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Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
Form 10-K
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number 001-34960
GENERAL MOTORS COMPANY
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE
27-0756180
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock
New York Stock Exchange/Toronto Stock Exchange
Warrants (expiring July 10, 2019)
New York Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its company Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “small
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨
Do not check if a smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨
No þ
The aggregate market value of the voting stock held by non-affiliates of the registrant (assuming only for purposes of this computation that directors and executive officers may be affiliates) was approximately $44.1
billion as of June 30, 2016.
As of January 31, 2017 the number of shares outstanding of common stock was 1,497,964,557 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement related to the Annual Stockholders Meeting to be filed subsequently are incorporated by reference into Part III of this Form 10-K.
INDEX
Page
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
1
11
16
16
16
17
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Consolidated Income Statements
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Equity
Notes to Consolidated Financial Statements
Note 1.
Nature of Operations and Basis of Presentation
Note 2.
Significant Accounting Policies
Note 3.
Marketable Securities
Note 4.
GM Financial Receivables
Note 5.
Inventories
Note 6.
Equipment on Operating Leases
Note 7.
Equity in Net Assets of Nonconsolidated Affiliates
Note 8.
Property
Note 9.
Acquisition of Business
Note 10.
Goodwill and Intangible Assets
Note 11.
Variable Interest Entities
Note 12.
Accrued and Other Liabilities
Note 13.
Automotive and GM Financial Debt
Note 14.
Pensions and Other Postretirement Benefits
Note 15.
Commitments and Contingencies
Note 16.
Income Taxes
Note 17.
Restructuring and Other Initiatives
Note 18.
Interest Income and Other Non-Operating Income
Note 19.
Stockholders’ Equity and Noncontrolling Interests
Note 20.
Earnings Per Share
Note 21.
Stock Incentive Plans
Note 22.
Supplementary Quarterly Financial Information (Unaudited)
Note 23.
Segment Reporting
Note 24.
Supplemental Information for the Consolidated Statements of Cash Flows
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
17
18
18
40
45
45
45
46
47
48
49
49
49
56
58
59
59
60
62
62
63
63
64
64
67
73
78
80
81
81
82
83
84
84
87
87
Page
Item 9A.
Controls and Procedures
Item 9B.
Other Information
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Signatures
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions and Director Independence
Principal Accountant Fees and Services
PART IV
Exhibits
87
88
89
89
89
89
89
90
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GENERAL MOTORS COMPANY AND SUBSIDIARIES
PART I
Item 1. Business
General Motors Company (sometimes referred to as we, our, us, ourselves, the Company, General Motors, or GM) was incorporated as a Delaware
corporation in 2009. We design, build and sell cars, trucks, crossovers and automobile parts worldwide. We also provide automotive financing services
through General Motors Financial Company, Inc. (GM Financial). Except for per share amounts or as otherwise specified, amounts presented within tables are
stated in millions.
Automotive Our automotive operations meet the demands of our customers through our automotive segments: GM North America (GMNA), GM Europe
(GME), GM International Operations (GMIO) and GM South America (GMSA).
GM primarily meets the demands of customers in North America with vehicles developed, manufactured and/or marketed under the Buick, Cadillac,
Chevrolet and GMC brands. GM primarily meets the demands of customers outside North America with vehicles developed, manufactured and/or marketed
under the Buick, Cadillac, Chevrolet, GMC, Holden, Opel and Vauxhall brands. We also have equity ownership stakes in regional joint ventures (JVs), which
meet the demands of customers in Asia with vehicles developed, manufactured and/or marketed under the Baojun, Buick, Cadillac, Chevrolet, Jiefang and
Wuling brands.
In addition to the vehicles we sell through our dealer network to retail customers, we also sell vehicles directly or through our dealer network to fleet
customers, including daily rental car companies, commercial fleet customers, leasing companies and governments. Our customers can obtain a wide range of
aftersale vehicle services and products through our dealer network, such as maintenance, light repairs, collision repairs, vehicle accessories and extended
service warranties.
Competitive Position and Vehicle Sales The principal factors that determine consumer vehicle preferences in the markets in which we operate include
overall vehicle design, price, quality, available options, safety, reliability, fuel economy and functionality. Market leadership in individual countries in
which we compete varies widely. We present both wholesale and retail vehicle sales data to assist in the analysis of our revenue and our market share.
Wholesale vehicle sales data, which represents sales directly to dealers and others, including sales to fleet customers, is the measure that correlates to our
revenue from the sale of vehicles, which is the largest component of Automotive net sales and revenue. Wholesale vehicle sales exclude vehicles sold by
joint ventures. In the year ended December 31, 2016, 46.3% of our wholesale vehicle sales volume was generated outside the U.S. The following table
summarizes total wholesale vehicle sales of new vehicles by automotive segment (vehicles in thousands):
Years ended December 31,
2016
GMNA
GME
GMIO
GMSA
Worldwide
2015
2014
3,958
1,162
559
568
63.4%
18.6%
8.9%
9.1%
3,558
1,127
588
603
60.5%
19.2%
10.0%
10.3%
3,320
1,172
655
886
55.0%
19.4%
10.9%
14.7%
6,247
100.0%
5,876
100.0%
6,033
100.0%
Retail vehicle sales data, which represents sales to end customers based upon the good faith estimates of management, including sales to fleet customers,
does not correlate directly to the revenue we recognize during the period. However retail vehicle sales data is indicative of the underlying demand for our
vehicles. Market share information is based primarily on retail vehicle sales volume. In countries where retail vehicle sales data is not readily available other
data sources, such as wholesale or forecast volumes, are used to estimate retail vehicle sales to end customers.
Retail vehicle sales data includes all sales by joint ventures on a total vehicle basis, not based on the percentage of ownership in the joint venture. Certain
joint venture agreements in China allow for the contractual right to report vehicle sales of non-GM trademarked vehicles by those joint ventures. Retail
vehicle sales data includes vehicles used by dealers under courtesy transportation programs and vehicles sold through the dealer registration channel
primarily in Europe. This sales channel consists primarily of dealer demonstrator, loaner and self-registered vehicles which are not eligible to be sold as new
vehicles after being registered by dealers. Certain fleet sales that are accounted for as operating leases are included in retail vehicle sales at the time of
delivery to daily rental car companies. The following table summarizes total industry retail sales, or estimated sales where retail sales volume is not available,
of vehicles and our related competitive position by geographic region (vehicles in thousands):
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GENERAL MOTORS COMPANY AND SUBSIDIARIES
Years Ended December 31,
2016
Industry
GM
2015
Market
Share
Industry
GM
2014
Market
Share
Industry
GM
Market
Share
North America
United States
Other
17,882
3,989
3,043
587
17.0%
14.7%
17,854
3,650
3,082
531
17.3%
14.5%
16,859
3,375
2,935
478
17.4%
14.2%
Total North America
21,871
3,630
16.6%
21,504
3,613
16.8%
20,234
3,413
16.9%
Europe
United Kingdom
Germany
Other
3,121
3,709
13,379
289
260
658
9.3%
7.0%
4.9%
3,063
3,540
12,704
312
244
620
10.2%
6.9%
4.9%
2,845
3,357
12,503
305
237
719
10.7%
7.1%
5.7%
Total Europe(a)
20,209
1,207
6.0%
19,307
1,176
6.1%
18,705
1,261
6.7%
Asia/Pacific, Middle East and Africa
China(b)
Other
28,270
18,905
3,914
673
13.8%
3.6%
25,050
19,527
3,730
795
14.9%
4.1%
24,035
19,722
3,540
840
14.7%
4.3%
Total Asia/Pacific, Middle East and Africa
47,175
4,587
9.7%
44,577
4,525
10.2%
43,757
4,380
10.0%
2,048
1,623
346
238
16.9%
14.6%
2,568
1,616
388
257
15.1%
15.9%
3,498
1,815
579
299
16.6%
16.5%
South America
Brazil
Other
Total South America
Total Worldwide(c)
United States
Cars
Trucks
Crossovers
Total United States
China(b)
SGMS
SGMW and FAW-GM
Total China
3,671
584
15.9%
4,184
645
15.4%
5,313
878
16.5%
92,926
10,008
10.8%
89,572
9,959
11.1%
88,009
9,932
11.3%
6,895
5,464
5,523
890
1,325
828
12.9%
24.2%
15.0%
7,483
5,181
5,190
931
1,274
877
12.4%
24.6%
16.9%
7,617
4,754
4,488
1,085
1,113
737
14.2%
23.4%
16.4%
17,882
3,043
17.0%
17,854
3,082
17.3%
16,859
2,935
17.4%
1,806
2,108
28,270
3,914
1,711
2,019
13.8%
25,050
3,730
1,710
1,830
14.9%
24,035
3,540
14.7%
__________
(a) Our Europe sales include Opel and Vauxhall sales of 1,159, 1,113 and 1,078, and market share of 5.7%, 5.8% and 5.8% in the years ending December 31, 2016, 2015 and
2014.
(b) Our China sales include the Automotive China JVs SAIC General Motors Sales Co., Ltd. (SGMS), SAIC GM Wuling Automobile Co., Ltd. (SGMW) and FAW-GM Light
Duty Commercial Vehicle Co., Ltd. (FAW-GM). Wholesale volumes were used for Industry, GM and Market Share. Our retail sales in China were 3,871, 3,613 and 3,435 in
the years ended December 31, 2016, 2015 and 2014. In 2017, we will begin using vehicle registrations data as the basis for calculating industry volume and market share in
China on a prospective basis.
(c) We do not currently export vehicles to Cuba, Iran, North Korea, Sudan or Syria . Accordingly these countries are excluded from industry sales data and corresponding
calculation of market share.
In the year ended December 31, 2016 we estimate we had the largest market share in North America and South America, the number three market share in
the Asia/Pacific, Middle East and Africa region, which included the number two market share in China, and the number eight market share in Europe. In the
year ended December 31, 2016 the Asia/Pacific, Middle East and Africa region was our largest region by retail vehicle sales volume and represented 45.8% of
our global retail vehicle sales. Refer to the Overview in Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
for discussion on changes in market share by region.
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The sales and market share data provided in the table above includes both fleet vehicle sales and sales to retail customers. Certain fleet transactions,
particularly sales to daily rental car companies, are generally less profitable than sales to retail customers. A significant portion of the sales to daily rental car
companies are recorded as operating leases under U.S. GAAP with no recognition of revenue at the date of initial delivery due to guaranteed repurchase
obligations. The following table summarizes estimated fleet sales and those sales as a percentage of total retail vehicle sales (vehicles in thousands):
Years Ended December 31,
2016
2015
GMNA
GME
GMIO
GMSA
Total fleet sales
Fleet sales as a percentage of total retail vehicle sales
2014
707
551
369
157
795
544
345
121
814
505
414
176
1,784
1,805
1,909
17.8%
18.1%
19.2%
The following table summarizes U.S. fleet sales (vehicles in thousands):
Years Ended December 31,
2016
2015
2014
Daily rental sales
Other fleet sales
327
269
400
278
449
255
Total fleet sales
596
678
704
Fleet sales as a percentage of total U.S. retail vehicle sales
Cars
Trucks
Crossovers
Total vehicles
24.9%
19.2%
14.6%
19.6%
29.3%
19.7%
17.5%
22.0%
29.5%
21.8%
19.1%
24.0%
Product Pricing Several methods are used to promote our products, including the use of dealer, retail and fleet incentives such as customer rebates and
finance rate support. The level of incentives is dependent in large part upon the level of competition in the markets in which we operate and the level of
demand for our products. In 2017 we plan to continue to price vehicles competitively, including offering incentives as required. We believe this strategy,
coupled with sound inventory management, will continue to strengthen our brands.
Cyclical Nature of Business Retail sales are cyclical and production varies from month to month. Vehicle model changeovers occur throughout the year as
a result of new market entries. The market for vehicles depends on general economic conditions, credit availability and consumer spending.
Relationship with Dealers We market vehicles worldwide primarily through a network of independent authorized retail dealers. These outlets include
distributors, dealers and authorized sales, service and parts outlets.
The following table summarizes the number of authorized dealerships:
December 31, 2016
GMNA
GME
GMIO
GMSA
Total worldwide
December 31, 2015
December 31, 2014
4,857
6,104
7,232
1,259
4,886
6,330
7,755
1,281
4,908
6,633
7,699
1,272
19,452
20,252
20,512
We and our joint ventures enter into a contract with each authorized dealer agreeing to sell to the dealer one or more specified product lines at wholesale
prices and granting the dealer the right to sell those vehicles to retail customers from an approved
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GENERAL MOTORS COMPANY AND SUBSIDIARIES
location. Our dealers often offer more than one GM brand at a single dealership in a number of our markets in order to enhance dealer profitability.
Authorized dealers offer parts, accessories, service and repairs for GM vehicles in the product lines that they sell using GM parts and accessories. Our dealers
are authorized to service GM vehicles under our limited warranty program and those repairs are made only with GM parts. Our dealers generally provide their
customers with access to credit or lease financing, vehicle insurance and extended service contracts provided by GM Financial and other financial
institutions.
The quality of GM dealerships and our relationship with our dealers and distributors are critical to our success as dealers maintain the primary sales and
service interface with the end consumer of our products. In addition to the terms of our contracts with our dealers we are regulated by various country and
state franchise laws that may supersede those contractual terms and impose specific regulatory requirements and standards for initiating dealer network
changes, pursuing terminations for cause and other contractual matters.
Research, Product and Business Development and Intellectual Property Costs for research, manufacturing engineering, product engineering and design
and development activities relate primarily to developing new products or services or improving existing products or services including activities related to
vehicle emissions control, improved fuel economy, the safety of drivers and passengers, urban mobility and autonomous vehicles. In the years ended
December 31, 2016, 2015 and 2014 research and development expenses were $8.1 billion, $7.5 billion and $7.4 billion.
Product Development The Product Development organization is responsible for designing and integrating vehicle and powertrain components to
maximize part sharing across multiple vehicle segments. Global teams in Design, Program Management, Component & Subsystem Engineering, Product
Integrity, Safety, Propulsion and Purchasing & Supply Chain collaborate to meet customer requirements and maximize global economies of scale.
Our global vehicle architecture development has been consolidated and headquartered at our Global Technical Center in Warren, Michigan, to further the
standardization of our overall vehicle development process. Cross-segment part sharing is an essential enabler to our Vehicle Set Strategy, designed to reduce
our overall number of global vehicle architectures to four major vehicle sets. As we implement the four vehicle sets, we will continue to leverage our current
architecture portfolio to accommodate our customers around the world while achieving our financial goals.
Hybrid, Plug-In, Extended Range and Battery Electric Vehicles We are investing in multiple technologies offering increasing levels of vehicle
electrification including eAssist, plug-in hybrid, full hybrid, extended range and battery electric vehicles. We currently offer six models in the U.S. featuring
some form of electrification and continue to develop plug-in hybrid electric vehicle technology and extended range electric vehicles such as the Chevrolet
Volt. In 2016 we began production and sales of the Chevrolet Bolt EV, which provides an EPA-rated 238 miles of range on a full charge.
Car- and Ride-Sharing In 2016, we executed several steps in our strategy to redefine personal mobility. In January 2016 we announced a new car-sharing
service called Maven, which combines our multiple car-sharing programs under a single brand. Maven gives customers access to highly personalized, ondemand mobility services. During 2016 we expanded our Maven offerings to 16 cities across the U.S. In January 2016 we also purchased a 9% equity
ownership interest in Lyft, Inc. (Lyft), a privately held company, for $0.5 billion. In March 2016 we announced a new program called Express Drive, which
leverages our Lyft relationship to expand our ride-sharing offerings. Under the Express Drive program, Lyft drivers in multiple cities across the U.S. can rent
General Motors vehicles on a weekly basis. We are also considering additional options to expand our ride-sharing offerings. In November 2016 we
announced that we are partnering with Uber Technologies Inc. (Uber) to pilot a program under which Uber drivers can rent General Motors vehicles on a
weekly basis. Additionally, we plan to develop an integrated network of on-demand autonomous vehicles in the U.S.
Autonomous Technology We see autonomous technology leading to significant advances in convenience, mobility and safety, since more than 90% of
crashes are caused by driver error. We have millions of miles of real-world experience with embedded connectivity through OnStar, LLC (OnStar) and
advanced safety features that are the building blocks to more advanced automation features that we believe will eventually lead to fully autonomous
vehicles. An example of advanced automation is Super Cruise, a hands-free driving customer convenience feature that will debut in 2017 on the Cadillac
CT6 sedan.
In May 2016 we acquired all of the outstanding capital stock of Cruise Automation Inc. (Cruise), an autonomous vehicle technology company, to further
accelerate our development of autonomous vehicles. We are also actively testing autonomous vehicles on public roads in San Francisco, California,
Scottsdale, Arizona and Warren, Michigan.
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Alternative Fuel Vehicles We believe alternative fuels offer significant potential to reduce petroleum consumption in the transportation sector. By
leveraging experience and capability developed around these technologies in our global operations we continue to develop FlexFuel vehicles that can run
on gasoline-ethanol blend fuels as well as vehicles that run on compressed natural gas (CNG) and liquefied petroleum gas (LPG).
We currently offer 11 FlexFuel vehicles in the U.S. for the 2017 model year to retail customers plus an additional seven models to fleet and commercial
customers capable of operating on gasoline, E85 ethanol or any combination of the two. In Brazil a substantial majority of vehicles sold were FlexFuel
vehicles capable of running on 100% ethanol blends. We also market FlexFuel vehicles in other global markets where biofuels have emerged in the
marketplace. In addition, we are studying ethanol-based fuels as well as other high-octane fuel blends and the role they can play in maximizing efficiencies
of future internal combustion engine technology development to meet the escalating fuel economy and greenhouse gas emission regulations in the U.S. and
other markets.
We produce CNG bi-fuel capable vehicles in Europe such as the Opel Zafira Tourer and the Opel Combo van. In the U.S. we are developing a program to
offer a wide selection of truck and van options through a specialty vehicle manufacturing program, operating on CNG or LPG, which are suitable for fleet and
commercial applications and retail customers alike. Availability is scheduled to begin in 2017. Globally, we offer CNG and LPG capable vehicles in select
markets reflecting the infrastructure, regulatory focus and natural resource availability of the markets in which they are sold. We support the development of
biodiesel blend fuels, which are alternative diesel fuels produced from renewable sources.
Hydrogen Fuel Cell Technology As part of our long-term strategy to reduce petroleum consumption and greenhouse gas emissions we are committed to
development of our hydrogen fuel cell technology. Our Chevrolet Equinox fuel cell electric vehicle demonstration programs, such as Project Driveway, have
accumulated more than 3 million miles of real-world driving by consumers, celebrities, business partners and government agencies. These programs are
helping us identify consumer and infrastructure needs to understand the business case for potential production of vehicles with this technology. We are
exploring non-traditional automotive uses for fuel cells in several areas, including demonstrations with the U.S. Army and U.S. Navy.
We signed a co-development agreement with Honda Motor Company in October 2016 for a next-generation fuel cell system and hydrogen storage
technologies, aiming for the 2020 timeframe for commercialization. The collaboration expects to succeed by sharing expertise, economies of scale and
common sourcing strategies and builds upon GM's and Honda Motor Company's strengths as leaders in hydrogen fuel cell technology.
Fuel Efficiency We are committed to improving fuel efficiency and meeting regulatory standards through a combination of strategies including:
(1) extensive technology improvements to conventional powertrains; (2) increased use of smaller displacement engines and improved and advanced
automatic transmissions; and (3) vehicle improvements including increased use of lighter, front-wheel drive architectures.
OnStar OnStar is a wholly-owned subsidiary of GM serving more than 7.2 million subscribers in the U.S., Canada, Mexico, China (through a joint venture),
South America and Europe. OnStar is a provider of connected safety, security and mobility solutions and advanced information technology and is available
on the majority of our 2017 model year vehicles. OnStar's key services include automatic crash response, stolen vehicle assistance, remote door unlock, turnby-turn navigation, vehicle diagnostics, hands-free calling and 4G LTE wireless connectivity.
Intellectual Property We generate and hold a significant number of patents in a number of countries in connection with the operation of our business.
While none of these patents are individually material to our business as a whole, these patents are important to our operations and continued technological
development. We hold a number of trademarks and service marks that are very important to our identity and recognition in the marketplace.
Raw Materials, Services and Supplies We purchase a wide variety of raw materials, parts, supplies, energy, freight, transportation and other services from
numerous suppliers to manufacture our products. The raw materials primarily include steel, aluminum, resins, copper, lead and platinum group metals. We
have not experienced any significant shortages of raw materials and normally do not carry substantial inventories of such raw materials in excess of levels
reasonably required to meet our production requirements.
In some instances, we purchase systems, components, parts and supplies from a single source and may be at an increased risk for supply disruptions. The
inability or unwillingness of these sources to supply us with parts and supplies could have a material adverse effect on our production capacity. Refer to Item
1A. Risk Factors for further discussion of these risks. Combined purchases
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from our two largest suppliers have ranged from approximately 11% to 12% of our total purchases in the years ended December 31, 2016, 2015 and 2014.
Environmental and Regulatory Matters
Automotive Emissions Control We are subject to laws and regulations that require us to control automotive emissions, including vehicle exhaust emission
standards, vehicle evaporative emission standards and onboard diagnostic (OBD) system requirements. Advanced OBD systems are used to identify and
diagnose problems with emission control systems. Problems detected by the OBD system and in-use compliance monitoring may increase warranty costs and
the likelihood of recall. Emission and OBD requirements become more stringent each year as vehicles must meet lower emission standards and new
diagnostics are required throughout the world with very little harmonization of global regulations. Zero emission vehicle (ZEV) requirements have been
adopted by some U.S. states as well as the Canadian Province of Quebec and there is the possibility that additional jurisdictions could adopt ZEV
requirements in the future. While we believe all our products are designed and manufactured in material compliance with substantially all vehicle emissions
requirements, regulatory authorities may conduct ongoing evaluations of the emissions compliance of products from all manufacturers. This includes vehicle
emissions testing, including CO2 and nitrogen oxide emissions testing, and review of emission control strategies.
The U.S. federal government imposes stringent emission control requirements on vehicles sold in the U.S. and various state governments impose additional
requirements. Canada’s federal government vehicle emission requirements are generally aligned with the U.S. federal requirements. Each model year we must
obtain certification for each test group that our vehicles will meet emission requirements from the U.S. Environmental Protection Agency (EPA) before we can
sell vehicles in the U.S. and Canada and from the California Air Resources Board (CARB) before we can sell vehicles in California and other states that have
adopted the California emissions requirements.
CARB's latest emission requirements include more stringent exhaust emission and evaporative emission standards including an increase in ZEVs which
must be offered for sale in California. CARB has adopted 2018 model year and later requirements for increasing volumes of ZEVs to achieve greenhouse gas
as well as criteria pollutant emission reductions to help achieve the state's long-term greenhouse gas reduction goals. The EPA has adopted similar exhaust
emission and evaporative emission standards which phase in with the 2017 model year, but do not include ZEV requirements. These new requirements will
also increase the time and mileage periods over which manufacturers are responsible for a vehicle's emission performance.
The Clean Air Act permits states that have areas with air quality compliance issues to adopt the California car and light-duty truck emission standards in
lieu of the federal requirements. Thirteen states currently have these standards in effect and 10 of these 13 states have adopted the ZEV requirements.
Emissions in the European Union are regulated by the European Commission (EC) and by governmental authorities in each European Union Member State
(EU Member States). The EC imposes emission control requirements on vehicles sold in all 28 EU Member States. We must demonstrate that vehicles will
meet emission requirements from an approval authority in one EU Member State before we can sell vehicles in any EU Member State. The regulatory
requirements include random testing of newly assembled vehicles and a manufacturer in-use surveillance program. The European Union requirements are
equivalent in terms of stringency and implementation to the framework of the United Nations Economic Commission for Europe.
The existing level of European Union exhaust emission standards for cars and light-duty trucks, Euro 6, was effective in 2014 for new vehicle approvals
and 2015 for new vehicle registrations. Future emission standards focus particularly on further reducing emissions from diesel vehicles by introducing new
testing criteria based on “real world driving” emissions (RDE). RDE tests will become effective in 2017. The new requirements will require additional
technologies and further increase the cost of diesel engines, which currently cost more than gasoline engines to manufacture. To comply with RDE tests we
believe it will be necessary to implement technologies which will introduce additional cost pressures on the already challenging European Union market for
small and mid-size diesel vehicles. Declines in diesel penetration may make fleet CO2 compliance more challenging. Gasoline engines are also affected by
the new requirements. The potential implementation of technology into gasoline vehicles to reduce exhaust pollutant emissions may further increase the cost
of gasoline engines and could have adverse effects on vehicle fuel economy.
In addition, increased scrutiny of compliance with emissions standards may result in changes to these standards, including the implementation of RDE
tests, as well as stricter interpretations or redefinition of these standards and more rigorous enforcement. This may lead to increased costs, penalties, lack of
certainty with respect to product portfolio planning, negative publicity or reputation impact for us. Refer to Item 1A. Risk Factors for further discussion of
these risks.
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In the long-term, we expect that the EC will continue devising regulatory requirements on the emission test cycle, RDE, low temperature testing, fuel
evaporation and OBD.
China has implemented European type China 4 standards nationally with European OBD requirements for new vehicle registrations. Cities such as Beijing,
Shanghai and Guangzhou each currently require China 5 standards for new vehicle registrations. China implemented the China 5 standards for light duty
gasoline nationwide at the beginning of 2017. The China 5 standards include more stringent emission requirements and increase the time and mileage
periods over which manufacturers are responsible for a vehicle's emission performance. China officially released a unique China 6 emission standard with the
potential to combine elements of both European and U.S. standards. Local implementation is expected as early as 2018. Nationwide implementation for new
registrations is expected in July 2020 for the base China 6a standard and July 2023 for the more stringent China 6b standard.
In South America certain countries follow the U.S. test procedures, standards and OBD requirements and others follow the European Union test procedures,
standards and OBD requirements with different levels of stringency. Brazil implemented national L6 standards for light diesel vehicles in 2012 and OBD
installation for light diesel vehicles in 2015. L6 standards for light gasoline vehicles were implemented in 2015 for all models.
Automotive Fuel Economy In the U.S., Corporate Average Fuel Economy (CAFE) reporting is required for three separate fleets: domestically produced
cars, imported cars and light-duty trucks. Both car and light-duty truck standards were established using targets for various vehicle sizes and vehicle model
sales volumes. In 2017 our domestic car standard is estimated to be 38.1 mpg, our import car standard is estimated to be 41.7 mpg, and our light-duty truck
standard is estimated to be 27.6 mpg. Our current product plan is expected to be compliant with the federal CAFE program through the 2017 model year. In
addition to federal CAFE reporting, the EPA requires compliance with greenhouse gas requirements that are similar to the CAFE program. Our current product
plan is expected to be compliant with the federal greenhouse gas program through the 2017 model year. CARB has agreed that compliance with the federal
program is deemed to be compliant with the California program for the 2012 through 2017 model years. Although Canada has no parallel CAFE-style fuel
economy regulations there are Canadian greenhouse gas regulations that are aligned with the U.S. EPA regulations and Canadian fleets are expected to be
compliant with these regulations through the 2017 model year. We regularly evaluate our current and future product plans and strategies for compliance with
fuel economy and greenhouse gas regulations.
Unlike other jurisdictions, the European Union's climate change policy framework focuses on fleet average CO2 emissions rather than fuel economy. The
European Union has implemented legislation regulating fleet average CO2 emissions in Europe and has adopted an even more stringent fleet average CO2
target for 2020. Requirements must be met through the introduction of CO2 reducing technologies on conventional gasoline and diesel engines or through
ultra-low CO2 vehicles. We are developing a compliance plan by adopting operational CO 2 targets for each market entry in Europe. The EC will also devise
regulatory requirements on the CO2 emission test cycle as of 2017.
China has both an individual vehicle pass-fail type approval requirement based on Phase 3 standards and a fleet fuel consumption requirement based on
Phase 4 standards effective in 2016. The China Phase 4 fleet fuel consumption standard is based on curb weight with full compliance to 5.0 L/100 km
required by 2020. China has continued subsidies for plug-in hybrid, battery electric and fuel cell vehicles. China proposes a Phase 5 fleet fuel consumption
standard effective beginning in 2021 with full compliance to 4.0L/100km required by 2025.
In Brazil the government has set fuel economy requirements called Inovar Auto. Original equipment manufacturers have mandatory fleet average
compliance required by October 2017 resulting in a reduction from 2012 levels. The Brazilian government provides indirect tax incentives to eligible
participant companies that meet certain requirements including these fuel economy targets. The level of potential indirect tax incentives varies based on the
timing and degree to which the targets are met. Participating companies that fail to meet the required criteria are subject to clawback provisions and specific
fines.
Industrial Environmental Control Our operations are subject to a wide range of environmental protection laws including those regulating air emissions,
water discharge, waste management and environmental cleanup. Certain environmental statutes require that responsible parties fund remediation actions
regardless of fault, legality of original disposal or ownership of a disposal site. Under certain circumstances these laws impose joint and several liability as
well as liability for related damages to natural resources.
To mitigate the effects our worldwide operations have on the environment and reduce greenhouse gas emissions associated with waste disposal, we are
committed to converting as many of our worldwide operations as possible to landfill-free operations. At December 31, 2016, 100 (or approximately 60%) of
our manufacturing operations were landfill-free. Additionally we have 52
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non-manufacturing operations that are landfill-free. At our landfill-free manufacturing operations approximately 90% of waste materials are reused or
recycled and approximately 10% are converted to energy at waste-to-energy facilities. Including construction, demolition and remediation wastes, we
estimate that we reused, recycled or composted over 2.5 million metric tons of waste materials at our global manufacturing operations, converted over
137,000 metric tons of waste materials to energy at waste-to-energy facilities and avoided approximately 9 million metric tons of greenhouse gas emissions
in the year ended December 31, 2016.
In addition to minimizing our impact on the environment our landfill-free program and total waste reduction commitments generate revenue from the sale
of production by-products, reduce our use of material, reduce our carbon footprint and help to reduce the risks and financial liabilities associated with waste
disposal.
We continue to search for ways to increase our use of renewable energy and improve our energy efficiency and work to drive growth and scale of
renewables. We have committed to meeting the electricity needs of our operations worldwide with renewable energy by 2050. At December 31, 2016 we had
implemented projects globally that had increased our total renewable energy capacity to over 167 megawatts. In 2016 we also met the EPA Energy Star
Challenge for Industry (EPA Challenge) at 12 of our sites globally by reducing energy intensity an average of 18% at these sites. To meet the EPA Challenge
industrial sites must reduce energy intensity by 10% in five years or fewer. Two of the sites achieved the goal for the first time, bringing the total number of
GM-owned sites to have met the EPA Challenge to 75, with many sites achieving the goal multiple times. These efforts minimize our utility expenses and are
part of our approach to addressing climate change through setting a greenhouse gas emissions reduction target, collecting accurate data, following our
business plan and publicly reporting progress against our target.
Chemical Regulations We continually monitor the implementation of chemical regulations to maintain compliance and evaluate their effect on our
business, suppliers and the automotive industry.
Governmental agencies in both the U.S. and Canada continue to introduce new regulations and legislation related to the selection and use of chemicals or
substances of concern by mandating broad prohibitions, green chemistry, life cycle analysis and product stewardship initiatives. These initiatives give broad
regulatory authority to ban or restrict the use of certain chemical substances and potentially affect automobile manufacturers' responsibilities for vehicle
components at the end of a vehicle's life, as well as chemical selection for product development and manufacturing. Chemical restrictions in Canada are
progressing rapidly as a result of Environment Canada’s Chemical Management Plan to assess existing substances and implement risk management controls
on any chemical deemed toxic. In June 2016, the U.S. enacted the Chemical Safety for the 21 st Century Act that grants the EPA more authority to regulate
and ban chemicals from use in the U.S. and is expected to increase the level of regulation of chemicals in vehicles. These emerging regulations will
potentially lead to increases in costs and supply chain complexity. We believe that we are materially in compliance with substantially all of these
requirements or expect to be materially in compliance by the required date.
In 2007 the European Union implemented its regulatory requirements, the EU REACH regulation among others, to register, evaluate, authorize and restrict
the use of chemical substances. This regulation requires chemical substances manufactured in or imported into the European Union to be registered with the
European Chemicals Agency before 2018. Under this regulation, “substances of very high concern” may either require authorization for further use or may be
restricted in the future. This could potentially increase the cost of certain alternative substances that are used to manufacture vehicles and parts, or result in a
supply chain disruption when a substance is no longer available to meet production timelines. Our research and development initiatives may be used to
address future requirements. We believe that we are materially in compliance with substantially all of these requirements or expect to be materially in
compliance by the required date.
There are various regulations in China stipulating the requirements for chemical management. Among other things, these regulations catalogue and restrict
the use and the import and export of various chemical substances. The failure of our joint venture partners or our suppliers to comply with these regulations
could disrupt production in China or prevent our joint venture partners from selling the affected products in the China market.
Safety In the U.S. the National Traffic and Motor Vehicle Safety Act of 1966 prohibits the sale of any new vehicle or equipment in the U.S. that does not
conform to applicable vehicle safety standards established by the National Highway Traffic Safety Administration (NHTSA). If we or NHTSA determine that
either a vehicle or vehicle equipment does not comply with a safety standard or if a vehicle defect creates an unreasonable safety risk the manufacturer is
required to notify owners and provide a remedy. We are required to report certain information relating to certain customer complaints, warranty claims, field
reports and notices and claims involving property damage, injuries and fatalities in the U.S. and claims involving fatalities outside the U.S. We are also
required to report certain information concerning safety recalls and other safety campaigns outside the U.S.
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Outside the U.S. safety standards and recall regulations often have the same purpose as the U.S. standards but may differ in their requirements and test
procedures, adding complexity to regulatory compliance.
Automotive Financing - GM Financial GM Financial is our global captive automotive finance company and our global provider of automobile finance
solutions. GM Financial conducts its business in North America, Europe, South America and through a joint venture in China.
GM Financial provides retail loan and lease lending across the credit spectrum. Additionally GM Financial offers commercial products to dealers that
include new and used vehicle inventory financing, inventory insurance, working capital, capital improvement loans, and storage center financing.
In North America GM Financial's retail automobile finance programs include prime and sub-prime lending and full credit spectrum leasing. The sub-prime
lending program is primarily offered to consumers with FICO scores less than 620 who have limited access to automobile financing through banks and credit
unions and is expected to sustain a higher level of credit losses than prime lending. The leasing product is offered through our franchised dealers and
primarily targets prime consumers leasing new vehicles. GM Financial has expanded its leasing, near prime and prime lending programs through our
franchised dealers, and as a result, leasing and prime lending have become a larger percentage of originations and the retail portfolio balance.
Internationally GM Financial’s retail automobile finance programs focus on prime quality financing through loan and lease products.
Generally GM Financial seeks to fund its operations in each country through local sources to minimize currency and country risk. GM Financial primarily
finances its loan, lease and commercial origination volume through the use of secured and unsecured credit facilities, through securitization transactions
where such markets are developed and through the issuance of unsecured debt in public markets including accepting deposits from retail banking customers
in Germany.
Employees At December 31, 2016 we employed 135,000 (60%) hourly employees and 90,000 (40%) salaried employees. At December 31, 2016 55,000
(53%) of our U.S. employees were represented by unions, a majority of which were represented by the International Union, United Automobile, Aerospace
and Agriculture Implement Workers of America (UAW). The following table summarizes worldwide employment (in thousands):
December 31, 2016
December 31, 2015
December 31, 2014
GMNA
GME
GMIO
GMSA
GM Financial
124
38
32
22
9
115
36
32
24
8
110
37
33
29
7
Total Worldwide
225
215
216
50
55
45
52
40
51
U.S. - Salaried
U.S. - Hourly
Executive Officers of the Registrant As of February 7, 2017 the names and ages of our executive officers and their positions with GM are as follows:
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Name (Age)
Present GM Position (Effective Date)
Mary T. Barra (55)
Chairman & Chief Executive Officer (2016)
Daniel Ammann (44)
President (2014)
Alan S. Batey (53)
Executive Vice President & President, North
America (2014)
Alicia Boler-Davis (47)
Executive Vice President, Global
Manufacturing (2016)
Executive Vice President & President,
Cadillac (2014)
Carel Johannes de Nysschen (56)
Positions Held During the Past Five Years (Effective Date)
Chief Executive Officer and Member of the Board of Directors (2014) Executive
Vice President, Global Product Development, Purchasing & Supply Chain (2013)
Senior Vice President, Global Product Development (2011)
Executive Vice President & Chief Financial Officer (2013)
Senior Vice President & Chief Financial Officer (2011)
Senior Vice President, Global Chevrolet and Brand Chief and U.S. Sales and
Marketing (2013)
GM Vice President, U.S. Sales and Service, and Interim GM Chief Marketing
Officer (2012)
Vice President, U.S. Chevrolet Sales and Service (2010)
Senior Vice President, Global Connected Customer Experience (2014)
Vice President, Global Quality and U.S. Customer Experience (2012)
Infiniti Motor Company, President (2012)
Audi of America, Inc., President (2004)
Barry L. Engle (53)
Executive Vice President & President, South
America (2015)
Agility Fuel Systems, CEO (2011)
Stefan Jacoby (58)
Executive Vice President & President, GM
International (2013)
Volvo Car Corporation - Global Chief Executive Officer and President (2010)
Craig B. Glidden (59)
Executive Vice President & General Counsel LyondellBasell, Executive Vice President and Chief Legal Officer (2009)
(2015)
Executive Vice President & President, Europe CEO, Opel Group GmbH & President, GM Europe (2013)
and Chairman of the Management Board of
Volkswagen Group China - Chief Executive Officer and President (2010)
Opel Group GmbH (2013)
Karl-Thomas Neumann (55)
John J. Quattrone (64)
Senior Vice President, Global Human
Resources (2014)
VP of Human Resources, Global Product Development & Global Purchasing &
Supply Chain / Corporate Strategy, Business Development & Global Planning &
Program organizations (2009)
Mark L. Reuss (53)
Executive Vice President, Global Product
Development, Purchasing & Supply Chain
(2014)
Executive Vice President & President, North America (2013)
GM Vice President & President, North America (2009)
Charles K. Stevens, III (57)
Executive Vice President & Chief Financial
Officer (2014)
Chief Financial Officer, GM North America (2010)
Interim Chief Financial Officer, GM South America (2011)
Matthew Tsien (56)
Executive Vice President & President, GM
China (2014)
GM Consolidated International Operations Vice President, Planning, Program
Management, & Strategic Alliances China (2012)
Executive Vice President, SAIC GM Wuling (2009)
Thomas S. Timko (48)
Vice President, Controller & Chief
Accounting Officer (2013)
Applied Materials Inc. - Corporate Vice President, Chief Accounting Officer, and
Corporate Controller (2010)
There are no family relationships between any of the officers named above and there is no arrangement or understanding between any of the officers named
above and any other person pursuant to which he or she was selected as an officer. Each of the officers named above was elected by the Board of Directors to
hold office until the next annual election of officers and until his or her successor is elected and qualified or until his or her earlier resignation or removal.
The Board of Directors elects the officers immediately following each annual meeting of the stockholders and may appoint other officers between annual
meetings.
Segment Reporting Data Operating segment data and principal geographic area data for the years ended December 31, 2016, 2015 and 2014 are summarized
in Note 23 to our consolidated financial statements.
Website Access to Our Reports Our internet website address is www.gm.com. In addition to the information about us and our subsidiaries contained in this
2016 Form 10-K information about us can be found on our website including information on our corporate governance principles and practices. Our Investor
Relations website at www.gm.com/investors contains a significant amount of information about us, including financial and other information for investors.
We encourage investors to visit our website,
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as we frequently update and post new information about our company on our website and it is possible that this information could be deemed to be material
information. Our website and information included in or linked to our website are not part of this 2016 Form 10-K.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (Exchange Act) are available free of charge through our website as soon as
reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission (SEC). The public may read and copy
the materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Additionally the SEC maintains an internet site that contains reports,
proxy and information statements and other information. The address of the SEC's website is www.sec.gov.
* * * * * * *
Item 1A. Risk Factors
We face a number of significant risks and uncertainties in connection with our operations. Our business and the results of our operations could be
materially adversely affected by the factors described below. The risks described below are not the only risks facing our operations. Risks and uncertainties
not currently known to us or that we currently deem to be immaterial also could have a material adverse impact on our business and results of operations.
If we do not deliver new products, services and customer experiences in response to new participants in the automotive industry, our business could
suffer. We believe that the automotive industry will experience significant and continued change in the coming years. In addition to our traditional
competitors, we must also be responsive to the entrance of non-traditional participants in the automotive industry. These non-traditional participants may
seek to disrupt the historic business model of the industry through the introduction of new technologies, new products or services, new business models or
new methods of travel. It is strategically significant that we lead the technological disruption occurring in our industry. As our business evolves, the pressure
to innovate will encompass a wider range of products and services, including products and services that may be outside of our historically core business, such
as autonomous vehicles, car- and ride-sharing and transportation as a service. If we do not accurately predict, prepare for and respond to new kinds of
technological innovations, market developments and changing customer needs, our sales, profitability and long-term competitiveness may be harmed.
Our ability to maintain profitability is dependent upon our ability to fund and introduce new and improved vehicle models that are able to attract a
sufficient number of consumers. We operate in a very competitive industry with market participants routinely introducing new and improved vehicle models
designed to meet rapidly evolving consumer expectations. Producing new and improved vehicle models competitively and preserving our reputation for
designing, building and selling high quality cars and trucks is critical to our long-term profitability. We will launch a substantial number of new vehicles in
2017. Successful launches of our new vehicles are critical to our short-term profitability. In addition, our growth strategies require us to make significant
investment in our brands to appeal to new markets.
Our long-term profitability depends upon successfully creating and funding technological innovations in design, engineering and manufacturing, which
requires extensive capital investment and the ability to retain and recruit talent. In some cases the technologies that we plan to employ are not yet
commercially practical and depend on significant future technological advances by us and by our suppliers. Although we will seek to obtain intellectual
property protection for our innovations to protect our competitive position, it is possible we may not be able to protect some of these innovations. There can
be no assurance that advances in technology will occur in a timely or feasible way, or that others will not acquire similar or superior technologies sooner than
we do or that we will acquire technologies on an exclusive basis or at a significant price advantage.
It generally takes two years or more to design and develop a new vehicle, and a number of factors may lengthen that time period. Because of this product
development cycle and the various elements that may contribute to consumers’ acceptance of new vehicle designs, including competitors’ product
introductions, technological innovations, fuel prices, general economic conditions and changes in styling preferences, an initial product concept or design
may not result in a vehicle that generates sales in sufficient quantities and at high enough prices to be profitable. Our high proportion of fixed costs, both due
to our significant investment in property, plant and equipment as well as other requirements of our collective bargaining agreements, which limit our
flexibility to adjust personnel costs to changes in demands for our products, may further exacerbate the risks associated with incorrectly assessing demand for
our vehicles.
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Our profitability is dependent upon the success of full-size pick-up trucks and SUVs. While we offer a balanced and complete portfolio of small, mid-size
and large cars, crossovers, sport utility vehicles (SUVs) and trucks, we generally recognize higher profit margins on our full-size pick-up trucks and SUVs. Our
success is dependent upon consumer preferences and our ability to sell higher margin vehicles in sufficient volumes. Any shift in consumer preferences
toward smaller, more fuel efficient vehicles, whether as a result of increases in the price of oil or any sustained shortage of oil, including as a result of global
political instability or other reasons, could weaken the demand for our higher margin full-size pick-up trucks and SUVs.
Our business is highly dependent upon global automobile market sales volume, which can be volatile. Our business and financial results are highly
sensitive to sales volume, changes to which can have a disproportionately large effect on our profitability. A number of economic and market conditions
drive changes in vehicle sales, including real estate values, levels of unemployment, availability of affordable financing, fluctuations in the cost of fuel,
consumer confidence, political unrest and global economic conditions. We cannot predict future economic and market conditions with certainty.
Our business in China is subject to aggressive competition. Maintaining a strong position in the Chinese market is a key component of our global growth
strategy. The automotive market in China is highly competitive with competition from many of the largest global manufacturers and numerous smaller
domestic manufacturers. As the size of the Chinese market continues to increase we anticipate that additional competitors, both international and domestic,
will seek to enter the Chinese market and that existing market participants will act aggressively to increase their market share. Increased competition may
result in price reductions, reduced margins and our inability to gain or hold market share.
The international scale and footprint of our operations exposes us to additional risks. We manufacture, sell and service products globally and rely upon a
global supply chain to deliver the raw materials, components, systems and parts that we need to manufacture our products. Our global operations subject us to
extensive domestic and foreign regulations and expose us to a variety of domestic and foreign political, economic and other risks, including: changes in
foreign or domestic government leadership; changes in foreign or domestic laws or regulations impacting our overall business model or restricting our ability
to manufacture, purchase or sell products, and political pressures to change any aspect of our business model or practices and source raw materials,
components, systems and parts on competitive terms in a manner consistent with our current practice; changes in domestic or foreign tax laws; economic
tensions between governments and changes in international trade and investment policies, including restrictions on the repatriation of dividends, especially
between the U.S. and China, more detailed inspections, new or higher tariffs, for example, on products imported from Mexico into the U.S.; new barriers to
entry or domestic preference procurement requirements, or changes to or withdrawals from free trade agreements; changes in foreign currency exchange rates
and interest rates; economic downturns in foreign countries or geographic regions where we have significant operations, such as China; significant changes
in conditions in the countries in which we operate with the effect of competition from new market entrants and in the United Kingdom (U.K.) with passage of
a referendum to discontinue membership in the European Union; differing local product preferences and product requirements, including fuel economy,
vehicle emissions and safety; impact of compliance with U.S. and other foreign countries’ export controls and economic sanctions; liabilities resulting from
U.S. and foreign laws and regulations, including those related to the Foreign Corrupt Practices Act and certain other anti-corruption laws; differing labor
regulations and union relationships; and difficulties in obtaining financing in foreign countries for local operations.
A significant amount of our operations are conducted by joint ventures that we cannot operate solely for our benefit. Many of our operations, primarily in
China, are carried out by joint ventures. In joint ventures we share ownership and management of a company with one or more parties who may not have the
same goals, strategies, priorities or resources as we do and may compete with us outside the joint venture. Joint ventures are intended to be operated for the
equal benefit of all co-owners, rather than for our exclusive benefit. Operating a business as a joint venture often requires additional organizational
formalities as well as time-consuming procedures for sharing information and making decisions. In joint ventures we are required to foster our relationships
with our co-owners as well as promote the overall success of the joint venture, and if a co-owner changes or relationships deteriorate, our success in the joint
venture may be materially adversely affected. The benefits from a successful joint venture are shared among the co-owners, therefore we do not receive all the
benefits from our successful joint ventures. In addition, because we share ownership and management with one or more parties, we may have limited control
over the actions of a joint venture, particularly when we own a minority interest. As a result, we may be unable to prevent misconduct or other violations of
applicable laws by a joint venture. Moreover, a joint venture may not follow the same requirements regarding compliance, internal controls and internal
control over financial reporting that we follow. To the extent another party makes decisions that negatively impact the joint venture or internal control issues
arise within the joint venture, we may have to take responsive or other action or we may be subject to penalties, fines or other related actions for these
activities.
We are subject to extensive laws, governmental regulations and policies, including those regarding fuel economy and emissions controls, that can
significantly increase our costs and affect how we do business. We are significantly affected by governmental
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regulations that can increase costs related to the production of our vehicles and affect our product portfolio. Meeting or exceeding many of these regulations
is costly and often technologically challenging, especially where standards may not be harmonized across jurisdictions, a significant challenge with respect
to mandated emissions and fuel economy standards. We anticipate that the number and extent of these regulations, and the related costs and changes to our
product portfolio, may increase significantly in the future. These government regulatory requirements could significantly affect our plans for global product
development and given the uncertainty surrounding enforcement and regulatory definitions, may result in substantial costs, including civil or criminal
penalties. In addition, an evolving but un-harmonized regulatory framework may limit or dictate the types of vehicles we sell and where we sell them, which
can affect revenue. Refer to the "Environmental and Regulatory Matters" section of Item 1. Business for further information on these regulatory requirements.
We also expect that manufacturers will continue to be subject to increased scrutiny from regulators globally. For example, in Germany, the Ministry of
Transportation and the Kraftfahrt-Bundesamt have requested the participation of a number of automotive manufacturers, including our German subsidiary, in
continuing discussions on emissions control issues and have also requested, from time to time, written responses from our subsidiary on the subject. Our
German subsidiary has participated in these discussions and has provided the requested responses to inquiries concerning nitrogen oxide emission control
systems of its diesel engines. In addition, the German and the EU Parliaments have instigated Inquiry Commissions into government agencies' oversight of
emissions enforcement, requesting our German subsidiary's participation. At the same time, the German government has initiated further industry-wide
inquiries about CO2 emissions. This scrutiny, regulatory changes or novel interpretations of current regulations, as well as increased enforcement has led to
and may result in further increased testing and re-testing of our vehicles and analysis of their emissions control systems, which could lead to increased costs,
penalties, negative publicity or reputational impact, and recall activity if regulators determine that emission levels and required regulatory compliance
should be based on either a wider spectrum of driving conditions for future testing parameters or stricter or novel interpretations and consequent enforcement
of existing requirements. No assurance can be given that the ultimate outcome of any potential investigations or increased testing resulting from this scrutiny
would not materially and adversely affect us.
We expect that to comply with fuel economy and emission control requirements we will be required to sell a significant volume of hybrid electric vehicles,
as well as develop and implement new technologies for conventional internal combustion engines, all at increased cost levels. There is no assurance that we
will be able to produce and sell vehicles that use such technologies on a profitable basis or that our customers will purchase such vehicles in the quantities
necessary for us to comply with these regulatory programs. Alternative compliance measures may not be sufficiently available in the marketplace to meet
volume driven compliance requirements.
In the current uncertain regulatory framework, environmental liabilities for which we may be responsible and that are not reasonably estimable could be
substantial. Alleged violations of safety or emissions standards could result in legal proceedings, the recall of one or more of our products, negotiated
remedial actions, fines, restricted product offerings or a combination of any of those items. Any of these actions could have substantial adverse effects on our
operations including facility idling, reduced employment, increased costs and loss of revenue.
We could be materially adversely affected by a negative outcome in unusual or significant litigation, governmental investigations or other legal
proceedings. We are subject to legal proceedings involving various issues, including product liability lawsuits, stockholder litigation and governmental
investigations, such as the legal proceedings related to the Ignition Switch Recall. Such legal proceedings could in the future result in the imposition of
damages, including punitive damages, substantial fines, civil lawsuits and criminal penalties, interruptions of business, modification of business practices,
equitable remedies and other sanctions against us or our personnel as well as significant legal and other costs. For a further discussion of these matters refer to
Note 15 to our consolidated financial statements.
If, in the discretion of the U.S. Attorney’s Office for the Southern District of New York (the Office), we do not comply with the terms of the Deferred
Prosecution Agreement (the DPA), the Office may prosecute us for charges alleged by the Office including those relating to faulty ignition switches. On
September 17, 2015 we announced that we entered into the DPA with the Office regarding its investigation of the events leading up to certain recalls
announced in February and March of 2014 relating to faulty ignition switches. Under the DPA, we consented to, among other things, the filing of a two-count
information (the Information) in the U.S. District Court for the Southern District of New York charging GM with a scheme to conceal material facts from a
government regulator and wire fraud. We pled not guilty to the charges alleged in the Information. The DPA further provides that, in the event the Office
determines during the period of deferral of prosecution (or any extensions thereof) that we have violated any provision of the DPA, including violating any
U.S. federal law or our obligation to cooperate with and assist the independent monitor, the Office may, in its discretion, either prosecute us on the charges
alleged in the Information or impose an extension of the period of deferral of prosecution of up to one additional year. Under such circumstance, the Office
would be permitted to rely
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upon the admissions we made in the DPA and would benefit from our waiver of certain procedural and evidentiary defenses. Such a criminal prosecution
could subject us to penalties.
The costs and effect on our reputation of product safety recalls could materially adversely affect our business. Government safety standards require
manufacturers to remedy certain product safety defects through recall campaigns. Under these standards, we could be subject to civil or criminal penalties or
may incur various costs, including significant costs for free repairs. At present, the costs we incur in connection with these recalls typically include the cost of
the part being replaced and labor to remove and replace the defective part. We currently source a variety of systems, components, raw materials and parts,
including but not limited to air bag inflators, from third parties. From time to time these items may have performance or quality issues that could harm our
reputation and cause us to incur significant costs. For example, we are currently conducting recalls for certain Takata Corporation (Takata) air bag inflators
used in some of our prior model year vehicles. We are continuing to assess the situation. Further recalls, if any, that may be required to remediate Takata air
bag inflators in our vehicles could have a material impact on our business. In addition, product recalls can harm our reputation and cause us to lose
customers, particularly if those recalls cause consumers to question the safety or reliability of our products. Conversely not issuing a recall or not issuing a
recall on a timely basis can harm our reputation, potentially expose us to significant monetary penalties, and cause us to lose customers for the same reasons
as expressed above.
Any disruption in our suppliers' operations could disrupt our production schedule. Our automotive operations are dependent upon the continued ability
of our suppliers to deliver the systems, components, raw materials and parts that we need to manufacture our products. Our use of “just-in-time”
manufacturing processes allows us to maintain minimal inventory quantities of systems, components, raw materials and parts. As a result our ability to
maintain production is dependent upon our suppliers delivering sufficient quantities of systems, components, raw materials and parts on time to meet our
production schedules. In some instances we purchase systems, components, raw materials and parts from a single source and may be at an increased risk for
supply disruptions. Financial difficulties or solvency problems with our suppliers, including Takata, which may be exacerbated by the cost of remediating
quality issues with these items, could lead to uncertainty in our supply chain or cause supply disruptions for us which could, in turn, disrupt our operations,
including production of certain of our higher margin vehicles. Where we experience supply disruptions, we may not be able to develop alternate sourcing
quickly. Any disruption of our production schedule caused by an unexpected shortage of systems, components, raw materials or parts even for a relatively
short period of time could cause us to alter production schedules or suspend production entirely.
We are dependent on our manufacturing facilities around the world. We assemble vehicles at various facilities around the world. These facilities are
typically designed to produce particular models for particular geographic markets. No single facility is designed to manufacture our full range of vehicles. In
some cases certain facilities produce products that disproportionately contribute a greater degree to our profitability than others. Should these or other
facilities become unavailable either temporarily or permanently for any number of reasons, including labor disruptions, the inability to manufacture vehicles
there may result in harm to our reputation, increased costs, lower revenues and the loss of customers. We may not be able to easily shift production of vehicles
at an inoperable facility to other facilities or to make up for lost production. Any new facility needed to replace an inoperable manufacturing facility would
need to comply with the necessary regulatory requirements, need to satisfy our specialized manufacturing requirements and require specialized
equipment. Even though we carry business interruption insurance policies, we may suffer losses as a result of business interruptions that exceed the coverage
available or any losses which may be excluded under our insurance policies.
We operate in a highly competitive industry that has excess manufacturing capacity and attempts by our competitors to sell more vehicles could have a
significant negative effect on our vehicle pricing, market share and operating results. The global automotive industry is highly competitive and overall
manufacturing capacity in the industry exceeds demand. Many manufacturers have relatively high fixed labor costs as well as significant limitations on their
ability to close facilities and reduce fixed costs. Our competitors may respond to these relatively high fixed costs by providing subsidized financing or
leasing programs, offering marketing incentives or reducing vehicle prices. Our competitors may also seek to benefit from economies of scale by
consolidating or entering into other strategic agreements such as alliances intended to enhance their competitiveness.
Domestic manufacturers in lower cost countries, such as China and India, have become competitors in key emerging markets and announced their intention
to export their products to established markets as a low cost alternative to established entry-level automobiles. In addition, foreign governments may decide
to implement tax and other policies that favor their domestic manufacturers at the expense of international manufacturers, including GM and its joint venture
partners. These actions have had, and are expected to continue to have, a significant negative effect on our vehicle pricing, market share and operating
results, and present a significant risk to our ability to enhance our revenue per vehicle.
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We may continue to restructure or divest our operations in various countries, but we may not succeed in doing so. We face difficult market and operating
conditions in certain parts of the world that may require us to restructure or rationalize these operations, which may result in impairments. In many countries
across our regions we have experienced challenges in our operations and continue to strategically assess the manner in which we operate in certain countries.
As we continue to assess our performance throughout our regions, additional restructuring and rationalization actions may be required and may be material.
Our future competitiveness and ability to achieve long-term profitability depends on our ability to control our costs, which requires us to successfully
implement operating effectiveness initiatives throughout our automotive operations. We are continuing to implement a number of operating effectiveness
initiatives to improve productivity and reduce costs. Our future competitiveness depends upon our continued success in implementing these initiatives
throughout our automotive operations. While some of the elements of cost reduction are within our control, others, such as interest rates or return on
investments, which influence our expense for pensions, depend more on external factors, and there can be no assurance that such external factors will not
materially adversely affect our ability to reduce our costs. Reducing costs may prove difficult due to our focus on increasing advertising and our belief that
engineering and other expenses necessary to improve the performance, safety and customer satisfaction of our vehicles and to continue to innovate our
technology and product offerings to meet changing customer needs and market developments are likely to increase.
Security breaches and other disruptions to our vehicles, information technology networks and systems could interfere with the safety of our customers or
our operations and could compromise the confidentiality of private customer data or our proprietary information. We rely upon information technology
networks and systems, including in-vehicle systems and mobile devices, some of which are managed by third-parties, to process, transmit and store electronic
information, and to manage or support a variety of vehicle or business processes and activities. Additionally we collect and store sensitive data, including
intellectual property, proprietary business information, proprietary business information of our dealers and suppliers, as well as personally identifiable
information of our customers and employees, in data centers and on information technology networks. The secure operation of these information technology
networks and in-vehicle systems, and the processing and maintenance of this information, is critical to our business operations and strategy. Despite security
measures and business continuity plans, our information technology networks and systems and in-vehicle systems may be vulnerable to damage, disruptions
or shutdowns due to attacks by hackers or breaches due to errors or malfeasance by employees, contractors and others who have access to our networks and
systems or computer viruses. The occurrence of any of these events could compromise our networks and the information stored there could be accessed,
publicly disclosed, lost or stolen. These occurrences could also impact vehicle safety. We have been the target of these types of attacks in the past and future
attacks are likely to occur. If successful, these types of attacks on our network or systems, including in-vehicle systems and mobile devices, or service failures
could result in, among other things, the loss of proprietary data, interruptions or delays in our business operations and damage to our reputation. In addition,
any such access, disruption, technological failures, disclosure or other loss of information could result in legal claims or proceedings, liability or regulatory
penalties under laws protecting the privacy of personal information, disrupt operations and reduce the competitive advantage we hope to derive from our
investment in advanced technologies.
We rely on GM Financial to provide financial services to our dealers and customers in a majority of the markets in which we sell vehicles. GM Financial
faces a number of business, economic and financial risks that could impair its access to capital and negatively affect its business and operations and its
ability to provide leasing and financing to retail consumers and commercial lending to our dealers to support additional sales of our vehicles. We rely on
GM Financial in North America, Europe, South America and China to support leasing and sales of our vehicles to consumers requiring vehicle financing and
also to provide commercial lending to our dealers. Any reduction in GM Financial's ability to provide such financial services would negatively affect our
efforts to support additional sales of our vehicles and expand our market penetration among consumers and dealers.
As an entity operating in the financial services sector, GM Financial is required to comply with a wide variety of laws and regulations that may be costly to
adhere to and may affect our consolidated operating results. Compliance with these laws and regulations requires that GM Financial maintain forms,
processes, procedures, controls and the infrastructure to support these requirements and these laws and regulations often create operational constraints both
on GM Financial’s ability to implement servicing procedures and on pricing. Laws in the financial services industry are designed primarily for the protection
of consumers. The failure to comply with these laws could result in significant statutory civil and criminal penalties, monetary damages, attorneys’ fees and
costs, possible revocation of licenses and damage to reputation, brand and valued customer relationships.
The primary factors that could adversely affect GM Financial's business and operations and reduce its ability to provide financing services at competitive
rates include the availability of borrowings under its credit facilities to fund its retail and commercial finance activities; its ability to access a variety of
financing sources including the asset-backed securities market and other secured
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and unsecured debt markets; the performance of loans and leases in its portfolio, which could be materially affected by delinquencies, defaults or
prepayments; wholesale auction values of used vehicles; higher than expected vehicle return rates and the residual value performance on vehicles GM
Financial leases to customers; fluctuations in interest rates and currencies; and changes to regulation, supervision and licensing across various jurisdictions,
including new regulations or sanctions imposed in the U.S. by the Department of Justice, SEC and Consumer Financial Protection Bureau.
Our defined benefit pension plans are currently underfunded and our pension funding requirements could increase significantly due to a reduction in
funded status as a result of a variety of factors, including weak performance of financial markets, declining interest rates, changes in laws or regulations,
changes in assumptions or investments that do not achieve adequate returns. Our employee benefit plans currently hold a significant amount of equity and
fixed income securities. A detailed description of the investment funds and strategies is disclosed in Note 14 to our consolidated financial statements, which
also describes significant concentrations of risk to the plan investments.
There are additional risks due to the complexity and magnitude of our investments. Examples include implementation of significant changes in investment
policy, insufficient market liquidity in particular asset classes and the inability to quickly rebalance illiquid and long-term investments.
Our future funding requirements for our U.S. defined benefit pension plans depend upon the future performance of assets placed in trusts for these plans, the
level of interest rates used to determine funding levels, the level of benefits provided for by the plans and any changes in government laws and regulations.
Future funding requirements generally increase if the discount rate decreases or if actual asset returns are lower than expected asset returns, assuming other
factors are held constant. Our potential funding requirements are described in Note 14 to our consolidated financial statements.
Factors which affect future funding requirements for our U.S. defined benefit plans generally affect the required funding for non-U.S. plans. Certain plans
outside the U.S. do not have assets and therefore the obligation is funded as benefits are paid. If local legal authorities increase the minimum funding
requirements for our non-U.S. plans, we could be required to contribute more funds.
* * * * * * *
Item 1B. Unresolved Staff Comments
None
* * * * * * *
Item 2. Properties
At December 31, 2016 we had over 100 locations in the U.S., excluding our automotive financing operations and dealerships, which are primarily for
manufacturing, assembly, distribution, warehousing, engineering and testing. Leased properties are primarily composed of warehouses and administration,
engineering and sales offices.
We have manufacturing, assembly, distribution, office or warehousing operations in 61 countries, including equity interests in associated companies which
perform manufacturing, assembly, or distribution operations. The major facilities outside the U.S., which are principally vehicle manufacturing and assembly
operations, are located in Argentina, Australia, Brazil, Canada, China, Colombia, Ecuador, Egypt, Germany, Kenya, Mexico, Poland, South Africa, South
Korea, Spain, Thailand and the U.K.
GM Financial leases facilities for administration and regional credit centers. GM Financial has 50 facilities, of which 25 are located in the U.S. The major
facilities outside the U.S. are located in Brazil, Canada, China, Germany, Mexico and the U.K.
We, our subsidiaries, or associated companies in which we own an equity interest, own most of the above facilities.
* * * * * * *
Item 3. Legal Proceedings
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Refer to the discussion in the Litigation-Related Liability and Tax Administrative Matters section in Note 15 to our consolidated financial statements for
information relating to legal proceedings.
* * * * * * *
Item 4. Mine Safety Disclosures
Not applicable
* * * * * * *
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information Shares of our common stock have been publicly traded since November 18, 2010 when our common stock was listed and began trading
on the New York Stock Exchange and the Toronto Stock Exchange. The following table summarizes the quarterly price ranges of our common stock based on
high and low prices from intraday trades on the New York Stock Exchange, the principal market on which the stock is traded:
Years Ended December 31,
2016
High
First quarter
Second quarter
Third quarter
Fourth quarter
$
$
$
$
33.54
33.41
32.87
37.74
2015
Low
$
$
$
$
26.69
27.34
27.52
30.21
High
$
$
$
$
Low
38.99
37.45
33.61
36.88
$
$
$
$
32.36
33.06
24.62
29.98
Holders At January 31, 2017 we had 1.5 billion issued and outstanding shares of common stock held by 591 holders of record.
Dividends Our Board of Directors began declaring quarterly dividends on our common stock in the three months ended March 31, 2014. It is anticipated that
dividends on our common stock will continue to be declared and paid quarterly. However the declaration of any dividend on our common stock is a matter to
be acted upon by our Board of Directors in its sole discretion. Any dividend will be paid out of funds legally available for that purpose. Our payment of
dividends in the future will depend on business conditions, our financial condition, earnings, liquidity and capital requirements and other factors. Refer to
Item 6. Selected Financial Data for cash dividends declared on our common stock for the years ended December 31, 2016, 2015 and 2014.
Purchases of Equity Securities The following table summarizes our purchases of common stock in the three months ended December 31, 2016:
Total Number of
Shares
Purchased(a)
October 1, 2016 through October 31, 2016
November 1, 2016 through November 30, 2016
December 1, 2016 through December 31, 2016
Total
__________
Average
Price Paid
per Share
Total Number of
Shares Purchased
Under Announced
Programs(b)
41,719
18,532,366
11,537,206
$
$
$
32.06
32.92
36.25
—
17,906,695
11,311,477
30,111,291
$
34.19
29,218,172
Approximate Dollar Value of
Shares That May Yet be
Purchased Under Announced
Programs
$4.0 billion
$3.4 billion
$3.0 billion
(a) Shares purchased consist of: (1) shares purchased under our previously announced common stock repurchase program; (2) shares retained by us for the payment of the
exercise price upon the exercise of warrants; and (3) shares delivered by employees or directors to us for the payment of taxes resulting from issuance of common stock upon
the vesting of Restricted Stock Units (RSUs) and Restricted Stock Awards (RSAs) relating to compensation plans. Refer to Note 21 to our consolidated financial statements
for additional details on employee stock incentive plans and Note 19 to our consolidated financial statements for additional details on warrants issued.
(b) In January 2016 our Board of Directors authorized the purchase of up to an additional $4 billion of our common stock under our previously announced common stock
repurchase program before the end of 2017. In January 2017 we announced that our Board of Directors had authorized the purchase of up to an additional $5 billion of our
common stock with no expiration date.
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* * * * * * *
Item 6. Selected Financial Data
At and for the Years Ended December 31,
2016
2015
2014
2013
2012
Income Statement Data:
Total net sales and revenue
$
166,380
$
152,356
$
155,929
$
155,427
$
152,256
Net income(a)
$
9,268
$
9,615
$
4,018
$
5,331
$
6,136
Net income attributable to stockholders
$
9,427
$
9,687
$
3,949
$
5,346
$
6,188
Net income attributable to common stockholders(b)
$
9,427
$
9,687
$
2,804
$
3,770
$
4,859
Basic earnings per common share(a)(b)
$
6.12
$
6.11
$
1.75
$
2.71
$
3.10
Diluted earnings per common share(a)(b)
$
6.00
$
5.91
$
1.65
$
2.38
$
2.92
Dividends declared per common share
$
1.52
$
1.38
$
1.20
$
—
$
—
Total assets(c)
$
221,690
$
194,338
$
177,311
$
166,231
$
149,422
Automotive notes and loans payable
$
10,752
$
8,765
$
9,350
$
7,098
$
5,172
GM Financial notes and loans payable(c)
$
73,876
$
54,346
$
37,315
$
28,972
$
10,878
Total equity
$
44,075
$
40,323
$
36,024
$
43,174
$
37,000
Balance Sheet Data:
_________
(a) In the year ended December 31, 2015 we recorded the reversal of deferred tax asset valuation allowances of $3.9 billion in GME and recorded charges related to the Ignition
Switch Recall for various legal matters of approximately $1.6 billion. In the year ended December 31, 2014 we recorded charges of approximately $2.9 billion in Automotive
cost of sales related to recall campaigns and courtesy transportation, a catch-up adjustment of $0.9 billion related to the change in estimate for recall campaigns and a charge of
$0.4 billion related to the Ignition Switch Recall compensation program. In the year ended December 31, 2012 we recorded Goodwill impairment charges of $27.1 billion, the
reversal of deferred tax asset valuation allowances of $36.3 billion in the U.S. and Canada, pension settlement charges of $2.7 billion and GME long-lived asset impairment
charges of $5.5 billion.
(b) In December 2014 we redeemed all of the remaining shares of our Series A Preferred Stock for $3.9 billion, which reduced Net income attributable to common stockholders
by $0.8 billion. In September 2013 we purchased 120 million shares of our Series A Preferred Stock held by the UAW Retiree Medical Benefits Trust (New VEBA) for $3.2
billion, which reduced Net income attributable to common stockholders by $0.8 billion.
(c) In the year ended December 31, 2013 GM Financial acquired Ally Financial Inc.'s international operations in Europe and Latin America.
* * * * * * *
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the
accompanying audited consolidated financial statements and notes. Forward-looking statements in this MD&A are not guarantees of future performance and
may involve risks and uncertainties that could cause actual results to differ materially from those projected. Refer to the "Forward-Looking Statements"
section of this MD&A and Item 1A. "Risk Factors" for a discussion of these risks and uncertainties.
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Non-GAAP Measures Our non-GAAP measures include earnings before interest and taxes (EBIT)-adjusted presented net of noncontrolling interests, EPSdiluted-adjusted, return on invested capital-adjusted (ROIC-adjusted) and adjusted automotive free cash flow. Our calculation of these non-GAAP measures
may not be comparable to similarly titled measures of other companies due to potential differences between companies in the method of calculation. As a
result, the use of these non-GAAP measures has limitations and should not be considered superior to, in isolation from, or as a substitute for, related U.S.
GAAP measures.
These non-GAAP measures allow management and investors to view operating trends, perform analytical comparisons and benchmark performance
between periods and among geographic regions to understand operating performance without regard to items we do not consider a component of our core
operating performance. Furthermore, these non-GAAP measures allow investors the opportunity to measure and monitor our performance against our
externally communicated targets and evaluate the investment decisions being made by management to improve ROIC-adjusted. Management uses these
measures in its financial, investment and operational decision-making processes, for internal reporting and as part of its forecasting and budgeting processes.
Further, our Board of Directors uses these and other measures as key metrics to determine management performance under our performance-based
compensation plans. For these reasons we believe these non-GAAP measures are useful for our investors.
EBIT-adjusted is used by management and can be used by investors to review our consolidated operating results because it excludes automotive interest
income, automotive interest expense and income taxes as well as certain additional adjustments that are not considered part of our core operations. Examples
of adjustments to EBIT include but are not limited to impairment charges related to goodwill; impairment charges on long-lived assets and other exit costs
resulting from strategic shifts in our operations or discrete market and business conditions; costs arising from the ignition switch recall and related legal
matters; and certain currency devaluations associated with hyperinflationary economies. For EBIT-adjusted and our other non-GAAP measures, once we have
made an adjustment in the current period for an item, we will also adjust the related non-GAAP measure in any future periods in which there is an impact from
the item.
EPS-diluted-adjusted is used by management and can be used by investors to review our consolidated diluted earnings per share results on a consistent
basis. EPS-diluted-adjusted is calculated as net income attributable to common stockholders-diluted less certain adjustments noted above for EBIT-adjusted
and gains or losses on the extinguishment of debt obligations on an after-tax basis as well as redemptions of preferred stock and certain income tax
adjustments divided by weighted-average common shares outstanding-diluted. Examples of income tax adjustments include the establishment or reversal of
significant deferred tax asset valuation allowances.
ROIC-adjusted is used by management and can be used by investors to review our investment and capital allocation decisions. We define ROIC-adjusted
as EBIT-adjusted for the trailing four quarters divided by average net assets, which is considered to be the average equity balances adjusted for average
automotive debt and interest liabilities, exclusive of capital leases; average automotive net pension and other postretirement benefits (OPEB) liabilities; and
average automotive net income tax assets during the same period.
Adjusted automotive free cash flow is used by management and can be used by investors to review the liquidity of our automotive operations and to
measure and monitor our performance against our capital allocation program and evaluate our automotive liquidity against the substantial cash requirements
of our automotive operations. We measure adjusted automotive free cash flow as automotive cash flow from operations less capital expenditures adjusted for
management actions, primarily related to strengthening our balance sheet, such as prepayments of debt and discretionary contributions to employee benefit
plans. Refer to the “Liquidity and Capital Resources” section of this MD&A for our reconciliation of Net Automotive cash provided by (used in) operating
activities under U.S. GAAP to this non-GAAP measure.
The following table reconciles Net income attributable to stockholders under U.S. GAAP to EBIT-adjusted used in the calculation of ROIC-adjusted:
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Years Ended December 31,
2016
Net income attributable to stockholders
Income tax expense (benefit)
Gain on extinguishment of debt
Automotive interest expense
Automotive interest income
Adjustments
Ignition switch recall and related legal matters(a)
Recall campaign catch-up adjustment(b)
Thailand asset impairments(c)
Venezuela currency devaluation and asset impairment(d)
Russia exit costs and asset impairment(e)
Goodwill impairment
Other
$
2015
9,427
2,416
—
572
(185)
$
300
—
—
—
—
—
—
Total adjustments
12,530
$
3,949
228
(202)
403
(211)
1,785
—
297
720
438
—
(41)
300
$
EBIT-...