SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report
(Date of earliest event reported) April 12, 1999
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GENERAL MOTORS CORPORATION
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(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 1-143 38-0572515
- ---------------------------- ----------------------- -------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
100 Renaissance Center, Detroit, Michigan 48265-1000
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
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- 1 -
ITEM 5. OTHER EVENTS
On April 12, 1999 General Motors Corporation (GM) issued a press release
which announced that the GM Board of Directors approved the complete separation
of Delphi from GM by means of a tax-free spin-off. GM's press release is
included as Exhibit 99.1, and Delphi's press release is included as Exhibit 99.2
to this Form 8-K. GM's consolidated financial statements have been restated to
reflect Delphi as discontinued operations and are included as Exhibit 99.3 to
this Form 8-K.
Exhibit 99.1 GM's press release dated April 12, 1999
Exhibit 99.2 Delphi's press release dated April 12, 1999
Exhibit 99.3 Audited consolidated financial statements and financial
statement schedule of General Motors Corporation as of December 31, 1998
and 1997 and for each of the three years in the period ended December 31,
1998 and Supplementary Information (Unaudited) relating to Selected
Quarterly Data.
Exhibit 27 Financial Data Schedule (for SEC information only).
* * * * * *
SIGNATURE
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 April 15, 1999
-----------------
By
s/Peter R. Bible
-------------------------------
(Peter R. Bible,
Chief Accounting Officer)
- 2 -
Exhibit 99.1
GENERAL MOTORS TO COMPLETE ITS SEPARATION OF
DELPHI AUTOMOTIVE SYSTEMS IN A TAX-FREE SPIN-OFF
DETROIT and TROY, Mich. -- General Motors Corporation (NYSE: GM) and Delphi
Automotive Systems Corporation (NYSE: DPH) jointly announced today that the GM
Board of Directors has approved the complete separation of Delphi from GM by
means of a tax-free spin-off. As a result of the board's action, 80.1 percent of
the ownership of Delphi, 452.6 million shares of Delphi common stock now owned
by GM, will be distributed to owners of GM $1-2/3 par value common stock.
In addition, the GM Board has indicated that it intends to maintain the
current $0.50 quarterly dividend on GM $1-2/3 common stock subsequent to the
separation of Delphi from GM. "By maintaining our current dividend -- even
though Delphi's earnings will no longer contribute to GM's earnings -- GM will
effectively be increasing the dividend yield and payout ratio to GM
shareholders," said GM Chairman and Chief Executive Officer John F. Smith, Jr.
"This reflects the confidence that GM's board and management have in the series
of strategic initiatives that GM has undertaken, and our future earnings
capacity."
The spin-off will result in Delphi becoming a fully independent company on
May 28, 1999. One hundred million shares of Delphi common stock were sold by
Delphi in an initial public offering completed in February 1999.
"Delphi's complete separation from GM through the spin-off provides Delphi
the opportunity to achieve the full benefits of an independent company," said
J.T. Battenberg III, chairman, chief executive officer and president of Delphi.
"We believe that we will have greater opportunities as a fully independent
company to leverage our technical expertise in a broad range of product lines,
our strong systems integration skills, our expansive global presence and our
significant scale advantages," Battenberg said.
GM and Delphi will have a significant ongoing customer-supplier
relationship following the spin-off. Prior to Delphi's initial public offering
in February 1999, the two companies entered into an agreement that is intended
to provide Delphi with a substantial base of business with GM well into the next
decade.
"While General Motors will continue to be an important and, we hope,
growing customer following the spin-off, Delphi's full independence will
substantially help us expand our revenue base through sales to major automotive
vehicle manufacturers other than GM," Battenberg said.
GM Chairman and Chief Executive Officer, John F. Smith, Jr. said, "We
believe that both companies will become stronger and more competitive in our
respective businesses through focused growth, thus allowing us to better meet
the needs of our customers, shareholders and employees.
- 1 -
"We have assured the leadership of the United Auto Workers (UAW), the
International Union of Electrical Workers (IUE), and our other unions that we
are prepared to promptly enter into agreements to protect the interests of
Delphi employees affected by the spin-off," Smith said.
"Pension plans will be fully funded, and health-care, and other benefits of
Delphi's current employees will be continued," Battenberg said. "We intend to
maintain a high-level dialogue with the leadership of the UAW, the IUE and our
other unions, and hope to forge long-lasting and constructive relationships."
Today's decision by the board was required to implement the full separation
of Delphi from GM, and fulfills the objectives announced Aug. 3, 1998, when GM
and Delphi jointly outlined plans for Delphi's independence.
Related to these actions, and if GM receives a favorable supplemental
ruling from the Internal Revenue Service (IRS) prior to May 14, 1999, GM will
contribute 12.4 million Delphi shares, or 2.2 percent of the ownership of
Delphi, to a Voluntary Employee Beneficiary Association (VEBA) trust which can
be used to fund benefits for hourly retirees. If such a ruling is not received,
the additional 2.2 percent of Delphi shares held by GM will also be distributed
to GM stockholders, in which case the same record date and payment date will be
used.
GM had previously said that the separation of Delphi would be completed by
means of a split-off, a spin-off or some combination of both transactions.
"After carefully reviewing these possible transaction structures, we have
determined that a spin-off is the most appropriate action," Smith said.
To effect the spin-off, the GM board has declared a dividend on GM $1-2/3
common stock consisting of 452.6 million shares of Delphi common stock owned by
GM. This dividend will be paid as of the opening of business on May 28, 1999
(9:00 a.m. EDT), to holders of record of GM $1-2/3 stock as of the close of
business on May 25, 1999. Delphi shares are issued under the direct registration
system, where stockholders receive account statements rather than stock
certificates, although an individual stockholder has the right to request and
obtain physical certificates. The New York Stock Exchange has advised GM that
the ex-dividend date for GM $1 2/3 common stock also will be May 28. Based on
the number of shares of GM $1-2/3 stock currently outstanding, this dividend
would be approximately 0.7 of a share of Delphi stock for each share of GM
$1-2/3 stock.
Earlier this year, GM received a ruling from the Internal Revenue Service
to the effect that the distribution by GM of its shares of Delphi stock will be
tax-free to General Motors and to GM $1-2/3 stockholders for U.S.
federal-income-tax purposes. Notwithstanding the "tax-free" ruling from the IRS,
the receipt of cash in lieu of fractional shares, which for each stockholder
will be no more than a fraction of the price of one share of Delphi stock, will
be taxable for U.S. federal-income-tax purposes.
Based on the current market price of Delphi stock, the indicated value of
the dividend would be approximately $7.8 billion in the aggregate, or
approximately $12 per share of GM $1-2/3 stock. GM $1-2/3 stockholders will
receive cash instead of any fractional shares of Delphi stock that would
otherwise be allocated to them in the stock dividend.
- 2 -
Subject to its financial results and action by its board of directors,
Delphi has announced that it currently intends to pay quarterly dividends at an
initial rate of $0.07 per share, commencing with the first declaration in June
1999 for payment in July 1999.
The GM board's approval today of the Delphi spin-off completes a series of
actions designed to allow Delphi to pursue more strategic growth and competitive
initiatives on a stand-alone basis.
In 1991, GM established Delphi (then called Automotive Components Group
Worldwide) as a separate business sector within GM, with the objective of
improving its competitiveness and increasing its business through penetration of
new markets. In 1995, GM renamed the business sector "Delphi Automotive Systems"
in order to establish its separate identity in the automotive parts industry. GM
began publicly disclosing separate financial data for Delphi in March of 1997.
In late 1997, in connection with GM's spin-off of its defense electronics
business, GM transferred Delco Electronics to Delphi in order to integrate more
closely Delco's expertise in electronics with Delphi's capabilities in
automotive components and systems.
In late 1998, Delphi was incorporated in Delaware and, effective Jan. 1,
1999, GM contributed to Delphi the assets and liabilities Delphi now carries on
its automotive components and systems business.
Delphi, based in Troy, Mich., is the world's largest and most diversified
supplier of automotive components, systems and modules. In 1998, Delphi reported
annual revenues of approximately $28.5 billion and a net loss of approximately
$93 million. Delphi's net income totaled $820 million, when adjusted to exclude
the unfavorable impact of special items and work stoppages.
Delphi became a leader in the global automotive parts industry by
capitalizing on the extensive experience it has gained as the principal supplier
of automotive parts to GM. Delphi has an expansive global presence, with a
network of 168 wholly owned and leased manufacturing sites, 27 technical
centers, 51 customer service centers and sales activity offices, and 40 joint
ventures or other strategic alliances in 36 countries. Delphi employs
approximately 198,000 people globally and has regional headquarters located in
Paris, Tokyo, and Sao Paulo.
General Motors, based in Detroit, is the world's largest manufacturer of
automotive vehicles and sells its products in 160 countries worldwide. GM also
has telecommunications, financing and insurance operations and, to a lesser
extent, engages in other industries. GM participates in the telecommunications
industry through its Hughes Electronics subsidiary, which designs, manufactures
and markets advanced technology electronic systems, products and services for
the telecommunications and space industry.
GM's other industrial operations include the design, manufacture and
marketing of locomotives and heavy-duty transmissions. GM's financing and
insurance operations primarily relate to General Motors Acceptance Corporation,
which provides a broad range of financial services, including consumer vehicle
financing, full service leasing, mortgage services and vehicle and homeowner's
insurance.
- 3 -
Immediately prior to the spin-off, GM will employ approximately 590,000
people globally, including those employed at Delphi. In 1998, GM reported
revenues of approximately $161 billion and net income of approximately $3.0
billion. GM would have had 1998 revenues of approximately $155 billion if Delphi
had been a fully independent company throughout that year.
In this news release, use of the words expects, intends, believes, plans
and similar words are associated with forward-looking statements that are
inherently subject to numerous risks and uncertainties. Accordingly, there can
be no assurance that the results described in such forward-looking statements
will be realized. The principal risk factors that may cause actual results to
differ materially from those expressed in forward-looking statements contained
in this news release are described in various documents filed by GM and Delphi
with the U.S. Securities and Exchange Commission, including GM's Annual Report
on Form 10-K for the year ended Dec. 31, 1998, (at page II-22); Delphi's Annual
Report on Form 10-K for the year ended Dec.
31, 1998, (at page 54).
Stockholders who have questions about technical issues related to the
distribution can call the Information Agent, Morrow & Co., at (800) 566-9058.
# # #
- 4 -
Exhibit 99.2
FULL SEPARATION APPROVED:
DELPHI HIGHLIGHTS BENEFITS OF INDEPENDENCE
TROY, MICH. - With its full separation from General Motors Corporation
(NYSE: GM) approved by the GM board of directors, Delphi Automotive Systems
Corporation (NYSE: DPH) today announced plans to move aggressively forward with
a post-separation business strategy designed to maximize shareholder value and
take full advantage of independence.
Delphi's board of directors voiced its support of the GM decision. "With
independence, Delphi can now fully implement its plans to enhance shareholder
value," said Thomas Wyman, Delphi's lead independent director.
"For as long as full separation has been an option, we have made clear our
intent to focus the business on developing new and advanced automotive
technologies, broadening our customer base, improving manufacturing operations
and creating new business relationships through acquisition or partnerships,"
said J.T. Battenberg III, Chairman, Chief Executive Officer and President of
Delphi. "This action by the GM Board of Directors pushes us forward on the path
to realize our business objectives.
"To the extent that full separation will improve Delphi's opportunities to
grow the business and become more profitable, we all benefit," said Battenberg.
"Sharing this potential with our labor partners and strengthening our
relationship with labor is a high priority throughout Delphi."
"We plan to have our current pension plan benefits fully funded over the
next few years on an economic basis. We expect to start this funding with
contributions of approximately $1.8 billion between separation and the first
part of next year," said Battenberg. Delphi currently does not have hourly
retirees, and anticipates having a small number of hourly retirees in the next
few years.
Battenberg's comments came in the wake of today's decision by the GM Board
of Directors to move forward with the completion of Delphi's separation from GM
by means of a tax-free spin-off. As a result of the board's action, 80.1 percent
of the ownership of Delphi, 452.6 million shares of Delphi common stock now
owned by GM, will be distributed to owners of GM $1-2/3 par value common stock,
and if GM receives a favorable ruling from the Internal Revenue Service (IRS)
prior to May 14, 1999, GM will contribute the other 2.2% of Delphi shares it
owns, 12.4 million shares, to a Voluntary Employee Beneficiary Association
(VEBA) trust which can be used to fund benefits for hourly retirees. If such a
ruling is not received, the additional 2.2 percent of Delphi shares held by GM
also will be distributed to GM stockholders, in which case the same record date
and payment date will be used.
The spin-off will result in Delphi becoming a fully independent, publicly
traded company on May 28, 1999. One hundred million shares of Delphi common
stock had been sold by Delphi in an initial public offering completed in
February 1999. With 465 million new shares in the marketplace Battenberg today
indicated that the company will take steps to familiarize new Delphi
shareholders with Delphi business strategies.
Battenberg said full separation from General Motors provides a number of
key opportunities for Delphi.
- 1 -
The benefits of separation include:
- Increased Sales to Vehicle Manufacturers Other Than GM: Until today's
action by the GM Board, Delphi's ability to expand sales to major vehicle
manufacturers (VMs) other than GM has been limited by a general reluctance to
source from a supplier owned by a major competitor. Separation from GM lifts
this barrier, and Delphi will - over time - be able to substantially grow sales
to VMs other than GM.
- Increased Financial and Strategic Flexibility: Separation will allow Delphi
to quickly execute investment and acquisition or partnership decisions and will
increase flexibility in financing through capital markets. Formerly, investments
required approval from the parent corporation, which balanced competing requests
for capital from several business sectors.
- Potential for Continued Improvement of Organized Labor Relationships:
Delphi has worked hard on its relationship with labor over the last several
years, and is proud of the progress made. We will now independently continue to
pursue improved relations through collaborative efforts with our union
colleagues focused on improving our manufacturing operations and implementing
the Delphi Manufacturing System. Through these efforts we hope to continue to
improve our quality and responsiveness to customer needs, and provide stability
to our business prospects.
Where new non-GM business is concerned, Battenberg today noted that Delphi
continues to receive greater numbers of bid opportunities since the Initial
Public Offering in February 1999, which he said is indicative of non-GM customer
acceptance of products and technology from an independent Delphi.
Recent examples include: $550M in long-term contracts for supply of
modular doors to Navistar International, MAN and two other major OEMs; a $35M
contract to provide ABS and GENIII integral wheel spindle bearings to Daewoo; a
$20M contract for steering wheels and airbags on a 2000MY VW.
"With this kind of reaction by customers we are tremendously excited by
the potential that exists in the marketplace to take advantage of the
benefits of Delphi's full independence," said Battenberg. "This is just the
beginning."
Delphi Automotive Systems (NYSE: DPH), with headquarters in Troy, Mich.,
USA, is a world leader in automotive component and systems technology. Delphi's
3 business sectors -- Dynamics and Propulsion; Safety, Thermal and Electrical
Architecture; and Electronics and Mobile Communications -- provide comprehensive
product solutions to complex customer needs. Delphi has more than 198,000
employees and operates 168 wholly owned manufacturing sites, 40 joint ventures
and 27 technical centers in 36 countries. Regional headquarters are located in
Paris, Tokyo and Sao Paulo. Delphi can be found on the Internet at
http://www.delphiauto.com. In this press release, use of the terms expects,
intends, believes, plans and similar words are associated with forward-looking
statements that are inherently subject to numerous risks and uncertainties.
Accordingly, there can be no assurance that the results described in such
forward-looking statements will be realized. The principle risk factors which
may cause actual results to differ materially from those expressed in
forward-looking statements contained in this press release are described in
various documents filed by GM and Delphi with the U.S. Securities and Exchange
Commission, including GM's Annual Report on Form 10-K for the Year Ended
December 31, 1998 (at page II-22), and Delphi's Annual Report on Form 10-K for
the Year Ended December 31, 1998 (at page 54).
Stockholders who have questions about technical issues related to the
distribution can call the Information Agent, Morrow & Co., at (800) 566-9058.
- 2-
Exhibit 99.3
Independent Auditors' Report
General Motors Corporation, its Directors, and Stockholders:
We have audited the Consolidated Balance Sheets of General Motors Corporation
and subsidiaries as of December 31, 1998 and 1997, and the related Consolidated
Statements of Income, Cash Flows, and Stockholders' Equity for each of the three
years in the period ended December 31, 1998. Our audits also included the
financial statement schedule on page 49. These financial statements and
the financial statement schedule are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of General Motors Corporation and subsidiaries
at December 31, 1998 and 1997, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
/s/DELOITTE & TOUCHE LLP
- ------------------------
DELOITTE & TOUCHE LLP
Detroit, Michigan
April 12, 1999
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
------------------------
1998 1997 1996
---- ---- ----
(Dollars in Millions Except Per Share Amounts)
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Manufactured products sales and
revenues (Note 1) $134,276 $148,143 $140,057
Financing revenues (Note 1) 13,585 12,762 12,674
Other income (Note 21) 7,584 11,675 5,550
--------- -------- ---------
Total net sales and revenues 155,445 172,580 158,281
------- ------- -------
Cost of sales and other operating
charges, exclusive of items listed
below (Note 2) 114,542 128,225 121,472
Selling, general and administrative
expenses 15,867 14,777 13,135
Depreciation and amortization expense
(Notes 1 and 2) 11,147 14,646 10,997
Interest expense (Note 10) 6,629 5,883 5,427
Other expenses (Notes 2 and 21) 2,316 1,480 1,810
--------- --------- ---------
Total costs and expenses 150,501 165,011 152,841
------- ------- -------
Income from continuing operations
before income taxes
and minority interests 4,944 7,569 5,440
Income tax expense (Note 6) 1,636 1,025 1,464
Minority interests (20) 44 53
(Losses) earnings of nonconsolidated
associates (239) (105) 71
------ -------- -------
Income from continuing operations $3,049 $6,483 $4,100
(Loss) income from discontinued
operations (Notes 1 and 23) (93) 215 863
------ -------- -------
Net income $2,956 $6,698 $4,963
------ ------ ------
Premium on exchange of preference
stocks (Note 16) - 26 -
Dividends on preference stocks (Note 17) 63 72 81
------- ------- -------
Earnings on common stocks $2,893 $6,600 $4,882
===== ===== =====
Basic earnings per share attributable
to common stocks (Note 18)
$1-2/3 par value common stock
Continuing operations $4.40 $8.52 $5.08
Discontinued operations
(Notes 1 and 23) (0.14) 0.18 0.98
---- ---- ----
Earnings per share attributable
to $1-2/3 par value $4.26 $8.70 $6.06
==== ==== ====
Income from discontinued operations
attributable to Class E $ - $ - $0.04
==== ==== ====
Class H (prior to recapitalization on
December 17, 1997 (Note 1)
Continuing operations $ - $2.30 $1.83
Discontinued operations - 0.87 1.05
---- ---- ----
Earnings per share attributable to
Class H (prior to its
recapitalization on
December 17, 1997) (Note 1) $ - $3.17 $2.88
==== ==== ====
Earnings per share attributable to
Class H (subsequent
to its recapitalization on
December 17, 1997) (Note 1) $0.68 $0.02 $ -
==== ==== ====
Diluted earnings per share attributable
to common stocks (Note 18)
$1-2/3 par value common stock
Continuing operations $4.32 $8.45 $5.04
Discontinued operations (Notes 1 & 23) (0.14) 0.17 0.98
---- ---- ----
Earnings per share attributable
to $1-2/3 par value $4.18 $8.62 $6.02
==== ==== ====
Income from discontinued operations
attributable to Class E $ - $ - $0.04
==== ==== ====
Class H (prior to recapitalization on
December 17, 1997 (Note 1)
Continuing operations $ - $2.30 $1.83
Discontinued operations - 0.87 1.05
---- ---- ----
Earnings per share attributable to
Class H (prior to its
recapitalization on
December 17, 1997) (Note 1) $ - $3.17 $2.88
==== ==== ====
Earnings per share attributable
to Class H (subsequent
to its recapitalization on
December 17, 1997) (Note 1) $0.68 $0.02 $ -
==== ==== ====
Reference should be made to the notes to consolidated financial statements.
- 1 -
CONSOLIDATED STATEMENTS OF INCOME - Concluded
Years Ended December 31,
------------------------
1998 1997 1996
---- ---- ----
(Dollars in Millions)
AUTOMOTIVE, ELECTRONICS AND OTHER OPERATIONS
Manufactured products sales and
revenues (Note 1) $134,276 $148,143 $140,057
Other income (Note 21) 2,885 7,952 2,529
--------- --------- ---------
Total net sales and revenues 137,161 156,095 142,586
------- ------- -------
Cost of sales and other operating
charges, exclusive of items listed
below (Note 2) 114,542 128,225 121,472
Selling, general and administrative
expenses 11,848 11,971 10,554
Depreciation and amortization expense
(Notes 1 and 2) 6,227 9,833 6,302
-------- -------- -------
Total operating costs and expenses 132,617 150,029 138,328
------- ------- -------
Interest expense (Note 10) 786 633 503
Other expenses (Notes 2 and 21) 792 210 519
Net expense (income) from transactions
with Financing and
Insurance Operations (Note 1) 82 (101) (125)
-------- -------- -------
Income from continuing operations
before income taxes
and minority interests 2,884 5,324 3,361
Income tax expense (Note 6) 1,018 111 626
Minority interests - 57 53
(Losses) earnings of nonconsolidated
associates (239) (105) 71
-------- -------- -------
Income from continuing operations 1,627 5,165 2,859
(Loss) income from discontinued
operations (Notes 1 and 23) (93) 215 863
-------- -------- -------
Net income - Automotive, Electronics
and Other Operations $1,534 $5,380 $3,722
===== ===== =====
Years Ended December 31,
------------------------
1998 1997 1996
---- ---- ----
(Dollars in Millions)
FINANCING AND INSURANCE OPERATIONS
Financing revenues (Note 1) $13,585 $12,762 $12,674
Insurance, mortgage and other
income (Note 21) 4,699 3,723 3,021
------ ------ ------
Total revenues and other income 18,284 16,485 15,695
------ ------ ------
Interest expense (Note 10) 5,843 5,250 4,924
Depreciation and amortization
expense (Note 1) 4,920 4,813 4,695
Operating and other expenses 4,019 2,806 2,581
Provisions for financing losses
(Notes 1 and 21) 463 523 669
Insurance losses and loss adjustment
expenses (Note 21) 1,061 747 622
------- -------- --------
Total costs and expenses 16,306 14,139 13,491
------ ------ ------
Net (income) expense from transactions
with Automotive, Electronics and
Other Operations (Note 1) (82) 101 125
-------- -------- --------
Income before income taxes 2,060 2,245 2,079
Income tax expense (Note 6) 618 914 838
Minority interests (20) (13) -
------ ------ --------
Net income - Financing and
Insurance Operations $1,422 $1,318 $1,241
===== ===== =====
The above supplemental consolidating information is explained in Note 1, "Nature
of Operations".
Reference should be made to the notes to consolidated financial statements.
- 2 -
<PAGE>
CONSOLIDATED BALANCE SHEETS
December 31,
------------
GENERAL MOTORS CORPORATION AND SUBSIDIARIES 1998 1997
---- ----
ASSETS (Dollars in Millions)
Automotive, Electronics and Other Operations
Cash and cash equivalents $9,728 $9,696
Marketable securities 402 3,815
------- -------
Total cash and marketable securities (Notes 1 and 3) 10,130 13,511
Accounts and notes receivable (less allowances) 4,750 4,551
Inventories (less allowances) (Note 5) 10,437 10,234
Net assets of discontinued operations (Notes 1 and 23) 77 -
Equipment on operating leases (less accumulated
depreciation) (Note 7) 4,954 4,677
Deferred income taxes and other current assets (Note 6) 10,051 6,034
Net receivable from Financing and Insurance
Operations (Note 1) - 319
------- -------
Total current assets 40,399 39,326
Equity in net assets of nonconsolidated associates 950 1,060
Property - net (Note 8) 32,222 29,315
Intangible assets - net (Notes 1 and 9) 9,994 10,655
Deferred income taxes (Note 6) 14,967 17,714
Other assets 16,062 15,246
------- -------
Total Automotive, Electronics and Other Operations
assets 114,594 113,316
Financing and Insurance Operations
Cash and cash equivalents (Note 1) 146 577
Investments in securities (Note 3) 8,748 7,896
Finance receivables - net (Note 4) 70,436 58,289
Investment in leases and other receivables (Note 7) 32,798 28,523
Other assets 18,807 12,799
Net receivable from Automotive, Electronics
and Other Operations (Note 1) 816 -
------- -------
Total Financing and Insurance Operations assets 131,751 108,084
------- -------
Total assets $246,345 $221,400
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive, Electronics and Other Operations
Accounts payable (principally trade) $13,542 $12,400
Loans payable (Note 10) 1,204 691
Accrued expenses (Note 14) 30,548 31,590
Net payable to Financing and Insurance
Operations (Note 1) 816 -
------- -------
Total current liabilities 46,110 44,681
Long-term debt (Note 10) 7,118 5,669
Postretirement benefits other than pensions (Note 13) 33,503 33,600
Pensions (Note 13) 4,410 2,472
Net liabilities of discontinued operations
(Notes 1 and 23) - 335
Other liabilities and deferred income taxes (Note 14) 17,807 16,888
------- -------
Total Automotive, Electronics and Other
Operations liabilities 108,948 103,645
Financing and Insurance Operations
Accounts payable 4,148 3,095
Debt (Note 10) 107,753 86,902
Deferred income taxes and other liabilities (Note 14) 9,661 8,962
Net payable to Automotive, Electronics and
Other Operations (Note 1) - 319
------- -------
Total Financing and Insurance Operations liabilities 121,562 99,278
Minority interests 563 671
General Motors - obligated mandatorily redeemable
preferred securities of subsidiary
trusts holding solely junior subordinated
debentures of General Motors (Note 16)
Series D 79 79
Series G 141 143
Stockholders' equity (Notes 17 and 19)
Preference stocks 1 1
$1-2/3 par value common stock (issued, 655,008,344
and 693,456,394 shares) 1,092 1,156
Class H common stock (issued, 106,159,776
and 103,885,803 shares) 11 10
Capital surplus (principally additional paid-in capital) 12,661 15,369
Retained earnings 6,984 5,416
------ ------
Subtotal 20,749 21,952
Accumulated foreign currency translation adjustments (1,089) (810)
Net unrealized gains on securities 481 504
Minimum pension liability adjustment (5,089) (4,062)
----- -----
Accumulated other comprehensive loss (5,697) (4,368)
----- -----
Total stockholders' equity 15,052 17,584
-------- --------
Total liabilities and stockholders' equity $246,345 $221,400
======= =======
Reference should be made to the notes to consolidated financial statements.
- 3 -
CONSOLIDATED BALANCE SHEETS - Concluded
December 31,
------------
AUTOMOTIVE, ELECTRONICS AND OTHER OPERATIONS 1998 1997
---- ----
(Dollars in Millions)
ASSETS
Cash and cash equivalents $9,728 $9,696
Marketable securities 402 3,815
-------- -------
Total cash and marketable securities (Notes 1 and 3) 10,130 13,511
Accounts and notes receivable (less allowances) 4,750 4,551
Inventories (less allowances) (Note 5) 10,437 10,234
Net assets of discontinued operations (Notes 1 and 23) 77 -
Equipment on operating leases (less accumulated
depreciation) (Note 7) 4,954 4,677
Deferred income taxes and other current assets (Note 6) 10,051 6,034
Net receivable from Financing and Insurance
Operations (Note 1) - 319
------ ------
Total current assets 40,399 39,326
Equity in net assets of nonconsolidated associates 950 1,060
Property - net (Note 8) 32,222 29,315
Intangible assets - net (Notes 1 and 9) 9,994 10,655
Deferred income taxes (Note 6) 14,967 17,714
Other assets 16,062 15,246
------ ------
Total Automotive, Electronics and
Other Operations assets $114,594 $113,316
======== ========
LIABILITIES AND GM INVESTMENT
Accounts payable (principally trade) $13,542 $12,400
Loans payable (Note 10) 1,204 691
Accrued expenses (Note 14) 30,548 31,590
Net payable to Financing and Insurance
Operations (Note 1) 816 -
------- -------
Total current liabilities 46,110 44,681
Long-term debt (Note 10) 7,118 5,669
Postretirement benefits other than pensions (Note 13) 33,503 33,600
Pensions (Note 13) 4,410 2,472
Net liabilities of discontinued operations
(Notes 1 and 23) - 335
Other liabilities and deferred income taxes (Note 14) 17,807 16,888
------ ------
Total Automotive, Electronics and Other
Operations liabilities 108,948 103,645
Minority interests 511 639
GM investment in Automotive, Electronics
and Other Operations 5,135 9,032
------- -------
Total Automotive, Electronics and
Other Operations liabilities and GM investment $114,594 $113,316
======== ========
December 31,
------------
FINANCING AND INSURANCE OPERATIONS 1998 1997
---- ----
(Dollars in Millions)
ASSETS
Cash and cash equivalents (Note 1) $146 $577
Investments in securities (Note 3) 8,748 7,896
Finance receivables - net (Note 4) 70,436 58,289
Investment in leases and other receivables (Note 7) 32,798 28,523
Other assets 18,807 12,799
Net receivable from Automotive, Electronics
and Other Operations (Note 1) 816 -
------- -------
Total Financing and Insurance Operations assets $131,751 $108,084
======= =======
LIABILITIES AND GM INVESTMENT
Accounts payable $4,148 $3,095
Debt (Note 10) 107,753 86,902
Deferred income taxes and other liabilities (Note 14) 9,661 8,962
Net payable to Automotive, Electronics and
Other Operations (Note 1) - 319
------- -------
Total Financing and Insurance Operations liabilities 121,562 99,278
Minority interests 52 32
GM investment in Financing and Insurance Operations 10,137 8,774
------- -------
Total Financing and Insurance Operations liabilities
and GM investment $131,751 $108,084
======== ========
The above supplemental consolidating information is explained in Note 1, "Nature
of Operations".
Reference should be made to the notes to consolidated financial statements.
- 4 -
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended December 31,
--------------------------------
1998 1997 1996
---- ---- ----
(Dollars in Millions)
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Cash flows from operating activities
Income from continuing operations $3,049 $6,483 $4,100
Adjustments to reconcile income
from continuing operations to net
cash provided by operating activities
Depreciation and amortization
expenses 11,147 14,646 10,997
Gain on Hughes Defense spin-off
(Note 1) - (4,269) -
Postretirement benefits other
than pensions, net of payments
and VEBA contributions 188 (874) 1,172
Pension expense, net of contributions 223 269 707
Originations and purchases of
mortgage loans (54,433) (30,878) (19,455)
Proceeds on sales of mortgage loans 51,582 28,543 18,157
Originations and purchases of
mortgage securities (2,237) (2,516) (970)
Proceeds on sales of mortgage
securities 849 1,449 758
Change in other investments
and miscellaneous assets 1,411 842 (748)
Change in other operating assets
and liabilities (Note 1) 1,582 (644) (900)
Other 982 533 2,144
------- ------ -------
Net cash provided by operating
activities 14,343 13,584 15,962
------ ------ ------
Cash flows from investing activities
Expenditures for property (8,231) (8,647) (8,550)
Investments in other marketable
securities - acquisitions (34,162) (30,594) (27,278)
Investments in other marketable
securities - liquidations 37,960 28,958 24,798
Mortgage servicing rights -
acquisitions (1,862) (479) (409)
Mortgage servicing rights - liquidations 80 23 99
Finance receivables - acquisitions (155,613) (163,614) (155,477)
Finance receivables - liquidations 114,662 129,615 120,323
Proceeds from sales of finance
receivables 27,681 31,191 36,657
Operating leases - acquisitions (23,525) (21,073) (18,494)
Operating leases - liquidations 15,386 12,187 10,224
Proceeds from borrowings of Hughes
Defense prior to the Hughes
Defense spin-off (Note 1) - 4,006 -
Investments in companies,
net of cash acquired (1,144) (2,272) (113)
Special inter-company payment
from EDS (Note 1) - - 500
Other (1,131) 765 1,144
------ ------ ------
Net cash used in investing activities (29,899) (19,934) (16,576)
------ ------ ------
Cash flows from financing activities
Net increase in loans payable 8,186 5,346 732
Increase in long-term debt 24,035 14,971 15,922
Decrease in long-term debt (12,869) (12,500) (12,810)
Repurchases of common and
preference stocks (3,089) (4,365) (251)
Proceeds from issuing common stocks 343 614 480
Cash dividends paid to stockholders (1,388) (1,620) (1,530)
----- ----- -----
Net cash provided by financing
activities 15,218 2,446 2,543
------ ----- -----
Effect of exchange rate changes on
cash and cash equivalents 317 (482) (180)
------ ----- -----
Net cash (used in) provided by
continuing operations (21) (4,386) 1,749
Net cash (used in) provided by
discontinued operations
(Notes 1 & 23) (378) 1,567 1,804
----- ------ ------
Net (decrease) increase in cash
and cash equivalents (399) (2,819) 3,553
Cash and cash equivalents at
beginning of the year 10,273 13,092 9,539
------ ------ -----
Cash and cash equivalents at
end of the year $9,874 $10,273 $13,092
====== ======= =======
Reference should be made to the notes to consolidated financial statements.
- 5 -
CONSOLIDATED STATEMENTS OF CASH FLOWS - Concluded
<TABLE>
For The Years Ended December 31,
--------------------------------
<CAPTION>
1998 1997 1996
---- ---- ----
Automotive, Financing Automotive, Financing Automotive, Financing
Electronics and Electronics and Electronics and
and Other Insurance and Other Insurance and Other Insurance
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities (Dollars in Millions)
Income from continuing operations $1,627 $1,422 $5,165 $1,318 $2,859 $1,241
Adjustments to reconcile income
from continuing operations to
net cash provided by operating
activities
Depreciation and amortization
expenses 6,227 4,920 9,833 4,813 6,302 4,695
Gain on Hughes Defense
spin-off (Note 1) - - (4,269) - - -
Postretirement benefits other
than pensions, net of payment
and VEBA contributions 157 31 (900) 26 1,146 26
Pension expense, net of
contributions 223 - 269 - 707 -
Originations and purchases
of mortgage loans - (54,433) - (30,878) - (19,455)
Proceeds on sales of mortgage loans - 51,582 - 28,543 - 18,157
Originations and purchases of
mortgage securities - (2,237) - (2,516) - (970)
Proceeds on sales of
mortgages securities - 849 - 1,449 - 758
Change in other investments and
miscellaneous assets 503 908 242 600 29 (777)
Change in other operating
assets and liabilities (Note 1) 90 1,492 (993) 349 (555) (345)
Other (84) 1,066 270 263 1,294 850
------- ------- ------ ------ ------- ------
Net cash provided by operating
activities 8,743 5,600 9,617 3,967 11,782 4,180
------- ------- ------ ------ ------- ------
Cash flows from investing activities
Expenditures for property (7,952) (279) (8,409) (238) (8,429) (121)
Investments in other marketable
securities - acquisitions (13,010) (21,152) (12,864) (17,730) (14,187) (13,091)
Investments in other marketable
securities - liquidations 16,272 21,688 12,663 16,295 11,723 13,075
Mortgage servicing rights
- acquisitions - (1,862) - (479) - (409)
Mortgage servicing rights
- liquidations - 80 - 23 - 99
Finance receivables - acquisitions - (155,613) - (163,614) - (155,477)
Finance receivables - liquidations - 114,662 - 129,615 - 120,323
Proceeds from sales of finance
receivables - 27,681 - 31,191 - 36,657
Operating leases - acquisitions (6,397) (17,128) (5,680) (15,393) (4,089) (14,405)
Operating leases - liquidations 5,609 9,777 3,711 8,476 3,819 6,405
Proceeds from borrowings of
Hughes Defense prior to the
Hughes Defense spin-off (Note 1) - - 4,006 - - -
Investments in companies,
net of cash acquired (971) (173) (1,850) (422) (113) -
Special inter-company payment
from EDS (Note 1) - - - - 500 -
Net investing activity with
Financing and
Insurance Operations 338 - 750 - 1,200 -
Other (889) (242) 554 211 711 433
------- ------- ------ ------ ------- ------
Net cash used in investing
activities (7,000) (22,561) (7,119) (12,065) (8,865) (6,511)
------ ------- ------ ------- ------ ------
Cash flows from financing activities
Net increase (decrease) in
loans payable (94) 8,280 (398) 5,744 (1,012) 1,744
Increase in long-term debt 2,937 21,098 384 14,587 1,913 14,009
Decrease in long-term debt (1,492) (11,377) (1,189) (11,311) (871) (11,939)
Net financing activity with
Automotive, Electronics
and Other Operations - (338) - (750) - (1,200)
Repurchases of common and
preference stocks (3,089) - (4,365) - (251) -
Proceeds from issuing common stocks 343 - 614 - 480 -
Cash dividends paid to stockholders (1,388) - (1,620) - (1,530) -
------ ------ ------ ----- ------ -----
Net cash (used in) provided by
financing activities (2,783) 17,663 (6,574) 8,270 (1,271) 2,614
------ ------ ------ ----- ------ -----
Effect of exchange rate changes
on cash and cash equivalents 315 2 (482) - (180) -
Net transactions with
Automotive/Financing Operations 1,135 (1,135) 338 (338) 989 (989)
------ ------ ------ ----- ------ -----
Net cash provided by (used in)
continuing operations 410 (431) (4,220) (166) 2,455 (706)
Net cash (used in) provided
by discontinued
Operations (Notes 1 and 23) (378) - 1,567 - 1,804 -
------ ------ ------ ----- ------ -----
Net increase (decrease) in
cash and cash equivalents 32 (431) (2,653) (166) 4,259 (706)
Cash and cash equivalents at
beginning of the year 9,696 577 12,349 743 8,090 1,449
------ ------ ------ ----- ------ -----
Cash and cash equivalents
at end of the year $9,728 $146 $9,696 $577 $12,349 $743
====== ==== ====== ==== ======= ====
</TABLE>
The above supplemental consolidating information is explained in Note 1, "Nature
of Operations".
Reference should be made to the notes to consolidated financial statements.
- 6 -
<PAGE>
<TABLE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<CAPTION>
Accumulated
Total Other Total
Capital Capital Comprehensive Retained Comprehensive Stockholders'
Stock Surplus Income Earnings Income/(Loss) Equity
----- ------- ------ -------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 $1,310 $18,871 $7,185 $(4,056) $23,310
Shares reacquired (8) (243) - - (251)
Shares issued 14 519 - - 533
Series C conversion 5 (7) - - (2)
EDS split-off (49) 49 (4,481) - (4,481)
Comprehensive income:
Net income - - $4,963 4,963 - 4,963
-----
Other comprehensive income (loss):
Foreign currency translation adjustments - - (305) - - -
Unrealized losses on securities - - (70) - - -
Minimum pension liability adjustment - - 1,246 - - -
-----
Other comprehensive income - - 871 - 871 871
------
Comprehensive income - - $5,834 - - -
=====
Cash dividends - - (1,530) - (1,530)
------ ------ ----- ----- -----
Balance at December 31, 1996 1,272 19,189 6,137 (3,185) 23,413
Shares reacquired (122) (4,243) - - (4,365)
Shares issued 17 619 - - 636
Preference stock exchange - (196) (26) - (222)
Hughes Defense spin-off - - (5,773) - (5,773)
Comprehensive income:
Net income - - $6,698 6,698 - 6,698
-----
Other comprehensive income (loss):
Foreign currency translation adjustments - - (692) - - -
Unrealized gains on securities - - 81 - - -
Minimum pension liability adjustment - - (572) - - -
-----
Other comprehensive loss - - (1,183) - (1,183) (1,183)
-----
Comprehensive income - - $5,515 - - -
=====
Cash dividends - - (1,620) - (1,620)
----- ------ ----- ----- -----
Balance at December 31, 1997 1,167 15,369 5,416 (4,368) 17,584
Shares reacquired (75) (3,105) - - (3,180)
Shares issued 12 397 - - 409
Comprehensive income:
Net income - - $2,956 2,956 - 2,956
-----
Other comprehensive income (loss):
Foreign currency translation adjustments - - (279) - - -
Unrealized losses on securities - - (23) - - -
Minimum pension liability adjustment - - (1,027) - - -
-----
Other comprehensive loss - - (1,329) - (1,329) (1,329)
-----
Comprehensive income - - $1,627 - - -
=====
Cash dividends - - (1,388) - (1,388)
----- ------ ----- ----- -----
Balance at December 31, 1998 $1,104 $12,661 $6,984 $(5,697) $15,052
===== ====== ===== ===== ======
</TABLE>
Reference should be made to the notes to consolidated financial statements.
- 7 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Significant Accounting Policies
Principles of Consolidation
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, prior to the December 17, 1997 restructuring of
the company (hereinafter referred to as "former Hughes") and subsequent to the
December 17, 1997 restructuring of the company (hereinafter referred to as
"Hughes") (see "Hughes Transactions" below) (collectively referred to as
"General Motors or GM"). General Motors' share of earnings or losses of
associates, in which at least 20% of the voting securities is owned, is included
in the consolidated operating results using the equity method of accounting. The
financial data related to Delphi Automotive Systems Corporation (Delphi) is
presented as discontinued operations for all periods presented and EDS is
presentd as discontinued operations for 1996 (refer to Note 23). GM encourages
reference to the Delphi and the GMAC Annual Reports on Form 10-K for the period
ended December 31, 1998, both filed with the Securities and Exchange Commission,
and the Hughes consolidated financial statements included as Exhibit 99 to the
GM Annual Report on Form 10-K for the period ended December 31, 1998.
Certain amounts for 1997 and 1996 have been reclassified to conform with the
1998 classifications.
Nature of Operations
GM presents separate supplemental consolidating financial information for the
following businesses: (1) Automotive, Electronics and Other Operations which
consists of the design, manufacturing and marketing of cars, trucks, locomotives
and heavy duty transmissions and related parts and accessories, as well as the
operations of Hughes; and (2) Financing and Insurance Operations which consists
primarily of GMAC, which provides a broad range of financial services, including
consumer vehicle financing, full-service leasing and fleet leasing, dealer
financing, car and truck extended service contracts, residential and commercial
mortgage services, and vehicle and homeowners insurance.
Transactions between businesses have been eliminated in the Corporation's
consolidated statements of income. Automotive, Electronics and Other Operations'
net expense (income) from transactions with Financing and Insurance Operations
was as follows (in millions):
Years Ended December 31,
------------------------
1998 1997 1996
---- ---- ----
Interest $140 $89 $71
Service fees 58 34 27
Insurance - net (24) (127) (138)
Other (92) (97) (85)
-- --- ---
Net expense (income) $82 $(101) $(125)
== === ===
Use of Estimates in the Preparation of the Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect amounts reported therein. Due to the inherent uncertainty involved in
making estimates, actual results reported in future periods may be based upon
amounts that differ from those estimates.
Revenue Recognition
Sales are generally recorded when products are shipped or when services are
rendered to independent dealers or other third parties. Provisions for normal
dealer sales incentives, returns and allowances, and GM Card rebates are made at
the time of vehicle sales. Costs related to special sales incentive programs are
recognized as reductions to sales when determinable.
Financing revenue is recorded over the terms of the receivables using the
interest method. Certain loan origination costs are deferred and amortized to
financing revenue over the lives of the related loans using the interest method.
Income from operating lease assets is recognized on a straight-line basis
over the scheduled lease term. Certain operating lease origination costs are
deferred and amortized to financing revenue over the lives of the related
operating leases using the straight-line method.
Insurance premiums are earned on a basis related to coverage provided over
the terms of the policies. Commission, premium taxes, and other costs incurred
in acquiring new business are deferred and amortized over the terms of the
related policies on the same basis as premiums are earned. The liability for
losses and loss expenses includes a provision for unreported losses, based on
past experience, net of the estimated salvage and subrogation recoverable.
- 8 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 1. Significant Accounting Policies (continued)
Product-Related Expenses
Advertising and sales promotion, research and development, and other
product-related costs are charged to expense as incurred. Provisions for
estimated expenses related to product warranty are made at the time the products
are sold. Advertising expense was $3.7 billion in 1998, $4.0 billion in 1997,
and $3.3 billion in 1996. Research and development expense was $6.5 billion in
1998, $6.6 billion in 1997, and $7.3 billion in 1996.
Depreciation and Amortization
Depreciation is provided based on the estimated useful lives of property
groups generally using accelerated methods, which accumulate depreciation of
approximately two-thirds of the depreciable cost during the first half of the
estimated useful lives.
Leasehold improvements are amortized over the period of the lease or the life
of the property, whichever is shorter, with the amortization applied directly to
the asset account. Depreciation on capitalized leases with terms of five years
or less is provided using the straight-line method; leases with terms in excess
of five years are depreciated using the foregoing accelerated methods.
Depreciation of vehicles and other equipment on operating leases or in GM's
use is provided generally on a straight-line basis. The difference between the
net book value and the proceeds of sale or salvage on items disposed of is
accounted for as a charge against or credit to the provision for depreciation.
Expenditures for special tools are amortized over their estimated useful
lives, primarily using the units of production method. Amortization is applied
directly to the asset account. Replacement of special tools for reasons other
than changes in products is charged directly to cost of sales.
Depreciation and amortization expense was as follows (in millions):
Years Ended December 31,
------------------------
Automotive, Electronics and Other Operations 1998 1997 1996
- -------------------------------------------- ---- ---- ----
Depreciation (Note 2) $3,772 $4,178 $3,366
Amortization of special tools (Note 2) 2,350 5,427 2,786
Amortization of intangible assets (Note 9) 105 228 150
------ ------- ------
Total $6,227 $9,833 $6,302
===== ===== =====
Financing and Insurance Operations
- ----------------------------------
Depreciation and amortization expense $4,920 $4,813 $4,695
===== ===== =====
Foreign Currency Translation
Foreign currency exchange transaction and translation losses on an after-tax
basis included in consolidated net income in 1998, 1997, and 1996, pursuant to
Statement of Financial Accounting Standards (SFAS) No. 52, Foreign Currency
Translation, amounted to $298 million, $497 million, and $401 million,
respectively.
Cash and Cash Equivalents
Cash equivalents are defined as short-term, highly liquid investments with
original maturities of 90 days or less.
- 9 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 1. Significant Accounting Policies (continued)
Statement of Cash Flows Supplementary Information
Years Ended December 31,
------------------------
Automotive, Electronics and Other Operations 1998 1997 1996
- -------------------------------------------- ---- ---- ----
(Dollars in Millions)
Changes in other operating assets and liabilities were as follows:
Accounts receivable $(80) $(1,006) $(103)
Prepaid expenses and other deferred charges 217 1,006 (159)
Inventories (494) (808) (690)
Accounts payable 1,249 1,212 827
Deferred taxes and income taxes payable (2,315) (3,565) (694)
Accrued expenses and other liabilities 1,513 2,168 264
----- ----- ---
Total $90 $(993) $(555)
== === ===
Cash paid for interest and income taxes was as follows:
Interest $435 $449 $632
Income taxes $1,132 $1,120 $1,202
Years Ended December 31,
------------------------
Financing and Insurance Operations 1998 1997 1996
- ---------------------------------- ---- ---- ----
(Dollars in Millions)
Changes in other operating assets and liabilities were as follows:
Other receivables $206 $(714) $(384)
Other assets (36) (55) 44
Accounts payable 858 624 592
Deferred taxes and other liabilities 464 494 (597)
------ --- ---
Total $1,492 $349 $(345)
===== === ===
Cash paid for interest and income taxes was as follows:
Interest $5,695 $5,202 $4,893
Income taxes $138 $338 $1,004
Allowance for Credit Losses
An allowance for credit losses is generally established during the period in
which receivables are acquired and is maintained at a level deemed appropriate
by management based on historical and other factors that affect collectibility.
Losses arising from the sale of repossessed collateral are charged to the
allowance for credit losses. Where repossession has not taken place, receivables
are charged off as soon as it is determined that the collateral cannot be
repossessed, generally not more than 150 days after default.
Repossessed Property and Impaired Loans
Losses arising from the repossession of collateral supporting doubtful
accounts and property supporting defaulted operating leases are recognized upon
repossession. Repossessed assets are recorded at the lower of historical cost or
estimated realizable value and are reclassified from finance receivables or
operating leases to nonearning assets with the related adjustments to the
valuation allowance included in other operating expenses.
Non-retail finance receivables are reduced to the lower of book value or the
estimated fair value of collateral when determined to be impaired or
uncollectible.
Valuation of Long-Lived Assets
GM periodically evaluates the carrying value of long-lived assets to be held
and used, including goodwill and other intangible assets, when events and
circumstances warrant such a review. The carrying value of a long-lived asset is
considered impaired when the anticipated undiscounted cash flow from such asset
is separately identifiable and is less than its carrying value. In that event, a
loss is recognized based on the amount by which the carrying value exceeds the
fair market value of the long-lived asset. Fair market value is determined
primarily using the anticipated cash flows discounted at a rate commensurate
with the risk involved. Losses on long-lived assets to be disposed of are
determined in a similar manner, except that fair market values are reduced for
the cost to dispose.
- 10 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 1. Significant Accounting Policies (continued)
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 commodity 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, 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. Generally, GM does not
enter into derivative transactions that do not have a high correlation with the
underlying financial risk. In the infrequent instances in which a derivative
transaction is entered into that does not have a high correlation with the
underlying exposure, the derivative is marked to market and included in net
income on a current basis. 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 and included in net income on a current basis.
Interest rate swaps and options that are designated, and are effective, as
hedges of underlying debt obligations are not marked to market and included in
net income, but are used to adjust interest expense recognized over the lives of
the underlying debt agreements. Gains and losses from terminated hedge 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 contracts 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 and included in net
income 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 and included in net income on a
current basis.
Postemployment Benefits and Employee Termination Benefits
GM's postemployment benefits primarily relate to GM's extended disability
benefit program in the United States and employee job security and supplemental
unemployment compensation benefits (mainly pursuant to union or other
contractual agreements). Extended disability benefits are accrued on a
service-driven basis and employee job security and supplemental unemployment
compensation benefits are accrued on an event-driven basis. Accruals for
postemployment benefits represent the discounted future cash expenditures
expected during the period between the idling of affected employees and the time
when such employees are redeployed, retire or otherwise terminate their
employment.
Voluntary termination benefits are accrued when the employees accept the
offer. Involuntary termination benefits are accrued when management has
committed to a termination plan and the benefit arrangement is communicated to
affected employees.
Environmental Liabilities
GM recognizes environmental liabilities when a loss is probable and can be
reasonably estimated. Such liabilities are generally not subject to insurance
coverage. The cost of each environmental liability is estimated by engineering,
financial, and legal specialists within GM based on current law. Such estimates
are based primarily upon the estimated cost of investigation and remediation
required and the likelihood that other potentially responsible parties (PRPs)
will be able to fulfill their commitments at the sites where GM may be jointly
and severally liable. At sites being addressed under the U.S. Comprehensive
Environmental Response, Compensation and Liability Act or similar state laws
(the Superfund Sites), GM typically recognizes a loss once it has been named as
a PRP and has determined that some loss is probable and estimable. The Superfund
Sites are primarily multi-PRP sites not owned or operated by
- 11 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 1. Significant Accounting Policies (concluded)
GM. For GM's operating plants, an estimated liability is typically recognized
either upon completion of an environmental assessment or when GM proposes an
agreement with the appropriate regulatory agency to take action at a site. For
closed or closing plants owned by GM and properties being sold, an estimated
liability is typically recognized at the time the closure decision is made or
sale is recorded and is based on an environmental assessment of the plant
property.
GM's estimates for environmental obligations are dependent primarily on the
nature and extent of historical information and physical data relating to a
contaminated site, the complexity of the site, uncertainty as to what remedy and
technology will be required, the outcome of discussions with regulatory agencies
and other PRPs at multi-party sites, the number and financial viability of other
PRPs, and the timing of expenditures; accordingly, such estimates could change
materially as GM periodically evaluates and revises such estimates based on
expenditures against established reserves and the availability of additional
information.
New Accounting Standards
In the first quarter of 1998, the AICPA's Accounting Standards Executive
Committee issued Statement of Position (SOP) 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. This SOP requires that
entities capitalize certain internal-use software cost once specific criteria
are met. Currently, GM generally expenses the costs of developing or obtaining
internal-use software as incurred. GM will adopt SOP 98-1 on January 1, 1999, as
required. GM expects that under the new SOP, approximately $300 million to $350
million in spending will be capitalized in 1999 that would have otherwise been
expensed.
In the second quarter of 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No. 133, Accounting
for Derivative Instruments and Hedging Activities. SFAS No. 133 requires an
entity to recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
Gains or losses resulting from changes in the values of those derivatives would
be accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. GM plans to adopt SFAS No. 133 by January 1, 2000, as
required. GM is currently assessing the impact of this Statement on GM's
consolidated financial statements.
Labor Force
GM, on a worldwide basis, has a concentration of its labor supply in
employees working under union collective bargaining agreements, a significant
number of which will expire in 1999.
Hughes Transactions
On December 17, 1997, GM and former Hughes completed a series of related
transactions (Hughes Transactions) that were designed to address strategic
challenges facing the three principal businesses of former Hughes and unlock
stockholder value in GM. The Hughes Transactions included the tax-free spin-off
of the defense electronics business of former Hughes (Hughes Defense) to holders
of $1-2/3 par value and Class H common stocks, which was then followed
immediately by the merger of Hughes Defense with Raytheon Company (Raytheon).
Concurrently, Delco Electronics Corporation (Delco), the automotive electronics
subsidiary of former Hughes, was transferred from former Hughes to GM's Delphi
Automotive Systems unit. Finally, Class H common stock was recapitalized into a
GM tracking stock, Class H common stock, that is linked to the
telecommunications and space businesses of Hughes.
The spin-off of Hughes Defense and merger with Raytheon had a total value to
GM and its stockholders of approximately $9.8 billion that consisted of
approximately $4.0 billion cash retained by Hughes from debt proceeds incurred
by Hughes Defense prior to its spin-off and $5.8 billion of Hughes Defense Class
A common stock distributed to holders of $1-2/3 par value and Class H common
stock. Substantially all of the proceeds from the debt obligation of Hughes
Defense were made available to Hughes. The distribution of Hughes Defense to the
$1-2/3 par value and Class H common stockholders was recorded by GM at fair
value and resulted in the recognition of a $4.3 billion gain that was included
in other income. In addition, GM's total stockholders' equity was reduced by
approximately $1.5 billion as a result of the Hughes Transactions.
GM distributed a total of 102,630,503 shares of Class A common stock of
Hughes Defense, 44,308,316 shares or 43.2% to $1-2/3 par value stockholders and
58,322,187 shares or 56.8% to Class H stockholders, which represented
approximately 30% of the total equity of the newly combined Hughes
Defense/Raytheon Company. The distribution to Class H common stockholders, which
had a total value of approximately $3.3 billion, accounted for their tracking
stock interest in Hughes Defense valued at approximately $1.5 billion, plus an
additional amount to compensate them for the elimination of their tracking stock
interest in Delco and other factors valued at approximately $1.8 billion.
- 12 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 2. Competitiveness Studies
GM periodically evaluates the carrying value of long-lived assets to be held
and used, when events and circumstances warrant such review. These evaluations
and reviews are generally done in conjunction with the annual business planning
cycle.
Based on the results of these reviews, GM recorded pre-tax charges against
income totaling $224 million ($228 million after-tax, or $0.35 per share of
$1-2/3 par value common stock) in 1998 and $5.0 billion ($3.1 billion after-tax,
or $4.34 per share of $1-2/3 par value common stock) in 1997. Following are the
pre-tax components of the charges:
1998 1997
---- ----
Underperforming assets, including both
vehicle and component-manufacturing assets $122 million $2.9 billion
Capacity reductions and employee separation
programs $102 million $1.3 billion
Other - $0.8 billion
In 1998, the pre-tax charges were comprised of $105 million ($80 million
after-tax) for GMNA, $82 million ($51 million after-tax) for GMLAAM, and $37
million ($97 million after-tax) for GMAP. Overall, these charges had the effect
of increasing 1998 cost of sales, depreciation and amortization and other
expenses by $92 million, $67 million and $65 million, respectively. In 1997, the
pre-tax charges were comprised of $3.8 billion ($2.4 billion after-tax) for
GMNA, $848 million ($488 million after-tax) for GME, $174 million ($170 million
after-tax) for GMAP and $205 million ($128 million after-tax) for GM Automotive,
Electronics and Other Operations' Other segment. These charges reduced 1997 net
sales and revenues by $548 million and increased cost of sales, depreciation and
amortization and other expenses by $1.4 billion, $3.0 billion and $72 million,
respectively. Amounts related to capacity reduction and other expenses that were
recorded in 1997 that still remain as of December 31, 1998 total $1.1 billion.
Going forward, GM's future cash requirements relating to the 1998 and 1997
charges are expected to total approximately $1.3 billion over the next five
years, with over 70% evenly expended over the first three years.
In 1998, the amount included for underperforming assets represents charges
recorded pursuant to GM's policy for the valuation of long-lived assets. GM
re-evaluated the carrying values of its long-lived assets during its annual
business planning cycle. This re-evaluation was performed using product specific
cash flow information. As a result, the carrying values of certain tooling and
other property, plant and equipment was determined to be impaired as the
separately identifiable, anticipated, undiscounted future cash flows from such
assets were less than their respective carrying values. The resulting pre-tax
impairment charges represented the amount by which the carrying values of such
assets exceeded their respective fair market values. The amount included for
employee separation programs represents voluntary early retirement and other
separation programs affecting approximately 3,300 and 1,150, for GMLAAM and
employees involved in the restructuring of the U.S. sales and service field
organizations, respectively.
In 1997, the amount included for underperforming assets, principally tooling,
property, plant and equipment and investments in joint ventures, represents
charges recorded pursuant to GM's policy for the valuation of long-lived assets.
The amount included for capacity reductions represents post-employment benefits
payable to employees, pursuant to contractual agreements and costs associated
with the disposal of assets at facilities subject to capacity reductions. This
affects approximately 10,000 employees at GMNA's Buick City Assembly and V-6
Powertrain plants in Flint, Michigan; Detroit Truck Assembly in Detroit,
Michigan; and certain GME facilities. Pursuant to some of these actions,
additional charges of $74 million ($44 million after-tax) related to work
schedule modifications at Opel Belgium were recorded during the second quarter
of 1998. The amount included as other primarily represents losses on contracts
associated with pricing pressures on used vehicles and the related effect on
GM's retail-lease commitments. These pricing pressures are primarily a result of
increased industry sales incentives on new vehicles.
In connection with the 1997 evaluation of long-lived assets, GM reviewed its
remaining previously recorded reserve for plant closings and reclassified the
reserve to the consolidated balance sheet accounts that reflected the nature of
the specific reserve components. At December 31, 1998 and 1997, the remaining
balance of this previously recorded reserve represents primarily accrued
expenses for post-employment benefits affecting approximately 3,100 employees
(mainly pursuant to union or other contractual arrangements) of approximately
$900 million and $1.0 billion, respectively. In 1996, favorable adjustments to
the previously recorded plant closings reserve totaled $789 million. Of this
amount, $409 million reflected GM's ability to utilize its Wilmington, Delaware
facility for the assembly of a new generation Saturn vehicle, and $380 million
was primarily due to revised estimates of postemployment benefit costs to be
incurred in connection with plant closings.
Separately, GM recorded a pre-tax plant closing charge of $62 million in
1996.
- 13 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 3. Marketable and Other Securities
Marketable securities held by GM are classified as available-for-sale, except
for certain mortgage-related securities of GMAC, which are classified as trading
securities. The aggregate excess of fair value over cost, net of related income
taxes, for available-for-sale securities is included as a separate component of
stockholders' equity. The excess of fair value over cost for trading securities
is included in income on a current basis. GM determines cost on the specific
identification basis.
Automotive, Electronics and Other Operations
- --------------------------------------------
Investments in marketable securities were as follows (in millions):
December 31, 1998
-----------------
Fair Unrealized Unrealized
Cost Value Gains Losses
---- ----- ----- ------
Type of Security
Bonds, notes, and other securities
United States government and
governmental agencies
and authorities $286 $286 $ - $ -
States, municipalities, and
political subdivisions 11 11 - -
Corporate debt securities and other 98 105 7 -
--- --- - --
Total marketable securities $395 $402 $7 $ -
=== === = ==
December 31, 1997
-----------------
Fair Unrealized Unrealized
Cost Value Gains Losses
---- ----- ----- ------
Type of Security
Bonds, notes, and other securities
United States government and
governmental agencies
and authorities $610 $612 $2 $ -
Corporate debt securities and other 3,188 3,203 15 -
----- ----- -- --
Total marketable securities $3,798 $3,815 $17 $ -
===== ===== == ==
Debt securities totaling $136 million mature within one year and $266 million
mature after one through five years. Proceeds from sales of marketable
securities totaled $4.4 billion in 1998, $10.9 billion in 1997 and $3.4 billion
in 1996. The gross gains related to sales of marketable securities were $17
million, $121 million and $106 million in 1998, 1997 and 1996, respectively. The
gross losses related to sales of marketable securities were $11 million, $51
million and $4 million in 1998, 1997 and 1996, respectively.
Other securities classified as cash equivalents, which consisted primarily
of commercial paper, repurchase agreements and certificates of deposit, were
$9.2 billion and $10.0 billion at December 31, 1998 and 1997, respectively.
Financing and Insurance Operations
- ----------------------------------
Investments in securities were as follows (in millions):
December 31, 1998
-----------------
Fair Unrealized Unrealized
Cost Value Gains Losses
---- ----- ----- ------
Type of Security
Bonds, notes, and other securities
United States government and
governmental agencies
and authorities $445 $456 $12 $1
States, municipalities,
and political subdivisions 1,495 1,600 117 12
Mortgage-backed securities 415 383 6 38
Corporate debt securities and other 1,895 1,926 66 35
----- ----- ---- --
Total debt securities
available-for-sale 4,250 4,365 201 86
Mortgage-backed securities held for
trading purposes 3,173 3,173 - -
----- ----- ----- --
Total debt securities 7,423 7,538 201 86
Equity securities 779 1,210 534 103
----- ----- --- ---
Total investment in securities $8,202 $8,748 $735 $189
===== ===== === ===
- 14 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 3. Marketable and Other Securities (concluded)
December 31, 1997
-----------------
Fair Unrealized Unrealized
Cost Value Gains Losses
---- ----- ----- ------
Type of Security
Bonds, notes, and other securities
United States government and
governmental agencies
and authorities $687 $694 $7 $-
States, municipalities, and
political subdivisions 1,576 1,686 121 11
Mortgage-backed securities 110 113 3 -
Corporate debt securities and other 2,401 2,441 50 10
----- ----- --- --
Total debt securities
available-for-sale 4,774 4,934 181 21
Mortgage-backed securities held for
trading purposes 2,063 2,063 - -
----- ----- ----- ---
Total debt securities 6,837 6,997 181 21
Equity securities 523 899 416 40
------ ------ --- --
Total investment in securities $7,360 $7,896 $597 $61
===== ===== === ==
Debt securities totaling $317 million mature within one year, $1.3 billion
mature after one through five years, $1.5 billion mature after five years
through 10 years and $4.5 billion mature after 10 years. Proceeds from sales of
marketable securities totaled $3.6 billion in 1998, $2.7 billion in 1997 and
$2.3 billion in 1996. The gross gains related to sales of marketable securities
were $218 million, $176 million and $130 million in 1998, 1997 and 1996,
respectively. The gross losses related to sales of marketable securities were
$49 million, $45 million and $29 million in 1998, 1997 and 1996, respectively.
Other securities classified as cash equivalents, which consisted primarily of
commercial paper, repurchase agreements and certificates of deposit, were $155
million and $293 million at December 31, 1998 and 1997, respectively.
NOTE 4. Finance Receivables - Net
Finance receivables - net included the following (in millions):
December 31,
------------
1998 1997
---- ----
U.S.
Retail $33,321 $26,570
Wholesale 17,722 15,213
Leasing and lease financing 632 716
Term loans to dealers and others 4,924 3,118
------- -------
Total U.S. 56,599 45,617
------ ------
Canada, Mexico and International
Retail 9,337 8,059
Wholesale 6,668 6,475
Leasing and lease financing 2,023 2,069
Term loans to dealers and others 857 488
------- -------
Total Canada, Mexico and International 18,885 17,091
------ ------
Total finance receivables 75,484 62,708
Less- Unearned income (4,027) (3,516)
Allowance for financing losses (1,021) (903)
------- --------
Total finance receivables - net $70,436 $58,289
======= ======
The aggregate amount of total finance receivables maturing in each of the
five years following December 31, 1998 is as follows: 1999-$42.1 billion;
2000-$13.7 billion; 2001-$10.7 billion; 2002-$5.6 billion; 2003-$2.5 billion;
and 2004 and thereafter-$900 million.
- 15 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 4. Finance Receivables - Net (concluded)
GMAC participates in various sales of receivables programs and sold retail
finance receivables through special purpose subsidiaries with principal
aggregating $1.6 billion in 1998 and $5.4 billion in 1997. These subsidiaries
generally retain a subordinated investment of no greater than 7.0% of the total
receivables pool and market the remaining portion. These subordinated
investments absorb losses related to sold receivables to the extent that such
losses are greater than the excess cash flows from those receivables and cash
reserves related to the sale transaction. Subordinated interests in trusts are
recorded in investments in securities. Pre-tax gains relating to such sales
(excluding limited recourse loss provisions which generally have been provided
at the time the contracts were originally acquired) amounted to $31.0 million in
1998 and $84.8 million in 1997. GMAC continues to service these receivables for
a fee that is considered to be adequate compensation and earns other related
ongoing income. GMAC's sold retail finance receivables servicing portfolio
amounted to $4.0 billion and $6.0 billion at December 31, 1998 and 1997,
respectively.
GMAC also sold wholesale receivables that it continues to service for a fee
that is considered to be adequate compensation. The sold wholesale receivables
servicing portfolio totaled $3.3 billion and $6.3 billion at December 31, 1998
and 1997, respectively. Additionally, GMAC is committed to sell eligible
wholesale receivables, on a revolving basis, arising in certain dealer accounts.
NOTE 5. Inventories
Automotive, Electronics and Other Operations' inventories included the
following (in millions):
December 31,
------------
1998 1997
---- ----
Productive material, work in process, and supplies $5,377 $4,988
Finished product, service parts, etc. 6,962 7,083
------ ------
Total inventories at FIFO 12,339 12,071
Less LIFO allowance 1,902 1,837
------- -------
Total inventories (less allowances) $10,437 $10,234
====== ======
Inventories are stated generally at cost, which is not in excess of market.
The cost of substantially all U.S. inventories other than the inventories of
Saturn Corporation (Saturn) and Hughes is determined by the last-in, first-out
(LIFO) method. The cost of non-U.S., Saturn and Hughes inventories is determined
generally by either the first-in, first-out (FIFO) or average cost methods.
NOTE 6. Income Taxes
Income from continuing operations before income taxes and minority interests
included the following (in millions):
Years Ended December 31,
------------------------
1998 1997 1996
---- ---- ----
U.S. income $1,729 $3,512 $1,119
Foreign income 3,149 4,021 4,261
----- ----- -----
Total $4,878 $7,533 $5,380
===== ===== =====
The provision for income taxes was estimated as follows (in millions):
Income taxes estimated to be payable (refundable) currently
U.S. federal $83 $458 $(250)
Foreign 1,952 1,590 1,499
U.S. state and local 295 166 147
------ ------ -----
Total payable currently 2,330 2,214 1,396
----- ----- -----
Deferred income tax (credit) expense - net
U.S. federal 373 (552) 233
Foreign (852) (349) (144)
U.S. state and local (196) (261) 11
------ ------ -----
Total deferred (675) (1,162) 100
------ ----- -----
Investment tax credits (19) (27) (32)
------- -------- ------
Total income taxes $1,636 $1,025 $1,464
===== ===== =====
- 16 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 6. Income Taxes (continued)
Annual tax provisions include amounts considered sufficient to pay
assessments that may result from examination of prior year tax returns; however,
the amount ultimately paid upon resolution of issues raised may differ
materially from the amount accrued.
Provisions are made for estimated U.S. and foreign income taxes, less
available tax credits and deductions, which may be incurred on the remittance of
the Corporation's share of subsidiaries' undistributed earnings not deemed to be
permanently invested. Taxes have not been provided on foreign subsidiaries'
earnings, which are deemed essentially permanently reinvested, of approximately
$9.8 billion at December 31, 1998 and $8.8 billion at December 31, 1997.
Quantification of the deferred tax liability, if any, associated with
permanently reinvested earnings is not practicable.
A reconciliation of the provision for income taxes compared with the amounts
at the U.S. federal statutory rate was as follows (in millions):
Years Ended December 31,
------------------------
1998 1997 1996
---- ---- ----
Tax at U.S. federal statutory income tax rate $1,707 $2,636 $1,883
Hughes Defense spin-off - (1,494) -
Foreign rates other than 35% 1 (154) (205)
Taxes on unremitted earnings of subsidiaries 92 73 32
Tax effect of the 1995 contribution of
Class E common stock to
the U.S. hourly pension plan - - (245)
Research and experimentation credits (179) (261) (116)
Subsidiary settlement of affirmative
claim with IRS (92) - -
Other adjustments 107 225 115
------ ----- -------
Total income tax $1,636 $1,025 $1,464
===== ===== =====
Deferred income tax assets and liabilities for 1998 and 1997 reflect the
impact of temporary differences between amounts of assets and liabilities for
financial reporting purposes and the bases of such assets and liabilities as
measured by tax laws. The net deferred tax asset in the U.S. was $15.0 billion
at December 31, 1998 and 1997, respectively.
Temporary differences and carryforwards that gave rise to deferred tax assets
and liabilities included the following (in millions):
December 31,
------------
1998 1997
---- ----
Deferred Tax Deferred Tax
------------ ------------
Assets Liabilities Assets Liabilities
------ ----------- ------ -----------
Postretirement benefits other
than pension $14,560 $ - $14,006 $ -
Minimum pension liability adjustment 3,054 - 2,423 -
Employee benefit plans 1,063 5,816 1,170 6,047
Policy and warranty reserves 2,534 - 2,445 -
Sales and product reserves 2,176 - 1,977 8
Profits on long-term contracts 146 156 156 143
Alternative minimum tax credit
carryforwards 690 - 673 -
Depreciation and amortization expense 594 3,263 900 3,101
Capitalized research and experimentation 82 - 285 -
U.S. state net operating loss
carryforwards 559 - 559 -
Financing losses 407 - 361 -
Tax credit carryforwards 879 - 467 -
Lease transactions - 3,624 - 3,075
Tax on unremitted profits - 330 - 303
Other U.S. 5,461 2,850 6,319 2,959
Miscellaneous foreign 2,763 922 1,805 607
------- ------- ------- -------
Subtotal 34,968 16,961 33,546 16,243
Valuation allowances (607) - (677) -
------- ------- ------- -------
Total deferred taxes $34,361 $16,961 $32,869 $16,243
====== ====== ====== ======
- 17 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 6. Income Taxes (concluded)
Realization of the net deferred tax assets is dependent on future reversals
of existing taxable temporary differences and adequate future taxable income,
exclusive of reversing temporary differences and carryforwards. Although
realization is not assured, management believes that it is more likely than not
that the net deferred tax assets will be realized. The amount of the net
deferred tax assets considered realizable, however, could be reduced in the near
term if actual future taxable income is lower than estimated, or if there are
differences in the timing or amount of future reversals of existing taxable
temporary differences.
The alternative minimum tax credit can be carried forward indefinitely. The
U.S. state net operating loss carryforwards will expire in the years 1999 - 2013
and 2018 if not utilized; however, a substantial portion will not expire until
after the year 2004. The tax credit carryforwards will expire in the years 2000
- - 2013 and 2018 if not utilized.
NOTE 7. Equipment on Operating Leases
The Corporation has significant investments in the residual values of its
leasing portfolios. The residual values represent the estimate of the values of
the assets at the end of the lease contracts and are initially recorded based on
appraisals and estimates. Realization of the residual values is dependent on the
Corporation's future ability to market the vehicles under then prevailing market
conditions. Management reviews residual values periodically to determine that
recorded amounts are appropriate. Included in equipment on operating leases and
other assets for Automotive, Electronics and Other Operations was the following
(in millions):
December 31,
------------
1998 1997
---- ----
Equipment on operating leases $9,064 $8,312
Less accumulated depreciation (935) (992)
------ ------
Net book value $8,129 $7,320
===== =====
Equipment on operating leases included in investment in leases and other
receivables for Financing and Insurance Operations was as follows (in millions):
December 31,
------------
1998 1997
---- ----
Equipment on operating leases $35,804 $33,364
Less accumulated depreciation (6,817) (6,994)
----- ------
Net book value $28,987 $26,370
====== ======
The lease payments to be received related to equipment on operating leases
maturing in each of the five years following December 31, 1998 are as follows:
Automotive, Electronics and Other Operations -1999-$5.5 billion; 2000-$490
million; 2001-$478 million; 2002-$463 million; and 2003-$441 million; Financing
and Insurance Operations - 1999-$6.1 billion; 2000-$4.1 billion; 2001-$1.6
billion; 2002-$161 million; and 2003-$8 million.
- 18 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 8. Property - Net
Property - net included the following for Automotive, Electronics and Other
Operations (in millions):
Estimated
Useful December 31,
Lives (Years) 1998 1997
------------- ---- ----
Land - $714 $637
Land improvements 10-30 1,709 1,575
Leasehold improvements - less amortization 3-10 207 190
Buildings 29-45 11,425 10,619
Machinery and equipment 3-30 39,914 37,196
Furniture and office equipment 3-20 925 819
Capitalized leases 5-40 1,026 886
Construction in progress - 3,645 3,911
------ ------
Real estate, plants, and equipment 59,565 55,833
Less accumulated depreciation (34,641) (32,819)
------ ------
Real estate, plants, and equipment - net 24,924 23,014
Special tools - net 7,298 6,301
------- -------
Total property - net $32,222 $29,315
====== ======
Financing and Insurance Operations had net property of $386 million and $265
million recorded in other assets at December 31, 1998 and 1997, respectively.
NOTE 9. Intangible Assets - Net
Intangible assets - net included the following for Automotive, Electronics
and Other Operations (in millions):
December 31,
------------
1998 1997
---- ----
Pensions $6,434 $7,683
Intangible assets relating to acquisition of HAC 427 448
Goodwill relating to all other acquisitions 3,133 2,524
------ ------
Total intangible assets - net $9,994 $10,655
===== ======
Intangible assets relating to the acquisition of Hughes Aircraft Company
(HAC) as of December 31, 1998 are applicable to Hughes. Such intangible assets
relate to patents and related technology and other intangible assets that were
originally recorded in 1985 and are being amortized over 40 years. Goodwill
resulting from other acquisitions is amortized over periods not exceeding 40
years. Such goodwill includes $3.1 billion associated with Hughes' 1997 merger
with, and additional 1998 investment in, PanAmSat Corporation (PAS).
Financing and Insurance Operations had net intangible assets of $855 million
and $717 million recorded in other assets at December 31, 1998 and 1997,
respectively.
- 19 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 10. Long-Term Debt and Loans Payable
Automotive, Electronics and Other Operations
Long-term debt and loans payable were as follows (in millions):
Weighted-Average December 31,
Interest Rate(1) 1998 1997
---------------- ---- ----
Long-term debt and loans payable
Payable within one year
Current portion of long-term debt 7.4% $256 $614
Commercial paper (2) 5.7% 381 29
All other 8.2% 567 48
Payable beyond one year
1999 - - 789
2000 9.6% 759 737
2001 9.8% 419 453
2002 14.3% 36 13
2003 7.5% 595 422
2004 and after 7.5% 5,326 3,275
Unamortized discount (17) (20)
----- ------
Total long-term debt and loans payable $8,322 $6,360
===== ======
(1) The 1998 weighted-average interest rate for commercial paper includes the
impact of interest rate swap agreements.
(2) The 1997 weighted-average interest rate for commercial paper was 5.7%.
Amounts payable beyond one year after consideration of foreign currency swaps
at December 31, 1998 included $309 million in currencies other than the U.S.
Dollar, primarily the Brazilian Real ($231 million), the Canadian Dollar ($52
million), the Swiss Franc ($12 million) and the German Mark ($5 million).
At December 31, 1998 and 1997, long-term debt and loans payable for
automotive, electronics and other operations included $7.2 billion and $4.4
billion, respectively, of obligations with fixed interest rates and $1.1 billion
and $2.0 billion, respectively, of obligations with variable interest rates
(predominantly based on the London Interbank Offering Rate - i.e., LIBOR), after
considering the impact of interest rate swap agreements.
To achieve its desired balance, between fixed and variable rate debt, within
prescribed limits, GM has entered into interest rate swap, cap and floor
agreements. The notional amounts of such agreements as of December 31, 1998 for
automotive, electronics and other operations were approximately $1.8 billion
($600 million pay variable and $1.2 billion pay fixed), $100 million and $nil,
respectively. The notional amounts of such agreements as of December 31, 1997
were approximately $2.4 billion ($1.2 billion pay variable and $1.2 billion pay
fixed), $200 million and $50 million, respectively.
GM and its subsidiaries maintain substantial bank lines of credit with
various banks that totaled $14.5 billion at December 31, 1998, of which $6.7
billion represented short-term credit facilities and $7.8 billion represented
long-term credit facilities. At December 31, 1997, bank lines of credit totaled
$9.3 billion, of which $3.9 billion represented short-term credit facilities and
$5.4 billion represented long-term credit facilities. The unused short-term and
long-term portions of the credit lines totaled $6.2 billion and $7.2 billion at
December 31, 1998, compared with $2.5 billion and $4.8 billion at December 31,
1997. Certain bank lines of credit contain covenants with which the Corporation
and applicable subsidiaries were in compliance during the year ended December
31, 1998.
- 20 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 10. Long-Term Debt and Loans Payable (concluded)
Financing and Insurance Operations
Debt was as follows (in millions):
Weighted-Average December 31,
Interest Rate(1) 1998 1997
---------------- ---- ----
Debt
Payable within one year
Current portion of debt 6.2% $12,701 $10,851
Commercial paper (2) 5.3% 34,487 27,687
All other (2) 7.5% 15,208 12,087
Payable beyond one year
1999 - - 11,347
2000 6.2% 13,154 6,165
2001 6.0% 10,322 5,932
2002 5.9% 8,561 7,017
2003 5.8% 7,919 2,603
2004 and after 6.8% 6,072 3,907
Unamortized discount (671) (694)
--------- --------
Total debt $107,753 $86,902
======= ======
(1) The 1998 weighted-average interest rate for commercial paper includes the
impact of interest rate swap agreements.
(2) The 1997 weighted-average interest rate for commercial paper and other
short-term borrowings was 5.6% and 5.2%, respectively.
Amounts payable beyond one year after consideration of foreign currency swaps
at December 31, 1998 included $8.3 billion in currencies other than the U.S.
Dollar, primarily the Canadian Dollar ($4.3 billion), the German Mark ($1.6
billion), the U.K. Pound Sterling ($898 million) and the Australian Dollar ($783
million).
At December 31, 1998 and 1997, debt for financing and insurance operations
included $72.8 billion and $67.9 billion, respectively, of obligations with
fixed interest rates and $35.0 billion and $19.0 billion, respectively, of
obligations with variable interest rates (predominantly based on the London
Interbank Offering Rate - i.e., LIBOR), after considering the impact of interest
rate swap agreements.
To achieve its desired balance, between fixed and variable rate debt, within
prescribed limits, GM has entered into interest rate swap, cap, floor and option
agreements. The notional amounts of such agreements as of December 31, 1998 for
financing and insurance operations were approximately $13.2 billion ($9.5
billion pay variable and $3.7 billion pay fixed), $400 million, $1.0 billion and
$1.0 billion, respectively. The notional amounts for interest rate swap, cap and
option agreements as of December 31, 1997 were approximately $9.7 billion ($5.9
billion pay variable and $3.8 billion pay fixed), $1.1 billion and $6.5 billion,
respectively.
GM's financing and insurance subsidiaries maintain substantial bank lines of
credit with various banks that totaled $44.3 billion at December 31, 1998, of
which $17.3 billion represented short-term credit facilities and $27.0 billion
represented long-term credit facilities. At December 31, 1997, bank lines of
credit totaled $41.0 billion, of which $25.8 billion represented short-term
credit facilities and $15.2 billion represented long-term credit facilities. The
unused short-term and long-term portions of the credit lines totaled $7.5
billion and $25.7 billion at December 31, 1998, compared with $17.7 billion and
$13.9 billion at December 31, 1997. Certain bank lines of credit contain
covenants with which the Corporation and applicable subsidiaries were in
compliance during the year ended December 31, 1998.
- 21 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 11. Derivative Financial Instruments and Risk Management
GM is a party to financial instruments with off-balance-sheet risk. These
financial instruments are used in the normal course of business to manage
exposure to fluctuations in interest rates and foreign exchange rates, and to
meet the financing needs of its customers.
The primary classes of derivatives used by GM are foreign exchange forward
contracts and options, interest rate swaps and options and forward contracts to
purchase or sell mortgages or mortgage-backed securities. Those instruments
involve, to varying degrees, market risk, as the instruments are subject to rate
and price fluctuations, and elements of credit risk in the event a counterparty
should default. Credit risk is managed through the approval and periodic
monitoring of financially sound counterparties.
Derivative transactions are used to hedge underlying business exposures.
Market risk in these instruments is offset by opposite movements in the
underlying exposure. Cash receipts or payments on these contracts normally occur
at maturity, or for interest rate swap agreements, at periodic contractually
defined intervals.
Foreign Exchange Forward Contracts and Options
GM is an international corporation with operations in over 50 countries and
has foreign currency exposures at these operations related to buying, selling
and financing in currencies other than the local currency. GM's most significant
foreign currency exposures relate to Canada, Mexico, Western European countries
(primarily Germany, United Kingdom, Spain, Italy, Belgium and France),
Australia, Japan and Brazil. The magnitude of these exposures significantly
varies over time depending upon the strength of local automotive markets and
sourcing decisions.
GM enters into agreements by which it seeks to manage certain of its foreign
exchange exposures in accordance with established policy guidelines, primarily
through foreign exchange forward contracts and purchased and written foreign
exchange options. These agreements primarily hedge cash flows such as debt, firm
commitments and anticipated transactions involving vehicles, components, fixed
assets, and subsidiary dividends. As a general practice, GM has not hedged the
foreign exchange exposure related to either the translation of overseas earnings
into U.S. dollars, or the translation of overseas equity positions back to U.S.
dollars. At December 31, 1998 and 1997, the Automotive, Electronics and Other
Operations held foreign exchange forward contracts of $6.3 billion and $3.9
billion (including cross-currency swaps of $70 million), respectively. At
December 31, 1998 and 1997, the Automotive, Electronics and Other Operations had
entered into foreign exchange options of $2.8 billion and $2.9 billion,
respectively. At December 31, 1998 and 1997, the Financing and Insurance
Operations held foreign exchange forward contracts of $8.0 billion and $6.2
billion (including cross-currency swaps of $3.4 billion and $2.0 billion),
respectively.
The Automotive, Electronics and Other Operations had deferred hedging losses
on outstanding foreign exchange forward contracts hedging firm commitments to
purchase inventory or fixed assets totaling $3 million and $17 million at
December 31, 1998 and 1997, respectively. Deferred hedging losses on outstanding
purchased foreign exchange option contracts hedging firm and anticipated
transactions to purchase inventory or fixed assets totaled $2 million and $20
million at December 31, 1998 and 1997, respectively. The Financing and Insurance
Operations had deferred hedging gains on outstanding foreign exchange forward
contracts hedging firm commitments to purchase assets totaling $13 million and
$9 million at December 31, 1998 and 1997, respectively. Such deferred amounts on
outstanding foreign exchange forward and option contracts will be included in
the cost of such assets when purchased, and subsequently recognized in
operations as part of the basis of these assets. In the event the contract is
terminated early or the anticipated transaction is no longer likely to occur,
the derivative is then marked to market. Foreign exchange forward contracts,
which hedge foreign exchange exposures of anticipated inventory, fixed assets
and sales transactions, are marked to market and recognized with other gains or
losses on foreign exchange transactions in the consolidated statement of income.
GM's firm commitments are typically up to one year and may extend for periods of
up to three years.
Interest Rate Swaps and Options
GM's financing and cash management activities subject it to market risk from
exposure to changes in interest rates. GM has entered into various financial
instrument transactions to maintain the desired level of exposure to the risk of
interest rate fluctuations and to minimize interest expense. To achieve this
objective, GM will at times use written options in the management of these
exposures.
In a limited number of cases, interest rate swaps are matched to the
anticipated roll-over of investments, wholesale assets or debt, and are executed
over terms of up to five years on a portfolio basis to achieve specific interest
rate management objectives. Swaps are also matched to operating lease payments
where interest rate exposure exists. The differential paid or received on such
swaps is recorded as an adjustment to expense or income over the term of the
underlying agreement or matched portfolio.
- 22 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 11. Derivative Financial Instruments and Risk Management (concluded)
Interest rate swaps are contractual agreements between GM and another party
to exchange fixed and floating interest rate payments periodically over the life
of the agreements without the exchange of underlying principal amounts. Interest
rate options, including swaptions and interest rate caps and floors, may result
in the future exchange of interest payments if market interest rates reach
certain levels. At December 31, 1998 and 1997, the total notional amount of such
agreements with off-balance-sheet risk was $2.1 billion and $3.1 billion,
respectively, for the Automotive, Electronics and Other Operations. At December
31, 1998 and 1997, the Financing and Insurance Operations held such agreements
with off-balance-sheet risk with notional amount totaling $20.0 billion and
$26.4 billion, respectively.
Interest rate swaps used to hedge an underlying debt obligation are not
marked to market, but are used to adjust interest expense recognized over the
life of the underlying debt agreement. Gains and losses on terminated interest
rate swaps are deferred and recognized as yield adjustments on the underlying
debt. The Automotive, Electronics and Other Operations' unamortized net gains on
interest rate swaps totaled approximately $6 million and $7 million at December
31, 1998 and 1997, respectively. Unamortized net gains on interest rate swaps
for the Financing and Insurance Operations totaled approximately $37 million and
$33 million at December 31, 1998 and 1997, respectively. Written options,
including those embedded in interest rate swaps, written interest rate caps,
interest rate collars, written swaptions and interest rate swaps that do not
meet settlement accounting criteria are marked to market with related gains and
losses recognized in income on a current basis.
Mortgage Contracts
GMAC has also entered into contracts to purchase and sell mortgages at
specific future dates and has entered into certain exchange traded futures and
option contracts to reduce exposure to interest rate risk. At December 31, 1998
and 1997, commitments to sell mortgage loans and securities totaled $6.2 billion
and $3.9 billion, respectively, and commitments to purchase or originate
mortgage loans totaled $5.2 billion and $4.1 billion, respectively. GMAC's
exchange traded futures and option contracts, which are used to hedge mortgage
loans held for sale, had notional values of $5.0 billion and $2.2 billion at
December 31, 1998 and 1997, respectively. Gains and losses on derivatives,
including exchange traded futures and option contracts, used to hedge interest
rate risk associated with rate locked funding commitments and mortgage loans
held for sale, are deferred and considered in the reporting of the underlying
mortgages on a lower of cost or market basis.
The notional values of derivatives used to hedge price and interest rate risk
associated with mortgage related securities totaled $9.7 billion and $1.4
billion at December 31, 1998 and 1997, respectively. Gains and losses associated
with these instruments are recognized in the current period on a marked to
market basis. Derivatives used to hedge mortgage servicing rights had notional
values of $65.1 billion and $8 billion at December 31, 1998 and 1997,
respectively. Gains and losses on such contracts are recorded as an adjustment
to amortization expense.
GMAC has also entered into interest rate swaps in an effort to stabilize
short-term borrowing costs and to maintain a minimum return on certain mortgage
loans held for investment. Amounts received or paid under such interest rate
swaps are recorded as an adjustment to interest expense. At December 31, 1998
and 1997, the notional values of such instruments totaled $100 million and $264
million, respectively.
Credit Risk
The forward contracts, swaps, options and lines of credit previously
discussed contain an element of risk that the counterparties may be unable to
meet the terms of the agreements. However, GM minimizes such risk exposure for
forward contracts, swaps and options by limiting the counterparties to major
international banks and financial institutions that meet established credit
guidelines and by limiting the amount of its risk exposure with any one bank or
financial institution. Management also reduces its credit risk for unused lines
of credit by applying the same credit policies in making commitments as it does
for extending loans. Management does not expect to incur any losses as a result
of counterparty default. GM generally does not require or place collateral for
these financial instruments, except for the lines of credit it extends.
GM has business activities with customers, dealers and associates around the
world. The Corporation's receivables from, and guarantees to, such parties are
well diversified, and when warranted, are secured by collateral. Consequently,
in management's opinion, no significant concentration of credit risk exists for
GM.
- 23 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 12. Fair Value of Financial Instruments
The estimated fair value of financial instruments has been determined using
available market information or other appropriate valuation methodologies.
However, considerable judgment is required in interpreting market data to
develop estimates of fair value; therefore, the estimates are not necessarily
indicative of the amounts that could be realized or would be paid in a current
market exchange. The effect of using different market assumptions and/or
estimation methodologies may be material to the estimated fair value amounts.
Fair value information presented herein is based on information available at
December 31, 1998 and 1997. Although management is not aware of any factors that
would significantly affect the estimated fair value amounts, such amounts have
not been updated since those dates and, therefore, the current estimates of fair
value at dates subsequent to December 31, 1998 and 1997 may differ significantly
from these amounts.
Book and estimated fair values of financial instruments, for which it is
practicable to estimate fair value, were as follows (in millions):
December 31,
------------
1998 1997
---- ----
Book Fair Book Fair
Value Value Value Value
----- ----- ----- -----
Automotive, Electronics and Other Operations
- --------------------------------------------
Assets
Cash and marketable securities $10,130 $10,130 $13,511 $13,511
Accounts and notes receivable
(less allowances) $4,501 $4,501 $4,370 $4,370
Other assets $1,644 $1,659 $1,234 $1,226
Liabilities
Accounts payable $13,542 $13,542 $12,400 $12,400
Long-term debt and loans payable
Payable within one year $1,204 $1,204 $691 $691
Payable beyond one year $7,118 $7,531 $5,669 $6,119
Other liabilities $524 $585 $526 $559
Preferred securities of
subsidiary trusts (Note 16) $220 $226 $222 $233
Financing and Insurance Operations
- ----------------------------------
Assets
Cash and investments in
securities $8,894 $8,894 $8,473 $8,473
Finance receivables - net $70,258 $70,457 $58,219 $58,667
Accounts and notes receivable
(less allowances) $3,797 $3,797 $2,042 $2,042
Other assets $11,441 $11,465 $8,746 $8,762
Liabilities
Accounts payable $4,148 $4,148 $3,095 $3,095
Debt
Payable within one year $62,396 $62,442 $50,625 $50,666
Payable beyond one year $45,357 $46,600 $36,277 $37,049
The prior tables exclude the book values and estimated fair values of
financial instrument derivatives which were as follows (in millions):
Fair Value of Open Contracts at
December 31,
------------
1998 1997
---- ----
Asset Liability Asset Liability
Position Position Position Position
-------- -------- -------- --------
Automotive, Electronics and Other Operations (1)
- ------------------------------------------------
Foreign exchange forward contracts (2) $126 $107 $78 $83
Foreign exchange options $71 $10 $46 $7
Interest rate swaps $34 $38 $27 $50
Interest rate options $- $1 $- $2
- 24 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 12. Fair Value of Financial Instruments (continued)
Financing and Insurance Operations (3)
- --------------------------------------
Foreign exchange forward contracts (4) $499 $161 $149 $326
Interest rate swaps $180 $93 $93 $49
Interest rate options $- $- $2 $-
Mortgage contracts $344 $55 $53 $30
(1)The related asset (liability) recorded on the balance sheet for foreign
exchange forward contracts, foreign exchange options, interest rate swaps and
interest rate options totaled $22 million, $62 million, $(7) million and $(1)
million, respectively, at December 31, 1998 and $33 million, $43 million,
$(17) million and $(2) million, respectively, at December 31, 1997.
(2)Foreign exchange forward contracts included certain derivatives with both
foreign exchange and interest rate exposures which had a fair value of $54
million and $17 million at December 31, 1998 and 1997, respectively.
(3)The related asset recorded on the balance sheet for foreign exchange forward
contracts and interest rate swaps totaled $233 million and $14 million,
respectively, at December 31, 1998. The related asset (liability) recorded on
the balance sheet for foreign exchange forward contracts, interest rate swaps
and interest rate options totaled $(111) million, $3 million and $1 million,
respectively, at December 31, 1997. The related asset recorded on the balance
sheet for mortgage contracts was $284 million and $20 million at December 31,
1998 and 1997, respectively.
(4)Foreign exchange forward contracts included certain derivatives with both
foreign exchange and interest rate exposures which had a fair value of $154
million and $(194) million at December 31, 1998 and 1997, respectively.
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument:
Cash and Marketable Securities
The fair value of cash equivalents and marketable securities was determined
principally based on quoted market prices.
Finance Receivables
The fair value was estimated by discounting the future cash flows using
applicable spreads to approximate current rates applicable to each category of
finance receivables. The carrying value of wholesale receivables and other
receivables whose interest rates adjust on a short-term basis with applicable
market indices (generally the prime rate) were assumed to approximate fair value
either due to their short maturities or due to the interest rate adjustment
feature.
Accounts and Notes Receivable and Accounts Payable
For receivables and payables with short maturities the book values
approximate fair values.
Other Assets and Accrued Expenses and Other Liabilities
Other assets reported at December 31, 1998 and 1997 include various financial
instruments (e.g., long-term receivables and certain investments) that have fair
values based on discounted cash flows, market quotations, and other appropriate
valuation techniques. The fair values of retained subordinated interests in
trusts and excess servicing assets (net of deferred costs) were derived by
discounting expected cash flows using current market rates. Estimated values of
Industrial Development Bonds, included in accrued expenses and other
liabilities, were based on quoted market prices for the same or similar issues.
Debt and Loans Payable
The fair value of the debt payable within one year was determined by using
quoted market prices, if available, or by calculating the estimated value of
each bank loan, note, or debenture in the portfolio at the applicable rate in
effect. Commercial paper, master notes and demand notes have an original term of
less than 90 days and; therefore, the carrying amounts of these liabilities were
considered their fair values. Debt payable beyond one year has an estimated fair
value based on quoted market prices for the same or similar issues or based on
the current rates offered to GM for debt of similar remaining maturities.
Foreign Exchange Forward Contracts and Options
The fair value of foreign exchange forward contracts was determined by using
current exchange rates. The fair value of foreign exchange options was estimated
using pricing models with indicative quotes obtained for the market variables.
- 25 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 12. Fair Value of Financial Instruments (concluded)
Preferred Securities of Subsidiary Trusts
The fair value of the GM-obligated mandatorily redeemable preferred
securities of subsidiary trusts (Note 16) was determined based on quoted market
prices.
Interest Rate Swaps and Options
The fair value of interest rate swaps, including contracts with optionality,
was estimated using pricing models based upon current market interest rates.
Exchange traded options are valued at quoted market prices.
Mortgage Contracts
The fair value of mortgage contracts was estimated based upon the amount that
would be received or paid to terminate the contracts based on market prices of
similar financial instruments and current rates for mortgage loans.
Unused Lines of Credit
Because loans extended under these commitments are at market interest rates,
there is no significant fair value position related to the outstanding
commitments.
NOTE 13. Pensions and Other Postretirement Benefits
GM has a number of defined benefit pension plans covering substantially all
employees. Plans covering U.S. and Canadian represented employees generally
provide benefits of negotiated, stated amounts for each year of service as well
as significant supplemental benefits for employees who retire with 30 years of
service before normal retirement age. The benefits provided by the plans
covering U.S. and Canadian salaried employees and employees in certain foreign
locations are generally based on years of service and salary history. GM also
has certain nonqualified pension plans covering executives that are based on
targeted wage replacement percentages and are unfunded.
The measurement dates used for the principal U.S. pension plans of the
Corporation and Hughes were December 31 and December 1, respectively. For
non-U.S. pension plans, the measurement dates were December 1 for Canadian plans
and October 1 for other foreign plans.
Pension plan assets are primarily invested in U.S. Government obligations,
equity and fixed income securities, commingled pension trust funds, insurance
contracts, the Corporation's $1-2/3 par value common stock (valued as of the
1998 measurement date at $56 million) and EDS common stock (valued as of the
1998 measurement date at $5.3 billion). In March 1995, under the terms of an
agreement between the Corporation and the Pension Benefit Guarantee Corporation
(PBGC), the Corporation contributed to the GM Hourly-Rate Employees Pension Plan
(Hourly Plan) 173.2 million shares of Class E common stock valued at $6.3
billion on such date. Subsequent to the split-off of EDS, the Class E stock held
by the Hourly Plan was exchanged for EDS common stock. The trustees for the
Hourly Plan have, from time-to-time, sold shares of former Class E common stock
and EDS common stock, with the effect of reducing the number of shares of EDS
common stock held by the Hourly Plan.
GM's funding policy with respect to its qualified pension plans is to
contribute annually not less than the minimum required by applicable law and
regulations. GM made pension contributions to the U.S. plans of $1.2 billion in
1998, $1.5 billion in 1997 and $800 million in 1996.
Additionally, GM maintains hourly and salaried benefit plans that provide
postretirement medical, dental, vision and life insurance to most U.S. retirees
and eligible dependents. The cost of such benefits is recognized in the
consolidated financial statements during the period employees provide service to
GM. Postretirement plan assets in GM's VEBA trust are invested primarily in
fixed income securities.
Certain of the Corporation's non-U.S. subsidiaries have postretirement plans,
although most participants are covered by government-sponsored or administered
programs. The cost of such programs generally is not significant to GM.
- 26 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 13. Pensions and Other Postretirement Benefits (continued)
U.S. Plans Non-U. S. Plans
Pension Benefits Pension Benefits Other Benefits
---------------- ---------------- --------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
Change in benefit obligations (in millions)
Benefit obligation at
beginning of year $73,570 $72,501 $9,824 $9,526 $44,294 $41,387
Service cost 1,270 1,332 214 191 663 639
Interest cost 4,974 5,261 643 633 3,113 3,128
Plan participants'
contributions 43 69 28 25 31 31
Amendments 208 25 81 - - -
Actuarial losses 1,973 4,443 92 710 1,622 1,819
Benefits paid (5,196) (5,408) (349) (331) (2,287) (2,174)
Curtailment charges and
other 121 (4,653) (250) (930) (90) (536)
------ ------ ------ ----- ------ ------
Benefit obligation at
end of year 76,963 73,570 10,283 9,824 47,346 44,294
------ ------ ------ ----- ------ ------
Change in plan assets
Fair value of plan assets
at beginning of year 72,280 71,295 6,075 5,915 3,000 -
Actual return on plan assets 6,438 10,882 328 756 249 -
Employer contributions 1,151 1,535 206 71 1,700 3,000
Plan participants'
contributions 43 69 28 25 - -
Benefits paid (5,196) (5,408) (349) (331) (375) -
Settlement charges and other 291 (6,093) (312) (361) - -
------ ----- ----- ----- ------ -----
Fair value of plan assets
at end of year 75,007 72,280 5,976 6,075 4,574 3,000
------ ------ ----- ----- ----- -----
Funded status (1,956) (1,290) (4,307) (3,749)(42,772) (41,294)
Unrecognized actuarial loss 10,368 8,632 1,880 1,773 2,209 689
Unrecognized prior service
cost 7,064 8,103 764 824 (448) (563)
Unrecognized transition (asset)
obligation (64) (105) 48 10 - -
----- ----- ----- ----- ----- -----
Net amount recognized
including discontinued
operations 15,412 15,340 (1,615) (1,142) (41,011) (41,168)
Discontinued operations
(Note 23) 1,635 1,354 - - 4,573 4,788
----- ------- ------- ------- ------- -------
Net amount recognized $17,047 $16,694 $(1,615) $(1,142)$(36,438)$(36,380)
======= ======= ======= ======= ======== ========
Amounts recognized in the
consolidated balance
sheets consist of:
Prepaid benefit cost $5,903 $5,757 $898 $868 $ - $ -
Accrued benefit
liability (2,181) (1,796) (3,814) (3,463)(36,438) (36,380)
Intangible asset 5,961 7,071 504 602 - -
Accumulated other
comprehensive
income 7,364 5,662 797 851 - -
------ ------ ------ ----- ----- -----
Net amount recognized $17,047 $16,694 $(1,615) $(1,142)$(36,438)$(36,380)
====== ====== ===== ===== ======= ======
The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $56.7 billion, $56.0 billion and $47.8 billion,
respectively, as of December 31, 1998 and $54.4 billion, $53.7 billion and $46.7
billion, respectively, as of December 31, 1997.
<TABLE>
<CAPTION>
U.S. Plans Non-U. S. Plans
Pension Benefits Pension Benefits Other Benefits
------------------- -------------------- -------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ---- ---- ---- ----
Components of expense (in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Service cost $1,270 $1,332 $1,208 $214 $191 $185 $663 $639 $668
Interest cost 4,974 5,261 4,777 643 633 653 3,113 3,128 2,980
Expected return on
plan assets (6,815) (6,630) (6,283) (516) (524) (487) (286) - -
Amortization of prior
service cost 1,173 1,170 824 99 99 100 (116) (116) (116)
Amortization of transition
asset (44) (85) (63) (17) (20) (18) - - -
Recognized net actuarial loss 331 308 675 75 60 57 97 72 43
Discontinued operations
(Note 23) (279) (422) (364) - - - (966) (1,047) (1,015)
Curtailments, settlements
and other 207 53 69 48 2 158 - (2) (3)
Discontinued operations
(Note 23) (130) (18) (18) - - - - - -
--- --- --- --- --- --- ----- ----- -----
Net expense $687 $969 $825 $546 $441 $648 $2,505 $2,674 $2,557
=== === === === === === ===== ===== =====
Weighted-average assumptions
Discount rate 6.8% 7.0% 7.5% 6.4 6.8% 7.3% 6.7% 7.2% 7.8%
Expected return on plan
assets 10.0% 10.0% 10.0% 9.2% 9.2% 9.8% 10.0% - -
Rate of compensation increase 5.0% 5.0% 5.0% 3.5% 4.1% 4.2% 4.4% 4.4% 4.4%
- 27 -
</TABLE>
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 13. Pensions and Other Postretirement Benefits (concluded)
For measurement purposes, a 6 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1999. The rate was
assumed to decrease on a linear basis to 5 percent through 2004 and remain at
that level thereafter.
A one percentage point increase in the assumed health care trend rate would
have increased the Accumulated Projected Benefit Obligation (APBO) by $5.5
billion at December 31, 1998 and increased the aggregate service and interest
cost components of non-pension postretirement benefit expense for 1998 by $484
million. A one percentage point decrease would have decreased the APBO by $4.6
billion and decreased the aggregate service and interest cost components of
non-pension postretirement benefit expense for 1998 by $377 million. A one
percentage point increase in the weighted-average discount rate would have
resulted in a $4.8 billion decrease in the APBO at December 31, 1998.
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 14. Accrued Expenses, Other Liabilities and Deferred Income Taxes
Automotive, Electronics and Other Operations
- --------------------------------------------
Accrued expenses, other liabilities and deferred income taxes included the
following (in millions):
December 31,
------------
1998 1997
---- ----
Warranties, dealer and customer allowances,
claims, and discounts $14,473 $13,954
Deferred revenue 8,548 7,799
Payrolls and employee benefits (excludes postemployment) 6,436 7,198
Unpaid losses under self-insurance programs 1,774 1,631
Taxes, other than income taxes 929 862
Interest 1,545 1,235
Income taxes 368 352
Deferred income taxes 2,635 2,694
Postemployment benefits 3,084 3,649
Other 8,563 9,104
----- ------
Total accrued expenses, other liabilities
and deferred income taxes $48,355 $48,478
======= =======
Financing and Insurance Operations
- ----------------------------------
Deferred income taxes and other liabilities included the following
(in millions):
December 31,
------------
1998 1997
---- ----
Unpaid insurance losses, loss adjustment
expenses and unearned
insurance premiums $3,918 $3,929
Postemployment benefits 704 672
Income taxes 552 321
Deferred income taxes 2,910 2,578
Interest 1,276 1,118
Other 301 344
----- -----
Total deferred income taxes and other liabilities $9,661 $8,962
===== =====
NOTE 15. Commitments and Contingent Matters
Commitments
GM had the following minimum commitments under noncancelable operating leases
having terms in excess of one year primarily for real property: 1999-$625
million; 2000-$611 million; 2001-$589 million; 2002-$573 million; 2003-$428
million; and $690 million in 2004 and thereafter. Certain of the leases contain
escalation clauses and renewal or purchase options. Rental expenses under
operating leases were $826 million in 1998 and 1997, and $755 million in 1996.
GM sponsors a credit card program, entitled the GM Card program, that offers
rebates that can be applied against the purchase or lease of GM vehicles. The
amount of rebates available to qualified cardholders at December 31, 1998 and
1997 was $3.7 billion and $3.5 billion, respectively. Provisions for GM Card
rebates are recorded as reductions in revenues at the time of vehicle sale.
- 28 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 15. Commitments and Contingent Matters (continued)
The 1996 Restructuring Agreement between GM and Saab's other owners (Investor
A.B.) includes certain provisions and options which may impact the relative
ownership interests of the parties involved. The agreement gives GM and Adam
Opel the right to purchase up to 100% of Investor A.B.'s interest in Saab during
1999 and 2000. Investor A.B. has the right to sell up to 50% of its present
holding in Saab to GM and Adam Opel in 2000. GM currently maintains a 50%
ownership in Saab.
In December 1998, Hughes agreed to acquire all of the outstanding capital
stock of United States Satellite Broadcasting Company, Inc. (USSB). USSB
provides direct-to-home premium satellite programming in conjunction with
DIRECTV's basic programming service. USSB launched its service in June 1994 and,
as of December 31, 1998, had more than two million subscribers nationwide. The
acquisition will be accounted for using the purchase method of accounting. The
purchase price, consisting of cash and GM Class H common stock, will be
determined at closing based upon an agreed-upon formula and will not exceed $1.6
billion in the aggregate. Subject to certain limitations in the merger
agreement, USSB shareholders will be entitled to elect to receive cash or shares
of GM Class H common stock. The amount of cash to be paid in the merger cannot
be less than 30% or greater than 50% of the aggregate purchase price with the
remaining consideration consisting of GM Class H common stock. The merger, which
is subject to USSB shareholder approval and the receipt of appropriate
regulatory approval, is expected to close in early to mid-1999.
Contingent Matters
As part of the 1997 spin-off of Hughes' defense business and the subsequent
merger of that business with Raytheon, the terms of the agreements entered into
in connection with the merger provide processes for resolving certain disputes
that might arise in connection with, among other things, post-closing financial
adjustments. Such adjustments might call for a cash payment between Hughes and
Raytheon. Various disputes currently exist regarding the post-closing
adjustments that Hughes and Raytheon have proposed to one another and related
issues regarding the completeness and accuracy of disclosures made to Raytheon
in the period prior to consummation of the merger. In an attempt to resolve the
post-closing adjustment dispute, Hughes gave notice to Raytheon to commence the
arbitration process specified in the merger agreements. It is possible that
the ultimate resolution of the post-closing financial adjustment and of the
related disclosure issues may result in Hughes making a payment to Raytheon that
would be material to Hughes. However, the amount of any payment that either
party might be required to make to the other can not be determined at this time.
Hughes intends to vigorously pursue resolution of the disputes through the
arbitration process, opposing the adjustments proposed by Raytheon, and seeking
the payment from Raytheon that Hughes has proposed.
GM is 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 GM under these government regulations and under these claims and
actions, was not determinable at December 31, 1998. 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 financial
statements.
On January 22, 1999, Hughes agreed to acquire Primestar, Inc.'s (Primestar)
2.3 million-subscriber, medium-power direct-to-home business. In a related
transaction, Hughes also agreed to acquire the high-power satellite assets and
direct broadcast satellite (DBS) orbital frequencies of Tempo, a wholly-owned
subsidiary of TCI Satellite Entertainment, Inc. The acquisitions will be
accounted for using the purchase method of accounting. The purchase price for
the direct-to-home business will be comprised of $1.1 billion in cash and
4,871,448 shares of GM Class H common stock, for a total purchase price of $1.3
billion. The direct-to-home transaction, pending Primestar lender approval is
expected to close in the second quarter of 1999. The purchase price for the
Tempo assets consists of $500 million in cash, $150 million of which was paid
in the first quarter of 1999 and $350 million which is payable upon Federal
Communications Commission approval of the transfer of the DBS orbital
frequencies, which is expected in mid to late-1999.
Hughes entered into a contract with Asia-Pacific Mobile Telecommunications
Satellite Pte. Ltd. (APMT) effective May 15, 1998, whereby Hughes was to provide
to APMT a satellite-based mobile telecommunications system consisting of two
satellites, a ground segment, user terminals and associated equipment and
software. As part of the contract, Hughes was required to obtain all necessary
U.S. Government export licenses for the APMT system by February 15, 1999. On
February 24, 1999, the Department of Commerce notified Hughes that it intended
to deny the export licenses required by Hughes to fulfill its contractual
obligation to APMT. As a result, APMT and Hughes terminated the contract on
April 9, 1999. As a result of the termination of the contract, Hughes is
- 29 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 15. Commitments and Contingent Matters (continued)
required to refund $45 million to APMT and has recorded a pre-tax charge to
earnings of $92 million in the first quarter of 1999.
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 April 7, 1998, the U.S. Court of
Appeals for the Federal Circuit (CAFC) reaffirmed earlier decisions in the
Williams case including the award of $114 million in damages, plus interest. In
March of 1999, Hughes received a $154 million payment from the U.S. Government
as final settlement of the suit. This amount was recorded as other income in
the Hughes first quarter 1999 financial statements.
On March 2, 1999, GM purchased an additional equity interest in Isuzu Motors,
Ltd. (Isuzu) that increased GM's equity interest from 37.5% to 49%. The
additional equity interest was purchased for approximately 52.5 billion yen or
approximately $440 million.
Note 16. Preferred Securities of Subsidiary Trusts
General Motors - Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trusts
In July 1997, the General Motors Capital Trust D (Series D Trust) issued
approximately $79 million of its 8.67% Trust Originated Preferred Securitiessm
(TOPrSsm) 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 Trust G (Series G
Trust) issued approximately $143 million 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 (Trusts) of the common securities of such Trusts,
which represent approximately 3 percent of the total assets of such Trusts, GM
issued to the wholly-owned Trusts, as the Series D Trust's sole assets its 8.67%
Junior Subordinated Deferrable Interest Debentures, Series D, due July 1, 2012
and as the Series G Trust's sole assets, its 9.87% Junior Subordinated
Deferrable Interest Debentures, 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 ($79 million with respect to the Series D Debentures
and $131 million with respect to the Series G Debentures).
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 amount 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 D Preferred Securities will be redeemed upon the
maturity or earlier redemption of the Series D Debentures.
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 amount 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. The Series G Preferred Securities will be redeemed
upon the maturity or earlier redemption of the Series G Debentures.
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
therefore, GM has made payments of interest or principal on the related
Debentures. These guarantees, when taken together with GM's obligations under
the Preferred Securities Guarantees, the Debentures, and the Indentures relating
thereto and the obligations under the Declaration of Trust 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.
sm "Trust Originated Preferred Securities" and "TOPrS" are service trademarks of
Merrill Lynch & Co.
- 30 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 17. Stockholders' Equity
The following table presents changes in capital stock for the period from
January 1, 1996 to December 31, 1998 (in millions):
<TABLE>
<CAPTION>
Common Stocks
------------------------------------------
Total
Preference $1-2/3 Capital
Stocks(a) par value Class H(b) Class E Class H(c) Stock
---------- --------- ---------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 $ 1 $1,255 $ - $44 $10 $1,310
Shares reacquired - (8) - - - (8)
Shares issued - 14 - - - 14
Series C conversion - - - 5 - 5
EDS split-off - - - (49) - (49)
---- ------ --- -- ---- ------
Balance at December 31, 1996 1 1,261 - - 10 1,272
Shares reacquired - (122) - - - (122)
Shares issued - 17 - - - 17
Recapitalization of
Class H Common Stock - - 10 - (10) -
---- ------ --- -- ---- ------
Balance at December 31, 1997 1 1,156 10 - - 1,167
Shares reacquired - (75) - - - (75)
Shares issued - 11 1 - - 12
--- ------- --- -- -- ------
Balance at December 31, 1998 $ 1 $1,092 $11 $ - $ - $1,104
== ===== == == == =====
</TABLE>
(a) The following describes the Corporation's preference stocks (in millions
except par value, stated value, and per share amounts):
Preference Stock, $0.10 par value (authorized 100 shares):
- Series B 9-1/8% Depositary Shares, stated value $25 per share, redeemable
at Corporation option on or after January 1, 1999; issued at December 31,
1998, 20 shares equivalent to 5 shares of nonconvertible Series B 9-1/8%
Preference Stock, stated value $100 per share.
- Series C Depositary Shares, liquidation preference $50 per share.
- Series D 7.92% Depositary Shares, stated value $25 per share, redeemable at
Corporation option on or after August 1, 1999; outstanding at December 31,
1998, 3 shares equivalent to .75 shares of Series D 7.92% Preference Stock
(see Note 16).
- Series G 9.12% Depositary Shares, stated value $25 per share, redeemable at
Corporation option on or after January 1, 2001; outstanding at December 31,
1998, 5 shares, equivalent to 1.25 shares of Series G 9.12% Preference
Stock (see Note 16).
(b) Subsequent to its recapitalization on December 17, 1997.
(c) Prior to its recapitalization on December 17, 1997.
- 31 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 17. Stockholders' Equity (concluded)
Common Stocks
The voting and liquidation rights of $1-2/3 par value common stock are one
vote per share and one liquidation unit per share. The voting and liquidation
rights of the recapitalized Class H common stock are 0.6 votes per share and 0.6
liquidation units per share.
The liquidation rights of the $1-2/3 par value and Class H common stocks are
subject to certain adjustments if outstanding common stock is subdivided, by
stock split or otherwise, or if shares of one class of common stock are issued
as a dividend to holders of another class of common stock. Holders of 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 outstanding shares of Class H common stock may be recapitalized as shares
of $1-2/3 par value common stock at any time after December 31, 2002, at the
sole discretion of the GM Board of Directors (GM Board), or automatically, if at
any time the Corporation should sell, liquidate, or otherwise dispose of 80% or
more of the business of Hughes, based on fair market value of the assets, both
tangible and intangible, of Hughes as of the date that such proposed transaction
is approved by the GM Board. In the event of any recapitalization, all
outstanding shares of Class H common stock will automatically be converted into
the Corporation's $1-2/3 par value common stock at an exchange rate that would
provide Class H common stockholders with that number of shares of $1-2/3 par
value common stock that would have a value equal to 120% of the value of their
Class H common stock, on such date. A recapitalization of the type described in
the prior sentence would occur if any of the triggering events took place unless
the holders of GM common stock (including the holders of $1-2/3 par value common
stock and holders of the Class H common stock voting separately as individual
classes) vote to approve an alternative proposal from the GM Board.
Common Stock Repurchases
During 1998, GM used $2.6 billion to acquire 38 million shares of $1-2/3 par
value common stock, which completed the second $2.5 billion stock repurchase
program announced in August of 1997 and represented 33 percent of the $4.0
billion stock repurchase program announced in February 1998. Due to work
stoppages at various GM components plants, stock repurchases were suspended as
part of GM's cash conservation initiatives. GM also used approximately $427
million to repurchase shares of $1-2/3 par value common stock for certain
employee benefit plans.
Preference Stocks
During 1996, approximately 45 million shares of Class E common stock were
issued upon conversion of approximately 3 million shares of Series C Preference
Stock (represented by depositary shares). The remaining 6,784 shares of Series C
Preference Stock were redeemed on February 22, 1996.
On April 5, 1999, GM redeemed its Series B 9-1/8% Preference Stock. The
approximately 20 million outstanding depositary shares had a face value of
approximately $500 million.
Other Comprehensive Income
The changes in the components of other comprehensive income (loss) are
reported net of income taxes, as follows (in millions):
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1998 1997 1996
---- ---- ----
Pre-tax Tax Exp. Net Pre-tax Tax Exp. Net Pre-tax Tax Exp. Net
Amount (Credit) Amount Amount Credit) Amount Amount (Credit) Amount
------ -------- ------ ------ ------- ------ ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Foreign currency translation
adjustments $(278) $1 $(279) $(1,140) $(448) $(692) $(564) $(259) $(305)
Unrealized gain (loss)
on securities:
Unrealized holding
gain (loss) 38 (14) 52 272 114 158 (15) (8) (7)
Reclassification
adjustment (115) (40) (75) (118) (41) (77) (96) (33) (63)
---- --- --- ---- --- --- --- --- ---
Net unrealized
(loss) gain (77) (54) (23) 154 73 81 (111) (41) (70)
---- --- --- ---- --- --- --- --- ---
Minimum pension
liability adjustment (1,657) (630) (1,027) (906) (334) (572) 2,013 767 1,246
----- --- ----- --- --- --- ----- --- -----
Other comprehensive
(loss) income
from continuing
operations $(2,012) $(683) $(1,329) $(1,892) $(709)$(1,183) $1,338 $467 $871
------ ----- ------- ----- ----- ----- ----- ---- ----
</TABLE>
- 32 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 18. 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. Diluted earnings per share
attributable to each class of GM common stock considers the impact of potential
common shares, unless the inclusion of the potential common shares would have an
antidilutive effect.
The assumed exercise of stock options has no effect on Class H common stock
earnings per share, because to the extent that shares of Class H common stock
deemed to be outstanding would increase, such increased shares would also
increase the numerator of the fraction used to determine Available Separate
Consolidated Net Income (ASCNI).
The attribution of earnings to each class of common stock was as follows (in
millions):
Years Ended December 31,
------------------------
1998 1997 1996
---- ---- ----
Earnings attributable to common stocks
$1-2/3 par value
Continuing operations $2,914 $6,149 $3,840
Discontinued operations (93) 127 744
------- ----- ------
Earnings attributable to
$1-2/3 par value $2,821 $6,276 $4,584
Income from discontinued operations
attributable to Class E $ - $ - $15
Class H (prior to its recapitalization
on December 17, 1997
Continuing operations $ - $234 $179
Discontinued operations - 88 104
--- --- ---
Earnings attributable to Class H
(prior to its recapitalization
on December 17, 1997) $ - $322 $283
=== === ===
Earnings attributable to Class H
(subsequent to its recapitalization
on December 17, 1997) $72 $2 $ -
-- - ---
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 ASCNI of EDS (Note 1), former Hughes, and Hughes for the period.
During the period that EDS was an indirect wholly-owned subsidiary of the
Corporation, the earnings attributable to Class E common stock for the period
represented the ASCNI of EDS for the period. The ASCNI of EDS was determined
quarterly in amounts equal to the separate consolidated net income of EDS for
each respective quarter, excluding the effects of purchase accounting
adjustments relating to the Corporation's acquisition of EDS for each such
period, multiplied by a fraction, the numerator of which represented the
weighted-average number of shares of Class E common stock outstanding during the
period. The weighted-average number of shares of Class E common stock
outstanding for 1996 reflects shares outstanding through June 30, 1996.
Earnings attributable to Class H common stock represented the ASCNI of Hughes
and former Hughes. The ASCNI of Hughes and former Hughes was determined
quarterly in amounts equal to the separate consolidated net income of Hughes and
former Hughes for each respective quarter, excluding the effects of purchase
accounting adjustments arising at the time of the Corporation's acquisition of
Hughes Aircraft Company (HAC), calculated for such period and multiplied by a
fraction, the numerator of which was a number equal to the weighted-average
number of shares of Class H common stock outstanding during the quarter (106
million, 103 million, and 99 million in the fourth quarters of 1998, 1997 and
1996, respectively) and the denominator of which was 400 million during the
fourth quarters of 1998, 1997, and 1996.
Earnings attributable to Class H common stock for the period subsequent to
the recapitalization of Class H common stock for 1997 represent the ASCNI of
Hughes for the period December 18, 1997 through December 31, 1997, excluding the
effects of purchase accounting adjustments arising at the time of the
Corporation's acquisition of HAC, calculated for such period and multiplied by a
fraction, the numerator of which was a number equal to the weighted-average
number of shares of Class H common stock outstanding during the period (104
million) and the denominator of which was 400 million.
The denominators used in determining the ASCNI of EDS and former Hughes were
adjusted from time-to-time as deemed appropriate by the GM Board to reflect
subdivisions or combinations of the Class E common stock and Class H common
stock, respectively, and to reflect certain transfers of capital to or from EDS
and former Hughes, respectively. The denominator used in determining the ASCNI
of Hughes may be adjusted from time-to-time as deemed appropriate by the GM
Board to reflect subdivisions or combinations of the Class H common stock and to
reflect certain transfers of capital to or from Hughes. The GM Board's
discretion to make such adjustments is limited by criteria set forth in the
Corporation's Restated Certificate of Incorporation.
- 33 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 18. Earnings Per Share Attributable to Common Stocks (concluded)
The reconciliation of the amounts used in the basic and diluted earnings per
share computations for income from continuing operations was as follows (in
millions except per share amounts):
<TABLE>
<CAPTION>
Class H Common Stock - Class H Common Stock -
Prior to its recapitalization Subsequent to its recapitalization
$1-2/3 Par Value Common Stock on December 17,1997 on December 17, 1997
----------------------------- ------------------- --------------------
Per Share Per Share Per Share
Income Shares Amount ASCNI Shares Amount ASCNI Shares Amount
------ ------ ------ ----- ------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1998
Income from continuing
operations $2,977 $72
Less:Dividends on
preference stocks 63 -
------ ---
Basic EPS
Income from continuing
operations available to
common stockholders 2,914 663 $4.40 72 105 $0.68
Effect of Dilutive Securities
Assumed exercise of
dilutive stock options (3) 11 3 4
----- ---- --- ---
Diluted EPS
Adjusted income from
continuing operations
available to common
stockholders $2,911 674 $4.32 $75 109 $0.68
===== === ==== === === ====
Year ended December 31, 1997
Income from continuing
operations $6,247 $234 $2
Less:Premium on exchange
of preference stocks 26 - -
Dividends on
preference stocks 72 - -
----- --- ---
Basic EPS
Income from continuing
operations available
to common stockholders 6,149 721 $8.52 234 101 $2.30 2 104 $0.02
==== ==== ====
Effect of Dilutive Securities
Assumed exercise of
dilutive stock options (8) 6 8 4 - 3
----- --- --- --- --- ---
Diluted EPS
Adjusted income from
continuing operations
available to common
stockholders $6,141 727 $8.45 $242 105 $2.30 $2 107 $0.02
===== === ==== === === ==== === === ====
Year ended December 31, 1996
Income from continuing
operations $3,921 $179
Less: Dividends on
preference stocks 81 -
------- ------
Basic EPS
Income from continuing
operations available to
common stockholders 3,840 756 $5.08 179 98 $1.83
===== === ==== ==== === ====
Effect of Dilutive Securities
Assumed exercise of
dilutive stock options (6) 4 6 3
----- --- ---- ---
Diluted EPS
Adjusted income from
continuing operations
available to common
stockholders $3,834 760 $5.04 $185 101 $1.83
===== === ==== === === ====
</TABLE>
- 34 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 19. Dividends on Common Stock
In connection with the consummation of the Hughes Transactions, the GM Board
determined that the amount available for the payment of dividends on outstanding
shares of $1-2/3 par value common stock would be the cumulative amount available
for the payment of dividends on $1-2/3 par value common stock immediately prior
to the closing of the Hughes Transactions, reduced by a pro rata portion of the
net reduction in GM's total stockholders' equity resulting from the Hughes
Transactions. In addition, the GM Board determined that the amount initially
available for the payment of dividends on shares of Class H common stock would
be the cumulative amount available for the payment of dividends on Class H
common stock immediately prior to the closing of the Hughes Transactions,
reduced by a pro rata portion of the net reduction in GM's total stockholders'
equity resulting from the Hughes Transactions. The pro rata allocation of the
net reduction in GM's total stockholders' equity resulting from the Hughes
Transactions was based on the fraction used in determining the ASCNI of former
Hughes immediately prior to the consummation of the Hughes Transactions.
Dividends may be paid on $1-2/3 par value common stock to the extent of the
amount determined to be available for the payment of dividends on $1-2/3 par
value common stock in connection with the consummation of the Hughes
Transactions, plus all of the earnings of GM after the consummation of the
Hughes Transactions, other than the earnings attributed to the Class H common
stock. Dividends may be paid on Class H common stock to the extent of the amount
initially determined to be available for the payment of dividends on Class H
common stock, plus the portion of earnings of GM after the closing of the Hughes
Transactions attributed to Class H common stock. The amount available for the
payment of dividends on each class of common stock will be reduced from
time-to-time by dividends paid on that class and will be adjusted from
time-to-time for changes to the amount of surplus attributed to the class
resulting from the repurchase or issuance of shares of that class.
As of December 31, 1998, the amount available for the payment of dividends on
$1-2/3 par value and Class H common stock was $15.9 billion and $3.8 billion,
respectively. Dividends may be paid on common stocks only when, and if declared
by the GM Board in its sole discretion. The GM Board's policy with respect to
$1-2/3 par value common stock is to distribute dividends based on the outlook
and the indicated capital needs of the business. The GM Board does not currently
intend to pay cash dividends on the Class H common stock, which was
recapitalized on December 17, 1997 as part of the Hughes Transactions.
Cash dividends per share of $1-2/3 par value common stock were $2.00, $2.00
and $1.60 for 1998, 1997, and 1996, respectively. Cash dividends per share for
Class H common stock, prior to its recapitalization on December 17, 1997, were
$1.00 and $0.96 in 1997 and 1996, respectively. Cash dividends per share of
Class E common stock were $0.30 in 1996.
NOTE 20. Stock Incentive Plans
Stock-Based Compensation
GM previously adopted SFAS No. 123, Accounting for Stock-Based Compensation,
and as permitted by this standard, will continue to apply the recognition and
measurement principles of Accounting Principles Board (APB) Opinion No. 25 to
its stock options and other stock-based employee compensation awards.
If compensation cost for stock options and other stock-based employee
compensation awards had been determined based on the fair value at the grant
date, consistent with the method prescribed by SFAS No. 123, GM's pro forma net
income, earnings attributable to common stocks, and basic and diluted earnings
per share attributable to common stocks would have been as follows (in millions
except per share amounts):
1998 1997 1996
---- ---- ----
Net income - as reported $2,956 $6,698 $4,963
- Pro forma $2,797 $6,558 $4,904
Earnings attributable to
common stocks
$1-2/3 - as reported $2,821 $6,276 $4,584
- Pro forma $2,673 $6,147 $4,528
Class H
(prior to recapitalization)
- as reported $ - $322 $283
- Pro forma $ - $315 $280
Class H
(subsequent to recapitalization)
- as reported $72 $2 $ -
- Pro forma $61 $(2) $ -
- 35 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 20. Stock Incentive Plans (continued)
1998 1997 1996
---- ---- ----
Basic earnings per share attributable to
common stocks
$1-2/3 - as reported $4.26 $8.70 $6.06
- Pro forma $4.04 $8.52 $5.98
Class H
(prior to recapitalization)
- as reported $ - $3.17 $2.88
- Pro forma $ - $3.10 $2.85
Class H
(subsequent to recapitalization)
- as reported $0.68 $0.02 $ -
- Pro forma $0.57 $(0.02) $ -
Diluted earnings per share attributable to
common stocks
$1-2/3 - as reported $4.18 $8.62 $6.02
- Pro forma $3.96 $8.44 $5.94
Class H
(prior to recapitalization)
- as reported $ - $3.17 $2.88
- Pro forma $ - $3.10 $2.85
Class H
(subsequent to recapitalization)
- as reported $0.68 $0.02 $ -
- Pro forma $0.57 $(0.02) $ -
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option- pricing model with the following weighted-average
assumptions:
1998 1997 1996
---------------------- ---------------- ---------------
Hughes Hughes Hughes
GMSIP Plan GMSSOP GMSIP Plan GMSIP Plan
Interest rate 5.2% 5.6% 5.2% 6.2% 6.8% 5.3% 6.6%
Expected life (years) 5.0 6.2 5.0 5.0 7.0 5.8 7.0
Expected volatility 26.2% 32.8% 26.2% 26.3% 20.7% 27.3% 20.6%
Dividend yield 3.6% - 3.6% 3.4% 2.1% 3.1% 1.6%
The effect of the Hughes Transactions adjustment on the number of options and
related exercise prices, as described below, is considered, under SFAS No. 123,
a modification of the terms of the outstanding options. Accordingly, the 1997
pro forma disclosure includes compensation cost for the incremental fair value,
under SFAS No. 123, resulting from such modification. The pro forma amounts for
compensation cost are not indicative of the effects on operating results for
future periods.
GM's stock incentive plans consist of the General Motors 1997 Stock Incentive
Plan, formerly the General Motors Amended Stock Incentive Plan, (the "GMSIP"),
the Hughes Electronics Corporation Incentive Plan (the "Hughes Plan") and the
General Motors 1998 Salaried Stock Option Plan (the "GMSSOP"). The GMSIP and
GMSSOP are administered by the Executive Compensation Committee of the GM Board.
The Hughes Plan is administered by the Executive Compensation Committee of the
Board of Directors of Hughes.
Under the GMSIP, 60 million shares of $1-2/3 par value and 2.5 million shares
of Class H common stocks may be granted from June 1, 1997 through May 31, 2002,
of which 50 million and 2.4 million were available for grants at December 31,
1998. Options granted prior to 1998 under the GMSIP generally are exercisable
one-half after one year and one-half after two years from the dates of grant.
Stock option grants awarded during 1998 vest ratably over three years following
the grant date. Option prices are 100% of fair market value on the dates of
grant and the options generally expire 10 years from the dates of grant, subject
to earlier termination under certain conditions.
Under the Hughes Plan, Hughes may grant shares, rights, or options to acquire
up to 35.6 million shares of Class H common stock through December 31, 1998, of
which 5.4 million were available for grants at December 31, 1998. Option prices
are 100% of fair market value on the dates of grant and the options generally
vest over two to four years and expire 10 years from the dates of grant, subject
to earlier termination under certain conditions.
Under the GMSSOP, 50 million shares of $1-2/3 par value may be granted from
January 1, 1998 through December 31, 2007, of which 45.7 million were available
for grants at December 31, 1998. Stock options are exercisable two years from
the date of grant and vest one year following the date of grant, subject to
earlier termination under certain conditions. Option prices are 100% of fair
market value on the dates of grant and the options generally expire 10 years and
two days from the dates of grant.
- 36 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 20. Stock Incentive Plans (concluded)
In connection with the Hughes Transactions, the number of options and related
exercise prices for outstanding options under the GMSIP and the Hughes Plan were
adjusted to reflect the change in the fair market value of $1-2/3 par value and
Class H common stocks that resulted from the Hughes Defense Class A common stock
distribution. The number of shares under option and the exercise price were
adjusted such that the aggregate intrinsic value of the options immediately
before and immediately after the transaction remained unchanged.
Changes in the status of outstanding options were as follows:
GMSIP and
GMSIP Hughes Plan GMSSOP
$1-2/3 Par Value Common Class H Common $1-2/3 Par Value Common
--------------------------------------------------------------
Weighted- Weighted- Weighted
Shares Average Shares Average Share Average
under Exercise under Exercise under Exercise
Option Price Option Price Option Price
- --------------------------------------------------------------------------------
Options outstanding at
January 1, 1996 29,280,126 $44.03 8,190,867 $30.16 - $ -
Granted 7,087,590 $52.27 1,501,900 $61.31 - $ -
Exercised 6,207,072 $39.16 864,889 $28.58 - $ -
Terminated 202,697 $51.75 128,075 $42.94 - $ -
- -------------------------------------------------------------------------------
Options outstanding at
December 31,
1996 29,957,947 $46.94 8,699,803 $35.51 - $ -
- -------------------------------------------------------------------------------
Granted 8,989,460 $58.81 5,750,600 $54.90 - $ -
Exercised 9,273,674 $42.95 2,158,728 $30.21 - $ -
Terminated 330,727 $57.05 2,694,982 $42.56 - $ -
Hughes Transactions
adjustment 3,023,651 $ - 5,897,936 $ - - $ -
- -------------------------------------------------------------------------------
Options outstanding at
December 31,
1997 32,366,657 $51.40 15,494,629 $28.70 - $ -
- -------------------------------------------------------------------------------
Granted 9,854,805 $56.14 4,234,620 $50.78 4,332,305 $56.00
Exercised 8,242,624 $44.08 2,055,168 $22.71 - $ -
Terminated 454,558 $54.45 980,464 $31.95 328,630 $56.00
- -------------------------------------------------------------------------------
Options outstanding at
December 31,
1998 33,524,280 $50.72 16,693,617 $34.85 4,003,675 $56.00
- -------------------------------------------------------------------------------
Options exercisable at
December 31,
1998 17,475,607 $46.71 6,089,532 $27.48 - $ -
- -------------------------------------------------------------------------------
The following table summarizes information about GM's stock option plans at
December 31, 1998:
---------------------------------------------------------------------------
Weighted-Average
Range of Options Remaining Weighted-Avg.Options Weighted-Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices Life (yrs.) Price Price
---------------------------------------------------------------------------
GMSIP
$1-2/3 Par
Value Common
$15.00 to
$39.99 5,739,004 4.8 $36.81 5,737,377 $36.81
40.00
to 49.99 5,200,940 6.7 $47.86 4,921,723 $47.85
50.00
to 70.00 22,584,336 7.9 $54.91 6,816,507 $54.21
---------------------------------------------------------------------------
$15.00 to
$70.00 33,524,280 7.2 $50.72 17,475,607 $46.71
---------------------------------------------------------------------------
GMSIP and
Hughes Plan
Class H
Common
$9.86 to
$20.00 940,516 3.7 $14.80 940,516 $14.80
20.01
to 30.00 1,489,096 5.9 $22.25 1,489,096 $22.25
30.01
to 40.00 10,255,230 8.2 $32.20 3,659,920 $32.86
40.01 to
50.00 1,372,700 9.6 $43.71 - $ -
50.01 to
54.79 2,636,075 9.3 $54.79 - $ -
---------------------------------------------------------------------------
$9.86 to
$54.79 16,693,617 8.1 $34.85 6,089,532 $27.48
---------------------------------------------------------------------------
GMSSOP
$1-2/3 Par
Value Common
---------------------------------------------------------------------------
$56.00 4,003,675 9.0 $56.00 - $ -
---------------------------------------------------------------------------
- 37 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 21. Other Income and Other Expenses
Other income and other expenses included the following (in millions):
Years Ended December 31,
------------------------
1998 1997 1996
---- ---- ----
Other income
Interest income $2,105 $2,127 $1,638
Insurance premiums 1,426 1,161 947
Mortgage operations investment income and
servicing fees 1,836 1,525 921
Rental car lease revenue 1,229 1,137 958
Gain on Hughes Defense spin-off - 4,269 -
Other 988 1,456 1,086
------ ------- -----
Total other income $7,584 $11,675 $5,550
===== ====== =====
Other expenses
Insurance losses and loss adjustment expenses$1,061 747 622
Provision for financing losses 463 523 669
Other 792 210 519
----- ----- -----
Total other expenses $2,316 $1,480 $1,810
===== ===== =====
NOTE 22: Segment Reporting
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, established standards for reporting information about operating
segments in financial statements. 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, or decision making
group, in deciding how to allocate resources and in assessing performance. GM's
chief operating decision maker is the Chairman and Chief Executive Officer. The
operating segments are managed separately because each operating segment
represents a strategic business unit that offers different products and serves
different markets.
GM's reportable operating segments within its Automotive, Electronics and
Other Operations business consist of General Motors Automotive (GMA), which is
comprised of four regions: GM North America (GMNA), GM Europe (GME), GM
Asia/Pacific (GMAP), and GM Latin America/Africa/Mid-East (GMLAAM), Hughes, and
Other. GMNA designs, manufactures, and markets vehicles primarily in North
America under the following nameplates: Chevrolet, Pontiac, GMC, Oldsmobile,
Buick, Cadillac, and Saturn. GME, GMAP and GMLAAM meet the demands of customers
outside North America with vehicles designed, manufactured and marketed under
the following nameplates: Opel, Vauxhall, Holden, Isuzu, Saab, Chevrolet, GMC,
and Cadillac. Hughes includes activities relating to designing, manufacturing,
and marketing advanced technology electronic systems, products, and services for
the telecommunications and space industries . The Other segment includes the
design, manufacturing and marketing of locomotives and heavy-duty transmissions
and the elimination of intersegment transactions, as well as former Hughes'
defense business prior to the Hughes Transactions. GM's reportable operating
segments within its Financing and Insurance Operations business consist of GMAC
and Other. GMAC provides a broad range of financial services, including consumer
vehicle financing, full-service leasing and fleet leasing, dealer financing, car
and truck extended service contracts, residential and commercial mortgage
services, and vehicle and homeowners insurance. The Financing and Insurance
Operations' Other segment includes financing entities operating in Canada,
Germany and Brazil, as well as eliminations of intersegment transactions.
The accounting policies of the operating segments are the same as those
described in the summary of significant accounting policies except that the
disaggregated financial results 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. GM evaluates performance based on stand alone
operating segment net income and generally accounts for intersegment sales and
transfers as if the sales or transfers were to third parties, that is, at
current market prices. Revenues are attributed to geographic areas based on the
location of the assets producing the revenues.
- 38 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
<TABLE>
Note 22. Segment Reporting (continued)
<CAPTION>
Elimin- Total Other Total
GMNA GME GMLAAM GMAP ations GMA Hughes Other(b) Automotive GMAC Financing Financing
---- --- ------ ---- ------ --- ------ ------- ---------- ---- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(in millions)
1998(a)
Manufactured products sales & revenues:
External customers $91,771 $23,948 $7,150 $2,814 $ - $125,683 $5,924 $2,669 $134,276 $ - $ - $ -
Intersegment 2,430 1,088 253 109 (3,880) - 40 (40) - - - -
------- ------- ------ ------ ----- -------- ----- ----- -------- ---- ---- ----
Total manufactured
products 94,201 25,036 7,403 2,923 (3,880) 125,683 5,964 2,629 134,276 - - -
Financing revenue - - - - - - - - - 12,731 854 13,585
Other income 2,296 804 150 121 - 3,371 131 (617) 2,885 5,183 (484) 4,699
------- ------- ------ ------ ----- -------- ----- ----- -------- ---- ---- ----
Total net sales
and revenues $96,497 $25,840 $7,553 $3,044$(3,880)$129,054 $6,095 $2,012 $137,161$17,914 $370 $18,284
====== ====== ===== ===== ===== ======= ===== ===== ======= ====== ==== =====
Depreciation and
amortization (c) $4,138 $1,102 $366 $95 $ - $5,701 $434 $92 $6,227 $4,812 $108 $4,920
Interest income $537 $544 $116 $9 $ - $1,206 $112 $(592) $726 $1,524 $(145) $1,379
Interest expense $939 $433 $92 $7 $ - $1,471 $18 $(703) $786 $5,787 $56 $5,843
Income tax expense
(benefit) $787 $319 $(213) $9 $ - $902 $(45) $161 $1,018 $612 $6 $618
Earnings (losses) of
nonconsolidated
associates $14 $(14) $102 $(152) $ - $(50) $(128) $(61) $(239) $ - $ - $ -
Net income (loss) (c) $1,635 $419 $(175) $(243) $(2) $1,634 $272 $(372) $1,534 $1,325 $97 $1,422
Investments in nonconsolidated
affiliates $675 $262 $445 $395 $(261) $1,516 $41 $(607) $950 $557 $(557) $ -
Segment assets $68,026 $18,440 $5,548 $1,557$(2,261) $91,310 $13,008$10,276 $114,594$131,417 $334 $131,751
Expenditures for
property (d) $5,464 $1,205 $534 $197 $ - $7,400 $344 $208 $7,952 $278 $ - $278
1997(a)
Manufactured products sales & revenues:
External customers $99,435 $23,269 $8,437 $2,980 $ - $134,121 $5,083 $8,939 $148,143 $ - $ - $ -
Intersegment 821 837 135 - (1,793) - 45 (45) - - - -
------- ------- ------ ------ ----- -------- ----- ----- -------- ---- ---- ----
Total manufactured
products 100,256 24,106 8,572 2,980 (1,793) 134,121 5,128 8,894 148,143 - - -
Financing revenue - - - - - - - - - 12,577 185 12,762
Other income 2,372 812 212 158 - 3,554 496 3,902 7,952 4,018 (295) 3,723
------- ------- ------ ------ ----- -------- ----- ----- -------- ---- ---- ----
Total net sales
and revenues $102,628 $24,918 $8,784 $3,138$(1,793)$137,675 $5,624$12,796 $156,095$16,595 $(110) $16,485
======= ====== ===== ===== ===== ======= ===== ===== ======= ====== ==== ======
Depreciation and
amortization (c) $7,116 $1,563 $248 $294 $ - $9,221 $296 $316 $9,833 $4,746 $67 $4,813
Interest income $839 $549 $167 $10 $ - $1,565 $33 $(489) $1,109 $1,127 $(109) $1,018
Interest expense $643 $395 $118 $23 $(1) $1,178 $91 $(636) $633 $5,256 $(6) $5,250
Income tax (benefit)
expense $(272) $121 $43 $(29) $(12) $(149) $237 $23 $111 $913 $1 $914
(Losses) earnings of
nonconsolidated
associates $(35) $(171) $173 $11 $ - $(22) $(72) $(11) $(105) $ - $ - $ -
Net (loss) income (c) $(12) $(17) $667 $(172) $(17) $449 $471 $4,460 $5,380 $1,301 $17 $1,318
Investments in nonconsolidated
affiliates $552 $229 $414 $427 $1 $1,623 $75 $(638) $1,060 $213 $(213) $ -
Segment assets $68,361 $17,582 $5,651 $1,567 $(874) $92,287 $12,283 $8,746 $113,316$109,319 $(1,235)$108,084
Expenditures for
property (d) $5,387 $1,687 $435 $327 $ - $7,836 $251 $322 $8,409 $238 $ - $238
</TABLE>
See notes on next page
- 39 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
<TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Note 22. Segment Reporting (continued)
<CAPTION>
Elimin- Total Other Total
GMNA GME GMLAAM GMAP ations GMA Hughes Other(b) Automotive GMAC Financing Financing
---- --- ------ ---- ------ --- ------ ------- ---------- ---- --------- ---------
(in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996(a)
Manufactured products sales & revenues:
External customer $92,659 $25,239 $6,691 $3,001 $ - $127,590 $3,958 $8,509 $140,057 $ - $ - $ -
Intersegment 723 289 32 - (1,044) - 51 (51) - - - -
------- ------- ------ ------ ----- -------- ----- ----- -------- ---- ---- ----
Total manufactured
products 93,382 25,528 6,723 3,001 (1,044) 127,590 4,009 8,458 140,057 - - -
Financing revenue - - - - - - - - - 12,644 30 12,674
Other income 1,960 775 173 133 - 3,041 118 (630) 2,529 3,330 (309) 3,021
------- ------- ------ ------ ----- -------- ----- ----- -------- ---- ---- ----
Total net sales
and revenues $95,342 $26,303 $6,896 $3,134$(1,044)$130,631 $4,127 $7,828 $142,586$15,974 $(279) $15,695
====== ====== ===== ===== ===== ======= ===== ===== ====== ===== ==== ======
Depreciation and
amortization (c) $4,348 $1,213 $202 $71 $ - $5,834 $195 $273 $6,302 $4,676 $19 $4,695
Interest income $569 $581 $169 $26 $ - $1,345 $7 $(369) $983 $743 $(88) $655
Interest expense $500 $430 $107 $29 $ - $1,066 $43 $(606) $503 $4,938 $(14) $4,924
Income tax (benefit)
expense $54 $168 $106 $32 $(7) $353 $105 $168 $626 $837 $1 $838
Earnings (losses) of
nonconsolidated
associates $37 $(97) $79 $70 $ - $89 $(42) $24 $71 $ - $ - $ -
Net income (loss) (c) $819 $778 $642 $110 $(12) $2,337 $184 $1,201 $3,722 $1,240 $1 $1,241
Investments in nonconsolidated
affiliates $472 $597 $242 $379 $ - $1,690 $95 $(523) $1,262 $158 $(158) $ -
Segment assets $67,528 $18,575 $4,941 $2,087 $(616) $92,515 $3,904$21,396 $117,815$98,578 $(703) $97,875
Expenditures for
property (d) $5,177 $1,652 $628 $389 $ - $7,846 $262 $321 $8,429 $121 $ - $121
</TABLE>
(a)The operating results for 1997 and 1996 and assets as of December 31, 1996
are presented to reflect the changes to GM's organizational structure
resulting from the Hughes Transactions which occurred in December 1997. As
such, Hughes excludes Hughes Defense and Other includes Hughes Defense.
(b)Other includes the $4.3 billion gain resulting from the Hughes Transactions
for the year ended December 31, 1997 and (loss) income from discontinued
operations of $(93) million, $215 million, and $863 million for the years
ended December 31, 1998, 1997, and 1996, respectively.
(c)The amount reported for Hughes excludes amortization of GM purchase
accounting adjustments of approximately $21 million for 1998, 1997 and 1996
related to GM's acquisition of Hughes Aircraft Company. Such amortization was
allocated to GM's Other segment which is consistent with the basis upon which
the segments are evaluated.
(d)Excludes expenditures related to telecommunications and other equipment
amounting to $726 million, $606 million and $259 million in 1998, 1997
and 1996, respectively.
- 40 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Note 22. Segment Reporting (concluded)
Information concerning principal geographic areas was as follows (in millions):
1998 1997 1996
---- ---- ----
Net Sales Net Sales Net Sales
& Net & Net & Net
Revenues Property Revenues Property Revenues Property
----------------- -------- -------- -------- --------
North America
United States $105,672 $19,454 $131,076 $17,592 $116,250 $19,044
Canada and Mexico 11,009 2,358 7,953 2,506 6,228 3,113
------- ------ ------ ------ ------- -------
Total North America 116,681 21,812 139,029 20,098 122,478 22,157
Europe
France 2,042 186 1,327 157 1,967 106
Germany 10,567 3,349 9,358 2,902 10,861 3,610
Spain 1,966 422 1,185 480 1,093 660
United Kingdom 5,379 1,192 5,085 1,176 4,714 1,056
Other 9,679 1,748 7,854 1,566 7,263 1,536
------- ----- ------- ----- ------- -----
Total Europe 29,633 6,897 24,809 6,281 25,898 6,968
Latin America
Brazil 4,773 1,879 4,719 1,873 4,664 1,819
Other Latin America 2,909 409 2,914 440 2,194 315
----- ----- ----- ------ ----- ------
Total Latin America 7,682 2,288 7,633 2,313 6,858 2,134
All Other 1,449 1,611 1,109 888 3,047 808
-------- ------- -------- ----- -------- -------
Total $155,445 $32,608 $172,580 $29,580 $158,281 $32,067
======= ====== ======= ====== ======= ======
Note 23. Discontinued Operations
Delphi
Delphi is a diverse supplier of automotive systems and components. Delphi
offers products and services in the areas of electronics and mobile
communication; safety, thermal and electrical architecture; and dynamics and
propulsion. On February 5, 1999, Delphi completed an initial public offering of
100 million shares of its common stock, which represented 17.7% of its
outstanding common shares. On April 12, 1999, the GM Board of Directors approved
the complete separation of Delphi from GM by means of a tax-free spin-off in
which 80.1 percent of the ownership of Delphi, 452.6 million shares of Delphi
common stock now owned by GM, will be distributed on a pro-rata basis to
owners of GM $1-2/3 par value common stock, and if GM receives a favorable
ruling from the Internal Revenue Service prior to May, 1999, GM will contribute
the other 2.2% of Delphi shares it owns, 12.4 million shares, to a Voluntary
Employee Beneficiary Association (VEBA) trust used to fund benefits to hourly
retirees. If such a ruling is not received, the additional 2.2 percent of
Delphi shares held by GM also will be distributed to GM stockholders, in which
case the same record date and payment dates will be used.
The financial data related to GM's investment in Delphi prior to the
approved May, 1999 spin-off is classified as discontinued operations for all
periods presented. The financial data of Delphi reflect the historical results
of operations and cash flows of the businesses that were considered part of the
Delphi business segment of GM during each respective period; they do not reflect
many significant changes that will occur in the operations and funding of Delphi
as a result of the separation from GM and the IPO. The Delphi financial data
classified as discontinued operations reflect the assets and liabilities
transferred to Delphi in accordance with the terms of a master separation
agreement to which Delphi and GM are parties (the "Separation Agreement").
Delphi and Delco Electronics Corporation ("Delco Electronics"), the electronics
and mobile communication business that was transferred to Delphi in December
1997, were under the common control of GM during such periods; therefore, the
financial data include amounts relating to Delco Electronics for all periods
presented, although Delco Electronics was not integrated with Delphi until
December 1997.
The following significant factors are reflected in Delphi's financial data
classified as discontinued operations:
- 41 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Note 23. Discontinued Operations (continued)
Capital Arrangements
o Delphi operated under a cash and debt management agreement with GM (the
"Cash and Debt Management Agreement"), and an intracompany note payable to
GM. The Cash and Debt Management Agreement established Delphi's combined
cash and marketable securities balance at $1.0 billion. Delphi's total debt
was $3.5 billion, reflecting a $3.1 billion intracompany note payable to GM
and outstanding debt at Delphi's international subsidiaries. The $3.1
billion intracompany note payable to GM reflects the portion of GM's
outstanding debt that was specifically related to Delphi's operations. The
financial data give effect to the terms of the Cash and Debt Management
Agreement and the intracompany note payable, and accordingly, reflect cash
and marketable securities and the combined short-term and long-term debt
capitalization totaling $1.0 billion and $3.5 billion, respectively, at
December 31, 1998 and 1997.
o Delphi's interest expense reflects interest associated with the historical
debt capitalization discussed above, primarily using a blend of prevailing
short-term and long-term weighted-average interest rates commensurate with
the overall credit risk of the Delphi business segment.
Employee Benefits Arrangements
o The Separation Agreement provides generally that pension plan assets and
liabilities related to Delphi's U.S. salaried active and inactive employees
retiring after January 1, 1999 will be assumed by Delphi. Delphi has
established defined benefit pension plans for its salaried employees under
the same terms that existed for the GM plans as of January 1, 1999.
Delphi's financial data classified as discontinued operations reflect the
assets and liabilities related to U.S. salaried employees that Delphi
will assume pursuant to the Separation Agreement, and exclude employee
benefit obligations and assets related to salaried employees retired on
or before January 1, 1999. Generally, Delphi's U.S. hourly employees
will continue to participate in the defined benefit pension plan for
hourly workers administered by GM until full separation from GM. Generally,
Delphi will assume the pension obligations for U.S. hourly employees who
retire after October 1, 1999 and GM will retain pension obligations for
U.S. hourly employees who retire on or before October 1, 1999. The
amount of such obligations varies depending on factors such as discount
rates, asset returns, contribution levels and other factors. The
obligation attributable to Delphi classified as discontinued operations
was $2.1 billion and $1.7 billion at December 31, 1998 and 1997,
respectively.
o The Separation Agreement provides in general that GM will retain other
postretirement benefit liabilities related to Delphi's U.S. salaried
employees retiring on or prior to January 1, 1999. The liabilities related
to Delphi's U.S. salaried active and inactive employees retiring after
January 1, 1999 will be assumed by Delphi. Delphi's U.S. hourly employees
will continue to participate in the postretirement plans administered by GM
until full separation from GM, and GM generally will retain postretirement
benefit obligations for U.S. hourly employees retired on or before October
1, 1999.
o The liabilities set forth in Delphi's balance sheet data classified as
discontinued operations include employee benefit obligations related to
its active and inactive employees only; however, the statements of
operations data include benefit costs for Delphi's active, inactive and
retired employees. Such accrued obligations and employee benefit costs
are based upon actuarial methods and assumptions. The allocation of
pension and other postretirement benefit obligations between Delphi and
GM assumes certain levels of employee retirements prior to October 1,
1999, based on historical experience and conditions surrounding the
separation. Delphi and GM have agreed to recalculate the allocation of
those liabilities based on the actual level of retirements on or before
October 1, 1999. Accordingly, if and to the extent that greater than
the assumed number of employees retire on or before October 1, 1999,
Delphi would be required to make a payment to GM. Depending on the amount
of such a payment, if any, it could have a material adverse effect on
Delphi's short-term liquidity. If and to the extent that less than the
assumed number of employees retire on or before October 1, 1999, GM
would be required to make a payment to Delphi.
- 42 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Note 23. Discontinued Operations (concluded)
Operating Costs
o Delphi's operating costs and expenses include allocations of general
corporate overhead expenses related to GM's corporate headquarters and
common support activities, including payroll administration, employee
medical coverage and property and casualty insurance, financial, legal, tax
and human resources. These allocated costs amounted to $135 million, $130
million and $124 million in 1998, 1997 and 1996, respectively, and have
been allocated to Delphi based on usage or allocation methodologies
primarily based on total net sales, certain tangible assets and payroll
expenses. Although the Corporation believes the allocations and charges
for such services to be reasonable, the costs of these services charged
to Delphi may not be indicative of the costs that would have been incurred
if Delphi had been a stand-alone entity.
Income Taxes
o Delphi's income taxes were determined in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
for Income Taxes." Once Delphi is a stand-alone entity and is no longer
included in GM's consolidated income tax return, it will no longer benefit
from its position within GM's consolidated income tax environment.
Delphi net sales (including sales to GM) included in discontinued operations
totaled $28.5 billion, $31.4 billion, and $31.0 billion for the years ended
December 31, 1998, 1997 and 1996, respectively. (Loss) income from Delphi
discontinued operations of $(93) million, $215 million, and $853 million for the
years ended December 31, 1998, 1997 and 1996 is reported net of income tax
(benefit) expense of $(173) million, $44 million, and $259 million,
respectively.
The net assets (liabilities) of Delphi were as follows (in millions):
December 31,
1998 1997
---- ----
Current assets $6,405 $6,378
Property and equipment - net 4,965 4,600
Deferred income taxes and other assets 4,136 4,048
Current liabilities (4,061) (4,066)
Long-term debt (3,137) (3,341)
Other liabilities (8,299) (8,032)
Accumulated translation adjustments 68 78
------- -----
Net assets (liabilities) of
discontinued operations $77 $(335)
== ===
For financial reporting purposes, Delphi's initial public offering and the
complete separation of Delphi from GM will be reflected as equity transactions.
EDS
On June 7, 1996, GM split-off Electronic Data Systems Corporation (EDS) to GM
Class E stockholders on a tax-free basis for U.S. federal income tax purposes.
Under the terms of the split-off, each share of GM former Class E common stock
was exchanged for one share of EDS common stock. In addition, GM and EDS entered
into a new 10-year agreement, under which EDS will continue to be GM's principal
provider of information technology services and EDS made a special inter-company
payment of $500 million to GM.
The financial data related to EDS prior to the June 7, 1996 split-off from GM
are classified as discontinued operations. The financial results of EDS,
including assets and liabilities, subsequent to the split-off are not included
in GM's consolidated financial statements.
EDS systems and other contracts revenues from outside customers included in
income from discontinued operations totaled $4.3 billion for the year ended
December 31, 1996. Income from discontinued operations of $10 million for the
year ended December 31, 1996, is reported net of income tax expense of $14
million.
Income from discontinued operations for 1996 also includes split-off expenses
attributable to $1-2/3 par value common stock of $15 million after-tax or $0.02
per share of $1-2/3 par value common stock.
* * * * * * * *
- 43 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION
Selected Quarterly Data (Unaudited)
1998 Quarters
-------------
1st 2nd(1)(2) 3rd(2) 4th(3)
--- --------- ------ ------
(Dollars in Millions Except Per Share Amounts)
Total net sales and revenues $40,024 $37,272 $33,525 $44,624
------ ------ ------ ------
Income (loss) from continuing operations
before income taxes
and minority interests 2,083 511 (419) 2,769
Income tax expense (credit) 695 159 (144) 926
Minority interests (10) - (1) (9)
Losses of nonconsolidated associates (10) (46) (33) (150)
------ ---- ---- -----
Income (loss) from continuing
operations 1,368 306 (309) 1,684
Income (loss) from discontinued
operations 236 83 (500) 88
----- ----- --- ------
Net income (loss) 1,604 389 (809) 1,772
Dividends on preference stocks 16 16 16 15
------ ---- ---- ------
Earnings (loss) on common stocks $1,588 $373 $(825) $1,757
===== === === =====
Earnings (loss) attributable to
common stocks $1-2/3 par value
from continuing operations $1,338 $275 $(336) $1,637
Income (loss) from
discontinued operations 236 83 (500) 88
----- ----- --- ------
Earnings attributable to
$1-2/3 par value $1,574 $358 $(836) $1,725
===== === === =====
Earnings attributable to Class H $14 $15 $11 $32
== == == ==
Basic earnings (loss) per share
attributable to common stocks
$1-2/3 par value from
continuing operations $1.96 $0.41 $(0.52) $2.51
Income (loss) from discontinued
operations 0.35 0.13 (0.76) 0.13
---- ---- ---- ----
Earnings attributable to
$1-2/3 par value $2.31 $0.54 $(1.28) $2.64
==== ==== ==== ====
Earnings attributable to Class H $0.13 $0.14 $0.11 $0.30
==== ==== ==== ====
Average number of shares of common stocks
outstanding - basic (in millions)
$1-2/3 par value 682 661 654 654
Class H 104 105 106 106
Diluted earnings (loss) per share
attributable to common stocks
$1-2/3 par value from continuing
operations $1.93 $0.40 $(0.52) $2.48
Income (loss) from discontinued
operations 0.34 0.12 (0.76) 0.13
---- ---- ---- ----
Earnings attributable to
$1-2/3 par value $2.27 $0.52 $(1.28) $2.61
==== ==== ==== ====
Earnings attributable to Class H $0.13 $0.14 $0.11 $0.30
==== ==== ==== ====
Average number of shares of common stocks
outstanding - diluted (in millions)
$1-2/3 par value 693 672 654 665
Class H 109 111 110 109
- 44 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION - Continued
Selected Quarterly Data (Unaudited) - Continued
(1)Second-quarter 1998 results included a pre-tax charge of $74 million ($44
million after-tax, or $0.07 basic loss per share of $1-2/3 par value common
stock), related to work schedule modifications at Opel Belgium.
(2)Work stoppages in the United States during the second and third quarter of
1998 reduced calendar year income from continuing operations by approximately
$1.5 billion or $2.26 basic loss per share of $1-2/3 par value common stock,
after considering partial recovery of production losses from the work
stoppages.
(3)Fourth quarter 1998 results included charges against income from continuing
operations totaling $228 million or $0.35 basic loss per share of $1-2/3 par
value common stock, resulting from GM's competitiveness studies.
- 45 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION - Continued
Selected Quarterly Data (Unaudited) - Continued
1997 Quarters
-------------
1st(1) 2nd(2)(3)(4) 3rd 4th(5)(6)
------ ---------- --- ---------
(Dollars in Millions Except Per Share Amounts)
Total net sales and revenues $40,846 $43,683 $40,590 $47,459
------ ------ ------ ------
Income from continuing operations
before income taxes and
minority interests 2,333 2,666 1,545 1,025
Income tax expense (credit) 852 947 524 (1,298)(6)
Minority interests 19 12 1 12
Earnings (losses) of
nonconsolidated associates 9 (6) (31) (77)
------- ------- ------ ----
Income from continuing operations 1,509 1,725 991 2,258
Income (loss) from discontinued
operations 287 373 76 (521)
----- ----- ------ ------
Net Income 1,796 2,098 1,067 1,737
Premium on exchange of
preference stocks - - 26 -
Dividends on preference stocks 20 20 16 16
------ ------ ------ -----
Earnings on common stocks $1,776 $2,078 $1,025 $1,721
===== ===== ===== =====
Earnings attributable to common stocks
$1-2/3 par value from continuing
operations $1,451 $1,593 $905 $2,200
Income (loss) from discontinued
operations 266 348 59 (546)
----- ----- ---- ------
Earnings attributable to
$1-2/3 par value $1,717 $1,941 $964 $1,654
===== ===== === =====
Class H from continuing operations $38 $112 $44 $40
Income from discontinued operations 21 25 17 25
--- --- --- ---
Earnings attributable to Class H (7) $59 $137 $61 $65
== === == ==
Earnings attributable to Class H (8) $ - $ - $ - $2
== == == =
Basic earnings per share attributable to common stocks
$1-2/3 par value from continuing
operations $1.94 $2.20 $1.27 $3.14
Income (loss) from discontinued
operations 0.36 0.48 0.08 (0.78)
---- ---- ---- ----
Earnings attributable to
$1-2/3 par value $2.30 $2.68 $1.35 $2.36
==== ==== ==== ====
Class H from continuing operations $0.38 $1.11 $0.43 $0.39
Income from discontinued operations 0.21 0.24 0.17 0.24
---- ---- ---- ----
Earnings attributable to Class H (7) $0.59 $1.35 $0.60 $0.63
==== ==== ==== ====
Earnings attributable to Class H (8) $ - $ - $ - $0.02
== == == ====
Average number of shares of common stocks
outstanding - basic (in millions)
$1-2/3 par value 747 724 713 702
Class H (7) 100 101 102 103
Class H (8) - - - 104
Diluted earnings per share attributable to common stocks
$1-2/3 par value from continuing
operations $1.93 $2.19 $1.26 $3.10
Income (loss) from discontinued
operations 0.35 0.48 0.08 (0.77)
---- ---- ---- ----
Earnings attributable to
$1-2/3 par value $2.28 $2.67 $1.34 $2.33
==== ==== ==== ====
Class H from continuing operations $0.38 $1.11 $0.43 $0.39
Income from discontinued operations 0.21 0.24 0.17 0.24
Earnings attributable to Class H (7) $0.59 $1.35 $0.60 $0.63
==== ==== ==== ====
Earnings attributable to Class H (8) $ - $ - $ - $0.02
== == == ====
Average number of shares of common stocks
outstanding - diluted (in millions)
$1-2/3 par value 752 729 720 709
Class H (7) 103 104 105 106
Class H (8) - - - 107
- 46 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION - Concluded
Selected Quarterly Data (Unaudited) - Concluded
(1)First quarter 1997 results included a pre-tax gain of $88 million, after
deducting certain legal expenses ($55 million after-tax or $0.07 basic
earnings per share of $1-2/3 par value common stock) that resulted from an
agreement with Volkswagen A.G. (VW) settling a civil lawsuit which GM brought
against VW.
(2)Work stoppages in the United States during the second quarter of 1997
reduced calendar year income from continuing operations by approximately $240
million or $0.33 basic loss per share of $1-2/3 par value common stock, after
considering partial recovery of production losses from the work stoppages.
(3)Second quarter 1997 results included a pre-tax gain of $490 million ($318
million after-tax or $0.33 basic earnings per share of $1-2/3 par value
common stock and $0.80 basic earnings per share of Class H common stock)
related to the merger of the satellite service operations of Hughes and
PanAmSat Corporation.
(4)Second quarter 1997 results included a pre-tax gain of $128 million ($103
million after-tax or $0.14 basic earnings per share of $1-2/3 par value
common stock) related to the sale of GM Europe's equity interest in Avis
Europe.
(5)Fourth quarter 1997 results included a tax-free gain of $4.3 billion ($6.08
basic earnings per share of $1-2/3 par value common stock) related to the
December 17, 1997 completion of the strategic restructuring of GM's Hughes
Electronics subsidiary (Hughes Transactions). The 1997 tax credit primarily
resulted from the effect of the tax-free status of the gain.
(6)Fourth quarter 1997 results included charges against income from continuing
operations totaling $3.1 billion or $4.34 basic loss per share of $1-2/3 par
value common stock, resulting from GM's competitiveness studies.
(7)Represents information through December 17, 1997, the date on which GM
recapitalized the Class H common stock (GM's Recapitalization Date).
(8)Represents information for the period from December 18, 1997, through
December 31, 1997, which is subsequent to GM's Recapitalization Date.
- 47 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA (Unaudited)
Years Ended December 31
-----------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(Dollars in Millions Except Per Share Amounts)
Total net sales and revenues $155,445 $172,580 $158,281 $154,954 $143,740
Income from continuing
operations before
cumulative effect of
accounting changes $3,049 $6,483 $4,100 $4,726 $3,633
Income from discontinued
operations (93) 215 863 2,207 2,026
Cumulative effect of
accounting changes - - - (52)(1) (758)(2)
----- ----- ----- ----- -----
Net income $2,956 $6,698 $4,963 $6,881 $4,901
===== ===== ===== ===== =====
$1-2/3 par value common stock
Basic earnings per share
(EPS) from
continuing operations $4.40 $8.52 $5.08 $5.57 $3.59
Basic (loss) earnings per
share from
discontinued operations $(0.14) $0.18 $0.98 $1.71 $1.63
Diluted EPS from continuing
operations $4.32 $8.45 $5.04 $5.52 $3.54
Diluted (loss) earnings per
share from
discontinued operations $(0.14) $0.17 $0.98 $1.69 $1.61
Cash dividends declared per
share $2.00 $2.00 $1.60 $1.10 $0.80
Class H common stock
(prior to its
recapitalization on
December 17, 1997)
Basic EPS from continuing
operations $ - $2.30 $1.83 $1.39 $1.46
Basic EPS from discontinued
operations $ - $0.87 $1.05 $1.38 $1.16
Diluted EPS from continuing
operations $ - $2.30 $1.83 $1.39 $1.46
Diluted EPS from discontinued
operations $ - $0.87 $1.05 $1.38 $1.16
Cash dividends declared
per share $ - $1.00 $0.96 $0.92 $0.80
Class H common stock
(subsequent to its
recapitalization on
December 17, 1997)
Basic EPS from continuing
operations $0.68 $0.02 $ - $ - $ -
Diluted EPS from continuing
operations $0.68 $0.02 $ - $ - $ -
Cash dividends declared
per share $ - $ - $ - $ - $ -
Class E common stock
Basic EPS from discontinued
operations $ - $ - $0.04 $1.96 $1.71
Diluted EPS from discontinued
operations $ - $ - $0.04 $1.96 $1.71
Cash dividends declared
per share $ - $ - $0.30 $0.52 $0.48
Total assets $246,345 $221,400 $215,690 $208,898 $186,141
Long-term debt $7,118 $5,669 $5,352 $4,100 $5,047
GM-obligated mandatorily
redeemable preferred
securities of subsidiary
trusts $220 $222 $ - $ - $ -
Stockholders' equity $15,052 $17,584 $23,413 $23,310 $12,814
(1) GM adopted the provisions of the EITF consensus on Issue No. 95-1,
effective January 1, 1995, which resulted in an unfavorable cumulative effect
of $52 million after-tax or $0.07 basic loss per share of $1-2/3 par value
common stock.
(2)GM adopted SFAS No. 112, Employers' Accounting for Postemployment Benefits,
effective January 1, 1994. The unfavorable cumulative effect of adopting SFAS
No. 112 was $751 million after-tax or $1.05 basic loss per share of $1-2/3
par value common stock and $7 million after-tax or $0.08 basic loss per share
of Class H common stock.
- 48 -
<PAGE>
<TABLE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
<CAPTION>
SCHEDULE II - ALLOWANCES
Additions Additions
Balance at charged to charged to
beginning costs and other Balance at
Description of year expenses accounts Deductions end of year
- ----------- ------- -------- -------- ---------- -----------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C>
For the Year Ended December 31, 1998
Allowances Deducted from Assets
Finance receivables (unearned income) $3,516 $ - $3,288 $2,777 $4,027
Allowance for credit losses 903 463 96(a) 441(b) 1,021
Accounts and notes receivable (for doubtful
receivables) 161 208 19(a) 79(b) 309
Inventories (principally for obsolescence of
service parts) 258 - - 1(c) 257
Other investments and miscellaneous assets
(receivables and other) 13 - 1 - 14
Miscellaneous allowances (mortgage and other) 202 52 113 115 252
------ ---- ------ ------ ------
Total Allowances Deducted from Assets $5,053 $723 $3,517 $3,413 $5,880
===== === ===== ===== =====
For the Year Ended December 31, 1997
Allowances Deducted from Assets
Finance receivables (unearned income) $3,642 $ - $3,161 $3,287 $3,516
Allowance for credit losses 922 523 62(a) 604(b) 903
Accounts and notes receivable (for doubtful
receivables) 127 41 41(a) 48(b) 161
Inventories (principally for obsolescence of
service parts) 302 - - 44(c) 258
Other investments and miscellaneous assets
(receivables and other) 12 - 1 - 13
Miscellaneous allowances (mortgage) 138 106 6 48 202
------ --- ------- ------ -----
Total Allowances Deducted from Assets $5,143 $670 $3,271 $4,031 $5,053
===== === ===== ===== =====
For the Year Ended December 31, 1996
Allowances Deducted from Assets
Finance receivables (unearned income) $3,922 $ - $3,044 $3,324 $3,642
Allowance for credit losses 808 669 116(a) 671(b) 922
Accounts and notes receivable (for doubtful
receivables) 114 49 9(a) 45(b) 127
Inventories (principally for obsolescence of
service parts) 228 74(c) - - 302
Other investments and miscellaneous assets
(receivables and other) 33 1 - 22 12
Miscellaneous allowances (mortgage) 59 99 31 51 138
------- ----- ------- ------ -------
Total Allowances Deducted from Assets $5,164 $892 $3,200 $4,113 $5,143
===== === ===== ===== =====
Notes: (a) Primarily reflects the recovery of accounts previously written-off.
(b) Accounts written off.
(c) Represents net change of inventory allowances.
Reference should be made to the notes to consolidated financial statements.
</TABLE>
- 49 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
General Motors Corporation December 31, 1998 Consolidated Financial
Statements and is qualified in its entirely by reference to the current
report on Form 8-K dated April 12, 1999.
</LEGEND>
<CIK> 0000040730
<NAME> General Motors Corporation
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<EXCHANGE-RATE> 1
<CASH> 9,874
<SECURITIES> 9,150
<RECEIVABLES> 78,997
<ALLOWANCES> 0
<INVENTORY> 10,437
<CURRENT-ASSETS> 40,399
<PP&E> 67,436
<DEPRECIATION> 34,828
<TOTAL-ASSETS> 247,362
<CURRENT-LIABILITIES> 46,109
<BONDS> 113,731
220
1
<COMMON> 1,103
<OTHER-SE> 13,948
<TOTAL-LIABILITY-AND-EQUITY> 247,362
<SALES> 134,276
<TOTAL-REVENUES> 155,445
<CGS> 114,542
<TOTAL-COSTS> 125,584
<OTHER-EXPENSES> 105
<LOSS-PROVISION> 463
<INTEREST-EXPENSE> 6,629
<INCOME-PRETAX> 4,944
<INCOME-TAX> 1,636
<INCOME-CONTINUING> 3,049
<DISCONTINUED> (93)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,956
<EPS-PRIMARY> 4.26
<EPS-DILUTED> 4.18
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
General Motors Corporation December 31, 1997 Consolidated Financial
Statements and is qualified in its entirely by reference to the current
report on Form 8-K dated April 12, 1999.
</LEGEND>
<CIK> 0000040730
<NAME> General Motors Corporation
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Dec-31-1997
<EXCHANGE-RATE> 1
<CASH> 10,273
<SECURITIES> 11,711
<RECEIVABLES> 64,993
<ALLOWANCES> 0
<INVENTORY> 10,234
<CURRENT-ASSETS> 39,326
<PP&E> 62,531
<DEPRECIATION> 34,773
<TOTAL-ASSETS> 222,417
<CURRENT-LIABILITIES> 44,681
<BONDS> 93,036
222
1
<COMMON> 1,166
<OTHER-SE> 16,417
<TOTAL-LIABILITY-AND-EQUITY> 222,417
<SALES> 148,143
<TOTAL-REVENUES> 172,580
<CGS> 128,225
<TOTAL-COSTS> 142,643
<OTHER-EXPENSES> 228
<LOSS-PROVISION> 523
<INTEREST-EXPENSE> 5,883
<INCOME-PRETAX> 7,569
<INCOME-TAX> 1,025
<INCOME-CONTINUING> 6,483
<DISCONTINUED> 215
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,698
<EPS-PRIMARY> 8.70
<EPS-DILUTED> 8.62
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
General Motors Corporation December 31, 1996 Consolidated Financial
Statements and is qualified in its entirely by reference to the current
report on Form 8-K dated April 12, 1999.
</LEGEND>
<CIK> 0000040730
<NAME> General Motors Corporation
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<EXCHANGE-RATE> 1
<CASH> 13,092
<SECURITIES> 8,170
<RECEIVABLES> 63,050
<ALLOWANCES> 0
<INVENTORY> 9,882
<CURRENT-ASSETS> 39,725
<PP&E> 67,677
<DEPRECIATION> 34,393
<TOTAL-ASSETS> 215,690
<CURRENT-LIABILITIES> 40,796
<BONDS> 85,123
0
1
<COMMON> 1,271
<OTHER-SE> 22,142
<TOTAL-LIABILITY-AND-EQUITY> 215,690
<SALES> 140,057
<TOTAL-REVENUES> 158,281
<CGS> 121,472
<TOTAL-COSTS> 132,319
<OTHER-EXPENSES> 150
<LOSS-PROVISION> 669
<INTEREST-EXPENSE> 5,427
<INCOME-PRETAX> 5,440
<INCOME-TAX> 1,464
<INCOME-CONTINUING> 4,100
<DISCONTINUED> 863
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,963
<EPS-PRIMARY> 6.06
<EPS-DILUTED> 6.02
</TABLE>
