TYPE: 425
SEQUENCE: 1
DESCRIPTION: FILING OF COMMUNICATION
Filed by General Motors Corporation (GM)
Subject Company - General Motors Corporation
Pursuant to Rule 425 under the Securities Act of 1933
Commission File No. 001-00143
The following communication contains forward-looking statements within the
meaning of the Safe Harbor Provisions of the Private Securities Litigation
Reform Act of 1995. Reference made in the following are based on management's
current expectations or beliefs and are subject to a number of factors and
uncertainties that could cause actual results to differ materially from those
described in the forward-looking statements.
The principal risk factors that may cause actual results to differ materially
from those expressed in forward-looking statements contained in this
communication are described in various documents filed by GM with the U.S.
Securities and Exchange Commission, including GM's Current Reports on Form 8-K
dated April 12, 1999, and Filed on April 15, 1999, and April 21, 1999.
* * * * * * * * * *
PRESS RELEASE
GM WILL OFFER TO REPURCHASE GM $1-2/3 STOCK IN EXCHANGE FOR $8 BILLION OF
CLASS H STOCK, AND MAKE $7 BILLION IN CLASS H STOCK CONTRIBUTIONS TO BENEFIT
PLANS
TRANSACTIONS WILL REDUCE GM'S ECONOMIC INTEREST IN HUGHES TO APPROXIMATELY
35 PERCENT, AND SIGNIFICANTLY INCREASE EPS FOR GM $1-2/3 STOCK
DETROIT -- General Motors Corp. (NYSE: GM, GMH) today announced plans for a
broad restructuring of its economic interest in Hughes Electronics (Hughes),
including an offer to its current shareholders to repurchase GM $1-2/3 par value
common stock in exchange for approximately $8 billion of GM Class H common
stock, and contributions of approximately $7 billion of Class H stock to GM
benefit plans.
"The GM Board of Directors today authorized this series of transactions that
continue GM's efforts to deliver significant value to its shareholders and
further strengthen the corporation's financial position," said GM Chairman and
Chief Executive Officer John F. Smith, Jr.
Exchange offer to be made
GM will offer to exchange approximately $8 billion of Class H stock for GM
$1-2/3 stock. This exchange would significantly reduce the number of shares of
GM $1-2/3 stock outstanding. Specifically, GM will offer to holders of GM $1-2/3
stock an opportunity to voluntarily tender any portion of their holdings of GM
$1-2/3 stock in order to acquire Class H stock. The exchange generally will be
tax-free to GM and its U.S. stockholders for U.S. income tax purposes. Shares
tendered will be subject to pro-ration if the exchange offer is oversubscribed.
A Form S-4 registration statement detailing the terms and conditions of the
proposed exchange offer will be filed shortly with the Securities and Exchange
Commission. GM expects to complete the proposed transaction during the second
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quarter of this year. The per-share exchange ratio for the offering will be
determined immediately prior to the commencement of the offer. No
offering of Class H stock will be made except by means of a prospectus to be
included in the Form S-4 registration statement.
Contributions to benefit plans
GM plans to contribute up to $7 billion of Class H stock to certain of its
benefit plans in the second quarter, including a significant amount to its U.S.
Hourly-Rate Employees Pension Plan, and the balance to its voluntary employees'
beneficiary association (VEBA) trust. The VEBA trust was set up in 1997 to fund
the corporation's other post-retirement employee benefit (OPEB) obligations for
hourly employees. The pension plan contribution will help to ensure that GM's
U.S. pension plans remain fully funded on an SFAS-87 basis for the foreseeable
future. The contributions to the benefit plans, which are not subject to any
regulatory approvals, will significantly reduce annual pension and OPEB expense,
and will strengthen the company's overall financial position.
"These actions enable GM to realize $15 billion of the value of Hughes, and
improve GM's financial flexibility to pursue business and growth initiatives in
our automotive and financial services businesses," said Smith. "We will improve
net income through reduced pension and OPEB expense while substantially reducing
the number of GM $1-2/3 shares outstanding. This will translate to a significant
increase in GM's earnings per share."
In connection with these transactions, GM will issue approximately $15
billion of Class H stock. However, the proposed transactions will not have any
dilutive effect on the earnings per share attributable to the outstanding Class
H stock. The issuance of additional Class H shares in connection with these
transactions will substantially increase the liquidity of that stock in the
securities market, which should benefit trading of Class H stock over time.
Upon completion of a fully subscribed exchange offer and contributions to the
benefit plans, GM will retain approximately a 35 percent, or $18 billion,
economic interest in Hughes (based on yesterday's NYSE closing price of Class H
stock) and Hughes will remain a wholly-owned subsidiary of GM. Consequently, GM
$1-2/3 common shareholders would benefit indirectly in any further improvement
in the Class H stock price as a result of GM's retained economic interest in
Hughes as well as the Class H stock held by the GM benefit plans.
GM has no current plans or intention to separate Hughes or any of its
businesses from GM, whether by means of a spin-off, split-off or any other
transaction. However, GM will continue to evaluate what Hughes ownership
structure would be optimal for the two companies and GM stockholders.
GM has the flexibility to use the economic interest that it retains in Hughes
in a variety of ways, including as a currency for additional GM $1-2/3 stock
repurchases, acquisitions, benefit plan contributions, to raise cash proceeds in
a tax-efficient manner, or to implement further corporate restructurings.
The transactions will not affect the business operations of Hughes, and GM's
automotive operations will continue to have direct access to the opportunities
for strategic synergies with Hughes' rapidly growing communications services
businesses.
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"It is important to retain our strategic relationship with Hughes. We
continue to create new communications capabilities and functionality in our
vehicles. Hughes has redefined itself as a premier provider of digital
entertainment and business communications, which strengthens its ability to
contribute to GM's strategy to grow its service-oriented businesses," Smith
said.
GM has repurchased approximately $9 billion of GM $1-2/3 stock since 1997, in
addition to the significant reduction in the number of GM $1-2/3 shares
outstanding expected to result from the proposed exchange offer. Moreover, GM
has distributed approximately $12 billion of value to its shareholders as part
of the spin-offs of the Hughes defense business in 1997 and the Delphi business
in 1999.
"GM has a strong and consistent track record of finding ways to return value
to shareholders, and that record is being extended through these proposed
transactions," Smith said. "GM will strive to continue to increase earnings with
less capital employed. This is an excellent formula to deliver superior
shareholder returns."
GM $1-2/3 stock and Class H stock are both common stocks of General Motors.
Class H earnings per share and amounts available for payment of dividends are
determined by the financial performance of Hughes. As of year-end 1999, there
were 137.1 million shares of Class H outstanding, representing a 32 percent
tracking stock interest in the earnings of Hughes, and 617.4 million shares of
GM $1-2/3 stock outstanding.
Morgan Stanley Dean Witter will act as dealer manager for General Motors in
connection with the exchange offer. Hughes will engage Salomon Smith Barney
in connection with the offering.
In this news release, use of the words anticipate, expect, should, believe,
plan, intensify, overcome 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 with the U.S. Securities and Exchange Commission,
including GM's Current Reports on Form 8-K dated April 12, 1999, and filed on
April 15, 1999, and April 21, 1999.
We urge holders of GM $1-2/3 common stock to read the Registration Statement
on Form S-4, including the prospectus, regarding the exchange offer referred to
above, when it becomes available, as well as the other documents which General
Motors has filed or will file with the Securities and Exchange Commission,
because they contain or will contain important information. Holders of GM $1-2/3
common stock may obtain a free copy of the prospectus, when it becomes
available, and other documents filed by General Motors at the Commission's web
site at at General Motors' web site at or from General Motors by directing such
request in writing or by telephone to: General Motors Corporation, 100
Renaissance Center, Detroit, Michigan 48243-7301, Attention: GM Investor
Relations, Telephone: (212) 418-6270, Facsimile: (212)418-3658. This
communication shall not constitute an offer to sell or the solicitation of an
offer to buy, nor shall there be any sale of securities in any state in which
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state. No offering of
securities shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as amended. Inquiries
from the news media should be directed to GM Corporation Communications:
212-418-6380.
# # #
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Note to editors:
A conference call for journalists to ask follow-up questions regarding today's
announcement will be held today (Tuesday, Feb. 1, 2000) from 4:00 p.m. to 4:30
p.m. EST. On the call will be General Motors Vice Chairman Harry J. Pearce, GM
Executive Vice President and Chief Financial Officer J. Michael Losh, and GM
Vice President and Treasurer Eric A. Feldstein. Following are the access
numbers:
800-266-1825 (calling from the United States)
212-676-4910 (calling from outside of the United States)
In addition to the live conference call, there is the opportunity to call the
following numbers, up to 48 hours after the press conference, and listen to a
replay:
800-633-8284 (calling from the United States)
858-812-6440 (calling from outside of the United States)
Password, required for the replay only, is: 14301146
A graphic chart and photos of GM officers are available on GM Media Online:
htpp://media.gm.com. High resolution files can be obtained by calling Wieck
Photo at 972-392-0888.
# # #
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QUESTIONS AND ANSWERS
General Strategy of Restructuring of GM's Economic Interest in Hughes
Q1. What is GM announcing today?
A. GM is planning to make an $8 billion exchange offer, which means that
holders of GM $1 2/3 common stock will be offered the opportunity to
exchange their share(s) for shares of GM Class H common stock, which is a
tracking stock of GM relating to GM's wholly-owned Hughes Electronics
subsidiary. In addition, we have announced that we currently plan to
contribute about $7 billion of Class H stock to our U.S. Hourly-Rate
Employees Pension Plan and VEBA Trust for hourly OPEB (other
post-employment benefit) obligations.
Q2. Why is GM choosing to reduce its economic interest in Class H at this time?
A. The proposed restructuring of GM's economic interest in Hughes is part of
GM's overall plan to monetize some of the heretofore unrecognized economic
value arising from GM's ownership of Hughes. The restructuring is designed
to:
o Generate a significant and immediate increase in GM $1 2/3 EPS by reducing
shares outstanding and reducing pension/OPEB expense.
o Bolster GM's capital position and thereby facilitate GM's business growth
initiatives and competitiveness.
o Allow $1 2/3 shareholders to benefit in any further improvement in the
Class H stock price through its retained economic interest in Hughes and
the Class H stock held by the benefit plans.
o Substantially increase the liquidity of the Class H stock, which should
benefit trading of Class H stock over time.
Q3. For quite some time, GM management has defended its ownership in Hughes
based on its strategic interest in Hughes. What has changed?
A. GM maintains its belief that Hughes is a valuable asset and as such will
continue to own 100% of the common stock of Hughes after the restructuring.
Accordingly, all of the GM-Hughes synergy opportunities that exist today
should remain in place following these transactions.
Q4. Why is GM retaining such a large economic interest in Hughes via unissued
Class H shares?
A. GM's remaining economic interest in Hughes via unissued Class H shares is
function of the proposed size of the exchange offer and pension/VEBA
contributions which have been sized based on market considerations (in the
case of the exchange) and ERISA limits (in the case of the pension/VEB
contributions). GM's remaining economic interest represents a "storehouse
of value" which is attractive from a credit rating perspective and allows
GM $1 2/3 shareholders to participate indirectly in any further
improvement in the Class H stock price. It also provides GM the flexibility
to consider additional shareholder value initiatives in the future, as
appropriate.
Q5. Now that GM has announced a significant reduction in its economic ownership
in Hughes, will GM spin-off Hughes?
A. GM has no present plans or intentions to spin-off or split-off Hughes or
any portion of its business; whether by means of a spin-off, split-off or
any other transaction.
Q6. Will GM pursue additional Class H for $1 2/3 exchange offers in the future?
A. GM has no current plans or intentions to pursue additional exchange offers
at this time. However, the Class H stock provides an attractive currency to
pursue further repurchases of GM $1 2/3 or other shareholder initiatives.
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Q7. Do these transactions limit GM's options for its remaining economic/legal
interest in Hughes?
A. The restructuring of GM's economic stake in Hughes affords GM maximum
flexibility to pursue a number of different strategies with respect to
Hughes over the long-term.
Q8. As a shareholder, can I vote on whether I want GM to do this?
A. The proposed transaction does not require shareholder approval.
GM $1 2/3 Exchange Offer
Q1. Why did GM choose to conduct the stock exchange offer?
A. The $8 billion exchange offer is an important element of our overall plan
to monetize some of the heretofore unrecognized economic value arising from
GM's ownership of Hughes. The $8 billion of indicated value attributed to
the exchange offer will be used to effect a substantial repurchase of GM $1
2/3 stock which should be accretive to GM $1 2/3 EPS.
Q2. How many additional shares of Class H will be outstanding as a result of
the exchange offer?
A. The exact number of Class H shares to be issued will be determined by GM
immediately prior to the commencement of the exchange offer, which will not
occur until after the SEC review process has been completed and GM is
prepared to proceed with the offer.
Q3. Will there be any dilution to existing Class H holders as a result of the
exchange offer?
A. No. There are currently about 137 million shares of GM Class H common stock
issued and outstanding. However, this number does not reflect the full 100%
tracking stock interest which GM could issue relating to the earnings of
Hughes. Instead, it currently represents about 32% of such interest that
is held by holders of Class H stock. The remaining unissued shares of GM
Class H stock represent the 68% economic interest currently retained by GM.
The issuance of additional shares of Class H stock in these transactions
will increase the outstanding shares to about 65%, assuming the exchange
offer is fully subscribed and based on yesterday's closing Class H stock
price on the NYSE. In light of the fact that the shares to be issued in
these transactions come from GM's current 68% economic interest in Hughes,
the issuance of new Class H shares will not have a dilutive impact on
current GM Class H shareholders. The issuance represents a transfer to GM's
$1 2/3 shareholders and GM's benefit plans of a portion of GM's economic
interest not an increase in the dividend base used to apportion Hughes
earnings.
Q4. What does the exchange offer permit me to do?
A. Pursuant to the exchange offer, you may tender some or all of your shares
of GM $1 2/3 common stock in exchange for shares of Class H stock (subject
to proration if the offer is over-subscribed) or you may decide not to
tender any of your shares of GM $1 2/3.
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Q5. Why would a shareholder want to exchange their GM common stock for GM
Class H stock?
A. GM's Board of Directors is not making a recommendation in connection with
the exchange offer. However, the exchange offer will provide $1 2/3
stockholders with an opportunity to acquire an interest in the financial
performance of Hughes using shares of $1 2/3 stock, rather than cash, as
the currency to accomplish that acquisition. This exchange would generally
be free of U.S. income tax to a holder of $1 2/3 stock (except for any cash
received for fractional shares) compared to the alternative of selling $1
2/3 stock, paying a broker's commissions and tax on the proceeds and using
the remainder to purchase Class H stock. GM would expect to provide $1 2/3
shareholders a financial incentive to participate in the exchange offer.
This incentive will manifest itself in the Class H for $1 2/3 share
exchange ratio which will be announced at a later date.
Q6. Who can participate in the exchange offer?
A. We have not yet commenced the exchange offer. However, once commenced, all
$1 2/3 stockholders may participate in the exchange offer, provided that
you hold shares of $1 2/3 stock during the exchange period and you tender
your shares in a jurisdiction where the exchange offer is permitted under
the laws of the jurisdiction, such as the United States.
Q7. Will the exchange offer be available to stockholders outside the U.S.?
A. GM currently intends to conduct the exchange offer in as many foreign
jurisdictions as reasonably practicable. Although GM is continuing to
assess the issue, GM currently believes that it will be possible to conduct
the exchange offer in a substantial number of foreign jurisdictions.
Q8. How many shares of Class H stock will I receive for each share of $1 2/3
common stock that I tender?
A. The exchange ratio and pro-ration methodology will determine how many
shares of Class H stock that you will receive for each share of $1 2/3
common stock tendered. The exchange ratio has not yet been set and will be
set by GM immediately prior to the commencement of the exchange offer. The
pro-ration methodology will be described in the prospectus.
Q9. When will I receive them?
A. Evidence of ownership of shares of Class H stock issued in exchange for
shares of $1 2/3 stock validly tendered in the exchange offer and accepted
by GM will be sent to participating stockholders as promptly as reasonably
practicable following the exchange offer. Currently, Class H stock is
registered under the direct registration-certificateless-system, although
stockholders may request certificates rather than account statements.
Q10. How will the exchange ratio be determined?
A. To determine the exchange ratio, GM will consider, among other things: i)
recent market prices for GM $1 2/3 common stock and Class H common stock;
and ii) financial advice from its dealer manager in the exchange offer.
Q11. When will you commence the exchange offer?
A. We are currently planning to commence the exchange offer promptly following
SEC approval of the transaction (i.e., when the S-4 becomes effective). We
currently plan to complete the exchange offer in the second quarter of
2000.
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Q12. When will the exchange offer expire?
A. Unless extended by GM, the exchange offer will expire on the expiration
date specified in the exchange offer documents which will be mailed to $1
2/3 stockholders in connection with the exchange offer. The expiration date
will be at least 20 business days after the offer is commenced.
Q13. What will happen to the value of my GM $ 1 2/3 stock with this transaction?
A. We can give no assurances regarding the market price of GM $1 2/3 stock or
Class H stock in the future. However, we do expect this restructuring to
increase GM $1 2/3's annual earnings per share.
Q14. What happens if the exchange offer is undersubscribed (i.e., if not enough
shares of $1 2/3 common stock are tendered)?
A. If the exchange offer is undersubscribed, GM may choose to complete the
offer for a lower amount.
Q15. What happens if the exchange offer is over-subscribed (i.e., if too many
shares of $1 2/3 common stock are tendered)?
A. If the exchange offer is over-subscribed, all shares of $1 2/3 common stock
that are validly tendered will be accepted for exchange on a pro rata basis
except that tenders from persons who own fewer than 100 shares of $1 2/3
common stock, which are sometimes referred to as "odd-lots", will generally
be accepted in full.
Q16. What are the tax implications of this transaction?
A. We currently expect that, for U.S. federal income tax purposes, the
exchange will generally be tax-free to GM and its $1 2/3 stockholders,
except that cash received in lieu of fractional shares will be taxable to
the stockholder. As always, you should consult your tax advisor as to the
particular tax consequences to you of your participation in the exchange
offer.
Q17. How will fractional shares be handled?
A. Fractional shares will be settled for cash.
Q18. Who are GM and Hughes bankers on the exchange offer?
A. Morgan Stanley Dean Witter will act as dealer manager for General Motors in
connection with the exchange offer. Hughes will engage Salomon Smith Barney
in connection with the offering.
Q19. How can I find out more information about the exchange offer?
A. GM urges holders of GM $1 2/3 Common Stock to read the Registration
Statement on Form S-4, including the prospectus, regarding the exchange
offer referred to herein, when it becomes available, as well as the other
documents which General Motors has filed or will file with the Securities
and Exchange Commission, because they contain or will contain important
information. Holders of GM $1 2/3 Common Stock may obtain a free copy of
the prospectus, when it becomes available, and other documents filed by
General Motors at the Commission's web site at www.sec.gov or at General
Motors' web site at generalmotors.com or from General Motors by directing
such request in writing or by telephone to: General Motors Corporation,
767 Fifth Avenue, New York, NY 10153-0013, Attention:GM Investor Relations,
Telephone: (212)418-6270, Facsimile:(212)418-3658. This communication shall
not constitute an offer to sell or the solicitation of an offer to buy, nor
shall there be any sale of securities in any state in which offer,
solicitation or sale would be unlawful prior to registration
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or qualification under the securities laws of any such state. No offering
of securities shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as amended.
Inquiries from the news media should be directed to GM Corporation
Communications: 212-418-6380.
Class H
Q1. As a potential participant in GM's exchange offer, I would like to better
understand Hughes strategy and investment story?
A. In mid-January 2000, Hughes announced major changes in its corporate
structure and business mix designed to sharply focus the company's
resources and management attention on its high-growth entertainment,
information and business communications services businesses. Through
several strategic moves (e.g., sale of the satellite manufacturing
operations, discontinuance of certain wireless manufacturing activities,
refocus on wireless broadband opportunities, consolidation of operations
along customer lines) Hughes has become a highly focused entertainment and
information services and distribution company. Hughes believes that it is
now in a better position to pursue its high-growth businesses.
Q2. How will this announcement impact Hughes and its ability to execute its
business strategy and take advantage of the growth opportunities in the
communications and entertainment industry?
A. Hughes' ability to execute its business strategy should not be affected by
the transactions.
Q3. Following last month's announcement of the pending sale of the satellite
manufacturing business to Boeing, will Hughes have sufficient cashflow to
fund its growth initiatives or will Hughes be going into the capital
markets this year to raise debt or equity?
A. Hughes expects to issue public debt sometime in the first half of 2000.
This debt will replace much of the money drawn from Hughes' credit
facilities last year.
Q4. What should we read into the announcement of a new outside board member by
Hughes today?
A. Today's separate announcement of Bernee D. L. Strom being elected to the
Hughes Board reflects that Hughes is able to attract outstanding
individuals to its board who are capable of providing a valuable
perspective to the running of the Hughes business.
Pension Fund and VEBA Questions
Q1. What is GM announcing with respect to its pension plans and VEBA Trust?
A. We have announced that we currently plan to contribute about $7 billion of
Class H stock to our U.S. Hourly-Rate Employees Pension Plan and the VEBA
Trust for hourly represented retirees other post-employment benefits This
will help to continue the fully funded status (on a SFAS 87 basis
of our pension plan and will also partially fund GM's OPEB liability. As a
result, we expect our annual pension and OPEB expense to be reduced.
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Q2. Why is GM contributing shares of Class H to GM's pension plan and VEBA
Trust?
A. By contributing shares of Class H to GM's Pension Plan and VEBA Trust, GM
would to some extent free up cash otherwise earmarked for benefit plan
contributions and at the same time help provide for the fully funded status
(on a SFAS 87 basis) of GM's Hourly Pension Plan. In addition, the VEBA
contribution will help to further reduce GM's post retirement health care
and life insurance liabilities. Furthermore, future appreciation of Class H
stock could lower future pension and OPEB expense.
Q3. How many shares of Class H common stock will be contributed to GM's Hourly
Pension Plan and VEBA Trust?
A. Although we have not determined the exact amounts, we currently expect that
the contributions will likely be up to the maximum allowable ERISA limits.
The exact amounts will be determined by GM immediately prior to making each
of these contributions.
Q4. How will GM choose the level of contribution to its Hourly Pension Plan and
VEBA Trust?
A. With respect to pension and VEBA funding, there are regulatory factors
which constrain the size of a potential Class H contribution.In particular,
ERISA restricts the amount of employer securities and employer real
property a benefit plan can hold to no more than 10% of the fair market
value of assets in the plan as measured immediately following the
contribution. In addition, the plan cannot hold more than 25% of the
outstanding shares of any class of employer securities, provided at least
50% of the remaining shares are independently held. These restrictions put
an upper limit on the amount of Class H Stock which could be contributed.
Q5. What is the timing of these contributions?
A. It is expected that both the Pension Plan and the VEBA Trust contributions
will take place in the second quarter of 2000. We currently expect to
complete the contributions following the exchange offer. We reserve the
right to modify the amount or timing of the pension and VEBA Trust
contributions, or not to make any contributions at all, in the event that
the Board of Directors determines that such a change would be in the best
interests of GM and its stockholders.
Q6. A share exchange of this size in conjunction with the large contributions
of Class H stock to the Pension Plan/VEBA Trust will likely cause a
supply/demand imbalance in the market and put temporary downward pressure
on the Class H stock price. How will GM minimize this situation?
A. We do not believe that it would be in the best interest of the Pension Plan
and/or VEBA to disrupt the market with disorderly sales of Class H stock.
Q7. Who will manage the Class H shares for the Pension Plan and the VEBA trust?
A. U.S. Trust.
Q8. Will there be a discount on the shares contributed to the Pension Plan /
VEBA Trust?
A. Any discount will be determined by U.S. Trust on behalf of the Pension Plan
and VEBA Trust. GM does not currently know what discount will be applied to
the contributions to either the Pension Plan or the VEBA Trust.
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Q9. What are the U.S. tax implications of the contributions to the benefit
plans?
A. GM will receive a tax deduction for the pension and VEBA contributions
based upon the fair-market value of the stock at the time of the
contribution.
Q10. What is GM's pension funding history?
A. In 1992 through 1994, GM contributed $13.4 billion to its U.S. Hourly and
Salaried Pension Plans. In 1995 through 1999, GM contributed $14.6 billion
to its pension plans ($8.3 billion in cash and $6.3 billion in stock). The
breakdown for 1995 through 1999 is as follows:
($, billions) 1995 1996 1997 1998 1999
---- ---- ---- ---- ----
Cash Contributions 4.1 0.8 1.5 1.1 0.8
Stock contributions* 6.3
*GM Class E stock
Q11. What is the current funded status of GM's pension liabilities?
A. As of year-end 1999, GM's total U.S. pension plans were $6.2 billion
overfunded on a SFAS 87 basis.
Q12. I thought GM's Hourly Pension Plan was fully funded. Why is GM contributing
additional funds to the plan?
A. The U.S. Hourly Pension Plan is $1.2 billion over funded on an SFAS-87
basis. However, federal regulatory funding requirements are not determined
on a SFAS-87 basis. GM strives to fund its U.S. pension plans to such an
extent that it meets minimum funding contribution requirements under ERISA,
avoids PBGC variable rate premiums, and avoids deficit reduction charges.
Under such criteria, GM would expect to make additional contributions to
the U.S. Hourly Pension Plan in the future. Therefore, GM has decided to
proceed with the proposed Class H stock contributions.
Q13. What is a VEBA Trust?
A. A VEBA Trust is one organized and operated under the rules of the Internal
Revenue Code. VEBA stands for Voluntary Employees' Beneficiary Association.
It is a tax-exempt trust which can be used to fund welfare benefits (not
pension), including post-employment health care and insurance benefits for
employees including those covered by collective bargaining agreements
(i.e., union employees). These types of benefits comprise GM's OPEB
liabilities. GM's VEBA Trust is for the benefit of represented hourly
retirees only.
Q14. What is the benefit of a VEBA Trust?
A. A VEBA Trust is a tax-efficient way to prefund certain benefit plan
liabilities because it allows tax-deductible contributions and permits
trust assets to grow tax-free.
Q15. How much value does GM currently have in its VEBA Trust?
A. About $6.3 billion at year-end 1999.
Q16. What is GM's current U.S. OPEB liability?
A. GM's U.S. OPEB liability is about $42.7 billion on a gross basis at
year-end 1999.
Q17. Following this contribution of Class H shares to GM's VEBA Trust what will
be the funded status of GM's OPEB liabilities?
A. As there are no requirements to fund the VEBA Trust, there is no "funded
status" per se.
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Rating Agency Questions
Q1. What is the Rating Agency reaction to these transactions?
A. We cannot predict how the rating agencies will react to these transactions.
However, we expect that rating agencies will view this transaction
favorably as the Class H stock contributed to the Hourly Pension Plan and
VEBA will further strengthen GM's balance sheet.
Q2. How does GM's retention of an economic interest in Hughes help its credit
rating?
A. GM's economic interest in Hughes should be viewed as a storehouse of value
which, combined with GM's strong liquidity position, provides GM with
strong financial flexibility.
Tracking Stock Questions
Q1. What kind of security is GM Class H stock?
A. GM Class H stock is a letter stock of General Motors.
Q2. What is "tracking stock" or "letter stock" and how does it work?
A. A "tracking stock" (also known as letter stock) is a separate class of a
company's common stock that is designed to provide holders with financial
returns based on the financial performance of a group of assets or a
specific business unit, division, or subsidiary. Holders of a tracking
stock are stockholders of the parent company and not of the underlying
business or subsidiary. The market value of the tracking stock generally
reflects the economic value of the tracked business rather than that
of the parent company as a whole. In the case of the GM Class H stock,
the security tracks the financial performance of Hughes Electronics
Corporation.
Q3. What are the benefits to having a "tracking stock"?
A. A tracking stock can provide many benefits including: a) greater financial
flexibility (i.e., ability to raise capital through a "currency" directly
tied to an underlying business); b) advantages of doing business under
common ownership (i.e., synergies); c) greater market recognition (which
translates to better realization of value); d) increased shareholder choice
(i.e., better match of investor profiles); e) advantages of accounting and
tax consolidation; f) management incentives (i.e., ability to direct
options and securities to employees of a specific group).
Q4. Are there separate shareholder meetings for holders of Class H stock?
A. No. As stockholders of GM, Class H stockholders participate in the GM
stockholder meetings.
Q5. What are the voting rights for Class H stock?
A. Each holder of Class H common stock is entitled to 0.60 vote per share.
Each holder of GM $1 2/3 common stock is entitled to one vote per share.
The holders of GM $1 2/3 and Class H vote together on all matters, except
with respect to certain special matters pertaining to each class.
- 12 -
Q6. How are conflicts of interest with respect to GM's dual class common stock
structure resolved?
A. Under Delaware law, the GM Board owes a fiduciary duty to all holders of GM
common stock and must act in the best interests of the corporation and all
stockholders, regardless of class. In this regard, the GM board,
principally through its Capital Stock Committee, oversees the policies,
programs and practices of GM which may impact the potentially divergent
interests of the two classes of GM common stock. The Capital Stock
Committee is comprised entirely of independent directors of GM.
GM Employees
Q1. Can I participate in the exchange offer?
A. Yes, you will receive additional information regarding the exchange offer
by mail in connection with the commencement of the exchange offer. You will
also be able to get more information about the exchange via GM's Socrates
intranet site.
Q2. What will be the impact of the transaction on my stock options?
A. This transaction should have no impact on the strike price of your stock
options.
Other
Q1. What is the EPS impact for GM $1 2/3 of the restructuring?
A. The earnings impact will ultimately depend on the GM $1 2/3 and Class H
stock prices at the time of the exchange and the exchange ratio, which will
not be set until immediately prior to the commencement of the exchange
offer.
Q2. What will GM do with the cash saved (i.e., the cash that no longer needs to
be contributed to the pension plan)?
A. GM will determine where this cash would best benefit the corporation and
its shareholders.
Q3. Now that GM has effectively freed up cash through its large pension and
VEBA contributions, will GM announce a new share repurchase program?
A. Although GM has no current outstanding share repurchase program, GM's board
periodically reviews GM's capital requirements and various alternatives to
maximize shareholder value.
# # #
Use of the words anticipate, expect, should, believe, plan, intensify, overcome
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 with the
U.S. Securities and Exchange Commission, including GM's Current Reports on Form
8-K dated April 12, 1999 and filed on April 15, 1999, and April 21, 1999.
- 13 -
We urge holders of GM $1 2/3 Common Stock to read the Registration Statement
on Form S-4, including the prospectus, regarding the exchange offer referred
to above, when it becomes available, as well as the other documents which
General Motors has filed or will file with the Securities and Exchange
Commission, because they contain or will contain important information.
Holders of GM $1 2/3 Common Stock may obtain a free copy of the prospectus,
when it becomes available, and other documents filed by General Motors at the
Commission's web site at at General Motors' web site at or from General
Motors by directing such request in writing or by telephone to: General
Motors Corporation, 767 Fifth Avenue, 14th Floor New York, New York
10153-0013, Attention: GM Investor Relations, Telephone: (212) 418-6270,
Facsimile: (212)418-3658. This communication shall not constitute an offer to
sell or the solicitation of an offer to buy, nor shall there be any sale of
securities in any state in which offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such state. No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities Act of
1933, as amended. Inquiries from the news media should be directed to GM
Corporation Communications: 212-418-6380.
# # #
- 14 -
RESEARCH ANALYST PRESENTATION
CHART:
RESTRUCTURING OF GM'S ECONOMIC INTEREST IN HUGHES
February 1, 2000
Use of the words anticipate, expect, should, believe, plan, intensify, overcome
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 with the
U.S. Securities and Exchange Commission, including GM's Current Reports on Form
8-K dated April 12, 1999 and filed on April 15, 1999, and April 21, 1999.
We urge holders of GM $1 2/3 Common Stock to read the Registration Statement on
Form S-4, including the prospectus, regarding the exchange offer referred to
herein, when it becomes available, as well as the other documents which General
Motors has filed or will file with the Securities and Exchange Commission,
because they contain or will contain important information. Holders of GM $1 2/3
Common Stock may obtain a free copy of the prospectus, when it becomes
available, and other documents filed by General Motors at the Commission's web
site at www.sec.gov or at General Motors' web site at generalmotors.com or from
General Motors by directing such request in writing or by telephone to: General
Motors Corporation, 767 Fifth Avenue, New York, NY 10153-0013, Attention: GM
Investor Relations, Telephone: (212)418-6270, Facsimile: (212)418-3658. This
communication shall not constitute an offer to sell or the solicitation of an
offer to buy, nor shall there be any sale of securities in any state in which
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state. No offering of
securities shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as amended. Inquiries
from the news media should be directed to GM Corporation Communications:
212-418-6380.
Operator:- Call Introduction [provided by external teleconference service]
Pat Campbell:
o I'd like to direct your attention to the safe harbor language and other
legends on the first page of the chart set. The content of our conference
call will be governed by this language.
o This afternoon we have from GM our Vice Chairman - Harry Pearce, our
CFO-Mike Losh and our Treasurer Eric Feldstein. In addition, we have Mike
Smith - Chairman and CEO of Hughes to answer your questions.
o Conference call handed over to Harry Pearce
Harry Pearce
o Thank you for joining the conference call
o This morning, the GM Board approved a plan under which GM will restructure its
economic interest in Hughes. The plan was disclosed in a press release issued a
little earlier today and I will ask Mike Losh to elaborate on the key aspects of
the transaction. But I wanted first to take a moment to offer you our
perspective on the fundamental Hughes business.
o Hughes has clearly undergone a major transformation in the past few years. It
started in 1997 with the spin-off of its defense business and the transfer of
Delco to Delphi.
o More recently, the Hughes' enterprise has developed into more of a "pure"
communications company with:
o The rapid growth of its DirecTV subscriber base;
o Its successful expansion of other communication service businesses;
o And the recent agreement to sell its satellite manufacturing operations to
Boeing
- 15 -
o So in just over 2 years, Hughes has reshaped its business from primarily a
manufacturing operation in the defense, aerospace and automotive industry into
one which is primarily a service-based communications company.
o As a digital entertainment and business communications enterprise,
Hughes will direct its focus and its capital towards high-growth and
high-margin service businesses. The prospects for Hughes earnings growth
looks quite favorable as the company continues to pursue a variety of exciting
initiatives. And as Hughes competes in this fast-paced communications arena,
the company will certainly benefit from the two new outside members recently
added to the Hughes Board of Directors who bring special knowledge and expertise
to the company.
o We are encouraged by the sharp appreciation in the market value of Class H
stock over the past few months (the price has actually doubled in the past 18
weeks). We believe it indicates that investors have begun to recognize the
enormous potential of Hughes'high-growth/high margin business initiatives.
o In light of the transformation of Hughes' business, and in view of the
extraordinary increase in the value of GM's economic interest, we have
determined it would be appropriate to redeploy a large portion of GM's economic
interest in Hughes.
o The transaction we announced earlier today is intended to redeploy GM's
economic interest in Hughes in a way which we believe will:
i) Generate a significant increase in GM $1 2/3 EPS and improve
shareholder returns;
ii) Strengthen GM's capital position;
iii) Preserve the opportunity for GM $1 2/3 shareholders to benefit from
the continued Class H stock price appreciation; and
iv) Provide significantly increased liquidity for trading in Class H
Stock
o With Hughes pursuing a number of exciting initiatives in the fast growth
highly profitable communications business including vehicle based
communications, I expect Class H stock holders and $1 2/3 stockholders to reap
the benefit of these opportunities over time.
o Now, I'd like to turn things over to Mike to walk you through the planned
transaction.
- 16 -
CHART:
RESTRUCTURING PLAN
o GM's current 68% economic interest in Hughes now valued at roughly $33
billion
o GM plans to redeploy this capital as follows:
o $8 billion to be used in a exchange offering of Class H stock for GM
$1 2/3 stock
o $7 billion in Class H stock to be contributed to GM pension/VEBA plans
o $18 billion to be retained as economic interest in Hughes
o Transaction would reduce GM's economic interest in Hughes to 35% (on a fully
diluted basis)
o Seek to complete execution by June month-end
Mike Losh
o Thanks Harry.
RESTRUCTURING PLAN
o I think most of you are generally familiar with the GM-Hughes ownership
structure. GM owns 100% of Hughes, but has distributed a 32% economic interest
in the company to public investors in the form of Class H stock which trades on
the NYSE.
o Currently the market value of GM's 68% economic interest in Hughes is
worth about $33 billion.
o GM now plans to redeploy a portion of this $33 billion of capital as follows:
o Utilize $8 billion of Class H stock in an exchange offer for $1 2/3 stock.
In other words, GM plans to use up to $8 billion of Class H stock as
the currency to offer to repurchase GM $1 2/3 stock.
o Contribute up to $7 billion of Class H stock to GM benefit plans --Split
between hourly pension plan and VEBA (mostly pension).
o Retain the ability to issue an additional $18 billion of Class H stock
representing roughly a 35% economic interest (on a fully diluted basis),
based on current market value of Class H stock.
o Execution of these transactions is currently expected to be completed prior to
June month-end.
- 17 -
<PAGE>
CHART:
Objectives of Restructuring Plan
o Generate higher net income with less capital employed
o Drive GM $1 2/3 EPS higher
o Strengthen GM's liquidity and credit position
o Retain an indirect interest for GM $1 2/3 stockholders in the future growth
of Hughes
o Significantly improve liquidity of Class H stock
OBJECTIVES OF RESTRUCTURING PLAN
o The objectives of the restructuring plan are as follows:
o To generate higher net income with less capital employed;
o To drive GM $1 2/3 EPS sharply higher by reducing the number of outstanding
shares;
o To strengthen GM's liquidity and credit position;
o To retain an indirect interest for GM $1 2/3 stockholders in the future growth
of Hughes including synergies as in-vehicle communications becomes an important
business; and
o To significantly improve liquidity of Class H stock.
- 18 -
<PAGE>
EXCHANGE OF CLASS H FOR GM $1 2/3
o So, the two principal components of the transaction are:
i) The Share Exchange -- GM's offer to repurchase $1 2/3 stock using Class H as
the currency;
ii) The contribution of GM's Class H Stock to its benefits plans
o Let's talk first about the exchange transaction
o GM plans to utilize up to $8 billion of newly issued shares of Class H stock
to repurchase GM $1 2/3 stock
o This stock repurchase would be executed as a single exchange transaction o GM
would offer up to $8 billion of Class H stock to GM $1 2/3 shareholders who
voluntarily elect to exchange their GM $1 2/3 stock for Class H shares at a
specified exchange ratio to be set immediately prior to the commencement of
the exchange offer
o Our plan is to complete this $8 billion share exchange transaction by mid-year
o So, for purposes of your EPS projections, we expect that, assuming completion
of the exchange offer, GM's $1 2/3 share base will be significantly lower by the
end of the second quarter
o Note that this exchange will come on the back of about $9 billion of GM $1 2/3
share repurchase activity where GM reduced the shares outstanding by 18% since
1997
o This transaction will bring GM's aggregate stock buyback activity over the
past 3 1/2 years to about $17 billion
BENEFIT PLAN CONTRIBUTION
o Now let me explain the funding of our benefit plans using newly issued shares
of GM Class H Stock
o GM expects to contribute up to $7 billion of its Class H stock to its hourly
pension plan and VEBA trust.
o The execution is fairly straightforward:
o The magnitude of these Class H stock contributions to the benefit plans
are in line with IRS , PBGC and DOL guidelines;
o Thus, no special government exemptions or rulings will be required.
o There will be special trustees engaged to manage this large Class H asset over
the coming years in a manner that will serve the best interests of the pension
and VEBA plans.
o The Trustees will manage the Class H stock subject to a "registration rights"
agreement which will help ensure that the Class H stock in the pension/VEBA is
sold in an orderly fashion over the next several years.
- 19 -
o This is essentially what we did with EDS and a Pension Trustee in 1995 when we
made the $6.3 billion Class E stock contribution to the pension fund.
o The Class E stock contribution to the pension is still managed today by
the Pension Trustee. It has worked very successfully for GM, for EDS, and
for the pension plan.
o We are confident we can execute this pension/VEBA contribution
successfully as well with all the appropriate provisions to ensure that
the Class H stock is sold over an extended period in an orderly manner.
o We anticipate that the Class H stock contributions will be made in the Q2
timeframe.
GM $ 1 2/3 EARNINGS IMPACT
o The overall transaction is expected be significantly accretive to GM $1 2/3
earnings per share
o Three major EPS drivers. These are as follows:
i) The use of the planned $8 billion of Class H stock to repurchase GM's
$1 2/3 stock (via the exchange offer) will sharply reduce the number of GM
$1 2/3 shares outstanding and will drive EPS higher;
ii) The planned $7 billion contribution to GM's pension/VEBA plans will
also provide a material uplift to net income;
o Market value of Class H stock --- once contributed to GM benefit
plans --- is expected to generate income each year at GM's expected
pension/VEBA asset return rate of 10% pre-tax
o Will reduce GM's pension and OPEB expense; will improve operating
margins; will increase net income and earnings per share
iii) A Lower portion of Hughes' current net losses will be consolidated
into the earnings for $1 2/3 stock
Improved GM Liquidity Cashflow
o Transaction expected to improve GM's liquidity and cash flow
o By utilizing Class H stock to fund pension/VEBA, GM will free up cash
otherwise currently earmarked for such benefit contributions in 2000-2001
o Transaction, therefore, will boost GM cash position
o Planned $7 billion contributions to benefit plans over the coming months will
accelerate reduction of GM's debt-like pension/OPEB obligations
o This will likely further strengthen GM's capital position
o Planned contributions will place GM's pension plan in a well-funded position
o Hence, no further significant pension contributions are expected for
the foreseeable future
- 20 -
o Finally, the planned $7 billion contribution to benefit plans are very tax
efficient
o There is no taxable gain to GM upon the disposition of the Class H
stock when the pension/VEBA contributions are made
o The contributions are tax deductible
o This will significantly increase cash flow
o
CHART:
Rationale of Restructuring Plan
(Benefit Plans Contributions)
o Class H stock contribution to certain GM benefit plans
- DOL regulations limit funding of benefit plans with employer securities
o Planned $7 billion contributions to pension/VEBA near DOL "ceiling"
- Planned $7 billion funding of benefit plans also in line with capital
planning objectives
o The market value of GM's retained economic interest in Hughes which will be
for the benefit of the GM $1 2/3 shareholders will amount to about $18
billion, based on the current market price of Class H stock.
o This retained amount is simply a function of: (i) GM's current $33 billion
stake in Hughes; less (ii) the about $15 billion of H stock we plan to
utilize for pension/VEBA contributions and the exchange offer. So, to explain
why GM is retaining an $18 billion interest in Hughes, let me give you a
sense of how we determined the size of the benefit plan contributions and the
size of the exchange offer.
o Pension/VEBA Contributions: The planned $7 billion of contribution to the GM
--------------------------
benefit plans is close to the maximum amount allowed by the DOL. In short
the DOL has specific limits governing the funding of such benefit plans with
"employer securities" (like Class H stock). At $7 billion, GM's planned
pension/VEBA contribution would approach this limit. The $7 billion funding
amount is also generally consistent with what GM was planning to contribute
to these benefit plans in the normal course over the next several years - in
other words, this is the desired amount of pension/VEBA funding from a
capital planning point of view. The contributions to the benefit plans are
merely being front-loaded (with H stock funding) which will accelerate the
reduction of pension/OPEB liabilities and strengthen GM's capital position.
o So, on the basis of DOL guidelines and on the basis of our capital planning
objectives, the size of the H stock contribution to benefit plans is expected
to be $7 billion.
- 21 -
o
<PAGE>
CHART:
Rationale of Restructuring Plan
(Exchange Offer)
o Offer to use about $8 billion of Class H stock as a currency to repurchase
$1 2/3 stock
- Transaction size established with objective of striking a balance between:
(i) maximizing value of GM $1 2/3 stock; and
(ii) maximizing value of Class H stock
o Transaction size much above $8 billion could have adverse impact on Class H
shares
- Would be detrimental to GM $1 2/3 given GM's large retained economic
interest in Hughes
o Exchange Offer: By offering to use up to $8 billion of Class H stock to
repurchase GM $1 2/3 stock, GM is seeking to effectively return $8 billion of
capital to its $1 2/3 shareholders. In this effort to return capital to
shareholders, we have deliberately structured this transaction in the form of
a GM $1 2/3 stock repurchase offer using Class H as the currency. And let me
make it clear that we have deliberately not structured the deal as a Class H
stock dividend distribution. We prefer to return capital in the form of an
exchange of Class H stock for $1 2/3 stock for several reasons:
o First, the voluntary nature of the exchange will place most of the $8
billion of H stock into "natural" GMH investors' hands. This will
minimize the "churn" of H stock following execution of the transaction.
o Second, as many of you have observed, we note that the implicit P/E
ratio of GM's auto business is extremely low. By utilizing H stock as
the currency to offer to repurchase GM $1 2/3 stock, we will generate
significant EPS accretion to GM $1 2/3 earnings per share.
o Given that this transaction is likely to be accretive to GM $1 2/3 EPS, we
are obviously inclined to execute this deal in "large size." At the same
time, we also want to strike a balance between: (i) maximizing GM $1 2/3
stock value; and (ii) maximizing Class H value. From the perspective of the
GM $1 2/3 shareholders, we would not want to execute a deal that would
materially depress the value of H stock since GM will remain, by far, the
largest economic owner of Hughes - holding an $18 billion economic interest
in Hughes for the benefit of the $1 2/3 shareholders.
o Therefore, we determined it would be optimal to conduct the H stock/GM stock
share exchange for up to $8 billion because: (i) it might be difficult for
the market to absorb more than $8 billion of H stock at one time without a
material adverse impact on the market price of H stock and (ii) it would be
difficult to induce GM shareholders to exchange more than $8 billion of their
$1 2/3 stock without offering an inappropriately large discount on the H
stock--(which would also likely have the effect of depressing the H stock
value).
o What we concluded is that the share exchange offer for up to $8 billion
strikes the appropriate balance between maximizing GM $1 2/3 EPS accretion
without depressing the value which the GM $1 2/3 shareholders will retain in
Hughes through GM's retained economic interest.
- 22 -
o
<PAGE>
CHART:
CAPITAL RETURN TO GM 1 2/3 SHAREHOLDERS
[GRAPHIC SHOWING THE FOLLOWING:
1997 HUGHES TRANSACTIONS-- $7.8 BILLION:
--SPECIAL DISTRIBUTIONS $2.5 BILLION
--STOCK REPURCHASE $3.8 BILLION
-- DIVIDENDS $1.5 BILLION
1998 -- $3.9 BILLION:
-- STOCK REPURCHASE $2.6 BILLION
-- DIVIDENDS $1.3 BILLION
1999 DELPHI SPIN-OFF-- $13.2 BILLION:
-- SPECIAL DISTRIBUTIONS $9.3 BILLION
-- STOCK REPURCHASE $2.6 BILLION
-- DIVIDENDS: $1.3 BILLION
YTD 2000 CLASS H EXCHANGE OFFER-- $8.3 BILLION*:
-- SPECIAL DISTRIBUTIONS $8.0 BILLION
-- DIVIDENDS: $0.3 BILLION
REPORTED
CNI
1997: $6.7 BILLION
1998: $3.0 BILLION
1999: $6.0 BILLION
* YEAR 2000 DIVIDENDS FOR THE REMAINDER OF 2000 ARE NOT SHOWN]
o Finally, with respect to GM's retained economic interest in Hughes, I want to
make GM's intention very clear:
"Currently, we have no plans to separate Hughes from GM, whether by means
of a spin-off, split-off or any other transaction. We like Hughes' growth
opportunities and communications synergies involving Hughes' capabilities
and our vehicles. With respect to GM's retained $18 billion economic
interest in Hughes, we have no current plans to monetize or distribute
this value. However, we will continue to evaluate on a regular basis what
Hughes ownership structure would be optimal for the two companies and GM's
stockholders, and GM retains the flexibility to conduct alternative Hughes
restructuring transactions in the future."
o What you should take away from today's announced restructuring plan is that GM
has the willingness and the ability to utilize its Class H Stock - at the
appropriate time and in the appropriate manner - in a way that is highly
earnings accretive to the $1 2/3 stockholders. Said another way, GM has the
wherewithal to redeploy its interest in Hughes in a manner that converts the
significant market value of its holdings into significant incremental earnings.
o I think the transactions we are pursuing also demonstrates just how versatile
this Class H Stock currency really is. Sometime in the future, if and when we
find it prudent, we could use Class H Stock as a currency for an additional GM
$1 2/3 stock buyback program; we could use it as a currency for an acquisition;
or we could monetize our Class H Stock to raise cash proceeds in a tax-efficient
manner.
o While we currently have no such plans to utilize Class H Stock, we can assure
you that we will continue to manage this economic stake in Hughes in an effort
to serve the long-term best interests of the company. And I can further assure
you that it is our objective to deploy this value over time in a way that will
enable GM $1 2/3 stockholders to realize maximum long-term value.
o The transactions which we rolled out today is consistent with our over-riding
shareholder value objective to "do more with less"; that is to generate higher
income with less capital employed. We will continue to strive to meet this
objective. But, as GM's chairman Jack Smith often advises, "I'd like you to
focus on our deeds and not just our words." Our "deeds" - i.e., our track record
- - - - in this area, speaks for itself and I call your attention to Chart 5.
o In the 3-year period from 1997 through 1999, GM remitted dividends and
executed stock repurchases which amounted to $13.1 billion in aggregate. Over
and above these large capital distributions to shareholders, GM also:
o 1)distributed $2.5 billion in 1997 with the spin-off of the Hughes defense
electronics business;
2)and distributed another $9.3 billion in 1999 with the spin-off of GM's
interest in Delphi.
- 23 -
o Overall, GM has distributed about $25 billion to shareholders from 1997
through 1999 while, over the same period, GM generated significant earnings.
With our plan now to use Class H Stock to fund pension/OPEB obligations and
repurchase an additional $8 billion of GM $1 2/3 stock, we are underscoring our
commitment to continue "to do more with less"... to continue to improve net
income while utilizing less shareholder capital. In our view, this is a great
formula for delivering superior returns to GM stockholders.
Harry Pearce:
o Thanks for joining us at relatively short notice. As you're aware, the GM
Board has approved a plan under which GM will restructure its economic
interest in Hughes. The plan was disclosed in a press release issued earlier
today, which I trust you've had a chance to review. I'm going to ask Mike
Losh to elaborate on the key aspects of the transaction in just a minute. But
I wanted first to take a moment to offer you our perspective on the
fundamental Hughes business.
o Hughes has clearly undergone a major transformation in the past few years.
o Since 1997, Hughes has reshaped its business from primarily a manufacturing
operation in the defense, aerospace and automotive industry into one which is
primarily a service-based digital entertainment and business communications
company. You see this in:
o The rapid growth of its DirecTV subscriber base;
o Its successful expansion of other communication service businesses;
o And the recent agreement to sell its satellite manufacturing operations
to Boeing
o As a communications enterprise, Hughes will direct its focus and its
capital toward high-growth and high-margin service businesses. The
prospects for Hughes' earnings growth looks quite favorable as the
company continues to pursue a variety of exciting initiatives. And,
as Hughes competes in this fast-paced communications arena, the
company will certainly benefit from the two new outside members
recently added to the Hughes Board of Directors who bring special
knowledge to the company.
o Investors have begun to recognize the enormous potential of Hughes'
high-growth/high margin business initiatives, which accounts for the sharp
appreciation in the H stock price in recent months.
o In light of the transformation of Hughes' business, and in view of the
extraordinary increase in the value of GM's economic interest, we have
determined it would be appropriate to redeploy a large portion of GM's
economic interest in Hughes.
o I expect GM stockholders to continue to reap the benefit of these
opportunities over time.
o Now, I'd like to turn things over to Mike to walk you through the planned
transaction.
Mike Losh:
o GM owns 100% of Hughes assets, but has previously distributed a 32% economic
interest in the company to public investors in the form of Class H stock
which trades on the NYSE.
o Currently the market value of GM's 68% economic interest in Hughes is worth
about $34 billion.
o GM now plans to redeploy a portion of this $34 billion of capital as follows:
o Utilize $8 billion of Class H stock in a voluntary exchange offer for
$1 2/3 stock.
- 24 -
In other words, GM will use its Class H stock as the currency to offer to
repurchase up to $8 billion of GM $1 2/3 stock in a single transaction.
o Contribute up to $7 billion of Class H stock to GM benefit plans --Split
between hourly pension plan and VEBA trust (mostly pension).
o No special government exemptions or rulings will be required for these
contributions.
o Retain the ability to issue an additional $18 billion of Class H stock
representing roughly a 35 percent economic interest (on a fully diluted
basis),based on current market value of Class H stock.
o Execution of these transactions are currently expected to be completed
prior to June month-end.
o The objectives of the restructuring plan are as follows:
o To generate higher net income with less capital employed.
o To drive GM $1 2/3 EPS higher by reducing the number of outstanding
shares; and by reducing pension and other post-retirement expenses.
o To strengthen GM's liquidity and credit position by utilizing Class H
stock to fund benefit plans instead of cash earmarked for such benefit
plans in 2000-2001.
o To retain an indirect interest for GM $1 2/3 stockholders in the future
growth of Hughes including synergies as in vehicle communications becomes
an important business.
o To significantly improve liquidity of Class H stock, which should benefit
the trading of Class H stock over time without diluting the earnings per
share attributable to Class H stock.
o We have no current plans or intention to separate Hughes from GM, whether by
means of a spin-off, split-off or any other transaction. We like Hughes'
growth opportunities and communications synergies involving Hughes'
capabilities and our vehicles.
o However, GM retains the flexibility to use the economic interest that it
retains in Hughes in a variety of ways, including as a currency for
additional GM $1-2/3 stock repurchases, acquisitions, benefit plan
contributions, to raise cash proceeds in a tax-efficient manner, or to
implement further corporate restructurings.
o What you should take away from today's announcement is that GM is willing and
able to use its Class H stock -- at the appropriate time and in the
appropriate manner -- in a way that is beneficial to stockholders. The
transactions we are pursuing demonstrate just how versatile our Class H stock
is.
o The actions we announced today continue our strong track record of
shareholder-value initiatives:
o From 1997 through 1999, GM remitted dividends and executed stock repurchases
amounting to $13 billion.
o Over and above these large capital distributions to stockholders, GM also
distributed $2.5 billion in the 1997 spin-off of the Hughes Defense
business, and distributed another $9.3 billion with the spin-off of GM'.
o Overall, GM has distributed about $25 billion to shareholders from 1997
through 1999, while at the same time generating significant earnings.
Now, we'd like to take your questions.
- 25 -
CHART:
CAPITAL RETURN TO GM 1 2/3 SHAREHOLDERS
[GRAPHIC SHOWING THE FOLLOWING:
1997 HUGHES TRANSACTIONS-- $7.8 BILLION:
--SPECIAL DISTRIBUTIONS $2.5 BILLION
--STOCK REPURCHASE $3.8 BILLION
-- DIVIDENDS $1.5 BILLION
1998 -- $3.9 BILLION:
-- STOCK REPURCHASE $2.6 BILLION
-- DIVIDENDS $1.3 BILLION
1999 DELPHI SPIN-OFF-- $13.2 BILLION:
-- SPECIAL DISTRIBUTIONS $9.3 BILLION
-- STOCK REPURCHASE $2.6 BILLION
-- DIVIDENDS: $1.3 BILLION
YTD 2000 CLASS H EXCHANGE OFFER-- $8.3 BILLION*:
-- SPECIAL DISTRIBUTIONS $8.0 BILLION
-- DIVIDENDS: $0.3 BILLION
REPORTED
CNI
1997: $6.7 BILLION
1998: $3.0 BILLION
1999: $6.0 BILLION
* YEAR 2000 DIVIDENDS FOR THE REMAINDER OF 2000 ARE NOT SHOWN]
SHAREHOLDER RETURN
GM has a strong and consistent track record of finding ways to return value
to shareholders. In addition to paying cash dividends, GM has repurchased
approximately $9 billion of GM $1-2/3 common stock since 1997 and distributed
approximately $12 billion of value to its shareholders as part of the
spin-offs of the Hughes defense business and the Delphi business.
We urge holders of GM $1-2/3 common stock to read the Registration Statement
on Form S-4, including the prospectus, regarding the exchange offer referred
to in connection with this communication, when it becomes available, as well
as the other documents which General Motors has filed or will file with the
Securities and Exchange Commission, because they contain or will contain
important information. Holders of GM $1-2/3 common stock may obtain a free
copy of the prospectus, when it becomes available, and other documents filed
by General Motors at the Commission's web site at at General Motors' web site
at or from General Motors by directing such request in writing or by
telephone to: General Motors Corporation, 100 Renaissance Center, Detroit,
Michigan 48243-7301, [Attention: GM Investor Relations, Telephone: (212)
418-6270, Facsimile: (212)418-3658.] This communication shall not constitute
an offer to sell or the solicitation of an offer to buy, nor shall there be
any sale of securities in any state in which offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any such state. No offering of securities shall be made except by
means of a prospectus meeting the requirements of Section 10 of the
Securities Act of 1933, as amended. Inquiries from the news media should be
directed to GM Corporation Communications: 212-418-6380.
# # #
- 26 -
FACT SHEET
FACT SHEET
RESTRUCTURING OF GENERAL MOTORS' ECONOMIC INTEREST IN HUGHES ELECTRONICS
o GM's $1-2/3 par value common stockholders will have an opportunity to
exchange their $1-2/3 shares for up to $8 billion worth of GM Class H stock
at a specified per share exchange ratio which GM will establish at a later
date.
o This exchange is currently expected to significantly reduce the number of
shares of GM $1-2/3 common stock outstanding and substantially increase
earnings per share.
o The exchange ratio will be determined immediately prior to commencement of
the offer, which is currently expected to occur in the second quarter of this
year.
o A registration statement describing the terms and conditions of the proposed
exchange offer will be filed shortly with the Securities and Exchange
Commission (SEC).
o GM also plans to contribute up to $7 billion of Class H stock to its U.S.
Hourly-Rate Employees Pension Plan and its VEBA trust, which GM previously
established to provide funding for the corporation's obligations for other
post-retirement employee benefits for its U.S. hourly retirees.
o These contributions are not subject to any regulatory approvals. The pension
plan contribution will help ensure the fully funded status of GM's U.S.
pension plans on a SFAS-87 basis for the foreseeable future.
o The actions monetize about $15 billion of Hughes value. At the same time, GM
is improving its financial flexibility to pursue business and growth
initiatives in its other business segments.
o Upon completion of the exchange offer and the contributions to the benefit
plans, GM will retain approximately a 35 percent, or $18 billion, economic
interest in Hughes (based on 1/31/00 closing Class H stock price).
o GM will continue to have direct access to the opportunities for strategic
synergies with Hughes' rapidly growing communications services businesses
since it will continue to hold 100% of Hughes' assets.
o Hughes has redefined itself as a premier provider of digital entertainment
and business communications services, which strengthens its ability to
contribute to GM's strategy to grow its downstream service-oriented
businesses.
o The issuance of $15 billion additional GM Class H shares in connection with
these transactions should substantially increase the liquidity of GM Class H
stock.
o The proposed actions will not have any dilutive effect on the earnings per
share attributable to the outstanding GM Class H stock.
o The proposed exchange offer, assuming that it is fully subscribed, will bring
the amount GM $1-2/3 common stock repurchased by GM since 1997 to about $17
billion.
o In addition, GM has distributed about $12 billion of value to its
shareholders as part of the 1997 spin-off of the Hughes defense business and
the 1999 spin-off of Delphi.
- 27 -
We urge holders of GM $1-2/3 common stock to read the Registration
Statement on Form S-4, including the prospectus, regarding the exchange offer
referred to above, when it becomes available, as well as the other documents
which General Motors has filed or will file with the Securities and Exchange
Commission, because they contain or will contain important information. Holders
of GM $1-2/3 common stock may obtain a free copy of the prospectus, when it
becomes available, and other documents filed by General Motors at the
Commission's web site at at General Motors' web site at or from General Motors
by directing such request in writing or by telephone to: General Motors
Corporation, 100 Renaissance Center, Detroit, Michigan 48243-7301, [Attention:
GM Investor Relations, Telephone: (212) 418-6270, Facsimile: (212) 418-3658.]
This communication shall not constitute an offer to sell or the solicitation of
an offer to buy, nor shall there be any sale of securities in any state in which
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state. No offering of
securities shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as amended. Inquiries
from the news media should be directed to GM Corporation Communications:
212-418-6380.
# # #
FACT SHEET
HISTORIC FACT SHEET
HUGHES ELECTRONICS
1985 - In June 1985 the Howard Hughes Medical Institute accepted an offer to
sell Hughes Aircraft Company to General Motors for $5.2 billion. The
GM-Hughes Electronics Corporation was established as a wholly owned
subsidiary of GM.
1987 - Expanding its role as an end-to-end telecommunications provider, Hughes
acquired M/A-COM Telecommunications in 1987. The company was renamed
Hughes Network Systems.
1992 - Hughes completed the purchase of General Dynamic's missile operations,
forming Hughes Missile Systems Company, a subsidiary.
1994 - History was made in 1994 when 20 retail locations in Jackson,
Mississippi, began selling set-top boxes capable of receiving the
DIRECTV(R) direct-to-home satellite service. DIRECTV, Inc. was the first
to offer digital television through a small (18-inch) dish, which became
the most successful product rollout in U.S. consumer electronics history.
Also in 1994, Hughes Network Systems announced DirecPC(R), a new
information delivery service for personal computers for faster,
cost-efficient transmission.
1995 - GMHE changed its name to Hughes Electronics, and DIRECTV went
international with Galaxy Latin America and DIRECTV Japan.
- 28 -
1997 - On January 16th GM, Hughes and Raytheon announced their plan to: 1) spin
off Hughes Aircraft Company from Hughes Electronics and merge it with
Raytheon; 2) transfer Delco Electronics from Hughes Electronics to GM's
Delphi Automotive Systems; and 3) recapitalize GM's Class H common stock -
creating a new tracking stock linked to the performance of Hughes
Electronics' telecommunications and space business.
Hughes and PanAmSat completed the merger of their respective satellite
service operations into a new publicly-held company, which retained the
name PanAmSat Corporation. Hughes contributed its Galaxy(R) satellite
services business in exchange for a 71.5 percent interest in the new
company.
1998 - In May, Hughes purchased an additional 9.5 percent in PanAmSat,
increasing Hughes' ownership to 81 percent.
Hughes signed a merger agreement with USSB to acquire its business and
assets, further strengthening DIRECTV's position as the nation's largest
DBS television service.
1999 - In March, Hughes announced that it will invest $1.4 billion in its
Spaceway broadband satellite system. Beginning in 2003, Spaceway will
provide affordable, high-bandwidth and high-speed communications for
broadband and multimedia applications.
In April, Hughes announced completion of its acquisitions involving
PRIMESTAR, Inc., which included its 2.3 million-subscriber PRIMESTAR
medium-power DBS business as well as two high-power Tempo satellites.
PRIMESTAR received approximately $1.32 billion for the medium-power DBS
business, comprised of approximately 4,871,000 shares of General Motors
Class H (GMH) common stock and $1.1 billion cash. Hughes also paid $500
million cash for the Tempo high-power satellite assets.
In June, America Online, Inc. and Hughes Electronics announced a strategic
alliance to develop and market uniquely integrated digital entertainment
and Internet services nationwide in the U.S. America Online made a
strategic investment of $1.5 billion in the new venture through the
purchase of convertible preference stock from GM.
2000 - In January, Hughes announced actions to focus on high-growth service
businesses: Boeing will acquire the Hughes satellite systems businesses in
an all-cash transaction of $3.75 billion; Hughes Network Systems will
focus on its leading broadband point-to-multipoint product line and
discontinue its mobile cellular and narrowband local loop product lines;
and Hughes formed two new sectors to consolidate all operations of the
company in alignment with its customer focus - individual consumers and
enterprise customers.
- 29 -
We urge holders of GM $1-2/3 common stock to read the Registration Statement on
Form S-4, including the prospectus, regarding the exchange offer referred to in
connection with this communication, when it becomes available, as well as the
other documents which General Motors has filed or will file with the Securities
and Exchange Commission, because they contain or will contain important
information. Holders of GM $1-2/3 common stock may obtain a free copy of the
prospectus, when it becomes available, and other documents filed by General
Motors at the Commission's web site at at General Motors' web site at or from
General Motors by directing such request in writing or by telephone to: General
Motors Corporation, 100 Renaissance Center, Detroit, Michigan 48243-7301,
[Attention: GM Investor Relations, Telephone: (212) 418-6270, Facsimile:
(212)418-3658.] This communication shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of securities in
any state in which offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such state. No
offering of securities shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as amended. Inquiries
from the news media should be directed to GM Corporation Communications:
212-418-6380.
# # #
- 30 -
PRESS RELEASE
HUGHES' AGGRESSIVE GROWTH STRATEGY UNAFFECTED BY GM STOCK TRANSACTION
Chairman Michael T. Smith Says Company Will Continue Its Focus on Delivery of
Business Objectives
EL SEGUNDO, Calif., Feb. 1, 2000 - The announcement today by General
Motors Corp. that GM will restructure its economic interest in Hughes
Electronics Corporation will have no impact on Hughes' current business plans,
or on its strategy to be the world leader in digital entertainment and business
communication services, according to Hughes Chairman and CEO Michael T. Smith.
The announced actions by GM would, however, provide the flexibility to use the
economic interest that it retains in Hughes in a variety of ways, including as a
currency for additional GM $1-2/3 stock repurchases, acquisitions, benefit plan
contributions, to raise cash proceeds in a tax-efficient manner, or to implement
further corporate restructuring, Smith noted.
Smith, who on January 13 announced the sale of Hughes' satellite
manufacturing operations and a restructuring of the company into two sectors
focused on its consumer and business customer groups, emphasized that Hughes'
strategy would focus on fueling the growth of its entertainment and business
communication service businesses, and on the successful convergence of
technologies for both the consumer and business markets.
"We are focused entirely on the execution and delivery of our business
plans," said Smith. "We believe we can deliver revenue growth in excess of 20
percent, while accelerating our EBITDA performance." EBITDA (earnings before
interest, taxes, depreciation and amortization) is the key measurement used by
financial analysts to evaluate the performance of entertainment and
communications companies investing heavily in high-growth business activities.
"Also, we are concentrating on the convergence of entertainment, data,
voice, internet, and other communications on a variety of platforms, including
television, desktop computers, mobile telephones, automobiles, airplanes, and
others," said Smith.
"We believe the combination of delivering on our commitments and long-term
investment will support great value for our shareholders," said Smith.
The year 2000 holds many significant milestones for Hughes. Content
enhancements of its DIRECTV(R) service, combined with the continuous addition of
local channels in major television markets, have resulted in greater demand for
DIRECTV, which is expecting a record year in subscriber growth. Partnerships
with Wink and TiVo, which add interactive capabilities to DIRECTV service, will
premiere by mid-year. Also, as part of its previously announced agreement with
America Online (AOL), Hughes and AOL will jointly launch a digital interactive
service, "AOL Plus by DirecPC," this year. Later, as part of the same agreement,
its DIRECTV unit will launch AOL TV, a new content-rich interactive service on
the television platform.
- 31 -
Hughes also plans to launch a total of five new satellites for its 81
percent-owned satellite communication services unit, PanAmSat. It will increase
its production of DIRECTV set top boxes to meet the growing demands of DIRECTV
customers. Its Latin American DIRECTV partnership, Galaxy Latin America, will
focus on maintaining strong double digit growth in the key consumer markets of
Brazil, Argentina and Mexico. And Hughes Network Systems continues to maintain
more than a 50 percent market share in satellite based business-to-business
private network communications, while at the same time investing in the
development and deployment of its two-way, broadband Spaceway(TM) system in
2003.
Hughes Electronics is a unit of General Motors Corporation. The earnings of
Hughes are used to calculate the earnings per share attributable to the General
Motors Class H common stock (NYSE:GMH)
NOTE: Hughes Electronics Corporation believes that certain statements in
this press release may constitute forward-looking statements within the meaning
of The Private Securities Litigation Reform Act of 1995. When used in this press
release, the words "estimate," "plan," "project," "anticipate," "expect,"
"intend," "outlook," "believe," and other similar expressions are intended to
identify forward-looking statements and information. Actual results of Hughes
may differ materially from anticipated results as a result of certain risks and
uncertainties, which include but are not limited to those associated with:
economic conditions; demand for products and services, and market acceptance;
government action; local political or economic developments in or affecting
countries where we have international operations; our ability to obtain export
licenses; competition; our ability to achieve cost reductions; technological
risks; our ability to address the year 2000 issue; interruptions to production
attributable to causes outside our control; limitations on access to
distribution channels; the success and timelines of satellite launches; the
in-orbit performance of satellites; the ability of our customers to obtain
financing; and our ability to access capital to maintain our financial
flexibility. Hughes cautions that these important factors are not exclusive.
We urge holders of GM $1-2/3 common stock to read the Registration Statement on
Form S-4, including the prospectus, regarding the exchange offer referred to
above, when it becomes available, as well as the other documents which General
Motors has filed or will file with the Securities and Exchange Commission,
because they contain or will contain important information. Holders of GM $1-2/3
common stock may obtain a free copy of the prospectus, when it becomes
available, and other documents filed by General Motors at the Commission's web
site at at General Motors' web site at or from General Motors by directing such
request in writing or by telephone to: General Motors Corporation, 100
Renaissance Center, Detroit, Michigan 48243-7301, [Attention: GM Investor
Relations, Telephone: (212) 418-6270, Facsimile: (212)418-3658.] This
communication shall not constitute an offer to sell or the solicitation of an
offer to buy, nor shall there be any sale of securities in any state in which
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state. No offering of
securities shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as amended. Inquiries
from the news media should be directed to GM Corporation Communications:
212-418-6380.
# # #
- 32 -
PRESS RELEASE
INTERNET EXECUTIVE BERNEE STROM ELECTED
TO HUGHES ELECTRONICS BOARD
EL SEGUNDO, Calif., Feb. 1, 2000 - Bernee D.L. Strom, president of
InfoSpace.com Ventures, LLC and former chief executive officer of Priceline.com,
has been elected to the board of directors of Hughes Electronics Corporation.
Strom's appointment is the continuation of Hughes' strategy to broaden the
expertise of its board by adding independent members with knowledge and
experience directly related to Hughes' future markets and growth opportunities.
"Bernee Strom brings a wealth of information on managing Internet content
and e-commerce to Hughes at a time when Hughes is focusing its resources on the
growth of its services businesses," said Michael T. Smith, chairman and chief
executive officer of Hughes. "Hughes is the world's leading provider of digital
entertainment and information, and Bernee's insight into the rapidly growing
Internet market will be valued as Hughes rolls out the interactive DIRECTV(R)
and consumer DirecPC(R) products it is introducing with America Online, and
develops future broadband opportunities."
Strom was elected to the board on Monday, bringing the membership to nine.
The board includes one member of Hughes management, three members of General
Motors management, three members who are also outside GM directors, and two
independent, non-affiliated members.
Hughes in October elected Alfred C. Sikes, president of Hearst Interactive
Media and former chairman of the Federal Communications Commission (FCC), to its
board.
Ms. Strom, 51, was named president of InfoSpace.com Ventures in January
after having served as president and chief operating officer of InfoSpace.com,
Inc. since November 1998. She remains a member of the board of directors of
InfoSpace.com, a leading global provider of infrastructure services for Web
sites, merchants and wireless devices.
Ms. Strom from July 1997 to December 1998 served on the board of directors
of Walker Digital, an intellectual property studio that invents, patents and
licenses processes, systems and technologies that leverage larger existing
marketing systems. She served as the founding CEO of Walker Digital's first
spin-out Internet commerce company, Priceline.com.
Prior to joining Walker, Ms. Strom was president and CEO of U.S.A. Digital
Radio, which is developing a technology to serve as a worldwide standard for AM
and FM digital radio broadcasting. She also is a founder and shareholder, and
was a principal, of the Gemstar International Group Ltd., which invented the VCR
Plus+ Instant Programmer. Ms. Strom was responsible for developing and
implementing the business strategy and marketing for the products worldwide.
Ms. Strom was founder, president and CEO of MBS Technologies, Inc., a
computer software company that published the FileRunner program, and served as
chairman of Quantum Development Corporation, a software company specializing in
business analysis and optimization applications.
Since 1990, Ms. Strom has served as managing partner of the Strom Group,
an investment, management consulting and business advisory firm that specializes
in the startup of new firms, especially in high technology.
- 33 -
A graduate of New York University with a bachelor's degree, summa cum
laude, in mathematics and history, Ms. Strom also earned a master's degree in
mathematics and mathematics education from New York University, and received an
MBA with highest honors in finance from the Anderson School at the University of
California, Los Angeles.
Ms. Strom, who served as a former senior executive at the Los Angeles
Herald Examiner and a senior management consultant at Deloitte, Haskins & Sells,
is on the boards of directors of Polaroid Corporation, InfoSpace.com and
ImageX.com.
She is on the board of advisors of the J.L. Kellogg Graduate School of
Management of Northwestern University, and is a trustee of the National Public
Radio Foundation.
Hughes Electronics is a unit of General Motors Corporation. The earnings
of Hughes are used to calculate the earnings per share attributable to the
General Motors Class H common stock (NYSE:GMH).
# # #
- 34 -
PRESS RELEASE
International Newsline:
GM Will Offer To Repurchase GM $1-2/3 Stock
in Exchange for $8 Billion of Class H Stock
And Make $7 Billion in Stock Contributions to Benefit Plans
The General Motors Board of Directors today authorized a broad restructuring of
GM's economic interest in its Hughes Electronics subsidiary, while maintaining
100% ownership of Hughes. The two transactions continue GM's efforts to deliver
significant value to shareholders and further strengthen the company's financial
position:
1) Exchange offer to be made
GM will offer holders of GM $1-2/3 common stock an opportunity to voluntarily
exchange some or all of their $1-2/3 shares in exchange for up to a total of
approximately $8 billion of GM Class H stock, a GM stock that tracks the
financial performance of Hughes. The ratio of Class H shares that a $1-2/3
shareholder would receive in the exchange will be determined at a later date.
All General Motors employees who hold GM $1-2/3 common stock through an S-SPP
or PSP plan will receive complete information regarding the exchange offer,
including instructions regarding participation, by mail. This transaction
will not have any effect on employee stock options.
2) Contribution to benefit plans
GM intends to contribute up to $7 billion of Class H stock to its benefit
plans in the second quarter of 2000. These contributions will also serve to
reduce GM's annual pension and other related expenses, which strengthens the
company's overall financial position.
"GM has a strong and consistent track record of finding ways to return value to
shareholders, and that record is being extended through these proposed
transactions," said GM Chairman and Chief Executive Office Jack Smith.
We urge holders of GM $1-2/3 common stock to read the Registration
Statement on Form S-4, including the prospectus, regarding the exchange offer
referred to above, when it becomes available, as well as the other documents
which General Motors has filed or will file with the Securities and Exchange
Commission, because they contain or will contain important information. Holders
of GM $1-2/3 common stock may obtain a free copy of the prospectus, when it
becomes available, and other documents filed by General Motors at the
Commission's web site at at General Motors' web site at or from General Motors
by directing such request in writing or by telephone to: General Motors
Corporation, 100 Renaissance Center, Detroit, Michigan 48243-7301, [Attention:
GM Investor Relations, Telephone: (212) 418-6270, Facsimile: (212)418-3658.]
This communication shall not constitute an offer to sell or the solicitation of
an offer to buy, nor shall there be any sale of securities in any state in which
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state. No offering of
securities shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as amended. Inquiries
from the news media should be directed to GM Corporation Communications:
212-418-6380.
# # #
- 35 -
General Motors Board of Directors
(as of 1-28-00)
Percy Barnevik
Chairman
ABB Asea Brown Boveri, Ltd.
Audit Committee
Public Policy Committee
John H. Bryan
Chairman and Chief Executive Officer
Sara Lee Corporation
Audit Committee
Capital Stock Committee
Executive Committee
Chairman, Executive Compensation Committee
Thomas E. Everhart
President Emeritus
California Institute of Technology
Committee on Director Affairs
Public Policy Committee
Charles T. Fisher III
Retired Chairman and President
NBD Bancorp, Inc.
Committee on Director Affairs
Executive Committee
Chairman, Investment Funds Committee
Public Policy Committee
George M.C. Fisher
Chairman and Chief Executive Officer
Eastman Kodak Company
Chairman, Capital Stock Committee
Executive Committee
Executive Compensation Committee
Investment Funds Committee
Nobuyuki Idei
Chief Executive Officer
Sony Corp.
Karen Katen
Executive Vice President
Pfizer Pharmaceuticals Group
President
Pfizer U.S. Pharmaceuticals
Audit Committee
Public Policy Committee
- 36 -
J. Willard Marriott, Jr.
Chairman and Chief Executive Officer
Marriott International, Inc.
Chairman, Committee on Director Affairs
Executive Committee
Executive Compensation Committee
Investment Funds Committee
Ann D. McLaughlin
Chairman
The Aspen Institute
Audit Committee
Capital Stock Committee
Executive Committee
Chairman, Public Policy Committee
Harry J. Pearce
Vice Chairman
General Motors Corporation
Eckhard Pfeiffer
Former President and Chief Executive Officer
Compaq Computer Corporation
Audit Committee
Capital Stock Committee
John G. Smale
Retired Chairman and CEO
The Procter & Gamble Company
Audit Committee
Capital Stock Committee
Committee on Director Affairs
Chairman, Executive Committee
Executive Compensation Committee
Investment Funds Committee
Public Policy Committee
John F. Smith, Jr.
Chairman and Chief Executive Officer
General Motors Corporation
Investment Funds Committee
Louis W. Sullivan, M.D.
President
Morehouse School of Medicine
Audit Committee
Public Policy Committee
G. Richard Wagoner, Jr.
President and Chief Operating Officer
General Motors Corporation
Dennis Weatherstone
Retired Chairman and Chief Executive Officer
J.P. Morgan & Co., Inc.
Chairman, Audit Committee
Capital Stock Committee
Executive Committee
Executive Compensation Committee
- 37 -
Hughes Electronics Board of Directors
(as of 1-28-00)
Thomas E. Everhart
President Emeritus
California Institute of Technology
Chairman, Audit Committee
J. Michael Losh
Executive Vice President and
Chief Financial Officer
General Motors Corporation
Audit Committee
Harry J. Pearce
Vice Chairman
General Motors Corporation
Executive Compensation Committee
Eckhard Pfeiffer
Chairman
Intershop Communications AG
Chairman, Executive Compensation Committee
Alfred C. Sikes
President
Hearst Interactive Media
John G. Smale
Retired Chairman and
Chief Executive Officer
The Procter and Gamble Company
Audit Committee
Executive Compensation Committee
John F. Smith, Jr.
Chairman and
Chief Executive Officer
General Motors Corporation
Michael T. Smith
Chairman and
Chief Executive Officer
Hughes Electronics Corporation
# # #
- 38 -
EMPLOYEE COMMUNICATION
To: * All Employees *
cc: (bcc: George H Jamison/ES/HSC/HUGHES)
Subject: GM Restructures Its Economic Interest in Hughes Electronics
Tuesday, February 1, 2000
To All Employees:
Today General Motors is announcing a plan to use $8 billion worth of GMH stock
as the "currency" to effect a substantial cashless buyback of GM's "$1-2/3" par
value common stock. Under this plan, current holders of GM's $1-2/3 common stock
will be able to exchange their shares for shares of GM Class H (GMH) stock. In a
related transaction, GM also will contribute up to $7 billion worth of GMH stock
to its benefit plans. The attached GM press release and fact sheet give more
details on today's announcement.
GM is taking these steps to improve its financial position by unlocking some of
the value it derives from its ownership of Hughes. Upon completion of this
transaction, GM will retain a 35 percent economic interest in Hughes, which will
remain a wholly owned subsidiary of GM. Also, GM says it has no current plans to
spin off Hughes or any part of its business.
GM has the flexibility to use the economic interest that it retains in Hughes in
a variety of ways, including as a currency for additional GM $1-2/3 stock
repurchases, acquisitions or benefit plan contributions as well as to raise cash
proceeds in a tax-efficient manner or implement further corporate
restructurings.
In addition, Bernee D. L. Strom, president of InfoSpace.com Ventures, LLC, has
been elected to the Hughes Electronics Corporation board of directors. Strom is
former chief executive officer of Priceline.com, and her appointment continues
Hughes' strategy to add board member expertise that is directly related to our
future markets and growth opportunities.
I'd like to take a moment to put both this restructuring of GM's ownership of
Hughes and Bernee Strom's appointment to our board into perspective. Most
importantly, these actions will have no impact on the day-to-day operations of
Hughes or the strategic business objectives of our company. Hughes will continue
to focus sharply on execution and delivery on its business plans as it continues
to pursue its vision of being the world leader in the distribution of digital
entertainment and information, satellite services, business-to-business
communications and broadband services.
GM's actions today reflect the significant value that Hughes has created for its
shareholders. I want to take this opportunity to acknowledge and thank each of
you for your part in Hughes' success and to encourage you to continue delivering
on the commitments we've made to grow that success.
Mike Smith
Chairman & Chief Executive Officer
Hughes Electronics Corporation
# # #
- 39 -
FACT SHEET ATTACHED TO EMPLOYEE COMMUNICATION
Fact Sheet
Restructuring of General Motors' Economic Interest in Hughes Electronics
o GM's $1-2/3 par value common stockholders will have an opportunity to
exchange their $1-2/3 shares for up to $8 billion worth of GM Class H stock
at a specified exchange ratio.
o This exchange is currently expected to significantly reduce the number of
shares of GM $1-2/3 common stock outstanding and substantially increase
earnings per share.
o The exchange ratio will be determined immediately prior to commencement of
the offer, which is currently expected to occur in the second quarter of this
year.
o A registration statement describing the terms and conditions of the proposed
exchange offer will be filed shortly with the Securities and Exchange
Commission (SEC).
o GM also plans to contribute up to $7 billion of Class H stock to its U.S.
Hourly-Rate Employees Pension Plan and a trust, which GM previously
established to provide funding for the corporation's obligations for other
post-retirement employee benefits for its U.S. hourly retirees.
o These contributions are not subject to any regulatory approvals. The pension
plan contribution will help ensure the fully funded status of GM's U.S.
pension plans on an SFAS-87 basis for the foreseeable future.
o The actions monetize about $15 billion of Hughes value. At the same time, GM
is improving its financial flexibility to pursue business and growth
initiatives in its other business segments.
o Upon completion of the exchange offer and the contributions to the benefit
plans, GM will retain a 35 percent, or $18 billion, economic interest in
Hughes (based on yesterday's closing Class H stock price).
o GM will continue to have direct access to the opportunities for strategic
synergies with Hughes' rapidly growing telecommunications services businesses
since it will continue to hold 100% of Hughes' assets.
o Hughes has redefined itself as a premier provider of telecommunications
services, which strengthens its ability to contribute to GM's strategy to
grow its downstream service-oriented businesses.
o The issuance of $15 billion additional GM Class H shares in connection with
these transactions will substantially increase the liquidity of GM Class H
stock.
o The proposed actions will not have any dilutive effect on the earnings per
share attributable to the outstanding GM Class H stock.
o The proposed exchange offer, assuming that it is fully subscribed, will bring
the amount GM $1-2/3 common stock repurchased by GM since 1997 to $17
billion.
o In addition, GM has distributed $12 billion of value to its shareholders as
part of the 1997 spin-off of the Hughes defense business and the 1999
spin-off of Delphi.
# # #
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PRESS RELEASE ATTACHED TO EMPLOYEE COMMUNICATION
For Release Tuesday, Feb. 1, 2000, 1:00 p.m. EST
GM WILL OFFER TO REPURCHASE GM $1-2/3 STOCK IN EXCHANGE FOR $8 BILLION OF
CLASS H STOCK, AND MAKE $7 BILLION IN CLASS H STOCK CONTRIBUTIONS TO BENEFIT
PLANS
TRANSACTIONS WILL REDUCE GM'S ECONOMIC INTEREST IN HUGHES TO APPROXIMATELY
35 PERCENT, AND SIGNIFICANTLY INCREASE EPS FOR GM $1-2/3 STOCK
DETROIT -- General Motors Corp. (NYSE: GM, GMH) today announced plans for a
broad restructuring of its economic interest in Hughes Electronics (Hughes),
including an offer to its current shareholders to repurchase GM $1-2/3 par value
common stock in exchange for approximately $8 billion of GM Class H common
stock, and contributions of approximately $7 billion of Class H stock to GM
benefit plans.
"The GM Board of Directors today authorized this series of transactions that
continue GM's efforts to deliver significant value to its shareholders and
further strengthen the corporation's financial position," said GM Chairman and
Chief Executive Officer John F. Smith, Jr.
Exchange offer to be made
GM will offer to exchange approximately $8 billion of Class H stock for GM
$1-2/3 stock. This exchange would significantly reduce the number of shares of
GM $1-2/3 stock outstanding. Specifically, GM will offer to holders of GM $1-2/3
stock an opportunity to voluntarily tender any portion of their holdings of GM
$1-2/3 stock in order to acquire Class H stock. The exchange generally will be
tax-free to GM and its U.S. stockholders for U.S. income tax purposes. Shares
tendered will be subject to pro-ration if the exchange offer is oversubscribed.
A Form S-4 registration statement detailing the terms and conditions of the
proposed exchange offer will be filed shortly with the Securities and Exchange
Commission. GM expects to complete the proposed transaction during the second
quarter of this year. The per-share exchange ratio for the offering will be
determined immediately prior to the commencement of the offer. No offering of
Class H stock will be made except by means of a prospectus to be included in the
Form S-4 registration statement.
Contributions to benefit plans
GM plans to contribute up to $7 billion of Class H stock to certain of its
benefit plans in the second quarter, including a significant amount to its U.S.
Hourly-Rate Employees Pension Plan, and the balance to its voluntary employees'
beneficiary association (VEBA) trust. The VEBA trust was set up in 1997 to fund
the corporation's other post-retirement employee benefit (OPEB) obligations for
hourly employees. The pension plan contribution will help to ensure that GM's
U.S. pension plans remain fully funded on an SFAS-87 basis for the foreseeable
future. The contributions to the benefit plans, which are not subject to any
regulatory approvals, will significantly reduce annual pension and OPEB expense,
and will strengthen the company's overall financial position.
"These actions enable GM to realize $15 billion of the value of Hughes, and
improve GM's financial flexibility to pursue business and growth initiatives in
our automotive and financial services businesses," said Smith. "We will improve
net income through reduced pension and OPEB expense while substantially reducing
the number of GM $1-2/3 shares outstanding. This will translate to a significant
increase in GM's earnings per share."
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In connection with these transactions, GM will issue approximately $15
billion of Class H stock. However, the proposed transactions will not have any
dilutive effect on the earnings per share attributable to the outstanding Class
H stock. The issuance of additional Class H shares in connection with these
transactions will substantially increase the liquidity of that stock in the
securities market, which should benefit trading of Class H stock over time.
Upon completion of a fully subscribed exchange offer and contributions to the
benefit plans, GM will retain approximately a 35 percent, or $18 billion,
economic interest in Hughes (based on yesterday's NYSE closing price of Class H
stock) and Hughes will remain a wholly-owned subsidiary of GM. Consequently, GM
$1-2/3 common shareholders would benefit indirectly in any further improvement
in the Class H stock price as a result of GM's retained economic interest in
Hughes as well as the Class H stock held by the GM benefit plans.
GM has no current plans or intention to separate Hughes or any of its
businesses from GM, whether by means of a spin-off, split-off or any other
transaction. However, GM will continue to evaluate what Hughes ownership
structure would be optimal for the two companies and GM stockholders.
GM has the flexibility to use the economic interest that it retains in Hughes
in a variety of ways, including as a currency for additional GM $1-2/3 stock
repurchases, acquisitions, benefit plan contributions, to raise cash proceeds in
a tax-efficient manner, or to implement further corporate restructurings.
The transactions will not affect the business operations of Hughes, and GM's
automotive operations will continue to have direct access to the opportunities
for strategic synergies with Hughes' rapidly growing communications services
businesses.
"It is important to retain our strategic relationship with Hughes. We
continue to create new communications capabilities and functionality in our
vehicles. Hughes has redefined itself as a premier provider of digital
entertainment and business communications, which strengthens its ability to
contribute to GM's strategy to grow its service-oriented businesses," Smith
said.
GM has repurchased approximately $9 billion of GM $1-2/3 stock since 1997, in
addition to the significant reduction in the number of GM $1-2/3 shares
outstanding expected to result from the proposed exchange offer. Moreover, GM
has distributed approximately $12 billion of value to its shareholders as part
of the spin-offs of the Hughes defense business in 1997 and the Delphi business
in 1999.
"GM has a strong and consistent track record of finding ways to return value
to shareholders, and that record is being extended through these proposed
transactions," Smith said. "GM will strive to continue to increase earnings with
less capital employed. This is an excellent formula to deliver superior
shareholder returns."
GM $1-2/3 stock and Class H stock are both common stocks of General Motors.
Class H earnings per share and amounts available for payment of dividends are
determined by the financial performance of Hughes. As of year-end 1999, there
were 137.1 million shares of Class H outstanding, representing a 32 percent
tracking stock interest in the earnings of Hughes, and 617.4 million shares of
GM $1-2/3 stock outstanding.
Morgan Stanley Dean Witter will act as dealer manager for General Motors in
connection with the exchange offer. Hughes will engage Salomon Smith Barney in
connection with the offering.
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In this news release, use of the words anticipate, expect, should, believe,
plan, intensify, overcome 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 with the U.S. Securities and Exchange Commission,
including GM's Current Reports on Form 8-K dated April 12, 1999, and filed on
April 15, 1999, and April 21, 1999.
We urge holders of GM $1-2/3 common stock to read the Registration Statement
on Form S-4, including the prospectus, regarding the exchange offer referred to
above, when it becomes available, as well as the other documents which General
Motors has filed or will file with the Securities and Exchange Commission,
because they contain or will contain important information. Holders of GM $1-2/3
common stock may obtain a free copy of the prospectus, when it becomes
available, and other documents filed by General Motors at the Commission's web
site at at General Motors' web site at or from General Motors by directing such
request in writing or by telephone to: General Motors Corporation, 100
Renaissance Center, Detroit, Michigan 48243-7301, Attention: GM Investor
Relations, Telephone: (212) 418-6270, Facsimile: (212)418-3658. This
communication shall not constitute an offer to sell or the solicitation of an
offer to buy, nor shall there be any sale of securities in any state in which
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state. No offering of
securities shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as amended. Inquiries
from the news media should be directed to GM Corporation Communications:
212-418-6380.
# # #
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