Report on Form 10-K,
the unaudited information relating to Hughes filed as Exhibit 99 in GM's
Quarterly Report on Form 10-Q dated March 31, 1997, and Current Reports on Form
8-K filed subsequent to the filing date for the GM 1996 Annual Report on Form
10-K.
NOTE 2.
Other income - net for the three and six months ended June 30, 1997 includes
a $489.7 million pre-tax gain recognized in connection with the PanAmSat merger
(See Note 5). The six month period ended June 30, 1996 amount includes a $120.3
million pre-tax gain from the sale of a 2.5% equity interest in DIRECTV(R) to
AT&T.
NOTE 3.
During the first quarter of 1997, the Company's DIRECTV subsidiary changed the
amortization period for certain subscriber acquisition costs related to a
consumer rebate and manufacturers' incentive program. Based on guidance from the
staff of the Securities and Exchange Commission, the period over which such
costs are amortized has been reduced from three years to one year. The
amortization period is now equal to the length of the subscriber's prepaid
programming commitment. The effect of this change on prior periods was not
material.
NOTE 4.
On January 16, 1997, GM and Hughes announced a series of planned transactions
designed to address strategic challenges and unlock stockholder value in the
three Hughes business segments. The transactions would include the tax-free
spin-off of the Hughes defense business to holders of GM's $1-2/3 par value and
Class H common stocks, followed immediately by the tax-free merger of that
business with Raytheon Company. The spin-off will not be proposed in a manner
that would result in the recapitalization of Class H common stock into $1-2/3
par value common stock at a 120% exchange ratio, as currently provided for under
certain circumstances in the GM Restated Certificate of Incorporation, as
amended. At the same time, Delco Electronics, the automotive electronics
subsidiary of Hughes, would be transferred from Hughes to GM's Delphi Automotive
Systems unit. Finally, GM's Class H common stock would be recapitalized into a
GM tracking stock linked to the telecommunications and space business of Hughes.
On July 14, 1997, GM received a ruling from the Internal Revenue Service that
it's contemplated spin-off of the Hughes defense business would be tax-free to
GM and its stockholders. The planned transactions must be approved by holders of
GM $1-2/3 par value and Class H common stocks, among a number of other
conditions. In addition, the merger of the Hughes defense business and Raytheon
is subject to antitrust clearance and approval by Raytheon stockholders. No
assurance can be given that the above transactions will be completed. GM expects
to solicit stockholders' approval of the planned transactions during the fourth
quarter of 1997, after certain conditions are satisfied.
NOTE 5.
In May 1997, Hughes and PanAmSat Corporation (PAS) completed the merger of
their respective satellite service operations into a new publicly-held company.
Hughes contributed its Galaxy(R) satellite services business in exchange for a
71.5% interest in the new company. Existing PAS stockholders received a 28.5%
interest in the new company and $1.5 billion in cash. Such cash consideration
and other funds required to consummate the merger were funded by new debt
financing totaling $1.725 billion. This debt financing was provided by Hughes,
which borrowed such funds from GM.
For accounting purposes, the merger was treated by Hughes as an acquisition
of 71.5% of PAS and was accounted for using the purchase method. Accordingly,
the purchase price was allocated to the net assets acquired, including
intangible assets, based on estimated fair values at date of acquisition. In
addition, the merger was treated as a partial sale of the Galaxy business by
Hughes and resulted in a one-time pre-tax gain of $489.7 million ($318.3
million after-tax or $0.80 per share of GM Class H common stock).
- 70 -
<PAGE>
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - concluded
(Unaudited)
NOTE 5. (concluded)
The preferred stock of PAS outstanding at the time of the merger is included
in the accompanying balance sheet as redeemable preferred stock of subsidiary.
Dividends on such redeemable preferred stock are payable quarterly in arrears.
On or after April 15, 2000, the preferred stock is redeemable at the option of
PAS, in whole or in part from time to time at a redemption price of 106.375%
declining to 100% of liquidation value plus accrued and unpaid dividends. The
redeemable preferred stock is subject to mandatory redemption in whole on April
15, 2005, at a price equal to the liquidation preference thereof plus accrued
and unpaid dividends. Subject to certain conditions, PAS will be required to
exchange all of the outstanding shares of redeemable preferred stock into 12
3/4% Senior Subordinated Notes due 2005. PAS currently expects the redeemable
preferred stock to be exchanged for senior subordinated notes in the
second half of 1997.
NOTE 6.
Earnings per share attributable to GM's Class H common stock was determined
based on the Available Separate Consolidated Net Income (ASCNI) of Hughes
divided by the weighted average number of common shares outstanding. Holders of
GM Class H common stock have no direct rights in the equity or assets of Hughes,
but rather have rights in the equity and assets of GM (which includes 100% of
the stock of Hughes).
The ASCNI of Hughes for any quarterly period represents the separate
consolidated net income of Hughes for such period, excluding the effects of GM
purchase accounting adjustments arising from the acquisition of Hughes Aircraft
Company (Earnings Used for Computation of Available Separate Consolidated Net
Income), calculated for such period and multiplied by a fraction, the numerator
of which is a number equal to the weighted average number of shares of GM Class
H common stock outstanding during the quarter (101 million and 98.2 million
during the second quarters of 1997 and 1996, respectively) and the denominator
of which was 399.9 million during the second quarters of 1997 and 1996.
NOTE 7.
Hughes has disclosed in the financial statements certain amounts associated
with estimated future postretirement benefits other than pensions and
characterized such amounts as "accumulated postretirement benefit obligations,"
"liabilities," or "obligations." Notwithstanding the recording of such amounts
and the use of these terms, Hughes does not admit or otherwise acknowledge that
such amounts or existing postretirement benefit plans of Hughes (other than
pensions) represent legally enforceable liabilities of Hughes.
NOTE 8.
As previously reported, Hughes has maintained a suit against the U.S.
Government since September 1973 regarding the Government's infringement and use
of a Hughes patent (the "Williams Patent") covering "Velocity Control and
Orientation of a Spin Stabilized Body," principally satellites. On June 17,
1994, the U.S. Court of Claims awarded Hughes damages of $114 million. Because
Hughes believed that the record supported a higher royalty rate, it appealed
that decision. The U.S. Government, contending that the award was too high, also
appealed. On June 19, 1996, the Court of Appeals for the Federal Circuit (CAFC)
affirmed the decision of the Court of Claims which awarded Hughes $114 million
in damages, together with interest. The U.S. Government petitioned the CAFC for
a rehearing. That petition was denied in October 1996. The U.S. Government then
filed a petition with the U.S. Supreme Court seeking certiorari. On April 21,
1997 the U.S. Supreme Court, citing a recent decision it had rendered in
Warner-Jenkinson v. Hilton Davis, remanded Hughes' suit over the Williams Patent
back to the CAFC in order to have the CAFC determine whether the ruling in the
Williams Patent matter was consistent with the U.S. Supreme Court's decision in
the Warner-Jenkinson case. The previous liability decision of the Court of
Claims in the Williams Patent matter, and its $114 million damage award to
Hughes, currently remain in effect pending reconsideration of the case by the
CAFC. Hughes is unable to estimate the duration of this reconsideration process.
While no amount has been recorded in the financial statements of Hughes to
reflect the $114 million award or the interest accumulating thereon, a
resolution of this matter could result in a gain that would be material to the
earnings of GM attributable to Class H common stock.
* * * * * *
- 71 -
<PAGE>
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management's discussion and analysis should be read in
conjunction with the Hughes management's discussion and analysis included in
GM's 1996 Annual Report to the SEC on Form 10-K, the management's discussion and
analysis relating to Hughes included in Exhibit 99 to GM's Quarterly Report on
Form 10-Q dated March 31, 1997, and Current Reports on Form 8-K filed subsequent
to the filing date for the 1996 Form 10-K. In addition, the following discussion
excludes the purchase accounting adjustments related to GM's acquisition of
Hughes Aircraft Company (see Supplemental Data beginning on page 75).
Statements made concerning expected financial performance, ongoing financial
performance strategies, and possible future action which Hughes intends to
pursue to achieve strategic objectives for each of its three principal business
segments constitute forward-looking information. The implementation of these
strategies and of such future actions and the achievement of such financial
performance are each subject to numerous conditions, uncertainties and risk
factors, and, accordingly, no assurance can be given that Hughes will be able to
successfully accomplish its strategic objectives or achieve such financial
performance. The principal important risk factors which could cause actual
performance and future actions to differ materially from the forward-looking
statements made herein include economic conditions, product demand and market
acceptance, government action, competition, ability to achieve cost reductions,
GM's global sourcing strategy with respect to automotive electronics, GM's North
American Operations (GM-NAO) volumes, technological risk, and interruptions to
production attributable to causes outside Hughes' control.
Transactions Update
On January 16, 1997, GM and Hughes announced a series of planned transactions
designed to address strategic challenges and unlock stockholder value in the
three Hughes business segments. The transactions would include the tax-free
spin-off of the Hughes defense business to holders of GM's $1-2/3 par value and
Class H common stocks, followed immediately by the tax-free merger of that
business with Raytheon Company. The spin-off will not be proposed in a manner
that would result in the recapitalization of Class H common stock into $1-2/3
par value common stock at a 120% exchange ratio, as currently provided for under
certain circumstances in the GM Restated Certificate of Incorporation, as
amended. At the same time, Delco Electronics, the automotive electronics
subsidiary of Hughes, would be transferred from Hughes to GM's Delphi Automotive
Systems unit. Finally, GM's Class H common stock would be recapitalized into a
GM tracking stock linked to the telecommunications and space business of Hughes.
On July 14, 1997, GM received a ruling from the Internal Revenue Service
that it's contemplated spin-off of the Hughes defense business would be tax-free
to GM and its stockholders. The planned transactions must be approved by holders
of GM $1-2/3 par value and Class H common stocks, among a number of other
conditions. In addition, the merger of the Hughes defense business and Raytheon
is subject to antitrust clearance and approval by Raytheon stockholders. No
assurance can be given that the above transactions will be completed. GM expects
to solicit stockholders' approval of the planned transactions during the fourth
quarter of 1997, after certain conditions are satisfied.
In May 1997, Hughes and PanAmSat Corporation (PAS) completed the merger of
their respective satellite service operations into a new publicly-held company.
Hughes contributed its Galaxy satellite services business in exchange for a
71.5% interest in the new company. Existing PAS stockholders received a 28.5%
interest in the new company and $1.5 billion in cash. Such cash consideration
and other funds required to consummate the merger were funded by new debt
financing totaling $1.725 billion. This debt financing was provided by Hughes,
which borrowed such funds from GM.
For accounting purposes, the merger was treated by Hughes as an acquisition of
71.5% of PAS and was accounted for using the purchase method. Accordingly, the
purchase price was allocated to the net assets acquired, including intangible
assets, based on estimated fair values at date of acquisition. In addition, the
merger was treated as a partial sale of the Galaxy business by Hughes and
resulted in a one-time pre-tax gain of $489.7 million ($318.3 million after-tax
or $0.80 per share of GM Class H common stock).
- 72 -
<PAGE>
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
Results of Operations
Hughes reported second quarter 1997 earnings of $541.4 million, compared with
$306.6 million reported in the second quarter of 1996. Excluding the $318.3
million after-tax gain ($0.80 per share of GM Class H common stock) recognized
in connection with the PAS merger, earnings decreased 27.2% and earnings per
share decreased $0.22 per share from $0.77 per share in the prior year period.
The declines were principally due to lower operating margins at Delco
Electronics as a result of reduced GM production volumes related to work
stoppages at two key GM assembly plants, and continued price reductions.
Revenues for the second quarter of 1997 were $4,755.7 million, a 17.4%
increase from the $4,050.6 million reported in the second quarter of 1996. Costs
and expenses as a percentage of revenues declined to 83.1% from 88.5% in the
second quarter of 1996. Income taxes were $275.1 million, or 34.2% of income
before income taxes and minority interests, for the second quarter of 1997
compared with $172.3 million, or 36.9% of income before income taxes and
minority interests, in the 1996 second quarter.
Operating profit was $339.1 million for the quarter ended June 30, 1997, a
24.7% decrease from the operating profit of $450.4 million reported during the
comparable period in 1996. The operating profit margin was 8.0% for the second
quarter of 1997 compared with 11.2% in the second quarter of 1996.
Telecommunications and Space segment revenues for the quarter ended June 30,
1997 were $1,618.8 million, an increase of 72.1% over revenues of $940.8 million
reported in the prior year's second quarter. Excluding the $489.7 million
pre-tax gain recognized in connection with the PAS merger, revenues increased
20.0%. The growth was primarily due to continued expansion of the DIRECTV
subscriber base in the United States and Latin America, partially offset by
lower sales of wireless telecommunications equipment particularly related to the
BellSouth Cellular Corp. contract. Operating profit in the second quarter of
1997 was $40.2 million compared with $57.0 million reported in the same period
in 1996. This decrease was largely the result of lower wireless
telecommunications equipment sales and margins, and start-up operating losses
from the Company's Latin American DIRECTV subsidiary, Galaxy Latin America. As a
result, second quarter operating profit margin declined to 3.5% in 1997 from
6.0% in 1996.
The Automotive Electronics segment reported second quarter 1997 revenues of
$1,460.6 million, a decrease of 6.0% from revenues of $1,553.8 million for the
same period in 1996. The decline reflects a 6.9% decrease in GM vehicles
produced in the United States and Canada (excluding joint ventures) primarily
related to work stoppages at two key GM assembly plants which resulted in an
estimated loss of 96,000 units of production. Also contributing to reduced
revenues was a 2.2% decline in Delco-supplied electronic content in these
vehicles from $896 to $876 per vehicle. Partially offsetting these reductions
was a 10.8% increase in international and non GM-NAO sales to $287
million. Operating profit declined to $134.4 million in the second quarter
from $236.4 million in the comparable period in 1996. The decline was primarily
due to lower production volumes, price reductions resulting from competitive
pricing in connection with GM's global sourcing initiative and the impact
from continued international expansion. Second quarter operating profit margin
declined to 9.2% from 15.3% in 1996.
As the principal supplier of automotive electronics to GM-NAO, Hughes' sales
of automotive electronics will continue to be heavily dependent on GM's
production of vehicles in North America, the level of Hughes-supplied electronic
content per GM vehicle, the price of such electronics, and the competitiveness
of Hughes' product offerings. In this regard, it is anticipated that competition
through GM's global purchasing process will negatively impact Hughes' sales to
GM-NAO and result in a decline in the portion of GM-NAO automotive electronics
supplied by Hughes. The segment's strategy is to aggressively reduce costs in
order to minimize the effect of continuing price reductions and to manage the
loss of GM-NAO market share by offering competitive products which increase
electronic functionality through a focus on safety, security, communications,
and convenience. The segment will also seek to improve its systems capability
and cost competitiveness both internally and by developing key design,
manufacturing, and marketing alliances and other relationships with mechanical
and electrical automotive component suppliers.
The international market for automotive electronic products is also highly
competitive. The segment has refined its strategy for this market to focus on
profitable growth as well as increased market share, and accordingly, will seek
to enhance the cost competitiveness of its international operations.
The competitive environment described above is making it increasingly
difficult to maintain the level of operating profit margins realized in this
segment in recent years as price and volume declines associated with GM's global
sourcing initiatives more than offset Hughes' ability to achieve cost
reductions. In response to the increased pressure on margins and to enhance
future competitiveness, management is taking action to reduce the cost structure
of the business. As a result of the factors described above, the operating
margin is expected to be at low double digits for the remainder of 1997, and
then show modest improvement in 1998 and 1999.
- 73 -
<PAGE>
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
The Aerospace and Defense Systems segment reported 1997 second quarter
revenues of $1,637.6 million, an 8.5% increase over revenues of $1,509.8 million
reported in the same period in 1996. The growth was principally due to
additional revenues resulting from the build-up of newer programs, particularly
information systems and services programs such as Desktop V, Wide Area
Augmentation System, and Hughes Air Warfare Center and the acquisition in March
1997 of the Marine Systems Group of Alliant Techsystems. Operating profit for
the second quarter of 1997 increased slightly to $162.8 million compared with
$161.4 million for the second quarter of 1996. The operating profit margin in
the period decreased to 10.0% as compared to 10.7% in 1996 primarily due to
provisions taken on certain air traffic control and training contracts offset in
part by strong performance on several radar programs. Future operating profits
could be adversely impacted by further reductions in the U.S. defense budget.
Liquidity and Capital Resources
Cash and cash equivalents at June 30, 1997 were $1,308.5 million, an increase
of $147.2 million from the $1,161.3 million reported at December 31, 1996. The
increase was primarily due to the positive net impact on cash of $258.8 million
as a result of the PAS merger and the proceeds of $697.2 million from short-term
commercial paper borrowings under an existing credit facility, partially offset
by the acquisition of the Marine Systems Group of Alliant Techsystems, Inc. for
$143.3 million, capital expenditures, cash dividends paid to GM, and the
repayment of $150.0 million of short-term borrowings.
The completion of the PAS merger in the second quarter of 1997 had a
significant impact on the liquidity and debt of Hughes. Existing PAS cash and
non-current marketable securities of $296.9 million and $330.0 million,
respectively, were acquired by Hughes as a result of the merger. Total Hughes
long-term debt increased by the acquisition financing of $1,725 million provided
by GM, as well as the assumption of the existing PAS debt of $613.4 million.
Existing redeemable preferred stock of $395.8 million was also assumed in
connection with merger; however, such redeemable preferred stock is expected to
be exchanged for senior subordinated notes in the second half of 1997.
Capital expenditures, including expenditures for telecommunications and other
equipment, were $361.5 million through June 30, 1997, compared with $397.8
million for the same period in 1996 reflecting decreased expenditures in the
Automotive Electronics and Telecommunications and Space segments.
Long-term debt and capitalized leases were $2,405.8 million at June 30, 1997,
consisting primarily of PAS related debt described above. The ratio of long-term
debt and capitalized leases to the total of such debt and pro forma
stockholder's equity was 25.5% at June 30, 1997 and 0.1% at December 31, 1996
As a measure of liquidity, Hughes' current ratio (ratio of current assets to
current liabilities) of 1.66 at June 30, 1997 remained relatively unchanged from
1.69 at December 31, 1996. Working capital increased to $3,004.8 million at June
30, 1997 from $2,558.8 million at December 31, 1996.
Hughes expects 1997 cash requirements prior to the consummation of the
planned transactions to result in additional short-term borrowings of up to $500
million under existing credit facilities.
Cash flows for the third quarter of 1997 and beyond are expected to be
negatively impacted by a change in the credit terms between Delco and GM-NAO for
purchases of automotive electronics. In the past, GM-NAO has generally paid
Delco for product shipments immediately upon billing. The policy governing
Delco/GM-NAO credit terms is being changed such that Delco and GM-NAO will
implement credit terms substantially equivalent to those given to GM-NAO's
non-affiliated suppliers, beginning in the third quarter of 1997. This change in
credit terms will be subject to a four year phase-in period. However, if the
spin-off of the Hughes defense business is completed with Delco being
transferred to Delphi, the credit terms for Delco will change, effective
immediately after such transaction is completed, without any phase-in period.
New Accounting Standards
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income,
and SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information. SFAS No. 130 establishes standards for reporting and displaying
comprehensive income and its components in a financial statement that is
displayed with the same prominence as other financial statements. SFAS No. 130
requires that an entity classify items of other comprehensive income by their
nature in that financial statement. In addition, the accumulated balance of
other comprehensive income must be displayed separately from retained earnings
and additional paid-in capital in the equity section of the statement of
financial position. Reclassification of financial statements for earlier
periods, provided for comparative purposes, is required. SFAS No. 131
- 74-
<PAGE>
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
New Accounting Standards (concluded)
establishes standards for reporting information about operating segments in
annual financial statements and requires selected information about operating
segments in interim financial reports issued to stockholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. Operating segments are defined as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. SFAS No.
131
requires reporting segment profit or loss, certain specific revenue and expense
items and segment assets. It also requires reconciliations of total segment
revenues, total segment profit or loss, total segment assets, and other amounts
disclosed for segments to corresponding amounts reported in the financial
statements. Restatement of comparative information for earlier periods presented
is required in the initial year of application. Interim information is not
required until the second year of application, at which time comparative
information is required. Hughes will adopt SFAS No. 130 and No. 131 on January
1, 1998, as required.
Security Ratings
On April 24, 1997, Standard and Poor's Rating Services, a division of
McGraw-Hill Companies, Inc., affirmed its security ratings of Hughes and
indicated that the security ratings outlook for Hughes remains developing.
Supplemental Data
The Consolidated Financial Statements reflect the application of purchase
accounting adjustments as previously discussed. However, as provided in GM's
Restated Certificate of Incorporation, as amended, the earnings attributable to
GM Class H common stock for purposes of determining the amount available for the
payment of dividends on GM Class H common stock specifically excludes such
adjustments. More specifically, amortization of the intangible assets associated
with GM's purchase of Hughes Aircraft Company amounted to $30.6 million for the
second quarters of 1997 and 1996. Such amounts were excluded from the earnings
available for the payment of dividends on GM Class H common stock and were
charged against the earnings available for the payment of dividends on GM's
$1-2/3 par value stock. Unamortized purchase accounting adjustments associated
with GM's purchase of Hughes Aircraft Company were $2,662.3 million at June 30,
1997 and $2,723.5 million at December 31, 1996.
In order to provide additional analytical data to the users of Hughes'
financial information, supplemental data in the form of unaudited summary pro
forma financial data are provided. Consistent with the basis on which earnings
of Hughes available for the payment of dividends on the GM Class H common stock
is determined, the pro forma data exclude purchase accounting adjustments
related to GM's acquisition of Hughes Aircraft Company. Included in the
supplemental data are certain financial ratios which provide measures of
financial returns excluding the impact of purchase accounting adjustments. The
pro forma data are not presented as a measure of GM's total return on its
investment in Hughes.
- 75-
<PAGE>
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
UNAUDITED SUMMARY PRO FORMA FINANCIAL DATA*
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
Six Months Ended
Second Quarter June 30,
1997 1996 1997 1996
------ ------- ------ ------
(Dollars in Millions Except Per Share Amounts)
Total Revenues $4,755.7 $4,050.6 $8,893.8 $7,782.6
Total Costs and Expenses 3,950.3 3,583.6 7,757.6 6,817.2
------- ------- ------- -------
Income before Income Taxes and
Minority Interests 805.4 467.0 1,136.2 965.4
Income Taxes 275.1 172.3 385.3 363.7
Minority Interests in Net Losses
of Subsidiaries 11.1 11.9 25.7 16.6
---- ---- ---- -----
Earnings Used for Computation of
Available Separate Consolidated
Net Income $541.4 $306.6 $776.6 $618.3
===== ===== ===== =====
Earnings Per Share Attributable to General
Motors Class H Common Stock $1.35 $0.77 $1.94 $1.55
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
June 30, December 31,
ASSETS 1997 1996
(Dollars in Millions)
Total Current Assets $7,530.2 $6,758.4
Property - Net 2,940.9 2,886.6
Telecommunications and Other Equipment - Net 2,289.9 1,133.5
Intangible Assets, Investments, and Other Assets
- Net 5,721.9 2,978.1
--------- ---------
Total Assets $18,482.9 $13,756.6
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Total Current Liabilities $4,525.4 $4,199.6
Long-Term Debt and Capitalized Leases 2,405.8 34.5
Postretirement Benefits Other Than Pensions,
Other Liabilities, Deferred Credits, Minority
Interests and Redeemable Preferred Stock of
Subsidiary 4,514.4 3,066.1
Total Stockholder's Equity ** 7,037.3 6,456.4
Total Liabilities and Stockholder's Equity ** $18,482.9 $13,756.6
Certain 1996 amounts have been reclassified to conform with the 1997
presentation.
* The summary excludes purchase accounting adjustments related to GM's
acquisition of Hughes Aircraft Company.
** GM's equity in its wholly-owned subsidiary, Hughes. Holders of GM Class H
common stock have no direct rights in the equity or assets of Hughes, but
rather have rights in the equity and assets of GM (which includes 100% of
the stock of Hughes).
- 76 -
<PAGE>
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
UNAUDITED SUMMARY PRO FORMA FINANCIAL DATA* - Continued
PRO FORMA SELECTED SEGMENT DATA
Six Months Ended
Second Quarter June 30,
1997 1996 1997 1996
------ ------- ------ ------
(Dollars in Millions)
Telecommunications and Space
Revenues
Amount $1,618.8 $940.8 $2,628.1 $1,873.6
As a percentage of Hughes Revenues 34.1% 23.2% 29.6% 24.1%
Net Sales $1,138.3 $950.3 $2,157.1 $1,771.3
Operating Profit(1) $40.2 $57.0 $47.3 $131.5
Operating Profit Margin(2) 3.5% 6.0% 2.2% 7.4%
Depreciation and Amortization(3) $66.9 $41.7 $117.2 $87.9
Capital Expenditures(4) $125.0 $165.3 $219.0 $235.6
Automotive Electronics
Revenues
Amount $1,460.6 $1,553.8 $2,907.1 $2,824.5
As a percentage of Hughes Revenues 30.7% 38.4% 32.7% 36.3%
Net Sales $1,456.9 $1,540.2 $2,890.8 $2,800.4
Operating Profit(1) $134.4 $236.4 $280.0 $395.7
Operating Profit Margin(2) 9.2% 15.3% 9.7% 14.1%
Depreciation and Amortization $55.6 $50.5 $111.8 $99.3
Capital Expenditures $36.5 $52.1 $72.3 $102.4
Aerospace And Defense Systems
Revenues
Amount $1,637.6 $1,509.8 $3,284.2 $3,022.2
As a percentage of Hughes Revenues 34.4% 37.3% 36.9% 38.8%
Net Sales $1,635.1 $1,512.0 $3,279.9 $3,014.2
Operating Profit(1) $162.8 $161.4 $336.3 $319.3
Operating Profit Margin(2) 10.0% 10.7% 10.3% 10.6%
Depreciation and Amortization(3) $39.5 $33.3 $76.5 $66.0
Capital Expenditures $37.7 $26.6 $68.1 $55.1
Corporate And Other
Operating Profit (Loss)(1) $1.7 ($4.4) $0.3 ($10.9)
Certain 1996 amounts have been reclassified to conform with the 1997
presentation.
* The summary excludes purchase accounting adjustments related to GM's
acquisition of Hughes Aircraft Company.
(1) Net Sales less Total Costs and Expenses other than Interest Expense.
(2) Operating Profit as a percentage of Net Sales.
(3) Excludes amortization arising from purchase accounting adjustments related
to GM's acquisition of Hughes Aircraft Company amounting to $5.3 million in
each of the second quarters and $10.6 million in each of the six-month
periods for the Telecommunications and Space segment and $25.2 million in
each of the second quarters and $50.4 million in each of the six-month
periods for the Aerospace and Defense Systems segment in 1997 and 1996.
(4) Includes expenditures related to telecommunications and other equipment
amounting to $72.0 million, $87.9 million, 129.6 million, and $103.9
million, respectively.
- 77 -
<PAGE>
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
UNAUDITED SUMMARY PRO FORMA FINANCIAL DATA* - Concluded
PRO FORMA SELECTED FINANCIAL DATA
Six Months Ended
Second Quarter June 30,
1997 1996 1997 1996
------ ------ ------- ------
(Dollars in Millions Except Per Share Amounts)
Operating profit $339.1 $450.4 $663.9 $835.6
Income before income taxes and
minority interests $805.4 $467.0 $1,136.2 $965.4
Earnings used for computation
of available separate
consolidated net income $541.4 $306.6 $776.6 $618.3
GM Class H dividend base shares (1) 399.9 399.9 399.9 399.9
Stockholder's Equity $7,037.3 $6,110.1 $7,037.3 $6,110.1
Dividends per share of GM Class H
common stock $0.25 $0.24 $0.50 $0.48
Working capital $3,004.8 $2,995.7 $3,004.8 $2,995.7
Operating profit as a percent
of net sales 8.0% 11.2% 7.9% 10.9%
Income before income taxes and
minority interests as a percent
of net sales 18.9% 11.6% 13.5% 12.6%
Net income as percent of net sales 12.7% 7.6% 9.3% 8.1%
Certain 1996 amounts have been reclassified to conform with the 1997
presentation.
* The summary excludes GM purchase accounting adjustments related to the
acquisition of Hughes Aircraft Company.
(1) GM Class H dividend base shares is used in calculating earnings per share
attributable to GM Class H common stock. This is not the same as the average
number of GM Class H shares outstanding, which was 101.0 million for the
second quarter of 1997 and 98.2 million for the second quarter of 1996.
* * * * * *
- 78 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GENERAL
MOTORS CORPORATION JUNE 30, 1997 CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SECOND QUARTER 1997 FORM 10-Q.
</LEGEND>
<CIK> 0000040730
<NAME> GENERAL MOTORS CORPORATION
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 11,674
<SECURITIES> 9,343
<RECEIVABLES> 67,818
<ALLOWANCES> 0
<INVENTORY> 13,528
<CURRENT-ASSETS> 0
<PP&E> 78,564
<DEPRECIATION> 40,911
<TOTAL-ASSETS> 231,905
<CURRENT-LIABILITIES> 0
<BONDS> 89,918
402
1
<COMMON> 1,212
<OTHER-SE> 22,818
<TOTAL-LIABILITY-AND-EQUITY> 231,905
<SALES> 77,164
<TOTAL-REVENUES> 87,387
<CGS> 64,038
<TOTAL-COSTS> 70,107
<OTHER-EXPENSES> 97
<LOSS-PROVISION> 257
<INTEREST-EXPENSE> 2,961
<INCOME-PRETAX> 5,999
<INCOME-TAX> 2,142
<INCOME-CONTINUING> 3,894
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,894
<EPS-PRIMARY> 4.98
<EPS-DILUTED> 0
</TABLE>
