UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF
-- 1934
For the quarterly period ended September 30, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF
--- 1934
For the transition period from to
--------------- -------------
Commission file number 1-143
GENERAL MOTORS CORPORATION
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 38-0572515
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 Renaissance Center, Detroit, Michigan 48265-3000
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (313) 556-5000
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X . No .
--- ---
As of September 30, 2000, there were outstanding 564,950,948 shares of
the issuer's $1-2/3 par value common stock and 874,604,340 shares of GM Class H
$0.10 par value common stock.
- 1 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
INDEX
Page No.
-------
Part I - Financial Information (Unaudited)
Item 1. Financial Statements
Consolidated Statements of Income for the Three and Nine
Months Ended September 30, 2000 and 1999 3
Consolidated Balance Sheets as of September 30, 2000,
December 31, 1999, and September 30, 1999 5
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 2000 and 1999 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 15
Part II - Other Information (Unaudited)
Item 1. Legal Proceedings 22
Item 6. Exhibits and Reports on Form 8-K 23
Signature 23
Exhibit 99 Hughes Electronics Corporation Financial Statements and
Management's Discussion and Analysis of Financial
Condition and Results of Operations (Unaudited) 24
Exhibit 27 Financial Data Schedule (Unaudited)
(for Securities and Exchange Commission information only)
- 2 -
<PAGE>
PART I
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2000 1999 2000 1999
---- ---- ---- ----
(Dollars in Millions Except Per Share Amounts)
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Total net sales and revenues $42,690 $42,794 $138,291 $130,296
------ ------ ------- -------
Cost of sales and other expenses
(Note 4) 33,678 34,555 108,888 104,261
Selling, general, and
administrative expenses 5,266 4,736 15,604 13,169
Interest expense 2,480 1,985 7,066 5,624
------- ------- --------- ---------
Total costs and expenses 41,424 41,276 131,558 123,054
------ ------ ------- -------
Income from continuing operations
before income taxes and
minority interests 1,266 1,518 6,733 7,242
Income tax expense 436 553 2,148 2,538
Equity income/(loss) and
minority interests (1) (88) (222) (273)
----- ----- ------ ------
Income from continuing operations 829 877 4,363 4,431
Income from discontinued operations
(Note 2) - - - 426
----- ----- ------ ------
Net income 829 877 4,363 4,857
Dividends on preference stocks (27) (28) (83) (51)
---- ---- ------ ------
Earnings attributable to
common stocks $802 $849 $4,280 $4,806
=== === ===== =====
Basic earnings (losses) per share
attributable to
common stocks (Note 8)
$1-2/3 par value
Continuing operations $1.57 $1.35 $7.51 $6.79
Discontinued operations (Note 2) - - - 0.66
---- ---- ---- ----
Earnings per share attributable
to $1-2/3 par value $1.57 $1.35 $7.51 $7.45
==== ==== ==== ====
Earnings per share attributable
to Class H $(0.09) $(0.04) $(0.23) $(0.06)
==== ==== ==== ====
Earnings (losses) per share
attributable to common
stocks assuming dilution (Note 8)
$1-2/3 par value
Continuing operations $1.55 $1.33 $7.37 $6.67
Discontinued operations (Note 2) - - - 0.65
---- ---- ---- ----
Earnings per share attributable
to $1-2/3 par value $1.55 $1.33 $7.37 $7.32
==== ==== ==== ====
Earnings per share attributable
to Class H $(0.09) $(0.04) $(0.23) $(0.06)
==== ==== ==== ====
Reference should be made to the notes to consolidated financial statements.
- 3 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME - concluded
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2000 1999 2000 1999
---- ---- ---- ----
(Dollars in Millions)
AUTOMOTIVE, COMMUNICATIONS SERVICES, AND OTHER OPERATIONS
Total net sales and revenues $36,602 $37,546 $120,667 $115,186
------ ------ ------- -------
Cost of sales and other expenses
(Note 4) 31,827 32,894 103,408 99,404
Selling, general, and
administrative expenses 3,765 3,486 11,304 9,648
------- ------- -------- --------
Total costs and expenses 35,592 36,380 114,712 109,052
------ ------ ------- -------
Interest expense 210 223 648 597
Net expense from transactions with
Financing and Insurance Operations 197 85 508 245
--- ---- ----- -----
Income from continuing
operations before income
taxes and minority interests 603 858 4,799 5,292
Income tax expense 193 291 1,433 1,799
Equity income/(loss) and
minority interests 13 (80) (207) (250)
---- ---- ----- -----
Income from continuing operations 423 487 3,159 3,243
Income from discontinued operations
(Note 2) - - - 426
---- ---- ----- -----
Net income - Automotive,
Communications Services,
and Other Operations $423 $487 $3,159 $3,669
=== === ===== =====
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2000 1999 2000 1999
---- ---- ---- ----
(Dollars in Millions)
FINANCING AND INSURANCE OPERATIONS
Total revenues $6,088 $5,248 $17,624 $15,110
----- ----- ------ ------
Interest expense 2,270 1,762 6,418 5,027
Depreciation and amortization
expense 1,474 1,371 4,480 3,918
Operating and other expenses 1,450 1,216 4,147 3,429
Provision for financing and
insurance losses 428 324 1,153 1,031
----- ----- ------ ------
Total costs and expenses 5,622 4,673 16,198 13,405
----- ----- ------ ------
Net income from transactions with
Automotive, Communications
Services, and Other Operations 197 85 508 245
--- ---- ---- -----
Income before income taxes
and minority interests 663 660 1,934 1,950
Income tax expense 243 262 715 739
Equity income/(loss) and
minority interests (14) (8) (15) (23)
--- --- --- -----
Net income - Financing and
Insurance Operations $406 $390 $1,204 $1,188
=== === ===== =====
Reference should be made to the notes to consolidated financial statements.
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<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Sept. 30, Sept. 30,
2000 Dec. 31, 1999
(Unaudited) 1999 (Unaudited)
--------- ---- ---------
GENERAL MOTORS CORPORATION AND SUBSIDIARIES (Dollars in Millions)
ASSETS
Automotive, Communications Services,
and Other Operations
Cash and cash equivalents $9,351 $9,730 $12,056
Marketable securities 1,176 1,698 1,666
------- ------- -------
Total cash and marketable securities 10,527 11,428 13,722
Accounts and notes receivable
(less allowances) 5,975 5,093 5,480
Inventories (less allowances) (Note 3) 11,300 10,638 10,603
Equipment on operating leases
(less accumulated depreciation) 5,980 5,744 6,244
Deferred income taxes and other current assets 9,489 9,006 7,494
------- ------- -------
Total current assets 43,271 41,909 43,543
Equity in net assets of
nonconsolidated associates 3,301 1,711 1,642
Property - net 34,036 32,779 31,761
Intangible assets - net 8,651 8,527 12,338
Deferred income taxes 13,202 15,277 17,139
Other assets 33,015 25,358 13,894
------- ------- -------
Total Automotive, Comm. Serv., and
Other Operations assets 135,476 125,561 120,317
Financing and Insurance Operations
Cash and cash equivalents 912 712 328
Investments in securities 9,309 9,110 8,937
Finance receivables - net 87,534 80,627 76,449
Investment in leases and other receivables 37,551 36,407 35,837
Other assets 24,864 21,312 20,589
Net receivable from Automotive,
Comm. Serv., and Other Operations 1,599 1,001 369
------- ------- -------
Total Financing and Insurance
Operations assets 161,769 149,169 142,509
------- ------- -------
Total assets $297,245 $274,730 $262,826
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive, Communications Services,
and Other Operations
Accounts payable (principally trade) $18,190 $17,254 $16,323
Loans payable 3,321 1,991 695
Accrued expenses 31,997 32,854 32,803
Net payable to Financing and
Insurance Operations 1,599 1,001 369
------ ------ ------
Total current liabilities 55,107 53,100 50,190
Long-term debt 8,245 7,415 7,880
Postretirement benefits other than pensions 34,376 34,166 34,455
Pensions 3,226 3,339 3,179
Other liabilities and deferred income taxes 16,088 17,426 18,170
------- ------- -------
Total Automotive, Communications Services,
and Other Operations liabilities 117,042 115,446 113,874
Financing and Insurance Operations
Accounts payable 5,316 4,262 4,587
Debt 129,325 122,282 115,329
Other liabilities and deferred income taxes 13,238 11,282 11,607
------- ------- -------
Total Financing and Insurance
Operations liabilities 147,879 137,826 131,523
Minority interests 670 596 635
General Motors - obligated mandatorily
redeemable preferred securities of subsidiary
trusts holding solely junior subordinated
debentures of General Motors (Note 5)
Series D - 79 79
Series G 139 139 140
Stockholders' equity
$1-2/3 par value common stock
(issued, 565,371,465; 619,412,233
and 642,050,210 shares) (Notes 6 and 8) 943 1,033 1,071
Class H common stock (issued, 874,807,080;
411,345,561 and 405,587,898 shares)
(Notes 6 and 8) 87 14 14
Capital surplus (principally additional
paid-in capital) 21,818 13,794 15,282
Retained earnings 10,335 6,961 5,573
------ ------- -------
Subtotal 33,183 21,802 21,940
Accumulated foreign currency translation
adjustments (2,480) (2,033) (1,969)
Net unrealized gains on securities 933 996 631
Minimum pension liability adjustment (121) (121) (4,027)
------ ------ -----
Accumulated other comprehensive loss (1,668) (1,158) (5,365)
------ ------- -------
Total stockholders' equity 31,515 20,644 16,575
------- ------- -------
Total liabilities and stockholders' equity $297,245 $274,730 $262,826
======== ======== ========
Reference should be made to the notes to consolidated financial statements.
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<TABLE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended September 30,
-------------------------------------------------------
2000 1999
------------------------- -------------------------
Automotive, Financing Automotive, Financing
Comm.Serv. and Comm.Serv. and
and Other Insurance and Other Insurance
--------- --------- --------- ---------
(Dollars in Millions)
<S> <C> <C> <C> <C>
Net cash provided by operating activities $9,066 $4,746 $15,372 $9,883
Cash flows from investing activities
Expenditures for property (6,314) (335) (4,721) (204)
Investments in marketable securities
- acquisitions (2,425) (18,198) (3,481) (16,089)
Investments in marketable securities
- liquidations 2,947 17,998 2,217 15,489
Mortgage servicing rights - acquisitions - (698) - (1,199)
Mortgage servicing rights - liquidations - - - 34
Finance receivables - acquisitions - (140,295) - (139,165)
Finance receivables - liquidations - 88,560 - 100,692
Proceeds from sales of finance receivables - 43,407 - 35,120
Operating leases - acquisitions (5,342) (12,147) (6,175) (13,948)
Operating leases - liquidations 4,615 7,313 4,279 7,104
Investments in companies, net of
cash acquired (Note 9) (3,911) - (2,885) (2,120)
Net investing activity with Financing and
Insurance Operations (998) - 75 -
Other (558) 356 (831) 677
------ ------ ------ ------
Net cash used in investing activities (11,986) (14,039) (11,522) (13,609)
------ ------ ------ ------
Cash flows from financing activities
Net increase (decrease) in loans payable 1,255 1,121 (551) (7,601)
Long-term debt-borrowings 4,130 19,450 5,414 21,672
Long-term debt-repayments (4,213) (11,482) (4,632) (10,536)
Net financing activity with Automotive,
Communications Services,
and Other Operations - 998 - (75)
Repurchases of common and preference stocks (652) - (2,149) -
Proceeds from issuing common and
preference stocks 2,778 - 1,905 -
Cash dividends paid to stockholders (989) - (1,023) -
----- ------ ----- -----
Net cash provided by (used in)
financing activities 2,309 10,087 (1,036) 3,460
----- ------ ----- -----
Effect of exchange rate changes on cash
and cash equivalents (365) 3 (167) 1
Net transactions with Automotive/
Financing Operations 597 (597) (447) 447
--- --- ----- ---
Net cash (used in) provided by
continuing operations (379) 200 2,200 182
Net cash provided by discontinued
operations (Note 2) - - 128 -
--- --- ----- ---
Net (decrease) increase in cash and
cash equivalents (379) 200 2,328 182
Cash and cash equivalents at beginning
of the period 9,730 712 9,728 146
----- --- ------ ---
Cash and cash equivalents at end
of the period $9,351 $912 $12,056 $328
===== === ====== ===
</TABLE>
Reference should be made to the notes to consolidated financial statements.
- 6 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Financial Statement Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. In the opinion of management, all adjustments (consisting
of only normal recurring items), which are necessary for a fair presentation
have been included. The results for interim periods are not necessarily
indicative of results which may be expected for any other interim period or for
the full year. For further information, refer to the December 31, 1999
consolidated financial statements and notes thereto included in General Motors
Corporation's (the "Corporation" or "GM") 1999 Annual Report on Form 10-K, and
all other GM, Hughes Electronics Corporation and Subsidiaries (Hughes), and
General Motors Acceptance Corporation and Subsidiaries (GMAC) filings with the
Securities and Exchange Commission.
GM presents separate financial information for the following businesses: (1)
Automotive, Communications Services, and Other Operations which consists of the
design, manufacturing, and marketing of cars, trucks, locomotives, and heavy
duty transmissions and related parts and accessories, as well as the operations
of Hughes; and (2) Financing and Insurance Operations which consists primarily
of GMAC, which provides a broad range of financial services, including consumer
vehicle financing, full-service leasing and fleet leasing, dealer financing, car
and truck extended service contracts, residential and commercial mortgage
services, vehicle and homeowners' insurance, and asset-based lending.
Transactions between businesses have been eliminated in the Corporation's
consolidated statements of income.
Certain amounts for 1999 were reclassified to conform with the 2000
classifications.
Note 2. Discontinued Operations
On February 5, 1999, Delphi Automotive Systems Corporation (Delphi) completed
an initial public offering (IPO) of 100 million shares of its common stock,
which represented 17.7% of its outstanding common shares. On April 12, 1999, the
GM Board of Directors (GM Board) approved the complete separation of Delphi from
GM by means of a spin-off (which was tax-free to GM and its stockholders for
U.S. federal income tax purposes). On May 28, 1999, GM distributed to holders of
its $1-2/3 par value common stock 80.1% of the outstanding shares of Delphi,
which resulted in 0.69893 shares of Delphi common stock being distributed for
each share of GM $1-2/3 par value common stock outstanding on the record date of
May 25, 1999. In addition, GM contributed the remaining 2.2% of Delphi shares
(around 12.4 million shares), to a Voluntary Employee Beneficiary Association
(VEBA) trust established by GM to fund benefits to its hourly retirees.
The financial data related to GM's investment in Delphi through May 28, 1999
is classified as discontinued operations for all periods presented.
Delphi net sales (including sales to GM) included in discontinued operations
totaled $12.5 billion for the nine months ended September 30, 1999. Income from
Delphi discontinued operations of $426 million for the nine months ended
September 30, 1999 is reported net of income tax expense of $314 million.
Note 3. Inventories
Inventories included the following for Automotive, Communications Services,
and Other Operations (in millions):
Sept. 30, Dec. 31, Sept. 30,
2000 1999 1999
---------- --------- ----------
Productive material, work in process,
and supplies $6,121 $5,505 $5,858
Finished product, service parts, etc. 7,062 7,023 6,647
------ ------ -------
Total inventories at FIFO 13,183 12,528 12,505
Less LIFO allowance 1,883 1,890 1,902
------- ------- -------
Total inventories (less allowances) $11,300 $10,638 $10,603
====== ====== ======
- 7 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
Note 4. Depreciation and Amortization
Depreciation and amortization included in cost of sales and other expenses
for Automotive, Communications Services, and Other Operations was as follows (in
millions):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2000 1999 2000 1999
---- ---- ---- ----
Depreciation $1,002 $1,004 $2,964 $3,075
Amortization of special tools 537 635 1,852 1,889
Amortization of intangible assets 57 78 209 157
------ ------ ------ ------
Total $1,596 $1,717 $5,025 $5,121
===== ===== ===== =====
Note 5. Preferred Securities of Subsidiary Trusts
The General Motors Capital Trust G's (Series G Trust) sole assets, are its
9.87% Junior Subordinated Deferrable Interest Debentures, Series G, due July 1,
2012 but redeemable, in whole or part, at GM's option on or after January 1,
2001, which have an aggregate principal amount of $131 million.
----------------
sm "Trust Originated Preferred Securities" and "TOPrS" are service trademarks of
Merrill Lynch & Co.
Note 6. Capital Stock Transactions
As part of GM's previously announced plans for a broad restructuring of its
economic interest in Hughes, during the second quarter of 2000, GM completed an
exchange offer in which GM repurchased 86 million shares of GM $1-2/3 par value
common stock and issued 92 million shares of GM Class H common stock. In
addition, on June 12, 2000, GM contributed approximately 54 million shares and
approximately 7 million shares of GM Class H common stock to its U.S.
Hourly-Rate Employees Pension Plan and VEBA trust, respectively. The total value
of the contributions was approximately $5.6 billion. As a result of the exchange
offer and employee-benefit plan contributions, the economic interest in Hughes
attributable to GM $1-2/3 par value common stock decreased from approximately
62% to approximately 30%, and the economic interest in Hughes attributable to GM
Class H common stock increased from approximately 38% to approximately 70%, on a
fully diluted basis.
On June 6, 2000, the GM Board declared a three-for-one stock split of the GM
Class H common stock. The stock split was in the form of a 200% stock dividend,
paid on June 30, 2000 to GM Class H common stockholders of record on June 13,
2000. All per share amounts and numbers of shares for all periods presented, as
well as GM Class H common stock and capital surplus as of June 30, 2000, were
adjusted to reflect the stock split. Furthermore, as a result of this stock
split, the voting and liquidation rights of the GM Class H common stock were
reduced from 0.6 votes per share and 0.6 liquidation units per share, to 0.2
votes per share and 0.2 liquidation units per share in order to avoid dilution
in the aggregate voting or liquidation rights of any class. The voting and
liquidation rights of the GM $1-2/3 par value common stock remained at one vote
per share and one liquidation unit per share.
During the nine months ended September 30, 2000, GM used $310 million to
acquire approximately 5 million shares of GM $1-2/3 par value common stock under
the Corporation's $1.4 billion stock repurchase program announced in March,
2000. GM also used approximately $97 million and $6 million to repurchase shares
of GM $1-2/3 par value common stock and GM Class H common stock for certain
employee benefit plans, respectively, during the nine months ended September 30,
2000.
Note 7. Comprehensive Income
GM's total comprehensive income was as follows (in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2000 1999 2000 1999
---- ---- ---- ----
Net income $829 $877 $4,363 $4,857
Other comprehensive (loss)/income (171) 88 (510) 332
--- ---- ------ -----
Total $658 $965 $3,853 $5,189
=== === ===== =====
- 8 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
Note 8. Earnings Per Share Attributable to Common Stocks
Earnings per share (EPS) attributable to each class of GM common stock was
determined based on the attribution of earnings to each such class of common
stock for the period divided by the weighted-average number of common shares for
each such class outstanding during the period. Diluted EPS attributable to each
class of GM common stock considers the impact of potential common shares, unless
the inclusion of the potential common shares would have an antidilutive effect.
The attribution of earnings to each class of GM common stock was as follows
(in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2000 1999 2000 1999
---- ---- ---- ----
Earnings (losses) attributable to
common stocks
$1-2/3 par value
Continuing operations $878 $866 $4,424 $4,400
Discontinued operations - - - 426
----- ----- --------- ------
Earnings attributable to
$1-2/3 par value $878 $866 $4,424 $4,826
(Losses) attributable to Class H $(76) $(17) $(144) $(20)
Earnings attributable to $1-2/3 par value common stock for the period
represent the earnings attributable to all GM common stocks for the period,
reduced by the Available Separate Consolidated Net Income (Loss) (ASCNI) of
Hughes for the respective period.
Losses attributable to GM Class H common stock for the three and nine months
ended September 30, 2000 and 1999, represent the ASCNI of Hughes. Losses used
for computation of the ASCNI of Hughes are based on the separate consolidated
net income (loss) of Hughes, excluding the effects of GM purchase accounting
adjustments arising from GM's acquisition of Hughes Aircraft Company (HAC) which
remains after the spin-off of Hughes Defense, reduced by the amount of dividends
accrued on the Hughes Series A Preferred Stock (as an equivalent measure of the
effect that GM's payment of dividends on the GM Series H 6.25% Automatically
Convertible Preference Stock would have if paid by Hughes). The calculated
losses used for computation of the ASCNI of Hughes are then multiplied by a
fraction, the numerator of which is equal to the weighted-average number of
shares of GM Class H common stock outstanding during the three and nine months
ended September 30, 2000 and 1999 (874 million and 405 million for the third
quarters of 2000 and 1999, respectively, and 618 million and 363 million for the
nine month periods ended September 30, 2000 and 1999, respectively), and the
denominator of which is a number equal to the weighted-average number of shares
of GM Class H common stock, which if issued and outstanding would represent a
100% interest in the earnings of Hughes (Average Class H dividend base). The
Average Class H dividend base was 1.3 billion for the third quarters of 2000 and
1999, and 1.3 billion and 1.2 billion for the nine month periods ended September
30, 2000 and 1999, respectively.
- 9 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
Note 8. Earnings Per Share Attributable to Common Stocks (concluded)
The reconciliation of the amounts used in the basic and diluted EPS
computations for income from continuing operations was as follows (in millions
except per share amounts):
<TABLE>
<CAPTION>
$1-2/3 Par Value Common Stock Class H Common Stock
------------------------------- ----------------------------
Per Share Per Share
Income Shares Amount ASCNI Shares Amount
------ ------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended September 30, 2000
Income (loss) from continuing operations $889 $(60)
Less:Dividends on preference stocks 11 16
---- --
Basic EPS
Income (loss) from continuing operations
attributable to common stockholders 878 559 $1.57 (76) 874 $(0.09)
==== ====
Effect of Dilutive Securities
Assumed exercise of dilutive
stock options - 8 - -
---- ---- --- ---
Diluted EPS
Adjusted income (loss) from
continuing operations
attributable to common stockholders $878 567 $1.55 $(76) 874 $(0.09)
=== === ==== == === ====
Three Months Ended September 30, 1999
Income (loss) from continuing operations $886 $(9)
Less:Dividends on preference stocks 20 8
--- --
Basic EPS
Income (loss) from continuing operations
attributable to common stockholders 866 641 $1.35 (17) 405 $(0.04)
==== ====
Effect of Dilutive Securities
Assumed exercise of dilutive
stock options - 11 - -
--- --- -- ---
Diluted EPS
Adjusted income (loss) from
continuing operations
attributable to common stockholders $866 652 $1.33 $(17) 405 $(0.04)
=== === ==== == === ====
Nine Months Ended September 30, 2000
Income (loss) from continuing
operations $4,472 $(109)
Less:Dividends on preference stocks 48 35
----- ---
Basic EPS
Income (loss) from continuing
operations attributable
to common stockholders 4,424 589 $7.51 (144) 618 $(0.23)
==== ====
Effect of Dilutive Securities
Assumed exercise of dilutive
stock options - 11 - -
----- --- --- ---
Diluted EPS
Adjusted income (loss) from
continuing operations
attributable to common
stockholders $4,424 600 $7.37 $(144) 618 $(0.23)
===== === ==== === === ====
Nine Months Ended September 30, 1999
Income (loss) from continuing
operations $4,444 $(13)
Less:Dividends on preference stocks 44 7
----- ---
Basic EPS
Income (loss) from continuing
operations attributable
to common stockholders 4,400 648 $6.79 (20) 363 $(0.06)
==== ====
Effect of Dilutive Securities
Assumed exercise of dilutive
stock options - 12 - -
----- --- --- ---
Diluted EPS
Adjusted income (loss) from
continuing operations
attributable to common
stockholders $4,400 660 $6.67 $(20) 363 $(0.06)
===== === ==== == === ====
</TABLE>
- 10 -
<PAGE>
Version4
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
Note 9. Acquisitions, Investments, and Divestitures
Acquisitions and Investments
On January 28, 2000, GM completed the acquisition of the remaining 50% of
Saab Automobile AB from Investor A.B. for $125 million. The transaction was
accounted for using the purchase method of accounting. The allocation of the
purchase price is expected to be finalized in the fourth quarter of 2000.
On April 12, 2000, GM finalized the previously announced Agreement of
Strategic Alliance (the "Alliance Agreement") between GM and Fuji Heavy
Industries Ltd. (Fuji) in which GM purchased 157,262,925 newly-issued shares of
Fuji's voting common stock, par value 50 yen ((Y)50) per share, for
approximately $1.3 billion, an equity interest in Fuji of 20% on a fully diluted
basis, at the time of payment. This investment is accounted for using the equity
method of accounting and Fuji will remain an independent company with GM as its
largest shareholder. This Alliance Agreement will allow GM and Fuji to
collaborate in the design, development, and manufacturing of cars, trucks, and
related technology.
On July 24, 2000, GM finalized its previously announced strategic industrial
alliance with Fiat S.p.A. (Fiat). As part of this alliance, GM acquired a 20%
interest in Fiat Auto Holdings, B.V. (Fiat Auto), a new holding company that
controls Fiat's automobile and light-commercial vehicle operations, except for
Ferrari and Maserati for $2.4 billion. This investment is accounted for using
the cost method of accounting. In addition, Fiat purchased for $2.4 billion
approximately 32 million shares of GM $1-2/3 par value common stock, or
approximately 5.6% of GM's $1-2/3 par value common stock outstanding as of July
24, 2000.
In 1999, significant transactions included the merger with United States
Satellite Broadcasting Company, Inc. (USSB) and acquisitions of PRIMESTAR, the
asset-based lending and factoring business unit of The Bank of New York (BNYFC),
and the full-service leasing business of Arriva Automotive Solutions Limited
(Arriva).
The following selected unaudited pro forma information is being provided to
present a summary of the combined results of GM, USSB, PRIMESTAR, BNYFC, and
Arriva for the nine months ended September 30, 1999 as if the acquisitions had
occurred as of the beginning of the period, giving effect to purchase accounting
adjustments. The pro forma data presents only significant transactions, is
presented for informational purposes only, and may not necessarily reflect the
results of operations of GM had these companies operated as part of GM for the
period presented, nor are they necessarily indicative of the results of future
operations. The pro forma information excludes the effect of non-recurring
charges. Pro forma information related to the 2000 transactions would not be
material to GM's results of operations, and therefore, is not presented.
The pro forma information is as follows (in millions except per share
amounts):
Nine Months Ended
September 30, 1999
------------------
Total net sales and revenues $131,623
Income from continuing operations $4,432
Income from discontinued operations 426
-----
Net income $4,858
=====
Basic earnings (losses) per share attributable to common stocks
$1-2/3 par value common stock
Continuing operations $6.80
Discontinued operations 0.66
----
Earnings per share attributable to $1-2/3 par value $7.46
====
Earnings per share attributable to Class H $(0.06)
====
Earnings (losses) per share attributable to common stocks
assuming dilution
$1-2/3 par value common stock
Continuing operations $6.67
Discontinued operations 0.65
----
Earnings per share attributable to $1-2/3 par value $7.32
====
Earnings per share attributable to Class H $(0.06)
====
- 11 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
Note 9. Acquisitions, Investments, and Divestitures (concluded)
Divestitures
On October 6, 2000, Hughes completed the sale, which was first announced on
January 13, 2000, of its satellite systems manufacturing businesses to The
Boeing Company (Boeing) for approximately $3.8 billion in cash, which will
result in a fourth quarter 2000 after-tax gain in excess of $1.0 billion. The
purchase price is subject to adjustment based upon the final closing net assets
of the satellite manufacturing businesses compared to a target amount, which
could require amounts to be paid to or received from Boeing.
On March 1, 2000, Hughes announced that the operations of DIRECTV Japan,
Hughes' affiliate that provides DIRECTV services in Japan, would be discontinued
and that its subscribers would have the opportunity to migrate during 2000 to
SkyPerfecTV!, a publicly traded company in Japan that provides direct-to-home
satellite broadcast services. In connection with the agreement, Hughes acquired
an approximate 6.6% interest in SkyPerfecTV!. As a result of the transaction, in
the first quarter of 2000, Hughes wrote off its investment and accrued for the
estimated costs to exit the DIRECTV Japan business. The principal components of
the accrued exit costs include estimated subscriber migration and termination
costs and costs to terminate certain leases, programming agreements, and other
long-term contractual commitments. These one-time charges were offset by the
estimated fair value of the SkyPerfecTV! interest acquired. The fair value of
the SkyPerfecTV! interest recorded was estimated based upon an independent
appraisal. The total loss related to DIRECTV Japan for the third quarter of 2000
and the nine months ended September 30, 2000, including Hughes' share of DIRECTV
Japan's operating losses was approximately $3 million and $258 million,
respectively. The after-tax impact for the same periods was approximately $2
million and $69 million, respectively. DIRECTV Japan ceased broadcasting on
September 30, 2000 and is completing the migration of customers to SkyPerfecTV!.
Note 10. Commitments and Contingent Matters
Commitments
On September 14, 2000, GM announced that it plans to invest approximately
$600 million in Suzuki, which will increase its equity ownership in Suzuki from
10% to 20%, primarily with the issuance of new GM $1-2/3 par value common stock.
This transaction is expected to be completed in early 2001.
Contingent Matters
In Anderson, et al v. General Motors Corporation, a jury in a Los Angeles
Superior Court returned a verdict of $4.9 billion against GM in a product
liability lawsuit involving a post-collision fuel fed fire in a 1979 Chevrolet
Malibu. In post-trial developments, the trial court has reduced the punitive
damages from $4.8 billion to $1.1 billion and has entered an order which stays
execution of the judgment pending resolution of all appeals by GM and has
released the bond GM had posted for the punitive and compensatory damages (the
cost of which was not material to the Corporation). GM continues to pursue its
appellate rights, including efforts to secure a new trial and the complete
elimination of responsibility to pay any damages in this matter consistent with
GM's view that the design of the Chevrolet Malibu was not responsible for
plaintiffs' injuries.
GM is subject to potential liability under government regulations and various
claims and legal actions which are pending or may be asserted against them. Some
of the pending actions purport to be class actions. The aggregate ultimate
liability of GM under these government regulations and under these claims and
actions, was not determinable at September 30, 2000. After discussion with
counsel, it is the opinion of management that such liability is not expected to
have a material adverse effect on the Corporation's consolidated financial
condition or results of operations.
Refer to Note 9 Contingencies to the Hughes financial statements, included in
Exhibit 99 to this GM Form 10-Q for the period ended September 30, 2000 for
information regarding Hughes' contingent matters.
- 12 -
<PAGE>
Version4
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
Note 11. Segment Reporting
GM's reportable operating segments within its Automotive, Communications
Services, and Other Operations business consist of GM Automotive (GMA), which is
comprised of four regions: GM North America (GMNA), GM Europe (GME), GM Latin
America/Africa/Mid-East (GMLAAM), and GM Asia/Pacific (GMAP); Hughes; and Other.
GM's reportable operating segments within its Financing and Insurance Operations
business consist of GMAC and Other. Selected information regarding GM's
reportable operating segments and regions were as follows:
<TABLE>
<CAPTION>
Total Other Total
GMNA GME GMLAAM GMAP GMA Hughes Other Automotive GMAC Financing Financing
------ ----- ------ ----- ---- ------ ----- ---------- ----- --------- ---------
(in millions)
For the Three Months Ended
September 30, 2000
Net sales and revenues:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
External customers $26,566 $5,115 $1,471 $834 $33,986 $2,082 $534 $36,602 $6,067 $21 $6,088
Intersegment (395) 224 53 118 - 6 (6) - - - -
------ ----- ----- --- ------ ----- --- ------ ----- ---- -----
Total net sales and revenues $26,171 $5,339 $1,524 $952 $33,986 $2,088 $528 $36,602 $6,067 $21 $6,088
====== ===== ===== === ====== ===== === ====== ===== == =====
Interest income (a) $157 $105 $5 $3 $270 $21 $(153) $138 $587 $(87) $500
Interest expense $323 $100 $15 $1 $439 $66 $(295) $210 $2,158 $112 $2,270
Net income (loss) $728 $(181) $31 $(10) $568 $(88)(b) $(57) $423 $401 $5 $406
Segment assets $91,585 $18,596 $4,580 $1,060 $115,821 $20,248 (c) $(593) $135,476 $160,254 $1,515 $161,769
For the Three Months Ended
September 30, 1999
Net sales and revenues:
External customers $27,322 $5,793 $1,135 $791 $35,041 $2,003 $502 $37,546 $5,203 $45 $5,248
Intersegment (756) 598 65 93 - (5) 5 - - - -
------ ----- ----- --- ------ ----- --- ------ ----- --- -----
Total net sales and revenues $26,566 $6,391 $1,200 $884 $35,041 $1,998 $507 $37,546 $5,203 $45 $5,248
====== ===== ===== === ====== ===== === ====== ===== == =====
Interest income (a) $231 $115 $11 $2 $359 $2 $(196) $165 $456 $(76) $380
Interest expense $326 $89 $29 $2 $446 $52 $(275) $223 $1,667 $95 $1,762
Net income (loss) $671 $32 $(36) $(54) $613 $(30)(b) $(96) $487 $393 $(3) $390
Segment assets $74,773 $19,764 $3,908 $1,223 $99,668 $18,395 (c) $2,254 $120,317 $142,591 $(82) $142,509
(a)Interest income is included in net sales and revenues from external customers.
(b)The amount reported for Hughes excludes amortization of GM purchase accounting
adjustments of approximately $5 million for both 2000 and 1999, related to
GM's acquisition of HAC. Such amortization was allocated to GM's Other
segment which is consistent with the basis upon which the segments are
evaluated.
(c)The amount reported for Hughes excludes the unamortized GM purchase
accounting adjustments of approximately $390 million and $411 million, for
2000 and 1999, respectively, related to GM's acquisition of HAC. These
adjustments were allocated to GM's Other segment which is consistent with the
basis upon which the segments are evaluated.
</TABLE>
- 13 -
<TABLE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - concluded
(Unaudited)
Note 11. Segment Reporting (concluded)
<CAPTION>
Total Other Total
GMNA GME GMLAAM GMAP GMA Hughes Other Automotive GMAC Financing Financing
------ ----- ------ ----- ---- ------ ----- ---------- ----- --------- ---------
(in millions)
For the Nine Months Ended
September 30, 2000
Net sales and revenues:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
External customers $87,094 $18,593 $4,142 $2,357 $112,186 $6,440 $2,041 $120,667 $17,443 $181 $17,624
Intersegment (1,110) 722 140 248 - 26 (26) - - - -
------ ------ ----- ----- ------- ----- ----- ------- ------ --- ------
Total net sales and revenues $85,984 $19,315 $4,282 $2,605 $112,186 $6,466 $2,015 $120,667 $17,443 $181 $17,624
====== ====== ===== ===== ======= ===== ===== ======= ====== === ======
Interest income (a) $418 $319 $19 $9 $765 $58 $(367) $456 $1,609 $(322) $1,287
Interest expense $879 $293 $77 $2 $1,251 $169 $(772) $648 $6,095 $323 $6,418
Net income (loss) $3,428 $206 $42 $(126) $3,550 $(229)(c) $(162) $3,159 $1,193 $11 $1,204
For the Nine Months Ended
September 30, 1999
Net sales and revenues:
External customers $83,900 $18,912 $3,278 $2,066 $108,156 $5,402 $1,628 $115,186 $14,931 $179 $15,110
Intersegment (1,107) 757 170 180 - 15 (15) - - - -
------ ------ ------ ----- ------- ----- ----- ------- ------ --- ------
-
----------
Total net sales and revenues $82,793 $19,669 $3,448 $2,246 $108,156 $5,417 $1,613 $115,186 $14,931 $179 $15,110
====== ====== ===== ===== ======= ===== ===== ======= ====== === ======
Interest income (a) $734 $313 $36 $6 $1,089 $21 $(525) $585 $1,278 $(170) $1,108
Interest expense $928 $242 $64 $9 $1,243 $71 $(717) $597 $4,718 $309 $5,027
Net income (loss) $3,575 $393 $(99) $(195) $3,674 $(44)(c) $39 (b) $3,669 $1,176 $12 $1,188
(a)Interest income is included in net sales and revenues from external customers.
(b)The amount for Other includes income from discontinued operations related to
Delphi of $426 million for the nine months ended September 30, 1999.
(c)The amount reported for Hughes excludes amortization of GM purchase
accounting adjustments of approximately $16 million for both 2000 and 1999,
related to GM's acquisition of HAC. Such amortization was allocated to GM's
Other segment which is consistent with the basis upon which the segments are
evaluated.
</TABLE>
* * * * * *
- 14 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following management's discussion and analysis of financial condition and
results of operations (MD&A) should be read in conjunction with the December 31,
1999 consolidated financial statements and notes thereto along with the MD&A
included in General Motors Corporation's (the "Corporation" or "GM") 1999 Annual
Report on Form 10-K, and all other GM, Hughes Electronics Corporation and
Subsidiaries (Hughes), and General Motors Acceptance Corporation and
Subsidiaries (GMAC) filings with the Securities and Exchange Commission (SEC).
All earnings per share amounts included in the MD&A are reported as diluted.
GM presents separate financial information for the following businesses:
Automotive, Communications Services, and Other Operations and Financing and
Insurance Operations.
GM's reportable operating segments within its Automotive, Communications
Services, and Other Operations business consist of:
. GM Automotive (GMA), is comprised of four regions: GM North America
(GMNA), GM Europe (GME), GM Latin America/Africa/Mid-East (GMLAAM), and GM
Asia/Pacific (GMAP).
. Hughes includes activities relating to digital entertainment, information
and communications services, and satellite-based private business
networks.
. The Other segment includes the design, manufacturing, and marketing of
locomotives and heavy-duty transmissions, the elimination of intersegment
transactions, and certain non-segment specific revenues and expenditures.
GM's reportable operating segments within its Financing and Insurance
Operations business consist of GMAC and Other. The Financing and Insurance
Operations' Other segment includes financing entities operating in the U.S.,
Canada, Brazil, Sweden, and Mexico which are not associated with GMAC.
The following discussion of GM's reportable operating segments should be read
in conjunction with Note 11 to the GM consolidated financial statements.
The disaggregated financial results for GMA have been prepared using a
management approach, which is consistent with the basis and manner in which GM
management internally disaggregates financial information for the purpose of
assisting in making internal operating decisions. In this regard, certain common
expenses were allocated among regions less precisely than would be required for
stand-alone financial information prepared in accordance with generally accepted
accounting principles (GAAP) and certain expenses (primarily certain U.S. taxes
related to non-U.S. operations) were included in the Automotive, Communications
Services, and Other Operations' Other segment. The financial results represent
the historical information used by management for internal decision making
purposes; therefore, other data prepared to represent the way in which the
business will operate in the future, or data prepared on a GAAP basis, may be
materially different.
RESULTS OF OPERATIONS
In the third quarter of 2000, GM's consolidated income from continuing
operations totaled $829 million or $1.55 per share of GM $1-2/3 par value common
stock, which represents a decrease of $48 million compared with $877 million or
$1.33 per share of GM $1-2/3 par value common stock in the third quarter of
1999. GM's consolidated income from continuing operations for the nine months
ended September 30, 2000 was $4.4 billion or $7.37 per share of GM $1-2/3 par
value common stock, which represents a decrease of $68 million compared with
$4.4 billion or $6.67 per share of GM $1-2/3 par value common stock for the nine
months ended September 30, 1999.
On April 12, 1999, the GM Board of Directors (GM Board) approved the complete
separation of Delphi Automotive Systems Corporation (Delphi) from GM by means of
a spin-off (which was tax-free to GM and its stockholders for U.S. federal
income tax purposes) which was completed on May 28, 1999 and, accordingly, the
financial results related to Delphi for all periods presented are reported as
discontinued operations. GM's net income for the nine months ended September 30,
1999, including the income from discontinued operations, totaled $4.9 billion or
$7.32 per share of GM $1-2/3 par value common stock. Additional information
regarding the spin-off of Delphi is contained in Note 2 to the GM consolidated
financial statements.
- 15 -
<PAGE>
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Vehicle Unit Deliveries of Cars and Trucks - GMA
Three Months Ended September 30,
------------------------------------------------------
2000 1999
------------------------ -------------------------
GM as GM as
a % of a % of
Industry GM Industry Industry GM Industry
-------- --- -------- -------- --- --------
(Units in Thousands)
GMNA
United States
Cars 2,297 670 29.2% 2,286 675 29.5%
Trucks 2,260 579 25.6% 2,210 623 28.2%
----- ------ ----- ------
Total United States 4,557 1,249 27.4% 4,496 1,298 28.9%
Canada, Mexico,
and Other 673 186 27.6% 637 168 26.4%
----- ------ ------ ------
Total GMNA 5,230 1,435 27.4% 5,133 1,466 28.6%
GME 4,640 413 8.9% 4,924 483 9.8%
GMLAAM 955 153 16.1% 919 149 16.2%
GMAP 3,224 128 4.0% 3,020 121 4.0%
------ ----- ------ -----
Total Worldwide 14,049 2,129 15.2% 13,996 2,219 15.9%
====== ===== ====== =====
Nine Months Ended September 30,
-----------------------------------------------------
2000 1999
------------------------- ------------------------
GM as GM as
a % of a % of
Industry GM Industry Industry GM Industry
-------- --- -------- -------- --- --------
(Units in Thousands)
GMNA
United States
Cars 6,974 2,009 28.8% 6,692 2,030 30.3%
Trucks 6,942 1,878 27.1% 6,571 1,826 27.8%
------ ----- ------ -----
Total United States 13,916 3,887 27.9% 13,263 3,856 29.1%
Canada, Mexico,
and Other 1,989 541 27.2% 1,871 512 27.4%
------ ----- ------ ------
Total GMNA 15,905 4,428 27.8% 15,134 4,368 28.9%
GME 15,544 1,459 9.4% 15,590 1,531 9.8%
GMLAAM 2,735 436 15.9% 2,502 401 16.0%
GMAP 9,646 349 3.6% 8,994 337 3.7%
------ ----- ------ -----
Total Worldwide 43,830 6,672 15.2% 42,220 6,637 15.7%
====== ===== ====== =====
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2000 1999 2000 1999
------ ------ ------ ------
(Units in Thousands)
Wholesale Sales
GMNA
Cars 703 661 2,240 2,199
Trucks 625 680 2,153 2,181
----- ----- ----- -----
Total GMNA 1,328 1,341 4,393 4,380
----- ----- ----- -----
GME
Cars 367 413 1,332 1,367
Trucks 29 33 102 104
---- ---- ----- -----
Total GME 396 446 1,434 1,471
--- --- ----- -----
GMLAAM
Cars 131 98 328 266
Trucks 50 43 142 133
--- --- --- ---
Total GMLAAM 181 141 470 399
--- --- --- ---
GMAP
Cars 49 45 130 121
Trucks 85 76 215 191
--- --- --- ---
Total GMAP 134 121 345 312
--- --- --- ---
Total Worldwide 2,039 2,049 6,642 6,562
===== ===== ===== =====
- 16 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
GMA Financial Review
GMA reported income of $568 million and a net margin of 1.7% on net sales and
revenues of $34.0 billion for the third quarter of 2000 compared with income of
$613 million and a net margin of 1.7% on net sales and revenues of $35.0 billion
for the prior year quarter. The decrease in income from the prior year quarter
was primarily due to an increase in spending for product development activities,
a decrease in wholesale sales volume, unfavorable product mix in Europe and
North America, unfavorable net price and currency exchange, partially offset by
material and structural cost savings. These factors were partially offset by an
overall increase in wholesale sales volume for the nine months ended September
30, 2000 to contribute to the decrease in income to $3.6 billion and a net
margin of 3.2% on net sales and revenues of $112.2 billion compared with income
of $3.7 billion and a net margin of 3.4% on net sales and revenues of $108.2
billion for the prior year nine-month period.
In September 2000, General Motors and the other founding partners of Covisint
(DaimlerChrysler Corporation, Ford Motor Company, and Renault/Nissan) received
requisite clearances from competition law authorities in the United States and
the Republic of Germany to begin operations. Final agreements among the founding
partners and their technology partners are being completed. Operations by the
original equipment manufacturers and their suppliers are anticipated to begin in
the fourth quarter of 2000 or early 2001.
GMNA reported income of $728 million for the third quarter of 2000 compared
with $671 million for the prior year quarter. The increase in GMNA's third
quarter 2000 income was primarily due to manufacturing and material cost
improvements, as well as improvements related to quality initiatives. These
improvements were partially offset by decreased wholesale sales volume,
unfavorable product mix largely due to the production ramp-up of two North
American truck assembly plants, and an increase in spending for growth
initiatives such as eGM, OnStar, TradeXchange and Order-To-Delivery. Income for
the nine months ended September 30, 2000 totaled $3.4 billion compared with $3.6
billion for the prior year nine-month period. The decrease in income for the
first nine months of 2000 was primarily due to competitive pricing pressure,
labor economics, and an increase in spending for product development activities
and growth initiatives, partially offset by material cost improvements. Net
price, which comprehends the percent increase/(decrease) a customer pays in the
current period for the same comparably equipped vehicle produced in the previous
year's period, was slightly lower for the quarter at (0.3)%.
GME reported a loss of $181 million for the third quarter of 2000 compared
with income of $32 million for the prior year quarter. The decrease in GME's
third quarter 2000 income was primarily due to the start-up of the Corsa, a
shift in volume within Europe from higher margin markets to lower margin
markets, increased pricing pressures, and a decrease in wholesale sales volume.
These factors were partially offset by material cost improvements and structural
cost reductions. Income for the nine months ended September 30, 2000 totaled
$206 million compared with $393 million for the prior year nine-month period.
The decrease in income for the first nine months of 2000 was primarily due to
the unfavorable shift in market mix, increased pricing pressures, and the
start-up of the Corsa, partially offset by material and structural cost
improvements.
During the third quarter 2000, the European parliament passed a directive
requiring member states to adopt legislation regarding end-of-life vehicles and
the responsibility of manufacturers for dismantling and recycling vehicles they
have sold. GME is currently assessing the impact of this potential legislation
on their results of operations and financial position.
GMLAAM reported income of $31 million for the third quarter of 2000 compared
with a loss of $36 million for the prior year quarter. The increase in GMLAAM's
third quarter 2000 earnings compared to third quarter 1999 results was primarily
due to higher wholesale sales volume and nominal price increases, partially
offset by an increase in material costs due to continuous supplier cost
pressures, a deterioration in product mix, and increased manufacturing costs due
to increased depreciation, amortization, labor economics, and the start-up of
the Celta at the Gravatai Plant in Brazil. The increase in income for the nine
months ended September 30, 2000 to $42 million compared to a loss of $99 million
for the prior year nine-month period is primarily due to the factors discussed
above, partially offset by increased material and freight costs driven by GM do
Brasil's and its suppliers' exposure to hard currencies and inflationary
factors.
GMAP reported a loss of $10 million for the third quarter of 2000 compared
with a loss of $54 million for the prior year quarter. The decrease in GMAP's
third quarter 2000 losses compared to third quarter 1999 results was primarily
due to increased equity earnings at Isuzu resulting from material and logistics
savings along with lower structural costs, and an increase in volume primarily
at Thailand related to the new Zafira and in Australia by Holden. These
increases were partially offset by start-up costs in Thailand related to the
Zafira and a decrease in equity earnings at Shanghai GM due to lower volume and
price pressures in China. Losses for the nine months ended September 30, 2000
totaled $126 million compared with losses of $195 million for the prior year
nine-month period. The decrease in losses for the first nine months of 2000 was
primarily due to continued strong performance at Holden and improved equity
earnings at Shanghai GM, partially offset by the increased equity losses at
Isuzu.
- 17 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Hughes Financial Review
Hughes' net sales and revenues increased to $2.1 billion and $6.5 billion in
the third quarter and first nine months of 2000, respectively, compared to $2.0
billion and $5.4 billion for the comparable periods in 1999. The increase in net
sales and revenues in the third quarter of 2000 compared to the third quarter of
1999 was primarily attributable to the growth in the DIRECTV businesses due to
the addition of approximately 1,639,000 net new subscribers in the United States
and Latin America since December 31, 1999. This increase was partially offset by
a decrease in net sales and revenues at Hughes Network Systems primarily due to
lower sales of DIRECTV receiver equipment associated with the completion of the
transition of the PRIMESTAR By DIRECTV subscribers to the high-power DIRECTV
service. The increase in net sales and revenues for the first nine months of
2000 compared to the first nine months of 1999 was primarily attributable to the
growth in the DIRECTV businesses due to the addition of net new subscribers
discussed above and added revenues from the PRIMESTAR By DIRECTV and premium
channel services. The PRIMESTAR medium-power direct-to-home and United States
Satellite Broadcasting Company, Inc. premium channel services were acquired in
mid-1999. PanAmSat also contributed to the increase in net sales and revenues
due primarily to increased revenues from outright sales and sales-type lease
transactions executed during 2000.
Hughes had a net loss of $88 million in the third quarter of 2000, compared
with a net loss of $30 million in the third quarter of 1999. The increased net
loss resulted primarily from increased marketing costs to support the increased
subscriber growth at the Direct-To-Home businesses. Hughes' net loss was $229
million for the first nine months of 2000, compared with a net loss of $44
million for the same period in 1999. The increased net loss for the first nine
months of 2000 was primarily due to higher marketing costs at the Direct-To-Home
businesses and an increase in depreciation and amortization expense due to 1999
acquisitions and additions to satellites and property. The increased net loss
was partially offset by an increase in Hughes' income tax benefit related to
both the write-off of Hughes' historical investments in DIRECTV Japan and
increased operating losses in 2000. The net loss for the first nine-months of
1999 included a $155 million pre-tax gain related to the settlement of a patent
infringement case, partially offset by a pre-tax charge of $92 million resulting
from the termination of a satellite systems contract with Asia-Pacific Mobile
Telecommunications Satellite Pte. Ltd. and a $125 million pre-tax charge at
Hughes Space and Communications Systems related to increased development costs
and schedule delays on several new product lines.
Due to rapid consolidation in the media and telecommunications industries, GM
is now considering alternative strategic transactions involving Hughes and other
participants in those industries. Any such transaction might involve the
separation of Hughes from General Motors. GM's objective in this effort is to
maximize the enterprise value of Hughes for the long-term benefit of the holders
of GM's Class H common stock and GM $1-2/3 par value common stock through a
structure that maintains the financial strength of General Motors. No assurance
can be given that any transaction will be agreed upon with any party or that
other conditions, including any stockholder or regulatory approvals will be
satisfied.
GMAC Financial Review
GMAC's revenue totaled $6.0 billion and $17.4 billion in the third quarter
and first nine months of 2000, respectively, compared to $5.2 billion and $14.9
billion for the comparable periods in 1999. The growth was mainly due to higher
average retail and other loan receivable balances, which resulted primarily from
strong GM sales levels and continued GM-sponsored special financing programs.
GMAC's revenue also increased due to an increase in asset earning rates compared
to the same periods in 1999.
GMAC earned record third quarter consolidated net income of $401 million, up
from the previous record of $393 million earned in the third quarter of 1999.
Net income for the first nine months of 2000 was $1.2 billion, up $17 million
from the $1.2 billion reported in the same period a year ago. Higher asset
levels were more than offset by the negative impact stemming from the higher
level of market interest rates and the corresponding increased cost of funds
over the past year. In addition, net income from mortgage operations increased
quarter-over-quarter primarily as a result of an increase in mortgage servicing
and processing fees due to significant growth in the servicing portfolio over
the last twelve months and to the revaluation to fair value of mortgage
servicing rights and retained interests in securities. Additionally, investment
income increased due to an increase in GMAC Mortgage Group's international
investment portfolio. These increases were partially offset by lower realized
capital gains in the quarter.
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GENERAL MOTORS CORPORATION AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
Automotive, Communications Services, and Other Operations
---------------------------------------------------------
Cash, marketable securities, and $3.0 billion of assets of the Voluntary
Employees' Beneficiary Association (VEBA) trust invested in fixed-income
securities, at September 30, 2000 totaled $13.5 billion compared with $14.4
billion at December 31, 1999 and $16.7 billion at September 30, 1999. The
decrease from December 31, 1999 is primarily due to GM's purchase of 20% of Fuji
Heavy Industries Ltd., and a $1.0 billion cash equity injection in GMAC,
partially offset by improvements in managed working capital and an increase in
debt. The total VEBA assets in the VEBA trust used to pre-fund part of GM's
other postretirement benefits liability were $6.7 billion at September 30, 2000,
compared to $6.3 billion at December 31, 1999 and $4.7 billion at September 30,
1999. GM previously indicated that it had a goal of maintaining $13.0 billion of
cash and marketable securities in order to continue funding product development
programs throughout the next downturn in the business cycle. This $13.0 billion
target includes cash to pay certain costs that were pre-funded in part by VEBA
contributions.
Net liquidity, calculated as cash and marketable securities less the total of
loans payable and long-term debt, was $(1.0) billion at September 30, 2000,
compared with $2.0 billion at December 31, 1999 and $5.1 billion at September
30, 1999.
Long-term debt was $8.2 billion at September 30, 2000, compared to $7.4
billion at December 31, 1999 and $7.9 billion at September 30, 1999. The ratio
of long-term debt to long-term debt and GM's net assets of Automotive,
Communications Services, and Other Operations was 31.6% at September 30, 2000,
compared to 43.7% at December 31, 1999 and 57.2% at September 30, 1999. The
ratio of long-term debt and short-term loans payable to the total of this debt
and GM's net assets of Automotive, Communications Services, and Other Operations
was 39.3% at September 30, 2000, compared to 49.6% at December 31, 1999 and
59.3% at September 30, 1999.
Financing and Insurance Operations
----------------------------------
At September 30, 2000, GMAC owned assets and serviced automotive receivables
totaling $174.9 billion, $12.6 billion above December 31, 1999. The increase
over year-end 1999 was principally the result of higher serviced retail
receivables, commercial and other loan receivables, other assets, receivables
with Automotive, Communications Services, and Other Operations, mortgage loans
held for investment, mortgage lending receivables, mortgage servicing rights,
and factored receivables.
Automotive and Commercial finance receivables serviced by GMAC, including
sold receivables, totaled $104.9 billion at September 30, 2000, $7.9 billion
above December 31, 1999 levels. This increase was primarily a result of a $4.7
billion increase in serviced retail receivables and a $4.2 billion increase in
commercial and other loan receivables. Continued GM-sponsored retail financing
incentives contributed to the rise in serviced retail receivables. The change in
commercial and other loan receivables was primarily attributable to increases in
secured notes as well as continued growth at GMAC Commercial Credit LLC and GMAC
Business Credit.
As of September 30, 2000, GMAC's total borrowings were $127.7 billion,
compared with $121.2 billion at December 31, 1999. The increased borrowings
since December 31,1999 were used to fund increased asset levels. GMAC's ratio of
consolidated debt to total stockholder's equity at September 30, 2000 was 9.4:1,
compared to 10.9:1 at December 31, 1999. The decline was due to capital
contributions from GM totaling $1.5 billion during the first quarter of 2000 and
an increase of $1.2 billion in retained earnings from net income for the first
nine months of 2000.
Book Value Per Share
Book value per share of GM $1-2/3 par value common stock was $40.39 at
September 30, 2000, compared with $27.02 at December 31, 1999 and $20.59 at
September 30, 1999. Book value per share of GM Class H common stock was $8.08 at
September 30, 2000, compared with $5.40 at December 31, 1999 and $4.12 at
September 30, 1999. Book value per share was determined based on the liquidation
rights of the various classes of common stock, adjusted to reflect the GM Class
H common stock split.
Return on Net Assets (RONA)
As part of its shareholder value initiatives, GM has adopted RONA as a
performance measure to heighten management's focus on balance sheet investments
and the return on those investments. GM's RONA calculation is based on
principles established by management and approved by the GM Board. GM's
four-quarter rolling-average RONA for continuing operations, excluding Hughes,
was 12.5% as of September 30, 2000.
- 19 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CASH FLOWS
Automotive, Communications Services, and Other Operations
---------------------------------------------------------
Net cash provided by operating activities was $9.1 billion during the nine
months ended September 30, 2000 compared with $15.4 billion for the prior year
period. The decrease in net cash provided by operating activities during the
first nine months of 2000 was primarily the result of decreases in operating
liabilities. These decreases were primarily related to an extension of payment
terms in the first quarter of 1999, forgiveness of accounts payable owed to
Delphi in 1999, and decreases in accrued and other liabilities in 1999 due to an
increase in North America sales incentives and customer deposits related to
increased volume in the Rental Car Program.
Net cash used in investing activities amounted to $12.0 billion during the
nine months ended September 30, 2000 compared with $11.5 billion in the prior
year period. The increase in net cash used in investing activities during the
first nine months of 2000 was primarily attributable to a $2.4 billion
investment in Fiat S.p.A. (Fiat), a $1.0 billion cash equity injection in GMAC,
and increased capital expenditures, partially offset by a decrease in
investments in marketable securities and operating leases.
Net cash provided by financing activities was $2.3 billion during the nine
months ended September 30, 2000 compared with net cash used of $1.0 billion in
the prior year period. The increase in cash provided by financing activities
during the first nine months of 2000 was primarily due to proceeds from issuing
common stock related to the $2.4 billion investment in Fiat and increases in
loans payable, partially offset by the impact of the issuance of $1.5 billion of
preference stock to America Online in 1999.
Financing and Insurance Operations
----------------------------------
Net cash provided by operating activities totaled $4.7 billion and $9.9
billion during the nine months ended September 30, 2000 and 1999, respectively.
The reduction in operating cash flow was primarily the result of a reduction in
the proceeds from sales of mortgage loans and securities held for trading and an
increase in miscellaneous assets and accounts receivable, partially offset by a
decrease in the origination/purchases of mortgage loans.
Net cash used for investing activities during the nine months ended September
30, 2000 totaled $14.0 billion, a $430 million increase compared to the same
period last year. Net cash used increased primarily as a result of net increases
in acquisitions of finance receivables, partially offset by increased proceeds
from sales of finance receivables, a net decrease in acquisitions of operating
leases, and a decrease in investments in companies.
Net cash provided by financing activities during the nine months ended
September 30, 2000 totaled $10.1 billion, compared with cash provided of $3.5
billion during the comparable 1999 period. The change was primarily the result
of increases in short-term loans payable and a $1.0 billion cash equity
injection from Automotive, Communications Services, and Other Operations,
partially offset by a net decrease in long-term debt.
Dividends
Dividends may be paid on common stocks only when, as, and if declared by the
GM Board in its sole discretion. GM's policy is to distribute dividends on its
GM $1-2/3 par value common stock based on the outlook and indicated capital
needs of the business. On August 1, 2000, the GM Board declared a quarterly cash
dividend of $0.50 per share on GM $1-2/3 par value common stock, paid September
9, 2000, to holders of record as of August 11, 2000. The GM Board also declared
a quarterly dividend on the Series G Depositary Shares of $0.57 per share, paid
November 1, 2000, to holders of record on October 2, 2000. With respect to GM
Class H common stock, the GM Board determined that it will not pay any cash
dividends at this time in order to allow the earnings of Hughes to be retained
for investment in its telecommunications and space businesses. A quarterly
dividend of $8.7793 per share for the GM Series H 6.25% Automatically
Convertible Preference Stock was paid November 1, 2000, to the holder of record
on October 2, 2000.
- 20 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Employment and Payrolls
Worldwide employment at September 30, (in thousands) 2000 1999
---- ----
GMNA 212 219
GME 90 82
GMLAAM 24 23
GMAP 11 10
GMAC 27 27
Hughes 18 18
Other 13 12
--- ---
Total employees 395 391
=== ===
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2000 1999 2000 1999
----- ------ ----- ------
Worldwide payrolls - (in billions) $5.2 $5.5 $16.6 $16.5
=== === ==== ====
New Accounting Standards
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities. In June 2000, the FASB issued
SFAS No. 138, which amends certain provisions of SFAS No. 133 to clarify four
areas causing difficulties in implementation. The amendment included expanding
the normal purchase and sale exemption for supply contracts, permitting the
offsetting of certain intercompany foreign currency derivatives and thus
reducing the number of third party derivatives, permitting hedge accounting for
foreign-currency denominated assets and liabilities, and redefining interest
rate risk to reduce sources of ineffectiveness. GM has appointed a team to
implement SFAS No. 133 on a global basis for the Corporation. This team has been
implementing a SFAS No. 133 compliant risk management information system,
globally educating both financial and non-financial personnel, inventorying
embedded derivatives and addressing various other SFAS No. 133 related issues.
GM will adopt SFAS No. 133 and the corresponding amendments under SFAS No. 138
on January 1, 2001. The SFAS No. 133 team is currently determining the impact of
SFAS No. 133 on GM's consolidated results of operations and financial position,
however, there are still open issues that need to be addressed before the impact
can be fully measurable. This statement should have no impact on GM's
consolidated cash flows.
In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101,
Revenue Recognition in Financial Statements. This SAB provides guidance in
applying generally accepted accounting principles to revenue recognition in
financial statements. GM will comply with SAB 101 by the fourth quarter of 2000,
as required. The adoption of SAB No. 101 is not expected to have a material
impact on General Motor's consolidated financial statements.
In September 2000, the FASB issued SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities - a replacement
of FASB Statement No. 125. This statement is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after
March 31, 2001, and is effective for the recognition and reclassification of
collateral and disclosures relating to securitization transactions and
collateral for fiscal years ending after December 15, 2000. Management is
currently assessing the impact of this statement on GM's results of operations
and financial position.
* * * * * * *
- 21 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
PART II
ITEM 1. LEGAL PROCEEDINGS
(a) Material pending proceedings, other than ordinary routine litigation
incidental to the business, to which the Corporation became, or was, a party
during the quarter ended September 30, 2000 or subsequent thereto, but before
the filing of this report are summarized below:
Environmental Matters
General Motors received two Notices of Violation dated May 25, 2000 and
August 23, 2000 from the Michigan Department of Environmental Quality alleging
non-compliance at the Lansing Craft Centre with applicable clean air
regulations. Enforcement officials stated during settlement negotiations that
they expected to propose a penalty in excess of $100,000. General Motors is
seeking to negotiate a resolution of this matter.
* * *
Other Matters
As previously reported, there is a pending grand jury investigation into
whether Hughes should be accused of criminal violations of the export control
laws arising out of the participation of two of its employees on a committee
formed to review the findings of Chinese engineers regarding the failure of a
Long March rocket in China in 1996. Hughes is also subject to the authority of
the State Department to impose sanctions for non-criminal violations of the Arms
Export Control Act. The possible criminal and/or civil sanctions could include
fines as well as debarment from various export privileges and participating in
government contracts. On October 6, 2000, Hughes completed the sale of its
satellite manufacturing business to the Boeing Company. In that transaction,
Hughes retained limited liability for certain possible fines and penalties and
the financial consequences of debarment related to the business now owned by
Boeing, should such sanctions be imposed by either the Department of Justice or
State Department against the satellite manufacturing business. Hughes does not
expect any sanctions imposed by the Department of Justice or State Department to
have a material adverse effect on Hughes.
* * *
With respect to the previously reported action against DIRECTV filed by
General Electric Capital Corporation (GECC), a trial commenced on June 12, 2000.
GECC presented evidence to the jury of damages of $157 million; DIRECTV sought
damages from GECC of $45 million. On July 21, 2000, the jury returned a verdict
in GECC's favor in the amount of $133 million. The trial judge issued an order
granting GECC $48.5 million in interest under Connecticut's offer-of-judgment
statute. With this order, the total judgment to be entered in GECC's favor is
$181.5 million. Hughes and DIRECTV plan to appeal. GM and Hughes do not believe
that the litigation will ultimately have a material adverse impact on Hughes.
* * *
With respect to the previously reported action against the DIRECTV unit of
Hughes filed by the National Rural Telecommunications Cooperative (NRTC) on June
3, 1999, NRTC stipulated on August 25, 2000 to dismiss without prejudices its
claim seeking the right to distribute former United States Satellite
Broadcasting Company, Inc. (USSB) programming services on a non-exclusive basis,
however, the NRTC continues to pursue its claim for the right to distribute
former USSB programming services on an exclusive basis and to recover revenues
related thereto.
* * *
On September 7, 2000, a putative class action was commenced against
DIRECTV, Inc., Thompson Consumer Electronics, Inc., Best Buy Co., Inc., Circuit
City Stores, Inc. and Tandy Corporation, Inc. in federal court in Los Angeles.
The named plaintiffs purport to represent a class of all consumers who purchased
DIRECTV equipment and services at any time from March 1996 to September 1, 2000.
The plaintiffs allege that the defendants have violated federal and California
antitrust statutes by entering into agreements to exclude competition and force
retailers to boycott competitors' products and services. The plaintiffs seek
declaratory and injunctive relief, as well as unspecified damages, including
treble damages. DIRECTV believes that the complaint is without merit and intends
to vigorously defend against the allegations raised.
* * * * * *
- 22 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS (Including Those Incorporated by Reference).
Exhibit
Number Exhibit Name Page No.
------ ----------------------------------------------- --------
99 Hughes Electronics Corporation Financial Statements and
Management's Discussion and Analysis of Financial
Condition and Results of Operations 24
27 Financial Data Schedule (Unaudited)
(for Securities and Exchange Commission information only)
(b) REPORTS ON FORM 8-K.
Eight reports on Form 8-K, dated February 25, 2000 (filed September 27,
2000), March 13, 2000 (filed July 24, 2000), June 6, 2000 (filed July 18, 2000),
July 25, 2000, August 16, 2000, August 24, 2000, September 14, 2000 and
September 15, 2000 were filed during the quarter ended September 30, 2000
reporting matters under Item 5, Other Events and reporting certain agreements
under Item 7, Financial Statements, Pro Forma Financial Information, and
Exhibits.
* * * * * *
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GENERAL MOTORS CORPORATION
--------------------------
(Registrant)
Date November 13, 2000 /s/Peter R. Bible
---------------------- ----------------------------------------
(Peter R. Bible, Chief Accounting Officer)
- 23 -
