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
File No. 333-30826
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 (SEC), including GM's Annual Report on Form
10-K for the year ended December 31, 1999.
* * * * * * * * *
The following is a paragraph which was included in a GM e-newsletter issued on
April 26, 2000:
Offer to exchange stock commenced April 24: GM stockholders have an opportunity
to voluntarily exchange their shares of GM $1 2/3 common stock for Class H
common stock. GM $1-2/3 shareholders are being offered 1.065 shares of Class H
stock for each share of $1-2/3 properly tendered in the exchange offer. This
represents a premium of 17.7 percent on GM $1-2/3 stock, based on the NYSE
composite tape closing prices for these stocks as of April 19, the day the
exchange ratio was determined. The exchange offer is available to individuals
who own shares of GM $1-2/3 common stock directly, through brokerage accounts, a
GM stock savings plan account or otherwise. The offer expires at midnight, EDT,
on Friday, May 19 (unless extended), although due to administrative necessity,
with respect to any shares you may wish to tender in the GM employee savings
plans, you must complete any tender by 4 p.m., EDT, on Tuesday, May 16. A
prospectus and other related exchange offer materials have been sent to homes
(or address of record). If you have questions relating to the exchange materials
after receiving them, call Morrow & Co., GM's information agent at 877.816.5329
or 212.754.8000. If you have questions regarding how to participate in the offer
through your GM stock savings plan, contact the GM Investment Service Center at
800.489.4646 or 606.491.8257. None of GM, its board or any other person acting
as an agent of GM is making any recommendation as to whether you should
participate in the exchange offer.
STOCKHOLDERS ARE URGED TO READ THE IMPORTANT INFORMATION IN GM'S PROSPECTUS
RELATING TO THE EXCHANGE OFFER IS ON FILE AT THE SEC AND IS AVAILABLE FREE OF
CHARGE AT ITS WEBSITE, www.sec.gov, AT GM'S WEBSITE, www.gm.com, AND FROM GM
STOCKHOLDER SERVICES. THIS COMMUNICATION DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION TO BUY IN CONNECTION WITH THE PLANNED EXCHANGE OFFER, WHICH WILL
ONLY BE MADE BY MEANS OF AN APPROPRIATE PROSPECTUS.
* * * * * * * * *
The following is a script first used on April 26, 2000 to answer questions from
stockholders:
General Strategy of Restructuring of GM's Economic Interest in Hughes
- - ---------------------------------------------------------------------
Q1. What is GM doing to restructure its economic interest in Hughes?
A. GM is commencing a $9 billion exchange offer, which means that holders of GM
$1-2/3 common stock are being 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-retirement employee benefit) obligations.
Q2. Why is GM choosing to reduce its economic interest in Class H at this time?
A. These two transactions are a continuation of General Motors' efforts to
further strengthen the corporation's financial position and to create
significant value for its stockholders. Specifically, GM expects that
the plan will result in the following benefits to GM and its stockholders:
- A significant improvement in the earnings per share (EPS) attributable
to GM $1-2/3 common stock as a result of the reduction of the number of
shares of GM $1-2/3 stock outstanding.
- A strengthening in GM's overall financial position as a result of a
reduction in annual pension expense and other post-retirement employee
benefit expenses.
- A substantial benefit to the liquidity of Class H stock as a result of
the issuance of Class H stock in connection with these transactions,
which GM believes will benefit Class H stockholders 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 a
function of the size of the exchange offer and pension/VEBA benefit plan
contributions which have been sized based on market considerations (in
the case of the exchange) and ERISA limits (in the case of the pension/VEBA
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 stockholders to participate indirectly in any further improvement
in the Class H common stock price. It also provides GM the flexibility to
consider additional stockholder value initiatives in the future, as
appropriate.
Q5. Now that GM has undertaken a significant reduction in its economic interest
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. However, GM will continue to evaluate what Hughes
ownership structure would be optimal for the two companies and GM's
stockholders. As a result, GM may determine to pursue any number of
future transactions involving Hughes, or no transaction at all.
Q6. Will GM pursue additional Class H for $1-2/3 common stock 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 common stock provides an attractive
currency to pursue further repurchases of GM $1-2/3 common stock or
other stockholder initiatives.
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 stockholder, can I vote on whether I want GM to pursue the exchange
offer or the benefit plan contributions?
A. The transaction does not require stockholder approval.
GM $1-2/3 Exchange Offer
- - ------------------------
Q1. Why did GM choose to conduct the stock exchange offer?
A. The exchange offer of up to $9 billion of Class H stock is an important
element of our overall plan to restructure GM's economic interest in our
Hughes subsidiary in order to realize some of the economic value arising from
GM's ownership of Hughes. The other element consists of our anticipated
contributions of about $7 billion of Class H common stock to certain of our
employee benefit plans.
We expect that our plan will result in the following benefits to GM and its
stockholders:
- We will use the exchange offer to repurchase a substantial amount of
$1-2/3 par value common stock, which we expect will significantly increase
the earnings per share attributable to $1-2/3 par value common stock in
the future.
- The contributions to the employee benefit plans will reduce our annual
pension expense and other post-retirement employee benefit expense and
will strengthen GM's overall financial position.
- The issuance of additional shares of Class H common stock in connection
with these transactions will substantially increase the liquidity of that
stock in the market, which we believe will benefit Class H stockholders
over time.
Q2. How many additional shares of Class H will be outstanding as a result of the
exchange offer?
A. GM will issue up to 92,012,781 shares of Class H stock in connection with the
exchange offer. The number of shares that will actually be outstanding after
the offer will depend upon the level of participation in the offer by holders
of GM $1-2/3 stock.
Q3. Will there be any dilution to existing Class H holders as a result of the
exchange offer?
A. No. There are currently about 138 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 38% of such interest.
The remaining unissued shares of GM Class H stock represent the 62%
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 73% assuming the exchange offer is fully
subscribed, the pension plan and VEBA contributions are made, and based on
the April 19 closing Class H stock price on the NYSE composite tape. In light
of the fact that the shares to be issued in these transactions come from GM's
current 62% economic interest in Hughes, the issuance of new Class H shares
will not have a dilutive impact on current GM Class H stockholders. The
issuance represents a transfer to GM's $1-2/3 stockholders and GM's benefit
plans of a portion of GM's economic interest not an increase in the dividend
base which determines the earnings per share of Class H stock.
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 common 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 common stock.
Q5. Why would a stockholder want to exchange their GM $1-2/3 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 is generally 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 any gain and using the remainder to purchase
Class H stock. Moreover, GM will issue 1.065 shares of Class H stock for each
share of GM $1-2/3 stock that is validly tendered in the exchange offer. The
exchange ratio reflects a premium of 17.7% on GM $1-2/3 stock, based on the
April 19 closing prices of $88.50 per share of GM $1-2/3 and $97.81 per share
of Class H on the NYSE composite tape. However, the relative trading prices
of GM $1-2/3 stock and Class H stock will fluctuate over the course of the
exchange offer and any premium that you might receive as a tendering GM
$1-2/3 shareholder will depend on the relative trading prices of GM $1-2/3
stock and Class H stock at the time of the closing of the exchange offer.
Q6. Who can participate in the exchange offer?
A. Any person, who holds shares of $1-2/3 stock that are properly tendered in
the U.S. or a country where the exchange offer is permitted, may participate
in the exchange offer.
Q7. Will the exchange offer be available to stockholders outside the U.S.?
A. GM is making the exchange offer globally, except in certain jurisdictions
where legal constraints do not permit us to conduct the offer.
Q8. How many shares of Class H stock will I receive for each share of $1-2/3
common stock that I tender?
A. You will receive 1.065 shares of Class H common stock for each share of GM
$1-2/3 common stock that is validly tendered and accepted by GM. If,
upon the expiration date, $1-2/3 stockholders have tendered more than
86,396,977 shares of $1-2/3 common stock so that more than 92,012,781 shares
of Class H common stock would be exchanged, GM will accept on a pro-rata
basis all shares of $1-2/3's tendered with appropriate adjustments to avoid
the return of fractional shares.
Q9. When will I receive my shares of Class H common stock?
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, in the form of account
statements from GM's transfer agent, as promptly as reasonably practicable
following the exchange offer. Stockholders participating through employee
benefit plans or their brokers will receive account statements from such
parties. Currently, Class H stock is issued under the direct
registration-certificateless-system, although stockholders may request
certificates rather than account statements.
Q10. How was the exchange ratio determined?
A. In determining the exchange ratio, GM considered, 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. The exchange offer was commenced Monday April 24.
Q12. When will the exchange offer expire?
A. Unless extended by GM, the exchange offer will expire on May 19. This date
is 20 business days after commencement.
Q13. What will happen to the value of my GM $ 1 2/3 common 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 the GM $1-2/3 earnings per share.
Q14. What happens if the exchange offer is undersubscribed (i.e., if less than
28,798,992 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 (i.e., waive the minimum condition) or the exchange offer
will be terminated and any shares you may have tendered will be returned to
you.
Q15. What happens if the exchange offer is over-subscribed (i.e., if more than
86,396,977 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 subject to proration
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. Shares tendered and not accepted due to
proration will be returned to the tendering person.
Q16. What are the tax implications of this transaction?
A. For U.S. federal income tax purposes, the exchange will generally be tax-free
to GM and its GM $1-2/3 stockholders, except that cash received in lieu of
fractional shares generally will be taxable to the stockholder. As always,
you should consult your tax advisor as to the particular tax consequences of
your participation in the exchange offer. Certain information regarding the
tax treatment to be afforded to stockholders outside the U.S. is in the
prospectus or will accompany the prospectus when it is distributed outside
the U.S. Since we cannot provide tax information to stockholders in every
country, we advise them to consult their local tax advisors.
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. Salomon Smith Barney will act as
marketing manager for Hughes in connection with the offering.
Q19. Explain why GM is increasing its exchange offer of $1-2/3 stock for Class H
stock by $1 billion and authorizing a $1.4 billion GM $1-2/3 stock repurchase
program in conjunction with the Fiat transaction?
A. GM will issue shares of GM $1-2/3 stock in conjunction with the Fiat
transaction. Increasing the exchange offer by $1 billion will mitigate the
dilutive effect on earnings per share associated with the additional shares
of $1-2/3 stock outstanding that will be issued in the Fiat transaction.
Q20. 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 as well as the other documents which General Motors has filed or
will file with the Securities and Exchange Commission, because they contain
important information. Holders of GM $1-2/3 Common Stock may obtain a free
copy of the prospectus and other documents filed by General Motors at the
Commission's web site at www.sec.gov or at General Motors' web site at gm.com
or from General Motors by directing such request in writing or by telephone
to:
GM Fulfillment Center
MC 480-000-FC1
30200 Stephenson Hwy.
Madison Heights, MI 48071
Telephone: (313) 667-1500
Select Menu Option #2
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.
Class H
- - -------
Q1. As a potential participant in GM's exchange offer, I would like to better
understand Hughes strategy and investment story?
A. You should read the section of the prospectus entitled Business of Hughes and
Risk Factors to gain further insight into the Hughes strategy and investment
story. In part, the prospectus indicates that in the first quarter of 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,
realignment of marketing organization 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. Today, Hughes' primary growth and
value driver is DIRECTV, the world's largest digital provider of
entertainment services.
Q2. How will these transactions 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, although the increased liquidity of Class H stock may
enable Hughes to use Class H stock more effectively in strategic transactions
designed to achieve its growth objectives.
Q3. Following the 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 currently anticipates that the Boeing transaction proceeds and other
sources of funds should be sufficient to meet all of Hughes' expected
2000 cash requirements and a portion of the requirements projected for 2001
(excluding potential mergers, acquisitions, alliances or similar
transactions). The Boeing transaction is scheduled to close later this year.
Hughes expects to use a combination of commercial bank borrowings and
floating rate notes to fund interim cash requirements pending receipt of the
Boeing sale proceeds. Hughes may also access the term debt market later in
the year to prefund 2001 needs if market conditions are attractive.
Q4. What should we read into the announcement of new outside board members by
Hughes?
A. The election of Bernee D.L. Strom, Peter A.Lund and James M. Cornelius to the
Hughes Board indicates that Hughes is able to attract outstanding individuals
to its board who are capable of providing valuable direction and assistance
in overseeing Hughes' business.
Q5. What impact will the proposed increase from 600 million to 3.6 billion in
the number of Class H shares authorized and expected stock split, as discussed
in GM's Proxy Statement, have on the exchange offer?
A. We don't anticipate that it will have any effect on the exchange offer.
Pension Fund and VEBA Questions
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Q1. What is GM proposing 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 other post-retirement employee benefits for hourly retirees.
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.
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 is expected to further defease GM's post retirement
health care and life insurance liabilities. Furthermore, future
appreciation of Class H stock, to the extent it exceeds GM's 10% asset return
assumption, 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, and at least 50% of the remaining shares have to be
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 could 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 interests 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 Company of New York.
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.
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 each
year, avoids PBGC variable rate premiums, and avoids deficit reduction
charges. To satisfy such criteria, GM would expect to make additional cash
contributions to the U.S. Hourly Pension Plan in the future. Therefore, to
avoid the necessity of such future contributions, GM has decided to proceed
with the proposed Class H stock contributions in order to retain cash in
future periods for use in its business.
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 provides GM with 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. What is the value of the asset GM currently has 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 (before deferred tax asset and VEBA funding).
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. The aggregate future liabilities in excess of current funding
is approximately $23 billion, net of deferred tax asset.
Rating Agency Questions
- - -----------------------
Q1. What is the Rating Agency reaction to these transactions?
A. The rating agencies 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 common stock of General Motors which is often referred
to as a "letter stock" or "tracking stock".
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 stock
options and tracking stock to employees of the tracked business).
Q4. Are there separate stockholder 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.
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, any GM $1-2/3 stockholder, including employees who hold GM $1-2/3
directly, through a broker, or who participate in the various GM savings
plans can participate in the exchange offer. You will also be able to get
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 will not change the exercise price or number of your stock
options.
Q3. If I hold shares of $1-2/3 stock which I acquired through the exercise of an
incentive stock option (ISO) less than a year prior to the close of the exchange
offer, can I tender those shares into the exchange offer without losing the
favorable ISO tax treatment?*
A. Yes, shares of $1-2/3 stock acquired through an exercise of an incentive
stock option less than a year before the close of the exchange offer can be
tendered into the exchange for Class H stock without losing the favorable
ISO tax treatment.
[*i.e., assuming a stock-for-stock exercise of an ISO, the value of the
additional stock acquired in the ISO exercise (the "spread") will not be
taxed until the Class H stock is sold, and then generally only at the
long-term capital-gain rate rather than the higher ordinary income rate
imposed on disqualifying dispositions of ISO stock that is disposed of
before the end of the one-year holding period]
Q4. What effect will such an exchange have on (1) the "tax basis" of my stock
and (2) the length of the holding period required before I can sell the Class
H stock acquired in the exchange offer without losing the favorable ISO tax
treatment?
A. If you use shares acquired through an ISO exercise in the exchange offer,
the tax basis of the shares tendered, including the basis allocated to the
additional shares of $1-2/3 stock acquired through the exercise of the ISO
(if any), must be allocated to the Class H stock you receive in exchange
for such shares.
The period of time between the original exercise of your ISO stock option and
the time the exchange occurs will carry over or be "tacked" onto the Class H
stock you receive. When the remainder of the one year holding period has
expired, you may sell the Class H stock without losing the favorable ISO tax
treatment.
In other words, if you sell the Class H stock acquired in the exchange prior
to the one year anniversary of the original related stock option exercise, it
will be considered a disqualifying disposition of ISO stock and taxed at the
ordinary income rate.
Other
- - -----
Q1. What is the EPS impact for GM $1-2/3 of the restructuring?
A. The EPS impact will ultimately depend on the level of stockholder
participation in 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
stockholders.
Q3. As GM will effectively free up cash through the proposed Class H
contribution to its pension and VEBA, will GM announce a new share repurchase
program?
A. At the time of the February 1st announcement GM had no current outstanding
share repurchase program. However, on March 13th, in connection with
the Fiat transaction, GM's board approved $2.4 billion in new repurchases of
GM $1-2/3 common stock which it expects to complete before year-end.
Specifically, GM increased the size of the exchange offer by $1 billion
(to a total of $9 billion) and will initiate a $1.4 billion cash
repurchase program to be implemented in the second half of the year.
# # #
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 Annual Report on Form
10-K for the year ended December 31, 1999, filed March 13, 2000 (at page II-20).
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, as well as the other documents which General Motors has filed 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 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:
GM Fulfillment Center
MC 480-000-FC1
30200 Stephenson Hwy.
Madison Heights, MI 48071
Telephone: (313) 667-1500
Select Menu Option #2
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.
GM urges holders of GM $1-2/3 common stock to read the final Registration
Statement on Form S-4, including the final prospectus, regarding the exchange
offer referred to above, as well as the other documents which General Motors has
filed or will file with the SEC, because they contain or will contain important
information for making an informed investment decision. Holders of GM $1-2/3
common stock may obtain a free copy of the final prospectus, and other documents
filed by General Motors at the SEC's web site at www.sec.gov, at General Motors'
web site at www.gm.com, or from General Motors by directing such request in
writing or by telephone to: GM Fulfillment Center, 30200 Stephenson Hwy. (MC
480-000-FC1), Madison Heights, Mich. 48071. Telephone: (313) 667-1500, menu
option #2. 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 jurisdiction in which offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction. 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 Corporate
Communications at 212-418-6380.
