item 14 exhibits financial statement schedules reports form 8k 1 financial statements see part ii 2 financial statement schedules page general motors corporation subsidiaries independent auditors report ii3 schedule vproperty years ended december 31 1993 1992 1991 iv5 schedule viaccumulated depreciation real estate plants equipment years ended december 31 1993 1992 1991 iv7 schedule viiiallowances years ended december 31 1993 1992 1991 iv8 schedule xsupplementary income statement information years ended december 31 1993 1992 1991 iv9 financial statements financial statement schedules omitted financial statements associates omitted conditions requiring filing stated paragraph rule 309 regulation sx met financial statements financial statement schedules omitted 1 absence conditions required 2 information called shown financial statements notes thereto 3 exhibits including incorporated reference exhibit page 3a restated certificate incorporation amended november 2 1992 incorporated reference form se general motors corporation dated march 22 1993 amendment article fourth certificate incorporation division iii preference stock reason certificates designations filed secretary state delaware september 14 1987 certificate decrease filed secretary state delaware september 29 1987 pertaining six series preference stock contributed general motors pension trusts incorporated reference exhibit 19 quarterly report form 10q general motors corporation quarter ended june 30 1990 form se general motors corporation dated august 6 1990 amended certificate designations filed secretary state delaware june 28 1991 pertaining series conversion preference stock incorporated reference exhibit 4a form s8 registration statement 33 43744 form se general motors corporation dated november 1 1991 amended certificate designations filed secretary state delaware december 9 1991 iv1 general motors corporation subsidiaries pertaining series b 918 preference stock incorporated reference exhibit 4a form s3 registration statement 33 45216 form se general motors corporation dated january 27 1992 amended certificate designations filed secretary state delaware february 14 1992 pertaining series c convertible preference stock incorporated reference exhibit 3a annual report form 10k general motors corporation year ended december 31 1991 form se general motors corporation dated march 20 1992 amended certificate designations filed secretary state delaware july 15 1992 pertaining series 792 preference stock incorporated reference exhibit 3a2 quarterly report form 10q general motors corporation quarter ended june 30 1992 form se general motors corporation dated august 10 1992 amended certificate designations filed secretary state delaware december 15 1992 pertaining series g 912 preference stock incorporated reference exhibit 4a form s3 registration statement 3349309 form se general motors corporation dated january 25 1993 na b bylaws amended december 6 1993 incorporated reference exhibit 3ii current report form 8k general motors corporation dated december 6 1993 na 4a form indenture relating 500000000 818 debentures due april 15 2016 dated april 1 1986 general motors corporation citibank na trustee incorporated reference exhibit 4 amendment 1 form s3 registration statement 334452 resolutions adopted special committee april 15 1986 incorporated reference exhibit 4a current report form 8k general motors corporation dated april 24 1986 na b form indenture relating 700000000 958 notes due december 1 2000 1400000000 mediumterm note program dated november 15 1990 general motors corporation citibank na trustee incorporated reference exhibit 4a form s3 registration statement 3337737 na c instruments defining rights holders nonregistered debt registrant omitted exhibit index amount debt authorized instrument exceed 10 total assets registrant subsidiaries registrant agrees furnish copy instrument commission upon request na 10a general motors hourlyrate employes pension plan incorporated reference exhibit 19b quarterly report form 10q general motors corporation quarter ended june 30 1988 form se general motors corporation dated august 8 1988 na iv2 general motors corporation subsidiaries b general motors retirement program salaried employes incorporated reference exhibit 19c quarterly report form 10q general motors corporation quarter ended june 30 1985 form se general motors corporation filed august 5 1985 amendments program incorporated reference exhibit 19c quarterly report form 10q general motors corporation quarter ended june 30 1988 form se general motors corporation dated august 8 1988 na cgeneral motors amended 1987 stock incentive plan incorporated reference exhibit proxy statement general motors corporation dated april 13 1992 na dgeneral motors performance achievement plan incorporated reference exhibit proxy statement general motors corporation dated april 16 1982 na egeneral motors 1987 performance achievement plan incorporated reference exhibit proxy statement general motors corporation dated april 17 1987 na fgeneral motors 1992 performance achievement plan incorporated reference exhibit proxy statement general motors corporation dated april 13 1992 na 11 computation earnings loss per share attributable common stocks three years ended december 31 1993 iv13 12 computation ratios earnings fixed charges three years ended december 31 1993 iv16 21 subsidiaries registrant december 31 1993 iv17 23 consents independent auditors iv24 iv26 99a electronic data systems corporation subsidiaries consolidated financial statements managements discussion analysis iv25 b gm hughes electronics corporation subsidiaries consolidated financial statements managements discussion analysis iv52 c class h stock agreement howard hughes medical institute general motors corporation incorporated reference form se general motors corporation dated march 7 1989 na required filed exhibit pursuant item 14c form 10k b reports form 8k one report form 8k dated november 16 1993 filed quarter ended december 31 1993 reporting matters item 5 events iv3 general motors corporation subsidiaries financial statement schedules iv4 iv5 iv6 iv7 iv8 general motors corporation schedule xsupplementary subsidiaries operating statement information charged principally costs item expenses years ended december 31 1993 1992 1991 dollars millions maintenance repairs including cost replacements special tools reasons changes products 57312 55999 57775 taxes payroll united states foreign income taxes united states foreign excise taxes 2716 2297 1429 state local ad valorem taxes state local taxes 7985 6355 7728 total 10701 8652 9157 advertising costs 25471 24141 23231 iv9 general motors corporation signatures subsidiaries pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized general motors corporation registrant date march 7 1994 sjohn f smith jr john f smith jr chief executive officer president director pursuant requirements securities exchange act 1934 report signed 7th day march 1994 following persons behalf registrant capacities indicated signature title sjohn g smale chairman board directors john g smale sjohn f smith jr chief executive officer president john f smith jr director swilliam e hoglund executive vice president william e hoglund director sg richard wagoner jr executive vice president g richard wagoner jr chief financial officer principal sleon j krain vice president financial leon j krain group executive officers sheidi kunz vice president heidi kunz treasurer swallace w creek comptroller principal wallace w creek accounting officers sdavid j fitzpatrick chief accounting officer david j fitzpatrick iv10 general motors corporation subsidiaries sanne l armstrong director anne l armstrong sjohn h bryan director john h bryan sthomas e everhart director thomas e everhart scharles fisher iii director charles fisher iii sj willard marriott jr director j willard marriott jr sann mclaughlin director ann mclaughlin spaul h oneill director paul h oneill sedmund pratt jr director edmund pratt jr slouis w sullivan director louis w sullivan sdennis weatherstone director dennis weatherstone sthomas h wyman director thomas h wyman iv11 general motors corporation subsidiaries exhibits iv12 item 14 exhibits financial statement schedule reports form 8k continued iv2 general motors corporation subsidiaries part iv continued item 14 exhibits financial statement schedule reports form 8k concluded registrant hereby undertakes furnish supplementally copy omitted schedule attachment securities exchange commission upon request required filed exhibit pursuant item 14c form 10k b reports form 8k five reports form 8k dated october 6 1997 october 13 1997 november 21 1997 november 24 1997 december 17 1997 filed quarter ended december 31 1997 reporting matters item 5 events iv3 general motors corporation subsidiaries schedule ii allowances notes primarily reflects recovery accounts previously writtenoff b accounts written c represents net change inventory allowances reference made notes consolidated financial statements iv4 general motors corporation subsidiaries signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned hereunto duly authorized general motors corporation registrant date march 2 1998 sjohn f smith jr john f smith jr chairman board directors chief executive officer president pursuant requirements securities exchange act 1934 report signed 2nd day march 1998 following persons behalf registrant capacities indicated iv5 general motors corporation subsidiaries signatures concluded iv6 item 14 exhibits financial statement schedule reports form 8k page number 1 financial statements see part ii 2 financial statement schedule ii allowances years ended december 31 1999 1998 1997 iv3 3 exhibits including incorporated reference exhibit number 3a restated certificate incorporation amended filed exhibit 3i current report form 8k general motors corporation dated june 24 1999 amendment article fourth certificate incorporation division iii preference stock reason certificates designations filed secretary state delaware september 14 1987 certificate decrease filed secretary state delaware september 29 1987 pertaining six series preference stock contributed general motors pension trusts incorporated reference exhibit 19 quarterly report form 10q general motors corporation quarter ended june 30 1990 form se general motors corporation dated august 6 1990 amended certificate designations filed secretary state delaware june 28 1991 pertaining series conversion preference stock incorporated reference exhibit 4a form s8 registration statement 3343744 form se general motors corporation dated november 1 1991 amended certificate designations filed secretary state delaware december 9 1991 pertaining series b 918 preference stock incorporated reference exhibit 4a form s3 registration statement 3345216 form se general motors corporation dated january 27 1992 amended certificate designations filed secretary state delaware february 14 1992 pertaining series c convertible preference stock incorporated reference exhibit 3a annual report form 10k general motors corporation year ended december 31 1991 form se general motors corporation dated march 20 1992 amended certificate designations filed secretary state delaware july 15 1992 pertaining series 792 preference stock incorporated reference exhibit 3a2 quarterly report form 10q general motors corporation quarter ended june 30 1992 form se general motors corporation dated august 10 1992 amended certificate designations filed secretary state delaware december 15 1992 pertaining series g 912 preference stock incorporated reference exhibit 4a form s3 registration statement 3349309 form se general motors corporation dated january 25 1993 amended certificate designations filed secretary state delaware june 24 1999 pertaining series h 625 automatically convertible preference stock incorporated reference exhibit 4a form s8 registration statement 33331846 form se general motors corporation dated march 6 2000 na 3b bylaws amended filed exhibit 3ii current report form 8k general motors corporation dated august 2 1999 na 4a form indenture relating 500000000 818 debentures due april 15 2016 dated april 1 1986 general motors corporation citibank na trustee incorporated reference exhibit 4 amendment 1 form s3 registration statement 334452 resolutions adopted special committee april 15 1986 incorporated reference exhibit 4a current report form 8k general motors corporation dated april 24 1986 na 4b form indenture relating 700000000 958 notes due december 1 2000 1400000000 mediumterm note program dated november 151990 general motors corporation citibank na trustee incorporated reference exhibit 4a form s3 registration statement 3337737 na iv1 general motors corporation subsidiaries part iv continued item 14 exhibits financial statement schedule reports form 8k continued exhibit page number 4c form indenture relating 377377000 775 debentures due march 15 2036 dated december 7 1995 general motors corporation citibank na trustee filed exhibit 4a amendment 1 form s3 registration statement 3364229 na 4d instruments defining rights holders nonregistered debt registrant omitted exhibit index amount debt authorized instrument exceed 10 total assets registrant subsidiaries registrant agrees furnish copy instrument commission upon request na 4ei amended restated declaration trust general motors capital trust incorporated reference exhibit 4ci current report form 8k general motors corporation dated july 1 1997 na 4eiiamended restated declaration trust general motors capital trust g incorporated reference exhibit 4cii current report form 8k general motors corporation dated july 1 1997 na 4fi indenture general motors corporation wilmington trust company incorporated reference exhibit 4di current report form 8k general motors corporation dated july 1 1997 na 4fiifirst supplemental indenture general motors corporation wilmington trust company respect series junior subordinated debentures incorporated reference exhibit 4dii current report form 8k general motors corporation dated july 1 1997 na 4fiiisecond supplemental indenture general motors corporation wilmington trust company respect series g junior subordinated debentures incorporated reference exhibit 4diii current report form 8k general motors corporation dated july 1 1997 na 4gi series preferred securities guarantee agreement general motors capital trust incorporated reference exhibit 4gi current report form 8k general motors corporation dated july 1 1997 na 4giiseries g preferred securities guarantee agreement general motors capital trust g incorporated reference exhibit 4gii current report form 8k general motors corporation dated july 1 1997 na 10a general motors amended 1987 stock incentive plan incorporated reference exhibit proxy statement general motors corporation dated april 131992 na 10b general motors performance achievement plan incorporated reference exhibit proxy statement general motors corporation dated april 16 1982 na 10c general motors 1987 performance achievement plan incorporated reference exhibit proxy statement general motors corporation dated april 171987 na 10d general motors 1992 performance achievement plan incorporated reference exhibit proxy statement general motors corporation dated april 131992 na 12 computation ratios earnings fixed charges years ended december 31 1999 1998 1997 iv6 21 subsidiaries registrant december 31 1999 iv7 23 consent independent auditors iv13 99 hughes electronics corporation financial statements managements discussion analysis financial condition results operations iv14 27 financial data schedule sec information na registrant hereby undertakes furnish supplementally copy omitted schedule attachment securities exchange commission upon request required filed exhibit pursuant item 14c form 10k b reports form 8k three reports form 8k dated october 4 1999 october 13 1999 december 10 1999 filed quarter ended december 31 1999 reporting matters item 5 events subsequently one report form 8k dated august 2 1999 filed january 14 2000 reporting matters item 5 events iv2 notes primarily reflects recovery accounts previously writtenoff b accounts written c represents net change inventory allowances reference made notes consolidated financial statements iv3 general motors corporation subsidiaries signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned hereunto duly authorized general motors corporation registrant date march 6 2000 sjohn f smith jr john f smith jr chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report signed 6th day march 2000 following persons behalf registrant capacities indicated signature title sjohn f smith jr chairman board directors chief executive officer john f smith jr sharry j pearce vice chairman board directors harry j pearce sg richard wagoner jr president chief operating officer g richard wagoner jr sj michael losh executive vice president chief financial officer j michael losh principal financial seric feldstein vice president officers treasurer eric feldstein swallace w creek comptroller wallace w creek principal accounting speter r bible chief accounting officer officers peter r bible iv4 general motors corporation subsidiaries signatures concluded signature title spercy barnevik director percy barnevik sjohn h bryan director john h bryan sthomas e everhart director thomas e everhart scharles fisher iii director charles fisher iii sgeorge c fisher director george c fisher snobuyuki idei director nobuyuki idei skaren katen director karen katen sj willard marriott jr director j willard marriott jr sann mclaughlin director ann mclaughlin seckhard pfieffer director eckhard pfeiffer sjohn g smale director john g smale slouis w sullivan director louis w sullivan sdennis weatherstone director dennis weatherstone iv5 item 14 exhibits financial statement schedule reports form 8k page number 1 financial statements see part ii 2 financial statement schedule ii allowances years ended december 31 2001 2000 1999 iv3 3 exhibits including incorporated reference exhibit number 3a restated certificate incorporation amended filed exhibit 3i current report form 8k general motors corporation dated june 6 2000 amendment article four certificate incorporation division iii preference stock reason certificates designations filed secretary state delaware september 14 1987 certificate decrease filed secretary state delaware september 29 1987 pertaining six series preference stock contributed general motors pension trusts incorporated reference exhibit 19 quarterly report form 10q general motors corporation quarter ended june 30 1990 form se general motors corporation dated august 6 1990 amended certificate designations filed secretary state delaware june 28 1991 pertaining series conversion preference stock incorporated reference exhibit 4a form s8 registration statement 3343744 form se general motors corporation dated november 1 1991 amended certificate designations filed secretary state delaware december 9 1991 pertaining series b 918 preference stock incorporated reference exhibit 4a form s3 registration statement 3345216 form se general motors corporation dated january 27 1992 amended certificate designations filed secretary state delaware february 14 1992 pertaining series c convertible preference stock incorporated reference exhibit 3a annual report form 10k general motors corporation year ended december 31 1991 form se general motors corporation dated march 20 1992 amended certificate designations filed secretary state delaware july 15 1992 pertaining series 792 preference stock incorporated reference exhibit 3a2 quarterly report form 10q general motors corporation quarter ended june 30 1992 form se general motors corporation dated august 10 1992 amended certificate designations filed secretary state delaware december 15 1992 pertaining series g 912 preference stock incorporated reference exhibit 4a form s3 registration statement 3349309 form se general motors corporation dated january 25 1993 amended certificate designations filed secretary state delaware june 24 1999 pertaining series h 625 automatically convertible preference stock incorporated reference exhibit 4a form s8 registration statement 33331846 form se general motors corporation dated march 6 2000 na 3b bylaws general motors corporation amended incorporated reference exhibit 3ii current report form 8k general motors corporation dated march 2 1998 amended incorporated reference exhibit 3ii current reports form 8k general motors corporation dated june 24 1999 august 2 1999 march 6 2000 june 6 2000 october 3 2000 june 5 2001 december 4 2001 na 4a form indenture relating 500000000 818 debentures due april 15 2016 dated april 1 1986 general motors corporation citibank na trustee incorporated reference exhibit 4 amendment 1 form s3 registration statement 334452 resolutions adopted special committee april 15 1986 incorporated reference exhibit 4a current report form 8k general motors corporation dated april 24 1986 na iv1 general motors corporation subsidiaries part iv continued item 14 exhibits financial statement schedule reports form 8k continued exhibit page number 4c form indenture relating 377377000 775 debentures due march 15 2036 dated december 7 1995 general motors corporation citibank na trustee filed exhibit 4a amendment 1 form s3 registration statement 3364229 na 4d instruments defining rights holders nonregistered debt registrant omitted exhibit index amount debt authorized instrument exceed 10 total assets registrant subsidiaries registrant agrees furnish copy instrument commission upon request na 4fiindenture general motors corporation wilmington trust company incorporated reference exhibit 4di current report form 8k general motors corporation dated july 1 1997 na 4fiifirst supplemental indenture dated march 4 2002 general motors corporation citibank na respect 450 series convertible senior debentures due 2032 525 series b convertible senior debentures due 2032 incorporated reference exhibit 2 current report form 8k general motors corporation dated march 6 2002 na 10ageneral motors 1997 annual incentive plan incorporated reference exhibit b proxy statement general motors corporation dated april 161997 na 10bgeneral motors 1997 stock incentive plan incorporated reference exhibit b proxy statement general motors corporation dated april 16 1997 na 10cgeneral motors 1997 performance achievement plan incorporated reference exhibit b proxy statement general motors corporation dated april 16 1997 na 10dcompensation plan nonemployee directors incorporated reference exhibit proxy statement general motors corporation dated april 16 1997 na 10e employment contract john devine dated december 12 2000 incorporated reference exhibit 10e annual report form 10k year ended december 31 2000 na 10f employment contract robert lutz dated september 1 2001 iv6 12 computation ratios earnings fixed charges years ended december 31 2001 2000 1999 iv9 21 subsidiaries registrant december 31 2001 iv10 23 consent independent auditors iv17 99 hughes electronics corporation financial statements managements discussion analysis financial condition results operations iv18 registrant hereby undertakes furnish supplementally copy omitted schedule attachment securities exchange commission upon request required filed exhibit pursuant item 14c form 10k b reports form 8k fourteen reports form 8k filed october 2 2001 october 3 2001 october 15 2001 october 18 2001 october 18 2001 october 19 2001 october 24 2001 2 october 31 2001 november 1 2001 november 13 2001 november 14 2001 december 3 2001 december 6 2001 quarter ended december 31 2001 reporting matters item 5 events reporting certain agreements item 7 financial statements pro forma financial information exhibits reports submitted securities exchange commission item 9 regulation fd disclosure pursuant general instruction b form 8k reports submitted item 9 deemed filed purpose section 18 securities exchange act 1934 subject liabilities section incorporating incorporate reference reports filing securities act exchange act iv2 notesa represents additional unearned income newly originated finance receivables b represents income recognized c primarily reflects recovery accounts previously writtenoff accounts written e represents net change inventory allowances reference made notes gm consolidated financial statements iv3 general motors corporation subsidiaries signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned hereunto duly authorized general motors corporation registrant date march 4 2002 sjohn f smith jr john f smith jr chairman board directors pursuant requirements securities exchange act 1934 report signed 4th day march 2002 following persons behalf registrant capacities indicated signature title sjohn f smith jr chairman board directors john f smith jr sg richard wagoner jr president chief executive officer director g richard wagoner jr sjohn devine vice chairman chief financial officer john devine principal financial officers seric feldstein vice president treasurer eric feldstein swallace w creek controller wallace w creek principal accounting officers speter r bible assistant controller chief accounting officer peter r bible iv4 general motors corporation subsidiaries signatures concluded signature title spercy barnevik director percy barnevik sjohn h bryan director john h bryan sarmando codina director armando codina sthomas e everhart director thomas e everhart sgeorge c fisher director george c fisher director nobuyuki idei skaren katen director karen katen salan g lafley director alan g lafley sj willard marriott jr director j willard marriott jr se stanley oneal director e stanley oneal seckhard pfeiffer director eckhard pfeiffer slloyd ward director lloyd ward iv5 item 14 principal accounting fees services audit committee retained deloitte touche llp audit consolidated financial statements effectiveness internal controls year ended december 31 2008 also retained deloitte touche llp certain affiliates collectively “deloitte” well accounting consulting firms provide various services 2008 services performed deloitte 2008 preapproved accordance preapproval policy procedures first adopted audit committee august 5 2002 meeting revised recently policy requires first meeting calendar year audit committee presented consideration description auditrelated tax services expected performed deloitte fiscal year requests services excess 1 million contemplated approved first meeting must thereafter submitted audit committee chair audit committee urgent case specific preapproval requests services less 1 million individually must preapproved audit committee chair reported full audit committee next regularly scheduled meeting independent auditors selected following year present proposed annual audit services related fees audit committee generally may approval audityear basis audit committee determined services provided deloitte 2008 compatible maintaining independence principal accountants general motors corporation subsidiaries following table summarizes deloitte fees billed expected billed connection 2008 services comparison purposes actual billings 2007 services also displayed audit fees 38 million audit annual consolidated financial statements including reviews interim financial statements contained quarterly reports form 10q preparation statutory reports addition included category fees services generally deloitte reasonably provide example comfort letters statutory audits attestation services consents assistance review documents filed sec auditrelated fees 11 million assurance related services traditionally performed independent auditor specifically services include employee benefit plan audits due diligence related mergers acquisitions accounting consultations audits connection proposed acquisitions internal control consultations attestation services required statute regulation consultation concerning financial accounting reporting standards tax fees 4 million includes fees tax compliance tax planning tax advice tax compliance involves preparation original amended tax returns claims refund tax paymentplanning services tax planning tax advice encompass diverse range services including assistance tax audits appeals tax advice related mergers acquisitions employee benefit plans requests rulings technical advice taxing authorities fees 1 million services related project management process improvements assistance information technology system projects systems associated financial statements general motors corporation subsidiaries part iv item 15 item 14 exhibits financial statement schedule reports form 8k page number 1 financial statements see part ii 2 financial statement schedule ii allowances years ended december 31 2000 1999 1998 iv3 3 exhibits including incorporated reference exhibit number 3a restated certificate incorporation amended filed exhibit 3i current report form 8k general motors corporation dated june 6 2000 amendment article fourth certificate incorporation division iii preference stock reason certificates designations filed secretary state delaware september 14 1987 certificate decrease filed secretary state delaware september 29 1987 pertaining six series preference stock contributed general motors pension trusts incorporated reference exhibit 19 quarterly report form 10q general motors corporation quarter ended june 30 1990 form se general motors corporation dated august 6 1990 amended certificate designations filed secretary state delaware june 28 1991 pertaining series conversion preference stock incorporated reference exhibit 4a form s8 registration statement 3343744 form se general motors corporation dated november 1 1991 amended certificate designations filed secretary state delaware december 9 1991 pertaining series b 918 preference stock incorporated reference exhibit 4a form s3 registration statement 3345216 form se general motors corporation dated january 27 1992 amended certificate designations filed secretary state delaware february 14 1992 pertaining series c convertible preference stock incorporated reference exhibit 3a annual report form 10k general motors corporation year ended december 31 1991 form se general motors corporation dated march 20 1992 amended certificate designations filed secretary state delaware july 15 1992 pertaining series 792 preference stock incorporated reference exhibit 3a2 quarterly report form 10q general motors corporation quarter ended june 30 1992 form se general motors corporation dated august 10 1992 amended certificate designations filed secretary state delaware december 15 1992 pertaining series g 912 preference stock incorporated reference exhibit 4a form s3 registration statement 3349309 form se general motors corporation dated january 25 1993 amended certificate designations filed secretary state delaware june 24 1999 pertaining series h 625 automatically convertible preference stock incorporated reference exhibit 4a form s8 registration statement 33331846 form se general motors corporation dated march 6 2000 na 3b bylaws general motors corporation amended incorporated reference exhibit 3ii current report form 8k general motors corporation dated march 2 1998 amended incorporated reference exhibit 3ii current reports form 8k general motors corporation dated june 24 1999 august 2 1999 march 6 2000 june 6 2000 october 3 2000 na 4a form indenture relating 500000000 818 debentures due april 15 2016 dated april 1 1986 general motors corporation citibank na trustee incorporated reference exhibit 4 amendment 1 form s3 registration statement 334452 resolutions adopted special committee april 15 1986 incorporated reference exhibit 4a current report form 8k general motors corporation dated april 24 1986 na iv1 general motors corporation subsidiaries part iv continued item 14 exhibits financial statement schedule reports form 8k continued exhibit page number 4b form indenture relating 700000000 958 notes due december 1 2000 1400000000 mediumterm note program dated november 15 1990 general motors corporation citibank na trusteeincorporated reference exhibit 4a form s3 registration statement 3337737 na 4c form indenture relating 377377000 775 debentures due march 15 2036 dated december 7 1995 general motors corporation citibank na trustee filed exhibit 4a amendment 1 form s3 registration statement 3364229 na 4d instruments defining rights holders nonregistered debt registrant omitted exhibit index amount debt authorized instrument exceed 10 total assets registrant subsidiaries registrant agrees furnish copy instrument commission upon request na 4eiiamended restated declaration trust general motors capital trust g incorporated reference exhibit 4cii current report form 8k general motors corporation dated july 1 1997 na 4fi indenture general motors corporation wilmington trust company incorporated reference exhibit 4di current report form 8k general motors corporation dated july 1 1997 na 4fiiisecond supplemental indenture general motors corporation wilmington trust company respect series g junior subordinated debentures incorporated reference exhibit 4diii current report form 8k general motors corporation dated july 1 1997 na 4giiseries g preferred securities guarantee agreement general motors capital trust g incorporated reference exhibit 4gii current report form 8k general motors corporation dated july 1 1997 na 10a general motors 1997 annual incentive plan incorporated reference exhibit b proxy statement general motors corporation dated april 161997 na 10b general motors 1997 stock incentive plan incorporated reference exhibit b proxy statement general motors corporation dated april 16 1997 na 10c general motors 1997 performance achievement plan incorporated reference exhibit b proxy statement general motors corporation dated april 16 1997 na 10d nonemployee director longterm stock incentive plan incorporated reference exhibit proxy statement general motors corporation dated april 16 1997 na 10e employment contract john devine dated december 12 2000 iv6 12 computation ratios earnings fixed charges years ended december 31 2000 1999 1998 iv11 21 subsidiaries registrant december 31 2000 iv12 23 consent independent auditors iv18 99 hughes electronics corporation financial statements managements discussion analysis financial condition results operations iv19 registrant hereby undertakes furnish supplementally copy omitted schedule attachment securities exchange commission upon request required filed exhibit pursuant item 14c form 10k b reports form 8k nine reports form 8k dated september 28 2000 filed october 2 2000 october 3 2000 november 1 2000 2 november 20 2000 december 1 2000 december 7 2000 december 12 2000 december 13 2000 filed quarter ended december 31 2000 reporting matters item 5 events reporting certain agreements item 7 financial statements pro forma financial information exhibits reporting matters item 9 regulation fd disclosure subsequently one report form 8k dated october 3 2000 filed january 17 2001 reporting matters item 5 events iv2 notesa primarily reflects recovery accounts previously writtenoff b accounts written c represents net change inventory allowances reference made notes gm consolidated financial statements iv3 general motors corporation subsidiaries signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned hereunto duly authorized general motors corporation registrant date march 5 2001 sjohn f smith jr john f smith jr chairman board directors pursuant requirements securities exchange act 1934 report signed 5th day march 2001 following persons behalf registrant capacities indicated signature title sjohn f smith jr chairman board directors john f smith jr sharry j pearce vice chairman board directors harry j pearce sg richard wagoner jr president chief executive officer g richard wagoner jr sjohn devine vice chairman chief financial officer john devine principal financial seric feldstein vice president treasurerofficers eric feldstein swallace w creek controller wallace w creek principal accounting speter r bible assistant controller officers chief accounting officer peter r bible iv4 general motors corporation subsidiaries signatures concluded signature title spercy barnevik director percy barnevik sjohn h bryan director john h bryan sthomas e everhart director thomas e everhart sgeorge c fisher director george c fisher snobuyuki idei director nobuyuki idei skaren katen director karen katen sj willard marriott jr director j willard marriott jr seckhard pfeiffer director eckhard pfeiffer slloyd ward director lloyd ward sdennis weatherstone director dennis weatherstone iv5 item 14 principal accounting fees services fees professional services provided plante moran pllc guc trust’s independent auditors years ended march 31 2014 2013 following categories including related expenses follows 1 consists fees audit guc trust’s annual financial statements review guc trust’s form 10k review quarterly financial statements included guc trust’s forms 10q review form 8k filings 2 consists fees consultation accounting financial reporting internal control matters 3 includes fees preparation guc trust’s federal income tax return fiscal years ended march 31 2013 2012 preparation mlc federal state income tax returns final tax year ended december 15 2012 assistance mlc tax compliance matters part iv item 15 item 14 controls procedures corporation maintains disclosure controls procedures designed ensure information required disclosed reports filed securities exchange act 1934 amended recorded processed summarized reported within specified time periods within 90 days prior date report corporations chief executive officer chief financial officer evaluated participation gms management effectiveness corporations disclosure controls procedures based evaluation disclosed significant deficiencies material weaknesses corporations chief executive officer chief financial officer concluded corporations disclosure controls procedures effective significant changes corporations internal controls factors could significantly affect internal controls subsequent evaluation iii1 part iv general motors corporation subsidiaries item 15 item 14 principal accounting fees services fees professional services provided plante moran pllc guc trust’s independent auditors years ended march 31 2020 2019 following categories including related expenses follows 1 consists fees audit guc trust’s annual financial statements review guc trust’s form 10k review quarterly financial statements included guc trust’s forms 10q review form 8k filings 2 includes fees preparation guc trust’s federal income tax returns fiscal years ended march 31 2019 2018 assistance mlc tax compliance matters part iv item 15 item 14 exhibits financial statement schedules reports form 8k iv1 two reports form 8k dated october 2 december 4 1995 filed quarter ended december 31 1995 reporting amendments bylaws required filed exhibit pursuant item 14c form 10k iv2 general motors corporation subsidiaries schedule ii allowances notes see analysis allowance financing losses note 4 financial statements b accounts written c obsolete parts written etc reference made notes consolidated financial statements iv3 signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned hereunto duly authorized general motors corporation registrant date march 4 1996 john f smith jr john f smith jr chairman board directors chief executive officer president pursuant requirements securities exchange act 1934 report signed 4th day march 1996 following persons behalf registrant capacities indicated signature title john f smith jr chairman board directors chief executive officer john f smith jr president harry j pearce vice chairman board directors harry j pearce j michael losh executive vice president chief financial officer j michael losh leon j krain vice president group executive leon j krain john finnegan vice president treasurer john finnegan wallace w creek comptroller wallace w creek james h humphrey chief accounting officer james h humphrey iv4 signatures concluded signature title anne l armstrong director anne l armstrong john h bryan director john h bryan thomas e everhart director thomas e everhart charles fisher iii director charles fisher iii j willard marriott jr director j willard marriott jr ann mclaughlin director ann mclaughlin edmund pratt jr director edmund pratt jr john g smale director john g smale louis w sullivan director louis w sullivan dennis weatherstone director dennis weatherstone thomas h wyman director thomas h wyman iv5 item 14 principal accounting fees services fees professional services provided plante moran pllc guc trust’s independent auditors years ended march 31 2018 2017 following categories including related expenses follows 1 consists fees audit guc trust’s annual financial statements review guc trust’s form 10k review quarterly financial statements included guc trust’s forms 10q review form 8k filings 2 includes fees preparation guc trust’s federal income tax returns fiscal years ended march 31 2017 2016 assistance mlc tax compliance matters part iv item 15 item 14 exhibits financial statement schedules reports form 8k iv1 b reports form 8k one report form 8k dated december 5 1994 filed quarter ended december 31 1994 reporting amendments bylaws item 7 financial statements pro forma financial information exhibits required filed exhibit pursuant item 14c form 10k iv2 general motors corporation subsidiaries schedule ii allowances notes see analysis allowance financing losses note 10 financial statements b accounts written c obsolete parts written etc reference made notes financial statements iv3 signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned hereunto duly authorized general motors corporation registrant date march 6 1995 john f smith jr john f smith jr chief executive officer president director pursuant requirements securities exchange act 1934 report signed 6th day march 1995 following persons behalf registrant capacities indicated iv4 signatures concluded iv5 item 14 exhibits financial statement schedule reports form 8k page number 1 financial statements see part ii 2 financial statement schedule ii allowances years ended december 31 1998 1997 1996 iv3 3 exhibits including incorporated reference exhibit number 3a restated certificate incorporation amended filed exhibit 3i current report form 8k general motors corporation dated june 8 1998 amendment article fourth certificate incorporation division iii preference stock reason certificates designations filed secretary state delaware september 14 1987 certificate decrease filed secretary state delaware september 29 1987 pertaining six series preference stock contributed general motors pension trusts incorporated reference exhibit 19 quarterly report form 10q general motors corporation quarter ended june 30 1990 form se general motors corporation dated august 6 1990 amended certificate designations filed secretary state delaware june 28 1991 pertaining series conversion preference stock incorporated reference exhibit 4a form s8 registration statement 3343744 form se general motors corporation dated november 1 1991 amended certificate designations filed secretary state delaware december 9 1991 pertaining series b 918 preference stock incorporated reference exhibit 4a form s3 registration statement 3345216 form se general motors corporation dated january 27 1992 amended certificate designations filed secretary state delaware february 14 1992 pertaining series c convertible preference stock incorporated reference exhibit 3a annual report form 10k general motors corporation year ended december 31 1991 form se general motors corporation dated march 20 1992 amended certificate designations filed secretary state delaware july 15 1992 pertaining series 792 preference stock incorporated reference exhibit 3a2 quarterly report form 10q general motors corporation quarter ended june 30 1992 form se general motors corporation dated august 10 1992 amended certificate designations filed secretary state delaware december 15 1992 pertaining series g 912 preference stock incorporated reference exhibit 4a form s3 registration statement 3349309 form se general motors corporation dated january 25 1993 na 3b bylaws amended filed exhibit 3ii current report form 8k general motors corporation dated march 2 1998 na 4a form indenture relating 500000000 818 debentures due april 15 2016 dated april 1 1986 general motors corporation citibank na trustee incorporated reference exhibit 4 amendment 1 form s3 registration statement 334452 resolutions adopted special committee april 15 1986 incorporated reference exhibit 4a current report form 8k general motors corporation dated april 24 1986 na 4b form indenture relating 700000000 958 notes due december 1 2000 1400000000 mediumterm note program dated november 15 1990 general motors corporation citibank na trustee incorporated reference exhibit 4a form s3 registration statement 3337737 na 4c form indenture relating 377377000 775 debentures due march 15 2036 dated december 7 1995 general motors corporation citibank na trustee filed exhibit 4a amendment 1 form s3 registration statement 3364229 na iv1 general motors corporation subsidiaries part iv continued item 14 exhibits financial statement schedule reports form 8k continued exhibit page number 4d instruments defining rights holders nonregistered debt registrant omitted exhibit index amount debt authorized instrument exceed 10 total assets registrant subsidiaries registrant agrees furnish copy instrument commission upon request na 4ei amended restated declaration trust general motors capital trust incorporated reference exhibit 4ci current report form 8k general motors corporation dated july 1 1997 na 4eii amended restated declaration trust general motors capital trust g incorporated reference exhibit 4cii current report form 8k general motors corporation dated july 1 1997 na 4fi indenture general motors corporation wilmington trust company incorporated reference exhibit 4di current report form 8k general motors corporation dated july 1 1997 na 4fii first supplemental indenture general motors corporation wilmington trust company respect series junior subordinated debentures incorporated reference exhibit 4dii current report form 8k general motors corporation dated july 1 1997 na 4fiiisecond supplemental indenture general motors corporation wilmington trust company respect series g junior subordinated debentures incorporated reference exhibit 4diii current report form 8k general motors corporation dated july 1 1997 na 4gi series preferred securities guarantee agreement general motors capital trust incorporated reference exhibit 4gi current report form 8k general motors corporation dated july 1 1997 na 4gii series g preferred securities guarantee agreement general motors capital trust g incorporated reference exhibit 4gii current report form 8k general motors corporation dated july 1 1997 na 10a general motors amended 1987 stock incentive plan incorporated reference exhibit proxy statement general motors corporation dated april 131992 na 10b general motors performance achievement plan incorporated reference exhibit proxy statement general motors corporation dated april 16 1982 na 10c general motors 1987 performance achievement plan incorporated reference exhibit proxy statement general motors corporation dated april 171987 na 10d general motors 1992 performance achievement plan incorporated reference exhibit proxy statement general motors corporation dated april 131992 na 12 computation ratios earnings fixed charges years ended december 31 1998 1997 1996 iv6 21 subsidiaries registrant december 31 1998 iv7 23 consent independent auditors iv14 99 hughes electronics corporation subsidiaries consolidated financial statements managements discussion analysis iv15 27 financial data schedule sec information na registrant hereby undertakes furnish supplementally copy omitted schedule attachment securities exchange commission upon request required filed exhibit pursuant item 14c form 10k b reports form 8k five reports form 8k dated october 5 1998 october 6 1998 october 13 1998 november 16 1998 december 11 1998 filed quarter ended december 31 1998 reporting matters item 5 events iv2 notesa primarily reflects recovery accounts previously writtenoff b accounts written c represents net change inventory allowances reference made notes consolidated financial statements iv3 general motors corporation subsidiaries signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned hereunto duly authorized general motors corporation registrant date march 1 1999 sjohn f smith jr john f smith jr chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report signed 1st day march 1999 following persons behalf registrant capacities indicated signature title sjohn f smith jr chairman board directors chief executive officer john f smith jr sharry j pearce vice chairman board directors harry j pearce sg richard wagoner jr president chief operating officer director g richard wagoner jr sj michael losh executive vice president chief financial officer j michael losh principal financial seric feldstein vice president treasurerofficers eric feldstein swallace w creek comptroller wallace w creek principal accounting speter r bible chief accounting officer officers peter r bible iv4 general motors corporation subsidiaries signatures concluded signature title spercy barnevik director percy barnevik sjohn h bryan director john h bryan sthomas e everhart director thomas e everhart scharles fisher iii director charles fisher iii sgeorge c fisher director george c fisher skaren katen director karen katen sj willard marriott jr director j willard marriott jr sann mclaughlin director ann mclaughlin seckhard pfieffer director eckhard pfeiffer sjohn g smale director john g smale slouis w sullivan director louis w sullivan sdennis weatherstone director dennis weatherstone iv5 item 14 principal accounting fees services fees professional services provided plante moran pllc guc trust’s independent auditors years ended march 31 2013 2012 following categories including related expenses follows 1 consists fees audit guc trust’s annual financial statements review guc trust’s form 10k review quarterly financial statements included guc trust’s forms 10q review form 8k filings 2 consists fees consultation accounting financial reporting internal control matters 3 includes fees preparation guc trust’s federal income tax return fiscal year ended march 31 2012 preparation mlc federal state income tax returns final tax year ended december 15 2012 assistance mlc tax compliance matters part iv item 15 item 14 principal accounting fees services fees professional services provided plante moran pllc guc trust’s independent auditors years ended march 31 2015 2014 following categories including related expenses follows 1 consists fees audit guc trust’s annual financial statements review guc trust’s form 10k review quarterly financial statements included guc trust’s forms 10q review form 8k filings 2 includes fees preparation guc trust’s federal income tax return fiscal years ended march 31 2014 2013 preparation amended mlc state income tax returns assistance mlc tax compliance matters part iv item 15 item 14 exhibits financial statement schedule reports form 8k iv1 iv2 reports form 8k filed three months ended december 31 1996 registrant hereby undertakes furnish supplementally copy omitted schedule attachment securities exchange commission upon request required filed exhibit pursuant item 14c form 10k iv3 general motors corporation subsidiaries schedule ii allowances notes primarily reflects recovery accounts previously writtenoff b accounts written c obsolete parts written etc reference made notes consolidated financial statements iv4 signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned hereunto duly authorized general motors corporation registrant date march 3 1997 john f smith jr john f smith jr chairman board directors chief executive officer president pursuant requirements securities exchange act 1934 report signed 3rd day march 1997 following persons behalf registrant capacities indicated iv5 signatures concluded iv6 hughes electronics corporation subsidiaries independent auditors report stockholder board directors hughes electronics corporation audited consolidated balance sheet hughes electronics corporation subsidiaries december 31 1996 1995 related consolidated statement income available separate consolidated net income consolidated statement cash flows three years period ended december 31 1996 financial statements responsibility hughes electronics corporations management responsibility express opinion financial statements based audits conducted audits accordance generally accepted auditing standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements present fairly material respects financial position hughes electronics corporation subsidiaries december 31 1996 1995 results operations cash flows three years period ended december 31 1996 conformity generally accepted accounting principles discussed note 1 consolidated financial statements effective january 1 1994 hughes electronics corporation changed method accounting postemployment benefits deloitte touche llp deloitte touche llp los angeles california january 28 1997 iv22 hughes electronics corporation subsidiaries consolidated statement income available separate consolidated net income reference made notes consolidated financial statements iv23 hughes electronics corporation subsidiaries consolidated balance sheet certain amounts 1995 reclassified conform 1996 classifications reference made notes consolidated financial statements iv24 hughes electronics corporation subsidiaries consolidated statement cash flows 1994 amounts exclude effect accounting change reference made notes consolidated financial statements iv25 hughes electronics corporation subsidiaries notes consolidated financial statements note 1 summary significant accounting policies organization consolidation consolidated financial statements include accounts hughes electronics corporation hughes domestic foreign subsidiaries 50 owned investments associated companies least 20 voting securities owned accounted equity method accounting effective december 31 1985 general motors corporation general motors gm acquired hughes aircraft company subsidiaries 27 billion cash equivalents 100 million shares gm class h common stock estimated value 25619 million carried certain guarantees february 28 1989 gm howard hughes medical institute reached agreement terminate gms thenexisting guarantee obligations respect institutes holding gm class h common stock terms agreement amended institute received put options exercisable circumstances 30 per share march 1 1991 1992 1993 1995 20 million 10 million 105 million 15 million shares respectively institute exercised put options 30 per share march 1 1991 march 2 1992 march 1 1993 february 15 1995 gm institute entered agreement gm assisted institute selling 15 million shares gm class h common stock 3850 per share march 1 1995 put option expired unexercised acquisition hughes aircraft company accounted purchase price exceeded net book value hughes aircraft company 42447 million assigned follows 5000 million patents related technology 1250 million future economic benefits gm hughes aircraft company longterm incentive plan ltip 36197 million intangible assets including goodwill amounts assigned patents related technology amortized straightline basis 15 years intangible assets including goodwill 40 years amount assigned future economic benefits ltip fully amortized 1990 purpose determining earnings per share amounts available dividends common stocks general motors amortization disposal intangible assets charged earnings attributable gm 1 23 par value common stock amounted 1223 million 1595 million 1238 million 1996 1995 1994 respectively 1995 amount included 361 million charge included income writeoff purchase accounting adjustments related disposition certain nonstrategic business units earnings hughes subsidiaries since acquisition hughes aircraft company form base dividends gm class h common stock declared earnings include income earned sales gm affiliates exclude purchase accounting adjustments see notes 2 7 january 16 1997 gm hughes announced series planned transactions designed address strategic challenges unlock stockholder value three hughes business segments see note 18 use estimates preparation financial statements preparation financial statements conformity generally accepted accounting principles requires management make estimates assumptions affect amounts reported therein due inherent uncertainty involved making estimates actual results reported future periods may based upon amounts differ estimates iv26 hughes electronics corporation subsidiaries notes consolidated financial statements continued revenue recognition sales general motors affiliates outside customers pursuant longterm contracts generally recognized products shipped services rendered sales longterm contracts recognized primarily using percentageofcompletion costtocost method accounting method sales recorded equivalent costs incurred plus portion profit expected realized determined based ratio costs incurred estimated total costs completion sales certain commercial longterm contracts recognized using unitsofdelivery method profits expected realized longterm contracts based estimates total sales value costs completion estimates reviewed revised periodically throughout lives contracts adjustments profits resulting revisions recorded accounting period revisions made estimated losses contracts recorded period identified certain contracts contain cost performance incentives provide increases profits surpassing stated objectives decreases profits failure achieve objectives amounts associated incentives included estimates total sales values sufficient information relate actual performance objectives cash flows cash equivalents consist highly liquid investments purchased original maturities 90 days less net cash provided operating activities reflects cash payments interest income taxes follows accounts receivable contracts process trade receivables principally related longterm contracts programs amounts billed retainage provisions contracts significant substantially amounts collectible within one year contracts process stated costs incurred plus estimated profit less amounts billed customers advances progress payments applied engineering tooling manufacturing applicable overhead costs including administrative research development selling expenses charged costs expenses incurred contracts process include amounts relating contracts long production cycles amounts receivable salestype leases 5460 million 1996 amount expected billed one year contracts process 1996 also include approximately 538 million relating claims requests equitable adjustments amounts withheld pending negotiation settlement customers certain contracts us government progress payments received based costs incurred respective contracts title inventories related contracts included contracts process vests us government iv27 hughes electronics corporation subsidiaries notes consolidated financial statements continued inventories stated lower cost market principally using firstin firstout fifo average cost methods property depreciation property carried cost depreciation property provided based estimated useful lives 3 45 years generally using accelerated methods telecommunications equipment telecommunications equipment includes satellite transponders equipment subject operating leases service agreements equipment carried hughes direct indirect manufacturing cost amortized estimated useful lives 7 23 years using straightline method net book value equipment subject operating leases 4124 million 2998 million december 31 1996 1995 respectively intangible assets intangible assets principally excess cost fair value identifiable net assets purchased businesses amortized using straightline method periods exceeding 40 years hughes periodically evaluates recoverability goodwill intangible assets assessing whether unamortized intangible asset recovered remaining life undiscounted cash flows generated underlying tangible assets income taxes provision income taxes based reported income taxes deferred income tax assets liabilities reflect impact temporary differences amounts assets liabilities recognized financial reporting purposes amounts recognized tax purposes measured applying currently enacted tax laws provision made us federal income taxes paid portion undistributed earnings foreign subsidiaries deemed permanently reinvested hughes domestic subsidiaries join general motors filing consolidated us federal income tax return portion consolidated income tax liability recorded hughes generally equivalent liability would incurred separate return basis research development expenditures research development charged costs expenses incurred amounted 7300 million 1996 7617 million 1995 6993 million 1994 iv28 hughes electronics corporation subsidiaries notes consolidated financial statements continued financial instruments hughes enters foreign exchangeforward contracts reduce exposure fluctuations foreign exchange rates foreign exchangeforward contracts accounted hedges extent designated effective hedges firm foreign currency commitments foreign currency transactions foreign currency transaction net gains losses included consolidated operating results amounted 54 million 1996 05 million 1995 42 million 1994 market credit risk concentrations sales united states government contracts 345 355 376 net sales 1996 1995 1994 respectively sales general motors affiliates consisting various automotive electronic component parts 323 total sales 1996 352 1995 1994 financial instruments potentially subject hughes concentrations credit risk consist principally highly liquid investments purchased original maturities 90 days less hughes places investments highquality counterparties policy limits amount credit exposure one counterparty accounting changes effective january 1 1996 hughes adopted statement financial accounting standards sfas 123 accounting stockbased compensation permitted standard continue apply recognition measurement principles accounting principles board opinion 25 stock options hughes calculated proforma effects applying sfas 123 determined effects significant relation reported net income earnings per share effective january 1 1996 hughes also adopted sfas 121 accounting impairment longlived assets longlived assets disposed statement establishes accounting standards impairment longlived assets certain identifiable intangibles goodwill related assets held used longlived assets certain identifiable intangibles disposed adoption new accounting standard material effect hughes consolidated operating results financial position effective january 1 1994 hughes adopted sfas 112 employers accounting postemployment benefits statement requires accrual costs benefits provided former inactive employees employment retirement unfavorable cumulative effect adopting standard 304 million net income taxes 192 million 008 per share gm class h common stock charge primarily related extended disability benefits accrued servicedriven basis note 2 relatedparty transactions sales purchases administrative expenses amounts due gm affiliates result sales products purchases materials services units controlled gm purchases gm affiliates including computer systems services provided electronic data systems corporation prior splitoff gm common administrative expenses allocated gm amounted approximately 779 million 2337 million 2571 million 1996 1995 1994 respectively iv29 hughes electronics corporation subsidiaries notes consolidated financial statements continued incentive plans certain eligible employees hughes participate various incentive plans gm subsidiaries note 3 incentive plan hughes electronics corporation incentive plan approved gm board directors 1987 1992 1995 shares rights options acquire 20 million shares gm class h common stock may granted may 31 1997 gm executive compensation committee may grant options rights acquire shares gm class h common stock provisions plan option price equal 100 fair market value gm class h common stock date options granted nonqualified options generally expire 10 years dates grant subject earlier termination certain conditions changes status outstanding options follows following table summarizes information plan stock options outstanding december 31 1996 december 31 1996 maximum number shares additional options rights may granted plan 2314449 shares iv30 hughes electronics corporation subsidiaries notes consolidated financial statements continued note 4 pension programs hughes total pension expense amounted 975 million 1996 390 million 1995 549 million 1994 substantially employees delco electronics participate defined benefit pension plans general motors plans covering represented employees generally provide benefits negotiated stated amounts year service well significant supplemental benefits employees retire 30 years service normal retirement age benefits provided plans covering salaried employees generally based years service employees salary history certain nonqualified pension plans covering executives based targeted wage replacement percentages unfunded accumulated plan benefit obligation plan net assets employees delco electronics determined separately however gm charged delco electronics 531 million 509 million 933 million benefits earned employees 1996 1995 1994 respectively substantially hughes nonautomotive employees covered hughes bargaining nonbargaining defined benefit retirement plans benefits based years service compensation earned specified period time retirement additionally unfunded nonqualified pension plan covers certain executives net pension expense credit related plans covering nonautomotive employees included components shown costs actuarially determined using projected unit credit method funded accordance us government cost accounting standards extent costs taxdeductible sfas 87 employers accounting pensions requires recognition additional pension liability increase amounts recorded unfunded accumulated benefit obligation adjustment required recognize minimum pension liability required sfas 87 recorded intangible asset extent unrecognized prior service cost remainder net applicable deferred income taxes recorded reduction stockholders equity december 31 1996 1995 additional minimum pension liability recorded 2108 million 2049 million respectively 1135 million 1086 million respectively recorded reduction stockholders equity plan assets invested primarily listed common stock cash shortterm investment funds us government securities investments weighted average discount rates used determining actuarial present values projected benefit obligation shown table next page 75 725 december 31 1996 1995 respectively rate increase future compensation levels 50 1996 1995 expected longterm rate return assets used determining pension cost 95 1996 1995 iv31 hughes electronics corporation subsidiaries notes consolidated financial statements continued following table sets forth funded status hughes nonautomotive employee plans amounts included consolidated balance sheet note 5 postretirement benefits substantially employees delco electronics participate various postretirement medical dental vision life insurance plans general motors hughes maintains program eligible nonautomotive retirees participate health care life insurance benefits generally reach age 65 qualified employees elected participate hughes contributory defined benefit pension plans may become eligible benefits retire hughes ages 55 65 total nonpension postretirement benefit cost hughes subsidiaries included components set forth follows iv32 hughes electronics corporation subsidiaries notes consolidated financial statements continued following table displays components hughes obligation recognized postretirement benefit plans included consolidated balance sheet assumed weighted average discount rates used determining actuarial present value accumulated postretirement benefit obligation 756 725 december 31 1996 1995 respectively assumed weighted average rate increase future compensation levels related pay related life insurance benefits 45 december 31 1996 44 december 31 1995 assumed weighted average health care cost trend rate 791 1996 decreasing linearly successive year reaches 531 2006 remains constant one percentage point increase year annual trend rate would increase accumulated postretirement benefit obligation december 31 1996 approximately 150 million increase service interest cost components 1996 postretirement benefit expense approximately 17 million hughes disclosed consolidated financial statements certain amounts associated estimated future postretirement benefits pensions characterized amounts accumulated postretirement benefit obligations liabilities obligations notwithstanding recording amounts use terms hughes admit otherwise acknowledge amounts existing postretirement benefit plans hughes pensions represent legally enforceable liabilities hughes iv33 hughes electronics corporation subsidiaries notes consolidated financial statements continued note 6 income taxes income tax provision consisted following excluding effect accounting change deferred income tax benefit 1994 included 630 million credit resulted adjustment beginning year valuation allowance change circumstances respect hughes ability realize benefit capital loss carryforward income taxes included following components consolidated income tax provision different amount computed using us statutory income tax rate reasons set forth following table excluding effect accounting change iv34 hughes electronics corporation subsidiaries notes consolidated financial statements continued temporary differences carryforwards gave rise deferred tax assets liabilities follows provision made us federal income taxes paid portion undistributed earnings foreign subsidiaries deemed permanently reinvested december 31 1996 1995 undistributed earnings foreign subsidiaries amounted approximately 4623 million 3974 million respectively repatriation accumulated foreign earnings would resulted tax liabilities 1226 million 1103 million respectively hughes provided deferred tax liabilities 934 million 828 million respectively december 31 1996 hughes 736 million foreign operating loss carryforwards expire varying amounts 1997 2001 valuation allowance includes provision foreign operating loss carryforwards addition hughes 196 million capital loss carryforwards 123 million expire 1998 73 million expire 2000 valuation allowance provided capital loss carryforwards note 7 earnings attributable general motors class h common stock per share basis available separate consolidated net income earnings attributable general motors class h common stock per share basis determined based relative amounts available payment dividends holders gm class h common stock holders gm class h common stock direct rights equity assets hughes rather rights equity assets gm includes 100 stock hughes dividends gm class h common stock declared gms board directors available separate consolidated net income hughes earned since acquisition hughes aircraft company gm available separate consolidated net income hughes determined quarterly equal separate consolidated net income hughes excluding effects gm purchase accounting adjustments arising acquisition hughes aircraft company earnings used computation available separate consolidated net income multiplied fraction numerator number equal weighted average number shares gm class h common stock outstanding period denominator 3999 million fourth quarters 1996 1995 1994 denominator used determining available separate consolidated net income hughes adjusted deemed appropriate gm board directors reflect subdivisions combinations gm class h common stock reflect certain transfers capital hughes gm boards iv35 hughes electronics corporation subsidiaries notes consolidated financial statements continued discretion make adjustments limited criteria set forth gms certificate incorporation regard gm board generally caused denominator decrease shares purchased hughes increase shares used hughes expense hughes employee benefit plans acquisitions dividends may paid gm class h common stock declared gm board directors sole discretion current policy gm board respect gm class h common stock pay cash dividends approximately equal 35 available separate consolidated net income hughes prior year notwithstanding current dividend policy dividends paid gm class h common stock 1996 1995 1994 based annual rate higher 35 available separate consolidated net income hughes preceding year note 8 property net note 9 notes loans payable longterm debt capitalized leases december 31 1996 hughes 5500 million 6500 million unused credit available shortterm lines credit unsecured revolving credit loan agreement respectively unsecured iv36 hughes electronics corporation subsidiaries notes consolidated financial statements continued revolving credit loan agreement provides commitment 6500 million january 2000 subject facility fee 010 per annum borrowings agreement bear interest rate approximates london interbank offered rate plus 0175 amounts outstanding agreement shortterm lines credit december 31 1996 december 31 1996 foreign bank debt included 271 million denominated british pounds sterling bearing interest rates ranging 59 71 maturity dates 1997 2003 gm term loan bears interest 61 maturity date 1997 term loans consisted notes payable insurance company bearing interest rates ranging 77 80 maturity dates 1997 notes loans payable 1995 included 3027 million related acquisition magnavox electronic systems company see note 13 note bore interest rate 53 repaid full january 5 1996 annual maturities longterm debt capitalized leases 2102 million 1997 24 million 1998 25 million 1999 28 million 2000 31 million 2001 237 million thereafter property net book value 148 million december 31 1996 pledged collateral debt note 10 accrued liabilities certain amounts 1995 reclassified conform 1996 classifications iv37 hughes electronics corporation subsidiaries notes consolidated financial statements continued note 11 stockholders equity authorized capital stock hughes consists 1000 shares 010 par value common stock december 31 1996 1995 1994 1000 shares aggregate par value 100 issued outstanding capital stock hughes held general motors sole stockholder hughes gm able cause hughes pay cash dividends make advances otherwise enter transactions gm deems desirable appropriate gm reserves right cause hughes pay cash dividends gm amounts gm determines desirable prevailing facts circumstances amounts may greater less cash dividends paid gm class h common stock fixed relationship per share aggregate basis cash dividends may paid gm holders class h common stock cash dividends amounts may paid hughes gm note 12 special provision restructuring 1992 hughes recorded special restructuring charge 12370 million primarily attributable redundant facilities related employment costs special charge comprehended reduction hughes worldwide employment major facilities consolidation reevaluation certain business lines longer met hughes strategic objectives restructuring costs 924 million 2088 million 2283 million charged reserve 1996 1995 1994 respectively addition 1994 restructuring reserve increased 350 million primarily due changes estimated loss disposition subsidiary remaining liability december 31 1996 420 million relates primarily reserves excess facilities site consolidation costs approximately 407 million total require future cash outflows expected costs expended predominantly next year iv38 hughes electronics corporation subsidiaries notes consolidated financial statements continued note 13 acquisitions divestitures december 1996 hughes announced reached agreement acquire marine systems division alliant techsystems inc 1410 million cash marine systems division leader lightweight torpedo manufacturing design manufacturing underwater surveillance sonar mine warfare systems acquisition completed first quarter 1997 september 1996 hughes panamsat corporation entered agreement merge respective satellite services operations new publiclyheld company hughes would contribute galaxyr satellite services business exchange 715 interest new company current panamsat stockholders would receive 285 interest new company 15 billion cash source cash component consideration expected new debt financing obligation new company panamsat leading provider international satellite services transaction contingent upon receiving certain regulatory approvals expected close second quarter 1997 march 1996 hughes sold 25 equity interest directvr whollyowned subsidiary hughes att 1375 million options increase ownership interest certain conditions sale resulted 1203 million pretax gain included income february 1995 hughes acquired substantially assets caelink corporation 1760 million cash caelink established supplier simulation training technical services primarily us military nasa december 1995 hughes acquired stock magnavox electronic systems company magnavox 3824 million consisting cash 705 million note payable 3027 million estimated additional amounts paid 92 million magnavox leading supplier military tactical communications electronic warfare command control systems addition hughes acquired several enterprises operations complement existing technological capabilities aggregate purchase prices paid cash 287 million 630 million 1996 1995 respectively acquisitions accounted using purchase method accounting operating results entities acquired consolidated hughes respective acquisition dates acquisitions material impact operating results hughes purchase price acquisition allocated net assets acquired including intangible assets based upon estimated fair values date acquisition 1995 hughes divested several nonstrategic enterprises generating aggregate proceeds approximately 1272 million net loss approximately 82 million included writeoff 301 million purchase accounting adjustments related gms acquisition hughes aircraft company also 1995 hughes recorded 460 million charge estimated loss disposition business unit including 60 million related writeoff gm purchase accounting adjustments completed divestiture hughes lan systems pretax charge 350 million taken 1994 note 14 derivative financial instruments risk management hughes party financial instruments offbalance sheet risk normal course business reduce exposure fluctuations foreign exchange rates primary class derivatives used hughes foreign exchangeforward contracts instruments involve varying degrees elements credit risk event counterparty default market risk instruments subject rate price fluctuations credit risk managed periodic monitoring approval financially sound counterparties market risk mitigated derivatives used hedge underlying transactions cash receipts payments contracts normally occur maturity hughes holds derivatives purposes trading iv39 hughes electronics corporation subsidiaries notes consolidated financial statements continued foreign exchangeforward contracts legal agreements two parties purchase sell foreign currency price specified contract date delivery settlement future hughes uses agreements hedge risk changes foreign currency exchange rates associated certain firm commitments denominated foreign currency total notional amount foreign exchangeforward contracts hughes held december 31 1996 1995 approximately 223 million 289 million respectively hughes open contracts extend periods averaging six months note 15 fair value financial instruments notes loans payable longterm debt capitalized leases estimated fair value approximates book value 2832 million 6949 million december 31 1996 1995 respectively fair value based quoted market prices similar issues current rates offered hughes debt similar remaining maturities carrying value debt original term less 90 days assumed approximate fair value fair values derivative financial instruments reflect estimated amounts hughes would receive pay terminate contracts reporting date takes account current unrealized gains losses open contracts deferred recognized offsetting gains losses recognized related hedged items fair value foreign exchangeforward contracts estimated based foreign exchange rate quotes reporting date december 31 1996 1995 estimated fair value open contracts net gain position 45 million 107 million respectively financial instruments described fair value approximates book value note 16 segment reporting hughes operates within field modern hightechnology electronics use telecommunications space automotive electronics aerospace defense systems business segments telecommunications space segment includes satellite construction ownership operation communication services ground equipment directtohome satellite television entertainment services radios controls engines transmissions navigation communication systems monitors sensors air bags controllers antilock brakes climate control dashboard instrumentation vehicle security electronics automotive electronic products included automotive electronics segment aerospace defense systems segment includes missile systems command control systems torpedoes sonar systems electrooptical systems airborne radar communication systems military training simulation systems air traffic control systems information systems guidance control systems intercompany transfers segments material information concerning operations segment shown next page iv40 hughes electronics corporation subsidiaries notes consolidated financial statements continued certain amounts 1995 reclassified conform 1996 classifications 1 includes purchase accounting adjustments associated gms purchase hughes aircraft company 1223 million 1996 210 million 1009 million 04 million related telecommunications space aerospace defense systems corporate respectively 1234 million 1995 210 million 1009 million 15 million related telecommunications space aerospace defense systems corporate respectively 1238 million 1994 210 million 1009 million 19 million related telecommunications space aerospace defense systems corporate respectively 2 identifiable assets include unamortized purchase accounting adjustments associated purchase hughes aircraft company detailed 3 telecommunications space includes expenditures related telecommunications equipment amounting 1879 million 2746 million 2558 million 1996 1995 1994 respectively iv41 hughes electronics corporation subsidiaries notes consolidated financial statements continued reconciliation operating profit shown previous page income taxes shown consolidated statement income available separate consolidated net income follows export sales us follows note 17 commitments contingencies hughes signed agreements 1995 1996 procure commercial satellite launches significant number expected used connection satellites ordered outside customers agreements provide launches beginning 1998 also contain options additional launch vehicles total amount commitment dependent upon number options exercised market conditions factors could exceed 2 billion december 1994 hughes entered agreement computer sciences corporation csc whereby csc provides significant amount nonautomotive data processing services required hughes baseline service payments csc expected aggregate approximately 15 billion term eightyear agreement contract cancelable hughes substantial early termination penalties minimum future commitments operating leases noncancelable lease terms excess one year primarily real property satellite transponders aggregating 25525 million payable follows 2748 million 1997 2445 million 1998 2659 million 1999 2897 million 2000 2088 million 2001 12688 million thereafter certain leases contain escalation clauses renewal purchase options rental expenses operating leases 2794 million 1996 2579 million 1995 3062 million 1994 hughes issued party various guarantees letter credit agreements totaling 8134 million december 31 1996 companys past experience virtually claims made financial instruments hughes subsidiaries subject potential liability government regulations various claims legal actions pending may asserted aggregate ultimate liability hughes subsidiaries government regulations claims actions determinable december 31 1996 opinion management hughes liability expected material adverse effect hughes consolidated operations financial position iv42 hughes electronics corporation subsidiaries notes consolidated financial statements continued hughes maintained suit us government since september 1973 regarding governments infringement use hughes patent williams patent covering velocity control orientation spin stabilized body principally satellites june 17 1994 us court claims awarded hughes damages 114 million hughes believed record supported higher royalty rate appealed decision us government contending award high also appealed june 19 1996 court appeals federal circuit affirmed decision court claims awarded hughes 114 million damages together interest us government petitioned court appeals federal circuit rehearing petition denied october 1996 us government filed petition us supreme court seeking certiorari opinion management hughes reasonable possibility matter could resolved near term amount recorded financial statements hughes reflect 114 million award resolution matter could result gain would material earnings general motors attributable class h common stock note 18 subsequent event january 16 1997 gm hughes announced series planned transactions would impact defense electronics automotive electronics telecommunications space businesses hughes transactions would include taxfree spinoff 100 hughes defense business holders gms 1 23 par value class h common stocks taxfree merger hughes defense business raytheon company raytheon immediately following spinoff would outstanding two classes raytheonhughes defense common stock transfer delco electronics delco automotive electronics subsidiary hughes gms delphi automotive systems reallocation derivative interest earnings delco currently held class h common stockholders holders 1 23 par value common stock recapitalization class h common stock tracking stock linked solely telecommunications space business hughes gm would continue 100 hughes would hold operate existing telecommunications space business distribution stock hughes defense business holders gm class h 1 23 par value common stock would ratio would determined gms board directors fair classes stockholders would reflect 1 pro rata spinoff hughes defense business holders gm class h 1 23 par value common stock 2 partial reallocation hughes defense business holders gm 1 23 par value common stock holders class h common stock exchange derivative interest earnings delco currently held class h stockholders 3 effects factors relating planned transactions distribution ratio set gms board directors time closer gms distribution solicitation statementprospectus pursuant gm stockholders asked approve transactions iv43 hughes electronics corporation subsidiaries notes consolidated financial statements concluded planned transactions subject approval holders gm 1 23 par value class h common stock addition merger hughes defense business raytheon contingent upon spinoff hughes defense business subject approval stockholders raytheon planned transactions also subject variety regulatory approvals actions including antitrust clearance receipt rulings internal revenue service spinoff hughes defense business would taxfree gm stockholders spinoff proposed manner would result recapitalization class h common stock 1 23 par value common stock 120 exchange ratio currently provided certain circumstances gms restated certificate incorporation assurances given transactions completed however management gm hughes gms board directors expect solicit stockholder approval third quarter 1997 certain conditions satisfied iv44 hughes electronics corporation subsidiaries supplemental information selected quarterly data unaudited selected quarterly data unaudited iv45 hughes electronics corporation subsidiaries supplemental information concluded selected financial data unaudited includes unfavorable cumulative effect accounting changes 304 million 1994 8721 million 1992 1 gm class h cash dividends divided available separate consolidated net income prior year 2 includes expenditures related telecommunications equipment amounting 1879 million 2746 million 2558 million 1311 million 1016 million 1996 1995 1994 1993 1992 respectively 3 net income loss divided average stockholders equity general motors equity whollyowned subsidiary hughes holders gm class h common stock direct rights equity assets hughes rather rights equity assets gm includes 100 stock hughes 4 income loss interest taxes divided average stockholders equity plus average debt 5 income loss income taxes divided average total assets iv46 hughes electronics corporation subsidiaries managements discussion analysis operating financial review following discussion excludes purchase accounting adjustments related general motors acquisition hughes aircraft company see supplemental data beginning page iv54 statements made concerning expected financial performance ongoing financial performance strategies possible future action hughes intends pursue achieve strategic objectives three principal business segments including planned transactions described constitute forwardlooking information implementation strategies future actions achievement financial performance subject numerous conditions uncertainties risk factors accordingly assurance given hughes able successfully accomplish strategic objectives achieve financial performance principal important risk factors could cause actual performance future actions differ materially forwardlooking statements made herein include economic conditions product demand market acceptance government action competition ability achieve cost reductions gms global sourcing strategy respect automotive electronics general motors north american operations gmnao volumes technological risk interruptions production attributable causes outside hughes control receipt various approvals respect planned transactions general january 16 1997 gm hughes announced series planned transactions designed address strategic challenges unlock stockholder value three hughes business segments transactions would include taxfree spinoff hughes defense business holders gms 1 23 par value class h common stocks followed immediately taxfree merger business raytheon company raytheon spinoff proposed manner would result recapitalization class h common stock 1 23 par value common stock 120 exchange ratio currently provided certain circumstances general motors restated certificate incorporation amended time delco electronics automotive electronics subsidiary hughes would transferred hughes gms delphi automotive systems unit finally gms class h common stock would recapitalized tracking stock linked solely telecommunications space business hughes spinoff taxfree merger hughes defense business raytheon would outstanding two classes raytheonhughes defense common stock class common stock approximately 103 million shares would distributed gms 1 23 class h stockholders spinoff class b common stock would exchanged raytheon common stock oneforone share basis merger common stock hughes defense business would distributed gm common stockholders would represent approximately 30 stock combined company distribution stock hughes defense business holders gm class h 1 23 par value common stock would ratio would determined gms board directors fair classes stockholders would reflect 1 pro rata spinoff hughes defense business holders gm class h 1 23 par value common stock 2 partial reallocation hughes defense business holders gm 1 23 par value common stock holders class h common stock exchange derivative interest earnings delco currently held class h stockholders 3 effects factors relating planned transactions distribution ratio set gms board directors time closer gms distribution solicitation statementprospectus pursuant gm stockholders asked approve transactions spinoff hughes defense business merger raytheon would indicated total value 95 billion gm common stockholders based stock prices announcement date value would consist combination approximately 47 billion total debt obligations hughes defense business time merger 48 billion indicated value hughes defense stock iv47 distributed common stockholders giving affect merger based market price raytheon common stock announcement date 4700 merger terms provide total debt hughes defense business adjusted reflect variations average market price raytheon stock subject specified limits two components value total 95 billion long market price range 4442 5429 per share substantially debt would incurred immediately prior spinoff proceeds used principally fund telecommunications space business hughes consummation transactions described previously subject various contingencies including regulatory clearances approval gm common stockholders additional information regarding planned transactions included note 18 hughes consolidated financial statements planned transactions impact 1996 financial results planned transactions described previously intended result achievement several strategic objectives merger hughes defense business raytheon would create stronger defense electronics company would able effectively compete new business industry significant consolidation occurring time integration delco electronics delphi automotive systems would combine advanced electronics capability components systems expertise would expected result reduced costs hughes electronics would continue hold operate telecommunications space business would allow hughes management focus business segment capital infusion would allow take advantage growth opportunities competitive industry strategy business continue expand offerings primarily supplier hardware becoming provider hardware video voice data services worldwide strategy requires significant current future investment order maintain enhance segments competitive position respect existing products take advantage growth opportunities presented well formation strategic alliances compete competitive global marketplace results operations revenues hughes reported record revenues 159179 million 1996 78 increase 1995 revenues 1995 148079 million increase 50 compared 1994 revenues 140994 million increase 1996 revenues largely result continued growth telecommunications space segment increased revenues aerospace defense systems segment partially offset lower automotive electronics revenues caused part work stoppages various gm production locations year 1995 revenue growth driven automotive electronics telecommunications space segments pro forma segment information presented page iv56 telecommunications space revenues telecommunications space segment 41149 million 1996 331 increase 1995 30927 million 1995 191 increase 1994 revenues 25962 million increases years primarily due continued expansion directvr subscriber base increased sales commercial satellites cellular communications equipment increased video distribution revenues galaxyr satellite transponders automotive electronics revenues automotive electronics segment decreased 38 1996 53508 million 55613 million 1995 decline principally due decrease gm vehicles produced united states canada excluding joint ventures primarily related united canadian auto workers uaw caw respectively strikes offset part increase hughessupplied electronic content vehicles 888 per vehicle 906 per vehicle increase international nongmnao sales 841 million 1995 1010 million 1996 revenues increased 3396 million 65 1995 52217 million 1994 1995 revenue growth attributed increase hughessupplied electronic content gm vehicles produced north america 888 1995 857 1994 increase sales international nongmnao customers iv48 841 million 1995 672 million 1994 vehicle production remained relatively unchanged 1994 1995 aerospace defense systems aerospace defense systems segment revenues 63384 million 1996 66 increase 1995 revenues 59454 million growth primarily attributable additional revenues resulting december 1995 acquisition hughes defense communications formerly magnavox electronic systems company buildup newer programs including desktop v wide area augmentation system land warrior 1995 revenues decreased 782 million 13 1994 revenues 60236 million decline principally due lower production rates several missile programs partially offset additional revenues related 1995 acquisition caelink corporation income included revenues income 1738 million 936 million 371 million 1996 1995 1994 respectively 1996 includes 1203 million pretax gain sale 25 equity interest directv att 1995 1994 included pretax charges 400 million 350 million respectively estimated losses disposition certain nonstrategic business units also included 1995 359 million revenue earned providing services gm operating profit operating profit 15943 million 1996 16673 million 1995 16304 million 1994 operating profit margins percentage net sales 101 113 116 1996 1995 1994 respectively decline profitability 1996 compared 1995 primarily attributable lower gm production volumes related uaw caw strikes continued price reductions automotive electronics segment offset part increased profitability telecommunications space segment also offsetting 1996 decline profitability reduced operating losses hughesavicom international inc operating profit improved 1995 largely due continued emphasis cost reduction efforts notably automotive electronics aerospace defense systems segments overall growth revenues partially offset planned increase operating expenses associated directv 1995 operating profit margin decline attributable primarily directv operating expense increase offset margin improvements two segments telecommunications space operating profit 1996 2598 million 373 increase 1892 million reported 1995 1996 increase largely result revenue increases previously discussed reduced mobile telephony satellite development costs offset part operating losses related start service companys directv business latin america operating profit 1995 decreased 302 1994 operating profit 2710 million 1995 decline operating profit principally due increased operating expenses associated expansion directv increased development costs geostationary satellite mobile telephony product line operating profit margins 65 1996 62 1995 103 1994 1996 operating profit margins telecommunications space segment expected increase directvs subscriber base grows automotive electronics 1996 operating profit 6540 million compared 8690 million 1995 decline mostly due reduced production volumes continued price reductions resulting competitive pricing connection gms global sourcing initiative impact continued investment international expansion 1995 operating profit increased 742 million 93 compared 1994 operating profit 7948 million improvement profitability 1995 attributable increased revenues also aggressive cost reduction program principal supplier automotive electronics general motors north american operations unit gmnao hughes sales automotive electronics continue heavily dependent general motors production vehicles north america level hughessupplied electronic content per gm vehicle price electronics competitiveness hughes product offerings regard anticipated competition gms global purchasing process negatively impact hughes sales gmnao result decline portion gmnao automotive electronics supplied hughes segments strategy aggressively reduce costs order minimize effect continuing price reductions manage loss gmnao market share offering competitive iv49 products increase electronic functionality focus safety security communications convenience segment also seek improve systems capability cost competitiveness internally developing key design manufacturing marketing alliances relationships mechanical electrical automotive component suppliers international market automotive electronic products also highly competitive segment refined strategy market focus profitable growth well increased market share accordingly seek enhance cost competitiveness international operations competitive environment described making increasingly difficult maintain level operating profit margins realized segment past beyond 1996 operating margins expected lower recent historical levels price volume declines associated gms global sourcing initiatives offset hughes ability achieve cost reductions response increased pressure margins enhance future competitiveness management take action reduce cost structure business result factors described operating margin expected decline 1997 low double digits show modest improvement 1998 1999 aerospace defense systems operating profit 6947 million 1996 compared 6880 million 1995 6636 million 1994 operating profit margin 1996 declined 110 117 1995 primarily due continued shift production programs engineering development programs growth information systems services revenues operating profit margin 1995 increased 117 110 largely due provision taken 1994 certain air traffic control contracts partly offset reduced revenues 1995 future operating profits could adversely impacted reductions us defense budget costs expenses selling general administrative expenses 15056 million 1996 12342 million 1995 10183 million 1994 increases principally due continued expansion directv us internationally increased international sales activities delco electronics effective income tax rate 345 368 347 1996 1995 1994 respectively decrease effective income tax rate 1996 due primarily favorable resolution certain tax contingencies effective income tax rate 1994 favorably impacted recognition capital loss carryforward benefits earnings hughes 1996 earnings 11512 million 288 per share gm class h common stock compared 1995 earnings 11078 million 277 per share 1994 earnings 10492 million 262 per share earnings 1994 included unfavorable effect accounting change postemployment benefits excluding accounting change hughes earnings 1994 would 10796 million 270 per share backlog 1996 yearend backlog 15100 million increased 14929 million end 1995 primarily due record backlog aerospace defense systems segment 1995 yearend backlog increased 13210 million end 1994 primarily due increased satellite orders telecommunications space segment portion backlog subject appropriation decisions us government subsequent award addition hughes contracts us government subject termination government either convenience default hughes sales us government may affected changes acquisition policies budget considerations changing concepts national defense spending priorities factors outside hughes control special provision restructuring 1992 hughes recorded special charge 7494 million aftertax restructuring hughes operations special charge comprehended reduction hughes worldwide employment major facilities consolidation reevaluation certain business lines longer met hughes strategic objectives restructuring costs 924 million 2088 million 2283 million charged reserve 1996 1995 1994 respectively addition 1994 restructuring reserve increased 350 million primarily due changes estimated loss disposition subsidiary remaining liability december 31 1996 420 million iv50 relates primarily reserves excess facilities site consolidation costs approximately 407 million amount require future cash outflows expected costs expended predominantly next year accounting changes effective january 1 1996 hughes adopted statement financial accounting standards sfas 123 accounting stockbased compensation permitted standard continue apply recognition measurement principles accounting principles board opinion 25 stock options hughes calculated proforma effects applying sfas 123 determined effects significant relation reported net income earnings per share effective january 1 1996 hughes also adopted sfas 121 accounting impairment longlived assets longlived assets disposed statement establishes accounting standards impairment longlived assets certain identifiable intangibles goodwill related assets held used longlived assets certain identifiable intangibles disposed adoption new accounting standard material effect hughes consolidated operating results financial position effective january 1 1994 hughes adopted sfas 112 employers accounting postemployment benefits statement requires accrual costs benefits provided former inactive employees employment retirement unfavorable cumulative effect adopting standard 304 million net income taxes 192 million 008 per share gm class h common stock charge primarily related extended disability benefits accrued servicedriven basis liquidity capital resources cash equivalents cash equivalents 11613 million december 31 1996 increase 218 million december 31 1995 operating activities generated cash 11994 million hughes achieved another year record earnings additional cash provided proceeds sale leaseback satellite transponders general motors acceptance corporation proceeds sale minority interest directv 1375 million increases cash offset cash used fund capital expenditures repay notes loans payable pay dividends general motors 1995 cash equivalents decreased 3623 million 11395 million december 31 1995 15018 million december 31 1994 operating activities generated cash 9862 million however cash used fund capital expenditures pay dividends general motors acquire new businesses offset cash generated operating activities third quarter 1996 hughes reported cash flows 1997 beyond expected negatively impacted change credit terms hughes gmnao purchases automotive electronics announcement planned transactions january 1997 see note 18 hughes consolidated financial statements implementation change credit terms deferred pending consummation planned transactions liquidity measurement measure liquidity current ratio current assets current liabilities 169 december 31 1996 158 december 31 1995 176 december 31 1994 increase 1995 1996 principally due repayment certain notes loans payable decrease 1994 1995 principally due decrease cash described increases notes loans payable balance primarily caused loan related acquisition see note 13 hughes consolidated financial statements property equipment property net accumulated depreciation increased 1474 million 1996 telecommunications equipment net accumulated depreciation decreased 416 million primarily due sale leaseback giiir offset additional expenditures related galaxy satellite fleet iv51 expenditures property equipment 6523 million 1996 compared 5457 million 4905 million 1995 1994 respectively management anticipates capital expenditures 1997 increase approximately 100 million 1996 financed primarily cash provided operating activities telecommunications equipment expenditures 1879 million 1996 compared 2746 million 2558 million 1995 1994 respectively management anticipates telecommunications equipment expenditures 1997 increase significantly compared 1996 financed primarily cash provided operating activities telecommunications space capital expenditures including expenditures related telecommunications equipment increased 4498 million 1996 4365 million 1995 3993 million 1994 1996 capital expenditures increase reflects additions galaxy satellite fleet construction california broadcast center uplink facility supports hughes directv business latin america increase 1995 due primarily additions galaxy satellite fleet automotive electronics capital expenditures decreased 1960 million 1996 compared 2647 million 1995 1664 million 1994 decrease 1996 capital spending reflects impact delays engineering capital expenditures higher normal level expenditures 1995 increased capital spending 1995 reflects expenditures additional program requirements related new product changes associated 1996 model year combined decrease tooling cost recoveries aerospace defense systems capital expenditures aerospace defense systems segment 1996 1995 1994 1711 million 1098 million 1595 million respectively 1996 increase relates capital expenditures support expanding business requirements 1995 decrease due high level expenditures 1994 related consolidation facilities effort increase operational efficiencies manufacturing engineering activities debt capitalized leases longterm debt capitalized leases 345 million december 31 1996 decrease 2588 million december 31 1995 3535 million december 31 1994 reflecting scheduled principal repayments reclassification certain amounts current liabilities ratio longterm debt capitalized leases total debt pro forma stockholders equity decreased 05 1996 44 1995 66 1994 discussed additional debt incurred conjunction panamsat merger anticipated portion debt would repaid cash expected received pursuant planned transactions see note 18 hughes consolidated financial statements balance sheet items evaluating pension retiree medical liabilities hughes recognizes impact changes longterm interest rates adjusting discount rate used determining actuarial present values projected benefit obligations 1996 weighted average discount rate hughes nonautomotive pension obligations increased 725 75 weighted average discount rate hughes postretirement benefits increased 725 756 acquisitions divestitures december 1996 hughes announced reached agreement acquire marine systems division alliant techsystems inc 1410 million cash marine systems division leader lightweight torpedo manufacturing design manufacturing underwater surveillance sonar mine warfare systems acquisition completed first quarter 1997 september 1996 hughes panamsat corporation entered agreement merge respective satellite services operations new publiclyheld company hughes would contribute galaxyr satellite services business exchange 715 interest new company current panamsat stockholders would receive 285 interest new company 15 billion cash consideration funds required consummate merger expected funded new debt financing totaling 1725 billion debt financing expected provided hughes currently intends borrow funds general motors iv52 accounting purposes transaction would treated partial sale galaxy business hughes would result onetime nonrecurring gain amount gain depends several variables expected 400 600 million tax panamsat leading provider international satellite services transaction contingent upon receiving certain regulatory approvals expected close second quarter 1997 march 1996 hughes sold 25 equity interest directvr whollyowned subsidiary hughes att 1375 million options increase ownership interest certain conditions sale resulted 1203 million pretax gain included income february 1995 hughes completed acquisition caelink corporation established supplier simulation training technical services primarily us military nasa 1760 million december 1995 hughes acquired magnavox electronic systems company leading supplier military tactical communications electronic warfare command control systems 3824 million 1995 hughes divested several nonstrategic enterprises resulting aggregate proceeds approximately 1272 million net gain approximately 219 million also 1995 hughes recorded 400 million charge estimated loss disposition business unit completed divestiture hughes lan systems pretax charge 350 million taken 1994 dividend policy discussed note 7 hughes consolidated financial statements gms current policy pay aggregate annual cash dividends gm class h common stock approximately equal 35 available separate consolidated net income hughes prior year january 1997 board directors gm increased quarterly dividend gm class h common stock 024 per share 025 per share anticipated previously described hughes transactions consummated general motors board directors adopt dividend policy relating new class h common stock board deems appropriate light capital needs growth opportunities hughes telecommunications space business generally commensurate companies telecommunications space business similar capital needs growth opportunities security ratings hughes security ratings tied security ratings general motors october 1996 standard poors ratings services division mcgrawhill companies inc sp revised outlook hughes stable developing result uncertainty respect gms investment strategy related hughes sp indicated developing outlook reflects possibility significant change relationship gm hughes occur credit quality hughes could either favorably adversely affected depending upon nature transaction pursued november 1996 january 1997 sp affirmed longterm debt rating hughes sp credit rating seventh highest within 10 investment grade ratings available sp longterm debt based strong capability pay interest repay principal although somewhat susceptible adverse effects changes circumstances economic conditions debt higher rated categories additionally sp also affirmed a2 rating hughes commercial paper sps ratings outlook hughes remains developing september 1996 moodys investors service moodys confirmed longterm credit rating hughes a3 seventh highest within 10 investment grade ratings available moodys longterm debt moodys defines a3 bonds uppermedium grade quality moodys rating hughes commercial paper remained unchanged p2 rating indicates issuer strong ability repayment relative issuers following gms hughes january 1997 announcement respect hughes business segments see note 18 hughes consolidated financial statements sp moodys reaffirmed current ratings outlook hughes securities moodys however put hughes ratings review possible downgrade iv53 debt ratings various rating agencies reflect agencys opinion ability issuers repay debt obligations punctually lower ratings generally result higher borrowing costs security rating recommendation buy sell hold securities may subject revision withdrawal time assigning rating organization rating evaluated independently rating supplemental data hughes consolidated financial statements reflect application purchase accounting adjustments described note 1 hughes consolidated financial statements however provided gms certificate incorporation earnings attributable gm class h common stock purposes determining amount available payment dividends gm class h common stock specifically excludes adjustments specifically amortization disposal intangible assets associated gms purchase hughes aircraft company amounted 1223 million 1996 1595 million 1995 1238 million 1994 1995 amount included 361 million charge included income writeoff purchase accounting adjustments related disposition certain nonstrategic business units amounts excluded earnings available payment dividends gm class h common stock charged earnings available payment dividends gms 1 23 par value stock unamortized purchase accounting adjustments associated gms purchase hughes aircraft company 27235 million 28458 million 30053 million december 31 1996 1995 1994 respectively order provide additional analytical data users hughes financial information supplemental data form unaudited summary pro forma financial data provided consistent basis earnings hughes available payment dividends gm class h common stock determined pro forma data exclude purchase accounting adjustments related general motors acquisition hughes aircraft company included supplemental data certain financial ratios provide measures financial returns excluding impact purchase accounting adjustments pro forma data presented measure gms total return investment hughes iv54 hughes electronic corporation subsidiaries unaudited summary pro forma financial data pro forma condensed consolidated statement income pro forma condensed consolidated balance sheet summary excludes purchase accounting adjustments related gms acquisition hughes aircraft company general motors equity whollyowned subsidiary hughes holders gm class h common stock direct rights equity assets hughes rather rights equity assets gm includes 100 stock hughes iv55 hughes electronics corporation subsidiaries unaudited summary pro forma financial data continued pro forma selected segment data summary excludes purchase accounting adjustments related gms acquisition hughes aircraft company certain amounts 1995 reclassified conform 1996 classifications 1 net sales less total costs expenses interest expense 2 operating profit percentage net sales 3 includes expenditures related telecommunications equipment amounting 1879 million 2746 million 2558 million respectively iv56 hughes electronics corporation subsidiaries unaudited summary pro forma financial data concluded pro forma selected financial data summary excludes purchase accounting adjustments related gms acquisition hughes aircraft company includes unfavorable cumulative effect accounting changes 304 million 1994 8721 million 1992 1 class h dividend base shares used calculating earnings attributable gm class h common stock per share basis average number gm class h shares outstanding 984 million 1996 2 earnings loss used computation available separate consolidated net income loss divided average stockholders equity general motors equity whollyowned subsidiary hughes holders gm class h common stock direct rights equity assets hughes rather rights equity assets gm includes 100 stock hughes 3 income loss interest income taxes divided average stockholders equity plus average total debt 4 income loss income taxes divided average total assets iv57 item 14 principal accounting fees services fees professional services provided plante moran pllc guc trust’s independent auditors years ended march 31 2016 2015 following categories including related expenses follows 1 consists fees audit guc trust’s annual financial statements review guc trust’s form 10k review quarterly financial statements included guc trust’s forms 10q review form 8k filings 2 includes fees preparation guc trust’s federal income tax return fiscal years ended march 31 2015 2014 preparation amended mlc state income tax returns assistance mlc tax compliance matters part iv item 15 item 14 principal accounting fees services fees professional services provided plante moran pllc guc trust’s independent auditors years ended march 31 2017 2016 following categories including related expenses follows 1 consists fees audit guc trust’s annual financial statements review guc trust’s form 10k review quarterly financial statements included guc trust’s forms 10q review form 8k filings 2 includes fees preparation guc trust’s federal income tax return fiscal years ended march 31 2016 2015 preparation amended mlc state income tax returns assistance mlc tax compliance matters part iv item 15 item 14 principal accounting fees services fees professional services provided plante moran pllc guc trust’s independent auditors years ended march 31 2019 2018 following categories including related expenses follows 1 consists fees audit guc trust’s annual financial statements review guc trust’s form 10k review quarterly financial statements included guc trust’s forms 10q review form 8k filings 2 includes fees preparation guc trust’s federal income tax returns fiscal years ended march 31 2018 2017 assistance mlc tax compliance matters part iv item 15 item 7 managements discussion analysis financial condition results operations following managements discussion analysis financial condition results operations mda read conjunction hughes electronics corporation consolidated financial statements mda period ended december 31 1997 included exhibit 99 annual report form 10k gmac annual report form 10k period ended december 31 1997 filed separately securities exchange commission hughes electronics corporation prior december 17 1997 restructuring company hereinafter referred former hughes electronics corporation subsequent december 17 1997 restructuring company hereinafter referred hughes earnings per share amounts included mda reported basic disaggregated financial results gms automotive sectors gms north american operations gmnao delphi automotive systems delphi gms international operations gmio prepared using management approach consistent basis manner gm management internally disaggregates financial information purposes assisting making internal operating decisions regard certain common expenses allocated among sectors less precisely would required standalone financial information prepared accordance generally accepted accounting principles gaap certain expenses primarily certain us taxes related nonus operations included gms sector financial results represent historical information used management internal decision making purposes therefore data prepared represent way business operate future data prepared gaap basis may materially different gmnao financial highlights 1 1995 provisions issue 951 emerging issues task force eitf financial accounting standards board revenue recognition sales guaranteed minimum resale value adopted resulted unfavorable aftertax impact 52 million 2 1997 results include 24 billion aftertax charges related competitiveness studies gm competitiveness studies excluding competitiveness studies charges income 23 billion net profit margin 23 vehicle unit deliveries cars trucks gmnao ii45 general motors corporation subsidiaries gmnao financial review including 24 billion aftertax charges related competitiveness studies see competitiveness studies gmnao reported net loss 1997 86 million excluding competitiveness studies charges gmnaos income 1997 23 billion 23 net sales revenues reported net income 730 million 08 net sales revenues 1996 15 billion 15 net sales revenues 1995the increase 1997 income excluding competitiveness studies charges primarily due higher wholesale sales volumes continued improvement profitability new vehicles lower material engineering costs factors partially offset higher retail incentives increased commercial spending support numerous vehicle launches progress unfavorable impact 238 million aftertax related work stoppage production losses decrease 1996 net income almost fully accounted lower wholesale sales caused three major work stoppages us canada net unfavorable impact 920 million aftertax factors impacting 1996 results record number new vehicle launches increased advertising consumer influence expenses related new vehicle launches unfavorable items partially offset savings associated continued implementation worldwide purchasing lean manufacturing strategies net favorable impact certain special items 397 million aftertax 1996 special items included favorable net plant closings reserve adjustments 450 million aftertax gain sale gms preferred stock interest avis inc 65 million aftertax effect favorable special items partially offset unfavorable impact retiree lump sum benefit payments 114 million aftertax net sales revenues 1997 1003 billion represented increase 69 billion compared 1996 improvement primarily due 397000 unit increase wholesale sales volumes net sales revenues 1996 934 billion represented decrease 25 billion compared 1995 decrease largely due lower number wholesale units sold result three previously mentioned work stoppages gmnaos 1997 market share decreased 308 intensely competitive north american market compared 310 323 1996 1995 respectively new products buicks park avenue pontiac grand prix oldsmobile intrigue gms new minivans well received marketplace significantly outselling models replaced addition gms fullsize pickups sport utility vehicles continue sell well even though late model cycles 1997 1996 gmnaos market share increase mexico resulted favorable customer reaction new products united states canada 1996 market share decreased primarily due work stoppages new vehicle launches restricted availability certain models gmnao reported pretax loss 1997 408 million compared pretax income 608 million 21 billion 1996 1995 respectively excluding 37 billion pretax impact competitiveness studies charges gmnaos 1997 pretax income 33 billion increased primarily due higher wholesale sales volumes continued improvement profitability new vehicles lower material engineering costs decrease 1996 pretax income primarily due impact lower wholesale sales resulting three work stoppages record number new vehicle launches restricted availability certain models partially offset favorable results continued efforts reduce costs improve efficiency net favorable impact special items previously mentioned effective income tax credit rate 1997 875 compared 140 275 1996 1995 respectively excluding previously mentioned competitiveness studies charges effective income tax rate 1997 315 adjusted rate indicated return normalized level 1996 credit tax rate resulted research experimentation credits united states favorable resolution items related gms 1995 tax return favorable tax position mexico 1995 tax rate reflected us net operating loss tax purposes carried back prior years subject higher income tax rates ii46 general motors corporation subsidiaries delphi financial highlights 1 1997 results include 870 million aftertax charges related competitiveness studies 50 million aftertax plant closing charge excluding charges income 860 million net profit margin 33 delphi financial review including 870 million aftertax charges related competitiveness studies see competitiveness studies 50 million aftertax plant closing charge related announcement delphi cease production trenton new jersey plant 1998 delphi reported net loss 60 million 1997 excluding charges delphis income 1997 860 million 33 net sales revenues reported net income 526 million 20 net sales revenues 1996 916 million 35 1995 increase 1997 income excluding competitiveness studies plant closing charges primarily result lower material manufacturing costs net impact work stoppages occurred 1997 oem customer locations versus three 1996 work stoppages related delphispecific issues unfavorable impact certain special items impacted 1996 net income special items included charges sale peregrine inc four delphi manufacturing facilities located flint livonia michigan oshawa windsor canada 153 million aftertax retiree lump sum benefit payments 49 million aftertax delphis net income 1996 decreased 526 million compared 916 million 1995 primarily due unfavorable impact three work stoppages 1996 special items net sales revenues 1997 263 billion represented increase 300 million compared prior year despite impact sale four plants annual revenues approximately 1 billion continued pricing pressures delphis 1997 sales customers outside gmnao vehicle groups continued increase represented approximately 38 total sales 34 delco electronics annualized basis including joint ventures increase reflected sales growth despite significant downward pressure revenues due volatility overseas economies associated weaker currencies net sales revenues 1996 totaled 26 billion compared 264 billion 1995 decrease primarily due three work stoppages including pretax charges 14 billion competitiveness studies 80 million trenton plant closing delphi reported pretax loss 167 million 1997 excluding charges delphis 1997 pretax income increased 13 billion compared 936 million 1996 excluding unfavorable 326 million pretax impact 1996 special items increase result lower material manufacturing costs well net impacts work stoppages occurred years delphis reported 1996 pretax income 610 million represented decrease 637 million 1995 pretax income 12 billion decrease primarily due unfavorable 326 million pretax impact 1996 special items impact three work stoppages earnings nonconsolidated affiliates decreased 15 million 1997 compared 47 million 1996 reflected unfavorable impact economic volatility overseas joint ventures particularly based korea effective income tax credit rate 1997 497 compared 220 302 1996 1995 respectively excluding competitiveness studies plant closing charges effective income tax rate 1997 352 normalized rate compared 1996 1995 december 17 1997 delco electronics delco gms automotive electronics business made part delphi organization places delphi position lead componentindustry trend toward integrated automotive systems integration delco delphi proceeds delphi establishes competitiveness combined operations gm evaluating relevant business considerations interests gm stockholders relating operations including consideration possible future public offering portion business operations formed combination delphi delco assurances long evaluations may take recommendations management may make gms board directors whether offering may occur ii47 general motors corporation subsidiaries gmio financial highlights 1 1997 results include 658 million aftertax charges related competitiveness studies favorable 158 million aftertax impact related special items excluding competitiveness studies charges favorable effect special items income 981 million net profit margin 28 vehicle unit deliveries cars trucks gmio ii48 general motors corporation subsidiaries gmio financial review including 658 million aftertax charges related competitiveness studies see competitiveness studies 103 million aftertax gain related sale gmes equity interest avis europe 55 million aftertax gain resulted settlement agreement volkswagen gmios 1997 net income 481 million excluding competitiveness studies charges favorable effect special items gmios income 1997 981 million 28 net sales revenues reported net income 15 billion 43 net sales revenues 1996 16 billion 51 net sales revenues 1995 decrease 1997 income excluding competitiveness studies charges favorable effect special items primarily due higher sales marketing costs intensely competitive market conditions deterioration profits latin america asia related economic turmoil emerging markets increased expenses related ambitious capacity expansion programs key growth regions startups holden commodore australia saab 95 decrease 1996 net income compared 1995 primarily due higher income tax rate net sales revenues 1997 totaled 357 billion increase 12 1996 net sales revenues 353 billion 98 higher 1995 increase net sales revenues 1997 reflected increased wholesale sales volumes europe latin america offset unfavorable impact yearoveryear currency exchange due appreciation us dollar gmios vehicle deliveries calendar year 1997 exceeded 32 million units despite intensely competitive market conditions gmio maintained 89 market share consistent prior year increase net sales revenues 1996 reflected increased wholesale sales volumes europe latin america asian pacific region pretax income 1997 decreased 561 million 18 billion 1996 included 1 billion pretax charges related competitiveness studies higher sales marketing costs well spending growth programs within asia latin america central europe fourth quarter 1997 gmios results impacted asian economic crisis significant economic volatility brazil startup new plant rosario argentina unfavorable items 1997 partially offset favorable 216 million pretax impact related previously mentioned special items increase pretax income 1996 reflected favorable impact increased net sales revenues favorable yearoveryear currency exchange partially offset spending growth programs new product development spending 1997 earnings nonconsolidated affiliates 39 million lower 1996 primarily due increased expenses saab related launch new 95 model earnings nonconsolidated affiliates 1996 153 million 1995 primarily due higher product development marketing costs saab dissolution australian joint venture holden toyota unusually high 1995 equity income nonrecurring asset sales isuzu effective income tax rate gmio 1997 242 compared 172 103 1996 1995 respectively excluding previously mentioned competitiveness studies charges special items effective income tax rate 1997 330 lower 1996 income tax rate primarily resulted income tax credits realized certain countries lower withholding taxes accrued unremitted earnings 1995 income tax rate favorably impacted nonrecurring income tax credits realized certain countries 1997 gme reported net loss 17 million compared net income 778 million 796 million 1996 1995 respectively decrease 1997 earnings primarily due 488 million aftertax charges related competitiveness studies higher sales marketing costs intensely competitive market conditions lower equity earnings saab related launch new 95 model partially offset favorable 158 million aftertax impact previously mentioned special items decrease 1996 net income primarily due competitive pricing environment reflected increased new product development costs net income 1996 also adversely affected startup vectra restricted availability early year remainder gmios operations reported 1997 net income 498 million represented decrease 256 million compared 1996 decline 1997 primarily resulted 170 million aftertax charges related competitiveness studies deterioration profits latin america related economic turmoil certain emerging markets remainder gmios operations reported 1996 net income 754 million represented decrease 94 million compared 1995 decline 1996 resulted higher tax rate lower equity earnings nonconsolidated affiliates increased spending growth programs asia latin america 1997 gmio continued longterm commitment automotive industry capital spending 24 billion bringing total capital expenditures past three years 7 billion ii49 general motors corporation subsidiaries gmac financial highlights 1 return average equity represents net income percentage average stockholders equity outstanding month period ii50 general motors corporation subsidiaries gmac financial review gmacs 1997 consolidated net income increased 49 1996 13 billion net income automotive financing operations totaled 910 million 38 1996 earnings decrease attributed reduced net financing margins partially offset lower credit losses loss provisions operating expenses net income insurance operations totaled 224 million 167 higher 1996 earnings increase attributed favorable underwriting experience higher realized capital gains net income mortgage operations totaled 167 million 637 higher 1996 earnings increase attributed significant increases originationpurchase volumes mortgage servicing portfolio 1997 gmac financed 331 new gm vehicle retail deliveries united states 284 264 1996 1995 respectively 1997 improvement primarily resulted higher volumes generated special rate financing lease incentive programs sponsored gm improvement achieved amid continued competitive pressures automotive financing marketplace gmacs automotive financing revenue totaled 126 billion 1997 compared 126 billion 117 billion 1996 1995 respectively increased us wholesale financing canadian operating lease revenues offset decline us international retail lease financing revenues resulting unchanged level financing revenues 1997 us wholesale financing revenues increased 1997 compared 1996 primarily higher average wholesale receivable balances resulting reduction average amount sold wholesale receivables year canadian operating lease revenues increased result 46 increase 1997 volume 1996 decline us international retail lease financing revenues 1996 1997 attributable continued competitive pressures markets increase 1996 total automotive financing revenue compared 1995 resulted higher revenues portfolios operating leases retail finance receivables partially offset decline wholesale revenue gmacs worldwide cost borrowing decreased 628 1997 compared 657 702 1996 1995 respectively cost borrowings united states 635 1997 compared 651 686 1996 1995 respectively improvements 1997 predominantly attributable reductions medium longterm debt costs improvements 1996 predominantly attributable greater proportion floating rate borrowings united states period general level interest rates declined net automotive financing revenue combined mortgage revenue insurance premiums income increased 1997 253 million 67 billion compared 64 billion 56 billion 1996 1995 respectively 1997 increase primarily due results mortgage insurance operations partially offset reduced net automotive financing margins expenses increased 116 million 493 million 1997 1996 respectively 1997 increase due higher costs salaries benefits increased insurance losses operating charges incidental expanding mortgage insurance business activities 1996 increase 1995 reflected higher general operating costs incidental expanded financing business activities principally mortgage operations well higher data processing costs increased credit losses operating leases higher collection repossession costs gmacs effective income tax rate 1997 412 compared 403 1996 422 1995 unfavorable change 1997 primarily attributable increases accruals prior years based periodic assessment adequacy accruals higher state local income taxes favorable change 1996 compared 1995 attributable lower effective income tax rates international financing operations ii51 general motors corporation subsidiaries hughes financial highlights including former hughes 1 excludes amortization adjustment gm purchase accounting adjustments approximately 118 million 122 million 160 million 1997 1996 1995 respectively related gms acquisition hughes aircraft company ii52 general motors corporation subsidiaries hughes financial review including former hughes december 17 1997 gm former hughes completed series related transactions hughes transactions designed address strategic challenges facing three principal businesses former hughes unlock stockholder value gm hughes transactions included taxfree spinoff defense electronics business former hughes defense holders 123 par value class h common stocks followed immediately merger hughes defense raytheon company raytheon concurrently delco transferred former hughes delphi finally class h common stock recapitalized gm tracking stock class h common stock linked telecommunications space businesses hughes result hughes transactions 1997 operating results hughes electronics corporation include results hughes defense delco december 17 1997 results telecommunications space businesses entire year net income 116 billion 1997 compared 103 billion 948 million 1996 1995 respectively excluding amortization adjustment purchase accounting adjustments relating gms acquisition hughes aircraft company earnings used computation available separate consolidated net income 128 billion 1997 compared 115 billion 1996 111 billion 1995 contributing 1997 increase net income 318 million aftertax gain recognized second quarter related panamsat corporation pas merger 63 million aftertax gain recognized fourth quarter sale hughesavicom international inc rockwell collins inc net income pas continued directvr subscriber growth increased sales commercial satellites partially offsetting increases lower earnings defense business resulting provisions taken certain air traffic control training contracts increased losses equity investments 1996 increase net income resulted higher operating profit telecommunications space businesses reduced losses hughesavicom international inc lower effective tax rate 72 million aftertax gain recognized first quarter sale 25 equity interest directv att partially offsetting increases impact delcos operating profit lower gm production volumes due three major work stoppages total revenues increased 177 billion 1997 compared 159 billion 1996 148 billion 1995 revenue growth propelled telecommunications space businesses revenues 1997 increased 56 billion compared 41 billion 32 billion 1996 1995 respectively 1997 increase telecommunications space businesses resulted strong directv subscriber growth higher sales commercial satellites completion pas merger increase 1996 reflected directv subscriber growth combined increased sales commercial satellites cellular communications equipment increased video distribution revenues galaxyr satellite transponders also contributing 1997 revenue increase modest increases delco hughes defense 1996 hughes defense revenues increased primarily due acquisition hughes defense communications increase revenues however mostly offset decreased revenues delco caused work stoppages various gm production locations year price reductions competitive pricing connection gms global sourcing initiative operating profit excluding amortization purchase accounting adjustments related gms acquisition hughes aircraft company 15 billion 1997 compared 16 billion 17 billion 1996 1995 respectively operating profit margins basis 85 101 113 1997 1996 1995 respectively decline 1997 operating profit operating profit margin due lower margins delco resulting price reductions provisions taken certain defense contracts startup costs related directv service latin america lower wireless telecommunications equipment sales margins decline 1996 operating profit operating profit margin due mainly unfavorable impact lower gm production volumes delco result previously mentioned work stoppages effective income tax rate 349 1997 compared 384 408 1996 1995 respectively decrease effective income tax rate 1997 primarily related research development credits decrease effective income tax rate 1996 due primarily favorable resolution certain tax contingencies ii53 general motors corporation subsidiaries results operations financing insurance operations equity basis facilitate analysis following sections present gms financial statements financing insurance operations primarily gmac reflected equity basis consolidated statements income financing insurance operations equity basis 1 effective january 1 1995 gm adopted eitf issue 951 2 net profit margin represents net income percentage net sales revenues ii54 general motors corporation subsidiaries results operations financing insurance operations equity basis continued 1997 gms income continuing operations cumulative effect accounting change totaled 67 billion 870 per share 123 par value common stock compared 5 billion 607 per share 123 par value common stock 6 billion 721 per share 123 par value common stock 1996 1995 respectively two significant items impacted 1997 financial results 43 billion taxfree gain 591 per share 123 par value common stock resulting december 17 1997 completion strategic restructuring former hughes see hughes transactions charges 40 billion aftertax 559 per share 123 par value common stock resulting gms competitiveness studies see competitiveness studies excluding impact two items 426 million aftertax impact special items occurred 1997 income continuing operations 6 billion 790 per share 123 par value common stock gm completed splitoff electronic data systems corporation eds june 7 1996 accordingly financial results related eds splitoff date reported discontinued operations gms 1996 net income including income discontinued operations june 7 1996 splitoff totaled 5 billion 606 per share 123 par value common stock compared 69 billion 728 per share 123 par value common stock 1995 additional information regarding splitoff eds contained note 1 gm consolidated financial statements highlights financial performance gms major business sectors follows millions reference made gmnao delphi gmio gmac hughes including former hughes financial reviews presented pages ii45 ii53 incorporated reference supplement information presented herein 1997 net sales revenues increased 84 billion 1538 billion compared 1454 billion 1438 billion 1996 1995 respectively 1997 increase primarily resulted higher wholesale sales volumes gmnao gmio 1996 increase resulted higher net sales revenues gmio former hughes partially offset lower wholesale sales north america gross margin 154 1997 compared 153 156 1996 1995 respectively 1997 increase gross margin realized despite unfavorable impact competitiveness studies reflected favorable impact higher wholesale sales savings associated continued implementation worldwide purchasing lean manufacturing strategies partially offset increased retail incentives highly competitive north american market gross margin 1996 included favorable impact 789 million related plant closing reserve adjustments decreased compared 1995 primarily due lower wholesale sales increased safety emissions costs spending new product launches new product development higher costs 1996 partially offset savings gmnao delphi gmio connection gms strategy utilizing common parts processes implementing lean operations selling general administrative expenses increased 1997 1996 primarily due efforts grow business gm business sectors included increased advertising consumer influence spending connection new vehicle launch support marketing programs north america europe depreciation amortization expenses increased 1997 approximately 47 billion compared 1996 amount primarily due 41 billion charges related competitiveness studies remainder increase 1997 well increase 1996 compared 1995 related increased expenditures production quality improvements worldwide income less income deductions 78 billion 1997 compared 21 billion 1996 12 billion 1995 respectively increase 1997 primarily due 43 billion gain related completion hughes transactions 490 million pretax gain related merger satellite service operations former hughes pas amount reported 1996 included 120 million pretax gain associated sale 25 equity interest directv 105 million pretax gain sale gms preferred stock interest avis inc interest expense totaled 971 million 1997 compared 859 million 344 million 1996 1995 respectively higher interest expense 1997 due primarily additional interest related higher longterm debt level former hughes lower 1995 interest expense resulted reversal interest related income tax issues resolved 1995 reevaluation remaining reserve lower 1995 accrued interest outstanding tax issues ii55 general motors corporation subsidiaries results operations financing insurance operations equity basis concluded 1997 effective income tax rate 28 compared 201 249 1996 1995 respectively lower 1997 tax rate primarily resulted effect taxfree status gain related completion hughes transactions 1996 tax rate included favorable resolution items related gms 1995 tax return overall foreign tax rates lower us statutory rate research experimentation credits 1995 tax rate included resolution numerous prior year tax issues worldwide efficient utilization net operating loss carryback tax benefits associated mix foreign earnings foreign income taxes tax benefits relating sale net assets national car rental system ncrs hughes transactions december 17 1997 gm former hughes completed series related transactions hughes transactions designed address strategic challenges facing three principal businesses former hughes unlock stockholder value gm hughes transactions included taxfree spinoff defense electronics business former hughes defense holders 123 par value class h common stocks followed immediately merger hughes defense raytheon company raytheon concurrently delco transferred former hughes delphi finally class h common stock recapitalized gm tracking stock class h common stock linked telecommunications space businesses hughes additional information regarding hughes transactions contained note 22 gm consolidated financial statements competitiveness studies global automotive industry including automotive components systems market become increasingly competitive presently undergoing significant restructuring consolidation activities major industry participants continuing increase focus efficiency cost improvements announced capacity increases north american market excess capacity european market led continuing price pressures result gmnao delphi delco gmio initiated studies 1997 concerning longterm competitiveness facets businesses competitiveness studies performed conjunction gms current business planning cycle substantially completed december 1997 additional information regarding competitiveness studies contained note 2 gm consolidated financial statements based results competitiveness studies gm recorded pretax charges income totaling 63 billion 40 billion aftertax 559 per share 123 par value common stock charges comprised 37 billion 24 billion aftertax gmnao 14 billion 870 million aftertax delphi delco 1 billion 658 million aftertax gmio 205 million 128 million aftertax gms sector overall charges effect reducing net sales revenues 459 million increasing cost sales depreciation amortization deductions 17 billion 41 billion 72 million respectively going forward gms future cash requirements relating charges expected total approximately 21 billion next five years competitiveness studies charges included amounts underperforming assets including vehicle component manufacturing assets pursuant gms policy valuation longlived assets future investments relating underperforming product lines expensed gm continue monitor competitiveness aspects businesses competitiveness studies undertaken market conditions warrant future charges may result delphis fixclosesell strategy cost reduction programs europe foreign currency years ended december 31 1997 1996 1995 gm recorded financial performance operations brazil using us dollar functional currency due gms classification brazilian economy highly inflationary accordingly translation gains losses recognized incurred consolidated income statement financial accounting standards 52 foreign currency translation defines highly inflationary economy one cumulative inflation approximately 100 threeyear period mid1997 brazilian threeyear cumulative inflation rate fell 100 level result gm evaluated historical inflation rate trends certain factors determined longer classify brazilian economy highly inflationary result beginning january 1 1998 gm record financial performance operations brazil using local currency functional currency translation gains losses recorded stockholders equity section consolidated balance sheet ii56 general motors corporation subsidiaries year 2000 certain gm information systems potential operational problems connection applications contain date andor use date comparative manner date transitions year 2000 gm comprehensive worldwide program identify remediate potential problems related year 2000 information systems infrastructure production manufacturing facilities addition gm initiated formal communications significant external interfaces determine extent gm vulnerable third parties failures remediate potential problems related year 2000 inability gm significant external interfaces gm adequately address year 2000 issues could cause disruption gms business operations many gms systems year 2000 compliant scheduled replacement gms ongoing systems plans gm incurred expensed approximately 40 million year ended december 31 1997 related assessment preliminary efforts connection year 2000 program remediation plan future spending software modifications testing required year 2000 currently estimated approximately 360 million 500 million majority expected incurred 1998 gms target date completing year 2000 modifications december 31 1998 additional testing refinements identified systems planned 1999 liquidity capital resources financing insurance operations equity basis total cash marketable securities december 31 1997 145 billion compared 17 billion december 31 1996 1997 gm elected prefund part postretirement benefits liability primarily related postretirement health care expenses creating voluntary employees beneficiary association veba trust contributed 3 billion cash reserves veba assets effect reducing gms postretirement benefits liability consolidated balance sheet gm believes sufficient resources meet anticipated future cash flow requirements addition cash flows operations gm subsidiaries maintain substantial lines credit various financial institutions additional information gms available credit facilities contained note 10 gm consolidated financial statements net liquidity calculated cash marketable securities less total loans payable longterm debt capitalized leases 82 billion december 31 1997 decrease 22 billion prior year gm previously indicated goal maintaining 13 billion cash marketable securities order continue funding product development programs throughout next downturn business cycle 13 billion target includes cash pay certain costs prefunded part 3 billion veba contribution separately approximately 2 billion cash december 31 1997 relates hughes transactions used fund future growth initiatives hughes next several years longterm debt 55 billion december 31 1997 increase approximately 300 million prior year ratio longterm debt capitalized leases total longterm debt capitalized leases stockholders equity 245 187 december 31 1997 1996 respectively ratio longterm debt capitalized leases shortterm loans payable total debt stockholders equity 266 220 december 31 1997 1996 respectively february 1998 gm board directors approved 4 billion stock repurchase program stock repurchases expected made 12month period principally open market transactions represent 10 percent outstanding shares 123 par value common stock based nyses closing price friday february 6 1998 6056 per share new stock repurchase program began midmarch upon completion gms second 25 billion stock repurchase program upon completion 4 billion stock repurchase program gms stock repurchases since january 1997 total 9 billion book value per share 123 par value common stock decreased 2226 2795 december 31 1997 1996 respectively book value per share class h common stock decreased 1336 december 31 1997 1397 december 31 1996 book value per share determined based liquidation rights various classes common stock liquidity capital resources gmac december 31 1997 gmac owned assets serviced automotive receivables others totaling 1207 billion compared 1081 billion year end 1996 earning assets totaled 1045 billion 957 billion december 31 1997 1996 respectively increase earning assets primarily attributable increase investments securities portfolio higher wholesale real estate mortgage outstandings continued growth operating leases partially offset decline retail finance receivables portfolio cash equivalents totaled 759 million 742 million december 31 1997 1996 respectively consolidated finance receivables net unearned income totaled 605 billion 593 billion december 31 1997 1996 respectively higher outstanding balance primarily attributable 22 billion increase us canadian wholesale receivables portfolios offset 09 billion decline european finance receivables ii57 general motors corporation subsidiaries consolidated balance sheets financing insurance operations equity basis liquidity capital resources gmac concluded gmacs liquidity well ability profit ongoing acquisition activity large part dependent access capital costs associated raising funds different segments capital markets regard gmac regularly accesses short medium longterm debt markets principally commercial paper term notes underwritten issuances gmacs borrowings outstanding december 31 1997 totaled 867 billion compared 787 billion december 31 1996 gmacs ratio debt total stockholders equity december 31 1997 991 951 december 31 1996 higher yeartoyear debt levels principally used fund increased asset levels gmac continued use asset securitization program alternative funding source sold finance receivables continues service fee servicing portfolio sold finance receivables totaled 124 billion 97 billion december 31 1997 1996 respectively gmac subsidiaries maintain substantial bank lines credit totaled 398 billion 407 billion december 31 1997 1996 respectively unused portion credit lines totaled 304 billion december 31 1997 200 million lower december 31 1996 ii58 general motors corporation subsidiaries consolidated statements cash flows financing insurance operations equity basis cash flows financing insurance operations equity basis net cash provided operating activities 139 billion 167 billion 111 billion 1997 1996 1995 respectively decrease net cash provided operating activities 1997 primarily resulted 3 billion veba contribution previously discussed 35 billion increase deferred tax assets partially offset 500 million yearoveryear increase operating assets liabilities 17 billion yearoveryear increase income continuing operations depreciation amortization expenses increased 47 billion 1997 primarily due competitiveness studies charges increase net cash provided operating activities 1996 resulted decrease accounts receivable cash contributions worldwide pension funds higher depreciation ii59 general motors corporation subsidiaries cash flows financing insurance operations equity basis concluded amortization expenses 1 billion income tax refund related carryback 1995 net operating loss tax purposes partially offset increase deferred tax assets cash pension contributions 1996 decreased due improved funding gms us hourly pension plan included effects 1995 noncash contribution gms former class e common stock eds common stock valued book purposes approximately 63 billion 1995 net cash used investing activities decreased 93 billion 1997 compared 111 billion 94 billion 1996 1995 respectively decrease 1997 primarily due gms receipt 40 billion proceeds borrowings hughes defense prior spinoff hughes defense see hughes transactions partially offset 17 billion increase investments companies net cash acquired primarily related completion merger satellite service operations former hughes pas increase 1996 primarily due 24 billion net change investments marketable securities combined 953 million increase property expenditures partially offset 500 million special intercompany payment eds worldwide property expenditures 1997 63 us 60 1996 65 1995 7 canada mexico 10 1996 8 1995 30 overseas 30 1996 27 1995 devoted primarily improve efficiency quality increase truck assembly capacity increase gms global presence capital expenditures 1998 estimated approximately 105 billion outstanding commitments 78 billion december 31 1997 net cash used financing activities increased 67 billion compared 12 billion 21 billion 1996 1995 respectively 1997 gm used 38 billion acquire 635 million shares 123 par value common stock completed 25 billion stock repurchase program announced january 1997 represented 50 percent gms second 25 billion stock repurchase program announced august 1997 gm also used approximately 600 million repurchase shares 123 par value common stock certain employee benefit plans 1997 also 1997 net cash flows used association changes longterm debt increased approximately 18 billion compared 1996 reflected combination refinancing retirement using gms new commercial paper program cash received connection hughes transactions cash used financing activities 1995 included 13 billion repurchase preference stocks dividends may paid common stocks declared gm board directors gm board sole discretion gms policy distribute dividends 123 par value common stock based outlook indicated capital needs business february 1998 gm board declared quarterly cash dividend 050 per share 123 par value common stock payable march 10 1998 gm board also declared quarterly dividends series b series g depositary shares 057 0495 057 per share respectively payable may 1 1998 respect class h common stock recapitalized december 17 1997 gm board determined pay cash dividends time order allow earnings hughes retained investment telecommunications space businesses cash flows gmac 1997 cash provided operating financing activities totaled 41 billion 83 billion respectively cash used investing activities principally expanding investments securities finance receivables operating lease portfolios totaled 123 billion 1996 cash provided operating financing activities totaled 42 billion 26 billion respectively cash used investing activities primarily expanding finance receivables operating lease portfolios totaled 75 billion 1995 cash provided operating financing activities totaled 59 billion 67 billion respectively cash used investing activities principally expanding finance receivables operating lease portfolios totaled 125 billion ii60 general motors corporation subsidiaries health care expense postretirement benefits cost postretirement medical dental vision life insurance benefits provided retirees eligible dependents recognized consolidated financial statements period employees provide services gm costs medical dental vision life insurance benefits provided employees active service expensed incurred payasyougo components postretirement benefits expense us health care cost cash expenditures gms us operations set forth excluding cash expenditures hughes former hughes nonautomotive employees including gmac gm committed reducing burden continuing health care cost increases 1997 gm elected prefund part postretirement benefits liability creating veba trust contributed 3 billion cash reserves veba assets effect reducing gms postretirement benefits liability consolidated balance sheet payasyougo amounts 1996 17 billion retirees 18 billion active employees 35 billion total gm disclosed consolidated financial statements certain amounts associated estimated future postretirement benefits pensions classified amounts accumulated postretirement benefit obligations liabilities obligations notwithstanding recording amounts use terms gm admit otherwise acknowledge amounts existing postretirement benefit plans gm pensions represent legally enforceable liabilities gm card gm sponsors credit card program entitled gm card program introduced us september 1992 subsequently canada australia brazil chile united kingdom cardholders use card generates entitlements rebates used solely connection cardholders purchase lease new gm vehicle sponsor gm card program gm provide consumer credit program used marketing tool increase product sales independent banks issue gm card responsible evaluating extending funding credit cardholders fully responsible credit card losses recourse gm us gm card rebates accumulate rate equal 5 spending goods services charged gm card maximum rebate amount 500 per year rebates expire 7 years may applied sales allowances market time vehicle purchase lease gm solely responsible cardholders rebates provisions gm card rebates recorded reductions revenue time vehicle sale gm right prospectively modify plan rebates redeemed worldwide 1997 1996 1995 656 million 443 million 299 million respectively cardholder rebates available worldwide future redemption cardholder purchases leases new gm vehicle amounted 35 billion 32 billion net deferred program income december 31 1997 1996 respectively gm anticipates profits incremental sales resulting gm card program along deferred program income offset future rebate costs associated gm card ii61 general motors corporation subsidiaries security ratings debt ratings various rating agencies reflect agencys opinion ability issuers repay debt obligations punctually lower ratings generally result higher borrowing costs security rating recommendation buy sell hold securities may subject revision withdrawal time assigning rating organization rating evaluated independently rating moodys investors services moodys longterm debt gm gmac hughes rated a3 moodys seventh highest within ten investment grade ratings available signifies uppermedium grade quality rating gm preference stocks gms capital trust capital trust g trust originated preferred securitiessm toprssm baa1 fourth highest within six investment grade ratings available signifies mediumgrade quality additional information regarding gms toprssm see note 17 gm consolidated financial statements gmacs commercial paper rated p1 highest three investment grade ratings available indicates issuers ability repay superior relative issuers gm hughes commercial paper rated p2 second highest investment grade rating available indicates issuer strong ability repayment relative issuers standard poors ratings services sp january 1998 sp division mcgrawhill companies inc raised longterm debt ratings commercial paper ratings a2 a1 gm gmac sp also raised preference stock rating gm bbb indicated ratings outlook revised stable positive based intensively competitive automotive industry conditions limiting upgrade potential rating longterm debt commercial paper ratings various overseas gmac affiliates also raised sp time sp affirmed ratings a2 longterm debt commercial paper hughes indicated outlook remains developing sps credit ratings longterm debt sixth seventh highest within ten investment grade ratings available indicate strong capability pay interest repay principal although somewhat susceptible adverse effects changes circumstances economic conditions debt higherrated categories preference stock toprssm rating seventh highest within ten investment grade ratings available indicates issue backed sound capacity pay related obligations a1 commercial paper rating second highest four categories available indicates degree safety regarding timely payment strong a2 commercial paper rating third highest category available indicates degree safety regarding timely payment satisfactory duff phelps credit rating co dp longterm debt gm gmac rated dp seventh highest within ten investment grade ratings available indicates adequate likelihood timely payment principal interest average adequate protection factors risk factors however variable greater periods economic stress gms preference stocks toprssm rated bbb eighth highest ten investment grade ratings available indicates considered reasonably safe securities assigned rating dp average protection factors still considered sufficient prudent investment gms gmacs commercial paper rated d1 respectively first second highest five investment grade ratings available signify high certainty timely payment based excellent liquidity factors good fundamental protection factors ii62 general motors corporation subsidiaries security ratings concluded fitch investors service inc fitch june 1997 fitch raised longterm debt ratings gm gmac preference stock rating gm bbb fitch also affirmed commercial paper ratings revised outlook gm gmac stable improving longterm debt rating fitch sixth highest within ten investment grade ratings available fitchs rating considered high credit quality based obligors strong ability pay interest repay principal may vulnerable adverse changes economic conditions circumstances debt higher ratings gms preference stocks toprssm rating seventh highest ten investment grade ratings available indicates considered good quality asset protection coverage related dividends gms gmacs commercial paper rated second highest four investment grade ratings available indicates shortterm issues possess strong credit qualities holding sufficient liquidity meet obligations timely manner sm trust originated preferred securities toprs service trademarks merrill lynch co deferred income taxes december 31 1997 gms consolidated balance sheet included net deferred tax asset approximately 203 billion related net future deductible temporary differences see note 6 gm consolidated financial statements united states approximately 155 billion related obligation postretirement benefits pensions realization net deferred tax asset dependent upon profitable operations united states future reversals existing taxable temporary differences although realization assured gm believes likely benefits realized reduction future taxable income management carefully considered various factors assessing probability realizing deferred tax assets including operating results gmnao delphi recent three year period overall financial forecasts book taxable income 19982002 period improvements expected continuing efforts maintain gms competitiveness including actions relating reducing material costs global sourcing increasing efficiency lean manufacturing operating results gmac generated us pretax income approximately 22 billion 21 billion 18 billion 1997 1996 1995 respectively ability utilize tax planning capitalization research experimentation costs tax purposes gm expect generate near future significant us federal tax net operating loss carryforwards extended period time tax assets utilized postretirement benefits become tax deductions periods 50 years fact gm never lost deferred federal tax credits due expiration us net operating loss carryforward dividends received foreign operations us federal income tax purposes totaled approximately 3 billion 12 billion 182 million 1997 1996 1995 respectively 1995 reduced level dividends resulted tax planning strategies related gms us net operating loss carryback position tax purposes pensions december 31 1997 gms total worldwide net unfunded pension position increased 50 billion 05 billion us automotive sectors qualified hourlysalary plans 45 billion plans worldwide 48 billion year ago 19 billion us automotive sectors qualified hourlysalary plans 29 billion plans worldwide excluding impact related hughes transactions gms 1996 total worldwide net unfunded pension liability would 62 billion 19 billion us automotive sectors qualified hourlysalary plans 43 billion plans worldwide major factors contributing decrease unfunded position us automotive sectors qualified hourlysalary plans included asset returns excess assumed 10 asset earnings rate contributions year partially offset 50 basis point decrease discount rate used measure pension obligation end 1997 compared 1996 1997 1996 respectively gm contributed 15 billion 08 billion cash us hourly pension plans economic basis gm continues maintain fullyfunded status us hourly salaried pension plans december 31 1997 economic basis measuring us hourly salaried pension liability differs statement financial accounting standards sfas 87 employers accounting pensions basis required gaap gm believes better measure gms ongoing economic exposure pension obligations uses measure determine funding economic basis discounts pension liabilities longterm asset earnings rate assumption currently 100 rather yearend market rate required sfas 87 currently 70 periods low interest rates current market environment sfas 87 liability generally exceed liability calculated economic basis whereas periods high interest rates economic basis liability generally exceed sfas 87 liability ii63 general motors corporation subsidiaries environmental matters gm subject various laws relating protection environment including laws regulating air emissions water discharges waste management environmental cleanup gm also various stages investigation remediation sites contamination alleged liability worldwide environmental cleanup 610 million 646 million december 31 1997 1996 respectively future periods new laws regulations advances technologies additional information ultimate remedy selected new existing sites gms share cost remedies could significantly change gms estimates process estimating environmental liabilities complex dependent primarily nature extent historical information physical data relating contaminated site complexity site uncertainty remedy technology required outcome discussions regulatory agencies potentially responsible parties prps multiparty sites number financial viability prps 1997 1996 1995 gm expensed 88 million 94 million 134 million respectively environmental investigation remediation waste management addition worldwide capital expenditures discussed previously included 115 million 122 million 133 million 1997 1996 1995 respectively various environmental matters employment payrolls 1 excludes eds hughes former hughes nonautomotive employees saturn ncrs 2 includes employees work excludes laidoff employees receiving benefits forwardlooking statements following principal important factors may cause actual results differ materially expressed forwardlooking statements made managements gm hughes changes economic conditions currency exchange rates political stability major markets gm procures material components supplies production principal products produced distributed sold ie north america europe latin america asiapacific including effects current economic problems asia political problems far east shortages fuel interruptions transportation systems labor strikes work stoppages interruptions difficulties employment labor major markets gm purchases material components supplies production products produced distributed sold significant changes competitive environment major markets gm purchases material components supplies production products produced distributed sold changes laws regulations policies activities governments agencies similar organizations actions may affect production distribution sale gm products cost thereof applicable tax rates ability gm achieve reductions cost employment levels realize production efficiencies implement capital expenditures levels times planned management ability gm achieve sale assets held disposal delphi within timing revenue levels upon terms contemplated management respect gms hughes subsidiary additional risk factors include ability achieve subscriber growth directtohome businesses ability sustain technological competitiveness failure planned satellite launches access capital financial flexibility order take advantage new market opportunities respond competitive pressures react quickly major changes marketplace ii64 general motors corporation subsidiaries item 7a item 7 managements discussion analysis financial condition results operations following managements discussion analysis financial condition results operations mda read conjunction hughes electronics corporation hughes consolidated financial statements mda period ended december 31 1999 included exhibit 99 gm annual report form 10k period ended december 31 1999 related hughes annual report form 10k filed separately securities exchange commission sec general motors acceptance corporation gmac annual report form 10k period ended december 31 1999 filed separately sec financial data related delphi automotive systems corporation delphi presented discontinued operations periods presented see note 2 gm consolidated financial statements hughes prior december 17 1997 restructuring company hereinafter referred former hughes subsequent december 17 1997 restructuring company hereinafter referred hughes earnings per share amounts included mda reported diluted gm presents separate supplemental consolidating financial information following businesses automotive communications services operations financing insurance operations gms reportable operating segments within automotive communications services operations business consist gm automotive gma comprised four regions gm north america gmna gm europe gme gm asiapacific gmap gm latin americaafricamideast gmlaam gmna designs manufactures markets vehicles primarily north america following nameplates chevrolet pontiac gmc oldsmobile buick cadillac saturn gme gmap gmlaam meet demands customers outside north america vehicles designed manufactured marketed following nameplates opel vauxhall holden isuzu saab buick chevrolet gmc cadillac hughes includes activities relating digital entertainment information communications services satellitebased private business networks segment includes design manufacturing marketing locomotives heavyduty transmissions elimination intersegment transactions certain nonsegment specific revenues expenditures gms reportable operating segments within financing insurance operations business consist gmac provides broad range financial services including consumer vehicle financing fullservice leasing fleet leasing dealer financing car truck extended service contracts residential commercial mortgage services commercial vehicle homeowners insurance assetbased lending financing insurance operations segment includes financing entities operating canada germany brazil associated gmac disaggregated financial results gma prepared using management approach consistent basis manner gm management internally disaggregates financial information purpose assisting making internal operating decisions regard certain common expenses allocated among regions less precisely would required standalone financial information prepared accordance generally accepted accounting principles gaap certain expenses primarily certain us taxes related nonus operations included automotive communications services operations segment financial results represent historical information used management internal decision making purposes therefore data prepared represent way business operate future data prepared gaap basis may materially different results operations 1999 gms consolidated income continuing operations totaled 56 billion 853 per share 123 par value common stock compared 30 billion 432 per share 123 par value common stock 65 billion 845 per share 123 par value common stock 1998 1997 respectively 1999 financial results impacted net charges 110 million aftertax 009 per share 123 par value common stock included increase income 553 million aftertax 084 per share 123 par value common stock related reversal liability benefits payable excess us hourly employees see note 4 gm consolidated financial statements charge 408 million aftertax 062 per share 123 par value common stock related benefit increase granted hourly retirees connection united auto workers uaw agreement gm expenses benefit period contract uaw ratified see gma financial review information charge 165 million aftertax 017 per share 123 par value common stock 039 per share gm class h common stock related hughes decision discontinue certain wireless manufacturing operations hughes network systems hns charge 90 million aftertax 014 per share 123 par value common stock related us salaried early retirement program approximately 1700 people elected participation program excluding impact special items income continuing operations 57 billion 862 per share 123 par value common stock ii3 general motors corporation subsidiaries results operations concluded 1998 financial results impacted charges 272 million special items included 228 million aftertax 034 per share 123 par value common stock resulting gms 1998 competitiveness studies see competitiveness studies note 3 gm consolidated financial statements 44 million aftertax 006 per share 123 par value common stock related work schedule modifications opel belgium additionally 1997 financial results impacted two significant items 43 billion taxfree gain 587 per share 123 par value common stock resulting december 17 1997 completion strategic restructuring former hughes see hughes financial review charges 32 billion aftertax 436 per share 123 par value common stock resulting gms 1997 competitiveness studies see competitiveness studies excluding impact special items 476 million income 1997 income continuing operations 33 billion 472 per share 123 par value common stock 49 billion 640 per share 123 par value common stock 1998 1997 respectively april 12 1999 gm board directors gm board approved complete separation delphi gm means spinoff taxfree gm stockholders us federal income tax purposes completed may 281999 accordingly financial results related delphi periods presented reported discontinued operations gms net income 1999 including income discontinued operations totaled 60 billion 918 per share 123 par value common stock compared income 30 billion 418 per share 123 par value common stock income 67 billion 862 per share 123 par value common stock 1998 1997 respectively additional information regarding spinoff delphi contained note 2 gm consolidated financial statements information regarding effect current year acquisitions refer note 23 gm consolidated financial statements automotive communications services operations highlights financial performance gms automotive communications services operations business follows years ended december 31 millions 1999 1998 1997 total net sales revenues gma 146056 129054 137675 hughes 7594 6095 5624 2457 2012 12796 total net sales revenues 156107 137161 156095 net income loss gma 4981 1634 449 hughes 1 270 272 471 669 279 4245 income continuing operations 4042 1627 5165 discontinued operations 426 93 215 net income 4468 1534 5380 1excludes amortization gm purchase accounting adjustments 21 million years related gms acquisition hughes aircraft company hac 1985 amortization allocated gms segment consistent basis upon segments evaluated amounts gma hughes financial reviews presented pages ii5 ii11 reflect change gms organizational structure resulting 1997 restructuring former hughes 1997 amounts hughes exclude delco hughes defense include hughes defense ii4 general motors corporation subsidiaries gma financial highlights year ended december 31 1999 1998 1997 dollars millions gmna total net sales revenues 115132 96497 102628 pretax income loss 7192 2409 249 income tax expense benefit 2339 787 272 earningslosses nonconsolidated associates minority interests 31 13 35 gmna income loss 4822 1635 12 gme total net sales revenues 26225 25840 24918 pretax income 642 740 256 income tax expense 220 319 121 earningslosses nonconsolidated associates minority interests 1 2 152 gme income loss 423 419 17 gmlaam total net sales revenues 4709 7553 8784 pretax loss income 266 471 536 income tax benefit expense 156 213 43 earningslosses nonconsolidated associates minority interests 29 83 174 gmlaam loss income 81 175 667 gmap total net sales revenues 3187 3044 3138 pretax loss 76 82 235 income tax benefit expense 7 9 29 earningslosses nonconsolidated associates minority interests 149 152 34 gmap loss 218 243 172 gma 1 total net sales revenues 146056 129054 137675 pretax income 7548 2594 279 income tax expense benefit 2418 902 149 earningslosses nonconsolidated associates minority interests 149 58 21 gma income 4981 1634 449 1 gmas results include eliminations transactions among gmna gme gmlaam gmap ii5 general motors corporation subsidiaries years ended december 31 1999 1998 1997 units thousands wholesale sales gmna cars 2992 2731 3095 trucks 2882 2340 2454 total gmna 5874 5071 5549 gme cars 1824 1764 1708 trucks 144 118 142 total gme 1968 1882 1850 gmlaam cars 350 404 495 trucks 173 248 290 total gmlaam 523 652 785 gmap cars 162 202 176 trucks 259 217 416 total gmap 421 419 592 total worldwide 8786 8024 8776 gma financial review gmas income 50 billion 16 billion 449 million 1999 1998 1997 respectively gmas 1999 results included 257 million special items consist previously mentioned increase income 553 million aftertax related reversal liability benefits payable excess us hourly employees see note 4 gm consolidated financial statements charge 257 million aftertax related previously mentioned benefit increase granted hourly retirees connection uaw agreement charge 39 million aftertax related us salaried early retirement program referred previously mentioned 1998 special items totaling 272 million aftertax related gmas 1998 results gmas portion 1997 special items included charge 30 billion aftertax related 1997 competitiveness studies increase income 158 million aftertax related previously mentioned 1997 special items excluding special items gmas income 47 billion 32 total net sales revenues 19 billion 15 total net sales revenues 33 billion 24 total net sales revenues 1999 1998 1997 respectively increase 1999 income net margin excluding special items primarily due continued improvement profitability new vehicles higher production volumes gmna compared prior year work stoppages two component plants flint michigan halted production wholesale units 26 29 assembly plants north america lower material costs ii6 general motors corporation subsidiaries gma financial review continued decrease 1998 income compared 1997 excluding special items primarily due lower production volumes gmna resulting work stoppages mentioned higher retail incentives economic downturn throughout latin america partially offset material engineering structural cost savings gmas net sales revenues 1999 1461 billion represented increase 170 billion compared 1998 increase largely due increases wholesale sales volumes 762000 units prior year primarily due 1998 gmna work stoppages previously mentioned total net sales revenues 1998 1291 billion represented decrease 86 billion compared 1997 decrease primarily due lower number wholesale units sold result previously mentioned work stoppages economic downturn throughout latin america gmas worldwide vehicle deliveries approximately 8678000 represented market share 158 1999 compared approximately 8198000 deliveries 156 market share approximately 8565000 deliveries 160 market share 1998 1997 respectively gmnas 1999 market share 286 compared 285 305 1998 1997 respectively gm currently negotiating agreement announced november 1999 commerce one recognized leader businesstobusiness electronic procurement solutions development automotive focused ecommerce marketsite called gm tradexchange connection agreement gm ford motor company daimlerchrysler corporation jointly announced february 25 2000 planning combine efforts form businesstobusiness integrated supplier exchange single global portal venture create worlds largest virtual marketplace new enterprise offer open participation auto manufacturers around world respective market suppliers partners dealers eventually marketplace could expanded encompass industries three automakers plan equal ownership new venture would operate separate independent business definitive agreement venture expected reached first quarter 2000 subject appropriate governmental approvals services currently associated existing exchange continue offered gmna reported income 48 billion 1999 compared income 16 billion loss 12 million 1998 1997 respectively gmnas 1999 results impacted 1999 special items referred relating gma gmnas portion 1998 1997 special items included charge 80 million aftertax related 1998 competitiveness studies charge approximately 24 billion aftertax related 1997 competitiveness studies excluding special items gmnas income 46 billion 17 billion 24 billion 1999 1998 1997 respectively improvement 1999 income 1998 excluding special items primarily due prior years work stoppages higher wholesale sales volumes continued improvement cost profitability new vehicles lower material costs reduced warranty expense resulting improved quality improvement partially offset increased manufacturing costs preproduction launch costs associated new lesabre impala monte carlo saturn ls deville aurora tahoe suburban yukon xl models well increased engineering costs innovation gms portfolio net price unfavorable 1999 03 yearoveryear net price comprehends percent increasedecrease customer pays current period comparably equipped vehicle produced previous years period decrease gmna income 1998 compared 1997 excluding special items primarily due previously discussed work stoppages minimized strong cost performance offset price reductions driven competitive market pressures 1998 cost performance resulted quality initiatives material performance reduced structural cost 1999 uaw labor contract ratified october 13 1999 covering fouryear term 19992003 contract included annual salary increase 3 per year upfront signing bonus 1350 per uaw employee amortized evenly life contract pension benefit increases addition retiree benefit increases include lump sum payments 125 monthly benefit increase per year service retiree lump sum payments resulted previously mentioned charge gms 1999 fourth quarter earnings approximately 408 million aftertax 151 million allocated gms segment pension benefit increases paid plan assets 1999 contract includes job security sourcing provisions containing employment floor set 95 1996 employment levels event net outsourcing also requires level attrition replacement based 1999 benchmark minimum employment level reduced 5 life contract 1999 canadian auto workers caw labor agreement ratified october 241999 covering threeyear term 19992002 contract included annual salary increase 3 per year upfront signing bonus 1000 canadian approximately 679 december 31 1999 exchange rate per active caw employee amortized evenly life contract addition hourly actives retirees granted pension benefit increases paid plan assets 1999 labor agreement continues provide flexibility cut costs streamline operations ii7 general motors corporation subsidiaries gma financial review continued past gm recorded liabilities termination postemployment benefits paid pursuant union contractual agreements connection closed plants north america december 31 1998 total liabilities represented approximately 5500 employees totaled approximately 13 billion gm reviews adequacy continuing need liabilities annual basis conjunction yearend production labor forecasts furthermore gm reviews reasonableness liabilities quarterly basis four factors occurred 1999 significantly changed assumptions previously used measuring liabilities stronger expected us vehicle market renewed strengthened relationship gm uaw higher expected levels attrition delphi following 1999 separation delphi gm changes national labor agreement gm uaw ratified october 1999 gms redeployment assumptions forecast excess us hourly employees used evaluate postemployment benefits liabilities assumptions largely dependent forecast us vehicle production due unanticipated sustained strength us economy resulted 174 million units produced us 1999 gm increased 1999 production created unanticipated demand us hourly employees gms relationship uaw also key factor determining redeployment assumptions may 28 1999 gm successfully completed separation delphi subsequently october 1999 negotiated new national labor agreement uaw without work stoppage delphi separation gm also significant impact gms redeployment assumptions separation delphi resulted approximately 14000 delphi us hourly employees electing retirement order take advantage provisions allowing retire gms retirement program january 1 2000 high level retirements created shortage hourly employees delphi allowed gm place excess employees closed plants positions delphi plants limited number delphi employees could elect return open positions gm 1999 uawgm national agreement ratified october 1999 changed gms ability place excess employees closed plants open positions plants change enabled gm place workers closed plants much quickly gm management expected quickly past experience result factors fourth quarter 1999 gm reversed postemployment benefits liabilities employees closed plants adjustment cost sales totaling approximately 892 million 553 million aftertax 084 earnings per share 123 par value common stock 1999 adjustment postemployment benefit costs reflects decrease number excess employees december 31 1999 compared december 31 1998 well shortened duration benefit payments based current redeployment assumptions remaining liability postemployment benefits december 31 1999 totals approximately 295 million representing approximately 2700 employees approximately 222 million expected paid cash next three years following table summarizes activity december 31 1998 december 31 1999 liability dollar amounts 000s 1the reduction excess employees buick city assembly flint v6 engine plants result redeployment gm delphi plants 1239 retirement 481 ii8 general motors corporation subsidiaries gma financial review concluded gme reported income 423 million 1999 compared income 419 million loss 17 million 1998 1997 respectively gmes 1998 results included aftertax charges 44 million related work schedule modifications opel belgium gmes portion previously mentioned special items 1997 included aftertax increases income 103 million related sale gmes interest avis europe 55 million related settlement agreement volkswagen ag additionally 1997 results included aftertax charges 488 million related 1997 competitiveness studies excluding gme special items 1998 1997 gmes income 463 million 313 million 1998 1997 respectively decrease gmes 1999 income 1998 excluding 1998 special items primarily due increasing competitive pricing pressure increased engineering expense associated model year 2000 midlife cycle enhancements vectra omega new model year 2001 corsa decreases partially offset continued material cost improvements result gms global purchasing efforts well improved manufacturing performance increase 1998 earnings compared 1997 excluding special items primarily due savings material costs policy warranty spending well lower equity losses saab automobile ab 1999 european parliament began consideration legislation regarding endoflife vehicles responsibility manufacturers vehicles dismantling recycling vehicles sold gme currently assessing impact potential legislation results operations financial position gmlaam reported loss 81 million 1999 compared loss 175 million income 667 million 1998 1997 respectively excluding 51 million aftertax charges related 1998 competitiveness studies gmlaams losses 124 million 1998 decrease 1999 losses compared 1998 excluding special items primarily due nominal price increases reduced structural costs reducing employee production costs partially offset lower industry volumes due economic crisis throughout latin america increased material freight costs driven gm brasils suppliers exposure hard currencies decrease 1998 earnings compared 1997 excluding special items primarily due economic downturn throughout latin america higher incentive costs 1999 gmlaam reduced employment levels approximately 4 effort resize operations current conditions addition approximate 11 reduction accomplished 1998 capital spending also greatly reduced conserve cash region going forward latin america continue slow steady recovery economic crisis region gmap reported loss 218 million 1999 compared losses 243 million 172 million 1998 1997 respectively excluding 97 million 170 million aftertax competitiveness studies charges gmaps losses 146 million 2 million 1998 1997 respectively increased losses 1999 compared 1998 excluding special items primarily due startup costs region equity losses isuzu due economic downturn asia partially offset continued strong performance australia earnings improvements shanghai gm increased losses 1997 1998 excluding special items also attributable equity losses isuzu due economic downturn asia spending associated gmaps growth strategy gmas effective income tax credit rate 1999 320 compared 348 534 1998 1997 respectively excluding previously mentioned special items effective income tax rates 1999 1998 1997 317 347 326 respectively hughes financial highlights years ended december 31 1999 1998 19971 dollars millions except per share amounts total net sales revenues 7594 6095 5624 pretax loss income 328 310 734 income tax benefit expense 194 45 237 minority interests 32 24 25 losses nonconsolidated associates 189 128 72 net loss income 291 251 450 losses earnings used computation available separate consolidated net income 2 321 272 471 losses earnings per share attributable class h common stock 3 077 068 118 see notes following page ii9 general motors corporation subsidiaries hughes financial highlights concluded 1the 1997 amounts relate telecommunications space business former hughes reflect changes gms organizational structure resulting hughes transactions occurred december 1997 see discussion hughes transactions 2excludes amortization gm purchase accounting adjustments 21 million years related gms acquisition hac 1985 includes accrued preferred stock dividends 51 million 1999 3for 1997 earnings per share attributable gm class h common stock presented pro forma basis prior hughes transactions amounts calculated based financial performance former hughes since financial highlights 1997 relate telecommunications space business former hughes reflect earnings per share attributable former gm class h common stock historical basis pro forma presentation therefore presents financial results would achieved 1997 relative gm class h common stock based solely performance telecommunications space business former hughes see hughes financial review discussion hughes financial review december 17 1997 gm former hughes completed series transactions hughes transactions designed address strategic challenges facing three principal businesses former hughes consisting defense electronics automotive electronics telecommunications space businesses hughes transactions included taxfree spinoff defense electronics business former hughes defense holders gms 123 par value class h common stocks transfer delco former hughes delphi recapitalization class h common stock new gm tracking stock gm class h common stock linked remaining telecommunications space businesses hughes transactions followed immediately merger hughes defense raytheon company 1997 financial information presented hughes relates telecommunications space businesses former hughes total net sales revenues increased 76 billion 1999 compared 61 billion 1998 56 billion 1997 directv businesses primary contributors growth revenues 1999 result significant increase subscribers us latin america additional revenues us directv businesses primestar us satellite broadcasting company ussb acquisitions also contributing growth 1999 revenues increased sales directv receiver equipment 155 million pretax gain resulted settlement patent infringement case 1999 revenue growth partially offset decreased revenues satellite systems manufacturing businesses principally due contract revenue adjustments delayed revenue recognition resulted increased development costs schedule delays several new product lines decreased activity associated contract ico global communications decrease interest income due decrease cash equivalents 1998 increase 1997 primarily due subscriber growth us directv businesses increase panamsat corporation panamsat resulting primarily may 1997 panamsat merger increased operating lease revenues video data internetrelated services higher commercial satellite sales higher sales directv receiver equipment hughes pretax loss 328 million 1999 compared pretax income 310 million 1998 734 million 1997 pretax loss 1999 included 272 million pretax charge related discontinued wireless product lines hughes network systems hns pretax charge 125 million satellite systems manufacturing businesses resulted increased development costs schedule delays several new product lines onetime pretax charge 92 million resulting termination asiapacific mobile telecommunications satellite contract 85 million decrease interest income discussed 105 million increase interest expense larger pretax loss 1999 also result increased subscriber acquisition costs higher depreciation amortization resulted 1999 acquisitions charges offset 155 million pretax gain settlement patent infringement case increased profitability due growth revenues discussed decrease 1998 pretax income primarily resulted 490 million pretax gain recognized connection panamsat merger 1997 goodwill amortization associated panamsat merger provision uncollectible amounts due certain wireless customers offset decrease interest expense increase interest income hughes recognized income tax benefit 1999 194 million compared income tax benefit 45 million 1998 income tax expense 237 million 1997 increased income tax benefit 1999 compared 1998 due losses incurred 1999 1998 taxes benefited increase research development credits related prior years favorable resolution certain tax contingencies losses earnings used computation available separate consolidated net income loss 1999 loss 321 million compared earnings 272 million 1998 earnings 471 million 1997 1999 included 51 million accrued preferred stock dividends ii10 general motors corporation subsidiaries hughes financial review continued hughes filed shelf registration statement sec respect issuance 20 billion debt securities time amounts issued december 31 1999 march 1 2000 hughes announced directv japans operations discontinued subscribers would migrate skyperfectv japanese company providing directtohome satellite broadcasting result transaction hughes acquire 68 interest skyperfectv expected complete ipo fiscal year ending march 31 2001 hughes required fund substantial portion costs incurred next six nine months exit directv japan business hughes accrue exit costs first quarter fiscal 2000 first quarter charge offset fair value skyperfectv interest received however amounts yet estimable addition hughes continue record share directv japans operating losses fiscal 2000 january 13 2000 hughes announced reached agreement sell satellite systems manufacturing businesses boeing company approximately 38 billion cash final transaction subject regulatory approval expected close second third quarter 2000 result aftertax gain excess 10 billion also january 13 2000 hughes announced discontinuation mobile cellular narrowband local loop product lines hughes network systems result decision hughes recorded fourth quarter 1999 pretax charge continuing operations approximately 272 million charge represents writeoff receivables inventories licenses software equipment alternative use september november 1999 directv japan raised approximately 281 million total issuance bonds convertible common stock five major shareholders including approximately 245 million issued hughes july 28 1999 galaxy latin america llc gla acquired galaxy brasil ltda glb exclusive distributor directv brazil tevecap sa approximately 114 million plus assumption debt connection transaction tevecap also sold 10 equity interest gla hughes cisneros group companies remaining gla partners increased hughes ownership interest gla 778 part transaction hughes also increased ownership interest surfin 591 750 total consideration paid transactions amounted approximately 101 million may 20 1999 hughes acquired merger outstanding capital stock ussb provider premium subscription television programming via digital broadcasting system shares directv total consideration approximately 16 billion paid july 1999 consisted approximately 360 million cash 226 million shares gm class h common stock may 11 1999 hughes announced would collaborate america online inc aol new service would combine digital satellite television programming directv aols new interactive television internet service hns design build initial dual purpose directvaol receiver equipment new service suited frequent internet users mass market consumer wants connect internet june 1999 hughes announced extensive strategic alliance aol develop market digital entertainment internet services nationwide new alliance expected accelerate subscriber growth revenuepersubscriber directv direcpc services well expand subscriber base aols developing aol tv aolplus broadband services part alliance hughes aol plan jointly develop new content interactive services us international markets additionally extensive crossmarketing initiative instituted market companys products respective retail outlets respective subscribers part marketing initiative aol hughes committed increase sales marketing expenditures next three years approximately 15 billion related direcpcaolplus dlrectv dlrectvaol tv direcduo products services part alliance described aol invested 15 billion shares gm series h 625 automatically convertible preference stock gm immediately invested 15 billion received aol shares hughes series preferred stock designed correspond financial terms gm series h 625 automatically convertible preference shares dividends hughes series preferred stock payable gm quarterly annual rate 625 discussion see note 18 gm consolidated financial statements april 28 1999 hughes completed acquisition primestars 23 million subscriber mediumpower directtohome satellite business purchase price consisted 11 billion cash 49 million shares gm class h common stock total purchase price 13 billion part agreement acquire primestar hughes agreed purchase highpower satellite assets related orbital frequencies tempo satellite inc whollyowned subsidiary tci satellite entertainment inc purchase price tempo satellite assets consisted 500 million cash purchase price 150 million paid march 10 1999 satellite yet launched remaining 350 million paid june 4 1999 inorbit satellite 11 related satellite orbital frequencies february 1999 hughes acquired additional ownership interest grupo galaxy mexicana srl de cv ggm latin american local operating company exclusive distributor directv mexico grupo mvs srl de cv hughes equity ownership represents 490 voting equity nonvoting equity ggm october 1998 hughes acquired grupo mvs additional 100 interest gla increasing hughes ownership interest 700 hughes also acquired additional 198 interest surfin company providing financing subscriber receiver equipment certain local operating companies located latin america mexico increasing hughes ownership percentage 393 591 aggregate purchase price transactions 197 million cash ii11 general motors corporation subsidiaries financing insurance operations highlights financial performance gms financing insurance operations business follows years ended december 31 millions 1999 1998 1997 total net sales revenues gmac 20218 17914 16595 233 370 110 total net sales revenues 20451 18284 16485 net income gmac 1527 1325 1301 7 97 17 total 1534 1422 1318 gmac financial highlights years ended december 31 1999 1998 1997 dollars millions financing revenues retail lease financing 4303 3869 3571 operating leases 7429 7233 7260 wholesale commercial loans 2046 1629 1746 total financing revenues 13778 12731 12577 interest discount 6526 5787 5256 depreciation operating leases 4892 4693 4677 net financing revenue 2360 2251 2644 mortgage revenue 2982 2030 1499 insurance premiums earned 1794 1859 1360 income 1664 1295 1159 net financing revenue 8800 7435 6662 expenses 6313 5498 4448 pretax income 2487 1937 2214 income tax expense 960 612 913 net income 1527 1325 1301 net income automotive financing operations 1057 984 910 net income insurance operations 210 226 224 net income mortgage operations 260 115 167 net income 1527 1325 1301 ii12 general motors corporation subsidiaries gmac financial review 1999 net income automotive financing operations totaled 11 billion 74 162 higher 1998 1997 respectively earnings 1999 higher due increased financing volumes reduced credit losses partially offset higher effective tax rate increase 1998 1997 primarily attributable retail asset growth reduced credit losses lower effective income tax rate partially offset lower net interest margins lower wholesale volume net income insurance operations totaled 210 million 1999 compared 226 million 224 million 1998 1997 respectively decrease primarily attributable pricing pressure personal lines insurance business net income relatively unchanged 1997 1998 net income mortgage operations totaled 260 million 1999 compared 115 million 167 million 1998 1997 respectively strong yearoveryear performance reflects improvement across sectors unusually low earnings 1998 largely due reduced mortgage asset values higher prepayment levels 1999 gmac financed 405 new gm vehicle retail deliveries united states 413 1998 331 1997 decline financing penetration 1998 primarily result competitive market conditions increase 1998 1997 resulted gmacs special rate financing lease incentive programs sponsored gm gmacs automotive financing revenue totaled 138 billion 1999 compared 127 billion 126 billion 1998 1997 respectively increases mainly due higher average retail operating lease loan receivable balances resulted continued retail financing incentives sponsored gm gmacs worldwide cost borrowing including effects derivatives 1999 averaged 567 decrease 32 63 basis points comparable periods 1998 1997 respectively total borrowing costs us operations averaged 566 1999 compared 589 639 1998 1997 respectively lower average borrowing costs since 1997 largely result lower shortterm market interest rates net automotive financing revenue combined mortgage revenue insurance premiums income increased 88 billion compared 74 billion 67 billion 1998 1997 respectively increase 1999 1998 primarily due results mortgage operations increase 1998 1997 primarily due results mortgage insurance operations partially offset reduced net automotive financing margins expenses increased 815 million 11 billion 1999 1998 respectively increases 1999 result higher costs salaries benefits operating charges reflect continued growth acquisitions gmac mortgage group inc increase 1999 1998 also includes increase goodwill amortization related gmac acquisitions gmacs effective income tax rate 1999 386 compared 316 1998 412 1997 differences effective tax rates 1997 1999 attributed decrease us foreign taxes assessed foreign source income 1998 competitiveness studies result pricing pressure excess capacity gm initiated studies 1997 concerning longterm competitiveness facets businesses studies include periodic evaluations carrying value longlived assets held used events circumstances warrant review evaluations reviews generally done conjunction annual business planning cycle additional information regarding competitiveness studies contained note 3 gm consolidated financial statements based results reviews gm record pretax charges income 1999 1998 1997 gm recorded pretax charges income totaling 224 million 228 million aftertax 034 per share 123 par value common stock 51 billion 32 billion aftertax 436 per share 123 par value common stock respectively 1998 pretax charges comprised 105 million 80 million aftertax gmna 82 million 51 million aftertax gmlaam 37 million 97 million aftertax gmap overall charges effect increasing 1998 cost sales depreciation amortization expenses 92 million 67 million 65 million respectively 1997 pretax charges comprised 38 billion 24 billion aftertax gmna 848 million 488 million aftertax gme 174 million 170 million aftertax gmap 205 million 128 million aftertax gm automotive communications services operations segment charges reduced 1997 net sales revenues 548 million increased cost sales depreciation amortization expenses 14 billion 30 billion 72 million respectively amounts related capacity reduction expenses recorded 1998 1997 still remain december 31 1999 total 795 million going forward gms future cash requirements relating 1998 1997 charges expected occur primarily next five years anticipated spending approximately 61 2000 15 2001 ii13 general motors corporation subsidiaries competitiveness studies concluded competitiveness studies charges include amounts underperforming assets pursuant gms policy valuation longlived assets future investments relating underperforming product lines expensed charges also include amounts voluntary early retirement separation programs recorded employee accepts offer accordance gms policy programs postemployment benefits payable employees pursuant contractual agreements costs associated disposal assets facilities subject capacity reductions charges losses contracts associated pricing pressures used vehicles related effect gms retaillease commitments gm continue monitor competitiveness aspects businesses competitiveness studies undertaken market conditions warrant year 2000 1999 gm successfully completed comprehensive worldwide program address year 2000 issue final preparations included deployment gm command centers around world monitor transition new millennium expected gm experience material adverse effects business products results operations financial condition result year 2000 issue gm continue monitor operations third parties critical gms operations potential year 2000related problems however gm anticipate discover future year 2000 issues material effect business products results operations financial condition gms direct year 2000 program cost expensed incurred exception capitalizable replacement hardware total incremental spending gm material corporations operations liquidity capital resources addition work gm direct financial responsibility eds provided year 2000related services gm required master service agreement eds provided services part normal fixed price services ongoing payments eds gms current forecast total direct expenditures including value services performed eds attributable gms year 2000 program approximate 615 million amount includes following estimated 410 million direct gm expenditures estimate includes gms additional payment eds approximately 62 million end first quarter 2000 since systems remediated eds master service agreement cause significant business disruption resulting material financial loss gm due millennium change approximately 205 million representing value year 2000 services eds providing gm part normal fixed price services ongoing payments eds master service agreement estimate include 62 million additional payment gm eds end first quarter 2000 mentioned gm incurred approximately 142 million year 2000 expense 1997 1998 additional 187 million 1999 thus total direct expenditures gm value year 2000related services performed eds attributable gms year 2000 program period january 1997 december 1999 amounted approximately 534 million liquidity capital resources automotive communications services operations cash marketable securities 30 billion assets voluntary employees beneficiary association veba trust invested fixedincome securities december 31 1999 totaled 144 billion compared 131 billion december 31 1998 increase cash marketable securities 1998 1999 primarily due stronger operating cash flows due previously mentioned work stoppage 1998 total veba assets veba trust used prefund part gms postretirement benefits liability approximated 63 billion 46 billion december 31 1999 1998 respectively net liquidity calculated cash marketable securities less total loans payable longterm debt 20 billion december 31 1999 increase 214 million prior year gm previously indicated goal maintaining 130 billion cash marketable securities order continue funding product development programs throughout next downturn business cycle 130 billion target includes cash pay certain costs prefunded part veba contributions longterm debt 74 billion december 31 1999 increase 297 million prior year ratio longterm debt longterm debt gm investment automotive communications services operations 437 581 december 31 1999 1998 respectively ratio longterm debt shortterm loans payable total debt gm investment 496 618 december 31 1999 1998 respectively ii14 general motors corporation subsidiaries automotive communications services operations concluded gm believes sufficient resources meet anticipated future cash flow requirements addition cash flows operations gm maintains substantial lines credit various financial institutions additional information gms available credit facilities contained note 14 gm consolidated financial statements financing insurance operations financing insurance operations conducted gmac certain subsidiaries financing entities operating canada germany brazil december 31 1999 gmac owned assets serviced automotive receivables totaling 1623 billion increase 232 billion yearend 1998 total consolidated assets gmac december 31 1999 1488 billion 170 billion previous year yeartoyear increases primarily result higher commercial loan receivables serviced retail wholesale loan receivables operating lease assets intangible assets receivables due automotive communications services operations increases partially offset decline real estate mortgage inventory held sale consolidated automotive commercial finance receivables serviced gmac including sold receivables amounted 970 billion 799 billion december 31 1999 1998 respectively yeartoyear increase primarily result 74 billion increase commercial loan receivables 51 billion increase serviced retail receivables 47 billion increase serviced wholesale receivables change commercial loan receivables due acquisition bank new york financial corporation bnyfc july 1999 increases secured notes increase wholesale receivable balances prior year result 1998 work stoppages previously mentioned higher penetration continued retail financing incentives sponsored gm contributed increase serviced retail receivables principal balances active trusts sold wholesale receivables including retained subordinated interests 1999 increased 51 billion due completion two sales 1999 sales wholesale receivables 1998 additionally outstanding principal balances sold retail automotive receivables including retained subordinated interests increased 16 billion due completion three sales 1999 compared one sale 1998 gmacs liquidity well ability profit ongoing acquisition activity large part dependent upon timely access capital costs associated raising funds different segments capital markets regard gmac regularly accesses shortterm mediumterm longterm debt markets principally commercial paper notes underwritten transactions december 31 1999 gmacs total borrowings 1212 billion compared 1062 billion december 31 1998 approximately 79 debt represented funding operations united states remaining 21 represented borrowings operations canada 9 germany 3 countries 9 gmacs 1999 yearend ratio total debt total stockholders equity 1091 compared 1081 yearend 1998 higher yeartoyear debt balances principally used fund increased asset levels total shortterm notes outstanding december 31 1999 amounted 508 billion compared 495 billion yearend 1998 gmac subsidiaries maintain substantial bank lines credit totaled 462 billion december 31 1999 429 billion december 31 1998 respectively unused portion credit lines totaled 356 billion december 31 1999 24 billion higher december 31 1998 book value per share book value per share 123 par value common stock increased 2702 2000 december 31 1999 1998 respectively book value per share gm class h common stock increased 1621 december 31 1999 1200 december 31 1998 book value per share determined based liquidation rights various classes common stock repurchases 1999 gm used 26 billion acquire approximately 36 million shares 123 par value common stock complete corporations 40 billion stock repurchase program announced february 1998 gm also used approximately 727 million 13 million repurchase shares 123 par value common stock gm class h common stock respectively certain employee benefit plans 501 million repurchase retire series b preference stock yearended december 31 1999 ii15 general motors corporation subsidiaries return net assets rona part shareholder value initiatives gm adopted rona performance measure heighten managements focus balance sheet investments return investments gms rona calculation based principles established management approved gm board gms calendar year 1999 rona continuing operations excluding hughes 140 cash flows automotive communications services operations net cash provided operating activities 162 billion 87 billion 96 billion 1999 1998 1997 respectively increase net cash provided operating activities 1999 primarily resulted increased income continuing operations net changes operating assets liabilities primarily related increases accounts payable resulting extension payment terms increases accrued liabilities primarily related increased sales incentive allowances north america increased customer deposits resulting increased volumes increases offset partially increases pension veba contributions decrease net cash provided operating activities 1998 compared 1997 primarily resulted decrease cash generated lower net income primarily due work stoppages previously discussed partially offset lower veba contributions 1998 net cash used investing activities 141 billion 70 billion 71 billion 1999 1998 1997 respectively increase net cash used investing activities 1999 primarily attributable increased net cash used investments companies investments marketable securities operating leases net cash used investing activities relatively unchanged 1998 1997 increase cash due net change investments marketable securities operating leases 1998 offset proceeds borrowings hughes defense prior spinoff hughes defense 1997 net cash used financing activities 23 billion 28 billion 66 billion 1999 1998 1997 respectively decrease net cash used financing activities 1999 primarily due proceeds issuing preference stocks related strategic alliance hughes america online inc second quarter 1999 see note 18 gm consolidated financial statements information net increases shortterm loans payable partially offset increases stock repurchases complete corporations stock repurchase program net decreases longterm debt decrease net cash used financing activities 1998 1997 primarily due 26 billion net increase loans payable longterm debt decrease cash used stock repurchases financing insurance operations net cash provided operating activities 1999 totaled 108 billion increase 56 billion 40 billion provided comparable 1998 1997 periods respectively additional operating cash flow primarily result increase proceeds sales mortgage loans mortgagerelated securities held trading reduction originations purchases mortgage loans acquisitions mortgagerelated securities held trading increases partially offset decline net payables due automotive communications services operations liabilities net cash used investing activities 1999 totaled 209 billion compared 226 billion 121 billion periods 1998 1997 respectively net cash usage 1998 1999 decreased primarily result increased proceeds sales receivables largely offset net increases acquisitions finance receivables primarily related bnyfc acquisition net increases operating lease acquisitions related strong lease incentive programs net investments companies increase net cash used 1998 1997 primarily result lower net finance receivable activity decrease sales retail receivables proceeds net cash provided financing activities 1999 totaled 108 billion compared 177 billion 83 billion periods 1998 1997 respectively decrease net cash provided 1998 1999 primarily result reduction shortterm debt partially offset net increase longterm debt primarily used fund increases finance receivables operating lease assets current year acquisitions see note 23 gm consolidated financial statements 1997 1998 increase net cash provided primarily result increases short longterm debt lower dividends paid gm ii16 general motors corporation subsidiaries dividends may paid common stocks declared gm board sole discretion gms policy distribute dividends 123 par value common stock based outlook indicated capital needs business november 1999 gm board declared quarterly cash dividend 050 per share 123 par value common stock paid december 10 1999 holders record november 11 1999 gm board also declared quarterly dividends series g depositary shares 0495 057 per share respectively paid february 1 2000 holders record january 3 2000 series b preference stock redeemed april 5 1999 result amount paid date series b shareholders record included accrued unpaid dividends part total redemption price respect gm class h common stock gm board determined pay cash dividends time order allow earnings hughes retained investment telecommunications space businesses quarterly dividend 87793 per share gm series h 625 automatically convertible preference stock paid february 1 2000 holders record january 3 2000 health care expense postretirement benefits total health care expense comprised health care costs active employees retirees expense associated active employees consists two components health care costs including medical dental vision benefits incurred active employees expected cost benefits active employees incur retired expense relating retirees consists primarily interest costs liability accrued retirement components postretirement benefits expense us health care cost cash expenditures gms us operations set forth excluding cash expenditures hughes former hughes nonautomotive employees including gmac gm committed reducing burden continuing health care cost increases since 1997 gm prefunded part postretirement benefits contributions resulted 1999 yearend balance 63 billion veba trust veba assets effect reducing gms postretirement benefits liability consolidated balance sheet year ended december 31 1999 postretirement health payasyougo benefits care cost dollars millions gm us operations health care postretirement medical dental vision 2324 retired employees payasyougo 2239 active employees payasyougo 1321 total health care 2324 3645 3560 life insurance 420 subsidiaries health care life insurance 203 total postretirement benefits expense 2947 payasyougo amounts 1998 20 billion retirees 12 billion active employees 32 billion total master separation agreement separation agreement gm delphi provides generally postretirement benefit liabilities related delphis us salaried active inactive employees retiring january 1 1999 assumed delphi separation agreement provided delphis us hourly employees would continue participate postretirement benefit plan hourly workers administered gm full separation gm generally delphi would assume postretirement benefit obligations us hourly employees retire october 1 1999 gm would retain postretirement benefit obligations us hourly employees retire october 1 1999 connection uaw labor contract see note 1 gm consolidated financial statements october 1 1999 date delphis assumption retirement obligations extended january 1 2000 december 31 1999 estimate employee retirements exceeded amount used allocation gms delphis postretirement benefit liability time separation result gm increased postretirement benefit liability 10 billion reflect increased estimate delphi retirees yearend recorded receivable delphi see note 12 gm consolidated financial statements accordance terms separation agreement uaw labor contract provision explained addition interest shall accrue outstanding amount paid full rate 675 per annum agreed parties gm received 483 million delphi january 2000 related outstanding receivable balance finalization amount receivable delphi occur 2000 time adjustment recorded gm anticipate finalization retirement obligations significant effect financial position ii17 general motors corporation subsidiaries health care expense postretirement benefits concluded gm disclosed consolidated financial statements certain amounts associated estimated future postretirement benefits pensions classified amounts accumulated postretirement benefit obligations liabilities obligations notwithstanding recording amounts use terms gm admit otherwise acknowledge amounts existing postretirement benefit plans gm pensions represent legally enforceable liabilities gm card gm sponsors credit card program entitled gm card program introduced us september 1992 subsequently canada australia brazil mexico chile united kingdom cardholders use card generates entitlements rebates used connection cardholders purchase lease new gm vehicle sponsor gm card program gm provide consumer credit program used marketing tool increase product sales independent banks issue gm card responsible evaluating extending funding credit cardholders fully responsible credit card losses recourse gm us gm card rebates accumulate rate equal 5 spending goods services charged gm card maximum rebate amount 500 per year rebates expire seven years may applied sales allowances market time vehicle purchase lease gm solely responsible cardholders rebates provisions gm card rebates recorded reductions revenue time vehicle sale gm right prospectively modify plan rebates redeemed worldwide 1999 1998 1997 778 million 705 million 656 million respectively cardholder rebates available worldwide future redemption cardholder purchases leases new gm vehicle amounted 37 billion 37 billion 35 billion net deferred program income december 31 1999 1998 1997 respectively gm anticipates profits incremental sales resulting gm card program along deferred program income offset future rebate costs associated gm card deferred income taxes december 31 1999 gms consolidated balance sheet included net deferred tax asset approximately 161 billion related net future deductible temporary differences united states approximately 137 billion related obligation postretirement benefits pensions realization net deferred tax asset dependent upon profitable operations united states future reversals existing taxable temporary differences although realization assured gm believes likely benefits realized reduction future income taxes management carefully considered various factors assessing probability realizing deferred tax asset including operating results gmna recent threeyear period overall financial forecasts book taxable income improvements expected continuing efforts maintain gms competitiveness including actions relating reducing material costs global sourcing increasing efficiency lean manufacturing operating results gmac hughes generated us pretax income approximately 15 billion 18 billion 33 billion 1999 1998 1997 respectively ability utilize tax planning capitalization research experimentation costs tax purposes gm expect generate near future significant us federal tax net operating loss carryforwards extended period time tax assets utilized postretirement benefits become tax deductions periods 50 years fact gm never lost deferred federal tax assets due expiration us tax carryforwards dividends received foreign operations us federal income tax purposes totaled approximately 35 billion 31 billion 26 billion 1999 1998 1997 respectively ii18 general motors corporation subsidiaries pensions december 31 1999 gms total worldwide funded position 45 billion 75 billion us automotive qualified hourlysalary plans 30 billion plans worldwide compares unfunded position 63 billion year ago 12 billion us automotive qualified hourlysalary plans 51 billion plans worldwide predominant factors contributed funded position us automotive qualified plans 1999 separation delphi combined 100 basis point increase discount rate used measure pension obligation end 1999 compared 1998 775 675 respectively gm made pension contributions us hourly salary plans 794 million 1999 11 billion 1998 15 billion 1997 addition gm made pension contributions us plans 67 million 51 million 35 million 1999 1998 1997 respectively economic basis gm continues maintain fullyfunded status us hourly salary pension plans december 31 1999 economic basis measuring us hourly salary pension liability differs statement financial accounting standards sfas 87 basis employers accounting pensions required gaap gm believes better measure gms ongoing economic exposure pension obligations uses measure determine funded status economic basis discounts pension liabilities longterm asset earnings rate assumption currently 100 rather variable yearend market rate required sfas 87 currently 775 periods low interest rates current market environment sfas 87 liability generally exceed liability calculated economic basis whereas periods high interest rates economic basis liability generally exceed sfas 87 liability separation agreement delphi gm provides generally pension plan assets liabilities related delphis us salaried active inactive employees retiring january 1 1999 assumed delphi established defined benefit pension plans salaried employees terms existed gm plans january 1 1999 separation agreement provided delphis us hourly employees would continue participate defined benefit pension plan hourly workers administered gm full separation gm generally delphi would assume pension obligations us hourly employees retire october 1 1999 gm would retain pension obligations us hourly employees retire october 1 1999 connection uaw labor contract see note 1 gm consolidated financial statements october 1 1999 date delphis assumption retirement obligations extended january 1 2000 december 31 1999 estimate employee retirements exceeded amount used allocation gms delphis pension liability time separation resultgm increased pension liability 498 million reflect increased estimate delphi retirees yearend recorded receivable delphi see note 12 gm consolidated financial statements accordance terms separation agreement uaw labor contract provision explained addition interest shall accrue outstanding amount paid full rate 675 per annum agreed parties gm received 231 million delphi january 2000 related outstanding receivable balance finalization amount receivable delphi occur 2000 time adjustment recorded gm anticipate finalization retirement obligations significant effect financial position net obligation attributable delphi classified discontinued operations 0 16 billion december 31 1999 1998 respectively additional information related employee benefit arrangements affected delphi separation found note 2 gm consolidated financial statements environmental matters gm subject various laws relating protection environment including laws regulating air emissions water discharges waste management environmental cleanup gm also various stages investigation remediation sites contamination alleged liability worldwide environmental cleanup approximately 404 million 500 million 590 million december 31 1999 1998 1997 respectively future periods new laws regulations advances technologies additional information ultimate remedy selected new existing sites gms share cost remedies could significantly change gms estimates net decreases liability 1997 1999 result actual expenditures 1999 1998 1997 gm expensed 109 million 72 million 63 million respectively environmental investigation remediation waste management addition worldwide capital expenditures discussed previously included 81 million 83 million 91 million 1999 1998 1997 respectively various environmental matters process estimating liabilities complex dependent primarily nature extent historical information physical data relating contaminated site complexity site uncertainty remedy technology required outcome discussions regulatory agencies potentially responsible parties prps multiparty sites number financial viability prps ii19 general motors corporation subsidiaries euro conversion january 1 1999 11 15 member countries european union established fixed conversion rates existing currencies adopted euro new common currency euro trades currency exchanges legacy currencies remain legal tender participating countries transition period january 1 2002 beginning january 1 2002 euro denominated bills coins issued legacy currencies withdrawn circulation gm established plans assess address impact gm result euro conversion introduction euro january 1 1999 increased pace price harmonization throughout europe gm developed comprehensive program identify analyze determine best strategy address price harmonization gm analyzing aspects pricing strategy minimize potential risk pricing harmonization addition corporation reviewed made required modifications applicable information technology systems contracts based new currency december 31 1999 conversion euro resulted material adverse impact gms financial position results operations material tax consequences gm believes remaining transition result material adverse financial tax consequences gm also believes euro conversion reduces overall foreign exchange risk number currencies transacts reduced employment payrolls worldwide employment december 31 thousands 1999 19983 19973 gmna 217 226 237 gme 81 84 79 gmlaam 23 24 27 gmap 10 gmac 28 24 21 hughes 18 15 14 11 13 10 total employees 388 396 398 worldwide payrolls continuing operations billions 218 204 223 us hourly payrolls billions 12 100 88 102 average labor cost per active hour worked us hourly 1 5051 4617 4510 1 amounts adjusted exclude delphis hughes former hughes nonautomotive employees 2 includes employees work excludes laidoff employees receiving benefits 3 amounts adjusted reflect changes gms organizational structure resulting restructuring former hughes occurred december 1997 separation delphi 1999 new accounting standards june 1999 financial accounting standards board fasb issued statement financial accounting standards sfas 137 accounting derivative instruments hedging activities deferral effective date fasb statement 133 amendment fasb statement 133 statement defers one year effective date sfas 133 accounting derivative instruments hedging activities fiscal years beginning june 15 2000 sfas 133 requires derivatives recorded either assets liabilities instruments measured fair value gains losses resulting changes values derivatives recognized immediately deferred depending use derivative whether qualifies hedge gm adopt sfas 133 january 1 2001 required management currently assessing impact statement gms results operations financial position forwardlooking statements following principal important factors may cause actual results differ materially expressed forwardlooking statements made managements gm hughes changes economic conditions currency exchange rates political stability major markets corporation procures material components supplies production principal products produced distributed sold ie north america europe latin america asiapacific shortages fuel interruptions transportation systems labor strikes work stoppages interruptions difficulties employment labor major markets corporation purchases material components supplies production products produced distributed sold ii20 general motors corporation subsidiaries forwardlooking statements concluded significant changes competitive environment major markets corporation purchases material components supplies production products produced distributed sold changes laws regulations policies activities governments agencies similar organizations actions may affect production licensing distribution sale corporations products cost thereof applicable tax rates ability corporation achieve reductions cost employment levels realize production efficiencies implement capital expenditures levels times planned management respect hughes additional risk factors include economic conditions product demand market acceptance government action local political economic developments affecting countries hughes operations ability obtain export licenses competition ability achieve cost reductions technological risk limitations access distribution channels success timeliness satellite launches inorbit performance satellites ability customers obtain financing hughes ability access capital maintain financial flexibility additionally hughes 81 owned subsidiary panamsat corporation experienced satellite anomalies past may experience satellite anomalies future could lead loss reduced capacity satellites could materially affect hughes operations ii21 general motors corporation subsidiaries item 7a item 7 managements discussion analysis financial condition results operations following managements discussion analysis financial condition results operations mda read conjunction hughes electronics corporation hughes consolidated financial statements mda period ended december 31 2001 included exhibit 99 gm annual report form 10k period ended december 31 2001 related hughes annual report form 10k filed separately securities exchange commission sec general motors acceptance corporation gmac annual report form 10k period ended december 31 2001 filed separately sec earnings per share amounts included mda reported diluted gm presents separate financial information following businesses automotive communications services operations aco financing insurance operations gms reportable operating segments within aco business consist gm automotive gma comprised four regions gm north america gmna gm europe gme gm latin americaafricamideast gmlaam gm asia pacific gmap hughes includes activities relating digital entertainment information communications services satellitebased private business networks includes design manufacturing marketing locomotives heavyduty transmissions elimination intersegment transactions certain nonsegment specific revenues expenditures certain corporate activities gms reportable operating segments within financing insurance operations business consist gmac financing includes financing entities operating us canada brazil mexico associated gmac disaggregated financial results gma prepared using management approach consistent basis manner gm management internally disaggregates financial information purpose assisting making internal operating decisions regard certain common expenses allocated among regions less precisely would required standalone financial information prepared accordance accounting principles generally accepted us gaap certain expenses primarily certain us taxes related nonus operations included aco segment financial results represent historical information used management internal decision making purposes therefore data prepared represent way business operate future data prepared gaap basis may materially different ii3 general motors corporation subsidiaries results operations year ended december 31 2001 income continuing operations corporation 601 million 177 per share gm 123 par value common stock compared 45 billion 56 billion 668 853 per share gm 123 par value common stock 2000 1999 respectively income continuing operations includes special items aftertax basis outlined ii4 general motors corporation subsidiaries footnotes ste therese charge relates asset impairments postemployment costs termination postemployment benefits associated announcement closing ste therese quebec assembly plant b raytheon settlement relates hughes settlement raytheon company purchase price adjustment related raytheons 1997 merger hughes defense c gain sale thomson relates hughes sale 41 million shares thomson multimedia common stock skyperfectv writedown relates hughes noncash charge revaluation investment e severance charge relates hughes 10 companywide workforce reduction us f directv japan adjustment relates favorable adjustment expected costs associated shutdown hughes directv japan business g isuzu restructuring charges include gms portion severance payments asset impairments part restructuring affiliate isuzu motors ltd h sfas 133 adjustment represents net impact first quarter 2001 initial adoption sfas 133 accounting derivatives hedging activities phaseout oldsmobile charge relates costs associated gms decision phaseout oldsmobile division current model lineup product lifecycles come end models longer economically viable j postemployment benefits charge relates postemployment costs termination postemployment benefits associated four north american manufacturing facilities slated conversion capacity reduction oklahoma city oklahoma delta engine lansing michigan spring hill tennessee wilmington delaware k capacity reduction adjustment relates costs associated reduction production capacity including restructuring vauxhall motors limiteds manufacturing operations uk l satellite businesses gain relates sale hughes satellite systems manufacturing businesses boeing company postemployment benefits adjustment relates reversal liability benefits payable excess us hourly employees n hourly retiree benefits charge relates benefit increase granted hourly retirees connection 1999 uaw agreement termination benefits charge relates us salaried early retirement program approximately 1700 people 100 executives elected participation program p wireless business charge relates hughes decision discontinue certain wireless manufacturing operations hughes network systems ii5 wholesale sales years ended december 31 2001 2000 1999 units thousands gmna cars 2441 2933 2992 trucks 2746 2842 2882 total gmna 5187 5775 5874 gme cars 1666 1744 1824 trucks 94 135 144 total gme 1760 1879 1968 gmlaam cars 463 438 350 trucks 203 196 173 total gmlaam 666 634 523 gmap cars 202 175 162 trucks 258 283 259 total gmap 460 458 421 total worldwide 8073 8746 8786 gma financial review gmas income margin adjusted exclude special items adjusted income margin 708 million 05 2001 39 billion 27 2000 47 billion 32 1999 decrease 2001 adjusted income margin compared 2000 primarily due decrease wholesale sales volume pricing pressures north america europe unfavorable conditions partially offset cost structure improvements also primarily north america europe decrease 2000 adjusted income margin compared 1999 primarily due increase spending product development activities pricing pressures north america europe decrease wholesale sales volume unfavorable product mix primarily europe unfavorable conditions partially offset cost structure improvements primarily north america gmas total net sales revenues adjusted exclude special items adjusted total net sales revenues 1407 billion 1481 billion 1461 billion 2001 2000 1999 respectively decrease 2001 adjusted total net sales revenues compared 2000 largely due lower wholesale volumes unfavorable net price north america europe net price comprehends percent increasedecrease customer pays current period comparably equipped vehicle price paid previous years period increase 2000 adjusted total net sales revenues compared 1999 largely due growth initiatives including onstar service parts operations partially offset lower wholesale volumes unfavorable net price north america europe ii6 general motors corporation subsidiaries gma financial review continued gmnas adjusted income 15 billion 44 billion 46 billion 2001 2000 1999 respectively decrease 2001 adjusted income 2000 primarily due unfavorable net price 13 yearoveryear lower wholesale sales volumes decrease partially offset favorable product mix improvements manufacturing costs due performance efficiencies material cost savings engineering productivity decrease 2000 adjusted income 1999 primarily due unfavorable net price 07 yearoveryear lower wholesale sales volumes decrease partially offset improvements manufacturing costs due performance efficiencies material cost savings gmes adjusted loss 767 million 2001 compared adjusted loss 257 million adjusted income 423 million 2000 1999 respectively increase gmes 2001 adjusted loss 2000 due continued shift sales mix larger profitable vehicles smaller less profitable entries well decrease wholesale sales volume continued competitive pricing pressures decreases partially offset improved material structural cost performance decrease gmes 2000 adjusted income 1999 due weakening european industry unfavorable sales mix increase competitive pricing pressure decrease wholesale sales volume impacted reduced availability new corsa launch period gmlaams adjusted loss 80 million 2001 compared adjusted income 26 million adjusted loss 81 million 2000 1999 respectively decrease 2001 adjusted earnings compared 2000 primarily due material cost increases reflecting supplier cost pressures manufacturing cost increases devaluation currency argentina decreases partially offset nominal price increases increase wholesale sales volumes increase 2000 adjusted income compared 1999 primarily due nominal price increases increase wholesale sales volumes partially offset increase manufacturing costs material costs gmaps adjusted income 77 million 2001 compared adjusted losses 233 million 218 million 2000 1999 respectively increase 2001 adjusted earnings compared 2000 primarily due gmaps suspension recording share isuzus losses gm reduced investment balance isuzu zero second quarter 2001 gm intend invest additional capital isuzu guarantee obligation isuzu addition equity income improvements several joint ventures region well slightly favorable price increases increased wholesale sales volume increased adjusted losses 2000 compared 1999 primarily due increased equity losses isuzu partially offset increased wholesale sales volumes gmas effective income tax rate adjusted basis 287 309 317 2001 2000 1999 respectively gmas effective income tax rate reported basis 251 266 320 2001 2000 1999 respectively hughes financial review total adjusted net sales revenues 83 billion 87 billion 76 billion 2001 2000 1999 respectively decrease adjusted net sales revenues 2001 compared 2000 due decreased revenues panamsat corporation panamsat hughes network systems hns result sale satellite systems manufacturing businesses boeing company october 6 2000 decrease adjusted net sales revenues panamsat primarily due decline new outright sales salestype lease transactions executed 2001 compared 2000 decrease adjusted net sales revenues hns primarily due decreased shipments directv receiving equipment due primarily directv completing conversion primestar directv customers highpower directv service 2000 decreases partially offset increase adjusted net sales revenues directtohome businesses resulted addition approximately 15 million net new subscribers united states latin america since december 31 2000 increase adjusted net sales revenues 2000 compared 1999 resulted growth directv businesses addition 23 million net new subscribers united states latin america december 31 1999 december 31 2000 panamsat also contributed increase adjusted net sales revenues primarily due increased revenues outright sales salestype lease transactions executed 2000 ii7 general motors corporation subsidiaries hughes financial review continued hughes adjusted losses 525 million 303 million 105 million 2001 2000 1999 respectively increase 2001 adjusted loss compared 2000 primarily due lower profits 2001 sales salestype lease transactions higher operating costs panamsat increased costs associated rollout new direcway services lower profits resulting decreased shipments directv receiving equipment hns added cost directv broadband increased depreciation amortization expense due various acquisitions 2001 capital expenditures satellites property increase 2000 adjusted loss compared 1999 primarily due higher marketing costs directtohome businesses increased depreciation amortization expense due 1999 acquisitions additions satellites property well increased interest expense result increased average outstanding borrowings throughout year gmac financial review gmacs adjusted income 18 billion 16 billion 15 billion 2001 2000 1999 respectively income automotive financing operations totaled 13 billion 11 billion 11 billion 2001 2000 1999 respectively increase adjusted income 2001 compared 2000 primarily due lower market interest rates increased asset levels increases partially offset weakness offlease residual values higher credit losses wider borrowing spreads occurred wake negative rating agency actions 2000 compared 1999 increased financing volumes asset levels offset negative impact higher level market interest rates income insurance operations totaled 200 million 220 million 210 million 2001 2000 1999 respectively decrease income 2001 compared 2000 primarily due reduction capital gains reflecting general weakness equity markets decrease partially offset improved underwriting results increase income 2000 compared 1999 primarily due improved operating results higher investment income capital gains income mortgage operations totaled 331 million 327 million 260 million 2001 2000 1999 respectively increase income 2001 compared 2000 primarily due strong origination volumes securitizations kept pace large runoff home mortgages occurred periods high refinancing activity revenue growth 2001 associated strong residential loan originations increases servicing portfolio realized gains sale securitization mortgage loans largely offset impairment charges recorded mortgage servicing rights due higher mortgage prepayment experience pretax gains securitizations mortgage loans 10 billion 376 650 higher gains 2000 1999 respectively strong yearoveryear performance 2000 compared 1999 reflects benefit strong international growth lower cost servicing increased mortgage originations second half 2000 automotive financing revenue totaled 151 billion 2001 compared 155 billion 138 billion 2000 1999 respectively decrease revenue 2001 primarily due decline asset earning rates 2001 operating lease assets wholesale receivables partially offset increase retail receivables increase 2000 compared 1999 mainly due higher average retail wholesale commercial loan receivable balances net premiums earned insurance operations totaled 20 billion 19 billion 18 billion 2001 2000 1999 respectively increase 2001 compared 2000 primarily due expanding customer relationships assumed reinsurance business strong volume dealer vehicle inventory insurance increase 2000 compared 1999 due premium growth across business lines mortgage revenue totaled 53 billion 39 billion 30 billion 2001 2000 1999 respectively increase revenue 2001 compared 2000 1999 primarily attributed stronger lending volumes loan originations securitizations increase servicing portfolio reflecting significant refinancing activity prompted decline interest rates observed throughout 2001 income including gains fees related sold finance receivables totaled 30 billion 24 billion 17 billion 2001 2000 1999 respectively increase 2001 compared 2000 primarily result increased income increased securitization levels retail wholesale receivables additionally interest income increased due increase cash equivalents 2001 increase 2000 compared 1999 primarily attributable increases interest servicing fees factoring commissions servicing fees liquidity capital resources financing structure 2001 gm gmac experienced excellent access capital markets gm gmac able issue various securities raise capital extend borrowing terms consistent gms need financial flexibility although downgrades gms gmacs credit ratings reduced gms gmacs access commercial paper market amount commercial paper available gm gmac remains sufficient meet corporations capital needs moreover downgrades significant adverse effect gms gmacs ability issue longterm public debt obtain bank debt sell assetbacked securities accordingly gm gmac expect continue excellent access capital markets sufficient meet corporations needs financial flexibility ii8 general motors corporation subsidiaries financing structure continued additional source funds gm currently unrestricted access 56 billion line credit syndicate banks committed june 2006 similarly gmac 74 billion line credit committed june 2002 additional 74 billion committed june 2006 gmac currently plans seek renewal line credit committed june 2002 march 6 2002 gm issued 38 billion convertible debt securities part comprehensive effort improve corporations financial flexibility offering includes 12 billion principal amount 45 series convertible senior debentures due 2032 26 billion principal amount 525 series b convertible senior debentures due 2032 securities mature 30 years convertible gm 123 common stock specific conditions satisfied proceeds offering combined cash generation initiatives used rebuild gms liquidity position reduce underfunded pension liability fund postretirement health care obligations automotive communications services operations december 31 2001 cash marketable securities 30 billion assets voluntary employees beneficiary association veba trust invested fixedincome securities totaled 122 billion compared 133 billion december 31 2000 decrease december 31 2000 primarily due capital expenditures gms purchase additional 10 equity stake suzuki 493 million equity injection gmac 500 million overall decrease earnings items partially offset improvements managed working capital total assets veba trust used prefund part gms postretirement benefits liability approximated 49 billion 67 billion december 31 2001 2000 respectively gm previously indicated goal maintaining 130 billion cash marketable securities order continue funding product development programs throughout next downturn business cycle 130 billion target includes cash pay certain costs prefunded part veba contributions net liquidity excluding hughes 10 billion cash marketable securities 30 billion assets veba trust invested fixedincome securities exceeded loans payable long term debt december 31 2001 decrease 25 billion prior year order provide financial flexibility gm suppliers gm maintains twopart financing program general electric capital corporation gecc pursuant trade payables agreement gm wherein gecc 1 purchases gm receivables discount gm suppliers prior due date receivables pays behalf gm amount due receivables reached due date first part 2 time allows gm defer payment gecc respect portion receivables purchased paid behalf gm deferral lasts generally 40 days extent gecc realize favorable economics transactions arising first part program shared gm whenever gecc gm agree gm defer payment beyond normal due date receivables second part program gm becomes obligated pay interest period deferral outstanding balances gm receivables held gecc classified accounts payable gms financial statements gms longterm unsecured debt obligations become subject rating sp bbb gms current rating bbb negative outlook bbb rating moodys baa3 gms current rating a3 negative outlook baa3 first part program would unavailable gm suppliers gms longterm unsecured debt obligations become subject rating sp bbb lower rating moodys baa2 lower second part program would unavailable gm maximum amount permitted program 2 billion december 31 2001 outstanding balance first part program amounted approximately 495 million outstanding balance second part program 12 billion longterm debt 107 billion 74 billion december 31 2001 2000 respectively ratio longterm debt longterm debt gms net assets automotive communications services operations 726 308 december 31 2001 2000 respectively ratio longterm debt shortterm loans payable total debt gms net assets automotive communications services operations 765 366 december 31 2001 2000 respectively beginning january 2004 fiat spa fiat right exercise put option require gm purchase 80 fiat auto bv fiat auto fair market value put expires july 24 2009 process establishing value would paid gm fiat involves determination fair market value investment banks would retained parties pursuant provisions set master agreement gm fiat made public filings sec result gms purchase initial 20 investment fiat auto 24 billion july 2000 transaction suggested valuation 96 billion 80 fiat auto however exhibit 803aiii master agreement states determining fair market value put shares price 24 billion paid general motors initial 20 interest fiat auto shall considered ii9 general motors corporation subsidiaries automotive communications services operations continued valuation actually performed accordance provisions master agreement amount gm may pay 80 fiat auto quantifiable due large part fact many variables could cause determination rise fall including limited operating results prospects fiat auto factors timing possible exercise put regional global economic developments automotive industry developments specific business fiat auto resolution antitrust issues arising context transaction legislative developments countries fiat auto gm conduct business operations fiat auto recently announced major restructuring including significant writeoff may relevant prospective valuation fiat auto recently fiat stated expects fiat auto return profitability end 2002 plan sell fiat auto gm put exercised gm would option pay 80 interest fiat auto entirely shares gm 123 par value common stock entirely cash whatever combination thereof gm may choose extent gm chooses pay cash portion purchase price may paid fiat four installments threeyear period gm would expect fund payments normal operating cash flows financing activities time cannot determined effects exercise put would ever occurs next eight years however exercised could material effect gm time exercise financing insurance operations december 31 2001 gmac owned assets serviced automotive receivables totaling 2201 billion compared 1857 billion december 31 2000 total consolidated assets gmac december 31 2001 1927 billion compared 1685 billion december 31 2000 increases primarily due increases serviced retail receivables cash equivalents mortgages held sale assets mortgage lending receivables mortgage loans held investment due deferred receivable sales mortgage servicing rights increases partially offset decreases serviced wholesale receivables operating lease assets receivables due aco factored receivables total automotive commercial finance receivables serviced gmac including sold receivables amounted 1306 billion 1125 billion december 31 2001 2000 respectively yeartoyear increase primarily due 243 billion increase serviced retail receivables partially offset 53 billion decrease serviced wholesale receivables continued increased gmsponsored retail financing incentives contributed rise serviced retail receivables decrease serviced wholesale receivables due lower dealer inventory levels principal balances active trusts sold wholesale receivables including retained subordinated interests increased 62 billion due completion three sales 2001 additionally outstanding principal balances sold retail automotive receivables including retained subordinated interests increased 35 billion due completion five sales 2001 gmacs liquidity well ability profit ongoing acquisition activity large part dependent timely access capital costs associated raising funds different segments capital markets regard gmac regularly accesses shortterm mediumterm longterm debt assetbacked securitization markets principally commercial paper notes underwritten transactions december 31 2001 gmacs total borrowings 1520 billion compared 1334 billion december 31 2000 higher yeartoyear debt balances principally used fund increased asset levels approximately 84 debt represented funding operations united states remaining 16 represented borrowings operations canada 7 united kingdom 3 germany 2 countries 4 gmacs 2001 yearend ratio total debt total stockholders equity 941 compared 951 december 31 2000 total shortterm debt outstanding december 31 2001 amounted 362 billion compared 569 billion yearend 2000 offbalance sheet arrangements gm gmac use offbalance sheet special purpose entities spes economics sound business principles warrant use gms principal use spes occurs connection securitization sale financial assets generated acquired ordinary course business gms whollyowned subsidiary gmac subsidiaries lesser extent gm assets securitized sold gmac subsidiaries consist principally mortgages wholesale retail loans secured vehicles sold gms dealer network assets sold gm consist trade receivables gm gmac use spes manner consistent conventional practices securitization industry purpose isolate receivables benefit securitization investors use spes enables gm gmac access highly liquid efficient markets sale types financial assets packaged securitized forms ii10 general motors corporation subsidiaries offbalance sheet arrangements continued gm leases real estate equipment various spes established facilitate financing assets gm nationally prominent creditworthy lessors assets consist principally office buildings warehouses machinery equipment use spes allows parties providing financing isolate particular assets single entity thereby syndicate financing multiple third parties conventional financing technique used lower cost borrowing thus lease cost lessee gm wellestablished market institutions participate financing property purchase interests spes established facilitate property leases gm owned institutions truly independent affiliated gm institutions maintain substantial equity investments spes officers directors employees gm gmac affiliates hold direct indirect equity interests spes assets spes follows dollars millions december 31 2001 2000 automotive communications services operations assets leased operating leases 2412 1729 trade receivables sold 868 897 total 3280 2626 financing insurance operations receivables sold securitized mortgage loans 104678 86344 retail finance receivables 11978 6957 wholesale finance receivables 16227 9988 total 132883 103289 book value per share book value per share determined based liquidation rights various classes common stock book value per share gm 123 par value common stock decreased 2479 december 31 2001 3936 december 31 2000 book value per share gm class h common stock decreased 496 december 31 2001 787 december 31 2000 dividends may paid common stocks declared gms board directors sole discretion amount available payment dividends class common stock reduced occasion dividends paid class adjusted occasion changes amount surplus attributed class resulting repurchase issuance shares class december 31 2001 amount available payment dividends gm 123 par value gm class h common stocks 101 billion 194 billion respectively gms policy distribute dividends 123 par value common stock based outlook indicated capital needs business cash dividends per share gm 123 par value common stock 200 2001 2000 1999 respect gm class h common stock gm board determined pay cash dividends time order allow earnings hughes retained investment business hughes dividends per share gm series h 625 automatically convertible preference stock 351172 2001 april 2 2001 gm redeemed approximately 5 million outstanding series g 912 depository shares represented onefourth interest gm series g preference stock 5 million outstanding series g 987 trust originated preferred securitiessm toprssm total redemption price included accrued unpaid dividends series preference stock redeemed may 2 2000 result amount paid date series shareholders record included accrued unpaid dividends part total redemption price sm trust originated preferred securities toprs service trademarks merrill lynch co ii11 general motors corporation subsidiaries euro conversion january 1 1999 11 15 member countries european union established fixed conversion rates existing currencies adopted euro new common currency euro traded currency exchanges legacy currencies remained legal tender participating countries transition period january 1 2002 beginning january 1 2002 eurodenominated bills coins issued february 28 2002 legacy currencies withdrawn circulation corporation reviewed made required modifications applicable information technology systems contracts based new currency december 31 2001 conversion euro resulted material adverse impact gms financial position results operations european matters 2001 gm europe announced intention turn around business implementation project olympia initial stages project olympia sought identify initiatives could deliver solid profitable business performance 2003 strengthened optimized sales structure revitalized opelvauxhall brand market growth opportunities continuous improvement refocusing organizational structure project identified several initiatives aim address goals mentioned initiatives include among things reducing gm europes manufacturing capacity restructuring dealer network germany redefining way vehicles marketed varying stages planning execution impact initiatives may financial position results operations gm currently assessed may include charge earnings 2002 september 2000 european parliament passed directive requiring member states adopt legislation regarding endoflife vehicles responsibility manufacturers dismantling recycling vehicles sold european union member states required transform concepts detailed directive national law april 2002 directive manufacturers financially responsible least portion cost takeback vehicles placed service july 2002 vehicles placed service prior july 2002 still operation january 2007 laws developed individual national legislatures throughout europe significant impact amount ultimately paid manufacturers issue management currently assessing impact potential legislation gms financial position results operations may include charge earnings 2002 european commission adopted draft block exemption regulation provides reform rules governing automotive distribution service europe european commissions proposal would eliminate current block exemption place since 1985 permits manufacturers control dealerships located brands sell current block exemption expires october 2002 however transition period end september 2003 existing agreements dealers gm presently evaluating effect proposed regulation would present distribution aftermarket strategies hughesechostar transactions october 28 2001 gm wholly owned subsidiary hughes together echostar communications corporation echostar announced signing definitive agreements subject stockholder approval regulatory clearance certain conditions provide splitoff hughes gm subsequent merger hughes business echostar transactions designed address strategic challenges currently facing hughes business provide liquidity value gm would help support credit position gm transactions splitoff hughes gm would occur means distribution holders gm class h common stock one share class c common stock hughes holding company stock hughes time splitoff exchange share gm class h common stock held immediately prior splitoff immediately following splitoff businesses hughes echostar would combined hughesechostar merger form new echostar share hughes holding company class c common stock shares would remain outstanding become share class c common stock new echostar holders class b common stock echostar would receive 1073 13699 shares stock merged entity exchange share class b common stock echostar held prior hughesechostar merger transactions structured manner result recapitalization gm class h common stock gm 123 par value common stock 120 exchange ratio currently provided certain circumstances general motors restated certificate incorporation amended gm 123 par value common stock would remain outstanding would gms class common stock transactions ii12 general motors corporation subsidiaries hughesechostar transactions continued part transactions gm would receive dividend hughes 42 billion cash approximately 30 retained economic interest hughes would reduced commensurate amount addition gm may achieve additional liquidity respect portion retained economic interest hughes represented 100 million shares gm class h common stock transactions new echostar class c common stock including exchanging shares gm outstanding obligations following transactions subject irs approval based number assumptions gm may retain interest merged entity transactions subject number conditions including approval majority class gm stockholders gm 123 gm class h voting separately distinct classes also voting together single class based respective per share voting power proposed transactions also subject antitrust clearance approval federal communications commission addition transactions contingent upon receipt favorable ruling irs separation hughes gm taxfree gm stockholders us federal income tax purposes transactions currently expected close second half 2002 gm hughes echostar agreed event transactions occur certain specified regulatoryrelated conditions satisfied echostar required purchase hughes interest panamsat corporation aggregate purchase price approximately 27 billion payable depending circumstances solely cash combination cash either debt equity securities echostar addition event transactions occur certain specified regulatory clearances approvals relating united states antitrust federal communication commission matters satisfied echostar required pay 600 million termination fee hughes gm stockholders approve transactions gm receives irs ruling abovementioned regulatory approvals financial results hughes reported discontinued operations gms consolidated financial statements gm would record dividend 42 billion reduction gms investment hughes gm would record splitoff hughes fair value would recognize gain based implied exchange ratio 073 shares echostar class common stock exchange share gm class h common stock inverse exchange ratio hughesechostar merger 1073 13699 shares new echostar class b common stock exchange share echostar class b common stock based upon closing price echostar class common stock 2747 per share december 31 2001 transaction would value hughes equity 276 billion resulting aftertax gain approximately 140 billion based net book value hughes december 31 2001 addition gm currently anticipates result splitoff would reduction gm stockholders equity approximately 36 billion based stock prices december 31 2001 actual gain loss well actual impact stockholders equity would higher lower depending actual echostar class common stock price net book value hughes time transactions close depending upon whether shares gm series h 625 automatically convertible preference stock held america online inc aol converted gm class h common stock prior closing would mandatorily june 24 2002 gain assuming december 31 2001 stock prices could increased approximately 10 employment payrolls worldwide employment december 31 thousands 2001 2000 1999 gmna 202 212 217 gme 73 89 91 gmlaam 23 24 23 gmap 11 10 gmac 29 27 hughes 14 12 1 11 1 13 12 total employees 365 389 391 worldwide payrolls continuing operations billions 198 209 1 211 1 us hourly payrolls billions 24 85 94 100 average labor cost per active hour worked us hourly 3 4 5776 5216 5051 1 amounts adjusted exclude hughes employees transferred boeing company 2 includes employees work excludes laidoff employees receiving benefits 3 includes us hourly wages benefits divided number hours worked 4 amounts adjusted exclude hughes employees ii13 general motors corporation subsidiaries significant accounting principles consolidated financial statements gm prepared conformity accounting principles generally accepted united states preparation financial statements requires use estimates judgments assumptions affect reported amounts assets liabilities date financial statements reported amounts revenues expenses periods presented gm believes significant accounting policies following may involve higher degree judgments estimates complexity sales allowances time sale gm records reduction revenue estimated impact sales allowances form dealer customer incentives may numerous types incentives available particular time estimate based upon assumption certain number vehicles dealer stock specific incentive applied actual number vehicles differs estimate different mix incentives occurs sales allowances could affected policy warranty provisions estimated expenses related product warranties made time products sold estimates established using historical information nature frequency average cost warranty claims management actively studies trends warranty claims takes action improve vehicle quality minimize warranty claims management believes warranty reserve appropriate however actual claims incurred could differ original estimates requiring adjustments reserve impairment longlived assets gm periodically reviews carrying value longlived assets held used assets disposed including goodwill intangible assets events circumstances warrant review performed using estimates future cash flows carrying value longlived asset considered impaired impairment charge recorded amount carrying value longlived asset exceeds fair value management believes estimates future cash flows fair value reasonable however changes estimates cash flows fair value could affect evaluations employee costs pension postretirement benefits costs obligations dependent assumptions used calculating amounts assumptions include discount rates health care cost trend rates benefits earned interest cost expected return plan assets mortality rates factors accordance accounting principles generally accepted united states actual results differ assumptions accumulated amortized future periods therefore generally affect recognized expense recorded obligation future periods management believes assumptions used appropriate differences actual experience changes assumptions may affect gms pension postretirement obligations future expense postemployment benefits gm establishes reserves termination postemployment benefit liabilities paid pursuant union contractual agreements connection closed plants reserve based comprehensive study considers impact annual production labor forecast assumptions well redeployment scenarios management believes assumptions used reserve appropriate however changes assumptions may affect postemployment benefit liability allowance credit losses allowance credit losses generally established gmac period receivables acquired maintained level considered appropriate management based historical factors affect collectibility factors include historical trends repossessions chargeoffs recoveries credit losses careful monitoring portfolio credit quality including impact acquisitions current projected economic market conditions different assumptions changes economic circumstances could result changes allowance credit losses ii14 general motors corporation subsidiaries significant accounting principles continued investments operating leases gmacs investments residual values leasing portfolio represent estimate values assets end lease contract initially recorded based appraisals estimates management reviews residual values periodically determine recorded amounts appropriate operating lease assets impaired gmac actively manages remarketing offlease vehicles maximize realization value changes value residuals external factors impacting gmacs future ability market vehicles prevailing market conditions may impact realization residual values accounting derivatives contracts fair value corporation uses derivatives normal course business manage exposure fluctuations commodity prices interest foreign currency rates effective january 1 2001 corporation accounts derivatives consolidated balance sheet assets liabilities fair value accordance statement financial accounting standards sfas 133 accounting derivative instruments hedging activities accounting complex evidenced significant interpretations primary accounting standard continues evolve well significant judgments estimates involved estimating fair value absence quoted market values estimates based upon valuation methodologies deemed appropriate circumstances however use different assumptions may material effect estimated fair value amounts new accounting standards june 2001 financial accounting standards board fasb issued sfas 141 business combinations sfas 141 requires purchase method accounting used business combinations initiated june 30 2001 statement specifies certain acquired intangible assets business combination recognized assets separately goodwill existing intangible assets goodwill evaluated new separation requirements management expect statement material impact gms consolidated financial position results operations june 2001 fasb issued sfas 142 goodwill intangible assets sfas 142 changes accounting goodwill amortization method impairmentonly approach amortization goodwill including goodwill recorded past business combinations cease upon adoption statement addition statement requires goodwill tested impairment least annually reporting unit level corporation implemented sfas 142 january 1 2002 accordance statement gm required complete transitional goodwill impairment test june 30 2002 corporation evaluating yet determined whether adoption statement result impairment goodwill management estimates goodwill indefinite lived intangible asset amortization required previous accounting standards 383 million pretax 302 million aftertax charged income statement 2002 june 2001 fasb issued sfas 143 accounting asset retirement obligations statement addresses financial accounting reporting obligations associated retirement tangible longlived assets associated asset retirement costs corporation required implement sfas 143 january 1 2003 management expect statement material impact gms consolidated financial position results operations august 2001 fasb issued sfas 144 accounting impairment disposal longlived assets statement supersedes sfas 121 accounting impairment longlived assets longlived assets disposed statement retains previously existing accounting requirements related recognition measurement impairment longlived assets held used expanding measurement requirements longlived assets disposed sale include discontinued operations also expands previously existing reporting requirements discontinued operations include component entity either disposed classified held sale corporation implemented sfas 144 january 1 2002 management expect statement material impact gms consolidated financial position results operations ii15 general motors corporation subsidiaries forwardlooking statements report reports subsequently filed gm sec forms 10q 8k related comments management gm hughes use words expect anticipate estimate forecast objective plan goal similar expressions intended identify forwardlooking statements represent current judgments future may hold believe judgments reasonable actual results may differ materially due numerous important factors described factors may described subsequent reports gm may file sec forms 10q 8k changes economic conditions currency exchange rates significant terrorist acts political instability major markets corporation procures material components supplies production principal products produced distributed sold ie north america europe latin america asia pacific shortages fuel interruptions transportation systems labor strikes work stoppages interruptions difficulties employment labor major markets corporation purchases material components supplies production products produced distributed sold significant changes competitive environment major markets corporation purchases material components supplies production products produced distributed sold changes laws regulations policies activities governments agencies similar organizations actions may affect production licensing distribution sale corporations products cost thereof applicable tax rates ability corporation achieve reductions cost employment levels realize production efficiencies implement capital expenditures levels times planned management respect hughes additional risk factors include economic conditions product demand market acceptance government action local political economic developments affecting countries hughes operations ability obtain export licenses competition ability achieve cost reductions ability timely perform material contracts technological risk limitations access distribution channels success timeliness satellite launches inorbit performance satellites loss uninsured satellites ability customers obtain financing hughes ability access capital maintain financial flexibility additionally inorbit satellites hughes 81 owned subsidiary panamsat corporation subject risk failing prematurely due among things mechanical failure collision objects space inability maintain proper orbit satellites subject risk launch delay failure destruction damage ground launch failure become fully operational launched delays production launch satellite complete partial loss satellite inorbit launch could material adverse impact operation hughes businesses respect inorbit launch problems insurance carried hughes panamsat generally compensate business interruption loss future revenues customers hughes past experienced technical anomalies satellites service interruptions caused anomalies depending severity could result claims affected customers termination transponder agreements cancellation service contracts loss customers item 7a item 7 management’s discussion analysis financial condition results operations overview primarily engaged worldwide production marketing cars trucks operate two businesses consisting automotive operations also refer automotive gm automotive gma includes four automotive segments consisting gmna gme gmlaam gmap financing insurance operations fio finance insurance operations primarily conducted gmac whollyowned subsidiary november 2006 november 30 2006 sold 51 controlling ownership interest gmac consortium investors sale accounted 49 ownership interest gmac equity method gmac provides broad range financial services including consumer vehicle financing automotive dealership commercial financing residential mortgage services automobile service contracts personal automobile insurance coverage selected commercial insurance coverage automotive industry 2008 global automotive industry severely affected deepening global credit crisis volatile oil prices recession north america western europe decreases employment rate lack consumer confidence industry continued show growth eastern europe laam region asia pacific although growth areas moderated previous levels beginning show effects credit market crisis began united states since spread western europe rest world global industry vehicle sales retail fleet customers 671 million units 2008 representing 51 decrease compared 2007 expect industry sales approximately 575 million units 2009 global vehicle sales 2008 84 million units compared 94 million units 2007 vehicle sales increased gmlaam gmap declined gmna gme global market share 2008 124 compared 133 2007 market share increased 2008 compared 2007 170 171 gmlaam 69 70 gmap declined period 231 215 gmna 94 93 gme competition factors commodity energy prices foreign currency exchange imbalances continued exert pricing pressure global automotive market 2008 expect global competition increase next years due primarily aggressive investment manufacturers established markets united states western europe presence local manufacturers key emerging markets china india commodity price increases particularly steel aluminum copper precious metals historically contributed substantial cost pressures industry vehicle manufacturers well suppliers second half 2008 prices commodities decreased significantly reflecting drop global demand brought tightening credit markets recession us western europe volatile oil prices addition historically low value japanese yen us dollar benefited japanese manufacturers exporting vehicles components united states due part pressures industry pricing comparably equipped products continued decline major markets united states actual prices vehicles similar content declined accelerating pace last decade expect challenging pricing environment continue foreseeable future recent developments reflecting dramatic deterioration economic market conditions three months ended december 31 2008 new vehicle sales united states declined rapidly falling lowest percapita levels 50 years revenues fell precipitously due deteriorating market conditions part reflecting escalating public speculation potential bankruptcy consuming liquidity one year prior considered adequate fund operations including contemplated restructuring efforts determined despite far reaching actions restructure us business liquidity would fall levels needed operate compelled turn us government financial assistance december 2 2008 submitted general motors corporation subsidiaries restructuring plan longterm viability senate banking committee house representatives financial services committee restructuring plan key elements restructuring plan included • dramatic shift us product portfolio 22 24 new vehicle launches 20092012 fuel efficient cars crossovers • full compliance eisa extensive investment wide array advanced propulsion technologies • reduction brands nameplates dealerships focus available resources growth strategies profitable operations • full labor cost competitiveness foreign manufacturers us later 2012 • manufacturing structural cost reductions increased productivity employment reductions • balance sheet restructuring supplemented liquidity temporary federal assistance bridge normal market conditions requested temporary federal assistance 180 billion comprised 120 billion term loan 60 billion line credit sustain operations accelerate implementation restructuring 120 billion term loan intended provide adequate liquidity baseline liquidity scenario 60 billion line credit intended provide supplemental liquidity anticipated requiring downside scenario submitted december 2 2008 baseline industry sales volume market share assumptions united states 2009 december 2 2008 120 million units 225 market share baseline industry global sales volume assumption 638 million units downside industry sales volume assumption united states 2009 december 2 2008 105 million units downside industry global sales volume assumption 603 million units december 31 2008 entered ust loan agreement pursuant ust agreed provide us 134 billion ust loan facility sustain operations march 31 2009 borrowed 40 billion ust loan facility december 31 2008 additional 54 billion january 21 2009 40 billion february 17 2009 condition obtaining ust loan facility agreed achieve certain restructuring targets within designated time frames fully described pursuant ust loan agreement february 17 2009 submitted ust viability plan achieve sustain longterm viability international competitiveness energy efficiency viability plan included description specific actions intended result following • repayment ust loans period extending beyond current maturity date december 30 2011 • ability comply federal fuel efficiency emissions requirements commence domestic manufacturing advanced technology vehicles • achievement positive net present value using reasonable assumptions taking account existing projected future costs • rationalization costs capitalization capacity respect manufacturing workforce suppliers dealerships • product mix cost structure competitive us marketplace general motors corporation subsidiaries viability plan addresses requirements set forth ust loan agreement specifically agreed use best efforts achieve following restructuring targets • reduction outstanding unsecured public debt less twothirds conversion existing public debt equity debt andor cash appropriate means • reduction total amount compensation including wages benefits paid us employees later december 31 2009 average total amount per hour per person amount competitive average total amount compensation certified secretary united states department labor paid per hour per person employees nissan toyota honda whose site employment us • elimination payment compensation benefits subsidiaries’ us employees fired laidoff furloughed idled customary severance pay • application december 31 2009 work rules subsidiaries’ us employees manner competitive work rules employees nissan toyota honda whose site employment us • less onehalf value future payment contribution made us subsidiaries veba account similar account shall made form common stock value payment contribution shall exceed amount required period settlement agreement dated february 21 2008 among us certain unions class representatives place december 31 2008 february 17 2009 ust loan agreement amended waive requirement provide term sheets relative conversion least twothirds public unsecured debt least onehalf value outstanding veba obligation equity summary significant elements viability plan included us brands nameplates focus resources us primarily core brands chevrolet cadillac buick gmc remaining brands pontiac part buickpontiacgmc retail channel highly focused niche brand hummer subject strategic review including potential sale hummer sale phase decision made three months ended march 31 2009 final resolution expected later 2010 saturn remain operation end planned lifecycle saturn products 20102011 interim saturn retailers group investors present plan would allow spin sale saturn distribution corporation indirect wholly owned subsidiary would open possibility spinoff sale occur intend phase saturn brand end current product lifecycle february 20 2009 saab automobile ab filed protection reorganization laws sweden could reorganize standalone entity independent us product plan calls 25 reduction number vehicle nameplates 48 2008 36 2012 anticipate lead higher per vehicle profit able provide additional marketing support concentrate engineering capital spending higher volume vehicles dealers due long operating history legacy locations many dealerships operate outdated facilities also longer prime locations required succeed result broad dealer network major markets become disadvantage dealerships us intend reduce dealers 6246 2008 4700 2012 25 reduction 4100 2014 reduction take place metro suburban markets dealership overcapacity prevalent manufacturing operations reduce total number powertrain stamping assembly plants us 47 2008 33 2012 addition consolidations implementing integrated global manufacturing strategy based common lean manufacturing principles processes implementation strategy provides infrastructure flexible production assembly facilities multiple body styles different architectures built given plant flexible manufacturing enables us respond changing market conditions quickly contributes higher overall capacity utilization resulting lower fixed costs per vehicle sold lower efficient capital investment general motors corporation subsidiaries labor cost intend reduce hourly salaried employment levels 47000 global basis reduce salaried employment levels 10000 employees 2009 reduce us salaries 3 10 depending employees level reduce salaried retiree benefits negotiated suspension jobs bank program uaw refer note 21 consolidated financial statements since execution ust loan agreement intense discussions uaw relative competitive improvements agreements concerning two items completed implemented first special attrition program negotiated assist restructuring efforts reducing excess employment costs voluntary incentivized attrition current hourly workforce second uaw agreed suspend jobs bank program provided full income benefit protection lieu layoff indefinite period time addition reached tentative agreement uaw regarding modification gmuaw labor agreement tentative agreement subject ratification uaw membership competitive improvements substantially reduce labor costs represent major move close competitive gap us transplant competitors addition uaw agreed improve competitive work rules also anticipated significantly reduce labor costs changes materially improve competitiveness help us realize substantial portion labor cost savings targeted viability plan progress required achieve full targeted savings capitalization currently engaged negotiations uaw counsel class gm retirees respective advisors pursue modifications settlement agreement accordance requirements ust loan agreement consistent terms ust loan agreement seeking convert least half value future payments veba common stock rather cash total value veba payments exceed amount provided veba settlement agreement extensive due diligence regarding current situation future prospects plans underway parties relevant agreements uaw class counsel advisors understand restructuring veba obligations necessary component viability plan agreed work toward executing agreement modify veba settlement agreement march 31 2009 yet reached agreement restructure veba payments also currently engaged negotiations advisors unofficial committee unsecured bondholders reduce public unsecured debt less twothirds exchange bonds equity appropriate consideration accordance requirements ust loan agreement negotiations ongoing committed commencing exchange offer march 31 2009 required ust loan agreement connection warrant provided ust connection ust loan agreement debt equity conversion least twothirds unsecured debt conversion least onehalf value outstanding veba obligation equity anticipate new equity issued pursuant ust warrant bond exchange veba would represent substantially pro forma common stock outstanding pursuant terms ust loan facility submitted ust february 17 2009 plan return profitability continue operate going concern viability plan developing viability plan considered two scenarios baseline downside baseline scenario generally conservative third parties’ forecasts sets forecasts assume increase oil prices 130 per barrel 2014 rapid rise prices consensus thirdparty commentators believe rising oil prices drive segment shift away trucks toward cars crossover vehicles 2009 2014 general motors corporation subsidiaries order execute viability plan requested us government funding totaling 225 billion cover baseline liquidity requirements initial 180 billion requested december 2 2008 downside scenario plus additional 45 billion cover downside liquidity requirements reflect changes various assumptions subsequent december 2 2008 submission proposed alternative debt funding could met combination secured term loan 60 billion preferred equity 165 billion viability plan baseline scenario representing increase 45 billion december request 91 billion incremental 134 billion outstanding february 28 2009 suggested ust current amount outstanding ust loan facility 134 billion plus additional 31 billion requested 2009 could provided form preferred stock believe structure would provide necessary mediumterm funding need provide higher return ust commensurate higher returns ust receives preferred stock investments financial institutions viability plan downside scenario additional 75 billion funding would required requested form secured revolving credit facility collateral used secure current 134 billion ust loan facility would used secure proposed 75 billion secured revolving credit facility 60 billion term loan viability plan also assumes loans 77 billion provisions eisa doe loans doe baseline industry vehicle sales forecast 2009 105 million total vehicles united states 575 million vehicles globally market share forecast 2009 22 united states 12 globally 2009 baseline liquidity forecast reflects 20 billion funding ust march 2009 additional 26 billion april 2009 addition 134 billion received date net 23 billion nonus governmental entities 20 billion doe loans sale certain assets net proceeds 15 billion currently approximately 1 billion outstanding series convertible debentures mature june 1 2009 funding plan described include payment maturity principal amount debentures unable restructure series convertible debentures prior june 1 2009 otherwise satisfactorily address payment due june 1 2009 default would arise respect payment obligations could also trigger cross defaults outstanding debt would potentially require us seek relief filing us bankruptcy code refer “liquidity overview” additional information basis presentation mda read conjunction accompanying consolidated financial statements prepared assuming continue going concern discussed note 2 consolidated financial statements recurring losses operations stockholders’ deficit inability generate sufficient cash flow meet obligations sustain operations raise substantial doubt ability continue going concern management’s plans concerning matters also discussed note 2 consolidated financial statements consolidated financial statements include adjustments might result outcome uncertainty fio business primarily consists operating results gmac eleven months ended november 30 2006 consolidated basis includes 49 share gmac’s operating results month december 2006 full years 2007 2008 equity method basis fio also includes financing includes two special purpose entities holding automotive leases previously owned gmac affiliates retained well elimination intersegment transactions gma corporate certain reclassifications made 2007 2006 financial information conform current period presentation results operations cash flows allison reported discontinued operations periods presented historically allison included gmna consistent industry practice market share information includes estimates industry sales certain countries public reporting legally required otherwise available consistent basis general motors corporation subsidiaries consolidated results operations nm meaningful 2008 compared 2007 total net sales revenue decreased year ended 2008 310 billion 172 due declining automotive sales 299 billion decrease reflects decline global automotive industry resulted tightening credit markets recession us western europe volatile oil prices declining consumer confidence around world factors first affected us economy late 2007 continued deteriorate spread 2008 western europe recently emerging markets asia south america automotive sales decreased 263 billion gmna due declining volumes unfavorable mix 231 billion increase accrual residual support programs leased vehicles 18 billion primarily due decline residual values fullsize pickup trucks sport utility vehicles middle 2008 automotive sales also decreased gme 31 billion gmap 25 billion partially offset increase gmlaam 14 billion expect vehicle net volume decline 2009 result challenging global economy operating loss increased year ended 2008 170 billion 213 billion due 1 changes vehicle net volume mix 110 billion 2 charges 58 billion related gmna restructuring special attrition programs facility idling 3 increased general motors corporation subsidiaries charges 28 billion related delphi 4 expenses 17 billion related salaried post65 healthcare settlement 5 increased asset impairment charges 13 billion 6 charges 03 billion related salaried window program voluntary early retirement program extended certain us salaried employees 2008 effect items mitigated 49 billion curtailment gain related uaw hourly medical plan nonrecurring charge 16 billion 2007 related pension prior service cost loss continuing operations decreased year ended 2008 124 billion 287 due 1 decrease income tax expense benefit 354 billion resulting 390 billion valuation allowance established deferred tax assets us canada germany 2007 2 21 billion improvement proportionate share gmac’s results operations prior year loss 12 billion improved current year income 09 billion primarily result gmac recording gain due extinguishment debt improvements partially offset 1 items mentioned related increase operating loss 170 billion 2 impairment charges 71 billion related gmac common membership interests 3 impairment charge 10 billion related gmac preferred membership interests execution viability plan calls reduction total number powertrain stamping assembly plants elimination certain brands nameplates result reduction reasonably possible may required record impairment charges related facilities tooling related certain brands nameplates accelerate depreciation assets utilized shorter period time current estimated useful life impairment charges increases depreciation may significant based currently anticipated restructuring actions viability plan result acceleration 16 billion depreciation impairment expense 2009 previously would recognized future periods details results businesses segments presented later mda 2007 compared 2006 total net sales revenue decreased year ended 2007 245 billion 120 primarily due deconsolidation gmac november 2006 following gmac transaction deconsolidation resulted 336 billion decrease total net sales revenue 2007 offset 1 increased automotive sales 70 billion 2007 resulting growth outside north america reduced declining sales gmna 2 additional financing revenue 2007 21 billion two special purpose entities holding outstanding leases previously owned gmac included gmac’s net income first 11 months 2006 operating loss decreased year ended 2007 15 billion 260 due special attrition program related charges 2006 64 billion recur 2007 improved results financing 2007 09 billion two special purpose entities holding leases previously owned gmac included gmac’s net income first eleven months 2006 improvements offset 1 effect gmac deconsolidation 2006 gmac contributed 18 billion operating profit 2007 gmac’s results recorded equity loss gmac llc 2 accelerated recognition previously unamortized pension prior service cost 16 billion 2007 3 increased net charges 2007 16 billion related delphi 4 increased restructuring asset impairment related charges 2007 07 billion loss continuing operations increased year ended 2007 409 billion result 390 billion valuation allowance established three months ended september 30 2007 net deferred tax assets united states canada germany proportionate share losses equity investment gmac 12 billion addition items identified previous paragraphs net loss year ended 2007 387 billion also included gain sale allison 43 billion august 2007 completed sale commercial military operations allison formerly division powertrain operations negotiated purchase price 56 billion cash plus assumed liabilities paid closing purchase price subject adjustment based amount allison’s net working capital debt closing date resulted adjusted general motors corporation subsidiaries purchase price 54 billion gain sale allison amount 53 billion 43 billion aftertax inclusive final purchase price adjustments recognized 2007 allison designs manufactures commercial military automatic transmissions global provider commercial vehicle automatic transmissions onhighway vehicles including trucks specialty vehicles buses recreational vehicles offhighway military vehicles well hybrid propulsion systems transit buses retained powertrain operations’ facility near baltimore maryland manufactures automatic transmissions primarily trucks hybrid propulsion systems results operations cash flows allison reported consolidated financial statements discontinued operations periods presented historically allison reported gmna information businesses segments presented changes consolidated financial condition accounts notes receivable net accounts notes receivable net decreased 20 billion 206 77 billion december 31 2008 97 billion december 31 2007 decrease due lower sales volumes end 2008 13 billion including 07 billion gmna 05 billion gme 01 billion gmap foreign currency translation 07 billion primarily gme 03 billion gmap 02 billion addition dividends receivable decreased 01 billion gmap inventories decreased 19 billion 128 130 billion december 31 2008 149 billion december 31 2007 decrease due closing facilities downtime inventory reduction efforts gmna 13 billion gme 03 billion offset increases 05 billion gmap 03 billion gmlaam foreign currency translation contributed decrease 08 billion gmap 06 billion gme 03 billion gmlaam decreases offset deferral vehicle sales high risk dealers us canada 08 billion equipment operating leases net equipment operating leases net decreased 19 billion 359 34 billion december 31 2008 53 billion december 31 2007 due reductions daily rental volumes gmna 15 billion addition gme decreased 04 billion due reduction rental fleet lower residual values financing equipment operating leases net financing equipment operating leases net decreased 45 billion 672 22 billion december 31 2008 67 billion december 31 2007 decrease due planned reduction equipment operating leases net retained part gmac transaction equity net assets gmac llc equity net assets gmac llc decreased 66 billion 930 05 billion december 31 2008 71 billion december 31 2007 decrease due impairment charges 71 billion related common membership interests offset proportionate share gmac’s income 09 billion property net property net decreased 33 billion 77 397 billion december 31 2008 430 billion december 31 2007 decrease due 1 foreign currency translation 10 billion gmap 04 billion gme 02 billion gmna 2 property disposals writedowns 09 billion gmna 3 impairments 05 billion gme 05 billion gmna general motors corporation subsidiaries goodwill intangible assets net goodwill intangible assets net decreased 801 million 728 265 million december 31 2008 11 billion december 31 2007 due impairment remaining goodwill 610 million gme gmna noncurrent deferred income tax assets noncurrent deferred income tax assets decreased 20 billion 953 01 billion december 31 2008 21 billion december 31 2007 due establishing valuation allowances deferred tax assets prepaid pension prepaid pension decreased 201 billion 995 01 billion december 31 2008 202 billion december 31 2007 decrease primarily due combination actual losses plan assets transfer delphi pension liability curtailments amendments factors also resulted significant increase noncurrent pension liability shortterm borrowings current portion longterm debt shortterm borrowings current portion longterm debt increased 98 billion 1633 158 billion december 31 2008 60 billion december 31 2007 increase due borrowings secured revolving credit facilities 45 billion borrowings ust 40 billion reclassification 30 billion debt noncurrent current increases offset payments maturity 12 billion exchange 05 billion convertible debt common equity financing debt financing debt decreased 37 billion 755 12 billion december 31 2008 49 billion december 31 2007 decrease due planned repayment debt secured equipment operating leases net retained selling 51 equity interest gmac longterm debt longterm debt decreased 38 billion 114 296 billion december 31 2008 334 billion december 31 2007 decrease due reclassification 30 billion debt noncurrent current 03 billion decrease british pound denominated debt obligation due british pound weakening us dollar noncurrent postretirement benefits pensions noncurrent postretirement benefits pensions decreased 185 billion 390 289 billion december 31 2008 474 billion december 31 2007 decrease liability postretirement benefits pensions primarily driven reduction accumulated postretirement benefit obligation apbo resulting uaw settlement agreement elimination salaried post65 retiree healthcare benefits noncurrent pensions liability noncurrent pensions liability increased 138 billion 1211 december 31 2008 252 billion 114 billion december 31 2007 increase noncurrent pensions liability primarily due combination actual losses plan assets transfer delphi pension liability curtailments amendments factors also resulted decrease prepaid pension described general motors corporation subsidiaries information businesses geographic segments discussed gm automotive results operations nm meaningful production volume represents number vehicles manufactured assembly facilities also includes vehicles produced certain joint ventures b vehicle sales primarily represent sales ultimate customer c vehicle sales data may include rounding differences general motors corporation subsidiaries following discussion highlights key changes operating results automotive region drivers changes discussed regional analysis follows section 2008 compared industry global vehicle sales industry vehicle sales decreased year ended 2008 36 million vehicles 51 671 million vehicles decline started north america extended regions especially second half 2008 reflecting effect slowing economies tightening credit markets volatile oil prices declining consumer confidence around world north america decreased 30 million vehicles 155 166 million vehicles europe decreased 12 million vehicles 50 220 million vehicles decreases offset industry sales increases asia pacific region 388000 vehicles 19 211 million vehicles laam region 210000 vehicles 29 75 million vehicles gm global vehicle sales global vehicle sales decreased year ended 2008 10 million vehicles 108 84 million vehicles sales decreased gmna 952000 vehicles gme 142000 vehicles offset increases 40000 vehicles gmlaam 39000 vehicles gmap consistent sales volume changes occurred within industry gm global production volume global production volume decreased year ended 2008 11 million vehicles 123 81 million vehicles production volume decreased gmna 818000 vehicles gme 278000 vehicles gmap 47000 vehicles offset increase gmlaam 1000 vehicles total net sales revenue total net sales revenue decreased year ended 2008 299 billion 168 decrease driven decline total net sales revenue 263 billion gmna 31 billion gme 25 billion gmap decrease offset increase 14 billion gmlaam automotive cost sales automotive cost sales decreased year ended 2008 152 billion 92 decrease resulted declines automotive cost sales 147 billion gmna 14 billion gme 10 billion gmap offset increase 14 billion gmlaam selling general administrative expense selling general administrative expense decreased year ended 2008 443 million 33 decrease result decrease 683 million gmna offset increases 150 million gmap 48 million gmlaam 35 million gme expenses increased 610 million due impairment goodwill 456 million gme 154 million gmna automotive interest expense net automotive interest expense net decreased year ended 2008 158 million 152 decrease resulted lower net interest expense gmna 463 million higher net interest income gmlaam 6 million offset lower net interest income gme 170 million gmap 95 million general motors corporation subsidiaries equity income net tax equity income net tax decreased year ended 2008 338 million 648 primarily result decreased equity earnings investments 223 million gmna 117 million gmap 10 million gmlaam offset increase 12 million gme minority interests net tax minority interests net tax decreased year ended 2008 509 million 1254 result decreased earnings consolidated affiliates 386 million gmap 74 million gmna 49 million gme discontinued operations august 2007 completed sale commercial military operations allison resulting gain sale discontinued operations net tax 43 billion exclusive gain sale income discontinued operations net tax 03 billion 2007 execution viability plan calls reduction total number powertrain stamping assembly plants elimination certain brands nameplates result reduction reasonably possible may required record impairment charges related facilities tooling related certain brands nameplates accelerate depreciation assets utilized shorter period time current estimated useful life impairment charges increases depreciation may significant based currently anticipated restructuring actions viability plan result acceleration depreciation impairment expense 2009 09 billion gme 07 billion gmna previously would recognized future periods 2007 compared 2006 industry global vehicle sales industry vehicle sales grew strongly regions outside north america year ended 2007 increasing 31 million vehicles 46 707 million vehicles industry vehicle sales increased asia pacific region 15 million vehicles 77 207 million vehicles europe increased 12 million vehicles 57 231 million vehicles laam region increased 10 million vehicles 159 73 million vehicles industry vehicle sales decreased north america 613000 vehicles 30 196 million vehicles gm global vehicle sales global vehicle sales increased year ended 2007 275000 vehicles 30 94 million vehicles third consecutive year sold 90 million vehicles vehicle sales increased 201000 vehicles gmlaam 188000 vehicles gmap 178000 vehicles gme offset decline vehicle sales gmna 291000 vehicles gm global production volume global production volume increased year ended 2007 105000 vehicles 11 production volume increased regions outside north america including increased volumes gmap 335000 vehicles gmlaam 130000 vehicles gme 22000 vehicles whereas gmna declined 382000 vehicles total net sales revenue total net sales revenue increased year ended 2007 67 billion 39 increase total net sales revenue due increases 53 billion gmap 43 billion gmlaam 42 billion gme offset decline total net sales revenue 42 billion gmna well 29 billion increase intercompany sales segments eliminated consolidations general motors corporation subsidiaries automotive cost sales automotive cost sales increased year ended 2007 14 billion 08 increase automotive cost sales resulted increases 47 billion gmap 44 billion gme 35 billion gmlaam offset decline automotive cost sales 83 billion gmna well 29 billion increase related intercompany sales segments eliminated consolidations selling general administrative expense selling general administrative expense increased year ended 2007 06 billion 48 increase selling general administrative expense driven increases 03 billon gmap 02 billion gme gmlaam offset decrease 01 billion gmna automotive interest expense net automotive interest expense net increased year ended 2007 03 billion 493 increase automotive interest expense net due 08 billion decrease net interest income gmap offset decreases net expense 03 billion gmlaam 01 billion gme 01 billion gmna equity income net tax equity income net tax increased year ended 2007 1 million 02 change result increased equity earnings investments 60 million gmap due improved performance shanghai gm offset decreased equity income due sale part equity stake suzuki 2006 15 million gmlaam 8 million gme offset decrease 82 million gmna minority interests net tax minority interests net tax increased year ended 2007 72 million 216 increase results increased earnings consolidated affiliates primarily 76 million gmap 2007 discontinued operations august 2007 completed sale commercial military operations allison resulting gain sale discontinued operations net tax 43 billion exclusive gain sale income discontinued operations net tax 03 billion 04 billion 2007 2006 respectively supplemental categories expenses evaluate gma make certain decisions using supplemental categories variable expenses nonvariable expenses believe categories provide us useful information investors would also find beneficial view business similar manner believe contribution costs structural costs impairment restructuring charges provide meaningful supplemental information regarding expenses place gma expenses categories allow us assess cost performance gma use categories evaluate expenses believe categories allow us readily view operating trends perform analytical comparisons benchmark expenses among geographic segments assess whether north american turnaround plan globalization strategy reducing costs target use categories forecasting purposes evaluating management determining future capital investment allocations accordingly believe categories useful investors allowing greater transparency supplemental information use financial operational decision general motors corporation subsidiaries making categories expenses include results hedging activities respect certain commodity prices foreign currency exchange rates effect foreign currency gains losses financial assets liabilities included automotive cost sales analyzed separately believe contribution costs structural costs impairment restructuring charges provide useful information limitations associated use categories contribution costs structural costs impairment restructuring charges may completely comparable similarly titled measures companies due potential differences companies method calculation result categories limitations considered isolation substitute measures automotive cost sales selling general administrative expense compensate limitations using categories supplements automotive cost sales selling general administrative expense total contribution costs structural costs impairment restructuring charges equals total automotive cost sales selling general administrative expense gma summarized nm meaningful contribution costs expenses consider variable production amount contribution costs included automotive cost sales 1075 billion 1222 billion 1172 billion years ended 2008 2007 2006 respectively costs comprised material cost freight policy warranty expenses amount contribution costs classified selling general administrative expenses 09 billion 10 billion 11 billion years ended 2008 2007 2006 respectively costs incurred primarily connection dealer advertising programs b structural costs expenses generally vary production recorded automotive cost sales selling general administrative expense costs include manufacturing labor pension opeb costs engineering expense marketing related costs certain costs related restructuring impairments included automotive cost sales also excluded structural costs amount structural costs included automotive cost sales 381 billion 399 billion 399 billion years ended 2008 2007 2006 respectively amount structural costs included selling general administrative expense 120 billion 125 billion 119 billion years ended 2008 2007 2006 respectively c impairment restructuring charges primarily included automotive cost sales 2008 02 billion related salaried window program included selling general administrative expense foreign currency certain derivative related items included automotive cost sales general motors corporation subsidiaries contribution costs contribution costs decreased year ended 2008 148 billion 120 lower global wholesale deliveries dealers primarily north america europe resulted decreased contribution costs 177 billion foreign currency translation increased transportation costs factors net favorable material performance increased contribution costs 29 billion contribution costs increased year ended 2007 49 billion 41 result foreign currency translation 37 billion richer product mix increased policy warranty costs overall material performance flat yearoveryear improvements realized supplier productivity global sourcing optimizing supplier footprints offset higher raw material costs product enhancements new vehicles increased global prices steel aluminum copper precious metals increased contribution costs 13 billion 2007 compared 2006 structural costs structural costs decreased year ended 2008 23 billion 44 due 1 manufacturing savings 14 billion gmna lower manufacturing costs hourly headcount levels resulting attrition programs productivity improvements 2 reductions incentive compensation profit sharing costs 06 billion primarily gmna 3 lower manufacturing costs gme 03 billion structural costs increased year ended 2007 06 billion 12 global engineering product development costs increased 2007 due increased global vehicle development advanced technology spending total structural cost expenditures increased gmap gmlaam due higher production costs new product launches associated volume growth effect foreign currency translation also increased structural costs opeb costs decreased 2007 gmna primarily due 2005 uaw health care settlement agreement reached uaw mitigate hourly retiree healthcare costs manufacturing labor costs declined production related headcount levels reduced 2006 uaw attrition program impairment restructuring charges recorded certain charges gains related primarily restructuring initiatives gma included automotive cost sales additional details regarding charges gains included notes 16 21 22 consolidated financial statements following table summarizes charges gains 2008 amounts related following • charges 35 billion restructuring initiatives gmna related special attrition programs • charges 27 billion restructuring initiatives primarily related headcount reductions follows gmna 23 billion gme 263 million gmap 98 million • charges 974 million product specific asset impairments follows gmna 412 million gme 497 million gmlaam 27 million gmap 38 million general motors corporation subsidiaries • 37 billion net curtailment gain related accelerated recognition unamortized net prior service credits due settlement agreement uaw hourly medical plan 257 million net curtailment gain related accelerated recognition unamortized net prior service credits related iuecwa agreement • charges 12 billion gmna settlement loss associated elimination healthcare coverage us salaried retirees age 65 beginning january 1 2009 • charges 340 million related agreement canadian auto workers union caw charges 170 million related pension plan enhancements current future iuecwa retirees charges 197 million gmna related support provided american axle manufacturing holdings inc charges 50 million related salaried window program 2007 amounts related following • charges 918 million restructuring initiatives follows gmna 290 million gme 579 million gmap 49 million • charges 265 million 14 million productspecific asset impairments gmna gmap respectively • charges 13 billion additional pension charges gmna related accelerated recognition unamortized prior service cost • 85 million favorable adjustment conjunction cessation production previously divested business 2006 amounts related following • net charges 64 billion restructuring initiatives gmna related special attrition programs • 412 million net reduction various restructuring matters including favorable revisions 11 billion reserves recorded 2005 related facility capacity actions result favorable effects 2006 uaw attrition program reserve postemployment benefits primarily due higher anticipated headcount reductions associated facility idling activities partially offset restructuring charges 642 million follows gmna 146 million gme 437 million gmlaam 43 million gmap 16 million • charges productspecific asset impairments follows gmna 405 million gme 60 million gmap 61 million well additional impairment charges 70 million 89 million resulting writedowns facilities gmna gme respectively • charges 224 million recorded conjunction cessation production previously divested business partially offset 36 million gain related sale majority investment suzuki derivative foreign currency related items results hedging activities respect certain foreign currency commodity price risks well effect foreign currency gains losses financial assets liabilities included automotive cost sales excluded structural contribution costs decreased 15 billion year ended 2008 compared 2007 increased 10 billion year ended 2007 compared 2006 decrease 2008 primarily due foreign currency gains gmna driven appreciation us dollar canadian dollar increase 2007 primarily due lower derivative marktomarket gains 2007 compared 2006 result less significant commodity price increases 2007 general motors corporation subsidiaries gm automotive segment results operations gm north america nm meaningful production volume represents number vehicles manufactured assembly facilities also includes vehicles produced certain joint ventures b vehicle sales primarily represent sales ultimate customer c vehicle sales data may include rounding differences general motors corporation subsidiaries 2008 compared 2007 industry vehicle sales year ended 2008 industry vehicle sales north america decreased 30 million vehicles 155 industry vehicle sales decreased first three quarters 2008 sharp decline fourth quarter industry vehicle sales decreased 324000 vehicles 69 decreased 510000 vehicles 96 decreased 766000 vehicles 155 first second third quarters 2008 respectively sharp fourth quarter decline resulted decreased vehicle sales 14 million vehicles 308 decrease industry vehicle sales directly attributable recession united states brought tightening credit markets turmoil mortgage markets reductions housing values volatile oil prices contributed declining consumer confidence shortterm anticipate quarterly industry vehicle sales remain levels reported prior 24 months due economic factors mentioned total net sales revenue economic factors mentioned resulting recession united states caused similar effect north american vehicle sales 2008 vehicle sales decreased 952000 vehicles 211 36 million vehicles 2008 379000 360 decrease occurring fourth quarter actual vehicle sales 947000 vehicles 964000 vehicles 978000 vehicles 675000 vehicles first second third fourth quarters 2008 respectively united states vehicle sales 2008 followed industry trend steady decreases first three quarters sharp decline fourth quarter united states vehicle sales decreased 103000 vehicles 114 decreased 214000 vehicles 212 decreased 218000 vehicles 209 first second third quarters 2008 respectively sharp fourth quarter decline resulted decreased vehicle sales 350000 vehicles 390 result decreasing trend vehicle sales anticipate shortterm vehicle sales remain levels reported fourth quarter 2008 year ended 2008 total net sales revenue decreased 263 billion 234 due primarily 1 decline volumes unfavorable mix 231 billion resulting continuing market challenges 2 18 billion increase accrual residual support programs leased vehicles primarily due decline residual values fullsize pickup trucks sport utility vehicles middle 2008 3 unfavorable pricing 07 billion 4 decrease sales components parts accessories 06 billion partially offset 5 foreign currency translation 03 billion due strengthening us dollar relation canadian dollar contributing volume decline 08 billion deferred fourth quarter 2008 related deliveries dealers meet criteria revenue recognition either collectability reasonably assured risks rewards ownership transferred time delivery automotive cost sales year ended 2008 automotive cost sales decreased 147 billion 138 primarily due 1 decreased costs related lower production volumes 140 billion 2 net curtailment gain 38 billion related settlement agreement 3 manufacturing savings 14 billion lower manufacturing costs hourly headcount levels resulting attrition programs productivity improvements 4 favorable foreign currency translation gains 14 billion due primarily appreciation us dollar canadian dollar 5 pension prior service costs 13 billion recorded 2007 6 favorable adjustment 09 billion related fair value commodity foreign exchange currency derivatives decreases partially offset 1 charges related restructuring costs associated special attrition programs certain canadian facility idlings finalization negotiations caw 58 billion 2 expenses 12 billion related salaried post65 healthcare settlement 3 unfavorable commodity derivative fair value adjustments 08 billion 4 increased delphi related charges 06 billion related certain cost subsidies reimbursed year 5 increased warranty expenses 05 billion selling general administrative expense year ended 2008 selling general administrative expense decreased 683 million 82 due 1 reductions incentive compensation profit sharing costs 398 million 2 decreased advertising selling sales promotion expenses general motors corporation subsidiaries 332 million 3 decreased administrative expenses 252 million including receipt 100 million insurance settlement decreases partially offset 236 million related salaried window program increased bad debt expense 44 million expense year ended 2008 expense increased 154 million due impairment charge related goodwill automotive interest expense net year ended 2008 automotive interest expense net decreased 463 million 349 primarily due decreased interest expense 653 million primarily reflecting lower interest rates decrease partially offset decrease interest income 226 million driven lower cash balances equity income loss net tax year ended 2008 equity income loss net tax decreased 223 million due impairment charges lower income investments nummi cami equity income related nummi decreased 113 million primarily due impairment charge 94 million decreased income 43 million primarily due lower volume increases material freight costs equity income related cami decreased 104 million due lower income 79 million related lower volume unfavorable adjustment tax claim liability impairment charge 25 million execution viability plan calls reduction total number powertrain stamping assembly plants elimination certain brands nameplates result reduction expect accelerate depreciation assets utilized shorter period time current useful life based currently anticipated restructuring actions viability plan result accelerated depreciation 07 billion 2009 previously would recognized future periods 2007 compared 2006 industry vehicle sales year ended 2007 industry vehicle sales north america decreased 613000 vehicles 30 due weakness economy resulting decline housing market volatile oil prices total net sales revenue year ended 2007 total net sales revenue decreased 42 billion 36 due decline volumes net favorable mix 46 billion partially offset effect favorable pricing vehicles sold 04 billion related fullsize pickup trucks launched 2007 decrease volume driven reduction year end dealer inventories 160000 vehicles 2006 year end levels result lower us industry sales volumes effect declining market share united states reduction daily rental volume 108000 vehicles automotive cost sales year ended 2007 automotive cost sales decreased 83 billion 72 due restructuring impairment charges 05 billion 2007 compared 62 billion 2006 recorded restructuring charges related 2006 uaw attrition program incurred 2007 also contributing decrease 2007 1 lower production volumes partially general motors corporation subsidiaries offset mix favorable net effect 38 billion 2 savings retiree pensionopeb costs 18 billion primarily due 2005 uaw health care settlement agreement 3 manufacturing savings 10 billion lower hourly headcount levels driven 2006 uaw attrition program productivity improvements cost reductions partially offset 1 additional expense 13 billion due accelerated recognition pension unamortized prior service costs 2 material freight costs 08 billion 3 engineering costs 06 billion related increased investment future products 4 warranty related costs 05 billion primarily result favorable adjustments warranty reserves 2006 occur 2007 5 decrease 05 billion gains commodity derivative contracts used hedge forecasted purchases raw materials 6 increased foreign currency translation losses 03 billion due appreciation canadian dollar us dollar selling general administrative expense year ended 2007 selling general administrative expense decreased 01 billion 17 due ongoing cost reduction initiatives well reduction dealerships automotive interest expense net year ended 2007 automotive interest expense net decreased 74 million 53 primarily due reductions debt balances segments utilizing certain proceeds allison sale equity income loss net tax year ended 2007 equity income loss net tax decreased 82 million 788 due decreased income gmna’s investment nummi result increased project spending preproduction expenses due launch pontiac vibe increases material freight labor costs income discontinued operations net tax august 2007 completed sale commercial military operations allison resulting gain 43 billion income gain sale business reported discontinued operations periods presented general motors corporation subsidiaries gm europe nm meaningful production volume represents number vehicles manufactured assembly facilities also includes vehicles produced certain joint ventures b vehicle sales primarily represent sales ultimate customer including unit sales chevrolet brand products region financial results sales chevrolet brand products produced gm daewoo reported part gmap c vehicle sales data may include rounding differences 2008 compared 2007 industry vehicle sales year ended 2008 industry vehicle sales began decline second quarter followed sharp decline third fourth quarters industry vehicle sales increased 232000 vehicles 41 132000 vehicles 22 first second quarters 2008 respectively industry vehicle sales decreased 356000 vehicles 64 12 million vehicles general motors corporation subsidiaries 202 third fourth quarters 2008 respectively decline industry vehicle sales reflects direct effect recession western europe indirect effect tightening credit markets volatile oil prices slowdown economic growth declining consumer confidence around world shortterm anticipate quarterly industry vehicle sales remain levels reported prior 24 months due economic factors mentioned year ended 2008 industry vehicle sales decreased 12 million vehicles 50 decline industry vehicle sales primarily resulted decrease 577000 vehicles 297 spain decrease 360000 vehicles 130 italy decrease united kingdom 314000 vehicles 112 net decrease various markets western europe 230000 vehicles 24 decrease turkey 109000 vehicles 172 decreases partially offset increase 343000 vehicles 127 russia increase 103000 vehicles 173 ukraine total net sales revenue trend vehicle sales mirrored industry trend mentioned vehicle sales increased 17000 vehicles 31 15000 vehicles 26 first second quarters 2008 respectively vehicle sales decreased 65000 vehicles 124 109000 vehicles 206 third fourth quarters 2008 respectively decline quarter vehicle sales attributable economic factors affecting industry mentioned anticipate shortterm vehicle sales remain levels first three quarters 2008 year ended 2008 total net sales revenue decreased 31 billion 82 due 1 decrease 44 billion due lower wholesale sales volume outside russia 2 decrease 06 billion unfavorable vehicle mix offset 3 net favorable effect 20 billion foreign currency translation driven mainly strengthening euro swedish krona offset partially weakening british pound versus us dollar line industry trends noted gme’s revenue excludes sales chevrolet brand products decreased significantly spain wholesale volumes decreased 67000 vehicles 469 followed united kingdom wholesale volumes decreased 43000 vehicles 105 italy wholesale volumes decreased 41000 vehicles 213 decreases partially offset wholesale volumes russia increased 22000 vehicles 296 automotive cost sales year ended 2008 automotive cost sales decreased 14 billion 40 due 1 decrease 35 billion related lower wholesale sales volume 2 decrease 03 billion unfavorable vehicle mix 3 decrease 03 billion related lower manufacturing costs offset 4 unfavorable effect 24 billion foreign currency translation 5 increase 05 billion related impairment charges related special tooling product related machinery equipment saab 93 95 product lines selling general administrative expense year ended 2008 selling general administrative expense increased 35 million 13 due 1 unfavorable effect 87 million foreign currency translation offset 2 decrease 35 million administrative expenses 3 decrease 17 million sales marketing expenses expense year ended 2008 expense increased 05 billion due impairment charge related goodwill automotive interest income expense net year ended 2008 automotive interest income expense net decreased 170 million primarily result 115 million favorable settlement vat claims united kingdom tax authorities 2007 decrease 35 million interest income general motors corporation subsidiaries minority interests net tax year ended 2008 minority interests net tax increased 49 million due declines profits 60 owned isuzu motors polska able implement aspects viability plan would expect record accelerated depreciation impairments 2009 09 billion previously would recognized future periods additionally conducted strategic review global saab business offered sale given urgency stemming sizeable outflows associated saab operations saab filed reorganization protection laws sweden february 20 2009 anticipate longer consolidate saab beginning three months ending march 31 2009 anticipate recording significant loss could exceed 10 billion deconsolidation 2007 compared 2006 industry vehicle sales year ended 2007 industry vehicle sales increased 12 million vehicles 57 growth industry vehicle sales primarily resulted increase 674000 vehicles 332 russia increases various markets central southeastern europe 188000 vehicles 92 increases italy 171000 vehicles 66 increases ukraine 163000 vehicles 378 increases france 85000 vehicles 34 increases poland 77000 vehicles 262 increases united kingdom 65000 vehicles 24 increases partially offset decrease 290000 vehicles 77 germany total net sales revenue year ended 2007 total net sales revenue increased 42 billion 126 due 1 favorable effect 29 billion foreign currency translation driven mainly strengthening euro british pound swedish krona versus us dollar 2 increase 16 billion due higher wholesale sales volume outside germany 3 increase 04 billion due improvements pricing outside germany primarily opelvauxhall corsa offsetting increases decrease 13 billion related lower wholesale volumes unfavorable pricing germany line industry trends noted gme’s revenue excludes sales chevrolet brand products increased significantly russia wholesale volumes increased 51000 vehicles 2150 followed united kingdom wholesale volumes increased 35000 vehicles 92 wholesale volumes germany decreased 68000 vehicles 189 automotive cost sales year ended 2007 automotive cost sales increased 44 billion 142 due 1 unfavorable effect 29 billion result foreign currency translation 2 increase 05 billion unfavorable vehicle country mix primarily result higher freight duties associated vehicles imported russia korea 3 increase 04 billion related higher wholesale sales volume automotive cost sales rate deteriorated 2007 primarily due unfavorable effect vehicle country mix automotive cost sales partially offset favorable effect price total net sales revenue selling general administrative expense year ended 2007 selling general administrative expense increased 02 billion 70 primarily due foreign currency translation automotive interest income expense net year ended 2007 automotive interest income expense net increased 138 million 1131 primarily result 115 million favorable settlement vat claims united kingdom tax authorities general motors corporation subsidiaries gm latin americaafricamideast nm meaningful production volume represents number vehicles manufactured assembly facilities also includes vehicles produced certain joint ventures b vehicle sales primarily represent sales ultimate customer c vehicle sales data may include rounding differences 2008 compared 2007 industry vehicle sales year ended 2008 industry vehicle sales began moderate third quarter sharp decline fourth quarter industry vehicle sales increased 199000 vehicles 121 increased 237000 vehicles 135 increased 101000 vehicles 53 first second third quarters 2008 respectively industry vehicle sales decreased 328000 vehicles 166 fourth quarter 2008 decline vehicle sales second half 2008 attributable negative global economic effect tightening credit markets volatile oil prices slowdown economic growth declining consumer confidence expect trend vehicle sales continue 2009 due economic factors mentioned year ended 2008 industry vehicle sales laam region increased 210000 vehicles 29 primarily due increases brazil 358000 vehicles 145 argentina 43000 vehicles 74 peru 41000 vehicles 812 egypt general motors corporation subsidiaries 35000 vehicles 154 chile 28000 vehicles 121 ecuador 24000 vehicles 277 northern african units 17000 vehicles 41 offset declines venezuela 220000 vehicles 447 south africa 124000 vehicles 202 total net sales revenue trend vehicle sales similar industry trend vehicle sales began moderate third quarter fell sharply fourth quarter 2008 vehicle sales increased 54000 vehicles 198 increased 52000 vehicles 178 increased 9000 vehicles 29 first second third quarters 2008 respectively vehicle sales decreased 75000 vehicles 221 fourth quarter 2008 decline vehicle sales second half 2008 attributable economic factors mentioned anticipate trend vehicle sales continue 2009 year ended 2008 total net sales revenue increased 14 billion 72 primarily due 1 favorable vehicle pricing 10 billion primarily gm venezolana driven high inflation gm brasil result industry growth high demand first half 2008 2 favorable effect foreign currency translation 05 billion mainly related brazilian real 3 favorable product mix 05 billion offset 4 06 billion decreased wholesale volumes across gmlaam business units including wholesale volume declines gm venezolana 81000 vehicles gm colmotores 24000 vehicles gm south africa 14000 vehicles partially offset increased wholesale volumes gm brasil 33000 vehicles gm ecuador 13000 vehicles automotive cost sales year ended 2008 automotive cost sales increased 14 billion 81 due 1 increased content cost 07 billion driven increase imported material costs gm venezolana high inflation across region primarily gm venezolana gm argentina gm south africa 2 unfavorable foreign currency translation 05 billion 3 unfavorable product mix 03 billion 4 foreign exchange transaction losses purchases treasury bills region 02 billion offset 5 decreased volume region 05 billion automotive cost sales rate deteriorated due increased volumes lower margin business units selling general administrative expense year ended 2008 selling general administrative expense increased 48 million 48 due high inflation primarily gm venezolana gm argentina 31 million unfavorable foreign currency translation effects 16 million automotive interest income expense net year ended 2008 automotive interest income expense net increased 6 million 25 due 1 higher cash balances resulting increase net interest income 48 million primarily gm brasil 37 million 2 favorable foreign currency translation effect 13 million offset 3 less favorable adjustments compared 2007 55 million relating tax contingencies recorded gm brasil 2007 compared 2006 industry vehicle sales year ended 2007 industry vehicle sales laam region increased 10 million vehicles 159 due strong growth throughout region included increases brazil 535000 vehicles 277 venezuela 149000 vehicles 433 argentina 119000 vehicles 263 egypt 70000 vehicles 449 colombia 60000 vehicles 311 israel 44000 vehicles 287 increases partially offset industry vehicle sales south africa decreased 34000 vehicles 52 general motors corporation subsidiaries total net sales revenue year ended 2007 total net sales revenue increased 43 billion 292 due 1 29 billion higher wholesale volumes across gmlaam business units including increases gm brasil 67000 vehicles gm venezolana 63000 vehicles gm argentina 63000 vehicles offset small decrease gm ecuador 6000 vehicles 2 favorable effect foreign currency translation 07 billion primarily related brazilian real colombian peso 3 favorable vehicle pricing 05 billion 4 favorable vehicle mix 02 billion automotive cost sales year ended 2007 automotive cost sales increased 35 billion 261 due 1 increased volume region 23 billion 2 unfavorable foreign currency translation 07 billion 3 higher content cost 03 billion 4 unfavorable product mix 01 billion automotive cost sales rate improved due higher pricing favorable product mix selling general administrative expense year ended 2007 selling general administrative expense increased 245 million 321 due 1 increased administrative marketing expenses 105 million throughout region support higher volume levels 2 66 million charge recorded gm brasil additional retirement benefits government sponsored pension plan 3 unfavorable foreign currency translation effects 40 million 4 increase cost expenses compared 2006 29 million automotive interest income expense net year ended 2007 automotive interest income expense net improved 271 million due 1 gain 194 million result gm brasil’s favorable resolution prior tax cases 2 reversals previously established tax accruals 81 million 2007 associated duties federal excise tax related matters longer required 3 income 25 million gm south africa relating increased export incentives due increases volume exports increases partially offset 1 64 million charge related previously recorded tax credits gm brasil 2 56 million settlement fines related information submitted brazil tax authorities material included consignment contracts one facilities general motors corporation subsidiaries gm asia pacific nm meaningful includes gm daewoo shanghai gm sgmw joint venture productionsales 34 sgmw joint venture agreement significant rights member well contractual right report sgmw china sales part global market share b production volume represents number vehicles manufactured assembly facilities also includes vehicles produced certain joint ventures c vehicle sales primarily represent sales ultimate customer vehicle sales data may include rounding differences e includes sgmw joint venture sales industry vehicle sales industry vehicle sales increased asia pacific region first half 2008 10 million vehicles 97 global financial crisis brought tightening credit markets volatile oil prices slowdown economic growth declining consumer confidence spread region industry vehicle sales declined 630000 vehicles 61 second half 2008 general motors corporation subsidiaries industry vehicle sales china also declined second half 2008 62000 vehicles 15 compared increase 736000 vehicles 173 first half 2008 due economic factors mentioned believe global economic slowdown continue 2009 benefits economic stimulus packages announced governments various countries start show positive effect year ended 2008 industry vehicle sales asia pacific region increased 388000 vehicles 19 due growth china indonesia malaysia 2008 industry sales increased 674000 vehicles 80 china increased 169000 vehicles 388 indonesia increased 58000 vehicles 119 malaysia growth markets offset decline 270000 vehicles 50 japan net decline 243000 vehicles countries china’s vehicle sales increased 91 million vehicles 80 2008 compared 85 million vehicles 2007 total net sales revenue vehicle sales similar industry vehicle sales vehicle sales began moderate third quarter fell sharply fourth quarter 2008 vehicle sales increased 22000 vehicles 58 increased 49000 vehicles 145 increased 8000 vehicles 25 first second third quarters 2008 respectively vehicle sales decreased 40000 vehicles 106 fourth quarter 2008 effect china vehicle sales similar vehicle sales increased 22000 vehicles 74 increased 45000 vehicles 193 increased 10000 vehicles 44 first second third quarters 2008 respectively vehicle sales china decreased 14000 vehicles 51 fourth quarter 2008 decline vehicle sales vehicle sales china second half 2008 attributable global economic factors affecting asia pacific region 2008 mentioned despite downturn vehicle sales second half 2008 continued capitalize demand china passenger light commercial vehicle markets increased vehicle sales asia pacific region 2008 part due strong sales china volumes exceeded 10 million vehicles second consecutive year anticipate however global economic slowdown continue affect vehicle sales 2009 shortterm anticipate vehicle sales remain levels reported first half 2008 market share increased 01 percentage points 70 due increased market share india driven increased volume related chevrolet spark although market share japan change overall regional market share favorably affected decline japanese market share china declined due weak performance buick line intense competition market share australia decreased industry shift smaller vehicles away gm holden’s traditional strength change attributable relatively less expensive vehicle imports japan korea shift major fleet buyers smaller vehicles market share thailand declined due customer demand shift pickups smaller vehicles political uncertainties industry greater adverse effect manufacturers smaller market share market share south korea also declined due competitive pressure year ended 2008 total net sales revenue decreased 25 billion 123 due 1 21 billion unfavorable derivative effect related determination certain cash flow hedging instruments longer effective resulted termination hedge accounting treatment previously designated cash flow hedge instruments includes 09 billion unfavorable marktomarket adjustment 08 billion charge related release hedge losses comprehensive loss associated depreciation korean 04 billion unfavorable adjustment hedged derivatives termination hedge accounting treatment certain cash flow hedge instruments 2 06 billion decrease overall gm daewoo sales volume declined driven global financial crisis 3 04 billion net price decrease primarily due unfavorable pricing related opel antara exports gm daewoo offset 4 06 billion favorable effect foreign currency translation primarily related euro australian dollar automotive cost sales year ended 2008 automotive cost sales decreased 10 billion 54 due 05 billion decrease gm daewoo overall volumes 05 billion net favorable effect foreign currency translation includes 07 billion favorable effect korean depreciation partially offset 02 billion unfavorable effect australian dollar appreciation general motors corporation subsidiaries automotive cost sales rate increased due reduction structural costs included automotive cost sales fully offsetting decline revenue selling general administrative expense year ended 2008 selling general administrative expense increased 150 million 102 primarily due gm daewoo expansion russia european markets resulted higher administrative expenses 81 million marketing selling expenses 69 million automotive interest income expense net year ended 2008 automotive interest income expense net decreased 95 million due decreased interest income 132 million 12 million nonrecurring loss 2008 sale equity stake suzuki fully disposed remaining 37 ownership decreases partially offset 48 million lower interest expense gm daewoo gm holden equity income net tax year ended 2008 equity income net tax decreased 01 billion 275 due lower earnings sgm driven volume decrease mix deterioration higher sales promotion expenses partially offset higher earnings sgmw driven volume increase minority interests net tax year ended 2008 minority interests net tax decreased 04 billion 1282 due lower income gm daewoo 2007 compared 2006 industry vehicle sales year ended 2007 industry vehicle sales asia pacific region increased 15 million vehicles 77 due strong growth china india 2007 industry sales increased 14 million vehicles 195 china increased 240000 vehicles 137 india increased 87000 vehicles 91 australia growth markets offset decline 385000 vehicles 67 japan china’s vehicle market remained strong 2007 increased 85 million vehicles 2007 compared 71 million vehicles 2006 gmap continued capitalize demand china passenger light commercial vehicle markets gmap increased vehicle sales asia pacific region part due strong sales china volumes exceeded 10 million vehicles 2007 gmap market share increased 04 percentage points 69 due increased market share india driven launch chevrolet spark performance new models portfolio although market share japan change overall regional market share favorably affected decline japanese market share china declined due continued robust industry growth faster pace volume growth intense competition market share australia decreased industry shift smaller vehicles away gm holden’s traditional strength change attributable relatively less expensive imports japan korea shift major fleet buyers smaller vehicles market share thailand declined due relatively aged models production effect political uncertainties industry greater adverse effect manufacturers smaller market share market share south korea also declined due competitive pressure product cycle several vehicles leaving lineup expected replaced 2008 beyond general motors corporation subsidiaries total net sales revenue year ended 2007 total net sales revenue increased 53 billion 354 due 1 35 billion increase gm daewoo export sales diverse global customer base driven gm holden captivagm daewoo winstrom launch 2 12 billion favorable effect foreign currency translation primarily related australian dollar euro 3 increase domestic vehicle sales remainder region automotive cost sales year ended 2007 automotive cost sales increased 47 billion 342 due 1 300 increase gm daewoo export volumes 29 billion 2 effect foreign currency translation primarily related australian dollar korean 08 billion 3 higher product engineering expenses gm daewoo 02 billion gm holden 01 billion automotive cost sales rate decreased due material cost performance efficiencies primarily gm daewoo selling general administrative expense year ended 2007 selling general administrative expense increased 03 billion 286 due higher consumer influence sales promotion selling expense 02 billion increased administrative expenses 01 billion line growth business across various operations region automotive interest income net year ended 2007 automotive interest income net decreased 08 billion 964 due 1 nonrecurring gain 07 billion 2006 sale equity stake suzuki reduced ownership 204 37 2 nonrecurring gain 03 billion 2006 sale remaining investment isuzu equity income net tax year ended 2007 equity income net tax increased 60 million 164 due improved performance shanghai gm offset decreased equity income due sale part equity stake suzuki 2006 minority interests net tax minority interests net tax increased 76 million 338 due growth income gm daewoo fio results operations fio business consists 49 share gmac’s operating results account equity method includes gmac’s lines business consisting automotive finance operations mortgage operations residential capital llc rescap insurance includes gmac’s commercial finance business gmac’s equity investment capmark financial group also included fio financing comprised primarily two special purpose entities holding automotive leases previously owned gmac affiliates retained elimination intersegment transactions gma corporate december 31 2007 disclosed believe investment gmac impaired however many factors significantly deteriorated since time factors included instability global credit mortgage markets deteriorating conditions residential home building markets credit downgrades gmac rescap 2008 global economy steadily deteriorated united states entered recessionary period beginning december 2007 result instability credit mortgage markets severe declines residential homebuilding markets significant volatility prices oil commodities 2008 factors continued deteriorate spread beyond united general motors corporation subsidiaries states initially western europe recently emerging markets south america asia economic factors initially affected consumer demand less fuel efficient vehicles particularly fullsize pickup trucks sport utility vehicles profitable products continued instability credit markets resulted extreme lack liquidity resulting prominent north american financial institutions declaring bankruptcy seized fdic sold distressed valuations recently consumer demand vehicles contracted due decline availability financing significant contraction consumer spending based continued recession united states resulting automobile sales lowest levels 16 years economic factors negatively affected gmac’s global automotive business well rescap’s residential mortgage business resulted significant losses businesses including higher provision credit losses 06 billion impairment charges 12 billion related gmac’s portfolio equipment operating leases net 2008 additional factor gmac’s need future ability continue provide support rescap allow continue operate result factors evaluated investment gmac common preferred membership interests possible impairment quarterly reporting period 2008 result recorded impairment charges related gmac common membership interests three months ended march 31 june 30 december 31 2008 related gmac preferred membership interests three months ended march 31 june 30 september 30 2008 following table summarizes impairment charges recorded related investment gmac common preferred membership interests 2008 dollars millions following table summarizes activity respect investment gmac common preferred membership interests 2008 residual values automobiles experienced sudden significant decline initially decline residual values isolated fullsize pickup trucks sport utility vehicles result shift consumer preference fuel efficient vehicles recently significant declines experienced passenger cars reflecting limited availability financing dealers purchase used vehicles severe contraction consumer spending prompting dealers attempt lower inventory levels less purchases declines residual values primary factor responsible impairment charges 12 billion 04 billion including increase intersegment residual support risk sharing reserves recorded gmac fio segment respectively 2008 addition gmna increased residual support risk sharing accruals 16 billion related obligations agreements gmac refer note 27 notes consolidated financial statements 2008 compared 2007 fio reported loss income taxes 70 billion year ended 2008 compared loss income taxes 07 billion 2007 refer commentary detailed discussion events factors contributing change general motors corporation subsidiaries gmac reported net income 19 billion year ended 2008 compared net loss 23 billion year ended 2007 2008 results primarily driven fourth quarter bond exchange resulted 115 billion gain extinguishment debt gain extinguishment debt partially offset losses rescap global automotive finance operations adverse market conditions continued persist domestically internationally disruption within mortgage housing capital markets contributed lack liquidity depressed asset valuations impairments lease residual values additional loss provisions related credit deterioration lower production levels despite adverse factors gmac’s insurance operations remained profitable gmac recognized gains extinguishment debt 126 billion 2008 private debt exchange cash tender offers generated gains 115 billion fourth quarter 2008 operations recognized 107 billion rescap recognized 757 million gain represents difference carrying value exchanged notes fair value newly issued securities 2008 results also include debt extinguishment gains 11 billion recognized rescap second third quarters 2008 gmac’s global automotive finance operations experienced net loss 21 billion year ended 2008 compared net income 15 billion year ended 2007 net loss 2008 primarily driven impairment charges related operating lease assets 12 billion higher provisions credit losses due weaker consumer dealer performance valuation losses assets heldforsale certain investment securities due weaker economic conditions additionally declines new vehicle financing originations due tighter underwriting standards lower industry sales adversely affected results declines demand used vehicle sale prices primary factors resulting gmac’s impairment charges related operating lease assets gmac’s north american automotive finance operations recorded impairment charges 12 billion consisted 08 billion related sport utility vehicles trucks united states canada 04 billion related car portfolio united states gmac’s rescap mortgage operations experienced net loss 56 billion year ended 2008 compared net loss 43 billion year ended 2007 rescap’s 2008 results continued adversely affected economic conditions domestically internationally mortgage capital markets continued experience severe stress throughout 2008 due credit concerns housing market contractions united states foreign markets rescap operates effectively eliminating liquidity sources reduced liquidity capital markets resulted stricter mortgage underwriting guidelines coupled declining home prices limited refinancing options homeowners housing prices many parts united states united kingdom international markets declined significantly 2008 number delinquent loans increased resulting higher levels severity frequency adverse conditions resulted lower net interest margins increased losses mortgage loan sales decline fair market value rescap’s mortgage loans heldforsale higher provision losses mortgage heldforinvestment lending receivables portfolio market conditions persist unfavorable effects rescap’s results operations may continue negative effects partially offset 2008 gains recognized extinguishment debt well cost reductions restructuring actions net income gmac’s insurance operations 05 billion years ended 2008 2007 net income 2008 positively affected 01 billion gain sale gmac’s us reinsurance managing general agency decreased insurance losses reduced acquisition underwriting expenses positive effects offset higher realized investment losses driven temporary impairments recognized certain investment securities losses sales securities unfavorable investment market volatility addition gmac’s insurance operations experienced decrease premiums earned us auto policies serviced dealershiprelated products due sharp declines vehicle sales three months ended december 31 2008 gmac’s insurance operations initiated evaluation goodwill potential impairment evaluation initiated light likely expectation one reporting units significant portion one reporting units would sold fair value determined using offer provided willing purchaser based results assessment gmac’s insurance operations concluded carrying value one reporting units exceeded fair value resulting impairment charges 42 million year ended 2008 general motors corporation subsidiaries net income gmac’s operations 91 billion year ended 2008 compared net income 01 billion year ended 2007 improvement operating results primarily due 107 billion gain resulting private exchange offers cash tender offers mentioned improvement operating results partially offset equity investment losses impairment charges increased bank facility fees due increased borrowings temporary impairment recognized certain investment securities due adverse market conditions well increased compensation benefits expense professional service fees information technology costs gmac’s operations experienced equity investment net losses 02 billion year ended 2008 compared net income 01 billion year ended 2007 additionally fourth quarter 2008 gmac recognized impairment charges related equity investment 06 billion equity investment losses impairment charges primarily attributed decline credit market conditions unfavorable asset revaluations fio’s financing reported income taxes 02 billion year ended 2008 compared income taxes 05 billion 2007 decrease income taxes year ended 2008 relates planned liquidation portfolio equipment operating leases 04 billion impairment charge including increase intersegment residual support risk sharing reserves recorded operating lease assets fio’s loss year ended 2008 included impairment charges related investment gmac common preferred membership interests discussed year ended 2008 recorded impairment charges 71 billion related investment gmac common membership interests impairment charges 10 billion related investment gmac preferred membership interests 2007 compared 2006 fio reported loss income taxes 07 billion year ended 2007 compared income taxes 19 billion 2006 change primarily due lower operating results gmac 2007 see commentary detailed discussion events factors contributed change gmac’s consolidated operating results record proportionate share equity income beginning december 2006 gmac reported net loss 23 billion year ended 2007 compared net income 21 billion year ended 2006 results reflect adverse effects disruption mortgage housing capital markets rescap lower levels realized capital gains gmac’s insurance operations offset performance global automotive finance operations rescap results adversely affected domestic economic conditions including delinquency increases mortgage loans heldforinvestment portfolio significant deterioration securitization residential housing markets rescap also affected downturn certain foreign mortgage capital markets disruption mortgage housing capital markets contributed lack liquidity depressed asset valuations additional loss provisions related credit deterioration lower production levels net income gmac’s global automotive finance operations increased 15 billion year ended 2007 compared 12 billion year ended 2006 north american operations benefited year ended 2007 lower interest expense higher gains sales servicing fee income due acceleration gmac’s transition originatetodistribute model united states resulted higher levels offbalance sheet securitizations wholeloan sales rescap experienced net loss 43 billion year ended 2007 compared net income 07 billion year ended 2006 2007 mortgage capital markets experienced severe stress due credit concerns housing market contractions united states second half 2007 negative market conditions spread foreign markets rescap’s mortgage subsidiaries operate predominantly united kingdom continental europe residential homebuilders domestically reduced accessibility cost efficient capital secondary markets made residential mortgage industry capital intensive mortgage industry experienced declining mortgage origination volumes reduced total mortgage indebtedness due deterioration nonprime nonconforming mortgage market business acquiring selling mortgage loans cyclical market factors including interest rates mentioned contributed mortgage industry experiencing downturn cycle year ended 2007 general motors corporation subsidiaries year ended 2007 global downturn mortgage credit markets negatively affected value gmac’s mortgagerelated assets markets continued experience greater volatility less liquidity widening credit spreads repricing credit risk lack price transparency rescap operated markets exposed loans trading securities derivatives lending commitments rescap’s accessibility capital markets restricted domestically internationally affecting renewal certain facilities cost funding factors adversely affected rescap’s results operations year ended 2007 result gmac conducted goodwill impairment test rescap business three months ended september 30 2007 based upon results assessment gmac concluded carrying value goodwill rescap business exceeded fair value recognized impairment charge 05 billion reduced investment gmac 02 billion share gmac’s impairment charge recorded corresponding charge equity loss gmac llc year ended 2007 net income gmac’s insurance operations 05 billion year ended 2007 compared 11 billion year ended 2006 decrease net income primarily due lower level realized capital gains net income gmac’s operations 01 billion year ended 2007 compared net loss 10 billion year ended 2006 year ended 2006 gmac’s commercial finance group recognized noncash charge 08 billion impairment goodwill intangibles excluding impairment charges increases net income primarily reflected improved profitability gmac’s commercial finance group fio’s financing reported income taxes 05 billion year ended 2007 compared loss income taxes 04 billion 2006 increase due 1 additional revenue 20 billion 2007 two special purpose entities holding outstanding leases previously owned gmac included gmac’s net income first 11 months 2006 2 29 billion loss gmac transaction recorded 2006 favorable items partially offset 1 25 billion decrease depreciation expense 2006 gmac’s longlived assets classified held sale 2 03 billion increase interest expense lease assets corporate results operations nm meaningful corporate includes certain centrally recorded income costs interest income taxes corporate expenditures elimination intersegment transactions costs related pension opeb delphi retirees divested businesses retained responsibility automotive interest income expense net 2006 includes eliminations gma gmac general motors corporation subsidiaries 2008 compared 2007 automotive cost sales decreased year ended 2008 10 billion 1657 due net curtailment gain 12 billion associated finalization settlement agreement nonrecurring charge 03 billion 2007 additional pension expense related accelerated recognition unamortized prior service cost effect items partially offset charge 05 billion associated salaried post65 healthcare settlement selling general administrative expense increased year ended 2008 03 billion 345 primarily due net charges 02 billion settlement legal issues expenses increased year ended 2008 27 billion 1130 due increased charges 33 billion related delphi benefit guarantee agreements partially offset 2007 nonrecurring charge 06 billion increased delphi pension expense result 2007 national agreement described “key factors affecting current future results” automotive interest income expense net increased year ended 2008 02 billion 1196 due lower interest income 03 billion resulting lower interest rates cash balances nonrecurring favorable interest 02 billion recorded 2007 resulting various tax related items partially offset gain 03 billion due ceasing hedge accounting treatment effective october 1 2008 previously designated cash flow hedge derivative instruments income tax expense benefit improved year ended 2008 347 billion 934 due effect recording valuation allowances 390 billion net deferred tax assets united states canada germany 2007 offset recording additional valuation allowances 2008 19 billion net deferred tax assets south korea united kingdom spain australia india china jurisdictions year ended 2007 concluded likely would generate sufficient taxable income realize net deferred tax assets united states canada germany either whole part accordingly recorded full valuation allowances 390 billion net deferred tax assets change primarily due decline actual results previous forecast significant downward revision nearterm 2008 2009 financial outlook full valuation allowance historically recorded gm daewoo several positive events occurred 2006 lead us conclude valuation allowance longer necessary accordingly reversed full valuation allowance net deferred tax assets 2006 however 2008 determined likely would realize net deferred tax assets whole part gm daewoo recorded full valuation allowances 725 million net deferred tax assets gm daewoo year ended 2008 determined likely would realize net deferred tax assets whole part spain united kingdom recorded full valuation allowances totaling 379 million net deferred tax assets tax jurisdictions outlook deteriorated based projections combined effects challenging foreign currency exchange environment unfavorable commodity prices estimate potential costs may arise regulatory tax environment relating co2 emissions european union including legislation enacted announced 2008 year ended 2008 also determined likely would realize net deferred tax assets whole part australia due effects current economic downturn nearterm midterm financial outlooks countries result recorded full valuation allowances 284 million net deferred tax assets tax jurisdictions significant additional negative evidence arose year ended 2008 form corporate going concern environment significant decline worldwide revenues profits period midterm forecast period result determined likely would realize net deferred tax assets jurisdictions net deferred tax assets even though entities threeyear adjusted cumulative loss established additional valuation allowances general motors corporation subsidiaries 481 million deferred tax assets entities argentina austria belgium brazil separate legal entity described chile colombia ecuador finland germany separate legal entities described hungary indonesia ireland italy kenya korea separate legal entity described netherlands new zealand norway peru philippines poland portugal russia south africa switzerland taiwan turkey uruguay us state jurisdiction texas venezuela description method determine deferred tax assets realizable included “critical accounting estimates deferred taxes” later mda 2007 compared 2006 automotive cost sales expense increased year ended 2007 10 billion increase due 1 decreased expenses 2006 resulting curtailment gain 06 billion associated pension opeb expense related gmac transaction 2 increased pension expense 03 billion 2007 result accelerated recognition unamortized prior service cost 3 03 billion related elimination intersegment transactions gmac 2006 longer eliminated 2007 since longer consolidated gmac increases offset ongoing legacy costs consisting primarily pension opeb expenses gm delphi employees retirees decreased 2007 01 billion due changes us salaried pension opeb plans 2005 uaw health care settlement agreement selling general administrative expenses increased year ended 2007 01 billion 200 due increased administrative expenses increased year ended 2007 13 billion 1210 due increased delphi benefit guarantee agreement related charges 10 billion charge pension expense 06 billion delphi portion 2007 national agreement described “key factors affecting current future results” 03 billion related transactions fio increases offset 2006 charges 06 billion related transactions gmac recur 2007 automotive interest income expense net decreased year ended 2007 03 billion 594 due effect elimination interest expense related gmac 2006 partially offset higher interest income 2007 income tax expense increased year ended 2007 410 billion due valuation allowance 390 billion recorded 2007 net deferred tax assets us canada germany described key factors affecting current future results following discussion identifies key factors known events trends affected current results could affect future results refer “liquidity capital resources liquidity overview” discussion viability plan ust loan agreement gmac conversion bank holding company related transactions previously disclosed described “gmac sale 51 controlling interest” november 2006 sold 51 controlling interest gmac retained 49 interest account equity method adverse domestic international market conditions 2008 resulted significant losses gmac’s mortgage lending subsidiary rescap gmac’s automotive finance operation experienced pressure lower used vehicle prices weaker consumer dealer credit performance result market conditions gmac tightened credit standards exited several markets difficult rescap maintain adequate capital liquidity levels gmac behalf whollyowned subsidiary gmc financial services took several actions address liquidity issues included submitting application board governors federal reserve approval become bhc bank holding company act 1956 amended bhc gmac would expanded opportunities funding access capital would provide increased flexibility stability general motors corporation subsidiaries board governors federal reserve informed gmac would require gmac implement certain actions prior becoming bhc including • achieving minimum amount outstanding total regulatory capital significant portion would obtained result private exchange cash tender offers described including 20 billion new capital third parties existing equity holders qualify tier 1 capital • modifying gmac’s capital shareholder governance structure consistent regulatory requirements applicable bhcs • obtaining necessary banking regulatory approvals • modifying gmac’s capital funding plan • certain actions order obtain approval convert bhc status board governors federal reserve required gmac undertake certain actions agree certain conditions described detail gmac private exchange cash tender offers gmac previously initiated private exchange cash tender offers purchase andor exchange certain subsidiaries’ outstanding notes private exchange cash tender offers concurrent predicated upon receiving approval conversion bhc status subsequent receiving approval become bhc gmac consummated private exchange cash tender offers previously outstanding notes 212 billion validly tendered private exchange cash tender offers gmac subsequently issued new notes 131 billion 9 cumulative perpetual preferred stock 26 billion gmac issuance preferred membership interests ust december 2008 part automotive industry financing program created troubled asset relief program established ust emergency economic stabilization act 2008 gmac entered agreement ust pursuant gmac issued sold ust 5000000 units series d1 fixed rate cumulative perpetual preferred membership interests capital amount 1000 per share ten year warrant purchase 250000 units series d2 fixed rate cumulative perpetual preferred membership interests initial exercise price 001 per unit aggregate purchase price 50 billion cash ust subsequently exercised warrant 250000 series d2 fixed rate cumulative perpetual preferred membership interests aggregate exercise price 2500 proceeds sale series d1 fixed rate cumulative perpetual preferred membership interests treated tier 1 capital bhc regulatory purposes conversion participation agreement common membership interests june 2008 along cerberus rescap financing llc cerberus fund entered participation agreement gmac participation agreement provided would fund 368 million loans made gmac rescap 35 billion secured loan facility gmac provided rescap facility cerberus fund would fund 382 million rescap facility expire may 1 2010 funding pursuant participation agreement done prorata basis us cerberus fund december 2008 funded maximum obligation rescap facility 368 million december 2008 fim holdings assignee cerberus fund entered exchange agreement gmac pursuant exchange agreement fim holdings exchanged respective amounts funded participation agreement 79368 class b common membership interests 82608 class common membership interests respectively general motors corporation subsidiaries purchase additional common membership interests december 2008 fim holdings entered subscription agreement gmac agreed purchase additional common membership interests gmac ust committed provide us additional funding order purchase additional common membership interests gmac january 2009 borrowed 884 million ust utilized funds purchase 190921 class b common membership interests gmac borrowings secured common preferred membership interests gmac part loan agreement ust option convert outstanding amounts loan agreement class b common membership interests prorata basis result purchase interest gmac’s common membership interests increased 49 60 refer note 15 consolidated financial statements additional commitments gmac’s conversion bhc status including future divestitures furtherance gmac’s effort become bhc committed following • 190921 class b common membership interests purchased proceeds ust gmac loan placed one trusts treasury trust later march 24 2009 beneficiary ust right appoint trustee treasury trust independent us authority vote dispose class b common membership interests treasury trust • hold 99 remaining economic interests directly currently consist common preferred membership interests excess common membership interests placed trust establish gm trust later march 24 2009 beneficiary appoint trustee gm trust independent us subject approval federal reserve trustee gm trust sole authority vote dispose common membership interests gm trust • reduce ownership gmac including common membership interests treasury gm trusts less 10 voting total equity gmac december 24 2011 • exercise controlling influence gmac including agreeing seek representation gmac’s board managers one nonvoting observer blocking rights gmac llc agreement terminated additionally agreed use current 60 ownership gmac exercise controlling influence gmac including board managers business activities approval bank holding company status application gmac financial services become bhc bank holding company act 1956 amended approved board governors federal reserve december 2008 address healthcarelegacy cost burden ust loan agreement limited opportunity implement restructuring plan restore long term viability one conditions contained ust loan agreement requirement modify settlement agreement less one half value future payment new veba shall made form common stock begun discussions uaw concerning restructuring existing new veba’s funding comply ust loan agreement 2007 national agreement october 2007 national agreement us uaw related retiree memorandum understanding retiree mou ratified 2007 national agreement covers wages hours terms conditions employment general motors corporation subsidiaries uawrepresented gm covered delphi employees retiree mou superseded settlement agreement executed february 2008 settlement agreement provides responsibility providing retiree health care permanently shift us new retiree plan funded new veba described following key terms provisions 2007 national agreement settlement agreement 2007 national agreement established new wage benefit package new hires tier ii wage certain noncore positions including limited material movement kitting sequencing certain stampings certain subassemblies new hires tier ii wage positions receive base wages approximately 15 per hour versus approximately 28 per hour existing employees additionally tier ii wage new hires higher cost sharing arrangements active healthcare coverage cash balance pension plan receive 1 per hour 401k contribution lieu defined benefit postretirement medical benefit plan addition agreement provides lump sum payments 3000 2007 30 40 30 wages 2008 2009 2010 respectively traditional employees amortize lump sum payments 12month period following payment settlement agreement february 2008 entered settlement agreement uaw class counsel representing class uaw retirees regarding postretirement healthcare coverage settlement agreement provides responsibility providing retiree healthcare uaw retirees spouses dependents permanently shift us new plan funded new veba july 2008 us district court eastern district michigan approved settlement agreement terms settlement agreement stipulated would become effective appeals july 2008 approval exhausted completed discussions staff sec regarding accounting treatment transactions contemplated settlement agreement basis believe reasonably satisfactory september 2 2008 became final effective date judgment became final period file appeals related us district court eastern district michigan’s order expired appeals filed september 2008 determined discussions us staff sec regarding accounting treatment transaction contemplated settlement agreement completed basis believe reasonably satisfactory therefore settlement agreement became effective september 2008 implementation date january 1 2010 result settlement agreement obligation provide retiree healthcare coverage uaw retirees beneficiaries terminate implementation date obligation retiree medical claims incurred date responsibility new plan new veba time account establishment funding new veba termination uaw hourly medical plan mitigation plan allowed settlement agreement consented class counsel deferring 19 billion payments contractually required settlement agreement new veba comprised interest 44 billion principal amount 675 series u convertible senior debentures due december 31 2012 convertible note annual wage payments annual base payment shortfall payments 165 million one due 2008 2009 resulting projected insolvency new veba described payments originally required contributed 2008 2009 deferred implementation date plus annual interest rate factor 90 general motors corporation subsidiaries following table summarizes contractual contributions new veba required settlement agreement assuming buyout options utilized convertible note held maturity total contractual contributions include shortfall payments described contractually obligated pay 2008 2009 shortfall payments interest deferred 2010 shortfall payments 2010 thereafter contingent upon future annual reviews solvency new veba table take consideration 450 million payment committed pay directly new veba settle uaw claim asserted delphi contingent upon substantial consummation delphi’s por terms settlement agreement require us make contributions new veba described • obligated either contribute 56 billion implementation date make annual payments varying amounts 436 million 33 billion 2020 election time implementation date option prepay remaining payments • february 2008 issued 40 billion shortterm note lbk llc lbk delaware limited liability company sole member shortterm note pays interest rate 90 matures 20th business day implementation date lbk hold shortterm note maturity point proceeds transferred new veba • february 2008 issued 44 billion convertible note lbk hold convertible note transferred new veba convertible note convertible 109 million shares common stock interest convertible note payable semiannually deferred payment interest 2008 2009 2010 interest payments 295 million due 2010 2011 2012 addition deferred interest payments convertible note contributed new veba made directly new veba holder convertible note • remaining contribution originally payable mitigation plan veba 10 billion due 2011 new veba • payments 285 million made implementation date • may required contribute shortfall payments 165 million per year limited maximum 20 payments new veba annual cash flow projections show new veba become insolvent rolling 25year basis time implementation date option prepay remaining payments discount rate 90 • effective january 1 2008 divided amount existing internal veba separate bookkeeping accounts related uaw represented employees retirees eligible spouses surviving spouses dependents uaw related account nonuaw represented employees retirees eligible spouses surviving spouses dependents nonuaw related account amounts withdrawn uaw related account including investment returns transfer assets new veba implementation date uaw related account balance 100 billion mitigation plan veba balance 12 billion december 31 2008 minimum amount contractual obligations required pay terms settlement agreement 179 billion considering possible buyout options maximum undiscounted amount potential payments 270 billion potential shortfall payments made general motors corporation subsidiaries refer note 16 consolidated financial statements details settlement agreement related accounting note 18 additional information regarding delphi 2008 special attrition programs us canada facility idlings february 2008 entered agreements uaw iuecwa regarding special attrition programs intended reduce number hourly employees 2008 uaw special attrition program offered 74000 uawrepresented employees consisted wage benefit packages normal voluntary retirements buyouts preretirement employees 26 29 years service addition vested pension benefits employees retirement eligible received lump sum payment amount depended upon job classification funded us hourly pension plan employees retirement eligible buyout options offered terms 2008 iuecwa special attrition program offered 2300 iuecwa represented employees similar offered 2008 uaw special attrition program result 2008 special attrition programs recognized curtailment losses charges special termination benefits 2008 32 billion recorded automotive cost sales refer note 16 consolidated financial statements additional details financial statement effects 2008 special attrition programs approximately 18700 hourly employees elected participate 2008 special attrition programs employees left active employment july 1 2008 cash expenditure 2008 special attrition programs 03 billion 2008 expect additional cash payments 01 billion 2009 01 billion thereafter iuecwa agreements october 2008 members iuecwa ratified closure agreement moraine ohio facility iuecwa represented facility agreement contingent upon establishment new healthcare plan iuecwa retirees funded entirely iuecwa veba would assume responsibility providing retiree medical benefits iuecwa retirees october 2008 iuecwa agreed principle framework establishing veba included incremental cash payments us well nonescalating increase pension benefits iuecwa retirees partially offset increased costs receipt healthcare benefits retirement proposed framework included among things requirements iuecwa reach settlement agreement class iuecwa retirees settlement agreement receive court approval due unprecedented declining economic circumstances leading obtaining ust loan facility however unable formally consummate agreement iuecwa would permitted parties proceed classwide settlement negotiations included among terms ust loan agreement prohibition increasing pension benefits effect terms pension plan december 31 2008 appears restrain us including pension increases part negotiations terms ust loan agreement call question composition incremental payments would pay continuing work iuecwa toward reaching agreement within parameters established ust light contingencies recognition effect iuecwa veba agreement made consolidated financial statements terms agreement obligation provide retiree healthcare coverage iuecwa retirees beneficiaries terminate january 1 2012 obligation retiree medical claims incurred thereafter responsibility iuecwa veba funding iuecwa veba begin final effective date january 1 2012 part closure agreement reached iuecwa october 2008 agreed certain pension benefit enhancements patterned 2008 uaw settlement agreement current future iuecwa retirees cost associated pension benefit enhancement 255 million amount recorded expense three months ended december 31 2008 consistent period future economic benefit due closure moraine ohio facility three months ending december 31 2008 general motors corporation subsidiaries result closure moraine facility accelerated substantially iuecwa retiree healthcare plan’s negative prior service cost resulting 257 million curtailment gain three months ended december 31 2008 salaried retiree benefit plan changes july 2008 amended us salaried retiree medical pension plans effective january 1 2009 eliminate healthcare coverage us salaried retirees age 65 upon reaching age 65 affected retirees surviving spouses receive pension increase 300 per month partially offset retiree’s increased cost medicare supplemental healthcare coverage salaried workforce reductions salaried benefit program modifications september 2008 extended voluntary early retirement offers salaried window program certain us salaried employees part july 15 2008 plan reduce salary related costs december 31 2008 3700 employees irrevocably accepted salaried window program october 2008 announced would initiate involuntary separations areas business achieve targeted personnel reduction levels still process assessing size effect reductions december 31 2008 involuntary terminations initiated amount accrued terminations october 2008 announced changes certain us canadian salaried employee benefit programs including significantly suspension matching contribution savings stock purchase plan effective november 1 2008 reimbursements contributions tuition assistance reimbursement programs effective january 1 2009 estimate actions reduce annual cash spending expense 131 million per year delphi bankruptcy background october 2005 delphi filed petition chapter 11 proceedings us bankruptcy code many us subsidiaries delphi’s financial distress chapter 11 filing posed significant risks us two principal reasons 1 production operations rely systems components parts provided delphi largest supplier could substantially disrupted delphi rejected supply agreements us labor agreements thereby affected availability price required systems components parts 2 connection 1999 spinoff delphi provided limited guarantees pension opeb benefits hourly employees represented uaw iuecwa usw transferred delphi pursuant benefit guarantee agreements could triggered connection chapter 11 proceedings since filing continued work delphi unions interested parties negotiate satisfactory resolution delphi’s chapter 11 restructuring process including several interim agreements labor settlement agreements discussed labor settlements june 2007 entered memorandum understanding delphi uaw delphi uaw mou included terms relating consensual triggering uaw benefit guarantee agreement well additional terms relating delphi’s restructuring delphi uaw mou also agreed pay certain healthcare costs delphi retirees beneficiaries order provide level benefits consistent provided retirees beneficiaries mitigation plan veba formed pursuant delphi uaw mou also committed pay 450 million settle uaw claim asserted delphi uaw directed us pay directly mitigation plan veba new veba depending upon timing payment amount paid upon substantial consummation delphi por consistent delphi uaw mou incorporates approves consistent comprehensive settlement agreement delphi us general motors corporation subsidiaries august 2007 also entered memorandums understanding delphi iuecwa delphi iuecwa mou delphi usw mou terms delphi iuecwa mou usw mous similar delphi uaw mou regard consensual triggering benefit guarantee agreements delphigm settlement agreements september 2007 amended october december 2007 entered delphigm settlement agreements consisting global settlement agreement amended gsa master restructuring agreement amended mra gsa intended resolve outstanding issues delphi us arisen may arise delphi’s emergence chapter 11 mra intended govern certain aspects ongoing commercial relationship delphi memoranda understandings discussed preceding paragraphs incorporated agreements september 2008 amended terms gsa amended gsa mra amended mra collectively amended delphigm settlement agreement part negotiations delphi regarding amended delphigm settlement agreements also entered implementation agreements uaw iuecwa usw implementation agreements addressed transfer pension assets liabilities 4141 irs code triggering basis set forth implementation agreements “term sheet delphi pension freeze cessation opeb gm consensual triggering benefit guarantee” negotiated respective unions 2007 release unions members retirees delphi us claims related matters september 2008 bankruptcy court entered order approving amended delphigm settlement agreements implementation agreements became effective september 29 2008 addition significant items contained amended delphigm settlement agreements included commitment • reimburse delphi costs provide opeb certain delphi’s hourly retirees december 31 2006 date delphi ceases provide benefits assume responsibility opeb going forward • reimburse delphi normal cost credited service delphi’s pension plan january 1 2007 date pension plans frozen • first hourly pension transfer irs code section 414l net liabilities 21 billion delphi hourly rate employee pension plan delphi hrp us hourly pension plan september 29 2008 • second hourly pension transfer remaining delphi hrp net liabilities estimated 32 billion december 31 2008 upon delphi’s substantial consummation por provides consideration received us described consistent terms amended delphigm settlement agreements actual amounts second hourly pension transfer depend among factors valuation pension liability transfer date proportion obligation assumed pbgc performance pension plan assets • reimburse delphi retirement incentives half buyout payments made pursuant various attrition program provisions reimburse certain us hourly buydown payments made certain hourly employees delphi • award certain future product programs delphi provide delphi ongoing preferential sourcing product programs eliminate certain previously agreed upon price reductions restrict ability resource certain production alternative suppliers • labor cost subsidy reimburse certain us hourly labor costs incurred produce systems components parts us october 1 2006 september 14 2015 certain us facilities owned divested delphi • production cash burn support reimburse delphi’s cash flow deficiency attributable production certain us facilities continue produce systems components parts us facilities either closed sold delphi general motors corporation subsidiaries • facilitation support pay delphi 110 million 2009 2010 quarterly installments connection certain us facilities owned delphi • temporarily accelerate payment terms delphi’s north american sales us upon substantial consummation por 2012 • reimburse delphi beginning january 1 2009 actual cash payments related workers compensation disability supplemental employment benefits severance obligations current former uawrepresented hourly active inactive employees • guarantee minimum recovery net working capital delphi invested certain businesses held sale delphi agreed provide us designee option purchase certain delphi businesses one dollar businesses sold certain specified deadlines business sold either third party us affiliate pursuant option applicable deadline option affiliate deemed exercised purchase option unsold business including materially assets liabilities automatically transfer gm buyer similarly delphi uaw mou transfer occurred applicable deadline responsibility affected uaw hourly employees unsold business would automatically transfer us designated affiliate amended gsa also resolves claims existence effective date amended delphigm settlement agreements certain limited exceptions either delphi may including delphi’s motion march 2006 us bankruptcy code reject certain supply contracts us amended gsa related agreements delphi’s unions release us related parties defined claims delphi related parties defined well employee benefit related claims delphi’s unions hourly employees also pursuant amended gsa released delphi related parties defined claims us related parties defined additionally amended gsa provides receive • administrative claim regarding first hourly pension transfer 16 billion share equally general unsecured creditors first 600 million recoveries event delphi emerge bankruptcy • administrative claim 21 billion total delphi hrp transfer inclusive administrative claim first hourly pension transfer paid preferred stock upon substantial consummation delphi’s por delphi emerges 1 principal core businesses 2 exit financing exceed 30 billion plus revolving credit facility 3 equity securities senior pari passu preferred stock issued us • general unsecured claim amount 25 billion subordinated general unsecured creditors receive recoveries equal 20 general unsecured claims receive 20 general unsecured claim preferred stock recovery shared ratably us general unsecured creditors ultimate value consideration may receive contingent fair value delphi’s assets event delphi fails emerge bankruptcy upon fair market value delphi’s securities delphi emerges bankruptcy delphi por bankruptcy court entered order january 2008 confirming delphi’s por april 2008 delphi announced although met conditions required substantially consummate por including obtaining 61 billion exit financing delphi’s plan investors refused participate closing transaction contemplated por commenced completed plan investors’ position continued work delphi stakeholders delphi’s efforts general motors corporation subsidiaries emerge bankruptcy including implementation amended delphigm settlement agreements october 2008 delphi filed modified por contemplated delphi obtaining 38 billion exit financing consummate modified por delphi advance agreement may 2008 agreed advance 650 million delphi 2008 within amounts would owed delphigm settlement agreements delphi emerged bankruptcy april 2008 august 2008 entered new agreement advance additional 300 million increased amount agreed advance 950 million 2008 within amounts would owe delphigm settlement agreements delphi emerge bankruptcy december 2008 upon effectiveness amended delphigm settlement agreements original 650 million advance agreement matured leaving 300 million advance agreement october 2008 subject delphi obtaining extension accommodation debtorinpossession financing june 30 2009 agreed extend 300 million advance agreement june 30 2009 temporarily accelerate north american payables delphi three months ended june 30 2009 expected result additional liquidity delphi 100 million april may june 2009 december 2008 delphi reached accommodation lender june 30 2009 agreed change commencement date temporary acceleration north american payables delphi april 2009 march 2009 temporary acceleration payment terms occur upon substantial consummation delphi’s por amended delphigm settlement agreements also subject delphi’s actual liquidity requirement january 2009 agreed immediately accelerate 50 million advances towards temporary acceleration north american payables february 2009 agreed increase advance agreement commitment 300 million 350 million become effective march 24 2009 subject approval ust terms ust loan agreement march 2009 agreed increase advance agreement commitment 350 million 450 million become effective march 24 2009 subject 1 board approval 2 ust approval terms ust loan agreement 3 bankruptcy court approval increase advance agreement 4 achievement certain milestones steering option exercise agreement described including limited bankruptcy court approval steering option exercise agreement execution definitive agreements sale global steering business us march 4 2009 advanced 245 million agreement assurances delphi able repay amounts advanced steering option exercise agreement march 2009 reached preliminary agreement delphi terms us acquire delphi’s global steering business provided amended delphigm settlement agreements option exercise agreement subject board approval ust approval bankruptcy court approval continue work delphi stakeholders delphi’s efforts emerge bankruptcy risks delphi cannot emerge bankruptcy delphi successful emerging bankruptcy could subject risks reported since delphi’s 2005 bankruptcy filing example may able obtain systems components parts delphi currently supplies us could materially disrupt operations including production certain vehicles addition although would still receive administrative claim first hourly pension transfer may receive recovery claim would receive preferred stock set forth amended gsa gmac sale 51 controlling interest november 2006 completed gmac transaction sale 51 controlling interest gmac purchase price 74 billion fim holdings retained 49 interest gmac’s common membership interests addition fim holdings purchased 555000 gmac’s preferred membership interests cash purchase price 500 million purchased 1555000 preferred membership interests cash purchase price 14 billion november 2007 fim holdings converted 555000 preferred membership interests common membership interests converted 533236 general motors corporation subsidiaries preferred membership interests common membership interests percentage ownership common membership interests remained unchanged although subsequent conversions sole holders series preferred membership interests gmac may required make certain quarterly cash distributions us based upon preferred membership interests hold preferred membership interests issued units 1000 accrue yield rate 10 per annum noncumulative gmac board managers may reduce distribution extent required avoid reduction equity capital gmac minimum amount equity capital equal net book value gmac november 30 2006 may reduce suspend distribution certain circumstances part gmac transaction retained option ten years closing date repurchase gmac certain assets related automotive finance business north american operations international operations gmac part gmac’s conversion bhc status call option terminated liquidity capital resources liquidity overview incurred significant losses 2005 2008 attributable operations restructurings charges support delphi share gmac’s losses impairments investments gmac charges related future cost cutting measures managed liquidity time series cost reduction initiatives capital markets transactions sales assets however global credit market crisis dramatic effect industry second half 2008 increased turmoil mortgage overall credit markets particularly lack financing buyers lessees vehicles continued reductions us housing values volatility price oil recession united states western europe slowdown economic growth rest world created substantially difficult business environment ability execute capital markets transactions sales assets extremely limited vehicle sales north america western europe contracted severely pace vehicle sales rest world slowed liquidity position well operating performance negatively affected economic industry conditions financial business factors many beyond control conditions improved january 2009 sales light vehicles us industry falling 657000 units seasonally adjusted rate 99 million units lowest level january since 1982 believe likely adverse economic conditions effect automotive industry improve significantly 2009 notwithstanding unprecedented intervention governments united states countries global banking financial systems year ended 2008 consolidated negative operating cash flow 121 billion compared positive operating cash flow 77 billion year ended 2007 available liquidity decreased 140 billion december 31 2008 273 billion december 31 2007 operating cash flow unfavorably affected primarily losses gmna gme due significant working capital deterioration result lower sales volumes available liquidity deteriorated 133 billion primarily due negative operating cash flow items payments delphi 14 billion connection gsa mra cash restructuring expenditures 12 billion partially offset borrowings secured revolver proceeds us government loan described taken far reaching actions restructure us business effects current global economic credit market conditions automotive industry require obtain additional nearterm liquidity support based estimated cash requirements december 31 2009 expect current operations generate sufficient cash flow fund obligations come due currently traditional sources liquidity available fund obligations 2008 announced plan combination operating related initiatives 2008 cash initiatives well asset sales capital market activities conserve cash generate incremental cash flows total amount 200 billion certain 2008 cash initiatives particularly asset sales capital market activities challenging given current business credit market environments moreover full effect many actions realized second half 2009 later even implemented successfully general motors corporation subsidiaries due sudden rapid decline industry sales determined three months ended december 31 2008 despite far reaching actions initiated restructure us business would unable pay obligations normal course business 2009 service debt timely fashion required development new plan depended financial assistance us government december 31 2008 entered ust loan agreement ust pursuant ust agreed provide us 134 billion ust loan facility borrowed 40 billion ust loan facility december 31 2008 additional 54 billion january 21 2009 40 billion february 17 2009 condition obtaining ust loan facility agreed achieve certain restructuring targets within designated time frames fully described “recent developments” pursuant terms ust loan facility described fully “recent developments” submitted ust february 17 2009 viability plan order execute viability plan requested us government funding 225 billion cover baseline liquidity debt funding requirements comprised initial 180 billion requested december 2 2008 downside scenario plus additional 45 billion reflect changes various assumptions subsequent december 2 2008 submission 300 billion cover downside sensitivity liquidity requirements proposed alternative debt funding could met combination secured term loan 60 billion preferred equity 165 billion viability plan baseline scenario representing increase 45 billion december request 91 billion incremental 134 billion outstanding february 28 2009 suggested ust current amount outstanding ust loan facility 134 billion plus additional 31 billion amount requested 2009 could provided form preferred stock believe structure would provide necessary mediumterm funding need provide higher return ust commensurate higher returns ust receives preferred stock investments financial institutions viability plan downside sensitivity scenario additional 75 billion funding would required requested form secured revolving credit facility collateral used support current 134 billion ust loan facility would used support proposed 75 billion secured revolving credit facility 60 billion term loan viability plan also assumes loans 77 billion doe loans doe baseline industry vehicle sales forecast 2009 105 million total vehicles united states 575 million vehicles globally market share forecast 2009 22 united states 12 globally 2009 baseline liquidity forecast reflects 20 billion funding ust march 2009 additional 26 billion april 2009 addition 134 billion received date net 23 billion nonus governmental entities receipt 20 billion doe loans sale certain assets net proceeds 15 billion funding additional amounts described required provide necessary working capital operate business global economy recovers consumers available credit begin purchasing automobiles historical volume levels addition viability plan dependent ability execute bond exchange veba modifications contemplated submissions ust ability achieve revenue targets execute cost reduction restructuring plans currently approximately 1 billion outstanding series convertible debentures mature june 1 2009 funding plan described include payment maturity principal amount debentures unable restructure series convertible debentures prior june 1 2009 otherwise satisfactorily address payment due june 1 2009 default would arise respect payment obligations could also trigger cross defaults outstanding debt thereby potentially requiring us seek relief us bankruptcy code addition request additional funding ust included viability plan requested financial support following governments outside united states among others provide necessary funding operate business 2009 australia continued local production become challenging due changes market preferences together australian government developed plan bring market new fuel efficient vehicle project funding provided australian government form permanent grants 118 million canada canadian market well canadian subsidiary gm canada highly integrated overall north american strategy operations approximately 90 gm canada’s production 2008 exported outside canada primarily us approximately 88 gm canada’s domestic sales imports us operations recent unprecedented industry volume downturn north america coupled gap cost competitiveness related active employees retirees accelerated need restructure canadian operations order achieve longterm viability general motors corporation subsidiaries discussions canadian federal ontario provincial governments secure longterm financial assistance execute necessary restructuring actions longterm viability addition discussion caw union reduce labor costs competitive levels caw committed achieving hourly cost structure consistent ultimately negotiate uaw discussions canadian federal ontario provincial governments based principle maintaining proportionate levels manufacturing canada gm canada receiving longterm financial assistance proportional total support provided us government sweden conducted strategic review global saab business offered sale given urgency stemming sizeable outflows associated saab operations saab automobile ab filed reorganization protection laws sweden february 20 2009 anticipate losing controlling interest saab anticipate longer consolidate saab beginning three months ending march 31 2009 anticipate recording significant loss may excess 10 billion deconsolidation europe highly competitive automotive market currently unprofitable many vehicle manufacturers relatively costly restructuring environment engaged european labor unions achieve cost reductions 12 billion include several possible closures spinoffs manufacturing facilities high cost locations addition restructuring sales organization become brand focused better optimize advertising expenses also discussions german government liquidity support fund operations certain liabilities german subsidiary submitted proposed viability plan connection discussions sustainable strategy european operations may include partnerships german government andor european governments asiapacific lower gdp industry volume outlooks prompted reconsideration pace capacity expansion plans india planned selffunded addition two sizeable manufacturing expansion projects thailand tooling assembly new midsized pickup model diesel engine facility longer feasible without support government thailand local banks partners suspended indefinitely currently engaged negotiations uaw counsel class gm retirees respective advisors pursue modifications settlement agreement accordance requirements ust loan agreement consistent terms ust loan agreement seeking convert least half value future payments veba common stock rather cash total value veba payments exceed amount provided veba settlement agreement extensive due diligence regarding current situation future prospects plans underway uaw class counsel advisors parties understand restructuring veba obligations necessary component viability plan agreed work toward executing agreement modify veba settlement agreement march 31 2009 yet reached agreement restructure veba payments also currently engaged negotiations advisors unofficial committee unsecured bondholders reduce public unsecured debt exchange bonds equity appropriate means accordance requirements ust loan agreement negotiations ongoing committed commencing exchange offer march 31 2009 required ust loan agreement connection warrant provided ust connection ust loan agreement debt equity conversion less twothirds unsecured debt conversion least onehalf value outstanding veba obligation equity anticipate new equity issued pursuant ust warrant bond exchange veba would represent substantially pro forma common stock outstanding addition 2008 cash initiatives taken numerous actions conserve cash improve liquidity actions include reducing number salaried employees 10000 2009 reducing us salaries range 3 10 depending level management reducing benefits salaried retirees negotiating suspension jobs bank program uaw refer note 21 consolidated financial statements reducing working capital requirements operations reduction inventories measures reducing capital engineering spending delay cancellation certain product programs also begun negotiations unions represent certain employees united general motors corporation subsidiaries states canada western europe reduce hourly labor costs discussions ongoing reached tentative agreement uaw subject ratification members obtain additional us hourly labor cost reductions united states also continue actively market certain assets sale including hummer brand ac delco business transmission facility strasbourg france however current global economic conditions lack available credit making difficult complete transactions possible receive net proceeds contemplated viability plan successful completion viability plan require significant cash payments related restructuring dealer brand rationalization employee headcount capacity rationalization currently estimate cash requirements 35 billion 2009 additional 23 billion 2014 successful completion viability plan also dependent ability continue procure parts delphi gmac continues provide financing dealers customers successful obtaining additional funding necessary execute restructuring plan provided viability plan would required take additional actions continue operations however assurance actions reductions productive capacity hourly salaried headcount employee compensation benefits capital expenditures engineering spending would sufficient prevent need us potentially seek relief filing bankruptcy laws united states jurisdictions liquidity plans subject number risks uncertainties including described “risk factors” outside control ust approve viability plan outstanding amounts ust loan agreement currently 134 billion plus additional ust note 07 billion ust gmac loan 09 million would become due payable within 30 days occur would unable repay amounts outstanding ust loan facility indebtedness come due would cause us default would forced seek waivers defaults covenant breaches indebtedness obligations arrange substitute financing potentially seek relief filing us bankruptcy code even assurances would able procure financing continue operations bankruptcy believe us government could provide financing directly indirectly guarantees assurance could secure waiver circumstances would incur significant costs additionally significant obligations include crossdefault provisions could triggered failure comply certain significant credit agreements 45 billion secured revolving credit facility 15 billion us term loan 125 million inventory financing facility contain covenants making debt thereunder callable lenders event independent auditors include paragraph report expressing substantial doubt ability continue going concern obtained waivers lenders waiving right call loans connection report auditors dated march 4 2009 containing paragraph however waivers provide loans would callable event ust approve viability plan ust loan becomes due payable confident ability execute operating actions substantially within control including reductions productive capacity hourly salaried headcount brands nameplates dealers spending working capital improvements success viability plan however necessarily depends global economic conditions level automotive sales particularly united states western europe viability plan also assumes required provide additional financial support delphi gmac beyond levels included viability plan trade suppliers continue conduct business us terms consistent historical practice suppliers might respond apparent weakening liquidity position address liquidity needs requesting faster payment invoices assurances happen need cash would intensified might unable make payments suppliers become due believe supplier liquidity issues could potentially arise soon march 2009 suppliers restart operations period limited production january february 2009 suppliers may also experience difficulties renewing credit lines facilities due tightened credit markets exposure automotive industry including us suppliers may also receive going concern opinions auditors could put default credit facilities address risk suppliers may able obtain adequate liquidity continue supply parts us proposed general motors corporation subsidiaries ust create credit insurance program government sponsored factoring program automotive manufacturers’ receivables estimate direct material logistics suppliers could eligible 45 billion receivables insurance 2011 program even successfully implement planned operating actions viability plan substantially within control estimated liquidity inadequate unless receive significant additional government funding economic automotive industry conditions significantly improve receive substantial proceeds asset sales gain access capital markets private sources funding take aggressive working capital initiatives combination foregoing actively pursuing possible sources funding assurance supply funds amounts timing sufficient meet liquidity requirements 2009 later periods consolidated financial statements prepared going concern basis contemplates realization assets satisfaction liabilities normal course business ability continue going concern substantially dependent successful execution many actions referred timeline contemplated plans uncertainty successful execution viability plan among factors raises substantial doubt ability continue going concern accompanying consolidated financial statements include adjustments might result outcome uncertainty investors potential investors securities consider cash flows automotive business consists four regional automotive segments corporate fio business relevant measures analysis various securities trade public markets accordingly provide supplemental statements cash flows aid users consolidated financial statements analysis performance liquidity capital resources general motors corporation subsidiaries information reconciles consolidated statements cash flows elimination “net investing activity fio” “net financing activity automotive operations” line items shown table following statements years ended december 31 2008 2007 2006 general motors corporation subsidiaries general motors corporation subsidiaries automotive available liquidity automotive available liquidity includes cash balances marketable securities readilyavailable assets vebas december 31 2008 available liquidity 140 billion compared 273 billion december 31 2007 264 billion december 31 2006 amount consolidated cash marketable securities subject intramonth seasonal fluctuations includes balances held various business units subsidiaries worldwide needed fund operations although cost reduction initiatives reduced ongoing need cash compared prior periods still expect substantial cash requirements going forward future uses cash include among possible demands • costs implement longterm cost savings restructuring plans potential capacity reduction programs • continuing capital expenditures • scheduled cash contributions 78 billion 2010 benefit new veba postretirement health care established pursuant settlement agreement • continuing use cash operations result lower global industry sales discussed previously experiencing decline vehicle sales north american western european markets results unfavorable effect working capital united states generally recognize revenue collect associated receivable shortly production pay suppliers approximately 47 days later accordingly consistently negative working capital periods declining sales production results outflows cash greater collections accounts receivable pay suppliers materials previously recognized revenue collected associated receivable production sales stabilize effect reverses return regular pattern working capital changes volume sales declines continue associated negative operating cash flow effect due working capital changes could significant however downward trend sales reverse would experience positive operating cash flow effects attributable reduction working capital continue manage global liquidity centrally within two primary liquidity pools specifically us cash pool international cash pool allows us optimize funding global operations december 31 2008 approximately 48 available liquidity held us year ended 2008 us liquidity position deteriorated mainly due negative operating cash flow payments delphi connection amended gsa amended mra restructuring charges partially offset borrowings secured us credit facility proceeds ust loan facility withdrawals veba assets deterioration particularly pronounced 2008 due unusually high sales allowance reserves north america related switch emphasizing cash rather financing incentives vehicle sales us operations access much overseas liquidity intercompany arrangements certain restrictions apply use us liquidity fund international operations ust loan agreement following table summarizes global liquidity general motors corporation subsidiaries available liquidity decreased 140 billion december 31 2008 273 billion december 31 2007 primarily result negative operating cash flow driven reduced production north america western europe working capital unwind postretirement benefit payments cash restructuring costs payments delphi connection amended gsa amended mra partially offset draws secured revolver proceeds ust loan facility available liquidity increased 273 billion december 31 2007 264 billion december 31 2006 primarily result positive operating cash flow net 10 billion contribution mitigation plan veba 54 billion proceeds sale allison cash flows received connection portfolios vehicle operating leases held fio increase partially offset 10 billion capital contribution gmac decrease readilyavailable veba assets 19 billion primarily result settlement agreement following table summarizes veba assets total veba assets decreased 100 billion december 31 2008 163 billion december 31 2007 due negative asset returns 14 billion withdrawal veba assets year ended 2008 connection settlement agreement significant portion veba assets allocated uaw related account also hold proportional investment returns percentage trust amounts withdrawn uaw related account including investment returns january 1 2008 transfer new veba treatment excluding portion uaw related account available liquidity subsequent december 31 2007 implementation date required transfer 69 billion including deferred amounts discussed subject adjustment new veba may either transfer additional 56 billion subject adjustment new veba time may instead opt make annual payments varying amounts 436 million 33 billion 2020 time implementation date option prepay remaining payments total veba assets decreased 163 billion december 31 2007 178 billion december 31 2006 decline veba assets primarily driven 27 billion withdrawals partially offset favorable asset returns year ended 2007 connection settlement agreement described excluded portion uaw related account available liquidity december 31 2007 credit facilities december 31 2008 unused credit capacity 06 billion 32 million available us 01 billion available countries business 05 billion available joint ventures components available credit unused credit capacity discussed following paragraphs 45 billion standby revolving credit facility syndicate banks terminates july 2011 december 31 2008 45 billion outstanding credit revolver addition outstanding amount december 31 2008 10 million letters credit issued credit facility 45 billion secured facility borrowings limited amount based value underlying collateral addition 45 billion secured line credit collateral also secures certain lines credit automated clearinghouse overdraft arrangements letters credit provided secured lenders 02 billion event work stoppages result loss certain level production secured facility would temporarily reduced 35 billion december 31 2008 5 million available facility general motors corporation subsidiaries august 2007 entered revolving credit agreement expiring august 2009 provides borrowings 10 billion december 31 2008 limited amount based value underlying collateral agreement provides additional available liquidity could use general corporate purposes including working capital needs underlying collateral supported borrowing base 03 billion 13 billion december 31 2008 2007 respectively december 31 2008 03 billion outstanding agreement leaving 13 million available november 2007 renewed revolving secured credit facility would provide borrowings 03 billion facility borrowings limited amount based value underlying collateral consists portion company vehicle fleet december 31 2008 underlying collateral supported borrowing base 01 billion amount borrowed program 01 billion leaving 3 million available december 31 2008 september 2008 entered oneyear revolving onbalance sheet securitization borrowing program provides financing 02 billion program replaced offbalance sheet trade receivable securitization facility expired september 2008 new facility addition existing onbalance sheet securitization borrowing program provides financing 05 billion part programs certain trade accounts receivables related vehicle sales isolated whollyowned bankruptcyremote special purpose entities turn pledge receivables lending institutions receivables pledged reported separately trade accounts receivables amount receivables pledged amounts borrowed programs 06 billion 05 billion respectively pledged receivables reported accounts notes receivable net borrowings reported shortterm borrowings addition consolidated affiliates nongm minority shareholders primarily gm daewoo combined 05 billion undrawn committed facilities cash flow operating activities year ended 2008 automotive negative cash flow continuing operating activities 131 billion net loss continuing operations 245 billion result compares positive cash flow continuing operating activities 54 billion net loss continuing operations 426 billion 2007 operating cash flow unfavorably affected primarily lower volumes resulting losses north america western europe resulting effect lower production volumes working capital balances postretirement benefit payments due continued deterioration economic conditions anticipate substantial negative cash flow operations first quarter 2009 year ended 2007 automotive positive cash flow continuing operating activities 54 billion net loss continuing operations 426 billion result compares positive cash flow continuing operating activities 50 billion net loss continuing operations 35 billion 2006 operating cash flow year ended 2007 included withdrawals 27 billion veba assets opeb plans reimbursement retiree healthcare life insurance benefits provided eligible plan participants operating cash flow unfavorably affected cash expenditures 09 billion related gmna restructuring initiative 04 billion related gme restructuring initiative 03 billion related delphi’s restructuring activities charges recorded 2003 2006 investing activities year ended 2008 automotive negative cash flow continuing investing activities 45 billion compared negative cash flow continuing investing activities 40 billion 2007 deterioration negative cash flow continuing investing activities 05 billion primarily relates 1 absence cash proceeds 54 billion sale allison 2007 2 29 billion decrease liquidation marketable securities primarily consist sales maturities highly liquid corporate us government us government agency mortgage backed debt securities used cash management purposes decreases partially offset 1 70 billion decrease acquisitions marketable securities 2 10 billion capital contribution gmac restore gmac’s adjusted tangible equity balance contractually required levels 2007 general motors corporation subsidiaries year ended 2007 automotive negative cash flow continuing investing activities 40 billion compared positive cash flow continuing investing activities 64 billion 2006 decrease cash flow continuing investing activities 104 billion relates 1 40 billion decrease net proceeds sales investments business units primarily 74 billion related 51 interest gmac sales 20 billion 2006 offset 54 billion related allison discontinued operations 2007 2 36 billion net decrease cash flow sale marketable equity securities 3 10 billion capital contribution gmac restore gmac’s adjusted tangible equity balance contractually required levels 2007 capital expenditures 75 billion years ended 2008 2007 significant use investing cash years ended 2008 2007 capital expenditures primarily made global product programs powertrain tooling requirements capital expenditures year ended 2006 75 billion primarily attributable gmna’s ongoing investment support new product launches anticipate capital expenditures 2009 decrease approximately 24 billion financing activities year ended 2008 automotive positive cash flow continuing financing activities 76 billion compared negative cash flow continuing financing activities 11 billion 2007 increase cash flow continuing financing activities 87 billion relates 1 88 billion net increase debt borrowings primarily related borrowings available credit facilities 45 billion ust loan facility 40 billion 2 03 billion decrease cash dividends paid 3 partially offset 03 billion increase payments longterm debt year ended 2007 automotive negative cash flow continuing financing activities 11 billion compared positive cash flow continuing financing activities 10 billion 2006 decrease cash flow continuing financing activities 21 billion relates 13 billion net increase payments longterm debt primarily related 11 billion convertible debentures put us settled cash 2007 10 billion net decrease shortterm debt borrowings september 2008 entered agreements qualified institutional holder 150 series debentures due 2009 pursuant agreements issued aggregate 44 million shares common stock exchange 05 billion principal amount series debentures entered agreements part reduce debt interest costs increase equity thereby improve liquidity receive cash proceeds exchange common stock series debentures retired cancelled result exchange recorded settlement gain 19 million year ended 2008 2007 issued 15 billion principal amount series debentures series debentures issued par interest rate 15 may converted option holder common stock including second business day prior maturity date based initial conversion rate 6837 shares per 2500 principal amount debentures represents initial conversion price 3657 per share series debentures provide satisfy conversion obligation paying cash aggregate principal amount cash remainder cash common stock combination cash common stock option connection issuance series debentures purchased convertible note hedge convertible debentures private transaction convertible note hedge expected reduce potential dilution respect common stock upon conversion series debentures effectively increases conversion price 4571 per share proceeds debentures provided additional available liquidity may use general corporate purposes including working capital needs general motors corporation subsidiaries net debt following table summarizes net debt balances liquidity issues believe possible issues may arise various financing arrangements 2006 restatement prior consolidated financial statements financing arrangements consist principally obligations connection saleleaseback transactions derivative contracts lease obligations including offbalance sheet arrangements include public debt indentures current period evaluated effect agreements restatements period adjustments identified current period including legal rights respect claims could asserted ability cure based review believe although assurances given likelihood nature amount claims may asserted amounts december 31 2008 subject possible claims acceleration termination remedies requiring payments us likely exceed 36 billion consisting primarily offbalance sheet arrangements derivative contracts moreover believe may economic disincentives third parties raise claims extent based review reclassified obligations longterm debt shortterm debt 187 million 212 million 257 million december 31 2008 2007 2006 respectively date received claims anticipate receiving claims noncash charges gains recorded significant noncash charges gains related impairments investments gmac common preferred membership interests assets fio segment’s portfolio equipment operating leases valuation allowances deferred tax assets remeasurement pension opeb plans following table summarizes significant noncash charges gains general motors corporation subsidiaries fio prior consummation gmac transaction gmac paid dividend us leaserelated assets net book value 40 billion related deferred tax liabilities 18 billion dividend resulted transfer us two bankruptcyremote subsidiaries hold equity interests ten trusts leased vehicles issued assetbacked securities collateralized vehicles gmac originated securitizations remains servicer securitizations august 2007 entered secured revolving credit arrangement provides borrowings 10 billion december 31 2008 secured equity interest ten securitization trusts connection credit facility contributed two bankruptcyremote subsidiaries third bankruptcyremote subsidiary consolidate bankruptcyremote subsidiaries ten trusts financial reporting purposes following table summarizes key balance sheet components related bankruptcyremote subsidiaries value vehicles subject lease bankruptcyremote subsidiaries december 31 2008 includes impairment charges 02 billion recorded fio segment result lower residual values vehicles year ended 2008 decrease operating leases secured debt equity december 31 2007 result payments received lessees termination leases year ended 2008 repayment related secured debt secured debt recourse solely leased vehicles related assets continue obligated bankruptcyremote subsidiaries residual support payments leased vehicles amount estimated 04 billion 09 billion december 31 2008 2007 respectively however neither securitization investors trusts rights residual support payments expect operating leases terminate related securitization debt gradually amortize next 24 months resulting release two bankruptcyremote subsidiaries certain cash flows related ownership securitization trusts related operating leases cash flow expect realize leased vehicle securitizations next 24 months come three principal sources 1 cash released securitizations monthly basis result available funds exceeding debt service required payments month 2 cash received upon following termination securitization extent remaining collateralization 3 return residual support payments owing us month year ended 2008 total cash flows released two bankruptcyremote subsidiaries 13 billion aggregate since consummation gmac transaction 23 billion released subsidiaries negative industry conditions north america continue increase risks costs associated vehicle lease financing impairment charges increases residual support risk sharing accruals related lease assets year ended 2008 results reduced expectations cash flows lease arrangements already taken steps reduce percentage business retail leasing emphasis curtailing high risk areas reducing contracts 24 27 month lease terms gmac largest provider lease financing vehicles implementing initiatives reduce risk lease portfolio exiting incentive based lease financing canada reducing lease volume united states plan continue offer leasing options though likely narrowly targeted certain products segments developing incentive programs encourage consumers purchase versus lease vehicles lease financing used approximately 13 18 retail sales united states years ended 2008 2007 respectively general motors corporation subsidiaries status debt ratings fixed income securities rated four independent credit rating agencies dbrs moody’s investor service fitch ratings standard poors ratings indicate agencies’ assessment company’s ability pay interest distributions dividends principal securities lower credit ratings generally represent higher borrowing costs reduced access capital markets company ratings us based information provide well sources agencies consider number factors determining rating including limited cash flows liquidity profitability business position risk profile ability service debt amount debt component total capitalization dbrs moody’s fitch sp currently rate credit noninvestment grade following table summarizes credit ratings february 27 2009 rating actions taken credit rating agencies january 1 2008 february 27 2009 follows dbrs • june 20 2008 affirmed corporate rating b high senior unsecured rating b placed credit ratings review negative implications stable trend • august 18 2008 downgraded corporate rating b low b high initiated coverage secured rating rr2b high confirmed senior unsecured rating rr4ccc high • november 7 2008 downgraded corporate rating cc b low senior unsecured rating cc ccc high senior secured rating ccc low b high outlook negative fitch • february 27 2008 affirmed issuerdefault rating b negative outlook • june 25 2008 downgraded corporate rating b secured rating bb senior unsecured rating ccc b negative outlook • september 22 2008 downgraded corporate rating ccc b senior secured rating brr1 bbrr1 senior unsecured rating cccrr5 • november 7 2008 placed rating credit watch negative implications • december 19 2008 downgraded corporate rating c ccc senior secured rating cccrr1 brr1 senior unsecured rating crr5 cccrr5 outlook negative moody’s • april 25 2008 affirmed corporate debt rating b3 placed credit rating negative outlook stable outlook • july 15 2008 affirmed corporate debt rating b3 placed credit rating review possible downgrade negative outlook speculative grade liquidity rating lowered sgl2 sgl1 general motors corporation subsidiaries • august 13 2008 downgraded corporate ratings caa1 b3 senior secured rating b1 ba3 senior unsecured caa2 caa1 • october 27 2008 downgraded corporate rating caa2 caa1 senior unsecured rating caa3 caa2 senior secured rating remained b1 speculative grade liquidity rating lowered sgl4 sgl2 • december 3 2008 downgraded corporate rating ca caa2 senior unsecured rating c caa3 senior secured rating b3 b1 speculative grade liquidity rating reaffirmed sgl4 outlook negative sp • march 17 2008 affirmed corporate debt rating b placed credit rating credit watch negative implications stable outlook • may 22 2008 affirmed corporate rating b upgraded senior unsecured rating b result extending recovery ratings speculativegrade unsecured debt issues placed credit ratings negative outlook credit watch negative implications • june 20 2008 affirmed b corporate rating bb secured rating placed credit ratings credit watch negative implications negative outlook • july 31 2008 downgraded corporate rating b senior secured rating b bb senior unsecured rating b negative outlook • october 9 2008 placed ratings credit watch negative implications • november 7 2008 downgraded corporate rating senior unsecured rating ccc b senior secured rating b negative outlook • december 4 2008 downgraded corporate rating senior unsecured rating cc ccc senior secured rating ccc b • december 22 2008 downgraded senior unsecured rating c cc recovery rating 6 4 corporate rating senior secured rating remained unchanged outlook negative pension postretirement benefits plans covering represented employees generally provide benefits negotiated stated amounts year service well significant supplemental benefits employees retire 30 years service normal retirement age policy respect qualified pension plans contribute annually less minimum required applicable law regulation directly pay benefit payments appropriate december 31 2008 legal funding requirements met following table summarizes contributions made pension plans general motors corporation subsidiaries 2009 contributions due expect make discretionary contributions us hourly salaried pension plans 2009 expect contribute pay benefits 112 million us pension plan 962 million nonus pension plans us pension plans underfunded 136 billion december 31 2008 overfunded 188 billion december 31 2007 change funded status primarily attributable actual plan asset losses 114 billion actuarial losses 57 billion well delphi benefit obligation transfer curtailments settlements increases projected benefit obligation pbo 88 billion nonus pension plans underfunded net amount 119 billion december 31 2008 104 billion december 31 2007 change funded status primarily attributable actual plan asset losses 29 billion offset net beneficial exchange rate movements 16 billion funded status us pension plans follows also maintain hourly salaried opeb plans provide postretirement medical dental vision life insurance us retirees eligible dependents certain nonus subsidiaries postretirement benefit plans although participants covered government sponsored administered programs us opeb plans underfunded 300 billion december 31 2008 434 billion december 31 2007 nonus opeb plans underfunded 29 billion december 31 2008 43 billion december 31 2007 2008 withdrew total 14 billion plan assets vebas opeb plans reimbursement retiree healthcare life insurance benefits provided eligible plan participants result liquidated veba us salaried retiree healthcare life insurance benefits 2007 withdrew total 27 billion vebas pursuant 2005 uaw health care settlement agreement required make certain contributions mitigation plan veba used mitigate effect reduced healthcare coverage uaw retirees number years control assets mitigation plan veba following table summarizes benefit payments expect pay reflect estimated future employee services appropriate benefits us pension plans certain nonus pension plans paid plan assets rather assets b benefit payments presented table reflect estimates changes result implementation settlement agreement general motors corporation subsidiaries offbalance sheet arrangements use offbalance sheet arrangements economics sound business principles warrant use principal use offbalance sheet arrangements occurs connection securitization sale financial assets leases participated securitization programs including trade receivables securitization program expired september 2008 renewed financial assets sold offbalance sheet arrangements primarily consisted trade receivables related program part program sold receivables whollyowned bankruptcyremote special purpose entity special purpose entity separate legal entity assumed risks rewards ownership receivables sold program sold fair market value excluded consolidated balance sheets gross amount proceeds received sale receivables program 16 billion 06 billion years ended 2008 2007 respectively loss trade receivables sold included automotive cost sales 3 million 2 million years ended 2008 2007 respectively banks bank conduits beneficial interest eligible pool receivables december 31 2007 retained interest receivables sold performed collection administrative functions addition securitization program participate trade receivable securitization programs europe direct indirect subsidiaries entered factoring agreements sell certain trade receivables banks factoring companies limits based contractually agreed upon amounts andor entities’ balance participating trade receivables 2008 average aggregate facility limits participating entities 66 million banks factoring companies beneficial interest 16 million 26 million participating pool trade receivables december 31 2008 2007 respectively lease real estate equipment various offbalance sheet entities established facilitate financing assets us nationally prominent lessors believe creditworthy assets consist principally office buildings machinery equipment use entities allows parties providing financing isolate particular assets single entity thereby syndicate financing multiple third parties conventional financing technique used lower cost borrowing thus lease cost lessee us wellestablished market institutions participate financing property purchase ownership interests entities owned institutions independent affiliated us believe officers directors employees affiliates hold direct indirect equity interests entities following table summarizes assets offbalance sheet entities guarantees provided third parties provided guarantees related residual value operating leases certain suppliers’ commitments commercial loans made gmac outstanding certain third parties maximum potential obligation commitments 680 million amount includes guarantee provided gmac brazil connection dealer floor plan financing secured 481 million certificate deposit purchased gmac title connection certain divestitures assets operating businesses provided guarantees respect benefits paid former employees relating pensions postretirement health care life insurance significant general motors corporation subsidiaries provided delphi since 2005 recorded charges 123 billion related guarantees provided delphi due uncertainties surrounding delphi’s ability emerge bankruptcy reasonably possible could record additional charges future currently unable estimate amount range losses november 2008 gmac agreed expand repurchase obligations gmac financed inventory certain dealers previously obligated pursuant dealer agreements repurchase certain gmac financed inventory limited current model year vehicles prior year model vehicles less 120 days dealer inventory event termination related dealer’s dealer sales service agreement current agreement gmac requires us repurchase gmac financed inventory invoiced dealers september 1 2007 limited exclusions event qualifying voluntary involuntary termination dealer’s dealer sales service agreement repurchase obligation excludes vehicles damaged excessive mileage altered repurchase obligation ends august 31 2009 vehicles invoiced august 31 2008 august 31 2010 vehicles invoiced august 31 2009 maximum potential amount future payments could required make guarantee would based repurchase value total eligible vehicles financed gmac dealer stock estimated 198 billion december 31 2008 required repurchase vehicles arrangement total exposure would reduced extent able resell vehicles another dealer fair value guarantee 8 million december 31 2008 considers likelihood dealers terminating estimated loss exposure ultimate disposition vehicles recorded reduction automotive sales refer note 18 consolidated financial statements additional information guarantees provided contractual obligations longterm liabilities following minimum commitments contractual obligations including purchase obligations purchase obligation defined agreement purchase goods services enforceable legally binding us specifies significant terms including fixed minimum quantities purchased fixed minimum variable price provisions approximate timing transaction longterm liabilities defined longterm liabilities recorded consolidated balance sheet based definition table includes contracts include fixed minimum obligations majority purchases included table made purchase orders requirements based accordingly specify minimum quantities general motors corporation subsidiaries following table summarizes aggregated information outstanding contractual obligations longterm liabilities december 31 2008 debt obligations 2009 include ust loan facility 38 billion net discount 09 billion secured revolving credit facility 45 billion us term loan 15 billion inventory financing facility 125 million classified shortterm debt due potential debt maturity acceleration refer note 15 consolidated financial statements additional information interest payments related borrowings 13 billion shown table according contractual maturity b amounts include interest payments based contractual terms current interest rates debt capital lease obligations c amount include forecasted obligations related delphi benefit guarantee agreements 390 million 640 million 2009 2010 reducing range 100 million 250 million per year thereafter 2015 amounts include postretirement benefit payments current north american contractual labor agreements post2010 uaw hourly medical plan cash payments capped contribution new veba e total veba assets allocated based projected spending requirements f amounts represent contractual obligations new veba net plan assets 100 billion required settlement agreement assuming buyout options utilized convertible note held maturity g amount includes expected future payments current expected future service december 31 2008 postretirement benefit obligations salaried employees hourly postretirement benefit obligations extending beyond current north american union contract agreements table reflect unrecognized tax benefits 28 billion due high degree uncertainty regarding future cash outflows associated amounts refer note 19 consolidated financial statements additional discussion unrecognized tax benefits general motors corporation subsidiaries combined us hourly salaried pension plans underfunded 136 billion december 31 2008 although expected funding us hourly salaried pension plans 2009 2012 project contributions 59 billion 64 billion 2013 2014 respectively additional contributions may required thereafter borrowed 54 billion 40 billion ust loan facility january 21 2009 february 17 2009 respectively january 2009 also borrowed 884 million ust utilized funds purchase class b common membership interests gmac loans included table result additional debt obligations 103 billion interest payments 15 billion 2009 2013 refer notes 9 15 consolidated financial statements information contractual terms loans fair value measurements january 1 2008 adopted sfas 157 “fair value measurements” addresses aspects fair value accounting refer note 20 consolidated financial statements additional information regarding adoption effects sfas 157 starting second half 2008 credit market volatility remained high creating broad credit concerns condition persists affect ability manage risks related market changes foreign currency exchange rates interest rates commodity prices exposed ordinary course business derivative counterparties already may continue unwilling enter transactions us due credit rating addition based provisions sfas 157 require companies consider nonperformance risk part measurement fair value derivative liabilities record changes fair value derivative liabilities based current credit standing december 31 2008 derivative liabilities 35 billion fair value measurements recurring basis used level 3 significant unobservable inputs measure 70 million 12 total assets measured fair value 23 billion 658 total liabilities measured fair value level 3 inputs estimates require significant judgment therefore subject change significant assets liabilities related level 3 inputs follows • mortgagebacked securities level 3 inputs utilized fair value measurement process include estimated prepayment default rates underlying portfolio embedded proprietary discounted cash flow projection model • foreign currency derivatives nonperformance risk associated derivative contracts certain foreign consolidated subsidiaries party estimated based credit rating sovereign comparable companies similar credit profiles observable credit ratings together internal bank credit ratings obtained subsidiary’s counterparty banks • warrant derivative results warrant issued connection ust loan agreement valuation warrant determined replication similar instruments observable market based prices option pricing model includes estimated volatility discount rate dividend yield inputs • commodity derivatives commodity derivatives include purchase contracts various suppliers gross settled physical commodity level 3 inputs utilized fair value measurement process include estimated projected selling prices quantities purchased counterparty credit ratings discounted expected cash flow general motors corporation subsidiaries three months ended december 31 2008 concluded due recent deterioration credit markets financial condition adjustments fair value derivatives due nonperformance risk required significant judgment derivative contracts certain foreign consolidated subsidiaries party nonperformance risk associated subsidiaries estimated based credit rating sovereign comparable companies similar credit profiles observable credit ratings together internal bank credit ratings obtained subsidiary’s counterparty banks derivatives valued using measurements transferred level 2 level 3 december 31 2008 warrant issued us department treasury determining value warrant issued ust utilized observable market value tradable call options common stock difference terms warrant observable call options common stock determined insignificant effect value warrant key inputs value call options stock price expected volatility stock returns extent common stock trading exercise price warrants 357 required record charges adjust fair value warrant current fair value charges could significant may vary materially period extent volatility common stock price increase 10 common stock price would increase fair value warrant approximately 28 million decrease 10 common stock price would decrease fair value warrant approximately 26 million increase decrease volatility 10 would cause increase decrease fair value warrant 16 million fair value measurements nonrecurring basis following tables summarize financial instruments measured fair value nonrecurring basis periods subsequent initial recognition review carrying value equity method investments events circumstances warrant review requires comparison fair value investments respective carrying values fair value investments determined based valuation techniques using best information available may include quoted market prices market comparables discounted cash flow projections impairment charge would recorded whenever decline fair value carrying value determined temporary investments gmac common preferred membership interests 2008 global economy steadily deteriorated united states entered recessionary period beginning december 2007 result instability credit mortgage markets severe declines residential homebuilding markets significant volatility prices oil commodities 2008 factors continued deteriorate spread beyond united states initially western europe recently emerging markets south america asia economic factors general motors corporation subsidiaries initially affected consumer demand less fuel efficient vehicles particularly fullsize pickup trucks sport utility vehicles profitable products continued instability credit markets resulted extreme lack liquidity resulting prominent north american financial institutions declaring bankruptcy seized fdic sold distressed valuations culminated us foreign governments providing various forms capital infusions financial institutions recently consumer demand automobiles contracted due decline availability financing significant contraction consumer spending based continued recession united states resulting automobile sales lowest levels 16 years economic factors negatively affected gmac’s global automotive business well rescap’s residential mortgage business resulted significant losses businesses including impairments charges 12 billion related gmac’s portfolio equipment operating leases net 2008 additional factor gmac’s need future ability continue provide support rescap allow continue operate refer “key factors affecting future current results gmac conversion bank holding company related transactions” result factors evaluated investment gmac common preferred membership interests possible impairment quarterly reporting period 2008 result recorded impairment charges related gmac common membership interests three months ended march 31 june 30 december 31 2008 related gmac preferred membership interests three months ended march 31 june 30 september 30 2008 following table summarizes impairment charges recorded related investment gmac common preferred membership interests 2008 dollars millions continued low decreased demand vehicles continued increased instability global credit mortgage markets lack available credit lengthy recession north america europe south america asia could negatively affect gmac’s lines business result future impairments investment gmac common preferred membership interests additionally gmac provides financing dealers well retail purchasers vehicles deterioration economic factors could cause vehicle sales decline order determine fair value investment gmac common membership interests first determined fair value gmac applying various valuation techniques significant business units applied 49 equity interest resulting fair value march 31 june 30 september 30 2008 determination fair value gmac encompassed applying valuation techniques included level 3 inputs gmac’s significant business units follows • auto finance obtained industry data equity earnings ratios industry participants developed average multiples companies based upon comparison businesses auto finance • insurance developed peer group based upon factors equity earnings ratios developed average multiples companies • rescap previously obtained industry data industry participant believe comparable also utilized implied valuation based acquisition industry participant believe comparable due prevailing market conditions september 30 2008 believe comparable industry participants existed however believe previous data used conjunction certain publicly available information incorporated analysis resulted appropriate valuation september 30 2008 • commercial finance group obtained industry data price earnings ratios industry participants developed average multiples companies based upon comparison businesses commercial finance group general motors corporation subsidiaries december 31 2008 determination fair value gmac common membership interests utilized data gmac’s discussions board governors federal reserve approval become bhc bank holding company act 1956 amended addition gmac’s negotiations ust regarding potential borrowings capital infusions automotive industry financing program created troubled asset relief program established ust emergency economic stabilization act 2008 part process cerberus fund agreed convert interests participation agreement gmac common membership interests december 2008 purchase subsequent december 2008 additional gmac common membership interests conversion participation agreement subsequent purchase additional gmac common membership interest utilized specified value per gmac common membership interest determined agreed relevant parties various transactions subsequently utilized determination gmac’s fair value believe per share value representative fair value order determine fair value investment gmac preferred membership interests determined fair value applying valuation techniques included level 3 inputs various characteristics gmac preferred membership interests follows • utilizing information pricing similar investments changes yields gmac securities developed discount rate valuation • utilizing assumptions receipt dividends gmac preferred membership interests expected call date discounted cash flow model developed present value related cash flows march 31 june 30 september 30 december 31 2008 adjusted assumptions appropriate discount rate utilize valuation due changes market conditions occurred periods additionally adjusted assumptions likelihood payments dividends call date preferred membership interests investments nummi cami decline industry sales north america negatively affected nummi cami’s net income cash flows 2008 addition weakness economy continue result challenging shortterm market conditions result events evaluated nummi cami impairment based discounted projected cash flows determined fair value investments carrying values impairments temporary recognized impairment charges related investments nummi cami 94 million 25 million respectively dividends may paid common stock declared board directors subject consent ust excess 100 million approval presidential designee amounts available dividends applicable law delaware law board may declare dividends extent statutory surplus ie total assets minus total liabilities case fair market value minus statutory capital surplus net profits current andor immediately preceding fiscal year policy distribute dividends common stock based outlook indicated capital needs business cash dividends per share common stock 050 100 2008 2007 2006 respectively july 2008 board directors voted suspend dividends common stock indefinitely noted terms ust loans prohibited paying dividends without consent ust declare dividend excess 100 million without approval presidential designee refer note 15 consolidated financial statements general motors corporation subsidiaries critical accounting estimates consolidated financial statements prepared conformity accounting principles generally accepted united states america require use estimates judgments assumptions affect reported amounts asset liabilities disclosure contingent assets liabilities date financial statements reported amounts revenue expenses periods presented believe accounting estimates employed appropriate resulting balances reasonable however due inherent uncertainties making estimates actual results could differ original estimates requiring adjustments balances future periods discussed development selection disclosures critical accounting estimates audit committee board directors audit committee reviewed disclosures relating estimates critical accounting estimates affect consolidated financial statements use judgments assumptions listed addition likelihood materially different amounts could reported varied conditions assumptions discussed pensions defined benefit pension plans accounted actuarial basis requires selection various assumptions including expected rate return plan assets discount rate due significant events discussed note 16 note 18 consolidated financial statements remeasured certain pension plans various dates 2008 expected return us plan assets included pension expense determined periodic studies include review asset allocation strategies anticipated future longterm performance individual asset classes risks using standard deviations correlations returns among asset classes comprise plans’ asset mix studies give appropriate consideration recent plan performance historical returns assumptions primarily longterm prospective rates return strategic asset mix us defined benefit pension plans intended reduce exposure equity market risks utilize asset classes reduce surplus volatility utilize asset classes active management historically generated excess returns market returns therefore expected longterm return assumption developed expectation active management achieve excess returns market returns net pension expense based expected return plan assets actual return plan assets differences expected return plan assets actual return plan assets recorded accumulated comprehensive loss actuarial gain loss subject possible amortization net pension expense future periods historical accounting policy utilize marketrelated value plan assets determination future pension expense marketrelated value averages gains losses period years define marketrelated value amount recognizes 60 difference actual fair value assets expected calculated value initially 10 difference next four years marketrelated value assets used calculation expected return us pension plan assets 2009 58 billion higher actual fair value plan assets therefore despite multiple remeasurements pension plans 2008 effect recent downturn financial markets yet fully affected net pension expense weightedaverage expected longterm rate return us plan assets used determine net pension expense 2008 85 compared 85 2007 90 2006 pension plan assets canada united kingdom comprise 85 nonus pension plan assets december 31 2008 expected return plan assets nonus pension plans determined similarly us plans except lesser return market assumed due lower level active management plan assets plans weighted average expected longterm rate return plan assets used determine net pension expense 2008 80 compared 79 2007 85 2006 another key assumption determining net pension expense assumed discount rate used discount plan obligations estimating rate us plans use iterative process based hypothetical investment portfolio general motors corporation subsidiaries highquality bonds rated aa higher recognized rating agency hypothetical reinvestment proceeds bonds upon maturity using forward rates derived yield curve us pension obligation defeased incorporate reinvestment component methodology feasible light magnitude time horizon us pension obligations extend accomplish full defeasance direct cash flows actual set bonds selected given measurement date weightedaverage discount rate used determine us net pension expense 2008 66 compared 60 2007 57 2006 benefit obligation pension plans canada united kingdom germany comprise 90 nonus pension benefit obligation december 31 2008 determining discount rate plans published indices utilized appropriate adjustments made reflect underlying duration expected benefit payments plans weighted average discount rate used determine net pension expense 2008 57 compared 49 2007 47 2006 significant differences actual experience significant changes assumptions may materially affect pension obligations effects actual results differing assumptions effects changing assumptions included unamortized net actuarial gains losses subject amortization expense future periods unamortized actuarial loss pension plans increased 411 billion tax december 31 2008 152 billion tax december 31 2007 primarily due lower expected return plan assets 2008 us actual return pension plan assets 114 billion loss less expected return 85 80 billion actual return nonus pension plan assets 29 billion loss less expected return 78 969 million following table illustrates sensitivity change certain assumptions pension plans holding assumptions constant discussed note 16 consolidated financial statements us hourly pension plan pbo increased 27 billion september 1 2008 pursuant settlement agreement increased 28 billion september 30 2008 pursuant delphi first hourly pension transfer additionally us salaried pension plan pbo increased 36 billion july 1 2008 pursuant increase pension benefits salaried retirees 65 provided offset elimination postretirement medical benefits us pension plans generally provide covered us hourly employees pension benefits negotiated flat dollar amounts year credited service earned individual employee formulas providing stated amounts contained applicable labor contract 2008 2007 pension expense pension obligation december 31 2008 2007 comprehend future benefit increases decreases may occur beyond current labor contract usual cycle negotiating new labor contracts every four years past practice maintaining consistent level benefit increases decreases one contract next however following data illustrates sensitivity changes pension expense pension obligation result changes future benefit units annual onepercentage point increase benefit units us hourly employees effective expiration current contract would result 45 million increase 2009 pension expense 255 million increase us hourly plan pension benefit obligation december 31 2008 annual onepercentage point decrease benefit units would result 44 million decrease 2009 pension expense 250 million decrease pension benefit obligation general motors corporation subsidiaries postretirement benefits account opeb plans actuarial basis requires selection various assumptions including discount rate healthcare cost trend rates estimating discount rate us plans use iterative process based hypothetical investment portfolio highquality bonds rated aa higher recognized rating agency hypothetical reinvestment proceeds bonds upon maturity using forward rates derived yield curve us opeb obligation defeased incorporate reinvestment component methodology feasible light magnitude time horizon us opeb obligations extend accomplish full defeasance direct cash flows actual set bonds selected given measurement date develop estimate healthcare cost trend rates used value benefit obligations review historical retiree cost data nearterm healthcare outlook includes appropriate cost control measures implemented changes assumed discount rate healthcare cost trend rate significant effect actuarially determined obligation related us opeb expense beginning september 1 2008 discount rate used uaw retiree medical plan based yield curve representative highquality aa rated bonds benefits paid period final effective date implementation date settlement agreement’s discount rate cash flows occurring implementation date 90 estimating discount rate retiree medical plans discount rate used continued based yield curve representative highquality aa rated bonds developed methodology described primary nonus opeb plans cover canadian employees determining discount rate canadian plans published indices utilized adjustments made reflect underlying duration expected benefit payments plans weighted average discount rate used determine net opeb expense 2008 590 compared 50 2007 50 2006 due significant events discussed note 16 consolidated financial statements remeasured us opeb obligation plans various dates 2008 significant differences actual experience significant changes assumptions may materially affect opeb obligations effects actual results differing assumptions effects changing assumptions included net actuarial gains losses accumulated comprehensive loss subject amortization future periods unrecognized actuarial loss opeb plans decreased 22 billion tax december 31 2008 due primarily actuarial gain associated settlement agreement discussed note 16 consolidated financial statements following significant assumptions used plans measurement apbo december 31 measurement date based assumptions december 31 2008 measurement date change assumptions holding assumptions constant would following effect opeb expense obligations annual basis us apbo significant portion worldwide apbo 429 billion december 31 2008 general motors corporation subsidiaries onepercentage point increase assumed us healthcare trend rates would increased us apbo 04 billion us aggregate service interest cost components nonpension postretirement benefit expense annualized basis 03 billion onepercentage point decrease would decreased us apbo 04 billion us aggregate service interest cost components nonpension postretirement benefit expense annualized basis 03 billion effect healthcare cost trend rate uaw retiree medical plan obligation largely eliminated result accounting recognition settlement agreement discussed note 16 consolidated financial statements onepercentage point increase assumed nonus healthcare trend rates would increased nonus apbo 03 billion nonus aggregate service interest cost components nonpension postretirement benefit expense annualized basis 27 million onepercentage point decrease would decreased nonus apbo 02 billion nonus aggregate service interest cost components nonpension postretirement benefit expense annualized basis 22 million deferred taxes establish valuation allowances deferred tax assets based likely threshold ability realize deferred tax assets depends ability generate sufficient taxable income within carryback carryforward periods provided tax law applicable tax jurisdiction consider following possible sources taxable income assessing realization deferred tax assets • future reversals existing taxable temporary differences • future taxable income exclusive reversing temporary differences carryforwards • taxable income prior carryback years • taxplanning strategies assessment regarding whether valuation allowance required adjusted also considers among matters nature frequency severity recent losses forecasts future profitability duration statutory carryforward periods experience tax attributes expiring unused tax planning alternatives making judgments significant weight given evidence objectively verified concluding valuation allowance required difficult significant negative evidence objective verifiable cumulative losses recent years utilize rolling three years actual current year anticipated results primary measure cumulative losses recent years however substantial portion cumulative losses relate various nonrecurring matters implementation north american turnaround plan adjust threeyear cumulative results effect items addition consider near mediumterm financial outlook assessing need valuation allowance future generate taxable income jurisdictions recorded full valuation allowances sustained basis conclusion regarding need full valuation allowances tax jurisdictions could change resulting reversal valuation allowances operations generate taxable income prior reaching profitability sustained basis would reverse portion valuation allowance related corresponding realized tax benefit period without changing conclusions need full valuation allowance remaining net deferred tax assets valuation deferred tax assets requires judgment accounting deferred tax consequences events recognized financial statements tax returns future profitability represents best estimate future events changes current estimates due unanticipated events otherwise could material effect financial condition results operations 2008 concluded substantial doubt related ability continue going concern determined likely would realize net deferred tax assets jurisdictions even though entities threeyear adjusted cumulative loss positions general motors corporation subsidiaries see note 19 consolidated financial statements information regarding recording valuation allowances sales incentives record estimated effect sales incentives dealers customers reduction revenue later time sale incentive program announced dealers may numerous types incentives available particular time including choice incentives specific model incentive programs generally brand specific model specific region specific specified time periods may extended significant factors used estimating cost incentives include volume vehicles affected incentive programs offered product mix rate customer acceptance incentive program likelihood incentive program extended estimated based historical experience assumptions concerning customer behavior future market conditions additionally incentive program announced determine number vehicles dealer inventory eligible incentive program record reduction revenue period program announced actual number affected vehicles differs estimate different mix incentives actually paid reduction revenue sales incentives could affected discussed multitude inputs affecting calculation estimate sales incentives increase decrease variables could significant effect reduction revenue sales incentives policy warranty recalls provisions estimated expenses related policy product warranties made time products sold estimates established using historical information nature frequency average cost claims actively study trends claims take action improve vehicle quality minimize claims actual experience could differ amounts estimated requiring adjustments liabilities future periods impairment longlived assets periodically evaluate carrying value longlived assets held used business goodwill intangible assets indefinite lives assets held sale events circumstances warrant carrying value longlived asset considered impaired loss recognized based amount carrying value exceeds fair value assets held used assets classified held sale assets recorded lower carrying value fair value less cost sell fair value determined primarily using anticipated cash flows discounted rate commensurate risk involved longlived assets could become impaired future require additional charges result actual andor forecasts declines profitability due changes volume pricing costs see note 22 consolidated financial statements information impairments longlived assets derivatives use derivatives normal course business manage exposure fluctuations commodity prices interest foreign currency exchange rates account derivatives consolidated balance sheet assets liabilities fair value accounting derivatives complex significant judgment estimates involved estimating fair values instruments particularly absence quoted market prices majority derivatives valued using internal models use basis readily observable market inputs time value forward interest rates volatility factors current forward market prices commodities foreign currency exchange rates generally classify instruments within level 2 valuation hierarchy derivatives include interest rate swaps cross currency swaps foreign currency derivatives commodity derivatives classify derivative contracts valued based upon models significant unobservable market inputs level 3 valuation hierarchy examples include certain longdated commodity derivatives interest rate swaps notional amounts fluctuate time models fair value measurements include unobservable inputs based estimated forward rates prepayment speeds general motors corporation subsidiaries valuation derivative liabilities takes account nonperformance risk effective january 1 2008 updated derivative liability valuation methodology consider nonperformance risk observed credit default swap market bond market based prices recent trades starting second half 2008 credit market volatility increased significantly creating broad credit market concerns condition persists affect ability manage risks related market changes foreign currency exchange rates interest rates commodity prices exposed ordinary course business derivative counterparties already may continue unwilling enter transactions us due credit rating valuation vehicle operating leases lease residuals accounting vehicle operating leases must make determination beginning lease estimated realizable value ie residual value vehicle end lease residual value represents estimate market value vehicle end lease term typically ranges nine months four years customer obligated make payments term lease contract residual however since customer obligated purchase vehicle end contract exposed risk loss extent value vehicle residual value estimated contract inception residual values initially determined consulting independently published residual value guides realization residual values dependent future ability market vehicles prevailing market conditions life lease evaluate adequacy estimate residual value may make adjustments extent expected value vehicle lease termination declines adjustment may form revisions depreciation rate recognition impairment charge impairment determined exist undiscounted expected future cash flows lower carrying value asset additionally operating leases arising vehicles sold dealers adjustment may also made estimate marketing incentive accruals residual support risk sharing programs initially recognized vehicles sold dealers respect residual values automotive segment’s portfolio equipment operating leases due shortterm nature operating leases historically forecasted auction proceeds lease termination three months ended december 31 2008 forecasted auction proceeds united states differed significantly actual auction proceeds due highly volatile economic conditions particularly decline consumer confidence lack available consumer credit affected residual values automobiles auction significantly due significant uncertainties inherent current economy determined longer reliable basis forecast auction proceeds united states utilized current auction proceeds determine estimated residual values impairment analysis automotive segment consistent impairment analysis fio segment result change estimate recorded incremental impairment charge 144 million related equipment operating leases included automotive cost sales 2008 increased accrual residual support risk sharing net 18 billion recognized impairment charges 02 billion fio segment 04 billion automotive segment related vehicles operating leases significant differences estimate residual values actual experience may materially affect impairment charges record rate vehicles equipment operating leases net depreciated residual support risk sharing reserves establish result certain agreements gmac whereby reimburse agreedupon percentage certain residual value losses experience operating lease portfolio general motors corporation subsidiaries following table illustrates effect changes estimate vehicle sales proceeds lease termination impairment equipment operating leases net residual support risk sharing reserves december 31 2008 holding assumptions constant includes amounts recorded result intersegment residual support risk sharing reserves b includes effect residual support risk sharing reserves related gmac’s equipment operating leases due contractual terms residual support risk sharing agreements gmac currently limit maximum obligation gmac vehicle residual values decrease increase sales proceeds equivalent offsetting effect residual support risk sharing reserves decrease sales proceeds december 31 2008 maximum obligations gmac residual support risk sharing agreements 14 billion 17 billion respectively recorded liabilities residual support risk sharing agreements 705 million 12 billion respectively methodology related depreciation impairments equipment operating leases net considers expectation value vehicles upon lease termination based numerous assumptions factors influencing used automotive vehicle values critical assumptions underlying estimated carrying value automotive lease assets include 1 estimated market value information obtained used estimating residual values 2 proper identification estimation business conditions 3 remarketing abilities 4 vehicle marketing programs changes assumptions could significant effect value lease residuals lease vehicle returned us asset reclassified equipment operating leases net inventory lower cost estimated fair value less costs sell valuation cost equity method investments events circumstances warrant evaluate equity investments accounted cost equity method accounting impairment charge would recorded whenever decline value equity investment carrying amount determined temporary determining decline temporary consider factors length time extent fair value investment less carrying amount equity affiliate nearterm longerterm operating financial prospects affiliate intent ability hold investment period time sufficient allow anticipated recovery available use quoted market prices determine fair value quoted market prices available fair value based upon valuation techniques use possible marketbased inputs generally fair value estimated using combination income approach market approach income approach estimated future cash flows discounted rate commensurate risk involved using marketplace assumptions market approach valuations based actual comparable market transactions market earnings book value multiples comparable entities assumptions used income market approaches significant effect determination fair value significant assumptions include estimated future cash flows appropriate discount rates adjustments market transactions market multiples differences market data equity affiliate valued changes assumptions could significant effect valuation equity affiliates 2008 recorded impairment charges related common membership interests gmac 71 billion preferred membership interests gmac 10 billion addition continued record proportionate share gmac’s income december 31 2008 balance investment common membership interests gmac 491 million balance preferred membership interests gmac 43 million general motors corporation subsidiaries accounting standards yet adopted accounting standards yet adopted discussed note 3 consolidated financial statements forwardlooking statements report reports subsequently file sec forms 10k 10q file furnish form 8k related comments management use words like “expect” “anticipate” “estimate” “forecast” “initiative” “believe” “estimate” “potential” “objective” “plan” “goal” “project” “outlook” “priorities” “target” “intend” “expect” “when” “evaluate” “pursue” “seek” “may” “would” “could” “should” “believe” “potential” “continue” “designed” “impact” “effect” negative words similar expressions identify forwardlooking statements represent current judgment possible future events making statements rely assumptions analyses based experience perception historical trends current conditions expected future developments well factors consider appropriate circumstances believe judgments reasonable statements guarantees events financial results actual results may differ materially due variety important factors positive negative may revised supplemented subsequent reports sec forms 10k 10q 8k factors include among others following • effect receiving “going concern” statement auditors’ report 2008 consolidated financial statements • ability remain compliance ust loan agreement obtain certification taken steps necessary achieve sustain goals accordance viability plan required ust loan agreement • ability realize production efficiencies achieve reductions costs result restructuring plan labor modifications • consumers’ confidence viability continuing entity ability continue attract customers particularly new products including cars crossover vehicles • availability adequate financing acceptable terms customers dealers distributors suppliers enable continue business relationships us • financial viability ability borrow key suppliers including delphi’s ability address underfunded pension plans emerge bankruptcy proceedings • ability sell spinoff phase brands planned manage distribution channels products complete planned asset sales • ability qualify federal funding advanced technology vehicle programs section 136 eisa • ability foreign operations restructure qualify support host governments • gmac’s ability obtain funding provide wholesale retail financing united states canada support ability sell vehicles markets • overall strength stability general economic conditions automotive industry united states global markets • ability maintain adequate liquidity financing sources appropriate level debt • continued economic automotive industry instability poor economic conditions us global markets including credit markets changes economic conditions commodity prices housing prices foreign currency exchange rates political stability markets operate • shortages price increases volatility fuel general motors corporation subsidiaries • market acceptance new products including cars crossover vehicles • significant changes competitive environment including result industry consolidation effect competition markets including pricing policies use incentives • changes existing adoption new laws regulations policies activities governments agencies similar organizations actions may affect production licensing distribution sale products cost thereof applicable tax rates • costs risks associated litigation • changes accounting principles application interpretation ability make estimates assumptions underlying estimates including estimates delphi pension benefit guarantees could result effect earnings • negotiations bankruptcy court actions respect delphi’s obligations us obligations delphi negotiations respect obligations benefit guarantees delphi employees ability recover indemnity claims delphi • financial difficulties distress bankruptcies key suppliers delphi addition gmac’s actual results may differ materially due numerous important factors described gmac’s recent report sec form 10k may revised supplemented subsequent reports sec forms 10k 10q 8k factors identified gmac include among others following • rating agencies may downgrade ratings gmac rescap future would adversely affect gmac’s ability raise capital debt markets attractive rates increase interest pays outstanding publicly traded notes could material adverse effect results operations financial condition • gmac’s business requires substantial capital unable maintain adequate financing sources profitability financial condition suffer jeopardize ability continue operations • profitability financial condition operations dependent upon operations substantial credit exposure us • recent developments residential mortgage market especially nonprime sector may adversely affect gmac’s revenue profitability financial condition • changes competitive markets gmac operates including increased competition automotive financing mortgage andor insurance markets generally markets securitizations asset sales margins could materially adversely affected caution investors place undue reliance forwardlooking statements undertake obligation update publicly otherwise revise forwardlooking statements whether result new information future events factors affect subject statements except expressly required law general motors corporation subsidiaries item 7a item 7 managements discussion analysis financial condition results operations following managements discussion analysis financial condition results operations mda read conjunction hughes electronics corporation hughes consolidated financial statements mda period ended december 31 2000 included exhibit 99 gm annual report form 10k period ended december 31 2000 related hughes annual report form 10k filed separately securities exchange commission sec general motors acceptance corporation gmac annual report form 10k period ended december 31 2000 filed separately sec earnings per share amounts included mda reported diluted gm presents separate financial information following businesses automotive communications services operations financing insurance operations gms reportable operating segments within automotive communications services operations business consist gm automotive gma comprised four regions gm north america gmna gm europe gme gm latin americaafricamideast gmlaam gm asia pacific gmap hughes includes activities relating digital entertainment information communications services satellitebased private business networks includes design manufacturing marketing locomotives heavyduty transmissions elimination intersegment transactions certain nonsegment specific revenues expenditures certain corporate activities gms reportable operating segments within financing insurance operations business consist gmac financing includes financing entities operating us canada brazil germany sweden mexico associated gmac disaggregated financial results gma prepared using management approach consistent basis manner gm management internally disaggregates financial information purpose assisting making internal operating decisions regard certain common expenses allocated among regions less precisely would required standalone financial information prepared accordance accounting principles generally accepted us gaap certain expenses primarily certain us taxes related nonus operations included automotive communications services operations segment financial results represent historical information used management internal decision making purposes therefore data prepared represent way business operate future data prepared gaap basis may materially different ii3 general motors corporation subsidiaries results operations year ended december 31 2000 income continuing operations corporation 45 billion 668 per share gm 123 par value common stock compared 56 billion 30 billion 853 432 per share gm 123 par value common stock 1999 1998 respectively income continuing operations includes special items aftertax basis outlined ii4 general motors corporation subsidiaries phaseout oldsmobile gmna represents costs associated gms decision fourth quarter 2000 phaseout oldsmobile division current model lineup product lifecycles come end models longer economically viable included 939 million charge phaseout oldsmobile 356 million related underperforming assets 583 million related estimated future payments dealers others underperforming assets represent writedown impaired longlived assets principally tooling equipment operating leases recorded pursuant gms policy evaluation longlived assets see note 2 gm consolidated financial statements estimated future payments dealers others represent transition assistance paid oldsmobile dealers increased sales incentives oldsmobile vehicles dealer inventory 294 million charge postemployment benefits gmna attributable postemployment costs termination postemployment benefits associated four north american manufacturing facilities slated conversion capacity reduction oklahoma city oklahoma delta engine lansing michigan spring hill tennessee wilmington delaware see note 3 gm consolidated financial statements action reduce production capacity approximately 376000 engines per year 127000 vehicles per year capacity reduction gme represents costs associated reduction production capacity including restructuring vauxhall motors limiteds manufacturing operations uk included 419 million charge capacity reduction 231 million related underperforming assets 80 million related cancellation charges paid suppliers incurred result certain gme restructuring actions 108 million related early retirements separation programs charge programs primarily relates approximately 2000 employees luton assembly plant action reduce production capacity approximately 270000 vehicles per year gms net tax cash requirements relating gmna gme charges expected total approximately 12 billion anticipated spending approximately 90 2003 11 billion gain hughes attributable sale satellite systems manufacturing businesses boeing company 38 billion cash 1999 553 million benefit postemployment benefits related reversal liability benefits payable excess us hourly employees see note 3 gm consolidated financial statements 408 million charge hourly retiree benefits related benefit increase granted hourly retirees connection 1999 united auto workers uaw agreement 90 million charge termination benefits related us salaried early retirement program approximately 1700 people elected participation program 165 million charge hughes wireless business related hughes decision discontinue certain wireless manufacturing operations hughes network systems 1998 165 million charge impairment represents writedown impaired tooling property plant equipment see note 2 gm consolidated financial statements 44 million work schedule modification charge resulted schedule modifications opel belgium 63 million termination benefits charge represents voluntary early retirement separation programs affecting approximately 4450 employees vehicle unit deliveries cars trucks gma ii5 general motors corporation subsidiaries wholesale sales years ended december 31 2000 1999 1998 units thousands gmna cars 2933 2992 2731 trucks 2842 2882 2340 total gmna 5775 5874 5071 gme cars 1744 1824 1764 trucks 135 144 118 total gme 1879 1968 1882 gmlaam cars 438 350 404 trucks 196 173 248 total gmlaam 634 523 652 gmap cars 175 162 202 trucks 283 259 217 total gmap 458 421 419 total worldwide 8746 8786 8024 gma financial review gmas income margin adjusted exclude special items adjusted income margin 39 billion 27 2000 47 billion 32 1999 19 billion 15 1998 decrease 2000 adjusted income margin compared 1999 primarily due increase spending product development activities pricing pressures north america europe decrease wholesale sales volume unfavorable product mix primarily europe unfavorable conditions partially offset cost structure improvements primarily north america improvement 1999 adjusted income margin compared 1998 primarily due improvement profitability new vehicles higher production volumes gmna compared prior year work stoppages two component plants flint michigan halted production wholesale units 26 29 assembly plants north america lower material costs gmas total net sales revenues adjusted exclude special items adjusted total net sales revenues 2000 1481 billion represented increase 20 billion compared 1999 increase adjusted total net sales revenues largely due growth initiatives including onstar service parts operations partially offset lower wholesale volumes unfavorable net price north america europe net price comprehends percent increasedecrease customer pays current period comparably equipped vehicle produced previous years period adjusted total net sales revenues 1999 1461 billion represented increase 170 billion compared 1998 increase primarily due increases wholesale sales volumes result previously mentioned 1998 gmna work stoppages gmnas adjusted income 44 billion 46 billion 17 billion 2000 1999 1998 respectively decrease 2000 adjusted income 1999 primarily due unfavorable net price lower wholesale sales volumes decrease partially offset improvements manufacturing costs due performance efficiencies material cost savings net price unfavorable 2000 07 yearoveryear improvement gmna adjusted income 1999 compared 1998 primarily due 1998 work stoppages higher wholesale sales volumes improvement cost profitability new vehicles lower material costs reduced warranty expense resulting improved quality improvement partially offset increased manufacturing costs launch costs associated new lesabre impala monte carlo saturn ls deville aurora tahoe suburban yukon xl models well increased engineering costs innovation gms portfolio gmes adjusted loss 257 million 2000 compared adjusted income 423 million 463 million 1999 1998 respectively decrease gmes 2000 adjusted income 1999 due weakening european industry shift sales mix larger profitable vehicles smaller less profitable entries continued increase competitive pricing pressure decrease wholesale sales volume impacted reduced availability new ii6 general motors corporation subsidiaries gma financial review concluded corsa launch period decrease gmes 1999 adjusted income 1998 primarily due increased competitive pricing pressure increased engineering expense associated model year 2000 midlife cycle enhancements vectra omega new model year 2001 corsa decreases partially offset continued material cost improvements result gms global purchasing efforts well improved manufacturing performance september 2000 european parliament passed directive requiring member states adopt legislation regarding endoflife vehicles responsibility manufacturers dismantling recycling vehicles sold european union member states required transform concepts detailed directive national law march 2002 directive manufacturers financially responsible least portion cost takeback vehicles put market july 2002 cost vehicles put market 2007 laws developed individual local legislatures throughout europe significant impact amount ultimately paid manufacturers issue gme currently assessing impact potential legislation results operations financial position gmlaams adjusted income 26 million 2000 compared adjusted losses 81 million 124 million 1999 1998 respectively increase 2000 adjusted income compared 1999 primarily due nominal price increases increase wholesale sales volumes partially offset increase manufacturing costs material costs decrease 1999 adjusted loss compared 1998 primarily due nominal price increases reduced structural costs reducing employee production costs partially offset lower industry volumes due economic crisis throughout latin america increased material freight costs driven gm brasils suppliers exposure hard currencies gmaps adjusted loss 233 million 2000 compared adjusted losses 218 million 146 million 1999 1998 respectively increase 2000 adjusted loss compared 1999 primarily due increased equity losses isuzu partially offset increased wholesale sales volumes increased adjusted losses 1999 compared 1998 primarily due startup costs region equity losses isuzu due economic downturn asia partially offset continued strong performance australia earnings improvements shanghai gm gmas effective income tax rate adjusted basis 309 317 347 2000 1999 1998 respectively gmas effective income tax rate reported basis 266 320 348 2000 1999 1998 respectively hughes financial review total adjusted net sales revenues increased 87 billion 2000 compared 76 billion 1999 61 billion 1998 increase adjusted net sales revenues 2000 compared 1999 resulted growth directv businesses addition 20 million net new subscribers united states latin america since december 31 1999 panamsat corporation also contributed increase adjusted net sales revenues primarily due increased revenues outright sales salestype lease transactions executed 2000 increase adjusted net sales revenues 1999 compared 1998 resulted growth directv businesses due addition slightly 17 million net new subscribers united states latin america since december 31 1998 added revenues acquisitions primestar united states satellite broadcasting company inc mid1999 also contributing growth 1999 revenues increased sales directv receiver equipment 155 million pretax gain resulted settlement patent infringement case 1999 increase partially offset decreased revenues satellite systems manufacturing businesses principally due contract revenue adjustments delayed revenue recognition resulted increased development costs schedule delays several new product lines decreased activity associated contract ico global communications hughes adjusted loss 303 million 2000 compared adjusted loss 105 million 1999 adjusted income 272 million 1998 increase 2000 adjusted loss compared 1999 primarily due higher marketing costs directtohome businesses increased depreciation amortization expense due 1999 acquisitions additions satellites property well increased interest expense result increased average outstanding borrowings throughout year adjusted loss 1999 compared adjusted income 1998 result 85 million decrease interest income 105 million increase interest expense increased subscriber acquisition costs higher depreciation amortization resulted 1999 acquisitions due rapid consolidation media telecommunications industries gm considering alternative strategic transactions involving hughes participants industries transaction might involve separation hughes gm gms objective effort maximize enterprise value hughes longterm benefit holders gms class h common stock gm 123 par value common stock structure maintains financial strength gm assurance given transaction agreed upon party conditions including stockholder regulatory approvals satisfied ii7 general motors corporation subsidiaries gmac financial review gmacs adjusted income 16 billion 15 billion 13 billion 2000 1999 1998 respectively income automotive financing operations totaled 11 billion 11 billion 10 billion 2000 1999 1998 respectively 2000 increased financing volumes asset levels offset negative impact higher level market interest rates compared 1999 increase 1999 1998 due increased financing volumes reduced credit losses partially offset higher effective tax rate income insurance operations totaled 220 million 210 million 226 million 2000 1999 1998 respectively increase income 1999 primarily due improved operating results higher investment income capital gains decrease 1999 1998 primarily attributable pricing pressure personal lines insurance business income mortgage operations totaled 327 million 260 million 115 million 2000 1999 1998 respectively strong yearoveryear performance reflects benefit strong international growth lower cost servicing increased mortgage originations second half 1999 unusually low earnings 1998 largely due reduced mortgage asset values higher prepayment levels financing revenue totaled 155 billion 2000 compared 138 billion 127 billion 1999 1998 respectively increases mainly due higher average retail wholesale commercial loan receivable balances liquidity capital resources automotive communications services operations december 31 2000 cash marketable securities 30 billion assets voluntary employees beneficiary association veba trust invested fixedincome securities totaled 133 billion compared 144 billion december 31 1999 decrease december 31 1999 primarily due decreased operating cash flows gms purchase 20 equity interest fuji heavy industries ltd approximately 13 billion 10 billion cash equity injection gmac stock repurchases items partially offset net cash proceeds sale hughes satellite systems manufacturing businesses boeing company improvements managed working capital total assets veba trust used prefund part gms postretirement benefits liability approximated 67 billion 63 billion december 31 2000 1999 respectively gm previously indicated goal maintaining 130 billion cash marketable securities order continue funding product development programs throughout next downturn business cycle 130 billion target includes cash pay certain costs prefunded part veba contributions net liquidity calculated cash marketable securities less total loans payable longterm debt 662 million december 31 2000 decrease 14 billion prior year longterm debt 74 billion december 31 2000 1999 respectively ratio longterm debt longterm debt gms net assets automotive communications services operations 308 423 december 31 2000 1999 respectively ratio longterm debt shortterm loans payable total debt gms net assets automotive communications services operations 366 482 december 31 2000 1999 respectively financing insurance operations december 31 2000 gmac owned assets serviced automotive receivables totaling 1856 billion compared 1623 billion december 31 1999 total consolidated assets gmac december 31 2000 1684 billion compared 1488 billion december 31 1999 increase yearend 1999 primarily result higher serviced retail receivables commercial loan receivables serviced wholesale receivables assets factored receivables mortgage lending receivables mortgage servicing rights mortgage loans held investment due deferred receivable sales receivables due automotive communications services operations increases partially offset decline operating lease assets consolidated automotive commercial finance receivables serviced gmac including sold receivables totaled 1125 billion 970 billion december 31 2000 1999 respectively increase primarily result 74 billion increase serviced retail receivables 49 billion increase commercial loan receivables 44 billion increase serviced wholesale receivables continued gmsponsored retail financing incentives contributed rise serviced retail receivables increase commercial loan receivables primarily attributable increases secured notes well continued growth commercial credit llc gmac business credit llc growth commercial credit llc partially attributable acquisitions factoring businesses finova capital corporation banc america third fourth quarters 2000 increase serviced wholesale loan receivables due higher dealer inventory levels well increase penetration ii8 general motors corporation subsidiaries financing insurance operations concluded gmacs liquidity well ability profit ongoing acquisition activity large part dependent timely access capital costs associated raising funds different segments capital markets regard gmac regularly accesses shortterm mediumterm longterm debt markets principally commercial paper notes underwritten transactions december 31 2000 gmacs total borrowings 1334 billion compared 1212 billion december 31 1999 approximately 81 debt represented funding operations us remaining 19 represented borrowings operations canada 9 united kingdom 3 germany 3 countries 4 gmacs 2000 yearend ratio total debt total stockholders equity 951 compared 1091 december 31 1999 higher yeartoyear debt balances principally used fund increased asset levels total shortterm debt outstanding december 31 2000 amounted 569 billion compared 508 billion december 31 1999 book value per share book value per share determined based liquidation rights various classes common stock book value per share gm 123 par value common stock increased 3936 december 31 2000 2702 december 31 1999 book value per share gm class h common stock adjusted reflect gm class h common stock split increased 787 december 31 2000 540 december 31 1999 return net assets rona part shareholder value initiatives gm adopted rona performance measure heighten managements focus balance sheet investments return investments gms rona calculation based principles established management approved gm board gms fourquarter rollingaverage rona continuing operations adjusted exclude special items excluding hughes 111 138 december 31 2000 1999 respectively dividends may paid common stocks declared gm board sole discretion amount available payment dividends class common stock reduced occasion dividends paid class adjusted occasion changes amount surplus attributed class resulting repurchase issuance shares class december 31 2000 amount available payment dividends gm 123 par value gm class h common stocks 98 billion 197 billion respectively gms policy distribute dividends 123 par value common stock based outlook indicated capital needs business cash dividends per share gm 123 par value common stock 200 2000 1999 1998 respect gm class h common stock gm board determined pay cash dividends time order allow earnings hughes retained investment telecommunications space businesses dividends per share gm series h 625 automatically convertible preference stock 351172 2000 gm board also paid dividends 2000 series g depositary shares 099 228 per share respectively series preference stock redeemed may 2 2000 result amount paid date series shareholders record included accrued unpaid dividends part total redemption price euro conversion january 1 1999 11 15 member countries european union established fixed conversion rates existing currencies adopted euro new common currency euro trades currency exchanges legacy currencies remain legal tender participating countries transition period january 1 2002 beginning january 1 2002 euro denominated bills coins issued legacy currencies withdrawn circulation corporation reviewed made required modifications applicable information technology systems contracts based new currency december 31 2000 conversion euro resulted remaining transition expected result material adverse impact gms financial position results operations ii9 general motors corporation subsidiaries employment payrolls worldwide employment december 31 thousands 2000 1999 19981 gmna 212 217 226 gme 89 91 2 942 gmlaam 24 23 24 gmap 11 10 gmac 29 27 24 hughes 9 18 15 12 13 total employees 386 398 406 worldwide payrolls continuing operations billions 3 216 218 204 us hourly payrolls billions 4 94 100 88 average labor cost per active hour worked us hourly 5289 5051 4617 1 amounts adjusted exclude delphi employees 2 amounts adjusted include saab employees 3 amounts adjusted exclude hughes employees 4 includes employees work excludes laidoff employees receiving benefits new accounting standards june 1998 financial accounting standards board fasb issued statement financial accounting standards sfas 133 accounting derivative instruments hedging activities june 2000 fasb issued sfas 138 amended certain provisions sfas 133 gm adopted sfas 133 amended january 1 2001 gm record onetime aftertax charge income initial adoption sfas 133 totaling 6 million well aftertax unrealized loss 77 million comprehensive income january 1 2001 outcome pending issues fasb derivatives implementation group could impact amount cumulative transition adjustment presented herein september 2000 fasb issued sfas 140 accounting transfers servicing financial assets extinguishments liabilities replacement fasb statement 125 statement effective transfers servicing financial assets extinguishments liabilities occurring march 31 2001 effective recognition reclassification collateral disclosures relating securitization transactions collateral fiscal years ending december 15 2000 management expect statement material impact gms results operations financial position forwardlooking statements report reports subsequently filed gm sec forms 10q 8k related comments management gm hughes use words expect anticipate estimate forecast objective plan goal similar expressions intended identify forwardlooking statements represent current judgment future may hold believe judgments reasonable actual results may differ materially due numerous important factors described factors may described subsequent reports gm may file sec forms 10q 8k changes economic conditions currency exchange rates political stability major markets corporation procures material components supplies production principal products produced distributed sold ie north america europe latin america asia pacific shortages fuel interruptions transportation systems labor strikes work stoppages interruptions difficulties employment labor major markets corporation purchases material components supplies production products produced distributed sold significant changes competitive environment major markets corporation purchases material components supplies production products produced distributed sold changes laws regulations policies activities governments agencies similar organizations actions may affect production licensing distribution sale corporations products cost thereof applicable tax rates ii10 general motors corporation subsidiaries forwardlooking statements concluded ability corporation achieve reductions cost employment levels realize production efficiencies implement capital expenditures levels times planned management respect hughes additional risk factors include economic conditions product demand market acceptance government action local political economic developments affecting countries hughes operations ability obtain export licenses competition ability achieve cost reductions technological risk limitations access distribution channels success timeliness satellite launches inorbit performance satellites ability customers obtain financing hughes ability access capital maintain financial flexibility additionally inorbit satellites hughes 81 owned subsidiary panamsat corporation subject risk failing prematurely due among things mechanical failure collision objects space inability maintain proper orbit satellites subject risk launch delay failure destruction damage ground launch failure become fully operational launched delays production launch satellite complete partial loss satellite inorbit launch could material adverse impact operation hughes businesses hughes purchases inorbit launch insurance satellite fleet mitigate potential financial impact inorbit launch failures insurance generally compensate business interruption loss future revenues customers certain hughes insurance policies contain exclusions related known anomalies hughes selfinsured certain satellites hughes past experienced technical anomalies satellites service interruptions caused anomalies depending severity could result claims affected customers termination transponder agreements cancellation service contracts loss customers item 7a item 7 management’s discussion analysis financial condition results operations following addresses material changes net assets liquidation motors liquidation company guc trust guc trust fiscal year ended march 31 2014 intended read conjunction financial statements guc trust included item 8 refer financial statements recent trading prices new gm securities described principal assets comprising corpus guc trust shares new gm common stock new gm series warrants new gm series b warrants purchase common stock result fluctuations market value new gm common stock related fluctuation market value new gm warrants increase reduce guc trust’s net assets liquidation accordingly addition fluctuations market value new gm securities relation tax basis securities affect amount net deferred tax liabilities recorded statement net assets liquidation see “income tax liabilities certain capital gains dividends new gm common stock” item 1 “business” new gm common stock new gm warrants listed new york stock exchange march 31 2014 last trading day end current fiscal year closing trading price shares new gm common stock 3442 compared 2782 march 28 2013 last trading day end previous fiscal year closing trading price new gm series warrants 2484 compared 185599 march 28 2013 closing trading price new gm series b warrants 1741 compared 1179 march 28 2013 case reported bloomberg finance lp guc trust units listed securities exchange following table shows intraday high low trading prices new gm common stock previous four fiscal quarters reported bloomberg finance lp following table shows intraday high low trading prices new gm series warrants previous four fiscal quarters reported bloomberg finance lp following table shows intraday high low trading prices new gm series b warrants previous four fiscal quarters reported bloomberg finance lp critical accounting policies estimates liquidation basis accounting guc trust created purposes described note 1 “purpose trust” financial statements finite life result guc trust prepared financial statements liquidation basis accounting accordance accounting principles generally accepted united states america liquidation basis accounting prescribed financial accounting standards board fasb accounting standards codification assets stated estimated net realizable value nondiscounted amount cash asset expected converted liquidation liabilities continue recognized amount required us generally accepted accounting principles gaap remeasured reflect anticipation entity legally released obligation additionally liquidation basis accounting reserve established estimated costs expected incurred liquidation costs accrued reasonable basis estimation estimates periodically reviewed adjusted appropriate described heading “reserves expected costs liquidation” reasonably possible estimates expected costs liquidation could change near term valuation assets net realizable value reserves residual winddown claims reserves expected liquidation costs represent estimates based present facts circumstances known guc trust administrator subject change described note 1 financial statements guc trust beneficiaries future extent liquidating distributions yet paid current holders allowed general unsecured claims future current holders guc trust units disputed general unsecured claims resolved allowed thereby become allowed general unsecured claims holders thereof become entitled receive liquidating distributions new gm securities including related dividend cash guc trust units pro rata amount claims upon occurrence guc trust incurs obligation distribute securities accordingly liquidating distributions payable recorded fair value new gm securities end period disputed general unsecured claims resolved allowed general unsecured claims similarly extent potential term loan avoidance action claims arise would become allowed manner described note 2 financial statements liquidating distributions payable would recorded new gm securities fair value along related dividend cash would become distributable holders term loan avoidance action claims upon occurrence prior resolution allowance disputed general unsecured claims potential term loan avoidance action claims liabilities recorded conditional obligations associated disputed general unsecured claims potential term loan avoidance action claims rather beneficial interests guc trust beneficiaries residual assets guc trust reflected net assets liquidation guc trust financial statements liquidation basis accounting guc trust presents two principal financial statements statement net assets liquidation statement changes net assets liquidation addition although required liquidation basis accounting guc trust also presents statement cash flows accordance requirements guc trust agreement holdings new gm securities dividends received new gm common stock holdings new gm securities represent guc trust’s holdings new gm securities held future distribution respect allowed general unsecured claims guc trust units include numbers new gm securities set aside distribution fund projected administrative costs potential income tax liabilities including dividend taxes distribution described “net assets liquidationnew gm securities set aside distribution” securities held consist shares new gm common stock new gm warrants guc trust valued holdings securities fair value based quoted closing market prices last trading day fiscal period dividends holdings new gm common stock recorded received accrued record date declared unpaid dividend dividends future declared dividends new gm common stock required applied purpose new gm common stock dividends relate shares new gm common stock distributed holders subsequently resolved allowed claims guc trust units dividends relating shares also distributed holders however shares new gm common stock sold guc trust accordance guc trust agreement fund costs liabilities guc trust case dividends relating shares applied costs liabilities guc trust like cash proceeds sale shares new gm common stock maintained administrative cash dividends applied purpose new gm common stock references new gm common stock new gm securities set aside distribution reserved sold understood include dividends relating new gm common stock unless expressly indicated otherwise amount cash equivalents held guc trust relates dividends received guc trust new gm common stock held guc trust referred dividend cash marketable securities marketable securities consist short term investments corporate commercial paper municipal government commercial paper variable demand notes guc trust valued securities fair value based carrying value municipal corporate commercial paper carrying value approximates fair value par value variable demand notes par value equals fair value reserves residual winddown claims residual winddown costs upon dissolution mlc occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining residual winddown claims date dissolution debtors transferred guc trust residual winddown assets amount necessary satisfy ultimate allowed amount residual winddown claims residual winddown costs certain avoidance action defense costs estimated debtors residual winddown costs residual winddown claims less residual winddown assets excess funds returned dip lenders collectively actual amounts residual winddown claims allowed residual winddown costs avoidance action defense costs exceed residual winddown assets guc trust administrator may required set aside distribution sell additional new gm securities fund shortfall sale securities would reduce numbers new gm securities related dividend cash available distribution holders guc trust units reserves expected costs liquidation basis accounting guc trust required estimate accrue costs associated implementing plan distributing guc trust’s distributable assets costs described winddown costs reporting costs note 2 “plan liquidation” financial statements consist principally professional fees costs governance administrative expenses amounts may vary significantly due among things time effort required complete distributions plan guc trust recorded reserves expected costs liquidation represent estimated costs incurred remaining liquidation period guc trust reasonable basis estimation amount liquidation costs ultimately incurred depends period time extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities march 31 2014 remaining liquidation period estimated probabilityweighted basis guc trust believes appropriate measurement basis circumstances dependent predominantly estimate remaining period time resolution term loan avoidance action well certain additional estimated time necessary wind guc trust reasonably possible guc trust’s estimates regarding costs remaining liquidation period could change near term guc trust incurs costs reserves released offset costs incurred liability service provider recognized accounts payable accrued expense paid addition guc trust records reserves expected costs reasonable basis estimation applicable generally accepted accounting principles additional costs may identified time additional reserves must recorded costs identified guc trust records increase reserves charges increase addition reserves statement changes net assets liquidation process recording reserves expected costs liquidation matter financial reporting separate distinct process new gm securities set aside distribution purposes funding projected costs liquidation projected costs generally estimated conservative ie inclusive basis include contingencies permitted accrued reserves expected costs liquidation applicable accounting standards complete description process setting aside new gm securities fund projected costs potential liabilities guc trust see “the guc trust assets” item 1 “business” “net assets liquidationnew gm securities set aside distribution” income taxes guc trust considered “disputed ownership fund” pursuant treasury regulation section 1468b9 assets transferred guc trust passive investments guc trust taxed qualified settlement fund qsf pursuant treasury regulation section 1468b9c1ii qsf tax status guc trust approved internal revenue service private letter ruling issued march 2 2011 general qsf considered c corporation pays federal income tax using trust income tax rates modified gross income modified gross income includes gross income pursuant internal revenue code section 61 less administrative expenses certain losses sale exchange worthlessness property net operating losses general disputed ownership fund taxed qsf recognize gross income assets transferred therefore guc trust recognized gross income transfer assets mlc guc trust currently expected generate gross income form interest dividend income including dividends received holdings new gm common stock recognize gains andor losses upon disposition shares new gm common stock new gm warrants holds reduced administrative expenses accumulated net operating capital losses compute modified gross income guc trust taxable federal income tax purposes current income tax liability asset recognized estimated taxes payable receivable year deferred tax liabilities assets recognized estimated future tax effects temporary differences financial reporting tax accounting deferred tax assets reviewed recoverability valuation allowances provided necessary guc trust subject state income taxes current law accordingly current deferred state income tax liabilities assets recorded guc trust recognizes tax benefit uncertain tax position likely tax position sustained examination taxing authority based technical merits position review available evidence consultation guc trust professionals guc trust’s federal income tax returns years ended march 31 2012 2013 longer subject examination result application section 505b bankruptcy code however net operating capital loss carryovers generated years ended march 31 2012 2013 could subject examination internal revenue service subsequent years losses utilized march 31 2014 known items would result significant accrual uncertain tax positions income tax benefit provision years ended march 31 2014 2013 determined computing deferred tax provision using enacted statutory rate 396 went effect guc trust’s fiscal year beginning april 1 2013 deferred tax provision year ended march 31 2012 computed using statutory rate effect 35 current tax provision periods process recognizing deferred tax assets liabilities current income taxes payable matter financial reporting separate distinct process new gm securities set aside distribution purposes funding potential income tax liabilities potential income tax liabilities generally estimated conservative ie inclusive basis include amounts potential income tax liabilities beyond amounts permitted recorded applicable accounting standards complete description process setting aside new gm securities fund projected costs potential income tax liabilities guc trust see “the guc trust assets” item 1 “business” “net assets liquidationnew gm securities set aside distribution” funding obligation avoidance action trust based analysis avoidance action trust potential funding sources guc trust administrator conjunction avoidance action trust administrator determined would best interest holders allowed general unsecured claims fund certain fees costs expenses avoidance action trust subject approval bankruptcy court described note 2 “plan liquidation” financial statements march 2012 bankruptcy court approved sale new gm securities aggregating approximately 137 million transfer resulting proceeds avoidance action trust funding sale occurred march 2012 proceeds transferred guc trust avoidance action trust may 14 2012 use estimates preparation financial statements liquidation basis conformity accounting principles generally accepted united states america requires use estimates assumptions affect reported amounts assets liabilities estimates subject known unknown risks uncertainties factors could materially impact amounts reported disclosed financial statements related footnotes significant estimates include anticipated amounts timing future cash flows expected costs liquidation residual winddown claims residual winddown costs fair value marketable securities actual results could differ estimates new accounting standard april 2013 fasb issued accounting standards update 201307 liquidation basis accounting amended fasb accounting standards codification provides guidance entity apply liquidation basis accounting addition guidance establishes principles recognition measurement assets liabilities requirements financial statements prepared using liquidation basis accounting provisions accounting standards update effective beginning april 1 2014 guc trust provisions require income cash expected received liquidation period estimated accrued extent reasonable basis estimation exists respect dividends new gm common stock held guc trust dividends recorded received accrued record date declared unpaid dividends accompanying financial statements guc trust yet determined impact adoption provisions financial statements statement changes net assets liquidation year ended march 31 2014 net assets liquidation decreased approximately 3257 million approximately 13902 million approximately 10645 million principally result impact approximately 1206 million liquidating distributions new gm securities partially offset increase fair value holdings new gm securities since march 31 2013 approximately 7027 million recording income tax benefit 1648 million described noted “recent trading prices new gm securities” closing trading price new gm common stock well new gm series new gm series b warrants increased last trading day year ended march 31 2013 last trading day year ended march 31 2014 liquidating distributions new gm securities year ended march 31 2014 primarily comprised special nova scotia distribution approximately 5275 million special excess distribution approximately 6148 million occurred pursuant following effectiveness nova scotia settlement november 25 2013 additional distributions year ended march 31 2014 consisted distributions holders allowed disputed general unsecured claims exclusive special nova scotia distribution distributions holders allowed general unsecured claims previously failed fulfill informational requirements distribution established accordance guc trust agreement subsequently successfully fulfilled information requirements additional information regarding nova scotia matter related nova scotia settlement see disclosure heading “nova scotia settlement” item 1 “business” form 10k income tax benefit 1648 million year ended march 31 2014 resulted primarily decrease net deferred tax liability year decrease net deferred tax liability primarily resulted decrease deferred tax liability excess fair value tax basis holdings new gm securities increase deferred tax asset net operating capital loss carryovers offset part establishment full valuation allowance net deferred tax assets decrease deferred tax liability excess fair value tax basis new gm securities increase deferred tax asset net operating capital loss carryovers resulted primarily new tax position taken guc trust’s us federal income tax returns described note 9 “income tax benefit provision” financial statements quarter ended september 30 2013 guc trust made determination file us federal income tax returns taking tax position beneficial ownership substantial majority new gm securities transferred mlc guc trust march 31 2011 tax basis new gm securities determined reference value securities date instead december 15 2011 record ownership remaining new gm securities still held mlc transferred mlc guc trust remaining substantial minority new gm securities transferred mlc guc trust guc trust determined transfer beneficial ownership occurred dates tax basis determined reference value securities dates new tax position resulted increased tax basis new gm securities prior tax position therefore reduced taxable gains increased taxable losses distributions sales new gm securities since march 31 2011 result tax benefit 4116 million net establishment valuation allowance deferred tax assets 1039 million related new tax position recognized financial statements three months ended september 30 2013 benefit recognized guc trust believes based available evidence consultation guc trust professionals likely new tax position amounts reflected guc trust’s income tax returns sustained examination internal revenue service based technical merits position subsequently guc trust filed us federal income tax returns year ended march 31 2013 internal revenue service using new tax position although guc trust’s us federal income tax returns years ended march 31 2012 2013 longer subject examination internal revenue service result application section 505b bankruptcy code new tax position date hereof sustained examination internal revenue service accordingly capital loss carryovers generated years ended march 31 2012 2013 new tax position could subject examination internal revenue service subsequent years losses utilized income tax benefit recognized three months ended september 30 2013 partly offset year ended march 31 2014 primarily increase deferred tax liability associated increase fair value holdings new gm securities since march 31 2013 see “functions responsibilities guc trustincome tax liabilities certain capital gains dividends new gm common stock” item 1 “business” note 9 “income tax benefit provision” financial statements net assets liquidation year ended march 31 2014 increased result reductions reserves expected costs liquidation 79 million described detail “liquidation administrative costs” reductions reserves expected costs liquidation resulted primarily decreases expected winddown costs reporting costs generally accepted accounting principles applicable guc trust process recognizing reserves matter financial reporting separate distinct process new gm securities set aside distribution purposes funding projected administrative costs potential income tax liabilities see “net assets liquidationnew gm securities set aside distribution” changes net assets liquidation year ended march 31 2014 also reflect approximately 47 million interest income dividends consisting almost entirely dividends received holdings new gm common stock march 2014 new gm paid dividend 030 per share common stock described “the guc trust assets” item 1 “business” dividends new gm common stock distributed holders subsequently resolved allowed claims guc trust units respect shares new gm common stock receive unless dividends respect shares new gm common stock sold guc trust accordance guc trust agreement fund guc trust’s costs liquidation tax liabilities shortfalls residual winddown assets case dividends respect new gm common stock sold maintained administrative cash liquidation administrative costs discussed “critical accounting policies estimates” liquidation basis accounting guc trust required upon establishment record reserves respect expected costs associated implementing plan distributing guc trust’s distributable assets costs consist principally professional fees governance costs liquidation administrative costs us gaap reserves may established extent reasonable basis estimation time additional costs identified reasonable basis estimation guc trust records increase reserves expected costs liquidation charges increase addition reserves expected costs liquidation statement changes net assets liquidation costs actually incurred guc trust costs reduce previously recorded reserves expected costs liquidation amount incurred costs effect statement changes net assets liquidation guc trust’s reserves liquidation administrative costs recorded conformity us gaap allocable following categories • reserve expected winddown costs corresponding expenditures made administrative fund following depletion administrative fund administrative cash see “the guc trust assets” item 1 “business” • reserve expected reporting costs corresponding expenditures made administrative cash see “the guc trust assets” item 1 “business” • reserve indenture trustee fiscal paying agent costs corresponding expenditures made cash received guc trust mlc dissolution date see “the guc trust assets” item 1 “business” • reserve avoidance action defense costs corresponding expenditures made residual winddown assets following depletion assets administrative cash see “the guc trust assets” “term loan avoidance action item 1 “business” • reserve residual winddown costs corresponding addition expenditures satisfy resolve residual winddown claims expenditures made residual winddown assets following depletion residual winddown assets administrative cash see “the guc trust assets” item 1 “business” described greater detail “the guc trust assets” item 1 “business” “liquidity capital resources” unused portions certain assets associated foregoing reserves required returned dip lenders upon winding dissolution guc trust therefore assets available fund costs liquidation administration income tax liabilities guc trust also available distribution holders allowed general unsecured claims guc trust units see “the guc trust assets” item 1 “business” march 31 2014 guc trust approximately 365 million reserves liquidation administrative costs estimated incurred winding conclusion guc trust compared approximately 615 million reserves march 31 2013 following table summarizes greater detail changes reserves year ended march 31 2014 reserves reduced approximately 79 million year ended march 31 2014 order reflect 38 million decrease expected winddown costs 41 million decrease expected reporting costs decrease expected winddown costs year ended march 31 2014 primarily associated nova scotia settlement resulting reduced expected litigation costs well reduction revised estimates ongoing costs necessary conduct winddown activities guc trust decrease expected reporting costs year ended march 31 2014 primarily associated reduction revised estimates ongoing costs services provided guc trust professionals well increased visibility expected reporting costs primarily result completing first full year sec reporting requirements year ended march 31 2013 comparison approximately 175 million additional reserves accrued year ended march 31 2013 order reflect increases expected reporting costs 123 million expected winddown costs approximately 52 million increase expected reporting costs associated increases estimated length remaining liquidation period ii increased visibility expected reporting costs increase expected winddown costs associated increases estimated length liquidation period ii revised estimates expected costs nova scotia claims iii additional trust professionals services required result adverse determination internal revenue service respect requested issuance private letter ruling iv increased visibility ongoing costs necessary conduct winddown activities guc trust offset large part reductions expected winddown costs resulting execution letter agreement dip lenders dated july 24 2012 provided relief certain restrictions utilization winddown assets total reserves reduced amount liquidation administrative costs incurred year ended march 31 2014 trust professional costs incurred year ended march 31 2014 approximately 110 million compared 255 million year ended march 31 2013 decrease 145 million year due 120 million decrease winddown costs 10 million decrease reporting costs 20 million decrease residual winddown costs partially offset 05 million increase avoidance action defense costs trust governance costs incurred year ended march 31 2014 approximately 57 million compared 62 million year ended march 31 2013 decrease 05 million year due decreased fees reimbursable expenses guc trust administrator guc trust monitor administrative costs years ended march 31 2014 2013 approximately 04 million costs represented miscellaneous fees costs guc trust additional information regarding components category costs see “the guc trust assets” item 1 “business” foregoing reserves represent future costs guc trust reasonable basis estimation march 31 2014 therefore recorded liquidation basis accounting accordance accounting principles generally accepted united states america us gaap reasonably possible however additional costs incurred reasonable basis estimation march 31 2014 particular march 31 2014 recorded reserves expected costs liquidation reflect estimated costs remaining liquidation period extending december 2016 date predominantly result estimate period time required resolution term loan avoidance action well certain additional estimated time necessary wind guc trust assumes extension current scheduled dissolution date guc trust end date remaining liquidation period estimated probabilityweighted basis permitted us gaap guc trust believes appropriate measurement basis circumstances addition certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued amount liquidation costs ultimately incurred depends length remaining liquidation period extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities reasonably possible guc trust’s estimates regarding remaining liquidation period expected costs liquidation change near term funds available foregoing categories costs sufficient satisfy costs category guc trust required sell portion holdings new gm securities order meet additional obligations costs sales new gm securities result lesser numbers new gm securities available distribution holders guc trust units process recognizing reserves expected costs liquidation matter financial reporting separate distinct process new gm securities set aside distribution purposes funding projected costs liquidation generally made conservative ie inclusive basis include contingencies permitted recognized applicable accounting standards described detail certain new gm securities related dividend cash already set aside distribution purposes meeting additional obligations however amounts set aside distribution neither reflected part financial statements included elsewhere form 10k process setting aside assets related process recording matter financial reporting statement net assets liquidation reserves expected costs liquidation current deferred income tax liabilities see “critical accounting policies estimatesincome taxes” “critical accounting policies estimatesreserves expected costs liquidation” “net assets liquidationnew gm securities set aside distribution” additional information regarding reserves described see note 2 “plan liquidation” note 8 “reserves expected costs liquidation residual winddown claims” financial statements net assets liquidation disputed claims year ended march 31 2014 guc trust administrator resolved disputed general unsecured claims aggregate maximum asserted dollar amount approximately 3525 million approximately 1626 million allowed approximately 1899 million disallowed following table provides additional detail regarding claims resolution status year ended march 31 2014 1 maximum amount unresolved claims represents sum disputed general unsecured claims term loan avoidance action claims 2 total claim amount represents sum allowed general unsecured claims maximum amount unresolved claims previously disclosed september 26 2013 guc trust entered nova settlement resolve nova scotia claims nova scotia settlement became effective pursuant terms november 25 2013 result disputed general unsecured claims aggregate maximum asserted amount 3061 million resolved 1550 million allowed approximately 1511 million disallowed see note 5 “liquidating distributions” financial statements additional information regarding distributions new gm securities year ended march 31 2014 pursuant terms nova scotia settlement distributable assets table summarizes activity new gm securities dividend cash comprise guc trust’s distributable assets including amounts new gm securities distributed distributable march 31 2014 well numbers new gm securities amount dividend cash available distribution holders guc trust units march 31 2014 1 numbers new gm securities shown distributed distributable include sales cash distributions governmental entities extent governmental entities requested sales demonstrated satisfaction guc trust administrator governmental entities precluded applicable law receiving distributions new gm securities b fractional amounts new gm securities lieu guc trust required pursuant guc trust agreement distribute cash subject certain minimum thresholds 2 holdings new gm securities reflect numbers new gm securities used determine holdings new gm securities statement net assets liquidation see note 6 “holdings new gm securities” financial statements 3 distributions payable respect allowed general unsecured claims including allowed general unsecured claims newly allowed quarter ended march 31 2014 b allowed general unsecured claims allowed prior fiscal periods holders claims yet supplied information required guc trust order effect distribution entitled excess distributions payable holders guc trust units 4 distributable assets reflects numbers new gm securities dividend cash shown “guc trust distributable assets” report included exhibit 991 form 8k filed guc trust sec april 23 2014 new gm securities associated dividend cash set aside potential distribution respect current disputed general unsecured claims term loan avoidance action claims march 31 2014 extent claims resolved favor guc trust amounts new gm securities associated dividend cash set aside may become available distribution holders guc trust units future periods numbers new gm securities set “distributable assets” however directly relate net assets liquidation number appearing financial statements prepared accordance us gaap described heading “disputed claims” march 31 2014 approximately 319 billion allowed general unsecured claims respect claims guc trust previously distributed obligated distribute march 31 2014 aggregate 134106321 shares new gm common stock 121914975 new gm series warrants 121914975 new gm series b warrants amounts reflect 43310 shares new gm common stock 39371 new gm series warrants 39371 new gm series b warrants set aside distribution respect allowed general unsecured claims newly allowed quarter ended march 31 2014 amounts also include 488556 shares new gm common stock 444143 new gm series warrants 444143 new gm series b warrants distributable holders guc trust units respect excess guc trust distributable assets march 31 2014 year ended march 31 2014 new gm securities sold fund liquidation administrative costs guc trust new gm securities set aside distribution overview new gm securities set aside distribution addition distributions liquidations new gm securities reflected reductions guc trust net assets financial statements guc trust also time sets aside new gm securities potential future liquidation fund projected liquidation administrative costs well potential income tax liabilities including dividend taxes distribution new gm securities set aside distribution guc trust deducted net assets liquidation guc trust financial statements unless new gm securities liquidated new gm securities set aside distribution segregated guc trust specific purposes available distribution holders guc trust units claimants unless extent guc trust later determines new gm securities longer needed fund specific purposes process related separate process recording current deferred income tax liabilities reserves expected costs liquidation statement net assets liquidation matter financial reporting matter financial reporting income tax liabilities reserves expected costs liquidation must determined accordance generally accepted accounting principles applicable guc trust contrast estimates projected costs potential liabilities guc trust may set aside new gm securities generally made conservative ie inclusive basis include contingencies amounts potential income tax liabilities permitted recognized applicable accounting standards see “critical accounting policiesincome taxes” “critical accounting policies estimatesreserves expected costs liquidation” march 31 2014 distributable assets guc trust included 7138543 shares new gm common stock 6489475 new gm series warrants 6489475 new gm series b warrants aggregate fair value approximately 5199 million well dividend cash 21 million deducting numbers new gm securities dividend cash set aside distribution fund additional projected liquidation administrative costs potential income tax liabilities guc trust described headings “‘set aside’ calculations relating projected liquidation administrative costs including dividend taxes” “‘set aside’ calculations relating potential taxes distribution” ii set aside distributions payable respect new allowed general unsecured claims allowed general unsecured claims allowed prior fiscal periods holders claims yet supplied information required guc trust order effect distributions entitled new gm securities dividend cash set aside potential distribution respect current disputed general unsecured claims term loan avoidance action claims extent claims resolved favor guc trust amounts new gm securities dividend cash set aside may become available distribution holders guc trust units future periods “set aside” calculations relating projected liquidation administrative costs including dividend taxes guc trust administrator reevaluates quarterly basis numbers new gm securities needed set aside distribution purposes funding projected liquidation administrative costs determination made basis different used calculate reserves financial statement purposes current methodology calculating set asides converts estimates projected liquidation administrative costs number new gm securities set aside distribution dividing estimates trailing twelve month average closing prices new gm securities addition beginning quarter ended march 31 2014 numbers new gm securities set aside distribution reduced dividends new gm common stock received guc trust quarter associated setaside new gm common stock dividing dividends trailing twelve month average closing prices new gm securities subtracting calculated numbers new gm securities numbers setaside new gm securities corresponding amount dividend cash associated setaside new gm securities also set aside distribution quarter ended march 31 2014 result standard quarterly reevaluations described number new gm securities set aside distribution fund projected liquidation administrative costs guc trust reduced 9371 shares new gm common stock 8519 new gm series warrants 8519 new gm series b warrants previously set aside december 31 2013 overall reductions primarily related increases trailing twelve month average closing prices new gm securities period partially offset increases set asides 47744 new gm common stock 43403 new gm series warrants 43403 new gm series b warrants projected dividend taxes relating dividends new gm common stock received march 2014 received june 2014 declared gm april 2014 required guc trust agreement paid proceeds sale new gm securities included excess guc trust distributable assets accordingly march 31 2014 guc trust set aside distribution aggregate 708901 shares new gm common stock 644430 new gm series warrants 644430 new gm series b warrants dividend cash 02 million aggregate fair value 518 million purposes funding future projected liquidation administrative costs guc trust including dividend taxes 35 million amounts sufficient fully fund projected liquidation administrative costs guc trust estimated guc trust administrator march 31 2014 respect projected dividend taxes additional set aside new gm securities made march 31 2014 due uncertainty associated number variables including limited likelihood payment timing potential future dividends b amount per share potential future dividend c numbers shares new gm common stock held guc trust record date potential future dividends extent guc trust administrator determines level uncertainty associated aforementioned variables sufficiently decreased guc trust administrator reserves right discretion without advance notice increase decrease set aside winddown costs amount sufficient cover estimated dividend taxes associated anticipated potential future dividends event assuming remainder estimated life guc trust estimated set aside purposes new gm continues pay quarterly dividends current rate per share number shares new gm common stock held guc trust march 31 2014 decrease based upon guc trust’s current applicable income tax rate market value new gm securities march 31 2014 could conservative measure 432 million new gm securities required set aside dollar value new gm securities comprising additional set aside would vary example dividend paid new gm one future quarters rate per share dividend actually paid new gm future periods increases decreases applicable income tax rate changes life guc trust longer shorter assumed likely number shares new gm common stock held guc trust declines remaining life market value new gm securities increases decreases “set aside” calculations relating potential taxes distribution addition reevaluating numbers new gm securities set aside distribution fund projected liquidation administrative costs including dividend taxes guc trust administrator also reevaluates quarterly basis numbers new gm securities needed set aside distribution fund potential income tax liabilities realized gains future gains disposition new gm securities referred taxes distribution current methodology calculating set asides estimates potential taxes distribution applying applicable us federal income tax rate estimates potential capital gains arrived comparing highest closing price new gm securities since december 15 2011 tax basis new gm securities december 15 2011 based date transfer record ownership new gm securities guc trust mlc set aside calculation methodology converts estimate potential taxes distribution numbers new gm securities set aside distribution dividing estimate trailing twelve month average closing prices new gm securities addition beginning quarter ended march 31 2014 number new gm securities set aside distribution reduced dividends new gm common stock received guc trust quarter associated setaside new gm common stock dividing dividends trailing twelve month average closing prices new gm securities subtracting calculated numbers new gm securities numbers setaside new gm securities corresponding amount dividend cash associated setaside new gm securities also set aside distribution guc trust’s calculations numbers new gm securities needed set aside distribution fund potential taxes distribution made using different methodology used calculate deferred tax liabilities financial statement purposes estimating potential taxes distribution “set aside” calculation estimates potential capital gains difference tax basis new gm securities december 15 2011 b highest closing price new gm securities since december 15 2011 contrast calculating deferred tax liabilities purposes financial reporting applicable generally accepted accounting principles guc trust calculates estimated capital gains difference tax basis new gm securities financial reporting purposes b closing price new gm securities last trading date recent fiscal quarter ended september 30 2013 guc trust made determination file us federal income tax returns taking tax position beneficial ownership substantial majority new gm securities transferred mlc guc trust march 31 2011 tax basis new gm securities determined reference value securities date rather december 15 2011 remaining substantial minority new gm securities transferred mlc guc trust guc trust determined transfer beneficial ownership occurred dates tax basis determined reference value securities dates accordingly guc trust filed us federal income tax returns year ended march 31 2013 internal revenue service using new tax position new tax position yet sustained examination internal revenue service however conservative measure guc trust administrator determined revise “set aside” calculation methodology described unless new tax position sustained examination internal revenue service liability guc trust taxes distribution otherwise finally determined accordance section 505b bankruptcy code applicable income tax returns including guc trust’s us federal income tax returns year ended march 31 2014 subsequent years quarter ended march 31 2014 result standard quarterly reevaluations described number new gm securities set aside distribution fund projected taxes distribution guc trust reduced 332492 shares new gm common stock 302266 new gm series warrants 302266 new gm series b warrants previously set aside december 31 2013 overall reductions primarily resulted increase trailing twelve month average closing prices new gm securities period accordingly march 31 2014 guc trust set aside distribution aggregate 7363141 shares new gm common stock 6693764 new gm series warrants 6693764 new gm series b warrants dividend cash 22 million aggregate fair value 5385 million purposes funding potential taxes distribution guc trust amounts sufficient fully fund potential taxes distribution guc trust estimated guc trust administrator march 31 2014 “set aside” calculation potential taxes distribution march 31 2014 set forth 1 using date transfer record ownership new gm securities guc trust mlc december 15 2011 purposes determining tax basis thereof 2 highest closing prices new gm common stock new gm series warrants new gm series b warrants occurred december 17 2013 3 net capital gains operating losses march 31 2014 reflects taxable capital gains distributions sales new gm securities using tax basis new gm securities described 1 4 average closing prices new gm common stock new gm series warrants new gm series b warrants period april 1 2013 march 31 2014 5 “ratio set aside” calculated dividing number new gm securities class authorized distribution plan ie 150000000 shares new gm common stock 136363635 series new gm warrants number shares new gm common stock authorized distribution plan 6 represents dividends received new gm common stock held guc trust associated number setaside shares new gm common stock 7 march 31 2014 fair value new gm securities set aside fund taxes distribution lower estimates potential taxes distribution fair value new gm securities based current closing prices lower trailing twelve month average prices used determine numbers new gm securities set aside nevertheless guc trust administrator believes new gm securities currently set aside purposes still sufficient upon liquidation satisfy obligations large part conservative measure calculation methodology estimates potential taxable gains using highest closing prices new gm securities since december 15 2011 whereas actual taxable gains determined using prices securities upon disposition guc trust tax basis established december 15 2011 date transfer record ownership new gm securities guc trust opposed date transfer beneficial ownership view guc trust administrator consultation guc trust monitor professionals retained guc trust calculation methodologies described basis new gm securities set aside distribution generally estimate projected liquidation administrative costs potential tax liabilities guc conservative basis accordingly view guc trust administrator guc trust monitor new gm securities currently set aside distribution fund costs liabilities would sufficient upon liquidation satisfy obligations guc trust date form 10k however assurance numbers new gm securities set aside sufficient fund costs liabilities actually incurred particular market price new gm securities remains trailing twelve month average closing prices used convert guc trust’s estimates projected costs potential liabilities numbers guc trust securities set aside described addition assurance result future evaluations additional numbers new gm securities need set aside sold fund additional costs liabilities beyond currently included guc trust’s estimates particular result fluctuations market price new gm securities changes guc trust’s estimates projected costs potential liabilities including possible increase estimates projected dividend taxes described “‘set aside’ calculations relating projected liquidation administrative costs including dividend taxes” see “liquidity capital resources” guc trust units table details changes numbers guc trust units outstanding issuable year ended march 31 2014 1 guc trust units issued year ended march 31 2014 1550000 related special nova scotia distribution applicable nova scotia settlement 2 number guc trust units issuable time represents guc trust units issuable respect allowed general unsecured claims newly allowed fiscal quarter 3 number guc trust units outstanding time represents guc trust units issued respect allowed general unsecured claims allowed prior periods including guc trust units held guc trust benefit holders allowed general unsecured claims yet supplied information required guc trust order effect initial distribution entitled b governmental entities precluded applicable law receiving distributions guc trust units new gm securities liquidity capital resources guc trust’s sources liquidity principally funds holds payment liquidation administrative costs significantly lesser degree earnings funds invested guc trust holds funds cash equivalents also invests funds marketable securities primarily corporate commercial paper municipal commercial paper demand notes permitted plan guc trust agreement year ended march 31 2014 guc trust’s holdings cash equivalents increased approximately 139 million approximately 10 million approximately 149 million increase due primarily proceeds maturity sale marketable securities excess reinvestments 324 million dividends received holdings new gm common stock 46 million offset part cash paid liquidation administrative costs 209 million cash paid residual winddown claims 17 million cash paid distributions 07 million year ended march 31 2014 funds invested guc trust marketable securities decreased approximately 324 million approximately 768 million approximately 444 million decrease due primarily reduced reinvestments cash marketable securities order fund cash needs period guc trust earned approximately 76000 interest dividend income investments year march 31 2014 guc trust held approximately 593 million cash equivalents marketable securities amount approximately 415 million comprising approximately 304 million remaining residual winddown assets approximately 106 million remaining administrative fund approximately 05 million remaining funds designated indenture trustee fiscal paying agent costs required guc trust agreement returned upon windingup guc trust dip lenders extent funds utilized satisfy designated winddown costs residual winddown claims residual winddown costs avoidance action defense costs indenture trusteefiscal paying agent costs 106 million cash equivalents marketable securities remaining administrative fund approximately 80 million separately designated satisfaction certain costs liabilities guc trust reporting costs 26 million available winddown costs funds must exhausted prior use administrative cash purposes amounts time available distribution holders guc trust units addition amount cash equivalents held guc trust march 31 2014 approximately 46 million relates dividend cash described dividend cash distributed holders subsequently resolved allowed claims guc trust units respect new gm common stock receive unless dividends respect shares new gm common stock sold guc trust accordance guc trust agreement fund guc trust’s liquidation administrative costs income tax liabilities shortfalls residual winddown assets balance cash equivalents marketable securities approximately 132 million available payment certain reporting administrative costs guc trust would available future distribution holders guc trust units otherwise used satisfy guc trust obligations see “the guc trust assets” item 1 “business” addition funds held payment costs liquidation administration dividend cash guc trust also holds new gm securities portion guc trust administrator permitted set aside distribution sell approval bankruptcy court trust monitor applicable order fund additional costs income tax liabilities including dividend taxes distribution become due march 31 2014 aggregate fair value new gm securities held guc trust excluding securities set aside liquidating distributions payable date approximately 10722 million march 31 2014 guc trust administrator set aside distribution new gm securities aggregate fair market value approximately 516 million related dividend cash 02 million fund projected liquidation administrative costs including dividend taxes new gm securities aggregate fair market value approximately 5363 million related dividend cash 22 million fund potential taxes distribution see “net assets liquidationdistributable assets” assurance additional numbers new gm securities required set aside distribution sold fund additional costs income tax liabilities beyond guc trust administrator already set aside sales new gm securities occur fund obligations result lesser amount new gm securities available distribution holders guc trust units addition described headings “the guc trust assets” item 1 “business” portion guc trust’s assets currently segregated pursuant guc trust agreement satisfaction residual winddown claims certain specified costs assets insufficient satisfy residual winddown claims fund specified costs reason guc trust administrator similarly required set aside distribution sell additional new gm securities order fund shortfall item 7a item 7 managements discussion analysis financial condition results operations following managements discussion analysis financial condition results operations mda read conjunction hughes electronics corporation hughes consolidated financial statements mda period ended december 31 2002 included exhibit 99 gm annual report form 10k period ended december 31 2002 related hughes annual report form 10k filed separately securities exchange commission sec general motors acceptance corporation gmac annual report form 10k period ended december 31 2002 filed separately sec earnings per share amounts included mda reported diluted gm presents separate supplemental financial information following businesses automotive communications services operations aco financing insurance operations fio gms reportable operating segments within aco business consist gm automotive gma comprised four regions gm north america gmna gm europe gme gm latin americaafricamideast gmlaam gm asia pacific gmap hughes includes activities relating digital entertainment information communications services satellitebased private business networks includes design manufacturing marketing locomotives heavyduty transmissions elimination intersegment transactions certain nonsegment specific revenues expenditures certain corporate activities gms reportable operating segments within fio business consist gmac financing includes financing entities operating us canada brazil mexico associated gmac disaggregated financial results gma prepared using management approach consistent basis manner gm management internally disaggregates financial information purpose assisting making internal operating decisions regard certain common expenses allocated among regions less precisely would required standalone financial information prepared accordance accounting principles generally accepted us gaap financial results represent historical information used management internal decisionmaking purposes therefore data prepared represent way business operate future data prepared accordance gaap may materially different ii3 general motors corporation subsidiaries results operations year ended december 31 2002 net income corporation 17 billion 335 per share gm 123 par value common stock compared 601 million 45 billion 177 668 per share gm 123 par value common stock 2001 2000 respectively net income includes special items aftertax basis outlined see footnotes next page discussion items ii4 general motors corporation subsidiaries footnotes echostar termination payment reflects 600 million echostar paid hughes connection termination october 28 2001 merger agreement hughes echostar b writedown crown media investment relates recognition temporary decline market value hughes investment crown media c writedown xm satellite radio investment relates recognition otherthantemporary decline market value hughes investment xm satellite radio costs related shutdown directv broadband business relates hughes costs close business including contract termination payments writeoffs equipment severance payments e loss htil transaction relates exchange hughes ownership hughes telecom india limited equity interest longterm receivables tata teleservices limited f writedown fiat auto investment relates gms investment fiat auto holdings bv fah reflects completion impairment study relating carrying value investment reduced 24 billion 220 million g production footprint charge primarily relates costs associated transfer commercial truck production janesville wisconsin flint michigan recorded gmna region h sale equity interests relates primarily hughes investment thomson multimedia sa end life vehicle charge relates european unions directive requiring member states enact legislation regarding endoflife vehicles responsibility manufacturers dismantling recycling vehicles sold see note 24 consolidated financial statements j restructuring charge relates initiative implemented first quarter 2002 improve competitiveness gms automotive operations europe see note 24 consolidated financial statements k space shuttle settlement relates favorable resolution lawsuit filed us government hughes march 22 1991 based upon national aeronautics space administrations nasa breach contract launch 10 satellites space shuttle l gecc contractual dispute relates loss associated contractual dispute settled general electric capital corporation loan guarantee charge relates loan guarantee hughes network systems affiliate india n ste therese charge relates asset impairments postemployment costs termination postemployment benefits associated announcement closing ste therese quebec assembly plant raytheon settlement relates hughes settlement raytheon company purchase price adjustment related raytheons 1997 merger hughes defense p gain sale thomson relates hughes sale 41 million shares thomson multimedia sa common stock q sky perfect writedown relates hughes charge revaluation investment r severance charge relates hughes 10 companywide work force reduction us directv japan adjustment relates favorable adjustment expected costs associated shutdown hughes directv japan business isuzu restructuring charges include gms portion severance payments asset impairments part restructuring affiliate isuzu motors ltd u sfas 133 adjustment represents net impact first quarter 2001 initial adoption sfas 133 accounting derivatives hedging activities v phaseout oldsmobile charge relates costs associated gms decision phase oldsmobile division current model lineup product life cycles come end models longer economically viable w postemployment benefits charge relates postemployment costs termination postemployment benefits associated four north american manufacturing facilities slated conversion capacity reduction oklahoma city oklahoma delta engine lansing michigan spring hill tennessee wilmington delaware x capacity reduction adjustment relates costs associated reduction production capacity including restructuring vauxhall motors limiteds manufacturing operations uk satellite businesses gain relates sale hughes satellite systems manufacturing businesses boeing company ii5 general motors corporation subsidiaries wholesale sales 2 years ended december 31 2002 2001 2000 units thousands gmna cars 2547 2441 2933 trucks 3174 2746 2842 total gmna 5721 5187 5775 gme cars 1545 1666 1744 trucks 100 94 135 total gme 1645 1760 1879 gmlaam cars 443 463 438 trucks 197 203 196 total gmlaam 640 666 634 gmap cars 185 202 175 trucks 220 258 283 total gmap 405 460 458 total worldwide 8411 8073 8746 1 gm vehicle unit sales primarily represents vehicles manufactured gm manufactured gms investees sold either gm nameplate gmowned distribution network consistent industry practice vehicle unit sales information employs estimates sales certain countries public reporting legally required otherwise available consistent basis 2 wholesale sales represent vehicles manufactured gm certain investees distributed gmowned distribution network gma financial review gmas income margin adjusted exclude special items adjusted income margin 25 billion 17 2002 708 million 05 2001 39 billion 27 2000 increase 2002 adjusted income margin compared 2001 primarily due increase wholesale sales volume favorable product mix reduced structural material costs favorable conditions offset unfavorable impact pricing pressures experienced north america europe decrease 2001 adjusted income margin compared 2000 primarily due decrease wholesale sales volume pricing pressures north america europe unfavorable conditions partially offset cost structure improvements also primarily north america europe gmas total net sales revenues adjusted exclude special items adjusted total net sales revenues 1480 billion 1407 billion 1481 billion 2002 2001 2000 respectively increase 2002 adjusted total net sales revenues compared 2001 largely due increase wholesale volumes offset partially unfavorable pricing pressures north america europe decrease 2001 adjusted total net sales revenues compared 2000 largely due lower wholesale volumes unfavorable pricing pressures north america europe ii6 general motors corporation subsidiaries gma financial review continued gmnas adjusted income 30 billion 15 billion 44 billion 2002 2001 2000 respectively increase 2002 adjusted income 2001 primarily due increase wholesale sales volume improved product mix material structural costs reductions interest income resolution certain prior tax years partially offset increase pension costs postretirement employee benefit costs opeb unfavorable net price 21 yearoveryear net price comprehends percent increasedecrease retailerdistributor pays current period price paid previous years period similar vehicle decrease 2001 adjusted income 2000 primarily due unfavorable net price 13 yearoveryear lower wholesale sales volumes decrease partially offset favorable product mix improvements manufacturing costs due performance efficiencies material cost savings engineering productivity gmes adjusted loss 549 million 767 million 257 million 2002 2001 2000 respectively decrease gmes 2002 adjusted loss 2001 primarily due material structural cost improvements partially offset decrease wholesale sales volumes driven weak european industry continuing competitive pricing pressures increase gmes 2001 adjusted loss 2000 due continued shift sales mix larger profitable vehicles smaller less profitable entries well decrease wholesale sales volume continued competitive pricing pressures decreases partially offset improved material structural cost performance gmlaams adjusted loss 181 million 2002 compared adjusted loss 80 million adjusted income 26 million 2001 2000 respectively increase gmlaams 2002 adjusted loss 2001 primarily due political unrest economic uncertainty argentina brazil venezuela caused significant deterioration industry region decrease 2001 adjusted earnings compared 2000 primarily due material cost increases reflecting supplier cost pressures manufacturing cost increases devaluation currency argentina decreases partially offset nominal price increases increase wholesale sales volumes gmaps adjusted income 188 million 2002 compared adjusted income 77 million adjusted loss 233 million 2001 2000 respectively increase 2002 adjusted income compared 2001 primarily due equity income improvements several joint ventures region led significantly improved results shanghai gm joint venture improvements partially offset decrease wholesale sales volumes increases structural costs increase 2001 adjusted earnings compared 2000 primarily due gmaps suspension recording share isuzus losses gm reduced investment balance isuzu zero second quarter 2001 addition equity income improvements several joint ventures region well slightly favorable price increases increased wholesale sales volumes hughes financial review total adjusted net sales revenues 90 billion 83 billion 87 billion 2002 2001 2000 respectively increase adjusted net sales revenues 2002 compared 2001 due increased revenues directv us due continued subscriber growth increase adjusted net sales revenues directv us partially offset decrease adjusted net sales revenues hughes network systems hns principally due lower sales resulting substantial completion two contracts late 2001 panamsat corporation panamsat also reported decrease adjusted net sales revenues due salestype lease transaction executed 2001 comparable transaction 2002 decrease adjusted net sales revenues 2001 compared 2000 due decreased revenues panamsat decreased revenues hns sale satellite systems manufacturing businesses boeing company october 6 2000 decrease adjusted net sales revenues panamsat primarily due decline new outright sales salestype lease transactions executed 2001 compared 2000 decrease adjusted net sales revenues hns primarily due decreased shipments directv receiving equipment due primarily directv completing conversion primestar directv customers highpower directv service 2000 decreases partially offset increase adjusted net sales revenues directtohome businesses resulted addition approximately 15 million net new subscribers united states latin america since december 31 2000 hughes adjusted losses 467 million 525 million 303 million 2002 2001 2000 respectively decrease 2002 adjusted loss compared 2001 primarily due additional gross profits gained directv us revenue growth mentioned lower expenses resulting cost saving initiatives decrease amortization expense related goodwill result implementation statement financial accounting standards sfas 142 goodwill intangible assets see note 1 consolidated financial statements favorable factors partially offset decrease interest income due lower average cash equivalent balances 2002 increase interest expense included 74 million charge 2002 losses associated final settlement contractual dispute general electric capital corporation increased depreciation expense due capital expenditures property satellites placed service ii7 general motors corporation subsidiaries hughes financial review concluded since december 31 2001 decrease income tax benefit resulting lower pretax losses 2002 increase 2001 adjusted loss compared 2000 primarily due lower profits 2001 sales salestype lease transactions higher operating costs panamsat increased costs associated rollout new direcway services lower profits resulting decreased shipments directv receiving equipment hns added cost directv broadband increased depreciation amortization expense due various acquisitions 2001 capital expenditures satellites property gmac financial review gmacs adjusted income 19 billion 18 billion 16 billion 2002 2001 2000 respectively years ended december 31 2002 2001 2000 dollars millions financing operations 1239 1211 1055 mortgage operations 544 332 327 insurance operations 87 209 220 adjusted income 1870 1752 1602 income financing operations totaled 12 billion 12 billion 11 billion 2002 2001 2000 respectively increase income 2002 compared 2001 primarily due higher asset levels partially offset higher credit loss provisions wider borrowing spreads occurred primarily result rating agency downgrades late 2001 2002 increase adjusted income 2001 compared 2000 primarily due lower market interest rates increased asset levels increases partially offset weakness offlease residual values higher credit losses wider borrowing spreads occurred wake negative rating agency actions income mortgage operations totaled 544 million 332 million 327 million 2002 2001 2000 respectively increase income 2002 compared 2001 primarily due increased production volumes higher servicing levels improved hedging results partially offset decrease value mortgage servicing rights increase income 2001 compared 2000 primarily due strong origination volumes securitizations kept pace large runoff home mortgages occurred periods high refinancing activity income insurance operations totaled 87 million 209 million 220 million 2002 2001 2000 respectively decrease income 2002 compared 2001 reflects writedown certain investment securities primarily due prolonged decline equity markets partially offset improved underwriting results favorable tax settlement decrease income 2001 compared 2000 primarily due reduction capital gains reflecting general weakness equity markets decrease partially offset improved underwriting results liquidity capital resources financing structure 2002 gm gmac experienced adequate access capital markets gm gmac able issue various securities raise capital extend borrowing terms consistent gms need financial flexibility downgrades gms gmacs credit ratings october 2002 reduced gms longterm credit rating standard poors bbb a3 moodys gmac rated a2 moodys despite downgrades gms gmacs access commercial paper unsecured debt markets remains sufficient meet corporations capital needs moreover downgrades significant adverse effect gms gmacs ability obtain bank credit sell assetbacked securities accordingly gm gmac expect continue adequate access capital markets sufficient meet corporations needs financial flexibility additional source funds gm currently unrestricted access 56 billion line credit syndicate banks committed june 2006 additional 32 billion committed facilities various maturities uncommitted lines credit 27 billion similarly gmac 15 billion syndicated line credit committed june 2003 74 billion committed june 2006 41 billion bilateral committed lines various maturities uncommitted lines credit 178 billion addition new center asset trust ncat 181 billion liquidity facilities committed june 2003 october 2002 gmac transferred 58 billion credit lines syndicated facility committed june 2003 ncat mortgage interest networking trust mint 41 billion liquidity facilities committed april 2003 ncat mint nonconsolidated limited purpose statutory trusts established issue assetbacked commercial paper see offbalance sheet arrangements discussion ii8 general motors corporation subsidiaries financing structure concluded february 7 2002 gm issued 875 million 7250 senior notes due february 15 2052 bonds mature 50 years redeemable gm whole part prior 2052 certain circumstances satisfied march 6 2002 gm also issued 38 billion convertible debt securities part comprehensive effort improve corporations financial flexibility offering includes 12 billion principal amount 45 series convertible senior debentures due 2032 26 billion principal amount 525 series b convertible senior debentures due 2032 securities mature 30 years convertible gm 123 par value common stock specific conditions satisfied proceeds offerings combined cash generation initiatives used rebuild gms liquidity position reduce underfunded pension liability fund postretirement health care obligations 2002 gm contributed total 49 billion us pension plans 10 billion longterm voluntary employees beneficiary association veba trust stockholders equity decreased 68 billion december 31 2002 197 billion december 31 2001 decrease primarily due increase minimum pension liability adjustment recorded december 31 2002 see note 14 consolidated financial statements automotive communications services operations december 31 2002 cash marketable securities 30 billion shortterm assets veba trust invested fixedincome securities totaled 185 billion compared 122 billion december 31 2001 increase december 31 2001 primarily due proceeds bond convertible debt offerings strong operating cash flow automotive operations total assets veba trust used prefund part gms postretirement benefits liability approximated 58 billion 49 billion december 31 2002 2001 respectively gm previously indicated goal maintaining 130 billion cash marketable securities order continue funding product development programs throughout next downturn business cycle 130 billion target includes cash pay certain costs prefunded part veba contributions longterm debt 167 billion 107 billion december 31 2002 2001 respectively ratio longterm debt longterm debt gms net assets aco 2670 726 december 31 2002 2001 respectively ratio longterm debt shortterm loans payable total debt gms net assets aco 2343 765 december 31 2002 2001 respectively increase ratios primarily due net assets aco changing net liability position result increase unfunded status gms pension plans december 31 2002 net liquidity excluding hughes calculated cash marketable securities 30 billion shortterm assets veba trust invested fixedincome securities less total loans payable longterm debt 23 billion 10 billion december 31 2002 2001 respectively order provide financial flexibility gm suppliers gm maintains twopart financing program gecc renewed october 2 2002 pursuant trade payables agreement gm wherein gecc 1 purchases gm receivables discount gm suppliers prior due date receivables pays behalf gm amount due receivables reached due date first part 2 time allows gm defer payment gecc respect portion receivables purchased paid behalf gm deferral could last 10 days 40 days extent gecc realize favorable economics transactions arising first part program shared gm whenever gecc gm agree gm defer payment beyond normal due date receivables second part program gm becomes obligated pay interest period deferral outstanding balances gm receivables held gecc classified accounts payable gms financial statements gms longterm unsecured debt obligations become subject rating sp bbb gms current rating bbb negative outlook bbb rating moodys baa3 gms current rating a3 negative outlook baa3 program would unavailable gm suppliers maximum amount permitted program 2 billion december 31 2002 outstanding balance first part program amounted approximately 12 billion outstanding balance second part program compared outstanding balance first part program 495 million 12 billion outstanding balance second part program december 31 2001 ii9 general motors corporation subsidiaries financing insurance operations gmacs consolidated assets totaled 2277 billion december 31 2002 representing 18 increase 1927 billion outstanding december 31 2001 increase total assets primarily due increase finance receivables loans 1097 billion december 31 2001 1348 billion december 31 2002 continued use gm sponsored special rate financing programs united states fueled asset growth consumer retail contract portfolio additionally 2002 gmac structured securitizations financing transactions accounting purposes instead qualifying sales resulting increase finance receivables loans primarily mortgage operations consistent growth assets gmacs total debt increased 1831 billion december 31 2002 compared 1520 billion december 31 2001 gmacs 2002 yearend ratio total debt total stockholders equity 1031 compared 941 december 31 2001 gmacs liquidity well ability profit ongoing activity large part dependent upon timely access capital costs associated raising funds different segments capital markets liquidity managed preserve stable reliable cost effective sources cash meet current future obligations gmacs strategy managing liquidity risk develop diversified funding sources across global investor base weak corporate bond market combined downgrades certain gmacs credit ratings increased gmacs unsecured borrowing spreads unprecedented levels 2002 result gmac placed greater emphasis securitization retail debt funding mix management expects continue use diverse funding sources maintain financial flexibility expects access capital markets continue levels sufficient meet gmacs funding needs investment fiat auto holdings march 13 2000 gm entered contract master agreement fiat spa fiat gm acquired 20 fah copy master agreement made public filings sec fiat continues hold 80 fah various subsidiaries fah sole stockholder fiat auto spa fiat auto owns operates global automotive group fiat ferrari maserati iveco businesses held separately fiat additionally gm fiat auto formed joint ventures relating powertrain purchasing initiated collaborative activities master agreement provides january 24 2004 july 24 2009 fiat right exercise put option put require gm purchase fiats fah shares fair market value whether fiat may seek exercise put unknown uncertain whether put would ever exercised due possibilities could affected subsequent agreements companies could become nonexercisable provisions master agreement could rendered unenforceable reason actions fiat may taken fiat may choose exercise put implemented fair market value fah shares would determined investment banks procedures set forth master agreement valuation completed amount gm might pay fiats fah shares quantifiable gm acquire fiats fah shares thus become sole owner fiat auto gm would decide additional capitalization would appropriate fiat auto specifically fiat auto need additional funding gm would decide whether provide funding conditions provide funding unless fah fiat auto subject liquidation insolvency fahs consolidated financial statements would required financial reporting purposes consolidated gm indebtedness losses capital needs fah fiat auto acquisition gm presently determinable could material adverse effect gm fiat discussed potential alternatives master agreement changes agreed upon gm expects continue working fiat future product sharing powertrain purchasing joint ventures initiated march 2000 providing significant cost savings line initial estimates operations companies additional opportunities industrial cooperation among gm fiat auto explored purpose reducing operating costs parties ii10 general motors corporation subsidiaries offbalance sheet arrangements gm gmac use offbalance sheet special purpose entities spes economics sound business principles warrant use principal use spes occurs connection securitization sale financial assets generated acquired ordinary course business gms whollyowned subsidiary gmac subsidiaries lesser extent gm assets securitized sold gmac subsidiaries consist principally mortgages wholesale retail loans secured vehicles sold gms dealer network assets sold gm consist trade receivables gm gmac use spes manner consistent conventional practices securitization industry purpose isolate receivables benefit securitization investors usually spes used transactions meet criteria qualifying special purpose entity qspe use qspes enables gm gmac access highly liquid efficient markets sale types financial assets packaged securitized forms gm leases real estate equipment various spes established facilitate financing assets gm nationally prominent creditworthy lessors assets consist principally office buildings warehouses machinery equipment use entities allows parties providing financing isolate particular assets single entity thereby syndicate financing multiple third parties conventional financing technique used lower cost borrowing thus lease cost lessee gm wellestablished market institutions participate financing property purchase interests spes established facilitate property leases gm owned institutions independent affiliated gm officers directors employees gm gmac affiliates hold direct indirect equity interests entities january 2003 fasb issued interpretation 46 consolidation variable interest entities fin 46 interpretation addresses consolidation certain variable interest entities vies include entities previously referred spes see new accounting standards discussion assets spes follows dollars millions december 31 2002 2001 automotive communications services operations assets leased operating leases 2904 2785 trade receivables sold 439 868 total 3343 3653 financing insurance operations receivables sold securitized mortgage loans 112128 113100 retail finance receivables 16164 11978 wholesale finance receivables 17415 16227 total 145707 141305 book value per share book value per share determined based liquidation rights various classes common stock book value per share gm 123 par value common stock decreased 906 december 31 2002 2481 december 31 2001 book value per share gm class h common stock decreased 181 december 31 2002 496 december 31 2001 dividends may paid common stocks declared gms board directors sole discretion amount available payment dividends class common stock reduced occasion dividends paid class adjusted occasion changes amount surplus attributed class resulting repurchase issuance shares class december 31 2002 amount available payment dividends gm 123 par value gm class h common stocks 103 billion 213 billion respectively gms policy distribute dividends 123 par value common stock based outlook indicated capital needs business cash dividends per share gm 123 par value common stock 200 2002 2001 2000 respect gm class h common stock gm board approved payment cash dividends date order allow cash retained investment business hughes ii11 general motors corporation subsidiaries european matters september 2000 european parliament passed directive requiring member states adopt legislation regarding endoflife vehicles responsibility manufacturers dismantling recycling vehicles sold european union member states required transform concepts detailed directive national law directive manufacturers financially responsible least portion cost takeback vehicles placed service july 2002 vehicles placed service prior july 2002 still operation january 2007 laws developed individual national legislatures throughout europe significant impact amount ultimately paid manufacturers issue gm recorded cost sales expenses gme segment aftertax charge 55 million 010 per diluted share gm 123 par value common stock 2002 member states passed national laws december 31 2002 management assessing impact potential legislation gms financial position results operations may include charges earnings future periods 2001 gm europe announced plan turn around business implementation project olympia initial stages project olympia sought identify initiatives could deliver solid profitable business performance 2003 strengthened optimized sales structure revitalized opelvauxhall brand market growth opportunities continuous improvement refocusing organizational structure project identified several initiatives aim address goals mentioned initiatives include among things reducing gmes manufacturing capacity restructuring dealer network germany redefining way vehicles marketed initiatives resulted decrease gms pretax earnings recorded gme region first quarter 2002 follows 1 298 million related employee separation costs approximately 4000 employees 2 235 million related asset writedowns 3 108 million related dealer network restructuring germany net income impact charges first quarter 2002 407 million 072 per diluted share gm 123 par value common stock 553 million included cost sales expenses 88 million included selling general administrative expenses 234 million included income tax expense european commission approved new block exemption regulation provides reform rules governing automotive distribution service europe european commissions proposal would eliminate current block exemption place since 1985 permits manufacturers control dealerships located brands sell current block exemption expired october 2002 however transition period end september 2003 existing agreements dealers order implement new regulatory changes well desired commercial strategies gme issued termination letter european union dealers excluding already termination notice simultaneously also offering unconditional letter intent remain part gmes network dealers authorized repairers expected sign new agreements september 30 2003 new regulation becomes fully effective management believe future impact changes block exemption regulation material adverse effect gms consolidated financial position results operations hughes transactions december 9 2002 hughes gm echostar communications corporation echostar entered termination settlement release agreement termination agreement parties agreed terminate agreement plan merger dated october 28 2001 amended hughes echostar merger agreement certain related agreements terms termination agreement echostar paid hughes 600 million cash hughes retained 81 ownership position panamsat resulted gain 600 million 372 million aftertax 021 per diluted share gm 123 par value common stock recorded total net sales revenues companies entered termination agreement merger could completed within time allowed merger agreement due regulatory opposition gm announced currently evaluating variety strategic options hughes including reduction elimination retained economic interest hughes transactions would involve strategic investors public offerings gm class h common stock related securities cash exchange outstanding gm debt obligations see note 26 consolidated financial statements transaction might involve separation hughes gm hughes engaged preliminary discussions parties decisions made regarding options combinations options gm pursue due numerous uncertainties involved matters assurance transaction offering announced completed time transaction offering might completed ii12 general motors corporation subsidiaries isuzu restructuring december 25 2002 gm isuzu creditor banks finalized transactions related contemplated restructuring isuzu restructuring package gm invested total y60 billion approximately us 500 million acquire majority interest certain isuzus diesel engine businesses complete ownership certain diesel engine technologies gm also acquired rights use various related technologies allocation purchase price assets liabilities acquired completed 2003 addition gm existing equity isuzu retired part isuzus financial restructuring plan gm purchased new equity isuzu leaving gm 12 ownership stake isuzu investment gm daewoo october 17 2002 gm announced transfer certain assets daewoo motor company completed leading creation gm daewoo auto technology company gm daewoo gm suzuki motor corporation shanghai automotive industry corporation saic creditors daewoo motor company stockholders gm daewoo gm daewoo owns three manufacturing plants 10 subsidiaries south korea europe puerto rico vietnam included gm daewoo design engineering research development sales marketing administration assets located bupyung south korea daewoo motor companys manufacturing facility bupyung south korea formed new company daewoo incheon motor company dimc supply gm daewoo vehicles engines transmissions components least six years agreements give gm daewoo option acquire dimc time within next six years december 31 2002 gm invested 251 million gm daewoo common stock purchase 421 gm daewoo daewoos creditors 33 suzuki saic 149 10 equity interest respectively gm daewoo gm accounts investment equity method employment payrolls worldwide employment december 31 thousands 2002 2001 2000 gmna 193 202 213 gme 66 73 89 gmlaam 24 25 gmap 11 gmac 32 29 hughes 12 14 12 1 12 13 11 total employees 350 366 390 worldwide payrolls billions 210 198 210 1 us hourly payrolls billions 2 4 91 85 94 average labor cost per active hour worked us 6278 5776 5216 hourly 3 4 1 amounts adjusted exclude hughes employees transferred boeing company 2 includes employees work excludes laidoff employees receiving benefits 3 includes us hourly wages benefits divided number hours worked 4 amounts adjusted exclude hughes employees ii13 general motors corporation subsidiaries critical accounting estimates accounting policies integral understanding mda consolidated financial statements gm prepared conformity accounting principles generally accepted united states requires use estimates judgments assumptions affect reported amounts assets liabilities date financial statements reported amounts revenues expenses periods presented gms accounting policies described note 1 consolidated financial statements critical accounting estimates described section accounting estimate considered critical estimate requires management make assumptions matters highly uncertain time estimate made different estimates reasonably could used changes estimate would material impact corporations financial condition results operations reasonably likely occur period management believes accounting estimates employed appropriate resulting balances reasonable however actual results could differ original estimates requiring adjustments balances future periods corporation discussed development selection disclosures critical accounting estimates audit committee gms board directors audit committee reviewed corporations disclosures relating estimates sales allowances later time sale time incentive announced dealers applies vehicles sold gm dealer inventory gm records reduction revenue estimated impact sales allowances form dealer customer incentives may numerous types incentives available particular time factors used estimating cost incentives include volume vehicles affected incentive programs offered product rate customer acceptance incentive program actual number vehicles differs estimate different mix incentives occurs sales allowances could affected policy warranty provisions estimated expenses related product warranties made time products sold estimates established using historical information nature frequency average cost warranty claims management actively studies trends warranty claims takes action improve vehicle quality minimize warranty claims impairment longlived assets gm periodically reviews carrying value longlived assets held used goodwill intangible assets indefinite lives assets disposed events circumstances warrant review performed using estimates future cash flows carrying value longlived asset considered impaired impairment charge recorded amount carrying value longlived asset exceeds fair value pension postretirement employee benefits opeb pension opeb costs obligations dependent assumptions used calculating amounts assumptions include discount rates health care cost trend rates benefits earned interest cost expected return plan assets mortality rates factors accordance accounting principles generally accepted united states actual results differ assumptions accumulated amortized future periods therefore generally affect recognized expense recorded obligation future periods management believes assumptions used appropriate differences actual experience changes assumptions may affect gms pension postretirement obligations future expense gm established us pension opeb plans discount rate 675 yearend 2002 675 discount rate represents 50 basis point reduction 725 discount rate used yearend 2001 gms us pretax pension expense forecasted increase approximately 10 billion 2002 excluding curtailments settlements approximately 29 billion 2003 due negative 2002 actual asset returns lower 2002 yearend discount rate lowering expected return plan assets assumption 10 9 ii14 general motors corporation subsidiaries following table illustrates sensitivity change certain assumptions us pension plans december 31 2002 projected benefit obligation pbo us pension plans 801 billion minimum pension liability charged equity respect us pension plans 212 billion net tax see note 14 consolidated financial statements impact 2003 impact december 31 pretax pension december 31 2002 equity change assumption expense 2002 pbo net tax 25 basis point decrease discount 120 million 19 billion 11 billion rate 25 basis point increase discount 120 million 18 billion 11 billion rate 25 basis point decrease expected 170 million return assets 25 basis point increase expected 170 million return assets changes assumptions would impact gms funding requirements following table illustrates sensitivity change discount rate assumption related gms us opeb plans us accumulated postretirement benefit obligation apbo significant portion gms worldwide apbo 572 billion december 31 2002 see note 14 consolidated financial statements impact 2003 impact pretax opeb december 31 2002 change assumption expense apbo 25 basis point decrease discount 150 million 16 billion rate 25 basis point increase discount 140 million 15 billion rate postemployment benefits gm establishes reserves termination postemployment benefit liabilities paid pursuant union contractual agreements connection closed plants reserve based comprehensive study considers impact annual production labor forecast assumptions well redeployment scenarios allowance credit losses allowance credit losses generally established gmac period receivables acquired maintained level considered appropriate management based historical factors affect collectibility factors include historical trends repossessions chargeoffs recoveries credit losses careful monitoring portfolio credit quality including impact acquisitions current projected economic market conditions different assumptions changes economic circumstances could result changes allowance credit losses ii15 general motors corporation subsidiaries investments operating leases gmacs investments residual values leasing portfolio represent estimate values assets end lease contract initially recorded based appraisals estimates management reviews residual values periodically determine recorded amounts appropriate operating lease assets impaired gmac actively manages remarketing offlease vehicles maximize realization value changes value residuals external factors impacting gmacs future ability market vehicles prevailing market conditions may impact realization residual values mortgage servicing rights corporation capitalizes mortgage servicing rights associated loans sold servicing retained servicing rights acquired bulk flow purchase transactions corporation capitalizes cost originated mortgage servicing rights based upon relative fair market value underlying mortgage loans mortgage servicing rights time sale underlying mortgage loan corporation capitalizes purchased mortgage servicing rights cost amount exceeding estimated fair market value purchased mortgage servicing rights accounting derivatives contracts fair value corporation uses derivatives normal course business manage exposure fluctuations commodity prices interest foreign currency rates effective january 1 2001 corporation accounts derivatives consolidated balance sheet assets liabilities fair value accordance sfas 133 accounting derivative instruments hedging activities accounting complex evidenced significant interpretations primary accounting standard continues evolve well significant judgments estimates involved estimating fair value absence quoted market values new accounting standards april 2002 fasb issued sfas 145 rescission fasb statements 4 44 64 amendment fasb statement 13 technical corrections statement eliminates required classification gain loss extinguishment debt extraordinary item income states gain loss evaluated extraordinary classification criteria accounting principles board opinion 30 reporting results operations statement also requires saleleaseback accounting certain lease modifications economic effects similar saleleaseback transactions makes various technical corrections existing pronouncements corporation implemented sfas 145 january 1 2003 management expect statement material impact gms consolidated financial position results operations june 2002 fasb issued sfas 146 accounting costs associated exit disposal activities statement nullifies emerging issues task force eitf issue 943 liability recognition certain employee termination benefits costs exit activity including certain costs incurred restructuring statement requires liability cost associated exit disposal activity recognized liability incurred rather date entitys commitment exit plan establishes fair value objective initial measurement liability corporation implemented sfas 146 january 1 2003 transactions occur december 31 2002 management expect statement material impact gms consolidated financial position results operations december 2002 fasb issued sfas 148 accounting stockbased compensation transition disclosure statement amends sfas 123 accounting stockbased compensation provide alternative methods transition voluntary change fair value based method accounting stockbased employee compensation august 6 2002 pursuant sfas 123 gm announced corporation would expense fair market value stock options newly granted employees beginning january 2003 assuming prospective application sfas 123 expense associated stock options approximately 51 million 009 per share gm 1 23 par value common stock 2003 however management currently evaluating various methods application sfas 123 outlined sfas 148 associated impact gms consolidated financial position results operations december 2002 fasb issued interpretation 45 guarantors accounting disclosure requirements guarantees including indirect guarantees indebtedness others fin 45 fin 45 requires time company issues guarantee company must recognize initial liability fair value market value obligations assumes guarantee interpretation applicable prospective basis guarantees issued modified december 31 2002 management currently evaluating impact recognizing liabilities gms consolidated ii16 general motors corporation subsidiaries new accounting standards concluded financial position results operations fin 45 also contains disclosure provisions surrounding existing guarantees effective financial statements interim annual periods ending december 15 2002 see note 15 consolidated financial statements disclosures january 2003 fasb issued fin 46 requires consolidation certain entities considered variable interest entities vies entity considered vie equity investors lack characteristics controlling financial interest capital insufficient permit finance activities without additional subordinated financial support consolidation vie investor required determined investor absorb majority vies expected losses residual returns occur fin 46 provides certain exceptions rules including qualifying spes subject requirements sfas 140 accounting transfers servicing financial assets extinguishments liabilities vies created january 31 2003 must consolidated immediately vies existed prior february 1 2003 must consolidated july 1 2003 gm may required consolidate certain vies previously collectively referred spes business management currently reviewing existing vies may require consolidation however reasonably possible certain vies assets totaling approximately 11 billion established exclusively facilitate gms leasing activities related aco business may require consolidation gm default obligations respect involvement entities gms maximum exposure loss would approximately 11 billion respect fio business vie structures used facilitate various activities gmac including securitization loans mortgage funding investing activities based managements preliminary assessment reasonably possible vies assets totaling approximately 175 billion may require consolidation management considering restructuring alternatives ensure continued nonconsolidation assets absence successful alternatives consolidation vies would effect increasing assets liabilities amount equal assets vies gms exposure loss related entities approximately 32 billion additional matters like domestic foreign automobile manufacturers years gm used brake products incorporating small amounts encapsulated asbestos products generally brake linings known asbestos containing friction products significant body scientific data demonstrating asbestoscontaining friction products safe create increased risk asbestosrelated disease gm believes use asbestos products appropriate companies used asbestos increase number claims gm related allegations concerning use asbestoscontaining friction products recent years growing number auto mechanics filing suit seeking recovery based alleged exposure small amount asbestos used brake components claims almost always identify numerous potential sources claimants alleged exposure asbestos involve gm even asbestoscontaining friction products many place users much greater risk vast majority claimants asbestosrelated illness may never develop one consistent experience reported automotive manufacturers end users asbestos efforts gm domestic auto manufacturers consolidate asbestos brake product litigation similar related claims currently pending federal mogul delaware bankruptcy court federal mogul bankruptcy pending unsuccessful although consolidation made sense effective efficient resolution similar related claims gm failure effort affect gms defenses remain strong presented individual cases two types claims related alleged asbestos exposure asserted gm representing significantly lower exposure automotive friction product claims like locomotive manufacturers gm used limited amount asbestos locomotive brakes insulation used locomotives resulting lawsuits filed railroad workers seeking relief based alleged exposure asbestos claims almost always identify numerous potential sources claimants alleged exposure asbestos involve gm even locomotives many claimants asbestosrelated illness may never develop one addition like many manufacturers relatively small number claims brought contractors seeking recovery based alleged exposure asbestoscontaining products working premises owned gm claims almost always identify numerous potential sources claimants alleged exposure asbestos involve gm vast majority claimants asbestorelated illness may never develop one i17 general motors corporation subsidiaries additional matters concluded general motors resolved many cases years continues conventional strategic litigation reasons avoiding defense costs possible exposure runaway verdicts gm stated believes vast majority claims gm without merit small percentage claims pending gm allege contraction malignant disease associated asbestos exposure vast majority claimants asbestosrelated illness may never develop one addition gm believes strong defenses based upon number published epidemiological studies prepared highly respected scientists indeed gm believes compelling evidence warranting dismissal virtually claims gm vigorously press evidence judges juries whenever possible furthermore gm believes strong statutory judicial precedent supporting federal preemption asbestos tort claims asserted behalf railroad workers preemption would mean federal law entirely eliminates possibility individuals could maintain claim gm many courts examining issue agreed gms position gms annual expenditures associated resolution claims increased nonmaterial amounts recent years amount expanded year highly dependent number claims filed amount pretrial proceedings conducted number trials settlements occur period foreseeable future gm anticipates annual expenditures relating claims increase somewhat function number claims increasing managements belief based upon consultation legal counsel claims result material adverse effect upon financial condition results operations gm forwardlooking statements report reports subsequently filed gm sec forms 10q 8k related comments management gm hughes use words expect anticipate estimate forecast objective plan goal similar expressions intended identify forwardlooking statements represent current judgments future may hold believe judgments reasonable actual results may differ materially due numerous important factors described factors may described subsequent reports gm may file sec forms 10q 8k changes economic conditions currency exchange rates significant terrorist acts political instability major markets corporation procures material components supplies production principal products produced distributed sold ie north america europe latin america asia pacific shortages fuel interruptions transportation systems labor strikes work stoppages interruptions difficulties employment labor major markets corporation purchases material components supplies production products produced distributed sold significant changes competitive environment major markets corporation purchases material components supplies production products produced distributed sold changes laws regulations policies activities governments agencies similar organizations actions may affect production licensing distribution sale corporations products cost thereof applicable tax rates ability corporation achieve reductions cost employment levels realize production efficiencies implement capital expenditures levels times planned management respect hughes additional risk factors include economic conditions product demand market acceptance government action local political economic developments affecting countries hughes operations including political economic social uncertainties many latin american countries directv latin america llc operates foreign currency exchange rates ability obtain export licenses competition outcome legal proceedings ability achieve cost reductions ability timely perform material contracts ability renew programming contracts favorable terms technological risk limitations access distribution channels success timeliness satellite launches orbit performance satellites loss uninsured satellites ability customers obtain financing hughes ability access capital maintain financial flexibility ii18 general motors corporation subsidiaries item 7a item 7 management’s discussion analysis financial condition results operations overview gm primarily engaged worldwide development production marketing automobiles consisting cars trucks gm develops manufactures markets vehicles worldwide four automotive regions gm north america gmna gm europe gme gm latin americaafricamideast gmlaam gm asia pacific gmap collectively automotive business also gm’s finance insurance operations primarily conducted gmac successor general motors acceptance corporation wholly owned subsidiary gmac transaction end november 2006 gm sold 51 controlling ownership interest gmac consortium investors gmac transaction gm accounted 49 ownership interest gmac using equity method gmac provides broad range financial services including consumer vehicle financing automotive dealership commercial financing residential mortgage services automobile service contracts personal automobile insurance coverage selected commercial insurance coverage time gm discusses issues shared interest possible transactions parties including vehicle manufacturers frequently proposals come fruition confirm comment potential transactions matters unless determine disclosure appropriate automotive industry 2006 global automotive industry continued show strong sales revenue growth global industry vehicle sales retail fleet customers 675 million units 2006 representing 4 increase 2005 expect industry sales approximately 69 million units 2007 past five years global automotive industry experienced consistent yeartoyear increases growing approximately 177 2001 2006 overall revenue growth industry averaged approximately 6 per year last decade much growth attributable demand emerging markets china industry vehicle unit sales increased 258 74 million units 2006 59 million units 2005 gm’s worldwide vehicle sales 2006 91 million units compared 92 million units 2005 vehicle unit sales increased gme gmlaam gmap declined gmna gm’s global market share 2006 135 compared 141 2005 market share increased 2006 compared 2005 168 17 gmlaam 58 64 gmap declined period 255 238 gmna 94 92 gme competition factors commodity energy prices currency exchange continued exert pricing pressure global automotive market 2006 expect competition increase next years due primarily aggressive investment manufacturers established markets united states western europe presence local manufacturers key emerging markets china india commodity price increases particularly aluminum copper precious metals resins contributed substantial cost pressures industry vehicle manufacturers well suppliers addition historically low value yen us dollar benefited japanese manufacturers exporting vehicles components united states due part pressures industry pricing comparably equipped products continued decline major markets united states actual prices vehicles similar content declined accelerating pace last decade expect challenging pricing environment continue foreseeable future financial results gm’s consolidated net sales revenues grew 2073 billion 2006 1947 billion 2005 gm incurred consolidated net loss 20 billion compared net loss 104 billion 2005 improvement revenues reduction net loss result improved automotive business performance primarily driven higher revenues reduced loss gmna due favorable impact gmna turnaround plan gmac net income gm consolidated basis 22 billion 2006 23 billion 2005 general motors corporation subsidiaries financial results concluded gm’s results operations 2006 significantly affected following strategy trends significant events strategy 2006 top priorities continue improving business north america achieving global competitiveness increasingly global environment thus positioning gm sustained profitability growth long term time maintaining strong liquidity growth profitability priorities 2007 straightforward • continue execute north america turnaround plan • grow aggressively emerging markets • continue drive benefits managing business globally • continue development implementation gm’s advanced propulsion strategy • improve business results continue execute north america turnaround plan first priority 2007 improving earnings cash flow particularly gmna traditional core operations financial results systematically aggressively implementing turnaround plan gmna return vital operations profitability positive cash flow soon possible plan built four elements described fully “key factors affecting future current results turnaround plan” • product excellence • revitalize sales marketing strategy • accelerate cost reductions quality improvements • address health carelegacy cost burden 2006 yearend results show continuing make progress toward stabilizing business north america although additional work required fully implement turnaround plan believe continued success turnaround efforts would return gm profitability structure gm sustained profitability positive cash flow growth competitive long term effectively managing business’ cost revenue liquidity primary revenue related goals 2007 include selling profitable product mix improving contribution margin north america pursuing goals emphasizing quality value vehicles reducing reliance sales marketing incentives focusing newly launched products gaining momentum north american marketplace realizing benefits associated “total value promise” initiative announced january 2006 contributed approximately 875 average reduction per vehicle incentive levels 2007 intend continue steps reducing daily rental car sales order increase residual values improving customer service order increase repeat business current customers september 2006 announced five year 100000 mile extended powertrain warranty policy believe offers extensive warranty coverage fullline auto manufacturer provide significant competitive advantage us consumers focused reliability total cost ownership plan introduce array new vehicles 2007 including gmc acadia saturn outlook buick enclave allnew cadillac cts chevrolet malibu believe contribute continued revenue growth addition introduce heavyduty versions new pickup trucks launched fourth quarter 2006 general motors corporation subsidiaries strategy continued primary cost related goals 2007 north america remain addressing legacy cost burden reducing structural costs line current levels revenue legacy costs primarily related cost benefits provided retired employees dependents costs associated employees businesses divested gm dependents structural costs compensation unionized salaried employees costs vary production include costs material freight policy warranty costs within control others pension opeb expenses influenced interest rates return investments dependent outside factors discussed “key factors affecting future current results” gm taken action number areas reduce legacy structural costs north america realized structural cost savings 68 billion 2006 compared 2005 levels major cost reduction actions contributed substantially significantly improved results automotive business second quarter 2006 showed profit first time since 2004 going forward intend reduce structural costs north america average 9 billion per year running rate basis 2007 compared 2005 remain focused repositioning business longterm competitiveness including successful resolution delphi situation new collective bargaining agreement uaw 2007 benefits gm hourly employees grow aggressively emerging markets second key priority focus emerging markets capitalize growth areas china india asean region well russia brazil middle east andean region vehicle sales revenues continue grow globally strongest growth emerging markets response planning expand capacity china russia india pursue additional growth opportunities relationships shanghai automotive gm daewoo many cases operations china businesses become profitable short time able fund expansion fiftyfive percent unit sales 2006 made outside united states expect unit sales key emerging markets continue grow faster pace us market anticipate percentage continue grow addition growth sales revenues expect emerging markets become increasingly profitable 2006 experienced growth revenue geographic regions improved profitability four regions continuation progress made first half year continue drive benefits managing business globally third key priority continue integrate operations around world manage business global basis gm focusing restructuring operations already taken number steps globalize principal business functions product development manufacturing powertrain purchasing improve performance evermore competitive environment global product development initiatives seeking leverage global capabilities design engineering bring products market faster lower cost identified developed centers technical expertise throughout world dedicated planning designing engineering specific vehicles technologies gm globally example gmna crossover sport utility vehicles rear wheel drive highperformance cars gme front wheel drive midsize sedans gmap small miniclass cars design centers supported global manufacturing purchasing organizations many years leveraged scale capitalize global purchasing synergies yielded significant cost savings gm intends build strategy making sourcing decisions global basis purchase capable costeffective suppliers wherever located continue develop implement gm’s advanced propulsion strategy fourth key priority continue develop advance alternative propulsion strategy focused fuel technologies making energy diversity environmental leadership critical element ongoing general motors corporation subsidiaries strategy concluded strategy addition continuing improve efficiency internal combustion engines focused introduction propulsion technologies utilize alternative fuels end 2006 sold two million vehicles run e85 ethanolgasoline blend also continued development electrically driven vehicles hybrid vehicles hydrogen fuel cell vehicles example november 2006 announced begun work first plugin hybrid january 2007 introduced chevrolet volt concept vehicle extended range electrically driven vehicle based eflex technology pure electric vehicle range 40 city miles e85 ethanolgasoline fuel economy 150 miles per gallon gasoline fuel economy 50 miles per gallon large lithiumion battery necessary power volt could ready production beginning 2010 2012 continue increase spending alternative technologies intensified efforts displace traditional petroleumbased fuels portion increased capital expenditures discussed “liquidity capital resources” devoted new technologies improve business results earnings cash flow anticipate improved automotive earnings cash flow 2007 resulting structural cost reductions material cost reductions increased unit sales particularly newly introduced models addition priorities outlined focused continued improvement balance sheet liquidity position 2006 materially strengthened liquidity financial flexibility allow us meet short mediumterm liquidity needs including funding projected increase capital spending 75 billion 2006 85 billion 9 billion 2007 2008 long term believe ability meet capital requirements primarily depend execution turnaround plan return north american operations profitability positive cash flow basis presentation management’s discussion analysis financial condition results operations mda gives effect restatement discussed “item 8 financial statements supplemental data note 2 restatement previously issued financial statements” read conjunction accompanying consolidated financial statements addition mda read conjunction gmac annual report form 10k year ended december 31 2006 filed separately sec part item 1 business part ii item 6 selected financial data item 7 mda item 8 financial statements supplementary data incorporated document reference earnings per share amounts included mda reported fully diluted basis gm operates two businesses consisting automotive auto financing insurance operations fio gm’s auto business consists gm’s four automotive regions gmna gme gmlaam gmap together constitute gm automotive gma gm’s fio business consists operating results gmac 2004 2005 eleven months ended november 30 2006 consolidated basis includes gm’s 49 share gmac’s operating results month december 2006 equity method basis fio also includes financing includes financing entities consolidated gmac disaggregated financial results gma prepared using management approach consistent basis manner gm management internally disaggregates financial information purpose assisting making internal operating decisions regard certain common expenses allocated among regions allocations may different would required standalone financial information prepared accordance accounting principles generally accepted united states gaap financial results represent historical information used management internal decisionmaking purposes general motors corporation subsidiaries basis presentation concluded therefore data prepared represent way business operate future data prepared accordance gaap may materially different consistent industry practice market share information includes estimates sales certain countries public reporting legally required otherwise available consistent basis consolidated results operations gm’s consolidated net sales revenues grew 2073 billion 2006 1947 billion 2005 gm incurred consolidated net loss 20 billion compared net loss 104 billion 2005 improvement revenues reduction net loss result improved automotive business performance primarily driven higher revenues reduced loss gmna due favorable impact gmna turnaround plan revenues net income 2006 gm’s fio business reflect gmac fully consolidated basis 11 months one month equity basis gmac net income gm consolidated basis 22 billion 2006 23 billion 2005 gm’s consolidated net sales revenues 1954 billion 2004 net income 27 billion information gm’s businesses geographic regions discussed gm automotive operations financial review general motors corporation subsidiaries gm automotive operations financial review concluded gm management evaluates automotive business makes certain decisions using supplemental measures variable expenses nonvariable expenses gm believes measures provide useful information investors would find beneficial opportunity view business similar manner see “explanation contribution costs structural costs impairment restructuring charges” contribution costs expenses considered gm variable production amount contribution costs included cost sales 118 billion 109 billion 107 billion 2006 2005 2004 respectively costs comprised material cost freight policy warranty expenses amount contribution costs included selling general administrative expenses 1 billion 2006 2005 2004 costs related advertising expense b structural costs expenses generally vary production recorded cost sales selling general administrative expenses costs manufacturing labor pensionopeb engineering expense marketing related costs certain costs related restructuring impairments included cost sales also excluded structural costs amount structural costs included cost sales 40 billion 44 billion 42 billion 2006 2005 2004 respectively amount structural costs included selling general administrative expenses approximately 12 billion 11 billion 10 billion 2006 2005 2004 respectively c amount impairment restructuring charges included cost sales 7 billion 5 billion 1 billion 2006 2005 2004 respectively industry global vehicle sales worldwide industry vehicle unit sales increased approximately 24 million units 2006 675 million units compared 652 million units 2005 industry sales decreased north america approximately 350 thousand units 202 million units compared 205 million units 2005 regions experienced growth industry unit volume compared 2005 particularly latin americaafricamideast region 830 thousand units 61 million units 2006 asia pacific region approximately 12 million units 195 million units 2006 gm global vehicle sales worldwide gm vehicle unit sales 91 million units decline approximately 79 thousand units compared 92 million units 2005 gme gmlaam gmap reported sales unit increases sales decline reported gmna global market share gm 135 compared 141 2005 gm market share increased gmlaam gmap share loss gmna slight reduction gme contributing overall drop global market share gm global production volume 2006 92 million units increase approximately 130 thousand units 2005 production increased yearoveryear gmlaam gmap slight decrease gme approximately 210 thousand unit reduction gmna 2004 gm achieved global market share 143 vehicle unit sales 90 million units global production 91 million units general motors corporation subsidiaries automotive revenues gm automotive revenues 173 billion 2006 increase approximately 13 billion 2005 gm sold mix products greater content higher prices pricing improvements gmna gme gmlaam also contributed revenue increase sales allowances reduced prices increased new model introductions strategic unit sales volume reductions less profitable daily rental fleets gmna gme contributed improved overall mix vehicle revenue per unit key factors increase total revenue 2005 include • approximately 7 billion due vehicle mix pricing resulting changes gm’s vehicle portfolio including new fullsize utilities north america • approximately 2 billion due increased production volume globally • approximately 2 billion due consolidation gm daewoo june 30 2005 providing full year revenue reported 2006 compared half year reported 2005 • approximately 2 billion due impact foreign exchange rates primarily canadian dollar euro uk pound swedish krona brazilian real korean versus us dollar gm automotive revenues 162 billion 2004 decrease 2004 2005 due lower production mix declines result sales reductions fullsize utility pickup midsize utility medium car segments gmna revenues increased gmlaam gmap contribution costs contribution costs 2006 totaled 119 billion increase 9 billion 2005 increase result increased material costs higher production volume higher levels vehicle content product mix well higher freight cost material performance slightly favorable yearoveryear improvements realized global architecture sourcing optimizing manufacturing supplier footprints offset higher raw material costs increased global demand aluminum copper precious metals petroleum resins increased contribution costs 06 billion 2006 versus 2005 contribution costs percentage revenue unchanged 2006 2005 contribution costs 110 billion 2005 compared 108 billion 2004 contribution costs increased 2004 2005 total percentage revenue increase primarily due unfavorable mix total automotive level production declined gmna along fewer fullsize utilities pickups offset production increases gme gmlaam gmap higher steel nonferrous metal prices resulted increase material costs 07 billion 2005 structural costs automotive structural cost 52 billion 2006 decrease approximately 3 billion 2005 cost reductions gmna 6 billion primary reason reduction partially offset structural cost increases gmlaam gmap gm continued invest infrastructure support higher unit production sales volumes regions consolidation gm daewoo also increased 2006 structural cost gmap 1 billion compared 2005 since gm daewoo consolidated june 30 2005 majority structural cost reductions north america driven turnaround actions implemented throughout 2006 largely related changes pension opeb hourly workforce level • gmna pension opeb costs reduced 28 billion largely result uaw health care settlement agreement hourly accelerated attrition program changes salaried pension health care benefit plans • gmna manufacturing costs reduced 10 billion total labor costs lowered employees retired left gm accelerated attrition program offered hourly employees represented general motors corporation subsidiaries structural costs concluded uaw iuecwa approximately 34400 gm hourly employees agreed participate program retired left company january 1 2007 • automotive costs lower due reduction various administrative costs global engineering costs lower gm increasingly leveraged global vehicle development architectures automotive structural costs 52 billion 2004 increased 3 billion 2005 healthcare expense increased primarily due escalating healthcare cost trends falling discount rates united states global consumer influence expense increased due efforts increase product awareness costs increased outside north america gm invested emerging markets impairment restructuring charges gm incurred certain expenses primarily related restructuring asset impairments included automotive cost sales costs totaled approximately 7 billion 5 billion 1 billion 2006 2005 2004 respectively 2006 amounts related following • 64 billion net charge related program uaw attrition agreement uaw attrition program primarily payments employees approximately 21 billion curtailment charges associated gm’s us hourly pension opeb extended disability plans result uaw attrition program approximately 43 billion • approximately 04 billion impairment charges related writedown productspecific assets primarily gmna • approximately 01 billion impairment charges related writedown plant facilities gme • approximately 06 billion various restructuring matters total approximately 04 billion incurred gme additional charges recorded regions favorable revision reserve recorded fourth quarter 2005 related north american plant capacity actions approximately 10 billion primarily attributable impact uaw attrition program fully discussed “gmuawdelphi special attrition program agreement” • approximately 02 billion taken conjunction cessation production previously divested business 2005 amounts related following • approximately 12 billion impairment charges related writedown productspecific assets 07 billion gmna 03 billion gme additional charges taken gmlaam gmap • approximately 08 billion impairment charges related writedown plant facilities gmna general motors corporation subsidiaries impairments restructuring charges concluded • approximately 31 billion associated restructuring initiatives approximately 20 billion incurred gmna including 18 billion employee related costs connection restructuring initiatives announced fourth quarter 2005 approximately 02 billion associated voluntary early retirement program separation programs related us salaried workforce gme recognized separation contract cancellation charges 11 billion mainly related restructuring plan announced fourth quarter 2004 addition gmap recognized separation costs related restructuring activities gm holden australia 2004 charges recognized asset impairments totaling approximately 08 billion vehicle tooling impairments 06 billion plant facilities impairments 02 billion interest expense interest income nonoperating income equity income minority interest tax benefit automotive interest expense 2006 43 billion increase 03 billion 2005 resulting primarily intercompany transactions automotive operations total automotive operations interest expense 26 billion 2006 100 million higher 2005 automotive interest expense 32 billion 2004 23 billion automotive operations intercompany elimination expense zero 2006 improvement 08 billion expense recorded 2005 due writedown fair value gm’s investment approximately 20 common stock fuji heavy industries fhi 2005 interest income nonoperating income 36 billion 2006 increase 13 billion 2005 13 billion increase result gains associated sale mesa arizona proving grounds part interest suzuki motor corporation suzuki isuzu motors limited isuzu interest income nonoperating income 22 billion 2004 automotive equity income minority interest 200 million 2006 300 million lower 2005 due sale majority gm’s investment suzuki increase minority interest associated consolidation gm daewoo june 2005 equity income minority interest 700 million 2004 200 million higher 2005 primarily due consolidation gm daewoo 2005 automotive tax net benefit 23 billion 2006 28 billion 2005 tax benefit 12 billion 2004 reflecting primarily tax benefits gmna net incomeloss result factors gm’s automotive business incurred net losses continuing operations 32 billion 101 billion 2006 2005 respectively 2005 net loss 101 billion included 100 million cumulative effect change accounting principle related implementation fin 47 “accounting conditional asset retirement obligations” automotive net income 14 billion 2004 explanation contribution costs structural costs impairment restructuring charges management believes contribution costs structural costs impairment restructuring charges provide meaningful supplemental information regarding expenses place automotive expenses categories allow gm management assess cost performance gma geographic regions gm management uses categories evaluate gm’s expenses believes measures allow gm management readily view operating trends perform analytical comparisons benchmark expenses among geographic regions assess whether turnaround globalization strategy cutting costs target gm management uses categories forecasting purposes evaluating management determining future capital investment general motors corporation subsidiaries explanation contribution costs structural costs impairment restructuring charges concluded allocations accordingly gm believes categories useful investors allowing greater transparency supplemental information used management financial operational decisionmaking gm believes contribution costs structural costs impairment restructuring charges provide useful information limitations associated use categories contribution costs structural costs impairment restructuring charges may completely comparable similarly titled measures companies due potential differences exact method calculation companies result categories limitations considered isolation substitute measures cost sales selling general administrative expenses gm compensates limitations using categories supplements cost sales selling general administrative expenses gm automotive regional results gm north america north american industry vehicle unit sales declined 17 202 million units 2006 expect unit sales relatively flat 2007 industry volume declined 17 gmna’s production declined 43 46 million units gmna ended year market share 238 2006 compared 255 2005 2006 industry vehicle unit sales united states decreased 171 million units gm’s us market share decreased 17 percentage points due part strategic decision reduce sales daily rental general motors corporation subsidiaries gm north america continued customers approximately 75000 units comparatively low profits sales due consumer shift passenger cars gm traditionally lower penetration dealer inventories us totaled approximately 1050 million units december 31 2006 consistent management’s expectations well inline year ago levels despite decline volume revenue north america increased 2006 2005 41 billion 39 driven primarily favorable mix higher end products 2005 revenue declined 97 billion 84 compared 2004 driven primarily unfavorable product mix decline sales volume 2006 vs 2005 earnings pretax earnings gmna improved 37 billion 2006 loss 106 billion 2005 loss 69 billion 2006 major factors contributing improvement included • pension opeb costs decreased 28 billion largely result uaw health care settlement agreement reduced hourly opeb costs impact uaw attrition program effects changes salaried retiree benefits plans announced first quarter 2006 • costs decreased approximately 25 billion due reduction advertising sales promotion expenses efficient engineering spending lower product warranty recall costs result improved vehicle quality addition gmna’s product liability reserve decreased approximately 01 billion including charge “incurred reported” asbestos liabilities approximately 01 billion • manufacturing related structural costs decreased 10 billion result uaw attrition program approximately 34400 gm hourly employees retired left gm january 1 2007 • favorable product mix resulted increased earnings approximately 04 billion due primarily launch new fullsize utilities • sale mesa arizona proving grounds resulted 270 million gain 2006 • connection gmac transaction fourth quarter 2006 gm reduced lease residual risk sharing support expense approximately 02 billion negotiated payments lease residual risk sharing support lower previously recorded liabilities • production volume decreases 43 attributable gmna’s market share decline reduction sales daily rental businesses approximately 75000 units resulted decrease earnings approximately 10 billion addition factors restructuring impairment charges approximately 62 billion 2006 compared 36 billion 2005 table provides information regarding charges gmna’s net loss improved 36 billion net loss 82 billion 2005 net loss 46 billion 2006 improvement driven matters discussed related tax effects general motors corporation subsidiaries gm north america concluded 2005 vs 2004 earnings pretax earnings gmna declined 113 billion 2005 pretax earnings 07 billion 2004 loss 106 billion 2005 major factors contributing decline included • unfavorable product mix adversely affected earnings approximately 27 billion due primarily reduced demand gmna’s large utility vehicles reaching end product life cycle well declines sales higher margin large cars • production volume decreases 7 attributable gmna market share decline significant reduction dealer inventories accounted decrease earnings approximately 25 billion • unfavorable material costs factoring cost government mandated product improvements accounted decrease earnings approximately 09 billion • increased health care expenses primarily due recognition opeb net actuarial losses caused escalating healthcare cost trends falling discount rates united states accounted decrease income approximately 07 billion 2005 healthcare cost increases reflect new healthcare initiatives uaw salaried employees retirees benefit subsequent years • factors resulted decrease earnings approximately 09 billion largest relates increased advertising sales promotion costs resulting efforts increase product awareness • 2004 gmna recognized gain sale xm satellite radio holdings stock approximately 200 million • addition restructuring impairment charges approximately 36 billion 2005 compared 03 billion 2004 table provides information regarding charges general motors corporation subsidiaries gm europe industry vehicle unit sales europe increased 218 million units 2006 32 2005 47 2004 gme’s 2006 total market share decreased slightly 92 94 european industry vehicle unit sales expected relatively flat 2007 two largest markets europe gm market share decreased market share 101 germany 07 percentage point decrease versus 2005 05 percentage point decrease versus 2004 united kingdom market share 143 decrease 04 percentage point versus 2005 increase 04 percentage point versus 2004 revenues 2006 increased 13 billion 41 2005 primarily due impact full consolidation european powertrain organization improved pricing revenue 2005 increased 07 billion 2004 driven primarily favorable mix partly offset volume declines negative pricing 2006 vs 2005 earnings gme restructuring plan announced fourth quarter 2004 gained traction 2006 together continued progress pricing material cost delivered improved results 2006 compared previous periods loss taxes gme totaled 312 million 18 billion 14 billion 2006 2005 2004 respectively improvement 15 billion loss taxes 2006 versus 2005 primarily due following factors • improvement operating performance 08 billion material cost performance structural cost performance resulting implementation restructuring plan along improved pricing offset volume declines additional cost related product upgrades • lower restructuring impairment charges 07 billion restructuring impairment charges 2006 totaled 586 million compared 1330 million 2005 2006 charges included impairment charges 149 million 89 million related closure gm’s portugal assembly plant 60 million related product specific assets separations contract cancellations totaled 437 million mostly related closure gm’s portugal assembly plant shift reduction gm’s ellesmere port assembly plant restructuring plan announced fourth quarter 2004 charges 2005 comprehended separations contract cancellation costs 11 billion mainly related restructuring plan announced fourth quarter 2004 also included costs related dissolution general motors corporation subsidiaries gm europe concluded powertrain joint venture fiat spa fiat contract cancellations 59 million charge product specific asset impairments 262 million gme’s 2006 net loss 225 million declined 803 million loss 10 billion prior year largely comprised operating improvements lower restructuring impairment charges discussed plus related tax effect items addition 2005 included charge 21 million connection adoption fin 47 “accounting conditional asset retirement obligations” favorable equity income related effects changes polish tax law 2005 vs 2004 earnings increase gme’s loss tax 2005 versus 2004 approximately 04 billion resulted mainly following factors • higher restructuring impairment charges 10 billion restructuring impairment charges 2005 13 billion compared 372 million 2004 charges 2005 comprehended separations contract cancellation costs 11 billion mainly related restructuring plan announced fourth quarter 2004 also included costs related dissolution powertrain joint venture fiat contract cancellation costs 59 million charge product specific asset impairments 262 million charges 2004 consisted product specific asset impairments • improvement operating performance 06 billion primarily favorable mix together material cost performance structural cost performance resulting implementation abovementioned restructuring plan compensated volume declines negative pricing gme turnaround plan remains track expect see progress 2007 addition continued implementation significant cost reduction initiatives expect benefit introduction new products opel corsa opel antara continue focus rollout multibrand strategy gm latin americaafricamideast general motors corporation subsidiaries gm latin americaafricamideast concluded industry latin america africa mideast increased 61 million units 2006 159 versus 2005 gmlaam’s vehicle unit sales increased 173 2005 399 2004 calendar year 2006 record breaking year gmlaam region achieved sales volume record 103 million units first time history gmlaam exceeded 1 million units annual sales growth led 170 market share gmlaam 02 percentage point increase compared 2005 09 percentage point increase 2004 overall market share gain primarily attributable increases colombia africa middle east brazil’s market share remained flat 2006 yearend consumer price inflation dropped 2005 2006 brazil gmlaam’s largest market 57 33 argentina 121 97 chile 37 26 colombia 48 45 ecuador 31 29 consumer price inflation yearend increased 2005 2006 venezuela 146 173 south africa 36 58 overall decrease inflation region improved affordability gm’s products contributed increased net sales income inflation brazil venezuela colombia 2005 decreased compared 2004 inflation increased argentina chile ecuador south africa 2006 vs 2005 earnings 2006 gmlaam achieved record revenue 146 billion increase 28 billion 23 prior year driven strong volume pretax income 527 million increased 484 million versus 2005 income 43 million improvement approximately 05 billion due various factors including • higher production volumes improved product mix contributed approximately 04 billion • favorable pricing contributed approximately 03 billion • reduction 2005 2006 approximately 01 billion restructuring impairment charges • unfavorable foreign exchange approximately 02 billion • unfavorable factors totaling 01 billion gmlaam reported net income 490 million 2006 approximately 11 billion improvement 2005’s reported net loss 566 million increase largely comprised operational improvement favorable impact restructuring impairment charges previously discussed tax valuation allowance established 2005 gm brasil 617 million associated dtas could longer realized 2005 vs 2004 earnings gmlaam reported 2005 net revenues 118 billion increase 30 billion 2004 income tax decreased 94 million 2004 43 million 2005 deterioration 51 million due part impairment charge 150 million assets still service related gmlaam’s export business 2005 partly offset favorable volume product mix pricing improvements 2007 industry expected continue grow moderate rate consumer price inflation expected remain control brazil colombia chile ecuador south africa increases expected argentina venezuela 2007 gmlaam expects launch four new products including chevrolet captiva across many latin american countries chevrolet epica venezuela africa cadillac bls srx south africa gmc acadia middle east addition launch hummer h3g south africa end 2006 gmlaam also planning grow aftermarket sales business 2007 region also continue strong focus reducing structural costs across region offset volume related cost increases general motors corporation subsidiaries gm asia pacific 1 2006 2005 2004 calendar years include gm daewoo wuling joint venture production 2 includes gm daewoo wuling joint venture sales 2006 2005 2004 3 includes wuling joint venture sales due gm equity position local ownership requirements industry vehicle unit sales asia pacific region increased approximately 66 2006 195 million units 183 million units 2005 result reflects strong growth china industry vehicle unit sales increased 258 74 million units 2006 59 million units 2005 gmap increased vehicle unit sales asia pacific region almost 18 2006 13 million units 11 million 2005 gmap’s 2006 market share 64 06 percentage point increase 2005 12 percentage point increase 2004 market share china increased 06 percentage points 118 2006 market share australia fell 24 percentage points 154 2006 result increased vehicle unit sales june 30 2005 consolidation gm daewoo gmap revenue rose 43 155 billion 2006 compared 108 billion 2005 revenue grew 38 billion 55 2004 2006 vs 2005 earnings income loss tax benefit gmap 10 billion 889 million 2006 2005 respectively income tax benefit improved 19 billion 2006 versus 2005 principally due following • writedown fair market value gm’s investment fhi resulted loss 735 million 2005 • 2006 gm sold approximately 85 investment suzuki resulting gain 666 million • gm also sold remaining interest isuzu gain 311 million 2006 • improved performance approximately 200 million gm daewoo fully consolidated basis resulting increased volume improved material cost performance partially offset unfavorable foreign exchange interest • addition restructuring impairment charges 42 million less 2006 versus 2005 general motors corporation subsidiaries gm asia pacific concluded reduction equity income minority interests 2005 2006 resulted sale majority gm’s equity investment suzuki decreased equity income associated consolidation gm daewoo beginning june 30 2005 gmap’s net income improved 14 billion net loss 246 million 2005 net income 12 billion 2006 improvement driven matters previously discussed well related tax effects reversal deferred tax asset valuation allowance 2006 gm daewoo 215 million management believes deferred tax assets utilized 2005 vs 2004 earnings income tax gmap decreased 09 billion 2005 versus 2004 mainly result charges 2005 related 735 million writedown fair market value gm’s investment fhi charge related product specific asset impairments 64 million separation costs 54 million gm holden australia unfavorable volume product mix gm holden australia offset favorable results gm daewoo 2007 asia pacific regional industry volume expected continue expand continued strong growth china india gmap expects take advantage strong industry grow revenue 2007 continuing implement multibrand strategy china well leverage product development capabilities gm daewoo overall gm’s broad operational footprint asia pacific region well positions meet regional market demand gmap also expects improve material cost performance increased supplier localization increase structural cost 2007 take advantage continuing robust growth region corporate operations total corporate revenue consists primarily corporate eliminations 2006 vs 2005 earnings corporate operations loss income tax benefit 12 billion 2006 compared 69 billion 2005 yearoveryear improvement 2006 primarily due 2005 charge 55 billion related delphi benefit guarantee charge pertaining contingent exposures relating delphi’s chapter 11 filing 2006 additional charge 05 billion recorded related delphi benefit guarantee refer note 20 consolidated financial statements background results 2006 also included benefit approximately 10 billion lower opeb expense resulting uaw health care settlement agreement reduced legacy costs related employee benefits divested businesses gm retained responsibility opeb curtailment related gmac transaction costs also increased general motors corporation subsidiaries corporate operations concluded approximately 05 billion 2006 primarily related increased administrative expenses elimination hedge accounting connection restatement prior financial statements sfas 133 2005 vs 2004 earnings operations loss income tax expense 28 billion 2004 included charge 16 billion related settlement agreement reached gm fiat terminate master agreement including put option settle various disputes two companies operations also included opeb legacy costs approximately 07 billion administration expense 04 billion 2004 tax benefit 2006 13 billion compared 43 billion 2005 reduced benefit primarily related larger pretax loss 2005 tax contingencies reduced 05 billion 2006 tax benefit 13 billion 2004 net income 02 billion 2006 compared net loss 26 billion 2005 net loss 15 billion 2004 fio financial review gmac segment data reported gm line business gmac’s results operations 11 months ended november 30 2006 b represents gm’s share gmac’s loss one month december following sale gmac using equity method c represents gmac’s reported results year ended december 31 2006 gm’s fio business consists results gmac’s lines business automotive finance operations rescap insurance includes commercial finance business gmac’s equity investment capmark also included fio financing includes financing entities consolidated gmac well two special purpose entities holding automotive leases previously owned gmac affiliates transferred gm part gmac transaction fio net income 10 billion 23 billion 29 billion years ended december 31 2006 2005 2004 respectively decrease 54 12 billion 2005 2006 primarily due gmac transaction discussed detail 2006 fio net income 10 billion includes 12 months activity gmac comprised 11 months operations whollyowned subsidiary general motors corporation general motors corporation subsidiaries fio financial review concluded totaling 22 billion income one month equity loss 5 million result sale controlling interest gmac fim holdings llc comparisons gmac activity 12 months basis automotive finance operations net income 2006 increased 33 compared 2005 net income positively impacted 383 million related writeoff certain net deferred tax liabilities part conversion gmac llc november 2006 net deferred tax liabilities simultaneously recorded gm’s parent company financial statements income tax expense results 2006 include unfavorable aftertax earnings impact 135 million 1 billion debt tender offer repurchase certain deferred interest debentures decrease 2005 net income 2004 reflects lower net interest margins result increased borrowing costs due widening spreads higher market interest rates rescap net income 2006 declined 31 compared 2005 2006 operating results adversely affected domestic economic conditions especially fourth quarter developments offset conversion llc income tax purposes resulted elimination 523 million net deferred tax liability excluding llc benefit rescap’s net income 182 million increase 2005 net income 2004 reflects improvements earnings increased loan production favorable credit experience improved mortgage servicing results gains sales mortgages insurance operations net income totaled record 11 billion 2006 compared 417 million 2005 increase income mainly result higher realized capital gains approximately 10 billion 2006 compared 108 million 2005 underwriting results favorable primarily due increased insurance premiums service revenue earned improved loss adjustment expense experience partially offset higher expenses increase 2005 net income 2004 reflects combination strong results achieved increased premium revenue higher realized capital gains improved investment portfolio performance gmac’s segment net loss 881 million 2006 compared loss 38 million 2005 increased loss mainly due decline income capmark gmac’s former commercial mortgage operations 237 million due sale 79 interest business march 23 2006 additional noncash goodwill charges 695 million higher loss provisions tax impact related gmac’s llc conversion segment net income decreased 111 2005 compared 2004 primarily due 439 million aftertax goodwill impairment charges 2005 fio financing net loss increased 11 billion 12 billion 2006 mainly due 29 billion pretax loss gmac transaction loss offset increase income 25 billion related ceasing depreciation gmac’s long lived assets classified held sale addition 786 million income tax expense arose due gmac’s llc conversion 351 million incremental tax arose due gmac sale offset reversal statelocal tax contingencies income related automotive leases transferred gm part gmac transaction fio net loss increased 5 million 2005 comparison 2004 key factors affecting future current results following discussion identifies key factors known events trends could affect future results turnaround plan past year one top priorities improving business north america position gm sustained profitability growth longterm achieve competitiveness global basis increasingly global environment gm systematically aggressively implementing turnaround plan gmna’s business return operations profitability positive cash flow soon possible plan built four elements general motors corporation subsidiaries turnaround plan continued • product excellence • revitalize sales marketing strategy • accelerate cost reductions quality improvements • address health carelegacy cost burden following update describes done far achieve elements product excellence gm continues focus significant attention maintaining consistent product freshness introducing new vehicles reducing average vehicle lifecycle 2006 approximately 30 gmna’s retail sales volume came cars trucks launched within past 18 months launches included next generation large utility trucks chevrolet tahoe suburban gmc yukon xl cadillac escalade saturn aura chevy hhr saturn sky pontiac g6 convertible buick lucerne saab 93 sportcombi hummer h3 cadillac dts launch vehicles contributed favorably improved profitability sales newly launched large utility trucks significant impact profitability despite negative effect higher fuel prices overall lower industry demand 2007 expect approximately 36 gmna’s retail sales come vehicles launched within 18 months launches include new chevrolet silverado gmc sierra chevrolet malibu cadillac cts entries large crossover segment gmc acadia saturn outlook buick enclave support new car truck programs gm’s total capital spending 2006 75 billion 50 billion devoted gmna gm expects increase commitment going forward spending 85 billion 9 billion 2007 2008 approximately 57 billion 2007 approximately 55 billion 57 billion 2008 devoted gmna also allocating capital engineering support fuelefficient vehicles including hybrid vehicles united states increasing production active fuel management engines sixspeed transmissions gm recently announced intention build first plugin hybrid unveiled chevy volt extended range electric concept vehicle time announcing two partnerships accelerate development advanced lithiumion batteries addition gm undertaking major initiative alternate fuels sustainable technologies e85 flex fuel vehicles gm sold two million e85 vehicles plans build two million next five years gm also adding five e85capable models lineup 2007 raising gm’s total flexfuel offerings 14 vehicles addition offering flexfuel vehicles gm responded strong market demand fuel economy selling one million 2006 model year vehicles achieve 30 mpg better highway estimated epa 2007 model year gm increase number vehicle models sells united states achieve 30 mpg 23 vehicles revitalize sales marketing strategy gm pursuing revised sales marketing strategy focusing clearly differentiating brands optimizing distribution network growing key metropolitan markets refocusing marketing efforts strength value products gm continues support orderly consistent alignment dealers particularly among buick pontiac gmc dealers believe strengthen brands january 2006 gm significantly lowered manufacturer’s suggested retail prices vehicles accounted 80 2006 model year automotive sales volume gm’s promotion strategy emphasizes brands vehicles rather price incentives addition gm intends increase advertising support new products specific marketing initiatives improve gm’s sales performance certain metropolitan markets general motors corporation subsidiaries turnaround plan continued september 2006 gm extended powertrain warranty policy five years 100000 miles applicable 2007 models united states canada gm believes expanded warranty offers extensive warranty coverage united states canada fullline vehicle manufacturer anticipate expanded warranty enhance consumer confidence quality durability vehicles united states canada gm’s pricing strategy improved quality product execution reduced sales daily rental fleets well strong market used vehicles resulted higher residual values gm’s cars trucks 2007 gm plans continue focus consistent alignment dealers particularly among buick pontiac gmc dealers improved retail performance key metropolitan markets reductions sales daily rental companies accelerate cost reductions quality improvements following november 2005 announcement strategy reduce structural costs manufacturing area gm introduced variety initiatives accomplish strategy 2007 expect realize 9 billion structuralcost savings target versus 2005 gmna corporate segments running rate basis running rate basis refers average annualized cost savings foreseeable future anticipated result cost savings actions fully implemented gm realized 68 billion structural cost reductions north america 2006 exceeding 4 billion structural cost reductions estimated 2006 gm’s 2005 annual report form 10k improvement due largely success attrition programs including effect pension remeasurement expected total annual cash savings structural cost reductions approximately 5 billion average running rate basis addition gm focusing longterm goal reducing global automotive structural costs 25 global revenue 2006 global automotive structural costs less 30 revenue 35 2005 november 2005 gm announced would cease operations 12 manufacturing facilities 2008 reduce manufacturing employment levels approximately 30000 employees end 2008 fact gm reached reduced employment levels january 2 2007 support structural cost initiatives march 2006 gm uaw delphi entered uaw attrition agreement designed reduce number hourly employees gm delphi uaw attrition program approximately 34400 gm employees participated beginning 2007 gmna benefit full year impact uaw attrition program since remainder participants program either retired otherwise left january 1 2007 see “gmuawdelphi special attrition program agreement” description uaw attrition agreement gm believes actions collectively reduce excess capacity one million units addition one million unit capacity eliminated 2002 2005 reduce structural costs assist closing cost gap vehicle manufacturers achieve cost reductions gm’s management putting high priority negotiating competitive collective bargaining agreement uaw 2007 first quarter 2006 gm announced plans substantially alter pension benefits current us salaried employees freezing accrued benefits current plan implementing new benefit structure future accruals include reduced defined benefit plan salaried employees new defined contribution plan salaried employees pension plan changes affect retirees surviving spouses currently drawing benefits salaried retirement program reducing material costs remains critical part gmna’s overall longterm cost reduction plans although improved performance purchasing offset higher commodity prices aluminum copper troubled supplier support gm continues aggressive pursuit material cost reductions via improvements global processes product development enable commonization application parts among vehicle architectures well continued use competitive supply sources globally extensive use benchmarking supplier footprint optimization leveraging global reach take advantage general motors corporation subsidiaries turnaround plan continued economies scale purchasing engineering advertising salaried employment levels indirect material costs gm seeks continue achieve cost reductions gm also anticipates resolution delphi bankruptcy reorganization discussed include opportunity gm mitigate cost penalty pays delphi certain parts gm seen significant improvements warranty quality related costs past several years enabled implementation extended powertrain warranty described 2007 continue focus reducing costs address health carelegacy cost burden addressing legacy cost burden health care employees retirees united states one critical challenges facing gm october 2005 announced agreement uaw reduce gm’s hourly retiree healthcare obligations gm began recognizing benefit uaw health care settlement agreement third quarter 2006 remeasurement us hourly opeb plans march 31 2006 generated 13 billion reduction opeb expense approximate 17 billion reduction opeb obligation reduction expense partially offset recognition expense associated approximate 3 billion related capped benefits expected paid gm contributions new uaw mitigation plan refer note 19 consolidated financial statements discussion financial impacts uaw settlement agreement uaw health care settlement agreement remain effect least september 2011 either gm uaw may cancel agreement upon 90 days written notice similarly gm’s contractual obligations provide healthcare benefits uaw hourly retirees extends least september 2011 continue thereafter terminated either gm uaw result provisions uaw health care settlement agreement continue effect uaw retirees beyond expiration current collective bargaining agreement gm uaw september 2007 regardless changes contract gm uaw may negotiate april 2006 gm iuecwa also reached tentative agreement reduce healthcare costs similar uaw health care settlement agreement ratified iuecwa membership april 2006 received court approval november 2006 effect material require remeasurement 2006 estimated 06 billion reduction opeb obligation recognized january 1 2007 measurement us opeb plans reflected part opeb expense 2007 gm also increasing us salaried workforce’s participation cost health care february 2006 gm announced beginning january 2007 would cap contributions salaried retiree health care level 2006 expenditures change affects employees retirees eligible salaried postretirement healthcare benefit spouses salaried employees hired january 1 1993 eligible retiree healthcare benefits affected changes 2006 average costs exceed established limits gm make additional plan changes affect costsharing features program coverage effective start next calendar year program changes may include limited higher monthly contributions deductibles coinsurance outofpocket maximums prescription drug payments plan changes may implemented medical dental vision prescription drug plans remeasurement us salaried opeb health care plan february 9 2006 resulted 47 billion reduction opeb obligation 05 billion opeb expense commencing second quarter october 2006 gm board directors approved reduction levels coverage corporatepaid life insurance salaried retirees eligible salaried employees retire may 1 2007 coverage reduce 50 tenth anniversary retirement date salaried employees retire may 1 general motors corporation subsidiaries turnaround plan concluded 2007 coverage reduced 50 january 1 2017 change reduced gm’s yearend opeb obligation approximately 05 billion 2007 gm benefit full year impact changes health care discussed addition gm continue work employees healthcare providers us government find solutions critical issues posed rising cost health care labor negotiations gm’s current collective bargaining agreement uaw expires september 2007 negotiations present risks opportunity address cost competitiveness issues relative competitors industry gm recognizes impact resulting labor stoppages could gm suppliers dealers begun contingency planning groups collective bargaining agreement expires new agreement reached gm anticipates would attempt persuade uaw support continuing operations negotiations continue possible however expiration collective bargaining agreement could result labor disruptions affecting gm facilities united states operations suppliers employ workers represented uaw lengthy strike uaw involves significant portion manufacturing facilities united states would material adverse effect operations financial condition particularly liquidity delphi bankruptcy general october 2005 delphi filed petition chapter 11 proceedings us bankruptcy code many us subsidiaries delphi gm’s largest supplier automotive systems components parts gm delphi’s largest customer gm worked continue work constructively court proceedings delphi’s unions participants delphi’s chapter 11 restructuring process delphi continues assure gm expects disruption ability supply gm systems components parts needs delphi pursues restructuring plan chapter 11 process although challenges faced delphi restructuring process could create operating financial risks gm process also expected present opportunities gm opportunities include reducing long term significant cost penalty gm incurs obtaining parts delphi well improving quality systems components parts gm procures delphi however assurance gm able realize benefits result delphi’s restructuring process framework support agreement december 18 2006 facilitate consensual resolution delphi’s bankruptcy gm entered plan framework support agreement framework agreement delphi consortium potential investors delphi plan investors outlines certain material terms proposed restructuring plan delphi proposed plan proposed plan conditioned implementation overall transformation strategy would include settlement certain issues disputes gm delphi designated issues proposed equity investments plan investors delphi designated issues include legacy obligations related delphi employees formerly gm hourly employees including responsibility various pension opeb obligations b costs associated transformation delphi’s business c delphi’s support gm’s efforts resource certain products purchased gm restructuring ongoing contractual relationships gm delphi e amount treatment gm’s claims delphi chapter 11 proceedings framework agreement gm agreed among things negotiate matters good faith obligated enter agreements gm delphi reach commercial business laborrelated agreements evidenced definitive documentation general motors corporation subsidiaries delphi bankruptcy continued framework agreement proposed plan would provide gm’s claims delphi ordinary course business environmental claims would flow bankruptcy would satisfied payment 263 billion cash seven million shares common stock delphi reorganized total 135 million fully diluted shares gm expects obligations costs would assume resolve designated issues together recoveries contemplated proposed plan would consistent 6 billion 75 billion estimated range contingent exposures discussed associated delphi’s chapter 11 proceedings pursuant framework agreement delphi intends among things negotiate finalize proposed plan related documents seek bankruptcy court approval proposed plan payment related expenses prepare distribute draft disclosure statement respect proposed plan investors gm seek bankruptcy court approval disclosure statement “disclosure statement order” provided gm delphi reach agreement issues documents affecting gm negotiated proposed plan gm support disclosure statement order object confirmation proposed plan bankruptcy court framework agreement terminated party agreement time april 1 2007 upon termination investment agreement delphi plan investors terminated time addition framework agreement provides april 1 2007 gm plan investors pursue negotiate facilitate transaction inconsistent proposed investment plan investors delphi commitment could extended beyond date consent gm plan investors may withheld unreasonably gm delphi reach comprehensive resolution issues affecting goal current negotiations framework agreement matters described remainder section handled parties agree since negotiations still underway however assurance gm delphi succeed agreeing upon comprehensive resolution following matters continue pose significant risks gm delphi motions seeking authority reject various contracts delphi consented consideration progress made toward consensual resolution chapter 11 process indefinite adjournment hearings motions filed march 2006 us bankruptcy code seeking authority reject us labor agreements modify retiree welfare benefits reject certain supply contracts gm delphi unions plan investors gm unable negotiate comprehensive agreements resolve issues involved delphi’s bankruptcy delphi one affiliates could subject labor disruptions could reject threaten reject individual contracts gm either purpose exiting specific lines business attempt increase price gm pays certain parts components events could materially adversely affect gm disrupting supply automotive systems components parts could even force suspension production gm assembly facilities gm believes likely gm delphi reach consensual resolution pursuant framework agreement seeking minimize risks protecting right setoff 115 billion owed delphi date chapter 11 filing however extent obligations covered right setoff may subject dispute delphi creditors’ committee delphi’s creditors limitation court gm cannot provide assurance able setoff amounts fully partially date gm taken setoffs approximately 536 million delphi’s agreement benefit guarantee agreements described designated issues delphi gm include legacy obligations responsibility various pension opeb obligations related certain us hourly employees formerly gm employees became delphi employees gm’s spinoff delphi 1999 transferred employees connection spinoff gm entered separate agreements uaw iuecwa united steel workers benefit guarantee agreements providing contingent benefit guarantees general motors corporation subsidiaries delphi bankruptcy continued make payments limited pension opeb certain transferred employees meet applicable eligibility requirements payments covered employees benefit guarantee agreement contains separate benefit guarantees relating pension opeb obligations different triggering events gm could liable delphi fails provide corresponding benefit required level therefore gm could incur liability one guarantees eg opeb without triggering guarantees eg pension addition respect pension benefits gm’s guarantee pension benefits arises extent pension benefits provided delphi applicable successor pension benefit guaranty corporation fall short guaranteed amounts gm’s obligations benefit guarantee agreements triggered delphi’s chapter 11 filing delphi’s motions bankruptcy court reject us labor agreements modify retiree welfare benefits actions date benefit guarantees expire october 18 2007 unless triggered date benefit guarantee agreements obligate gm guarantee benefits delphi retirees excess corresponding benefits gm provides time hourly retirees accordingly reduction benefits gm provides hourly retirees would reduce gm’s obligations corresponding benefit guarantee separate agreement gm delphi also expires october 18 2007 requires delphi indemnify gm payments benefit guarantees uaw employees retirees recovery gm indemnity claims delphi might subject partial complete discharge delphi reorganization proceeding result gm’s claims indemnity may paid fully partially part gm’s discussions 2005 uaw led settlement uaw changing healthcare benefits hourly retirees gm provided covered employees represented uaw potential earn seven years credited service purposes eligibility certain healthcare benefits gmuaw benefit guarantee agreement uaw attrition agreement first half 2006 gm delphi uaw implemented uaw attrition agreement provided combination early retirement programs incentives reduce hourly employment levels gm delphi december 31 2006 approximately 12400 uawrepresented delphi employees elected one retirement options available uaw attrition program uaw attrition agreement gm agreed assume certain costs regarding uawrepresented delphi employees specifically gm agreed 1 pay lump sums 35000 certain employees participate uaw attrition program 2 assume opeb obligations transferred employees agree retire uaw attrition program via return gm 3 subsidize healthcare costs delphi employees participating special voluntary preretirement program interim period delphi reduces eliminates health care andor life insurance coverage provided active uaw employees 4 accept back 5000 active transferred employees gm prepetition general unsecured claim assertable delphi amount approximately 29 billion related certain gm’s costs uaw attrition agreement subject objections grounds claim arise terms certain preexisting contractual agreements gm delphi additional attrition programs december 31 2006 approximately 6200 transferred employees represented iuecwa approximately 1400 transferred employees represented uaw elected participate additional attrition buyout programs offered second half 2006 similar program uaw attrition agreement described gm prepetition general unsecured claim assertable delphi amount approximately 06 billion related certain gm’s costs iuecwa attrition program subject objections grounds claim arise terms certain preexisting contractual agreement gm delphi gm also allowed general motors corporation subsidiaries delphi bankruptcy concluded prepetition general unsecured claim delphi amount approximately 03 billion gm’s portion buyout payments made additional iuecwa uaw programs gm claims delphi july 2006 gm filed consolidated proof claim accordance bankruptcy court’s procedures order setting forth gm claims including claims various gm subsidiaries delphi debtor entities exact amount gm’s claims cannot established contingent nature many claims involved fact validity amount claims may subject objections delphi stakeholders based currently available data amount gm’s claims could much 13 billion although proof claim preserves gm’s right pursue recovery claims delphi claims may subject compromise bankruptcy process part negotiated settlement gm may receive portion claims gm contingent liability depending outcome current negotiations factors gm believes probable incurred contingent liability due delphi’s chapter 11 filing based currently available data ongoing discussions delphi stakeholders gm believes range contingent exposures 6 billion 75 billion amounts near low end range considered possible amounts near high end range initially gm established liability 55 billion 36 billion tax contingent exposure fourth quarter 2005 recorded additional charge 05 billion 03 billion tax third quarter 2006 reflect gm’s potential exposure opeb costs associated previously divested delphi business units certain labor restructuring costs including limited expenditures related attrition plans discussed december 31 2006 2005 gm’s contingent liability related delphi matters 15 billion 55 billion respectively 2006 amounts previously recorded benefit guarantee reclassified gm’s opeb liability gm assumed opeb obligation approximately 17800 delphi employees returned back gm continue working retire gm views reflect gm’s current assessment unlikely chapter 11 process result termination delphi’s pension plan complete elimination opeb plans addition theses charges gm may agree reimburse delphi certain labor expenses incurred upon delphi’s emergence bankruptcy gm’s current estimate expenses involves initial payment 2007 expected exceed approximately 400 million ongoing expenses limited duration estimated average less 100 million annually gm recognize expenses incurred future gm expects payments far exceeded anticipated reductions price systems components parts purchases delphi negotiations ongoing actual impact resolution issues related delphi cannot determined bankruptcy court’s approval comprehensive resolution assurance parties reach comprehensive resolution bankruptcy court approve resolution include terms described gm required make opeb payments current delphi retirees benefit guarantee agreements gm would expect make payments ongoing operating cash flow financings payments expected material effect gm’s cash flows short term however required payments would likely increase time could material effect gm’s liquidity coming years reference delphi’s 2006 annual report form 10k reported 2006 paid benefits 229 million hourly salaried retirees salaried retirees covered benefit guarantee agreements gmac sale 51 controlling interest november 30 2006 gm completed gmac transaction sale 51 controlling interest gmac purchase price 74 billion fim holdings fim holdings consortium investors including cerberus fim investors llc citigroup inc aozora bank limited subsidiary pnc financial services group inc gm retained 49 interest gmac’s common membership interests addition fim holdings purchased 555000 gmac’s preferred membership interests cash purchase price 500 million gm purchased 1555000 preferred membership interests cash purchase price 14 billion general motors corporation subsidiaries gmac sale 51 controlling interest continued total value cash proceeds distributions gm payment certain intercompany obligations purchased preferred membership interests gmac expected approximately 14 billion three years comprised 74 billion purchase price 27 billion cash dividend closing transaction related cash flows including monetization certain retained assets subsequent december 31 2006 determined gm would required make capital contribution gmac approximately 10 billion restore adjusted tangible equity balance contractually required amount 144 billion due decrease adjusted tangible equity balance gmac november 30 2006 gmac required make certain quarterly distributions holders preferred membership interests cash pro rata basis preferred membership interests issued units 1000 accrue yield rate 10 per annum gmac’s board managers gmac board may reduce distribution extent required avoid reduction equity capital gmac minimum amount equity capital equal net book value gmac november 30 2006 addition gmac board may suspend payment preferred membership interest distributions consent holders majority preferred membership interest distributions made respect fiscal quarter distributions would cumulative accrued yield gmac’s preferred membership interests fiscal quarter fully paid preferred holders portion excess net financial book income gmac fiscal quarter amount yield distributed holders preferred membership interests quarter distributed holders common membership interests follows least 40 excess paid fiscal quarters ending prior december 31 2008 least 70 excess paid fiscal quarters ending december 31 2008 prior consummation gmac transaction certain assets respect automotive leases owned gmac affiliates net book value approximately 4 billion related deferred tax liabilities 18 billion transferred gm ii gm assumed retained certain gmac’s opeb obligations 842 million related deferred tax assets 302 million iii gmac transferred entities hold certain real properties gm iv gmac paid cash dividends gm based gmac’s anticipated net income period september 30 2005 november 30 2006 totaling 19 billion v gm repaid certain indebtedness specified intercompany unsecured obligations owing gmac vi gmac made onetime distribution gm 27 billion cash reflect increase gmac’s equity resulting transfer portion gmac’s net deferred tax liabilities arising conversion gmac certain subsidiaries llcs part agreement gm retained option 10 years closing date repurchase gmac certain assets related automotive finance business north american operations international operations gmac gm’s exercise option conditional gm’s credit rating investment grade higher gmac’s credit rating call option price calculated higher fair market value ii 95 times consolidated net income gmac’s automotive finance business either calendar year call option exercised calendar year immediately following year call option exercised gmac transaction important element gm’s turnaround efforts provided following • strong longterm services agreement gm gmac part transaction gm gmac entered number agreements intended continue mutuallybeneficial global relationship gm gmac agreements substance consistent existing historical practices gm gmac including requiring gmac continue allocate capital automotive financing thereby continuing provide critical financing support significant share gm’s global sales gmac retains right make individual credit decisions gmac committed fund broad spectrum customers dealers consistent historical practice relevant jurisdictions subject gmac’s fulfillment certain conditions gm granted gmac exclusivity gm products specified markets around world us canadian international gmsponsored retail lease dealer marketing incentives exception saturn branded products general motors corporation subsidiaries gmac sale 51 controlling interest concluded • improved liquidity gm received significant cash proceeds closing bolster gm’s liquidity strengthening gm’s balance sheet funding turnaround plan • enhanced stockholder value stronger gmac gm retained 49 common membership interest gmac able continue participate gmac’s strong profitability levels • delinkage gmac’s credit rating gm pursuing sale majority interest gmac gm expected introduction new controlling investor gmac new capital gmac significantly reduced intercompany exposures gm would provide gmac solid foundation improve current credit rating delink gmac credit ratings gm following sale december 2006 fitch ratings fitch standard poor’s sp raised gmac’s credit rating one notch although remains investment grade investigations previously reported gm cooperating federal governmental agencies connection number investigations sec issued subpoenas gm connection various matters including gm’s financial reporting concerning pension opeb certain transactions gm delphi supplier price reductions credits obligation gm may fund pension opeb costs connection delphi’s proceedings chapter 11 bankruptcy code addition sec issued subpoena connection investigation transactions precious metal raw materials used automotive manufacturing operation federal grand jury issued subpoena connection supplier credits gm produced documents provided testimony response sec federal grand jury subpoenas gm continue cooperate sec federal grand jury respect matters addition sec federal grand jury subpoenas served gmac entities connection industrywide investigations practices insurance industry relating loss mitigation insurance products finite risk insurance following gmac transaction gmac retained responsibility matter liquidity capital resources investors potential investors gm securities consider cash flows automotive fio businesses relevant measure analysis gm’s various securities trade public markets accordingly gm provides supplemental statements cash flows aid users gm’s consolidated financial statements analysis performance liquidity capital resources general motors corporation subsidiaries liquidity capital resources continued information reconciles consolidated statements cash flows elimination “net investing activity financing insurance operations” “net financing activity automotive operations” line items shown table following statements years ended december 31 2006 2005 2004 general motors corporation subsidiaries general motors corporation subsidiaries auto available liquidity gm believes sufficient liquidity financial flexibility meet capital requirements short medium term reasonably foreseeable circumstances long term gm believes ability meet capital requirements primarily depend successful execution turnaround plan return north american operations profitability positive cash flow auto available liquidity includes cash balances marketable securities readily available assets veba trusts december 31 2006 auto’s available liquidity 264 billion compared 204 billion december 31 2005 233 billion december 31 2004 amount gm’s consolidated cash marketable securities subject intramonth seasonal fluctuations includes balances held various gm business units subsidiaries worldwide needed fund operations addition 25 billion readilyavailable veba trust assets included available liquidity gm expects access additional veba trust assets time reimburse opeb plan costs additional veba trust assets totaled approximately 153 billion december 31 2006 making total veba trust assets available gm 178 billion december 31 2006 december 31 2005 total veba trust assets 191 billion 38 billion readily available december 31 2004 total veba trust assets 20 billion 35 billion readily available decline veba balances since december 31 2005 primarily driven 41 billion withdrawals 2006 partially offset favorable asset returns year november 30 2006 gm consummated gmac transaction sold controlling interest gmac fim holdings total value cash proceeds distributions gm repayment certain intercompany obligations purchased preferred membership interests gmac expected approximately 14 billion three years comprised 74 billion purchase price 27 billion cash dividend closing transaction related cash flows including monetization certain retained assets three years proceeds gm invested 14 billion cash new preferred membership interests gmac subsequent december 31 2006 determined gm would required make capital contribution gmac approximately 1 billion restore adjusted tangible equity balance contractually required amount 144 billion due decrease adjusted tangible equity balance gmac november 30 2006 gm also 46 billion standby revolving credit facility syndicate banks 150 million terminates june 2008 45 billion terminates july 2011 approximately 69 million letters credit issued credit facility loans currently outstanding gm believes banks continue lend facility notwithstanding restatement certain historical financial statements described annual report form 10k 45 billion secured facility borrowings limited amount based value underlying collateral consists certain north american accounts receivable inventory gm saturn corporation gm canada certain plants property equipment gm canada pledge 65 stock holding company gm’s indirect subsidiary gm de mexico addition 45 billion secured line credit collateral also secures certain lines credit automatic clearinghouse overdraft arrangements letters credit provided secured lenders totaling general motors corporation subsidiaries available liquidity continued approximately 15 billion event certain work stoppages secured facility would temporarily reduced 35 billion gm believes possible issues may arise recent restatement prior financial statements various financing arrangements financing arrangements consist principally obligations connection saleleaseback transactions lease obligations including offbalance sheet arrangements include gm’s public debt indentures view recent restatement prior financial statements gm evaluated effect restatement agreements including legal rights ability cure respect claims could asserted based review gm believes amounts subject possible claims acceleration termination remedies likely exceed 27 billion consisting primarily offbalance sheet arrangements although assurances given likelihood nature amount claims may asserted moreover gm believes may economic disincentives third parties raise claims extent based review gm reclassified approximately 257 million obligations longterm debt shortterm debt gm believes sufficient liquidity short medium term regardless resolution matters gm also additional 12 billion undrawn committed facilities including certain offbalance sheet securitization programs various maturities 08 billion undrawn uncommitted lines credit addition gm’s consolidated affiliates nongm minority shareholders primarily gm daewoo combined 16 billion undrawn committed facilities potential measures strengthen available liquidity could include sale noncore assets additional public private financing transactions recoveries framework agreement entered delphi plan investors january 2007 gm announced looking strategic options allison transmission commercial military operations including potential sale business additionally gm currently believes access bank financing limited access public markets debt equity combination thereof access markets dependent market conditions financial condition connection delphi recoveries gm arrangement contemplated framework agreement expected include estimated 26 billion cash gm’s claims delphi bankruptcy 20 billion cash andor notes receivable connection transfer portion delphi’s us hourly pension plan obligations gm anticipates additional liquidity could used funding turnaround plan addressing potential risks contingencies described “risk factors risks related gm automotive business” cash flow increase available liquidity 264 billion december 31 2006 204 billion december 31 2005 primarily result gmac transaction cash dividends received gmac net cash received gm’s partial sale interest suzuki common stock increase longterm borrowings withdrawals gm’s veba trusts increase partially offset auto’s loss cumulative effect change accounting principle significant capital expenditures required support business cash payments retiree healthcare life insurance benefits investments marketable securities primarily consist purchases sales maturities highlyliquid corporate us government us government agency mortgagebacked debt securities used cash management purposes 2006 gm acquired approximately 02 billion marketable securities sales maturities marketable securities approximately 17 billion year ended december 31 2006 auto positive operating cash flow 56 billion net loss 30 billion result compares positive operating cash flow 36 million net loss 127 billion 2005 apart improvements gm’s net loss position 2006 operating cash flow included withdrawals 41 billion gm’s veba trust opeb plans reimbursement retiree healthcare life insurance general motors corporation subsidiaries available liquidity concluded benefits provided eligible plan participants operating cash flow unfavorably impacted approximately 04 billion cash costs related gmna restructuring initiative 01 billion cash costs related gme restructuring initiative 04 billion cash costs related delphi special attrition programs charges recorded 2003 2005 2006 charge 64 billion related uaw attrition agreement includes 21 billion cash payments employees 14 billion paid 2006 balance 07 billion expected paid next three years payments funded using cash flow operations remaining 43 billion charge reflects noncash curtailment charges associated gm’s pension opeb extended disability plans us hourly employees consequently immediate cash flow impact capital expenditures significant use investing cash 2006 capital expenditures 75 billion primarily attributable ongoing investment gmna required support new product launches years ended december 31 2005 2004 capital expenditures 79 billion 73 billion respectively favorable investing cash flows included 48 billion dividends gmac 25 billion 2005 15 billion 2004 increase dividends gmac 2006 largely attributable gmac transaction favorable investing cash flows included 93 billion proceeds sale business units equity investments comprising gm’s sale controlling interest gmac approximately 74 billion cash november 2006 gm’s sale interest suzuki common stock approximately 20 billion march 2006 gm anticipates total annual capital spending 85 billion 9 billion 2007 2008 approximately 57 billion 2007 approximately 55 billion 57 billion 2008 devoted gmna debt auto’s total debt including capital leases industrial revenue bond obligations borrowings gmac december 31 2006 387 billion 57 billion classified shortterm current portion longterm debt 330 billion classified noncurrent longterm december 31 2005 total debt 342 billion 16 billion shortterm current portion longterm debt 326 billion noncurrent longterm increase total debt primarily result issuance 15 billion term loan november 29 2006 classification 29 billion liabilities due gmac debt december 31 2006 instead amount due gmac prior gmac transaction shortterm borrowing current portion longterm debt 57 billion includes approximately 12 billion related convertible debentures puttable gm 11 billion settled cash march 6 2007 approximately 10 billion debt issued gm’s subsidiaries consolidated affiliates 28 billion related party debt mainly dealer financing gmac reclassification gmac financing primary driver increase shortterm debt year gm funded settlement convertible debentures using cash flow operations available liquidity gm various debt maturities approximately 28 billion 2008 07 billion 2009 gm believes adequate liquidity settle obligations become due order provide financial flexibility gm suppliers gm maintains trade payables program gmac commercial finance gmaccf terms gmac transaction gm permitted continue administering program gmaccf long gm provides funding advance payments suppliers program may 1 2006 gm commenced funding advance payments result december 31 2006 outstanding balance owed gm gmaccf program general motors corporation subsidiaries available liquidity concluded net liquidity net liquidity calculated cash marketable securities 25 billion 38 billion december 31 2005 readilyavailable assets veba trust less shortterm borrowings longterm debt negative 123 billion december 31 2006 compared negative 138 billion december 31 2005 financing insurance operations described “gmac sale 51 controlling interest” prior consummation gmac transaction gmac dividended gm leaserelated assets net equity value approximately 4 billion related deferred tax liabilities 18 billion dividend resulted transfer gm two bankruptcyremote subsidiaries hold equity interests ten trusts leased vehicles issued assetbacked securities secured vehicles gmac originated securitizations remains servicer securitizations gm consolidates bankruptcyremote subsidiaries ten trusts financial reporting purposes result december 31 2006 gm vehicles subject operating leases 118 billion net assets 15 billion outstanding secured debt 94 billion net equity 39 billion associated bankruptcyremote subsidiaries secured debt recourse solely leased vehicles related assets gm continues obligated bankruptcyremote subsidiaries residual support payments leased vehicles amount estimated equal approximately 16 billion december 31 2006 however neither securitization investors trusts rights residual support payments gm expects operating leases related securitization debt gradually amortize next three four years resulting release two bankruptcyremote subsidiaries certain cash flows related ownership securitization trusts related operating leases cash flow gm expects realize leased vehicle securitizations next three four years come three principal sources first cash released securitizations monthly basis result available funds exceeding debt service required payments month second cash received upon following termination securitization extent remaining overcollateralization third return residual support payments owing gm month since transferred gmac gm december 31 2006 total cash flows released two bankruptcyremote subsidiaries approximately 118 million status debt ratings dominion bond rating services dbrs moody’s investor service moody’s fitch sp currently rate gm’s credit noninvestment grade following table summarizes gm’s credit ratings march 12 2007 2006 dbrs fitch moody’s sp downgraded gm’s unsecured debt july 24 2006 dbrs downgraded gm’s senior unsecured rating b high commercial paper rating r3 low r3 middle following completion aforementioned secured credit transaction trend remained negative september 15 2006 dbrs revised shortterm credit rating gm r5 negative r3 low negative result new ratings methodology november 30 2006 dbrs affirmed gm’s senior unsecured rating b negative trend commercial paper rating r5 negative trend march 1 2006 fitch downgraded gm’s senior unsecured rating b june 20 2006 fitch assigned bb rating negative rating watch gm’s secured credit facility gm’s issuer rating remained unchanged b rating watch negative november 13 2006 fitch assigned bb rating negative rating watch gm’s secured term loan general motors corporation subsidiaries status debt ratings concluded february 21 2006 moody’s downgraded gm’s senior unsecured debt b2 negative outlook b1 review possible downgrade march 16 2006 moody’s placed senior unsecured ratings gm review possible downgrade march 29 2006 moody’s downgraded gm’s senior unsecured debt b3 negative outlook may 5 2006 moody’s placed gm’s senior unsecured debt rating review possible downgrade gm’s corporate rating unaffected june 20 2006 moody’s assigned b2 rating gm’s secured credit facility affirmed company’s b3 corporate rating lowered unsecured credit rating caa1 rating outlook negative september 22 2006 moody’s revised debt rating secured credit facility result new lossgivendefault methodology ba3 b2 issuer credit rating longterm unsecured debt rating gm unaffected november 13 2006 moody’s assigned ba3 rating gm’s new senior secured term loan march 29 2006 sp placed gm’s longterm b shortterm b3 corporate credit ratings creditwatch negative implications june 20 2006 sp assigned b credit rating proposed gm senior bank loan facility recovery rating “1” signifying lenders expect full recovery principal event payment default time sp affirmed company’s b corporate credit rating lowered senior unsecured debt rating gm b result secured bank transaction rating remained creditwatch negative implications november 14 2006 sp assigned b credit rating proposed gm senior term loan facility recovery rating “1” signifying lenders expect full recovery principal event payment default december 13 2006 sp affirmed b corporate credit rating negative outlook gm removed credit rating creditwatch ratings actions described increased borrowing costs limited access unsecured debt markets outcomes mitigated actions taken gm past years focus increased use liquidity sources institutional unsecured markets directly affected ratings unsecured debt including secured funding sources conduit facilities reductions gm’s credit ratings could increase possibility additional terms conditions contained new replacement financing arrangements result specific funding actions taken past years management believes gm continue access sufficient capital meet ongoing funding needs short mediumterm notwithstanding foregoing management believes current ratings situation outlook increase level risk achieving gm’s funding strategy addition ratings situation outlook increase importance successfully executing gm’s plans improvement operating results pension postretirement benefits plans covering represented employees generally provide benefits negotiated stated amounts year service well significant supplemental benefits employees retire 30 years service normal retirement age gm’s policy respect qualified pension plans contribute annually less minimum required applicable law regulation directly pay benefit payments appropriate december 31 2006 legal funding requirements met gm made contributions pension plans follows 2007 gm contributions due us hourly salaried pension plans gm expect make discretionary contributions us hourly salaried pension plans 2007 gm expects general motors corporation subsidiaries pension postretirement benefits concluded contribute pay benefits approximately 100 million us pension plan 600 million primary nonus pension plans include gm canada adam opel vauxhall 2007 gm’s us hourly salaried pension plans overfunded 171 billion 2006 75 billion 2005 increase primarily attributable strong actual asset returns approximately 15 2006 gm’s nonus pension plans underfunded 109 billion end 2006 107 billion end 2005 gm also maintains hourly salaried opeb plans provide postretirement medical dental vision life insurance us retirees eligible dependents certain nonus subsidiaries postretirement benefit plans although participants covered government sponsored administered programs gm’s us opeb plan underfunded 474 billion 2006 621 billion 2005 gm’s nonus opeb plans underfunded 37 billion 2006 38 billion 2005 2006 gm withdrew total 41 billion plan assets veba trusts opeb plans reimbursement retiree healthcare life insurance benefits provided eligible plan participants 2005 gm withdrew total 32 billion veba trust 2007 gm currently anticipates withdraw approximately 2 billion plan assets veba trust opeb plans pursuant uaw health care settlement agreement gm required make certain contributions new independent veba trust used mitigate effect reduced gm healthcare coverage uaw retirees number years gm control assets veba trust following benefit payments reflect estimated future employee services appropriate expected paid benefits us pension plans certain nonus pension plans paid plan assets rather cash offbalance sheet arrangements gm uses offbalance sheet arrangements economics sound business principles warrant use gm’s principal use offbalance sheet arrangements occurs connection securitization sale financial assets financial assets sold gm consist principally trade receivables part securitization program gm participated since 2004 part program gm entered agreement sell undivided interests eligible trade receivables 850 million 1 billion 2006 2005 respectively bank conduit funds purchases issuance commercial paper via direct bank funding receivables program sold fair market value excluded consolidated balance sheets loss trade receivables sold included automotive cost sales 30 million 2006 23 million 2005 amount receivables sold december 31 2006 2005 200 million 444 million respectively gm retained interest receivables sold performs collection administrative functions gross amount proceeds received sale receivables program approximately 90 billion 128 billion 2006 2005 respectively general motors corporation subsidiaries offbalance sheet arrangements concluded addition securitization program gm participates trade receivable securitization programs primarily europe financing providers beneficial interest gm’s pool eligible european receivables 01 billion 03 billion december 31 2006 2005 respectively related securitization programs gm leases real estate equipment various offbalance sheet entities established facilitate financing assets gm nationally prominent lessors gm believes creditworthy assets consist principally office buildings warehouses machinery equipment use entities allows parties providing financing isolate particular assets single entity thereby syndicate financing multiple third parties conventional financing technique used lower cost borrowing thus lease cost lessee gm wellestablished market institutions participate financing property purchase ownership interests entities owned institutions independent affiliated gm believes officers directors employees gm affiliates hold direct indirect equity interests entities gmac transaction november 2006 gmac’s assets offbalance sheet entities attributable gm end 2006 gmac transaction lower utilization gm’s trade receivables securitization primarily explain decrease offbalance sheet arrangements assets offbalance sheet entities follows december 31 2005 additional offbalance sheet trade receivables sold gmac 525 million contractual obligations longterm liabilities gm following minimum commitments contractual obligations including purchase obligations defined sec “purchase obligation” defined agreement purchase goods services enforceable legally binding gm specifies significant terms including fixed minimum quantities purchased fixed minimum variable price provisions approximate timing transaction longterm liabilities defined longterm liabilities reflected gm’s balance sheet gaap based definition table includes contracts include fixed minimum obligations include normal purchases made ordinary course business general motors corporation subsidiaries contractual obligations longterm liabilities concluded following table provides aggregated information outstanding contractual obligations longterm liabilities december 31 2006 1 amounts include postretirement benefits current contractual labor agreements north america remainder estimated liability benefits beyond current labor agreement essentially salaried employees classified remaining balance postretirement benefits obligations contractual 2 total veba assets allocated based projected spending requirements amount includes 01 billion veba withdrawal fourth quarter 2006 combined us hourly salaried pension plans 171 billion overfunded yearend 2006 result gm expect make contributions us hourly salaried pension plans foreseeable future assuming material changes present market conditions dividends may paid 123 par value common stock declared gm’s board directors sole discretion amounts available dividends applicable law delaware law board may declare dividends extent statutory “surplus” ie total assets minus total liabilities case fair market value minus statutory capital surplus net profits current andor immediately preceding fiscal year gm’s policy distribute dividends 123 par value common stock based outlook indicated capital needs business cash dividends per share gm 123 par value common stock 100 2006 general motors corporation subsidiaries dividends concluded 200 2005 2004 february 6 2007 meeting gm board directors board approved payment 025 quarterly dividend gm 123 par value common stock first quarter 2007 cash dividends per share common stock 025 per quarter 2006 critical accounting estimates preparation consolidated financial statements accordance accounting principles generally accepted united states requires management make estimates assumptions affect reported amounts asset liabilities disclosure contingent assets liabilities date financial statements reported amounts revenues expenses periods presented management believes accounting estimates employed appropriate resulting balances reasonable however due inherent uncertainties making estimates actual results could differ original estimates requiring adjustments balances future periods pension opeb pension opeb costs liabilities dependent assumptions used calculating amounts primary assumptions include factors discount rates health care cost trend rates expected return plan assets mortality rates retirement rates rate compensation increase discussed • discount rates beginning 2005 yearend valuations gm estimates discount rate us pension opeb obligations using iterative process based hypothetical investment portfolio highquality bonds rated aa higher recognized rating agency hypothetical reinvestment proceeds bonds upon maturity forward rates derived yield curve us pension opeb obligations fully defeased gm incorporates reinvestment component methodology feasible light magnitude time horizon us pension opeb obligations extend accomplish full defeasance direct cash flows actual set bonds selected given measurement date improved methodology considered change estimate developed 2005 adopted deemed superior previously available algorithms estimating assumed discount rates particular approach permits better match future cash outflows related benefit payments future cash inflows associated bond coupons maturities prior 2005 yearend valuations gm estimated discount rate us pension opeb obligations reference moody’s aa index citibank salomon smith barney’s abovemedian curve watson wyatt’s bondmatching model well benchmarking • health care cost trend rate healthcare cost trend rate based historical retiree cost data near term health care outlook including appropriate cost control measures implemented gm industry benchmarks surveys • expected return plan assets expected return plan assets derived detailed periodic studies include review asset allocation strategies anticipated future longterm performance individual asset classes risks standard deviations correlations returns among asset classes comprise plans’ asset mix studies give appropriate consideration recent plan performance historical returns assumptions primarily longterm prospective rates return • mortality rates mortality rates based actual projected plan experience • retirement rates retirement rates based actual projected plan experience • rate compensation increase rate compensation increase final pay plans reflects longterm actual experience outlook including contractually agreed upon wage rate increases represented hourly employees general motors corporation subsidiaries pension opeb concluded accordance gaap actual results differ assumptions accumulated amortized future periods therefore generally affect recognized expense recorded obligation future periods management believes assumptions used appropriate differences actual experience changes assumptions may affect gm’s pension postretirement obligations future expense following information illustrates sensitivity change certain assumptions us pension plans december 31 2006 projected benefit obligation pbo us pension plans 85 billion gm’s us pension plans generally provide covered us hourly employees pension benefits negotiated flat dollar amounts year credited service earned individual employee formulas providing stated amounts contained prevailing labor contract expires september 2007 consistent gaap 2006 pension expense december 31 2006 pbo comprehend future benefit increases decreases one contract next current cycle negotiating new labor contracts every four years past practice maintaining consistent level benefit increases decreases one contract next however following data illustrates sensitivity pension expense pbo hypothetical assumed changes future basic benefits annual onepercentage point increase benefit units us hourly employees would result 100 million increase 2007 pension expense 510 million increase december 31 2006 us hourly plan pbo annual onepercentage point decrease benefit unit would result 90 million decrease 2007 pension expense 460 million decrease pbo following table illustrates sensitivity change discount rate assumption related gm’s us opeb plans us accumulated postretirement benefit obligation apbo significant portion gm’s worldwide apbo 68 billion december 31 2006 onepercentage point increase assumed us health care trend rates would increased us apbo 60 billion aggregate service interest cost components nonpension postretirement benefit expense annualized basis 502 million onepercentage point decrease would decreased us apbo 50 billion aggregate service interest cost components nonpension postretirement benefit expense annualized basis 413 million sensitivities reflect effect changing one assumption time noted economic factors conditions often affect multiple assumptions simultaneously effects changes key assumptions necessarily linear general motors corporation subsidiaries deferred taxes gm recognizes deferred tax assets liabilities based differences financial statement carrying amounts tax bases assets liabilities gm regularly evaluates recoverability deferred tax assets establishes valuation allowance based historical taxable income projected future taxable income expected timing reversals existing temporary differences implementation taxplanning strategies gm considers whether likely portion deferred tax assets realized gm unable generate sufficient future taxable income certain tax jurisdictions material change actual effective tax rates time period within underlying temporary differences become taxable deductible gm could required increase valuation allowance deferred tax assets resulting additional income tax expense december 31 2006 approximately 348 billion us net deferred tax assets time consider likely us taxable income future allow us realize deferred tax assets however possible deferred tax assets could ultimately expire unused especially gm’s automotive operations profitable sales incentives later time sale time incentive announced dealers applies vehicles sold gm dealer inventory gm records reduction revenue estimated impact sales allowances form dealer customer incentives may numerous types incentives available particular time incentive programs generally brand specific model specific regionally specific factors used estimating cost incentives include volume vehicles affected incentive programs offered product mix rate customer acceptance incentive program actual number affected vehicles differs estimate different mix incentives actually paid reduction revenue sales incentives could affected discussed multitude inputs affecting calculation estimate sales allowances increase decrease variables could significant impact reduction revenue sales allowances policy warranty recalls provisions estimated expenses related policy product warranties made time products sold estimates established using historical information nature frequency average cost claims management actively studies trends claims takes action improve vehicle quality minimize claims actual experience could differ amounts estimated requiring adjustment liabilities future periods impairment longlived assets gm periodically reviews carrying value longlived assets held used goodwill intangible assets indefinite lives assets disposed events circumstances warrant conjunction annual business planning cycle review performed using estimates future cash flows discounted rate commensurate risk involved carrying value longlived asset considered impaired impairment charge recorded amount carrying value longlived asset exceeds fair value product lines could become impaired future require additional charges result declines profitability due changes volume pricing costs postemployment benefits costs idle consolidate close facilities provide postemployment benefits employees temporary basis accrued based management’s best estimate wage benefits costs incurred qualified employees jobs bank provisions current labor agreement date expiration september 2007 plus estimated costs expected paid thereafter estimates include 45 9 projected level acceptance normal early retirement offers respectively made pursuant current labor agreement estimates acceptances based gm’s historical experience offering general motors corporation subsidiaries postemployment benefits concluded programs costs related idling employees expected temporary expensed incurred gm reviews adequacy continuing need liabilities annual basis conjunction yearend production labor forecasts furthermore gm reviews reasonableness liabilities quarterly basis valuation operating leases lease residuals accounting operating leases management must make determination beginning lease estimated realizable value ie residual value vehicle end lease residual value represents estimate market value vehicle end lease term typically ranges nine months four years customer obligated make payments term lease contract residual however since customer obligated purchase vehicle end contract exposed risk loss extent value vehicle residual value estimated contract inception residual values represent estimate values assets end lease contracts initially determined consulting independently published residual value guides realization residual values dependent future ability market vehicles prevailing market conditions life lease evaluate adequacy estimate residual value may make adjustments extent expected value vehicle lease termination changes operating leases arising vehicle sales daily rental car companies adjustment may form revisions depreciation rate recognition impairment loss impairment determined exist undiscounted expected future cash flows lower carrying value asset operating leases arising vehicles sold dealers adjustment made estimate marketing incentive accruals residual support programs initially recognized vehicles sold dealers refer marketing incentives operating lease residuals note 28 lease vehicle returned us asset reclassified investment operating leases inventory lower cost estimated fair value less costs sell depreciation methodology operating lease assets considers management’s expectation value vehicles upon lease termination based numerous assumptions factors influencing used automotive vehicle values critical assumptions underlying estimated carrying value automotive lease assets include 1 estimated market value information obtained used management estimating residual values 2 proper identification estimation business conditions 3 remarketing abilities 4 gm’s vehicle marketing programs changes assumptions could significant impact value lease residuals accounting derivatives fair value measurements corporation uses derivatives normal course business manage exposure fluctuations commodity prices interest foreign currency rates corporation accounts derivatives consolidated balance sheet assets liabilities fair value accordance sfas 133 accounting complex requires significant judgments estimates involved estimating fair values absence quoted market prices use estimates various assumptions determining fair value many assets including retained interests securitizations loans contracts mortgage servicing rights investments established market value publicly traded difficult determine accuracy estimates assumptions actual experience may differ materially estimates assumptions new accounting standards june 2006 fasb issued interpretation 48 “accounting uncertainty income taxes” fin 48 supplements sfas 109 “accounting income taxes” defining confidence level tax position must meet order recognized financial statements interpretation requires tax general motors corporation subsidiaries new accounting standards continued effects position recognized “morelikelythannot” sustained based solely technical merits reporting date morelikelythannot threshold represents positive assertion management company entitled economic benefits tax position tax position considered morelikelythannot sustained based solely technical merits benefits position recognized moreover morelikelythannot threshold must continue met reporting period support continued recognition benefit adoption companies must adjust financial statements reflect tax positions morelikelythannot sustained adoption date necessary adjustment would recorded directly retained earnings period adoption reported change accounting principle interpretation effective beginning first fiscal year beginning december 15 2006 management estimates upon adoption cumulative effect adjustment approximately 50 million 100 million decrease reserves uncertain tax positions increase retained earnings estimate subject revision management completes analysis september 2006 sec issued staff accounting bulletin sab 108 “quantifying financial misstatements” expresses staff’s views regarding process quantifying financial statement misstatements registrants required quantify impact correcting misstatements including carryover reversing effects prior year misstatements current year financial statements techniques commonly used practice accumulate quantify misstatements generally referred “rollover” current year income statement perspective “iron curtain” yearend balance sheet perspective approaches financial statements would require adjustment either approach results quantifying misstatement material considering relevant quantitative qualitative factors bulletin effective financial statements first fiscal year ending november 15 2006 prior issuance bulletin gm quantified impact errors using iron curtain approach rollover approach therefore sab financial statement impact gm september 2006 fasb issued sfas 157 “fair value measurement” sfas 157 provides definition fair value establishes framework measuring fair value requires expanded disclosures fair value measurements sfas 157 effective financial statements issued fiscal years beginning november 15 2007 interim periods within fiscal years provisions sfas 157 applied prospectively management assessing potential impact standard gm’s financial condition results operations september 2006 fasb issued sfas 158 “employers’ accounting defined benefit pension postretirement plans” sfas 158 amends sfas 87 “employers’ accounting pensions” sfas 87 sfas 88 “employers’ accounting settlements curtailments defined benefit pension plans termination benefits” sfas 88 sfas 106 “employers’ accounting postretirement benefits pensions” sfas 106 sfas 132r “employers’ disclosures pensions postretirement benefits revised 2003” sfas 132r statement requires companies recognize asset liability overfunded underfunded status benefit plans financial statements sfas 158 also requires measurement date plan assets liabilities coincide sponsor’s year end standard provides two transition alternatives related change measurement date provisions recognition asset liability related funded status provision effective fiscal year ending december 15 2006 change measurement date provisions effective fiscal years ending december 15 2008 gm adopted recognition asset liability related funded status provisions sfas 158 december 31 2006 additional net pension opeb liability included balance sheet 274 billion impact adoption also resulted additional net deferred tax assets 108 billion impact adoption shareholders’ equity reduction 169 billion impact pension opeb expense cash flow benefits plans see note 19 discussion implementation recognition provisions sfas 158 management elected early adopt measurementdate provisions sfas 158 requires new measurement dates coinciding gm’s fiscal year plans 2007 gm use “twomeasurement” approach adopting measurementdate provisions general motors corporation subsidiaries new accounting standards continued sfas 158 see note 19 discussions measurementdate provisions sfas 158 early adopted gm january 1 2007 october 2006 fasb issued fsp 123r5 “amendment fasb staff position fas 123r1” fsp amends fsp fas 123r1 “classification measurement freestanding financial instruments originally issued exchange employee services sfas 123r” clarify freestanding financial instruments originally issued employee compensation subject sfas 123r subsequently modified solely reflect equity restructuring occurs holders longer employees continue subject recognition measurement provisions sfas 123r certain conditions met provisions fsp effective first reporting period beginning october 10 2006 gm adopted provisions fsp 123r5 january 1 2007 guidance material effect gm’s financial condition results operations october 2006 fasb issued fsp 123r6 “technical corrections fasb statement 123r” revises definition “shortterm inducement” exclude offer settle award provisions fsp effective first reporting period beginning october 20 2006 gm adopted provisions fsp 123r6 january 1 2007 guidance material effect gm’s financial condition results operations february 2007 fasb issued sfas 159 “the fair value option financial assets financial liabilities including amendment sfas 115” sfas 159 permits entity measure many financial assets financial liabilities fair value currently required measured fair value entities elect fair value option report unrealized gains losses earnings subsequent reporting date fair value option may elected instrumentbyinstrument basis exceptions sfas 159 amends previous guidance extend use fair value option availableforsale heldtomaturity securities statement also establishes presentation disclosure requirements help financial statement users understand effect election sfas 159 effective beginning first fiscal year beginning november 15 2007 management currently assessing potential impact standard gm’s financial condition results operations forwardlooking statements report reports subsequently filed gm sec form 10q filed furnished form 8k related comments management gm use words “expect” “anticipate” “estimate” “forecast” “initiative” “objective” “plan” “goal” “project” “outlook” “priorities” “target” “intend” “evaluate” “pursue” “seek” “may” “would” “could” “should” “believe” “potential” “continue” “designed” “impact” negative words similar expressions intended identify forwardlooking statements represent current judgment possible future events statements report subsequent reports gm may file sec form 10q file furnish form 8k statements historical fact including without limitation statements future events financial performance forwardlooking statements involve certain risks uncertainties believe judgments reasonable statements guarantees events financial results gm’s actual results may differ materially due variety important factors may revised supplemented subsequent reports sec forms 10q 8k factors include among others following • ability gm realize production efficiencies achieve reductions costs result turnaround restructuring health care cost reductions implement capital expenditures levels times planned management • pace product introductions • market acceptance corporation’s new products general motors corporation subsidiaries forwardlooking statements continued • significant changes competitive environment effect competition corporation’s markets including corporation’s pricing policies • ability maintain adequate liquidity financing sources appropriate level debt • changes existing adoption new laws regulations policies activities governments agencies similar organizations actions may affect production licensing distribution sale products cost thereof applicable tax rates • costs risks associated litigation • final results investigations inquiries sec governmental agencies • changes accounting principles application interpretation ability make estimates assumptions underlying estimates including range estimates delphi pension benefit guarantees could result impact earnings • changes relations unions employeesretirees legal interpretations agreements unions regard employeesretirees • negotiations bankruptcy court actions respect delphi’s obligations gm negotiations respect gm’s obligations pension benefit guarantees delphi employees gm’s ability recover indemnity claims delphi • labor strikes work stoppages gm key suppliers delphi financial difficulties gm’s key suppliers delphi • additional credit rating downgrades effects thereof • shortages price increases fuel • changes economic conditions commodity prices currency exchange rates political stability markets operate addition gmac’s actual results may differ materially due numerous important factors described gmac’s recent report sec form 10k may revised supplemented subsequent reports sec forms 10q 8k factors include among others following • factors affecting results operations financial condition credit ratings adequate access market changes residual value offlease vehicles changes us governmentsponsored mortgage programs disruptions markets mortgage subsidiaries operate changes contractual servicing rights • significant changes competitive environment effect competition gmac’s markets including gmac’s pricing policies • ability maintain adequate financing sources • ability maintain appropriate level debt • restrictions rescap’s ability pay dividends prepay subordinated debt obligations gmac • changes residual value offlease vehicles • changes us governmentsponsored mortgage programs disruptions markets gmac’s mortgage subsidiaries operate • changes contractual servicing rights • costs risks associated litigation general motors corporation subsidiaries forwardlooking statements concluded • changes gmac’s accounting assumptions may require result changes accounting rules application could result impact earnings • changes credit ratings gmac gm • threat natural calamities • changes economic conditions currency exchange rates political stability markets operates • changes existing adoption new laws regulations policies activities governments agencies similar organizations caution investors place undue reliance forwardlooking statements undertake obligation update publicly otherwise revise forwardlooking statements whether result new information future events factors affect subject statements except expressly required law item 7a item 7 management’s discussion analysis financial condition results operations following addresses material changes net assets liquidation motors liquidation company guc trust guc trust fiscal year ended march 31 2020 intended read conjunction financial statements guc trust included item 8 “financial statements supplementary data” critical accounting policies estimates liquidation basis accounting guc trust created purposes described note 1 “purpose trust” item 8 “financial statements supplementary data” finite life result guc trust prepared financial statements liquidation basis accounting accordance accounting principles generally accepted united states america “us gaap” liquidation basis accounting assets stated estimated realizable value nondiscounted amount cash asset expected converted liquidation liabilities continue recognized amount required us gaap remeasured reflect anticipation entity legally released obligation additionally liquidation basis accounting reserve established estimated costs expected incurred liquidation costs accrued reasonable basis estimation accrual also made estimated income cash expected received liquidation period extent reasonable basis estimation exists valuation assets realizable value reserves expected liquidation costs accrual investment income marketable securities contingent settlement obligation represent estimates based present facts circumstances known guc trust administrator subject change estimates periodically reviewed adjusted appropriate described headings “cash equivalents marketable securities accrued investment income cash equivalents marketable securities” “reserves expected costs liquidation” “contingent settlement obligation” estimates investment income expected earned remaining liquidation period estimates expected costs liquidation estimates regarding incurrence contingent settlement obligation may change near term change could material guc trust beneficiaries holders allowed general unsecured claims extent liquidating distributions yet paid holders guc trust units disputed general unsecured claims term loan avoidance action claims resolved allowed thereby became allowed general unsecured claims holders thereof became entitled receive liquidating distributions distributable cash including dividend cash guc trust units pro rata amount claims upon occurrence guc trust incurred obligation distribute distributable cash accordingly liquidating distributions payable recorded amount distributable cash previously fair value new gm securities guc trust obligated distribute end period disputed general unsecured claims term loan avoidance action claims resolved allowed general unsecured claims prior resolution allowance disputed general unsecured claims term loan avoidance action claims liabilities recorded conditional obligations associated disputed general unsecured claims term loan avoidance action claims rather beneficial interests guc trust beneficiaries residual assets guc trust reflected net assets liquidation guc trust financial statements liquidation basis accounting guc trust presents two principal financial statements statement net assets liquidation statement changes net assets liquidation addition although required liquidation basis accounting guc trust also presents statement cash flows accordance requirements guc trust agreement holdings new gm securities dividends received new gm common stock guc trust previously held new gm securities future distribution respect allowed general unsecured claims guc trust units previously set aside distribution fund potential administrative costs income tax liabilities including taxes distribution dividend taxes investment income taxes securities held consisted shares new gm common stock new gm warrants described “the guc trust assets” item 1 “business” pursuant liquidation order guc trust liquidated holdings new gm securities july august 2015 guc trust valued holdings securities fair value based quoted closing market prices last trading day fiscal period dividends received new gm common stock required applied purpose new gm common stock dividends relate portion distributable cash applicable liquidated new gm common stock distributed holders subsequently resolved allowed claims guc trust units dividends relating distributable cash also distributed holders however distributable cash appropriated guc trust accordance guc trust agreement fund costs liabilities guc trust case dividends relating appropriated distributable cash applied costs liabilities guc trust like appropriated distributable cash maintained administrative cash dividends applied purpose associated distributable cash references distributable cash understood include dividends relating distributable cash unless expressly indicated otherwise amount cash equivalents marketable securities held guc trust relates dividends received guc trust new gm common stock previously held guc trust referred dividend cash included amount cash equivalents marketable securities held distribution guc trust beneficiaries referred distributable cash except extent dividends relating appropriated distributable cash classified administrative cash following appropriation cash equivalents marketable securities accrued investment income cash equivalents marketable securities cash equivalents consist balances held money market funds marketable securities consist shortterm investments us treasury bills guc trust valued securities carrying value approximates fair value receivables associated interest income earned included accrued investment income accompanying statements net assets liquidation combined carrying value us treasury bills estimated investment income expected received holdings marketable securities cash equivalents accrued liquidation basis accounting extent reasonable basis estimation exists accrual estimated principally based forecasted cash outflows expected returns based recent yields expected yields resulting recent changes federal funds rate us treasury bills marketable securities invested modifications made accrual yields holdings us treasury bills date financial statement significantly differ recent yields estimates forecasted cash outflows consider amount timing distributions respect guc trust units estimates may change near term change may material reserves residual winddown claims residual winddown costs upon dissolution mlc occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining residual winddown claims date dissolution debtors transferred guc trust residual winddown assets amount necessary satisfy ultimate allowed amount residual winddown claims including certain avoidance action defense costs residual winddown costs estimated debtors corresponding amount recorded reserves residual winddown claims costs residual winddown claims residual winddown costs less residual winddown assets excess funds returned dip lenders expected collectively actual amounts residual winddown claims including certain avoidance action defense costs allowed residual winddown costs exceed residual winddown assets guc trust administrator may required set aside distribution appropriate distributable cash fund shortfall appropriation would reduce amount distributable cash including dividend cash available distribution holders guc trust units reserves expected costs liquidation basis accounting guc trust required estimate accrue costs associated implementing plan distributing guc trust’s distributable assets costs described winddown costs reporting costs note 2 “plan liquidation” item 8 “financial statements supplementary data” consist principally professional fees costs governance administrative expenses amounts may vary significantly due among things time effort required complete activities distributions plan guc trust recorded reserves expected costs liquidation represent estimated costs incurred remaining liquidation period guc trust reasonable basis estimation amount liquidation costs ultimately incurred depends period time extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities result estimates expected costs liquidation may change near term change could material march 31 2020 remaining liquidation period estimated extend july 2021 estimated predominantly modified probabilityweighted basis guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome addition consistent liquidation basis accounting consideration given potential outcomes extent exist reasonable basis estimation remaining liquidation period dependent predominantly estimate remaining period time resolution litigation involving certain general motors vehicle recalls described item 3 “legal proceedings” addition certain additional estimated time wind guc trust following resolution litigation included estimated liquidation period future developments general motors vehicle recall litigation could extend current estimate remaining period time resolution therefore extend estimated remaining liquidation period guc trust beyond july 2021 addition certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued guc trust’s estimates regarding costs remaining liquidation period may change near term change may material guc trust incurs liquidation costs reserves released offset costs incurred liability service provider recognized accounts payable accrued liability paid addition guc trust records reserves expected costs reasonable basis estimation applicable us gaap additional costs may identified time additional reserves must recorded costs identified guc trust records increase reserves charges increase addition reserves statement changes net assets liquidation process recording reserves expected costs liquidation matter financial reporting separate distinct process distributable cash set aside distribution purposes funding projected costs liquidation projected costs generally estimated conservative ie inclusive basis include contingencies permitted accrued reserves expected costs liquidation applicable us gaap complete description process setting aside distributable cash fund projected costs potential liabilities guc trust see “functions responsibilities guc trustfunding guc trust’s liquidation administrative costs” “net assets liquidationdistributable cash set aside distribution” contingent settlement obligation guc trust accrues loss contingencies probable liability incurred date financial statements amount liability reasonably estimated assessing whether liability incurred date financial statements guc trust considers events occurring date financial statements provide additional evidence respect conditions existed date financial statements including estimates inherent process preparing financial statements accordingly quarter ended march 31 2020 guc trust accrued contingent settlement obligation pursuant amended settlement agreement described item 3 “legal proceedings” quarter ended march 31 2018 guc trust accrued contingent settlement obligation pursuant previously executed settlement agreement result developments related litigation accrual reversed quarter ended september 30 2018 due uncertainties associated effectiveness settlement agreement effect time estimates regarding future payment contingent settlement obligation may change near term change may material income taxes guc trust considered disputed ownership fund pursuant treasury regulation section 1468b9 assets transferred guc trust passive investments guc trust taxed qualified settlement fund qsf pursuant treasury regulation section 1468b9c1ii qsf tax status guc trust approved irs private letter ruling issued march 2 2011 general qsf computes taxable income manner corporation pays federal income tax using trust income tax rates modified gross income modified gross income includes gross income pursuant internal revenue code section 61 less administrative expenses certain losses sale exchange worthlessness property net operating losses general disputed ownership fund taxed qsf recognize gross income assets transferred therefore guc trust recognized gross income transfer assets mlc guc trust generates gross income form interest dividend income including dividends received previous holdings new gm common stock recognizes capital gains andor losses upon disposition new gm securities reduced administrative expenses accumulated net operating capital losses compute modified gross income guc trust taxable federal income tax purposes current income tax liability asset recognized estimated taxes payable receivable year deferred tax liabilities assets recognized estimated future tax effects temporary differences financial reporting tax accounting deferred tax assets reviewed recoverability valuation allowances provided necessary guc trust subject state income taxes current law accordingly current deferred state income tax liabilities assets recorded process recognizing deferred tax assets liabilities current income taxes payable matter financial reporting separate distinct process distributable cash set aside distribution purposes funding potential income tax liabilities potential income tax liabilities generally estimated conservative ie inclusive basis may include amounts potential income tax liabilities beyond amounts permitted recorded applicable accounting standards complete description process setting aside distributable cash fund projected costs potential income tax liabilities guc trust see “net assets liquidationdistributable cash set aside distribution” guc trust recognizes tax benefit uncertain tax position likely tax position sustained examination taxing authority based technical merits position review available evidence consultation guc trust professionals guc trust’s tax liability respect federal income tax returns year ended march 31 2019 prior years longer subject examination result application section 505b bankruptcy code however amounts shown table net operating loss carryovers generated march 31 2020 could subject examination irs subsequent years losses utilized march 31 2020 known items would result significant accrual uncertain tax positions described guc trust’s capital loss carryovers expired longer available utilized guc trust five year rule however described capital loss carryovers may utilized claimants defined could subject examination irs subsequent years losses utilized march 31 2020 guc trust capital loss carryovers net operating loss carryovers together loss carryovers guc trust taken deduction amounts set forth scheduled year losses incurred net losses utilized subsequent years offset net taxable income gains amounts reflect loss carryovers shown federal income tax returns filed guc trust examined irs follows thousands quarter ended september 30 2015 guc trust disposed capital assets accordingly guc trust expect recognize additional capital gains losses going forward general capital losses may carried forward corporations five years losses incurred five year rule may carried forward indefinitely noncorporate persons capital loss carryovers 1581 million 226 million 17 million attributable years ended march 31 2012 2013 2015 respectively longer available utilization guc trust five year rule net operating losses generally may carried forward 20 years losses incurred although pursuant enactment “tax cuts jobs act” december 2017 net operating losses generated tax years beginning december 31 2017 may carried indefinitely addition pursuant “coronavirus aid relief economic security act” enacted march 27 2020 net operating losses immediately permitted carried back five years net operating loss carryover attributable year ended march 31 2012 reduced approximately 02 million result utilization portion carryover offset net taxable income recognized year ended march 31 2019 loss succession rule treasury regulations section 1468b9c6 loss succession rule upon termination guc trust guc trust claimant defined pursuant tax regulations entitled succeed take account portion unused vs unexpired loss carryovers guc trust loss succession rule provides order determine portion loss carryovers claimant succeed loss carryovers must allocated among guc trust claimants proportion value guc trust assets distributable claimant purposes rules govern disputed ownership funds claimant defined person claims ownership whole part property immediately property transferred disputed ownership fund accordingly loss succession rule person generally eligible succeed guc trust’s loss carryovers person receives distribution guc trust assets upon guc trust’s termination ii qualifies claimant respect guc trust mechanics loss succession rule applied guc trust holders guc trust units unclear several respects following discussion describes one possible interpretation rules however possible irs take position differs described previously disclosed guc trust initiated preliminary discussions irs regarding loss succession rule time discussions pursued holders guc trust units consult tax advisors application loss succession rule upon termination guc trust light particular circumstances termination guc trust generally expected holders guc trust units final distribution date receive distribution excess guc trust distributable assets rules govern disputed ownership funds address disputed ownership fund considered terminate purposes loss succession rule one possible interpretation loss succession rule guc trust considered terminate guc trust distributes remaining assets holders guc trust units ie final distribution date interpretation holders guc trust units would considered receive distribution guc trust assets upon termination guc trust time guc trust able predict certainty final distribution may occur guc trust terminated allocation loss carryovers rules govern disputed ownership funds address loss succession rule apply claimants permitted transfer interests disputed ownership fund guc trust units transferrable possible guc trust determine holders guc trust units may constitute claimants purposes loss succession rule given time accordingly upon termination guc trust position provide allocation guc trust’s loss carryovers among guc trust claimants andor holders guc trust units march 31 2020 32086501 guc trust units outstanding 321 billion allowed general unsecured claims addition guc trust computes taxable income manner corporation unclear whether extent five year rule might affect amount unused capital loss carryovers guc trust claimants may succeed loss succession rule use estimates preparation financial statements liquidation basis conformity us gaap requires use estimates assumptions affect reported amounts assets liabilities estimates subject known unknown risks uncertainties factors could materially impact amounts reported disclosed financial statements related footnotes significant estimates include anticipated amounts timing future cash flows estimated investment income expected received expected liquidation costs fair value marketable securities contingent settlement obligation actual results could differ estimates statement changes net assets liquidation year ended march 31 2020 net assets liquidation decreased approximately 4879 million approximately 4945 million approximately 66 million principally result liquidating distributions 4179 million incurrence contingent settlement obligation 480 million net reversal investment income 205 million net additions 15 million reserves expected costs liquidation liquidating distributions consist distributions paid payable holders resolved term loan avoidance action claims distributions payable holders guc trust units described note 3 “net assets liquidation” item 8 “financial statements supplementary data” incurrence contingent settlement obligation associated amended settlement agreement described item 3 “legal proceedings” also described note 3 “net assets liquidation” net reversal investment income primarily associated reversal accrued investment income resulting reduction yields us treasury bills along changes forecasted cash outflows respect expected dates make distributions respect guc trust units period changes forecasted cash outflows resulted shortenings expected dates make distributions holders guc trust units shortenings expected dates make distributions holders guc trust units associated execution amended settlement agreement described item 3 “legal proceedings” described “liquidation administrative costs” net additions reserves expected costs liquidation 15 million primarily associated increase legal fees expected reimbursements 100 million certain holders majority guc trust units legal fees connection monitoring actions guc trust participating litigation related general motors vehicle recalls largely offset reduction estimated length remaining liquidation period income tax provision benefit year ended march 31 2020 result cumulative net operating losses establishment full valuation allowance net deferred tax assets beginning end period result liquidation guc trust’s holdings new gm securities determined deferred tax assets realizable see “income tax liabilities certain capital gains investment income dividends new gm common stock” item 1 “business” note 8 “income taxes” item 8 “financial statements supplementary data” liquidation administrative costs discussed “critical accounting policies estimates” liquidation basis accounting guc trust required upon establishment record reserves respect expected costs associated implementing plan distributing guc trust’s distributable assets costs consist principally professional fees governance costs liquidation administrative costs us gaap reserves may established extent reasonable basis estimation time additional costs identified reasonable basis estimation guc trust records increase reserves expected costs liquidation charges increase addition reserves expected costs liquidation statement changes net assets liquidation costs actually incurred guc trust costs reduce previously recorded reserves expected costs liquidation amount incurred costs effect statement changes net assets liquidation guc trust’s reserves liquidation administrative costs recorded conformity us gaap allocable following categories • reserve expected winddown costs corresponding expenditures made administrative fund following depletion administrative fund administrative cash see “the guc trust assets” item 1 “business” • reserve expected reporting costs corresponding expenditures made administrative cash see “the guc trust assets” item 1 “business” • reserve indenture trustee fiscal paying agent costs corresponding expenditures made cash received guc trust mlc dissolution date see “the guc trust assets” item 1 “business” addition guc trust maintains reserves residual winddown claims costs corresponding expenditures made residual winddown assets following depletion assets administrative cash see “the guc trust assets” item 1 “business” described greater detail heading “the guc trust assets” item 1 “business” “liquidity capital resources” unused portions certain assets associated foregoing reserves required returned dip lenders upon winding dissolution guc trust therefore assets available fund costs liquidation administration guc trust also available distribution holders allowed general unsecured claims guc trust units see “the guc trust assets” item 1 “business” march 31 2020 guc trust approximately 287 million reserves liquidation administrative costs estimated incurred winding conclusion guc trust compared approximately 375 million reserves march 31 2019 following table summarizes greater detail changes reserves year ended march 31 2020 reserves expected costs liquidation increased approximately 15 million year ended march 31 2020 order reflect 51 million increase expected winddown costs 35 million decrease expected reporting costs increase expected winddown costs year ended march 31 2020 primarily associated increase legal fees expected reimbursements 100 million certain holders majority guc trust units legal fees largely offset net reduction nine months estimated end date remaining liquidation period decrease expected reporting costs year ended march 31 2020 primarily associated aforementioned net reduction estimated end date remaining liquidation period comparison reserves increased approximately 95 million year ended march 31 2019 order reflect 41 million increase expected winddown costs 54 million increase expected reporting costs increase expected winddown costs year ended march 31 2019 primarily associated net extension seventeen months estimated end date remaining liquidation period partly offset reversal expected noticing costs previously accrued reduction legal fees associated balances due increase expected reporting costs year ended march 31 2019 primarily associated aforementioned net extension estimated end date remaining liquidation period reserves expected costs liquidation reduced amount liquidation administrative costs incurred year ended march 31 2020 trust professional costs incurred year ended march 31 2020 approximately 56 million compared 52 million year ended march 31 2019 increase 04 million year primarily due increases winddown costs charged reserves trust governance costs incurred year ended march 31 2020 approximately 43 million compared 45 million year ended march 31 2019 decrease 02 million year primarily due decreases winddown costs charged reserves administrative costs years ended march 31 2020 2019 approximately 04 million 03 million respectively additional information regarding components category costs see “the guc trust assets” item 1 “business” foregoing reserves represent future costs guc trust reasonable basis estimation march 31 2020 therefore recorded liquidation basis accounting accordance us gaap additional costs may incurred reasonable basis estimation march 31 2020 particular march 31 2020 recorded reserves expected costs liquidation reflect estimated costs remaining liquidation period estimated extend july 2021 date dependent predominantly estimate remaining period time resolution litigation involving certain general motors vehicle recalls described item 3 “legal proceedings” addition certain additional estimated time wind guc trust following resolution litigation included estimated liquidation period end date remaining liquidation period estimated predominantly modified probabilityweighted basis permitted us gaap guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome addition consistent liquidation basis accounting consideration given potential outcomes extent exist reasonable basis estimation additionally certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued future developments general motors vehicle recall litigation could extend current estimate remaining period time resolution therefore extend estimated remaining liquidation period guc trust beyond july 2021 amount liquidation costs ultimately incurred depends length remaining liquidation period extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities guc trust’s estimates regarding remaining liquidation period expected costs liquidation may change near term change could material funds available foregoing categories costs sufficient satisfy costs category guc trust required appropriate portion distributable cash order meet additional obligations costs appropriation result lesser amount distributable cash available distribution holders guc trust units process recognizing reserves expected costs liquidation matter financial reporting separate distinct process distributable cash set aside distribution purposes funding projected costs liquidation generally estimated conservative ie inclusive basis include contingencies permitted recognized applicable accounting standards described detail certain amounts distributable cash already set aside distribution purposes meeting potential additional obligations however amounts set aside distribution neither reflected part financial statements included elsewhere annual report form 10k process setting aside assets related process recording matter financial reporting statement net assets liquidation reserves expected costs liquidation current deferred income tax liabilities see “critical accounting policies estimatesincome taxes” “critical accounting policies estimatesreserves expected costs liquidation” “net assets liquidationdistributable cash set aside distribution” additional information regarding reserves described see note 2 “plan liquidation” note 7 “reserves expected costs liquidation residual winddown claims costs” item 8 “financial statements supplementary data” net assets liquidation disputed claims following table presents summary activity allowed disputed general unsecured claims term loan avoidance action claims year ended march 31 2020 1 remaining disputed general unsecured claims march 31 2019 represented general claim contingency future disputed claims obligations guc trust year ended march 31 2020 guc trust released general claim contingency longer deemed necessary 2 maximum amount unresolved claims represents sum disputed general unsecured claims term loan avoidance action claims 3 total claim amount represents sum allowed general unsecured claims maximum amount unresolved claims described heading “term loan avoidance action” item 1 “business” term loan avoidance action settled among parties resulting recoveries avoidance action trust approximately 2310 million july 1 2019 result july 1 2019 resolved term loan avoidance action claims arose corresponding amount holders became entitled receive distributions aggregating approximately 685 million distributable assets table summarizes activity new gm securities prior liquidation distributable cash comprises guc trust’s distributable assets including numbers new gm securities amount distributable cash previously distributed well amount distributable cash available distribution holders guc trust units march 31 2020 thousands 1 numbers new gm securities amount distributable cash shown distributed include sales cash distributions governmental entities extent governmental entities requested sales demonstrated satisfaction guc trust administrator governmental entities precluded applicable law receiving distributions new gm securities b fractional amounts new gm securities lieu guc trust required pursuant guc trust agreement distribute cash subject certain minimum thresholds 2 distributions payable includes distributions payable holders guc trust units b amounts payable respect allowed general unsecured claims allowed prior fiscal periods holders claims yet supplied information required guc trust order effect distribution entitled 3 distributable assets reflects amounts distributable cash dividend cash shown “guc trust distributable assets” report included exhibit 991 current report form 8k filed guc trust sec may 11 2020 amount distributable cash associated dividend cash set “distributable assets” directly relate net assets liquidation number appearing guc trust’s financial statements prepared accordance us gaap described heading “disputed claims” march 31 2020 approximately 32086 million allowed general unsecured claims respect claims guc trust previously distributed aggregate 137298736 shares new gm common stock 124817263 new gm series warrants 124817263 new gm series b warrants 3140 million distributable cash addition guc trust obligated distribute march 31 2020 24 million distributable cash respect allowed general unsecured claims recorded distributions payable holders guc trust units 3494 million march 31 2020 pursuant amended settlement agreement described item 3 “legal proceedings” guc trust made distribution 300 million holders guc trust units may 28 2020 described item 1 “business” april 3 2020 bankruptcy court issued order granting approval guc trust’s motion filed march 27 2020 seeking authority bankruptcy court appropriate distributable cash 500 million settlement consideration amended settlement agreement distributable cash set aside distribution overview distributable cash set aside distribution addition distributions distributable cash reflected reductions guc trust net assets financial statements guc trust also time sets aside distributable cash potential future appropriation fund projected liquidation administrative costs well potential income tax liabilities including dividend taxes investment income taxes distribution distributable cash set aside distribution guc trust deducted net assets liquidation guc trust financial statements unless set aside distributable cash appropriated expended distributable cash set aside distribution segregated guc trust specific purposes available distribution holders guc trust units claimants unless extent guc trust later determines set aside distributable cash longer needed fund specific purposes process related separate process recording current deferred income tax liabilities reserves expected costs liquidation statement net assets liquidation matter financial reporting matter financial reporting income tax liabilities reserves expected costs liquidation must determined accordance generally accepted accounting principles applicable guc trust contrast estimates projected costs potential liabilities guc trust may set aside distributable cash generally made conservative ie inclusive basis include contingencies may include amounts potential income tax liabilities permitted recognized applicable accounting standards see “critical accounting policies estimatesincome taxes” “critical accounting policies estimatesreserves expected costs liquidation” march 31 2020 distributable assets guc trust available distribution holders guc trust units consisted distributable cash approximately 3494 million including dividend cash deducting amounts distributable cash including dividend cash set aside distribution fund additional projected liquidation administrative costs guc trust described headings “set aside calculations relating projected liquidation administrative costs including dividend taxes investment income taxes” ii set aside distributions payable respect allowed general unsecured claims allowed prior fiscal periods holders claims yet supplied information required guc trust order effect distributions entitled march 31 2020 distributable cash available distribution holders guc trust units future periods pursuant amended settlement agreement guc trust made distribution 3000 million holders guc trust units may 28 2020 guc trust expects make distributions holders guc trust units upon winding guc trust prior liquidation guc trust’s holdings new gm securities july august 2015 new gm securities set aside fund projected liquidation administrative costs potential income tax liabilities described set aside calculations relating projected liquidation administrative costs including dividend taxes investment income taxes guc trust administrator reevaluates quarterly basis amount distributable cash including dividend cash needed set aside distribution purposes funding projected liquidation administrative costs including dividend taxes investment income taxes determination made basis different used calculate reserves financial statement purposes current methodology amount set aside equal estimates unfunded projected liquidation administrative costs including dividend taxes investment income taxes beginning quarter ended june 30 2019 estimates unfunded projected liquidation administrative costs reflect projected costs longer estimated remaining life guc trust associated resolution gm product recall litigation described item 3 “legal proceedings” used estimating remaining life guc trust financial reporting purposes quarter ended march 31 2020 longer estimated remaining life guc trust purposes set aside calculations extends march 2022 set aside purposes prior liquidation guc trust’s holdings new gm securities estimates unfunded projected liquidation administrative costs including dividend taxes investment income taxes converted number new gm securities set aside distribution dividing estimates trailing twelvemonth average closing prices new gm securities corresponding amount dividend cash associated setaside new gm securities also set aside distribution quarter ended march 31 2020 result standard quarterly reevaluations described estimate unfunded projected liquidation administrative costs including dividend taxes investment income taxes decreased 392 million 415 million decrease primarily related reduction fortynine months estimated end date remaining life guc trust holdback purposes along appropriation distributable cash 108 million january 2020 included total appropriations described heading “the guc trust assets” item 1 “business” partly offset increase expected settlement consideration 500 million paid pursuant amended settlement agreement accordingly march 31 2020 guc trust set aside distribution distributable cash 415 million purposes funding future projected liquidation administrative costs guc trust “set aside” calculations relating potential taxes distribution addition reevaluating amount distributable cash including dividend cash set aside distribution fund projected liquidation administrative costs including dividend taxes investment income taxes guc trust administrator also reevaluates quarterly basis amount distributable cash needed set aside distribution fund potential taxes distribution current methodology calculating set aside estimates potential taxes distribution applying applicable us federal income tax rate net realized capital gains still subject examination irs less current period tax deductible expenses future tax deductible expenses realized capital gains computed using tax basis new gm securities based date transfer record ownership new gm securities guc trust mlc december 15 2011 tax basis new gm common stock received exercise new gm warrants pursuant liquidation order however result application section 505b bankruptcy code guc trust’s federal income tax returns year ended march 31 2019 prior years longer subject examination income taxes may assessed year ended march 31 2019 prior year guc trust’s remaining capital losses based tax basis previously held new gm securities financial reporting purposes expired longer utilized guc trust guc trust’s net operating losses still subject examination irs subsequent years losses utilized utilization net basis expected result sale new gm securities year ended march 31 2016 accordingly income taxes expected paid future result beginning quarter ended september 30 2016 march 31 2020 guc trust administrator determined distributable cash set aside potential taxes distribution dividend taxes investment income taxes time guc trust’s calculation amount distributable cash needed set aside distribution fund potential taxes distribution made using different methodology used calculate current deferred taxes financial statement purposes described estimating potential taxes distribution current set aside methodology calculates realized capital gains using tax basis new gm securities december 15 2011 respect tax return years still subject examination contrast calculating current deferred taxes purposes financial reporting applicable us gaap guc trust calculates realized capital gains using tax basis new gm securities financial reporting purposes based date transfer beneficial ownership new gm securities guc trust mlc occurred march 31 2011 substantial majority previously held new gm securities view guc trust administrator consultation guc trust monitor professionals retained guc trust calculation methodologies described basis distributable cash including dividend cash set aside distribution generally estimate projected liquidation administrative costs potential liabilities guc trust conservative basis accordingly view guc trust administrator guc trust monitor distributable cash currently set aside distribution fund costs liabilities would sufficient satisfy obligations guc trust date annual report form 10k however assurance amount distributable cash set aside sufficient fund costs liabilities actually incurred addition assurance result future evaluations additional distributable cash need set aside appropriated fund additional costs liabilities beyond currently included guc trust’s estimates particular result changes guc trust’s estimates projected costs potential liabilities see “liquidity capital resources” guc trust units table details changes numbers guc trust units outstanding issuable year ended march 31 2020 1 number guc trust units outstanding represents guc trust units issued respect allowed general unsecured claims allowed prior periods including guc trust units held guc trust benefit holders allowed general unsecured claims yet supplied information required guc trust order effect initial distribution entitled b governmental entities precluded applicable law receiving distributions guc trust units 2 number guc trust units outstanding issuable end year equal amount allowed general unsecured claims 1 1000 basis corresponding date additional guc trust units issued due rounding liquidity capital resources guc trust’s sources liquidity principally funds holds payment liquidation administrative costs significantly lesser degree earnings funds invested addition result liquidation guc trust’s holdings new gm securities quarter ended september 30 2015 guc trust holds distributable cash distribution guc trust beneficiaries guc trust holds funds us treasury bills permitted plan guc trust agreement year ended march 31 2020 guc trust’s holdings cash equivalents increased approximately 411 million approximately 18 million approximately 429 million increase primarily due cash received sale marketable securities excess reinvestments 1104 million along interest dividend income received marketable securities 90 million receipt 04 million reimbursement avoidance action trust partly offset cash paid liquidating distributions 678 million liquidation administrative costs 109 million year ended march 31 2020 funds invested guc trust marketable securities decreased approximately 1104 million approximately 5032 million approximately 3928 million decrease due primarily sale marketable securities fund payments described period guc trust earned accrual basis approximately 90 million interest income investments year march 31 2020 guc trust held approximately 4356 million cash equivalents marketable securities amount approximately 3934 million relates distributable cash including dividend cash portion guc trust administrator permitted set aside distribution appropriate approval bankruptcy court trust monitor applicable order fund additional costs become due included distributable cash march 31 2020 approximately 109 million dividend cash described dividend cash distributed holders resolved allowed claims guc trust units respect distributable cash receive unless dividends respect distributable cash appropriated guc trust accordance guc trust agreement fund guc trust’s liquidation administrative costs income tax liabilities march 31 2020 distributable cash including dividend cash held guc trust set aside follows 24 million liquidating distributions payable date exclusive distributions payable holders guc trust units 3494 million b 415 million fund unfunded projected liquidation administrative costs described item 1 “business” april 3 2020 bankruptcy court issued order granting approval guc trust’s motion filed march 27 2020 seeking authority bankruptcy court appropriate distributable cash 500 million settlement consideration amended settlement agreement see “net assets liquidationdistributable assets” addition distributable cash including dividend cash guc trust held approximately 422 million cash equivalents marketable securities march 31 2020 representing funds held payment costs liquidation administration liabilities amount approximately 14 million comprising approximately 11 million remaining administrative fund approximately 02 million remaining residual winddown assets approximately 01 million remaining funds designated indenture trustee fiscal paying agent costs required guc trust agreement returned upon windingup guc trust dip lenders extent funds utilized satisfy designated winddown costs residual winddown claims costs indenture trusteefiscal paying agent costs cash equivalents marketable securities 11 million remaining administrative fund designated satisfaction certain specifically identified costs liabilities guc trust amounts may used payment guc trust professionals’ fees expenses winddown costs amounts time available distribution holders guc trust units balance cash equivalents marketable securities approximately 408 million available payment certain reporting administrative costs guc trust would available future distribution holders guc trust units otherwise used satisfy expected costs see “liquidation administrative costs” assurance additional amounts distributable cash required set aside distribution appropriated fund additional costs income tax liabilities beyond guc trust administrator already set aside appropriation distributable cash occurs fund obligations result lesser amount distributable cash available distribution holders guc trust units addition described “the guc trust assets” item 1 “business” portion guc trust’s assets currently segregated pursuant guc trust agreement satisfaction certain specified costs assets insufficient satisfy residual winddown claims fund specified costs reason guc trust administrator similarly required set aside distribution appropriate additional amounts distributable cash order fund shortfall trends litigation reference made item 3 “legal proceedings” item 7a item 7 management’s discussion analysis financial condition results operations following addresses material changes net assets liquidation motors liquidation company guc trust guc trust fiscal year ended march 31 2018 intended read conjunction financial statements guc trust included item 8 critical accounting policies estimates liquidation basis accounting guc trust created purposes described note 1 “purpose trust” financial statements finite life result guc trust prepared financial statements liquidation basis accounting accordance accounting principles generally accepted united states america “us gaap” liquidation basis accounting assets stated estimated realizable value nondiscounted amount cash asset expected converted liquidation liabilities continue recognized amount required us gaap remeasured reflect anticipation entity legally released obligation additionally liquidation basis accounting reserve established estimated costs expected incurred liquidation costs accrued reasonable basis estimation accrual also made estimated income cash expected received liquidation period extent reasonable basis estimation exists valuation assets realizable value reserves residual winddown claims costs reserves expected liquidation costs accrual investment income marketable securities represent estimates based present facts circumstances known guc trust administrator subject change estimates periodically reviewed adjusted appropriate described heading “reserves expected costs liquidation” estimates expected costs liquidation may change near term changes could material guc trust beneficiaries future extent liquidating distributions yet paid current holders allowed general unsecured claims future current holders guc trust units disputed general unsecured claims term loan avoidance action claims resolved allowed thereby become allowed general unsecured claims holders thereof become entitled receive liquidating distributions distributable cash including dividend cash guc trust units pro rata amount claims upon occurrence guc trust incurs obligation distribute distributable cash accordingly liquidating distributions payable recorded amount distributable cash previously fair value new gm securities guc trust obligated distribute end period disputed general unsecured claims term loan avoidance action claims resolved allowed general unsecured claims prior resolution allowance disputed general unsecured claims term loan avoidance action claims liabilities recorded conditional obligations associated disputed general unsecured claims term loan avoidance action claims rather beneficial interests guc trust beneficiaries residual assets guc trust reflected net assets liquidation guc trust financial statements liquidation basis accounting guc trust presents two principal financial statements statement net assets liquidation statement changes net assets liquidation addition although required liquidation basis accounting guc trust also presents statement cash flows accordance requirements guc trust agreement holdings new gm securities dividends received new gm common stock guc trust previously held new gm securities future distribution respect allowed general unsecured claims guc trust units previously set aside distribution fund potential administrative costs income tax liabilities including taxes distribution dividend taxes investment income taxes securities held consisted shares new gm common stock new gm warrants described “the guc trust assets” item 1 “business” pursuant liquidation order guc trust liquidated holdings new gm securities july august 2015 guc trust valued holdings securities fair value based quoted closing market prices last trading day fiscal period beginning quarter ended june 30 2014 quarter ended march 31 2015 estimated dividends expected received holdings new gm common stock accrued liquidation basis accounting extent reasonable basis estimation existed quarter ended june 30 2015 based determination would best interests trust beneficiaries guc trust made determination file motion bankruptcy court seeking authority liquidate substantially guc trust’s holdings new gm securities motion approved bankruptcy court liquidation order described “the guc trust assets” item 1 “business” guc trust’s holdings new gm securities liquidated july august 2015 result guc trust longer expected receive dividends new gm common stock previously accrued estimated future dividends net dividends received june 2015 reversed quarter ended june 30 2015 dividends received new gm common stock required applied purpose new gm common stock dividends relate portion distributable cash applicable liquidated new gm common stock distributed holders subsequently resolved allowed claims guc trust units dividends relating distributable cash also distributed holders however distributable cash appropriated guc trust accordance guc trust agreement fund costs liabilities guc trust case dividends relating appropriated distributable cash applied costs liabilities guc trust like appropriated distributable cash maintained administrative cash dividends applied purpose associated distributable cash references distributable cash understood include dividends relating distributable cash unless expressly indicated otherwise amount cash equivalents marketable securities held guc trust relates dividends received guc trust new gm common stock previously held guc trust referred dividend cash included amount cash equivalents marketable securities held distribution guc trust beneficiaries referred distributable cash except extent dividends relating appropriated distributable cash classified administrative cash following appropriation cash equivalents marketable securities accrued investment income cash equivalents marketable securities cash equivalents consist balances held money market funds marketable securities consist shortterm investments us treasury bills guc trust valued securities carrying value approximates fair value beginning quarter ended june 30 2014 estimated investment income expected received shortterm investments marketable securities accrued liquidation basis accounting extent reasonable basis estimation exists accrual estimated principally based forecasted cash outflows expected returns based recent yields treasury bills marketable securities invested reserves residual winddown claims residual winddown costs upon dissolution mlc occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining residual winddown claims date dissolution debtors transferred guc trust residual winddown assets amount necessary satisfy ultimate allowed amount residual winddown claims including certain avoidance action defense costs residual winddown costs estimated debtors corresponding amount recorded reserves residual winddown claims costs prior execution letter agreement administrative agent described “functions responsibilities guc trust” item 1 “business” reserves increased expected increases avoidance action defense reasonable basis estimation expected exceed recorded reserves residual winddown claims residual winddown costs less residual winddown assets excess funds returned dip lenders expected time collectively actual amounts residual winddown claims including certain avoidance action defense costs allowed residual winddown costs exceed residual winddown assets guc trust administrator may required set aside distribution appropriate distributable cash fund shortfall appropriation would reduce amount distributable cash including dividend cash available distribution holders guc trust units reserves expected costs liquidation basis accounting guc trust required estimate accrue costs associated implementing plan distributing guc trust’s distributable assets costs described winddown costs reporting costs note 2 “plan liquidation” item 8 consist principally professional fees costs governance administrative expenses amounts may vary significantly due among things time effort required complete activities distributions plan guc trust recorded reserves expected costs liquidation represent estimated costs incurred remaining liquidation period guc trust reasonable basis estimation amount liquidation costs ultimately incurred depends period time extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities result estimates expected costs liquidation may change near term change could material march 31 2018 estimated remaining liquidation period extends november 2020 estimated predominantly modified probabilityweighted basis guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome beginning quarter ended december 31 2016 remaining liquidation period dependent predominantly estimate remaining period time resolution litigation involving certain general motors vehicle recalls described item 3 “legal proceedings” quarter developments vehicle recall litigation resulted extension estimated length time resolution litigation exceeds estimate remaining period time resolution term loan avoidance action previously primary determinant addition certain additional estimated time wind guc trust following resolution litigation included estimated liquidation period possible future developments general motors vehicle recall litigation well term loan avoidance action could extend current estimate remaining period time resolution therefore extend estimated remaining liquidation period guc trust beyond november 2020 addition certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued guc trust incurs liquidation costs reserves released offset costs incurred liability service provider recognized accounts payable accrued liability paid addition guc trust records reserves expected costs reasonable basis estimation applicable us gaap additional costs may identified time additional reserves must recorded costs identified guc trust records increase reserves charges increase addition reserves statement changes net assets liquidation process recording reserves expected costs liquidation matter financial reporting separate distinct process distributable cash set aside distribution purposes funding projected costs liquidation projected costs generally estimated conservative ie inclusive basis include contingencies permitted accrued reserves expected costs liquidation applicable us gaap complete description process setting aside distributable cash fund projected costs potential liabilities guc trust see “functions responsibilities guc trustfunding guc trust’s liquidation administrative costs” “net assets liquidationdistributable cash set aside distribution” contingent settlement obligation guc trust accrues loss contingencies probable liability incurred date financial statements amount liability reasonably estimated assessing whether liability incurred date financial statements guc trust considers events occurring date financial statements provide additional evidence respect conditions existed date financial statements including estimates inherent process preparing financial statements accordingly march 31 2018 guc trust accrued contingent settlement obligation pursuant settlement agreement described item 3 “legal proceedings” income taxes guc trust considered disputed ownership fund pursuant treasury regulation section 1468b9 assets transferred guc trust passive investments guc trust taxed qualified settlement fund qsf pursuant treasury regulation section 1468b9c1ii qsf tax status guc trust approved irs private letter ruling issued march 2 2011 general qsf computes taxable income manner corporation pays federal income tax using trust income tax rates modified gross income modified gross income includes gross income pursuant internal revenue code section 61 less administrative expenses certain losses sale exchange worthlessness property net operating losses general disputed ownership fund taxed qsf recognize gross income assets transferred therefore guc trust recognized gross income transfer assets mlc guc trust generates gross income form interest dividend income including dividends received previous holdings new gm common stock recognizes capital gains andor losses upon disposition new gm securities b recovery guc trust member settlement class related proposed settlement securities class action new gm described item 3 “legal proceedings” c receipt subsequent distribution sale guc trust additional shares fair market value additional shares date distribution sale differs fair market value shares date receipt reduced administrative expenses accumulated net operating capital losses compute modified gross income guc trust taxable federal income tax purposes current income tax liability asset recognized estimated taxes payable receivable year deferred tax liabilities assets recognized estimated future tax effects temporary differences financial reporting tax accounting deferred tax assets reviewed recoverability valuation allowances provided necessary guc trust subject state income taxes current law accordingly current deferred state income tax liabilities assets recorded process recognizing deferred tax assets liabilities current income taxes payable matter financial reporting separate distinct process distributable cash set aside distribution purposes funding potential income tax liabilities potential income tax liabilities generally estimated conservative ie inclusive basis may include amounts potential income tax liabilities beyond amounts permitted recorded applicable accounting standards complete description process setting aside distributable cash fund projected costs potential income tax liabilities guc trust see “net assets liquidationdistributable cash set aside distribution” guc trust recognizes tax benefit uncertain tax position likely tax position sustained examination taxing authority based technical merits position review available evidence consultation guc trust professionals guc trust’s tax liability respect federal income tax returns year ended march 31 2017 prior years longer subject examination result application section 505b bankruptcy code however amounts shown schedule include capital loss carryovers march 31 2018 along net operating loss carryovers generated march 31 2018 could subject examination irs subsequent years losses utilized expected losses utilized future except potentially respect recovery guc trust member settlement class related proposed settlement securities class action new gm referred b receipt subsequent distribution sale guc trust additional shares referred fair market value additional shares date distribution sale greater fair market value shares date receipt determinable estimable time march 31 2018 known items would result significant accrual uncertain tax positions march 31 2018 guc trust capital loss carryovers net operating loss carryovers together loss carryovers guc trust taken deduction amounts set forth scheduled year losses incurred amounts reflect loss carryovers shown federal income tax returns filed guc trust examined irs follows thousands quarter ended september 30 2015 guc trust disposed capital assets accordingly guc trust expect recognize additional capital gains losses going forward except potentially respect recovery guc trust member settlement class related proposed settlement securities class action new gm referred b receipt subsequent distribution sale guc trust additional shares referred fair market value additional shares date distribution sale differs fair market value shares date receipt determinable estimable time general capital losses may carried forward corporations five years losses incurred five year rule may carried forward indefinitely noncorporate persons capital loss carryovers 1581 million 226 million attributable years ended march 31 2012 2013 respectively longer available utilization guc trust five year rule net operating losses generally may carried forward 20 years losses incurred although pursuant enactment “tax cuts jobs act” december 2017 net operating losses generated tax years beginning december 31 2017 may carried indefinitely loss succession rule treasury regulations section 1468b9c6 loss succession rule upon termination guc trust guc trust claimant defined pursuant tax regulations entitled succeed take account portion unused vs unexpired loss carryovers guc trust loss succession rule provides order determine portion loss carryovers claimant succeed loss carryovers must allocated among guc trust claimants proportion value guc trust assets distributable claimant purposes rules govern disputed ownership funds claimant defined person claims ownership whole part property immediately property transferred disputed ownership fund accordingly loss succession rule person generally eligible succeed guc trust’s loss carryovers person receives distribution guc trust assets upon guc trust’s termination ii qualifies claimant respect guc trust mechanics loss succession rule applied guc trust holders guc trust units unclear several respects following discussion describes one possible interpretation rules however possible irs take position differs described previously disclosed guc trust initiated preliminary discussions irs regarding loss succession rule time discussions pursued holders guc trust units consult tax advisors application loss succession rule upon termination guc trust light particular circumstances termination guc trust generally expected holders guc trust units final distribution date receive distribution excess guc trust distributable assets rules govern disputed ownership funds address disputed ownership fund considered terminate purposes loss succession rule one possible interpretation loss succession rule guc trust considered terminate guc trust distributes remaining assets holders guc trust units ie final distribution date interpretation holders guc trust units would considered receive distribution guc trust assets upon termination guc trust time guc trust able predict certainty final distribution may occur guc trust terminated allocation loss carryovers rules govern disputed ownership funds address loss succession rule apply claimants permitted transfer interests disputed ownership fund guc trust units transferrable possible guc trust determine holders guc trust units may constitute claimants purposes loss succession rule given time accordingly upon termination guc trust position provide allocation guc trust’s loss carryovers among guc trust claimants andor holders guc trust units march 31 2018 31855504 guc trust units outstanding 319 billion allowed general unsecured claims addition guc trust computes taxable income manner corporation unclear whether extent five year rule might affect amount unused capital loss carryovers guc trust claimants may succeed loss succession rule use estimates preparation financial statements liquidation basis conformity us gaap requires use estimates assumptions affect reported amounts assets liabilities estimates subject known unknown risks uncertainties factors could materially impact amounts reported disclosed financial statements related footnotes significant estimates include anticipated amounts timing future cash flows estimated investment income expected received expected liquidation costs expected residual winddown claims costs fair value marketable securities actual results could differ estimates statement changes net assets liquidation year ended march 31 2018 net assets liquidation decreased approximately 234 million approximately 4882 million approximately 4648 million principally result additions aggregate 340 million reserves expected costs liquidation incurrence settlement obligation 150 million described “net assets liquidation” note 4 “net assets liquidation” item 8 partly offset investment income 186 million net reversal accrued liquidating distributions 69 million described “liquidation administrative costs” increase reserves expected costs liquidation 340 million primarily associated increase estimated length remaining liquidation period quarters ended september 30 2017 march 31 2018 anticipated increases legal fees associated litigation involving certain general motor vehicle recalls anticipated noticing costs associated settlement agreement described item 3 “legal proceedings” income tax provision benefit year ended march 31 2018 result cumulative net operating capital losses establishment full valuation allowance net deferred tax assets beginning end period result liquidation guc trust’s holdings new gm securities determined deferred tax assets realizable see “income tax liabilities certain capital gains investment income dividends new gm common stock” item 1 “business” note 8 “income taxes” item 8 liquidation administrative costs discussed “critical accounting policies estimates” liquidation basis accounting guc trust required upon establishment record reserves respect expected costs associated implementing plan distributing guc trust’s distributable assets costs consist principally professional fees governance costs liquidation administrative costs us gaap reserves may established extent reasonable basis estimation time additional costs identified reasonable basis estimation guc trust records increase reserves expected costs liquidation charges increase addition reserves expected costs liquidation statement changes net assets liquidation costs actually incurred guc trust costs reduce previously recorded reserves expected costs liquidation amount incurred costs effect statement changes net assets liquidation guc trust’s reserves liquidation administrative costs recorded conformity us gaap allocable following categories • reserve expected winddown costs corresponding expenditures made administrative fund following depletion administrative fund administrative cash see “the guc trust assets” item 1 “business” • reserve expected reporting costs corresponding expenditures made administrative cash see “the guc trust assets” item 1 “business” • reserve indenture trustee fiscal paying agent costs corresponding expenditures made cash received guc trust mlc dissolution date see “the guc trust assets” item 1 “business” addition guc trust maintains reserves residual winddown claims costs corresponding expenditures made residual winddown assets following depletion assets administrative cash see “the guc trust assets” part item 1 “business” described greater detail heading “the guc trust assets” item 1 “business” “liquidity capital resources” unused portions certain assets associated foregoing reserves required returned dip lenders upon winding dissolution guc trust therefore assets available fund costs liquidation administration guc trust also available distribution holders allowed general unsecured claims guc trust units see “the guc trust assets” item 1 “business” march 31 2018 guc trust approximately 381 million reserves liquidation administrative costs estimated incurred winding conclusion guc trust compared approximately 189 million reserves march 31 2017 following table summarizes greater detail changes reserves year ended march 31 2018 reserves expected costs liquidation increased approximately 339 million year ended march 31 2018 order reflect 253 million increase expected winddown costs 86 million increase expected reporting costs increase expected winddown costs year ended march 31 2018 primarily associated extension estimated length remaining liquidation period quarters ended september 30 2017 march 31 2018 along increases expected legal fees associated litigation involving certain vehicle recalls noticing costs associated settlement agreement described item 3 “legal proceedings” increase expected reporting costs year ended march 31 2018 primarily associated aforementioned extensions estimated length remaining liquidation period comparison reserves increased approximately 121 million year ended march 31 2017 order reflect 53 million increase expected winddown costs 68 million increase expected reporting costs increases expected winddown costs expected reporting costs year ended march 31 2017 primarily associated increases estimated length remaining liquidation period quarters ended december 31 2016 september 30 2016 reserves expected costs liquidation reduced amount liquidation administrative costs incurred year ended march 31 2018 trust professional costs incurred year ended march 31 2018 approximately 101 million compared 56 million year ended march 31 2017 increase 45 million year primarily due increases winddown costs charged reserves trust governance costs incurred year ended march 31 2018 approximately 44 million compared 47 million year ended march 31 2017 decrease 03 million year due decreases winddown costs charged reserves administrative costs years ended march 31 2018 2017 approximately 03 million additional information regarding components category costs see “the guc trust assets” item 1 “business” foregoing reserves represent future costs guc trust reasonable basis estimation march 31 2018 therefore recorded liquidation basis accounting accordance us gaap additional costs may incurred reasonable basis estimation march 31 2018 particular march 31 2018 recorded reserves expected costs liquidation reflected estimated costs remaining liquidation period extending november 2020 date beginning quarter ended december 31 2016 dependent predominantly estimate remaining period time resolution litigation involving certain general motors vehicle recalls described item 3 “legal proceedings” quarter developments vehicle recall litigation resulted extension estimated length time resolution litigation exceeds estimate remaining period time resolution term loan avoidance action previously primary determinant addition certain additional estimated time wind guc trust following resolution litigation included estimated liquidation period end date remaining liquidation period estimated predominantly modified probabilityweighted basis permitted us gaap guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome addition certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued possible future developments general motors vehicle recall litigation well term loan avoidance action could extend current estimate remaining period time resolution therefore extend estimated remaining liquidation period guc trust beyond november 2020 amount liquidation costs ultimately incurred depends length remaining liquidation period extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities guc trust’s estimates regarding remaining liquidation period expected costs liquidation may change near term change could material funds available foregoing categories costs sufficient satisfy costs category guc trust required appropriate portion distributable cash order meet additional obligations costs appropriation result lesser amount distributable cash available distribution holders guc trust units process recognizing reserves expected costs liquidation matter financial reporting separate distinct process distributable cash set aside distribution purposes funding projected costs liquidation generally estimated conservative ie inclusive basis include contingencies permitted recognized applicable accounting standards described detail certain amounts distributable cash already set aside distribution purposes meeting potential additional obligations however amounts set aside distribution neither reflected part financial statements included elsewhere form 10k process setting aside assets related process recording matter financial reporting statement net assets liquidation reserves expected costs liquidation current deferred income tax liabilities see “critical accounting policies estimatesincome taxes” “critical accounting policies estimatesreserves expected costs liquidation” “net assets liquidationdistributable cash set aside distribution” additional information regarding reserves described see note 2 “plan liquidation” note 7 “reserves expected costs liquidation residual winddown claims costs” item 8 net assets liquidation disputed claims following table presents summary activity allowed disputed general unsecured claims term loan avoidance action claims year ended march 31 2018 1 remaining disputed general unsecured claims represent general claim contingency future disputed claims obligations guc trust guc trust set aside distribution aggregate 148 million general claim contingency ie 296 distributable cash per 1000 allowed general unsecured claims provided plan 2 maximum amount unresolved claims represents sum disputed general unsecured claims term loan avoidance action claims 3 total claim amount represents sum allowed general unsecured claims maximum amount unresolved claims year ended march 31 2018 avoidance action trust reached settlements certain defendants term loan avoidance action resulting recoveries avoidance action trust approximately 14 million result corresponding term loan avoidance action claims approximately 14 million allowed guc trust agreement described item 3 “legal proceedings” guc trust executed settlement agreement certain plaintiffs approved bankruptcy court settlement agreement would provide settlement payment plaintiffs 150 million among provisions march 31 2018 contingent settlement obligation 150 million settlement payment accrued statement net assets liquidation item 8 distributable assets table summarizes activity new gm securities prior liquidation distributable cash comprises guc trust’s distributable assets including numbers new gm securities amount distributable cash previously distributed well amount distributable cash available distribution holders guc trust units march 31 2018 thousands 1 numbers new gm securities amount distributable cash shown distributed include sales cash distributions governmental entities extent governmental entities requested sales demonstrated satisfaction guc trust administrator governmental entities precluded applicable law receiving distributions new gm securities b fractional amounts new gm securities lieu guc trust required pursuant guc trust agreement distribute cash subject certain minimum thresholds 2 distributions payable includes distributions payable respect allowed general unsecured claims allowed prior fiscal periods holders claims yet supplied information required guc trust order effect distribution entitled 3 distributable assets reflects amounts distributable cash dividend cash shown “guc trust distributable assets” report included exhibit 991 form 8k filed guc trust sec april 30 2018 distributable cash associated dividend cash set aside potential distribution respect current disputed general unsecured claims term loan avoidance action claims march 31 2018 extent claims resolved favor guc trust distributable cash associated dividend cash may become available distribution holders guc trust units future periods amount distributable cash associated dividend cash set “distributable assets” directly relate net assets liquidation number appearing guc trust’s financial statements prepared accordance us gaap described heading “disputed claims” march 31 2018 approximately 31855 million allowed general unsecured claims respect claims guc trust previously distributed aggregate 137298736 shares new gm common stock 124817263 new gm series warrants 124817263 new gm series b warrants 2462 million distributable cash addition guc trust obligated distribute march 31 2018 18 million distributable cash distributable cash set aside distribution overview distributable cash set aside distribution addition distributions distributable cash reflected reductions guc trust net assets financial statements guc trust also time sets aside distributable cash potential future appropriation fund projected liquidation administrative costs well potential income tax liabilities including dividend taxes investment income taxes distribution distributable cash set aside distribution guc trust deducted net assets liquidation guc trust financial statements unless set aside distributable cash appropriated expended distributable cash set aside distribution segregated guc trust specific purposes available distribution holders guc trust units claimants unless extent guc trust later determines set aside distributable cash longer needed fund specific purposes process related separate process recording current deferred income tax liabilities reserves expected costs liquidation statement net assets liquidation matter financial reporting matter financial reporting income tax liabilities reserves expected costs liquidation must determined accordance generally accepted accounting principles applicable guc trust contrast estimates projected costs potential liabilities guc trust may set aside distributable cash generally made conservative ie inclusive basis include contingencies may include amounts potential income tax liabilities permitted recognized applicable accounting standards see “critical accounting policies estimatesincome taxes” “critical accounting policies estimatesreserves expected costs liquidation” march 31 2018 distributable assets guc trust available distribution holders guc trust units consisted distributable cash approximately 4580 million including dividend cash deducting amounts distributable cash including dividend cash set aside distribution fund additional projected liquidation administrative costs guc trust described headings “set aside calculations relating projected liquidation administrative costs including dividend taxes investment income taxes” ii set aside distributions payable respect allowed general unsecured claims allowed prior fiscal periods holders claims yet supplied information required guc trust order effect distributions entitled distributable cash set aside potential distribution respect current disputed general unsecured claims term loan avoidance action claims extent claims resolved favor guc trust distributable cash including dividend cash may become available distribution holders guc trust units future periods prior liquidation guc trust’s holdings new gm securities july august 2015 new gm securities set aside fund projected liquidation administrative costs potential income tax liabilities described set aside calculations relating projected liquidation administrative costs including dividend taxes investment income taxes guc trust administrator reevaluates quarterly basis amount distributable cash including dividend cash needed set aside distribution purposes funding projected liquidation administrative costs including dividend taxes investment income taxes determination made basis different used calculate reserves financial statement purposes current methodology amount set aside equal estimates unfunded projected liquidation administrative costs including dividend taxes investment income taxes prior liquidation guc trust’s holdings new gm securities estimates unfunded projected liquidation administrative costs including dividend taxes investment income taxes converted number new gm securities set aside distribution dividing estimates trailing twelvemonth average closing prices new gm securities corresponding amount dividend cash associated setaside new gm securities also set aside distribution quarter ended march 31 2018 result standard quarterly reevaluations described estimate unfunded projected liquidation administrative costs including dividend taxes investment income taxes decreased 96 million 283 million decrease primarily related appropriation distributable cash 136 million march 2018 included total appropriations described heading “the guc trust assets” item 1 “business” however due limitations amount distributable cash available set aside purposes amount set aside reduced 247 million accordingly march 31 2018 guc trust set aside distribution distributable cash 247 million purposes funding future projected liquidation administrative costs guc trust fixed amount distributable cash administered guc trust well requirement also set aside sufficient amount distributable cash satisfy potential allowed general unsecured claims including term loan avoidance action claims amount distributable cash available set aside fund projected liquidation costs potential obligations subject inherent limitations “set aside” calculations relating potential taxes distribution addition reevaluating amount distributable cash including dividend cash set aside distribution fund projected liquidation administrative costs including dividend taxes investment income taxes guc trust administrator also reevaluates quarterly basis amount distributable cash needed set aside distribution fund potential taxes distribution current methodology calculating set aside estimates potential taxes distribution applying applicable us federal income tax rate net realized capital gains still subject examination irs less current period tax deductible expenses future tax deductible expenses realized capital gains computed using tax basis new gm securities based date transfer record ownership new gm securities guc trust mlc december 15 2011 tax basis new gm common stock received exercise new gm warrants pursuant liquidation order however result application section 505b bankruptcy code guc trust’s federal income tax returns year ended march 31 2017 prior years longer subject examination income taxes may assessed year ended march 31 2017 prior year addition guc trust’s remaining capital losses based tax basis previously held new gm securities financial reporting purposes net operating losses still subject examination irs subsequent years losses utilized utilization expected result sale new gm securities year ended march 31 2016 except potentially respect recovery guc trust member settlement class related proposed settlement securities class action new gm described item 3 “legal proceedings” b receipt subsequent distribution sale additional shares fair market value additional shares date distribution sale greater fair market value shares date receipt determinable estimable time accordingly income taxes expected paid future except potentially respect income taxes due recovery proposed settlement securities class action new gm b taxes distribution resulting receipt subsequent distribution sale guc trust additional shares determinable estimable time however income taxes recovery proposed settlement securities class action new gm become payable anticipated income taxes would funded proceeds recovery taxes distribution resulting receipt subsequent distribution sale additional shares become payable anticipated income taxes would funded sale portion additional shares result beginning quarter ended september 30 2016 march 31 2018 guc trust administrator determined distributable cash set aside potential taxes distribution dividend taxes investment income taxes time guc trust’s calculation amount distributable cash needed set aside distribution fund potential taxes distribution made using different methodology used calculate current deferred taxes financial statement purposes described estimating potential taxes distribution current set aside methodology calculates realized capital gains using tax basis new gm securities december 15 2011 respect tax return years still subject examination contrast calculating current deferred taxes purposes financial reporting applicable us gaap guc trust calculates realized capital gains using tax basis new gm securities financial reporting purposes based date transfer beneficial ownership new gm securities guc trust mlc occurred march 31 2011 substantial majority previously held new gm securities view guc trust administrator consultation guc trust monitor professionals retained guc trust calculation methodologies described basis distributable cash including dividend cash set aside distribution generally estimate projected liquidation administrative costs potential liabilities guc trust conservative basis accordingly view guc trust administrator guc trust monitor distributable cash currently set aside distribution fund costs liabilities would sufficient satisfy obligations guc trust date form 10k however assurance amount distributable cash set aside sufficient fund costs liabilities actually incurred addition assurance result future evaluations additional distributable cash need set aside appropriated fund additional costs liabilities beyond currently included guc trust’s estimates particular result changes guc trust’s estimates projected costs potential liabilities see “liquidity capital resources” guc trust units table details changes numbers guc trust units outstanding issuable year ended march 31 2018 1 number guc trust units issuable time represents guc trust units issuable respect allowed general unsecured claims newly allowed fiscal year 2 number guc trust units outstanding time represents guc trust units issued respect allowed general unsecured claims allowed prior periods including guc trust units held guc trust benefit holders allowed general unsecured claims yet supplied information required guc trust order effect initial distribution entitled b governmental entities precluded applicable law receiving distributions guc trust units 3 number guc trust units outstanding issuable end year equal amount allowed general unsecured claims 1 1000 basis corresponding date additional guc trust units issued due rounding liquidity capital resources guc trust’s sources liquidity principally funds holds payment liquidation administrative costs significantly lesser degree earnings funds invested addition result liquidation guc trust’s holdings new gm securities quarter ended september 30 2015 guc trust holds distributable cash distribution guc trust beneficiaries guc trust holds funds primarily us treasury bills permitted plan guc trust agreement year ended march 31 2018 guc trust’s holdings cash equivalents decreased approximately 17 million approximately 43 million approximately 26 million decrease primarily due cash paid liquidation administrative costs 119 million cash paid residual winddown claims costs 117 million partly offset cash received sale marketable securities excess reinvestments 173 million interest dividend income received marketable securities 48 million year ended march 31 2018 funds invested guc trust marketable securities decreased approximately 173 million approximately 5225 million approximately 5052 million decrease due primarily sale marketable securities fund payments described period guc trust earned accrual basis approximately 52 million interest income investments year march 31 2018 guc trust held approximately 5077 million cash equivalents marketable securities amount approximately 4845 million relates distributable cash including dividend cash portion guc trust administrator permitted set aside distribution appropriate approval bankruptcy court trust monitor applicable order fund additional costs become due included distributable cash march 31 2018 approximately 135 million dividend cash described dividend cash distributed holders subsequently resolved allowed claims guc trust units respect distributable cash receive unless dividends respect distributable cash appropriated guc trust accordance guc trust agreement fund guc trust’s liquidation administrative costs income tax liabilities shortfalls residual winddown assets march 31 2018 distributable cash including dividend cash held guc trust set aside follows 18 million liquidating distributions payable date b 247 million fund projected liquidation administrative costs addition described subsequent march 31 2018 guc trust filed motions seeking authority bankruptcy court appropriate distributable cash 60 million noticing costs 150 million settlement payment settlement agreement see item 3 “legal proceedings” “net assets liquidationdistributable assets” addition distributable cash including dividend cash guc trust held 232 million cash equivalents marketable securities march 31 2018 representing funds held payment costs liquidation administration liabilities amount approximately 20 million comprising approximately 17 million remaining administrative fund approximately 02 million remaining residual winddown assets approximately 01 million remaining funds designated indenture trustee fiscal paying agent costs required guc trust agreement returned upon windingup guc trust dip lenders extent funds utilized satisfy designated winddown costs residual winddown claims costs indenture trusteefiscal paying agent costs cash equivalents marketable securities 17 million remaining administrative fund designated satisfaction certain specifically identified costs liabilities guc trust amounts may used payment guc trust professionals’ fees expenses winddown costs amounts time available distribution holders guc trust units balance cash equivalents marketable securities approximately 212 million available payment certain reporting administrative costs guc trust would available future distribution holders guc trust units otherwise used satisfy expected costs see “liquidation administrative costs” assurance additional amounts distributable cash required set aside distribution appropriated fund additional costs income tax liabilities beyond guc trust administrator already set aside appropriation distributable cash occurs fund obligations result lesser amount distributable cash available distribution holders guc trust units addition described “the guc trust assets” item 1 “business” portion guc trust’s assets currently segregated pursuant guc trust agreement satisfaction certain specified costs assets insufficient satisfy residual winddown claims fund specified costs reason guc trust administrator similarly required set aside distribution appropriate additional amounts distributable cash order fund shortfall trends litigation reference made item 3 “legal proceedings” item 7a item 7 managements discussion analysis financial condition results operations following managements discussion analysis financial condition results operations mda read conjunction hughes electronics corporation consolidated financial statements mda period ended december 31 1998 included exhibit 99 annual report form 10k delphi automotive systems corporation delphi general motors acceptance corporation gmac annual reports form 10k period ended december 31 1998 filed separately securities exchange commission hughes electronics corporation prior december 17 1997 restructuring company hereinafter referred former hughes electronics corporation subsequent december 17 1997 restructuring company hereinafter referred hughes earnings per share amounts included mda reported basic gm presents separate supplemental consolidating financial information following businesses automotive electronics operations financing insurance operations gms reportable operating segments within automotive electronics operations business consist general motors automotive gma comprised four regions gm north america gmna gm europe gme gm asiapacific gmap gm latin americaafricamideast gmlaam delphi hughes gmna designs manufactures markets vehicles primarily north america following nameplates chevrolet pontiac gmc oldsmobile buick cadillac saturn gme gmap gmlaam meet demands customers outside north america vehicles designed manufactured marketed following nameplates opel vauxhall holden isuzu saab chevrolet gmc cadillac delphi diverse supplier automotive systems components delphi offers products services areas electronics mobile communication safety thermal electrical architecture dynamics propulsion february 5 1999 delphi completed initial public offering 100 million shares common stock represented 177 outstanding common shares currently traded new york stock exchange symbol dph gm currently owns remaining 823 delphis common stock gm announced intention distribute holders 123 par value common stock 1999 interest delphis common stock see note 23 gm consolidated financial statements information gm received ruling us internal revenue service confirming gms plan effect distribution shares holds delphi would taxfree gm stockholders us federal income tax purposes although gm fully committed completing full separation delphi gm distribution would subject number conditions assurance whether occur hughes includes activities relating designing manufacturing marketing advanced technology electronic systems products services telecommunications space industries segment includes design manufacturing marketing locomotives heavyduty transmissions elimination intersegment transactions gms reportable operating segments within financing insurance operations business consist gmac provides broad range financial services including consumer vehicle financing fullservice leasing fleet leasing dealer financing car truck extended service contracts residential commercial mortgage services vehicle homeowners insurance financing insurance operations segment includes financing entities operating canada germany brazil disaggregated financial results gma prepared using management approach consistent basis manner gm management internally disaggregates financial information purposes assisting making internal operating decisions regard certain common expenses allocated among regions less precisely would required standalone financial information prepared accordance generally accepted accounting principles gaap certain expenses primarily certain us taxes related nonus operations included automotive electronics operations segment financial results represent historical information used management internal decision making purposes therefore data prepared represent way business operate future data prepared gaap basis may materially different ii3 general motors corporation subsidiaries results operations 1998 gms consolidated income continuing operations totaled 30 billion 426 per share 123 par value common stock compared 67 billion 870 per share 123 par value common stock 50 billion 607 per share 123 par value common stock 1997 1996 respectively 1998 financial results impacted charges 420 million aftertax 064 per share 123 par value common stock resulting gms 1998 competitiveness studies see competitiveness studies 1997 financial results impacted two significant items 43 billion taxfree gain 591 per share 123 par value common stock resulting december 17 1997 completion strategic restructuring former hughes see hughes financial review charges 40 billion aftertax 559 per share 123 par value common stock resulting gms 1997 competitiveness studies see competitiveness studies excluding impact special items 315 million losses 426 million income 1998 1997 respectively income 37 billion 538 per share 123 par value common stock 60 billion 790 per share 123 par value common stock 1998 1997 respectively gm completed splitoff electronic data systems corporation eds june 7 1996 accordingly financial results related eds splitoff date reported discontinued operations gms 1996 net income including income discontinued operations june 7 1996 splitoff totaled 50 billion 606 per share 123 par value common stock additional information regarding splitoff eds contained note 1 gm consolidated financial statements automotive electronics operations highlights financial performance gms automotive electronics operations business follows years ended december 31in millions 19981 19971 19961 manufactured products sales revenues gma 125683 134121 127590 delphi 28479 31447 31032 hughes 5964 5128 4009 19693 17013 17290 manufactured products sale revenues 140433 153683 145341 net income loss gma 1634 449 2337 delphi 93 215 853 hughes 272 471 184 279 4245 348 net income 1534 5380 3722 1adjustments made reflect impact adjustments delphis management basis financial statements connection initial public offering 1997 1996 amounts also adjusted reflect changes gms organizational structure resulting restructuring former hughes occurred december 1997 delphi amounts include delco hughes amounts exclude delco hughes defense includes hughes defense gma delphi hughes financial reviews presented pages ii5 ii11 reflect change gms organizational structure resulting restructuring former hughes ii4 general motors corporation subsidiaries gma financial highlights year ended december 31 19981 1997 1 1996 1 dollars millions gmna manufactured products sale revenues 94201 100256 93382 pretax income loss 2409 249 836 income tax expense benefit 787 272 54 earnings nonconsolidated associates minority interests 13 35 37 gmna income loss 1635 12 819 gme manufactured products sales revenues 25036 24106 25528 pretax income 740 256 1053 income tax expense 319 121 168 earnings nonconsolidated associates minority interests 2 152 107 gme income loss 419 17 778 gmlaam manufactured products sales revenues 7403 8572 6723 pretax loss income 471 536 667 income tax benefit expense 213 43 106 earnings nonconsolidated associates minority interests 83 174 81 gmlaam loss income 175 667 642 gmap manufactured products sales revenues 2923 2980 3001 pretax loss income 82 235 63 income tax expense benefit 9 29 32 earnings nonconsolidated associates minority interests 152 34 79 gmap loss income 243 172 110 gma 2 manufactured products sales revenues 125683 134121 127590 pretax income 2594 279 2600 income tax expense benefit 902 149 353 earnings nonconsolidated associates minority interests 58 21 90 gma income 1634 449 2337 1adjustments made gmas results reflect impact adjustments delphis management basis financial statements connection initial public offering 2gmas results include eliminations activity gmna gme gmlaam gmap ii5 general motors corporation subsidiaries years ended december 31 1998 1997 1996 units thousands wholesale sales gmna cars 2731 3095 2913 trucks 2340 2454 2239 total gmna 5071 5549 5152 gme cars 1882 1708 1673 trucks 125 142 122 total gme 2007 1850 1795 gmlaam cars 404 495 459 trucks 248 290 244 total gmlaam 652 785 703 gmap cars 202 176 199 trucks 217 416 414 total gmap 419 592 613 total worldwide 8149 8776 8263 ii6 general motors corporation subsidiaries gma financial review including 228 million 30 billion aftertax charges 1998 1997 respectively related competitiveness studies see competitiveness studies gmas income 16 billion 449 million 1998 1997 respectively excluding competitiveness studies charges gmas income 19 billion 15 manufactured products sales revenues 35 billion 26 manufactured products sales revenues 1998 1997 respectively income 23 billion 18 manufactured products sales revenues 1996 decrease 1998 income primarily due lower production volumes gmna associated work stoppages two component plants flint michigan discussed economic downturn throughout latin america partially offset material structural cost savings members united auto workers locals 659 651 flint michigan ceased production two component plants june 5 june 11 1998 respectively work stoppages facilities resolved july 28 1998 tentative agreements reached agreements ratified rank file july 29 1998 operations began accelerate normal production levels july 30 1998 work stoppages aggregate unfavorable aftertax impact approximately 20 billion 294 per share gm 123 par value common stock 1998 resulted loss approximately 371000 units production unfavorable aftertax impact represents combined effects gmna 15 billion delphi 450 million increase 1997 income compared 1996 excluding competitiveness studies charges primarily due higher wholesale sales volumes continued improvement profitability new vehicles lower material engineering costs factors partially offset higher retail incentives increased commercial spending support numerous vehicle launches unfavorable impact approximately 240 million aftertax related work stoppage production losses 1997 manufactured products sales revenues 1998 1257 billion represented decrease 84 billion compared 1997 decrease largely due lower number wholesale units sold result previously mentioned work stoppages economic downturn throughout latin america manufactured products sales revenues 1997 1341 billion represented increase 65 billion compared 1996 improvement primarily due 513000 unit increase wholesale sales volumes gma reported 1998 pretax income 26 billion compared 279 million 26 billion 1997 1996 respectively excluding 224 million 47 billion pretax impact competitiveness studies charges gmas pretax income 28 billion 50 billion 1998 1997 respectively decrease 1998 pretax income excluding competitiveness studies charges primarily due impact lower wholesale sales resulting previously mentioned work stoppages higher retail incentives partially offset material engineering manufacturing cost improvements increase 1997 pretax income primarily due higher wholesale sales volumes continued improvement profitability new vehicles lower material engineering costs gmas 1998 worldwide market share decreased 157 compared 160 162 1997 1996 respectively decrease market share primarily due dealer inventory shortages due mentioned work stoppages gmna gmnas 1998 market share 289 compared 308 310 1997 1996 respectively gmna reported income 16 billion 1998 compared loss 12 million income 819 million 1997 1996 respectively excluding competitiveness studies charges gmnas income 17 billion 24 billion 1998 1997 respectively decrease income 1998 compared 1997excluding competitiveness studies charges primarily due previously discussed work stoppages minimized strong cost performance offset price reductions driven competitive market pressures 1998 cost performance resulted quality initiatives material performance reduced structural cost increase income 1997 compared 1996 excluding competitiveness studies charges primarily due 397000 unit increase wholesale sales volumes continued improvement profitability new vehicles lower material engineering costs factors partially offset higher retail incentives increased commercial spending support numerous vehicle launches progress unfavorable impact work stoppages gme reported income 419 million 1998 compared loss 17 million income 778 million 1997 1996 respectively excluding competitiveness studies charge gmes income 471 million 1997 gmes results also included aftertax charge 1998 44 million related work schedule modifications opel belgium aftertax gains 1997 103 million related sale gmes interest avis europe 55 million related settlement agreement volkswagen ag excluding items gmes income 463 million 313 million 1998 1997 respectively increase 1998 adjusted earnings compared 1997 primarily due savings material costs policy warranty spending well lower equity losses saab automobile ab saab decrease 1997 adjusted earnings compared 1996 primarily due higher sales marketing costs intensely competitive market conditions lower equity earnings saab related launch new 95 model 1996 restructuring agreement gm saabs owners investor ab includes certain provisions options may ii7 general motors corporation subsidiaries gma financial review concluded impact relative ownership interests parties involved agreement gives gm adam opel right purchase 100 investor abs interest saab 1999 2000 investor ab right sell 50 present holdings saab gm adam opel 2000 gm currently maintains 50 ownership interest saab gmlaam reported loss 175 million 1998 compared income 667 million 642 million 1997 1996 respectively decrease 1998 earnings compared 1997 primarily due economic downturn throughout latin america 51 million aftertax charges 1998 related competitiveness studies higher incentive costs increase 1997 earnings compared 1996 primarily due increase wholesale sales financial outlook gmlaam uncertain 1999 due ongoing economic crisis latin america 1998 gmlaam reduced employment levels approximately 21 effort resize operations current conditions additional reduction accomplished 1999 significant schedule adjustments capital spending also greatly reduced conserve cash region gmap reported loss 243 million 1998 compared loss 172 million income 110 million 1997 1996 respectively excluding competitiveness studies charges gmaps losses 146 million 2 million 1998 1997 respectively higher losses 1998 compared 1997 primarily attributable decreased equity earnings isuzu resulting write investments due economic downturn asia continued spending associated gmaps growth strategy decrease 1997 earnings compared 1996 due increased spending associated gmaps growth strategy beginning economic downturn asia gmas effective income tax credit rate 1998 348 compared 530 136 1997 1996 respectively excluding previously mentioned competitiveness studies charges effective income tax rates 1998 1997 345 323 respectively adjusted rates indicated return normalized level lower 1996 tax rate resulted research experimentation credits united states favorable resolution items related gms 1995 tax return favorable tax position mexico delphi financial highlights years ended december 31 19981 19971 19961 dollars millions manufactured products sales revenues 28479 31447 31032 pretax loss income 332 223 1052 income tax benefit expense 173 44 259 minority interests 11 9 3 earnings nonconsolidated associates 55 27 57 loss income 93 215 853 1the 1997 amounts adjusted reflect changes gms organizational structure resulting restructuring former hughes occurred december 1997 delphi adjusted amounts include delco adjustments also made periods reflect impact adjustments delphis management basis financial statements connection initial public offering delphi financial review delphi reported loss 93 million 1998 compared income 215 million 853 million 1997 1996 respectively delphis results years included impact several special items described fourth quarter 1998 delphi recorded 310 million charge 192 million aftertax related evaluation competitiveness business see competitiveness studies third quarter 1998 delphi recorded loss 430 million 271 million aftertax related divestitures seating lighting coil spring businesses fourth quarter 1997 delphi recorded 14 billion charge 870 million aftertax relating evaluation competitiveness business see competitiveness studies first quarter 1997 delphi recorded 80 million plant closing charge 50 million aftertax relating facility trenton new jersey fourth quarter 1996 delphi sold four facilities located flint livonia michigan oshawa windsor ontario resulted loss 247 million 153 million aftertax also retiree lump sum benefit payments resulting us labor negotiations 1996 resulted fourth quarter charge 86 million 53 million aftertax ii8 general motors corporation subsidiaries delphi financial review concluded income excluding impact special items discussed 370 million 1998 compared income 11 billion 1997 1996 decrease 1998 income excluding impact special items primarily reflects unfavorable volumes due impact work stoppages 1998 certain gm delphi locations well economic downturn throughout asia latin america 1998 year material manufacturing cost savings exceeded impact price reductions unrecovered design costs partially offset unfavorable impact lower volume income 1997 excluding impact special items increased 76 million due lower material manufacturing costs net impact work stoppages occurred 1997 compared three work stoppages 1996 certain gm delphi locations manufactured products sales revenues 1998 totaled 285 billion compared 314 billion 1997 decrease 30 billion decrease reflects unfavorable volumes associated work stoppages lost fourth quarter revenues associated divested businesses historical annual net sales approximately 20 billion economic conditions asia latin america well impact price reductions 1998 manufactured products sales revenues 1997 increased 400 million compared 1996 increase reflects improved sales volumes nongm customers well higher production gmna 1997 improved volumes 1997 partially offset impact 1996 sale four plants annual revenues approximately 10 billion well continued pricing pressures effective income tax rate 1998 521 credit compared effective income tax rate 197 1997 1998 certain deductions tax credits remained constant taxable income decreased substantially resulting greater effective tax benefit percentage pretax loss effective income tax rate 1996 246 lower effective rates 1997 1996 reflect favorable impact state local foreign tax rates generally lower us federal statutory rate impact research experimentation credits earnings nonconsolidated associates increased 28 million 1998 compared 1997 increase primarily reflects improved profitability certain new established ventures earnings nonconsolidated associates decreased 27 million 1997 compared 57 million 1996 decrease reflects sale certain minority owned investments unfavorable impact economic volatility overseas joint ventures ii9 general motors corporation subsidiaries hughes financial highlights years ended december 31 1998 19971 19961 dollars millions except per share amounts revenues 5964 5128 4009 pretax income 310 734 257 income tax benefit expense 45 237 105 minority interests 24 25 53 losses nonconsolidated associates 128 72 42 net income 251 450 163 earnings used computation available separate consolidated net income 2 272 471 184 earnings per share attributable class h common stock 3 068 118 046 1the 1997 1996 amounts relate telecommunications space business former hughes reflect changes gms organizational structure resulting hughes transactions occurred december 1997 see discussion hughes transactions 2excludes amortization gm purchase accounting adjustments 21 million years related gms acquisition hughes aircraft company hac 1985 3for 1997 1996 earnings per share attributable class h common stock presented pro forma basis prior hughes transactions amounts calculated based financial performance former hughes since financial highlights 1997 1996 relate telecommunications space business former hughes reflect earnings per share attributable former class h common stock historical basis pro forma presentation therefore presents financial results would achieved 1997 1996 relative class h common stock based solely performance telecommunications space business former hughes see hughes financial review discussion hughes financial review december 17 1997 gm former hughes completed series transactions hughes transactions designed address strategic challenges facing three principal businesses former hughes consisting defense electronics automotive electronics telecommunications space businesses hughes transactions included taxfree spinoff defense electronics business former hughes defense holders gms 123 par value class h common stocks transfer delco former hughes delphi recapitalization class h common stock new gm tracking stock class h common stock linked remaining telecommunications space business hughes transactions followed immediately merger hughes defense raytheon company 1997 1996 amounts presented hughes relate telecommunications space businesses former hughes revenues increased 60 billion 1998 compared 51 billion 1997 40 billion 1996 1998 revenue growth propelled increase directvr businesses due strong subscriber growth average monthly revenues per subscriber well low subscriber churn rates increase panamsat primarily may 1997 panamsat merger increased operating lease revenues video data internetrelated services higher commercial satellite sales higher sales directvtm receiver equipment 1997 increase due primarily strong directv subscriber growth higher sales commercial satellites completion panamsat merger operating profit excluding amortization purchase accounting adjustments related gms acquisition hac 270 million 1998 compared 306 million 210 million 1997 1996 respectively fullyear 1998 operating profit margin basis 45 compared 60 1997 52 1996 lower 1998 operating profit operating profit margin principally result lower sales wireless telephone systems private business networks asia pacific region well provisions estimated losses associated uncollectible amounts due certain wireless customers hughes network systems offset part lower operating losses domestic directv higher operating profit panamsat increase 1997 operating profit operating profit margin resulted primarily completion panamsat merger reduced losses directv business higher commercial satellite sales ii10 general motors corporation subsidiaries hughes financial review concluded pretax income 310 million 1998 compared 734 million 257 million 1997 1996 respectively decrease 1998 primarily resulted 1997 490 million pretax gain recognized connection panmsat merger 1997 goodwill amortization associated panamsat merger provision uncollectible amounts due certain wireless customers offset decrease interest expense increase interest income increase 1997 477 million 1996 reflects 490 million pretax gain discussed completion panamsat merger reduced losses directv business higher commercial satellite sales nineteen ninetysix included 120 million pretax gain recognized sale 25 directv att effective income tax rate 1998 145 compared 323 409 1997 1996 respectively effective income tax rate 1998 benefited favorable adjustment relating agreement internal revenue service regarding treatment research experimentation costs years 1983 1995 1997 decrease effective income tax rate due primarily increase research experimentation credits favorable resolution certain tax contingencies excluding amortization purchase accounting adjustments related gms acquisition hac hughes earnings used computation available separate consolidated net income 1998 272 million compared 471 million 184 million 1997 1996 respectively may 1998 hughes purchased additional 95 interest panamsat increasing hughes ownership interest panamsat 810 october 1998 hughes agreed acquire pending regulatory approval mexico additional ownership interest grupo galaxy mexicana sa de cv ggm galaxy latin america lcc gla local operating company located mexico grupo mvs sa de cv mvs hughes equity ownership represent 490 voting equity nonvoting equity ggm part transaction hughes acquired mvs additional 100 interest gla increasing ownership interest 700 well additional 198 interest surfin ltd increasing ownership percentage 591 december 1998 hughes agreed acquire outstanding capital stock united states satellite broadcasting company inc ussb provides directtohome premium satellite programming conjunction directvs basic programming service ussb launched service june 1994 december 31 1998 two million subscribers nationwide acquisition accounted using purchase method accounting purchase price consisting cash gm class h common stock determined closing based upon agreedupon formula exceed 16 billion aggregate subject certain limitations merger agreement ussb shareholders entitled elect receive cash shares gm class h common stock amount cash paid merger cannot less 30 greater 50 aggregate purchase price remaining consideration consisting gm class h common stock merger subject ussb shareholder approval receipt appropriate regulatory approvals expected close early mid1999 january 1999 hughes agreed acquire primestar incs primestar 23 millionsubscriber mediumpower directtohome business related transaction hughes also agreed acquire highpower satellite assets direct broadcast satellite dbs orbital frequencies tempo whollyowned subsidiary tci satellite entertainment inc primestar transaction pending regulatory primestar lender approval expected close early mid1999 tempo transaction pending regulatory approval expected close mid late1999 ii11 general motors corporation subsidiaries financing insurance operations highlights financial performance gms financing insurance operations business follows years ended december 31 millions 1998 1997 1996 financing revenues gmac 12731 12577 12644 854 185 30 total 13585 12762 12674 net income gmac 1325 1301 1240 97 17 1 total 1422 1318 1241 gmac financial highlights years ended december 31 1998 1997 1996 dollars millions financing revenues retail lease financing 3869 3571 3822 operating leases 7233 7260 7215 wholesale term loans 1629 1746 1607 total financing revenues 12731 12577 12644 interest discount 5787 5256 4938 depreciation operating leases 4693 4677 4627 net financing revenue 2251 2644 3079 mortgage revenue 2030 1499 944 insurance premiums earned 1859 1360 1158 income 1295 1159 1228 net financing revenue 7435 6662 6409 expenses 5498 4448 4332 pretax income 1937 2214 2077 income tax expense 612 913 837 net income 1325 1301 1240 net income automotive financing operations 984 910 946 net income mortgage operations 115 167 102 net income insurance operations 226 224 192 net income 1325 1301 1240 gmac financial review gmacs 1998 consolidated net income increased 2 1997 13 billion net income automotive financing operations totaled 984 million 8 1997 earnings higher due retail asset growth reduced credit losses lower effective income tax rate partially offset lower net interest margins lower wholesale volume net income insurance operations totaled 226 million 224 million earned 1997 net income mortgage operations totaled 115 million 167 million earned 1997 earnings lower primarily result reduced mortgage asset values due higher prepayment levels 1998 gmac financed 418 new gm vehicle retail deliveries united states 331 284 1997 1996 respectively improvements since 1996 primarily reflect higher volumes generated special rate financing lease incentive programs sponsored gm improvement achieved amid continued competitive pressures automotive financing marketplace ii12 general motors corporation subsidiaries gmac financial review concluded gmacs automotive financing revenue totaled 127 billion 1998 compared 126 billion 1997 1996 higher retail financing revenues 1998 partially offset decline wholesale revenues principally reduction average wholesale receivable balances related gm work stoppages gmacs worldwide cost borrowing decreased 599 compared 630 657 1997 1996 respectively cost borrowings united states 589 1998 639 651 1997 1996 respectively lower average borrowing costs since 1996 largely result decrease us interest rates greater proportion floating rate debt compared fixed rate debt net automotive financing revenue combined mortgage revenue insurance premiums income increased 74 billion compared 67 billion 64 billion 1997 1996 respectively increases 1998 1997 primarily due results mortgage insurance operations partially offset reduced net automotive financing margins expenses increased 11 billion 116 million 1998 1997 respectively increases 1998 1997 primarily due higher costs salaries benefits increased insurance losses operating charges incidental expanding mortgage insurance business activities gmacs effective income tax rate 1998 316 compared 412 1997 403 1996 favorable change 1998 primarily attributable lower us foreign taxes assessed foreign source income favorable change resulting periodic assessments state local income tax accruals unfavorable change 1997 primarily attributable increases accruals prior years based periodic assessment adequacy accruals higher state local income taxes competitiveness studies global automotive industry including automotive components systems market continues increasingly competitive presently undergoing significant restructuring consolidation activities major industry participants continuing increase focus efficiency cost improvements excess capacity led continuing price pressures result gmna delphi gme gmlaam gmap initiated studies 1997 concerning longterm competitiveness facets businesses market conditions continued warrant review competitiveness studies completed 1998 conjunction annual business planning cycle additional information regarding competitiveness studies contained note 2 gm consolidated financial statements based results competitiveness studies gm recorded pretax charges income totaling 534 million 420 million tax 064 per share 123 par value common stock 1998 64 billion 40 billion aftertax 559 per share 123 par value common stock 1997 1998 pretax charges comprised 105 million 80 million aftertax gmna 310 million 192 million aftertax delphi 82 million 51 million aftertax gmlaam 37 million 97 million aftertax gmap overall charges effect increasing 1998 cost sales depreciation amortization expenses 246 million 223 million 65 million respectively 1997 pretax charges comprised 38 billion 24 billion tax gmna 14 billion 870 million aftertax delphi 848 million 488 million aftertax gme 174 million 170 million aftertax gmap 205 million 128 million aftertax gm automotive electronics operations segment charges reduced 1997 net sales revenues 548 million increased cost sales depreciation amortization expenses 17 billion 41 billion 72 million respectively accruals related capacity reductions expenses part 1997 charges still remain december 31 1998 total 11 billion going forward gms future cash requirements relating 1998 1997 charges expected total approximately 14 billion next five years 70 evenly expended first three years competitiveness studies charges included amounts underperforming assets including vehicle component manufacturing assets pursuant gms policy valuation longlived assets future investments relating underperforming product lines expensed charges also include amounts voluntary employee separation programs recorded employee accepts offer accordance gms policy programs gm continue monitor competitiveness aspects businesses competitiveness studies undertaken market conditions warrant ii13 general motors corporation subsidiaries year 2000 many computerized systems microprocessors embedded variety products either made used gm potential operational problems lack ability handle transition year 2000 issue potential cause disruption gms business operations gm developed comprehensive worldwide program identify remediate potential year 2000 problems business information systems embedded engineering manufacturing operations additionally gm initiated communications site assessments suppliers dealers third parties order assess reduce risk gms operations could adversely affected failure third parties adequately address year 2000 issue one gms first priorities analysis microprocessors used gm passenger cars trucks review included current planned models well electronics older cars trucks produced period approximately last 15 years gm began installing microchips capable processing date information approximately 15 years ago processors reviewed daterelated functionality accordingly year 2000 issues vehicles processors perform daterelated functions none year 2000 issues gms year 2000 program teams responsible remediating gms information technology embedded systems information technology principally consists business information systems mainframe shared computers associated business application software infrastructure personal computers operating systems networks devices like switches routers embedded systems include microprocessors used factory automation systems elevators security facility management gms year 2000 program includes assessment remediation services provided electronic data systems corporation eds pursuant master service agreement gm year 2000 program implemented seven phases conducted concurrently inventory identification validation inventory systems could affected year 2000 issue inventory phase commenced earnest 1996 substantially complete identified approximately 7600 business information systems 17 million infrastructure items embedded systems assessment initial testing code scanning supplier contacts determine whether remediation needed developing remediation plan applicable assessment business information systems substantially complete included determination one quarter systems regarded critical based criteria potential business disruption assessment infrastructure items embedded systems substantially completed end 1998 remediation design execution remediation plan followed testing adherence design gm substantially completed remediation critical noncritical systems small number systems remediated replaced 1999 unimportant systems continue removed gms year 2000 inventory remediated gm believes meet targets year 2000 readiness normal course business plans gms delphi automotive systems unit incrementally implementing enterprise software replace thereby eliminate need remediate certain existing systems implementation software several delphi sites scheduled completion first quarter 1999 another delphi site implementation expected complete july 1999 system test testing remediated items ensure function normally replaced original operating environment phase closely related remediation phase follows essentially schedule implementation return items normal operation satisfactory performance system testing phase follows essentially schedule remediation system testing readiness testing planning testing integrated systems year 2000 ready environment including ongoing auditing followup readiness testing currently underway phase commenced fourth quarter 1998 expected major focus year 2000 program throughout 1999 ii14 general motors corporation subsidiaries year 2000 continued contingency planning development execution plans narrow focus specific areas significant concern concentrate resources address gm currently believes reasonably likely worst case scenario localized disruptions systems affect individual business processes facilities suppliers short time rather systemic longterm problems affecting business operations whole gm contingency planning continue identify systems aspects gms business suppliers believes would likely experience year 2000 problems gm contingency planning also address business operations localized disruption could potential causing wider problem interrupting flow products materials data operations uncertainty activities may affected exact nature problems may arise gms contingency planning focus minimizing scope duration disruptions sufficient personnel inventory resources place permit flexible realtime response specific problems may arise individual locations around world actions gm may consider include deployment emergency response teams regional local basis development plans allocation stockpiling resourcing components materials may critical continued production specific contingency plans resources permitting necessary flexibility response expected identified put place commencing mid1999 gms communication suppliers focused element assessment remediation phases described gm leading participant industry trade association automotive industry action group distributed year 2000 compliance questionnaires well numerous awareness assistance mailings half 100000 supplier sites supply gm throughout world responses questionnaires generally sent gms principal suppliers received half supplier sites sent many nonresponding suppliers communicating directly gm informal basis additionally gm initiated review suppliers considered critical gms operations including 2400 onsite assessments date assessment efforts substantially completed respect critical supplier sites based assessment activity date gm believes substantial majority suppliers making acceptable progress toward year 2000 readiness gm established program provide assistance suppliers desire input believed high risk noncompliance result foregoing assessment efforts supplier assistance program currently includes providing compliance workshops remediation consultants work suppliers developing implementing remediation programs gms contingency planning efforts described also expected address critical suppliers gm identifies high risk encountering year 2000 problems gm relying entirely receipt written assurances suppliers respect year 2000 compliance gm also evaluating certain suppliers firsthand basis seeking enhance likelihood full year 2000 readiness actively assisting training consultation regarding year 2000 remediation projects gm expects information suppliers written responses interactions provide gm basis contingency planning risk management gm also program work independent dealers year 2000 readiness program includes distributing materials assist dealers designing executing assessment remediation efforts gm also included year 2000 compliance criteria part established program certifying thirdparty business information systems properly interface systems provided dealers gm gms direct year 2000 program cost expensed incurred exception capitalizable replacement hardware beginning 1999 internaluse software total incremental spending gm expected material corporations operations liquidity capital resources addition work gm direct financial responsibility eds providing year 2000related services gm required master service agreement services provided eds part normal fixed price services ongoing payments eds gms current forecast total direct expenditures value services performed eds attributable gms year 2000 program approximately 710 million 780 million entire year 2000 program amount gm currently expects total year 2000 direct spending approximately 450 million 520 million peak spending occurring last quarter 1998 early 1999 total direct spending estimate includes additional payment 75 million gm agreed pay eds end first quarter 2000 systems remediated eds master service agreement cause significant business disruption results material financial loss gm due millennium change estimated value services eds required provide gm master service agreement attributable work performed connection gms year 2000 program approximately 335 million ii15 general motors corporation subsidiaries year 2000 concluded gm incurred approximately 40 million year 2000 expense 1997 approximately 145 million 1998 also estimated value services provided gm eds 1997 1998 master service agreement attributable work performed connection gms year 2000 program approximately 260 million thus total direct expenditures gm value year 2000related services performed eds 1997 1998 attributable gms year 2000 program amounted approximately 445 million despite incremental year 2000 spending expected incurred throughout corporation gms current business plan projects continued declining information technology expenses gms total year 2000 costs noted include information technology projects accelerated due year 2000 estimated approximately 30 million view foregoing gm currently anticipate experience significant disruption business result year 2000 issue however still uncertainty broader scope year 2000 issue may affect gm third parties critical gms operations example lack readiness electrical water utilities financial institutions government agencies providers general infrastructure could geographic areas pose significant impediments gms ability carry normal operations area areas affected event gm unable complete remedial actions described unable implement adequate contingency plans event problems encountered could material adverse effect gms business results operations financial condition foregoing discussion describes year 2000 program implemented gm consolidated subsidiaries hughes information year 2000 efforts hughes found exhibit 99 statements made herein implementation various phases gms year 2000 program costs expected associated program results gm expects achieve constitute forwardlooking information noted many uncertainties involved year 2000 issue including extent gm able successfully remediate systems adequately provide contingencies may arise well broader scope year 2000 issue may affect third parties controlled gm accordingly costs results gms year 2000 program extent impact gms operations could vary materially stated herein liquidity capital resources automotive electronics operations cash marketable securities 30 billion assets voluntary employees beneficiary association veba trust invested fixedincome securities december 31 1998 totaled 141 billion compared 175 billion december 31 1997 gm elected prefund part postretirement benefits liability primarily related postretirement health care expenses creating veba trust total veba assets approximated 46 billion 30 billion december 31 1998 1997 respectively effect reducing gms postretirement benefits liability consolidated balance sheet net liquidity calculated cash marketable securities less total loans payable longterm debt 24 billion december 31 1998 decrease 58 billion prior year gm previously indicated goal maintaining 130 billion cash marketable securities order continue funding product development programs throughout next downturn business cycle 130 billion target includes cash pay certain costs prefunded part veba contributions longterm debt 72 billion december 31 1998 increase approximately 15 billion prior year ratio longterm debt longterm debt gm investment automotive electronics operations 588 389 december 31 1998 1997 respectively ratio longterm debt shortterm loans payable total debt gm investment 633 415 december 31 1998 1997 respectively gm believes sufficient resources meet anticipated future cash flow requirements addition cash flows operations gm subsidiaries maintain substantial lines credit various financial institutions additional information gms available credit facilities contained note 10 gm consolidated financial statements ii16 general motors corporation subsidiaries financing insurance operations gms financing insurance operations primarily consist gmac december 31 1998 gmac owned assets serviced automotive receivables others totaling 1387 billion compared 1212 billion year end 1997 earning assets totaled 1251 billion 1040 billion december 31 1998 1997 respectively increase earning assets primarily attributable increases automotive finance receivables outstanding operating lease assets investments securities portfolio real estate mortgages outstanding receivables due gm cash equivalents totaled 618 million 759 million december 31 1998 1997 respectively gmacs consolidated finance receivables net unearned income totaled 721 billion 600 billion december 31 1998 1997 respectively higher outstanding balance primarily attributable 75 billion worldwide increase retail receivables 31 billion increase us european wholesale receivables 18 billion increase term loans gmacs liquidity well ability profit ongoing acquisition activity large part dependent access capital costs associated raising funds different segments capital markets regard gmac regularly accesses short medium longterm debt markets principally commercial paper term notes underwritten issuances gmacs borrowings outstanding december 31 1998 totaled 1038 billion compared 867 billion december 31 1997 gmacs ratio debt stockholders equity december 31 1998 1061 991 december 31 1997 higher yeartoyear debt levels principally used fund increased asset levels gmac continued use asset securitization program alternative funding source sold finance receivables continues service fee servicing portfolio sold finance receivables totaled 73 billion 124 billion december 31 1998 1997 respectively gmac subsidiaries maintain substantial bank lines credit totaled 429 billion 398 billion december 31 1998 1997 respectively unused portion credit lines totaled 332 billion december 31 1998 28 billion higher december 31 1997 book value per share book value per share 123 par value common stock decreased 1990 2226 december 31 1998 1997 respectively book value per share class h common stock decreased 1194 december 31 1998 1336 december 31 1997 book value per share determined based liquidation rights various classes common stock repurchases february 1998 gm board directors gm board approved 40 billion stock repurchase program due previously mentioned work stoppages second third quarters 1998 stock repurchases temporarily suspended part gms cash conservation initiatives stock repurchases reinstated first quarter 1999 expected completed end 1999 upon completion 40 billion stock repurchase program gms stock repurchases since january 1997 total 90 billion january 1999 gm announced intention redeem series b preference stock pursuant option commenced january 1 1999 cash flows automotive electronics operations net cash provided operating activities 93 billion 128 billion 145 billion 1998 1997 1996 respectively decrease net cash provided operating activities 1998 primarily resulted decrease cash generated lower net income primarily due work stoppages previously discussed partially offset lower veba contributions 1998 decrease net cash provided operating activities 1997 primarily resulted 30 billion veba contribution 35 billion increase deferred tax assets partially offset 500 million yearoveryear increase operating assets liabilities 17 billion yearoveryear increase income continuing operations depreciation amortization expenses increased 47 billion 1997 primarily due competitiveness studies charges ii17 general motors corporation subsidiaries automotive electronics operations concluded net cash used investing activities relatively unchanged 86 billion 1998 1997 increase cash due net change investments marketable securities operating leases 1998 offset proceeds borrowings hughes defense prior spinoff hughes defense 1997 net cash used investing activities decreased 13 billion 1997 99 billion 1996 decrease primarily due gms receipt 40 billion proceeds borrowings hughes defense partially offset 17 billion increase investments companies net cash acquired primarily related completion merger satellite service operations former hughes panamsat amounts also offset intercompany payment eds prior separation 1996 lower dividends received gmac 1997 net cash used financing activities 21 billion 67 billion 12 billion 1998 1997 1996 respectively decrease cash used financing activities 1998 primarily due 33 billion net increase loans payable longterm debt decrease cash used stock repurchases net cash used financing activities increased 55 billion 1997 compared 1996 1997 gm used 38 billion acquire 635 million shares 123 par value common stock gm also used approximately 600 million repurchase shares 123 par value common stock certain employee benefit plans 1997 also 1997 net cash flows used association changes longterm debt increased approximately 18 billion compared 1996 reflected combination refinancing retirement using gms new commercial paper program cash received connection hughes transactions financing insurance operations cash provided operating activities 1998 totaled 77 billion increase 41 billion 43 billion provided comparable 1997 1996 periods respectively additional operating cash flow primarily result increased mortgage activity cash used investing activities 1998 totaled 226 billion compared 121 billion 65 billion periods 1997 1996 respectively cash usage increased primarily result lower net finance receivable activity decrease sales retail receivables proceeds cash provided financing activities 1998 totaled 155 billion compared 82 billion 25 billion cash provided financing activities comparable 1997 1996 periods respectively change primarily result increases short longterm debt lower dividends paid gm dividends may paid common stocks declared gm board sole discretion gms policy distribute dividends 123 par value common stock based outlook indicated capital needs business january 1999 gm board declared quarterly cash dividend 050 per share 123 par value common stock payable march 10 1999 gm board also declared quarterly dividends series b series g depositary shares 057 0495 057 per share respectively payable may 1 1999 respect class h common stock recapitalized december 17 1997 gm board determined pay cash dividends time order allow earnings hughes retained investment telecommunications space businesses health care expense postretirement benefits cost postretirement medical dental vision life insurance benefits provided retirees eligible dependents recognized consolidated financial statements period employees provide services gm costs medical dental vision life insurance benefits provided employees active service expensed incurred payasyougo components postretirement benefits expense us health care cost cash expenditures gms us operations set forth excluding cash expenditures hughes former hughes nonautomotive employees including gmac gm committed reducing burden continuing health care cost increases 1997 gm elected prefund part postretirement benefits liability creating veba trust contributed 3 billion cash reserves 1998 gm contributed additional 17 billion paid 375 million benefits veba trust veba assets effect reducing gms postretirement benefits liability consolidated balance sheet ii18 general motors corporation subsidiaries health care expense postretirement benefits concluded year ended december 31 1998 postretirement health payasyougo benefit care cost dollars millions gm us operations health care postretirement medical dental vision 2829 retired employees payasyougo 2012 active employees payasyougo 1717 total health care 2829 4546 3729 life insurance 449 subsidiaries health care life insurance 193 total postretirement benefits expense 3471 payasyougo amounts 1997 19 billion retirees 17 billion active employees 36 billion total gm disclosed consolidated financial statements certain amounts associated estimated future postretirement benefits pensions classified amounts accumulated postretirement benefit obligations liabilities obligations notwithstanding recording amounts use terms gm admit otherwise acknowledge amounts existing postretirement benefit plans gm pensions represent legally enforceable liabilities gm card gm sponsors credit card program entitled gm card program introduced us september 1992 subsequently canada australia brazil mexico chile united kingdom cardholders use card generates entitlements rebates used connection cardholders purchase lease new gm vehicle sponsor gm card program gm provide consumer credit program used marketing tool increase product sales independent banks issue gm card responsible evaluating extending funding credit cardholders fully responsible credit card losses recourse gm us gm card rebates accumulate rate equal 5 spending goods services charged gm card maximum rebate amount 500 per year rebates expire 7 years may applied sales allowances market time vehicle purchase lease gm solely responsible cardholders rebates provisions gm card rebates recorded reductions revenue time vehicle sale gm right prospectively modify plan rebates redeemed worldwide 1998 1997 1996 705 million 656 million 443 million respectively cardholder rebates available worldwide future redemption cardholder purchases leases new gm vehicle amounted 37 billion 35 billion net deferred program income december 31 1998 1997 respectively gm anticipates profits incremental sales resulting gm card program along deferred program income offset future rebate costs associated gm card ii19 general motors corporation subsidiaries deferred income taxes december 31 1998 gms consolidated balance sheet included net deferred tax asset approximately 208 billion related net future deductible temporary differences see note 6 gm consolidated financial statements united states approximately 154 billion related obligation postretirement benefits pensions realization net deferred tax asset dependent upon profitable operations united states future reversals existing taxable temporary differences although realization assured gm believes likely benefits realized reduction future taxable income management carefully considered various factors assessing probability realizing deferred tax asset including operating results gmna recent three year period overall financial forecasts book taxable income 19992003 period improvements expected continuing efforts maintain gms competitiveness including actions relating reducing material costs global sourcing increasing efficiency lean manufacturing operating results gmac hughes generated us pretax income approximately 18 billion 33 billion 31 billion 1998 1997 1996 respectively ability utilize tax planning capitalization research experimentation costs tax purposes gm expect generate near future significant us federal tax net operating loss carryforwards extended period time tax assets utilized postretirement benefits become tax deductions periods 50 years fact gm never lost deferred federal tax assets due expiration us net operating loss carryforward dividends received foreign operations us federal income tax purposes totaled approximately 31 billion 30 billion 12 billion 1998 1997 1996 respectively pensions december 31 1998 gms total worldwide net unfunded pension position increased 63 billion 12 billion us automotive qualified hourlysalary plans 51 billion plans worldwide 50 billion year ago 05 billion us automotive qualified hourlysalary plans 45 billion plans worldwide predominant factor contributing increase unfunded position us automotive qualified hourlysalary plans 25 basis point decline discount rate used measure pension obligation end 1998 compared 1997 675 700 respectively 1998 1997 gm contributed 11 billion 15 billion cash respectively us hourly pension plans economic basis gm continues maintain fullyfunded status us hourly salaried pension plans december 31 1998 economic basis measuring us hourly salaried pension liability differs statement financial accounting standards sfas 87 basis employers accounting pensions required gaap gm believes better measure gms ongoing economic exposure pension obligations uses measure determine funded status economic basis discounts pension liabilities longterm asset earnings rate assumption currently 100 rather variable yearend market rate required sfas 87 currently 675 periods low interest rates current market environment sfas 87 liability generally exceed liability calculated economic basis whereas periods high interest rates economic basis liability generally exceed sfas 87 liability environmental matters gm subject various laws relating protection environment including laws regulating air emissions water discharges waste management environmental cleanup gm also various stages investigation remediation sites contamination alleged liability worldwide environmental cleanup 519 million 610 million december 31 1998 1997 respectively future periods new laws regulations advances technologies additional information ultimate remedy selected new existing sites gms share cost remedies could significantly change gms estimates process estimating liabilities complex dependent primarily nature extent historical information physical data relating contaminated site complexity site uncertainty remedy technology required outcome discussions regulatory agencies potentially responsible parties prps multiparty sites number financial viability prps 1998 1997 1996 gm expensed 91 million 88 million 94 million respectively environmental investigation remediation waste management addition worldwide capital expenditures discussed previously included 98 million 115 million 122 million 1998 1997 1996 respectively various environmental matters ii20 general motors corporation subsidiaries euro conversion january 1 1999 eleven fifteen member countries european union established fixed conversion rates existing currencies adopted euro new common currency euro trades currency exchanges legacy currencies remain legal tender participating countries transition period january 1 2002 beginning january 1 2002 euro denominated bills coins issued legacy currencies withdrawn circulation gm established plans assess address impact gm result euro conversion introduction euro january 1 1999 increased pace price harmonization throughout europe gm developed comprehensive program identify analyze determine best strategy address price harmonization gm analyzing aspects pricing strategy minimize potential risk pricing harmonization addition corporation reviewed made required modifications applicable information technology systems contracts based new currency gm believes introduction euro material tax consequences also believes reduces overall foreign exchange risk number currencies transacts reduced gm believes euro conversion material adverse impact financial position results operations employment payrolls worldwide employment december 31 thousands 1998 1997 19961 gmna 226 237 245 gme 84 79 gmlaam 24 27 23 gmap 10 9 delphi 198 210 211 gmac 24 21 18 hughes 15 14 12 13 10 8 total employees 594 608 605 worldwide payrolls continuing operations billions 265 283 1 278 us hourly payrolls billions 23 125 139 138 average labor cost per active hour worked us hourly 2 4542 4486 4408 1 amounts adjusted reflect changes gms organizational structure resulting restructuring former hughes occurred december 1997 delphi adjusted amounts include delco hughes adjusted amounts exclude delco hughes defense 2 excludes eds hughes former hughes nonautomotive employees 3 includes employees work excludes laidoff employees receiving benefits new accounting standards first quarter 1998 aicpas accounting standards executive committee issued statement position sop 981 accounting costs computer software developed obtained internal use sop requires entities capitalize certain internaluse software cost specific criteria met currently gm generally expenses costs developing obtaining internaluse software incurred gm adopt sop 981 january 1 1999 required gm expects new sop approximately 300 million 350 million spending capitalized 1999 would otherwise expensed second quarter 1998 financial accounting standards board issued statement financial accounting standards sfas 133 accounting derivative instruments hedging activities sfas 133 requires entity recognize derivatives either assets liabilitiies statement financial position measure instruments fair value gains losses resulting changes values derivatives would accounted depending use derivative whether qualifies hedge accounting gm plans adopt sfas 133 january 1 2000 required gm currently assessing impact statement gms consolidated financial statements ii21 general motors corporation subsidiaries forwardlooking statements following principal important factors may cause actual results differ materially expressed forwardlooking statements made managements gm hughes delphi changes economic conditions currency exchange rates political stability major markets corporation procures material components supplies production principal products produced distributed sold ie north america europe latin america asiapacific including effects current economic problems asia political problems far east shortages fuel interruptions transportation systems labor strikes work stoppages interruptions difficulties employment labor major markets corporation purchases material components supplies production products produced distributed sold significant changes competitive environment major markets corporation purchases material components supplies production products produced distributed sold changes laws regulations policies activities governments agencies similar organizations actions may affect production licensing distribution sale corporations products cost thereof applicable tax rates ability corporation achieve reductions cost employment levels realize production efficiencies implement capital expenditures levels times planned management respect hughes additional risk factors include ability achieve subscriber growth directtohome businesses ability sustain technological competitiveness possible failure delay planned satellite launches access capital financial flexibility order take advantage new market opportunities ability complete strategic acquisition businesses assets ability respond competitive pressures react quickly major changes marketplace ii22 general motors corporation subsidiaries item 7a item 7 mda item 8 financial statements supplementary data gmac annual report form 10k period ended december 31 2005 filed separately sec incorporated document reference 1 january 1 2002 corporation implemented statement financial accounting standards sfas 142 “goodwill intangible assets” ceased amortization method accounting goodwill changed impairment approach accordingly goodwill longer amortized tested impairment least annually effective january 1 2003 corporation ii3 general motors corporation subsidiaries selected financial data concluded began expensing fair market value newly granted stock options stockbased compensation awards issued employees conform sfas 123 “accounting stockbased compensation” effective july 1 2003 corporation began consolidating certain variable interest entities conform fasb interpretation fin 46 “consolidation variable interest entities” december 31 2005 corporation recorded pretax asset retirement obligation 181 million accordance requirements fin 47 “accounting conditional asset retirement obligations” cumulative effect net loss net related income tax effects recording asset retirement obligations 109 million 019 per share 2 effective december 22 2003 gm split hughes distributing hughes common stock holders gm class h common stock exchange outstanding shares gm class h common stock simultaneously gm sold 198 retained economic interest hughes news corporation exchange cash news corporation preferred adss shares gm class h common stock cancelled see note 2 consolidated financial statements ii4 general motors corporation subsidiaries item 7 management’s discussion analysis financial condition results operations overview gm primarily engaged automotive production marketing financing insurance operations gm designs manufactures markets vehicles worldwide largest operating presence north america gm’s finance insurance operations primarily relate general motors acceptance corporation gmac wholly owned subsidiary gm provides broad range financial services including automotive finance mortgage products services automotive industry 2005 global industry vehicle sales retail fleet customers 647 million units representing 37 increase 2004 expect industry sales 655 million 66 million units 2006 gm’s worldwide vehicle sales 2005 92 million units compared 90 million units 2004 represents global market share 142 2005 slightly gm’s 2004 global market share 144 2005 gm posted market share gains three four automotive regions exception gm north america gmna gm’s market share declined past five years global automotive industry experienced consistent yeartoyear increases growing approximately 13 2001 2005 much growth attributable continued development emerging markets china united states gm largest presence 2005 industry vehicle sales totaled 175 million units representing slight increase 2004 us sales level 173 million units us industry experienced annual sales volumes approximately 17 million units past eight years management believes competition among automotive manufacturers involving price incentive promotions financing offers important factor maintaining level industry sales gm’s market share united states 259 2005 272 2004 due part declines sales fullsize utilities mid sized utilities mid sized cars overall us industrywide proportion light trucks percentage total us vehicle sales continued increase past several decades light trucks include pickups vans utilities cross utilities derived car platforms 1981 light trucks accounted 19 overall us vehicle market 1999 light trucks surpassed cars take 50 market first time despite negative influence fuel prices 2005 light trucks including growing segment cross vehicles still accounted 56 us vehicle market compared 56 55 respectively 2004 2003 financial results gm’s consolidated net sales revenues fell 1926 billion 2005 1935 billion 2004 gm incurred consolidated net loss 2005 106 billion compared net income 28 billion 2004 unfavorable results driven primarily losses gmna gmac’s net income 2005 declined 24 billion compared 30 billion 2004 gm’s results operations 2005 significantly affected following trends significant events gmna market share product mix industrywide north american vehicle sales grew slightly gmna’s vehicle production declined 7 2005 49 million units due part gm’s efforts reduce high dealer inventory levels market share decreased 12 percentage points compounding decline volumes effect unfavorable product mix whereby gm fewer sales higher margin large trucks large cars due combination volatility consumer demand anticipated introduction new truck models replace products end lifecycles ii5 general motors corporation subsidiaries financial results concluded delphi chapter 11 proceedings fourth quarter 2005 gm recorded charge 55 billion 36 billion tax estimate contingent exposures relating chapter 11 filing delphi corporation delphi including benefit guarantees certain former gm us employees transferred delphi connection 1999 spinoff gm believes range contingent exposures 55 billion 12 billion amounts near low end range considered possible amounts near high end range assuming agreement reached among gm delphi’s unions views reflect gm’s current assessment unlikely chapter 11 process result termination delphi’s pension plan complete elimination opeb plans gmna restructuring global asset impairments result north american manufacturing restructuring actions announced november 2005 gm recorded aftertax charge 17 billion charge includes 12 billion associated employees 455 million noncash writedown property plants equipment currently believe likely impacted actions employee costs represent best estimate wage benefits costs incur qualified employees jobs bank provisions current labor agreement date expiration september 2007 plus estimated costs paid thereafter discussing provisions international union united automobile aerospace agricultural implement workers america uaw effort develop agreed upon accelerated attrition program among things would require entitle participants also eligible jobs bank part discussions march 22 2006 gm delphi uaw reached tentative agreement intended reduce number us hourly employees accelerated attrition program agreement subject approval bankruptcy court delphi’s participation agreement approved agreement provide combination early retirement programs incentives designed help reduce employment levels gm may effect reducing number employees jobs bank attrition program expected result additional charges recorded 2006 employees locations included north american manufacturing restructuring actions announced november 2005 agree participate agreement gm uaw also agreed discuss options address remaining surplus people specific locations areas gm uaw work together close gm’s competitive gap foreign competition reduce gm’s structural costs addition gm’s results reflect writedown corporation’s investment fuji heavy industries ltd fhi 717 million tax considering original impairment 788 million gain sale 71 million due appreciation stock following writedown furthermore gm recorded aftertax charges 872 million plant facility asset impairments within automotive regions healthcare cost escalation health care united states one biggest competitive challenges make progress structurally fixing issue could longterm threat company 2005 gm challenged compound impact escalating healthcare cost rates falling discount rates used determine future healthcare liabilities result factors 2005 gm’s us postretirement employee benefits opeb expense consisting retiree health care life insurance increased 53 billion increase 1 billion 2004 strategy size gm’s 2005 loss related north american operations clearly demonstrates need significant changes gm’s business model large part losses arise gm’s huge legacy cost burden difficulty adjusting structural costs line falling revenue legacy costs ii6 general motors corporation subsidiaries strategy continued primarily related cost benefits provided retired employees dependents costs associated employees dependents businesses divested gm structural costs vary production include costs material freight policy warranty costs structural costs include among things cost unionized employees top priority gm return north american operations profitability positive cash flow soon possible gm systematically aggressively implementing fourpoint turnaround plan gmna’s business four elements plan include • product excellence continue raise bar execution great cars trucks • revitalize sales marketing strategy offer customers best value industry • accelerate cost reductions quality improvements improve gm’s cost position reduce breakeven point response intensely competitive environment • address health care burden reduce legacy cost disadvantages date gm focusing restructuring operations already taken number steps improve performance competitive global environment key driver efforts globalization principal business functions including aggressive engineering product development manufacturing purchasing addition backed commitment great cars trucks raising related capital expenditures 2005 intend maintain commitment going forward endeavoring revitalize sales marketing strategy clearly focus customer recognition brands align distribution channels refocus marketing efforts quality cars trucks value offer price features performance healthcare area gm announced october 2005 historic agreement uaw among things reduce healthcare obligations retired hourly employees february 2006 gm announced would increase us salaried workforce’s participation cost health care capping gm’s contributions salaried retiree health care level 2006 expenditures march 2006 gm announced details plan substantially alter pension benefits current us salaried employees gm freeze accrued benefits current plan implement reduced defined benefit plan salaried employees new defined contribution plan salaried employees mentioned gm announced north american restructuring plan november 2005 impact multiple manufacturing facilities gmna restructuring initiative reduce excess capacity one million units reduce manufacturing employment levels approximately 30000 employees result initiative cost reduction actions currently expect reduce structural costs north america average 7 billion per year running rate basis end 2006 reduce net material costs 1 billion 2006 expect 4 billion structural cost reduction realized calendar year 2006 information matters may found gm north american restructuring plan discussion starting page ii20 gm’s objective reduce global structural costs 25 automotive revenue 2010 current level approximately 34 order achieve objective need go beyond gmna turnaround plan accomplish capacity rationalization efficiency measures global basis management believes four elements gmna turnaround plan well global benchmarking best competitive practices major automotive processes gm’s economy scale make 25 global structural cost reduction target realistic objective believe managing business global functional basis enable us leverage product development spending consolidate brand structure share best practices throughout corporation optimize manufacturing supply engineering footprint accomplishing structural cost reduction critical gm’s future success ii7 general motors corporation subsidiaries strategy concluded addition gmna turnaround activities gm plans continue address important strategic issues including • bankruptcy largest supplier delphi situation presents significant risks gm including disruption supply automotive systems components parts gm receiving portion amounts owed delphi gm obligations excess amounts recognized gm 2005 connection benefit guarantees situation also presents opportunities gm including reducing long term significant cost penalty gm incurs obtaining parts delphi well improving quality systems components parts gm procures delphi result restructuring delphi chapter 11 process • pursuit possible sale controlling interest gmac goal delinking gmac’s credit rating gm’s credit rating renewing gmac’s access low cost financing exploration strategic structural alternatives rescap • negotiations uaw connection expiration collective bargaining agreement september 2007 • restructuring initiatives areas including brazil europe australia gm believes sufficient balance sheet strength fund short mediumterm cash needs implement fourpoint turnaround plan strategic objectives reasonably foreseeable circumstances long term believe gm’s ability meet capital requirements primarily depend successful execution fourpoint turnaround plan return north american operations profitability positive cash flow ability execute globalization principal business functions december 31 2005 gm’s automotive operations cash marketable securities readily available assets voluntary employees’ beneficiary association veba trust totaling 204 billion debt principally longterm note cash balance varies time calendar year particular cash balance generally materially lower third quarter result product changeovers annual shutdown north american manufacturing facilities approximately two weeks period gmac continues maintain adequate liquidity cash reserve balances december 31 2005 197 billion including 42 billion marketable securities maturities greater 90 days addition gm recently implemented number costcutting cashsaving initiatives intended help maintain adequate liquidity including recent reduction quarterly dividend 050 per share 025 per share nevertheless significant risks gm’s liquidity position including possibility extended labor dispute delphi inability access amend replace existing standby bank credit facility claims may successfully asserted gm various financing agreements view gm’s recent restatement prior financial statements deterioration gmac’s credit rating leading higher cost capital failure improve competitive position 2007 labor negotiations payment delphi employees amounts incremental previously announced charges contingent exposures relating delphi’s chapter 11 filing occurrence one combination events could severely threaten liquidity position threaten successful implementation turnaround plan uncertainty regarding future earnings given potential matters affect earnings positively negatively put fourpoint turnaround plan place 2005 tremendous sense urgency executing elements plan highest degree possible 2006 coming years ii8 general motors corporation subsidiaries business environment gm views following factors many important execution gmna’s fourpoint turnaround plan significant drivers near term financial results • continued demand gm’s profitable products maintenance strong product mix • introduction innovative new products timely cadence integration global architectures engineering procurement efforts • implementation measures reducing structural costs offsetting legacy healthcare burdens • maintenance sufficient balance sheet strength liquidity • factors affecting gm’s financing insurance operations fio reportable operating segment results including interest rates credit ratings demand mortgage financing addition drivers significant risks execution business strategy improved financial performance discussed risk factors basis presentation management’s discussion analysis financial condition results operations mda read conjunction gmac annual report form 10k period ended december 31 2005 filed separately sec part item 1 business part ii item 6 selected financial data item 7 mda item 8 financial statements supplementary data incorporated document reference earnings per share amounts included mda reported fully diluted basis gm presents separate supplemental financial information reportable operating segments automotive operations auto financing insurance operations fio gm’s auto reportable operating segment consists • gm’s four automotive regions gm north america gmna gm europe gme gm latin americaafricamideast gmlaam gm asia pacific gmap constitute gm automotive gma • includes elimination intersegment transactions certain nonsegment specific revenues expenditures including legacy costs related postretirement benefits certain delphi retirees certain corporate activities gm’s fio reportable operating segment consists gmac financing includes financing entities consolidated gmac disaggregated financial results gma prepared using management approach consistent basis manner gm management internally disaggregates financial information purpose assisting making internal operating decisions regard certain common expenses allocated among regions less precisely would required standalone financial information prepared accordance accounting principles generally accepted united states gaap financial results represent historical information used management internal decisionmaking purposes therefore data prepared represent way business operate future data prepared accordance gaap may materially different consistent industry practice market share information includes estimates sales certain countries public reporting legally required otherwise available consistent basis ii9 general motors corporation subsidiaries results operations consolidated results total net sales revenues decreased 2005 compared 2004 primarily due decreased gmna revenue 98 billion largely offset increases gmlaam gmap revenue 30 billion 39 billion respectively increases gmac 28 billion total net sales revenues increased 2004 compared 2003 due increases gma revenue 66 billion including increases gmlaam gme revenue 34 billion 33 billion respectively increases gmac revenue 18 billion net income decreased 134 billion 2005 compared 2004 primarily driven losses gmna due largely unfavorable volume product mix restructuring charges asset impairments automotive regions also incurred losses 2005 gme loss primarily driven restructuring charges offset partially improved operating performance gmlaam loss largely attributable full valuation allowance taken gm brasil’s deferred tax assets gmap loss mainly due write gm’s investment fhi described gmac’s net income declined 24 billion 30 billion 2004 primarily due goodwill impairment charges 2004 income continuing operations decreased 95 million 28 billion compared 2003 automotive results improved 614 million due improvement gmna strong recovery gmlaam record income gmap offsetting increased losses gme operations’ 2004 results include aftertax charge 886 million related february 2005 settlement reached gm fiat spa fiat terminate master agreement including put option settle various disputes two companies gmac earned record 30 billion net income due higher financing insurance income 2005 results included • consolidated net loss 106 billion 1869 per share • losses automotive regions • charge recognized announced gmna restructuring plan • charge recognized contingent exposures relating delphi’s chapter 11 filing including benefit guarantees • strong performance gmac despite challenging environment • strong yearend cash position ii10 general motors corporation subsidiaries consolidated results concluded • favorable returns pension assets resulting us hourly salaried plans overfunded statement financial accounting standards 87 basis approximately 6 billion detailed discussions results operations automotive regions operations gmac found following sections gm automotive operations financial review decrease 2005 total net sales revenues compared 2004 resulted decreased gmna revenue 98 billion primarily lower production unfavorable product mix largely offset significant increases gmlaam gmap amounting 30 billion 39 billion respectively increase 2004 total net sales revenues compared 2003 largely due higher wholesale volumes gmlaam gme continued growth gmap partially offset lower gmna revenue gm’s global market share 142 144 years 2005 2004 respectively gmna posted 12 percentage point decline market share largely result sales declines within large sport utility pickup mid sized utility mid sized car segments market share gains recognized three automotive regions gma’s 2005 net income decreased 115 billion compared 2004 automotive region sustained net loss 2005 volume mix unfavorable overall addition restructuring charge gmna noted restructuring charges gme gmap asset impairments regions ii11 general motors corporation subsidiaries gm automotive operations financial review continued contributed poor results year gma’s 2004 net income increased 614 million compared 2003 gmna’s income increased due material cost savings favorable tax items partially offset decreased production negative mix gmap gmlaam improved 2003 gme’s loss 2004 increased due continued price pressure unfavorable exchange rates see discussion operations’ results gm automotive regional results gm north america north american industry vehicle unit sales increased 13 205 million units 2005 expect unit sales relatively flat 2006 despite slight industry growth gmna’s production declined 70 49 million units result decreased market share 12 percentage points along significant reduction dealer inventories approximately 200000 units gmna ended year market share 255 2005 compared 267 2004 2005 industry vehicle unit sales united states increased 175 million units gm’s us market share decreased 13 percentage points due sales declines segments gm high volume large sport utilities mid sized utilities mid sized cars gm ended year us market share 259 2005 versus 272 2004 gm’s us car market share declined 23 percentage points 226 us truck market share year 285 05 percentage point truck sales represented 61 gm’s total us vehicle unit sales 2005 slightly 60 2004 ii12 general motors corporation subsidiaries gm automotive operations financial review continued gm north america continued net loss gmna totaled 82 billion 2005 compared income 14 billion 879 million 2004 2003 respectively deterioration 2005 due part various operating factors including • unfavorable product mix adversely affected net income approximately 22 billion due primarily reduced demand gmna’s large utility vehicles reaching end product life cycle well declines sales higher margin large cars • production volume decreases 7 attributable gmna market share decline significant reduction dealer inventories accounted decrease net income approximately 21 billion • unfavorable material costs factoring cost government mandated product improvements accounted decrease net income approximately 700 million • increased healthcare expenses primarily due recognition opeb net actuarial losses caused escalating health care cost trends falling discount rates us accounted decrease net income approximately 600 million 2005 health care cost increases reflect new health care initiatives uaw salaried employees retirees benefit subsequent years • advertising sales promotion cost increases accounting decrease net income 500 million due efforts increase product awareness addition items gmna recognized fourth quarter 2005 restructuring charge 17 billion tax result gmna restructuring initiatives announced fourth quarter 2005 refer also subsequent discussion key factors affecting future results initiatives represent critical step towards reducing structural costs given highcost manufacturing environment united states charge 17 billion included 455 million tax noncash writedown property plants equipment comprised 362 million production facilities still service december 31 2005 well product specific assets 93 million charge also included 12 billion tax employee costs representing best estimate wage benefits costs incur qualified employees jobs bank provisions current labor agreement date expiration september 2007 plus estimated costs expected paid thereafter approximately 17500 employees affected included restructuring charge discussing provisions uaw effort develop agreed upon accelerated attrition program reduce number employees jobs bank cost effective manner part discussions march 22 2006 gm delphi uaw reached tentative agreement intended reduce number us hourly employees accelerated attrition program agreement subject approval bankruptcy court delphi’s participation agreement approved agreement provide combination early retirement programs incentives designed help reduce employment levels gm may effect reducing number employees jobs bank attrition program expected result additional charges recorded 2006 employees locations included north american manufacturing restructuring actions announced november 2005 agree participate agreement gm uaw also agreed discuss options address remaining surplus people specific locations areas gm uaw work together close gm’s competitive gap foreign competition reduce gm’s structural costs 2005 gmna also recognized aftertax impairment charges 552 million first quarter gmna recorded 84 million writedown fair market value various production facility assets 82 million product specific assets 2 million connection cessation production lansing michigan assembly plant third quarter 2005 part business planning cycle carrying value longlived assets held used goodwill intangible assets indefinite lives compared projected cash flows based review gmna concluded certain ii13 general motors corporation subsidiaries gm automotive operations financial review continued gm north america concluded productspecific assets well certain office production facilities recoverable accordingly third quarter 2005 gmna recorded aftertax impairment charge 468 million assets still service comprised 421 million productspecific assets 47 million related certain office production facilities increase gmna’s 2004 net income 2003 due part effects material cost savings structural cost savings partially offset lower volume unfavorable product mix additionally 2004 net income includes effect gm’s contribution approximately 11 million shares xm satellite radio holdings inc xm common stock gm’s veba resulted aftertax gain gmna 118 million gmna recognized tax benefits 2004 540 million primarily result us mexico tax legislation canadian capital loss carryforwards well benefit related settlement various prior year tax matters us addition third quarter 2004 gm completed periodic review products liability reserves comprehend products liability exposure review resulted aftertax reduction reserves approximately 250 million order appropriately reflect current level exposure 2003 gmna incurred charges 448 million tax related october 2003 contract uaw provided lumpsum payments vehicle discount vouchers retirees addition gmna adjusted previously established reserve idled workers primarily related janesville wisconsin plant resulting 103 million net income tax also gmna incurred various structural cost adjustments asset impairment charges favorable interest income settlements prior year tax matters income related market valuation xm warrants items netted approximately 90 million income year fourth quarter 2004 gm announced plans close assembly plant baltimore maryland approximately 1000 employees lay approximately 950 employees gm’s assembly plant linden new jersey connection actions gmna recognized aftertax charges totaling 78 million 2004 impairment production facilities addition gmna incurred aftertax charges 2004 55 million impairment facilities related actions 63 million impairments productspecific assets employee idling separation costs conjunction impairments since time believed employees would redeployed fourth quarter 2005 gmna announced fourpoint turnaround plan focused improving results addressing factors contributing loss items described top priority corporation return gmna’s operations profitability positive cash flow soon possible via systematic aggressive implementation fourpoint turnaround plan discussed detail gm north american restructuring plan section key factors affecting future results found page ii20 ii14 general motors corporation subsidiaries gm automotive operations financial review continued gm europe 1 2004 2005 calendar years include gmavtovaz joint venture production industry vehicle unit sales europe increased slightly 2005 10 2004 gme’s total market share increased slightly 95 94 european industry vehicle unit sales expected relatively flat 2006 two largest markets europe gm continued increase market share market share 108 germany 02 percentage point increase 2004 united kingdom market share 147 increase 08 percentage point 2004 net loss gme totaled 12 billion 925 million 466 million 2005 2004 2003 respectively increase gme’s loss 2005 2004 due part following factors • restructuring charges totaling 673 million connection restructuring plan announced fourth quarter 2004 well costs related dissolution gm’s powertrain purchasing joint ventures fiat restructuring plan involves reduction workforce 12000 2007 largely manufacturing operations germany december 2004 gm reached agreement various labor unions europe framework restructuring plan charges 2005 related separation approximately 7500 people charge recognized 2004 agreements yet finalized • favorable material cost structural costs product mix offset pricing volume declines resulting almost 370 million improvement year performance addition items gme recorded charges impairment product specific assets 176 million 234 million 2005 2004 respectively charges identified part business planning cycles third quarter 2005 fourth quarter 2004 carrying value longlived assets held used goodwill intangible assets indefinite lives determined exceed projected cash flows increase gme’s loss 2004 2003 primarily due continued negative pricing unfavorable exchange rates respect weakening us dollar compared euro swedish krona partially offset favorable volume mix material cost savings reduced structural costs addition 2004 gme’s net loss included aftertax charge 234 million impairment various productspecific assets implemented gme turnaround plan remains track expect see progress 2006 addition continued implementation significant cost reduction initiatives ii15 general motors corporation subsidiaries gm automotive operations financial review continued gm europe concluded expect benefit introduction new products opel corsa continue focus rollout multibrand strategy particularly efforts expand chevrolet brand gm latin america africa mideast improving economic conditions latin america resulted significant industry growth 2005 markets venezuela argentina increasing approximately 70 34 respectively brazil’s market grew 8 2005 compared 10 2004 addition south africa market grew 25 2005 compared 20 2004 anticipate regional industry sales show slower growth 2006 however growth still remain positive gmlaam improved regional market share 02 percentage points 177 2005 19 increase vehicle unit sales 881 thousand 738 thousand 2004 2005 gmlaam net sales revenues improved approximately 34 30 billion compared 2004 improved volume mix contributed 18 billion favorable exchange rates pricing contributed 09 billion 03 billion respectively 2004 increase net sales revenues 63 34 billion 2003 results attributable volume mix related improvements 17 billion acquisition remaining interest delta motors totaling 10 billion favorable exchange rates pricing 02 billion 05 billion respectively net loss income gmlaam totaled 571 million 60 million 329 million 2005 2004 2003 respectively deterioration gmlaam’s 2005 results compared 2004 due part following factors • full valuation allowance charge 617 million taken gm brasil’s deferred tax assets determined likely deferred taxes gm’s brazilian operations would realized • volume product mix pricing improvements exceeded losses unfavorable exchange rate changes primarily respect brazilian real approximately 40 million 2004 2005 addition items 2005 results include third quarter impairment charges 99 million assets still service determined comparing projected cash flows book value specific productrelated assets production facilities charges included 52 million tax productspecific assets 47 million tax production facilities unusually strong south american currencies impacted ii16 general motors corporation subsidiaries gm automotive operations financial review continued gm latin america africa mideast concluded profitability gmlaam’s export business management’s decision adjust export volumes resulted lower future cash flows triggering impairment charge 2004 favorable volume mix positive pricing partially offset increased material structural costs drove improved results 2003 gmlaam incurred asset impairment charges unfavorable exchange effects partially offset net price increases effective january 1 2004 gm increased ownership delta motor co south africa 100 49 previously moving equity method accounting full consolidation company known general motors south africa focus gmlaam 2006 continue leverage position south africa accelerate turnaround program brazil build strong performance middle east andean region countries gm asia pacific 1 2004 2005 calendar years include gm daewoo wuling joint venture production industry vehicle unit sales asia pacific region increased approximately 63 2005 182 million units 172 million units 2004 reflects slower growth china previous years vehicle unit sales increased 132 59 million units 2005 52 million units 2004 industry vehicle unit sales china increased 15 2003 levels anticipate asia pacific region remain fastest growing automotive region 2006 continuing role real catalyst growth automotive sales globally gmap increased vehicle unit sales including gm daewoo auto technology company gm daewoo formerly referred gmdat china affiliates asia pacific region 20 period 11 million units 887 thousand 2004 gmap’s 2005 market share 58 compared 52 2004 gmap’s market share china increased 18 percentage points 112 2005 china gm’s second largest market 2005 net income loss gmap totaled 220 million 730 million 576 million 2005 2004 2003 respectively deterioration gmap’s 2005 results compared 2004 due part following factors • writedown gm’s investment fhi second quarter 788 million aftertax result fhi’s declining financial performance downward adjustments business plan may ii17 general motors corporation subsidiaries gm automotive operations financial review concluded gm asia pacific concluded 2005 writedown partially offset fourth quarter gm completed sale investment common stock fhi recorded gain 71 million tax due appreciation fair value stock june 30 2005 date fhi impairment charge • volume product mix gm holden australia well reduced equity income higher costs associated gm’s growth initiatives china partially offset favorable results gm daewoo resulting decrease net income approximately 200 million 2004 2005 addition items third quarter 2005 gmap recognized asset impairment charges 45 million tax assets still service gm holden determined comparing projected cash flows book value assets charges comprised 23 million productspecific assets 22 million related production facilities fourth quarter 2005 gmap recognized 38 million separation costs associated restructuring activities resulted idling approximately 1200 employees increase gmap’s 2004 net income 2003 due improved results equity investees japan gm daewoo well improved earnings gm operations thailand india partially offset reduced income gm holden 2006 gmap continue take advantage strong position growth china leverage capabilities gm daewoo execute turnaround gm’s holden unit operations’ net loss increased 13 billion 2005 compared 2004 2005 total net loss primarily due impact delphi benefit guarantee charges offset favorable income tax items fourth quarter 2005 aftertax charge 36 billion recorded pertaining contingent exposures relating delphi’s chapter 11 filing including benefit guarantees see subsequent discussion factors affecting future results income tax expense 2005 allocated gm’s automotive regions based tax rates used management evaluating performance tax benefits realized excess assigned gma allocated operations totaled 16 billion 2005 december 2004 gm wrote remaining balance investment fiat auto holdings bv fah operations’ cost sales resulting aftertax charge 136 million february 13 2005 gm fiat reached settlement agreement whereby gm paid fiat approximately 20 billion returned 10 equity interest fah terminate master agreement including put option entered march 2000 settle various disputes related thereto acquire interest key strategic ii18 general motors corporation subsidiaries operations concluded diesel engine assets important rights respect diesel engine technology knowhow settlement agreement resulted pretax charge earnings approximately 14 billion 886 million tax 156 per fully diluted share since underlying events disputes giving rise gm’s fiat’s agreement settle disputes terminate master agreement including put option existed december 31 2004 gm recognized charge fourth quarter 2004 charge recorded cost sales expenses operations’ results include aftertax legacy costs 477 million 402 million 2005 2004 respectively related employee benefit costs divested businesses primarily delphi gm retained responsibility discontinued operations december 2003 gm split hughes distributing hughes common stock holders gm class h common stock exchange outstanding shares gm class h common stock simultaneously gm sold 198 retained economic interest hughes news corporation ltd news corporation exchange cash news corporation preferred american depositary shares completion transactions december 22 2003 results operations cash flows assets liabilities hughes classified discontinued operations periods date presented gm’s consolidated financial statements transactions resulted aftertax gain approximately 12 billion classified gain sale discontinued operations gm’s consolidated statement income year ended december 31 2003 see note 2 consolidated financial statements discussion gmac financial review gmac’s net income 24 billion 30 billion 27 billion 2005 2004 2003 respectively net income financing operations totaled 06 billion 14 billion 14 billion 2005 2004 2003 respectively decrease 2005 net income 2004 primarily due goodwill impairment charges 439 million tax relating primarily goodwill recognized connection acquisition gmac’s commercial finance business well lower net interest margins result increased borrowing costs due widening spreads higher market interest rates decline net interest margins somewhat mitigated lower consumer credit provisions primarily result lower asset levels effect improved used vehicle prices terminating leases increase 2004 net income 2003 reflects improvement earnings international operations lower credit loss provisions improved vehicle remarketing results north america favorable tax items partially offset lower net interest margins net income mortgage operations totaled 13 billion 12 billion 12 billion 2005 2004 2003 respectively increase 2005 net income reflects increases residential commercial mortgage operations gmac’s residential mortgage businesses benefited increased loan production favorable credit experience improved mortgage servicing results gains sales mortgages gmac commercial mortgage also experienced increase earnings compared 2004 largely due record loan origination volume higher gains sales loans increases fee investment income 2004 ii19 general motors corporation subsidiaries gmac financial review concluded us residential mortgage industry volumes declined approximately 30 compared 2003 however despite lower industry volumes mortgage operations achieved market share gains asset growth improved mortgage servicing results increase feebased revenue 2004 compared 2003 net income insurance operations totaled record 411 million 2005 352 million 162 million 2004 2003 respectively increase 2005 reflects combination strong results achieved increased premium revenue higher capital gains improved investment portfolio performance addition gmac insurance maintained strong investment portfolio market value 77 billion december 31 2005 including net unrealized gains 573 million december 31 2004 investment portfolio valued 73 billion net unrealized gains 563 million previously announced october 2005 gm pursuing sale controlling interest gmac goal delinking gmac’s credit rating gm’s credit rating renewing access lowcost financing gm currently discussions potential interested parties process ongoing march 23 2006 gmac completed previously announced sale controlling interest gmac commercial mortgage key factors affecting future results following discussion identifies key factors known events trends could affect future results gm north america restructuring plan size gm’s 2005 loss related gmna clearly demonstrates need significant changes gm’s business model large part losses arises gm’s legacy cost burden fixed nature much cost base response cost burdens gm intently focusing especially past year restructuring operations succeed competitive global environment gm systematically aggressively implementing fourpoint turnaround plan gmna’s business following update key elements plans actions date product excellence gmna keeping intense focus improving revenue contribution margin contribution margin revenues less material freight policy warranty costs gmna increased capital spending approximately 400 million 2005 support new car truck programs despite financial pressures gm anticipates total capital spending product development 2006 87 billion 57 billion devoted gmna execution new product introductions continues major emphasis shown success new entries chevrolet cobalt impala hhr hummer h3 pontiac g6 solstice buick lucerne cadillac sts dts starting 2006 gm rapidly revitalize product portfolio next two years new fullsized sport utility vehicles pickup trucks additional cross vehicles significantly expanded line saturn 2006 approximately 29 gmna’s sales volume expected come recently launched cars trucks well upcoming launch vehicles chevrolet tahoe saturn sky gmc yukon cadillac escalade saturn aura 2007 gm expects 30 gm’s sales volumes come new vehicles gmna reallocating capital engineering support fuelefficient vehicles including hybrid vehicles united states increasing production active fuel management engines sixspeed transmissions gm also undertaking major initiative alternate fuels sustainable technologies ethanolgasoline blended e85 flexfuel vehicles 2006 gm offer nine e85 flexfuel models bringing additional 400000 e85 flexfuel vehicles fleet ii20 general motors corporation subsidiaries key factors affecting future results continued gm north america restructuring plan continued revitalize sales marketing strategy january 2006 gm announced significantly lowered manufacturer’s suggested retail prices vehicles accounting 80 automotive sales volume included every chevrolet buick gmc model well pontiac cars trucks next step gm’s “total value promise” initiative gmna emphasize value offers consumers clarifying focusing differentiating role north american brand continues important goal gm also continues implement orderly consistent alignment distribution system especially among pontiac buick gmc dealers addition gm believes increased advertising support new products specific marketing initiatives improve gm’s sales performance certain major metropolitan markets support growing gmna’s business accelerate cost reductions quality improvements gm announced november 2005 significant move reduce structural costs manufacturing area plans include cessation operations nine assembly stamping powertrain facilities three service parts operations facilities 2008 reduction manufacturing employment levels approximately 30000 gm expects actions together efficiency productivity initiatives result efficiency productivity gains reduce excess capacity one million units annually addition one millionunit annual reduction assembly capacity achieved 2002 2005 period addition discussions uaw effort develop agreed upon accelerated attrition program reduce number employees jobs bank cost effective manner part discussions march 22 2006 gm delphi uaw reached tentative agreement intended reduce number us hourly employees accelerated attrition program agreement subject approval bankruptcy court delphi’s participation agreement approved agreement provide combination early retirement programs incentives designed help reduce employment levels gm may effect reducing number employees jobs bank agreement gm uaw also agreed discuss options address remaining surplus people specific locations areas gm uaw work together close gm’s competitive gap foreign competition reduce gm’s structural costs gm’s management believes important negotiate competitive collective bargaining agreement uaw 2007 february 7 2006 gm announced intention substantially alter pension benefits current us salaried employees march 7 2006 gm announced details plan gm freeze accrued benefits current plan implement new benefit structure future accruals include reduced defined benefit plan salaried employees new defined contribution plan salaried employees pension plan changes affect current retirees surviving spouses drawing benefits salaried retirement program reducing material costs far largest cost item aggregate remains critical part gmna’s overall cost reduction plans despite higher commodity prices troubled supplier situations gmna targeting 2006 net reduction 1 billion prior factoring cost government mandated product improvements gm believes utilization competitive supply sources improvements global processes product development two major opportunities reduce material costs gmna also seeking cost efficiencies areas business including engineering advertising salaried employment levels indirect material costs engineering seek reduce ii21 general motors corporation subsidiaries key factors affecting future results continued gm north america restructuring plan continued development costs use common vehicle architectures used global basis advertising seek efficient focused spending line brand focus 2006 salaried headcount levels expected continue decline headcount reduction efforts resulted 30 reduction salaried headcount past five years address healthcare burden addressing legacy cost burden health care employees retirees united states one critical challenges facing corporation october 2005 gm uaw reached tentative agreement reduce gm’s healthcare costs significantly maintaining high level healthcare benefits hourly employees retirees united states december 2005 gm uaw class hourly retirees finalized agreement subject court approval submitted court approval agreement projected reduce gm’s retiree healthcare opeb liabilities 15 billion 25 corporation’s hourly healthcare liability reduce gm’s annual employee healthcare expense 3 billion pretax basis sevenyear amortization period result cash flow savings estimated 1 billion year agreement fully implemented agreement remain effect september 2011 either gm uaw may cancel agreement upon 90 days written notice similarly gm’s contractual obligations provide uaw hourly retiree heathcare benefits extends september 2011 continue thereafter unless terminated gm uaw essentially means matters covered agreement continue effect uaw retirees beyond expiration gm’s current collective bargaining agreement september 2007 agreement also commits gm make contributions new independent defined contribution voluntary employees’ beneficiary association dc veba used mitigate effect reduced gm healthcare coverage individual uaw hourly retirees new independent dc veba partially funded gm contributions 1 billion three years currently expected 2006 2007 2011 gm also make future contributions subject provisions tentative agreement referencing profit sharing payments wage deferral payments increases value gm 123 par value common stock dividend payments addition generally speaking terms agreement uaw retirees responsible annual increases healthcare benefit costs 3 gm responsible increases excess thereof although gm continues believe lawfully make changes retiree healthcare benefits gm uaw agreed part tentative settlement seek court approval agreement finalized gm uaw class hourly retirees december 2005 submitted court approval gm awaiting final determination agreement court gm also increasing us salaried workforce’s participation cost health care february 7 2006 gm announced cap contributions salaried retiree health care level 2006 expenditures cap take effect beginning january 1 2007 affects employees retirees eligible salaried postretirement healthcare benefit surviving spouses eligible dependents salaried employees hired january 1 1993 eligible retiree healthcare benefits affected changes average costs exceed established limits following 2006 additional plan changes affect costsharing features program coverage occur effective start next calendar year program changes may include limited higher monthly contributions deductibles coinsurance outofpocket maximums prescription drug payments plan changes may implemented medical dental vision prescription drug plans ii22 general motors corporation subsidiaries key factors affecting future results continued gm north america restructuring plan concluded gm currently expects remeasure opeb liability revised healthcare benefits salaried retirees become effective january 2007 remeasurement expected result reduction liability approximately 48 billion benefit associated reduction opeb liability expected amortized reduce expenses annual pretax rate 900 million approximately eight years favorable effect gm’s 2006 pretax earnings estimated approximately 500 million majority opeb liability reduction related expense would accrue gm’s north american automotive operations cash savings limited initially gm expects annual cash savings action grow 200 million within five years continue increase expected healthcare costreduction results exclude possible effect delphi situation discussed gm committed meeting challenges opportunities related delphi bankruptcy work constructively possible delphi support objective emerging bankruptcy viable ongoing business expected cost reduction north america based gmna restructuring initiatives late 2005 set target reducing structural costs north america 6 billion running rate basis end 2006 reducing net material costs 1 billion 2006 running rate basis refers annualized cost savings foreseeable future anticipated result cost savings actions fully implemented largely due additional costreduction actions areas us salaried retiree health care us salaried employee pension benefits expect reduce structural costs north america average 7 billion running rate basis end 2006 expect 4 billion structural cost reduction realized calendar year 2006 7 billion average reduction running rate basis takes account unfavorable impact structural costs 1 billion contributions committed make new dc veba 2006 2007 2011 order mitigate effect reduced gm health care coverage individual uaw hourly retirees expected annual structural cost reductions consist • approximately 3 billion related uaw healthcare agreement 3 billion comprised approximately 1 billion principally related opeb service interest costs expected realized year sixyear term agreement approximately 2 billion results amortization 15 billion gain related agreement approximately sevenyear period coincides remaining service life active employees annual savings allocated approximately 80 gmna 20 corporate sector • approximately 2 billion based capacity utilization manufacturing initiatives • approximately 2 billion based additional productivity cost efficiencies areas business including engineering advertising salaried employment levels benefits execution fourpoint turnaround plan critical success although substantial portion cost savings arising uaw healthcare agreement amortized six sevenyear periods described gm expects pursue initiatives enable continue achieve structural cost reductions excess annual running rate beyond date gm believes sufficient balance sheet strength finance fourpoint turnaround plan reasonably foreseeable circumstances nevertheless significant risks gm’s liquidity position including possibility extended labor dispute delphi inability access amend replace existing standby bank credit facility claims may successfully asserted gm various financing agreements view gm’s recent restatement prior financial statements deterioration gmac’s credit rating leading higher cost capital failure improve competitive position 2007 ii23 general motors corporation subsidiaries key factors affecting future results continued gm north america restructuring plan concluded labor negotiations payment delphi employees amounts incremental previously announced charges contingent exposures related delphi’s chapter 11 filing information liquidity found liquidity capital resources section delphi bankruptcy october 8 2005 delphi filed petition chapter 11 proceedings united states bankruptcy code many us subsidiaries gm expects immediate effect global automotive operations result delphi’s action delphi gm’s largest supplier automotive systems components parts gm delphi’s largest customer gm continue work constructively court proceedings delphi’s unions participants delphi’s restructuring process gm’s goal pursue outcomes best interests gm stockholders enable delphi continue important supplier gm delphi indicated gm expects disruption ability supply gm systems components parts needs delphi pursues restructuring plan chapter 11 process although challenges faced delphi restructuring process could create operating financial risks gm process also expected present opportunities gm opportunities include reducing long term significant cost penalty gm incurs obtaining parts delphi well improving quality systems components parts gm procures delphi result restructuring delphi chapter 11 process however assurance gm able realize benefits risk delphi one affiliates may reject threaten reject individual contracts gm either purpose exiting specific lines business attempt increase price gm pays certain parts components result gm might materially adversely affected disruption supply automotive systems components parts could force suspension production gm assembly facilities addition various financial obligations delphi gm date delphi’s chapter 11 filing including 951 million payable amounts delphi owed gm relating delphi employees formerly gm employees subsequently transferred back gm job openings became available certain employee “flowback” arrangements date delphi’s filing chapter 11 may subject compromise bankruptcy proceedings may result gm receiving payment portion face amount owed delphi gm seek minimize risk protecting right setoff 115 billion owed delphi date chapter 11 filing procedure determining setoff claims put place bankruptcy court however extent obligations covered right setoff may subject dispute delphi creditors committee delphi’s creditors limitation court gm cannot provide assurance able fully partially setoff amounts however date setoffs approximately 525 million agreed delphi taken gm although gm believes probable able collect amounts due delphi financial impact substantial compromise right setoff could material adverse impact financial position connection gm’s spinoff delphi 1999 gm entered separate agreements uaw international union electrical workers united steel workers three agreements benefit guarantee agreements gm provided contingent benefit guarantees make payments limited pension opeb expenses certain former gm us hourly employees ii24 general motors corporation subsidiaries key factors affecting future results continued delphi bankruptcy continued transferred delphi part spinoff meet eligibility requirements payments covered employees benefit guarantee agreement contains separate benefit guarantees relating pension postretirement health care life insurance benefits limited benefit guarantees separate triggering events initiate potential gm liability delphi fails provide corresponding benefit required level therefore possible gm could incur liability one guarantees eg pension without triggering guarantees eg postretirement health care life insurance addition respect pension benefits gm’s obligation pension benefit guarantees arises extent combination pension benefits provided delphi pension benefit guaranty corporation pbgc falls short amounts gm guaranteed chapter 11 filing delphi trigger benefit guarantees addition benefit guarantees expire october 18 2007 previously triggered delphi’s failure pay specified benefits benefit guarantee triggered expiration date gm’s obligation could extend lives affected covered employees subject applicable terms pertinent benefit plans relevant agreements benefit guarantees obligate gm guarantee benefits delphi retirees excess levels corresponding benefits gm provides given time gm’s hourly retirees accordingly benefits gm provides hourly retirees reduced would similar reduction gm’s obligations corresponding benefit guarantee separate agreement gm delphi requires delphi indemnify gm extent gm makes payments benefit guarantees uaw employees retirees gm received notice delphi dated october 8 2005 likely gm would become obligated provide benefits pursuant benefit guarantees uaw employees retirees notice stated delphi unable time estimate timing scope benefits gm might required provide benefit guarantees recovery gm indemnity claims delphi might subject partial complete discharge delphi reorganization proceeding result gm’s claims indemnity may paid full part discussion attain gm’s tentative healthcare agreement uaw gm provided former gm employees became delphi employees potential earn seven years credited service purposes eligibility certain healthcare benefits gm uaw benefit guarantee agreement march 22 2006 gm delphi uaw reached tentative agreement intended reduce number us hourly employees gm delphi accelerated attrition program agreement subject approval bankruptcy court delphi’s participation agreement approved agreement provide combination early retirement programs incentives designed help reduce employment levels gm delphi agreement also calls flowback 5000 uawrepresented delphi employees gm september 2007 subject extension eligible uawrepresented delphi employees may elect retire delphi flow back gm retire agreement gm agreed assume financial obligations relating lump sum payments made eligible delphi us hourly employees accepting normal voluntary retirement incentives certain postretirement employee benefit obligations relating delphi employees flow back gm agreement gm believes agreement enhance prospects gm uaw delphi reach broadbased consensual resolution issues relating delphi restructuring however gm cannot provide assurance bankruptcy court approve delphi’s participation agreement approval obtained gm uaw obligations agreement ii25 general motors corporation subsidiaries key factors affecting future results continued delphi bankruptcy concluded enough employees agree participate attrition program reduce employment levels delphi sufficient provide benefits anticipate gm believes probable incurred contingent liability due delphi’s chapter 11 filing gm believes range contingent exposures 55 billion 12 billion amounts near low end range considered possible amounts near high end range assuming agreement reached among gm delphi’s unions result gm established reserve 55 billion 36 billion tax noncash charge fourth quarter 2005 views reflect gm’s current assessment unlikely chapter 11 process result termination delphi’s pension plan complete elimination opeb plans amount charge may change depending result discussions among gm delphi’s unions factors gm currently unable estimate amount additional charges may arise delphi’s chapter 11 filing consensual agreement resolve delphi matter may cause gm incur additional costs exchange benefits would accrue gm time respect possible cash flow effect gm related ability make either pension opeb payments required benefit guarantees gm would expect make payments ongoing operating cash flow financings payments expected material effect gm’s cash flows shortterm however payable payments would likely increase time could material effect gm’s liquidity coming years reference delphi’s 2004 form 10k reported total cash outlay opeb 2004 226 million included 154 million hourly salaried retirees latter covered benefit guarantees plus 72 million payments gm certain former delphi hourly employees flowed back retire gm benefits delphi’s us hourly employees delphi’s pension plan reduced terminated resulting effect gm cash flows future years due benefit guarantee agreements currently reasonably estimable gmac strategic alternatives october 17 2005 gm announced exploring possible sale controlling interest gmac goal delinking gmac’s credit rating gm’s credit rating renewing access lowcost financing although transaction involving gmac would reduce interest earnings gmac expected financial effects reduction would offset value consideration receive purchaser working finalize transaction rapidly structuring gmac transaction complex endeavor cannot predict whether transaction respect gmac occur terms transaction identity purchaser whether period transaction could achieve principal strategic goals even complete transaction involving gmac management believes gmac able maintain necessary liquidity support gm vehicle sales vehicle financing activities 2006 sale controlling interest gmac would trigger need reassess valuation attributable interest sell interest retain gmac even sell controlling interest gmac continue reassess value gmac periodic basis gmac also announced continue evaluate strategic structural alternatives help ensure residential mortgage business residential capital corp rescap retains investment grade credit ratings ii26 general motors corporation subsidiaries key factors affecting future results concluded healthcare liquidity matters recent years gm paid opeb expenditures operating cash flow reduces gm’s liquidity cash flow operations gm’s opeb spending 43 billion 2005 05 billion 2004 gm’s total cash spending health care 2005 55 billion approximately 01 billion 2004 spending levels however gm veba 401h trusts assets totaling 191 billion value december 31 2005 could used reimburse gm opeb expenditures certain circumstances second third quarters 2005 gm withdrew 1 billion veba trust reimbursement retiree health care payments life insurance costs october 3 2005 gm withdrew additional 1 billion veba december withdrew 121 million hourly veba 55 million salaried veba gm withdrew 1 billion hourly veba trust february 1 2006 march 1 2006 respectively quarterbyquarter basis gm evaluate need additional withdrawals cost health care continues adversely affect gm’s liquidity gm’s opeb liabilities also negatively affect gm’s credit ratings discussed status debt ratings section importance opeb liabilities gm’s financial condition gm management pursuing aggressive strategy several fronts mitigate continued growth liabilities efforts include public policy initiatives improvements healthcare delivery system enhanced consumer awareness effect healthcare choices increased cost sharing salaried hourly employees gm’s turnaround plan future prospects could materially adversely affected unless substantial progress made healthcare cost issues future investigations gm cooperating government connection number investigations including investigations concerning pension opeb certain transactions gm delphi securities exchange commission sec issued subpoenas gm connection various matters involving gm investigation matters include gm’s financial reporting concerning pension opeb certain transactions gm delphi supplier price reductions credits obligation gm may fund pension opeb costs connection delphi’s proceedings chapter 11 us bankruptcy code addition sec recently issued subpoena connection investigation transactions precious metal raw materials used automotive manufacturing operations federal grand jury recently issued subpoena connection supplier credits separately sec federal grand jury subpoenas served gmac entities connection industry wide investigations practices insurance industry relating loss mitigation insurance products finite risk insurance ii27 general motors corporation subsidiaries restatements gm concluded internal review credits received suppliers appropriateness accounting treatment years 2000 2005 review indicated gm erroneously recognized supplier credits income year received instead amortized future periods attributable upon completion review gm filed revised periodic reports sec gm restated financial statements errors identified periods presented reports restated financial statements presented reports corrected erroneous accounting supplier credits transactions gm delphi opeb pension transactions involving precious metals classifications cash flows rescap matters requiring outofperiod adjustments certain financing agreements gm party contain customary covenants representations respect delivery certification financial statements generally require financial statements materially accurate delivered result gm’s recent restatement financial statements possible counterparties certain financing agreements may assert gm longer entitled benefits agreements default occurred regard financial statements gm provided gm restated agreements consist principally obligations connection saleleaseback transactions lease obligations include gm’s public debt indentures although gm certain legal rights ability cure respect certain claims could asserted may economic disincentives third parties raise certain claims extent assurance one counterparties attempt declare default exercise rights remedies may deem available could include acceleration termination remedies amounts involved could material date gm received notices declaration default similar action counterparty gm continues make required payments satisfy obligations agreements liquidity capital resources automotive operations available liquidity gm believes sufficient liquidity balance sheet strength financial flexibility meet capital requirements short mediumterm reasonably foreseeable circumstances long term believe gm’s ability meet capital requirements primarily depend successful execution fourpoint turnaround plan return north american operations profitability positive cash flow ability execute globalization principal business functions gm auto other’s available liquidity includes cash balances marketable securities readilyavailable assets veba trusts december 31 2005 gm auto other’s available liquidity 204 billion compared 233 billion december 31 2004 march 2006 gm sold approximately 17 suzuki’s common stock approximately 20 billion cash continues hold approximately 37 suzuki’s common stock amount gm’s consolidated cash marketable securities subject intramonth seasonal fluctuations includes balances held various gm business units subsidiaries worldwide needed fund operations ii28 general motors corporation subsidiaries automotive operations continued available liquidity continued addition readilyavailable portion gm’s veba trusts included available liquidity gm expects access significant additional assets veba trusts time fund future opeb plan costs total assets veba trusts approximated 191 billion december 31 2005 versus 200 billion december 31 2004 decline balances primarily driven 32 billion withdrawals 2005 partially offset favorable asset returns year gm also 56 billion unsecured line credit standby facility syndicate banks terminates june 2008 gm previously drawn credit facility predecessor facilities believes sufficient liquidity short medium term without drawing facility gm believes good faith basis make borrowing request credit facility however view gm’s recent restatement prior financial statements substantial uncertainty whether bank syndicate would required honor request therefore high risk gm would able borrow facility gm believes matter unlikely tested gm current need intention draw existing facility moreover gm currently exploring possibility amending replacing existing facility new terms would among things resolve uncertainty regarding gm’s ability borrow thereunder assurance gm successful negotiating amendment replacement existing credit line amount terms conditions amended replacement facility gm believes issues also may arise recent restatement prior financial statements various financing agreements consist principally obligations connection sale leaseback transactions lease obligations include gm’s public debt indentures gm party gm evaluated effect restatement agreements including legal rights ability cure respect claims could asserted amounts might subject possible claims acceleration termination remedies agreements uncertain gm currently believes amounts would likely exceed approximately 3 billion addition may economic disincentives third parties raise claims extent gm believes sufficient liquidity short medium term regardless resolution matters gm also additional 03 billion undrawn committed facilities various maturities undrawn uncommitted lines credit 07 billion addition gm’s consolidated affiliates nongm minority shareholders primarily gm daewoo combined 15 billion undrawn committed facilities potential sources liquidity could include acceleration additional dividends gmac sale noncore assets cash flow decrease available liquidity 204 billion december 31 2005 233 billion december 31 2004 primarily result gm auto other’s negative operating cash flow significant capital expenditures required support business partially offset withdrawals gm’s veba trusts opeb plans reimbursement retiree healthcare life insurance benefits cash dividends received gmac net cash received consolidated part transactions related equity interests affiliates year ended december 31 2005 auto other’s operating cash flow breakeven principally driven 128 billion net loss continuing operations cumulative effect accounting change result compares operating cash flow 12 billion net loss continuing operations 145 million 2004 addition significant net loss 2005 operating cash flow unfavorably impacted approximately 18 billion cash payments made gm fiat terminate master agreement settle various disputes related thereto gm paid total approximately 20 billion result fiat settlement approximately 18 billion classified operating cash flow ii29 general motors corporation subsidiaries automotive operations continued available liquidity continued approximately 200 million primarily related purchase certain assets classified investing cash flow approximately 802 million cash costs related gme restructuring initiative 2005 gm withdrew 32 billion veba trusts opeb plans reimbursement retiree health care life insurance benefits provided eligible plan participants improving operating cash flow 32 billion investments marketable securities primarily consist purchases sales maturities highlyliquid corporate us government us government agency mortgagebacked debt securities used cash management purposes 2005 gm acquired approximately 26 billion marketable securities sales maturities marketable securities approximately 77 billion capital expenditures significant use investing cash 2005 capital expenditures 79 billion 73 billion 2004 primarily result significant investment gmna required support new product launches favorable investing cash flows included 25 billion dividends gmac 15 billion 2004 14 billion cash acquired net investment result investment activity 846 million proceeds sale business unitsequity investments 14 billion cash acquired net investment result investment activity 2005 driven primarily gm’s acquisition 2005 majority interest gm daewoo resulted gm consolidating gm daewoo’s cash balance approximately 16 billion net 70 million cash paid gm acquire additional 63 interest gm daewoo proceeds sale business unitsequity investments primarily driven gm’s sale interest fhi gm received approximately 800 million march 2006 gm sold interest suzuki common stock approximately 20 billion cash 2006 gm anticipates total capital spending product development including gm’s fullsize pickup trucks 2006 87 billion 57 billion devoted gmna maintain commitment product development substantial legacy costs give us less available cash invest relative competitors debt gm auto other’s total debt december 31 2005 325 billion 15 billion classified shortterm 310 billion classified longterm december 31 2004 total debt 325 billion 21 billion shortterm 304 billion longterm separate 15 billion shortterm debt nearterm north american term debt maturities include approximately 12 billion 2007 primarily related approximately 12 billion convertible debentures may put gm cash settlement march 2007 approximately 13 billion various maturities 2008 order provide financial flexibility gm suppliers gm maintains trade payables program gmaccf program implemented second quarter 2005 replacing larger program gm maintained general electric capital corporation gmaccf program gmac commercial finance gmaccf pays participating gm suppliers amount due gm advance contractual original due dates exchange early payment suppliers accept discounted payment original due date payables gm pays gmaccf full amount december 31 2005 gm owed approximately 03 billion gmaccf program amount included balances net payable fio net receivable auto gm’s supplemental information consolidated balance sheets eliminated gm’s consolidated balance sheets ii30 general motors corporation subsidiaries automotive operations concluded available liquidity concluded net liquidity net liquidity calculated cash marketable securities 38 billion 35 billion december 31 2004 readilyavailable assets veba trust less total loans payable longterm debt negative 121 billion december 31 2005 compared negative 92 billion december 31 2004 financing insurance operations gmac’s consolidated assets totaled 3205 billion december 31 2005 12 3242 billion december 31 2004 decrease primarily attributable decrease consumer finance receivables primarily due lower automotive finance receivables result increase whole loan sales consistent reduction assets gmac’s total debt decreased 2532 billion december 31 2005 excluding commercial mortgage debt 43 billion reclassified held sale compared 2678 billion december 31 2004 2394 billion december 31 2003 gmac’s 2005 yearend ratio total debt total stockholder’s equity 1191 compared 1201 december 31 2004 gmac’s liquidity well ability profit ongoing activity large part dependent upon timely access capital costs associated raising funds different segments capital markets part gmac’s strategy managing liquidity risk develop diversified funding sources across global investor base important part overall funding liquidity strategy gmac maintains substantial bank lines credit bank lines credit totaled 470 billion december 31 2005 provide “backup” liquidity represent additional funding sources required gmac currently 30 billion syndicated line credit committed june 2006 44 billion committed june 2008 committed uncommitted lines credit 36 billion 110 billion respectively addition december 31 2005 new center asset trust ncat 185 billion committed liquidity facility ncat special purpose entity administered gmac purpose funding assets part gmac’s securitization funding programs entity funds purchase assets issuance assetbacked commercial paper represents important source liquidity gmac december 31 2005 ncat commercial paper outstanding 109 billion consolidated corporation’s consolidated balance sheet addition gmac 1268 billion committed uncommitted secured funding facilities thirdparties including commitments thirdparty assetbacked commercial paper conduits well forward flow sale agreements thirdparties repurchase facilities includes five year commitments gmac entered 2005 remaining capacity sell 64 billion retail automotive receivables third party purchasers 2010 unused portion committed uncommitted facilities totaled 877 billion december 31 2005 status debt ratings standard poor’s moody’s fitch currently rate gm’s gmac’s credit noninvestment grade dominion bond rating services dbrs rates gm’s credit noninvestment grade maintains investment grade rating gmac major rating agencies rate rescap investment grade following table summarizes gm’s gmac’s rescap’s credit ratings march 27 2006 ii31 general motors corporation subsidiaries gm experienced limited access capital markets 2005 result deterioration credit ratings able utilize available liquidity meet capital requirements similarly due downgrade unsecured debt noninvestment grade gmac’s access unsecured capital markets limited gmac able meet capital requirements accessing alternative funding sources focus secured funding automotive whole loan sales addition gmac able diversify unsecured funding formation rescap 2005 issued 525 billion unsecured debt investors standard poor’s moody’s fitch dbrs recently downgraded gm’s senior debt ratings october 10 2005 moody’s placed gm’s ba2 gmac’s ba1 senior unsecured ratings review possible downgrade october 17 2005 moody’s announced change gmac’s rescap’s review status “direction uncertain” “review possible downgrade” addition moody’s placed gmac’s nonprime shortterm rating review possible upgrade november 1 2005 moody’s downgraded gm’s longterm credit rating ba2 b1 negative outlook gmac’s rating ba1 rescap’s baa3 left review direction uncertain moody’s affirmed ratings entities november 21 2005 january 19 2006 february 21 2006 moody’s downgraded gm’s senior unsecured debt b2 negative outlook b1 review possible downgrade march 16 2006 moody’s placed senior unsecured ratings gm gmac rescap review possible downgrade time moody’s changed review status rescap’s shortterm p3 ratings review possible downgrade direction uncertain october 3 2005 standard poor’s placed ratings gm gmac rescap creditwatch negative implications october 10 2005 standard poor’s downgraded gm’s longterm corporate credit rating bb creditwatch negative implications bb minus creditwatch negative implications time downgraded gm’s shortterm rating b1 creditwatch negative implications b2 creditwatch negative implications ratings gmac rescap left bb bbb minus respectively outlook gmac rescap remained creditwatch implications entities changed “developing” “negative” december 12 2005 standard poor’s resolved gm’s issuer credit rating downgrading rating bb minus creditwatch negative implications b outlook negative downgraded gm’s shortterm ratings b2 creditwatch negative implications b3 outlook negative gm’s ratings removed creditwatch longterm ratings gmac rescap unchanged bb bbb minus respectively creditwatch developing implications gmac’s rescap’s shortterm ratings remained unchanged b1 a3 respectively creditwatch developing implications october 17 2005 fitch affirmed gm’s senior debt credit rating bb placed ratings gmac rescap rating watch evolving rating bb bbbminus respectively november 9 2005 fitch downgraded gm’s senior unsecured ratings bb bplus rating watch negative leaving ratings gmac rescap unchanged gm’s shortterm rating withdrawn gmac’s rescap’s shortterm ratings left b respectively rating watch ii32 general motors corporation subsidiaries status debt ratings concluded evolving fitch affirmed ratings gm gmac rescap february 7 2006 march 1 2006 fitch downgraded gm’s senior unsecured rating b fitch maintained rating watch negative outlook gm’s ratings october 11 2005 dbrs placed ratings gmac rescap review developing implications october 14 2005 dbrs downgraded gm’s longterm debt bb negative trends confirmed gm’s commercial paper rating r3 high also negative trends december 16 2005 dbrs downgraded gm’s longterm debt b high gm’s shortterm rating r3 mid negative trends aforementioned ratings actions increased borrowing costs limited access unsecured debt markets outcomes mitigated actions taken gm gmac past years focus increased use liquidity sources institutional unsecured markets directly affected ratings unsecured debt including secured funding sources beyond traditional asset classes geographical markets automotive whole loan sales use bank conduit facilities reductions gm’s andor gmac’s credit ratings could increase possibility additional terms conditions contained new replacement financing arrangements result specific funding actions taken past years management believes gm gmac continue access sufficient capital meet corporation’s ongoing funding needs short mediumterm notwithstanding foregoing management believes current ratings situation outlook increase level risk achieving corporation’s funding strategy gmac’s ability sustain current level asset originations longterm addition ratings situation outlook increase importance successfully executing corporation’s plans improvement operating results management continuously assesses matters seeking mitigate increased risk exploring whether actions could taken would provide basis rating agencies evaluate gmac’s financial performance order provide gmac ratings independent assigned gm october 17 2005 gm made announcement exploring possible sale controlling interest gmac goal delinking gmac’s credit rating gm’s credit rating renewing access lowcost financing assurance actions taken would successful achieving delinking gmac’s credit rating gm’s credit rating agencies addition gmac able diversify unsecured funding formation rescap formed holding company gmac’s residential mortgage businesses successfully achieved investment grade rating independent gmac issued 4 billion unsecured debt second quarter 2005 following bond offering july 2005 rescap closed 35 billion syndication bank facilities consisting 175 billion syndicated term loan 09 billion syndicated line credit committed july 2008 09 billion syndicated line credit committed july 2006 addition fourth quarter 2005 rescap filed 12 billion shelf registration statement order offer senior andor subordinated debt securities issued 3 billion 175 billion issued february 2006 unsecured debt investors portion proceeds notes used repay portion intercompany borrowings facilities intended used primarily general corporate working capital purposes well repay affiliate borrowings thus providing additional liquidity line credit gm gmac gm 4 billion revolving line credit gmac expires september 2006 credit line used general operating seasonal working capital purposes reduce external liquidity requirements given differences timing gm’s gmac’s peak funding requirements maximum amount outstanding line year 33 billion amounts outstanding line december 31 2005 interest payable amounts advanced arrangements based market interest rates adjusted reflect credit rating gm gmac capacity borrower ii33 general motors corporation subsidiaries addition line credit gmac similar line credit gm allowed gmac draw 6 billion arrangement expired december 2005 renewed pension postretirement benefits plans covering represented employees generally provide benefits negotiated stated amounts year service well significant supplemental benefits employees retire 30 years service normal retirement age gm’s policy respect qualified pension plans contribute annually less minimum required applicable law regulation directly pay benefit payments appropriate december 31 2005 legal funding requirements met gm made contributions pension plans follows dollars millions 2006 gm contributions due us hourly pension plan february 2006 gm contributed 17 million us salaried pension plan contribution required contribution behalf gm employees former participants saturn pcrp plan merged gm salaried pension plan 2005 gm expect make additional contributions salaried pension plan 2006 gm expects contribute pay benefits approximately 100 million us pension plan 500 million primary nonus pension plans include gm canada limited adam opel vauxhall 2006 gm’s us hourly salaried pension plans overfunded 75 billion 2005 16 billion 2004 increase primarily attributable strong actual asset returns approximately 13 2005 nonus pension plans underfunded deficit nonus pension benefits increased approximately 9 billion end 2004 107 billion end 2005 increase primarily due declines discount rates various countries gm sponsors plans gm also maintains hourly salaried benefit plans provide postretirement medical dental vision life insurance us retirees eligible dependents certain nonus subsidiaries postretirement benefit plans although participants covered government sponsored administered programs gm’s us opeb plan underfunded 621 billion 2005 538 billion 2004 gm’s nonus opeb plans underfunded 38 billion 2005 37 billion 2004 2005 gm withdrew total 32 billion plan assets veba trusts opeb plans reimbursement retiree healthcare life insurance benefits provided eligible plan participants 2004 gm contributed total 9 billion us opeb plans primarily us hourly salaried veba opeb plan accounts gm withdrew 1 billion veba trust february 1 2006 march 1 2006 ii34 general motors corporation subsidiaries pension postretirement benefits concluded following benefit payments reflect estimated future employee services appropriate expected paid dollars millions offbalance sheet arrangements gm gmac use offbalance sheet arrangements economics sound business principles warrant use gm’s principal use offbalance sheet arrangements occurs connection securitization sale financial assets generated acquired ordinary course business gmac subsidiaries lesser extent gm assets securitized sold gmac subsidiaries consist principally mortgages wholesale retail loans secured vehicles sold gm’s dealer network assets sold gm consist principally trade receivables addition gm leases real estate equipment various offbalance sheet entities established facilitate financing assets gm nationally prominent lessors gm believes creditworthy assets consist principally office buildings warehouses machinery equipment use entities allows parties providing financing isolate particular assets single entity thereby syndicate financing multiple third parties conventional financing technique used lower cost borrowing thus lease cost lessee gm wellestablished market institutions participate financing property purchase ownership interests entities owned institutions independent affiliated gm believes officers directors employees gm gmac affiliates hold direct indirect equity interests entities amounts outstanding offbalance sheet facilities used gm fio reportable segment increased past years gmac continues use securitization transactions similar legal structure offbalance sheet securitizations accounted secured financings recorded receivables debt balance sheet assets offbalance sheet entities follows dollars millions ii35 general motors corporation subsidiaries offbalance sheet arrangements concluded 1 addition trade receivables sold gmac 525 million december 31 2005 549 million december 31 2004 contractual obligations longterm liabilities gm following minimum commitments contractual obligations including purchase obligations defined sec “purchase obligation” defined agreement purchase goods services enforceable legally binding gm specifies significant terms including fixed minimum quantities purchased fixed minimum variable price provisions approximate timing transaction longterm liabilities defined longterm liabilities reflected gm’s balance sheet gaap based definition tables include contracts include fixed minimum obligations include normal purchases made ordinary course business ii36 general motors corporation subsidiaries contractual obligations longterm liabilities continued following table provides aggregated information auto segment’s outstanding contractual obligations longterm liabilities december 31 2005 automotive operations longterm debt payable beyond one year december 31 2005 includes scheduled maturities follows 2007 1 billion 2008 19 billion 2009 04 billion 2010 02 billion 2011 276 billion included longterm debt payable beyond one year certain convertible debentures approximately 12 billion may put gm cash settlement march 2007 ahead scheduled maturity 2011 1 amounts include postretirement benefits current contractual labor agreements north america remainder estimated liability benefits beyond current labor agreement essentially salaried employees classified remaining balance postretirement benefits 2 total veba assets allocated based projected spending requirements amount includes 10 billion veba withdrawal 02 billion veba withdrawal fourth quarter 2005 3 reflect effect january 2006 agreements information technology providers combined us hourly salaried pension plans 75 billion overfunded statement financial accounting standards 87 basis yearend 2005 result normal conditions gm expect make contribution us hourly salaried pension plans foreseeable future ii37 general motors corporation subsidiaries contractual obligations longterm liabilities continued following table provides aggregated information fio segments outstanding contractual obligations longterm liabilities december 31 2005 financing insurance operations book value per share book value per share represents net assets corporation divided number outstanding shares determined based liquidation rights common stockholders book value per share gm 123 par value common stock decreased 2581 december 31 2005 4841 december 31 2004 book value per share meaningful financial measure gm provides investors objective metric based gaap compared similar metrics competitors industry participants book value per share vary significantly trading price common stock since latter driven investor expectations variety factors including present value future cash flows may warrant financial statement recognition gaap december 31 2005 gm’s book value per share significantly higher trading price 123 par value common stock gm believes difference driven mainly marketplace uncertainty surrounding future events gm matters discussed risk factors section also believe fact gm’s book value exceeds recent trading price 123 par value common stock potential indicator impairment presently none uncertainties warrant modification amounts reflected gm’s consolidated financial statements dividends may paid 123 par value common stock declared gm’s board directors sole discretion amounts available dividends applicable law december 31 2005 amount capital surplus plus retained earnings gaap basis 176 billion delaware law board may declare dividends extent statutory “surplus” defined total assets minus total liabilities case fair market value minus ii38 general motors corporation subsidiaries contractual obligations longterm liabilities concluded statutory capital surplus net profits current andor immediately preceding fiscal year gm’s policy distribute dividends 123 par value common stock based outlook indicated capital needs business cash dividends per share gm 123 par value common stock 200 2005 2004 2003 february 6 2006 meeting gm board directors board approved reduction quarterly dividend gm 123 par value common stock 050 per share 025 per share effective first quarter 2006 paid march 10 2006 holders record february 16 2006 employment payrolls 1 2005 includes approximately 7000 employees added former powertrain joint venture fiat 2 2005 includes approximately 13000 employees added result consolidation gm daewoo 3 includes employees “at work” excludes laidoff employees receiving benefits 4 includes us hourly wages benefits divided number hours worked critical accounting estimates accounting policies integral understanding mda consolidated financial statements gm prepared conformity gaap requires use estimates judgments assumptions affect reported amounts assets liabilities date financial statements reported amounts revenues expenses periods presented gm’s accounting policies described note 1 consolidated financial statements critical accounting estimates described section accounting estimate considered critical estimate requires management make assumptions matters highly uncertain time estimate made different estimates reasonably could used changes estimate would material impact corporation’s financial condition results operations reasonably likely occur period management believes accounting estimates employed appropriate resulting balances reasonable however actual results could differ original estimates requiring adjustments balances future periods corporation discussed development selection disclosures critical accounting estimates audit committee gm’s board directors audit committee reviewed corporation’s disclosures relating estimates ii39 general motors corporation subsidiaries critical accounting estimates continued pension postretirement employee benefits opeb pension opeb costs liabilities dependent assumptions used calculating amounts primary assumptions include factors discount rates health care cost trend rates expected return plan assets mortality rates retirement rates rate compensation increase discussed • discount rates 2005 discount rates based creating hypothetical portfolio high quality bonds rated aa recognized rating agency timing amount cash inflows approximates estimated outflows defined benefit plan • health care cost trend rate healthcare cost trend rate based historical retiree cost data near term health care outlook including appropriate cost control measures implemented gm industry benchmarks surveys • expected return plan assets expected return plan assets derived detailed periodic studies include review asset allocation strategies anticipated future longterm performance individual asset classes risk correlations asset classes comprise fund’s asset mix recent longterm historical performance • mortality rates mortality rates based actual projected plan experience • retirement rates retirement rates based actual projected plan experience • rate compensation increase rate compensation increase final pay plans reflects longterm actual experience outlook including contractually agreed upon wage rate increases represented hourly employees accordance gaap actual results differ assumptions accumulated amortized future periods therefore generally affect recognized expense recorded obligation future periods management believes assumptions used appropriate differences actual experience changes assumptions may affect gm’s pension postretirement obligations future expense december 31 2005 gm unrecognized actuarial losses 321 billion us non us pension plans 323 billion us non us opeb plans balances accumulated differences actual experience compared original assumptions accumulated several years particular general trend lower discount rates driven interest rate environments well escalating health care cost trend rates gm amortizes amounts future working lives plan participants accordingly higher levels unrecognized actuarial losses unfavorable impacts reported pension opeb expense recognized net actuarial losses component total us non us pension opeb expense 2005 2004 2003 47 billion 32 billion 27 billion respectively increases total recognized net actuarial losses us non us pension opeb expense 2005 2004 2003 14 billion 06 billion 15 billion respectively balance sheet classification unrecognized losses subject current fasb project gm established us pension plans discount rate 570 yearend 2005 represents 10 basis point increase 560 discount rate used yearend 2004 gm’s us pretax pension expense forecasted decrease approximately 13 billion 2005 excluding curtailments settlements approximately 06 billion 2006 due approximately 13 actual return plan assets 2005 ii40 general motors corporation subsidiaries critical accounting estimates continued following information illustrates sensitivity change certain assumptions us pension plans december 31 2005 projected benefit obligation pbo us pension plans 89 billion minimum pension liability charged equity respect us pension plans 109 million net tax gm’s us hourly pension plans generally provide covered us hourly employees pension benefits negotiated flat dollar amounts year credited service earned individual employee formulas providing stated amounts contained prevailing labor contract consistent gaap 2005 pretax pension expense december 31 2005 pbo comprehend future benefit increases beyond amounts stated currently prevailing contract expires september 2007 current cycle negotiating new labor contracts every four years past practice maintaining consistent level benefit increases decreases one contract next however following data illustrates sensitivity pension expense pbo hypothetical assumed changes future basic benefits 1 increase basic benefit us hourly employees would result 140 million increase 2006 pretax pension expense 660 million increase december 31 2005 pbo 1 decrease benefit would result 130 million decrease 2006 pretax pension expense 610 million decrease december 31 2005 pbo changes assumptions would effect gm’s funding requirements addition december 31 2005 25 basis point decrease discount rate would decrease stockholders’ equity 195 million net tax 25 basis point increase discount rate would increase stockholders’ equity 195 million net tax impact greater 25 basis point decreaseincrease discount rate would proportional first 25 basis point decreaseincrease discount rate gm established us opeb plans discount rate 545 yearend 2005 represents 30 basis point reduction 575 discount rate used yearend 2004 following table illustrates sensitivity change discount rate assumption related gm’s us opeb plans us accumulated postretirement benefit obligation apbo significant portion gm’s worldwide apbo 849 billion december 31 2005 gm assumes 10 initial us healthcare cost trend rate 2006 calendar year 50 ultimate us healthcare cost trend rate projected calendar year 2012 beyond december 31 2005 one percentage point increase assumed us health care trend rates periods would increased us apbo 93 billion december 31 2005 aggregate service interest cost components nonpension postretirement benefit expense 2005 629 million onepercentage point decrease would decreased us apbo 77 billion aggregate service interest cost components nonpension postretirement benefit expense 2005 516 million ii41 general motors corporation subsidiaries critical accounting estimates continued sensitivities reflect effect changing one assumption time noted economic factors conditions often affect multiple assumptions simultaneously effects changes key assumptions necessarily linear recent years gm estimated discount rate us pension opeb obligations reference moody’s aa index citibank salomon smith barney’s abovemedian curve watson wyatt’s bondmatching model well benchmarking beginning 2005 yearend valuations gm estimates discount rate us pension opeb obligations using iterative process based hypothetical investment portfolio highquality bonds hypothetical reinvestment proceeds bonds upon maturity forward rates derived yield curve us pension opeb obligations fully defeased gm incorporates reinvestment component methodology feasible light magnitude time horizon us pension opeb obligations extend accomplish full defeasance direct cash flows actual set bonds selected given measurement date improved methodology considered change estimate developed 2005 adopted deemed superior previously available algorithms estimating assumed discount rates particular approach permits better match future cash outflows related benefit payments future cash inflows associated bond coupons maturities hypothetical described gm’s discount rate estimation iterative process involves four steps first gm identifies bond universe consists aarated higher bonds amount outstanding greater 25 million gm excludes universe callable convertible bonds mortgagebacked assetbacked securities bonds negative credit watch bond universe data including amounts outstanding market prices credit ratings relevant data obtained bloomberg second gm creates defeasance portfolio bond universe selecting set bonds would yield cash flows coupons maturation reinvestment sufficient defease us pension opeb obligations reinvestments assumed occur forward rates calculated using yield curve developed following methodology years bond universe sufficient number bonds yield curve based yields bonds future years bond universe sufficient number bonds yield curve extrapolated follows • gm computes spread yield curve swap curve marketbased curve • extrapolate yield curve period beginning last year substantial bonds available bond universe ending year 50 gm adds spread swap curve observable 50 years • extrapolate yield curve beyond 50th year gm assumes last oneyear forward rate yield curve 49th year remains constant remaining years third gm determines market value defeasance portfolio using actual initial market value bonds selected part defeasance portfolio fourth gm computes internal rate return irr defeasance portfolio based market value measurement date final net cash flows coupons maturations reinvestments gm uses irr discount rate us pension opeb obligations beginning 2005 yearend valuations gm rounds discount rates us pensions us opeb plans nearest 005 percentage point rather nearest 025 percentage point prior years ii42 general motors corporation subsidiaries critical accounting estimates continued using new methodology gm established us pension plans us opeb plans discount rates 570 545 respectively yearend 2005 sales allowances later time sale time incentive announced dealers applies vehicles sold gm dealer inventory gm records reduction revenue estimated impact sales allowances form dealer customer incentives may numerous types incentives available particular time factors used estimating cost incentives include volume vehicles affected incentive programs offered product rate customer acceptance incentive program actual number affected vehicles differs estimate different mix incentives actually paid sales allowances could affected policy warranty provisions estimated expenses related product warranties made time products sold estimates established using historical information nature frequency average cost warranty claims management actively studies trends warranty claims takes action improve vehicle quality minimize warranty claims see note 16 consolidated financial statements effect retroactive adjustments liability preexisting warranties impairment longlived assets gm periodically reviews carrying value longlived assets held used goodwill intangible assets indefinite lives assets disposed events circumstances warrant review performed using estimates future cash flows carrying value longlived asset considered impaired impairment charge recorded amount carrying value longlived asset exceeds fair value postemployment benefits costs idle consolidate close facilities provide postemployment benefits employees temporary basis accrued based management’s best estimate wage benefits costs incurred qualified employees jobs bank provisions current labor agreement date expiration september 2007 plus estimated costs expected paid thereafter estimates include 45 9 projected level acceptance normal early retirement offers respectively made pursuant current labor agreement costs related idling employees expected temporary expensed incurred gm reviews adequacy continuing need liabilities annual basis conjunction yearend production labor forecasts furthermore gm reviews reasonableness liabilities quarterly basis allowance credit losses allowance credit losses management’s estimate incurred losses gmac’s consumer commercial finance receivable loan portfolios held investment management periodically performs detailed reviews portfolios determine impairment occurred assess estimated realizable value collateral applicable adequacy allowance credit losses based historical current trends factors affecting credit quality losses determination allowance credit losses requires management exercise significant judgment timing frequency severity credit losses could materially affect provision credit losses therefore net income ii43 general motors corporation subsidiaries critical accounting estimates concluded investments operating leases gmac’s investments leasing portfolio represent estimate realizable values assets based residual value established contract inception gmac establishes residual values contract inception using independently published residual value guides management reviews residual values periodically determine recorded amounts appropriate operating lease assets impaired gmac actively manages remarketing offlease vehicles maximize realization value changes value residuals external factors impacting gmac’s future ability market vehicles prevailing market conditions may impact realization residual values example change estimated realizable value 1 us operating lease portfolio could result cumulative aftertax earnings impact 41 million december 31 2005 recognized remaining term lease portfolio mortgage servicing rights corporation capitalizes mortgage servicing rights represents capitalized value associated right receive future cash flows connection servicing mortgage loans residential mortgage loans typically contain prepayment option borrowers often elect prepay mortgages refinancing lower rates declining interest rate environments market value residential mortgage servicing rights sensitive changes interest rates tends decline market interest rates decline increase interest rates rise corporation capitalizes cost originated mortgage servicing rights based upon relative fair market value underlying mortgage loans mortgage servicing rights time sale securitization underlying mortgage loan purchased mortgage servicing rights capitalized cost approximates fair market value assets assumed mortgage servicing rights recorded fair market value date servicing obligation assumed carrying value mortgage servicing rights dependent upon whether asset hedged mortgage servicing rights hedged derivatives receive hedge accounting treatment prescribed sfas 133 “accounting derivative instruments hedging activities” carried fair value changes fair value recognized current period earnings generally offset changes fair value underlying derivative changes value asset derivative highly correlated majority mortgage servicing rights hedged part corporation’s risk management program mortgage servicing rights receive hedge accounting treatment carried lower cost fair value accounting derivatives fair value measurements corporation uses derivatives normal course business manage exposure fluctuations commodity prices interest foreign currency rates corporation accounts derivatives consolidated balance sheet assets liabilities fair value accordance sfas 133 accounting complex requires significant judgments estimates involved estimating fair values absence quoted market prices use estimates various assumptions determining fair value many assets including retained interests securitizations loans contracts mortgage servicing rights investments established market value publicly traded difficult determine accuracy estimates assumptions actual experience may differ materially estimates assumptions material difference estimates assumptions actual experience may materially adversely affect cash flow profitability financial condition business prospects finance mortgage insurance operations ii44 general motors corporation subsidiaries new accounting standards december 2004 financial accounting standards board fasb revised statement financial accounting standards 123 “accounting stockbased compensation” sfas 123r requiring companies record sharebased payment transactions compensation expense fair market value sfas 123r defines concept fair market value relates arrangements based sec guidance issued staff accounting bulletin sab 107 april 2005 provisions statement effective gm january 1 2006 corporation began expensing fair market value newly granted stock options stock based compensation awards employees pursuant sfas 123 2003 therefore statement expected material effect gm’s consolidated financial position results operations december 2005 fasb released fasb staff position fsp sfas 123r3 “transition election related accounting tax effects sharebased payment awards” provides practical transition election related accounting tax effects sharebased payment awards employees corporation currently reviewing transition alternatives elect appropriate alternative within one year adoption sfas 123r april 2005 fasb issued sfas 154 “accounting changes error corrections” requiring retrospective application required method reporting change accounting principle unless impracticable pronouncement includes specific transition provisions statement also requires change depreciation amortization depletion method longlived nonfinancial assets accounted change accounting estimate effected change accounting principle statement carries forward guidance apb opinion 20 “accounting changes” reporting correction error change accounting estimate statement effective accounting changes correction errors made fiscal years beginning december 15 2005 forwardlooking statements report reports subsequently filed gm sec form 10q filed furnished form 8k related comments management gm use words “expect” “anticipate” “estimate” “forecast” “initiative” “objective” “plan” “goal” “project” “outlook” “priorities” “target” “intend” “evaluate” “pursue” “seek” “may” “would” “could” “should” “believe” “potential” “continue” “designed” “impact” negative words similar expressions intended identify forwardlooking statements subsequent reports gm may file sec form 10q filed furnished form 8k statements historical fact including without limitation statements future events financial performance forwardlooking statements involve certain risks uncertainties statements represent current judgment future may hold believe judgments reasonable made statements guarantees events financial results gm’s actual results may differ materially due numerous important factors may revised supplemented subsequent reports sec forms 10q 8k factors include among others following • ability gm realize production efficiencies achieve reductions costs result turnaround restructuring health care cost reductions implement capital expenditures levels times planned management • pace product introductions • market acceptance corporation’s new products • significant changes competitive environment effect competition corporation’s markets including corporation’s pricing policies • ability maintain adequate liquidity financing sources appropriate level debt ii45 general motors corporation subsidiaries forwardlooking statements continued • restrictions gmac’s rescap’s ability pay dividends prepay subordinated debt obligations us • changes existing adoption new laws regulations policies activities governments agencies similar organizations actions may affect production licensing distribution sale products cost thereof applicable tax rates • costs risks associated litigation • final results investigations inquiries sec • changes accounting principles application interpretation ability make estimates assumptions underlying estimates including range estimates delphi pension benefit guarantees could result impact earnings • changes relations unions employeesretirees legal interpretations agreements unions regard employeesretirees • negotiations bankruptcy court actions respect delphi’s obligations gm negotiations respect gm’s obligations pension benefit guarantees delphi employees gm’s ability recover indemnity claims delphi • labor strikes work stoppages gm key suppliers delphi financial difficulties gm’s key suppliers delphi • additional credit rating downgrades effects thereof • effect potential sale extraordinary transaction involving gmac results gm’s gmac’s operations liquidity • factors affecting financing insurance operating segments’ results operations financial condition credit ratings adequate access market changes residual value offlease vehicles changes us governmentsponsored mortgage programs disruptions markets mortgage subsidiaries operate changes contractual servicing rights • shortages price increases fuel • changes economic conditions commodity prices currency exchange rates political stability markets operate addition gmac’s actual results may differ materially due numerous important factors described gmac’s recent report sec form 10k may revised supplemented subsequent reports sec forms 10q 8k factors include among others following • ability gm complete transaction regarding controlling interest gmac maintaining significant stake gmac securing separate credit ratings low cost funding sustain growth gmac rescap maintaining mutually beneficial relationship gmac gm • significant changes competitive environment effect competition corporation’s markets including corporation’s pricing policies • ability maintain adequate financing sources • ability maintain appropriate level debt ii46 general motors corporation subsidiaries forwardlooking statements concluded • profitability financial condition gm including changes production sales gm vehicles risks based gm’s contingent benefit guarantees possibility labor strikes work stoppages gm key suppliers delphi • funding obligations gm subsidiaries’ qualified us defined benefits pension plans • restrictions rescap’s ability pay dividends prepay subordinated debt obligations us • changes residual value offlease vehicles • changes us governmentsponsored mortgage programs disruptions markets mortgage subsidiaries operate • changes contractual servicing rights • costs risks associated litigation • changes accounting assumptions may require result changes accounting rules application could result impact earnings • changes credit ratings gmac gm • threat natural calamities • changes economic conditions currency exchange rates political stability markets operate • changes existing adoption new laws regulations policies activities governments agencies similar organizations investors cautioned place undue reliance forwardlooking statements gm undertakes obligation update publicly otherwise revise forwardlooking statements whether result new information future events factors affect subject statements except expressly required law item 7a item 7 management’s discussion analysis financial condition results operations following addresses material changes net assets liquidation motors liquidation company guc trust guc trust fiscal year ended march 31 2013 intended read conjunction financial statements guc trust included item 8 refer financial statements recent trading prices new gm securities described principal assets comprising corpus guc trust shares new gm common stock new gm series warrants new gm series b warrants purchase common stock result fluctuations market value new gm common stock related fluctuation market value new gm warrants increase reduce guc trust’s net assets liquidation accordingly addition fluctuations market value new gm securities relation tax basis securities affect amount net deferred tax liabilities recorded statement net assets liquidation see “functions responsibilities guc trustincome tax liabilities certain capital gains” new gm common stock new gm warrants listed new york stock exchange march 28 2013 last trading day end current fiscal year closing trading price shares new gm common stock 2782 compared 2565 march 30 2012 last trading day end previous fiscal year closing trading price new gm series warrants 185599 compared 1663 march 30 2012 closing trading price new gm series b warrants 1179 compared 1120 march 30 2012 case reported bloomberg finance lp guc trust units listed securities exchange following table shows intraday high low trading prices new gm common stock previous four fiscal quarters reported bloomberg finance lp following table shows intraday high low trading prices new gm series warrants previous four fiscal quarters reported bloomberg finance lp following table shows intraday high low trading prices new gm series b warrants previous four fiscal quarters reported bloomberg finance lp critical accounting policies estimates liquidation basis accounting guc trust created purposes described note 1 “purpose trust” financial statements finite life result guc trust prepared financial statements liquidation basis accounting accordance accounting principles generally accepted united states america liquidation basis accounting prescribed financial accounting standards board fasb accounting standards codification assets stated estimated net realizable value nondiscounted amount cash asset expected converted liquidation liabilities continue recognized amount required us gaap remeasured reflect anticipation entity legally released obligation additionally liquidation basis accounting reserve established estimated costs expected incurred liquidation costs accrued reasonable basis estimation estimates periodically reviewed adjusted appropriate described heading “reserves expected costs liquidation” reasonably possible estimates expected costs liquidation could change near term valuation assets net realizable value reserves residual winddown claims reserves expected liquidation costs represent estimates based present facts circumstances known guc trust administrator subject change described note 1 financial statements guc trust beneficiaries future extent liquidating distributions yet paid current holders allowed general unsecured claims future current holders guc trust units disputed general unsecured claims resolved allowed thereby become allowed general unsecured claims holders thereof become entitled receive liquidating distributions new gm securities guc trust units pro rata amount claims upon occurrence guc trust incurs obligation distribute securities accordingly liquidating distributions payable recorded fair value new gm securities end period disputed general unsecured claims resolved allowed general unsecured claims similarly extent potential term loan avoidance action claims arise would become allowed manner described note 2 financial statements liquidating distributions payable would recorded new gm securities fair value would become distributable holders term loan avoidance action claims upon occurrence prior resolution allowance disputed general unsecured claims potential term loan avoidance action claims liabilities recorded conditional obligations associated disputed general unsecured claims potential term loan avoidance action claims rather beneficial interests guc trust beneficiaries residual assets guc trust reflected net assets liquidation guc trust financial statements liquidation basis accounting guc trust presents two principal financial statements statement net assets liquidation statement changes net assets liquidation addition although required liquidation basis accounting guc trust also presents statement cash flows accordance requirements guc trust agreement holdings new gm securities holdings new gm securities represent guc trust’s holdings new gm securities held future distribution respect allowed general unsecured claims guc trust units include amounts set aside distribution fund potential administrative costs income tax liabilities described “net assets liquidationnew gm securities set aside distribution” securities held consist shares new gm common stock new gm warrants guc trust valued holdings securities fair value based quoted closing market prices last trading day fiscal period prior december 15 2011 mlc held new gm securities benefit guc trust guc trust reported interest securities “securities due mlc” marketable securities marketable securities consist short term investments corporate commercial paper municipal government commercial paper variable demand notes us government agency bonds guc trust valued securities fair value based carrying value municipal corporate commercial paper carrying value approximates fair value par value variable demand notes par value equals fair value pricing models quoted prices securities similar characteristics broker quotes us government agency bonds reserves residual winddown claims residual winddown costs upon dissolution mlc occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining residual winddown claims date dissolution debtors transferred guc trust residual winddown assets amount necessary satisfy ultimate allowed amount residual winddown claims residual winddown costs estimated debtors residual winddown costs residual winddown claims less cash amount transferred debtors excess funds returned dip lenders reserves expected costs liquidation basis accounting guc trust required estimate accrue costs associated implementing plan distributing guc trust’s distributable assets costs described winddown costs reporting costs note 2 “plan liquidation” financial statements consist principally professional fees costs governance administrative expenses amounts may vary significantly due among things time effort required complete distributions plan guc trust recorded reserves expected costs liquidation represent estimated costs incurred remaining liquidation period guc trust reasonable basis estimation amount liquidation costs ultimately incurred depends period time extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities march 31 2013 remaining liquidation period estimated probabilityweighted basis guc trust believes appropriate measurement basis circumstances reasonably possible guc trust’s estimates regarding costs remaining liquidation period could change near term guc trust incurs costs reserves released offset costs incurred liability service provider recognized accounts payable accrued expense paid process recording reserves matter financial reporting separate distinct process new gm securities set aside distribution purposes funding projected administrative costs income tax liabilities complete description latter see “functions responsibilities guc trustfunding guc trust’s liquidation administrative costs” “net assets liquidationnew gm securities set aside distribution” income taxes guc trust considered “disputed ownership fund” pursuant treasury regulation section 1468b9 assets transferred guc trust passive investments guc trust taxed qualified settlement fund qsf pursuant treasury regulation section 1468b9c1ii qsf tax status guc trust approved internal revenue service private letter ruling issued march 2 2011 general qsf considered c corporation pays federal income tax using trust income tax rates modified gross income modified gross income includes gross income pursuant internal revenue code section 61 less administrative expenses certain losses sale exchange worthlessness property net operating losses general disputed ownership fund taxed qsf recognize gross income assets transferred therefore guc trust recognized gross income transfer assets mlc guc trust currently expected generate gross income form interest dividend income recognize gains andor losses upon disposition shares new gm common stock new gm warrants holds reduced administrative expenses accumulated net operating losses compute modified gross income guc trust taxable federal income tax purposes current income tax liability asset recognized estimated taxes payable receivable year deferred tax liabilities assets recognized estimated future tax effects temporary differences financial reporting tax accounting deferred tax assets reviewed recoverability valuation allowances provided necessary guc trust subject state income taxes current law accordingly current deferred state income tax liabilities assets recorded guc trust recognizes tax benefit uncertain tax position likely tax position sustained examination taxing authority based technical merits position guc trust’s federal income tax return year ended march 31 2012 longer subject examination march 31 2013 known items would result significant accrual uncertain tax positions funding obligation avoidance action trust based analysis avoidance action trust potential funding sources guc trust administrator conjunction trust administrator trustee avoidance action trust determined would best interest holders allowed general unsecured claims fund certain fees costs expenses avoidance action trust subject approval bankruptcy court described note 2 “plan liquidation” financial statements march 2012 bankruptcy court approved sale new gm securities aggregating approximately 137 million transfer resulting proceeds avoidance action trust funding accordingly funding obligation avoidance action trust established statement net assets liquidation march 31 2012 amount expected transferred guc trust avoidance action trust may 14 2012 use estimates preparation financial statements liquidation basis conformity accounting principles generally accepted united states america requires use estimates assumptions affect reported amounts assets liabilities estimates subject known unknown risks uncertainties factors could materially impact amounts reported disclosed financial statements related footnotes significant estimates include anticipated amounts timing future cash flows expected liquidation costs residual winddown claims fair value marketable securities ultimate allowed amounts disputed general unsecured claims fair value new gm warrants held mlc benefit guc trust april 1 2011 actual results could differ estimates new accounting standard april 2013 fasb issued accounting standards update 201307 liquidation basis accounting amended fasb accounting standards codification provides guidance entity apply liquidation basis accounting addition guidance provides principles recognition measurement assets liabilities requirements financial statements prepared using liquidation basis accounting provisions effective annual periods beginning december 15 2013 interim periods therein early adoption permitted guc trust expect adoption provisions material impact financial statements statement changes net assets liquidation year ended march 31 2013 net assets liquidation increased approximately 210 million approximately 13692 million approximately 13902 million principally result increase fair value holdings new gm securities since march 31 2012 noted “recent trading prices new gm securities” closing trading price new gm common stock well new gm series new gm series b warrants increased last trading day year ended march 31 2012 last trading day year ended march 31 2013 changes net assets liquidation year ended march 31 2013 also reflected impact approximately 294 million liquidating distributions new gm securities year well approximately 175 million increases reserves expected costs liquidation year ended march 31 2013 described detail “liquidation administrative costs” increases reserves expected costs liquidation resulted guc trust’s identification expected liquidation administrative costs reasonable basis estimation partially offset year ended march 31 2013 reductions expected liquidation administrative costs resulting execution letter agreement dip lenders dated july 24 2012 provided relief certain restrictions utilization winddown assets additional information letter agreement see “functions responsibilities guc trustfunding guc trust’s liquidation administrative costs” addition changes net assets liquidation year ended march 31 2013 reflect impact income tax provision 563 million recorded year income tax provision resulted increase year deferred tax liability increase deferred tax liability primarily due increase fair value excess tax basis new gm securities held guc trust resulting increase fair value new gm securities year along increase statutory tax rate applied see “functions responsibilities guc trustincome tax liabilities certain capital gains” note 9 “income tax provision” financial statements changes net assets liquidation year ended march 31 2013 also reflect approximately 145000 interest dividend income earned cash short term investments held guc trust pay certain future expenses liquidation administrative costs discussed “critical accounting policies estimates” liquidation basis accounting guc trust required upon establishment record reserves respect expected costs associated implementing plan distributing guc trust’s distributable assets costs consist principally professional fees governance costs liquidation administrative costs generally accepted accounting principles reserves may established extent reasonable basis estimation time additional costs identified reasonable basis estimation guc trust records increase reserves expected costs liquidation charges increase addition reserves expected costs liquidation statement changes net assets liquidation costs actually incurred guc trust costs reduce previously recorded reserves expected costs liquidation amount incurred costs effect statement changes net assets liquidation guc trust’s reserves liquidation administrative costs allocable following categories • reserve expected winddown costs corresponding expenditures made administrative fund following depletion administrative fund administrative cash see “functions responsibilities guc trustfunding guc trust’s liquidation administrative costs” • reserve expected reporting costs corresponding expenditures made administrative cash see “functions responsibilities guc trustfunding guc trust’s liquidation administrative costs” • reserve indenture trustee fiscal paying agent costs corresponding expenditures made cash received guc trust mlc dissolution date see “functions responsibilities guc trustother assets received mlc dissolution date” • reserve avoidance action defense costs corresponding expenditures made residual winddown assets following depletion assets administrative cash see “functions responsibilities guc trustother assets received mlc dissolution date” • reserve residual winddown costs corresponding addition expenditures satisfy resolve residual winddown claims expenditures made residual winddown assets following depletion residual winddown assets administrative cash see “functions responsibilities guc trustresidual winddown claims” described greater detail “functions responsibilities guc trust” “liquidity capital resources” unused portions certain assets associated foregoing reserves required returned dip lenders upon winding dissolution guc trust therefore assets available fund costs liquidation administration income tax liabilities guc trust also available distribution holders allowed general unsecured claims guc trust units see “functions responsibilities guc trustfunding guc trust’s liquidation administrative costs” “functions responsibilities guc trustresidual winddown claims” “functions responsibilities guc trustother assets received mlc dissolution date” march 31 2013 guc trust approximately 615 million reserves liquidation administrative costs estimated incurred winding conclusion guc trust compared approximately 761 million reserves march 31 2012 following table summarizes greater detail changes reserves year ended march 31 2013 approximately 175 million additional reserves accrued year ended march 31 2013 order reflect increases expected reporting costs 123 million expected winddown costs approximately 52 million increase expected reporting costs associated increases estimated length remaining liquidation period ii increased visibility expected reporting costs increase expected winddown costs associated increases estimated length liquidation period ii revised estimates expected costs nova scotia matter iii additional trust professionals services required result adverse determination internal revenue service respect requested issuance private letter ruling iv increased visibility ongoing costs necessary conduct winddown activities guc trust offset large part reductions expected winddown costs resulting execution letter agreement dip lenders dated july 24 2012 provided relief certain restrictions utilization winddown assets comparison approximately 530 million additional reserves accrued year ended march 31 2012 order reflect increases expected winddown costs approximately 324 million expected reporting costs approximately 206 million increase expected winddown costs resulted primarily increased visibility extent activities associated costs required conduct winddown activities guc trust increase expected reporting costs resulted primarily increased visibility costs total reserves reduced amount liquidation administrative costs incurred year ended march 31 2013 trust professional costs incurred year ended march 31 2013 approximately 255 million compared 359 million year ended march 31 2012 decrease 104 million year due primarily decreases winddown reporting residual winddown costs trust governance costs incurred year ended march 31 2013 approximately 62 million compared 36 million year ended march 31 2012 increase 26 million year due increased fees guc trust administrator guc trust monitor certain services relating issuance transferable guc trust units incurred prior calendar year 2012 offset decrease indenture trusteefiscal paying agent costs decrease indenture trusteefiscal paying agent costs year resulted termination relevant indenture trusts fiscal paying agency arrangements set forth plan result settlement allowed general unsecured claims holders various bond debt securities issued general motors company predecessor mlc related distributions new gm securities administrative costs years ended march 31 2013 2012 approximately 04 million costs represented miscellaneous fees costs guc trust additional information regarding components category costs see “functions responsibilities guc trustfunding guc trust’s liquidation administrative costs” “functions responsibilities guc trustresidual winddown claims” “functions responsibilities guc trustother assets received mlc trust dissolution date” foregoing reserves represent future costs guc trust reasonable basis estimation march 31 2013 therefore recorded liquidation basis accounting accordance accounting principles generally accepted united states america us gaap reasonably possible however additional costs incurred reasonable basis estimation march 31 2013 particular march 31 2013 recorded reserves expected costs liquidation reflect estimated costs remaining liquidation period extending december 2016 end date remaining liquidation period estimated probabilityweighted basis permitted us gaap guc trust believes appropriate measurement basis circumstances addition certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued amount liquidation costs ultimately incurred depends length remaining liquidation period extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities reasonably possible guc trust’s estimates regarding remaining liquidation period expected costs liquidation change near term funds available foregoing categories costs sufficient satisfy costs category guc trust required sell portion holdings new gm securities order meet additional obligations costs sales new gm securities result lesser amount new gm securities available distribution holders guc trust units described detail certain new gm securities already set aside distribution purposes meeting additional obligations however amounts set aside distribution neither reflected part financial statements included elsewhere form 10k process setting aside new gm securities related process recording matter financial reporting statement net assets liquidation reserves expected costs liquidation current deferred income tax liabilities see “critical accounting policies estimatesincome taxes” “critical accounting policies estimatesreserves expected costs liquidation” “net assets liquidationnew gm securities set aside distribution” additional information regarding reserves described see note 2 “plan liquidation” note 8 “reserves expected costs liquidation residual winddown claims” financial statements net assets liquidation disputed claims year ended march 31 2013 guc trust administrator resolved disputed general unsecured claims aggregate maximum asserted dollar amount approximately 16004 million approximately 1904 million allowed approximately 14100 million disallowed following table provides additional detail regarding claims resolution status year ended march 31 2013 1 maximum amount unresolved claims represents sum disputed general unsecured claims term loan avoidance action claims 2 total claim amount represents sum allowed general unsecured claims maximum amount unresolved claims year ended march 31 2013 holders disputed general unsecured claims allowed year became entitled distribution 828717 shares new gm common stock 753383 new gm series warrants 753383 new gm series b warrants aggregate distributions respect new allowed general unsecured claims claim holders informational requirements met made quarterly basis may 10 2013 see “distributable assets” disputed general unsecured claims aggregating 360 billion table approximately 268 billion relates litigation currently pursued guc trust refer nova scotia matter disallow equitably subordinate reduce following claims debtors’ chapter 11 cases claims aggregating approximately 107 billion refer collectively guarantee claims filed behalf certain holders notes refer nova scotia notes issued 2003 general motors nova scotia finance company refer nova scotia finance nova scotia unlimited liability company former subsidiary mlc guaranteed mlc ii claim approximately 161 billion refer collectively guarantee claims disputed nova scotia claims filed bankruptcy trustee nova scotia finance addition guc trust determined march 31 2013 approximately 407 million relates claims filed directly former beneficial owners notes previously issued guaranteed debtors proofs claim otherwise filed indirectly behalf beneficial owners members broader class guc trust expects petition bankruptcy court disallowance claims upon final resolution claims classes beneficial owners otherwise belong nova scotia matter involves prior settlement agreement refer lockup agreement entered day mlc filed bankruptcy among mlc nova scotia finance certain holders nova scotia notes among parties lockup agreement purported settle certain prepetition litigation commenced canada relating nova scotia notes exchange among things cash payment approximately 367 million funded mlc ii allowance claims extent permitted law chapter 11 cases mlc aggregating approximately 268 billion prior lockup agreement aggregate amount claims holders nova scotia notes approximately 10 billion trial nova scotia matter commenced bankruptcy court august 7 2012 yet concluded resolution nova scotia matter favor guc trust would result portion disputed nova scotia claims disallowed additional information see “item 3 legal proceedings” part form 10k distributable assets table summarizes activity new gm securities comprise guc trust’s distributable assets including amounts new gm securities distributed distributable march 31 2013 well numbers new gm securities available distribution holders guc trust units march 31 2013 1 numbers new gm securities shown distributed distributable include sales cash distributions governmental entities extent governmental entities requested sales demonstrated satisfaction guc trust administrator governmental entities precluded applicable law receiving distributions new gm securities b fractional amounts new gm securities lieu guc trust required pursuant guc trust agreement distribute cash subject certain minimum thresholds 2 holdings new gm securities reflect numbers new gm securities used determine holdings new gm securities statement net assets liquidation see note 6 “holdings new gm securities” financial statements 3 distributions payable respect new allowed general unsecured claims including allowed general unsecured claims newly allowed quarter ended march 31 2013 b allowed general unsecured claims allowed prior fiscal periods holders claims yet supplied information required guc trust order effect distribution entitled 4 distributable assets reflects numbers new gm securities shown “guc trust distributable assets” report included exhibit 991 form 8k filed guc trust sec april 23 2013 new gm securities set aside potential distribution respect current disputed general unsecured claims term loan avoidance action claims march 31 2013 extent claims resolved favor guc trust amounts new gm securities set aside may become available distribution holders guc trust units future periods described heading “disputed claims” march 31 2013 approximately 302272 million allowed general unsecured claims respect claims guc trust previously distributed obligated distribute march 31 2013 aggregate 120402053 shares new gm common stock 109456550 new gm series warrants 109456550 new gm series b warrants amounts reflect 115029 shares new gm common stock 104570 new gm series warrants 104570 new gm series b warrants set aside distribution respect allowed general unsecured claims newly allowed quarter ended march 31 2013 previously disclosed exhibit 991 form 8k filed guc trust sec april 23 2013 march 31 2013 new gm securities currently distributable holders guc trust units respect excess guc trust distributable assets year ended march 31 2013 294133 shares new gm company stock 267392 new gm series warrants 267392 new gm series b warrants liquidated sales proceeds approximately 180 million fund liquidation administrative costs guc trust new gm securities set aside distribution addition distributions liquidations new gm securities reflected reductions guc trust net assets financial statements guc trust also time sets aside new gm securities potential future liquidation fund projected liquidation administrative costs well potential income tax liabilities new gm securities set aside distribution guc trust deducted net assets liquidation guc trust financial statements unless new gm securities liquidated new gm securities set aside distribution segregated guc trust specific purposes available distribution holders guc trust units claimants unless extent guc trust later determines new gm securities longer needed fund specific purposes process related separate process recording current deferred income tax liabilities reserves expected costs liquidation statement net assets liquidation matter financial reporting see “critical accounting policiesincome taxes” “critical accounting policies estimatesreserves expected costs liquidation” guc trust administrator reevaluates quarterly basis amount new gm securities needed set aside distribution purposes funding projected liquidation administrative costs reevaluation includes calculation converts estimates projected liquidation administrative costs number new gm securities set aside distribution using lowest closing price new gm securities since december 15 2011 date new gm securities transferred guc trust mlc quarter ended march 31 2013 number new gm securities set aside distribution fund projected liquidation administrative costs guc trust calculation reduced 1010369 shares new gm common stock 918546 new gm series warrants 918546 new gm series b warrants result limitations number new gm securities available set aside set aside potential taxes distribution described accordingly march 31 2013 guc trust set aside distribution aggregate 740788 shares new gm common stock 673415 new gm series warrants 673415 new gm series b warrants aggregate fair value 410 million order partially fund projected liquidation administrative costs guc trust extent new gm securities associated currently disputed general unsecured claims become available distribution future periods new gm securities may need set aside guc trust administrator order fund additional currently projected liquidation administrative costs accordance guc trust agreement approval guc trust monitor pursuant procedures described see “liquidation administrative costs” addition reevaluating amount new gm securities set aside distribution fund projected liquidation administrative costs guc trust administrator also reevaluates quarterly basis amount new gm securities needed set aside distribution fund potential income tax liabilities realized gains future gains disposition new gm securities determination made basis different used calculate deferred tax liabilities financial statement purposes “set aside” calculation methodology uses highest closing price new gm securities since december 15 2011 date new gm securities transferred guc trust mlc estimating potential taxes future gains disposition new gm securities contrast calculating deferred tax liabilities purposes financial reporting guc trust uses closing price last trading date fiscal quarter “set aside” calculation converts estimates potential income tax liabilities number new gm securities set aside distribution using lowest closing price new gm securities since december 15 2011 date new gm securities transferred guc trust mlc addition march 31 2013 “set aside” calculation applied enacted income tax rate 396 scheduled go effect guc trust’s fiscal year beginning april 1 2013 estimating potential taxes future gains disposition new gm securities result foregoing quarterly reevaluation quarter ended march 31 2013 number new gm securities needed set aside fund potential income tax liabilities guc trust administrator determined necessary reserve 2275880 additional shares new gm common stock 2068982 additional new gm series warrants 2068982 additional new gm series b warrants primarily result increase potential taxes future gains disposition new gm securities resulting increases fair value new gm securities quarter including additional new gm securities march 31 2013 guc trust set aside distribution aggregate 7351443 shares new gm common stock 6683130 new gm series warrants 6683130 new gm series b warrants aggregate fair value approximately 4073 million order fund potential income tax liabilities additional information see “funding potential tax liabilities” note 2 “plan liquidation” financial statements “set aside” calculation potential income tax liabilities march 31 2013 set forth 1 highest closing prices new gm common stock new gm series warrants new gm series b warrants occurred january 15 2013 2 lowest closing prices new gm common stock new gm series warrants new gm series b warrants occurred july 25 2012 3 “ratio set aside” calculated dividing number new gm securities class authorized distribution plan ie 150000000 shares new gm common stock 136363635 series new gm warrants number shares new gm common stock authorized distribution plan deducting amounts set aside distribution fund additional projected liquidation administrative costs potential income tax liabilities guc trust amounts set aside distributions payable respect new allowed general unsecured claims march 31 2013 distributable assets guc trust included 20334066 shares new gm common stock 18485406 new gm series warrants 18485406 new gm series b warrants aggregate fair value approximately 11267 million new gm securities set aside potential distribution respect current disputed general unsecured claims term loan avoidance action claims extent claims resolved favor guc trust amounts new gm securities set aside may become available distribution holders guc trust units future periods assurance additional amounts new gm securities required set aside distribution sold fund additional costs income tax liabilities beyond guc trust administrator already set aside sales new gm securities occur fund obligations result lesser amount new gm securities available distribution holders guc trust units see “liquidity capital resources” guc trust units table details changes numbers guc trust units outstanding issuable year ended march 31 2013 1 number guc trust units issuable time represents guc trust units issuable respect allowed general unsecured claims newly allowed preceding fiscal year b allowed general unsecured claims allowed prior fiscal periods holders claims yet supplied information required guc trust order effect initial distribution entitled liquidity capital resources guc trust’s sources liquidity principally funds holds payment liquidation administrative costs significantly lesser degree earnings funds invested guc trust holds funds cash equivalents also invests funds marketable securities primarily corporate commercial paper municipal commercial paper demand notes permitted plan guc trust agreement year ended march 31 2013 guc trust’s holdings cash equivalents decreased approximately 374 million approximately 384 million approximately 10 million decrease due primarily cash used fund liquidation administrative costs 393 million cash transferred avoidance action trust 137 million satisfy funding obligation avoidance action trust cash used payment residual winddown claims 14 million net cash reinvested marketable securities 17 million offset part sales new gm securities fund expected costs liquidation 180 million year ended march 31 2013 funds invested guc trust marketable securities decreased approximately 98 million approximately 866 million approximately 768 million decrease due primarily reduced reinvestments cash marketable securities order fund cash needs period guc trust earned approximately 145000 interest dividend income investments year addition funds held payment costs liquidation administration guc trust also holds new gm securities portion guc trust administrator permitted set aside distribution sell approval bankruptcy court trust monitor applicable order fund additional costs income tax liabilities become due march 31 2013 aggregate fair value new gm securities held guc trust excluding securities set aside liquidating distributions payable date approximately 15751 million march 31 2013 guc trust administrator set aside distribution new gm securities aggregate fair market value approximately 410 million fund projected liquidation administrative costs new gm securities aggregate fair market value approximately 4073 million fund potential income taxes see “net assets liquidationdistributable assets” assurance additional amounts new gm securities required set aside distribution sold fund additional costs income tax liabilities beyond guc trust administrator already set aside sales new gm securities occur fund obligations result lesser amount new gm securities available distribution holders guc trust units addition described headings “functions responsibilities guc trustresidual winddown claims” “functions responsibilities guc trustother assets received mlc dissolution date” portion guc trust’s assets currently segregated pursuant guc trust agreement satisfaction residual winddown claims certain specified costs assets insufficient satisfy residual winddown claims fund specified costs reason guc trust administrator similarly required set aside distribution sell additional new gm securities order fund shortfall described headings “functions responsibilities guc trustresidual winddown claims” “functions responsibilities guc trustother assets received mlc dissolution date” residual winddown assets received guc trust dissolution date available payment liquidation administrative costs income tax liabilities guc trust rather unused portions assets must returned dip lenders available distribution holders guc trust units winding conclusion guc trust item 7a item 7 management’s discussion analysis financial condition results operations following addresses material changes net assets liquidation motors liquidation company guc trust guc trust fiscal year ended march 31 2015 intended read conjunction financial statements guc trust included item 8 refer financial statements recent trading prices new gm securities described principal assets comprising corpus guc trust shares new gm common stock new gm series warrants new gm series b warrants purchase common stock result fluctuations market value new gm common stock related fluctuation market value new gm warrants increase reduce guc trust’s net assets liquidation accordingly addition fluctuations market value new gm securities relation tax basis securities affect amount net deferred tax liabilities recorded statement net assets liquidation see “income tax liabilities certain capital gains dividends new gm common stock” item 1 “business” new gm common stock new gm warrants listed new york stock exchange march 31 2015 closing trading price shares new gm common stock 3750 compared 3442 march 31 2014 closing trading price new gm series warrants 2775 compared 2484 march 31 2014 closing trading price new gm series b warrants 1965 compared 1741 march 31 2014 case reported bloomberg finance lp guc trust units listed securities exchange following table shows intraday high low trading prices new gm common stock previous four fiscal quarters reported bloomberg finance lp following table shows intraday high low trading prices new gm series warrants previous four fiscal quarters reported bloomberg finance lp following table shows intraday high low trading prices new gm series b warrants previous four fiscal quarters reported bloomberg finance lp critical accounting policies estimates liquidation basis accounting guc trust created purposes described note 1 “purpose trust” financial statements finite life result guc trust prepared financial statements liquidation basis accounting accordance accounting principles generally accepted united states america us gaap liquidation basis accounting prescribed financial accounting standards board fasb accounting standards codification assets stated estimated net realizable value nondiscounted amount cash asset expected converted liquidation liabilities continue recognized amount required us gaap remeasured reflect anticipation entity legally released obligation additionally liquidation basis accounting reserve established estimated costs expected incurred liquidation costs accrued reasonable basis estimation described heading “new accounting standard” beginning quarter ended june 30 2014 accrual made estimated income cash expected received liquidation period extent reasonable basis estimation exists estimates periodically reviewed adjusted appropriate described headings “holdings new gm securities dividends received new gm common stock” “reserves expected costs liquidation” reasonably possible estimates accrued dividends expected costs liquidation could change near term valuation assets net realizable value reserves residual winddown claims reserves expected liquidation costs accrual dividends expected received guc trust’s holdings new gm common stock represent estimates based present facts circumstances known guc trust administrator subject change guc trust beneficiaries future extent liquidating distributions yet paid current holders allowed general unsecured claims future current holders guc trust units disputed general unsecured claims resolved allowed thereby become allowed general unsecured claims holders thereof become entitled receive liquidating distributions new gm securities including related dividend cash guc trust units pro rata amount claims upon occurrence guc trust incurs obligation distribute securities accordingly liquidating distributions payable recorded fair value new gm securities end period disputed general unsecured claims resolved allowed general unsecured claims similarly extent potential term loan avoidance action claims arise would become allowed manner described note 2 financial statements liquidating distributions payable would recorded new gm securities fair value along related dividend cash would become distributable holders term loan avoidance action claims upon occurrence prior resolution allowance disputed general unsecured claims potential term loan avoidance action claims liabilities recorded conditional obligations associated disputed general unsecured claims potential term loan avoidance action claims rather beneficial interests guc trust beneficiaries residual assets guc trust reflected net assets liquidation guc trust financial statements liquidation basis accounting guc trust presents two principal financial statements statement net assets liquidation statement changes net assets liquidation addition although required liquidation basis accounting guc trust also presents statement cash flows accordance requirements guc trust agreement holdings new gm securities dividends received new gm common stock holdings new gm securities represent guc trust’s holdings new gm securities held future distribution respect allowed general unsecured claims guc trust units include amounts set aside distribution fund potential administrative costs income tax liabilities including dividend taxes distribution described “net assets liquidationnew gm securities set aside distribution” securities held consist shares new gm common stock new gm warrants guc trust valued holdings securities fair value based quoted closing market prices last trading day fiscal period beginning quarter ended june 30 2014 estimated dividends expected received holdings new gm common stock accrued liquidation basis accounting extent reasonable basis estimation exists march 31 2015 dividends approximately 265 million accrued relating dividends 036 per share declared new gm april 2015 payable common stockholders record june 10 2015 aggregating 41 million b estimated dividends aggregating 224 million expected declared new gm future based new gm’s recent dividend history factors received guc trust estimated remaining liquidation period february 2017 accrued dividends estimated using current dividend rate 036 per share guc trust’s estimated holdings new gm common stock remaining liquidation period february 2017 reasonably possible guc trust’s estimates regarding future dividends could change near term prior quarter ended june 30 2014 dividends recorded received accrued record date declared unpaid dividend dividends received new gm common stock required applied purpose new gm common stock dividends relate shares new gm common stock distributed holders subsequently resolved allowed claims guc trust units dividends relating shares also distributed holders however shares new gm common stock sold guc trust accordance guc trust agreement fund costs liabilities guc trust case dividends relating shares applied costs liabilities guc trust like cash proceeds sale shares new gm common stock maintained administrative cash dividends applied purpose new gm common stock references new gm common stock new gm securities set aside distribution reserved sold understood include dividends relating new gm common stock unless expressly indicated otherwise amount cash equivalents held guc trust relates dividends received guc trust new gm common stock held guc trust referred dividend cash marketable securities marketable securities consist short term investments corporate commercial paper municipal government commercial paper variable demand notes guc trust valued securities fair value based carrying value municipal corporate commercial paper carrying value approximates fair value par value variable demand notes par value equals fair value reserves residual winddown claims residual winddown costs upon dissolution mlc occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining residual winddown claims date dissolution debtors transferred guc trust residual winddown assets amount necessary satisfy ultimate allowed amount residual winddown claims including certain avoidance action defense costs residual winddown costs estimated debtors residual winddown costs residual winddown claims less residual winddown assets excess funds returned dip lenders collectively actual amounts residual winddown claims including certain avoidance action defense costs allowed residual winddown costs exceed residual winddown assets guc trust administrator may required set aside distribution sell additional new gm securities fund shortfall sale securities would reduce numbers new gm securities related dividend cash available distribution holders guc trust units reserves expected costs liquidation basis accounting guc trust required estimate accrue costs associated implementing plan distributing guc trust’s distributable assets costs described winddown costs reporting costs note 2 “plan liquidation” financial statements consist principally professional fees costs governance administrative expenses amounts may vary significantly due among things time effort required complete distributions plan guc trust recorded reserves expected costs liquidation represent estimated costs incurred remaining liquidation period guc trust reasonable basis estimation amount liquidation costs ultimately incurred depends period time extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities march 31 2015 remaining liquidation period extends february 2017 estimated predominantly probabilityweighted basis guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome remaining liquidation period dependent predominantly estimate remaining period time resolution term loan avoidance action well certain additional estimated time necessary wind guc trust possible future developments term loan avoidance action could extend current estimate remaining period time resolution therefore extend estimated remaining liquidation period guc trust beyond february 2017 described item 3 legal proceedings guc trust participating interested party litigation involving certain general motors vehicle recalls impact litigation remaining liquidation period guc trust subject reasonable estimation time possible litigation could extend remaining liquidation period guc trust beyond february 2017 reasonably possible guc trust’s estimates regarding costs remaining liquidation period could change near term guc trust incurs costs reserves released offset costs incurred liability service provider recognized accounts payable accrued expense paid addition guc trust records reserves expected costs reasonable basis estimation applicable us gaap additional costs may identified time additional reserves must recorded costs identified guc trust records increase reserves charges increase addition reserves statement changes net assets liquidation process recording reserves expected costs liquidation matter financial reporting separate distinct process new gm securities set aside distribution purposes funding projected costs liquidation projected costs generally estimated conservative ie inclusive basis include contingencies permitted accrued reserves expected costs liquidation applicable us gaap complete description process setting aside new gm securities fund projected costs potential liabilities guc trust see “the guc trust assets” item 1 “business” “net assets liquidation” heading “new gm securities set aside distribution” income taxes guc trust considered “disputed ownership fund” pursuant treasury regulation section 1468b9 assets transferred guc trust passive investments guc trust taxed qualified settlement fund qsf pursuant treasury regulation section 1468b9c1ii qsf tax status guc trust approved internal revenue service private letter ruling issued march 2 2011 general qsf considered c corporation pays federal income tax using trust income tax rates modified gross income modified gross income includes gross income pursuant internal revenue code section 61 less administrative expenses certain losses sale exchange worthlessness property net operating losses general disputed ownership fund taxed qsf recognize gross income assets transferred therefore guc trust recognized gross income transfer assets mlc guc trust generates gross income form interest dividend income including dividends received holdings new gm common stock recognizes gains andor losses upon disposition shares new gm common stock new gm warrants reduced administrative expenses accumulated net operating capital losses compute modified gross income guc trust taxable federal income tax purposes current income tax liability asset recognized estimated taxes payable receivable year deferred tax liabilities assets recognized estimated future tax effects temporary differences financial reporting tax accounting deferred tax assets reviewed recoverability valuation allowances provided necessary guc trust subject state income taxes current law accordingly current deferred state income tax liabilities assets recorded guc trust recognizes tax benefit uncertain tax position likely tax position sustained examination taxing authority based technical merits position review available evidence consultation guc trust professionals guc trust’s tax liability respect federal income tax returns year ended march 31 2014 prior years longer subject examination result application section 505b bankruptcy code however remaining capital loss carryovers generated years combined capital losses generated year ended march 31 2015 new tax position aggregate 1871 million along net operating loss carryovers generated march 31 2015 aggregating 862 million could subject examination internal revenue service subsequent years losses utilized march 31 2015 known items would result significant accrual uncertain tax positions process recognizing deferred tax assets liabilities current income taxes payable matter financial reporting separate distinct process new gm securities set aside distribution purposes funding potential income tax liabilities potential income tax liabilities generally estimated conservative ie inclusive basis include amounts potential income tax liabilities beyond amounts permitted recorded applicable accounting standards complete description process setting aside new gm securities fund projected costs potential income tax liabilities guc trust see “the guc trust assets” item 1 “business” “net assets liquidation” heading “new gm securities set aside distribution” funding obligation avoidance action trust based analysis avoidance action trust potential funding sources guc trust administrator conjunction avoidance action trust administrator determined would best interest holders allowed general unsecured claims fund certain fees costs expenses avoidance action trust subject approval bankruptcy court described note 2 “plan liquidation” financial statements march 2012 bankruptcy court approved sale new gm securities aggregating approximately 137 million transfer resulting proceeds avoidance action trust funding sale occurred march 2012 proceeds transferred guc trust avoidance action trust may 14 2012 use estimates preparation financial statements liquidation basis conformity accounting principles generally accepted united states america requires use estimates assumptions affect reported amounts assets liabilities estimates subject known unknown risks uncertainties factors could materially impact amounts reported disclosed financial statements related footnotes significant estimates include anticipated amounts timing future cash flows expected dividends received holdings new gm common stock expected liquidation costs actual results could differ estimates new accounting standard quarter ended june 30 2014 guc trust adopted accounting standards update 201307 “liquidation basis accounting” effect adoption standard material guc trust’s financial statements quarter standard requires income cash expected received liquidation period estimated accrued extent reasonable basis estimation exists march 31 2015 guc trust accrued dividends approximately 265 million relating dividends 036 per share declared new gm april 2015 payable common stockholders record june 10 2015 aggregating 41 million b estimated dividends aggregating 224 million expected declared new gm based new gm’s recent dividend history factors received guc trust estimated remaining liquidation period february 2017 accrued dividends estimated using current dividend rate 036 per share guc trust’s estimated holdings new gm common stock remaining liquidation period february 2017 addition march 31 2015 guc trust accrued approximately 07 million investment income expected earned cash equivalents marketable securities estimated remaining liquidation period guc trust statement changes net assets liquidation year ended march 31 2015 net assets liquidation decreased approximately 1198 million approximately 10645 million approximately 9447 million principally result impact approximately 2099 million liquidating distributions new gm securities partially offset increase fair value holdings new gm securities since march 31 2014 approximately 562 million dividend interest income 433 million noted “recent trading prices new gm securities” closing trading price new gm common stock well new gm series new gm series b warrants increased march 31 2014 march 31 2015 distributions year ended march 31 2015 consisted 1 distributions holders guc trust units 2 distributions holders allowed general unsecured claims previously failed fulfill informational requirements distribution established accordance guc trust agreement subsequently successfully fulfilled information requirements distributions holders guc trust units year ended march 31 2015 resulted primarily release distributable assets guc trust previously set aside respect potential taxes distribution dividend interest income year ended march 31 2015 433 million consists almost entirely dividends received holdings new gm common stock accrual dividends aggregating 265 million beginning quarter ended june 30 2014 estimated dividends expected received holdings new gm common stock accrued liquidation basis accounting extent reasonable basis estimation exists march 31 2015 dividends approximately 265 million accrued relating dividends 036 per share declared new gm april 2015 payable common stockholders record june 10 2015 aggregating 41 million b estimated dividends aggregating 224 million expected declared new gm based new gm’s recent dividend history factors received guc trust estimated remaining liquidation period described “the guc trust assets” item 1 “business” dividends new gm common stock distributed holders subsequently resolved allowed claims guc trust units respect shares new gm common stock receive unless dividends respect shares new gm common stock sold guc trust accordance guc trust agreement fund guc trust’s costs liquidation tax liabilities shortfalls residual winddown assets case dividends respect new gm common stock sold maintained administrative cash net assets liquidation year ended march 31 2015 decreased result increases reserves expected costs liquidation 94 million described detail “liquidation administrative costs” increases reserves expected costs liquidation resulted primarily increases expected winddown costs reporting costs generally accepted accounting principles applicable guc trust process recognizing reserves matter financial reporting separate distinct process new gm securities set aside distribution purposes funding projected administrative costs potential income tax liabilities see “net assets liquidationnew gm securities set aside distribution” liquidation administrative costs discussed “critical accounting policies estimates” liquidation basis accounting guc trust required upon establishment record reserves respect expected costs associated implementing plan distributing guc trust’s distributable assets costs consist principally professional fees governance costs liquidation administrative costs us gaap reserves may established extent reasonable basis estimation time additional costs identified reasonable basis estimation guc trust records increase reserves expected costs liquidation charges increase addition reserves expected costs liquidation statement changes net assets liquidation costs actually incurred guc trust costs reduce previously recorded reserves expected costs liquidation amount incurred costs effect statement changes net assets liquidation guc trust’s reserves liquidation administrative costs recorded conformity us gaap allocable following categories • reserve expected winddown costs corresponding expenditures made administrative fund following depletion administrative fund administrative cash see “the guc trust assets” item 1 “business” • reserve expected reporting costs corresponding expenditures made administrative cash see “the guc trust assets” item 1 “business” • reserve indenture trustee fiscal paying agent costs corresponding expenditures made cash received guc trust mlc dissolution date see “the guc trust assets” item 1 “business” • reserve avoidance action defense costs corresponding expenditures made residual winddown assets following depletion assets administrative cash see “the guc trust assets” “term loan avoidance action” item 1 “business” • reserve residual winddown costs corresponding addition expenditures satisfy resolve residual winddown claims expenditures made residual winddown assets following depletion residual winddown assets administrative cash see “the guc trust assets” item 1 “business” described greater detail “the guc trust assets” item 1 “business” “liquidity capital resources” unused portions certain assets associated foregoing reserves required returned dip lenders upon winding dissolution guc trust therefore assets available fund costs liquidation administration income tax liabilities guc trust also available distribution holders allowed general unsecured claims guc trust units see “the guc trust assets” item 1 “business” march 31 2015 guc trust approximately 313 million reserves liquidation administrative costs estimated incurred winding conclusion guc trust compared approximately 365 million reserves march 31 2014 following table summarizes greater detail changes reserves year ended march 31 2015 reserves increased approximately 94 million year ended march 31 2015 order reflect 90 million increase expected winddown costs 04 million increase expected reporting costs increase expected winddown costs year ended march 31 2015 primarily associated increased expected legal costs resulting guc trust’s participation interested party legal proceedings related new gm vehicle recalls well increase expected costs associated increase expected remaining life guc trust increase expected reporting costs year ended march 31 2015 primarily associated increase expected costs associated increase expected remaining life guc trust comparison reserves reduced approximately 79 million year ended march 31 2014 order reflect 38 million decrease expected winddown costs 41 million decrease expected reporting costs decrease expected winddown costs year ended march 31 2014 primarily associated nova scotia settlement resulting reduced expected litigation costs well reduction revised estimates ongoing costs necessary conduct winddown activities guc trust decrease expected reporting costs year ended march 31 2014 primarily associated reduction revised estimates ongoing costs services provided guc trust professionals well increased visibility expected reporting costs primarily result completing first full year sec reporting requirements year ended march 31 2013 total reserves reduced amount liquidation administrative costs incurred year ended march 31 2015 trust professional costs incurred year ended march 31 2015 approximately 87 million compared 110 million year ended march 31 2014 decrease 23 million year due 09 million decrease winddown costs 01 million decrease reporting costs 09 million decrease avoidance action defense costs 04 million decrease residual winddown costs trust governance costs incurred year ended march 31 2015 approximately 54 million compared 57 million year ended march 31 2014 decrease 03 million year due decreased fees reimbursable expenses guc trust administrator guc trust monitor administrative costs years ended march 31 2015 2014 approximately 04 million costs represented miscellaneous fees costs guc trust additional information regarding components category costs see “the guc trust assets” item 1 “business” foregoing reserves represent future costs guc trust reasonable basis estimation march 31 2015 therefore recorded liquidation basis accounting accordance us gaap reasonably possible however additional costs incurred reasonable basis estimation march 31 2015 particular march 31 2015 recorded reserves expected costs liquidation reflect estimated costs remaining liquidation period extending february 2017 date predominantly result estimate period time required resolution term loan avoidance action well certain additional estimated time necessary wind guc trust assumes extension current scheduled dissolution date guc trust end date remaining liquidation period estimated predominantly probabilityweighted basis permitted us gaap guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome addition certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued possible future developments term loan avoidance action could extend current estimate remaining period time required resolution therefore extend estimated remaining liquidation period guc trust beyond february 2017 described item 3 “legal proceedings” guc trust participating interested party litigation involving certain general motors vehicle recalls impact litigation remaining liquidation period guc trust subject reasonable estimation time possible litigation could extend remaining liquidation period guc trust beyond february 2017 amount liquidation costs ultimately incurred depends length remaining liquidation period extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities reasonably possible guc trust’s estimates regarding remaining liquidation period expected costs liquidation change near term funds available foregoing categories costs sufficient satisfy costs category guc trust required sell portion holdings new gm securities order meet additional obligations costs sales new gm securities result lesser numbers new gm securities available distribution holders guc trust units process recognizing reserves expected costs liquidation matter financial reporting separate distinct process new gm securities set aside distribution purposes funding projected costs liquidation generally made conservative ie inclusive basis include contingencies permitted recognized applicable accounting standards described detail certain new gm securities related dividend cash already set aside distribution purposes meeting additional obligations however amounts set aside distribution neither reflected part financial statements included elsewhere form 10k process setting aside assets related process recording matter financial reporting statement net assets liquidation reserves expected costs liquidation current deferred income tax liabilities see “critical accounting policies estimatesincome taxes” “critical accounting policies estimatesreserves expected costs liquidation” “net assets liquidationnew gm securities set aside distribution” additional information regarding reserves described see note 2 “plan liquidation” note 8 “reserves expected costs liquidation residual winddown claims” financial statements net assets liquidation disputed claims year ended march 31 2015 guc trust administrator resolved disputed general unsecured claims aggregate maximum asserted dollar amount approximately 95 million disallowed following table provides additional detail regarding claims resolution status year ended march 31 2015 1 maximum amount unresolved claims represents sum disputed general unsecured claims term loan avoidance action claims 2 total claim amount represents sum allowed general unsecured claims maximum amount unresolved claims distributable assets table summarizes activity new gm securities dividend cash comprise guc trust’s distributable assets including amounts new gm securities distributed distributable march 31 2015 well numbers new gm securities amount dividend cash available distribution holders guc trust units march 31 2015 1 numbers new gm securities shown distributed distributable include sales cash distributions governmental entities extent governmental entities requested sales demonstrated satisfaction guc trust administrator governmental entities precluded applicable law receiving distributions new gm securities b fractional amounts new gm securities lieu guc trust required pursuant guc trust agreement distribute cash subject certain minimum thresholds 2 holdings new gm securities reflect numbers new gm securities used determine holdings new gm securities statement net assets liquidation see note 6 “holdings new gm securities” financial statements 3 distributions payable respect allowed general unsecured claims allowed prior fiscal periods holders claims yet supplied information required guc trust order effect distribution entitled excess distributions payable holders guc trust units 4 distributable assets reflects numbers new gm securities dividend cash shown “guc trust distributable assets” report included exhibit 991 form 8k filed guc trust sec april 22 2015 new gm securities associated dividend cash set aside potential distribution respect current disputed general unsecured claims term loan avoidance action claims march 31 2015 extent claims resolved favor guc trust amounts new gm securities associated dividend cash set aside may become available distribution holders guc trust units future periods numbers new gm securities set “distributable assets” however directly relate net assets liquidation number appearing financial statements prepared accordance us gaap described heading “disputed claims” march 31 2015 approximately 319 billion allowed general unsecured claims respect claims guc trust previously distributed obligated distribute march 31 2015 aggregate 137389190 shares new gm common stock 124899418 new gm series warrants 124899418 new gm series b warrants amounts include 58528 shares new gm common stock 53225 new gm series warrants 53225 new gm series b warrants distributable holders guc trust units respect excess guc trust distributable assets march 31 2015 year ended march 31 2015 new gm securities aggregating 114 million sold fund liquidation administrative costs guc trust new gm securities set aside distribution overview new gm securities set aside distribution addition distributions liquidations new gm securities reflected reductions guc trust net assets financial statements guc trust also time sets aside new gm securities potential future liquidation fund projected liquidation administrative costs well potential income tax liabilities including dividend taxes distribution new gm securities set aside distribution guc trust deducted net assets liquidation guc trust financial statements unless new gm securities liquidated new gm securities set aside distribution segregated guc trust specific purposes available distribution holders guc trust units claimants unless extent guc trust later determines new gm securities longer needed fund specific purposes process related separate process recording current deferred income tax liabilities reserves expected costs liquidation statement net assets liquidation matter financial reporting matter financial reporting income tax liabilities reserves expected costs liquidation must determined accordance generally accepted accounting principles applicable guc trust contrast estimates projected costs potential liabilities guc trust may set aside new gm securities generally made conservative ie inclusive basis include contingencies amounts potential income tax liabilities permitted recognized applicable accounting standards see “critical accounting policiesincome taxes” “critical accounting policies estimatesreserves expected costs liquidation” march 31 2015 distributable assets guc trust included 6830325 shares new gm common stock 6209295 new gm series warrants 6209295 new gm series b warrants aggregate fair value approximately 5505 million well dividend cash 102 million deducting numbers new gm securities dividend cash set aside distribution fund additional projected liquidation administrative costs potential income tax liabilities guc trust described headings “‘set aside’ calculations relating projected liquidation administrative costs including dividend taxes” “‘set aside’ calculations relating potential taxes distribution” ii set aside distributions payable respect allowed general unsecured claims allowed prior fiscal periods holders claims yet supplied information required guc trust order effect distributions entitled new gm securities dividend cash set aside potential distribution respect current disputed general unsecured claims term loan avoidance action claims extent claims resolved favor guc trust amounts new gm securities dividend cash set aside may become available distribution holders guc trust units future periods “set aside” calculations relating projected liquidation administrative costs including dividend taxes guc trust administrator reevaluates quarterly basis numbers new gm securities needed set aside distribution purposes funding projected liquidation administrative costs determination made basis different used calculate reserves financial statement purposes current methodology calculating set asides converts estimates projected liquidation administrative costs number new gm securities set aside distribution dividing estimates trailing twelve month average closing prices new gm securities addition beginning quarter ended march 31 2014 numbers new gm securities set aside distribution reduced dividends new gm common stock received guc trust quarter associated setaside new gm common stock dividing dividends trailing twelve month average closing prices new gm securities subtracting calculated numbers new gm securities numbers setaside new gm securities corresponding amount dividend cash associated setaside new gm securities also set aside distribution quarter ended march 31 2015 result standard quarterly reevaluations described number new gm securities dividend cash set aside distribution fund projected liquidation administrative costs guc trust reduced 97866 shares new gm common stock 88964 new gm series warrants 88964 new gm series b warrants amount dividend cash increased 133851 previously set aside december 31 2014 overall reductions set aside new gm securities primarily related sale new gm common stock february 2015 fund liquidation administrative costs guc trust decrease remaining projected winddown costs reporting transfer costs partially offset increase number new gm securities required set aside result imposition future dividend tax set aside defined described increase set aside dividend cash primarily related receipt quarter ended march 31 2015 dividends new gm common stock held guc trust associated new gm common stock set aside funding projected liquidation administrative costs guc trust partially offset reduction numbers set aside new gm securities quarter ended march 31 2015 accordingly march 31 2015 guc trust set aside distribution aggregate 837633 shares new gm common stock 761461 new gm series warrants 761461 new gm series b warrants dividend cash 13 million aggregate fair value 688 million purposes funding future projected liquidation administrative costs guc trust including dividend taxes 197 million amounts sufficient fully fund projected liquidation administrative costs guc trust estimated guc trust administrator march 31 2015 respect projected dividend taxes quarter ended december 31 2014 prior periods guc trust held dividend cash additional set aside new gm securities made potential future dividends determination based uncertainty associated number variables including limited likelihood payment timing potential future dividends ii amount per share potential future dividends iii numbers shares new gm common stock held guc trust record date potential future dividend quarter ended march 31 2015 guc trust administrator consultation trust professionals determined level uncertainty associated certain aforementioned variables sufficiently decreased necessary increase set aside winddown costs amount sufficient reasonable estimation guc trust administrator cover estimated dividend taxes associated anticipated potential future dividends estimated declared new gm future received guc trust holdings new gm common stock december 2016 “future dividend tax set aside” regard quarter ended march 31 2015 guc trust included set aside winddown costs 240555 shares new gm common stock 218688 warrants class warrants 360833 dividend cash aggregate fair value 197 million dividend taxes relating dividends received guc trust dividends declared new gm payable june 2015 potential future dividends estimated declared new gm received guc trust december 2016 increase set aside winddown costs assumes december 2016 new gm continues pay quarterly dividends current rate 036 per share ii number shares new gm common stock held guc trust march 31 2015 decrease iii guc trust’s current applicable income tax rate change fair value new gm securities dividend cash comprising additional set aside would vary example dividend paid new gm one future quarters rate per share dividend actually paid new gm future periods increases decreases applicable income tax rate changes number shares new gm common stock held guc trust declines remaining life likely market value new gm securities increases decreases respect potential liability dividend taxes potential future dividends remainder estimated life guc trust beyond december 31 2016 estimated set aside purposes however guc trust determined increase set aside winddown costs march 31 2015 due uncertainty associated number variables including limited likelihood payment timing potential future dividends beyond december 31 2016 ii amount per share potential future dividends beyond december 31 2016 iii numbers shares new gm common stock held guc trust record date potential future dividend beyond december 31 2016 assuming remainder estimated life guc trust estimated set aside purposes new gm continues pay quarterly dividends current rate per share number shares new gm common stock held guc trust march 31 2015 decrease based upon guc trust’s current applicable income tax rate market value new gm securities march 31 2015 could 216 million new gm securities dividend cash required set aside fund dividend taxes dollar value new gm securities dividend assets comprising additional set aside would vary example dividend paid new gm one future quarters rate per share dividend actually paid new gm future periods increases decreases applicable income tax rate changes life guc trust longer shorter assumed likely number shares new gm common stock held guc trust declines remaining life estimated set aside purposes market value new gm securities increases decreases “set aside” calculations relating potential taxes distribution addition reevaluating numbers new gm securities set aside distribution fund projected liquidation administrative costs including dividend taxes guc trust administrator also reevaluates quarterly basis numbers new gm securities needed set aside distribution fund potential income tax liabilities realized gains future gains disposition new gm securities referred taxes distribution current methodology calculating set asides estimates potential taxes distribution applying applicable us federal income tax rate estimates potential capital gains arrived comparing highest closing price new gm securities since december 15 2011 tax basis new gm securities december 15 2011 based date transfer record ownership new gm securities guc trust mlc set aside calculation methodology converts estimate potential taxes distribution numbers new gm securities set aside distribution dividing estimate trailing twelve month average closing prices new gm securities addition number new gm securities set aside distribution reduced dividends new gm common stock received guc trust associated setaside new gm common stock dividing dividends trailing twelve month average closing prices new gm securities subtracting calculated numbers new gm securities numbers setaside new gm securities corresponding amount dividend cash associated setaside new gm securities also set aside distribution guc trust’s calculations numbers new gm securities needed set aside distribution fund potential taxes distribution made using different methodology used calculate deferred tax liabilities financial statement purposes estimating potential taxes distribution “set aside” calculation estimates potential capital gains difference tax basis new gm securities december 15 2011 b highest closing price new gm securities since december 15 2011 contrast calculating deferred tax liabilities purposes financial reporting applicable us gaap guc trust calculates estimated capital gains difference tax basis new gm securities financial reporting purposes based date transfer beneficial ownership new gm securities guc trust mlc b closing price new gm securities last trading date recent fiscal quarter ended march 31 2015 result standard quarterly reevaluations described number new gm securities dividend cash set aside distribution fund projected taxes distribution guc trust reduced 18011 shares new gm common stock 16374 new gm series warrants 16374 new gm series b warrants increased 1084834 dividend cash previously set aside december 31 2014 overall reductions set aside new gm securities primarily resulted reduction projected taxes distribution increase dividend cash associated set aside new gm commons stock overall increase set aside dividend cash primarily resulted receipt quarter ended march 31 2015 dividends new gm common stock held guc trust associated new gm common stock set aside funding potential taxes distribution accordingly march 31 2015 guc trust set aside distribution aggregate 3688157 shares new gm common stock 3352870 new gm series warrants 3352870 new gm series b warrants dividend cash 55 million aggregate fair value 3028 million purposes funding potential taxes distribution guc trust amounts sufficient fully fund potential taxes distribution guc trust estimated guc trust administrator march 31 2015 “set aside” calculation potential taxes distribution march 31 2015 set forth 1 uses date transfer record ownership new gm securities guc trust mlc december 15 2011 purposes determining tax basis thereof 2 highest closing prices new gm common stock new gm series warrants new gm series b warrants occurred december 17 2013 3 capital gains net operating losses since march 31 2014 reflect taxable capital gains distributions sales new gm securities using tax basis new gm securities described 1 operating losses exclude dividends received new gm common stock held guc trust potential dividend taxes reflected set aside purposes funding projected liquidation administrative costs remaining capital net operating loss carryovers march 31 2014 subject examination internal revenue service therefore excluded 4 average closing prices new gm common stock new gm series warrants new gm series b warrants period april 1 2014 march 31 2015 5 “ratio set aside” calculated dividing number new gm securities class authorized distribution plan ie 150000000 shares new gm common stock 136363635 series new gm warrants number shares new gm common stock authorized distribution plan 6 represents dividends received new gm common stock held guc trust associated number setaside shares new gm common stock 7 march 31 2015 fair value new gm securities set aside fund taxes distribution higher estimates potential taxes distribution fair value new gm securities based current closing prices higher trailing twelve month average prices used determine numbers new gm securities set aside view guc trust administrator consultation guc trust monitor professionals retained guc trust calculation methodologies described basis new gm securities set aside distribution generally estimate projected liquidation administrative costs potential tax liabilities guc conservative basis accordingly view guc trust administrator guc trust monitor new gm securities currently set aside distribution fund costs liabilities would sufficient upon liquidation satisfy obligations guc trust date form 10k however assurance numbers new gm securities set aside sufficient fund costs liabilities actually incurred particular market price new gm securities falls trailing twelve month average closing prices used convert guc trust’s estimates projected costs potential liabilities numbers guc trust securities set aside described addition assurance result future evaluations additional numbers new gm securities need set aside sold fund additional costs liabilities beyond currently included guc trust’s estimates particular result fluctuations market price new gm securities changes guc trust’s estimates projected costs potential liabilities including possible increase estimates projected dividend taxes described “‘set aside’ calculations relating projected liquidation administrative costs including dividend taxes” see “liquidity capital resources” guc trust units table details changes numbers guc trust units outstanding issuable year ended march 31 2015 1 number guc trust units issuable time represents guc trust units issuable respect allowed general unsecured claims newly allowed fiscal year 2 number guc trust units outstanding time represents guc trust units issued respect allowed general unsecured claims allowed prior periods including guc trust units held guc trust benefit holders allowed general unsecured claims yet supplied information required guc trust order effect initial distribution entitled b governmental entities precluded applicable law receiving distributions guc trust units new gm securities liquidity capital resources guc trust’s sources liquidity principally funds holds payment liquidation administrative costs significantly lesser degree earnings funds invested guc trust holds funds cash equivalents also invests funds marketable securities primarily corporate commercial paper municipal commercial paper demand notes permitted plan guc trust agreement year ended march 31 2015 guc trust’s holdings cash equivalents increased approximately 226 million approximately 149 million approximately 375 million increase due primarily dividends received holdings new gm common stock 161 million b proceeds maturity sale marketable securities excess reinvestments 134 million proceeds sale new gm securities fund expected costs liquidation administrative costs 114 million offset part cash paid liquidation administrative costs 128 million b cash paid distributions 36 million c cash paid residual winddown claims 26 million year ended march 31 2015 funds invested guc trust marketable securities decreased approximately 134 million approximately 444 million approximately 310 million decrease due primarily reduced reinvestments cash marketable securities order fund cash needs year guc trust earned approximately 70000 interest dividend income investments year march 31 2015 guc trust held approximately 684 million cash equivalents marketable securities amount approximately 369 million comprising approximately 282 million remaining residual winddown assets approximately 83 million remaining administrative fund approximately 04 million remaining funds designated indenture trustee fiscal paying agent costs required guc trust agreement returned upon windingup guc trust dip lenders extent funds utilized satisfy designated winddown costs residual winddown claims residual winddown costs avoidance action defense costs indenture trusteefiscal paying agent costs cash equivalents marketable securities 83 million remaining administrative fund separately designated satisfaction certain costs liabilities guc trust reporting costs amounts time available distribution holders guc trust units addition amount cash equivalents held guc trust march 31 2015 approximately 170 million relates dividend cash described dividend cash distributed holders subsequently resolved allowed claims guc trust units respect new gm common stock receive unless dividends respect shares new gm common stock sold guc trust accordance guc trust agreement fund guc trust’s liquidation administrative costs income tax liabilities shortfalls residual winddown assets balance cash equivalents marketable securities approximately 145 million available payment certain reporting administrative costs guc trust would available future distribution holders guc trust units otherwise used satisfy guc trust obligations see “the guc trust assets” item 1 “business” addition funds held payment costs liquidation administration dividend cash guc trust also holds new gm securities portion guc trust administrator permitted set aside distribution sell approval bankruptcy court trust monitor applicable order fund additional costs income tax liabilities including dividend taxes distribution become due march 31 2015 aggregate fair value new gm securities held guc trust excluding securities set aside liquidating distributions payable date approximately 9105 million march 31 2015 guc trust administrator set aside distribution new gm securities aggregate fair market value approximately 675 million related dividend cash 13 million fund projected liquidation administrative costs including dividend taxes new gm securities aggregate fair market value approximately 2972 million related dividend cash 55 million fund potential taxes distribution see “net assets liquidationdistributable assets” assurance additional numbers new gm securities required set aside distribution sold fund additional costs income tax liabilities beyond guc trust administrator already set aside sales new gm securities occur fund obligations result lesser amount new gm securities available distribution holders guc trust units addition described headings “the guc trust assets” item 1 “business” portion guc trust’s assets currently segregated pursuant guc trust agreement satisfaction residual winddown claims certain specified costs assets insufficient satisfy residual winddown claims fund specified costs reason guc trust administrator similarly required set aside distribution sell additional new gm securities order fund shortfall item 7a item 7 managements discussion analysis financial condition results operations following managements discussion analysis financial condition results operations mda read conjunction hughes electronics corporation hughes consolidated financial statements mda period ended december 31 1996 included exhibit 99 annual report form 10k gmac annual report form 10k period ended december 31 1996 filed separately securities exchange commission gmnaodelphi financial highlights 1 november 1995 provisions issue 951 emerging issues task force financial accounting standards board eitf revenue recognition sales guaranteed minimum resale value retroactively adopted january 1 1995 resulted unfavorable impact 52 million 2 effective january 1 1994 statement financial accounting standards sfas 112 employers accounting postemployment benefits adopted resulted unfavorable impact 705 million 3 net profit margin represents net income percentage total net sales revenues vehicle unit deliveries cars trucks gmnao 1 industry deliveries include foreign brands 42 million units 271 1996 41 million units 268 1995 41 million units 268 1994 ii48 gmnaodelphi financial review 1996 net income gmnaodelphi represents combined results general motors north american operations gmnao delphi automotive systems delphi totaled 12 billion 12 net sales revenues compared 24 billion 677 million 1995 1994 respectively decrease 1996 net income almost fully accounted lower wholesale sales caused three major work stoppages factors impacting 1996 results record number new vehicle launches increased advertising consumer influence expenses related new vehicle launches partially offset savings associated continued implementation worldwide purchasing lean manufacturing strategies increase 1995 net income primarily due revenue growth global sourcing savings reduced manufacturing costs gmnaodelphis 1996 net income included certain special items net unfavorable impact approximately 900 million aftertax 1996 special items included unfavorable impact three work stoppages us canada approximately 11 billion aftertax sale four delphi plants gmnaos oshawa diemanagement business 157 million aftertax retiree lump sum benefit payments 163 million aftertax effect unfavorable special items partially offset favorable net plant closings reserve adjustments 450 million aftertax gain sale gms preferred stock interest avis inc 65 million aftertax additional information regarding gmnao plant closings reserve contained note 17 gm consolidated financial statements net sales revenues 1996 101 billion represented decrease 23 billion compared 1995 decrease net sales revenues largely due decrease number wholesale units sold caused work stoppages partially offset increase approximately 6 delphis non gmnao vehicle component sales net sales revenues 1995 1033 billion represented increase 51 billion compared 1994 increase 1995 net sales revenues primarily resulted favorable pricing increase 23000 wholesale units sold increase approximately 9 delphis non gmnao vehicle component sales favorable items partially offset yearoveryear shift vehicle sales largeluxury segments smallcompact segments 1996 gmnaos market share increase mexico resulted favorable customer reaction new products however united states canada market share decreased primarily due work stoppages new vehicle launches restricted availability certain models pretax income 1996 decreased 21 billion 12 billion compared 33 billion 16 billion 1995 1994 respectively decrease 1996 pretax income primarily due impact special items described previously record number new vehicle launches partially offset favorable results continued efforts reduce costs improve efficiency increase 1995 pretax income compared 1994 reflected material manufacturing efficiencies lower interest expense partially offset increased depreciation amortization expenses associated new equipment special tools effective income tax rate 1996 36 compared 288 169 1995 1994 respectively lower 1996 tax rate resulted research experimentation credits united states favorable resolution items related gms 1995 tax return favorable tax position mexico 1995 tax rate reflected us net operating loss tax purposes carried back prior years subject higher income tax rates 1994 tax rate reflected favorable tax positions canada mexico ii49 gmio financial highlights 1 net profit margin represents total net income percentage net sales revenues vehicle unit deliveries cars trucks gmio ii50 gmio financial review general motors international operations gmio 1996 net income 15 billion 43 net sales revenues compared 16 billion 1995 1994 decrease 1996 net income primarily due higher income tax rate net sales revenues 1996 reached 353 billion 98 1995 net sales revenues 321 billion 143 higher 1994 increase net sales revenues 1996 1995 reflected increased wholesale sales volumes europe latin america asian pacific region gmios vehicle deliveries calendar year 1996 totaled 31 million units resulted 9 market share compared 91 market share 1995 vehicle unit deliveries 1996 hit alltime record marking first time gmio annual deliveries exceeded three million units pretax income 1996 increased 18 billion 16 billion 1995 reflected favorable impact increased net sales revenues favorable yearoveryear currency exchange partially offset spending growth programs within asia latin america central europe new product development spending 1995 pretax income declined 631 million compared 1994 reduction largely result adverse foreign exchange rate movements material labor cost pressures latin america startup launch costs associated introduction new opelvauxhall vectra europe 1996 earnings nonconsolidated affiliates 153 million 1995 primarily due higher product development marketing costs saab dissolution australian joint venture holden toyota unusually high 1995 equity income nonrecurring asset sales isuzu effective income tax rate gmio 1996 172 compared 101 366 1995 1994 respectively 1996 tax rate primarily resulted tax benefits realized certain countries partially offset decreased withholding taxes accrued unremitted earnings 1995 tax rate favorably impacted nonrecurring tax benefits realized certain countries 1994 tax rate impacted higher withholding taxes accrued unremitted earnings 1996 gmes net income decreased 18 million 778 million compared 796 million 695 million 1995 1994 respectively decrease 1996 net income primarily due competitive pricing environment reflected increased new product development costs net income 1996 also adversely affected startup vectra restricted availability early year improvement 1995 net income resulted volume gains material manufacturing cost reductions favorable income tax rate partially offset unfavorable exchange rate movements costs associated new vectra model introduction second half year remainder gmios operations reported 1996 net income 754 million represented decrease 94 million compared 1995 decline 1996 resulted higher tax rate lower equity earnings nonconsolidated affiliates increased spending growth programs asia latin america decline net income 1995 compared 1994 reflected impact government initiated popular car program brazil negative impact sales mix adverse exchange rate movements material labor cost pressures latin america continued growthrelated expenditures asia pacific region factors partially offset favorable income tax rate improved volumes income gains nonconsolidated affiliates finally 1996 gmio reinforced longterm commitment leadership international automotive business capital expenditures approximately 27 billion increase 565 million approximately 13 billion compared 1995 1994 respectively ii51 gmac financial highlights 1 effective january 1 1994 gmac adopted sfas 112 resulted unfavorable impact 7 million 2 includes gmac mortgage group gmacmg 3 return average equity represents net income cumulative effect accounting change percentage average stockholders equity outstanding month period ii52 gmac financial review gmacs 1996 consolidated net income increased 203 1995 compared 121 improvement recognized 1995 business sectors contributed 1996 earnings gain net income financing operations totaled 1 billion 207 1995 increase 1996 net income financing operations primarily resulted continued improvements net financing revenue higher average earning asset levels north america principally retail finance receivables operating lease portfolios earnings growth gmacmg 82 increase 1995 net income financing operations 1994 resulted primarily improved net financing revenue higher average earning asset levels insurance operations contributed 192 million 1996 net income compared 163 million 118 million 1995 1994 respectively 1996 1995 yearoveryear increases reflected improvements underwriting results higher realized capital gains 1996 gmac financed 284 new gm vehicle retail deliveries united states 264 262 1995 1994 respectively 1996 improvement primarily resulted higher volumes generated first nine months year special rate financing leasing incentive programs sponsored gm improvement along modest 1995 increase market share achieved amid continued competitive pressures automotive financing marketplace gmacs financing revenue totaled 126 billion 1996 compared 117 billion 94 billion 1995 1994 respectively increase 1996 total financing revenue resulted higher revenues portfolios operating leases retail finance receivables partially offset decline wholesale revenue gain operating lease revenue principally driven increase average lease assets north america resulted continued growth portfolio higher 1996 retail financing revenues primarily due 39 billion increase average us outstanding balances resulted growth owned portfolio mid1995 mid1996 reduced wholesale revenue primarily due combination lower average outstanding balances caused establishing additional trusts revolving sales floor plan receivables august 1995 april 1996 lower shortterm interest rate indices upon inventory financing rates based 238 growth 1995 total financing revenue represented increased activities financing business lines predominantly operating leases wholesale financing gmacs worldwide cost borrowing decreased 657 1996 compared 702 669 1995 1994 respectively cost borrowings united states 651 1996 compared 686 648 1995 1994 respectively improvements 1996 predominantly attributable greater proportion floating rate borrowings united states period general level shortterm interest rates declined eg 1996 us prime lending rate averaged 56 basis points 1995 lower 1996 borrowing cost factors almost entirely offset effects higher average borrowings resulted 2 million increase interest discount expense 1996 compared 1995 amount 1995 interest discount expense 705 million 1994 amount due increased borrowing levels higher interest rates net financing revenue combined income insurance premiums increased 1996 787 million 64 billion compared 56 billion 47 billion 1995 1994 respectively 1996 increase primarily due improvement net interest margins addition increase net interest margins 1995 increase also result rise income primarily attributable significantly higher fee investment income gmacmg activities expenses increased 493 million 599 million 1996 1995 primarily due increases provision financing losses 220 million 272 million respectively consistent recent trends consumer finance industry gmacs delinquencies losses increased since 1994 particularly united states used vehicle financing portfolio additions loss reserve well tightened credit standards intensified collection efforts expected mitigate gmacs exposure adverse trends consumer payment experience additionally gmac incurred higher costs salaries benefits operating charges incidental expanding financing business activities contributed increased expenses 1996 1995 gmacs effective income tax rate 1996 403 compared 422 1995 356 1994 favorable change 1996 attributable lower effective income tax rates international financing operations 1995 increase 1994 reflected higher us foreign taxes assessed foreign source income ii53 hughes financial highlights 1 effective january 1 1994 sfas 112 adopted resulted unfavorable impact 30 million 008 per share class h common stock 2 excludes amortization adjustment gm purchase accounting adjustments 122 million 160 million 124 million 1996 1995 1994 respectively related gms acquisition hughes aircraft company 3 includes expenditures related telecommunications equipment amounting 188 million 275 million 256 million 1996 1995 1994 respectively segment highlights 1 operating profit represents net sales less total costs expenses interest expense amortization purchase accounting adjustments related gms acquisition hughes aircraft company 2 operating profit margin represents operating profit percentage net sales ii54 hughes financial review hughes reported net income 1 billion 1996 compared 948 million 925 million 1995 1994 respectively excluding amortization adjustment purchase accounting adjustments relating gms acquisition hughes aircraft company hughes earnings used computation available separate consolidated net income 115 billion 1996 compared 111 billion 1995 105 billion 1994 contributing 1996 increase net income higher operating profit telecommunications space segment reduced losses hughesavicom international inc lower effective tax rate 72 million aftertax gain recognized first quarter sale 25 equity interest directvr att partially offsetting increases impact automotive electronics segment operating profit lower gm production volumes attributable primarily three major work stoppages increase 1995 net income due primarily increased revenues ongoing cost reduction efforts partially offset planned increase expenses associated operation expansion directv total revenues increased 159 billion 1996 compared 148 billion 1995 141 billion 1994 revenue growth propelled telecommunications space segment revenues 1996 increased 41 billion compared 31 billion 26 billion 1995 1994 respectively increases 1996 1995 revenues reflected directv subscriber growth combined increased sales commercial satellites cellular communications equipment increased video distribution revenues galaxyr satellite transponders automotive electronics segment revenues 1996 54 billion compared 56 billion 52 billion 1995 1994 respectively 1996 decrease reflected impact work stoppages various gm production locations year price reductions competitive pricing connection gms global sourcing initiative increase automotive electronics segment revenues 1995 resulted increase hughessupplied electronic content gm vehicles produced north america continued growth sales international non gmnao customers aerospace defense systems segment revenues 1996 increased 63 billion compared 59 billion 6 billion 1995 1994 respectively 1996 increase revenues due primarily acquisition hughes defense communications formerly magnavox electronic systems company december 1995 operating profit excluding amortization purchase accounting adjustments related gms acquisition hughes aircraft company 16 billion 1996 compared 17 billion 16 billion 1995 1994 respectively operating profit margin basis 101 113 116 1996 1995 1994 respectively decline 1996 operating profit operating profit margin due mainly unfavorable impact lower gm production volumes automotive electronics segment result aforementioned work stoppages 1995 decrease operating profit margin primarily result increased operating expenses associated continued expansion directv partially offset higher margins automotive electronics aerospace defense systems segments resulting costreduction programs hughes effective income tax rate 371 1996 compared 405 375 1995 1994 respectively decrease effective income tax rate 1996 due primarily favorable resolution certain tax contingencies effective income tax rate 1994 favorably impacted recognition capital loss carryforward benefits january 16 1997 gm hughes announced series planned transactions designed address strategic challenges unlock stockholder value three hughes business segments see hughes transactions section pages ii58 ii59 additional information regarding planned transactions ii55 facilitate analysis following sections present financial statements corporations manufacturing wholesale marketing defense electronics operations financing insurance operations primarily gmac reflected equity basis format used years prior corporations adoption sfas 94 consolidation majorityowned subsidiaries consolidated statements income financing insurance operations equity basis 1 includes sales nonconsolidated affiliates 954 million 855 million 856 million 1996 1995 1994 respectively 2 effective january 1 1995 gm adopted eitf issue 951 effective january 1 1994 gm adopted sfas 112 included 1994 unfavorable cumulative effect gmac earnings 7 million adopting sfas 112 cumulative effect included earnings nonconsolidated affiliates 3 net profit margin represents income continuing operations cumulative effect accounting changes percentage net sales revenues results operations financing insurance operations equity basis 1996 gms income continuing operations cumulative effect accounting changes totaled 5 billion 607 per share 1 23 par value common stock compared 6 billion 714 per share 1 23 par value common stock 49 billion 574 per share 1 23 par value common stock 1995 1994 respectively gms 1996 income continuing operations cumulative effect accounting changes included certain special items net unfavorable impact approximately 900 million aftertax see gmnaodelphi financial review gm completed splitoff electronic data systems corporation eds june 7 1996 accordingly financial results related eds splitoff date reported discontinued ii56 results operations financing insurance operations equity basis continued operations gms 1996 net income including income discontinued operations june 7 1996 splitoff totaled 5 billion 606 per share 1 23 par value common stock compared 69 billion 721 per share 1 23 par value common stock 49 billion 515 per share 1 23 par value common stock 1995 1994 respectively highlights financial performance gms major business sectors follows millions reference made gmnaodelphi gmio gmac hughes financial reviews presented pages ii48 ii55 incorporated reference supplement information presented herein 1996 net sales revenues increased 16 billion 1454 billion compared 1438 billion 1349 billion 1995 1994 respectively 1996 increase resulted increased net sales gmio hughes partially offset lower wholesale sales north america increase 1995 compared 1994 primarily due increased wholesale vehicle sales lower sales incentives improved mix retail fleet sales north america increased wholesale vehicle sales outside north america continued expansion hughes gross margin 148 1996 compared 156 157 1995 1994 respectively 1996 decrease gross margin primarily resulted lower wholesale sales increased safety emissions costs spending new product launches new product development slight decrease 1995 gross margin primarily resulted labor cost pressures latin america foreign exchange rate movements europe brazil venezuela vehicle launch costs europe increased corporatewide engineering expenses support new product development higher costs 1996 1995 partially offset savings gmnao delphi gmio connection gms strategy utilizing common parts processes implementing lean operations selling general administrative expenses increased 1996 1995 primarily due efforts grow business gm business sectors included increased advertising consumer influence spending connection new vehicle launch support marketing programs north america 1996 depreciation amortization expenses increased 1996 1995 connection expenditures production quality improvements worldwide favorable pretax plant closings reserve adjustments 727 million recorded 1996 additional information regarding plant closings reserve adjustments contained note 17 gm consolidated financial statements income less income deductions 21 billion 1996 compared 12 billion 1995 1994 amount reported 1996 included 120 million pretax gain associated sale 25 equity interest directv 105 million pretax gain sale gms preferred stock interest avis inc 1995 amount included 148 million pretax loss associated sale net assets national car rental system ncrs interest expense totaled 859 million 1996 compared 344 million 13 billion 1995 1994 respectively lower 1995 interest expense resulted reversal interest related income tax issues resolved 1995 reevaluation remaining reserve lower 1995 accrued interest outstanding tax issues ii57 results operations financing insurance operations equity basis concluded 1996 effective income tax rate 198 compared 249 315 1995 1994 respectively lower 1996 tax rate resulted favorable resolution items related gms 1995 tax return overall foreign tax rates lower us statutory rate research experimentation credits 1995 effective income tax rate resulted resolution numerous prior year tax issues worldwide efficient utilization net operating loss carryback tax benefits associated mix foreign earnings foreign income taxes tax benefits relating sale net assets ncrs eds splitoff june 7 1996 gm splitoff eds gm class e stockholders taxfree basis us federal income tax purposes terms splitoff share gms former class e common stock exchanged one share eds common stock addition gm eds entered new 10year agreement eds continue gms principal provider information technology services eds made special intercompany payment 500 million gm gms board directors determined ownership eds necessary gm execute information technology strategy ensure security computer data information furthermore gms board directors determined certain actual potential conflicts business eds businesses gm splitoff completed address conflicts manner beneficial standpoint stockholders gm allow boards managements gm eds increase focus respective business operations majority holders three classes gm common stock approved splitoff additional information regarding splitoff eds contained note 2 gm consolidated financial statements hughes transactions january 16 1997 gm hughes announced series planned transactions designed address strategic challenges unlock stockholder value three hughes business segments transactions would include taxfree spinoff hughes defense business holders gms 1 23 par value class h common stocks followed immediately taxfree merger business raytheon company raytheon spinoff proposed manner would result recapitalization class h common stock 1 23 par value common stock 120 exchange ratio currently provided certain circumstances general motors restated certificate incorporation amended time delco electronics automotive electronics subsidiary hughes would transferred hughes gms delphi automotive systems unit finally gms class h common stock would recapitalized tracking stock linked solely telecommunications space business hughes spinoff taxfree merger hughes defense business raytheon would outstanding two classes raytheonhughes defense common stock class common stock approximately 103 million shares would distributed gms 1 23 class h stockholders spinoff class b common stock would exchanged raytheon common stock oneforone share basis merger common stock hughes defense business would distributed gm common stockholders would represent approximately 30 stock combined company distribution stock hughes defense business holders gm class h 1 23 par value common stock would ratio would determined gms board directors fair classes stockholders would reflect 1 pro rata spinoff hughes defense business holders gm class h 1 23 par value common stock 2 partial reallocation hughes defense business holders gm 1 23 par value common stock holders class h common stock exchange derivative interest earnings delco currently held class h stockholders 3 effects factors relating planned transactions distribution ratio set gms board directors time closer gms distribution solicitation statementprospectus pursuant gm stockholders asked approve transactions spinoff hughes defense business merger raytheon would indicated total value 95 billion gm common stockholders based stock prices announcement date value would consist combination approximately 47 billion total debt obligations hughes ii58 hughes transactions concluded defense business time merger 48 billion indicated value hughes defense stock distributed common stockholders giving affect merger based market price raytheon common stock announcement date 4700 merger terms provide total debt hughes defense business adjusted reflect variations average market price raytheon stock subject specified limits two components value total 95 billion long market price range 4442 5429 per share substantially debt would incurred immediately prior spinoff proceeds used principally fund telecommunications space business hughes integration delco certain parts delphi distinct business unit give gm flexibility consider form future partial public ownership resulting entity gm evaluating strategic alternatives regard gm evaluating accounting transactions whether pro rata distribution hughes defense business would recorded historical cost gain recognized fair value related gain regardless whether planned transactions recorded historical cost fair value anticipated would reduction gms stockholders equity 06 billion 16 billion depending several variables largest level debt incurred hughes defense business prior spinoff consummation transactions described previously subject various contingencies including regulatory clearances approval gm common stockholders additional information regarding planned transactions included note 23 gm consolidated financial statements planned transactions impact gms 1996 financial results planned transactions described previously intended result achievement several strategic objectives merger hughes defense business raytheon would create stronger defense electronics company would able effectively compete new business industry significant consolidation occurring time integration delco electronics delphi automotive systems would combine advanced electronics capability components systems expertise would expected result reduced costs hughes electronics would continue hold operate telecommunications space business would allow hughes management focus business segment capital infusion would allow take advantage growth opportunities competitive industry strategy business continue expand offerings primarily supplier hardware becoming provider hardware video voice data services worldwide strategy requires significant current future investment order maintain enhance segments competitive position respect existing products take advantage growth opportunities presented well formation strategic alliances compete competitive global marketplace separately september 1996 hughes panamsat corporation entered agreement merge respective satellite services operations new publiclyheld company hughes would contribute galaxy satellite services business exchange 715 interest new company current panamsat stockholders would receive 285 interest new company 15 billion cash accounting purposes transaction would treated partial sale galaxy business hughes would result onetime nonrecurring gain amount gain depends several variables expected 400 600 million tax transaction contingent upon receiving certain regulatory approvals expected close second quarter 1997 statements made herein concerning transactions planned hughes general motors strategic alternatives possibility future action relation thereto constitute forwardlooking information transactions described statements subject numerous conditions uncertainties accordingly assurance transactions consummated accomplish strategic objectives hughes general motors ii59 consolidated balance sheets financing insurance operations equity basis liquidity capital resources financing insurance operations equity basis total cash marketable securities december 31 1996 17 billion 102 billion december 31 1995 gm surpassed goal accumulate 13 billion cash marketable securities order continue fund product development programs throughout next downturn business cycle gm believes sufficient resources meet anticipated future cash flow requirements addition cash flows operations gm subsidiaries maintain substantial bank lines credit various banks totaled 537 billion december 31 1996 324 billion represented shortterm credit facilities 213 billion represented longterm credit facilities december 31 1995 bank lines credit totaled 509 billion 301 billion represented shortterm credit facilities 208 billion represented longterm credit facilities unused shortterm longterm portions credit lines ii60 liquidity capital resources financing insurance operations equity basis concluded totaled 219 billion 192 billion december 31 1996 compared 206 billion 188 billion december 31 1995 longterm debt 52 billion december 31 1996 increase 11 billion prior year ratio longterm debt total longterm debt stockholders equity 181 15 december 31 1996 1995 respectively ratio longterm debt shortterm loans payable total debt stockholders equity 215 213 december 31 1996 1995 respectively net liquidity calculated cash marketable securities less total loans payable longterm debt capitalized leases record 104 billion december 31 1996 increase 66 billion prior year book value per share 1 23 par value common stock increased 2795 2437 december 31 1996 1995 respectively book value per share class h common stock increased 1397 1220 december 31 1996 1995 respectively book value per share determined based liquidation rights various classes common stock liquidity capital resources gmac december 31 1996 gmac owned assets serviced automotive receivables others totaling 108 billion compared 1066 billion year end 1995 earning assets totaled 953 billion 92 billion december 31 1996 1995 respectively increase earning assets primarily attributable continued growth operating lease portfolio well higher outstanding balances real estate mortgages cash equivalents totaled 742 million 14 billion december 31 1996 1995 respectively lower holdings reflect reduced need accumulate cash gmacs access capital markets continued improve consolidated finance receivables net unearned income totaled 593 billion december 31 1996 decrease 19 billion december 31 1995 primarily resulted lower wholesale receivables outstanding gmacs liquidity well ability profit ongoing acquisition activity large part dependent access capital costs associated raising funds different segments capital markets regard gmac regularly accesses short medium longterm debt markets principally commercial paper mediumterm notes underwritten issuances gmacs borrowings outstanding december 31 1996 totaled 787 billion compared 749 billion december 31 1995 gmacs ratio debt total stockholders equity december 31 1996 951 911 december 31 1995 higher yeartoyear debt levels principally used fund increased asset levels reduce accounts payable gmac continued use asset securitization program alternative funding source sold finance receivables continues service fee servicing portfolio sold finance receivables totaled 97 billion 113 billion december 31 1996 1995 respectively gmac subsidiaries maintain substantial bank lines credit totaled 407 billion 40 billion december 31 1996 1995 respectively unused portion credit lines totaled 306 billion december 31 1996 200 million higher december 31 1995 ii61 consolidated statements cash flows financing insurance operations equity basis ii62 cash flows financing insurance operations equity basis net cash provided operating activities 169 billion 111 billion 77 billion 1996 1995 1994 respectively increase net cash provided operating activities 1996 resulted decrease accounts receivable cash contributions worldwide pension funds higher depreciation amortization expenses 1 billion income tax refund related carryback 1995 net operating loss partially offset increase deferred tax assets increase 1995 primarily attributable higher net income depreciation amortization expenses sale 600 million accounts receivable decrease cash contributions worldwide pension funds depreciation amortization expenses increased result higher property expenditures last three years cash pension contributions 1996 1995 decreased due improved funding gms us hourly pension plan included effects 1995 noncash contribution gms former class e common stock eds common stock valued book purposes approximately 63 billion gm made substantial progress toward realigning plant capacity north america improved operating cash flows reflect actions total future discounted cash expenditures plant closings estimated 1279 million additional information plant closings reserve excluding environmental summarized note 17 gm consolidated financial statements net cash used investing activities increased 115 billion 1996 compared 94 billion 65 billion 1995 1994 respectively increase 1996 primarily due 24 billion net change investments marketable securities combined 953 million increase property expenditures partially offset 500 million special intercompany payment eds 29 billion increase 1995 1994 resulted primarily increased property expenditures worldwide property expenditures 1996 60 us 65 1995 66 1994 10 canada mexico 8 1995 10 1994 30 overseas 27 1995 24 1994 devoted primarily improve efficiency quality increase truck assembly capacity increase gms global presence capital expenditures 1997 estimated approximately 99 billion outstanding commitments 7 billion december 31 1996 net cash used financing activities decreased 11 billion compared 21 billion 14 billion 1995 1994 respectively higher level cash used financing activities 1995 due 13 billion repurchase preference stocks increase net cash used financing 1995 compared 1994 resulted repurchase preference stocks well reduction 564 million proceeds issuing common stocks 11 billion increase total loans payable cash dividends paid stockholders increased 1996 1995 gms board directors approved dividend increases first quarter year gms policy distribute dividends 1 23 par value common stock based outlook indicated capital needs business january 1997 gms board directors increased quarterly dividend 1 23 par value common stock 010 per share 050 per share level gm believes sustainable throughout automotive business cycle respect class h common stock gms current policy pay quarterly cash dividends approximately equal 35 available separate consolidated net income hughes prior year january 1997 gms board directors increased quarterly dividend class h common stock 025 per share 024 per share anticipated previously described hughes transactions consummated general motors board directors adopt dividend policy relating new class h common stock board deems appropriate light capital needs growth opportunities hughes telecommunications space business generally commensurate companies telecommunications space business similar capital needs growth opportunities also january 1997 gms board directors approved 25 billion repurchase program 1 23 par value common stock expected completed principally openmarket purchases within 12 months announcement date would represent repurchase slightly 5 shares 1 23 par value common stock outstanding date announcement based new york stock exchanges closing price last business day prior announcement ii63 cash flows gmac 1996 cash provided operating financing activities totaled 42 billion 26 billion respectively cash used investing activities primarily expanding operating lease portfolio totaled 75 billion 1995 cash provided operating financing activities totaled 59 billion 67 billion respectively cash used investing activities principally expanding finance receivables operating lease portfolios totaled 125 billion 1994 cash provided operating financing activities totaled 44 billion 25 billion respectively cash used investing activities primarily acquisition operating lease assets totaled 96 billion 1994 decrease cash equivalents 27 billion resulted planned reduction liquidity reserve requirements due gmacs improved access capital markets health care expense postretirement benefits described note 14 gm consolidated financial statements sfas 106 requires cost postretirement medical dental vision life insurance retirees eligible dependents recognized consolidated financial statements period employees provide services gm costs medical dental vision life insurance claims provided employees active service expensed incurred payasyougo covered sfas 106 components sfas 106 expense us health care cost cash expenditures gms us operations set forth excluding cash expenditures hughes nonautomotive employees including gmac sfas 106 effect cash flow since gm continues practice paying postretirement benefits pensions incurred nonetheless gm committed reducing burden continuing health care cost increases payasyougo amounts 1995 17 billion retirees 19 billion active employees 36 billion total gm disclosed consolidated financial statements certain amounts associated estimated future postretirement benefits pensions classified amounts accumulated postretirement benefit obligations liabilities obligations notwithstanding recording amounts use terms gm admit otherwise acknowledge amounts existing postretirement benefit plans gm pensions represent legally enforceable liabilities gm ii64 gm card gm sponsors credit card program entitled gm card program introduced us september 1992 subsequently canada australia brazil united kingdom cardholders use card generates entitlements rebates used solely connection cardholders purchase lease new gm vehicle sponsor gm card program gm provide consumer credit program used marketing tool increase product sales independent banks issue gm card responsible evaluating extending funding credit cardholders fully responsible credit card losses recourse gm us gm card rebates accumulate rate equal 5 spending goods services charged gm card maximum rebate amount 500 per year beginning annual fee date 1997 maximum rebate gold card members 500 per year additional rebates may earned gm card used make purchases nonbank marketing partners rebates expire 7 years may applied sales allowances market time vehicle purchase lease gm solely responsible cardholders rebates provisions gm card rebates recorded reductions revenue time vehicle sale gm right prospectively modify plan rebates redeemed worldwide 1996 1995 1994 443 million 299 million 150 million respectively cardholder rebates available worldwide future redemption cardholder purchases leases new gm vehicle amounted 32 billion 25 billion net deferred program income december 31 1996 1995 respectively gm anticipates profits incremental sales resulting gm card program along deferred program income offset future rebate costs associated gm card derivative instruments gm international corporation operations 50 countries naturally exposes variety financial risks financial risks principally effects movements foreign exchange rates transactions denominated us dollars lesser extent changes interest rates net cost borrowings addition gm hedging use metals physical financial commodities markets impact financial exposures gms annual income relatively small compared impact changes vehicle sales volumes operating margins gains losses derivatives used hedge commodities price exposures deferred recorded basis adjustment underlying inventory purchase time inventory sold gain loss derivative recognized income adjustment cost sales additional information regarding gms accounting policies use derivative financial instruments contained notes 1 11 12 13 gm consolidated financial statements security ratings debt ratings various rating agencies reflect agencys opinion ability issuers repay debt obligations punctually lower ratings generally result higher borrowing costs security rating ii65 security ratings concluded recommendation buy sell hold securities may subject revision withdrawal time assigning rating organization rating evaluated independently rating gms 1996 credit ratings remained unchanged 1995 us rating agencies following gms january 1997 announcement respect hughes business segments see note 23 gm consolidated financial statements rating agencies reaffirmed current rating outlook gm securities moodys investors service moodys however put hughes ratings review possible downgrade september 1996 moodys confirmed longterm credit ratings gm hughes certain related affiliates a3 seventh highest within 10 investment grade ratings available moodys longterm debt moodys defines a3 bonds uppermedium grade quality action credit rating commercial paper hughes confirmed p2 moodys employs p1 rating indicate issuers ability repay superior relative issuers p2 rating indicates issuer strong ability repayment relative issuers rating gm preference stocks remains baa1 signifies mediumgrade quality october 1996 standard poors ratings services division mcgrawhill companies inc sp revised outlook hughes stable developing result uncertainty respect gms investment strategy related hughes sp indicated developing outlook reflects possibility significant change relationship gm hughes occur credit quality hughes could either favorably adversely affected depending upon nature transaction pursued november 1996 january 1997 sp affirmed longterm debt ratings gm gmac hughes sp credit rating seventh highest within 10 investment grade ratings available sp longterm debt based strong capability pay interest repay principal although somewhat susceptible adverse effects changes circumstances economic conditions debt higher rated categories additionally sp affirmed rating gms preference stock bbb eighth highest within 10 sp investment grade ratings affirmed a2 rating gmacs hughes commercial paper ratings outlook gm gmac remain stable outlook hughes remains developing addition substantially short medium longterm debt issued gmac senior debt gm rated fitch investors service inc fitch duff phelps credit rating co dp ratings reaffirmed fitch dp september 1996 january 1997 senior debt gm gmac remains rated agencies seventh highest within 10 investment grade ratings available fitchs rating assigned bonds considered high credit quality obligors ability pay interest repay principal considered strong dps rating indicates adequate likelihood timely payment principal interest gmacs commercial paper remains rated fitch second highest four investment grade ratings available assigned shortterm issues possess strong credit quality based primarily existence liquidity necessary meet obligation timely manner gmacs commercial paper remains rated d1 dp second highest five investment grade ratings available signifies high certainty timely payment based excellent liquidity factors good fundamental protection factors gms preference stocks remain rated bbb fitch dp eighth highest 10 investment grade ratings available preference issues assigned rating fitch considered reasonably safe lack protection aaa categories rating signifies current results watched possible signs deterioration preference stocks assigned rating dp average protection factors still considered sufficient prudent investment ii66 deferred income taxes december 31 1996 gms consolidated balance sheet included net deferred tax asset approximately 175 billion related net future deductible temporary differences see note 7 gm consolidated financial statements united states approximately 164 billion related obligation postretirement benefits pensions realization net deferred tax asset dependent upon profitable operations united states future reversals existing taxable temporary differences although realization assured gm believes likely benefits realized reduction future taxable income management carefully considered various factors assessing probability realizing deferred tax benefits including operating results gmac hughes generated us pretax income approximately 31 billion 27 billion 23 billion 1996 1995 1994 respectively operating results gmnaodelphi recent three year period overall financial forecasts book taxable income 19972001 period improvements expected continuing balance plant capacity pursuant plant closing plan reducing material costs global sourcing increasing efficiency lean manufacturing ability utilize tax planning capitalization research experimentation costs tax purposes gm expect generate near future significant us federal tax net operating loss carryforwards extended period time tax benefits utilized postretirement benefits become tax deductions periods 50 years fact gm never lost deferred federal tax benefits due expiration us net operating loss carryforward dividends received foreign operations us federal income tax purposes totaled approximately 12 billion 182 million 11 billion 1996 1995 1994 respectively 1995 reduced level dividends resulted tax planning strategies related us net operating loss carryback position tax purposes pensions december 31 1996 gms total worldwide net unfunded pension position decreased 48 billion 12 billion us 36 billion nonus 64 billion year ago 29 billion us 35 billion nonus major factors contributing improvement us plans 50 basis points increase discount rate used measure pension obligation end 1996 compared 1995 asset returns excess assumed 10 asset earnings rate contributions year partially offset benefit increases result us labor negotiations economic basis gm achieved fullyfunded status us hourly salaried pension plans december 31 1995 continues maintain fullyfunded status basis economic basis measuring us hourly salaried pension liability differs sfas 87 basis required generally accepted accounting principles gm believes better measure gms ongoing economic exposure pension obligations uses measure determine funding economic basis discounts pension liabilities longterm asset earnings rate assumption currently 10 rather yearend market rate required sfas 87 currently 75 periods low interest rates current market environment sfas 87 liability generally exceed liability calculated economic basis whereas periods high interest rates economic basis liability generally exceed sfas 87 liability 1996 gm contributed 800 million cash us hourly pension plans march 1995 terms agreement gm pension benefit guarantee corporation gm contributed gm hourlyrate employees pension plan 173 million shares class e common stock valued 63 billion date subsequent splitoff eds class e common stock held plan ii67 pensions concluded exchanged eds common stock see notes 2 16 gm consolidated financial statements additional information eds splitoff pensions environmental matters gm subject various laws relating protection environment various stages investigation remediation sites contamination alleged disclosed note 15 gm consolidated financial statements accrued liability worldwide environmental cleanup 646 million 692 million december 31 1996 1995 respectively future periods new laws regulations advances technologies additional information ultimate remedy selected new existing sites gms share cost remedies could significantly change gms estimates note 1 gm consolidated financial statements describes gms methodology estimating environmental liabilities process estimating liabilities complex dependent primarily nature extent historical information physical data relating contaminated site complexity site uncertainty remedy technology required outcome discussions regulatory agencies potentially responsible parties prps multiparty sites number financial viability prps 1996 1995 1994 gm expensed 94 million 134 million 106 million respectively environmental cleanup addition worldwide capital expenditures discussed previously included 122 million 133 million 131 million 1996 1995 1994 respectively various environmental matters employment payrolls 1 includes employees ncrs december 31 1994 2 excludes eds hughes nonautomotive employees saturn ncrs 3 includes employees work excludes laidoff employees receiving benefits ii68 part iii general motors corporation subsidiaries items 10 13 certain information required part iii items 10 13 form information set forth omitted registrant intends file definitive proxy statement pursuant regulation 14a later 120 days end fiscal year executive officers registrant names ages executive officers registrant february 28 1997 positions offices registrant date follows family relationships defined executive officers arrangement understanding executive officers person pursuant selected officer executive officers elected board directors hold office next annual election officers successor elected qualified earlier resignation removal board directors elects officers conjunction annual meeting stockholders mr john f smith jr associated general motors since 1961 elected executive vice president charge international operations 1988 effective august 1990 elected vice chairman board directors april 6 1992 mr smith elected president chief operating officer effective november 1992 elected chief executive officer president january 1 1996 mr smith became chairman board directors mr pearce associated general motors since 1985 may 1987 elected vice president general counsel general motors effective november 1992 elected executive vice president general motors responsibility industrygovernment relations staff environmental activities staff environmental energy staff worldwide economics electronic data systems corporation gm hughes electronics corporation hughes electronics corporation july 1994 assumed responsibility gms strategic decision center corporate communications allison transmission division electromotive division gm locomotive group urban community affairs executive compensation corporate governance corporate services staff remained general counsel august 1 1994 effective january 1 1996 mr pearce elected director became vice chairman board directors mr losh associated general motors since 1964 july 1984 elected vice president general motors general manager pontiac division named general manager oldsmobile division june 1989 effective may 1992 elected group executive charge north iii1 american vehicle sales service marketing july 1994 elected executive vice president chief financial officer general motors mr wagoner associated general motors since 1977 elected vice president charge finance general motors europe june 1989 july 1991 elected president managing director general motors brasil effective november 1992 elected executive vice president chief financial officer general motors july 1994 named president north american operations mr hughes associated general motors since 1966 march 1989 elected chairman managing director adam opel ag elected president general motors europe vice president group executive general motors april 1992 effective november 1992 elected executive vice president international operations general motors september 1994 named president international operations iii2 part iv general motors corporation subsidiaries item 14 item 7 managements discussion analysis financial condition results operations following managements discussion analysis financial condition results operations mda read conjunction general motors acceptance corporation gmac annual report form 10k period ended december 31 2003 filed separately securities exchange commission sec earnings per share amounts included mda reported fully diluted basis gm presents separate supplemental financial information following businesses automotive operations auto financing insurance operations fio gms reportable operating segments within auto business consist gm automotive gma comprised four regions gm north america gmna gm europe gme gm latin americaafricamideast gmlaam gm asia pacific gmap includes design manufacturing marketing locomotives elimination intersegment transactions certain nonsegment specific revenues expenditures certain corporate activities gms reportable operating segments within fio business consist gmac financing includes financing entities consolidated gmac disaggregated financial results gma prepared using management approach consistent basis manner gm management internally disaggregates financial information purpose assisting making internal operating decisions regard certain common expenses allocated among regions less precisely would required standalone financial information prepared accordance accounting principles generally accepted us gaap financial results represent historical information used management internal decisionmaking purposes therefore data prepared represent way business operate future data prepared accordance gaap may materially different ii4 general motors corporation subsidiaries results operations consolidated results gms total net sales revenues 186 billion 177 billion 169 billion 2003 2002 2001 respectively gms net income 38 billion 17 billion 601 million 2003 2002 2001 respectively years ended december 31 2003 2002 2001 dollars millions total net sales revenues 185524 177324 169051 income continuing operations 2862 1975 1222 net income 3822 1736 601 net margin continuing operations 15 11 07 increase 2003 total net sales revenues compared 2002 due increases gma revenue 52 billion despite lower gmna global volumes worldwide pricing competitiveness increases fio revenue 26 billion increase 2002 total net sales revenues compared 2001 largely due increase wholesale sales gma despite increased revenues cost savings strong equity income 2003 compared 2002 continued automotive pricing pressures higher pension postretirement employee benefit opeb expenses us unfavorable foreign currency exchange resulted gma net income decreasing 2003 compared 2002 gmac record net income 28 billion 2003 compared 19 billion prior year due primarily income growth gmacs mortgage operations increase 2002 net income compared 2001 primarily due increased volumes gma offset partially pricing pressures north america europe 2003 highlights included market share increased three four automotive regions strong cash flow generated gm fully funded combined us hourly salaried pension plans 185 billion total contributions pension plans earned approximate 22 return assets completed hughes transactions 1 gmac gmap generated strong net income gm completed sale defense business 1in hughes transactions gm split hughes distributing hughes common stock holders gm class h common stock exchange outstanding shares gm class h common stock simultaneously gm sold 198 percent economic interest hughes news corporation exchange cash news corporation preferred american depositary shares preferred adss ii5 general motors corporation subsidiaries gm automotive financial review gmas total net sales revenues 155 billion 149 billion 142 billion 2003 2002 2001 respectively gmas net income 553 million 20 billion 445 million 2003 2002 2001 respectively years ended december 31 2003 2002 2001 dollars millions gma total net sales revenues 154513 149355 141939 gma net income 553 1988 445 gma net margin 04 13 03 net income loss region gmna 811 2992 1348 gme 504 1011 765 gmlaam 331 181 81 gmap 577 188 57 net income 553 1988 445 gm global market share 147 150 increase 2003 total net sales revenues compared 2002 largely due favorable product mix weaker us dollar partially offset unfavorable pricing pressures north america europe lower wholesale volumes increase 2002 total net sales revenues compared 2001 largely due increase wholesale sales volumes partially offset unfavorable pricing pressures north america europe gms global market share 147 150 years ended 2003 2002 respectively market share gains recognized three four automotive regions see discussion region gmna posting 05 percentage point decline 274 gm introduces several new models 2004 overall economic conditions improve gms goal achieve market share growth regions 2004 decrease gmas 2003 net income compared 2002 result lower wholesale sales continued pricing pressures north america europe increased pension opeb expense us unfavorable foreign exchange partially offset continued strong product mix material cost savings strong equity results gmap increase 2002 net income compared 2001 primarily due increase wholesale sales volume favorable product mix reduced structural material costs favorable conditions offset unfavorable effect pricing pressures experienced north america europe gm automotive regional results gm north america years ended december 31 2003 2002 2001 gmna dollars millions net income 811 2992 1348 net margin 07 26 12 wholesale sales volumes thousands cars 2340 2547 2441 trucks 3267 3174 2746 total gmna 5607 5721 5187 vehicle unit sales industry north america 19821 20118 20250 gm percentage industry 274 279 276 industry us 16966 17144 17475 gm percentage industry 280 283 281 gm cars 257 254 269 gm trucks 299 310 292 ii6 general motors corporation subsidiaries gm automotive financial review continued gm north america continued north american industry vehicle unit sales decreased 198 million units 2003 decrease industry sales gmnas market share decreased 05 percentage points gmna ended year market share 274 2003 compared 279 2002 2003 industry vehicle unit sales united states decreased slightly 170 million units conjunction slight decrease industry volume gms us market share decreased 03 percentage points gm ended year market share 280 2003 versus 283 2002 us car market share rose modestly 03 percentage points 257 us truck market share ended year 299 11 percentage points contributing slight decline overall us market share gm introduces several new models north america 2004 gm anticipates increasing market share united states north america 2004 net income gmna totaled 811 million 30 billion 13 billion 2003 2002 2001 respectively decrease gmnas 2003 net income 2002 primarily due unfavorable pricing increased pension opeb expense us higher currencyexchange losses 2003 gmna incurred charges 448 million tax related october 2003 contract united auto workers provided lumpsum payments vehicle discount vouchers retirees adjusted previously established reserve idled workers primarily related janesville wisconsin plant resulting 103 million income tax also gmna incurred various structural cost adjustments asset impairment charges favorable interest income settlements prior year tax matters income related market valuation xm satellite radio warrants items netted approximately 90 million income year vehicle revenue per unit 18992 2003 compared 18698 2002 even though trucks percent total sales flat mix remained strong 2003 customers continued buy upgraded vehicles resulted revenue per unit growth 294 increase 2002 net income 2001 primarily due increase wholesale sales volume improved product mix material structural costs reductions interest income resolution certain prior tax years partially offset increase pension expense opeb expense unfavorable price addition 2002 gmna incurred charges 116 million tax primarily related costs associated transfer commercial truck production janesville wisconsin flint michigan gm europe years ended december 31 2003 2002 2001 dollars millions gme net loss 504 1011 765 gme net margin 18 42 32 wholesale sales volumes thousands cars 1563 1545 1666 trucks 94 100 94 total gme 1657 1645 1760 vehicle unit sales industry 19468 19172 19705 gm percentage industry 94 91 gm market share germany 105 103 114 gm market share united kingdom 137 131 127 industry vehicle unit sales remained relatively flat europe 2003 increase approximately 300000 units 2002 gme increased total market share 94 03 percentage points 2002 two gms largest markets europe gm continued perform well increased market share gain market share increased 105 germany 02 percentage point increase 2002 137 united kingdom increase 06 percentage points 2002 ii7 general motors corporation subsidiaries gm automotive financial review continued gm europe concluded net loss gme totaled 504 million 10 billion 765 million 2003 2002 2001 respectively decrease gmes 2003 net loss 2002 primarily due favorable product mix reduced material structural costs favorable conditions partially offset unfavorable pricing foreign currency translation euro swedish krona strengthened relative us dollar 2003 gmes net loss included restructuring charge 2003 218 million tax related initiative improve competitiveness gms automotive operations europe see note 25 consolidated financial statements increase gmes 2002 net loss 2001 primarily due decrease wholesale sales volumes driven weak european industry continuing competitive pricing pressures restructuring initiative implemented first quarter 2002 resulted charge 407 million tax decreases partially offset improved material structural cost performance gm latin americaafricamideast years ended december 31 2003 2002 2001 dollars millions gmlaam net loss 331 181 81 gmlaam net margin 61 35 14 wholesale sales volumes thousands cars 438 443 463 trucks 123 197 203 total gmlaam 561 640 666 vehicle unit sales industry 3570 3673 4009 gm percentage industry 160 157 166 gm market share brazil 233 230 226 despite unfavorable economic conditions latin america gm able increase overall gmlaam vehicle market share 160 2003 net loss gmlaam totaled 331 million 181 million 81 million 2003 2002 2001 respectively increase gmlaams 2003 net loss 2002 primarily due continued economic weakness region industry vehicle sales decreased 100000 units 36 million 2003 gmlaam incurred asset impairment charges unfavorable exchange impacts partially offset net price increases increase gmlaams 2002 net loss 2001 primarily due political unrest economic uncertainty argentina brazil venezuela caused significant deterioration industry region gm asia pacific years ended december 31 2003 2002 2001 dollars millions gmap net income loss 577 188 57 gmap net margin 108 42 14 wholesale sales volumes thousands cars 203 185 202 trucks 70 220 258 total gmap 273 405 460 vehicle unit sales industry 15720 14373 13101 gm percentage industry 49 46 40 gm market share australia 204 231 224 gm market share china 85 78 41 ii8 general motors corporation subsidiaries gm automotive financial review concluded gm asia pacific concluded gmap increased total market share 49 03 percentage points 2002 gms market share china increased 85 increase 07 percentage points 2002 china third largest automotive market world gms fourth largest market net income loss gmap totaled 577 million 188 million 57 million 2003 2002 2001 respectively increase gmaps net income compared 2002 primarily due strong equity earnings shanghai gm equity investees well earnings holden australia increase gmaps 2002 net income compared 2001 primarily due equity income improvements several joint ventures led significantly improved results shanghai gm results equity investments 2001 included restructuring charge 133 million tax respect gms portion severance payments asset impairments part restructuring affiliate isuzu motors ltd 2002 improvements partially offset decrease wholesale sales volumes increases structural costs operations total net sales revenues include pretax gain approximately 814 million approximately 505 million aftertax 090 per diluted share related sale gms defense operations light armored vehicle business general dynamics corporation march 1 2003 sale generated net proceeds approximately 11 billion cash also operations includes charges approximately 277 million 049 per diluted share related october 2003 contract uaw provided lumpsum payments vehicle vouchers delphi retirees well net interest expense approximately 200 million related 2003 debt issuances 2002 gm completed review carrying value investment fiat auto spa fiat auto resulted noncash impairment charge 22 billion 14 billion aftertax recorded cost sales writedown decreased carrying value gms investment fiat auto holdings bv fah 24 billion 220 million remaining 220 million attributable investment fah certain joint ventures gme discontinued operations completion hughes transactions december 22 2003 results operations cash flows assets liabilities hughes electronics corporation classified discontinued operations periods presented gms consolidated financial statements transactions resulted aftertax gain approximately 12 billion classified gain sale discontinued operations gms consolidated statement income year ended december 31 2003 see note 2 consolidated financial statements discussion gmac financial review gmacs net income 28 billion 19 billion 18 billion 2003 2002 2001 respectively years ended december 31 2003 2002 2001 dollars millions financing operations 1360 1239 1254 mortgage operations 1254 544 331 insurance operations 179 87 201 net income 2793 1870 1786 net income financing operations totaled 14 billion 12 billion 13 billion 2003 2002 2001 respectively increase net income 2003 compared 2002 primarily due lower credit loss provisions increased revenues higher asset levels offset unfavorable effect lower net interest margins decrease 2002 net income compared 2001 due combination higher credit loss provisions wider borrowings spreads offset income higher asset levels addition 2001 results reflect favorable impact cumulative effect adopting sfas 133 ii9 general motors corporation subsidiaries gmac financial review continued net income mortgage operations totaled 13 billion 544 million 331 million 2003 2002 2001 respectively increase net income 2003 compared 2002 primarily due higher production securitization volumes residential commercial mortgage sectors increase net income 2002 compared 2001 primarily due increased loan production volumes higher servicing levels improved hedging results partially offset decrease value mortgage servicing rights net income insurance operations totaled 179 million 87 million 201 million 2003 2002 2001 respectively increase net income 2003 compared 2002 primarily relates increased underwriting volume increased investment income resulting reduced levels impairments 2003 compared 2002 related insurance groups investment portfolio decrease net income 2002 compared 2001 reflects writedown certain investment securities primarily due prolonged decline equity markets partially offset improved underwriting results favorable tax settlement 2004 prioritiestargets 2004 gm established certain operating priorities financial targets including attaining earnings per share 600 650 current dilution levels generating 50 billion operating cash flow increasing automotive market share regions reducing structural material costs capital spending 70 billion regionalsector income targets follows income target dollars millions gmna 1000 1400 gme 0 100 gmlaam 200 100 gmap 700 800 gmac greater 2000 cash flow cost savings regional income targets formulated using management approach consistent basis manner gm management internally disaggregates financial information purposes assisting making internal operating decisions liquidity capital resources financing structure 2003 gm gmac experienced adequate access capital markets gm gmac able issue various securities raise capital extend borrowing terms consistent gms need financial flexibility june 13 2003 moodys lowered gms longterm rating baa1 a3 gmacs a3 a2 rating outlook negative moodys also reduced gmacs shortterm rating prime2 prime1 reaffirmed gms shortterm rating prime2 october 21 2003 standard poors affirmed gm gmacs longterm ratings bbb shortterm ratings a2 rating outlook negative november 14 2003 fitch affirmed gm gmacs longterm ratings bbb commercial paper ratings rating outlook negative december 10 2003 dominion bond rating service dbrs confirmed gm gmacs senior debt ratings low commercial paper ratings r1 low stable outlook rating actions expected significant adverse effect gms gmacs ability obtain bank credit sell assetbacked securities table summarizes gms gmacs credit ratings december 31 2003 gm gmac gm gmac gm gmac rating agency senior debt commercial paper outlook dbrs low r1 low r1 low stable fitch bbb negative moodys baa1 a3 prime2 negative sp bbb a2 negative ii10 general motors corporation subsidiaries financing structure concluded gms gmacs access capital markets remained sufficient meet corporations capital needs second quarter 2003 gm issued approximately 15 billion senior notes beginning third quarter 2003 combined single event financing gm issued approximately 135 billion gm senior notes convertible debentures gmac issued approximately 44 billion shortterm senior notes debt addition gm gmac expect continue adequate access capital markets sufficient meet corporations needs financial flexibility 2003 gm contributed voluntary employees beneficiary association veba trust total 33 billion including 03 billion gm class h common stock 185 billion including 09 billion gm class h common stock us pension plans december 22 2003 terms hughes transactions shares gm h common stock contributed veba trust 2003 converted exchanged approximately 34 million shares hughes electronics corporation common stock approximately 4 million news corporation preferred adss similarly shares gm class h common stock contributed pension plans 2003 converted exchanged approximately 89 million shares hughes electronics corporation common stock approximately 10 million news corporation preferred adss pension plan assets gms us hourly salaried pension plans earned returns approximately 22 2003 addition result 185 billion 2003 pension contributions combined us hourly salaried pension plans 03 billion overfunded yearend 2003 using 600 discount rate additional source funds gm currently unrestricted access 56 billion line credit syndicate banks committed june 2008 gm also additional 08 billion undrawn committed facilities various maturities undrawn uncommitted lines credit 17 billion similarly gmac currently 42 billion syndicated line credit committed june 2004 43 billion committed june 2008 47 billion bilateral committed lines various maturities uncommitted lines credit 180 billion addition new center asset trust ncat 192 billion liquidity facilities committed june 2004 mortgage interest networking trust mint 34 billion liquidity facilities committed april 2004 ncat mint nonconsolidated qualified special purpose entities administered gmac purpose purchasing assets part gmacs securitization mortgage warehouse funding programs entities fund purchases assets issuance assetbacked commercial paper represent important source liquidity corporation stockholders equity increased 253 billion december 31 2003 68 billion december 31 2002 increase primarily due decrease minimum pension liability adjustment favorably effected much improved funded status pension plans recorded december 31 2003 partly offset splitoff hughes see note 19 consolidated financial statements automotive operations december 31 2003 cash marketable securities 34 billion assets voluntary employees beneficiary association veba trust invested fixedincome securities totaled 269 billion compared cash marketable securities 30 billion assets veba trust invested fixedincome securities totaling 173 billion december 31 2002 increase approximately 55 december 31 2002 primarily due strong cash flow operations proceeds hughes transactions sale gm defense business aggregate amount 53 billion net proceeds debt issuances totaling 145 billion offset us hourly salaried pension veba cash contributions 206 billion 2003 gm total assets veba trust used prefund part gms postretirement benefits liability approximated 100 billion december 31 2003 compared 58 billion december 31 2002 increase approximately 72 strong cash flows operations 2003 enabled gm make cash contribution 30 billion veba trust august 2003 addition 03 billion class h stock contributed veba march 2003 contributions veba trust converted exchanged approximately 34 million shares hughes electronics corporation common stock approximately 4 million news corporation preferred adss longterm debt 296 billion december 31 2003 compared 143 billion december 31 2002 mentioned proceeds issuance debt securities used fund gms us hourly salaried pension plans ratio longterm debt total longterm debt gms net assets automotive operations 852 december 31 2003 compared 4332 december 31 2002 ratio longterm debt shortterm loans payable total debt gms net assets automotive operations 864 december 31 2003 ii11 general motors corporation subsidiaries automotive operations concluded compared 3075 december 31 2002 decrease ratios due improvement gms net asset position resulting improved funded status gms us hourly salaried pension plans net liquidity calculated cash marketable securities 34 billion assets veba trust invested fixedincome securities less total loans payable longterm debt negative 55 billion december 31 2003 compared 11 billion including 30 billion assets veba december 31 2002 order provide financial flexibility gm suppliers gm maintains trade payables program gecc pays participating gm suppliers amount due gm advance contractual original due dates exchange early payment suppliers accept discounted payment original due date payables gm pays gecc full amount december 31 2003 2002 gm owed approximately 12 billion gecc program classified shortterm debt gms consolidated financial statements addition gm right agreement defer payment gecc respect portion receivables paid behalf gm permissible deferral periods range 10 days 40 days would also classified shortterm debt gms financial statements deferred payments subject interest deferral period december 31 2003 gm elected defer payment payables maximum amount permitted parts program 20 billion gms longterm unsecured debt obligations become subject rating sp bbb negative outlook gms current rating bbb negative outlook bbb rating moodys baa3 negative outlook gms current rating baa1 negative outlook baa3 gecc would permitted immediately terminate continued access program gm suppliers gm anticipate discontinuance future availability gecc program would result material disruption supply parts materials gm would material adverse effect gms financial position results operations cash flows financing insurance operations gmacs consolidated assets totaled 2882 billion december 31 2003 representing 266 increase 2277 billion outstanding december 31 2002 increase total assets primarily due increase finance receivables loans 1341 billion december 31 2002 1727 billion december 31 2003 increased use securitizations structured financing transactions primarily mortgage operations combined continued use gm sponsored special rate financing programs resulted increase consumer finance receivables loans additional asset growth result increase wholesale receivables outstanding due higher dealer inventories consistent growth assets gmacs total debt increased 2389 billion december 31 2003 compared 1832 billion december 31 2002 gmacs 2003 yearend ratio total debt total stockholders equity 1181 compared 1031 december 31 2002 gmacs liquidity well ability profit ongoing activity large part dependent upon timely access capital costs associated raising funds different segments capital markets liquidity managed preserve stable reliable cost effective sources cash meet current future obligations gmacs strategy managing liquidity risk develop diversified funding sources across global investor base 2003 gmac continued experience difficult funding environment caused high funding requirements due continued growth assets levels negative credit rating agency activity general instability corporate bond markets challenges presented environment resulted gmacs funding effort continuing reach beyond traditional unsecured debt sources increase emphasis securitization including transactions accounted secured financings retail debt programs management expects based corporations current financial position funding strategy diversified financing sources provide sufficient access capital markets meet corporations funding needs investment fiat auto holdings april 23 2003 annual general shareholders meeting fah adopted euro 5 billion recapitalization plan provides shareholders option make prorata capital contributions eighteen months following adoption plan adopted fiat held 80 fah gm 20 fiat participated recapitalization making euro 3 billion contribution fah used repay intercompany debts owed fiat affiliates currently gm plan participate due fiats participation recapitalization gms nonparticipation fiat reported gms interest fah reduced 20 10 ii12 general motors corporation subsidiaries investment fiat auto holdings concluded discussed gms annual report form 10k period ended december 31 2002 master agreement provides january 24 2004 july 24 2009 fiat may seek exercise put option put require gm purchase fiats fah shares fair market value whether fiat may seek exercise put unknown although fiat stated 2002 annual report form 20f filed us securities exchange commission views exercise put secondary possibility fiat also stated form 20f believes put enforceable accordance terms master agreement gm however asserted fiat sale certain assets financing business fiat auto recapitalization fah represent material breaches master agreement result master agreement including put terminable gm notwithstanding different views gm continuing build cooperation parties worked past several years joint ventures cooperative contractual arrangements entered independent master agreement pursuing resolution different views towards end fiat gm entered standstill agreement october 26 2003 provisions enable gm defer december 15 2004 necessity electing remedy termination master agreement put without deferral prejudicing right gm elect remedy december 15 2004 october 26 2003 fiat gm also entered amendment master agreement shifts put period one year begins january 24 2005 runs july 24 2010 put implemented fair market value fah shares would determined averaging three closest four valuations would prepared four investment banks conducting due diligence procedures set forth master agreement based upon terms conditions incorporated purchase agreement time parties prepared unless process valuation completed amount gm might pay fiats fah shares valid exercise put quantifiable valid exercise put gm would option pay fiats fah shares entirely shares gm 123 par value common stock entirely cash whatever combination thereof gm may choose circumstances extent gm chose pay cash portion purchase price could paid fiat four installments threeyear period gm would expect fund payments normal operating cash flows financing activities gm acquire fiats fah shares thus become sole owner fah gm would decide additional capitalization would appropriate fah fiat auto specifically fiat auto need additional funding gm would decide whether provide funding conditions might unless fah fiat auto subject liquidation insolvency fahs consolidated financial statements would required financial reporting purposes consolidated gm indebtedness losses capital needs fah fiat auto acquisition gm presently determinable could material adverse effect gm chooses fund needs allows consolidation gms financial statements fah fiat auto gm discussed fiat potential alternatives master agreement expects discussions regarding relationship parties offbalance sheet arrangements gm gmac use offbalance sheet arrangements economics sound business principles warrant use gms principal use offbalance sheet arrangements occurs connection securitization sale financial assets generated acquired ordinary course business gmac subsidiaries lesser extent gm assets securitized sold gmac subsidiaries consist principally mortgages wholesale retail loans secured vehicles sold gms dealer network assets sold gm consist principally trade receivables addition gm leases real estate equipment various offbalance sheet entities established facilitate financing assets gm nationally prominent lessors gm believes creditworthy assets consist principally office buildings warehouses machinery equipment use entities allows parties providing financing isolate particular assets single entity thereby syndicate financing multiple third parties conventional financing technique used lower cost borrowing thus lease cost lessee gm wellestablished market institutions participate financing property purchase ownership interests entities owned institutions independent affiliated gm believes officers directors employees gm gmac affiliates hold direct indirect equity interests entities ii13 general motors corporation subsidiaries offbalance sheet arrangements concluded amounts outstanding offbalance sheet facilities used financing insurance operations decreased since december 31 2002 gmac continues use securitization transactions similar legal structure offbalance sheet securitizations accounted secured financings recorded receivables debt balance sheet assets offbalance sheet entities follows dollars millions december 31 automotive operations 2003 2002 assets leased operating leases 2287 2126 trade receivables sold 1 759 725 total 3046 2851 financing insurance operations receivables sold securitized mortgage loans 80798 106520 retail finance receivables 9548 16164 wholesale finance receivables 21142 17415 total 111488 140099 1 addition trade receivables sold gmac 553 million 2003 434 million 2002 contractual obligations longterm liabilities gm following minimum commitments contractual obligations including purchase obligations defined us securities exchange commission purchase obligation defined agreement purchase goods services enforceable legally binding gm specifies significant terms including fixed minimum quantities purchased fixed minimum variable price provisions approximate timing transaction longterm liabilities defined longterm liabilities reflected gms balance sheet gaap based definition tables include contracts include fixed minimum obligations include normal purchases made ordinary course business following table provides aggregated information auto outstanding contractual obligations longterm liabilities december 31 2003 payments due period 2009 millions 2004 20052006 20072008 total debt 1090 1116 1798 26800 30804 capital lease obligations 105 205 459 649 1418 operating lease obligations 668 1191 1638 1763 5260 contractual commitments capital expenditures 1223 137 1360 contractual commitments postretirement benefits1 3005 6459 3416 12880 less veba assets 2 3005 6459 534 9998 net 2882 material 901 1613 1447 605 4566 information technology 161 147 11 319 marketing 171 181 8 3 363 facilities 201 270 99 396 966 rental car repurchases 8204 policy product warranty recall campaigns liability 3593 3837 825 419 8674 total contractual commitments 16317 8697 9167 30635 64816 remaining balance postretirement benefits 734 1527 5170 43154 50585 1amounts include postretirement benefits current contractual labor agreements north america remainder estimated liability benefits beyond current labor agreement essentially salaried employees classified remaining balance postretirement benefits 2total veba assets allocated based projected spending requirements ii14 general motors corporation subsidiaries contractual obligations longterm liabilities concluded combined us hourly salaried pension plans 03 billion overfunded yearend 2003 gm expect contribution us hourly salaried pension plans next decade meet erisa legal minimum funding requirements avoid variable rate premiums pension benefit guaranty corporation following table provides aggregated information fio outstanding contractual obligations longterm liabilities december 31 2003 payments due period 2009 millions 2004 20052006 20072008 total debt 77424 64555 19996 75455 237430 operating lease obligations 142 220 136 184 682 mortgage purchase sale commitments 16021 3057 19078 lending commitments 13496 1222 954 5206 20878 commitments provide capital equity method investees 109 2 16 28 155 purchase obligations 49 46 19 1 115 total contractural commitments 107241 69102 21121 80874 278338 book value per share book value per share determined based liquidation rights common stockholders book value per share gm 123 par value common stock increased 4496 december 31 2003 906 december 31 2002 dividends may paid common stock declared gms board directors sole discretion december 31 2003 amount available payment dividends gm 123 par value 279 billion gms policy distribute dividends 123 par value common stock based outlook indicated capital needs business cash dividends per share gm 123 par value common stock 200 2003 2002 2001 employment payrolls worldwide employment december 31 thousands 2003 2002 2001 gmna 190 198 207 gme 62 66 73 gmlaam 23 24 gmap 14 11 gmac 32 29 5 7 8 total employees 326 338 352 worldwide payrolls billions 209 204 191 us hourly payrolls billions 1 89 91 85 average labor cost per active hour worked us hourly 2 7839 6278 5776 1includes employees work excludes laidoff employees receiving benefits 2includes us hourly wages benefits divided number hours worked ii15 general motors corporation subsidiaries critical accounting estimates accounting policies integral understanding mda consolidated financial statements gm prepared conformity gaap requires use estimates judgments assumptions affect reported amounts assets liabilities date financial statements reported amounts revenues expenses periods presented gms accounting policies described note 1 consolidated financial statements critical accounting estimates described section accounting estimate considered critical estimate requires management make assumptions matters highly uncertain time estimate made different estimates reasonably could used changes estimate would material impact corporations financial condition results operations reasonably likely occur period management believes accounting estimates employed appropriate resulting balances reasonable however actual results could differ original estimates requiring adjustments balances future periods corporation discussed development selection disclosures critical accounting estimates audit committee gms board directors audit committee reviewed corporations disclosures relating estimates sales allowances later time sale time incentive announced dealers applies vehicles sold gm dealer inventory gm records reduction revenue estimated impact sales allowances form dealer customer incentives may numerous types incentives available particular time factors used estimating cost incentives include volume vehicles affected incentive programs offered product rate customer acceptance incentive program actual number vehicles differs estimate different mix incentives occurs sales allowances could affected policy warranty provisions estimated expenses related product warranties made time products sold estimates established using historical information nature frequency average cost warranty claims management actively studies trends warranty claims takes action improve vehicle quality minimize warranty claims impairment longlived assets gm periodically reviews carrying value longlived assets held used goodwill intangible assets indefinite lives assets disposed events circumstances warrant review performed using estimates future cash flows carrying value longlived asset considered impaired impairment charge recorded amount carrying value longlived asset exceeds fair value pension postretirement employee benefits opeb pension opeb costs obligations dependent assumptions used calculating amounts assumptions include discount rates health care cost trend rates benefits earned interest cost expected return plan assets mortality rates factors accordance gaap actual results differ assumptions accumulated amortized future periods therefore generally affect recognized expense recorded obligation future periods management believes assumptions used appropriate differences actual experience changes assumptions may affect gms pension postretirement obligations future expense gm established us pension plans discount rate 600 yearend 2003 represents 75 basis point reduction 675 discount rate used yearend 2002 gms us pretax pension expense forecasted decrease approximately 26 billion 2003 excluding curtailments settlements approximately 14 billion 2004 due 185 billion 2003 pension contribution approximately 22 2003 actual return assets partially offset lower 2003 yearend discount rate following information illustrates sensitivity change certain assumptions us pension plans december 31 2003 projected benefit obligation pbo us pension plans 87 billion minimum pension liability charged equity respect us pension plans 125 million net tax ii16 general motors corporation subsidiaries critical accounting estimates continued effect 2004 december 31 2003 change assumption pretax pension expense pbo 25 basis point decrease discount rate 150 million 21 billion 25 basis point increase discount rate 150 million 21 billion 25 basis point decrease expected return assets 220 million 25 basis point increase expected return assets 220 million sensitivities reflect impact changing one assumption time noted economic factors conditions often affect multiple assumptions simultaneously effects changes key assumptions necessarily linear changes assumptions would effect gms funding requirements addition december 31 2003 25 basis point decrease discount rate would decrease stockholders equity 140 billion net tax 25 basis point increase discount rate would increase stockholders equity 200 million net tax 25 basis point decrease discount rate certain pension plans would become accumulated benefit obligation abo underfunded resulting significantly larger impact equity compared 25 basis point increase discount rate addition impact greater 25 basis point decrease discount rate would proportional first 25 basis point decrease discount rate gm established us opeb plans discount rate 625 yearend 2003 represents 50 basis point reduction 675 discount rate used yearend 2002 following table illustrates sensitivity change discount rate assumption related gms us opeb plans us accumulated postretirement benefit obligation apbo significant portion gms worldwide apbo 675 billion december 31 2003 effect 2004 effect pretax opeb december 31 2003 change assumption expense apbo 25 basis point decrease discount rate 170 million 19 billion 25 basis point increase discount rate 170 million 19 billion sensitivities reflect impact changing one assumption time noted economic factors conditions often affect multiple assumptions simultaneously effects changes key assumptions necessarily linear postemployment benefits gm establishes reserves termination postemployment benefit liabilities paid pursuant union contractual agreements connection closed plants reserve based comprehensive study considers impact annual production labor forecast assumptions well redeployment scenarios ii17 general motors corporation subsidiaries critical accounting estimates concluded allowance credit losses allowance credit losses managements estimate incurred losses gmacs consumer commercial finance receivable loan portfolios held investment management periodically performs detailed reviews portfolios determine impairment occurred assess adequacy allowance credit losses based historical anticipated trends factors affecting credit quality factors include historical trends repossessions chargeoffs recoveries credit losses careful monitoring portfolio credit quality including impact acquisitions current projected economic market conditions different assumptions changes economic circumstances could result changes allowance credit losses investments operating leases gmacs investments residual values leasing portfolio represent estimate values assets end lease contract initially recorded based appraisals estimates management reviews residual values periodically determine recorded amounts appropriate operating lease assets impaired gmac actively manages remarketing offlease vehicles maximize realization value changes value residuals external factors impacting gmacs future ability market vehicles prevailing market conditions may impact realization residual values mortgage servicing rights corporation capitalizes mortgage servicing rights associated loans sold servicing retained servicing rights acquired bulk flow purchase transactions corporation capitalizes cost originated mortgage servicing rights based upon relative fair market value underlying mortgage loans mortgage servicing rights time sale underlying mortgage loan corporation capitalizes purchased mortgage servicing rights cost amount exceeding estimated fair market value purchased mortgage servicing rights accounting derivatives contracts fair value corporation uses derivatives normal course business manage exposure fluctuations commodity prices interest foreign currency rates effective january 1 2001 corporation accounts derivatives consolidated balance sheet assets liabilities fair value accordance sfas 133 accounting derivative instruments hedging activities accounting complex evidenced significant interpretations primary accounting standard continues evolve well significant judgments estimates involved estimating fair values absence quoted market prices new accounting standards beginning january 1 2003 corporation began expensing fair market value newly granted stock options stock based compensation awards employees pursuant statement financial accounting standards sfas 123 accounting stockbased compensation fair value stock option grants estimated date grant using blackscholes optionpricing model fair value stock compensation awards determined market price gm 123 common stock date grant total expense 2003 229 million 142 million net tax recorded cost sales expenses 2002 permitted sfas 123 gm applied intrinsic value method recognition measurement accounting principles board opinion 25 apb 25 accounting stock issued employees stock options stockbased employee compensation awards compensation expense related employee stock options reflected net income periods options granted exercise price equal market value underlying common stock date grant refer note 1 consolidated financial statements effect net income earnings per share compensation cost outstanding unvested stock options stockbased employee compensation awards determined based fair values grant date december 2002 financial accounting standards board fasb issued interpretation 45 guarantors accounting disclosure requirements guarantees including indirect guarantees indebtedness others fin 45 fin 45 requires time company issues guarantee company must recognize initial liability fair value obligations assumes guarantee interpretation applicable prospective basis guarantees issued modified december 31 2002 fin 45 also contains disclosure provisions surrounding existing guarantees effective financial statements interim annual periods ending december 15 2002 see note 18 consolidated financial statements ii18 general motors corporation subsidiaries new accounting standards concluded january 2003 fasb issued interpretation 46 consolidation variable interest entities fin 46 requires consolidation certain entities considered variable interest entities vies entity considered vie equity investors lack characteristics controlling financial interest capital insufficient permit finance activities without additional subordinated financial support consolidation vie investor required determined investor absorb majority vies expected losses residual returns occur fin 46 provides certain exceptions rules relating qualifying special purpose entities qspes subject requirements sfas 140 upon original issuance fin 46 required vies created january 31 2003 would consolidated immediately vies created prior february 1 2003 consolidated july 1 2003 october 2003 fasb deferred effective date consolidation vies created prior february 1 2003 december 31 2003 calendar yearend companies earlier application encouraged gm adopted fin 46 original effective date july 1 2003 entities created prior february 1 2003 application consolidation provisions fin 46 resulted increase assets debt approximately 46 billion 917 million auto 37 billion fio cumulative effect accounting change recorded cost sales 27 million aftertax related auto net income impact fio refer note 7 consolidated financial statements discussion gms involvement variable interest entities december 2003 fasb published revision fin 46 fin 46r clarify provisions original interpretation exempt certain entities requirements fin 46r provides special effective date provisions enterprises fully partially applied fin 46 prior issuance revised interpretation particular entities already adopted fin 46 required adopt fin 46r quarterly reporting period ended march 31 2004 corporation currently reviewing provisions fin 46r adopt fin 46r quarterly reporting period ending march 31 2004 april 2003 fasb issued sfas 149 amendments statement 133 derivative instruments hedging activities sfas 149 amends clarifies accounting derivative instruments including certain derivative instruments embedded contracts hedging activities statement effective contracts entered modified june 30 2003 hedging relationships designated june 30 2003 adoption standard material effect corporations financial condition results operations may 2003 fasb issued sfas 150 accounting certain financial instruments characteristics liabilities equity provides standards issuer classifies measures certain financial instruments characteristics liabilities equity statement effective financial instruments entered modified may 31 2003 preexisting instruments beginning first interim period beginning june 15 2003 adoption standard material effect corporations financial condition results operations december 2003 fasb issued sfas 132 revised 2003 employers disclosures pensions postretirement benefits revisions sfas 132 intended improve financial statement disclosures defined benefit plans initiated 2003 response concerns raised investors users financial statements need greater transparency pension information particular standard requires companies provide details plan assets benefit obligations cash flows benefit costs relevant quantitative qualitative information guidance effective fiscal years ending december 15 2003 refer note 17 consolidated financial statements discussion gms pension postretirement benefits obligations additional matters like domestic foreign automobile manufacturers years gm used brake products incorporated small amounts encapsulated asbestos products generally brake linings known asbestoscontaining friction products significant body scientific data demonstrating asbestoscontaining friction products unsafe create increased risk asbestosrelated disease gm believes use asbestos products appropriate ii19 general motors corporation subsidiaries additional matters concluded companies used asbestos increase number claims gm related allegations concerning use asbestoscontaining friction products recent years growing number auto mechanics filing suit seeking recovery based alleged exposure small amount asbestos used brake components claims almost always identify numerous potential sources claimants alleged exposure asbestos involve gm even asbestoscontaining friction products many potential sources would place users much greater risk vast majority claimants asbestosrelated illness may never develop one consistent experience reported automotive manufacturers end users asbestos two types claims related alleged asbestos exposure asserted gm representing significantly lower exposure automotive friction product claims like locomotive manufacturers gm used limited amount asbestos locomotive brakes insulation used manufacturing locomotives uses basis lawsuits filed gm railroad workers seeking relief based alleged exposure asbestos claims almost always identify numerous potential sources claimants alleged exposure asbestos involve gm even locomotives many claimants asbestosrelated illness may never develop one addition like many manufacturers relatively small number claims brought contractors seeking recovery based alleged exposure asbestoscontaining products working premises owned gm claims almost always identify numerous potential sources claimants alleged exposure asbestos involve gm vast majority claimants asbestosrelated illness may never develop one general motors resolved many cases years continues conventional strategic litigation reasons avoiding defense costs possible exposure runaway verdicts gm stated believes vast majority claims gm without merit small percentage claims pending gm allege contraction malignant disease associated asbestos exposure vast majority claimants asbestosrelated illness may never develop one addition gm believes strong defenses based upon number published epidemiological studies prepared highly respected scientists indeed gm believes compelling evidence warranting dismissal virtually claims gm vigorously press evidence judges juries whenever possible west virginia supreme court ohio trial court ruled federal law preempts asbestos tort claims asserted behalf railroad workers preemption means federal law entirely eliminates possibility railroad workers could maintain claims gm gms annual expenditures associated resolution claims increased nonmaterial amounts recent years amount expended year highly dependent number claims filed amount pretrial proceedings conducted number trials settlements occur period time gm anticipates annual expenditures relating claims may increase somewhat function number claims increasing managements belief based upon consultation legal counsel claims result material adverse effect upon financial condition results operations gm forwardlooking statements report reports subsequently filed gm sec form 10q filed furnished form 8k related comments management gm use words expect anticipate estimate forecast objective plan goal project prioritiestargets similar expressions intended identify forwardlooking statements represent current judgment future may hold believe judgments reasonable actual results may differ materially due numerous important factors described factors may described subsequent reports gm may file sec form 10q filed furnished form 8k changes economic conditions currency exchange rates political stability shortages price increase fuel labor strikes work stoppages market acceptance corporations new products significant changes competitive environment changes laws regulations tax rates ability corporation achieve reductions cost employment levels realize production efficiencies implement capital expenditures levels times planned management ii20 general motors corporation subsidiaries item 7a item 7 management’s discussion analysis financial condition results operations overview engaged primarily worldwide development production marketing automobiles develop manufacture market vehicles worldwide four automotive regions gm north america gmna gm europe gme gm latin americaafricamideast gmlaam gm asia pacific gmap collectively automotive business also finance insurance operations primarily conducted gmac successor general motors acceptance corporation wholly owned subsidiary november 2006 sold 51 controlling ownership interest gmac consortium investors gmac transaction since gmac transaction accounted 49 ownership interest gmac using equity method gmac provides broad range financial services including consumer vehicle financing automotive dealership commercial financing residential mortgage services automobile service contracts personal automobile insurance coverage selected commercial insurance coverage automotive industry 2007 global automotive industry continued show strong sales revenue growth global industry vehicle sales retail fleet customers 706 million units 2007 representing 48 increase 2006 expect industry sales approximately 73 million units 2008 past five years global automotive industry experienced consistent yeartoyear increases growing 194 2003 2007 overall revenue growth industry averaged 70 per year last decade much growth attributable demand emerging markets china industry vehicle unit sales increased 204 86 million units 2007 71 million units 2006 worldwide vehicle sales 2007 94 million units compared 91 million units 2006 vehicle unit sales increased gme gmlaam gmap declined gmna global market share 2007 133 compared 135 2006 market share increased 2007 compared 2006 92 95 gme 170 172 gmlaam 65 69 gmap declined period 238 230 gmna competition factors commodity energy prices currency exchange imbalances continued exert pricing pressure global automotive market 2007 expect global competition increase next years due primarily aggressive investment manufacturers established markets united states western europe presence local manufacturers key emerging markets china india commodity price increases particularly steel aluminum copper precious metals contributed substantial cost pressures industry vehicle manufacturers well suppliers addition historically low value japanese yen us dollar benefited japanese manufacturers exporting vehicles components united states due part pressures industry pricing comparably equipped products continued decline major markets united states actual prices vehicles similar content declined accelerating pace last decade expect challenging pricing environment continue foreseeable future overview fully described management’s discussion analysis following items noted regarding 2007 • consolidated net sales revenues declined 119 reflecting deconsolidation gmac following gmac transaction november 2006 • automotive revenues increased 39 • 2007 net loss 387 billion 6845 per diluted share includes valuation allowances recorded net deferred tax assets us canada germany 39 billion • sold allison transmission allison business 54 billion cash proceeds resulting gain 43 billion • results reflect 12 billion loss 49 interest gmac general motors corporation subsidiaries • signed 2007 national agreement anticipate support structural cost reduction plans • achieved structural cost reduction target north american turnaround plan • continued progress finalization support delphi corporation delphi emerging bankruptcy proceedings priorities 2007 top priorities continue improving business north america europe achieving competitiveness increasingly global environment thus positioning us sustained profitability growth long term time maintaining liquidity growth profitability priorities 2008 straightforward • continue execute great products • build strong brands distribution channels • execute additional cost reduction initiatives • grow aggressively emerging markets • continue development implementation advanced propulsion strategy • drive benefits managing business globally continue execute great products first priority 2008 continuing focus product excellence fully leveraging global design engineering powertrain expertise produce vehicles wide variety regions market segments north america plan introduce several new vehicles 2008 including pontiac g8 chevrolet traverse complement successful 2007 introductions gmc acadia saturn outlook buick enclave cadillac cts chevrolet malibu emerging markets plan expand enhance portfolio lower cost vehicles special attention fuel economy build strong brands distribution channels second priority 2008 building strong brands distribution channels plan integrate product marketing strategies believe achieve product excellence stronger brands result addition plan build brand equity special focus key car segments programs 2008 intended enhance effectiveness marketing particularly using digital marketing finally propose leverage competitive advantages like onstar telematics systems available 50 gm vehicles throughout world also plan accelerate channel strategy combining certain brands single dealership believe differentiate products brands clearly enhance dealer profitability provide us greater flexibility product portfolio technology planning execute additional cost reduction initiatives third priority 2008 addressing costs executing additional cost reduction initiatives discussed “key factors affecting future current results” taken action number areas reduce legacy structural costs 2007 achieved announced target reducing certain annual structural costs gmna corporate primarily related labor pension postretirement costs 9 billion average less costs 2005 also reduced structural costs percentage global automotive revenue 30 2007 34 2005 announced global targets 25 2010 23 2012 also plan reduce structural costs percentage global automotive revenue pursuing manufacturing capacity utilization 100 higher cost countries continue assess specific actions may required based trends industry volumes product mix october 2007 entered new collective bargaining agreement international union united automobile aerospace agricultural workers america uaw including settlement agreement anticipate significantly support structural cost reduction plans put effect january 1 2010 additionally plan execute collective bargaining general motors corporation subsidiaries agreement national automobile aerospace transportation general workers union canada caw support cost reduction goals announced special attrition program available 74000 hourly workers represented uaw expect participating employees begin exiting april 2008 remain focused repositioning business longterm competitiveness including achieving successful resolution issues related bankruptcy proceedings delphi major supplier former subsidiary recognize however nearterm continuing weakness us automotive market impact canadian operations linked us market provide significant challenge improving earnings cash flow could constrain ability achieve future revenue goals grow aggressively emerging markets fourth 2008 priority focus emerging markets capitalize growth areas china india asean region well russia brazil middle east andean region vehicle sales revenues continue grow globally strongest growth emerging markets 2007 38 vehicle sales took place emerging markets project 2012 45 vehicles sold emerging markets response planning expand capacity emerging markets pursue additional growth opportunities relationships shanghai gm daewoo potential strategic partners recently announced joint ventures malaysia uzbekistan 2007 key metrics net margin operating income market share showed continued growth across key emerging markets addition product brand strategies discussed plan expand manufacturing capacity emerging markets cost effective way pursue new market opportunities believe growth emerging markets help offset challenging nearterm market conditions mature markets us germany continue develop implement advanced propulsion strategy fifth priority 2008 continue develop advance alternative propulsion strategy focused fuel technologies making energy diversity environmental leadership critical element ongoing strategy addition continuing improve efficiency internal combustion engines focused introduction propulsion technologies utilize alternative fuels intensified efforts displace traditional petroleumbased fuels example entered arrangements battery biofuel companies support development commercially viable applications technologies september 2007 launched project driveway making 100 chevrolet equinox fuel cell electric vehicles available driving public vicinity los angeles new york city washington dc fourth quarter 2007 introduced new hybrid models chevrolet tahoe gmc yukon anticipate strategy require major commitment technical financial resources like others automotive industry recognize key challenge advanced propulsion strategy ability price products cover cost increases driven new technology drive benefits managing business globally final priority 2008 continue integrate operations around world manage business global basis focusing restructuring operations already taken number steps globalize principal business functions product development manufacturing powertrain purchasing improve performance increasingly competitive environment build functional technical excellence plan leverage products powertrains supplier base technical expertise globally flow existing resources support opportunities highest returns lowest cost basis presentation management’s discussion analysis financial condition results operations mda read conjunction accompanying consolidated financial statements operate two businesses consisting automotive gm automotive gma financing insurance operations fio auto business consists four regional segments gmna gme gmlaam gmap collectively constitute gma general motors corporation subsidiaries fio business consists operating results gmac 2005 eleven months ended november 30 2006 consolidated basis includes 49 share gmac’s operating results month december 2006 full year 2007 equity method basis fio also includes financing includes financing entities consolidated gmac two special purpose entities holding automotive leases previously owned gmac affiliates retained net book value 33 billion well elimination intercompany transactions gm automotive corporate 2007 changed measure segment operating performance segment net income segment pretax income plus equity income net tax minority interest net tax prior periods adjusted reflect change income taxes evaluated consolidated basis results operations cash flows allison reported discontinued operations periods presented historically allison included gmna consistent industry practice market share information includes estimates industry sales certain countries public reporting legally required otherwise available consistent basis consolidated results operations nm meaningful general motors corporation subsidiaries compared 2006 total net sales revenues 2007 declined driven deconsolidation gmac november 2006 following gmac transaction offset increased automotive sales reflecting growth outside north america operating loss decreased reflecting improved automotive results particularly north america driving total improvement 46 billion improvement automotive results partially offset deconsolidation gmac contributed 22 billion operating profit 2006 whereas 2007 gmac’s results reflected equity income loss increased costs corporate addition factors loss continuing operations increased substantially result 39 billion valuation allowance established third quarter net deferred tax assets united states canada germany also increased share losses equity investment gmac totaling 12 billion net loss 2007 also reflected gain sale allison 43 billion information businesses segments presented august 2007 completed sale commercial military operations allison negotiated purchase price 56 billion cash plus assumed liabilities paid closing purchase price subject adjustment based amount allison’s net working capital debt closing date resulted adjusted purchase price 54 billion gain sale allison amount 53 billion 43 billion aftertax inclusive final purchase price adjustments recognized 2007 allison formerly division powertrain operations global leader design manufacture commercial military automatic transmissions premier global provider commercial vehicle automatic transmissions onhighway including trucks specialty vehicles buses recreational vehicles offhighway military vehicles well hybrid propulsion systems transit buses retained powertrain operations’ facility near baltimore manufactures automatic transmissions primarily trucks hybrid propulsion systems results operations cash flows allison reported consolidated financial statements discontinued operations periods presented historically allison reported gmna compared 2005 total net sales revenues 2006 increased result higher automotive sales principally gmna gmlaam operating loss decreased due lower restructuring charges gmna improved operating results across automotive segments information businesses segments presented changes consolidated financial condition deferred income taxes third quarter 2007 recorded charge 39 billion related establishing full valuation allowances deferred tax assets united states canada germany see “critical accounting estimates” mda discussion specific factors lead us conclusion determined prior periods valuation allowances necessary deferred tax assets united states canada germany based several factors including 1 degree threeyear historical cumulative losses attributable unusual items charges several incurred result actions improve future profitability 2 long duration deferred tax assets 3 expectation continued strong earnings gmac improved earnings gmna accounts notes receivable net accounts notes receivable 97 billion december 31 2007 compared 82 billion december 31 2006 increase 15 billion 176 increase primarily due increased sales across segments totaling 9 billion increases 3 billion gme result translation local currency accounts us dollars foreign currency translation reduction securitization activities higher accrued delphi warranty recoveries gmna 4 billion general motors corporation subsidiaries inventories december 31 2007 149 billion compared 139 billion december 31 2006 increase 1 billion 73 increase primarily due increases finished product 8 billion gme gmap foreign currency translation effects 5 billion gme gmlaam raw materials increases 3 billion gmlaam gmap gme support future production increases partially offset reduction daily rental repurchase inventory 2 billion gmna financing equipment operating leases net equipment operating leases net december 31 2007 67 billion compared 118 billion december 31 2006 decrease 51 billion 431 decrease due planned reduction equipment operating leases net retained part gmac transaction automotive accounts payable principally trade automotive accounts payable december 31 2007 294 billion compared 269 billion december 31 2006 increase 25 billion 93 increase accounts payable primarily related product mix gmna 9 billion foreign currency translation effects resulted increases totaling 13 billion across regions financing debt financing debt december 31 2007 49 billion compared 94 billion december 31 2006 decrease 45 billion 48 decrease debt due planned repayment debt 34 billion secured equipment operating leases retained part gmac transaction combined payments short term longterm debt 8 billion 3 billion respectively financing liabilities deferred income taxes financing liabilities deferred income taxes december 31 2007 9 billion compared 19 billion december 31 2006 decrease 1 billion 551 decrease due 1 billion payment gmac amounts owed gmac sales agreement restore tangible equity balance contractually required levels information businesses geographic regions discussed general motors corporation subsidiaries gm automotive operations financial review nm meaningful production volume represents number vehicles manufactured assembly facilities also includes vehicles produced certain joint ventures b vehicle unit sales primarily represent sales ultimate customer following discussion highlights key changes operating results automotive region drivers changes discussed regional analysis follows section compared 2006 industry global vehicle sales industry unit sales grew strongly regions outside north america 2007 industry unit sales increased asia pacific region 16 million units 82 208 million units 2007 europe grew 12 million units 55 231 million units 2007 latin americaafricamideast region increased 11 million units 177 72 million units 2007 industry sales decreased north america 599000 units 30 196 million units compared 202 million units 2006 gm global vehicle sales worldwide vehicle unit sales increased second highest global sales total history third consecutive year sold 9 million vehicles vehicle unit sales increased 201000 gmlaam 188000 gmap 179000 gme offset decline vehicle units sales gmna 291000 general motors corporation subsidiaries global production volume increased 105000 units 2006 production increased yearoveryear regions outside north america production volume increased notably gmap 335000 units gmlaam 130000 units whereas gmna declined 382000 units total net sales revenue increase total net sales revenues driven increases 55 billion gmap 43 billion gmlaam 41 billion gme offset decline total net sales revenue 42 billion gmna well 29 billion incremental intersegment eliminations automotive cost sales increase automotive cost sales resulted increases 48 billion gmap 44 billion gme 35 billion gmlaam offset decline automotive cost sales 83 billion gmna well 29 billion incremental intersegment eliminations selling general administrative expense increase selling general administrative expense driven increases 3 billion gmap 2 billion gme gmlaam offset decrease 1 billion gmna automotive interest income expense degradation automotive interest income expense resulted due 823 million decrease interest income gmap offset increases net expense 271 million gmlaam 219 million gme 74 million gmna equity income net tax equity income net tax relatively flat overall 2007 recorded increases 60 million gmap due continued growth gm daewoo 15 million gmlaam 8 million gme offset decrease 82 million gmna minority interests net tax increase minority interests net tax results increased earnings consolidated affiliates notably 76 million gmap 2007 income discontinued operations net taxes august 2007 completed sale commercial military operations allison resulting gain 43 billion net tax exclusive gain sale income discontinued operations net tax 256 million 445 million 313 million 2007 2006 2005 respectively compared 2005 industry global vehicle sales regions outside north america experienced growth industry unit volume compared 2005 asia pacific region increased 11 million units 62 192 million units 2006 latin americaafricamideast region increased 794000 units 150 61 million units 2006 europe increased 784000 units 37 219 million units 2006 industry sales decreased north america 376000 units 18 202 million units compared 206 million units 2005 general motors corporation subsidiaries global vehicle sales reported increases worldwide vehicle unit sales 2006 regions outside north america gmap increased 184000 units 173 gmlaam increased 152000 units 172 gme increased 19000 units 1 vehicle unit sales declined gmna 441000 units 84 global production volume increased 130000 units 2005 production volumes increased yearoveryear gmap 334000 units 55000 units gmlaam offset notably decline 207000 units gmna total net sales revenue total net sales revenues increased worldwide 2006 driven increases 53 billion gmna 47 billion gmap 28 billion gmlaam 13 billion gme offset 15 billion incremental intersegment eliminations automotive cost sales increase automotive cost sales resulted increases 39 billion gmap 23 billion gmna 22 billion gmlaam offset decline automotive cost sales 3 billion gme well 15 billion incremental intersegment eliminations selling general administrative expense increase selling general administrative expense driven increases 4 billon gmap 2 billion gme 1 billion gmlaam offset decrease 3 billion gmna expenses expense decreased zero 2006 resulting 8 billion decrease gmap automotive interest income expense improvement automotive interest income expense 2006 resulted primarily due improvements 8 billion gmap 1 billion gmna equity income net tax equity income net tax decreased 2006 principally due 152 million increase gmna offset decreases 162 million gmap 66 million gme minority interests net tax minority interests net tax increased regions except gme 2006 increase resulted primarily due increase 172 million gmap cumulative effect change accounting principle effective december 31 2005 adopted financial accounting standards board interpretation 47 “accounting conditional asset retirement obligations” fin 47 fin 47 relates legal obligations associated retirement tangible longlived assets result acquisition construction development normal operation longlived asset performed analysis obligations associated real property owned leased including plants warehouses offices estimates conditional asset retirement obligations related case owned properties costs estimated necessary legally required removal general motors corporation subsidiaries remediation various regulated materials primarily asbestos abatement estimated using sitespecific surveys available per square foot estimate surveys unavailable leased properties obligations related estimated cost contractually required property restoration refer note 17 application fin 47 resulted charge 109 million aftertax 2005 presented cumulative effect change accounting principle liability conditional asset retirement obligations december 31 2007 2006 222 million 193 million respectively evaluate automotive business make certain decisions using supplemental categories variable expenses nonvariable expenses believe categories provide us useful information investors would also find beneficial view business similar manner believe contribution costs structural costs impairment restructuring charges provide meaningful supplemental information regarding expenses place automotive expenses categories allow us assess cost performance gma use categories evaluate expenses believe categories allow us readily view operating trends perform analytical comparisons benchmark expenses among geographic segments assess whether turnaround globalization strategy reducing costs target use categories forecasting purposes evaluating management determining future capital investment allocations accordingly believe categories useful investors allowing greater transparency supplemental information used management financial operational decisionmaking believe contribution costs structural costs impairment restructuring charges provide useful information limitations associated use categories contribution costs structural costs impairment restructuring charges may completely comparable similarly titled measures companies due potential differences companies exact method calculation result categories limitations considered isolation substitute measures automotive cost sales selling general administrative expense compensate limitations using categories supplements automotive cost sales selling general administrative expense contribution costs expenses consider variable production amount contribution costs included automotive cost sales 123 billion 118 billion 109 billion 2007 2006 2005 respectively costs comprised material cost freight policy warranty expenses amount contribution costs classified selling general administrative expenses 1 billion 2007 2006 2005 costs incurred primarily connection dealer advertising programs b structural costs expenses generally vary production recorded automotive cost sales selling general administrative expense costs include manufacturing labor pension postretirement employee benefits opeb costs engineering expense marketing related costs certain costs related restructuring impairments included automotive cost sales also excluded structural costs amount structural costs included automotive cost sales 40 billion 39 billion 44 billion 2007 2006 2005 respectively amount structural costs included selling general administrative expense 13 billion 12 billion 11 billion 2007 2006 2005 respectively c impairment restructuring charges included automotive cost sales general motors corporation subsidiaries contribution costs contribution costs 2007 totaled 124 billion increase 5 billion 2006 increase result foreign currency translation accounting 37 billion richer product mix increased policy warranty costs overall material performance flat yearoveryear improvements realized supplier productivity global sourcing optimizing supplier footprints offset higher raw material costs product enhancements new vehicles increased global prices steel aluminum copper precious metals increased contribution costs 13 billion 2007 versus 2006 contribution costs percentage revenue increased 695 2007 694 2006 contribution costs 2006 totaled 119 billion increase 9 billion 2005 increase result increased material costs higher levels vehicle content product mix well higher freight cost material performance slightly favorable yearoveryear contribution costs percentage revenue increased slightly 694 2006 692 2005 structural costs automotive structural costs 53 billion 2007 increase 2 billion 2006 costs 2007 driven higher impact foreign currency translation lower gains commodity derivatives contracts related purchases raw materials global engineering product development costs higher 2007 reflecting increased global vehicle development advanced technology spending total structural cost expenditures higher gmap gmlaam reflecting higher production costs new product launches associated volume growth opeb costs reduced 2007 gmna primarily due 2005 uaw health care settlement agreement manufacturing labor costs declined productionrelated headcount levels reduced 2006 uaw attrition program percentage revenue structural costs declined 297 2007 299 2006 structural costs 51 billion 2006 decrease 4 billion 2005 cost reductions gmna 6 billion primary reason reduction partially offset structural cost increases gmlaam gmap continued invest infrastructure support higher unit production sales volumes regions consolidation gm daewoo also increased 2006 structural costs gmap 1 billion compared 2005 since gm daewoo consolidated june 30 2005 percentage revenue structural costs declined 299 2006 346 2005 impairment restructuring charges incurred certain expenses primarily related restructuring asset impairments included automotive cost sales additional details regarding expenses included notes 20 21 22 consolidated financial statements expenses comprised 2007 amounts related following • 918 million total charges restructuring initiatives follows gmna 290 million gme 579 million gmap 49 million • 265 million productspecific asset impairments gmna 14 million gmap • 13 billion additional pension expense gmna related accelerated recognition unamortized prior service cost • adjustment 85 million conjunction cessation production previously divested business general motors corporation subsidiaries 2006 amounts related following • 64 billion net charge related program uaw attrition program primarily payments employees 21 billion curtailment charges associated us hourly pension opeb extended disability plans result 2006 uaw attrition program 43 billion • net reduction 412 million various restructuring matters gmna recorded favorable revisions 11 billion reserves recorded fourth quarter 2005 related plant capacity actions result favorable effects 2006 uaw attrition program reserve postemployment benefits primarily due higher anticipated headcount reductions associated plant idling activities partially offset charges restructuring initiatives 146 million gmna 437 million gme 43 million gmlaam 16 million gmap • 405 million productspecific asset impairment charges gmna 60 million gme 61 million gmap well impairment charges 70 million 89 million writedown plant facilities gmna gme respectively • 224 million recorded conjunction cessation production previously divested business partially offset 36 million adjustment related sale majority investment suzuki 2005 amounts related following • 32 billion associated restructuring initiatives 21 billion incurred gmna including 18 billion employee related costs connection restructuring initiatives announced fourth quarter 2005 222 million associated voluntary salaried early retirement program separation programs related us salaried workforce gme recognized separation contract cancellation charges 11 billion mainly related restructuring plan announced fourth quarter 2004 addition gmap recognized separation costs 55 million related restructuring activities gm holden australia • 21 billion productspecific asset impairment charges 689 million gmna 262 million gme 150 million gmlaam 64 million gmap related writedown productspecific assets also includes 887 million impairment charges related writedown plant facilities gmna general motors corporation subsidiaries gm automotive regional results gm north america nm meaningful production volume represents number vehicles manufactured assembly facilities also includes vehicles produced certain joint ventures b vehicle unit sales primarily represent sales ultimate customer compared 2006 industry vehicle sales industry vehicle sales north america decreased due weakness economy resulting decline housing market rising volatile gas prices expect weakness us economy result challenging nearterm market conditions gmna general motors corporation subsidiaries total net sales revenue total net sales revenue decreased due decline volumes net favorable mix 46 billion partially offset impact favorable pricing vehicles sold 4 billion related recently launched fullsize pickup trucks decrease volume driven reduction yearend dealer inventories 160000 units 2006 yearend levels result lower us industry sales volumes impact declining market share united states reduction daily rental volume 108000 units automotive cost sales automotive cost sales decreased due restructuring impairment charges 5 billion 2007 compared 62 billion 2006 recorded restructuring charges related uaw attrition program incurred 2007 also contributing decrease 2007 1 lower production volumes partially offset mix favorable net impact 38 billion 2 savings retiree pensionopeb costs 18 billion primarily due 2005 uaw health care settlement agreement 3 manufacturing savings 1 billion lower hourly headcount levels driven uaw attrition program productivity improvements cost reductions partially offset 1 13 billion additional expense due accelerated recognition pension unamortized prior service costs refer note 15 2 higher material freight costs 8 billion 3 higher warranty related costs 5 billion primarily result favorable adjustments warranty reserves 2006 occur 2007 4 higher engineering costs 6 billion related increased investment future products 5 higher foreign exchange losses 3 billion due appreciation canadian dollar us dollar 6 decrease 5 billion gains commodity derivative contracts used hedge forecasted purchases raw materials automotive cost sales rate decreased due reduction labor pension costs driven 2006 uaw attrition program selling general administrative expense selling general administrative expense decreased due ongoing cost reduction initiatives well reduction dealerships automotive interest income expense automotive interest expense decreased primarily due reductions debt balances segments utilizing certain proceeds allison sale equity income loss net tax equity income decreased due decreased income gmna’s investment new united motor manufacturing inc nummi result increased project spending preproduction expenses due upcoming launch new vibe increases material freight labor costs income discontinued operations net tax august 2007 completed sale commercial military operations allison resulting gain 43 billion income gain sale business reported discontinued operations periods presented general motors corporation subsidiaries compared 2005 industry vehicle sales industry vehicle sales north america decreased due strong 2005 sales levels weakness economy 2006 total net sales revenue total net sales revenue increased primarily due favorable mix offset declines volume automotive cost sales automotive cost sales increased primarily due increases restructuring impairment charges 25 billion driven charges 1 2006 uaw attrition program 64 billion 2006 2 net reductions vehicle facility impairment charges 1 billion 3 net reductions closed plant restructuring initiatives totaling 28 billion increases offset 1 15 billion reduced costs due lower production volumes partially offset mix 2 savings retiree pensionopeb costs 28 billion due 2005 uaw health care settlement agreement 3 manufacturing savings 1 billion lower hourly headcount levels driven 2006 uaw attrition program 4 lower warranty related costs 2 billion 5 lower engineering costs 4 billion 6 lower tooling amortization 3 billion 7 increase 3 billion gains commodity derivative contracts used hedge forecasted purchases raw materials automotive cost sales rate decreased primarily due increase revenue described selling general administrative expense selling general administrative expense decreased primarily due reduced advertising sales promotion expense 540 million reduced administrative expense due gmna cost reduction initiatives automotive interest income expense automotive interest expense decreased due gain sale mesa arizona proving grounds 2006 270 million equity income loss net taxes equity income increased due improved operating results gmna’s investment nummi general motors corporation subsidiaries gm europe nm meaningful production volume represents number vehicles manufactured assembly facilities also includes vehicles produced certain joint ventures b vehicle unit sales primarily represent sales ultimate customer including unit sales chevrolet brand products region financial results sales chevrolet brand products reported part gmap units sold gm daewoo compared 2006 industry vehicle sales 12 million 55 growth industry vehicle unit sales 2007 primarily resulted increase 680000 vehicles 335 russia increases italy ukraine france poland united kingdom various markets central southeastern europe partially offset decrease 290000 vehicles 77 germany total net sales revenue total net sales revenue increased due 1 favorable impact 29 billion foreign currency translation driven mainly strengthening euro british pound swedish krona versus us dollar 2 increase 16 billion due higher wholesale sales volume outside germany 3 increase 4 billion due improvements pricing outside germany primarily corsa offsetting increases decrease 13 billion related lower wholesale volumes unfavorable pricing germany general motors corporation subsidiaries line industry trends noted gme’s revenue excludes sales chevrolet brand products increased significantly russia wholesale volumes 51000 units 215 followed united kingdom wholesale volumes 35000 units 92 wholesale volumes germany declined 68000 units 189 automotive cost sales automotive cost sales increased due 1 unfavorable impact 29 billion result foreign currency translation 2 increase 5 billion unfavorable vehicle country mix primarily result higher freight duties associated vehicles imported russia korea 3 increase 4 billion related higher wholesale sales volume automotive cost sales rate deteriorated 2007 primarily due unfavorable impact vehicle country mix automotive cost sales partially offset favorable impact price total net sales revenue selling general administrative expense selling general administrative expense increased primarily due foreign currency translation automotive interest income expense automotive interest income expense increased primarily result 1 billion favorable settlement vat claims uk tax authorities compared 2005 industry vehicle sales industry vehicle sales grew 784000 vehicles 37 2006 primarily due increases 373000 vehicles 226 russia 157000 vehicles 44 germany 122000 vehicles 392 ukraine 108000 vehicles 43 italy offset decreases 98000 vehicles 128 turkey 94000 vehicles 33 united kingdom total net sales revenue total net sales revenue increased primarily due 1 increase 3 billion due improvements pricing primarily associated zafira corsa 2 increase 3 billion related vehicle mix primarily associated zafira astra 3 2 billion favorable impact associated increased volume parts accessories 4 favorable impact 2 billion due foreign currency translation 5 increase 2 billion inclusion full year’s results european powertrain organization 2006 opposed partial year’s results 2005 following dissolution fiat joint venture automotive cost sales automotive cost sales decreased due 1 decrease restructuring impairment charges 7 billion 2 lower material costs 3 billion 3 increase 2 billion related vehicle mix primarily associated zafira 4 1 billion increase attributed increased volume parts accessories 5 1 billion unfavorable impact due foreign currency translation 6 increase 2 billion inclusion full year’s results european powertrain organization 2006 opposed partial year’s results 2005 following dissolution fiat joint venture automotive cost sales rate improved 2006 result lower separation costs selling general administrative expense selling general administrative expense increased primarily due increase commercial expense general motors corporation subsidiaries equity income net tax equity income net tax decreased 2006 due 2005 change polish tax law generated additional equity income 2005 gm latin americaafricamideast nm meaningful production volume represents number vehicles manufactured assembly facilities also includes vehicles produced certain joint ventures b vehicle unit sales primarily represent sales ultimate customer compared 2006 industry vehicle sales industry vehicle sales laam region increased strong growth throughout region included increases brazil 535000 vehicles 277 venezuela 148000 vehicles 430 argentina 119000 vehicles 263 middle east excluding israel 93000 vehicles 60 colombia 59000 vehicles 308 egypt 57000 vehicles 361 israel 41000 266 2007 industry vehicle sales south africa declined 34000 vehicles 52 total net sales revenue total net sales revenue increased due 1 29 billion higher volumes across gmlaam business units including increases brazil venezuela argentina offset small decrease ecuador 2 favorable impact foreign currency translation 7 billion primarily related brazilian real colombian peso 3 favorable vehicle pricing 5 billion 4 favorable vehicle mix 2 billion general motors corporation subsidiaries automotive cost sales automotive cost sales increased due 1 increased volume impact region 23 billion 2 unfavorable foreign currency translation 7 billion also includes impact foreign exchange losses result translating amounts payable currency local currency 3 higher content cost 3 billion 4 unfavorable product mix impact 1 billion automotive cost sales rate improved due higher pricing favorable product mix selling general administrative expense selling general administrative expense increased due 1 66 million charge recorded gm brasil second quarter 2007 additional retirement benefits government sponsored pension plan 2 unfavorable foreign currency translation impact 40 million 3 increase cost expenses compared 2006 29 million 4 105 million increased administrative marketing expenses throughout region support higher volume levels automotive interest income expense automotive interest income expense improved due 1 gain 194 million 2007 recorded result gm brasil’s favorable resolution prior tax cases 2 reversals previously established tax accruals 81 million 2007 associated duties federal excise tax related matters longer required 3 income 25 million south africa relating increased export incentives due increases volume exports increases partially offset 1 64 million charge related previously recorded tax credits gm brasil 2 56 million settlement fines related information submitted brazil tax authorities material included consignment contracts one facilities compared 2005 industry vehicle sales industry vehicle sales laam region increased 794000 vehicles 150 2006 compared 2005 included increases brazil 214000 vehicles 125 middle east 193000 vehicles 127 venezuela 115000 vehicles 503 south africa 82000 vehicles 144 argentina 64000 vehicles 163 egypt 59000 vehicles 602 colombia 50000 vehicles 347 total net sales revenue total net sales revenue increased due 1 14 billion increased volumes across gmlaam business units including increased revenues venezuela colombia south africa middle east brazil offset decrease chile 2 favorable vehicle pricing 7 billion 3 favorable effects foreign currency transaction 2 billion automotive cost sales automotive cost sales increased due 1 increased volume region 11 billion 2 higher content cost 4 billion 3 unfavorable foreign currency translation effects 4 billion automotive cost sales rate improved due higher pricing favorable product mix selling general administrative expense selling general administrative expense increased due 1 unfavorable foreign currency translation effects 25 million 2 increases cost expenses compared cost 2005 18 million 3 increased administrative marketing expenses 99 million throughout region support higher volume levels general motors corporation subsidiaries automotive interest income expense automotive interest income expense improved due 1 decrease interest expense 74 million shortterm borrowings gm brasil due reduced shortterm debt outstanding 2 general increase interest income 23 million spread throughout region factors partially offset 1 increase interest expense 15 million shortterm borrowings venezuela due primarily increased shortterm debt outstanding 2 unfavorable foreign currency translation effects 16 million gm asia pacific nm meaningful includes gm daewoo shanghai gm saicgmwuling automobile co ltd sgmw joint venture productionsales 34 sgmw joint venture agreement significant rights member well contractual right report sgmw global sales part global market share b production volume represents number vehicles manufactured assembly facilities also includes vehicles produced certain joint ventures c vehicle unit sales primarily represent sales ultimate customer includes sgmw joint venture sales compared 2006 industry vehicle sales industry vehicle sales asia pacific region increased due strong growth china india 2007 industry sales increased 14 million vehicles 204 china increased 246000 vehicles 141 india increased 87000 vehicles 91 australia growth markets offset decline 385000 vehicles 67 japan china’s vehicle market general motors corporation subsidiaries remained strong 2007 increased 85 million vehicles 2007 compared 71 million vehicles 2006 gmap continued capitalize demand china passenger light commercial vehicle markets gmap increased vehicle sales asia pacific region part due strong sales china volumes exceeded 1 million vehicles 2007 gmap market share increased due increased market share india driven launch chevrolet spark performance new models portfolio although market share japan change overall regional market share favorably impacted due decline japanese market share china declined due continued robust industry growth faster pace volume growth intense competition market share australia decreased industry shift small segments away gm holden’s holden traditional strength change attributable relatively less expensive imports japan korea shift major fleet buyers small segments market share thailand declined due relatively aged models currently production political uncertainties industry greater adverse impact manufacturers smaller market share market share south korea also declined due competitive pressure product cycle several vehicles leaving lineup expected replaced 2008 beyond total net sales revenue total net sales revenue increased due 1 35 billion increase gm daewoo export sales diverse global customer base driven captivawinstrom launch 2 12 billion favorable effect foreign currency translation primarily related australian dollar euro 3 increase domestic unit sales remainder region automotive cost sales automotive cost sales increased due 1 30 increase gm daewoo export volumes amounting 29 billion 2 higher product engineering expenses gm daewoo 2 billion holden 1 billion 3 effect foreign currency translation primarily related australian dollar korean 8 billion automotive cost sales rate decreased due material cost performance efficiencies primarily gm daewoo selling general administrative expense selling general administrative expense increased due higher consumer influence sales promotion selling expense amounting 181 million increased administrative expenses amounting 147 million line growth business across various operations region automotive interest income automotive interest income decreased due 1 nonrecurring gain 7 billion 2006 sale equity stake suzuki reduced ownership 204 37 2 nonrecurring gain 3 billion 2006 sale remaining investment isuzu equity income net tax equity income increased due improved performance shanghai gm offset decreased equity income due sale part equity stake suzuki 2006 minority interests net tax minority interests increased due growth income gm daewoo general motors corporation subsidiaries compared 2005 industry vehicle sales industry vehicle sales asia pacific region increased due strong growth china industry vehicle sales increased 236 71 million vehicles 2006 compared 57 million vehicles 2005 gmap increased vehicle sales asia pacific region due growth china gmap market share increased due increased market share china capitalized strong industry growth market share australia declined due industry shift small segments consolidation gm daewoo beginning june 2005 consolidated gm daewoo result obtaining majority ownership change primarily drives increase total net sales revenues automotive cost sales selling general administrative expense minority interests net tax expense zero 2006 compared 8 billion expense 2005 due writedown fair market value investment fhi automotive interest income automotive interest income increased due 1 gain 7 billion sale equity stake suzuki reduced ownership 204 37 2006 2 gain 3 billion sale remaining investment isuzu 2006 equity income net tax equity income net tax decreased due sale equity stake suzuki 2006 fio financial review fio business includes consolidated operating results gmac’s lines business consisting automotive finance operations mortgage operations insurance includes gmac’s commercial finance business gmac’s equity investment capmark financial group previously gmac commercial mortgage gmac transaction november 2006 sold 51 controlling interest gmac fim holdings llc fim holdings remaining interest gmac accounted using equity method also included fio financing entities consolidated gmac well two special purpose entities holding automotive leases previously owned gmac affiliates retained us part gmac transaction therefore 2007 fio’s operations primarily reflected 49 share operating results gmac compared 2006 included 11 months fully consolidated gmac operations one month 49 share operating results gmac compared 2006 fio reported loss income taxes 7 billion 2007 compared income taxes 19 billion 2006 change primarily due lower operating results gmac 2007 see commentary detailed discussion events factors contributing change gmac’s consolidated operating results record proportionate share equity income beginning december 2006 general motors corporation subsidiaries gmac reported net loss available members 25 billion 2007 compared net income available members 21 billion 2006 gmac’s net losses 2007 reflect adverse effects continued disruption mortgage housing capital markets mortgage business lower levels realized capital gains insurance business offset continued strong performance global automotive finance business mortgage results adversely affected domestic economic conditions including delinquency increases mortgage loans held investment portfolio significant deterioration securitization residential housing markets mortgage business also affected downturn certain foreign mortgage capital markets disruption mortgage housing capital markets contributed lack liquidity depressed asset valuations additional loss provisions related credit deterioration lower production levels global automotive finance operations benefited 2007 lower interest expense higher gains sales servicing fee income due acceleration transition originatetodistribute model united states resulted higher levels offbalance sheet securitizations wholeloan sales mortgage losses increased significantly 2007 compared 2006 2007 mortgage capital markets experienced severe stress due credit concerns housing market contractions united states second half year negative market conditions spread foreign markets gmac’s mortgage business operates predominantly united kingdom continental europe residential homebuilders united states reduced accessibility cost efficient capital secondary markets made residential mortgage industry even capital intensive shortterm probable mortgage industry continue experience declining mortgage origination volumes reduced total mortgage indebtedness due deterioration nonprime nonconforming mortgage market due market factors including interest rates business acquiring selling mortgage loans cyclical industry experiencing downturn cycle mortgage business expect current market conditions turn favorable near term persistence global dislocation mortgage credit markets may continue negatively affect value gmac’s mortgagerelated assets markets continue experience greater volatility less liquidity widening credit spreads repricing credit risk lack price transparency mortgage business operates markets exposure loans trading securities derivatives lending commitments mortgage’s accessibility capital markets continues restricted domestically internationally impacting renewal certain facilities cost funding difficult predict long conditions exist markets products businesses continue affected accordingly factors could continue adversely impact mortgage’s results operations near term result gmac conducted goodwill impairment test mortgage business accordance sfas 142 “goodwill intangible assets” sfas 142 third quarter 2007 based upon results assessment gmac concluded carrying value goodwill mortgage business exceeded fair value recorded impairment loss 455 million reduced investment gmac 223 million share gmac’s impairment loss recorded charge equity loss gmac llc 2007 insurance operations’ net income decreased 2007 due lower level realized capital gains fio’s financing reported income taxes 5 billion 2007 compared loss income taxes 4 billion 2006 increase due 1 2 billion additional revenue 2007 two special purpose entities holding outstanding leases previously owned gmac included gmac’s net income first 11 months 2006 2 29 billion loss gmac transaction recorded 2006 favorable items partially offset 1 3 billion increase interest expense lease assets 2 25 billion decrease depreciation expense 2006 gmac’s longlived assets classified held sale compared 2005 fio reported income taxes 19 billion 2006 compared 35 billion 2005 decrease 46 16 billion 2005 2006 primarily due gmac transaction 2006 fio net income 1 billion includes 12 months activity gmac comprised 11 months operations whollyowned subsidiary totaling 22 billion income one month general motors corporation subsidiaries equity loss 5 million result sale controlling interest gmac fim holdings llc comparisons gmac activity 12 month basis global automotive finance operations’ net income 2006 increased 78 compared 2005 net income positively impacted 4 billion related writeoff certain net deferred tax liabilities part conversion gmac limited liability corporation november 2006 results 2006 include unfavorable aftertax earnings impact 1 billion 1 billion debt tender offer repurchase certain deferred interest debentures net income gmac’s rescap mortgage subsidiary 2006 declined 31 compared 2005 2006 operating results adversely affected domestic economic conditions especially fourth quarter developments offset conversion limited liability corporation income tax purposes resulted elimination 5 billion net deferred tax liability excluding benefit realized conversion limited liability company mortgage’s net income 2 billion insurance operations’ reported net income 11 billion 2006 compared 4 billion 2005 increase income mainly result higher realized capital gains 1 billion 2006 compared 1 billion 2005 underwriting results favorable primarily due increased insurance premiums service revenue earned improved loss adjustment expense experience partially offset higher expenses gmac’s segment net loss 1 billion 2006 compared loss 3 billion 2005 increased loss mainly due decline income capmark financial group 2 billion due sale 79 interest business march 2006 goodwill impairment charges 7 billion higher loss provisions tax impact related gmac’s conversion limited liability corporation fio’s financing reported loss income taxes 4 billion 2006 compared 27 million 2005 change primarily due 1 29 billion loss gmac transaction recorded 2006 2 25 billion decrease depreciation expense 2006 gmac’s longlived assets classified held sale corporate operations nm meaningful corporate includes certain centrally recorded income costs interest income taxes corporate expenditures elimination interregion transactions costs related pension opeb delphi retirees divested businesses retained responsibility automotive interest income expense prior years includes eliminations automotive business gmac general motors corporation subsidiaries compared 2006 automotive cost sales selling general administrative expense increased 11 billion 2007 compared 2006 pension expense increased 251 million 2007 result accelerated recognition unamortized prior service cost ongoing legacy costs lower 2007 100 million due changes us salaried pension opeb plans 2005 uaw health care settlement agreement expenses lower 2006 due curtailment gain 600 million associated pensionopeb expense related gmac transaction reductions 250 million related elimination intersegment transactions gmac recorded automotive cost sales 2006 transactions longer eliminated 2007 longer consolidate gmac expense increased 13 billion 2007 compared 2006 expense 2007 24 billion comprised charges 15 billion related delphi benefit guarantee charge pension expense 552 million delphi portion 2007 national agreement negotiations 255 million related transactions fio 2006 expense comprised charge 500 million related delphi benefit guarantee 565 million expenses related transactions gmac recur 2007 automotive interest income expense decreased due effect elimination interest expense related gmac 2006 partially offset higher interest income 2007 loss continuing operations income taxes equity income minority interests cumulative effect change accounting principle 36 billion 2007 compared 12 billion 2006 income tax expense 371 billion 2007 compared benefit 39 billion 2006 increase attributable valuation allowance 39 billion established 2007 net deferred tax assets us canada germany compared 2005 automotive cost sales selling general administrative expense decreased 846 million 2006 compared 2005 decrease due primarily decrease 11 billion opeb expense resulting 2005 uaw health care settlement agreement reduced legacy costs related employee benefits divested businesses retained responsibility opeb curtailment gain related gmac transaction noted partially offset 250 million increased administrative expenses driven higher outside consulting information technology expenditures expense decreased due 55 billion charge recorded 2005 related delphi benefit guarantee pertaining contingent exposures relating delphi’s chapter 11 filing compared 500 million charge recorded 2006 automotive interest income expense offset elimination certain transactions gmac loss continuing operations income taxes equity income minority interests cumulative effect change accounting principle decreased 57 billion 2006 compared 2005 income tax benefit 39 billion 2006 compared 72 billion 2005 key factors affecting future current results following discussion identifies key factors known events trends could affect future results north american turnaround plan top priorities continue improving business north america achieving competitiveness increasingly global environment thus positioning us sustained profitability growth long term maintaining liquidity general motors corporation subsidiaries systematically aggressively implementing turnaround plan gmna’s business return operations profitability positive cash flow soon possible turnaround plan gmna built four elements • product excellence • revitalizing sales marketing strategy • accelerating cost reductions quality improvements • addressing health carelegacy cost burden following update describes done far achieve elements product excellence continue focus significant attention maintaining consistent product freshness introducing new vehicles frequently reducing average vehicle lifecycle 2008 expect significant percentage retail sales come vehicles launched prior 18 months cadillac cts chevrolet malibu buick lucerne saturn aura fullsize trucks sport utility vehicles midsize crossovers saturn outlook gmc acadia buick enclave fourth quarter 2007 launched two vehicles cadillac cts chevrolet malibu achieved robust sales volumes well significant industry awards chevrolet malibu receiving 2008 north america car year award cadillac cts named 2008 motor trend car year entering 2008 expect cadillac cts chevrolet malibu well upcoming launches pontiac g8 chevrolet traverse contribute favorably restoring brand health anticipate capital spending north america approximately 5 billion 2008 would comparable 2007 levels gmna allocate capital engineering resources support fuelefficient vehicles including hybrid vehicles united states increasing production active fuel management engines sixspeed transmissions fourth quarter 2007 introduced new 2mode hybrid models chevrolet tahoe gmc yukon addition undertaking major initiative alternative fuels sustainable technologies e85 flex fuel vehicles run gasoline ethanol combination two fuels september 2007 launched project driveway make 100 chevrolet equinox fuel cell electric vehicles available driving public vicinity los angeles new york city washington dc revitalize sales marketing strategy pursuing revised sales marketing strategy focusing clearly differentiating brands optimizing distribution network growing key metropolitan markets refocusing marketing efforts strength value products since early 2006 promotion strategy emphasized brands vehicles rather price incentives addition begun increasing advertising support new products specific marketing initiatives including price incentives improve sales performance key underdeveloped states pricing strategy improved quality product execution reduced sales daily rental fleets strong market used vehicles resulted higher residual values higher average transaction prices cars trucks 2008 plan accelerate alignment us brands four distinct dealer channels chevrolet saturn buickpontiacgmc cadillachummersaab expect enhance dealer profitability time facilitate highly differentiated products brands continued weakness us automotive market significant challenge us nearterm fully discussed “nearterm market challenges” accelerate cost reductions quality improvements since november 2005 announcement strategy reduce structural costs manufacturing area introduced variety initiatives accomplish strategy 2007 achieved announced target reducing certain annual structural costs primarily related labor pension post retirement costs gmna corporate 9 billion average less costs 2005 improvement due largely success attrition programs reduced number hourly employees 34400 effect resulting pension remeasurement well number items including 2005 health care settlement agreement uaw reductions pensions salaried employees caps healthcare costs salaried retirees 2008 implemented additional voluntary special attrition program 74000 uawrepresented general motors corporation subsidiaries employees eligible participate including 46000 employees currently eligible retirement continue focus longterm goal reducing global automotive structural costs revenues percentage 2005 revenues less 25 2010 2007 global automotive structural costs less 30 revenue believe new collective bargaining agreement entered october 2007 national agreement provides additional cost reduction opportunities particularly areas healthcare costs savings implementation tier ii wage structure accordingly revised previously announced target reductions structural costs percent revenues 25 2010 23 2012 reducing material costs remains critical part gmna’s overall longterm cost reduction plans 2007 improved performance purchasing offset improvements content additions new vehicle programs higher commodity prices steel nonferrous metals looking forward expect commodity pricing pressures remain flat improve modestly also expect reduce substantial portion cost premiums historically paid delphi systems components next three five years savings offset various labor transitional subsidies expect achieve annual net savings medium term approximately 500 million full realization savings depends delphi’s successful emergence bankruptcy protection terms delphi negotiated us see delphi bankruptcy continue aggressive pursuit material cost reductions via improvements global processes product development enable commonization application parts among vehicle architectures well continued use competitive supply sources globally extensive use benchmarking supplier footprint optimization leveraging global reach take advantage economies scale purchasing engineering advertising salaried employment levels indirect material costs seek continue achieve cost reductions seen significant improvements warranty quality related costs past several years enabled implementation extended powertrain warranty 2008 plan continue focus reducing costs continued investment product development new technology vehicle quality demonstrates continued improvements 2007 recent vehicle launches performing record warranty levels buick cadillac brands first third respectively recent jd power vehicle dependability study also experienced 89 decrease number vehicles included safety noncompliance recall campaigns since 2005 2008 maintain focus improving vehicle quality address health carelegacy cost burden addressing legacy cost burden health care employees retirees united states one critical challenges face past three years worked uaw us labor unions find solutions challenge october 2005 announced 2005 uaw health care settlement agreement modified postretirement healthcare benefits uaw active employees retirees eligible dependents require monthly contributions deductibles copay obligations first time october 2007 signed memorandum understanding postretirement medical care retiree mou uaw superseded settlement agreement currently pending court approval settlement agreement settlement agreement executed connection 2007 national agreement incorporate supersede 2005 uaw health care settlement agreement implemented later january 1 2010 date appeals challenges court approval settlement agreement exhausted implementation date began recognizing benefits 2005 uaw health care settlement agreement three months ended september 30 2006 remeasurement us hourly opeb plans march 31 2006 generated 13 billion opeb expense 145 billion reduction opeb obligation including mitigation plan described note 15 consolidated financial statements april 2006 reached tentative agreement international union electrical workers communications workers america iuecwa reduce healthcare costs similar 2005 uaw health care settlement agreement ratified iuecwa membership april 2006 received court approval november 2006 iuecwa healthcare agreement reduced 2007 opeb expense 1 billion opeb obligation 5 billion iuecwa collective bargaining agreement expired fourth quarter 2007 anticipate new collective bargaining agreement iuecwa include arrangements similar contemplated settlement agreement also increased us salaried workforce’s participation cost healthcare january 2007 established cap contributions salaried retiree healthcare level 2006 expenditures future average costs exceed established general motors corporation subsidiaries limits make additional plan changes affect costsharing features program coverage effective start following calendar year program changes may include limited higher monthly contributions deductibles coinsurance outofpocket maximums prescription drug payments also reduced levels coverage corporatepaid life insurance salaried retirees 2007 national agreement provides permanent shift responsibility retiree healthcare liabilities 47 billion new benefit plan established funded new veba promptly implementation date believe initiatives area reduce us healthcare related cash payments 2 billion per year beginning 2010 reduced 46 billion 2007 continue work employees healthcare providers us government find solutions critical issues posed rising cost healthcare settlement agreement provides publicly support federal policies improve quality affordability healthcare work cooperatively uaw toward goal agreed uaw form national institute health care reform conduct research analyze current medical delivery system united states develop targeted broadbased reform proposals improve quality affordability accountability system educate public policymakers others reforms could address deficiencies current system initiatives reduce healthcare costs 2007 also included using global purchasing process identify costeffective suppliers auditing eligibility plan participants well working uaw vehicle manufacturers support variety federal legislation would reduce employer healthcare costs nearterm market challenges nearterm expect challenging market conditions developed third quarter 2007 north america germany continue north america turmoil mortgage credit markets continued reductions housing values high energy prices threat recession negative impact consumer’s willingness purchase products factors contributed lower unit sales north america 2007 combined shifts consumer preferences towards cars away fullsize trucks utility vehicles negatively impacted results larger vehicles among profitable products expect lower unit sales continue nearterm addition competition fullsize trucks increased resulting increased consumer incentives compared earlier expectations german market experienced 77 decrease unit sales volumes 2007 compared 2006 anticipated drop unit sales volumes early 2007 result increases taxes automobiles however expect decrease would continue entire 2007 calendar year nearterm future response industrywide volume decline competitors increased consumer incentives maintain volume expect increased consumer incentives continue nearterm addition significant uncertainty developed market reflecting new factor impact new european environmental regulations would german automotive market constrained volumes consumers delayed purchases uncertainty cost new environmental regulations automobiles finally global effect turmoil credit markets increased oil prices continued diminish consumers’ ability willingness purchase new vehicles germany well markets national agreement october 10 2007 national agreement us uaw related retiree mou ratified 2007 national agreement covers wages hours terms conditions employment uawrepresented employees retiree mou superseded settlement agreement executed february 2008 settlement agreement provides responsibility providing retiree health care permanently shift us new retiree plan funded new veba final effectiveness settlement agreement subject number conditions described already begun executing certain provisions settlement agreement following key terms provisions 2007 national agreement settlement agreement general motors corporation subsidiaries national agreement 2007 national agreement established new wage benefit package new hires tier ii wage certain noncore positions including limited material movement kitting sequencing certain stampings certain subassemblies new hires tier ii wage positions receive base wages approximately 15 per hour versus approximately 28 per hour existing employees addition tier ii wage new hires higher cost sharing arrangements active healthcare coverage cash balance pension plan receive 1 per hour 401k contribution lieu defined benefit postretirement medical benefit plan addition agreement provides lump sum payments 3000 2007 3 4 3 wages 2008 2009 2010 respectively traditional employees amortize lump sum payments 12month period following payment finally pension benefit increases lump sum payments provided current retirees covered employees delphi result changes expect average hourly manufacturing wage rate tier ii wage positions reduced approximately 78 per hour 26 per hour settlement agreement fully implemented settlement agreement cap retiree healthcare obligations uaw associated employees retirees dependents defined settlement agreement supersede replace 2005 uaw health care settlement agreement transfer responsibility administering retiree healthcare benefits individuals new benefit plan established funded new veba trust become effective settlement agreement subject class certification court approval completion discussions us sec regarding accounting treatment transactions contemplated settlement agreement basis reasonably satisfactory us light contingencies recognition effects settlement agreement made consolidated financial statements settlement agreement provides later january 1 2010 final court approval settlement agreement transfer obligations provide covered uaw employees postretirement medical benefits new retiree health care plan new plan established funded new veba accordance settlement agreement effective january 1 2008 bookkeeping purposes divide existing internal veba two bookkeeping accounts one account consist percentage existing internal veba’s assets january 1 2008 equal estimated percentage hourly opeb liability covered existing internal veba attributable nonuaw represented employees retirees eligible spouses surviving spouses dependents nonuaw related account balance approximately 12 billion second account consist remaining assets existing internal veba january 1 2008 uaw related account balance approximately 145 billion amounts withdrawn uaw related account including investment returns january 1 2008 transfer new veba pursuant settlement agreement issued 44 billion principal amount 675 series u convertible senior debentures due december 31 2012 convertible note lbk llc delaware limited liability company sole member lbk hold convertible note transferred new veba accordance terms settlement agreement interest convertible note payable semiannually accordance settlement agreement lbk transfer interest receives convertible note temporary asset account maintain funds temporary asset account transferred new veba accordance terms settlement agreement conjunction issuance convertible note lbk entered certain cashsettled derivative instruments maturing june 30 2011 economic effect reducing conversion price convertible note 40 36 derivative instruments also entitle us partially recover additional economic value provided common stock price appreciates 6348 7053 per share fully recover additional economic value provided common stock price reaches 7053 per share pursuant settlement agreement lbk transfer interests derivatives new veba convertible note transferred lbk new veba also issued 4 billion short term note lbk short term note pursuant settlement agreement short term note pays interest rate 9 matures date face amount short term note paid interest new veba accordance terms settlement agreement lbk hold short term note matures general motors corporation subsidiaries wholly owned consolidated subsidiary lbk hold convertible note short term note derivatives paid transferred new veba three securities effectively eliminated consolidated financial statements paid transferred new veba without restrictions april 1 2008 make additional contribution 165 million temporary asset account beginning 2009 may required contribute additional 165 million per year limited maximum additional 19 payments either temporary asset account new veba established contributions required annual cash flow projections show new veba become insolvent rolling 25year basis time option prepay remaining contingent 165 million payments additionally initial effective date settlement agreement may transfer additional 56 billion subject adjustment new veba may instead opt make annual payments varying amounts 421 million 33 billion 2020 delphi bankruptcy background october 2005 delphi filed petition chapter 11 proceedings us bankruptcy code many us subsidiaries delphi’s financial distress chapter 11 filing posed significant risks us two principal reasons 1 production operations rely systems components parts provided delphi largest supplier could substantially disrupted delphi rejected gm supply agreements labor agreements thereby affected availability price required systems components parts 2 connection 1999 spinoff delphi gm provided limited guarantees pension opeb benefits hourly employees represented uaw iuecwa united steel workers usw transferred delphi gm benefit guarantees could triggered connection chapter 11 proceedings since filing worked delphi unions interested parties negotiate satisfactory resolution delphi’s chapter 11 restructuring process including several interim agreements 2006 attrition buyout programs affecting certain gm delphi employees described certain labor issues resolved among delphi union us bankruptcy court approved delphi’s plan reorganization delphi por includes agreements delphi gm delphigm settlement agreements would settle claims delphi pursuing approximately 61 billion new exit financing support delphi por may difficult light current challenging conditions us global credit markets particularly weakness decline capacity market highly leveraged loans 2007 annual report form 10k delphi stated discussions plan investors us regarding implementation exit financing could assurance whether exit financing could obtained plan investors’ obligation invest delphi subject number conditions including delphi’s obtaining adequate exit financing investments closed march 31 2008 later date parties agree lead investor terminate investment agreement exploring alternatives delphi event planned financing level achieved including providing additional significant portion delphi’s exit financing delphi’s emergence chapter 11 proceedings remains contingent upon obtaining sufficient financing delphi por assurance delphi obtain sufficient financing emerge bankruptcy terms set forth delphi por delphi cannot secure financing needs delphi por would consummated terms negotiated us interested parties believe delphi would likely seek alternative arrangements assurance delphi would successful obtaining alternative arrangements resulting uncertainty could disrupt ability plan future production realize cost reduction goals could affect relationship uaw result providing additional financial support delphi receiving less distributions expect resolution delphi’s bankruptcy proceedings assuming delphi’s obligations workforce retirees due uncertainties reasonably possible additional losses could arise future currently unable estimate amount range losses labor settlement july 2007 memorandum understanding among delphi uaw us delphi uaw mou approved bankruptcy court similar labor agreements delphi’s major unions also approved delphi uaw mou covers number issues including 1 extension gmuaw benefit guarantee related delphi indemnity 2 flowbacks certain delphi uaw employees 3 settlement uaw claim delphi 4 gm support certain specific delphi sites general motors corporation subsidiaries delphi uaw mou agreed extend expiration date benefit guarantees uaw delphi agreed extend agreement indemnify us benefit guarantee payments october 18 2007 march 31 2008 also agreed applicable benefit guarantees triggered certain uaw employees delphi terminates pension plan ceases provide ongoing service fails refuses provide postretirement medical benefits uaw employees time 1 execution comprehensive settlement agreement delphi us resolving financial commercial matters us 2 substantial consummation plan reorganization delphi por confirmed bankruptcy court also agreed delphi uaw mou allow delphi uaw employees payroll prior october 8 2005 flowback gm offered job opportunities gm certain circumstances permitted certain delphi uaw represented employees agreed retire september 1 2007 retirement incentives agreed delphi uaw delphi uaw mou flowback gm agreed assume opeb obligations retirees committed delphi uaw mou pay 450 million settle uaw claim delphi uaw directed us pay directly external veba upon execution delphigm settlement agreements substantial consummation delphi por another reorganization plan delphi incorporates delphigm settlement agreements financial contribution payments retirement incentives buyouts buy downs severance payments agreed delphi uaw delphi uaw mou covered delphigm settlement agreements described delphi uaw mou also agreed make commitments certain product programs certain specified delphi sites addition certain delphi sale sites saginaw steering saginaw sandusky adrian delphi “footprint” sites flint east needmore road saginaw manufacturing agreed cause production operations active inactive delphi uaw employees transferred third party certain dates certain circumstances finally agreed provide certain number job opportunities delphi “footprint” sites august 5 2007 entered memorandum understanding delphi iuecwa delphi iuecwa mou provides terms similar delphi uaw mou regard establishing terms related consensual triggering benefit guarantee agreement offering additional attrition program continuing operations certain delphi sites committed certain product programs also entered similar agreements usw us labor unions represent delphi hourly employees delphi iuecwa mou similar agreements labor unions representing us employees transferred gm delphi ratified appropriate membership approved bankruptcy court warranty claims settlement october 1 2007 bankruptcy court approved warranty settlement agreement delphi us resolves certain outstanding warranty claims asserted us delphi related components systems supplied delphi us estimated settlement amount 170 million comprised payments anticipated total 130 million cash replacement components valued 40 million delphi por delphi gm settlement agreements bankruptcy court entered order january 25 2008 confirming delphi por including delphigm settlement agreements mentioned delphi currently pursuing exit financing support delphi por may particularly difficult light recent contraction credit markets following discussion describes implementing delphi por would affect us assurance however delphi por substantially consummated terms set forth therein terms acceptable us also discuss could affected delphi’s chapter 11 process resolved delphi por delphi por terms delphigm settlement agreements would receive 15 billion combination least 750 million cash second lien note 1 billion junior preferred convertible stock delphi por value ultimate value consideration contingent fair market value delphi’s securities upon emergence general motors corporation subsidiaries bankruptcy would release claims delphi would receive unconditional release alleged claims us delphi customers certain claims related ordinary business would flow chapter 11 proceedings satisfied delphi reorganization ordinary course business delphi continuing experience difficulty obtaining exit financing result current weakness credit market informed delphi prepared reduce cash portion distributions significantly accept equivalent amount debt form first lien note help facilitate delphi’s successful emergence bankruptcy proceedings delphigm settlement agreements global settlement agreement amended gsa master restructuring agreement amended mra comprise delphigm settlement agreements gsa would released claims delphi us affiliates creditors unions current future stockholders delphi claims related spinoff delphi collective bargaining agreements delphi bankruptcy delphi’s subsidiaries outside us affiliates would release similar claims delphi affiliates claims resulting ordinary course business would released gsa agreed assume approximately 15 billion delphi’s net pension obligations delphi agreed issue us note amount also agreed reimburse delphi cost credited service accrued since january 1 2007 delphi us hourly employees well cost opeb claims paid delphi behalf employees 2007 retirement gsa also provides would reimburse delphi 100 retirement incentives 50 buyout payments 100 buydown payments made part recent delphi attrition programs members uaw iuecwa usw would also make payments aggregating 60 million related claims iuecwa usw delphi costs expenses incurred delphi connection delphi iuecwa mou mra sets forth terms conditions governing scope existing supply contracts related pricing agreements extensions certain supply contracts rights move production certain suppliers delphi’s rights bid qualify new business delphi also agreed assume reinstate applicable certain agreements us including certain agreements related 1999 spinoff delphi gm certain subsequent agreements ordinary course agreements prepetition contracts us delphi including contracts related 1999 spinoff delphi gm terminated agreed reimburse certain portion delphi’s hourly labor costs incurred produce systems components parts us october 1 2006 september 14 2015 offer similar reimbursement prospective buyers certain delphi facilities gm production labor cost subsidy mra provides additional gm commitments regard specific delphi facilities certain us facilities providing production us agreed reimburse delphi’s expenses necessary make cash losses attributable production facilities either closed sold production cash burn support regard certain businesses delphi holding sale agreed make certain portion shortfall delphi fully recover net working capital invested business sales proceeds exceed net working capital would receive certain portion excess finally delphi agreed provide us designee option purchase certain delphi businesses one dollar businesses sold certain specified deadlines business sold either third party us affiliate pursuant option applicable deadline option gm affiliate deemed exercised purchase option unsold business including materially assets liabilities automatically transfer gm “buyer” similarly delphi uaw mou transfer occurred applicable deadline responsibility uaw hourly employees unsold business affected would automatically transfer us designated affiliate delphi agreed guarantee performance subsidiary issue us purchase orders provided material breach certain obligations delphigm settlement agreements delphi agreed maintain majority ownership subsidiary certain limited exceptions risks delphi por consummated delphi successful consummating delphi por could subject many risks reported since delphi’s 2005 bankruptcy filing example delphi could reject threaten reject individual contracts us either purpose exiting specific lines business attempt increase price pay certain parts components delphi por consummated intend continue protect right setoff 115 billion owed delphi ordinary course business made chapter 11 filing however extent obligations covered right setoff may subject dispute delphi creditors’ committee delphi’s creditors limitation court cannot provide assurance able setoff amounts fully partially date recorded setoffs approximately 54 million prepetition obligation delphi’s agreement also filed consolidated proof claim accordance general motors corporation subsidiaries bankruptcy court’s procedures setting forth claims including claims various gm subsidiaries delphi debtor entities although exact amount claims cannot established contingent nature many claims involved fact validity amount claims may subject objections delphi stakeholders labor mous benefit guarantees related indemnification agreement delphi expire march 31 2008 delphi por similar agreement consummated obligation make benefit guarantee payments could triggered delphi makes certain changes pension opeb plans ceases provide ongoing credited service delphi would required indemnify us payments claims indemnity might paid may partially paid depending upon reorganization plan approved delphi would also claim delphi 38 billion related costs paid related delphi hourly employees participated special attrition buyout programs provided combination early retirement programs incentives reduce hourly employment gm delphi 2006 13800 delphi employees represented uaw 6300 delphi employees represented iuecwa elected participate attrition buyout programs gm contingent liability believe probable incurred contingent liability due delphi’s chapter 11 filing quarterly report form 10q second quarter 2007 reported believed range contingent exposures approximately 7 billion recorded charges 11 billion 5 billion 55 billion 2007 2006 2005 respectively connection benefit guarantee agreements addition 2007 recorded charges 5 billion related delphigm settlement agreements consisting primarily guarantee delphi’s recovery net working capital facilities held sale amounts due labor cost subsidy charges net estimated recoveries would due us upon emergence delphi bankruptcy commitments delphigm settlement agreements labor cost subsidy production cash burn support expected result additional expense 300 million 400 million annually beginning 2008 2015 treated period cost expensed incurred continue expect cost reimbursements offset long term savings reductions estimated 15 billion price penalty pay delphi annually systems components parts 2006 2007 certain amounts previously recorded benefit guarantee reclassified opeb liability since assumed opeb obligations 18500 delphi employees returned gm continue working gm employees retire gm actual impact resolution issues related delphi cannot determined delphi emerges bankruptcy protection delphi por another comprehensive resolution plan reorganization assurance parties successfully consummate delphi por approved bankruptcy court parties reach subsequent comprehensive resolution plan bankruptcy court approve resolution plan resolution plan include terms described gmac sale 51 controlling interest november 2006 completed gmac transaction sale 51 controlling interest gmac purchase price 74 billion fim holdings fim holdings consortium investors including cerberus fim investors llc citigroup inc aozora bank limited subsidiary pnc financial services group inc retained 49 interest gmac’s common membership interests addition fim holdings purchased 555000 gmac’s preferred membership interests cash purchase price 500 million purchased 1555000 preferred membership interests cash purchase price 14 billion november 1 2007 fim holdings converted 555000 preferred membership interests common membership interests converted 533236 preferred membership interests common membership interests percentage ownership common membership interests remained unchanged general motors corporation subsidiaries total value cash proceeds distributions us payment certain intercompany obligations purchased preferred membership interests gmac expected approximately 14 billion three years comprised 74 billion purchase price 27 billion cash dividend closing transaction related cash flows including monetization portfolio vehicle leases related vehicles delinquency rate portfolio increased recently consistent trends credit markets january 2007 made capital contribution gmac approximately 1 billion restore adjusted tangible equity balance contractually required amount due decrease adjusted tangible equity balance gmac november 30 2006 gmac may required make certain quarterly distributions holders preferred membership interests cash pro rata basis preferred membership interests issued units 1000 accrue yield rate 10 per annum gmac’s board managers gmac board may reduce distribution extent required avoid reduction equity capital gmac minimum amount equity capital equal net book value gmac november 30 2006 addition gmac board may suspend payment preferred membership interest distributions consent holders majority preferred membership interest distributions made respect fiscal quarter distributions would cumulative accrued yield gmac’s preferred membership interests fiscal quarter fully paid preferred holders portion excess net financial book income gmac fiscal quarter amount yield distributed holders preferred membership interests quarter distributed holders common membership interests follows least 40 excess paid fiscal quarters ending prior december 31 2008 least 70 excess paid fiscal quarters ending december 31 2008 prior consummation gmac transaction 1 certain assets respect automotive leases owned gmac affiliates net book value approximately 4 billion related deferred tax liabilities 18 billion transferred us 2 assumed retained certain gmac’s opeb obligations 842 million related deferred tax assets 302 million 3 gmac transferred entities hold certain real properties us 4 gmac paid cash dividends us based gmac’s anticipated net income period september 30 2005 november 30 2006 totaling 19 billion 5 repaid certain indebtedness specified intercompany unsecured obligations owing gmac 6 gmac made onetime cash distribution us 27 billion cash reflect increase gmac’s equity resulting transfer portion gmac’s net deferred tax liabilities arising conversion gmac certain subsidiaries limited liability corporations part agreement retained option ten years closing date repurchase gmac certain assets related automotive finance business north american operations international operations gmac exercise option conditional credit rating investment grade higher gmac’s credit rating call option price calculated higher 1 fair market value 2 95 times consolidated net income gmac’s automotive finance business either calendar year call option exercised calendar year immediately following year call option exercised gmac transaction important element turnaround efforts provided following • strong longterm services agreement us gmac part transaction entered number agreements gmac intended continue mutuallybeneficial global relationship us gmac agreements substance consistent existing historical practices gmac us including requiring gmac continue allocate capital automotive financing thereby continuing provide critical financing support significant share global sales gmac retains right make individual credit decisions gmac committed fund broad spectrum customers dealers consistent historical practice relevant jurisdictions subject gmac’s fulfillment certain conditions granted gmac exclusivity products specified markets around world us canadian international gmsponsored retail lease dealer marketing incentives exception saturn branded products • improved liquidity received significant cash proceeds closing bolster liquidity strengthening balance sheet funding turnaround plan • enhanced stockholder value stronger gmac retained 49 common membership interest gmac able continue participate gmac’s financial results general motors corporation subsidiaries • delinkage gmac’s credit rating pursuing sale majority interest gmac expected introduction new controlling investor gmac new capital gmac significantly reduced intercompany exposures us would provide gmac solid foundation improve current credit rating delink gmac credit ratings us november 2007 converted 533236 preferred membership interests fim holdings converted 555000 preferred membership interests 3912 4072 respectively common membership interests order strengthen gmac’s capital position percentage ownership common membership interests gmac remained unchanged conversion accounted conversion fair value recorded loss 27 million 2007 loss conversion represents difference fair value carrying value preferred membership interests converted gmac accounted conversion preferred membership interests recapitalization recorded book value proportionate share increase gmac’s net equity attributable common membership interest holders result conversion exceeded fair value preferred membership interests converted 27 million difference recorded increase additional paidin capital 2007 december 31 2007 hold remaining 1021764 preferred membership interests 49 52912 common membership interests gmac periodically evaluate carrying value investment gmac including preferred membership interests assess whether investment impaired currently believe investment gmac impaired however many economic factors unstable december 31 2007 may affect gmac’s ability generate sustainable earnings continue distributions preferred membership interests accordingly assessment impairment factors include • instability global credit mortgage markets effect gmac’s residential capital llc rescap subsidiary well automotive finance insurance operations • deteriorating conditions residential home building markets including significant changes mortgage secondary market tightening underwriting guidelines reduced product offerings • recent credit downgrades gmac rescap effect ability raise capital necessary acceptable terms • effect expected nearterm automotive market conditions gmac’s automotive finance operations investigations previously reported cooperating federal governmental agencies connection number investigations sec issued subpoenas information requests us connection various matters including restatements previously disclosed financial statements connection accounting certain foreign exchange contracts commodities contracts financial reporting concerning pension opeb certain transactions us delphi supplier price reductions credits obligation may fund pension opeb costs connection delphi’s proceedings chapter 11 bankruptcy code addition sec issued subpoena connection investigation transactions precious metal raw materials used automotive manufacturing operation produced documents provided testimony response subpoenas continue cooperate respect matters negative outcome one investigations could require us restate prior financial results pay fines penalties satisfy remedies various provisions us securities laws outcomes could certain circumstances material adverse effect business liquidity capital resources investors potential investors securities consider cash flows automotive fio businesses relevant measure analysis various securities trade public markets accordingly provide supplemental statements cash flows aid users consolidated financial statements analysis performance liquidity capital resources general motors corporation subsidiaries information reconciles consolidated statements cash flows elimination “net investing activity financing insurance operations” “net financing activity automotive operations” line items shown table following statements years ended december 31 2007 2006 2005 general motors corporation subsidiaries general motors corporation subsidiaries automotive available liquidity believe sufficient liquidity financial flexibility meet capital requirements including required funding uaw attrition program funding needs short mediumterm even event us industry decline medium longterm believe ability meet capital requirements funding obligations including required funding outlined settlement agreement primarily depend successful execution turnaround plan return north american operations profitability positive cash flow automotive available liquidity includes cash balances marketable securities readily available assets veba trusts december 31 2007 available liquidity 273 billion compared 264 billion december 31 2006 204 billion december 31 2005 amount consolidated cash marketable securities subject intramonth seasonal fluctuations includes balances held various business units subsidiaries worldwide needed fund operations manage global liquidity centrally allows us optimize funding global operations december 31 2007 60 reported liquidity held us additionally us operations access much overseas liquidity intercompany arrangements summary global liquidity follows december 31 2007 total veba trust assets related accounts 163 billion 6 billion readily available december 31 2006 total veba trust assets related accounts 178 billion 25 billion readily available december 31 2005 total veba trust assets related accounts 191 billion 38 billion readily available decline veba balances since december 31 2006 primarily driven 27 billion withdrawals 2007 partially offset favorable asset returns year connection settlement agreement significant portion veba trust assets allocated uaw related account also hold proportional investment returns percentage trust amounts withdrawn uaw related account including investment returns january 1 2008 transfer new veba treatment led us exclude portion uaw related account available liquidity december 31 2007 also 46 billion standby revolving credit facility syndicate banks 150 million terminates june 2008 45 billion terminates july 2011 december 31 2007 availability revolving credit facility 45 billion 91 million letters credit issued credit facility loans currently outstanding 45 billion secured facility borrowings limited amount based value underlying collateral consists certain north american accounts receivable inventory gm saturn corporation gm canada certain plants property equipment gm canada pledge 65 stock holding company indirect subsidiary general motors de mexico de rl de cv collateral also secures certain lines credit automatic clearinghouse overdraft arrangements letters credit provided secured lenders facility totals 6 billion 45 billion maximum available revolving credit facility december 31 2007 addition 91 million letters credit issued revolving credit facility 16 billion utilized secure facilities event certain work stoppages secured revolving credit facility would temporarily reduced 35 billion may 2007 entered unsecured revolving credit agreement expiring june 2008 provided borrowings 500 million reviewing liquidity position december 2007 believe sufficient liquidity financial flexibility meet capital requirements first half 2008 without credit agreement result terminated credit agreement january 9 2008 never borrowed credit agreement general motors corporation subsidiaries additional source available liquidity obtained 41 billion standby revolving credit agreement syndicate banks june 2007 facility secured common membership interests gmac scheduled mature june 2008 reviewing liquidity position december 2007 believe sufficient liquidity financial flexibility meet capital requirements first half 2008 without credit agreement result terminated credit agreement december 31 2007 never borrowed credit agreement august 2007 entered revolving credit agreement expiring august 2009 provides borrowings 13 billion agreement provides additional available liquidity could use general corporate purposes including working capital needs facility borrowings limited amount based value underlying collateral consists residual interests trusts leased vehicles issue assetbacked securities collateralized vehicles associated leases underlying collateral previously owned gmac transferred us part gmac transaction november 2006 underlying collateral held bankruptcyremote subsidiaries pledged trustee benefit lender consolidate bankruptcyremote subsidiaries trusts financial reporting purposes borrowings outstanding agreement december 31 2007 also additional 15 billion undrawn committed facilities including certain offbalance sheet securitization programs various maturities one year 1 billion undrawn uncommitted lines credit addition consolidated affiliates nongm minority shareholders primarily gm daewoo combined 16 billion undrawn committed facilities may 2007 issued 15 billion principal amount series convertible debentures due 2009 series convertible debentures issued par interest rate 15 may converted option holder common stock based initial conversion rate 6837 shares per 2500 principal amount debentures represents initial conversion price 3657 per share connection issuance series convertible debentures purchased convertible note hedge convertible debentures private transaction convertible note hedge expected reduce potential dilution respect common stock upon conversion series convertible debentures effectively increases conversion price 4571 per share proceeds debentures provided additional available liquidity may use general corporate purposes including working capital needs potential measures strengthen available liquidity could include sale noncore assets additional public private financing transactions anticipate additional liquidity along currently available liquidity described used general corporate purposes including working capital needs well funding cash requirements outlined settlement agreement potentially similar arrangements labor unions uaw special attrition program believe possible issues may arise various financing arrangements connection restatement prior consolidated financial statements financing arrangements principally consist obligations connection saleleaseback transactions lease obligations including offbalance sheet arrangements include public debt indentures connection 2006 restatement prior consolidated financial statements evaluated effect restatement agreements including legal rights respect claims could asserted ability cure based review believe although assurances given likelihood nature amount claims may asserted amounts subject possible claims acceleration termination remedies likely exceed 27 billion consisting primarily offbalance sheet arrangements moreover believe may economic disincentives third parties raise claims extent based review reclassified 257 million obligations december 31 2006 longterm debt shortterm debt december 31 2007 amount obligations reclassified longterm debt shortterm debt based review 212 million believe sufficient liquidity short medium term satisfy claims related matters date received claims anticipate receiving claims cash flow increase available liquidity 273 billion december 31 2007 264 billion december 31 2006 primarily result positive operating cash flow net 1 billion contribution mitigation veba 54 billion proceeds sale allison cash flows received connection portfolios vehicle operating leases held fio increase partially offset general motors corporation subsidiaries capital expenditures 1 billion capital contribution gmac decrease readilyavailable veba trust assets 19 billion primarily result settlement agreement investments marketable securities primarily consist purchases sales maturities highlyliquid corporate us government us government agency mortgagebacked debt securities used cash management purposes 2007 acquired net 20 billion marketable securities year ended december 31 2007 positive operating cash flow 54 billion net loss continuing operations 426 billion result compares positive operating cash flow 5 billion net loss continuing operations 35 billion 2006 operating cash flow 2007 included withdrawals 27 billion veba trust assets opeb plans reimbursement retiree healthcare life insurance benefits provided eligible plan participants operating cash flow unfavorably impacted 9 billion cash expenditures related gmna restructuring initiative 4 billion cash expenditures related gme restructuring initiative 3 billion cash expenditures related delphi’s restructuring activities charges recorded 2003 2006 capital expenditures 75 billion significant use investing cash 2007 primarily attributable global product programs powertrain tooling requirements years ended december 31 2006 2005 capital expenditures 75 billion 79 billion respectively anticipate capital expenditures 2008 increase approximately 8 billion august 2007 completed sale commercial military operations allison 54 billion cash plus assumed liabilities november 2006 consummated gmac transaction sold controlling 51 interest gmac fim holdings first quarter 2007 made capital contribution 1 billion gmac restore gmac’s adjusted tangible equity balance contractually required levels capital contribution required due decrease adjusted tangible equity balance gmac november 30 2006 debt automotive’s total debt including capital leases industrial revenue bond obligations borrowings gmac december 31 2007 394 billion 6 billion classified shortterm current portion longterm debt 334 billion classified longterm debt december 31 2006 total debt 387 billion 57 billion shortterm current portion longterm debt 33 billion longterm debt increase total debt primarily result 15 billion convertible debenture issuance may 31 2007 increases overseas debt balances partly offset 11 billion convertible debentures put us settled cash march 6 2007 funded settlement using cash flow operations available liquidity shortterm borrowings current portion longterm debt 6 billion includes 13 billion debt issued subsidiaries consolidated affiliates 25 billion related party debt mainly dealer financing gmac various debt maturities 23 billion 2009 2 billion 2010 various debt maturities 309 billion thereafter believe adequate liquidity settle obligations become due order provide financial flexibility us suppliers maintain trade payables program gmac commercial finance gmaccf terms gmac transaction permitted continue administering program gmaccf long provide funding advance payments suppliers program may 1 2006 commenced funding advance payments result december 31 2007 outstanding balance owed us gmaccf program general motors corporation subsidiaries net debt net debt calculated cash marketable securities 6 billion 25 billion december 31 2006 readilyavailable assets veba trust less shortterm borrowings longterm debt 121 billion december 31 2007 compared 123 billion december 31 2006 financing insurance operations prior consummation gmac transaction gmac paid dividend us leaserelated assets net book value 4 billion related deferred tax liabilities 18 billion dividend resulted transfer us two bankruptcyremote subsidiaries hold equity interests ten trusts leased vehicles issued assetbacked securities collateralized vehicles gmac originated securitizations remains servicer securitizations august 2007 entered secured revolving credit arrangement 13 billion secured equity interest ten securitization trusts connection credit facility contributed two bankruptcy remote subsidiaries third bankruptcy remote subsidiary consolidate bankruptcyremote subsidiaries ten trusts financial reporting purposes december 31 2007 bankruptcyremote subsidiaries vehicles subject operating leases 67 billion compared 118 billion december 31 2006 net assets 14 billion compared 15 billion december 31 2006 outstanding secured debt 49 billion compared 94 billion december 31 2006 net equity 33 billion compared 39 billion december 31 2006 decrease operating leases secured debt net equity december 31 2006 result termination leases 2007 repayment related secured debt secured debt recourse solely leased vehicles related assets continue obligated bankruptcyremote subsidiaries residual support payments leased vehicles amount estimated total 9 billion december 31 2007 16 billion december 31 2006 however neither securitization investors trusts rights residual support payments expect operating leases related securitization debt amortize gradually next two three years resulting release two bankruptcyremote subsidiaries certain cash flows related ownership securitization trusts related operating leases cash flow expect realize leased vehicle securitizations next two three years come three principal sources 1 cash released securitizations monthly basis result available funds exceeding debt service required payments month 2 cash received upon following termination securitization extent remaining overcollateralization 3 return residual support payments owing us month year ended december 31 2007 total cash flows released two bankruptcyremote subsidiaries 864 million november 2006 december 31 2007 total cash flows released 987 million status debt ratings fixed income securities rated four independent credit rating agencies dominion bond rating services dbrs moody’s investor service moody’s fitch ratings fitch standard poor’s sp ratings indicate agencies’ assessment company’s ability pay interest distributions dividends principal securities lower credit ratings generally representative higher borrowing costs reduced access capital markets company ratings us based information provided us sources factors agencies consider determining rating include limited cash flows liquidity profitability business position risk profile ability service debt amount debt component total capitalization general motors corporation subsidiaries dbrs moody’s fitch sp currently rate credit noninvestment grade following table summarizes credit ratings february 18 2008 rating actions taken credit rating agencies 2007 follows dbrs may 14 2007 dbrs affirmed senior unsecured debt rating ‘b’ ‘negative’ trend october 11 2007 dbrs affirmed senior unsecured debt rating ‘b’ placed credit rating ‘stable’ trend ‘negative’ trend november 2 2007 dbrs assigned us issuer rating ‘b high’ ‘stable’ trend fitch may 23 2007 fitch affirmed issuer default rating ‘b’ ‘rating watch negative’ downgraded senior unsecured debt rating ‘b’ ‘b’ july 12 2007 fitch affirmed issuer default rating ‘b’ removed ‘rating watch negative’ september 24 2007 fitch affirmed issuerdefault rating ‘b’ placed credit rating ‘rating watch negative’ september 26 2007 fitch affirmed issuerdefault rating ‘b’ placed credit rating ‘negative’ outlook ‘rating watch negative’ moody’s october 16 2007 moody’s affirmed longterm debt rating including ‘b3’ corporate family rating ‘ba3’ senior secured rating ‘caa1’ senior unsecured rating placed credit rating ‘positive’ outlook ‘negative’ outlook november 7 2007 moody’s affirmed longterm debt rating including ‘b3’ corporate family rating ‘ba3’ senior secured rating ‘caa1’ senior unsecured rating placed credit rating ‘stable’ outlook ‘positive’ outlook sp june 7 2007 sp recalibrated rating scale resulting upgrade secured credit rating ‘bb’ ‘b’ september 16 2007 sp affirmed corporate debt rating ‘b’ placed credit rating ‘credit watch positive’ ‘negative’ outlook october 19 2007 sp affirmed corporate debt rating ‘b’ placed credit rating ‘stable’ outlook ‘credit watch positive’ noninvestment grade rating increased borrowing costs limited access unsecured debt markets mitigated outcomes actions taken past years focus increased use liquidity sources institutional unsecured markets directly affected ratings unsecured debt including secured funding sources conduit facilities reductions credit ratings could increase possibility additional terms conditions contained new replacement financing arrangements result specific funding actions taken past years management believes continue access sufficient capital meet ongoing funding needs short mediumterm notwithstanding foregoing management believes current ratings situation outlook increase level risk achieving funding strategy addition ratings situation outlook increase importance successfully executing plans improvement operating results pension postretirement benefits plans covering represented employees generally provide benefits negotiated stated amounts year service well significant supplemental benefits employees retire 30 years service normal retirement age general motors corporation subsidiaries policy respect qualified pension plans contribute annually less minimum required applicable law regulation directly pay benefit payments appropriate december 31 2007 legal funding requirements met made contributions pension plans follows 2008 contributions due expect make discretionary contributions us hourly salaried pension plans 2008 expect contribute pay benefits approximately 100 million us pension plan approximately 900 million primary nonus pension plans us pension plans overfunded 188 billion end 2007 16 billion end 2006 increase primarily attributable actual asset returns 11 2007 nonus pension plans underfunded net amount 104 billion 2007 110 billion 2006 funded status us pension plans follows also maintain hourly salaried opeb plans provide postretirement medical dental vision life insurance us retirees eligible dependents certain nonus subsidiaries postretirement benefit plans although participants covered government sponsored administered programs us opeb plan underfunded 434 billion 2007 476 billion 2006 nonus opeb plans underfunded 43 billion 2007 37 billion 2006 2007 withdrew total 27 billion plan assets veba trusts opeb plans reimbursement retiree healthcare life insurance benefits provided eligible plan participants 2006 withdrew total 41 billion veba trusts pursuant 2005 uaw health care settlement agreement required make certain contributions independent veba trust mitigation veba used mitigate effect reduced gm healthcare coverage uaw retirees number years control assets veba trust following benefit payments reflect estimated future employee services appropriate expected paid benefits us pension plans certain nonus pension plans paid plan assets rather assets b benefit payments presented table reflect changes result implementation settlement agreement general motors corporation subsidiaries offbalance sheet arrangements use offbalance sheet arrangements economics sound business principles warrant use principal use offbalance sheet arrangements occurs connection securitization sale financial assets financial assets sell principally consist trade receivables part securitization program participated since 2004 part program sell receivables whollyowned bankruptcy remote special purpose entity spe separate legal entity assumes risks rewards ownership receivables turn spe entered agreement sell undivided interests eligible trade receivables 600 million 850 million 2007 2006 respectively directly third party banks third party bank conduit funds purchases issuance commercial paper via direct bank funding receivables program sold fair market value removed consolidated balance sheets loss trade receivables sold included automotive cost sales 2 million 2007 30 million 2006 december 31 2007 banks bank conduit beneficial interest spe’s pool eligible receivables december 31 2006 banks bank conduit beneficial interest 200 million spe’s pool eligible trade receivables retained interest receivables sold perform collection administrative functions gross amount proceeds received sale receivables spe program 600 million 9 billion 2007 2006 respectively addition securitization program participate trade receivable securitization programs primarily europe financing providers beneficial interest pool eligible european receivables 87 million 109 million december 31 2007 2006 respectively related securitization programs lease real estate equipment various offbalance sheet entities established facilitate financing assets us nationally prominent lessors believe creditworthy assets consist principally office buildings warehouses machinery equipment use entities allows parties providing financing isolate particular assets single entity thereby syndicate financing multiple third parties conventional financing technique used lower cost borrowing thus lease cost lessee wellestablished market institutions participate financing property purchase ownership interests entities owned institutions independent affiliated us believe none officers directors employees affiliates hold direct indirect equity interests entities gmac transaction november 2006 gmac’s assets offbalance sheet entities attributable us end 2006 assets offbalance sheet entities follows contractual obligations longterm liabilities following minimum commitments contractual obligations including purchase obligations “purchase obligation” defined agreement purchase goods services enforceable legally binding us specifies significant terms including fixed minimum quantities purchased fixed minimum variable price provisions approximate timing transaction longterm liabilities defined longterm liabilities reflected consolidated balance sheet based definition table includes contracts include fixed minimum obligations majority purchases included table made purchase orders requirements based accordingly specify minimum quantities general motors corporation subsidiaries following table provides aggregated information outstanding contractual obligations longterm liabilities december 31 2007 amounts include interest payments based contractual terms current interest rates debt capital lease obligations b amounts include postretirement benefits current contractual labor agreements north america remainder estimated liability benefits beyond current labor agreement essentially salaried employees classified remaining balance postretirement benefits obligations contractual amounts would required reduced accordance settlement agreement approved excluded table c total veba assets allocated based projected spending requirements veba asset allocations reflect impact settlement agreement yet approved court table reflect unrecognized tax benefits 28 billion due high degree uncertainty regarding future cash outflows associated amounts refer note 18 consolidated financial statements additional discussion unrecognized tax benefits combined us hourly salaried pension plans 20 billion overfunded december 31 2007 result expect make contributions us hourly salaried pension plans foreseeable future assuming material changes present market conditions dividends may paid common stock declared board directors sole discretion amounts available dividends applicable law delaware law board may declare dividends extent statutory “surplus” ie total assets minus total liabilities case fair market value minus statutory capital surplus net profits current andor immediately preceding fiscal year policy distribute dividends common stock based outlook indicated capital needs business cash dividends per share common stock 100 2007 2006 200 2005 february 5 2008 meeting board directors board approved payment 025 quarterly dividend common stock first quarter 2008 2007 cash dividends per share common stock 025 per quarter general motors corporation subsidiaries critical accounting estimates consolidated financial statements prepared conformity accounting principles generally accepted united states require use estimates judgments assumptions affect reported amounts asset liabilities disclosure contingent assets liabilities date financial statements reported amounts revenues expenses periods presented management believes accounting estimates employed appropriate resulting balances reasonable however due inherent uncertainties making estimates actual results could differ original estimates requiring adjustments balances future periods critical accounting estimates affect consolidated financial statements use judgments assumptions listed addition likelihood materially different amounts could reported varied conditions assumptions discussed pensions account defined benefit pension plans accordance statement financial accounting standards sfas 87 “employers’ accounting pensions” sfas 87 amended sfas 158 requires amounts recognized financial statements determined actuarial basis determination involves selection various assumptions including expected rate return plan assets discount rate key assumption determining net pension expense accordance sfas 87 expected longterm rate return plan assets expected return plan assets included pension expense determined periodic studies include review asset allocation strategies anticipated future longterm performance individual asset classes risks using standard deviations correlations returns among asset classes comprise plans’ asset mix studies give appropriate consideration recent plan performance historical returns assumptions primarily longterm prospective rates return weighted average expected longterm rate return us plan assets used determine net pension expense 2007 85 compared 90 2006 2005 another key assumption determining net pension expense assumed discount rate used discount plan obligations estimating rate use iterative process based hypothetical investment portfolio highquality bonds rated aa higher recognized rating agency hypothetical reinvestment proceeds bonds upon maturity using forward rates derived yield curve us pension obligation defeased incorporate reinvestment component methodology feasible light magnitude time horizon us pension obligations extend accomplish full defeasance direct cash flows actual set bonds selected given measurement date weighted average discount rate used determine us net pension expense 2007 60 compared 57 2006 56 2005 following table illustrates sensitivity change certain assumptions us pension plans holding assumptions constant us pension plans generally provide covered us hourly employees pension benefits negotiated flat dollar amounts year credited service earned individual employee formulas providing stated amounts contained applicable labor contract 2007 pension expense pension obligation december 31 2007 comprehend future benefit general motors corporation subsidiaries increases decreases may occur beyond current labor contract usual cycle negotiating new labor contracts every four years past practice maintaining consistent level benefit increases decreases one contract next however following data illustrates sensitivity changes pension expense pension obligation result changes future benefit units annual onepercentage point increase benefit units us hourly employees effective expiration current contract would result 60 million increase 2008 pension expense 300 million increase us hourly plan pension benefit obligation december 31 2007 annual onepercentage point decrease benefit units would result 60 million decrease 2008 pension expense 290 million decrease pension benefit obligation post retirement benefits account opeb accordance sfas 106 “employers’ accounting post retirement benefits pensions” sfas 106 amended sfas 158 requires amounts recognized financial statements determined actuarial basis determination requires selection various assumptions including discount rate health care cost trend rates used value benefit obligations estimating discount rate use iterative process based hypothetical investment portfolio highquality bonds rated aa higher recognized rating agency hypothetical reinvestment proceeds bonds upon maturity using forward rates derived yield curve us opeb obligation defeased incorporate reinvestment component methodology feasible light magnitude time horizon us opeb obligations extend accomplish full defeasance direct cash flows actual set bonds selected given measurement date develop estimate health care cost trend rates used value benefit obligations review historical retiree cost data nearterm health care outlook includes appropriate cost control measures implemented us changes assumed discount rate health care cost trend rate significant impact actuarially determined obligation related opeb expense following significant assumptions used measurement accumulated projected benefit obligations apbo december 31 measurement date based assumptions december 31 2007 measurement date change assumptions holding assumptions constant would following effect us opeb expense obligations annual basis us apbo significant portion worldwide apbo 640 billion december 31 2007 onepercentage point increase assumed us health care trend rates would increased us apbo 64 billion us aggregate service interest cost components nonpension postretirement benefit expense annualized basis 511 million onepercentage point decrease would decreased us apbo 54 billion us aggregate service interest cost components nonpension postretirement benefit expense annualized basis 420 million general motors corporation subsidiaries deferred taxes significant net deferred tax assets resulting net operating loss carryforwards tax credit carryforwards deductible temporary differences may reduce taxable income future periods detailed components deferred tax assets liabilities valuation allowances included note 18 consolidated financial statements valuation allowances established deferred tax assets based “more likely not” threshold ability realize deferred tax assets depends ability generate sufficient taxable income within carryback carryforward periods provided tax law applicable tax jurisdiction considered following possible sources taxable income assessing realization deferred tax assets • future reversals existing taxable temporary differences • future taxable income exclusive reversing temporary differences carryforwards • taxable income prior carryback years • taxplanning strategies third quarter 2007 recorded charge 39 billion related establishing full valuation allowances net deferred tax assets us canada germany concluding valuation allowance required difficult significant negative evidence objective verifiable cumulative losses recent years utilize rolling twelve quarters results measure cumulative losses recent years adjust historical results remove certain unusual items charges us canada germany analysis indicates cumulative three year historical losses adjusted basis considered significant negative evidence objective verifiable therefore difficult overcome addition discussed “nearterm market challenges” nearterm financial outlook us canada germany deteriorated third quarter longterm financial outlook us canada germany remains positive concluded ability rely longterm outlook future taxable income limited due uncertainty created weight negative evidence particularly • possibility continued increasing price competition highly competitive us market seen external market third quarter 2007 competitor introduced new fullsize trucks offered customer incentives gain market share accordingly increased customer incentives recently launched fullsize trucks previously anticipated • continued high fuel prices possible effect may consumer preferences related profitable products fullsize trucks utility vehicles • uncertainty effect cost structure stringent us fuel economy global emissions standards may require us sell significant volume alternative fuel vehicles across portfolio • uncertainty future operating results gmac’s residential capital llc mortgage business • acceleration tax deductions opeb liabilities compared prior expectations due changes associated settlement agreement accordingly based current circumstances uncertainty regarding future taxable income recorded full valuation allowances net deferred tax assets third quarter 2007 operating performance improves sustained basis conclusion regarding need full valuation allowances could change resulting reversal valuation allowances future sales incentives record estimated impact sales incentives dealers customers reduction revenue later time sale incentive program announced dealers may numerous types incentives available particular time including choice incentives specific model incentive programs generally brand specific model specific regionally specific specified time periods may extended significant factors used estimating cost incentives include volume vehicles affected incentive programs offered product mix rate general motors corporation subsidiaries customer acceptance incentive program likelihood incentive program extended estimated based upon historical experience assumptions concerning customer behavior future market conditions additionally incentive program announced determine number vehicles dealer inventory eligible incentive program record reduction revenue period program announced actual number affected vehicles differs estimate different mix incentives actually paid reduction revenue sales incentives could affected discussed multitude inputs affecting calculation estimate sales incentives increase decrease variables could significant impact reduction revenue sales incentives policy warranty recalls provisions estimated expenses related policy product warranties made time products sold estimates established using historical information nature frequency average cost claims actively study trends claims take action improve vehicle quality minimize claims actual experience could differ amounts estimated requiring adjustments liabilities future periods impairment longlived assets periodically evaluate carrying value longlived assets held used business goodwill intangible assets indefinite lives assets held sale events circumstances warrant carrying value longlived asset considered impaired loss recognized based amount carrying value exceeds fair value assets held used assets classified held sale assets reflected lower carrying value fair value less cost sell fair market value determined primarily using anticipated cash flows discounted rate commensurate risk involved product lines could become impaired future require additional charges result declines profitability due changes volume pricing costs derivatives use derivatives normal course business manage exposure fluctuations commodity prices interest foreign currency rates account derivatives consolidated balance sheet assets liabilities fair value accordance sfas 133 “accounting derivative instruments hedging activities” accounting derivatives complex significant judgment estimates involved estimating fair values instruments particularly absence quoted market prices generally fair value estimates derivative contracts involve selection appropriate valuation model determining appropriate inputs use models contractual terms market prices yield curves credit curves measures volatility prepayment rates correlations factors majority derivatives related assets indexes actively traded quoted selection appropriate valuation model inputs models subject significant judgment market information readily available contrast selection appropriate valuation model related inputs minority derivatives relate assets indexes thinly traded may highly judgmental instruments tend complex market information less available example valuing commodities purchase contract meets definition derivative requires subjective determination timing quantities expected purchases moreover tenor thinly traded commodities contracts greater available market data used value contracts forward prices volatility curves generally extrapolated using linear methodology contract life valuation vehicle operating leases lease residuals accounting vehicle operating leases must make determination beginning lease estimated realizable value ie residual value vehicle end lease residual value represents estimate market value vehicle end lease term typically ranges nine months four years customer obligated make payments general motors corporation subsidiaries term lease contract residual however since customer obligated purchase vehicle end contract exposed risk loss extent value vehicle residual value estimated contract inception residual values initially determined consulting independently published residual value guides realization residual values dependent future ability market vehicles prevailing market conditions life lease evaluate adequacy estimate residual value may make adjustments extent expected value vehicle lease termination declines operating leases arising vehicle sales daily rental car companies adjustment may form revisions depreciation rate recognition impairment loss impairment determined exist undiscounted expected future cash flows lower carrying value asset operating leases arising vehicles sold dealers adjustment made estimate marketing incentive accruals residual support programs initially recognized vehicles sold dealers lease vehicle returned us asset reclassified equipment operating leases net inventory lower cost estimated fair value less costs sell depreciation methodology related equipment operating leases net considers management’s expectation value vehicles upon lease termination based numerous assumptions factors influencing used automotive vehicle values critical assumptions underlying estimated carrying value automotive lease assets include 1 estimated market value information obtained used management estimating residual values 2 proper identification estimation business conditions 3 remarketing abilities 4 vehicle marketing programs changes assumptions could significant impact value lease residuals accounting standards yet adopted september 2006 fasb issued sfas 157 “fair value measurements” sfas 157 provides consistent definition fair value focuses exit price prioritizes within measurement fair value use marketbased inputs entityspecific inputs sfas 157 requires expanded disclosures fair value measurements establishes threelevel hierarchy fair value measurements based transparency inputs valuation asset liability measurement date standard also requires company use nonperformance risk measuring liabilities carried fair value including derivatives february 2008 fasb approved fasb staff position fsp permits companies partially defer effective date sfas 157 one year nonfinancial assets nonfinancial liabilities recognized disclosed fair value financial statements nonrecurring basis fsp permit companies defer recognition disclosure requirements financial assets financial liabilities nonfinancial assets nonfinancial liabilities remeasured least annually sfas 157 effective financial assets financial liabilities nonfinancial assets nonfinancial liabilities remeasured least annually financial statements issued fiscal years beginning november 15 2007 interim periods within fiscal years provisions sfas 157 applied prospectively intend defer adoption sfas 157 one year nonfinancial assets nonfinancial liabilities recognized disclosed fair value financial statements nonrecurring basis currently evaluating effects sfas 157 may financial condition results operations february 2007 fasb issued sfas 159 “the fair value option financial assets financial liabilities including amendment sfas 115” sfas 159 permits entity measure certain financial assets financial liabilities fair value currently required measured fair value entities elect fair value option report unrealized gains losses earnings subsequent reporting date fair value option may elected instrumentbyinstrument basis exceptions sfas 159 amends previous guidance extend use fair value option availableforsale heldtomaturity securities statement also establishes presentation disclosure requirements help financial statement users understand effect election sfas 159 effective beginning first fiscal year beginning november 15 2007 expect adoption standard material impact financial condition results operations june 2007 fasb ratified emerging issue task force eitf issue 073 “accounting nonrefundable payments goods services used future research development activities” eitf 073 requiring nonrefundable advance payments future research development activities deferred capitalized amounts expensed related goods delivered related services performed statement effective fiscal years beginning december 15 2007 general motors corporation subsidiaries management estimates upon adoption guidance material effect financial condition results operations june 2007 fasb ratified eitf issue 0611 “accounting income tax benefits dividends sharebased payment awards” eitf 0611 requires entities record additional paid capital tax benefits dividends dividend equivalents charged retained earnings certain sharebased awards sharebased payment arrangement employees may receive dividends dividend equivalents awards nonvested equity shares nonvested equity share units vesting period share options exercise date generally payment dividends treated deductible compensation tax purposes amount tax benefits recognized additional paidin capital included pool excess tax benefits available absorb tax deficiencies sharebased payment awards eitf 0611 effective fiscal years beginning december 15 2007 interim periods within years management estimates upon adoption guidance material effect financial condition results operations december 2007 fasb issued sfas 141r “business combinations” sfas 141r retained underlying concepts sfas 141 business combinations still required accounted fair value acquisition method accounting sfas 141r changed method applying acquisition method number significant aspects sfas 141r require 1 business combinations acquirer records assets liabilities acquired business including goodwill generally fair values 2 certain contingent assets liabilities acquired recognized fair values acquisition date 3 contingent consideration recognized fair value acquisition date certain arrangements changes fair value recognized earnings settled 4 acquisitionrelated transaction restructuring costs expensed rather treated part cost acquisition included amount recorded assets acquired 5 step acquisitions previous equity interests acquiree held prior obtaining control remeasured acquisitiondate fair values gain loss recognized earnings 6 making adjustments finalize initial accounting companies revise previously issued postacquisition financial information future financial statements reflect adjustments recorded acquisition date sfas 141r effective prospective basis business combinations acquisition date beginning first annual period subsequent december 15 2008 exception accounting valuation allowances deferred taxes acquired tax contingencies sfas 141r amends sfas 109 adjustments made valuation allowances deferred taxes acquired tax contingencies associated acquisitions closed prior effective date statement also apply provisions sfas 141r standard applied future business combinations december 2007 fasb issued sfas 160 “noncontrolling interests consolidated financial statements amendment arb 51” sfas 160 amends arb 51 establish new standards govern accounting reporting noncontrolling interests partially owned consolidated subsidiaries loss control subsidiaries also sfas 160 requires 1 noncontrolling interest previously referred minority interest reported part equity consolidated financial statements 2 losses allocated noncontrolling interest even allocation might result deficit balance reducing losses attributed controlling interest 3 changes ownership interests treated equity transactions control maintained 4 upon loss control gain loss interest sold recognized earnings sfas 160 effective prospective basis fiscal years interim periods within fiscal years beginning december 15 2008 except presentation disclosure requirements applied retrospectively currently evaluating effects sfas 160 may financial condition results operations forwardlooking statements report reports subsequently file sec forms 10k 10q filed furnished form 8k related comments management use words “expect” “anticipate” “estimate” “forecast” “initiative” “objective” “plan” “goal” “project” “outlook” “priorities” “target” “intend” “when” “evaluate” “pursue” “seek” “may” “would” “could” “should” “believe” “potential” “continue” “designed” “impact” negative words similar expressions intended identify forwardlooking statements represent current judgment possible future events statements report subsequent reports may file sec forms 10k 10q file furnish form 8k statements historical fact including without limitation statements future events financial performance forwardlooking statements involve certain risks uncertainties believe judgments reasonable statements guarantees events financial results actual results may differ materially due variety important factors may revised general motors corporation subsidiaries supplemented subsequent reports sec forms 10k 10q 8k factors include listed risk factors among others following • ability realize production efficiencies achieve reductions costs result turnaround restructuring health care cost reductions implement capital expenditures levels times planned management • pace product introductions development technology associated products • market acceptance new products • significant changes competitive environment effect competition markets including pricing policies • ability maintain adequate liquidity financing sources appropriate level debt • changes existing adoption new laws regulations policies activities governments agencies similar organizations actions may affect production licensing distribution sale products cost thereof applicable tax rates • costs risks associated litigation • final results investigations inquiries sec governmental agencies • changes ability gmac make distributions preferred membership interests held us • changes accounting principles application interpretation ability make estimates assumptions underlying estimates including estimates delphi pension benefit guarantees could result impact earnings • negotiations bankruptcy court actions respect delphi’s obligations us obligations delphi negotiations respect obligations benefit guarantees delphi employees ability recover indemnity claims delphi • labor strikes work stoppages facilities key suppliers delphi financial difficulties key suppliers delphi • additional credit rating downgrades effects thereof • changes relations unions employeesretirees legal interpretations agreements unions regard employeesretirees including negotiation new collective bargaining agreements unions representing employees united states uaw • completion final settlement uaw retirees including obtaining court approval form acceptable us uaw class counsel treatment terms 2007 national agreement pursuant settlement agreement form acceptable us uaw class counsel completion discussions staff sec regarding accounting treatment respect new veba postretirement medical benefits covered group set forth settlement agreement basis reasonably satisfactory us applicable determination us new veba satisfies requirements section 302c5 labormanagement relations act 1947 amended lmra well bank regulatory approval • shortages price increases fuel • changes economic conditions commodity prices currency exchange rates political stability markets operate general motors corporation subsidiaries addition gmac’s actual results may differ materially due numerous important factors described gmac’s recent report sec form 10k may revised supplemented subsequent reports sec forms 10k 10q 8k factors identified gmac include among others following • rating agencies may downgrade ratings gmac rescap future would adversely affect gmac’s ability raise capital debt markets attractive rates increase interest pays outstanding publicly traded notes could material adverse effect results operations financial condition • gmac’s business requires substantial capital unable maintain adequate financing sources profitability financial condition suffer jeopardize ability continue operations • profitability financial condition operations dependent upon operations substantial credit exposure us • recent developments residential mortgage market especially nonprime sector may adversely affect gmac’s revenues profitability financial condition • worldwide financial services industry highly competitive gmac unable compete successfully increased competition automotive financing mortgage andor insurance markets generally markets securitizations asset sales margins could materially adversely affected • significant changes competitive environment effect competition gmac’s markets including gmac’s pricing policies • restrictions ability gmac’s residential mortgage subsidiary pay dividends prepay subordinated debt obligations gmac • changes residual value offlease vehicles • changes us governmentsponsored mortgage programs disruptions markets gmac’s mortgage subsidiaries operate • changes gmac’s contractual servicing rights • costs risks associated litigation • changes gmac’s accounting assumptions may require result changes accounting rules application could result impact earnings • threat natural calamities • changes economic conditions currency exchange rates political stability markets operates • changes existing adoption new laws regulations policies activities governments agencies similar organizations caution investors place undue reliance forwardlooking statements undertake obligation update publicly otherwise revise forwardlooking statements whether result new information future events factors affect subject statements except expressly required law item 7a item 7 management’s discussion analysis financial condition results operations following addresses material changes net assets liquidation motors liquidation company guc trust guc trust fiscal year ended march 31 2016 intended read conjunction financial statements guc trust included item 8 refer financial statements critical accounting policies estimates liquidation basis accounting guc trust created purposes described note 1 “purpose trust” financial statements finite life result guc trust prepared financial statements liquidation basis accounting accordance accounting principles generally accepted united states america us gaap liquidation basis accounting prescribed financial accounting standards board fasb accounting standards codification assets stated estimated realizable value nondiscounted amount cash asset expected converted liquidation liabilities continue recognized amount required us gaap remeasured reflect anticipation entity legally released obligation additionally liquidation basis accounting reserve established estimated costs expected incurred liquidation costs accrued reasonable basis estimation accrual also made estimated income cash expected received liquidation period extent reasonable basis estimation exists valuation assets realizable value reserves residual winddown claims reserves expected liquidation costs accrual investment income marketable securities represent estimates based present facts circumstances known guc trust administrator subject change estimates periodically reviewed adjusted appropriate described heading “reserves expected costs liquidation” reasonably possible estimates expected costs liquidation could change near term guc trust beneficiaries future extent liquidating distributions yet paid current holders allowed general unsecured claims future current holders guc trust units disputed general unsecured claims resolved allowed term loan avoidance action claims resolved avoidance action trust claims thereby become allowed general unsecured claims holders thereof become entitled receive liquidating distributions distributable cash including dividend cash guc trust units pro rata amount claims upon occurrence guc trust incurs obligation distribute distributable cash accordingly liquidating distributions payable recorded amount distributable cash previously fair value new gm securities guc trust obligated distribute end period disputed general unsecured claims term loan avoidance action claims resolved allowed general unsecured claims similarly extent potential additional term loan avoidance action claims arise would become allowed manner described note 2 “plan liquidation” financial statements liquidating distributions payable would recorded distributable cash including related dividend cash would become distributable holders term loan avoidance action claims upon occurrence prior resolution allowance disputed general unsecured claims term loan avoidance action claims liabilities recorded conditional obligations associated disputed general unsecured claims potential term loan avoidance action claims rather beneficial interests guc trust beneficiaries residual assets guc trust reflected net assets liquidation guc trust financial statements liquidation basis accounting guc trust presents two principal financial statements statement net assets liquidation statement changes net assets liquidation addition although required liquidation basis accounting guc trust also presents statement cash flows accordance requirements guc trust agreement holdings new gm securities dividends received new gm common stock holdings new gm securities march 31 2015 represent guc trust’s holdings new gm securities held future distribution respect allowed general unsecured claims guc trust units include amounts previously set aside distribution fund potential administrative costs income tax liabilities including taxes distribution dividend taxes investment income taxes securities held consisted shares new gm common stock new gm warrants described “the guc trust assets” item 1 “business” pursuant liquidation order guc trust liquidated holdings new gm securities july august 2015 guc trust valued holdings securities fair value based quoted closing market prices last trading day fiscal period beginning quarter ended june 30 2014 quarter ended march 31 2015 estimated dividends expected received holdings new gm common stock accrued liquidation basis accounting extent reasonable basis estimation existed quarter ended june 30 2015 based determination would best interests trust beneficiaries guc trust made determination file motion bankruptcy court seeking authority liquidate substantially guc trust’s holdings new gm securities motion approved bankruptcy court liquidation order described “the guc trust assets” item 1 “business” guc trust’s holdings new gm securities liquidated july august 2015 result guc trust longer expected receive dividends new gm common stock previously accrued estimated future dividends net dividends received june 2015 reversed quarter ended june 30 2015 dividends received new gm common stock required applied purpose new gm common stock dividends relate portion distributable cash applicable liquidated new gm common stock distributed holders subsequently resolved allowed claims guc trust units dividends relating distributable cash also distributed holders however distributable cash appropriated guc trust accordance guc trust agreement fund costs liabilities guc trust case dividends relating appropriated distributable cash applied costs liabilities guc trust like appropriated distributable cash maintained administrative cash dividends applied purpose associated distributable cash references distributable cash understood include dividends relating distributable cash unless expressly indicated otherwise amount cash equivalents marketable securities held guc trust relates dividends received guc trust new gm common stock previously held guc trust referred dividend cash included amount cash equivalents marketable securities held distribution guc trust beneficiaries referred distributable cash except extent dividends relating appropriated distributable cash classified administrative cash following appropriation marketable securities accrued investment income marketable securities marketable securities march 31 2016 consist shortterm investments us treasury bills us government agency securities marketable securities march 31 2015 consist shortterm investments corporate commercial paper municipal government commercial paper variable demand notes guc trust valued securities fair value based carrying value us treasury bills municipal corporate commercial paper carrying value approximates fair value par value variable demand notes par value equals fair value based pricing models quoted market prices securities similar characteristics broker quotes us government agency securities beginning quarter ended june 30 2014 estimated investment income expected received shortterm investments marketable securities accrued liquidation basis accounting extent reasonable basis estimation exists reserves residual winddown claims residual winddown costs upon dissolution mlc occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining residual winddown claims date dissolution debtors transferred guc trust residual winddown assets amount necessary satisfy ultimate allowed amount residual winddown claims including certain avoidance action defense costs residual winddown costs estimated debtors residual winddown costs residual winddown claims less residual winddown assets excess funds returned dip lenders collectively actual amounts residual winddown claims including certain avoidance action defense costs allowed residual winddown costs exceed residual winddown assets guc trust administrator may required set aside distribution appropriate distributable cash fund shortfall appropriation would reduce amount distributable cash including dividend cash available distribution holders guc trust units reserves expected costs liquidation basis accounting guc trust required estimate accrue costs associated implementing plan distributing guc trust’s distributable assets costs described winddown costs reporting costs note 2 “plan liquidation” financial statements consist principally professional fees costs governance administrative expenses amounts may vary significantly due among things time effort required complete distributions plan guc trust recorded reserves expected costs liquidation represent estimated costs incurred remaining liquidation period guc trust reasonable basis estimation amount liquidation costs ultimately incurred depends period time extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities march 31 2016 remaining liquidation period extends october 2017 estimated predominantly probabilityweighted basis guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome remaining liquidation period dependent predominantly estimate remaining period time resolution term loan avoidance action well certain additional estimated time necessary wind guc trust possible future developments term loan avoidance action could extend current estimate remaining period time resolution therefore extend estimated remaining liquidation period guc trust beyond october 2017 described item 3 “legal proceedings” guc trust participating interested party litigation involving certain general motors vehicle recalls unlikely time possible litigation could extend remaining liquidation period guc trust beyond october 2017 reasonably possible guc trust’s estimates regarding costs remaining liquidation period could change near term guc trust incurs liquidation costs reserves released offset costs incurred liability service provider recognized accounts payable accrued expense paid addition guc trust records reserves expected costs reasonable basis estimation applicable us gaap additional costs may identified time additional reserves must recorded costs identified guc trust records increase reserves charges increase addition reserves statement changes net assets liquidation process recording reserves expected costs liquidation matter financial reporting separate distinct process distributable cash set aside distribution purposes funding projected costs liquidation projected costs generally estimated conservative ie inclusive basis include contingencies permitted accrued reserves expected costs liquidation applicable us gaap complete description process setting aside distributable cash fund projected costs potential liabilities guc trust see “net assets liquidation distributable cash set aside distribution” income taxes guc trust considered disputed ownership fund pursuant treasury regulation section 1468b9 assets transferred guc trust passive investments guc trust taxed qualified settlement fund qsf pursuant treasury regulation section 1468b9c1ii qsf tax status guc trust approved internal revenue service private letter ruling issued march 2 2011 general qsf considered c corporation pays federal income tax using trust income tax rates modified gross income modified gross income includes gross income pursuant internal revenue code section 61 less administrative expenses certain losses sale exchange worthlessness property net operating losses general disputed ownership fund taxed qsf recognize gross income assets transferred therefore guc trust recognized gross income transfer assets mlc guc trust generates gross income form interest dividend income including dividends received previous holdings new gm common stock recognizes gains andor losses upon disposition shares new gm common stock new gm warrants reduced administrative expenses accumulated net operating capital losses compute modified gross income guc trust taxable federal income tax purposes current income tax liability asset recognized estimated taxes payable receivable year deferred tax liabilities assets recognized estimated future tax effects temporary differences financial reporting tax accounting deferred tax assets reviewed recoverability valuation allowances provided necessary guc trust subject state income taxes current law accordingly current deferred state income tax liabilities assets recorded guc trust recognizes tax benefit uncertain tax position likely tax position sustained examination taxing authority based technical merits position review available evidence consultation guc trust professionals guc trust’s tax liability respect federal income tax returns year ended march 31 2015 prior years longer subject examination result application section 505b bankruptcy code however remaining capital loss carryovers generated years combined net capital gains generated year ended march 31 2016 new tax position aggregate 1824 million along net operating loss carryovers generated march 31 2016 aggregating 1015 million could subject examination internal revenue service subsequent years losses utilized march 31 2016 known items would result significant accrual uncertain tax positions process recognizing deferred tax assets liabilities current income taxes payable matter financial reporting separate distinct process distributable cash set aside distribution purposes funding potential income tax liabilities potential income tax liabilities generally estimated conservative ie inclusive basis include amounts potential income tax liabilities beyond amounts permitted recorded applicable accounting standards complete description process setting aside distributable cash fund projected costs potential income tax liabilities guc trust see “net assets liquidation new gm securities set aside distribution” use estimates preparation financial statements liquidation basis conformity us gaap requires use estimates assumptions affect reported amounts assets liabilities estimates subject known unknown risks uncertainties factors could materially impact amounts reported disclosed financial statements related footnotes significant estimates include anticipated amounts timing future cash flows expected dividends received holdings new gm common stock march 31 2015 estimated investment income expected received expected liquidation costs residual winddown claims fair value marketable securities actual results could differ estimates statement changes net assets liquidation year ended march 31 2016 net assets liquidation decreased approximately 3329 million approximately 9447 million approximately 6118 million principally result decrease fair value holdings new gm securities march 31 2015 dates liquidation new gm securities 1752 million liquidating distributions 1287 million changes net assets liquidation year ended march 31 2016 also reflect impact addition approximately 77 million reserves expected costs liquidation described detail “liquidation administrative costs” addition reserves expected costs liquidation year ended march 31 2016 resulted primarily increases expected costs resulting increase estimated length remaining liquidation period quarter ended september 30 2015 changes net assets liquidation year ended march 31 2016 also reflect decrease 213 million dividend interest income decrease primarily result net reversal accrued dividends 224 million quarter ended june 30 2015 described note 3 “basis presentation significant accounting policies” financial statements quarter ended june 30 2015 based determination would best interests trust beneficiaries guc trust made determination file motion bankruptcy court seeking authority liquidate guc trust’s holdings new gm securities motion approved bankruptcy court liquidation order described note 1 “purpose trust” financial statements guc trust’s holdings new gm securities liquidated july august 2015 accordingly guc trust longer expected receive dividends new gm common stock accordingly previous accrual estimated future dividends net dividends received june 2015 reversed quarter ended june 30 2015 accrual dividends made subsequent march 31 2015 decrease due reversal accrued dividends new gm common stock offset part 11 million increase year ended march 31 2016 investment income marketable securities primarily resulting investment proceeds liquidation new gm securities period income tax provision benefit year ended march 31 2016 result cumulative net operating capital losses establishment full valuation allowance net deferred tax assets beginning end period result liquidation guc trust’s holdings new gm securities determined deferred tax assets realizable see “income tax liabilities certain capital gains dividends new gm common stock” item 1 “business” note 9 “income tax benefit” financial statements liquidation administrative costs discussed “critical accounting policies estimates” liquidation basis accounting guc trust required upon establishment record reserves respect expected costs associated implementing plan distributing guc trust’s distributable assets costs consist principally professional fees governance costs liquidation administrative costs us gaap reserves may established extent reasonable basis estimation time additional costs identified reasonable basis estimation guc trust records increase reserves expected costs liquidation charges increase addition reserves expected costs liquidation statement changes net assets liquidation costs actually incurred guc trust costs reduce previously recorded reserves expected costs liquidation amount incurred costs effect statement changes net assets liquidation guc trust’s reserves liquidation administrative costs recorded conformity us gaap allocable following categories • reserve expected winddown costs corresponding expenditures made administrative fund following depletion administrative fund administrative cash see “the guc trust assets” item 1 “business” • reserve expected reporting costs corresponding expenditures made administrative cash see “the guc trust assets” item 1 “business” • reserve indenture trustee fiscal paying agent costs corresponding expenditures made cash received guc trust mlc dissolution date see “the guc trust assets” item 1 “business” • reserve avoidance action defense costs corresponding expenditures made residual winddown assets following depletion assets administrative fund respect excess amounts remaining funds designated satisfaction certain specifically identified costs liabilities guc trust administrative cash see “the guc trust assets” “term loan avoidance action” item 1 “business” • reserve residual winddown costs corresponding addition expenditures satisfy resolve residual winddown claims expenditures made residual winddown assets following depletion residual winddown assets administrative cash see “the guc trust assets” item 1 “business” described greater detail heading “the guc trust assets” item 1 “business” “liquidity capital resources” unused portions certain assets associated foregoing reserves required returned dip lenders upon winding dissolution guc trust therefore assets available fund costs liquidation administration income tax liabilities guc trust also available distribution holders allowed general unsecured claims guc trust units see “the guc trust assets” item 1 “business” march 31 2016 guc trust approximately 246 million reserves liquidation administrative costs estimated incurred winding conclusion guc trust compared approximately 313 million reserves march 31 2015 following table summarizes greater detail changes reserves year ended march 31 2016 reserves increased approximately 77 million year ended march 31 2016 order reflect 56 million increase expected winddown costs 21 million increase expected reporting costs increases expected winddown costs expected reporting costs year ended march 31 2016 primarily associated increase estimated length remaining liquidation period quarter ended september 30 2015 addition expected winddown costs increased year ended march 31 2016 result additional expenses guc trust professionals respect liquidation new gm securities amendment guc trust agreement commissions sale new gm common stock expected reporting costs also increased year ended march 31 2016 result additional expenses guc trust professionals respect liquidation new gm securities increased insurance costs comparison reserves increased approximately 94 million year ended march 31 2015 order reflect 90 million increase expected winddown costs 04 million increase expected reporting costs increase expected winddown costs year ended march 31 2015 primarily associated increased expected legal costs resulting guc trust’s participation interested party legal proceedings related new gm vehicle recalls well increase expected costs associated increase expected remaining life guc trust increase expected reporting costs year ended march 31 2015 primarily associated increase expected costs associated increase expected remaining life guc trust total reserves reduced amount liquidation administrative costs incurred year ended march 31 2016 trust professional costs incurred year ended march 31 2016 approximately 79 million compared 87 million year ended march 31 2015 decrease 08 million year primarily due 12 million decrease winddown costs 04 million increase reporting costs trust governance costs incurred year ended march 31 2016 approximately 53 million compared 54 million year ended march 31 2015 decrease 01 million year due decreased fees reimbursable expenses guc trust administrator guc trust monitor administrative costs year ended march 31 2016 approximately 11 million compared 04 million year ended march 31 2015 increase 07 million year primarily due commissions sale new gm common stock three months ended september 30 2015 additional information regarding components category costs see “the guc trust assets” item 1 “business” foregoing reserves represent future costs guc trust reasonable basis estimation march 31 2016 therefore recorded liquidation basis accounting accordance us gaap reasonably possible however additional costs incurred reasonable basis estimation march 31 2016 particular march 31 2016 recorded reserves expected costs liquidation reflect estimated costs remaining liquidation period extending october 2017 date predominantly result estimate period time required resolution term loan avoidance action well certain additional estimated time necessary wind guc trust assumes extension current scheduled dissolution date guc trust end date remaining liquidation period estimated predominantly probabilityweighted basis permitted us gaap guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome addition certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued possible future developments term loan avoidance action could extend current estimate remaining period time required resolution therefore extend estimated remaining liquidation period guc trust beyond october 2017 described item 3 “legal proceedings” guc trust participating interested party litigation involving certain general motors vehicle recalls unlikely time possible litigation could extend remaining liquidation period guc trust beyond october 2017 amount liquidation costs ultimately incurred depends length remaining liquidation period extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities reasonably possible guc trust’s estimates regarding remaining liquidation period expected costs liquidation change near term funds available foregoing categories costs sufficient satisfy costs category guc trust required appropriate portion distributable cash order meet additional obligations costs appropriation result lesser amount distributable cash available distribution holders guc trust units process recognizing reserves expected costs liquidation matter financial reporting separate distinct process distributable cash set aside distribution purposes funding projected costs liquidation generally estimated conservative ie inclusive basis include contingencies permitted recognized applicable accounting standards described detail certain amounts distributable cash already set aside distribution purposes meeting additional obligations however amounts set aside distribution neither reflected part financial statements included elsewhere form 10k process setting aside assets related process recording matter financial reporting statement net assets liquidation reserves expected costs liquidation current deferred income tax liabilities see “critical accounting policies estimatesincome taxes” “critical accounting policies estimatesreserves expected costs liquidation” “net assets liquidationdistributable cash set aside distribution” additional information regarding reserves described see note 2 “plan liquidation” note 8 “reserves expected costs liquidation residual winddown claims” financial statements net assets liquidation disputed claims year ended march 31 2016 disputed general unsecured claims resolved year ended march 31 2016 avoidance action trust resolved term loan avoidance action claims aggregating 55000 thereby became allowed following table provides additional detail regarding claims resolution status year ended march 31 2016 1 maximum amount unresolved claims represents sum disputed general unsecured claims term loan avoidance action claims 2 total claim amount represents sum allowed general unsecured claims maximum amount unresolved claims distributable assets table summarizes activity new gm securities prior liquidation distributable cash comprises guc trust’s distributable assets including numbers new gm securities previously distributed amount distributable cash distributable march 31 2016 well amount distributable cash available distribution holders guc trust units march 31 2016 thousands 1 numbers new gm securities shown distributed include sales cash distributions governmental entities extent governmental entities requested sales demonstrated satisfaction guc trust administrator governmental entities precluded applicable law receiving distributions new gm securities b fractional amounts new gm securities lieu guc trust required pursuant guc trust agreement distribute cash subject certain minimum thresholds 2 described heading “the guc trust assets” item 1 “business” note 1 “purpose trust” financial statements guc trust’s holdings new gm securities liquidated july august 2015 3 december 2015 bankruptcy court approved appropriation approximately 12 million distributable cash fund liquidation administrative costs guc trust calendar year 2016 4 distributions payable includes distributions payable holders guc trust units respect excess guc trust distributable assets exceeded minimum thresholds distribution guc trust agreement ii distributions payable respect allowed general unsecured claims allowed prior fiscal periods holders claims yet supplied information required guc trust order effect distribution entitled 5 distributable assets reflects amounts distributable cash dividend cash shown “guc trust distributable assets” report included exhibit 991 form 8k filed guc trust sec april 22 2016 distributable cash associated dividend cash set aside potential distribution respect current disputed general unsecured claims term loan avoidance action claims march 31 2016 extent claims resolved favor guc trust distributable cash associated dividend cash may become available distribution holders guc trust units future periods amount distributable cash associated dividend cash set “distributable assets” directly relate net assets liquidation number appearing guc trust’s financial statements prepared accordance us gaap described heading “disputed claims” march 31 2016 approximately 319 billion allowed general unsecured claims respect claims guc trust previously distributed aggregate 137298736 shares new gm common stock 124817263 new gm series warrants 124817263 new gm series b warrants 1334 million distributable cash addition guc trust obligated distribute march 31 2016 62 million distributable cash amount includes 43 million distributable cash distributable holders guc trust units respect excess guc trust distributable assets march 31 2016 distributable cash set aside distribution overview distributable cash set aside distribution addition distributions distributable cash reflected reductions guc trust net assets financial statements guc trust also time sets aside distributable cash potential future appropriation fund projected liquidation administrative costs well potential income tax liabilities including dividend taxes investment income taxes distribution distributable cash set aside distribution guc trust deducted net assets liquidation guc trust financial statements unless set aside distributable cash appropriated expended distributable cash set aside distribution segregated guc trust specific purposes available distribution holders guc trust units claimants unless extent guc trust later determines set aside distributable cash longer needed fund specific purposes process related separate process recording current deferred income tax liabilities reserves expected costs liquidation statement net assets liquidation matter financial reporting matter financial reporting income tax liabilities reserves expected costs liquidation must determined accordance generally accepted accounting principles applicable guc trust contrast estimates projected costs potential liabilities guc trust may set aside distributable cash generally made conservative ie inclusive basis include contingencies amounts potential income tax liabilities permitted recognized applicable accounting standards see “critical accounting policiesincome taxes” “critical accounting policies estimatesreserves expected costs liquidation” march 31 2016 distributable assets guc trust consisted distributable cash approximately 4643 million including dividend cash deducting amounts distributable cash including dividend cash set aside distribution fund additional projected liquidation administrative costs potential income tax liabilities guc trust described headings “set aside calculations relating projected liquidation administrative costs including dividend taxes” “set aside calculations relating potential taxes distribution” ii set aside distributions payable respect general unsecured claims allowed prior fiscal periods holders claims yet supplied information required guc trust order effect distributions entitled distributable cash set aside potential distribution respect current disputed general unsecured claims term loan avoidance action claims extent claims resolved favor guc trust distributable cash including dividend cash may become available distribution holders guc trust units future periods prior liquidation guc trust’s holdings new gm securities july august 2015 new gm securities set aside fund projected liquidation administrative costs potential income tax liabilities described “set aside” calculations relating projected liquidation administrative costs including dividend taxes investment income taxes guc trust administrator reevaluates quarterly basis amount distributable cash including dividend cash needed set aside distribution purposes funding projected liquidation administrative costs including dividend taxes investment income taxes determination made basis different used calculate reserves financial statement purposes current methodology amount set aside equal estimates unfunded projected liquidation administrative costs including dividend taxes investment income taxes prior liquidation guc trust’s holdings new gm securities estimates unfunded projected liquidation administrative costs including dividend taxes investment income taxes converted number new gm securities set aside distribution dividing estimates trailing twelvemonth average closing prices new gm securities corresponding amount dividend cash associated setaside new gm securities also set aside distribution quarter ended march 31 2016 result standard quarterly reevaluations described estimate unfunded projected liquidation administrative costs including dividend taxes investment income taxes increased 05 million resulted corresponding increase 05 million needed set aside distributable cash compared distributable cash previously set aside distribution increase unfunded projected winddown reporting transfer costs primarily related changes projected costs associated contingencies costs may incurred future accordingly march 31 2016 guc trust set aside distribution distributable cash 471 million purposes funding future projected liquidation administrative costs guc trust including dividend taxes investment income taxes 23 million amount sufficient fully fund projected liquidation administrative costs guc trust estimated guc trust administrator march 31 2016 “set aside” calculations relating potential taxes distribution addition reevaluating amount distributable cash including dividend cash set aside distribution fund projected liquidation administrative costs including dividend taxes investment income taxes guc trust administrator also reevaluates quarterly basis amount distributable cash needed set aside distribution fund potential income tax liabilities realized gains disposition new gm securities referred taxes distribution current methodology calculating set aside estimates potential taxes distribution applying applicable us federal income tax rate realized capital gains still subject examination internal revenue service less current period tax deductible expenses future tax deductible expenses realized capital gains computed using tax basis new gm securities based date transfer record ownership new gm securities guc trust mlc december 15 2011 tax basis new gm common stock received exercise new gm warrants pursuant liquidation order prior liquidation guc trust’s holdings new gm securities estimates potential taxes distribution arrived applying applicable us federal income tax rate estimates potential capital gains including realized capital gains still subject adjustment internal revenue service less current period tax deductible expenses future tax deductible expenses b potential future capital gains holdings new gm securities date measurement potential future capital gains determined comparing highest closing price new gm securities since december 15 2011 tax basis new gm securities realized capital gains potential future capital gains tax basis determined based date transfer record ownership new gm securities december 15 2011 potential taxes distribution converted number new gm securities set aside distribution dividing estimates trailing twelvemonth average closing prices new gm securities dividend cash associated set aside new gm securities also set aside distribution guc trust’s calculation amount distributable cash needed set aside distribution fund potential taxes distribution made using different methodology used calculate current deferred taxes financial statement purposes described estimating potential taxes distribution current set aside methodology calculates realized capital gains using tax basis new gm securities december 15 2011 contrast calculating current deferred taxes purposes financial reporting applicable us gaap guc trust calculates realized capital gains using tax basis new gm securities financial reporting purposes based date transfer beneficial ownership new gm securities guc trust mlc quarter ended march 31 2016 result standard quarterly reevaluations described estimates taxes distribution decreased 22 million resulted corresponding decrease amount distributable cash set aside distribution fund projected taxes distribution guc trust 22 million compared distributable cash previously set aside distribution decrease taxes distributions primarily resulted decrease expected taxable income resulting increase estimated taxable deductions quarter accordingly march 31 2016 guc trust set aside distribution distributable cash 1075 million purposes funding potential taxes distribution guc trust amounts sufficient fully fund potential taxes distribution guc trust estimated guc trust administrator march 31 2016 “set aside” calculation potential taxes distribution march 31 2016 set forth 1 using date transfer record ownership new gm securities guc trust mlc december 15 2011 purposes determining tax basis thereof 2 net capital gains net operating losses since march 31 2015 reflect taxable capital gains distributions new gm securities using tax basis new gm securities described 1 operating income excludes dividends received new gm common stock held guc trust investment income potential dividend taxes investment income taxes reflected set aside purposes funding projected liquidation administrative costs remaining capital net operating loss carryovers march 31 2016 subject examination internal revenue service therefore excluded view guc trust administrator consultation guc trust monitor professionals retained guc trust calculation methodologies described basis distributable cash including dividend cash set aside distribution generally estimate projected liquidation administrative costs potential tax liabilities guc trust conservative basis accordingly view guc trust administrator guc trust monitor distributable cash currently set aside distribution fund costs liabilities would sufficient satisfy obligations guc trust date form 10k however assurance amount distributable cash set aside sufficient fund costs liabilities actually incurred addition assurance result future evaluations additional distributable cash need set aside appropriated fund additional costs liabilities beyond currently included guc trust’s estimates particular result changes guc trust’s estimates projected costs potential liabilities see “liquidity capital resources” guc trust units table details changes numbers guc trust units outstanding issuable year ended march 31 2016 1 number guc trust units issuable time represents guc trust units issuable respect allowed general unsecured claims newly allowed fiscal year 2 number guc trust units outstanding time represents guc trust units issued respect allowed general unsecured claims allowed prior periods including guc trust units held guc trust benefit holders allowed general unsecured claims yet supplied information required guc trust order effect initial distribution entitled b governmental entities precluded applicable law receiving distributions guc trust units new gm securities liquidity capital resources guc trust’s sources liquidity principally funds holds payment liquidation administrative costs significantly lesser degree earnings funds invested addition result liquidation guc trust’s holdings new gm securities quarter ended september 30 2015 guc trust holds distributable cash distribution guc trust beneficiaries guc trust holds funds cash equivalents also invests funds marketable securities primarily us treasury bills permitted plan guc trust agreement year ended march 31 2016 guc trust’s holdings cash equivalents decreased approximately 331 million approximately 375 million approximately 44 million decrease primarily due cash paid liquidation administrative costs 132 million cash paid residual winddown claims 62 million cash reinvested marketable securities offset part receipts cash dividends holdings new gm common stock 41 million cash distributions approximately 1300 million year ended march 31 2016 funded proceeds liquidation new gm securities 7417 million balance proceeds remaining largely invested marketable securities year ended march 31 2016 funds invested guc trust marketable securities increased approximately 6302 million approximately 309 million approximately 6611 million increase due primarily liquidation guc trust’s holdings new gm securities quarter ended september 30 2015 guc trust earned approximately 08 million interest income investments year march 31 2016 guc trust held approximately 6655 million cash equivalents marketable securities amount approximately 6209 million relates distributable cash including dividend cash portion guc trust administrator permitted set aside distribution appropriate approval bankruptcy court trust monitor applicable order fund additional costs income tax liabilities including dividend taxes investment income taxes distribution become due included distributable cash march 31 2016 approximately 173 million dividend cash described dividend cash distributed holders subsequently resolved allowed claims guc trust units respect distributable cash receive unless dividends respect distributable cash appropriated guc trust accordance guc trust agreement fund guc trust’s liquidation administrative costs income tax liabilities shortfalls residual winddown assets march 31 2016 distributable cash including dividend cash held guc trust set aside follows 62 million liquidating distributions payable date b 471 million fund projected liquidation administrative costs including dividend taxes investment income taxes c 1075 million fund potential taxes distribution see “net assets liquidationdistributable assets” addition distributable cash including dividend cash guc trust held 447 million cash equivalents marketable securities march 31 2016 representing funds held payment costs liquidation administration amount approximately 305 million comprising approximately 220 million remaining residual winddown assets approximately 82 million remaining administrative fund approximately 03 million remaining funds designated indenture trustee fiscal paying agent costs required guc trust agreement returned upon windingup guc trust dip lenders extent funds utilized satisfy designated winddown costs residual winddown claims residual winddown costs avoidance action defense costs indenture trusteefiscal paying agent costs cash equivalents marketable securities 82 million remaining administrative fund designated satisfaction certain specifically identified costs liabilities guc trust substantial majority likely incurred therefore likely returned dip lenders amounts may used payment guc trust professionals’ fees expenses winddown costs amounts time available distribution holders guc trust units balance cash equivalents marketable securities approximately 142 million available payment certain reporting administrative costs guc trust would available future distribution holders guc trust units otherwise used satisfy guc trust obligations see “functions responsibilities guc trust” assurance additional amounts distributable cash required set aside distribution appropriated fund additional costs income tax liabilities beyond guc trust administrator already set aside appropriation distributable cash occurs fund obligations result lesser amount distributable cash available distribution holders guc trust units addition described “the guc trust assets” item 1 “business” portion guc trust’s assets currently segregated pursuant guc trust agreement satisfaction residual winddown claims certain specified costs assets insufficient satisfy residual winddown claims fund specified costs reason guc trust administrator similarly required set aside distribution appropriate additional amounts distributable cash order fund shortfall item 7a item 7 management’s discussion analysis financial condition results operations following addresses material changes net assets liquidation motors liquidation company guc trust guc trust fiscal year ended march 31 2017 intended read conjunction financial statements guc trust included item 8 refer financial statements critical accounting policies estimates liquidation basis accounting guc trust created purposes described note 1 “purpose trust” financial statements finite life result guc trust prepared financial statements liquidation basis accounting accordance accounting principles generally accepted united states america us gaap liquidation basis accounting assets stated estimated realizable value nondiscounted amount cash asset expected converted liquidation liabilities continue recognized amount required us gaap remeasured reflect anticipation entity legally released obligation additionally liquidation basis accounting reserve established estimated costs expected incurred liquidation costs accrued reasonable basis estimation accrual also made estimated income cash expected received liquidation period extent reasonable basis estimation exists valuation assets realizable value reserves residual winddown claims costs reserves expected liquidation costs accrual investment income marketable securities represent estimates based present facts circumstances known guc trust administrator subject change estimates periodically reviewed adjusted appropriate described heading “reserves expected costs liquidation” reasonably possible estimates expected costs liquidation could change near term guc trust beneficiaries future extent liquidating distributions yet paid current holders allowed general unsecured claims future current holders guc trust units disputed general unsecured claims resolved allowed thereby become allowed general unsecured claims holders thereof become entitled receive liquidating distributions distributable cash including dividend cash guc trust units pro rata amount claims upon occurrence guc trust incurs obligation distribute distributable cash accordingly liquidating distributions payable recorded amount distributable cash previously fair value new gm securities guc trust obligated distribute end period disputed general unsecured claims term loan avoidance action claims resolved allowed general unsecured claims similarly extent term loan avoidance action claims arise would become allowed manner described note 2 “plan liquidation” financial statements liquidating distributions payable would recorded distributable cash including related dividend cash would become distributable holders term loan avoidance action claims upon occurrence prior resolution allowance disputed general unsecured claims term loan avoidance action claims liabilities recorded conditional obligations associated disputed general unsecured claims potential term loan avoidance action claims rather beneficial interests guc trust beneficiaries residual assets guc trust reflected net assets liquidation guc trust financial statements liquidation basis accounting guc trust presents two principal financial statements statement net assets liquidation statement changes net assets liquidation addition although required liquidation basis accounting guc trust also presents statement cash flows accordance requirements guc trust agreement holdings new gm securities dividends received new gm common stock guc trust previously held new gm securities future distribution respect allowed general unsecured claims guc trust units previously set aside distribution fund potential administrative costs income tax liabilities including taxes distribution dividend taxes investment income taxes securities held consisted shares new gm common stock new gm warrants described “the guc trust assets” item 1 “business” pursuant liquidation order guc trust liquidated holdings new gm securities july august 2015 guc trust valued holdings securities fair value based quoted closing market prices last trading day fiscal period beginning quarter ended june 30 2014 quarter ended march 31 2015 estimated dividends expected received holdings new gm common stock accrued liquidation basis accounting extent reasonable basis estimation existed quarter ended june 30 2015 based determination would best interests trust beneficiaries guc trust made determination file motion bankruptcy court seeking authority liquidate substantially guc trust’s holdings new gm securities motion approved bankruptcy court liquidation order described “the guc trust assets” item 1 “business” guc trust’s holdings new gm securities liquidated july august 2015 result guc trust longer expected receive dividends new gm common stock previously accrued estimated future dividends net dividends received june 2015 reversed quarter ended june 30 2015 dividends received new gm common stock required applied purpose new gm common stock dividends relate portion distributable cash applicable liquidated new gm common stock distributed holders subsequently resolved allowed claims guc trust units dividends relating distributable cash also distributed holders however distributable cash appropriated guc trust accordance guc trust agreement fund costs liabilities guc trust case dividends relating appropriated distributable cash applied costs liabilities guc trust like appropriated distributable cash maintained administrative cash dividends applied purpose associated distributable cash references distributable cash understood include dividends relating distributable cash unless expressly indicated otherwise amount cash equivalents marketable securities held guc trust relates dividends received guc trust new gm common stock previously held guc trust referred dividend cash included amount cash equivalents marketable securities held distribution guc trust beneficiaries referred distributable cash except extent dividends relating appropriated distributable cash classified administrative cash following appropriation cash equivalents marketable securities accrued investment income cash equivalents marketable securities cash equivalents consist balances held money market funds marketable securities march 31 2017 2016 consist shortterm investments us treasury bills us government agency securities march 31 2016 guc trust valued securities fair value based carrying value us treasury bills carrying value approximates fair value based pricing models quoted market prices securities similar characteristics broker quotes us government agency securities beginning quarter ended june 30 2014 estimated investment income expected received shortterm investments marketable securities accrued liquidation basis accounting extent reasonable basis estimation exists reserves residual winddown claims residual winddown costs upon dissolution mlc occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining residual winddown claims date dissolution debtors transferred guc trust residual winddown assets amount necessary satisfy ultimate allowed amount residual winddown claims including certain avoidance action defense costs residual winddown costs estimated debtors corresponding amount recorded reserves residual winddown claims costs reserves increased expected increases avoidance action defense reasonable basis estimation expected exceed recorded reserves expected time residual winddown claims residual winddown costs less residual winddown assets excess funds returned dip lenders also expected time collectively actual amounts residual winddown claims including certain avoidance action defense costs allowed residual winddown costs exceed residual winddown assets guc trust administrator may required set aside distribution appropriate distributable cash fund shortfall appropriation would reduce amount distributable cash including dividend cash available distribution holders guc trust units reserves expected costs liquidation basis accounting guc trust required estimate accrue costs associated implementing plan distributing guc trust’s distributable assets costs described winddown costs reporting costs note 2 “plan liquidation” financial statements consist principally professional fees costs governance administrative expenses amounts may vary significantly due among things time effort required complete distributions plan guc trust recorded reserves expected costs liquidation represent estimated costs incurred remaining liquidation period guc trust reasonable basis estimation amount liquidation costs ultimately incurred depends period time extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities march 31 2017 remaining liquidation period extends january 2019 estimated predominantly modified probabilityweighted basis guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome beginning quarter ended december 31 2016 remaining liquidation period dependent predominantly estimate remaining period time resolution litigation involving certain general motors vehicle recalls described part item 3 “legal proceedings” quarter developments vehicle recall litigation resulted extension estimated length time resolution litigation exceeds estimate remaining period time resolution term loan avoidance action previously primary determinant addition certain additional estimated time wind guc trust following resolution litigation included estimated liquidation period possible future developments general motors vehicle recall litigation well term loan avoidance action could extend current estimate remaining period time resolution therefore extend estimated remaining liquidation period guc trust beyond january 2019 addition certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued guc trust incurs liquidation costs reserves released offset costs incurred liability service provider recognized accounts payable accrued liability paid addition guc trust records reserves expected costs reasonable basis estimation applicable us gaap additional costs may identified time additional reserves must recorded costs identified guc trust records increase reserves charges increase addition reserves statement changes net assets liquidation process recording reserves expected costs liquidation matter financial reporting separate distinct process distributable cash set aside distribution purposes funding projected costs liquidation projected costs generally estimated conservative ie inclusive basis include contingencies permitted accrued reserves expected costs liquidation applicable us gaap complete description process setting aside distributable cash fund projected costs potential liabilities guc trust see “functions responsibilities guc trustfunding guc trust’s liquidation administrative costs” “net assets liquidationdistributable cash set aside distribution” income taxes guc trust considered disputed ownership fund pursuant treasury regulation section 1468b9 assets transferred guc trust passive investments guc trust taxed qualified settlement fund qsf pursuant treasury regulation section 1468b9c1ii qsf tax status guc trust approved internal revenue service private letter ruling issued march 2 2011 general qsf computes taxable income manner corporation pays federal income tax using trust income tax rates modified gross income modified gross income includes gross income pursuant internal revenue code section 61 less administrative expenses certain losses sale exchange worthlessness property net operating losses general disputed ownership fund taxed qsf recognize gross income assets transferred therefore guc trust recognized gross income transfer assets mlc guc trust generates gross income form interest dividend income including dividends received previous holdings new gm common stock recognizes capital gains andor losses upon disposition new gm securities recovery guc trust member settlement class related proposed settlement securities class action new gm described part item 3 “legal proceedings” reduced administrative expenses accumulated net operating capital losses compute modified gross income guc trust taxable federal income tax purposes current income tax liability asset recognized estimated taxes payable receivable year deferred tax liabilities assets recognized estimated future tax effects temporary differences financial reporting tax accounting deferred tax assets reviewed recoverability valuation allowances provided necessary guc trust subject state income taxes current law accordingly current deferred state income tax liabilities assets recorded process recognizing deferred tax assets liabilities current income taxes payable matter financial reporting separate distinct process distributable cash set aside distribution purposes funding potential income tax liabilities potential income tax liabilities generally estimated conservative ie inclusive basis may include amounts potential income tax liabilities beyond amounts permitted recorded applicable accounting standards complete description process setting aside distributable cash fund projected costs potential income tax liabilities guc trust see “net assets liquidationnew gm securities set aside distribution” guc trust recognizes tax benefit uncertain tax position likely tax position sustained examination taxing authority based technical merits position review available evidence consultation guc trust professionals guc trust’s tax liability respect federal income tax returns year ended march 31 2016 prior years longer subject examination result application section 505b bankruptcy code however amounts shown schedule include capital loss carryovers march 31 2017 along net operating loss carryovers generated march 31 2017 could subject examination internal revenue service subsequent years losses utilized expected losses utilized future except potentially respect recovery guc trust member settlement class related proposed settlement securities class action new gm referred estimable time march 31 2017 known items would result significant accrual uncertain tax positions march 31 2017 guc trust capital loss carryovers net operating loss carryovers together loss carryovers guc trust taken deduction amounts set forth scheduled year losses incurred amounts reflect loss carryovers shown federal income tax returns filed guc trust examined internal revenue service follows quarter ended september 30 2015 guc trust disposed capital assets accordingly guc trust expect recognize additional capital gains losses going forward except potentially respect recovery guc trust member settlement class related proposed settlement securities class action new gm referred estimable time general capital losses may carried forward corporations five years losses incurred five year rule may carried forward indefinitely noncorporate persons capital loss carryovers 158137284 attributable year ended march 31 2012 longer available utilization guc trust five year rule net operating losses generally may carried forward 20 years losses incurred loss succession rule treasury regulations section 1468b9c6 loss succession rule upon termination guc trust guc trust claimant defined pursuant tax regulations entitled succeed take account portion unused vs unexpired loss carryovers guc trust loss succession rule provides order determine portion loss carryovers claimant succeed loss carryovers must allocated among guc trust claimants proportion value guc trust assets distributable claimant purposes rules govern disputed ownership funds claimant defined person claims ownership whole part property immediately property transferred disputed ownership fund accordingly loss succession rule person generally eligible succeed guc trust’s loss carryovers person receives distribution guc trust assets upon guc trust’s termination ii qualifies claimant respect guc trust mechanics loss succession rule applied guc trust holders guc trust units unclear several respects following discussion describes one possible interpretation rules however possible internal revenue service take position differs described previously disclosed guc trust initiated preliminary discussions internal revenue service regarding loss succession rule time discussions pursued holders guc trust units consult tax advisors application loss succession rule upon termination guc trust light particular circumstances termination guc trust generally expected holders guc trust units final distribution date receive distribution excess guc trust distributable assets rules govern disputed ownership funds address disputed ownership fund considered terminate purposes loss succession rule one possible interpretation loss succession rule guc trust considered terminate guc trust distributes remaining assets holders guc trust units ie final distribution date interpretation holders guc trust units would considered receive distribution guc trust assets upon termination guc trust time guc trust able predict certainty final distribution may occur guc trust terminated allocation loss carryovers rules govern disputed ownership funds address loss succession rule apply claimants permitted transfer interests disputed ownership fund guc trust units transferrable possible guc trust determine holders guc trust units may constitute claimants purposes loss succession rule given time accordingly upon termination guc trust position provide allocation guc trust’s loss carryovers among guc trust claimants andor holders guc trust units march 31 2017 31854103 guc trust units outstanding 319 billion allowed general unsecured claims addition guc trust computes taxable income manner corporation unclear whether extent five year rule might affect amount unused capital loss carryovers guc trust claimants may succeed loss succession rule use estimates preparation financial statements liquidation basis conformity us gaap requires use estimates assumptions affect reported amounts assets liabilities estimates subject known unknown risks uncertainties factors could materially impact amounts reported disclosed financial statements related footnotes significant estimates include anticipated amounts timing future cash flows estimated investment income expected received expected liquidation costs expected residual winddown claims costs fair value marketable securities actual results could differ estimates statement changes net assets liquidation year ended march 31 2017 net assets liquidation decreased approximately 1236 million approximately 6118 million approximately 4882 million principally result liquidating distributions 1154 million well additions aggregate 124 million reserves expected costs liquidation 121 million residual winddown claims costs 02 million offset part investment income 42 million described “liquidation administrative costs” increase reserves expected costs liquidation 121 million primarily associated increase estimated length remaining liquidation period income tax provision benefit year ended march 31 2017 result cumulative net operating capital losses establishment full valuation allowance net deferred tax assets beginning end period result liquidation guc trust’s holdings new gm securities determined deferred tax assets realizable see “income tax liabilities certain capital gains dividends new gm common stock” item 1 “business” note 8 “income taxes” financial statements liquidation administrative costs discussed “critical accounting policies estimates” liquidation basis accounting guc trust required upon establishment record reserves respect expected costs associated implementing plan distributing guc trust’s distributable assets costs consist principally professional fees governance costs liquidation administrative costs us gaap reserves may established extent reasonable basis estimation time additional costs identified reasonable basis estimation guc trust records increase reserves expected costs liquidation charges increase addition reserves expected costs liquidation statement changes net assets liquidation costs actually incurred guc trust costs reduce previously recorded reserves expected costs liquidation amount incurred costs effect statement changes net assets liquidation guc trust’s reserves liquidation administrative costs recorded conformity us gaap allocable following categories • reserve expected winddown costs corresponding expenditures made administrative fund following depletion administrative fund administrative cash see “the guc trust assets” item 1 “business” • reserve expected reporting costs corresponding expenditures made administrative cash see “the guc trust assets” item 1 “business” • reserve indenture trustee fiscal paying agent costs corresponding expenditures made cash received guc trust mlc dissolution date see “the guc trust assets” item 1 “business” addition guc trust maintains reserves residual winddown claims costs corresponding expenditures made residual winddown assets following depletion assets administrative cash see “the guc trust assets” part item 1 “business” described greater detail heading “the guc trust assets” part item 1 “business” “liquidity capital resources” unused portions certain assets associated foregoing reserves required returned dip lenders upon winding dissolution guc trust therefore assets available fund costs liquidation administration guc trust also available distribution holders allowed general unsecured claims guc trust units see “the guc trust assets” item 1 “business” march 31 2017 guc trust approximately 189 million reserves liquidation administrative costs estimated incurred winding conclusion guc trust compared approximately 234 million reserves march 31 2016 following table summarizes greater detail changes reserves year ended march 31 2017 reserves expected costs liquidation increased approximately 121 million year ended march 31 2017 order reflect 53 million increase expected winddown costs 68 million increase expected reporting costs increases expected winddown costs expected reporting costs year ended march 31 2017 primarily associated increases estimated length remaining liquidation period quarters ended december 31 2016 september 30 2016 comparison reserves increased approximately 77 million year ended march 31 2016 order reflect 56 million increase expected winddown costs 21 million increase expected reporting costs increases expected winddown costs expected reporting costs year ended march 31 2016 primarily associated increase estimated length remaining liquidation period quarter ended september 30 2015 addition expected winddown costs increased year ended march 31 2016 result additional expenses guc trust professionals respect liquidation new gm securities amendment guc trust agreement commissions sale new gm common stock expected reporting costs also increased year ended march 31 2016 result additional expenses guc trust professionals respect liquidation new gm securities increased insurance costs reserves expected costs liquidation reduced amount liquidation administrative costs incurred year ended march 31 2017 trust professional costs incurred year ended march 31 2017 approximately 56 million compared 79 million year ended march 31 2016 decrease 23 million year due decreases winddown costs charged reserves trust governance costs incurred year ended march 31 2017 approximately 47 million compared 53 million year ended march 31 2016 decrease 06 million year due decreases winddown costs charged reserves administrative costs year ended march 31 2017 approximately 03 million compared 11 million year ended march 31 2016 decrease 08 million year primarily due commissions sale new gm common stock three months ended september 30 2015 additional information regarding components category costs see “the guc trust assets” part item 1 “business” foregoing reserves represent future costs guc trust reasonable basis estimation march 31 2017 therefore recorded liquidation basis accounting accordance us gaap reasonably possible however additional costs incurred reasonable basis estimation march 31 2017 particular march 31 2017 recorded reserves expected costs liquidation reflect estimated costs remaining liquidation period extending january 2019 date beginning quarter ended december 31 2016 dependent predominantly estimate remaining period time resolution litigation involving certain general motors vehicle recalls described part item 3 “legal proceedings” quarter developments vehicle recall litigation resulted extension estimated length time resolution litigation exceeds estimate remaining period time resolution term loan avoidance action previously primary determinant addition certain additional estimated time wind guc trust following resolution litigation included estimated liquidation period end date remaining liquidation period estimated predominantly modified probabilityweighted basis permitted us gaap guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome addition certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued possible future developments general motors vehicle recall litigation well term loan avoidance action could extend current estimate remaining period time resolution therefore extend estimated remaining liquidation period guc trust beyond january 2019 amount liquidation costs ultimately incurred depends length remaining liquidation period extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities reasonably possible guc trust’s estimates regarding remaining liquidation period expected costs liquidation change near term funds available foregoing categories costs sufficient satisfy costs category guc trust required appropriate portion distributable cash order meet additional obligations costs appropriation result lesser amount distributable cash available distribution holders guc trust units process recognizing reserves expected costs liquidation matter financial reporting separate distinct process distributable cash set aside distribution purposes funding projected costs liquidation generally estimated conservative ie inclusive basis include contingencies permitted recognized applicable accounting standards described detail certain amounts distributable cash already set aside distribution purposes meeting potential additional obligations however amounts set aside distribution neither reflected part financial statements included elsewhere form 10k process setting aside assets related process recording matter financial reporting statement net assets liquidation reserves expected costs liquidation current deferred income tax liabilities see “critical accounting policies estimatesincome taxes” “critical accounting policies estimatesreserves expected costs liquidation” “net assets liquidationdistributable cash set aside distribution” additional information regarding reserves described see note 2 “plan liquidation” note 7 “reserves expected costs liquidation residual winddown claims costs” financial statements net assets liquidation disputed claims following table presents summary activity allowed disputed general unsecured claims potential term loan avoidance action claims year ended march 31 2017 1 maximum amount unresolved claims represents sum disputed general unsecured claims term loan avoidance action claims 2 total claim amount represents sum allowed general unsecured claims maximum amount unresolved claims year ended march 31 2017 avoidance action trust reached settlements certain defendants term loan avoidance action resulting recoveries avoidance action trust approximately 346000 result corresponding term loan avoidance action claims approximately 346000 arose allowed guc trust agreement described part item 3 “legal proceedings” certain plaintiffs economic loss actions personal injury actions defined therein filed motions bankruptcy court seeking authority file late proofs claim guc trust late proofs claim filed following receipt authority bankruptcy court additional disputed general unsecured claims would arise distributable assets table summarizes activity new gm securities prior liquidation distributable cash comprises guc trust’s distributable assets including numbers new gm securities amount distributable cash previously distributed well amount distributable cash available distribution holders guc trust units march 31 2017 thousands 1 numbers new gm securities amount distributable cash shown distributed include sales cash distributions governmental entities extent governmental entities requested sales demonstrated satisfaction guc trust administrator governmental entities precluded applicable law receiving distributions new gm securities b fractional amounts new gm securities lieu guc trust required pursuant guc trust agreement distribute cash subject certain minimum thresholds 2 distributions payable includes distributions payable respect excess distributions payable holders guc trust units new allowed general unsecured claims including allowed general unsecured claims newly allowed quarter ended march 31 2017 b allowed general unsecured claims allowed prior fiscal periods holders claims yet supplied information required guc trust order effect distribution entitled 3 distributable assets reflects amounts distributable cash dividend cash shown “guc trust distributable assets” report included exhibit 991 form 8k amended filed guc trust sec april 25 2017 distributable cash associated dividend cash set aside potential distribution respect current disputed general unsecured claims potential term loan avoidance action claims march 31 2017 extent claims resolved favor guc trust distributable cash associated dividend cash may become available distribution holders guc trust units future periods amount distributable cash associated dividend cash set “distributable assets” directly relate net assets liquidation number appearing guc trust’s financial statements prepared accordance us gaap described heading “disputed claims” march 31 2017 approximately 319 billion allowed general unsecured claims respect claims guc trust previously distributed aggregate 137298736 shares new gm common stock 124817263 new gm series warrants 124817263 new gm series b warrants 2458 million distributable cash addition guc trust obligated distribute march 31 2017 92 million distributable cash amount includes 74 million distributable cash distributable holders guc trust units respect excess guc trust distributable assets march 31 2017 distributable cash set aside distribution overview distributable cash set aside distribution addition distributions distributable cash reflected reductions guc trust net assets financial statements guc trust also time sets aside distributable cash potential future appropriation fund projected liquidation administrative costs expected additional avoidance action defense costs well potential income tax liabilities including dividend taxes investment income taxes distribution distributable cash set aside distribution guc trust deducted net assets liquidation guc trust financial statements unless set aside distributable cash appropriated expended distributable cash set aside distribution segregated guc trust specific purposes available distribution holders guc trust units claimants unless extent guc trust later determines set aside distributable cash longer needed fund specific purposes process related separate process recording current deferred income tax liabilities reserves expected costs liquidation residual winddown claims costs statement net assets liquidation matter financial reporting matter financial reporting income tax liabilities reserves expected costs liquidation residual winddown claims costs must determined accordance generally accepted accounting principles applicable guc trust contrast estimates projected costs potential liabilities guc trust may set aside distributable cash generally made conservative ie inclusive basis include contingencies may include amounts potential income tax liabilities permitted recognized applicable accounting standards see “critical accounting policiesincome taxes” “critical accounting policies estimatesreserves expected costs liquidation” march 31 2017 distributable assets guc trust available distribution holders guc trust units consisted distributable cash approximately 4669 million including dividend cash deducting amounts distributable cash including dividend cash set aside distribution fund additional projected liquidation administrative costs guc trust described headings “set aside calculations relating projected liquidation administrative costs including avoidance action defense costs dividend taxes investment income taxes” ii set aside distributions payable respect newly allowed general unsecured claims allowed general unsecured claims allowed prior fiscal periods holders claims yet supplied information required guc trust order effect distributions entitled distributable cash set aside potential distribution respect current disputed general unsecured claims potential term loan avoidance action claims extent claims resolved favor guc trust distributable cash including dividend cash may become available distribution holders guc trust units future periods prior liquidation guc trust’s holdings new gm securities july august 2015 new gm securities set aside fund projected liquidation administrative costs potential income tax liabilities described set aside calculations relating projected liquidation administrative costs including avoidance action defense costs dividend taxes investment income taxes guc trust administrator reevaluates quarterly basis amount distributable cash including dividend cash needed set aside distribution purposes funding projected liquidation administrative costs including avoidance action defense costs dividend taxes investment income taxes determination made basis different used calculate reserves financial statement purposes current methodology amount set aside equal estimates unfunded projected liquidation administrative costs including avoidance action defense costs dividend taxes investment income taxes prior liquidation guc trust’s holdings new gm securities estimates unfunded projected liquidation administrative costs including avoidance action defense costs dividend taxes investment income taxes converted number new gm securities set aside distribution dividing estimates trailing twelvemonth average closing prices new gm securities corresponding amount dividend cash associated setaside new gm securities also set aside distribution quarter ended march 31 2017 result standard quarterly reevaluations described estimate unfunded projected liquidation administrative costs including avoidance action defense costs dividend taxes investment income taxes decreased 184 million 298 million decrease primarily related appropriation distributable cash 99 million february 2017 included total appropriations described heading “the guc trust assets” part item 1 “business” b decrease 62 million expected additional avoidance action defense costs april 2017 guc trust entered letter agreement administrative agent prepetition lenders defendants term loan avoidance action “administrative agent” letter agreement provides guc trust’s obligation pay avoidance action defense costs administrative agent limited remaining designated residual winddown assets time term loan avoidance action resolved full final court order settlement court order settlement contains determination administrative agent oversecured respect loan subject term loan avoidance action otherwise contains voluntary agreement guc trust respect payment avoidance action defense costs accordingly time guc trust longer expects incur additional avoidance action defense costs beyond remaining designated residual winddown assets accordingly march 31 2017 guc trust set aside distribution distributable cash 298 million purposes funding future projected liquidation administrative costs guc trust amount sufficient fully fund projected liquidation administrative costs guc trust estimated guc trust administrator march 31 2017 “set aside” calculations relating potential taxes distribution addition reevaluating amount distributable cash including dividend cash set aside distribution fund projected liquidation administrative costs including dividend taxes investment income taxes guc trust administrator also reevaluates quarterly basis amount distributable cash needed set aside distribution fund potential taxes distribution current methodology calculating set aside estimates potential taxes distribution applying applicable us federal income tax rate net realized capital gains still subject examination internal revenue service less current period tax deductible expenses future tax deductible expenses realized capital gains computed using tax basis new gm securities based date transfer record ownership new gm securities guc trust mlc december 15 2011 tax basis new gm common stock received exercise new gm warrants pursuant liquidation order however result application section 505b bankruptcy code guc trust’s federal income tax returns year ended march 31 2016 prior years longer subject examination income taxes may assessed year ended march 31 2016 prior years addition guc trust’s remaining capital losses based tax basis previously held new gm securities financial reporting purposes net operating losses still subject examination internal revenue service subsequent years losses utilized utilization expected result sale new gm securities year ended march 31 2016 except potentially respect recovery guc trust member settlement class related proposed settlement securities class action new gm described part item 3 “legal proceedings” estimable time accordingly income taxes expected paid future except potentially respect income taxes due recovery proposed settlement securities class action new gm estimable time recovery would potentially generate income tax liability unlikely event guc trust required recalculate previously recognized capital gains losses sale distribution new gm securities prior years using tax basis determined december 15 2011 record ownership previously held new gm securities transferred guc trust mlc rather march 31 2011 beneficial ownership substantial majority previously held new gm securities transferred guc trust mlc income taxes recovery become payable anticipated income taxes would funded proceeds recovery result beginning quarter ended september 30 2016 march 31 2017 guc trust administrator determined distributable cash set aside potential taxes distribution dividend taxes investment income taxes time guc trust’s calculation amount distributable cash needed set aside distribution fund potential taxes distribution made using different methodology used calculate current deferred taxes financial statement purposes described estimating potential taxes distribution current set aside methodology calculates realized capital gains using tax basis new gm securities december 15 2011 respect tax return years still subject examination contrast calculating current deferred taxes purposes financial reporting applicable us gaap guc trust calculates realized capital gains using tax basis new gm securities financial reporting purposes based date transfer beneficial ownership new gm securities guc trust mlc occurred march 31 2011 substantial majority previously held new gm securities view guc trust administrator consultation guc trust monitor professionals retained guc trust calculation methodologies described basis distributable cash including dividend cash set aside distribution generally estimate projected liquidation administrative costs potential liabilities guc trust conservative basis accordingly view guc trust administrator guc trust monitor distributable cash currently set aside distribution fund costs liabilities would sufficient satisfy obligations guc trust date form 10k however assurance amount distributable cash set aside sufficient fund costs liabilities actually incurred addition assurance result future evaluations additional distributable cash need set aside appropriated fund additional costs liabilities beyond currently included guc trust’s estimates particular result changes guc trust’s estimates projected costs potential liabilities see “liquidity capital resources” guc trust units table details changes numbers guc trust units outstanding issuable year ended march 31 2017 1 number guc trust units issuable time represents guc trust units issuable respect allowed general unsecured claims newly allowed fiscal year 2 number guc trust units outstanding time represents guc trust units issued respect allowed general unsecured claims allowed prior periods including guc trust units held guc trust benefit holders allowed general unsecured claims yet supplied information required guc trust order effect initial distribution entitled b governmental entities precluded applicable law receiving distributions guc trust units new gm securities 3 number guc trust units outstanding issuable end year equal amount allowed general unsecured claims 1 1000 basis corresponding date additional guc trust units issued due rounding liquidity capital resources guc trust’s sources liquidity principally funds holds payment liquidation administrative costs significantly lesser degree earnings funds invested addition result liquidation guc trust’s holdings new gm securities quarter ended september 30 2015 guc trust holds distributable cash distribution guc trust beneficiaries guc trust holds funds primarily us treasury bills permitted plan guc trust agreement year ended march 31 2017 guc trust’s holdings cash equivalents decreased approximately 01 million approximately 44 million approximately 43 million decrease primarily due cash sale marketable securities excess reinvestments 1387 million interest income received marketable securities 16 million offset cash distributions 1124 million cash paid liquidation administrative costs 117 million cash paid residual winddown claims costs 103 million cash administrative fund returned dip lenders 60 million year ended march 31 2017 funds invested guc trust marketable securities decreased approximately 1387 million approximately 6611 million approximately 5224 million decrease due primarily sale marketable securities fund cash distributions payments described period guc trust earned approximately 18 million interest income investments year march 31 2017 guc trust held approximately 5268 million cash equivalents marketable securities amount approximately 4986 million relates distributable cash including dividend cash portion guc trust administrator permitted set aside distribution appropriate approval bankruptcy court trust monitor applicable order fund additional costs become due included distributable cash march 31 2017 approximately 139 million dividend cash described dividend cash distributed holders subsequently resolved allowed claims guc trust units respect distributable cash receive unless dividends respect distributable cash appropriated guc trust accordance guc trust agreement fund guc trust’s liquidation administrative costs income tax liabilities shortfalls residual winddown assets march 31 2017 distributable cash including dividend cash held guc trust set aside follows 92 million liquidating distributions payable date b 298 million fund projected liquidation administrative costs avoidance action defense costs see “net assets liquidationdistributable assets” addition distributable cash including dividend cash guc trust held 282 million cash equivalents marketable securities march 31 2017 representing funds held payment costs liquidation administration liabilities amount approximately 136 million comprising approximately 117 million remaining residual winddown assets approximately 17 million remaining administrative fund approximately 02 million remaining funds designated indenture trustee fiscal paying agent costs required guc trust agreement returned upon windingup guc trust dip lenders extent funds utilized satisfy designated winddown costs residual winddown claims costs indenture trusteefiscal paying agent costs cash equivalents marketable securities 17 million remaining administrative fund designated satisfaction certain specifically identified costs liabilities guc trust amounts may used payment guc trust professionals’ fees expenses winddown costs amounts time available distribution holders guc trust units balance cash equivalents marketable securities approximately 146 million available payment certain reporting administrative costs guc trust would available future distribution holders guc trust units otherwise used satisfy expected costs see “liquidation administrative costs” assurance additional amounts distributable cash required set aside distribution appropriated fund additional costs income tax liabilities beyond guc trust administrator already set aside appropriation distributable cash occurs fund obligations result lesser amount distributable cash available distribution holders guc trust units addition described “the guc trust assets” item 1 “business” portion guc trust’s assets currently segregated pursuant guc trust agreement satisfaction certain specified costs assets insufficient satisfy residual winddown claims fund specified costs reason guc trust administrator similarly required set aside distribution appropriate additional amounts distributable cash order fund shortfall item 7a item 7 managements discussion analysis financial condition results operations following managements discussion analysis financial condition results operations mda read conjunction general motors acceptance corporation gmac annual report form 10k period ended december 31 2004 filed separately securities exchange commission sec earnings per share amounts included mda reported fully diluted basis gm presents separate supplemental financial information reportable operating segments automotive operations auto financing insurance operations fio gms auto reportable operating segment consists gms four automotive regions gm north america gmna gm europe gme gm latin americaafricamideast gmlaam gm asia pacific gmap constitute gm automotive gma includes design manufacturing marketing locomotives elimination intersegment transactions certain nonsegment specific revenues expenditures including legacy costs related postretirement benefits certain delphi retirees certain corporate activities gms fio reportable operating segment consists gmac financing includes financing entities consolidated gmac disaggregated financial results gma prepared using management approach consistent basis manner gm management internally disaggregates financial information purpose assisting making internal operating decisions regard certain common expenses allocated among regions less precisely would required standalone financial information prepared accordance accounting principles generally accepted united states gaap financial results represent historical information used management internal decisionmaking purposes therefore data prepared represent way business operate future data prepared accordance gaap may materially different consistent industry practice market share information employs estimates sales certain countries public reporting legally required otherwise available consistent basis ii4 general motors corporation subsidiaries results operations consolidated results years ended december 31 2004 2003 2002 dollars millions consolidated total net sales revenues 193517 185837 177867 income continuing operations 2805 2862 1975 net income 2805 3822 1736 net margin continuing operations 14 15 11 automotive operations total net sales revenues 161545 155831 150250 income loss continuing operations 89 35 93 net income loss 89 995 146 financing insurance operations total revenues 31972 30006 27617 net income 2894 2827 1882 increase 2004 total net sales revenues compared 2003 resulted increased gma revenue 66 billion significant increases gmlaam gme increases fio revenue 20 billion revenues 2003 included approximately 814 million sale gms defense business increase 2003 total net sales revenues compared 2002 due increases gma revenue 52 billion despite lower gmna global volumes worldwide pricing competitiveness increases fio revenue 24 billion income continuing operations decreased 57 million 28 billion 2004 compared 2003 automotive results improved 868 million due improvement gmna strong recovery gmlaam record income gmap offsetting increased losses gme operations 2004 results include aftertax charge 886 million related february 2005 settlement reached gm fiat spa fiat terminate master agreement including put option settle various disputes two companies gmac earned record 29 billion net income higher financing insurance income offsetting lower mortgage income 2003 consolidated net income included gain sale discontinued operations 12 billion loss discontinued operations 219 million related hughes electronics corporation hughes see discussion discontinued operations despite increased revenues cost savings strong equity income 2003 compared 2002 continued automotive pricing pressures higher pension postretirement employee benefit opeb expenses us unfavorable foreign currency exchange resulted gma net income decreasing 2003 compared 2002 gmac record net income 28 billion 2003 compared 19 billion prior year 2004 highlights included record consolidated net sales revenues market share increases three four automotive regions record net income gmac record net income market share gmap profitability gmlaam approximately 14 actual return assets us pension plans 9 billion contributed prefund us opeb liabilities termination master agreement including put option fiat settlement related disputes included 2004 financial results ii5 general motors corporation subsidiaries gm automotive operations financial review years ended december 31 2004 2003 2002 dollars millions auto total net sales revenues 161545 155831 150250 income loss continuing operations 89 35 93 loss discontinued operations 219 239 gain sale discontinued operations 1179 net income loss 89 995 146 gma net income loss region gmna 1583 811 2992 gme 976 504 1011 gmlaam 85 331 181 gmap 729 577 188 net income loss 1421 553 1988 net margin 09 04 13 gm global automotive market share 145 146 150 loss continuing operations 1510 518 1895 loss discontinued operations 219 239 gain sale discontinued operations 1179 net income loss 1510 442 2134 increase 2004 total net sales revenues compared 2003 largely due higher wholesale volumes gmlaam gme continued growth gmap partially offset lower gmna revenue increase 2003 total net sales revenues compared 2002 largely due favorable product mix weaker us dollar partially offset unfavorable pricing pressures north america europe lower wholesale volumes gms global market share 145 146 years 2004 2003 respectively market share gains recognized 2004 three four automotive regions see discussion region gmna posting 07 percentage point decline 267 gmas 2004 net income increased 868 million compared 2003 gmnas income increased due material cost savings favorable tax items partially offset decreased production negative mix gmap achieved record annual income despite slower growth second half year gmlaam reached annual profitability first year since 2000 gmes loss 2004 increased due continued price pressure unfavorable exchange decrease gmas 2003 net income compared 2002 result lower wholesale volumes continued pricing pressures north america europe increased pension opeb expense us unfavorable foreign exchange partially offset continued strong product mix material cost savings strong equity results gmap see discussion operations results gm automotive regional results gm north america years ended december 31 2004 2003 2002 gmna dollars millions net income 1583 811 2992 net margin 14 07 26 wholesale volumes thousands cars 2271 2340 2547 trucks 3193 3267 3174 total gmna 5464 5607 5721 vehicle unit sales industry north america 20275 19841 20135 gm percentage industry 267 274 279 industry us 17302 16970 17143 gm percentage industry 272 280 283 gm cars 249 257 254 gm trucks 290 300 310 ii6 general motors corporation subsidiaries gm automotive operations financial review continued gm north america concluded north american industry vehicle unit sales increased 2 203 million units 2004 industry grew slightly gmnas production declined approximately 4 52 million units market share decreased 07 percentage points gmna ended year market share 267 2004 compared 274 2003 2004 industry vehicle unit sales united states increased 173 million units gms us market share decreased 08 percentage points gm ended year us market share 272 2004 versus 280 2003 gms us car market share declined 08 percentage points 249 us truck market share year 290 10 percentage point truck sales represented 60 gms total us vehicle unit sales 2004 slightly 59 2003 net income gmna totaled 16 billion 811 million 30 billion 2004 2003 2002 respectively effects material structural cost savings 2004 partially offset lower volume unfavorable product mix additionally 2004 net income includes effect gms contribution approximately 11 million shares xm satellite radio holdings inc xm common stock gms voluntary employees beneficiary association veba resulted aftertax gain gmna 118 million gmna recognized tax benefits 2004 540 million primarily result us mexico tax legislation canadian capital loss carryforwards well benefit related settlement various prior year tax matters us addition third quarter 2004 gm completed periodic review products liability reserves comprehend products liability exposure review resulted aftertax reduction reserves approximately 250 million order appropriately reflect current level exposure fourth quarter 2004 gm announced plans close assembly plant baltimore maryland permanently lay approximately 950 employees gms assembly plant linden new jersey connection actions gm recognized aftertax charges totaling 78 million 2004 impairment productspecific assets facilities associated costs continued payment compensation benefits laidoff employees baltimore linden plants estimated 6 million 10 million per month respectively expected decline employees redeployed retire otherwise terminate employment accordingly total charges currently estimable exit environmental costs totaling approximately 28 million tax expected recognized future liabilities incurred addition gm incurred aftertax charges 2004 118 million impairments productspecific assets facilities related actions decrease gmnas 2003 net income 2002 primarily due unfavorable pricing increased pension opeb expense us higher currencyexchange losses 2003 gmna incurred charges 448 million tax related october 2003 contract united auto workers provided lumpsum payments vehicle discount vouchers retirees addition gmna adjusted previously established reserve idled workers primarily related janesville wisconsin plant resulting 103 million net income tax also gmna incurred various structural cost adjustments asset impairment charges favorable interest income settlements prior year tax matters income related market valuation xm warrants items netted approximately 90 million income year vehicle revenue per unit consistent year 18991 calendar year 2004 18992 calendar year 2003 reflecting continuing trend moderating pricing gm europe years ended december 31 2004 2003 2002 dollars millions gme net loss 976 504 1011 gme net margin 32 18 42 wholesale volumes thousands cars 1620 1563 1545 trucks 97 94 100 total gme 1717 1657 1645 vehicle unit sales industry 20606 19537 19340 gm percentage industry 95 93 86 gm market share germany 105 104 102 gm market share united kingdom 139 137 127 ii7 general motors corporation subsidiaries gm automotive operations financial review continued gm europe concluded industry vehicle unit sales increased 5 europe 2004 gme increased total market share 95 02 percentage points 2003 two gms largest markets europe gm continued increase market share market share 105 germany 01 percentage point increase 2003 united kingdom market share 139 increase 02 percentage points 2003 net loss gme totaled 976 million 504 million 10 billion 2004 2003 2002 respectively increase gmes loss 2004 2003 primarily due continued negative price unfavorable exchange respect weakening us dollar compared euro swedish krona partially offset favorable volume mix material cost savings reduced structural costs addition 2004 gmes net loss included aftertax charge 234 million impairment various productspecific assets decrease gmes 2003 net loss 2002 primarily due favorable product mix reduced material structural costs favorable conditions partially offset unfavorable pricing foreign currency translation euro krona strengthened relative us dollar 2003 gmes net loss included restructuring charge 2003 218 million tax related initiative improve competitiveness gms automotive operations europe october 14 2004 gm announced major restructuring initiative gme reduce annual structural costs approximately euro 500 million 600 million 2006 plan involves reduction workforce 12000 2005 2006 largely manufacturing engineering operations germany continued integration design engineering functions december 2004 gm reached agreement various labor unions europe framework restructuring plan total costs associated restructuring initiative yet determined recognized future periods restructuring occurs gm expects incur charges connection throughout 2005 amounts charges yet determined gm latin americaafricamideast years ended december 31 2004 2003 2002 dollars millions gmlaam net income loss 85 331 181 gmlaam net margin 10 61 35 wholesale volumes thousands cars 586 438 443 trucks 183 123 197 total gmlaam 769 561 640 vehicle unit sales industry 4240 3585 3637 gm percentage industry 174 163 170 gm market share brazil 231 233 230 improving economic conditions latin america resulted significant industry growth 2004 markets argentina venezuela doubling brazils market growing 10 compared 2003 addition south africa market grew 20 2004 gmlaam capitalized industry growth improved regional market share 11 percentage points 174 2004 26 increase vehicle unit sales 737 thousand 2004 net income loss gmlaam totaled 85 million 331 million 181 million 2004 2003 2002 respectively 2004 first profitable year gmlaam since 2000 favorable volume mix positive pricing partially offset increased material structural costs drove improved results 2004 increase regions 2003 net loss 2002 primarily due continued economic weakness region industry vehicle sales decreased 52 thousand units 36 million 2003 gmlaam incurred asset impairment charges unfavorable exchange effects partially offset net price increases effective january 1 2004 gm increased ownership delta motor co south africa 100 49 previously moving equity method accounting full consolidation company known general motors south africa ii8 general motors corporation subsidiaries gm automotive operations financial review continued gm asia pacific concluded years ended december 31 2004 2003 2002 dollars millions gmap net income 729 577 188 gmap net margin 104 108 42 wholesale volumes thousands cars 203 185 trucks 88 70 220 total gmap 291 273 405 vehicle unit sales industry 17070 15925 14503 gm percentage industry 52 49 34 gm market share australia 194 204 226 gm market share china 93 86 42 industry vehicle unit sales asia pacific region increased approximately 72 2004 171 million units 159 million units 2003 reflects slower growth china previous years vehicle unit sales increased 16 53 million 2004 46 million units 2003 industry vehicle unit sales china increased 35 2002 levels gmap increased vehicle unit sales including gm daewoo auto technology company gmdat china affiliates asia pacific region 14 period 887 thousand units 775 thousand 2003 gmaps 2004 market share 52 compared 49 2003 gmaps market share china increased 07 percentage point 93 2004 china gms second largest market 2004 net income gmap totaled 729 million 577 million 188 million 2004 2003 2002 respectively increase gmaps 2004 net income 2003 due improved results equity investees japan gmdat well improved earnings gm operations thailand india partially offset reduced income gm holden increase gmaps 2003 net income compared 2002 primarily due strong equity earnings shanghai general motors co ltd equity investees well increased earnings holden australia operations years ended december 31 2004 2003 2002 dollars millions total net sales revenues 410 1318 895 loss continuing operations 1510 518 1895 loss discontinued operations 219 239 gain sale discontinued operations 1179 net loss income 1510 442 2134 operations loss continuing operations increased 992 million 2004 compared 2003 15 billion operations loss continuing operations includes aftertax legacy costs 402 million 634 million 2004 2003 respectively related employee benefit costs divested businesses primarily delphi gm retained responsibility 2002 gm evaluated carrying value investment fiat auto holdings bv fah resulting noncash impairment charge 22 billion 14 billion aftertax writedown decreased carrying value gms investment fah 24 billion 220 million remaining 220 million attributable investment fah certain joint ventures gme december 2004 gm wrote remaining balance operations cost sales resulting aftertax charge 136 million february 13 2005 gm fiat reached settlement agreement whereby gm pay fiat approximately 20 billion return 10 equity interest fah terminate master agreement including put option entered march 2000 settle various disputes related thereto acquire interest key strategic diesel engine assets important rights respect diesel engine technology knowhow settlement agreement results pretax charge earnings approximately 14 billion 886 million tax 156 per fully diluted share since underlying events disputes giving rise gms fiats agreement settle disputes terminate master agreement including put option existed december 31 2004 gm recognized charge fourth quarter 2004 charge recorded cost sales expenses operations ii9 general motors corporation subsidiaries operations concluded addition settlement agreement includes among things following actions provisions fiatgm powertrain fgp joint venture company dissolved gm regain complete ownership gm assets originally contributed transition period fgp continue supply companies respective operations disrupted gm retain coownership fiat key powertrain intellectual property including sde jtd diesel engines m2032 sixspeed manual transmission gm hold 50 interest joint venture limited operating powertrain manufacturing plant bielskobiala poland currently produces 13 liter sde diesel engine companies continue supply powertrains long term contracts provide considerable ongoing savings gm fiat also continue work together develop certain car programs fiat participate gms purchasing alliance program gm fiat exchanged broad releases claims liabilities operations total net sales revenues 2003 include pretax gain approximately 814 million approximately 505 million aftertax related sale gms defense operations light armored vehicle business general dynamics corporation sale generated net proceeds approximately 11 billion cash also operations 2003 results include charges approximately 277 million related october 2003 contract uaw provided lumpsum payments vehicle vouchers delphi retirees well net interest expense approximately 200 million related 2003 debt issuances discontinued operations december 2003 gm split hughes distributing hughes common stock holders gm class h common stock exchange outstanding shares gm class h common stock simultaneously gm sold 198 economic interest hughes news corporation ltd news corporation exchange cash news corporation preferred american depositary shares transactions referred hughes transactions completion hughes transactions december 22 2003 results operations cash flows assets liabilities hughes classified discontinued operations periods date presented gms consolidated financial statements transactions resulted aftertax gain approximately 12 billion classified gain sale discontinued operations gms consolidated statement income year ended december 31 2003 see note 2 consolidated financial statements discussion gmac financial review gmacs net income 29 billion 28 billion 19 billion 2004 2003 2002 respectively years ended december 31 2004 2003 2002 dollars millions financing operations 1476 1360 1239 mortgage operations 1108 1254 544 insurance operations 329 179 87 net income 2913 2793 1870 net income financing operations totaled 15 billion 14 billion 12 billion 2004 2003 2002 respectively increase 2004 net income 2003 reflects improvement earnings international operations lower credit loss provisions improved vehicle remarketing results north america favorable tax items partially offset lower net interest margins increase net income 2003 compared 2002 primarily due lower credit loss provisions increased revenues higher asset levels offset unfavorable effect lower net interest margins ii10 general motors corporation subsidiaries gmac financial review concluded net income mortgage operations totaled 11 billion 13 billion 544 million 2004 2003 2002 respectively 2004 us residential mortgage industry volumes declined approximately 30 compared 2003 however despite lower industry volumes mortgage operations achieved market share gains asset growth improved mortgage servicing results increase feebased revenue 2004 compared 2003 increase net income 2003 compared 2002 primarily due higher production securitization volumes residential commercial mortgage sectors result historically low market interest rates net income insurance operations totaled record 329 million 2004 179 million 87 million 2003 2002 respectively increase 2004 net income due improved operating performance across majority product lines combined improved investment portfolio performance increase net income 2003 compared 2002 primarily relates increased underwriting volume increased investment income resulting reduced levels impairments 2003 compared 2002 related insurance groups investment portfolio 2005 prioritiestargets respect gms previously reported operating priorities financial targets 2005 gms estimate 2005 calendaryear earnings per share restructuring charges north america europe revised range 100 200 previously announced range 400 500 reduction accounted deterioration gmnas net income outlook partially offset improvements sectors gm estimates operating cash flow negative approximately 20 billion fiat settlement gme restructuring compared previously announced target 20 billion largely due decreased net income lower production volume gmna capital spending remains track 8 billion gm estimates target increasing global sales volume attained reduction north america partially offset stronger sales regions sector net income estimates updated follows gmna expected miss target 500 million incur significant fullyear loss largely due shortfalls volume product mix pricing partially offset better cost performance gme gmlaam gmap gmac expected meet beat targets 500 million 100 million 600 million greater 2500 million respectively first quarter 2005 gm estimates earnings per share gmna gme restructuring charges loss range around 150 per share compared previous estimate breakeven better decrease fully accounted gmnas production mix pricing shortfalls gmnas results balance calendar year expected improve first quarter level volume improves new models enter production 2006 model year cash flow cost savings regional income targets formulated using management approach consistent basis manner gm management internally disaggregates financial information purposes assisting making internal operating decisions see discussion status debt ratings recent actions rating agencies respect gms gmacs credit ratings potential effect future ratings actions corporations access capital markets liquidity capital resources statements cash flows reclassifications 2004 gm reclassified certain amounts operating investing activities consolidated statements cash flows result concerns raised staff sec previous presentation reclassification primarily relates financing wholesale receivables dealers gms financing insurance operations result net cash receipts gm consolidated basis vehicles sold receivables relate sale gms inventory changes balances considered operating cash flows accordance statement financial accounting standards 95 statement cash flows sfas 95 reclassification better reflects financing sale inventory noncash transaction gm consolidated basis eliminates effects intercompany transactions reclassification affect key measures reported cash flow operating investing activities auto shown supplemental information consolidated statements cash flows gms operating cash flow measure reported using management approach also unaffected change see note 1 consolidated financial statements ii11 general motors corporation subsidiaries status debt ratings 2004 gm gmac experienced adequate access capital markets gm gmac able issue various securities raise capital consistent gms gmacs need financial flexibility october 13 2004 fitch downgraded gms gmacs longterm credit rating bbb negative outlook bbb negative outlook time affirmed gms gmacs commercial paper rating negative outlook february 14 2005 fitch affirmed gms gmacs ratings levels october 14 2004 standard poors downgraded gms gmacs longterm credit rating bbb negative outlook bbb stable outlook time downgraded gms gmacs commercial paper rating a2 negative outlook a3 stable outlook february 13 2005 standard poors affirmed gms gmacs ratings levels october 25 2004 dominion bond rating service dbrs downgraded gms gmacs longterm credit rating low bbb high stable outlook time affirmed gms gmacs commercial paper rating r1 low stable outlook february 14 2005 dbrs placed gms longterm credit rating bbb high stable outlook gms commercial paper rating r1 low stable outlook review negative implications time dbrs affirmed gmacs longterm credit rating bbb high stable outlook gmacs commercial paper rating r1 low stable outlook november 4 2004 moodys downgraded gms longterm credit rating baa1 negative outlook baa2 stable outlook time downgraded gmacs longterm credit rating a3 negative outlook baa1 stable outlook moodys affirmed gms gmacs commercial paper rating prime2 stable outlook february 14 2005 moodys lowered outlook gms gmacs longterm credit ratings baa2 baa1 respectively negative stable time lowered outlook gms gmacs commercial paper rating prime2 negative stable refer table summary gms gmacs credit ratings subsequent rating actions rating actions expected material effect gms gmacs ability obtain bank credit sell term debt assetbacked securities decline longterm ratings assigned one agencies noninvestment grade could temporarily limit gms gmacs access unsecured debt markets could severely limit gms gmacs ability access retail debt market period time additionally gm may assured reliable future access unsecured debt markets subsequent assigned noninvestment grade rating one agencies however past years gm gmac increased focus expanding developing diversified funding sources result management expects based corporations current financial position diversified funding strategy continue provide sufficient access capital order meet corporations ongoing funding needs accordingly gm gmac expect continue adequate access capital markets sufficient meet corporations needs financial flexibility gm gmac gm gmac gm gmac rating agency senior debt commercial paper outlook dbrs bbb high bbb r1 stable high low review fitch bbb negative moodys baa2 baa1 prime2 negative sp bbb a3 stable additional source funds gm currently unrestricted access 56 billion line credit syndicate banks committed june 2008 gm also additional 09 billion undrawn committed facilities various maturities undrawn uncommitted lines credit 18 billion similarly gmac currently 46 billion syndicated line credit committed june 2005 44 billion committed june 2008 50 billion bilateral committed lines various maturities uncommitted lines credit 226 billion addition new center asset trust ncat 195 billion liquidity facilities committed june 2005 mortgage interest networking trust mint 34 billion liquidity facilities committed april 2005 ncat mint special purpose entities administered gmac purpose funding assets part gmacs securitization mortgage warehouse funding programs entities fund purchase assets issuance assetbacked commercial paper represent important source liquidity gmac december 31 2004 ncat commercial paper outstanding 97 billion consolidated corporations consolidated balance sheet december 31 2004 mint commercial paper outstanding 15 billion reflected secured debt corporations consolidated balance sheet gmac also 593 billion funding commitments 284 billion used third parties including third party assetbacked commercial paper conduits may used additional secured funding sources ii12 general motors corporation subsidiaries automotive operations december 31 2004 cash marketable securities 35 billion 34 billion december 31 2003 readilyavailable assets veba trust totaled 233 billion compared 269 billion december 31 2003 decrease approximately 13 december 31 2003 primarily due veba salaried 401h cash contributions 86 billion 2004 gm offset strong cash flow operations 15 billion dividends gmac total assets veba trust 401h account used prefund part gms postretirement benefits liability approximated 200 billion december 31 2004 compared 100 billion december 31 2003 increase 100 longterm debt 305 billion december 31 2004 compared 296 billion december 31 2003 ratio longterm debt total longterm debt gms net assets automotive operations 847 december 31 2004 compared 852 december 31 2003 ratio longterm debt shortterm loans payable total debt gms net assets automotive operations 855 december 31 2004 compared 863 december 31 2003 decrease ratios due improved funding status gms postretirement benefits liabilities us net liquidity calculated cash marketable securities 35 billion 34 billion december 31 2003 assets veba trust invested liquid securities less total loans payable longterm debt negative 92 billion december 31 2004 compared negative 55 billion december 31 2003 order provide financial flexibility gm suppliers gm maintains trade payables program gecc pays participating gm suppliers amount due gm advance contractual original due dates exchange early payment suppliers accept discounted payment original due date payables gm pays gecc full amount december 31 2004 2003 gm owed approximately 10 billion 12 billion respectively gecc program classified shortterm debt gms consolidated financial statements addition gm right agreement defer payment gecc respect portion receivables paid behalf gm permissible deferral periods range 10 days 40 days would also classified shortterm debt gms financial statements deferred payments subject interest deferral period 2004 gm elect defer payment payables time year maximum amount permitted parts program 20 billion gms longterm unsecured debt obligations become subject rating sp bbb negative outlook gms current rating bbb stable outlook bbb rating moodys baa3 negative outlook gms current rating baa2 negative outlook baa3 gecc would permitted immediately terminate continued access program gm suppliers 2004 gecc communicated gm intent terminate trade payables program end 2005 following gecc communication gm gave participating suppliers notice impending program termination suppliers could develop alternative funding sources replace gecc program gm anticipate discontinuance future availability gecc program result material disruption supply parts materials gm material adverse effect gms financial position results operations cash flows financing insurance operations gmacs consolidated assets totaled 3241 billion december 31 2004 approximately 12 increase 2882 billion outstanding december 31 2003 increase total assets primarily due increase net finance receivables loans 1744 billion december 31 2003 1997 billion december 31 2004 increased use securitizations structured financing transactions primarily mortgage operations combined continued use gm sponsored incentive financing programs resulted increase consumer finance receivables loans additional asset growth result increase commercial loans balance cash equivalents consistent growth assets gmacs total debt increased 2678 billion december 31 2004 compared 2389 billion december 31 2003 gmacs 2004 yearend ratio total debt total stockholders equity 1201 compared 1181 december 31 2003 gmacs liquidity well ability profit ongoing activity large part dependent upon timely access capital costs associated raising funds different segments capital markets part gmacs strategy managing liquidity risk develop diversified funding sources across global investor base important part overall funding liquidity strategy gmac maintains substantial bank lines credit bank lines credit totaled 594 billion december 31 2004 provide backup liquidity represent additional funding sources required addition gmac 593 billion funding commitments 284 billion used variety committed facilities third parties including third party assetbacked commercial paper conduits gmacs financing mortgage operations may use additional secured funding sources ii13 general motors corporation subsidiaries offbalance sheet arrangements gm gmac use offbalance sheet arrangements economics sound business principles warrant use gms principal use offbalance sheet arrangements occurs connection securitization sale financial assets generated acquired ordinary course business gmac subsidiaries lesser extent gm assets securitized sold gmac subsidiaries consist principally mortgages wholesale retail loans secured vehicles sold gms dealer network assets sold gm consist principally trade receivables addition gm leases real estate equipment various offbalance sheet entities established facilitate financing assets gm nationally prominent lessors gm believes creditworthy assets consist principally office buildings warehouses machinery equipment use entities allows parties providing financing isolate particular assets single entity thereby syndicate financing multiple third parties conventional financing technique used lower cost borrowing thus lease cost lessee gm wellestablished market institutions participate financing property purchase ownership interests entities owned institutions independent affiliated gm believes officers directors employees gm gmac affiliates hold direct indirect equity interests entities amounts outstanding offbalance sheet facilities used financing insurance operations decreased past years gmac continues use securitization transactions similar legal structure offbalance sheet securitizations accounted secured financings recorded receivables debt balance sheet assets offbalance sheet entities follows dollars millions december 31 automotive operations 2004 2003 assets leased operating leases 2553 2411 trade receivables sold 1 1210 755 total 3763 3166 financing insurance operations receivables sold securitized mortgage loans 79043 80798 retail finance receivables 5615 9548 wholesale finance receivables 21291 21142 total 105949 111488 1 addition trade receivables sold gmac 549 million december 31 2004 586 million december 31 2003 contractual obligations longterm liabilities gm following minimum commitments contractual obligations including purchase obligations defined us securities exchange commission purchase obligation defined agreement purchase goods services enforceable legally binding gm specifies significant terms including fixed minimum quantities purchased fixed minimum variable price provisions approximate timing transaction longterm liabilities defined longterm liabilities reflected gms balance sheet gaap based definition tables include contracts include fixed minimum obligations include normal purchases made ordinary course business ii14 general motors corporation subsidiaries contractual obligations longterm liabilities concluded following table provides aggregated information auto outstanding contractual obligations longterm liabilities december 31 2004 payments due period 2010 dollars millions 2005 20062007 20082009 total debt 2062 814 1896 27715 32487 capital lease obligations 113 221 487 545 1366 operating lease obligations 467 964 1341 1340 4112 contractual commitments capital expenditures 676 137 813 contractual commitments postretirement benefits 1 3373 7201 10574 less veba assets 2 3373 7201 10574 net material 1230 2029 1436 307 5002 information technology 324 287 27 638 marketing 1377 416 58 148 1999 facilities 273 262 174 477 1186 rental car repurchases 8230 policy product warranty recall campaigns liability 3864 4394 757 118 9133 total contractual commitments 18616 9524 6176 30650 64966 remaining balance postretirement benefits 804 1606 9670 54820 66900 less veba assets 2 804 1606 7032 9442 net 2638 54820 57458 1amounts include postretirement benefits current contractual labor agreements north america remainder estimated liability benefits beyond current labor agreement essentially salaried employees classified remaining balance postretirement benefits 2total veba assets allocated based projected spending requirements amount includes 40 billion veba asset contribution made december 2004 combined us hourly salaried pension plans 30 billion overfunded yearend 2004 result normal conditions gm expect make contribution us hourly salaried pension plans foreseeable future following table provides aggregated information fio outstanding contractual obligations longterm liabilities december 31 2004 payments due period 2010 dollars millions 2005 20062007 20082009 total debt 92321 63140 21031 91820 268312 operating lease obligations 195 288 156 147 786 mortgage purchase sale commitments 23061 2376 186 65 25688 lending commitments 16468 2974 999 4501 24942 commitments remit excess cash flows certain loan portfolios 4335 commitments sell retail automotive receivables 2000 commitments provide capital equity method investees 11 4 101 227 343 purchase obligations 203 94 21 1 319 total contractual commitments 134259 68876 22494 101096 326725 book value per share book value per share determined based liquidation rights common stockholders book value per share gm 123 par value common stock increased 4906 december 31 2004 4496 december 31 2003 ii15 general motors corporation subsidiaries dividends may paid common stock declared gms board directors sole discretion december 31 2004 amount available payment dividends gm 123 par value 297 billion gms policy distribute dividends 123 par value common stock based outlook indicated capital needs business cash dividends per share gm 123 par value common stock 200 2004 2003 2002 employment payrolls worldwide employment december 31 thousands 2004 2003 2002 gmna 181 190 198 gme 61 62 66 gmlaam 29 23 24 gmap 15 14 11 gmac 34 32 4 5 7 total employees 324 326 338 worldwide payrolls billions 215 209 204 us hourly payrolls billions 1 87 89 91 average labor cost per active hour worked us 7373 7839 6278 hourly 2 1 includes employees work excludes laidoff employees receiving benefits 2 includes us hourly wages benefits divided number hours worked critical accounting estimates accounting policies integral understanding mda consolidated financial statements gm prepared conformity gaap requires use estimates judgments assumptions affect reported amounts assets liabilities date financial statements reported amounts revenues expenses periods presented gms accounting policies described note 1 consolidated financial statements critical accounting estimates described section accounting estimate considered critical estimate requires management make assumptions matters highly uncertain time estimate made different estimates reasonably could used changes estimate would material impact corporations financial condition results operations reasonably likely occur period management believes accounting estimates employed appropriate resulting balances reasonable however actual results could differ original estimates requiring adjustments balances future periods corporation discussed development selection disclosures critical accounting estimates audit committee gms board directors audit committee reviewed corporations disclosures relating estimates sales allowances latter time sale time incentive announced dealers applies vehicles sold gm dealer inventory gm records reduction revenue estimated impact sales allowances form dealer customer incentives may numerous types incentives available particular time factors used estimating cost incentives include volume vehicles affected incentive programs offered product rate customer acceptance incentive program actual number vehicles differs estimate different mix incentives occurs sales allowances could affected policy warranty provisions estimated expenses related product warranties made time products sold estimates established using historical information nature frequency average cost warranty claims management actively studies trends warranty claims takes action improve vehicle quality minimize warranty claims impairment longlived assets gm periodically reviews carrying value longlived assets held used goodwill intangible assets indefinite lives assets disposed events circumstances warrant review performed using estimates future cash flows carrying value longlived asset considered impaired impairment charge recorded amount carrying value longlived asset exceeds fair value ii16 general motors corporation subsidiaries critical accounting estimates continued pension postretirement employee benefits opeb pension opeb costs liabilities dependent assumptions used calculating amounts assumptions include discount rates health care cost trend rates benefits earned interest cost expected return plan assets mortality rates factors accordance gaap actual results differ assumptions accumulated amortized future periods therefore generally affect recognized expense recorded obligation future periods management believes assumptions used appropriate differences actual experience changes assumptions may affect gms pension postretirement obligations future expense gm established us pension plans discount rate 575 yearend 2004 represents 25 basis point reduction 600 discount rate used yearend 2003 gms us pretax pension expense forecasted decrease approximately 15 billion 2004 excluding curtailments settlements approximately 12 billion 2005 due approximately 14 2004 actual return assets partially offset lower 2004 yearend discount rate following information illustrates sensitivity change certain assumptions us pension plans december 31 2004 projected benefit obligation pbo us pension plans 89 billion minimum pension liability charged equity respect us pension plans 108 million net tax effect 2005 december 31 2004 change assumption pretax pension expense pbo 25 basis point decrease discount rate 160 million 23 billion 25 basis point increase discount rate 160 million 22 billion 25 basis point decrease expected return assets 220 million 25 basis point increase expected return assets 220 million gms us pension plans generally provide covered us hourly employees pension benefits negotiated flat dollar amounts year credited service earned individual employee formulas providing stated amounts contained prevailing labor contract consistent gaap 2004 pretax pension expense december 31 2004 pbo comprehend future benefit increases beyond amounts stated currently prevailing contract expires september 2007 current cycle negotiating new labor contracts every four years past practice maintaining consistent level benefit increases decreases one contract next however following data illustrates sensitivity pension expense pbo hypothetical assumed changes future basic benefits annual 1 increase basic benefit us hourly employees pension plan would result 112 million increase 2005 pretax pension expense 523 million increase december 31 2004 pbo annual 1 decrease benefit would result 104 million decrease 2005 pretax pension expense 487 million decrease december 31 2004 pbo changes assumptions would effect gms funding requirements addition december 31 2004 25 basis point decrease discount rate would decrease stockholders equity 190 million net tax 25 basis point increase discount rate would increase stockholders equity 190 million net tax impact greater 25 basis point decreaseincrease discount rate would proportional first 25 basis point decreaseincrease discount rate gm established us opeb plans discount rate 575 yearend 2004 represents 50 basis point reduction 625 discount rate used yearend 2003 following table illustrates sensitivity change discount rate assumption related gms us opeb plans us accumulated postretirement benefit obligation apbo significant portion gms worldwide apbo 775 billion december 31 2004 effect 2005 effect pretax opeb december 31 2004 change assumption expense apbo 25 basis point decrease discount rate 200 million 21 billion 25 basis point increase discount rate 200 million 21 billion ii17 general motors corporation subsidiaries critical accounting estimates concluded gm assumes 105 initial health care cost trend rate 50 ultimate health care cost trend rate december 31 2004 one percentage point increase initial ultimate assumed health care trend rates would increased apbo 84 billion december 31 2004 aggregate service interest cost components nonpension postretirement benefit expense 2004 543 million onepercentage point decrease would decreased apbo 70 billion aggregate service interest cost components nonpension postretirement benefit expense 2004 384 million sensitivities reflect effect changing one assumption time noted economic factors conditions often affect multiple assumptions simultaneously effects changes key assumptions necessarily linear postemployment benefits gm establishes reserves termination postemployment benefit liabilities paid pursuant union contractual agreements onetime termination benefits subject contractual agreement connection closed plants restructuring actions liabilities based comprehensive studies consider effect annual production labor forecast assumptions well redeployment scenarios allowance credit losses allowance credit losses managements estimate incurred losses gmacs consumer commercial finance receivable loan portfolios held investment management periodically performs detailed reviews portfolios determine impairment occurred assess estimated realizable value collateral applicable adequacy allowance credit losses based historical current trends factors affecting credit quality losses determination allowance credit losses requires management exercise significant judgment timing frequency severity credit losses could materially affect provision credit losses therefore net income investments operating leases gmacs investments leasing portfolio represent estimate realizable values assets based residual value established contract inception gmac establishes residual values contract inception using independently published residual value guides management reviews residual values periodically determine recorded amounts appropriate operating lease assets impaired gmac actively manages remarketing offlease vehicles maximize realization value changes value residuals external factors impacting gmacs future ability market vehicles prevailing market conditions may impact realization residual values mortgage servicing rights corporation capitalizes mortgage servicing rights associated loans sold servicing retained servicing rights acquired bulk flow purchase transactions corporation capitalizes cost originated mortgage servicing rights based upon relative fair market value underlying mortgage loans mortgage servicing rights time sale underlying mortgage loan corporation capitalizes purchased mortgage servicing rights cost amount exceeding estimated fair market value purchased assumed mortgage servicing rights carrying value mortgage servicing rights dependent upon whether asset hedged mortgage servicing rights receive hedge accounting treatment prescribed sfas 133 accounting derivative instruments hedging activities carried fair value changes fair value recognized current period earnings generally offset changes fair value underlying derivative changes value asset derivative highly correlated majority mortgage servicing rights hedged part corporations risk management program mortgage servicing rights receive hedge accounting treatment carried lower cost fair value accounting derivatives contracts fair value corporation uses derivatives normal course business manage exposure fluctuations commodity prices interest foreign currency rates corporation accounts derivatives consolidated balance sheet assets liabilities fair value accordance sfas 133 accounting complex requires significant judgments estimates involved estimating fair values absence quoted market prices ii18 general motors corporation subsidiaries new accounting standards beginning january 1 2003 corporation began expensing fair market value newly granted stock options stock based compensation awards employees pursuant sfas 123 accounting stockbased compensation fair value stock option grants estimated date grant using blackscholes optionpricing model fair value stock compensation awards determined market price gm 123 common stock date grant total expense 2003 229 million 142 million net tax recorded cost sales expenses 2002 prior years permitted sfas 123 gm applied intrinsic value method recognition measurement accounting principles board opinion 25 apb 25 accounting stock issued employees stock options stockbased employee compensation awards compensation expense related employee stock options reflected net income periods options granted exercise price equal market value underlying common stock date grant refer note 1 consolidated financial statements effect net income earnings per share compensation cost outstanding unvested stock options stockbased employee compensation awards determined based fair values grant date december 2004 financial accounting standards board fasb revised sfas 123 sfas 123r requiring companies record sharebased payment transactions compensation expense fair market value sfas 123r defines concept fair market value relates arrangements provisions statement effective beginning first interim annual reporting period begins june 15 2005 corporation began expensing fair market value newly granted stock options stock based compensation awards employees pursuant sfas 123 2003 therefore statement expected material effect gms consolidated financial position results operations effective july 1 2003 corporation began consolidating certain variable interest entities conform fasb interpretation 46 consolidation variable interest entities fin 46 gm adopted revision fin 46 fin 46r clarified certain provisions original interpretation exempted certain entities requirements january 1 2004 adoption fin 46r significant effect corporations financial condition results operations may 19 2004 fasb released fasb staff position fas 1062 fsp 1062 provides accounting guidance respect medicare prescription drug improvement modernization act 2003 medicare act fsp 1062 provides guidance accounting prescription drug benefit medicare act prescribes transition new guidance sets forth new disclosure requirements gms adoption july 1 2004 accounting provisions fsp 1062 significant effect corporations financial condition results operations refer note 16 consolidated financial statements disclosures required fsp 1062 november 2004 fasb issued sfas 151 inventory costs amendment arb 43 chapter 4 sfas 151 amends guidance arb 43 inventory pricing abnormal amounts idle facility expense freight handling costs wasted material spoilage requiring items recognized currentperiod expenses regardless whether meet criterion abnormal statement also requires allocation fixed production overheads costs conversion based normal capacity production facilities statement effective inventory costs incurred fiscal years beginning june 15 2005 management expect statement material impact gms consolidated financial position results operations december 2004 fasb issued sfas 153 exchanges nonmonetary assets amendment apb opinion 29 apb opinion 29 accounting nonmonetary transactions based principle exchanges nonmonetary assets measured based fair value assets exchanged sfas 153 amends apb opinion 29 eliminating exception fair value accounting nonmonetary exchanges similar productive assets replaces general exception fair value accounting nonmonetary exchanges commercial substance nonmonetary exchange commercial substance future cash flows entity expected change significantly result exchange statement effective nonmonetary asset exchanges occurring fiscal periods beginning june 15 2005 management expect statement material impact gms consolidated financial position results operations additional matters like domestic foreign automobile manufacturers years gm used brake products incorporated small amounts encapsulated asbestos products generally brake linings known asbestoscontaining friction products significant body scientific data demonstrating asbestoscontaining friction products unsafe create increased risk asbestosrelated disease gm believes use asbestos products appropriate ii19 general motors corporation subsidiaries additional matters concluded companies used asbestos increase number claims gm related allegations concerning use asbestoscontaining friction products recent years growing number auto mechanics filing suit seeking recovery based alleged exposure small amount asbestos used brake components claims almost always identify numerous potential sources claimants alleged exposure asbestos involve gm even asbestoscontaining friction products many potential sources would place users much greater risk vast majority claimants asbestosrelated illness may never develop one consistent experience reported automotive manufacturers end users asbestos two types claims related alleged asbestos exposure asserted gm representing significantly lower exposure automotive friction product claims like locomotive manufacturers gm used limited amount asbestos locomotive brakes insulation used manufacturing locomotives uses basis lawsuits filed gm railroad workers seeking relief based alleged exposure asbestos claims almost always identify numerous potential sources claimants alleged exposure asbestos involve gm even locomotives many claimants asbestosrelated illness may never develop one addition like many manufacturers relatively small number claims brought contractors seeking recovery based alleged exposure asbestoscontaining products working premises owned gm claims almost always identify numerous potential sources claimants alleged exposure asbestos involve gm vast majority claimants asbestosrelated illness may never develop one general motors resolved many cases years continues conventional strategic litigation reasons avoiding defense costs possible exposure runaway verdicts gm stated believes vast majority claims gm without merit small percentage claims pending gm allege contraction malignant disease associated asbestos exposure vast majority claimants asbestosrelated illness may never develop one addition gm believes strong defenses based upon number published epidemiological studies prepared highly respected scientists indeed gm believes compelling evidence warranting dismissal virtually claims gm vigorously press evidence judges juries whenever possible west virginia supreme court ohio trial court ruled federal law preempts asbestos tort claims asserted behalf railroad workers preemption means federal law entirely eliminates possibility railroad workers could maintain claims gm gms annual expenditures associated resolution claims decreased last year increasing nonmaterial amounts recent years amount expended year highly dependent number claims filed amount pretrial proceedings conducted number trials settlements occur period managements belief based upon consultation legal counsel claims result material adverse effect upon financial condition results operations gm forwardlooking statements report reports subsequently filed gm sec form 10q filed furnished form 8k related comments management gm use words expect anticipate estimate forecast objective plan goal project prioritiestargets similar expressions intended identify forwardlooking statements represent current judgment future may hold believe judgments reasonable actual results may differ materially due numerous important factors described factors may described subsequent reports gm may file sec form 10q filed furnished form 8k changes economic conditions currency exchange rates political stability shortages price increase fuel labor strikes work stoppages market acceptance corporations new products significant changes competitive environment changes laws regulations tax rates ability corporation achieve reductions cost employment levels realize production efficiencies implement capital expenditures levels times planned management ii20 general motors corporation subsidiaries item 7a item 7 management’s discussion analysis financial condition results operations following addresses material changes net assets liquidation motors liquidation company guc trust guc trust fiscal year ended march 31 2019 intended read conjunction financial statements guc trust included item 8 “financial statements supplementary data” critical accounting policies estimates liquidation basis accounting guc trust created purposes described note 1 “purpose trust” item 8 “financial statements supplementary data” finite life result guc trust prepared financial statements liquidation basis accounting accordance accounting principles generally accepted united states america “us gaap” liquidation basis accounting assets stated estimated realizable value nondiscounted amount cash asset expected converted liquidation liabilities continue recognized amount required us gaap remeasured reflect anticipation entity legally released obligation additionally liquidation basis accounting reserve established estimated costs expected incurred liquidation costs accrued reasonable basis estimation accrual also made estimated income cash expected received liquidation period extent reasonable basis estimation exists valuation assets realizable value reserves expected liquidation costs accrual investment income marketable securities represent estimates based present facts circumstances known guc trust administrator subject change estimates periodically reviewed adjusted appropriate described headings “cash equivalents marketable securities accrued investment income cash equivalents marketable securities” “reserves expected costs liquidation” estimates investment income expected earned remaining liquidation period estimates expected costs liquidation may change near term change could material guc trust beneficiaries future extent liquidating distributions yet paid current holders allowed general unsecured claims future current holders guc trust units disputed general unsecured claims term loan avoidance action claims resolved allowed thereby become allowed general unsecured claims holders thereof become entitled receive liquidating distributions distributable cash including dividend cash guc trust units pro rata amount claims upon occurrence guc trust incurs obligation distribute distributable cash accordingly liquidating distributions payable recorded amount distributable cash previously fair value new gm securities guc trust obligated distribute end period disputed general unsecured claims term loan avoidance action claims resolved allowed general unsecured claims prior resolution allowance disputed general unsecured claims term loan avoidance action claims liabilities recorded conditional obligations associated disputed general unsecured claims term loan avoidance action claims rather beneficial interests guc trust beneficiaries residual assets guc trust reflected net assets liquidation guc trust financial statements liquidation basis accounting guc trust presents two principal financial statements statement net assets liquidation statement changes net assets liquidation addition although required liquidation basis accounting guc trust also presents statement cash flows accordance requirements guc trust agreement holdings new gm securities dividends received new gm common stock guc trust previously held new gm securities future distribution respect allowed general unsecured claims guc trust units previously set aside distribution fund potential administrative costs income tax liabilities including taxes distribution dividend taxes investment income taxes securities held consisted shares new gm common stock new gm warrants described “the guc trust assets” item 1 “business” pursuant liquidation order guc trust liquidated holdings new gm securities july august 2015 guc trust valued holdings securities fair value based quoted closing market prices last trading day fiscal period dividends received new gm common stock required applied purpose new gm common stock dividends relate portion distributable cash applicable liquidated new gm common stock distributed holders subsequently resolved allowed claims guc trust units dividends relating distributable cash also distributed holders however distributable cash appropriated guc trust accordance guc trust agreement fund costs liabilities guc trust case dividends relating appropriated distributable cash applied costs liabilities guc trust like appropriated distributable cash maintained administrative cash dividends applied purpose associated distributable cash references distributable cash understood include dividends relating distributable cash unless expressly indicated otherwise amount cash equivalents marketable securities held guc trust relates dividends received guc trust new gm common stock previously held guc trust referred dividend cash included amount cash equivalents marketable securities held distribution guc trust beneficiaries referred distributable cash except extent dividends relating appropriated distributable cash classified administrative cash following appropriation cash equivalents marketable securities accrued investment income cash equivalents marketable securities cash equivalents consist balances held money market funds marketable securities consist shortterm investments us treasury bills guc trust valued securities carrying value approximates fair value beginning quarter ended june 30 2014 estimated investment income expected received holdings marketable securities cash equivalents accrued liquidation basis accounting extent reasonable basis estimation exists accrual estimated principally based forecasted cash outflows expected returns based recent yields us treasury bills marketable securities invested estimates forecasted cash outflows consider amount timing distributions respect guc trust units estimates may change near term change may material reserves residual winddown claims residual winddown costs upon dissolution mlc occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining residual winddown claims date dissolution debtors transferred guc trust residual winddown assets amount necessary satisfy ultimate allowed amount residual winddown claims including certain avoidance action defense costs residual winddown costs estimated debtors corresponding amount recorded reserves residual winddown claims costs prior execution letter agreement administrative agent described “functions responsibilities guc trust” item 1 “business” reserves increased expected increases avoidance action defense reasonable basis estimation expected exceed recorded reserves residual winddown claims residual winddown costs less residual winddown assets excess funds returned dip lenders expected collectively actual amounts residual winddown claims including certain avoidance action defense costs allowed residual winddown costs exceed residual winddown assets guc trust administrator may required set aside distribution appropriate distributable cash fund shortfall appropriation would reduce amount distributable cash including dividend cash available distribution holders guc trust units reserves expected costs liquidation basis accounting guc trust required estimate accrue costs associated implementing plan distributing guc trust’s distributable assets costs described winddown costs reporting costs note 2 “plan liquidation” item 8 “financial statements supplementary data” consist principally professional fees costs governance administrative expenses amounts may vary significantly due among things time effort required complete activities distributions plan guc trust recorded reserves expected costs liquidation represent estimated costs incurred remaining liquidation period guc trust reasonable basis estimation amount liquidation costs ultimately incurred depends period time extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities result estimates expected costs liquidation may change near term change could material march 31 2019 remaining liquidation period estimated extend minimum april 2022 estimated predominantly modified probabilityweighted basis guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome addition consistent liquidation basis accounting consideration given potential outcomes extent exist reasonable basis estimation remaining liquidation period dependent predominantly estimate remaining period time resolution litigation involving certain general motors vehicle recalls described item 3 “legal proceedings” uncertainties associated resolution general motors vehicle recall litigation reasonable basis estimation respect certain outcomes exist result guc trust’s estimate remaining period time resolution represents minimum remaining length time estimated likely resolution litigation addition certain additional estimated time wind guc trust following resolution litigation included estimated liquidation period future developments general motors vehicle recall litigation could extend current estimate remaining period time resolution therefore extend estimated remaining liquidation period guc trust beyond april 2022 addition certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued guc trust’s estimates regarding costs remaining liquidation period may change near term change may material guc trust incurs liquidation costs reserves released offset costs incurred liability service provider recognized accounts payable accrued liability paid addition guc trust records reserves expected costs reasonable basis estimation applicable us gaap additional costs may identified time additional reserves must recorded costs identified guc trust records increase reserves charges increase addition reserves statement changes net assets liquidation process recording reserves expected costs liquidation matter financial reporting separate distinct process distributable cash set aside distribution purposes funding projected costs liquidation projected costs generally estimated conservative ie inclusive basis include contingencies permitted accrued reserves expected costs liquidation applicable us gaap complete description process setting aside distributable cash fund projected costs potential liabilities guc trust see “functions responsibilities guc trustfunding guc trust’s liquidation administrative costs” “net assets liquidationdistributable cash set aside distribution” contingent settlement obligation guc trust accrues loss contingencies probable liability incurred date financial statements amount liability reasonably estimated assessing whether liability incurred date financial statements guc trust considers events occurring date financial statements provide additional evidence respect conditions existed date financial statements including estimates inherent process preparing financial statements accordingly quarter ended march 31 2018 guc trust accrued contingent settlement obligation pursuant settlement agreement described item 3 “legal proceedings” result developments related litigation specifically related impact rule 23 decision described item 3 “legal proceedings” accrual reversed quarter ended september 30 2018 due uncertainties associated effectiveness settlement agreement effect time income taxes guc trust considered disputed ownership fund pursuant treasury regulation section 1468b9 assets transferred guc trust passive investments guc trust taxed qualified settlement fund qsf pursuant treasury regulation section 1468b9c1ii qsf tax status guc trust approved irs private letter ruling issued march 2 2011 general qsf computes taxable income manner corporation pays federal income tax using trust income tax rates modified gross income modified gross income includes gross income pursuant internal revenue code section 61 less administrative expenses certain losses sale exchange worthlessness property net operating losses general disputed ownership fund taxed qsf recognize gross income assets transferred therefore guc trust recognized gross income transfer assets mlc guc trust generates gross income form interest dividend income including dividends received previous holdings new gm common stock recognizes capital gains andor losses upon disposition new gm securities b receipt subsequent distribution sale guc trust additional shares fair market value additional shares date distribution sale differs fair market value shares date receipt reduced administrative expenses accumulated net operating capital losses compute modified gross income guc trust taxable federal income tax purposes current income tax liability asset recognized estimated taxes payable receivable year deferred tax liabilities assets recognized estimated future tax effects temporary differences financial reporting tax accounting deferred tax assets reviewed recoverability valuation allowances provided necessary guc trust subject state income taxes current law accordingly current deferred state income tax liabilities assets recorded process recognizing deferred tax assets liabilities current income taxes payable matter financial reporting separate distinct process distributable cash set aside distribution purposes funding potential income tax liabilities potential income tax liabilities generally estimated conservative ie inclusive basis may include amounts potential income tax liabilities beyond amounts permitted recorded applicable accounting standards complete description process setting aside distributable cash fund projected costs potential income tax liabilities guc trust see “net assets liquidationdistributable cash set aside distribution” guc trust recognizes tax benefit uncertain tax position likely tax position sustained examination taxing authority based technical merits position review available evidence consultation guc trust professionals guc trust’s tax liability respect federal income tax returns year ended march 31 2018 prior years longer subject examination result application section 505b bankruptcy code however amounts shown schedule include capital loss carryovers march 31 2019 along net operating loss carryovers generated march 31 2019 could subject examination irs subsequent years losses utilized expected losses utilized net basis future except potentially respect receipt subsequent distribution sale guc trust additional shares referred fair market value additional shares date distribution sale greater fair market value shares date receipt determinable estimable time march 31 2019 known items would result significant accrual uncertain tax positions march 31 2019 guc trust capital loss carryovers net operating loss carryovers together loss carryovers guc trust taken deduction amounts set forth scheduled year losses incurred net losses utilized subsequent years offset net taxable income gains amounts reflect loss carryovers shown federal income tax returns filed guc trust examined irs follows thousands quarter ended september 30 2015 guc trust disposed capital assets accordingly guc trust expect recognize additional capital gains losses going forward except potentially respect receipt subsequent distribution sale guc trust additional shares referred fair market value additional shares date distribution sale differs fair market value shares date receipt determinable estimable time general capital losses may carried forward corporations five years losses incurred five year rule may carried forward indefinitely noncorporate persons capital loss carryovers 1581 million 226 million attributable years ended march 31 2012 2013 respectively longer available utilization guc trust five year rule net operating losses generally may carried forward 20 years losses incurred although pursuant enactment “tax cuts jobs act” december 2017 net operating losses generated tax years beginning december 31 2017 may carried indefinitely net operating loss carryover attributable year ended march 31 2012 reduced approximately 02 million result utilization portion carryover offset net taxable income recognized year ended march 31 2019 loss succession rule treasury regulations section 1468b9c6 loss succession rule upon termination guc trust guc trust claimant defined pursuant tax regulations entitled succeed take account portion unused vs unexpired loss carryovers guc trust loss succession rule provides order determine portion loss carryovers claimant succeed loss carryovers must allocated among guc trust claimants proportion value guc trust assets distributable claimant purposes rules govern disputed ownership funds claimant defined person claims ownership whole part property immediately property transferred disputed ownership fund accordingly loss succession rule person generally eligible succeed guc trust’s loss carryovers person receives distribution guc trust assets upon guc trust’s termination ii qualifies claimant respect guc trust mechanics loss succession rule applied guc trust holders guc trust units unclear several respects following discussion describes one possible interpretation rules however possible irs take position differs described previously disclosed guc trust initiated preliminary discussions irs regarding loss succession rule time discussions pursued holders guc trust units consult tax advisors application loss succession rule upon termination guc trust light particular circumstances termination guc trust generally expected holders guc trust units final distribution date receive distribution excess guc trust distributable assets rules govern disputed ownership funds address disputed ownership fund considered terminate purposes loss succession rule one possible interpretation loss succession rule guc trust considered terminate guc trust distributes remaining assets holders guc trust units ie final distribution date interpretation holders guc trust units would considered receive distribution guc trust assets upon termination guc trust time guc trust able predict certainty final distribution may occur guc trust terminated allocation loss carryovers rules govern disputed ownership funds address loss succession rule apply claimants permitted transfer interests disputed ownership fund guc trust units transferrable possible guc trust determine holders guc trust units may constitute claimants purposes loss succession rule given time accordingly upon termination guc trust position provide allocation guc trust’s loss carryovers among guc trust claimants andor holders guc trust units march 31 2019 31855504 guc trust units outstanding 319 billion allowed general unsecured claims addition guc trust computes taxable income manner corporation unclear whether extent five year rule might affect amount unused capital loss carryovers guc trust claimants may succeed loss succession rule use estimates preparation financial statements liquidation basis conformity us gaap requires use estimates assumptions affect reported amounts assets liabilities estimates subject known unknown risks uncertainties factors could materially impact amounts reported disclosed financial statements related footnotes significant estimates include anticipated amounts timing future cash flows estimated investment income expected received expected liquidation costs fair value marketable securities actual results could differ estimates statement changes net assets liquidation year ended march 31 2019 net assets liquidation increased approximately 297 million approximately 4648 million approximately 4945 million principally result investment income 239 million reversal contingent settlement obligation 150 million quarter ended september 30 2018 partly offset net additions 95 million reserves expected costs liquidation described note 3 “net assets liquidation” item 8 “financial statements supplementary data” reversal contingent settlement obligation 150 million associated developments related litigation specifically associated impact rule 23 decision described item 3 “legal proceedings” approximately 136 million investment income associated increase accrued investment income due following net extension estimated length time resolution aforementioned vehicle recall litigation corresponding extension expected date make distributions respect guc trust units b reduction expected distributions associated term loan avoidance action claims quarter ended december 31 2018 result settlement principle term loan avoidance action c increases yields us treasury bills described “liquidation administrative costs” increase reserves expected costs liquidation 95 million primarily associated net extension estimated length remaining liquidation period partly offset reversals expected noticing costs thenexisting settlement agreement previously accrued income tax provision benefit year ended march 31 2019 result cumulative net operating capital losses establishment full valuation allowance net deferred tax assets beginning end period result liquidation guc trust’s holdings new gm securities determined deferred tax assets realizable see “income tax liabilities certain capital gains investment income dividends new gm common stock” item 1 “business” note 8 “income taxes” item 8 “financial statements supplementary data” liquidation administrative costs discussed “critical accounting policies estimates” liquidation basis accounting guc trust required upon establishment record reserves respect expected costs associated implementing plan distributing guc trust’s distributable assets costs consist principally professional fees governance costs liquidation administrative costs us gaap reserves may established extent reasonable basis estimation time additional costs identified reasonable basis estimation guc trust records increase reserves expected costs liquidation charges increase addition reserves expected costs liquidation statement changes net assets liquidation costs actually incurred guc trust costs reduce previously recorded reserves expected costs liquidation amount incurred costs effect statement changes net assets liquidation guc trust’s reserves liquidation administrative costs recorded conformity us gaap allocable following categories • reserve expected winddown costs corresponding expenditures made administrative fund following depletion administrative fund administrative cash see “the guc trust assets” item 1 “business” • reserve expected reporting costs corresponding expenditures made administrative cash see “the guc trust assets” item 1 “business” • reserve indenture trustee fiscal paying agent costs corresponding expenditures made cash received guc trust mlc dissolution date see “the guc trust assets” item 1 “business” addition guc trust maintains reserves residual winddown claims costs corresponding expenditures made residual winddown assets following depletion assets administrative cash see “the guc trust assets” item 1 “business” described greater detail heading “the guc trust assets” item 1 “business” “liquidity capital resources” unused portions certain assets associated foregoing reserves required returned dip lenders upon winding dissolution guc trust therefore assets available fund costs liquidation administration guc trust also available distribution holders allowed general unsecured claims guc trust units see “the guc trust assets” item 1 “business” march 31 2019 guc trust approximately 375 million reserves liquidation administrative costs estimated incurred winding conclusion guc trust compared approximately 381 million reserves march 31 2018 following table summarizes greater detail changes reserves year ended march 31 2019 reserves expected costs liquidation increased approximately 95 million year ended march 31 2019 order reflect 41 million increase expected winddown costs 54 million increase expected reporting costs increase expected winddown costs year ended march 31 2019 primarily associated net extension estimated length remaining liquidation period partly offset reversal expected noticing costs previously accrued reduction legal fees associated balances due increase expected reporting costs year ended march 31 2019 primarily associated net extension estimated length remaining liquidation period comparison reserves increased approximately 339 million year ended march 31 2018 order reflect 253 million increase expected winddown costs 86 million increase expected reporting costs increase expected winddown costs year ended march 31 2018 primarily associated extensions estimated length remaining liquidation period along increases expected legal fees associated litigation involving certain vehicle recalls noticing costs associated settlement agreement described item 3 “legal proceedings” increase expected reporting costs year ended march 31 2018 primarily associated aforementioned extensions estimated length remaining liquidation period reserves expected costs liquidation reduced amount liquidation administrative costs incurred year ended march 31 2019 trust professional costs incurred year ended march 31 2019 approximately 52 million compared 101 million year ended march 31 2018 decrease 49 million year primarily due decreases winddown costs charged reserves trust governance costs incurred year ended march 31 2019 approximately 45 million compared 44 million year ended march 31 2018 increase 01 million year due increases winddown costs charged reserves administrative costs years ended march 31 2019 2018 approximately 03 million additional information regarding components category costs see “the guc trust assets” item 1 “business” foregoing reserves represent future costs guc trust reasonable basis estimation march 31 2019 therefore recorded liquidation basis accounting accordance us gaap additional costs may incurred reasonable basis estimation march 31 2019 particular march 31 2019 recorded reserves expected costs liquidation reflect estimated costs remaining liquidation period estimated extend minimum april 2022 date dependent predominantly estimate remaining period time resolution litigation involving certain general motors vehicle recalls described item 3 “legal proceedings” uncertainties associated resolution general motors vehicle recall litigation reasonable basis estimation respect certain outcomes exist result guc trust’s estimate remaining period time resolution represents minimum remaining length time estimated likely resolution litigation addition certain additional estimated time wind guc trust following resolution litigation included estimated liquidation period minimum end date remaining liquidation period estimated predominantly modified probabilityweighted basis permitted us gaap guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome addition consistent liquidation basis accounting consideration given potential outcomes extent exist reasonable basis estimation additionally certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued future developments general motors vehicle recall litigation could extend current estimate minimum remaining period time resolution therefore extend estimated minimum remaining liquidation period guc trust beyond april 2022 addition described item 3 “legal proceedings” noticing costs 1372 million paid revised settlement agreement approved bankruptcy court time reasonable basis estimation exist whether noticing costs incurred accordingly march 31 2019 accrual potential noticing costs recorded also described item 3 “legal proceedings” certain holders majority guc trust units asserted claim reimbursement legal fees approximately 67 million incurred connection litigation involving certain general motors vehicle recalls time reasonable basis estimation exist whether reimbursement made accordingly march 31 2019 accrual claim recorded amount liquidation costs ultimately incurred depends length remaining liquidation period extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities guc trust’s estimates regarding remaining liquidation period expected costs liquidation may change near term change could material funds available foregoing categories costs sufficient satisfy costs category guc trust required appropriate portion distributable cash order meet additional obligations costs appropriation result lesser amount distributable cash available distribution holders guc trust units process recognizing reserves expected costs liquidation matter financial reporting separate distinct process distributable cash set aside distribution purposes funding projected costs liquidation generally estimated conservative ie inclusive basis include contingencies permitted recognized applicable accounting standards described detail certain amounts distributable cash already set aside distribution purposes meeting potential additional obligations however amounts set aside distribution neither reflected part financial statements included elsewhere annual report form 10k process setting aside assets related process recording matter financial reporting statement net assets liquidation reserves expected costs liquidation current deferred income tax liabilities see “critical accounting policies estimatesincome taxes” “critical accounting policies estimatesreserves expected costs liquidation” “net assets liquidationdistributable cash set aside distribution” additional information regarding reserves described see note 2 “plan liquidation” note 7 “reserves expected costs liquidation residual winddown claims costs” item 8 “financial statements supplementary data” net assets liquidation disputed claims following table presents summary activity allowed disputed general unsecured claims term loan avoidance action claims year ended march 31 2019 1 remaining disputed general unsecured claims represent general claim contingency future disputed claims obligations guc trust guc trust set aside distribution aggregate 148 million general claim contingency ie 296 distributable cash per 1000 allowed general unsecured claims provided plan 2 maximum amount unresolved claims represents sum disputed general unsecured claims term loan avoidance action claims 3 total claim amount represents sum allowed general unsecured claims maximum amount unresolved claims described item 3 “legal proceedings” parties term loan avoidance action entered settlement agreement subject bankruptcy court approval pursuant settlement defendants term loan avoidance action receive allowed general unsecured claims aggregating 2310 million also described item 3 “legal proceedings” guc trust previously executed settlement agreement certain plaintiffs approved bankruptcy court settlement agreement would provided settlement payment plaintiffs 150 million among provisions quarter ended march 31 2018 guc trust accrued contingent settlement obligation 150 million settlement payment result developments related litigation specifically associated impact rule 23 decision described item 3 “legal proceedings” contingent obligation reversed quarter ended september 30 2018 due uncertainties associated effectiveness settlement agreement effect time described item 3 “legal proceedings” settlement agreement approved bankruptcy court distributable assets table summarizes activity new gm securities prior liquidation distributable cash comprises guc trust’s distributable assets including numbers new gm securities amount distributable cash previously distributed well amount distributable cash available distribution holders guc trust units march 31 2019 thousands 1 numbers new gm securities amount distributable cash shown distributed include sales cash distributions governmental entities extent governmental entities requested sales demonstrated satisfaction guc trust administrator governmental entities precluded applicable law receiving distributions new gm securities b fractional amounts new gm securities lieu guc trust required pursuant guc trust agreement distribute cash subject certain minimum thresholds 2 distributions payable includes amounts payable respect allowed general unsecured claims allowed prior fiscal periods holders claims yet supplied information required guc trust order effect distribution entitled 3 distributable assets reflects amounts distributable cash dividend cash shown “guc trust distributable assets” report included exhibit 991 current report form 8k filed guc trust sec may 8 2019 distributable cash associated dividend cash set aside potential distribution respect current disputed general unsecured claims term loan avoidance action claims march 31 2019 extent claims resolved favor guc trust distributable cash associated dividend cash may become available distribution holders guc trust units future periods amount distributable cash associated dividend cash set “distributable assets” directly relate net assets liquidation number appearing guc trust’s financial statements prepared accordance us gaap described heading “disputed claims” march 31 2019 approximately 31855 million allowed general unsecured claims respect claims guc trust previously distributed aggregate 137298736 shares new gm common stock 124817263 new gm series warrants 124817263 new gm series b warrants 2462 million distributable cash addition guc trust obligated distribute march 31 2019 18 million distributable cash described item 1 “business” subsequent march 31 2019 guc trust filed motion seeking authority bankruptcy court appropriate distributable cash 1372 million noticing costs revised settlement agreement reference made item 3 “legal proceedings” information regarding motion distributable cash set aside distribution overview distributable cash set aside distribution addition distributions distributable cash reflected reductions guc trust net assets financial statements guc trust also time sets aside distributable cash potential future appropriation fund projected liquidation administrative costs well potential income tax liabilities including dividend taxes investment income taxes distribution distributable cash set aside distribution guc trust deducted net assets liquidation guc trust financial statements unless set aside distributable cash appropriated expended distributable cash set aside distribution segregated guc trust specific purposes available distribution holders guc trust units claimants unless extent guc trust later determines set aside distributable cash longer needed fund specific purposes process related separate process recording current deferred income tax liabilities reserves expected costs liquidation statement net assets liquidation matter financial reporting matter financial reporting income tax liabilities reserves expected costs liquidation must determined accordance generally accepted accounting principles applicable guc trust contrast estimates projected costs potential liabilities guc trust may set aside distributable cash generally made conservative ie inclusive basis include contingencies may include amounts potential income tax liabilities permitted recognized applicable accounting standards see “critical accounting policies estimatesincome taxes” “critical accounting policies estimatesreserves expected costs liquidation” march 31 2019 distributable assets guc trust available distribution holders guc trust units consisted distributable cash approximately 4579 million including dividend cash deducting amounts distributable cash including dividend cash set aside distribution fund additional projected liquidation administrative costs guc trust described headings “set aside calculations relating projected liquidation administrative costs including dividend taxes investment income taxes” ii set aside distributions payable respect allowed general unsecured claims allowed prior fiscal periods holders claims yet supplied information required guc trust order effect distributions entitled distributable cash set aside potential distribution respect current disputed general unsecured claims term loan avoidance action claims extent claims resolved favor guc trust distributable cash including dividend cash may become available distribution holders guc trust units future periods prior liquidation guc trust’s holdings new gm securities july august 2015 new gm securities set aside fund projected liquidation administrative costs potential income tax liabilities described set aside calculations relating projected liquidation administrative costs including dividend taxes investment income taxes guc trust administrator reevaluates quarterly basis amount distributable cash including dividend cash needed set aside distribution purposes funding projected liquidation administrative costs including dividend taxes investment income taxes determination made basis different used calculate reserves financial statement purposes current methodology amount set aside equal estimates unfunded projected liquidation administrative costs including dividend taxes investment income taxes prior liquidation guc trust’s holdings new gm securities estimates unfunded projected liquidation administrative costs including dividend taxes investment income taxes converted number new gm securities set aside distribution dividing estimates trailing twelvemonth average closing prices new gm securities corresponding amount dividend cash associated setaside new gm securities also set aside distribution quarter ended march 31 2019 result standard quarterly reevaluations described estimate unfunded projected liquidation administrative costs including dividend taxes investment income taxes decreased 81 million 256 million decrease primarily related appropriation distributable cash 124 million january 2019 included total appropriations described heading “the guc trust assets” item 1 “business” partly offset increase projected noticing costs revised settlement agreement 67 million total projected amount approximately 137 million however due limitations amount distributable cash available set aside purposes amount set aside reduced 124 million accordingly march 31 2019 guc trust set aside distribution distributable cash 124 million purposes funding future projected liquidation administrative costs guc trust fixed amount distributable cash administered guc trust well requirement also set aside sufficient amount distributable cash satisfy potential allowed general unsecured claims including term loan avoidance action claims amount distributable cash available set aside fund projected liquidation costs potential obligations subject inherent limitations “set aside” calculations relating potential taxes distribution addition reevaluating amount distributable cash including dividend cash set aside distribution fund projected liquidation administrative costs including dividend taxes investment income taxes guc trust administrator also reevaluates quarterly basis amount distributable cash needed set aside distribution fund potential taxes distribution current methodology calculating set aside estimates potential taxes distribution applying applicable us federal income tax rate net realized capital gains still subject examination irs less current period tax deductible expenses future tax deductible expenses realized capital gains computed using tax basis new gm securities based date transfer record ownership new gm securities guc trust mlc december 15 2011 tax basis new gm common stock received exercise new gm warrants pursuant liquidation order however result application section 505b bankruptcy code guc trust’s federal income tax returns year ended march 31 2018 prior years longer subject examination income taxes may assessed year ended march 31 2018 prior year addition guc trust’s remaining capital losses based tax basis previously held new gm securities financial reporting purposes net operating losses still subject examination irs subsequent years losses utilized utilization net basis expected result sale new gm securities year ended march 31 2016 except potentially respect receipt subsequent distribution sale additional shares fair market value additional shares date distribution sale greater fair market value shares date receipt determinable estimable time accordingly income taxes expected paid future except potentially respect taxes distribution resulting receipt subsequent distribution sale guc trust additional shares determinable estimable time however taxes distribution resulting receipt subsequent distribution sale additional shares become payable anticipated income taxes would funded sale portion additional shares result beginning quarter ended september 30 2016 march 31 2019 guc trust administrator determined distributable cash set aside potential taxes distribution dividend taxes investment income taxes time guc trust’s calculation amount distributable cash needed set aside distribution fund potential taxes distribution made using different methodology used calculate current deferred taxes financial statement purposes described estimating potential taxes distribution current set aside methodology calculates realized capital gains using tax basis new gm securities december 15 2011 respect tax return years still subject examination contrast calculating current deferred taxes purposes financial reporting applicable us gaap guc trust calculates realized capital gains using tax basis new gm securities financial reporting purposes based date transfer beneficial ownership new gm securities guc trust mlc occurred march 31 2011 substantial majority previously held new gm securities view guc trust administrator consultation guc trust monitor professionals retained guc trust calculation methodologies described basis distributable cash including dividend cash set aside distribution generally estimate projected liquidation administrative costs potential liabilities guc trust conservative basis accordingly view guc trust administrator guc trust monitor distributable cash currently set aside distribution fund costs liabilities would sufficient satisfy obligations guc trust date annual report form 10k however assurance amount distributable cash set aside sufficient fund costs liabilities actually incurred addition assurance result future evaluations additional distributable cash need set aside appropriated fund additional costs liabilities beyond currently included guc trust’s estimates particular result changes guc trust’s estimates projected costs potential liabilities see “liquidity capital resources” guc trust units table details changes numbers guc trust units outstanding issuable year ended march 31 2019 1 number guc trust units issuable time represents guc trust units issuable respect allowed general unsecured claims newly allowed fiscal year 2 number guc trust units outstanding time represents guc trust units issued respect allowed general unsecured claims allowed prior periods including guc trust units held guc trust benefit holders allowed general unsecured claims yet supplied information required guc trust order effect initial distribution entitled b governmental entities precluded applicable law receiving distributions guc trust units 3 number guc trust units outstanding issuable end year equal amount allowed general unsecured claims 1 1000 basis corresponding date additional guc trust units issued due rounding liquidity capital resources guc trust’s sources liquidity principally funds holds payment liquidation administrative costs significantly lesser degree earnings funds invested addition result liquidation guc trust’s holdings new gm securities quarter ended september 30 2015 guc trust holds distributable cash distribution guc trust beneficiaries guc trust holds funds us treasury bills permitted plan guc trust agreement year ended march 31 2019 guc trust’s holdings cash equivalents decreased approximately 07 million approximately 26 million approximately 18 million decrease primarily due cash paid liquidation administrative costs 125 million partly offset interest dividend income received marketable securities 98 million cash received sale marketable securities excess reinvestments 20 million year ended march 31 2019 funds invested guc trust marketable securities decreased approximately 20 million approximately 5052 million approximately 5032 million decrease due primarily sale marketable securities fund payments described period guc trust earned accrual basis approximately 103 million interest income investments year march 31 2019 guc trust held approximately 5051 million cash equivalents marketable securities amount approximately 4721 million relates distributable cash including dividend cash portion guc trust administrator permitted set aside distribution appropriate approval bankruptcy court trust monitor applicable order fund additional costs become due included distributable cash march 31 2019 approximately 131 million dividend cash described dividend cash distributed holders subsequently resolved allowed claims guc trust units respect distributable cash receive unless dividends respect distributable cash appropriated guc trust accordance guc trust agreement fund guc trust’s liquidation administrative costs income tax liabilities march 31 2019 distributable cash including dividend cash held guc trust set aside follows 18 million liquidating distributions payable date b 124 million fund projected liquidation administrative costs described subsequent march 31 2019 guc trust filed motion seeking authority bankruptcy court appropriate distributable cash 1372 million noticing costs revised settlement agreement see item 3 “legal proceedings” “net assets liquidationdistributable assets” addition distributable cash including dividend cash guc trust held 330 million cash equivalents marketable securities march 31 2019 representing funds held payment costs liquidation administration liabilities amount approximately 15 million comprising approximately 12 million remaining administrative fund approximately 02 million remaining residual winddown assets approximately 01 million remaining funds designated indenture trustee fiscal paying agent costs required guc trust agreement returned upon windingup guc trust dip lenders extent funds utilized satisfy designated winddown costs residual winddown claims costs indenture trusteefiscal paying agent costs cash equivalents marketable securities 12 million remaining administrative fund designated satisfaction certain specifically identified costs liabilities guc trust amounts may used payment guc trust professionals’ fees expenses winddown costs amounts time available distribution holders guc trust units balance cash equivalents marketable securities approximately 315 million available payment certain reporting administrative costs guc trust would available future distribution holders guc trust units otherwise used satisfy expected costs see “liquidation administrative costs” assurance additional amounts distributable cash required set aside distribution appropriated fund additional costs income tax liabilities beyond guc trust administrator already set aside appropriation distributable cash occurs fund obligations result lesser amount distributable cash available distribution holders guc trust units addition described “the guc trust assets” item 1 “business” portion guc trust’s assets currently segregated pursuant guc trust agreement satisfaction certain specified costs assets insufficient satisfy residual winddown claims fund specified costs reason guc trust administrator similarly required set aside distribution appropriate additional amounts distributable cash order fund shortfall trends litigation reference made item 3 “legal proceedings” item 7a item 7a quantitative qualitative disclosures market risk general motors gm exposed market risk changes foreign currency exchange rates interest rates certain commodity equity security prices order manage risk arising exposures gm enters variety foreign exchange interest rate commodity forward contracts options discussion gms accounting policies derivative instruments included note 1 gm consolidated financial statements disclosure provided notes 10 11 12 gm consolidated financial statements gm maintains risk management control systems monitor foreign exchange interest rate commodity equity price risks related hedge positions monitored using variety analytical techniques including market value sensitivity analysis valueatrisk models following analyses based sensitivity analysis tests assume instantaneous parallel shifts exchange rates interest rate yield curves commodity equity prices options instruments nonlinear returns models appropriate instrument utilized determine impact sensitivity shifts foreign currency exchange rate risk gm foreign currency exposures related buying selling financing currencies local currencies operates specifically gm exposed foreign currency risk related uncertainty future earnings assets liability values exposed due operating cash flows various financial instruments denominated foreign currencies gms significant foreign currency exposures relate canada mexico western european countries primarily germany united kingdom spain italy belgium france australia japan brazil december 31 1997 net fair value liability financial instruments exposure foreign currency risk approximately 19 billion potential loss fair value financial instruments hypothetical 10 adverse change quoted foreign currency exchange rates would approximately 190 million model assumes parallel shift foreign currency exchange rates exchange rates rarely move direction assumption exchange rates change parallel fashion may overstate impact changing exchange rates assets liabilities denominated foreign currency interest rate risk gm subject market risk exposure changes interest rates based financing investing cash management activities gm enters various financial instrument transactions maintain desired level exposure risk interest rate fluctuations minimize interest expense specifically general motors acceptance corporation gmac affiliates also entered contracts provide commercial retail financing retain mortgage servicing rights retain various assets related mortgage securitization certain exchange traded future option contracts interest rate caps floors along various investments entered reduce interest rate risk related activities manage potential prepayment activity associated mortgage servicing rights gmac mortgage group gmacmg manages prepayment risk associated capitalized mortgage servicing rights us treasury options futures since derivative instruments identical characteristics underlying mortgage servicing rights gm exposed basis risk gmacmg mitigates risk historical review value change various interest rate scenarios establishing maintaining hedge program december 31 1997 net fair value liability financial instruments exposure interest rate risk approximately 16 billion potential decrease fair value resulting hypothetical 10 shift interest rates would approximately 257 million sec disclosures market risk requires financial instruments defined statement financial accounting standards sfas 107 disclosures fair value financial instruments included quantitative disclosure calculation operating leases required disclosed sfas 107 presented part sensitivity analysis significant limitation analysis presented sensitivity analysis show fair market value change debt funds gms operating lease portfolio corresponding change gms operating lease portfolio book value 26 billion considered model result overall impact fair market value financial instruments hypothetical change interest rates may overstated certain shortcomings inherent sensitivity analyses presented model assumes interest rate changes instantaneous parallel shifts yield curve reality changes rarely instantaneous although certain assets liabilities may similar maturities periods repricing may react correspondingly changes market interest rates also interest rates certain types assets liabilities may fluctuate changes market interest rates ii65 general motors corporation subsidiaries interest rate risk concluded interest rates types assets may lag behind changes market rates finance receivables less susceptible prepayments interest rates change prepayments many mortgage related instruments directly affected change interest rates gms model address prepayment risk automotive related finance receivables consider prepayment risk mortgage related instruments highly sensitive prepayment risk however event change interest rates actual loan prepayments may deviate significantly assumptions used model certain assets adjustable rate loans features annual lifetime caps restrict changing interest rates shortterm basis life asset finally ability certain borrowers make scheduled payments adjustable rate loans may decrease event interest rate increase commodity price risk gm enters commodity forward option contracts executed offset gms exposure potential change prices mainly various nonferrous metals used manufacturing automotive components net fair value liability contracts excluding underlying exposures december 31 1997 approximately 42 million potential change fair value commodity forward option contracts assuming 10 change underlying commodity price would approximately 111 million december 31 1997 amount excludes offsetting impact price risk inherent physical purchase underlying commodities equity price risk gm holds investments various availableforsale equity securities subject price risk fair value investments december 31 1997 approximately 899 million potential change fair value investments assuming 10 change prices would approximately 90 million forwardlooking statements discussion estimated amounts generated sensitivity analyses referred include forwardlooking statements market risk assume analytical purposes certain adverse market conditions may occur actual future market conditions may differ materially assumptions amounts noted previously result analyses used purpose assessing possible risks mitigation thereof accordingly forwardlooking statements considered projections gm future events losses ii66 part iii general motors corporation subsidiaries items 10 13 certain information required part iii items 10 13 form information set forth omitted registrant intends file definitive proxy statement pursuant regulation 14a later 120 days end fiscal year executive officers registrant names ages executive officers registrant february 28 1998 positions offices registrant date follows family relationships defined executive officers arrangement understanding executive officers person pursuant selected officer executive officers elected board directors hold office next annual election officers successor elected qualified earlier resignation removal board directors elects officers conjunction annual meeting stockholders iii1 general motors corporation subsidiaries executive officers registrant concluded mr john f smith jr associated general motors since 1961 elected executive vice president charge international operations 1988 effective august 1990 elected vice chairman board directors april 6 1992 mr smith elected president chief operating officer effective november 1992 elected chief executive officer president january 1 1996 mr smith became chairman board directors mr pearce associated general motors since 1985 may 1987 elected vice president general counsel general motors effective november 1992 elected executive vice president general motors responsibility industrygovernment relations staff environmental activities staff environmental energy staff worldwide economics electronic data systems corporation gm hughes electronics corporation hughes electronics corporation july 1994 assumed responsibility gms strategic decision center corporate communications allison transmission division electromotive division gm locomotive group urban community affairs executive compensation corporate governance corporate services staff remained general counsel august 1 1994 effective january 1 1996 mr pearce elected director became vice chairman board directors mr losh associated general motors since 1964 july 1984 elected vice president general motors general manager pontiac division named general manager oldsmobile division june 1989 effective may 1992 elected group executive charge north american vehicle sales service marketing july 1994 elected executive vice president chief financial officer general motors mr wagoner associated general motors since 1977 elected vice president charge finance general motors europe june 1989 july 1991 elected president managing director general motors brasil effective november 1992 elected executive vice president chief financial officer general motors july 1994 named president north american operations mr hughes associated general motors since 1966 march 1989 elected chairman managing director adam opel ag elected president general motors europe vice president group executive general motors april 1992 effective november 1992 elected executive vice president international operations general motors september 1994 named president international operations mr battenberg associated general motors since 1961 1986 appointed product manager former buickoldsmobilecadillac groups flint automotive division later served vice president division vice president group executive buickoldsmobilecadillac group named vice president group executive former automotive components group acg worldwide 1992 two years later elected senior vice president acg worldwide july 1995 elected executive vice president delphi automotive systems formerly acg worldwide iii2 part iv general motors corporation subsidiaries iv1 general motors corporation subsidiaries part iv continued item 14 item 7a quantitative qualitative disclosures market risk gm exposed market risk changes foreign currency exchange rates interest rates certain commodity equity security prices order manage risk arising exposures gm enters variety foreign exchange interest rate commodity forward contracts options discussion gms accounting policies derivative instruments included note 1 gm consolidated financial statements disclosure provided notes 14 21 22 gm consolidated financial statements gm maintains risk management control systems monitor foreign exchange interest rate commodity equity price risks related hedge positions monitored using variety analytical techniques including market value sensitivity analysis valueatrisk models following analyses based sensitivity analysis tests assume instantaneous parallel shifts exchange rates interest rate yield curves commodity equity prices options instruments nonlinear returns models appropriate instrument utilized determine impact market shifts foreign currency exchange rate risk gm foreign currency exposures related buying selling financing currencies local currencies operates specifically gm exposed foreign currency risk related uncertainty future earnings assets liability values exposed due operating cash flows various financial instruments denominated foreign currencies gms significant foreign currency exposures relate canada mexico western european countries primarily germany united kingdom spain italy belgium france australia japan brazil december 31 1999 1998 net fair value liability financial instruments exposure foreign currency risk approximately 112 billion 35 billion respectively potential loss fair value financial instruments hypothetical 10 adverse change quoted foreign currency exchange rates would approximately 10 billion 161 million 1999 1998 respectively model assumes parallel shift foreign currency exchange rates exchange rates rarely move direction assumption exchange rates change parallel fashion may overstate impact changing exchange rates assets liabilities denominated foreign currency interest rate risk gm subject market risk exposure changes interest rates based financing investing cash management activities gm enters various financial instrument transactions maintain desired level exposure risk interest rate fluctuations minimize interest expense specifically general motors acceptance corporation gmac affiliates also entered contracts provide commercial retail financing retain mortgage servicing rights retain various assets related mortgage securitization certain exchange traded future option contracts interest rate caps floors along various investments entered reduce interest rate risk related activities manage potential prepayment activity associated mortgage servicing rights gmac mortgage group inc gmacmg manages prepayment risk associated capitalized mortgage servicing rights us treasury options futures since derivative instruments identical characteristics underlying mortgage servicing rights gm exposed basis risk gmacmg mitigates risk historical review value change various interest rate scenarios establishing maintaining hedge program december 31 1999 1998 net fair value liability financial instruments held purposes trading exposure interest rate risk approximately 188 billion 159 billion respectively potential decrease fair value resulting hypothetical 10 shift interest rates would approximately 127 million 90 million 1999 1998 respectively net fair value asset financial instruments held trading purposes exposure interest rate risk approximately 27 billion 32 billion 1999 1998 respectively potential loss fair value resulting hypothetical 10 shift interest rates would approximately 39 million 84 million 1999 1998 respectively sec disclosures market risk require financial instruments defined statement financial accounting standards sfas 107 disclosures fair value financial instruments included quantitative disclosure calculation operating leases required disclosed sfas 107 presented part sensitivity analysis significant limitation analysis presented sensitivity analysis show fair market value change debt funds gms operating lease portfolio corresponding change gms operating lease portfolio book value 428 billion 371 billion december 31 1999 1998 respectively considered model result overall impact fair market value financial instruments hypothetical change interest rates may overstated ii22 general motors corporation subsidiaries interest rate risk concluded certain shortcomings inherent sensitivity analyses presented model assumes interest rate changes instantaneous parallel shifts yield curve reality changes rarely instantaneous although certain assets liabilities may similar maturities periods repricing may react correspondingly changes market interest rates also interest rates certain types assets liabilities may fluctuate changes market interest rates interest rates types assets may lag behind changes market rates finance receivables less susceptible prepayments interest rates change prepayments many mortgagerelated instruments directly affected change interest rates gms model address prepayment risk automotiverelated finance receivables consider prepayment risk mortgagerelated instruments highly sensitive prepayment risk however event change interest rates actual loan prepayments may deviate significantly assumptions used model certain assets adjustable rate loans features annual lifetime caps restrict changing interest rates shortterm basis life asset finally ability certain borrowers make scheduled payments adjustable rate loans may decrease event interest rate increase commodity price risk gm enters commodity forward option contracts executed offset gms exposure potential change prices mainly various nonferrous metals used manufacturing automotive components net fair value asset liability contracts excluding underlying exposures december 31 1999 1998 approximately 151 million 172 million respectively potential change fair value commodity forward option contracts assuming 10 change underlying commodity price would approximately 210 million 203 million december 31 1999 1998 respectively amount excludes offsetting impact price risk inherent physical purchase underlying commodities equity price risk gm holds investments various availableforsale equity securities subject price risk fair value investments december 31 1999 1998 approximately 32 billion 23 billion respectively potential change fair value investments assuming 10 change prices would approximately 323 million 230 million 1999 1998 respectively forwardlooking statements discussion estimated amounts generated sensitivity analyses referred include forwardlooking statements market risk assume analytical purposes certain adverse market conditions may occur actual future market conditions may differ materially assumptions amounts noted previously result analyses used purpose assessing possible risks mitigation thereof accordingly forwardlooking statements considered projections gm future events losses ii23 responsibilities consolidated financial statements following consolidated financial statements general motors corporation subsidiaries prepared management responsible integrity objectivity statements prepared conformity generally accepted accounting principles include amounts based judgments management responsible maintaining internal control designed provide reasonable assurance books records reflect transactions companies established policies procedures carefully followed stockholders point view perhaps important feature internal control continually reviewed effectiveness augmented written policies guidelines careful selection training qualified personnel strong program internal audit deloitte touche llp independent auditing firm engaged audit consolidated financial statements general motors corporation subsidiaries issue reports thereon audit conducted accordance generally accepted auditing standards comprehend consideration internal control tests transactions extent necessary form independent opinion financial statements prepared management independent auditors report appears next page board directors audit committee composed entirely nonemployee directors responsible assuring management fulfills responsibilities preparation consolidated financial statements audit committee selects independent auditors annually advance annual meeting stockholders submits selection ratification meeting addition audit committee reviews scope audits accounting principles applied financial reporting independent auditors representatives management internal auditors meet regularly separately jointly audit committee review activities ensure properly discharging responsibilities assess effectiveness internal control managements conclusion internal control december 31 1999 provides reasonable assurance books records reflect transactions companies established policies procedures complied ensure complete independence deloitte touche llp full free access meet audit committee without management representatives present discuss results audit adequacy internal control quality financial reporting sjohn f smith jr sj michael losh john f smith jr j michael losh chairman chief executive officer executive vice president chief financial officer ii24 independent auditors report general motors corporation directors stockholders audited consolidated balance sheets general motors corporation subsidiaries december 31 1999 1998 related consolidated statements income cash flows stockholders equity three years period ended december 31 1999 audits also included financial statement schedule listed item 14 financial statements financial statement schedule responsibility corporations management responsibility express opinion financial statements financial statement schedule based audits conducted audits accordance generally accepted auditing standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements present fairly material respects financial position general motors corporation subsidiaries december 31 1999 1998 results operations cash flows three years period ended december 31 1999 conformity generally accepted accounting principles also opinion financial statement schedule considered relation basic consolidated financial statements taken whole presents fairly material respects information set forth therein sdeloitte touche llp deloitte touche llp detroit michigan january 20 2000 march 7 2000 note 27 ii25 item 8 item 7a quantitative qualitative disclosures market risk gm exposed market risk changes foreign currency exchange rates interest rates certain commodity equity security prices gm enters variety foreign exchange interest rate commodity forward contracts options primarily maintain desired level exposure arising risks risk management control system utilized monitor foreign exchange interest rate commodity equity price risks related hedge positions discussion gms accounting policies derivative financial instruments included note 1 gm consolidated financial statements information gms exposure market risk included notes 19 20 gm consolidated financial statements following analyses provide quantitative information regarding gms exposure foreign currency exchange rate risk interest rate risk commodity equity price risk gm uses model evaluate sensitivity fair value financial instruments exposure market risk assumes instantaneous parallel shifts exchange rates interest rate yield curves commodity equity prices options instruments nonlinear returns models appropriate instrument utilized determine impact market shifts certain shortcomings inherent sensitivity analyses presented primarily due assumption exchange rates change parallel fashion interest rates change instantaneously addition analyses unable reflect complex market reactions normally would arise market shifts modeled ii16 general motors corporation subsidiaries foreign exchange rate risk gm foreign currency exposures related buying selling financing currencies local currencies operates specifically gm exposed foreign currency risk related uncertainty future earnings asset liability values exposed result operating cash flows various financial instruments denominated foreign currencies december 31 2001 2000 net fair value liability financial instruments exposure foreign currency risk approximately 150 billion 136 billion respectively potential loss fair value financial instruments 10 adverse change quoted foreign currency exchange rates would approximately 15 billion 12 billion 2001 2000 respectively interest rate risk gm subject market risk exposure changes interest rates due financing investing cash management activities specifically corporation exposed interest rate risk associated longterm debt contracts provide commercial retail financing retained mortgage servicing rights retained assets related mortgage securitization addition gm exposed prepayment risk associated capitalized mortgage servicing rights retained assets risk managed us treasury options futures exposes gm basis risk since derivative instruments identical characteristics underlying mortgage servicing rights december 31 2001 2000 net fair value liability financial instruments held purposes trading exposure interest rate risk approximately 53 billion 181 billion respectively potential loss fair value resulting 10 adverse shift quoted interest rates would approximately 16 billion 385 million 2001 2000 respectively december 31 2001 net fair value liability financial instruments held trading purposes exposure interest rate risk approximately 36 billion compared net fair value asset approximately 32 billion december 31 2000 potential loss fair value resulting 10 adverse shift quoted interest rates would approximately 182 million 217 million 2001 2000 respectively analysis excludes gms operating lease portfolio fair value change debt funds portfolio would potentially different impact fair value portfolio overall impact fair value financial instruments hypothetical change interest rates may overstated commodity price risk gm exposed changes prices commodities used automotive business primarily associated various nonferrous metals used manufacturing automotive components gm enters commodity forward option contracts offset exposure december 31 2001 net fair value liability contracts approximately 78 million compared net fair value asset approximately 51 million december 31 2000 potential loss fair value resulting 10 adverse change underlying commodity prices would approximately 150 million 152 million 2001 2000 respectively amount excludes offsetting impact price risk inherent physical purchase underlying commodities equity price risk gm exposed changes prices various availableforsale equity securities invests december 31 2001 2000 fair value investments approximately 23 billion 33 billion respectively potential loss fair value resulting 10 adverse change equity prices would approximately 231 million 330 million 2001 2000 respectively ii17 responsibilities consolidated financial statements following consolidated financial statements general motors corporation subsidiaries prepared management responsible integrity objectivity statements prepared conformity accounting principles generally accepted united states america include amounts based judgments management responsible maintaining internal control designed provide reasonable assurance books records reflect transactions companies established policies procedures carefully followed stockholders point view perhaps important feature internal control continually reviewed effectiveness augmented written policies guidelines careful selection training qualified personnel strong program internal audit deloitte touche llp independent auditing firm engaged audit consolidated financial statements general motors corporation subsidiaries issue reports thereon audit conducted accordance auditing standards generally accepted united states america comprehend consideration internal control tests transactions extent necessary form independent opinion financial statements prepared management independent auditors report appears next page board directors audit committee composed entirely independent directors responsible assuring management fulfills responsibilities preparation consolidated financial statements audit committee annually recommends board directors selection independent auditors advance annual meeting stockholders submits selection ratification meeting addition audit committee reviews scope audits accounting principles applied financial reporting independent auditors representatives management internal auditors meet regularly separately jointly audit committee review activities ensure properly discharging responsibilities assess effectiveness internal control managements conclusion internal control december 31 2001 provides reasonable assurance books records reflect transactions companies established policies procedures complied reinforce complete independence deloitte touche llp full free access meet audit committee without management representatives present discuss results audit adequacy internal control quality financial reporting sjohn f smith jr sg richard wagoner jr sjohn devine john f smith jr g richard wagoner jr john devine chairman president vice chairman chief executive officer chief financial officer ii18 independent auditors report general motors corporation directors stockholders audited consolidated balance sheets general motors corporation subsidiaries december 31 2001 2000 related consolidated statements income cash flows stockholders equity three years period ended december 31 2001 audits also included financial statement schedule listed item 14 financial statements financial statement schedule responsibility corporations management responsibility express opinion financial statements financial statement schedule based audits conducted audits accordance auditing standards generally accepted united states america standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements present fairly material respects financial position general motors corporation subsidiaries december 31 2001 2000 results operations cash flows three years period ended december 31 2001 conformity accounting principles generally accepted united states america also opinion financial statement schedule considered relation basic consolidated financial statements taken whole presents fairly material respects information set forth therein sdeloitte touche llp deloitte touche llp detroit michigan january 16 2002 march 6 2002 note 25 ii19 item 8 item 7a quantitative qualitative disclosures market risk exposed market risk changes foreign currency exchange rates interest rates certain commodity prices enter variety foreign currency exchange interest rate commodity forward contracts options maintain desired level exposure arising risks enter derivative transactions speculative trading purposes overall financial risk management program placed responsibility risk management committee reviews appropriate approves recommendations level exposure strategies pursued mitigate risks risk management control system utilized monitor strategies risks related hedge positions accordance policies procedures approved risk management committee discussion accounting policies derivative financial instruments included note 3 consolidated financial statements information exposure market risk included note 17 consolidated financial statements 2008 credit market volatility increased significantly creating broad credit concerns condition persists affect ability manage risks related market changes foreign currency exchange rates interest rates commodity prices exposed ordinary course business derivative counterparties may unwilling enter transactions us addition accordance provisions sfas 157 require companies consider nonperformance risk part measurement fair value derivative liabilities record changes fair value derivative liabilities based current credit standing december 31 2008 derivative liabilities 35 billion following analyses provide quantitative information regarding exposure foreign currency exchange rate risk interest rate risk commodity price risk equity price risk use sensitivity analysis measure potential loss fair value financial instruments exposure market risk models used assume instantaneous parallel shifts exchange rates interest rate yield curves commodity prices options instruments nonlinear returns models appropriate types instruments utilized determine effect market shifts certain shortcomings inherent sensitivity analyses presented primarily due assumption interest rates commodity prices change parallel fashion spot exchange rates change instantaneously addition analyses unable reflect complex market reactions normally would arise market shifts modeled contemplate effects correlations foreign currency pairs offsetting longshort positions currency pairs may reduce potential loss value foreign currency exchange rate risk foreign currency exposures related buying selling financing currencies local currencies operate derivative instruments foreign currency forwards swaps options used primarily hedge exposures respect forecasted revenues costs commitments denominated foreign currencies contracts generally maturities 32 months december 31 2008 three significant foreign currency exposures us dollarkorean eurobritish pound us dollarcanadian dollar december 31 2008 2007 net fair value asset liability financial instruments exposure foreign currency risk 63 billion 68 billion respectively presentation current prior year utilizes population foreign currency exchange derivatives foreign currency denominated debt excludes offsetting effect foreign currency cash equivalents assets potential loss fair value financial instruments 10 parallel shift quoted foreign currency exchange rates would 23 billion 30 billion 2008 2007 respectively also exposed foreign currency risk translate results international operations us dollars part consolidation process fluctuations foreign currency exchange rates therefore create volatility results operations may adversely affect financial position effect foreign currency exchange rate translation consolidated financial general motors corporation subsidiaries position year ended 2008 net translation loss 12 billion loss recognized adjustment stockholders’ deficit accumulated comprehensive loss effects foreign currency exchange rate transactions gain 17 billion 2008 loss 661 million 2007 interest rate risk subject market risk exposure changes interest rates due financing activities interest rate risk managed primarily interest rate swaps generally maturities ranging three months eight years interest rate swaps involve exchange fixed variable rate interest payments effectively convert fixed rate debt variable rate debt order achieve target range variable rate debt december 31 2008 fixed rate shortterm debt 29 billion variable rate shortterm debt 129 billion fixed rate shortterm debt 19 billion denominated u dollars 10 billion denominated foreign currencies variable rate shortterm debt 109 billion denominated u dollars 20 billion denominated foreign currencies december 31 2008 fixed rate longterm debt 288 billion variable rate longterm debt 810 million fixed rate longterm debt 228 billion denominated u dollars 60 billion denominated foreign currencies variable rate longterm debt 434 million denominated u dollars 376 million denominated foreign currencies december 31 2008 2007 net fair value liability financial instruments exposure interest rate risk 155 billion 267 billion respectively potential increase fair value resulting 10 increase quoted interest rates would 36 billion 17 billion years ended 2008 2007 respectively commodity price risk exposed changes prices commodities used automotive business primarily associated various nonferrous precious metals automotive components energy used overall manufacturing process commodity purchase contracts meet definition derivative addition enter various derivatives commodity swaps options offset commodity price exposures contracts generally maturities ranging one 21 months december 31 2008 2007 net fair value derivatives certain purchase contracts 553 million liability 517 million asset respectively potential loss fair value resulting 10 adverse change underlying commodity prices would 109 million 331 million years ended 2008 2007 respectively amount excludes offsetting effect commodity price risk inherent physical purchase underlying commodities equity price risk exposed equity price risk marketable portion equity securities hold investment purposes well strategic business purposes typically attempt reduce market exposure equity instruments 2008 recorded temporary impairment charges 10 billion related investment gmac’s preferred interests december 31 2008 2007 fair value equity securities 122 million 16 billion respectively investment gmac’s preferred interests 43 million 10 billion respectively counterparty risk exposed counterparty risk loss could incur counterparty derivative contract defaulted enter agreements counterparties allow setoff certain exposures order manage risk counterparty risk exposure primarily related derivative contracts use manage exposure interest rate longterm debt foreign currency exchange rate commodity price risk general motors corporation subsidiaries counterparty risk managed risk management committee establishes exposure limits net fair value potential exposure based overall risk tolerance monitor report exposures risk management committee treasurer periodic basis substantially counterparty exposures counterparties rated higher concentration credit risk exposed concentration credit risk primarily holding cash short longterm investments derivatives part risk management process monitor evaluate credit standing financial institutions business financial institutions business generally highly rated geographically dispersed report independent registered public accounting firm general motors corporation directors stockholders audited general motors corporation subsidiaries’ corporation internal control financial reporting december 31 2008 based criteria established internal control integrated framework issued committee sponsoring organizations treadway commission corporation’s management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included management’s report internal control financial reporting item 9a responsibility express opinion corporation’s internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based risk performing procedures considered necessary circumstances believe audit provides reasonable basis opinion company’s internal control financial reporting process designed supervision company’s principal executive principal financial officers persons performing similar functions effected company’s board directors management personnel provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting including possibility collusion improper management override controls material misstatements due error fraud may prevented detected timely basis also projections evaluation effectiveness internal control financial reporting future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate material weakness deficiency combination deficiencies internal control financial reporting reasonable possibility material misstatement company’s annual interim financial statements prevented detected timely basis material weakness related ineffective controls periodend financial reporting process identified included management’s assessment material weakness considered determining nature timing extent audit tests applied audit consolidated financial statements financial statement schedule listed index item 15 year ended december 31 2008 report affect report financial statements financial statement schedule opinion effect material weakness identified achievement objectives control criteria corporation maintained effective internal control financial reporting december 31 2008 based criteria established internal control integrated framework issued committee sponsoring organizations treadway commission also audited accordance standards public company accounting oversight board united states consolidated balance sheets related consolidated statements operations cash flows stockholders’ equity deficit corporation year ended december 31 2008 audit also included financial statement schedule listed index item 15 year ended december 31 2008 report dated march 4 2009 expressed unqualified opinion financial statements financial statement schedule included explanatory paragraph expressing substantial doubt corporation’s ability continue going concern b explanatory paragraph relating adoption statement financial accounting standards 157 fair value measurements deloitte touche llp deloitte touche llp detroit michigan march 4 2009 report independent registered public accounting firm general motors corporation directors stockholders audited accompanying consolidated balance sheets general motors corporation subsidiaries corporation december 31 2008 2007 related consolidated statements operations cash flows stockholders’ equity deficit three years period ended december 31 2008 audits also included financial statement schedule listed index item 15 financial statements financial statement schedule responsibility corporation’s management responsibility express opinion financial statements financial statement schedule based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements present fairly material respects financial position general motors corporation subsidiaries december 31 2008 2007 results operations cash flows three years period ended december 31 2008 conformity accounting principles generally accepted united states america also opinion financial statement schedule considered relation basic consolidated financial statements taken whole presents fairly material respects information set forth therein accompanying consolidated financial statements year ended december 31 2008 prepared assuming corporation continue going concern discussed note 2 consolidated financial statements corporation’s recurring losses operations stockholders’ deficit inability generate sufficient cash flow meet obligations sustain operations raise substantial doubt ability continue going concern management’s plans concerning matters also discussed note 2 consolidated financial statements consolidated financial statements include adjustments might result outcome uncertainty discussed note 3 consolidated financial statements corporation 1 effective january 1 2008 adopted statement financial accounting standards 157 fair value measurements 2 effective january 1 2007 adopted recognition measurement provisions fasb interpretation 48 accounting uncertainty income taxes interpretation fasb statement 109 3 effective january 1 2007 changed measurement date defined benefit plan assets liabilities coincide year end conform statement financial accounting standards 158 employers’ accounting defined benefit pension postretirement plans amendment fasb statements 87 88 106 132r sfas 158 4 effective december 31 2006 began recognize funded status defined benefit plans consolidated balance sheets conform sfas 158 discussed note 4 consolidated financial statements november 30 2006 corporation sold 51 controlling interest gmac llc former whollyowned finance subsidiary corporation’s remaining interest gmac llc accounted equity method investment also audited accordance standards public company accounting oversight board united states corporation’s internal control financial reporting december 31 2008 based criteria established internal control integrated framework issued committee sponsoring organizations treadway commission report dated march 4 2009 expressed adverse opinion corporation’s internal control financial reporting deloitte touche llp deloitte touche llp detroit michigan march 4 2009 general motors corporation subsidiaries consolidated statements operations dollars millions except per share amounts item 8 item 7a quantitative qualitative disclosures market risk gm exposed market risk changes foreign currency exchange rates interest rates certain commodity equity security prices gm enters variety foreign exchange interest rate commodity forward contracts options primarily maintain desired level exposure arising risks risk management control system utilized monitor foreign exchange interest rate commodity equity price risks related hedge positions discussion gms accounting policies derivative financial instruments included note 1 gm consolidated financial statements information gms exposure market risk included notes 19 20 gm consolidated financial statements following analyses provide quantitative information regarding gms exposure foreign currency exchange rate risk interest rate risk commodity equity price risk gm uses model evaluate sensitivity fair value financial instruments exposure market risk assumes instantaneous parallel shifts exchange rates interest rate yield curves commodity equity prices options instruments nonlinear returns models appropriate instrument utilized determine impact market shifts certain shortcomings inherent sensitivity analyses presented primarily due assumption exchange rates change parallel fashion interest rates change instantaneously addition analyses unable reflect complex market reactions normally would arise market shifts modeled foreign exchange rate risk gm foreign currency exposures related buying selling financing currencies local currencies operates specifically gm exposed foreign currency risk related uncertainty future earnings asset liability values exposed result operating cash flows various financial instruments denominated foreign currencies december 31 2000 1999 net fair value liability financial instruments exposure foreign currency risk approximately 136 billion 112 billion respectively potential loss fair value financial instruments 10 adverse change quoted foreign currency exchange rates would approximately 12 billion 10 billion 2000 1999 respectively ii11 general motors corporation subsidiaries interest rate risk gm subject market risk exposure changes interest rates due financing investing cash management activities specifically corporation exposed interest rate risk associated long term debt contracts provide commercial retail financing retain mortgage servicing rights retain assets related mortgage securitization addition gm exposed prepayment risk associated capitalized mortgage servicing rights risk managed us treasury options futures exposes gm basis risk since derivative instruments identical characteristics underlying mortgage servicing rights december 31 2000 1999 net fair value liability financial instruments held purposes trading exposure interest rate risk approximately 181 billion 188 billion respectively potential loss fair value resulting 10 adverse shift quoted interest rates would approximately 385 million 127 million 2000 1999 respectively december 31 2000 1999 net fair value asset financial instruments held trading purposes exposure interest rate risk approximately 32 billion 27 billion respectively potential loss fair value resulting 10 adverse shift quoted interest rates would approximately 217 million 39 million 2000 1999 respectively analysis excludes gms operating lease portfolio fair value change debt funds portfolio would potentially diametric impact fair value portfolio overall impact fair value financial instruments hypothetical change interest rates may overstated commodity price risk gm exposed changes prices commodities used automotive business primarily associated various nonferrous metals used manufacturing automotive components gm enters commodity forward option contracts offset exposure december 31 2000 1999 net fair value asset contracts approximately 51 million 151 million respectively potential loss fair value resulting 10 adverse change underlying commodity prices would approximately 152 million 210 million 2000 1999 respectively amount excludes offsetting impact price risk inherent physical purchase underlying commodities equity price risk gm exposed changes prices various availableforsale equity securities invests december 31 2000 1999 fair value investments approximately 33 billion 32 billion respectively potential loss fair value resulting 10 adverse change equity prices would approximately 330 million 323 million 2000 1999 respectively ii12 responsibilities consolidated financial statements following consolidated financial statements general motors corporation subsidiaries prepared management responsible integrity objectivity statements prepared conformity accounting principles generally accepted united states america include amounts based judgments management responsible maintaining internal control designed provide reasonable assurance books records reflect transactions companies established policies procedures carefully followed stockholders point view perhaps important feature internal control continually reviewed effectiveness augmented written policies guidelines careful selection training qualified personnel strong program internal audit deloitte touche llp independent auditing firm engaged audit consolidated financial statements general motors corporation subsidiaries issue reports thereon audit conducted accordance auditing standards generally accepted united states america comprehend consideration internal control tests transactions extent necessary form independent opinion financial statements prepared management independent auditors report appears next page board directors audit committee composed entirely nonemployee directors responsible assuring management fulfills responsibilities preparation consolidated financial statements audit committee annually recommends board directors selection independent auditors advance annual meeting stockholders submits selection ratification meeting addition audit committee reviews scope audits accounting principles applied financial reporting independent auditors representatives management internal auditors meet regularly separately jointly audit committee review activities ensure properly discharging responsibilities assess effectiveness internal control managements conclusion internal control december 31 2000 provides reasonable assurance books records reflect transactions companies established policies procedures complied ensure complete independence deloitte touche llp full free access meet audit committee without management representatives present discuss results audit adequacy internal control quality financial reporting sjohn f smith jr sg richard wagoner jr sjohn devine john f smith jr g richard wagoner jr john devine chairman president vice chairman chief executive officer chief financial officer ii13 independent auditors report general motors corporation directors stockholders audited consolidated balance sheets general motors corporation subsidiaries december 31 2000 1999 related consolidated statements income cash flows stockholders equity three years period ended december 31 2000 audits also included financial statement schedule listed item 14 financial statements financial statement schedule responsibility corporations management responsibility express opinion financial statements financial statement schedule based audits conducted audits accordance auditing standards generally accepted united states america standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements present fairly material respects financial position general motors corporation subsidiaries december 31 2000 1999 results operations cash flows three years period ended december 31 2000 conformity accounting principles generally accepted united states america also opinion financial statement schedule considered relation basic consolidated financial statements taken whole presents fairly material respects information set forth therein sdeloitte touche llp deloitte touche llp detroit michigan january 17 2001 ii14 item 8 item 7a quantitative qualitative disclosures market risk disclosure item required pursuant action letter item 8 item 7a quantitative qualitative disclosures market risk gm exposed market risk changes foreign currency exchange rates interest rates certain commodity equity security prices gm enters variety foreign exchange interest rate commodity forward contracts options primarily maintain desired level exposure arising risks risk management control system utilized monitor foreign exchange interest rate commodity equity price risks related hedge positions discussion gms accounting policies derivative financial instruments included note 1 gm consolidated financial statements information gms exposure market risk included notes 19 20 gm consolidated financial statements following analyses provide quantitative information regarding gms exposure foreign currency exchange rate risk interest rate risk commodity equity price risk gm uses model evaluate sensitivity fair value financial instruments exposure market risk assumes instantaneous parallel shifts exchange rates interest rate yield curves commodity equity prices options instruments nonlinear returns models appropriate instrument utilized determine impact market shifts certain shortcomings inherent sensitivity analyses presented primarily due assumption exchange rates change parallel fashion interest rates change instantaneously addition analyses unable reflect complex market reactions normally would arise market shifts modeled foreign exchange rate risk gm foreign currency exposures related buying selling financing currencies local currencies operates specifically gm exposed foreign currency risk related uncertainty future earnings asset liability values exposed result operating cash flows various financial instruments denominated foreign currencies december 31 2002 net fair value asset financial instruments exposure foreign currency risk approximately 37 billion compared net fair value liability 53 billion december 31 2001 potential loss fair value financial instruments 10 adverse change quoted foreign currency exchange rates would approximately 370 million 531 million 2002 2001 respectively interest rate risk gm subject market risk exposure changes interest rates due financing investing cash management activities specifically corporation exposed interest rate risk associated longterm debt contracts provide commercial retail financing retained mortgage servicing rights retained assets related mortgage securitization addition gm exposed prepayment risk associated capitalized mortgage servicing rights retained assets risk managed us treasury options futures exposing gm basis risk since derivative instruments identical characteristics underlying mortgage servicing rights december 31 2002 2001 net fair value liability financial instruments held purposes trading exposure interest rate risk approximately 277 billion 233 billion respectively potential loss fair value resulting 10 adverse shift quoted interest rates would approximately 16 billion 16 billion 2002 2001 respectively december 31 2002 2001 net fair value asset financial instruments held trading purposes exposure interest rate risk approximately 44 billion 36 billion respectively potential loss fair value resulting 10 adverse shift quoted interest rates would approximately 26 million 182 million 2002 2001 respectively analysis excludes gms operating lease portfolio fair value change debt funds portfolio would potentially different impact fair value portfolio overall impact fair value financial instruments hypothetical change interest rates may overstated commodity price risk gm exposed changes prices commodities used automotive business primarily associated various nonferrous metals used manufacturing automotive components gm enters commodity forward option contracts offset exposure december 31 2002 2001 net fair value liability contracts approximately 43 million 78 million respectively potential loss fair value resulting 10 adverse change underlying commodity prices would approximately 159 million 150 million 2002 2001 respectively amount excludes offsetting impact price risk inherent physical purchase underlying commodities equity price risk gm exposed changes prices various availableforsale equity securities invests december 31 2002 2001 fair value investments approximately 18 billion 23 billion respectively potential loss fair value resulting 10 adverse change equity prices would approximately 182 million 231 million 2002 2001 respectively ii19 independent auditors report general motors corporation directors stockholders audited consolidated balance sheets general motors corporation subsidiaries december 31 2002 2001 related consolidated statements income cash flows stockholders equity three years period ended december 31 2002 audits also included supplemental information consolidated balance sheets consolidated statements income cash flows financial statement schedule listed item 15 collectively financial statement schedules financial statements financial statement schedules responsibility corporations management responsibility express opinion financial statements financial statement schedules based audits conducted audits accordance auditing standards generally accepted united states america standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements present fairly material respects financial position general motors corporation subsidiaries december 31 2002 2001 results operations cash flows three years period ended december 31 2002 conformity accounting principles generally accepted united states america also opinion financial statement schedules considered relation basic consolidated financial statements taken whole present fairly material respects information set forth therein discussed note 1 financial statements effective january 1 2002 general motors corporation changed method accounting goodwill intangible assets conform statement financial accounting standards 142 goodwill intangible assets sdeloitte touche llp deloitte touche llp detroit michigan january 16 2003 march 12 2003 note 26 ii20 item 8 item 7a quantitative qualitative disclosures market risk gm exposed market risk changes foreign currency exchange rates interest rates certain commodity equity prices company enters variety foreign exchange interest rate commodity forward contracts options maintain desired level exposure arising risks overall financial risk management program placed responsibility risk management committee rmc reviews appropriate approves recommendations level exposure strategies pursued mitigate risks risk management control system utilized monitor strategies risks related hedge positions accordance policies procedures approved rmc discussion gm’s accounting policies derivative financial instruments included note 3 consolidated financial statements information gm’s exposure market risk included notes 23 24 consolidated financial statements following analyses provide quantitative information regarding gm’s exposure foreign currency exchange rate risk interest rate risk commodity equity price risk gm uses sensitivity analysis measure potential loss fair value financial instruments exposure market risk model used assumes instantaneous parallel shifts exchange rates interest rate yield curves commodity equity prices options instruments nonlinear returns models appropriate types instruments utilized determine impact market shifts certain shortcomings inherent sensitivity analyses presented primarily due assumption exchange rates change parallel fashion interest rates change instantaneously addition analyses unable reflect complex market reactions normally would arise market shifts modeled foreign exchange rate risk gm foreign currency exposures related buying selling financing currencies local currencies operates derivative instruments foreign currency forwards swaps options used hedge exposures december 31 2006 net fair value asset financial instruments exposure foreign currency risk approximately 84 billion compared net fair value liability 35 billion december 31 2005 potential loss fair value financial instruments 10 adverse change quoted foreign currency exchange rates would approximately 18 billion 05 billion 2006 2005 respectively general motors corporation subsidiaries foreign exchange rate risk concluded analysis excludes gmac’s portfolio december 31 2006 entity reported equitymethod investee december 1 2006 consolidated december 31 2005 interest rate risk gm subject market risk exposure changes interest rates due financing activities interest rate risk managed mainly interest rate swaps december 31 2006 2005 net fair value asset financial instruments held purposes trading exposure interest rate risk approximately 253 billion 419 billion respectively potential loss fair value resulting 10 adverse shift quoted interest rates would approximately 15 billion 30 billion 2006 2005 respectively analysis excludes gmac’s portfolio december 31 2006 entity reported equitymethod investee december 1 2006 consolidated december 31 2005 commodity price risk gm exposed changes prices commodities used automotive business primarily associated various nonferrous precious metals automotive components energy used overall manufacturing process commodity purchase contracts meet definition derivative sfas 133 addition gm enters various derivatives commodity swaps options offset commodity price exposures december 31 2006 2005 net fair value asset derivative purchase contracts approximately 7546 million 7816 million respectively potential loss fair value resulting 10 adverse change underlying commodity prices would approximately 3182 million 2895 million 2006 2005 respectively amount excludes offsetting impact commodity price risk inherent physical purchase underlying commodities equity price risk availableforsale equity securities december 31 2005 related insurance business gmac entity reported equitymethod investee december 1 2006 therefore investments longer reported consolidated balance sheet report independent registered public accounting firm general motors corporation directors stockholders audited management’s assessment included accompanying management’s report internal control financial reporting item 9a general motors corporation subsidiaries corporation maintain effective internal control financial reporting december 31 2006 effect material weaknesses identified management’s assessment based criteria established internal control integrated framework issued committee sponsoring organizations treadway commission corporation’s management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting responsibility express opinion management’s assessment opinion effectiveness corporation’s internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting evaluating management’s assessment testing evaluating design operating effectiveness internal control performing procedures considered necessary circumstances believe audit provides reasonable basis opinions company’s internal control financial reporting process designed supervision company’s principal executive principal financial officers persons performing similar functions effected company’s board directors management personnel provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting including possibility collusion improper management override controls material misstatements due error fraud may prevented detected timely basis also projections evaluation effectiveness internal control financial reporting future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate material weakness significant deficiency combination significant deficiencies results remote likelihood material misstatement annual interim financial statements prevented detected following material weaknesses identified included management’s assessment resulting deficiencies design operation respective controls 1 corporation lacked technical expertise processes ensure compliance statement financial accounting standards sfas 109 accounting income taxes maintain adequate controls respect timely tax account reconciliations analyses b coordination communication corporate accounting tax staffs c timely review analysis corporate journals recorded consolidation process material weakness resulted restatement prior financial statements described note 2 consolidated financial statements remediated could result material misstatement future 2 corporation certain instances lacked technical expertise maintain adequate procedures ensure accounting derivative financial instruments sfas 133 accounting derivative instruments hedging activities sfas 133 appropriate procedures relating hedging transactions certain instances operate effectively properly evaluate hedge accounting treatment b meet documentation requirements sfas 133 c adequately assess measure hedge effectiveness quarterly basis establish appropriate communication coordination relevant gm departments involved complex hedging transactions material weakness resulted restatement prior financial statements described note 2 consolidated financial statements remediated could result material misstatement future 3 corporation maintain sufficient complement personnel appropriate level accounting knowledge experience training application generally accepted accounting principles commensurate corporation’s complex financial accounting reporting requirements material weakness contributed restatement prior financial statements described note 2 consolidated financial statements remediated potential cause material misstatement future 4 due previously reported material weaknesses evidenced significant number magnitude outofperiod adjustments identified yearend closing process resulting restatement related deferred taxes derivatives hedging activities management concluded controls periodend financial reporting process operating effectively specifically controls effective ensure significant nonroutine transactions accounting estimates adjustments appropriately reviewed analyzed monitored timely basis material weakness contributed restatement prior financial statements described note 2 consolidated financial statements remediated potential cause material misstatement future management restated previously reported 2005 2004 consolidated financial statements due matters material weaknesses considered determining nature timing extent audit tests applied audit consolidated financial statements financial statement schedule listed item 15 year ended december 31 2006 collectively financial statements financial statement schedule report affect report consolidated financial statements financial statement schedule opinion management’s assessment corporation maintain effective internal control financial reporting december 31 2006 fairly stated material respects based criteria established internal control integrated framework issued committee sponsoring organizations treadway commission also opinion effect material weaknesses described achievement objectives control criteria corporation maintained effective internal control financial reporting december 31 2006 based criteria established internal control integrated framework issued committee sponsoring organizations treadway commission also audited accordance standards public company accounting oversight board united states consolidated balance sheet related consolidated statements operations cash flows stockholders’ equity deficit corporation year ended december 31 2006 audit also included financial statement schedule listed item 15 year ended december 31 2006 report dated march 14 2007 expressed unqualified opinion financial statements financial statement schedule included explanatory paragraphs concerning 1 adoption funded status recognition provisions sfas 158 employers’ accounting defined benefit pension postretirement plans amendment fasb statements 87 88 106 132r 2 corporation’s sale controlling interest gmac llc deloitte touche llp deloitte touche llp detroit michigan march 14 2007 report independent registered public accounting firm general motors corporation directors stockholders audited accompanying consolidated balance sheets general motors corporation subsidiaries corporation december 31 2006 2005 related consolidated statements operations cash flows stockholders’ equity deficit three years period ended december 31 2006 audits also included financial statement schedule listed item 15 financial statements financial statement schedule responsibility corporation’s management responsibility express opinion financial statements financial statement schedule based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements present fairly material respects financial position general motors corporation subsidiaries december 31 2006 2005 results operations cash flows three years period ended december 31 2006 conformity accounting principles generally accepted united states america also opinion financial statement schedule considered relation basic consolidated financial statements taken whole presents fairly material respects information set forth therein discussed note 2 consolidated financial statements accompanying 2005 2004 consolidated financial statements restated discussed note 3 consolidated financial statements corporation 1 effective december 31 2006 began recognize funded status benefit plans consolidated balance sheet conform statement financial accounting standards 158 employers’ accounting defined benefit pension postretirement plans amendment fasb statements 87 88 106 132r 2 effective december 31 2005 began account estimated fair value conditional asset retirement obligations conform fasb interpretation 47 accounting conditional asset retirement obligations discussed note 4 consolidated financial statements november 30 2006 corporation sold 51 controlling interest gmac llc former whollyowned finance subsidiary effective december 1 2006 corporation’s remaining 49 interest gmac llc accounted equity method investment also audited accordance standards public company accounting oversight board united states effectiveness corporation’s internal control financial reporting december 31 2006 based criteria established internal control integrated framework issued committee sponsoring organizations treadway commission report dated march 14 2007 expressed unqualified opinion management’s assessment effectiveness corporation’s internal control financial reporting adverse opinion effectiveness corporation’s internal control financial reporting deloitte touche llp deloitte touche llp detroit michigan march 14 2007 item 8 item 7a quantitative qualitative disclosures market risk disclosure item required pursuant action letter item 8 item 7a quantitative qualitative disclosures market risk disclosure item required pursuant action letter item 8 item 7a quantitative qualitative disclosures market risk gm exposed market risk changes foreign currency exchange rates interest rates certain commodity equity security prices order manage risk arising exposures gm enters variety foreign exchange interest rate commodity forward contracts options discussion gms accounting policies derivative instruments included note 1 gm consolidated financial statements disclosure provided notes 10 11 12 gm consolidated financial statements gm maintains risk management control systems monitor foreign exchange interest rate commodity equity price risks related hedge positions monitored using variety analytical techniques including market value sensitivity analysis valueatrisk models following analyses based sensitivity analysis tests assume instantaneous parallel shifts exchange rates interest rate yield curves commodity equity prices options instruments nonlinear returns models appropriate instrument utilized determine impact sensitivity shifts foreign currency exchange rate risk gm foreign currency exposures related buying selling financing currencies local currencies operates specifically gm exposed foreign currency risk related uncertainty future earnings assets liability values exposed due operating cash flows various financial instruments denominated foreign currencies gms significant foreign currency exposures relate canada mexico western european countries primarily germany united kingdom spain italy belgium france australia japan brazil december 31 1998 1997 net fair value liability financial instruments exposure foreign currency risk approximately 35 billion 19 billion respectively potential loss fair value financial instruments hypothetical 10 adverse change quoted foreign currency exchange rates would approximately 161 million 190 million 1998 1997 respectively model assumes parallel shift foreign currency exchange rates exchange rates rarely move direction assumption exchange rates change parallel fashion may overstate impact changing exchange rates assets liabilities denominated foreign currency interest rate risk gm subject market risk exposure changes interest rates based financing investing cash management activities gm enters various financial instrument transactions maintain desired level exposure risk interest rate fluctuations minimize interest expense specifically general motors acceptance corporation gmac affiliates also entered contracts provide commercial retail financing retain mortgage servicing rights retain various assets related mortgage securitization certain exchange traded future option contracts interest rate caps floors along various investments entered reduce interest rate risk related activities manage potential prepayment activity associated mortgage servicing rights gmac mortgage group gmacmg manages prepayment risk associated capitalized mortgage servicing rights us treasury options futures since derivative instruments identical characteristics underlying mortgage servicing rights gm exposed basis risk gmacmg mitigates risk historical review value change various interest rate scenarios establishing maintaining hedge program december 31 1998 1997 net fair value liability financial instruments held purposes trading exposure interest rate risk approximately 159 billion 37 billion respectively potential decrease fair value resulting hypothetical 10 shift interest rates would approximately 90 million 214 million 1998 1997 respectively net fair value asset financial instruments held trading purposes exposure interest rate risk approximately 32 billion 21 billion 1998 1997 respectively potential loss fair value resulting hypothetical 10 shift interest rates would approximately 84 million 43 million 1998 1997 respectively sec disclosures market risk require financial instruments defined statement financial accounting standards sfas 107 disclosures fair value financial instruments included quantitative disclosure calculation operating leases required disclosed sfas 107 presented part sensitivity analysis significant limitation analysis presented sensitivity analysis show fair market value change debt funds gms operating lease portfolio corresponding change gms operating lease portfolio book value 371 billion 337 billion december 31 1998 1997 respectively considered model result overall impact fair market value financial instruments hypothetical change interest rates may overstated ii23 general motors corporation subsidiaries interest rate risk concluded certain shortcomings inherent sensitivity analyses presented model assumes interest rate changes instantaneous parallel shifts yield curve reality changes rarely instantaneous although certain assets liabilities may similar maturities periods repricing may react correspondingly changes market interest rates also interest rates certain types assets liabilities may fluctuate changes market interest rates interest rates types assets may lag behind changes market rates finance receivables less susceptible prepayments interest rates change prepayments many mortgage related instruments directly affected change interest rates gms model address prepayment risk automotive related finance receivables consider prepayment risk mortgage related instruments highly sensitive prepayment risk however event change interest rates actual loan prepayments may deviate significantly assumptions used model certain assets adjustable rate loans features annual lifetime caps restrict changing interest rates shortterm basis life asset finally ability certain borrowers make scheduled payments adjustable rate loans may decrease event interest rate increase commodity price risk gm enters commodity forward option contracts executed offset gms exposure potential change prices mainly various nonferrous metals used manufacturing automotive components net fair value liability contracts excluding underlying exposures december 31 1998 1997 approximately 200 million 42 million respectively potential change fair value commodity forward option contracts assuming 10 change underlying commodity price would approximately 203 million 111 million december 31 1998 1997 respectively amount excludes offsetting impact price risk inherent physical purchase underlying commodities equity price risk gm holds investments various availableforsale equity securities subject price risk fair value investments december 31 1998 1997 approximately 12 billion 899 million respectively potential change fair value investments assuming 10 change prices would approximately 121 million 90 million 1998 1997 respectively forwardlooking statements discussion estimated amounts generated sensitivity analyses referred include forwardlooking statements market risk assume analytical purposes certain adverse market conditions may occur actual future market conditions may differ materially assumptions amounts noted previously result analyses used purpose assessing possible risks mitigation thereof accordingly forwardlooking statements considered projections gm future events losses ii24 responsibilities consolidated financial statements following consolidated financial statements general motors corporation subsidiaries prepared management responsible integrity objectivity statements prepared conformity generally accepted accounting principles include amounts based judgments management responsible maintaining internal control designed provide reasonable assurance books records reflect transactions companies established policies procedures carefully followed stockholders point view perhaps important feature internal control continually reviewed effectiveness augmented written policies guidelines careful selection training qualified personnel strong program internal audit deloitte touche llp independent auditing firm engaged audit consolidated financial statements general motors corporation subsidiaries issue reports thereon audit conducted accordance generally accepted auditing standards comprehend consideration internal control tests transactions extent necessary form independent opinion financial statements prepared management independent auditors report appears next page board directors audit committee composed entirely nonemployee directors responsible assuring management fulfills responsibilities preparation consolidated financial statements audit committee selects independent auditors annually advance annual meeting stockholders submits selection ratification meeting addition audit committee reviews scope audits accounting principles applied financial reporting independent auditors representatives management internal auditors meet regularly separately jointly audit committee review activities ensure properly discharging responsibilities assess effectiveness internal control managements conclusion internal control december 31 1998 provides reasonable assurance books records reflect transactions companies established policies procedures complied ensure complete independence deloitte touche llp full free access meet audit committee without management representatives present discuss results audit adequacy internal control quality financial reporting sjohn f smith jr sj michael losh john f smith jr j michael losh chairman chief executive officer executive vice president chief financial officer ii25 independent auditors report general motors corporation directors stockholders audited consolidated balance sheets general motors corporation subsidiaries december 31 1998 1997 related consolidated statements income cash flows stockholders equity three years period ended december 31 1998 audits also included financial statement schedule listed item 14 financial statements financial statement schedule responsibility corporations management responsibility express opinion financial statements financial statement schedule based audits conducted audits accordance generally accepted auditing standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements present fairly material respects financial position general motors corporation subsidiaries december 31 1998 1997 results operations cash flows three years period ended december 31 1998 conformity generally accepted accounting principles also opinion financial statement schedule considered relation basic consolidated financial statements taken whole presents fairly material respects information set forth therein sdeloitte touche llp deloitte touche llp detroit michigan january 20 1999 march 2 1999 note 23 ii26 supplemental consolidating information explained note 1 nature operations reference made notes consolidated financial statements ii27 ii28 supplemental consolidating information explained note 1 nature operations reference made notes consolidated financial statements ii29 reference made notes consolidated financial statements ii30 supplemental consolidating information explained note 1 nature operations reference made notes consolidated financial statements ii31 reference made notes consolidated financial statements ii32 reference made notes consolidated financial statements ii33 general motors corporation subsidiaries notes consolidated financial statements note 1 significant accounting policies principles consolidation consolidated financial statements include accounts general motors corporation hereinafter referred corporation domestic foreign subsidiaries 50 owned principally general motors acceptance corporation subsidiaries gmac hughes electronics corporation subsidiaries prior december 17 1997 restructuring company hereinafter referred former hughes subsequent december 17 1997 restructuring company hereinafter referred hughes see hughes transactions collectively referred general motors gm general motors share earnings losses associates least 20 voting securities owned included consolidated operating results using equity method accounting gm encourages reference delphi automotive systems corporation delphi gmac annual reports form 10k period ended december 31 1998 filed securities exchange commission hughes consolidated financial statements included exhibit 99 gm annual report form 10k period ended december 31 1998 certain amounts 1997 1996 reclassified conform 1998 classifications nature operations gm presents separate supplemental consolidating financial information following businesses 1 automotive electronics operations consists design manufacturing marketing cars trucks locomotives heavy duty transmissions related parts accessories well operations hughes 2 financing insurance operations consists primarily gmac provides broad range financial services including consumer vehicle financing fullservice leasing fleet leasing dealer financing car truck extended service contracts residential commercial mortgage services vehicle homeowners insurance transactions businesses eliminated corporations consolidated statements income automotive electronics operations net expense income transactions financing insurance operations follows millions years ended december 31 1998 1997 1996 interest 140 89 71 service fees 58 34 27 insurance net 24 127 138 92 97 85 net expense income 82 101 125 use estimates preparation financial statements preparation financial statements conformity generally accepted accounting principles requires management make estimates assumptions affect amounts reported therein due inherent uncertainty involved making estimates actual results reported future periods may based upon amounts differ estimates revenue recognition sales generally recorded products shipped services rendered independent dealers third parties provisions normal dealer sales incentives returns allowances gm card rebates made time vehicle sales costs related special sales incentive programs recognized reductions sales determinable financing revenue recorded terms receivables using interest method certain loan origination costs deferred amortized financing revenue lives related loans using interest method income operating lease assets recognized straightline basis scheduled lease term certain operating lease origination costs deferred amortized financing revenue lives related operating leases using straightline method insurance premiums earned basis related coverage provided terms policies commission premium taxes costs incurred acquiring new business deferred amortized terms related policies basis premiums earned liability losses loss expenses includes provision unreported losses based past experience net estimated salvage subrogation recoverable ii34 general motors corporation subsidiaries notes consolidated financial statements continued note 1 significant accounting policies continued productrelated expenses advertising sales promotion research development productrelated costs charged expense incurred provisions estimated expenses related product warranty made time products sold advertising expense 37 billion 1998 41 billion 1997 34 billion 1996 research development expense 79 billion 1998 82 billion 1997 89 billion 1996 depreciation amortization depreciation provided based estimated useful lives property groups generally using accelerated methods accumulate depreciation approximately twothirds depreciable cost first half estimated useful lives leasehold improvements amortized period lease life property whichever shorter amortization applied directly asset account depreciation capitalized leases terms five years less provided using straightline method leases terms excess five years depreciated using foregoing accelerated methods depreciation vehicles equipment operating leases gms use provided generally straightline basis difference net book value proceeds sale salvage items disposed accounted charge credit provision depreciation expenditures special tools amortized estimated useful lives primarily using units production method amortization applied directly asset account replacement special tools reasons changes products charged directly cost sales depreciation amortization expense follows millions years ended december 31 automotiveelectronics operations 1998 1997 1996 depreciation note 2 4501 5901 4139 amortization special tools note 2 2661 5674 2856 amortization intangible assets note 9 119 228 150 total 7281 11803 7145 financing insurance operations depreciation amortization expense 4920 4813 4695 foreign currency translation foreign currency exchange transaction translation losses aftertax basis included consolidated net income 1998 1997 1996 pursuant statement financial accounting standards sfas 52 foreign currency translation amounted 323 million 429 million 380 million respectively discontinued operations june 7 1996 gm splitoff electronic data systems corporation eds gm class e stockholders taxfree basis us federal income tax purposes terms splitoff share gm former class e common stock exchanged one share eds common stock addition gm eds entered new 10year agreement eds continue gms principal provider information technology services eds made special intercompany payment 500 million gm financial data related eds prior june 7 1996 splitoff gm classified discontinued operations financial results eds including assets liabilities subsequent splitoff included gms consolidated financial statements eds systems contracts revenues outside customers included income discontinued operations totaled 43 billion year ended december 31 1996 income discontinued operations 10 million year ended december 31 1996 reported net income tax expense 14 million income discontinued operations 1996 also includes splitoff expenses attributable 123 par value common stock 15 million aftertax 002 per share 123 par value common stock cash equivalents cash equivalents defined shortterm highly liquid investments original maturities 90 days less ii35 general motors corporation subsidiaries notes consolidated financial statements continued note 1 significant accounting policies continued statement cash flows supplementary information years ended december 31 automotive electronics operations 1998 1997 1996 dollars millions changes operating assets liabilities follows accounts receivable 166 1160 206 prepaid expenses deferred charges 158 1101 178 inventories 276 716 757 accounts payable 982 1153 830 deferred taxes income taxes payable 1555 2651 354 accrued expenses liabilities 829 4123 53 total 304 1850 306 cash paid interest income taxes follows interest 721 748 899 income taxes 1873 1085 1334 years ended december 31 financing insurance operations 1998 1997 1996 dollars millions changes operating assets liabilities follows receivables 206 714 384 assets 36 55 44 accounts payable 2976 624 700 deferred taxes liabilities 464 612 597 total 3610 467 237 cash paid interest income taxes follows interest 5695 5202 4893 income taxes 138 338 1004 allowance credit losses allowance credit losses generally established period receivables acquired maintained level deemed appropriate management based historical factors affect collectibility losses arising sale repossessed collateral charged allowance credit losses repossession taken place receivables charged soon determined collateral cannot repossessed generally 150 days default repossessed property impaired loans losses arising repossession collateral supporting doubtful accounts property supporting defaulted operating leases recognized upon repossession repossessed assets recorded lower historical cost estimated realizable value reclassified finance receivables operating leases nonearning assets related adjustments valuation allowance included operating expenses nonretail finance receivables reduced lower book value estimated fair value collateral determined impaired uncollectible valuation longlived assets gm periodically evaluates carrying value longlived assets held used including goodwill intangible assets events circumstances warrant review carrying value longlived asset considered impaired anticipated undiscounted cash flow asset separately identifiable less carrying value event loss recognized based amount carrying value exceeds fair market value longlived asset fair market value determined primarily using anticipated cash flows discounted rate commensurate risk involved losses longlived assets disposed determined similar manner except fair market values reduced cost dispose ii36 general motors corporation subsidiaries notes consolidated financial statements continued note 1 significant accounting policies continued derivative instruments gm party variety foreign exchange interest rate commodity forward contracts options entered connection management exposure fluctuations foreign exchange rates interest rates certain commodity prices financial exposures managed accordance corporate policies procedures gm established risk management committee develop monitor corporations financial risk strategies policies procedures committee reviews approves new risk management strategies establishes approval authority guidelines approved programs monitors compliance performance existing risk management programs gm enter derivative transactions trading purposes part hedging program approval process gms management required identify specific financial risk derivative transaction minimize appropriate hedging instrument used reduce risk correlation financial risk hedging instrument purchase orders letters intent vehicle production forecasts capital planning forecasts historical data used basis determining anticipated values transactions hedged generally gm enter derivative transactions high correlation underlying financial risk infrequent instances derivative transaction entered high correlation underlying exposure derivative marked market included net income current basis hedge positions well correlation transaction risks hedging instruments reviewed management ongoing basis foreign exchange forward option contracts accounted hedges extent designated effective hedges firm foreign currency commitments additionally certain foreign exchange option contracts receive hedge accounting treatment extent contracts hedge certain anticipated foreign currency transactions foreign exchange contracts options marked market included net income current basis interest rate swaps options designated effective hedges underlying debt obligations marked market included net income used adjust interest expense recognized lives underlying debt agreements gains losses terminated hedge contracts deferred amortized remaining period original swap remaining term underlying exposure whichever shorter open interest rate contracts reviewed regularly ensure remain effective hedges interest rate exposure written options including swaptions interest rate caps collars swaps embedded swaptions swaps qualify hedge accounting marked market included net income current basis gm also enters commodity forward option contracts since gm discretion settle transactions either cash taking physical delivery contracts considered financial instruments accounting purposes commodity forward contracts options accounted hedges extent designated effective hedges firm anticipated commodity purchase contracts commodity forward contracts options marked market included net income current basis postemployment benefits employee termination benefits gms postemployment benefits primarily relate gms extended disability benefit program united states employee job security supplemental unemployment compensation benefits mainly pursuant union contractual agreements extended disability benefits accrued servicedriven basis employee job security supplemental unemployment compensation benefits accrued eventdriven basis accruals postemployment benefits represent discounted future cash expenditures expected period idling affected employees time employees redeployed retire otherwise terminate employment voluntary termination benefits accrued employees accept offer involuntary termination benefits accrued management committed termination plan benefit arrangement communicated affected employees environmental liabilities gm recognizes environmental liabilities loss probable reasonably estimated liabilities generally subject insurance coverage cost environmental liability estimated engineering financial legal specialists within gm based current law estimates based primarily upon estimated cost investigation remediation required likelihood potentially responsible parties prps able fulfill commitments sites gm may jointly severally liable sites addressed us comprehensive environmental response compensation liability act similar state laws superfund sites gm typically recognizes loss named prp determined loss probable estimable superfund sites primarily multiprp sites owned operated gm ii37 general motors corporation subsidiaries notes consolidated financial statements continued note 1 significant accounting policies concluded gms operating plants estimated liability typically recognized either upon completion environmental assessment gm proposes agreement appropriate regulatory agency take action site closed closing plants owned gm properties sold estimated liability typically recognized time closure decision made sale recorded based environmental assessment plant property gms estimates environmental obligations dependent primarily nature extent historical information physical data relating contaminated site complexity site uncertainty remedy technology required outcome discussions regulatory agencies prps multiparty sites number financial viability prps timing expenditures accordingly estimates could change materially gm periodically evaluates revises estimates based expenditures established reserves availability additional information new accounting standards first quarter 1998 aicpas accounting standards executive committee issued statement position sop 981 accounting costs computer software developed obtained internal use sop requires entities capitalize certain internaluse software cost specific criteria met currently gm generally expenses costs developing obtaining internaluse software incurred gm adopt sop 981 january 1 1999 required gm expects new sop approximately 300 million 350 million spending capitalized 1999 would otherwise expensed second quarter 1998 financial accounting standards board issued statement financial accounting standards sfas 133 accounting derivative instruments hedging activities sfas 133 requires entity recognize derivatives either assets liabilities statement financial position measure instruments fair value gains losses resulting changes values derivatives would accounted depending use derivative whether qualifies hedge accounting gm plans adopt sfas 133 january 1 2000 required gm currently assessing impact statement gms consolidated financial statements labor force gm worldwide basis concentration labor supply employees working union collective bargaining agreements significant number expire 1999 hughes transactions december 17 1997 gm former hughes completed series related transactions hughes transactions designed address strategic challenges facing three principal businesses former hughes unlock stockholder value gm hughes transactions included taxfree spinoff defense electronics business former hughes defense holders 123 par value class h common stocks followed immediately merger hughes defense raytheon company raytheon concurrently delco electronics corporation delco automotive electronics subsidiary former hughes transferred former hughes gms delphi automotive systems unit finally class h common stock recapitalized gm tracking stock class h common stock linked telecommunications space businesses hughes spinoff hughes defense merger raytheon total value gm stockholders approximately 98 billion consisted approximately 40 billion cash retained hughes debt proceeds incurred hughes defense prior spinoff 58 billion hughes defense class common stock distributed holders 123 par value class h common stock substantially proceeds debt obligation hughes defense made available hughes distribution hughes defense 123 par value class h common stockholders recorded gm fair value resulted recognition 43 billion gain included income addition gms total stockholders equity reduced approximately 15 billion result hughes transactions gm distributed total 102630503 shares class common stock hughes defense 44308316 shares 432 123 par value stockholders 58322187 shares 568 class h stockholders represented approximately 30 total equity newly combined hughes defenseraytheon company distribution class h common stockholders total value approximately 33 billion accounted tracking stock interest hughes defense valued approximately 15 billion plus additional amount compensate elimination tracking stock interest delco factors valued approximately 18 billion ii38 general motors corporation subsidiaries notes consolidated financial statements continued note 2 competitiveness studies gm periodically evaluates carrying value longlived assets held used events circumstances warrant review evaluations reviews generally done conjunction annual business planning cycle based results reviews gm recorded pretax charges income totaling 534 million 420 million aftertax 064 per share 123 par value common stock 1998 64 billion 40 billion aftertax 559 per share 123 par value common stock 1997 following pretax components charges 1998 1997 underperforming assets including vehicle componentmanufacturing assets 298 million 37 billion capacity reductions employee separation programs 236 million 14 billion assets held disposal 05 billion 08 billion 1998 pretax charges comprised 105 million 80 million aftertax gmna 310 million 192 million aftertax delphi 82 million 51 million aftertax gmlaam 37 million 97 million aftertax gmap overall charges effect increasing 1998 cost sales depreciation amortization expenses 246 million 223 million 65 million respectively 1997 pretax charges comprised 38 billion 24 billion aftertax gmna 14 billion 870 million aftertax delphi 848 million 488 million aftertax gme 174 million 170 million aftertax gmap 205 million 128 million aftertax gm automotive electronics operations segment charges reduced 1997 net sales revenues 548 million increased cost sales depreciation amortization expenses 17 billion 41 billion 72 million respectively amounts related capacity reduction expenses recorded 1997 still remain december 31 1998 total 11 billion going forward gms future cash requirements relating 1998 1997 charges expected total approximately 14 billion next five years 70 evenly expended first three years 1998 amount included underperforming assets represents charges recorded pursuant gms policy valuation longlived assets gm reevaluated carrying values longlived assets annual business planning cycle reevaluation performed using product specific cash flow information result carrying values certain tooling property plant equipment determined impaired separately identifiable anticipated undiscounted future cash flows assets less respective carrying values resulting pretax impairment charges represented amount carrying values assets exceeded respective fair market values amount included employee separation programs represents voluntary early retirement separation programs affecting approximately 5700 3300 1150 delphi gmlaam employees involved restructuring us sales service field organizations respectively 1997 amount included underperforming assets principally tooling property plant equipment investments joint ventures represents charges recorded pursuant gms policy valuation longlived assets amount included capacity reductions represents postemployment benefits payable employees pursuant contractual agreements costs associated disposal assets facilities subject capacity reductions affects approximately 10000 employees gmnas buick city assembly v6 powertrain plants flint michigan detroit truck assembly detroit michigan delphis leafspring plant livonia michigan certain gme facilities pursuant actions additional charges 74 million 44 million aftertax related work schedule modifications opel belgium recorded second quarter 1998 assets held disposal primarily related delphis seating lighting coil spring operations announced sale 1997 subsequently sold 1998 additional charges recorded 1998 income related sales amounted 430 million 271 million aftertax delphis results operations included total operating losses related businesses 107 million 488 million 224 million years ended december 31 1998 1997 1996 respectively amount included primarily represents losses contracts associated pricing pressures used vehicles related effect gms retaillease commitments pricing pressures primarily result increased industry sales incentives new vehicles connection 1997 evaluation longlived assets gm reviewed remaining previously recorded reserve plant closings reclassified reserve consolidated balance sheet accounts reflected nature specific reserve components december 31 1998 1997 remaining balance previously recorded reserve represents primarily accrued expenses postemployment benefits affecting approximately 3100 employees mainly pursuant union contractual arrangements approximately 900 million 10 billion respectively 1996 favorable ii39 general motors corporation subsidiaries notes consolidated financial statements continued note 2 competitiveness studies concluded adjustments previously recorded plant closings reserve totaled 789 million amount 409 million reflected gms ability utilize wilmington delaware facility assembly new generation saturn vehicle 380 million primarily due revised estimates postemployment benefit costs incurred connection plant closings separately gm recorded pretax plant closings charges 80 million 1997 62 million 1996 note 3 marketable securities marketable securities held gm classified availableforsale except certain mortgagerelated securities gmac classified trading securities aggregate excess fair value cost net related income taxes availableforsale securities included separate component stockholders equity excess fair value cost trading securities included income current basis gm determines cost specific identification basis automotive electronics operations investments marketable securities follows millions december 31 1998 fair unrealized cost value gains losses type security bonds notes securities united states government governmental agencies authorities 291 states municipalities political subdivisions 11 corporate debt securities 98 105 7 total marketable securities 400 407 7 december 31 1997 fair unrealized cost value gains losses type security bonds notes securities united states government governmental agencies authorities 621 623 2 corporate debt securities 3188 3203 15 total marketable securities 3809 3826 17 debt securities totaling 136 million mature within one year 271 million mature one five years proceeds sales marketable securities totaled 44 billion 1998 109 billion 1997 34 billion 1996 gross gains related sales marketable securities 17 million 121 million 106 million 1998 1997 1996 respectively gross losses related sales marketable securities 11 million 51 million 4 million 1998 1997 1996 respectively securities classified cash equivalents consisted primarily commercial paper repurchase agreements certificates deposit 92 billion 100 billion december 31 1998 1997 respectively financing insurance operations investments securities follows millions december 31 1998 fair unrealized cost value gains losses type security bonds notes securities united states government governmental agencies authorities 445 456 12 1 states municipalities political subdivisions 1495 1600 117 12 mortgagebacked securities 415 383 6 38 corporate debt securities 1895 1926 66 35 total debt securities availableforsale 4250 4365 201 86 mortgagebacked securities held trading purposes 3173 total debt securities 7423 7538 201 86 equity securities 779 1210 534 103 total investment securities 8202 8748 735 189 ii40 general motors corporation subsidiaries notes consolidated financial statements continued note 3 marketable securities concluded december 31 1997 fair unrealized cost value gains losses type security bonds notes securities united states government governmental agencies authorities 687 694 7 states municipalities political subdivisions 1576 1686 121 11 mortgagebacked securities 110 113 3 corporate debt securities 2401 2441 50 10 total debt securities availableforsale 4774 4934 181 21 mortgagebacked securities held trading purposes 2063 total debt securities 6837 6997 181 21 equity securities 523 899 416 40 total investment securities 7360 7896 597 61 debt securities totaling 317 million mature within one year 13 billion mature one five years 15 billion mature five years 10 years 45 billion mature 10 years proceeds sales marketable securities totaled 36 billion 1998 27 billion 1997 23 billion 1996 gross gains related sales marketable securities 218 million 176 million 130 million 1998 1997 1996 respectively gross losses related sales marketable securities 49 million 45 million 29 million 1998 1997 1996 respectively securities classified cash equivalents consisted primarily commercial paper repurchase agreements certificates deposit 155 million 293 million december 31 1998 1997 respectively note 4 finance receivables net finance receivables net included following millions december 31 1998 1997 us retail 33321 26570 wholesale 17722 15213 leasing lease financing 632 716 term loans dealers others 4924 3118 total us 56599 45617 canada mexico international retail 9337 8059 wholesale 6668 6475 leasing lease financing 2023 2069 term loans dealers others 857 488 total canada mexico international 18885 17091 total finance receivables 75484 62708 less unearned income 4027 3516 allowance financing losses 1021 903 total finance receivables net 70436 58289 aggregate amount total finance receivables maturing five years following december 31 1998 follows 1999421 billion 2000137 billion 2001107 billion 200256 billion 200325 billion 2004 thereafter900 million gmac participates various sales receivables programs sold retail finance receivables special purpose subsidiaries principal aggregating 16 billion 1998 54 billion 1997 subsidiaries generally retain subordinated investment greater 70 total receivables pool market remaining portion subordinated investments absorb losses related sold receivables extent losses greater excess cash flows receivables cash reserves related sale transaction subordinated interests trusts recorded investments securities pretax gains relating sales excluding limited recourse loss provisions generally provided time contracts originally acquired amounted 310 ii41 general motors corporation subsidiaries notes consolidated financial statements continued note 4 finance receivables net concluded million 1998 848 million 1997 gmac continues service receivables fee considered adequate compensation earns related ongoing income gmacs sold retail finance receivables servicing portfolio amounted 40 billion 60 billion december 31 1998 1997 respectively gmac also sold wholesale receivables continues service fee considered adequate compensation sold wholesale receivables servicing portfolio totaled 33 billion 63 billion december 31 1998 1997 respectively additionally gmac committed sell eligible wholesale receivables revolving basis arising certain dealer accounts note 5 inventories automotive electronics operations inventories included following millions december 31 1998 1997 productive material work process supplies 7287 7023 finished product service parts etc 7215 7347 total inventories fifo 14502 14370 less lifo allowance 2295 2268 total inventories less allowances 12207 12102 inventories stated generally cost excess market cost substantially us inventories saturn corporation saturn delco hughes determined lastin firstout lifo method cost nonus saturn delco hughes inventories determined generally either firstin firstout fifo average cost methods note 6 income taxes income continuing operations income taxes minority interests included following millions years ended december 31 1998 1997 1996 us income 1228 3413 1703 foreign income 3384 4379 4789 total 4612 7792 6492 provision income taxes estimated follows millions income taxes estimated payable refundable currently us federal 36 1307 357 foreign 2086 1793 1607 us state local 276 198 197 total payable currently 2398 3298 1447 deferred income tax credit expense net us federal 145 1467 477 foreign 844 396 147 us state local 207 332 15 total deferred 906 2195 315 investment tax credits 29 34 39 total income taxes 1463 1069 1723 annual tax provisions include amounts considered sufficient pay assessments may result examination prior year tax returns however amount ultimately paid upon resolution issues raised may differ materially amount accrued provisions made estimated us foreign income taxes less available tax credits deductions may incurred remittance corporations share subsidiaries undistributed earnings deemed permanently invested taxes provided foreign subsidiaries earnings deemed essentially permanently reinvested approximately 97 billion december 31 1998 87 billion december 31 1997 quantification deferred tax liability associated permanently reinvested earnings practicable ii42 general motors corporation subsidiaries notes consolidated financial statements continued note 6 income taxes concluded reconciliation provision income taxes compared amounts us federal statutory rate follows millions years ended december 31 1998 1997 1996 tax us federal statutory income tax rate 1614 2727 2272 hughes defense spinoff 1494 foreign rates 35 60 123 285 taxes unremitted earnings subsidiaries 98 44 49 tax effect 1995 contribution class e common stock us hourly pension plan 245 research experimentation credits 237 311 165 subsidiary settlement affirmative claim irs 92 adjustments 20 226 97 total income tax 1463 1069 1723 deferred income tax assets liabilities 1998 1997 reflect impact temporary differences amounts assets liabilities financial reporting purposes bases assets liabilities measured tax laws net deferred tax asset us 208 billion 203 billion december 31 1998 1997 respectively temporary differences carryforwards gave rise deferred tax assets liabilities included following millions december 31 1998 1997 deferred tax deferred tax assets liabilities assets liabilities postretirement benefits pensions 16135 15683 minimum pension liability adjustment 3054 2423 employee benefit plans 2171 5816 2226 6047 policy warranty reserves 2534 2445 sales product reserves 2176 1977 8 profits longterm contracts 146 156 143 alternative minimum tax credit carryforwards 690 673 depreciation amortization expense 602 3263 900 3130 capitalized research experimentation 82 285 us state net operating loss carryforwards 559 financing losses 407 361 tax credit carryforwards 879 467 lease transactions 3624 3075 tax unremitted profits 372 339 us 5835 2918 6700 3016 miscellaneous foreign 2861 978 1850 692 subtotal 38131 17127 36705 16450 valuation allowances 672 700 total deferred taxes 37459 17127 36005 16450 realization net deferred tax assets dependent future reversals existing taxable temporary differences adequate future taxable income exclusive reversing temporary differences carryforwards although realization assured management believes likely net deferred tax assets realized amount net deferred tax assets considered realizable however could reduced near term actual future taxable income lower estimated differences timing amount future reversals existing taxable temporary differences alternative minimum tax credit carried forward indefinitely us state net operating loss carryforwards expire years 1999 2013 2018 utilized however substantial portion expire year 2004 tax credit carryforwards expire years 2000 2013 2018 utilized ii43 general motors corporation subsidiaries notes consolidated financial statements continued note 7 equipment operating leases corporation significant investments residual values leasing portfolios residual values represent estimate values assets end lease contracts initially recorded based appraisals estimates realization residual values dependent corporations future ability market vehicles prevailing market conditions management reviews residual values periodically determine recorded amounts appropriate included equipment operating leases assets automotive electronics operations following millions december 31 1998 1997 equipment operating leases 9064 8312 less accumulated depreciation 935 992 net book value 8129 7320 equipment operating leases included investment leases receivables financing insurance operations follows millions december 31 1998 1997 equipment operating leases 35804 33364 less accumulated depreciation 6817 6994 net book value 28987 26370 lease payments received related equipment operating leases maturing five years following december 31 1998 follows automotive electronics operations 199955 billion 2000490 million 2001478 million 2002463 million 2003441 million financing insurance operations 199961 billion 200041 billion 200116 billion 2002161 million 20038 million note 8 property net property net included following automotive electronics operations millions estimated december 31 useful lives years 1998 1997 land 774 703 land improvements 1030 1906 1805 leasehold improvements less amortization 310 222 209 buildings 2945 13400 12733 machinery equipment 330 49284 46602 furniture office equipment 320 1089 972 capitalized leases 540 1120 1137 construction progress 4397 4673 real estate plants equipment 72192 68834 less accumulated depreciation 42829 41722 real estate plants equipment net 29363 27112 special tools net 7824 6802 total property net 37187 33914 financing insurance operations net property 386 million 265 million recorded assets december 31 1998 1997 respectively ii44 general motors corporation subsidiaries notes consolidated financial statements continued note 9 intangible assets net intangible assets net included following automotive electronics operations millions december 31 1998 1997 pensions 6434 7683 intangible assets relating acquisition hac 427 448 goodwill relating acquisitions 3361 2621 total intangible assets net 10222 10752 intangible assets relating acquisition hughes aircraft company hac december 31 1998 applicable hughes intangible assets relate patents related technology intangible assets originally recorded 1985 amortized 40 years goodwill resulting acquisitions amortized periods exceeding 40 years goodwill includes 31 billion associated hughes 1997 merger additional 1998 investment panamsat corporation pas financing insurance operations net intangible assets 855 million 717 million recorded assets december 31 1998 1997 respectively note 10 longterm debt loans payable automotive electronics operations longterm debt loans payable follows millions december 31 weightedaverage interest rate1 1998 1997 longterm debt loans payable within one year current portion longterm debt 74 273 627 commercial paper 2 57 381 29 82 872 payable beyond one year 1999 796 2000 95 799 738 2001 98 432 457 2002 131 47 21 2003 75 611 425 2004 75 5345 3278 unamortized discount 17 20 total longterm debt loans payable 8743 6351 1 1998 weightedaverage interest rate commercial paper includes impact interest rate swap agreements 2 1997 weightedaverage interest rate commercial paper 57 amounts payable beyond one year consideration foreign currency swaps december 31 1998 included 401 million currencies us dollar primarily brazilian real 231 million canadian dollar 52 million french franc 44 million german mark 24 million december 31 1998 1997 longterm debt loans payable automotive electronics operations included 75 billion 45 billion respectively obligations fixed interest rates 12 billion 19 billion respectively obligations variable interest rates predominantly based london interbank offering rate ie libor considering impact interest rate swap agreements achieve desired balance fixed variable rate debt within prescribed limits gm entered interest rate swap cap floor agreements notional amounts agreements december 31 1998 automotive electronics operations approximately 18 billion 600 million pay variable 12 billion pay fixed 100 million nil respectively notional amounts agreements december 31 1997 approximately 24 billion 12 billion pay variable 12 billion pay fixed 200 million 50 million respectively ii45 general motors corporation subsidiaries notes consolidated financial statements continued note 10 longterm debt loans payable concluded gm subsidiaries maintain substantial bank lines credit various banks totaled 145 billion december 31 1998 67 billion represented shortterm credit facilities 78 billion represented longterm credit facilities december 31 1997 bank lines credit totaled 93 billion 39 billion represented shortterm credit facilities 54 billion represented longterm credit facilities unused shortterm longterm portions credit lines totaled 62 billion 72 billion december 31 1998 compared 25 billion 48 billion december 31 1997 certain bank lines credit contain covenants corporation applicable subsidiaries compliance year ended december 31 1998 financing insurance operations debt follows millions december 31 weightedaverage interest rate1 1998 1997 debt payable within one year current portion debt 62 12701 10851 commercial paper 2 53 32143 27461 2 75 15208 12087 payable beyond one year 1999 11347 2000 62 13154 6165 2001 60 10322 5932 2002 59 8561 7017 2003 58 7919 2603 2004 68 6072 3907 unamortized discount 671 694 total debt 105409 86676 1 1998 weightedaverage interest rate commercial paper includes impact interest rate swap agreements 2 1997 weightedaverage interest rate commercial paper shortterm borrowings 56 52 respectively amounts payable beyond one year consideration foreign currency swaps december 31 1998 included 83 billion currencies us dollar primarily canadian dollar 43 billion german mark 16 billion uk pound sterling 898 million australian dollar 783 million december 31 1998 1997 debt financing insurance operations included 728 billion 679 billion respectively obligations fixed interest rates 326 billion 188 billion respectively obligations variable interest rates predominantly based london interbank offering rate ie libor considering impact interest rate swap agreements achieve desired balance fixed variable rate debt within prescribed limits gm entered interest rate swap cap floor option agreements notional amounts agreements december 31 1998 financing insurance operations approximately 132 billion 95 billion pay variable 37 billion pay fixed 400 million 10 billion 10 billion respectively notional amounts interest rate swap cap option agreements december 31 1997 approximately 97 billion 59 billion pay variable 38 billion pay fixed 11 billion 65 billion respectively gms financing insurance subsidiaries maintain substantial bank lines credit various banks totaled 443 billion december 31 1998 173 billion represented shortterm credit facilities 270 billion represented longterm credit facilities december 31 1997 bank lines credit totaled 410 billion 258 billion represented shortterm credit facilities 152 billion represented longterm credit facilities unused shortterm longterm portions credit lines totaled 75 billion 257 billion december 31 1998 compared 177 billion 139 billion december 31 1997 certain bank lines credit contain covenants corporation applicable subsidiaries compliance year ended december 31 1998 ii46 general motors corporation subsidiaries notes consolidated financial statements continued note 11 derivative financial instruments risk management gm party financial instruments offbalancesheet risk financial instruments used normal course business manage exposure fluctuations interest rates foreign exchange rates meet financing needs customers primary classes derivatives used gm foreign exchange forward contracts options interest rate swaps options forward contracts purchase sell mortgages mortgagebacked securities instruments involve varying degrees market risk instruments subject rate price fluctuations elements credit risk event counterparty default credit risk managed approval periodic monitoring financially sound counterparties derivative transactions used hedge underlying business exposures market risk instruments offset opposite movements underlying exposure cash receipts payments contracts normally occur maturity interest rate swap agreements periodic contractually defined intervals foreign exchange forward contracts options gm international corporation operations 50 countries foreign currency exposures operations related buying selling financing currencies local currency gms significant foreign currency exposures relate canada mexico western european countries primarily germany united kingdom spain italy belgium france australia japan brazil magnitude exposures significantly varies time depending upon strength local automotive markets sourcing decisions gm enters agreements seeks manage certain foreign exchange exposures accordance established policy guidelines primarily foreign exchange forward contracts purchased written foreign exchange options agreements primarily hedge cash flows debt firm commitments anticipated transactions involving vehicles components fixed assets subsidiary dividends general practice gm hedged foreign exchange exposure related either translation overseas earnings us dollars translation overseas equity positions back us dollars december 31 1998 1997 automotive electronics operations held foreign exchange forward contracts 63 billion 39 billion including crosscurrency swaps 70 million respectively december 31 1998 1997 automotive electronics operations entered foreign exchange options 28 billion 29 billion respectively december 31 1998 1997 financing insurance operations held foreign exchange forward contracts 80 billion 62 billion including crosscurrency swaps 34 billion 20 billion respectively automotive electronics operations deferred hedging losses outstanding foreign exchange forward contracts hedging firm commitments purchase inventory fixed assets totaling 3 million 17 million december 31 1998 1997 respectively deferred hedging losses outstanding purchased foreign exchange option contracts hedging firm anticipated transactions purchase inventory fixed assets totaled 2 million 20 million december 31 1998 1997 respectively financing insurance operations deferred hedging gains outstanding foreign exchange forward contracts hedging firm commitments purchase assets totaling 13 million 9 million december 31 1998 1997 respectively deferred amounts outstanding foreign exchange forward option contracts included cost assets purchased subsequently recognized operations part basis assets event contract terminated early anticipated transaction longer likely occur derivative marked market foreign exchange forward contracts hedge foreign exchange exposures anticipated inventory fixed assets sales transactions marked market recognized gains losses foreign exchange transactions consolidated statement income gms firm commitments typically one year may extend periods three years interest rate swaps options gms financing cash management activities subject market risk exposure changes interest rates gm entered various financial instrument transactions maintain desired level exposure risk interest rate fluctuations minimize interest expense achieve objective gm times use written options management exposures limited number cases interest rate swaps matched anticipated rollover investments wholesale assets debt executed terms five years portfolio basis achieve specific interest rate management objectives swaps also matched operating lease payments interest rate exposure exists differential paid received swaps recorded adjustment expense income term underlying agreement matched portfolio ii47 general motors corporation subsidiaries notes consolidated financial statements continued note 11 derivative financial instruments risk management concluded interest rate swaps contractual agreements gm another party exchange fixed floating interest rate payments periodically life agreements without exchange underlying principal amounts interest rate options including swaptions interest rate caps floors may result future exchange interest payments market interest rates reach certain levels december 31 1998 1997 total notional amount agreements offbalancesheet risk 21 billion 31 billion respectively automotive electronics operations december 31 1998 1997 financing insurance operations held agreements offbalancesheet risk notional amount totaling 200 billion 264 billion respectively interest rate swaps used hedge underlying debt obligation marked market used adjust interest expense recognized life underlying debt agreement gains losses terminated interest rate swaps deferred recognized yield adjustments underlying debt automotive electronics operations unamortized net gains interest rate swaps totaled approximately 6 million 7 million december 31 1998 1997 respectively unamortized net gains interest rate swaps financing insurance operations totaled approximately 37 million 33 million december 31 1998 1997 respectively written options including embedded interest rate swaps written interest rate caps interest rate collars written swaptions interest rate swaps meet settlement accounting criteria marked market related gains losses recognized income current basis mortgage contracts gmac also entered contracts purchase sell mortgages specific future dates entered certain exchange traded futures option contracts reduce exposure interest rate risk december 31 1998 1997 commitments sell mortgage loans securities totaled 62 billion 39 billion respectively commitments purchase originate mortgage loans totaled 52 billion 41 billion respectively gmacs exchange traded futures option contracts used hedge mortgage loans held sale notional values 50 billion 22 billion december 31 1998 1997 respectively gains losses derivatives including exchange traded futures option contracts used hedge interest rate risk associated rate locked funding commitments mortgage loans held sale deferred considered reporting underlying mortgages lower cost market basis notional values derivatives used hedge price interest rate risk associated mortgage related securities totaled 97 billion 14 billion december 31 1998 1997 respectively gains losses associated instruments recognized current period marked market basis derivatives used hedge mortgage servicing rights notional values 651 billion 8 billion december 31 1998 1997 respectively gains losses contracts recorded adjustment amortization expense gmac also entered interest rate swaps effort stabilize shortterm borrowing costs maintain minimum return certain mortgage loans held investment amounts received paid interest rate swaps recorded adjustment interest expense december 31 1998 1997 notional values instruments totaled 100 million 264 million respectively credit risk forward contracts swaps options lines credit previously discussed contain element risk counterparties may unable meet terms agreements however gm minimizes risk exposure forward contracts swaps options limiting counterparties major international banks financial institutions meet established credit guidelines limiting amount risk exposure one bank financial institution management also reduces credit risk unused lines credit applying credit policies making commitments extending loans management expect incur losses result counterparty default gm generally require place collateral financial instruments except lines credit extends gm business activities customers dealers associates around world corporations receivables guarantees parties well diversified warranted secured collateral consequently managements opinion significant concentration credit risk exists gm ii48 general motors corporation subsidiaries notes consolidated financial statements continued note 12 fair value financial instruments estimated fair value financial instruments determined using available market information appropriate valuation methodologies however considerable judgment required interpreting market data develop estimates fair value therefore estimates necessarily indicative amounts could realized would paid current market exchange effect using different market assumptions andor estimation methodologies may material estimated fair value amounts fair value information presented herein based information available december 31 1998 1997 although management aware factors would significantly affect estimated fair value amounts updated since dates therefore current estimates fair value dates subsequent december 31 1998 1997 may differ significantly amounts book estimated fair values financial instruments practicable estimate fair value follows millions december 31 1998 1997 book fair book fair value automotive electronics operations assets cash marketable securities 11130 14511 accounts notes receivable less allowances 5478 5352 assets 2710 2729 2287 2279 liabilities accounts payable 13479 12461 longterm debt loans payable within one year 1526 656 payable beyond one year 7217 7621 5695 6147 liabilities 590 651 593 626 preferred securities subsidiary trusts note 16 220 226 222 233 financing insurance operations assets cash investments securities 8894 8473 finance receivables net 70258 70457 58219 58667 accounts notes receivable less allowances 3797 2042 assets 11441 11465 8746 8762 liabilities accounts payable 6492 3321 debt payable within one year 60052 60098 50399 50440 payable beyond one year 45357 46600 36277 37049 prior tables exclude book values estimated fair values financial instrument derivatives follows millions fair value open contracts december 31 1998 1997 asset liability asset liability position automotive electronics operations 1 foreign exchange forward contracts 2 126 107 78 83 foreign exchange options 71 10 46 7 interest rate swaps 34 38 27 50 interest rate options 1 2 ii49 general motors corporation subsidiaries notes consolidated financial statements continued note 12 fair value financial instruments continued financing insurance operations 3 foreign exchange forward contracts 4 499 161 149 326 interest rate swaps 180 93 49 interest rate options 2 mortgage contracts 344 55 53 30 1the related asset liability recorded balance sheet foreign exchange forward contracts foreign exchange options interest rate swaps interest rate options totaled 22 million 62 million 7 million 1 million respectively december 31 1998 33 million 43 million 17 million 2 million respectively december 31 1997 2foreign exchange forward contracts included certain derivatives foreign exchange interest rate exposures fair value 54 million 17 million december 31 1998 1997 respectively 3the related asset recorded balance sheet foreign exchange forward contracts interest rate swaps totaled 233 million 14 million respectively december 31 1998 related asset liability recorded balance sheet foreign exchange forward contracts interest rate swaps interest rate options totaled 111 million 3 million 1 million respectively december 31 1997 related asset recorded balance sheet mortgage contracts 284 million 20 million december 31 1998 1997 respectively 4foreign exchange forward contracts included certain derivatives foreign exchange interest rate exposures fair value 154 million 194 million december 31 1998 1997 respectively following methods assumptions used estimate fair value class financial instrument cash marketable securities fair value cash equivalents marketable securities determined principally based quoted market prices finance receivables fair value estimated discounting future cash flows using applicable spreads approximate current rates applicable category finance receivables carrying value wholesale receivables whose interest rates adjust shortterm basis applicable market indices generally prime rate assumed approximate fair value either due short maturities due interest rate adjustment feature accounts notes receivable accounts payable receivables payables short maturities book values approximate fair values assets accrued expenses liabilities assets reported december 31 1998 1997 include various financial instruments eg longterm receivables certain investments fair values based discounted cash flows market quotations appropriate valuation techniques fair values retained subordinated interests trusts excess servicing assets net deferred costs derived discounting expected cash flows using current market rates estimated values industrial development bonds included accrued expenses liabilities based quoted market prices similar issues debt loans payable fair value debt payable within one year determined using quoted market prices available calculating estimated value bank loan note debenture portfolio applicable rate effect commercial paper master notes demand notes original term less 90 days therefore carrying amounts liabilities considered fair values debt payable beyond one year estimated fair value based quoted market prices similar issues based current rates offered gm debt similar remaining maturities foreign exchange forward contracts options fair value foreign exchange forward contracts determined using current exchange rates fair value foreign exchange options estimated using pricing models indicative quotes obtained market variables ii50 general motors corporation subsidiaries notes consolidated financial statements continued note 12 fair value financial instruments concluded preferred securities subsidiary trusts fair value gmobligated mandatorily redeemable preferred securities subsidiary trusts note 16 determined based quoted market prices interest rate swaps options fair value interest rate swaps including contracts optionality estimated using pricing models based upon current market interest rates exchange traded options valued quoted market prices mortgage contracts fair value mortgage contracts estimated based upon amount would received paid terminate contracts based market prices similar financial instruments current rates mortgage loans unused lines credit loans extended commitments market interest rates significant fair value position related outstanding commitments note 13 pensions postretirement benefits gm number defined benefit pension plans covering substantially employees plans covering us canadian represented employees generally provide benefits negotiated stated amounts year service well significant supplemental benefits employees retire 30 years service normal retirement age benefits provided plans covering us canadian salaried employees certain foreign locations generally based years service salary history gm also certain nonqualified pension plans covering executives based targeted wage replacement percentages unfunded measurement dates used principal us pension plans corporation hughes december 31 december 1 respectively nonus pension plans measurement dates december 1 canadian plans october 1 foreign plans pension plan assets primarily invested us government obligations equity fixed income securities commingled pension trust funds insurance contracts corporations 123 par value common stock valued 1998 measurement date 56 million eds common stock valued 1998 measurement date 53 billion march 1995 terms agreement corporation pension benefit guarantee corporation pbgc corporation contributed gm hourlyrate employees pension plan hourly plan 1732 million shares class e common stock valued 63 billion date subsequent splitoff eds class e stock held hourly plan exchanged eds common stock trustees hourly plan timetotime sold shares former class e common stock eds common stock effect reducing number shares eds common stock held hourly plan gms funding policy respect qualified pension plans contribute annually less minimum required applicable law regulations gm made pension contributions us plans 12 billion 1998 15 billion 1997 800 million 1996 additionally gm maintains hourly salaried benefit plans provide postretirement medical dental vision life insurance us retirees eligible dependents cost benefits recognized consolidated financial statements period employees provide service gm postretirement plan assets gms veba trust invested primarily fixed income securities certain corporations nonus subsidiaries postretirement plans although participants covered governmentsponsored administered programs cost programs generally significant gm ii51 general motors corporation subsidiaries notes consolidated financial statements continued note 13 pensions postretirement benefits continued us plans nonu plans pension benefits pension benefits 1998 1997 1998 1997 1998 1997 millions change benefit obligations benefit obligation beginning year 73570 72501 9824 9526 44294 41387 service cost 1270 1332 214 191 663 639 interest cost 4974 5261 643 633 3113 3128 plan participants contributions 43 69 28 25 31 amendments 208 25 81 actuarial losses 1973 4443 92 710 1622 1819 benefits paid 5196 5408 349 331 2287 2174 curtailment charges 121 4653 250 930 90 536 benefit obligation end year 76963 73570 10283 9824 47346 44294 change plan assets fair value plan assets beginning year 72280 71295 6075 5915 3000 actual return plan assets 6438 10882 328 756 249 employer contributions 1151 1535 206 71 1700 3000 plan participants contributions 43 69 28 25 benefits paid 5196 5408 349 331 375 settlement charges 291 6093 312 361 fair value plan assets end year 75007 72280 5976 6075 4574 3000 funded status 1956 1290 4307 3749 42772 41294 unrecognized actuarial loss 10368 8632 1880 1773 2209 689 unrecognized prior service cost 7064 8103 764 824 448 563 unrecognized transition asset obligation 64 105 48 10 net amount recognized 15412 15340 1615 11424101141168 amounts recognized consolidated balance sheets consist prepaid benefit cost 6448 6202 898 868 accrued benefit liability 4361 3595 3814 3463 41011 41168 intangible asset 5961 7071 504 602 accumulated comprehensive income 7364 5662 797 851 net amount recognized 15412 15340 1615 11424101141168 projected benefit obligation accumulated benefit obligation fair value plan assets pension plans accumulated benefit obligations excess plan assets 567 billion 560 billion 478 billion respectively december 31 1998 544 billion 537 billion 467 billion respectively december 31 1997 ii52 general motors corporation subsidiaries notes consolidated financial statements continued note 13 pensions postretirement benefits concluded measurement purposes 6 percent annual rate increase per capita cost covered health care benefits assumed 1999 rate assumed decrease linear basis 5 percent 2004 remain level thereafter one percentage point increase assumed health care trend rate would increased accumulated projected benefit obligation apbo 55 billion december 31 1998 increased aggregate service interest cost components nonpension postretirement benefit expense 1998 484 million one percentage point decrease would decreased apbo 46 billion decreased aggregate service interest cost components nonpension postretirement benefit expense 1998 377 million one percentage point increase weightedaverage discount rate would resulted 48 billion decrease apbo december 31 1998 gm disclosed consolidated financial statements certain amounts associated estimated future postretirement benefits pensions characterized amounts accumulated postretirement benefit obligations liabilities obligations notwithstanding recording amounts use terms gm admit otherwise acknowledge amounts existing postretirement benefit plans gm pensions represent legally enforceable liabilities gm note 14 accrued expenses liabilities deferred income taxes automotive electronics operations accrued expenses liabilities deferred income taxes included following millions december 31 1998 1997 warranties dealer customer allowances claims discounts 14603 13992 deferred revenue 8548 7799 payrolls employee benefits excludes postemployment 6884 7794 unpaid losses selfinsurance programs 1774 1631 taxes income taxes 1067 981 interest 1545 1235 income taxes 449 1023 deferred income taxes 2973 2923 postemployment benefits 3820 4038 10589 11132 total accrued expenses liabilities deferred income taxes 52252 52548 financing insurance operations deferred income taxes liabilities included following millions december 31 1998 1997 unpaid insurance losses loss adjustment expenses unearned insurance premiums 3918 3929 postemployment benefits 704 672 income taxes 552 321 deferred income taxes 2910 2578 interest 1276 1118 301 344 total deferred income taxes liabilities 9661 8962 note 15 commitments contingent matters commitments gm following minimum commitments noncancelable operating leases terms excess one year primarily real property 1999688 million 2000668 million 2001640 million 2002620 million 2003473 million 758 million 2004 thereafter certain leases contain escalation clauses renewal purchase options rental expenses operating leases 930 million 1998 925 million 1997 853 million 1996 gm sponsors credit card program entitled gm card program offers rebates applied purchase lease gm vehicles amount rebates available qualified cardholders december 31 1998 1997 37 billion 35 billion respectively provisions gm card rebates recorded reductions revenues time vehicle sale ii53 general motors corporation subsidiaries notes consolidated financial statements continued note 15 commitments contingent matters concluded 1996 restructuring agreement gm saabs owners investor ab includes certain provisions options may impact relative ownership interests parties involved agreement gives gm adam opel right purchase 100 investor abs interest saab 1999 2000 investor ab right sell 50 present holding saab gm adam opel 2000 gm currently maintains 50 ownership saab december 1998 hughes agreed acquire outstanding capital stock united states satellite broadcasting company inc ussb provides directtohome premium satellite programming conjunction directvs basic programming service ussb launched service june 1994 december 31 1998 two million subscribers nationwide purchase price consisting cash gm class h common stock determined closing based upon agreedupon formula exceed 16 billion aggregate subject certain limitations merger agreement ussb shareholders entitled elect receive cash shares gm class h common stock amount cash paid merger cannot less 30 aggregate purchase price greater 50 aggregate purchase price remaining consideration consisting gm class h common stock merger subject ussb shareholder approval receipt appropriate regulatory approvals expected close early mid1999 contingent matters connection 1997 spinoff hughes defense subsequent merger raytheon process agreed among gm hughes raytheon resolving disputes might arise connection postclosing adjustments called terms merger agreement adjustments might call cash payment hughes raytheon dispute currently exists regarding postclosing adjustments hughes raytheon proposed one another attempt resolve dispute hughes gave notice raytheon commence arbitration process raytheon responded filing action delaware chancery court seeks enjoin arbitration premature possible ultimate resolution postclosing financial adjustment provision merger agreement may result hughes making payment raytheon could material hughes however amount payment either party might required make determinable time hughes intends vigorously pursue resolution dispute arbitration process opposing adjustments raytheon seeks seeking payment raytheon proposed gm subject potential liability government regulations various claims legal actions pending may asserted pending actions purport class actions aggregate ultimate liability gm government regulations claims actions determinable december 31 1998 discussion counsel opinion management liability expected material adverse effect corporations consolidated financial statements note 16 preferred securities subsidiary trusts general motors obligated mandatorily redeemable preferred securities subsidiary trusts july 1997 general motors capital trust series trust issued approximately 79 million 867 trust originated preferred securitiessm toprssm series preferred securities oneforone exchange 3055255 outstanding gm series 792 depositary shares representing onefourth share gm series preference stock 010 par value per share addition general motors capital trust g series g trust issued approximately 143 million 987 toprs series g series g preferred securities oneforone exchange 5064489 outstanding gm series g 912 depositary shares representing onefourth share gm series g preference stock 010 par value per share concurrently exchanges related purchases gm series g trusts common securities trusts represent approximately 3 percent total assets trusts gm issued whollyowned trusts series trusts sole assets 867 junior subordinated deferrable interest debentures series due july 1 2012 series g trusts sole assets 987 junior subordinated deferrable interest debentures series g due july 1 2012 series debentures series g debentures collectively debentures aggregate principal amounts equal aggregate stated liquidation amounts series g preferred securities related common securities respectively 79 million respect series debentures 131 million respect series g debentures ii54 general motors corporation subsidiaries notes consolidated financial statements continued note 16 preferred securities subsidiary trusts concluded series debentures redeemable whole part gms option august 1 1999 redemption price equal 100 outstanding principal amount series debentures plus accrued unpaid interest certain circumstances prior august 1 1999 redemption price equal 105 outstanding principal series debentures series expiration date july 31 1998 declining ratably august 1 thereafter 100 august 1 1999 plus accrued unpaid interest series preferred securities redeemed upon maturity earlier redemption series debentures series g debentures redeemable whole part gms option january 1 2001 redemption price equal 100 outstanding principal amount series g debentures plus accrued unpaid interest certain circumstances prior january 1 2001 redemption price equal 114 outstanding principal series g debentures series g expiration date december 31 1997 declining ratably january 1 thereafter 100 january 1 2001 plus accrued unpaid interest series g preferred securities redeemed upon maturity earlier redemption series g debentures gm guaranteed payment full holders series g preferred securities collectively preferred securities distributions payments preferred securities extent paid trusts extent trusts assets therefore gm made payments interest principal related debentures guarantees taken together gms obligations preferred securities guarantees debentures indentures relating thereto obligations declaration trust trusts including obligations pay certain costs expenses trusts constitute full unconditional guarantees gm trusts obligations preferred securities sm trust originated preferred securities toprs service trademarks merrill lynch co ii55 general motors corporation subsidiaries notes consolidated financial statements continued note 17 stockholders equity following table presents changes capital stock period january 1 1996 december 31 1998 millions athe following describes corporations preference stocks millions except par value stated value per share amounts preference stock 010 par value authorized 100 shares series b 918 depositary shares stated value 25 per share redeemable corporation option january 1 1999 issued december 31 1998 20 shares equivalent 5 shares nonconvertible series b 918 preference stock stated value 100 per share series c depositary shares liquidation preference 50 per share series 792 depositary shares stated value 25 per share redeemable corporation option august 1 1999 outstanding december 31 1998 3 shares equivalent 75 shares series 792 preference stock see note 16 series g 912 depositary shares stated value 25 per share redeemable corporation option january 1 2001 outstanding december 31 1998 5 shares equivalent 125 shares series g 912 preference stock see note 16 bsubsequent recapitalization december 17 1997 cprior recapitalization december 17 1997 ii56 general motors corporation subsidiaries notes consolidated financial statements continued note 17 stockholders equity concluded common stocks voting liquidation rights 123 par value common stock one vote per share one liquidation unit per share voting liquidation rights recapitalized class h common stock 06 votes per share 06 liquidation units per share liquidation rights 123 par value class h common stocks subject certain adjustments outstanding common stock subdivided stock split otherwise shares one class common stock issued dividend holders another class common stock holders class h common stock direct rights equity assets hughes rather rights equity assets gm includes 100 stock hughes outstanding shares class h common stock may recapitalized shares 123 par value common stock time december 31 2002 sole discretion gm board directors gm board automatically time corporation sell liquidate otherwise dispose 80 business hughes based fair market value assets tangible intangible hughes date proposed transaction approved gm board event recapitalization outstanding shares class h common stock automatically converted corporations 123 par value common stock exchange rate would provide class h common stockholders number shares 123 par value common stock would value equal 120 value class h common stock date recapitalization type described prior sentence would occur triggering events took place unless holders gm common stock including holders 123 par value common stock holders class h common stock voting separately individual classes vote approve alternative proposal gm board common stock repurchases 1998 gm used 26 billion acquire 38 million shares 123 par value common stock completed second 25 billion stock repurchase program announced august 1997 represented 33 percent 40 billion stock repurchase program announced february 1998 due work stoppages various gm components plants stock repurchases suspended part gms cash conservation initiatives gm also used approximately 427 million repurchase shares 123 par value common stock certain employee benefit plans preference stocks 1996 approximately 45 million shares class e common stock issued upon conversion approximately 3 million shares series c preference stock represented depositary shares remaining 6784 shares series c preference stock redeemed february 22 1996 comprehensive income changes components comprehensive income loss reported net income taxes follows millions ii57 general motors corporation subsidiaries notes consolidated financial statements continued note 18 earnings per share attributable common stocks earnings per share attributable class gm common stock determined based attribution earnings class common stock period divided weightedaverage number common shares class outstanding period diluted earnings per share attributable class gm common stock considers impact potential common shares unless inclusion potential common shares would antidilutive effect assumed exercise stock options effect class h common stock earnings per share extent shares class h common stock deemed outstanding would increase increased shares would also increase numerator fraction used determine available separate consolidated net income ascni attribution earnings class common stock follows millions years ended december 31 1998 1997 1996 earnings attributable common stocks 123 par value continuing operations 2821 6276 4589 discontinued operations 5 earnings attributable 123 par value 2821 6276 4584 income discontinued operation attributable class e 15 earnings attributable class h prior recapitalization december 17 1997 322 283 earnings attributable class h subsequent recapitalization december 17 1997 72 2 earnings attributable 123 par value common stock period represent earnings attributable gm common stocks period reduced ascni eds note 1 former hughes period eds indirect whollyowned subsidiary corporation earnings attributable class e common stock period represented ascni eds period ascni eds determined quarterly amounts equal separate consolidated net income eds respective quarter excluding effects purchase accounting adjustments relating corporations acquisition eds period multiplied fraction numerator represented weightedaverage number shares class e common stock outstanding period weightedaverage number shares class e common stock outstanding 1996 reflects shares outstanding june 30 1996 earnings attributable class h common stock represented ascni hughes former hughes ascni hughes former hughes determined quarterly amounts equal separate consolidated net income hughes former hughes respective quarter excluding effects purchase accounting adjustments arising time corporations acquisition hughes aircraft company hac calculated period multiplied fraction numerator number equal weightedaverage number shares class h common stock outstanding quarter 106 million 103 million 99 million fourth quarters 1998 1997 1996 respectively denominator 400 million fourth quarters 1998 1997 1996 earnings attributable class h common stock period subsequent recapitalization class h common stock 1997 represent ascni hughes period december 18 1997 december 31 1997 excluding effects purchase accounting adjustments arising time corporations acquisition hac calculated period multiplied fraction numerator number equal weightedaverage number shares class h common stock outstanding period 104 million denominator 400 million denominators used determining ascni eds former hughes adjusted timetotime deemed appropriate gm board reflect subdivisions combinations class e common stock class h common stock respectively reflect certain transfers capital eds former hughes respectively denominator used determining ascni hughes may adjusted timetotime deemed appropriate gm board reflect subdivisions combinations class h common stock reflect certain transfers capital hughes gm boards discretion make adjustments limited criteria set forth corporations restated certificate incorporation ii58 general motors corporation subsidiaries notes consolidated financial statements continued note 18 earnings per share attributable common stocks concluded reconciliation amounts used basic diluted earnings per share computations income continuing operations follows millions except per share amounts ii59 general motors corporation subsidiaries notes consolidated financial statements continued note 19 dividends common stock connection consummation hughes transactions gm board determined amount available payment dividends outstanding shares 123 par value common stock would cumulative amount available payment dividends 123 par value common stock immediately prior closing hughes transactions reduced pro rata portion net reduction gms total stockholders equity resulting hughes transactions addition gm board determined amount initially available payment dividends shares class h common stock would cumulative amount available payment dividends class h common stock immediately prior closing hughes transactions reduced pro rata portion net reduction gms total stockholders equity resulting hughes transactions pro rata allocation net reduction gms total stockholders equity resulting hughes transactions based fraction used determining ascni former hughes immediately prior consummation hughes transactions dividends may paid 123 par value common stock extent amount determined available payment dividends 123 par value common stock connection consummation hughes transactions plus earnings gm consummation hughes transactions earnings attributed class h common stock dividends may paid class h common stock extent amount initially determined available payment dividends class h common stock plus portion earnings gm closing hughes transactions attributed class h common stock amount available payment dividends class common stock reduced timetotime dividends paid class adjusted timetotime changes amount surplus attributed class resulting repurchase issuance shares class december 31 1998 amount available payment dividends 123 par value class h common stock 159 billion 38 billion respectively dividends may paid common stocks declared gm board sole discretion gm boards policy respect 123 par value common stock distribute dividends based outlook indicated capital needs business gm board currently intend pay cash dividends class h common stock recapitalized december 17 1997 part hughes transactions cash dividends per share 123 par value common stock 200 160 1998 1997 1996 respectively cash dividends per share class h common stock prior recapitalization december 17 1997 100 096 1997 1996 respectively cash dividends per share class e common stock 030 1996 note 20 stock incentive plans stockbased compensation gm previously adopted sfas 123 accounting stockbased compensation permitted standard continue apply recognition measurement principles accounting principles board apb opinion 25 stock options stockbased employee compensation awards compensation cost stock options stockbased employee compensation awards determined based fair value grant date consistent method prescribed sfas 123 gms pro forma net income earnings attributable common stocks basic diluted earnings per share attributable common stocks would follows millions except per share amounts 1998 1997 1996 net income reported 2956 6698 4963 pro forma 2797 6558 4904 earnings attributable common stocks 123 reported 2821 6276 4584 pro forma 2673 6147 4528 class h prior recapitalization reported 322 283 pro forma 315 280 class h subsequent recapitalization reported 72 2 pro forma 61 2 ii60 general motors corporation subsidiaries notes consolidated financial statements continued note 20 stock incentive plans continued 1998 1997 1996 basic earnings per share attributable common stocks 123 reported 426 870 606 pro forma 404 852 598 class h prior recapitalization reported 317 288 pro forma 310 285 class h subsequent recapitalization reported 068 002 pro forma 057 002 diluted earnings per share attributable common stocks 123 reported 418 862 602 pro forma 396 844 594 class h prior recapitalization reported 317 288 pro forma 310 285 class h subsequent recapitalization reported 068 002 pro forma 057 002 fair value option grant estimated date grant using blackscholes option pricing model following weightedaverage assumptions 1998 1997 1996 hughes gmsip plan gmssop gmsip plan gmsip plan interest rate 52 56 52 62 68 53 66 expected life years 50 62 50 70 58 70 expected volatility 262 328 262 263 207 273 206 dividend yield 36 34 21 31 16 effect hughes transactions adjustment number options related exercise prices described considered sfas 123 modification terms outstanding options accordingly 1997 pro forma disclosure includes compensation cost incremental fair value sfas 123 resulting modification pro forma amounts compensation cost indicative effects operating results future periods gms stock incentive plans consist general motors 1997 stock incentive plan formerly general motors amended stock incentive plan gmsip hughes electronics corporation incentive plan hughes plan general motors 1998 salaried stock option plan gmssop gmsip gmssop administered executive compensation committee gm board hughes plan administered executive compensation committee board directors hughes gmsip 60 million shares 123 par value 25 million shares class h common stocks may granted june 1 1997 may 31 2002 50 million 24 million available grants december 31 1998 options granted prior 1998 gmsip generally exercisable onehalf one year onehalf two years dates grant stock option grants awarded 1998 vest ratably three years following grant date option prices 100 fair market value dates grant options generally expire 10 years dates grant subject earlier termination certain conditions hughes plan hughes may grant shares rights options acquire 356 million shares class h common stock december 31 1998 54 million available grants december 31 1998 option prices 100 fair market value dates grant options generally vest two four years expire 10 years dates grant subject earlier termination certain conditions gmssop 50 million shares 123 par value may granted january 1 1998 december 31 2007 457 million available grants december 31 1998 stock options exercisable two years date grant vest one year following date grant subject earlier termination certain conditions option prices 100 fair market value dates grant options generally expire 10 years two days dates grant ii61 general motors corporation subsidiaries notes consolidated financial statements continued note 20 stock incentive plans concluded connection hughes transactions number options related exercise prices outstanding options gmsip hughes plan adjusted reflect change fair market value 123 par value class h common stocks resulted hughes defense class common stock distribution number shares option exercise price adjusted aggregate intrinsic value options immediately transaction remained unchanged changes status outstanding options follows following table summarizes information gms stock option plans december 31 1998 ii62 general motors corporation subsidiaries notes consolidated financial statements continued note 21 income expenses income expenses included following millions years ended december 31 1998 1997 1996 income interest income 2149 2127 1679 insurance premiums 1426 1161 947 mortgage operations investment income servicing fees 1836 1525 921 rental car lease revenue 1234 1143 966 gain hughes defense spinoff 4269 652 1582 1357 total income 7297 11807 5870 expenses insurance losses loss adjustment expenses 1061 747 622 provision financing losses 463 523 669 782 241 792 total expenses 2306 1511 2083 note 22 segment reporting sfas 131 disclosures segments enterprise related information established standards reporting information operating segments financial statements operating segments defined components enterprise separate financial information available evaluated regularly chief operating decision maker decision making group deciding allocate resources assessing performance gms chief operating decision maker chairman chief executive officer operating segments managed separately operating segment represents strategic business unit offers different products serves different markets gms reportable operating segments within automotive electronics operations business consist general motors automotive gma comprised four regions gm north america gmna gm europe gme gm asiapacific gmap gm latin americaafricamideast gmlaam delphi hughes gmna designs manufactures markets vehicles primarily north america following nameplates chevrolet pontiac gmc oldsmobile buick cadillac saturn gme gmap gmlaam meet demands customers outside north america vehicles designed manufactured marketed following nameplates opel vauxhall holden isuzu saab chevrolet gmc cadillac delphi diverse supplier automotive systems components delphi offers products services areas electronics mobile communication safety thermal electrical architecture dynamics propulsion hughes includes activities relating designing manufacturing marketing advanced technology electronic systems products services telecommunications space industries segment includes design manufacturing marketing locomotives heavyduty transmissions elimination intersegment transactions well former hughes defense business prior hughes transactions gms reportable operating segments within financing insurance operations business consist gmac provides broad range financial services including consumer vehicle financing fullservice leasing fleet leasing dealer financing car truck extended service contracts residential commercial mortgage services vehicle homeowners insurance financing insurance operations segment includes financing entities operating canada germany brazil well eliminations intersegment transactions accounting policies operating segments described summary significant accounting policies except disaggregated financial results prepared using management approach consistent basis manner gm management internally disaggregates financial information purposes assisting making internal operating decisions gm evaluates performance based stand alone operating segment net income generally accounts intersegment sales transfers sales transfers third parties current market prices revenues attributed geographic areas based location assets producing revenues ii63 general motors corporation subsidiaries notes consolidated financial statements continued ii64 general motors corporation subsidiaries notes consolidated financial statements continued athe operating results 1997 1996 assets december 31 1996 presented reflect changes gms organizational structure resulting hughes transactions occurred december 1997 delphi includes delco hughes excludes delco hughes defense includes hughes defense adjustments also made reflect impact adjustments delphis management basis financial statements connection initial public offering bother includes 43 billion gain resulting hughes transactions year ended december 31 1997 income discontinued operations 10 million year ended december 31 1996 cthe amount reported hughes excludes amortization gm purchase accounting adjustments approximately 21 million 1998 1997 1996 related gms acquisition hughes aircraft company amortization allocated gms segment consistent basis upon segments evaluated dexcludes expenditures related telecommunications equipment amounting 726 million 606 million 259 million 1998 1997 1996 respectively ii65 general motors corporation subsidiaries notes consolidated financial statements continued note 22 segment reporting concluded information concerning principal geographic areas follows millions 1998 1997 1996 net sales net sales net sales net revenues property revenues property revenues property north america united states 111375 22814 127226 20778 112961 22821 canada mexico 10960 2641 12207 2783 9661 3386 total north america 122335 25455 139433 23561 122622 26207 europe france 2107 448 1972 424 2680 390 germany 10711 3508 10723 3083 12363 3821 spain 1966 555 1760 611 1730 805 united kingdom 5379 1205 5409 1183 5063 1103 9679 2095 9165 1800 8717 1797 total europe 29842 7811 29029 7101 30553 7916 latin america brazil 4775 1991 5317 1964 5063 1910 latin america 2909 425 2978 466 2237 328 total latin america 7684 2416 8295 2430 7300 2238 1454 1891 1495 1087 3410 947 total 161315 37573 178252 34179 163885 37308 note 23 subsequent events january 22 1999 hughes agreed acquire primestar incs primestar 23 millionsubscriber medium power directtohome business related transaction hughes also agreed acquire highpower satellite assets direct broadcast satellite dbs orbital frequencies tempo whollyowned subsidiary tci satellite entertainment inc acquisitions accounted using purchase method accounting purchase price directtohome business comprised 11 billion cash 4871448 shares gm class h common stock total purchase price 13 billion directtohome transaction pending regulatory primestar lender approval expected close early mid1999 purchase price tempo assets consists 500 million cash 150 million expected paid early mid1999 350 million payable upon federal communications commission approval transfer dbs orbital frequencies expected mid late1999 february 5 1999 delphi completed initial public offering 100 million shares common stock represented 177 outstanding common shares gm currently owns remaining 823 delphis common stock gm intends fully separate delphi gm later 1999 distributing shares delphi common stock holders gm 123 par value common stock gm expects accomplish distribution following splitoff exchange offer gm holders gms 123 common stock would invited tender shares exchange shares delphi common stock spinoff pro rata distribution gm shares delphi common stock holders gms 123 common stock combined splitoffspinoff combination transactions although gm fully committed completing full separation delphi gm distribution would subject number conditions assurance whether occur hughes entered contract asiapacific mobile telecommunications satellite pte ltd apmt effective may 15 1998 whereby hughes provide apmt satellitebased mobile telecommunications system consisting two satellites ground segment user terminals associated equipment software part contract hughes required obtain necessary us government export licenses apmt system february 15 1999 february 24 1999 department commerce notified hughes intends deny export licenses required hughes fulfill contractual obligation apmt hughes march 16 1999 request reconsideration decision result hughes failing obtain export licenses apmt right terminate contract time ongoing discussions hughes apmt regarding contract hughes us government regarding export licenses us government ultimately denies required export licenses apmt terminates ii66 general motors corporation subsidiaries notes consolidated financial statements concluded note 23 subsequent events concluded contract hughes could required refund 45 million apmt record pretax charge earnings approximately 100 million 1999 hughes maintained suit us government since september 1973 regarding governments infringement use hughes patent williams patent covering velocity control orientation spin stabilized body principally satellites april 7 1998 us court appeals federal circuit cafc reaffirmed earlier decisions williams case including award 114 million damages cafc ruled conclusions previously reached williams case consistent us supreme courts findings warnerjenkinson case us government petitioned cafc rehearing denied request thereafter applied certiorari us supreme court march 1 1999 us surpreme court denied us governments petition certiorari case remanded back trial court claims entry final judgement amount recorded financial statements hughes reflect 114 million award interest accumulating thereon december 31 1998 expected resolution matter result recognition pretax gain approximately 150 million 1999 march 2 1999 gm purchased additional equity interest isuzu motors ltd isuzu increased gms equity interest 375 49 additional equity interest purchased approximately 525 billion yen approximately 440 million ii67 general motors corporation subsidiaries supplementary information selected quarterly data unaudited 1998 quarters 1st 2nd12 3rd23 4th4 dollars millions except per share amounts total net sales revenues 41576 38929 34444 46366 income loss income taxes minority interests 2427 589 1243 2839 income tax expense credit 808 175 451 931 minority interests 10 3 4 6 losses nonconsolidated associates 5 28 21 130 net income 1604 389 809 1772 dividends preference stocks 16 15 earnings common stocks 1588 373 825 1757 earnings loss attributable common stocks earnings attributable 123 par value 1574 358 836 1725 earnings attributable class h 14 15 11 32 basic earnings loss per share attributable common stocks earnings attributable 123 par value 231 054 128 264 earnings attributable class h 013 014 011 030 average number shares common stocks outstanding basic millions 123 par value 682 661 654 class h 104 105 106 diluted earnings loss per share attributable common stocks earnings attributable 123 par value 227 052 128 261 earnings attributable class h 013 014 011 030 average number shares common stocks outstanding diluted millions 123 par value 693 672 654 665 class h 109 111 110 109 ii68 general motors corporation subsidiaries supplementary information continued selected quarterly data unaudited continued 1secondquarter 1998 results included pretax charge 74 million 44 million aftertax 007 basic loss per share 123 par value common stock related work schedule modifications opel belgium 2work stoppages united states second third quarter 1998 reduced calendar year pretax income approximately 31 billion 20 billion aftertax 294 basic loss per share 123 par value common stock considering partial recovery production losses work stoppages 3third quarter 1998 results included pretax loss 430 million 271 million aftertax 041 basic loss per share 123 par value common stock related sale delphi seating coil spring lighting businesses 4fourth quarter 1998 results included pretax charges income totaling 534 million 420 million aftertax 064 basic loss per share 123 par value common stock resulting gms competitiveness studies ii69 general motors corporation subsidiaries supplementary information continued selected quarterly data unaudited continued 1997 quarters 1st12 2nd 3rd 4th67 dollars millions except per share amounts total net sales revenues 42217 45141 41903 48991 income taxes minority interests 2742 3228 1609 213 income tax expense credit 989 1153 533 16066 minority interests 19 18 4 12 earnings losses nonconsolidated associates 24 5 13 94 net income 1796 2098 1067 1737 premium exchange preference stocks 26 dividends preference stocks 20 16 earnings common stocks 1776 2078 1025 1721 earnings attributable common stocks earnings attributable 123 par value 1717 1941 964 1654 earnings attributable class h 8 59 137 61 65 earnings attributable class h 9 2 basic earnings per share attributable common stocks earnings attributable 123 par value 230 268 135 236 earnings attributable class h 8 059 135 060 063 earnings attributable class h 9 002 average number shares common stocks outstanding basic millions 123 par value 747 724 713 702 class h 8 100 101 102 103 class h 9 104 diluted earnings per share attributable common stocks earnings attributable 123 par value 228 267 134 233 earnings attributable class h 8 059 135 060 063 earnings attributable class h 9 002 average number shares common stocks outstanding diluted millions 123 par value 752 729 720 709 class h 8 103 104 105 106 class h 9 107 ii70 general motors corporation subsidiaries supplementary information concluded selected quarterly data unaudited concluded 1first quarter 1997 results included pretax gain 88 million deducting certain legal expenses 55 million aftertax 007 basic earnings per share 123 par value common stock resulted agreement volkswagen ag vw settling civil lawsuit gm brought vw 2first quarter 1997 results included unfavorable impact pretax plant closing charge 80 milion 50 million aftertax 007 basic loss per share 123 par value common stock related announcement delphi interior lighting systems cease production trenton new jersey plant 1998 calendar year 3work stoppages united states second quarter 1997 reduced calendar year pretax income approximately 530 million 330 million aftertax 045 basic loss per share 123 par value common stock considering partial recovery production losses work stoppages 4second quarter 1997 results included pretax gain 490 million 318 million aftertax 033 basic earnings per share 123 par value common stock 080 basic earnings per share class h common stock related merger satellite service operations hughes panamsat corporation 5second quarter 1997 results included pretax gain 128 million 103 million aftertax 014 basic earnings per share 123 par value common stock related sale gm europes equity interest avis europe 6fourth quarter 1997 results included taxfree gain 43 billion 608 basic earnings per share 123 par value common stock related december 17 1997 completion strategic restructuring gms hughes electronics subsidiary hughes transactions 1997 tax credit primarily resulted effect taxfree status gain 7fourth quarter 1997 results included pretax charges income totaling 64 billion 40 billion aftertax 575 basic loss per share 123 par value common stock resulting gms competitiveness studies 8represents information december 17 1997 date gm recapitalized class h common stock gms recapitalization date 9represents information period december 18 1997 december 31 1997 subsequent gms recapitalization date ii71 general motors corporation subsidiaries item 9 item 7a quantitative qualitative disclosures market risk gm various market risk sensitive instruments exposed market risk changes foreign currency exchange rates interest rates certain commodity equity security prices gm enters variety foreign exchange interest rate commodity forward contracts options primarily maintain desired level exposure arising risks risk management control system utilized monitor foreign exchange interest rate commodity equity price risks related hedge positions discussion gm’s accounting policies derivative financial instruments included note 1 gm consolidated financial statements information gm’s exposure market risk included notes 22 23 consolidated financial statements following analyses provide quantitative information regarding gm’s exposure foreign currency exchange rate risk interest rate risk commodity equity price risk gm uses model evaluate sensitivity fair value financial instruments exposure market risk assumes instantaneous parallel shifts exchange rates interest rate yield curves commodity equity prices options instruments nonlinear returns models appropriate instrument utilized determine impact market shifts certain shortcomings inherent sensitivity analyses presented primarily due assumption exchange rates change parallel fashion interest rates change instantaneously ii47 general motors corporation subsidiaries quantitative qualitative disclosures market risk concluded addition analyses unable reflect complex market reactions normally would arise market shifts modeled foreign exchange rate risk gm foreign currency exposures related buying selling financing currencies local currencies operates specifically gm exposed foreign currency risk related uncertainty future earnings asset liability values exposed result operating cash flows various financial instruments denominated foreign currencies december 31 2005 net fair value asset financial instruments exposure foreign currency risk approximately 68 billion compared net fair value liability 58 billion december 31 2004 potential loss fair value financial instruments 10 adverse change quoted foreign currency exchange rates would approximately 12 billion 2005 2004 interest rate risk gm subject market risk exposure changes interest rates due financing investing cash management activities specifically corporation exposed interest rate risk associated longterm debt contracts provide commercial retail financing retained mortgage servicing rights retained assets related mortgage securitizations addition gm exposed prepayment risk associated capitalized mortgage servicing rights retained assets related securitization activities risk managed us treasury options futures exposing gm basis risk since derivative instruments identical characteristics underlying mortgage servicing rights december 31 2005 2004 net fair value liability financial instruments held purposes trading exposure interest rate risk approximately 419 billion 511 billion respectively potential loss fair value resulting 10 adverse shift quoted interest rates would approximately 30 billion 2005 2004 december 31 2005 2004 net fair value asset financial instruments held trading purposes exposure interest rate risk approximately 46 billion 35 billion respectively potential loss fair value resulting 10 adverse shift quoted interest rates would approximately 127 million 33 million 2005 2004 respectively analysis excludes gm’s operating lease portfolio fair value change debt funds portfolio would potentially different impact fair value portfolio overall effect fair value financial instruments hypothetical change interest rates may overstated commodity price risk gm exposed changes prices commodities used automotive business primarily associated various nonferrous metals used manufacturing automotive components gm enters commodity forward option contracts offset exposure december 31 2005 2004 net fair value asset contracts approximately 610 million 431 million respectively potential loss fair value resulting 10 adverse change underlying commodity prices would approximately 241 million 264 million 2005 2004 respectively amount excludes offsetting impact price risk inherent physical purchase underlying commodities equity price risk gm exposed changes prices various availableforsale equity securities invests december 31 2005 2004 fair value investments approximately 28 billion 26 billion respectively potential loss fair value resulting 10 adverse change equity prices would approximately 280 million 258 million 2005 2004 respectively ii48 general motors corporation subsidiaries management’s report internal control financial reporting management responsible establishing maintaining effective internal control financial reporting corporation system designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance accounting principles generally accepted united states america corporation’s internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets corporation ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures corporation made accordance authorizations management directors corporation iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition corporation’s assets could material effect financial statements material weakness significant deficiency combination significant deficiencies result remote likelihood material misstatement annual interim financial statements prevented detected following material weaknesses gm’s internal controls identified material weakness identified related design maintenance adequate controls preparation review presentation disclosure amounts included consolidated statements cash flows resulted misstatements therein cash outflows related certain mortgage loan originations purchases appropriately classified either operating cash flows investing cash flows consistent original description loans held sale loans held investment addition proceeds sales repayments related certain mortgage loans initially classified mortgage loans held investment subsequently transferred mortgage loans held sale reported operating cash flows instead investing cash flows consolidated statements cash flows required statement financial accounting standards 102 statement cash flows exemption certain enterprises classification cash flows certain securities acquired resale finally certain noncash proceeds transfers appropriately presented statements cash flows b material weakness identified related fact gm’s management adequately design control procedures account gm’s portfolio vehicles operating lease daily rental car entities impaired lease inception prematurely revalued reflect increased anticipated proceeds upon disposal material weakness identified january 2006 remediated discontinuing premature revaluation previously recognized impairments management assessed internal control financial reporting december 31 2005 end fiscal year management based assessment criteria established internal control integrated framework issued committee sponsoring organizations treadway commission coso based assessment material weakness described management concluded internal control financial reporting effective end fiscal year provide reasonable assurance regarding reliability financial reporting preparation financial statements external reporting purposes accordance generally accepted accounting principles ii49 general motors corporation subsidiaries independent registered public accounting firm deloitte touche llp audited management’s assessment internal control financial reporting issued attestation report management’s assessment included part ii item 8 item 7a quantitative qualitative disclosures market risk disclosure item required pursuant action letter item 8 item 7a quantitative qualitative disclosures market risk disclosure item required pursuant action letter item 8 item 7a quantitative qualitative disclosures market risk gm exposed market risk changes foreign currency exchange rates interest rates certain commodity equity security prices gm enters variety foreign exchange interest rate commodity forward contracts options primarily maintain desired level exposure arising risks risk management control system utilized monitor foreign exchange interest rate commodity equity price risks related hedge positions discussion gms accounting policies derivative financial instruments included note 1 gm consolidated financial statements information gms exposure market risk included notes 19 21 consolidated financial statements following analyses provide quantitative information regarding gms exposure foreign currency exchange rate risk interest rate risk commodity equity price risk gm uses model evaluate sensitivity fair value financial instruments exposure market risk assumes instantaneous parallel shifts exchange rates interest rate yield curves commodity equity prices options instruments nonlinear returns models appropriate instrument utilized determine impact market shifts certain shortcomings inherent sensitivity analyses presented primarily due assumption exchange rates change parallel fashion interest rates change instantaneously addition analyses unable reflect complex market reactions normally would arise market shifts modeled foreign exchange rate risk gm foreign currency exposures related buying selling financing currencies local currencies operates specifically gm exposed foreign currency risk related uncertainty future earnings asset liability values exposed result operating cash flows various financial instruments denominated foreign currencies december 31 2003 net fair value liability financial instruments exposure foreign currency risk approximately 32 billion compared net fair value asset 41 billion december 31 2002 potential loss fair value financial instruments 10 adverse change quoted foreign currency exchange rates would approximately 323 million 411 million 2003 2002 respectively interest rate risk gm subject market risk exposure changes interest rates due financing investing cash management activities specifically corporation exposed interest rate risk associated longterm debt contracts provide commercial retail financing retained mortgage servicing rights retained assets related mortgage securitizations addition gm exposed prepayment risk associated capitalized mortgage servicing rights retained assets risk managed us treasury options futures exposing gm basis risk since derivative instruments identical characteristics underlying mortgage servicing rights december 31 2003 2002 net fair value liability financial instruments held purposes trading exposure interest rate risk approximately 515 billion 266 billion respectively potential loss fair value resulting 10 adverse shift quoted interest rates would approximately 27 billion 16 billion 2003 2002 respectively december 31 2003 2002 net fair value asset financial instruments held trading purposes exposure interest rate risk approximately 41 billion 44 billion respectively potential loss fair value resulting 10 adverse shift quoted interest rates would approximately 11 million 26 million 2003 2002 respectively analysis excludes gms operating lease portfolio fair value change debt funds portfolio would potentially different impact fair value portfolio overall effect fair value financial instruments hypothetical change interest rates may overstated ii21 general motors corporation subsidiaries item 7a quantitative qualitative disclosures market risk concluded commodity price risk gm exposed changes prices commodities used automotive business primarily associated various nonferrous metals used manufacturing automotive components gm enters commodity forward option contracts offset exposure december 31 2003 net fair value asset contracts approximately 194 million december 31 2002 net fair value liability contracts 40 million potential loss fair value resulting 10 adverse change underlying commodity prices would approximately 190 million 189 million 2003 2002 respectively amount excludes offsetting impact price risk inherent physical purchase underlying commodities equity price risk gm exposed changes prices various availableforsale equity securities invests december 31 2003 2002 fair value investments approximately 22 billion 16 billion respectively potential loss fair value resulting 10 adverse change equity prices would approximately 216 million 157 million 2003 2002 respectively ii22 independent auditors report general motors corporation directors stockholders audited accompanying consolidated balance sheets general motors corporation subsidiaries corporation december 31 2003 2002 related consolidated statements income cash flows stockholders equity three years period ended december 31 2003 audits also included supplemental information consolidated balance sheets consolidated statements income cash flows financial statement schedule listed item 15 collectively financial statement schedules financial statements financial statement schedules responsibility corporations management responsibility express opinion financial statements financial statement schedules based audits conducted audits accordance auditing standards generally accepted united states america standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements present fairly material respects financial position general motors corporation subsidiaries december 31 2003 2002 results operations cash flows three years period ended december 31 2003 conformity accounting principles generally accepted united states america also opinion financial statement schedules considered relation basic consolidated financial statements taken whole present fairly material respects information set forth therein discussed note 1 consolidated financial statements corporation 1 effective july 1 2003 began consolidating certain variable interest entities conform fasb interpretation 46 consolidation variable interest entities 2 effective january 1 2003 began expensing fair market value newly granted stock options stockbased compensation awards issued employees conform statement financial accounting standards sfas 123 accounting stockbased compensation 3 effective january 1 2002 changed method accounting goodwill intangible assets conform sfas 142 goodwill intangible assets sdeloitte touche llp deloitte touche llp detroit michigan march 10 2004 ii23 item 8 item 7a quantitative qualitative disclosures market risk exposed market risk changes foreign currency exchange rates interest rates certain commodity prices enter variety foreign exchange interest rate commodity forward contracts options maintain desired level exposure arising risks general motors corporation subsidiaries overall financial risk management program placed responsibility risk management committee rmc reviews appropriate approves recommendations level exposure strategies pursued mitigate risks risk management control system utilized monitor strategies risks related hedge positions accordance policies procedures approved rmc discussion accounting policies derivative financial instruments included note 2 consolidated financial statements information exposure market risk included notes 16 19 consolidated financial statements following analyses provide quantitative information regarding exposure foreign currency exchange rate risk interest rate risk commodity price risk use sensitivity analysis measure potential loss fair value financial instruments exposure market risk model used assumes instantaneous parallel shifts exchange rates interest rate yield curves commodity prices options instruments nonlinear returns models appropriate types instruments utilized determine impact market shifts certain shortcomings inherent sensitivity analyses presented primarily due assumption interest rates commodity prices change parallel fashion spot exchange rates change instantaneously addition analyses unable reflect complex market reactions normally would arise market shifts modeled foreign exchange rate risk foreign currency exposures related buying selling financing currencies local currencies operate derivative instruments foreign currency forwards swaps options used hedge exposures december 31 2007 2006 net fair value asset financial instruments exposure foreign currency risk 19 billion 44 billion respectively potential loss fair value financial instruments 10 adverse change quoted foreign currency exchange rates would 2 billion 2 billion 2007 2006 respectively interest rate risk subject market risk exposure changes interest rates due financing activities interest rate risk managed mainly interest rate swaps december 31 2007 2006 net fair value liability financial instruments held purposes trading exposure interest rate risk 267 billion 253 billion respectively potential loss fair value resulting 10 adverse shift quoted interest rates would 17 billion 15 billion 2007 2006 respectively commodity price risk exposed changes prices commodities used automotive business primarily associated various nonferrous precious metals automotive components energy used overall manufacturing process commodity purchase contracts meet definition derivative sfas 133 addition enter various derivatives commodity swaps options offset commodity price exposures december 31 2007 2006 net fair value asset derivative purchase contracts 517 million 755 million respectively potential loss fair value resulting 10 adverse change underlying commodity prices would 331 million 318 million 2007 2006 respectively amount excludes offsetting impact commodity price risk inherent physical purchase underlying commodities report independent registered public accounting firm general motors corporation directors stockholders audited internal control financial reporting general motors corporation subsidiaries corporation december 31 2007 based criteria established internal control integrated framework issued committee sponsoring organizations treadway commission corporation’s management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included management’s report internal control financial reporting item 9a responsibility express opinion corporation’s internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based risk performing procedures considered necessary circumstances believe audit provides reasonable basis opinion company’s internal control financial reporting process designed supervision company’s principal executive principal financial officers persons performing similar functions effected company’s board directors management personnel provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting including possibility collusion improper management override controls material misstatements due error fraud may prevented detected timely basis also projections evaluation effectiveness internal control financial reporting future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate material weakness deficiency combination deficiencies internal control financial reporting reasonable possibility material misstatement company’s annual interim financial statements prevented detected timely basis following material weaknesses identified included management’s assessment 1 controls periodend financial reporting process effective 2 controls ensure consolidated financial statements comply sfas 109 accounting income taxes effective 3 controls accounting employee benefit arrangements effective material weaknesses considered determining nature timing extent audit tests applied audit consolidated financial statements financial statement schedule listed index item 15 year ended december 31 2007 report affect report financial statements financial statement schedule opinion effect material weaknesses identified achievement objectives control criteria corporation maintained effective internal control financial reporting december 31 2007 based criteria established internal control integrated framework issued committee sponsoring organizations treadway commission also audited accordance standards public company accounting oversight board united states consolidated balance sheets related consolidated statements operations cash flows stockholders’ equity deficit corporation year ended december 31 2007 audit also included financial statement schedule listed index item 15 year ended december 31 2007 report dated february 28 2008 expressed unqualified opinion financial statements financial statement schedule included explanatory paragraph relating adoption recognition measurement provisions fasb interpretation 48 accounting uncertainty income taxes interpretation fasb statement 109 change measurement date defined benefit plan assets liabilities coincide corporation’s year end conform statement financial accounting standards 158 employers’ accounting defined benefit pension postretirement plans amendment fasb statements 87 88 106 132r deloitte touche llp deloitte touche llp detroit michigan february 28 2008 report independent registered public accounting firm general motors corporation directors stockholders audited accompanying consolidated balance sheets general motors corporation subsidiaries corporation december 31 2007 2006 related consolidated statements operations cash flows stockholders’ equity deficit three years period ended december 31 2007 audits also included financial statement schedule listed index item 15 financial statements financial statement schedule responsibility corporation’s management responsibility express opinion financial statements financial statement schedule based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements present fairly material respects financial position general motors corporation subsidiaries december 31 2007 2006 results operations cash flows three years period ended december 31 2007 conformity accounting principles generally accepted united states america also opinion financial statement schedule considered relation basic consolidated financial statements taken whole presents fairly material respects information set forth therein discussed note 2 consolidated financial statements corporation 1 effective january 1 2007 adopted recognition measurement provisions fasb interpretation 48 accounting uncertainty income taxes interpretation fasb statement 109 2 effective january 1 2007 changed measurement date defined benefit plan assets liabilities coincide year end conform statement financial accounting standards 158 employers’ accounting defined benefit pension postretirement plans amendment fasb statements 87 88 106 132r sfas 158 3 effective december 31 2006 began recognize funded status defined benefit plans consolidated balance sheets conform sfas 158 4 effective december 31 2005 began account estimated fair value conditional asset retirement obligations conform fasb interpretation 47 accounting conditional asset retirement obligations discussed note 3 consolidated financial statements november 30 2006 corporation sold 51 controlling interest gmac llc former whollyowned finance subsidiary corporation’s remaining 49 interest gmac llc accounted equity method investment also audited accordance standards public company accounting oversight board united states corporation’s internal control financial reporting december 31 2007 based criteria established internal control integrated framework issued committee sponsoring organizations treadway commission report dated february 28 2008 expressed adverse opinion corporation’s internal control financial reporting deloitte touche llp deloitte touche llp detroit michigan february 28 2008 general motors corporation subsidiaries consolidated statements operations dollars millions except per share amounts item 8 item 7a quantitative qualitative disclosures market risk disclosure item required pursuant action letter item 8 item 7a quantitative qualitative disclosures market risk disclosure item required pursuant action letter item 8 item 7a quantitative qualitative disclosures market risk gm exposed market risk changes foreign currency exchange rates interest rates certain commodity equity security prices gm enters variety foreign exchange interest rate commodity forward contracts options primarily maintain desired level exposure arising risks risk management control system utilized monitor foreign exchange interest rate commodity equity price risks related hedge positions discussion gms accounting policies derivative financial instruments included note 1 gm consolidated financial statements information gms exposure market risk included notes 18 20 consolidated financial statements following analyses provide quantitative information regarding gms exposure foreign currency exchange rate risk interest rate risk commodity equity price risk gm uses model evaluate sensitivity fair value financial instruments exposure market risk assumes instantaneous parallel shifts exchange rates interest rate yield curves commodity equity prices options instruments nonlinear returns models appropriate instrument utilized determine impact market shifts certain shortcomings inherent sensitivity analyses presented primarily due assumption exchange rates change parallel fashion interest rates change instantaneously addition analyses unable reflect complex market reactions normally would arise market shifts modeled foreign exchange rate risk gm foreign currency exposures related buying selling financing currencies local currencies operates specifically gm exposed foreign currency risk related uncertainty future earnings asset liability values exposed result operating cash flows various financial instruments denominated foreign currencies december 31 2004 net fair value liability financial instruments exposure foreign currency risk approximately 58 billion compared net fair value liability 32 billion december 31 2003 potential loss fair value financial instruments 10 adverse change quoted foreign currency exchange rates would approximately 12 billion 744 million 2004 2003 respectively interest rate risk gm subject market risk exposure changes interest rates due financing investing cash management activities specifically corporation exposed interest rate risk associated longterm debt contracts provide commercial retail financing retained mortgage servicing rights retained assets related mortgage securitizations addition gm exposed prepayment risk associated capitalized mortgage servicing rights retained assets related securitization activities risk managed us treasury options futures exposing gm basis risk since derivative instruments identical characteristics underlying mortgage servicing rights december 31 2004 2003 net fair value liability financial instruments held purposes trading exposure interest rate risk approximately 511 billion 515 billion respectively potential loss fair value resulting 10 adverse shift quoted interest rates would approximately 30 billion 27 billion 2004 2003 respectively december 31 2004 2003 net fair value asset financial instruments held trading purposes exposure interest rate risk approximately 35 billion 41 billion respectively potential loss fair value resulting 10 adverse shift quoted interest rates would approximately 33 million 11 million 2004 2003 respectively analysis excludes gms operating lease portfolio fair value change debt funds portfolio would potentially different impact fair value portfolio overall effect fair value financial instruments hypothetical change interest rates may overstated commodity price risk gm exposed changes prices commodities used automotive business primarily associated various nonferrous metals used manufacturing automotive components gm enters commodity forward option contracts offset exposure december 31 2004 net fair value asset contracts approximately 431 million december 31 2003 net fair value liability contracts 194 million potential loss fair value resulting 10 adverse change underlying commodity prices would approximately 264 million 190 million 2004 2003 respectively amount excludes offsetting impact price risk inherent physical purchase underlying commodities equity price risk gm exposed changes prices various availableforsale equity securities invests december 31 2004 2003 fair value investments approximately 26 billion 22 billion respectively potential loss fair value resulting 10 adverse change equity prices would approximately 258 million 216 million 2004 2003 respectively ii21 general motors corporation subsidiaries managements report internal control financial reporting management responsible establishing maintaining effective internal control financial reporting corporation system designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance accounting principles generally accepted united states america corporations internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets corporation ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures corporation made accordance authorizations management directors corporation iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition corporations assets could material effect financial statements inherent limitations system internal control financial reporting provide reasonable assurance may prevent detect misstatements changes conditions effectiveness internal controls financial reporting may vary time management conducted evaluation effectiveness system internal control financial reporting based framework internal controlintegrated framework issued committee sponsoring organizations treadway commission based evaluation management determined corporations system internal control financial reporting effective december 31 2004 managements assessment effectiveness corporations internal control financial reporting audited deloitte touche llp independent registered public accounting firm stated report included herein g richard wagoner jr john devine g richard wagoner jr john devine chairman chief executive officer vice chairman chief financial officer march 14 2005 march 14 2005 ii22 report independent registered public accounting firm general motors corporation directors stockholders audited managements assessment included accompanying managements report internal control financial reporting general motors corporation subsidiaries corporation maintained effective internal control financial reporting december 31 2004 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission corporations management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting responsibility express opinion managements assessment opinion effectiveness corporations internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting evaluating managements assessment testing evaluating design operating effectiveness internal control performing procedures considered necessary circumstances believe audit provides reasonable basis opinions companys internal control financial reporting process designed supervision companys principal executive principal financial officers persons performing similar functions effected companys board directors management personnel provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles companys internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition companys assets could material effect financial statements inherent limitations internal control financial reporting including possibility collusion improper management override controls material misstatements due error fraud may prevented detected timely basis also projections evaluation effectiveness internal control financial reporting future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate opinion managements assessment corporation maintained effective internal control financial reporting december 31 2004 fairly stated material respects based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission also opinion corporation maintained material respects effective internal control financial reporting december 31 2004 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission also audited accordance standards public company accounting oversight board united states consolidated balance sheet related consolidated statements income cash flows stockholders equity corporation year ended december 31 2004 audit also included supplemental information consolidated balance sheet consolidated statements income cash flows financial statement schedule listed item 15 collectively financial statement schedules year ended december 31 2004 report dated march 14 2005 expressed unqualified opinion financial statements financial statement schedules deloitte touche llp deloitte touche llp detroit michigan march 14 2005 ii23 report independent registered public accounting firm general motors corporation directors stockholders audited accompanying consolidated balance sheets general motors corporation subsidiaries corporation december 31 2004 2003 related consolidated statements income cash flows stockholders equity three years period ended december 31 2004 audits also included supplemental information consolidated balance sheets consolidated statements income cash flows financial statement schedule listed item 15 collectively financial statement schedules financial statements financial statement schedules responsibility corporations management responsibility express opinion financial statements financial statement schedules based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements present fairly material respects financial position general motors corporation subsidiaries december 31 2004 2003 results operations cash flows three years period ended december 31 2004 conformity accounting principles generally accepted united states america also opinion financial statement schedules considered relation basic consolidated financial statements taken whole present fairly material respects information set forth therein discussed note 1 consolidated financial statements corporation 1 effective july 1 2003 began consolidating certain variable interest entities conform fasb interpretation 46 consolidation variable interest entities 2 effective january 1 2003 began expensing fair market value newly granted stock options stockbased compensation awards issued employees conform statement financial accounting standards 123 accounting stockbased compensation also audited accordance standards public company accounting oversight board united states effectiveness corporations internal control financial reporting december 31 2004 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission report dated march 14 2005 expressed unqualified opinion managements assessment effectiveness corporations internal control financial reporting unqualified opinion effectiveness corporations internal control financial reporting deloitte touche llp deloitte touche llp detroit michigan march 14 2005 ii24 item 8 item 7a quantitative qualitative disclosures market risk disclosure item required pursuant action letter item 8 item 8 consolidated statements income years ended december 31 1999 1998 1997 dollars millions except per share amounts general motors corporation subsidiaries manufactured products sales revenues notes 1 3 152635 134276 148143 financing revenues note 1 14734 13585 12762 income note 25 9189 7584 11675 total net sales revenues 176558 155445 172580 cost sales operating expenses exclusive items listed notes 3 4 126809 114542 128225 selling general administrative expenses 18845 15915 14777 depreciation amortization expense notes 1 3 12318 11147 14646 interest expense note 14 7750 6629 5883 expenses notes 3 25 1789 2268 1480 total costs expenses 167511 150501 165011 income continuing operations income taxes minority interests 9047 4944 7569 income tax expense note 9 3118 1636 1025 minority interests 28 20 44 losses nonconsolidated associates 325 239 105 income continuing operations 5576 3049 6483 income loss discontinued operations notes 1 2 426 93 215 net income 6002 2956 6698 premium exchange preference stocks note 17 26 dividends preference stocks note 18 80 63 72 earnings attributable common stocks 5922 2893 6600 basic earnings losses per share attributable common stocks note 19 123 par value continuing operations 870 440 852 discontinued operations notes 1 2 066 014 018 earnings per share attributable 123 par value 936 426 870 class h prior recapitalization december 17 1997 note 1 continuing operations 230 discontinued operations notes 1 2 087 earnings per share attributable class h prior recapitalization december 17 1997 note 1 317 earnings per share attributable class h subsequent recapitalization december 17 1997 note 1 077 068 002 diluted earnings losses per share attributable common stocks note 19 123 par value continuing operations 853 432 845 discontinued operations notes 1 2 065 014 017 earnings per share attributable 123 par value 918 418 862 class h prior recapitalization december 17 1997 note 1 continuing operations 230 discontinued operations notes 1 2 087 earnings per share attributable class h prior recapitalization december 17 1997 note 1 317 earnings per share attributable class h subsequent recapitalization december 17 1997 note 1 077 068 002 reference made notes consolidated financial statements ii26 consolidated statements income concluded years ended december 31 1999 1998 1997 dollars millions automotive communications services operations manufactured products sales revenues notes 1 3 152635 134276 148143 income note 25 3472 2885 7952 total net sales revenues 156107 137161 156095 cost sales operating expenses exclusive items listed notes 3 4 126809 114542 128225 selling general administrative expenses 14250 11848 11971 depreciation amortization expense notes 1 3 6873 6227 9833 total operating costs expenses 147932 132617 150029 interest expense note 14 828 786 633 expenses notes 3 25 503 792 210 net expense income transactions financing insurance operations note 1 308 82 101 income continuing operations income taxes minority interests 6536 2884 5324 income tax expense note 9 2167 1018 111 minority interests 2 57 losses nonconsolidated associates 325 239 105 income continuing operations 4042 1627 5165 income loss discontinued operations notes 1 2 426 93 215 net income automotive communications services operations 4468 1534 5380 years ended december 31 1999 1998 1997 dollars millions financing insurance operations financing revenues note 1 14734 13585 12762 insurance mortgage income note 25 5717 4699 3723 total revenues income 20451 18284 16485 interest expense note 14 6922 5843 5250 depreciation amortization expense note 1 5445 4920 4813 operating expenses 4595 4067 2806 provisions financing losses notes 1 25 404 463 523 insurance losses loss adjustment expenses note 25 882 1013 747 total costs expenses 18248 16306 14139 net income expense transactions automotive communications services operations note 1 308 82 101 income taxes 2511 2060 2245 income tax expense note 9 951 618 914 minority interests 26 20 13 net income financing insurance operations 1534 1422 1318 supplemental consolidating information explained note 1 nature operations reference made notes consolidated financial statements ii27 consolidated balance sheets december 31 general motors corporation subsidiaries 1999 1998 assets dollars millions automotive communications services operations cash equivalents 9730 9728 marketable securities 1698 402 total cash marketable securities notes 1 5 11428 10130 accounts notes receivable less allowances 5093 4750 inventories less allowances note 7 10638 10437 net assets discontinued operations notes 1 2 77 equipment operating leases less accumulated depreciation note 8 5744 4954 deferred income taxes current assets note 9 9006 10051 total current assets 41909 40399 equity net assets nonconsolidated associates 1711 950 property net note 10 32779 32222 intangible assets net notes 1 11 8527 9994 deferred income taxes note 9 15277 14967 assets note 12 25358 16062 total automotive communications services operations assets 125561 114594 financing insurance operations cash equivalents note 1 712 146 investments securities note 5 9110 8748 finance receivables net note 6 80627 70436 investment leases receivables note 8 36407 32798 assets note 12 21312 19150 net receivable automotive communications services operations note 1 1001 816 total financing insurance operations assets 149169 132094 total assets 274730 246688 liabilities stockholders equity automotive communications services operations accounts payable principally trade 17254 13542 loans payable note 14 1991 1204 accrued expenses note 13 32854 30548 net payable financing insurance operations note 1 1001 816 total current liabilities 53100 46110 longterm debt note 14 7415 7118 postretirement benefits pensions note 15 34166 33503 pensions note 15 3339 4410 liabilities deferred income taxes note 13 17426 17807 total automotive communications services operations liabilities 115446 108948 financing insurance operations accounts payable 4262 4148 debt note 14 122282 107753 liabilities deferred income taxes note 13 11282 10004 total financing insurance operations liabilities 137826 121905 minority interests 596 563 general motors obligated mandatorily redeemable preferred securities subsidiary trusts holding solely junior subordinated debentures general motors note 17 series 79 series g 139 141 stockholders equity notes 18 20 preference stocks 1 123 par value common stock issued 619412233 655008344 shares note 19 1033 1092 class h common stock issued 137115187 106159776 shares 14 11 capital surplus principally additional paidin capital 13794 12661 retained earnings 6961 6984 subtotal 21802 20749 accumulated foreign currency translation adjustments 2033 1089 net unrealized gains securities 996 481 minimum pension liability adjustment 121 5089 accumulated comprehensive loss 1158 5697 total stockholders equity 20644 15052 total liabilities stockholders equity 274730 246688 reference made notes consolidated financial statements ii28 consolidated balance sheets concluded december 31 automotive communications services operations 1999 1998 dollars millions assets cash equivalents 9730 9728 marketable securities 1698 402 total cash marketable securities notes 1 5 11428 10130 accounts notes receivable less allowances 5093 4750 inventories less allowances note 7 10638 10437 net assets discontinued operations notes 1 2 77 equipment operating leases less accumulated depreciation note 8 5744 4954 deferred income taxes current assets note 9 9006 10051 total current assets 41909 40399 equity net assets nonconsolidated associates 1711 950 property net note 10 32779 32222 intangible assets net notes 1 11 8527 9994 deferred income taxes note 9 15277 14967 assets note 12 25358 16062 total automotive communications services operations assets 125561 114594 liabilities gm investment accounts payable principally trade 17254 13542 loans payable note 14 1991 1204 accrued expenses note 13 32854 30548 net payable financing insurance operations note 1 1001 816 total current liabilities 53100 46110 longterm debt note 14 7415 7118 postretirement benefits pensions note 15 34166 33503 pensions note 15 3339 4410 liabilities deferred income taxes note 13 17426 17807 total automotive communications services operations liabilities 115446 108948 minority interests 574 511 gm investment automotive communications services operations 9541 5135 total automotive communications services operations liabilities gm investment 125561 114594 december 31 financing insurance operations 1999 1998 dollars millions assets cash equivalents note 1 712 146 investments securities note 5 9110 8748 finance receivables net note 6 80627 70436 investment leases receivables note 8 36407 32798 assets note 12 21312 19150 net receivable automotive communications services operations note 1 1001 816 total financing insurance operations assets 149169 132094 liabilities gm investment accounts payable 4262 4148 debt note 14 122282 107753 liabilities deferred income taxes note 13 11282 10004 total financing insurance operations liabilities 137826 121905 minority interests 22 52 gm investment financing insurance operations 11321 10137 total financing insurance operations liabilities gm investment 149169 132094 supplemental consolidating information explained note 1 nature operations reference made notes consolidated financial statements ii29 consolidated statements cash flows years ended december 31 1999 1998 1997 dollars millions general motors corporation subsidiaries cash flows operating activities income continuing operations 5576 3049 6483 adjustments reconcile income continuing operations net cash provided operating activities depreciation amortization expenses 12318 11147 14646 gain hughes defense spinoff note 1 4269 postretirement benefits pensions net payments veba contributions 1036 188 874 pension expense net contributions 808 223 269 originations purchases mortgage loans 53006 54433 30878 proceeds sales mortgage loans 55777 51582 28543 originations purchases mortgage securities 1309 2237 2516 proceeds sales mortgage securities 1545 849 1449 change investments miscellaneous assets 395 770 1457 change operating assets liabilities note 1 7500 1558 1552 78 1647 826 net cash provided operating activities 27030 14343 13584 cash flows investing activities expenditures property 7384 8231 8647 investments marketable securities acquisitions 25406 34162 30594 investments marketable securities liquidations 23479 37960 28958 mortgage servicing rights acquisitions 1424 1862 479 mortgage servicing rights liquidations 35 80 23 finance receivables acquisitions 186379 155613 163614 finance receivables liquidations 130293 114662 129615 proceeds sales finance receivables 48178 27681 31191 operating leases acquisitions 23165 23525 21073 operating leases liquidations 12079 15386 12187 proceeds borrowings hughes defense prior hughes defense spinoff note 1 4006 investments companies net cash acquired 5108 1144 2272 192 1131 765 net cash used investing activities 34994 29899 19934 cash flows financing activities net decrease increase loans payable 2360 8186 5346 longterm debt borrowing 35561 24035 14971 longterm debt repayments 21359 12869 12500 repurchases common preference stocks 3870 3089 4365 proceeds issuing common preference stocks 2005 343 614 cash dividends paid stockholders 1367 1388 1620 net cash provided financing activities 8610 15218 2446 effect exchange rate change cash equivalents 206 317 482 net cash provided used continuing operations 440 21 4386 net cash provided used discontinued operations notes 1 2 128 378 1567 net increase decrease cash equivalents 568 399 2819 cash equivalents beginning year 9874 10273 13092 cash equivalents end year 10442 9874 10273 reference made notes consolidated financial statements ii30 supplemental consolidating information explained note 1 nature operations reference made notes consolidated financial statements ii31 reference made notes consolidated financial statements ii32 general motors corporation subsidiaries notes consolidated financial statements note 1 significant accounting policies principles consolidation consolidated financial statements include accounts general motors corporation hereinafter referred corporation domestic foreign subsidiaries 50 owned principally general motors acceptance corporation subsidiaries gmac hughes electronics corporation subsidiaries prior december 17 1997 restructuring company hereinafter referred former hughes subsequent december 17 1997 restructuring company hereinafter referred hughes see hughes transactions collectively referred general motors gm general motors share earnings losses associates least 20 voting securities owned included consolidated operating results using equity method accounting financial data related delphi automotive systems corporation delphi presented discontinued operations periods presented gm encourages reference gmac annual report form 10k period ended december 31 1999 filed separately securities exchange commission hughes consolidated financial statements included exhibit 99 gm annual report form 10k period ended december 31 1999 related hughes annual report form 10k filed separately securities exchange commission certain amounts 1998 1997 reclassified conform 1999 classifications nature operations gm presents separate supplemental consolidating financial information following businesses 1 automotive communications services operations consists design manufacturingand marketing cars trucks locomotives heavy duty transmissions related parts accessories well operations hughes 2 financing insurance operations consists primarily gmac provides broad range financial services including consumer vehicle financing fullservice leasing fleet leasing dealer financing car truck extended service contracts residential commercial mortgage services vehicle homeowners insurance assetbased lending transactions businesses eliminated corporations consolidated statements income automotive communications services operations net expense income transactions financing insurance operations follows millions years ended december 31 1999 1998 1997 interest 306 140 89 service fees 56 58 34 insurance net 53 24 127 1 92 97 net expense income 308 82 101 use estimates preparation financial statements preparation financial statements conformity generally accepted accounting principles requires management make estimates assumptions affect amounts reported therein due inherent uncertainty involved making estimates actual results reported future periods may based upon amounts differ estimates revenue recognition sales generally recorded products shipped services rendered independent dealers third parties provisions normal dealer sales incentives returns allowances gm card rebates made time vehicle sales costs related special sales incentive programs recognized reductions sales determinable financing revenue recorded terms receivables using interest method certain loan origination costs deferred amortized financing revenue lives related loans using interest method income operating lease assets recognized straightline basis scheduled lease term certain operating lease origination costs deferred amortized financing revenue lives related operating leases using straightline method insurance premiums earned basis related coverage provided terms policies commission premium taxes costs incurred acquiring new business deferred amortized terms related policies basis premiums earned liability losses loss expenses includes provision unreported losses based past experience net estimated salvage subrogation recoverable ii33 general motors corporation subsidiaries notes consolidated financial statements continued note 1 significant accounting policies continued productrelated expenses advertising sales promotion research development productrelated costs charged expense incurred provisions estimated expenses related product warranty made time products sold advertising expense 45 billion 1999 37 billion 1998 40 billion 1997 research development expense 68 billion 1999 63 billion 1998 65 billion 1997 depreciation amortization depreciation provided based estimated useful lives property groups generally using accelerated methods accumulate depreciation approximately twothirds depreciable cost first half estimated useful lives leasehold improvements amortized period lease life property whichever shorter amortization applied directly asset account depreciation capitalized leases terms five years less provided using straightline method leases terms excess five years depreciated using foregoing accelerated methods equipment operating leases depreciated straightline basis period time consistent term underlying operating lease agreement difference net book value proceeds sale salvage items disposed accounted charge credit provision depreciation expenditures special tools amortized estimated useful lives primarily using units production method amortization applied directly asset account replacement special tools reasons changes products charged directly cost sales goodwill amortized straightline basis periods ranging 20 40 years depreciation amortization expense follows millions years ended december 31 1999 1998 1997 automotive communications services operations depreciation note 3 4155 3772 4178 amortization special tools note 3 2492 2350 5427 amortization intangible assets note 11 226 105 228 total 6873 6227 9833 financing insurance operations depreciation amortization expense 5445 4920 4813 internaluse software january 1 1999 gm adopted statement position 981 accounting costs computer software developed obtained internal use prospective basis revised accounting software development costs based accounting standard certain internaluse software costs historically expensed capitalized specific criteria met costs amortized straightline basis threeyear period adoption statement material impact corporations financial statements foreign currency translation foreign currency exchange transaction translation losses aftertax basis included consolidated net income 1999 1998 1997 pursuant statement financial accounting standards sfas 52 foreign currency translation amounted 162 million 298 million 497 million respectively cash equivalents cash equivalents defined shortterm highly liquid investments original maturities 90 days less ii34 general motors corporation subsidiaries notes consolidated financial statements continued note 1 significant accounting policies continued statement cash flows supplementary information years ended december 31 1999 1998 1997 dollars millions automotive communications services operations changes operating assets liabilities follows accounts receivable 659 80 1006 prepaid expenses deferred charges 623 217 1006 inventories 66 494 808 accounts payable 5606 1249 1212 deferred taxes income taxes payable 160 2315 3565 accrued expenses liabilities 3425 1513 2168 total 7523 90 993 cash paid interest income taxes follows interest 526 435 449 income taxes 2166 1132 1120 years ended december 31 1999 1998 1997 dollars millions financing insurance operations changes operating assets liabilities follows receivables 269 206 714 assets 83 36 55 accounts payable 114 858 624 deferred taxes liabilities 215 440 414 total 23 1468 559 cash paid interest income taxes follows interest 6618 5695 5202 income taxes 214 138 338 allowance credit losses allowance credit losses generally established period receivables acquired maintained level deemed appropriate management based historical factors affect collectibility losses arising sale repossessed collateral charged allowance credit losses repossession taken place receivables charged soon determined collateral cannot repossessed generally 150 days default repossessed property impaired loans losses arising repossession collateral supporting doubtful accounts property supporting defaulted operating leases recognized upon repossession repossessed assets recorded lower historical cost estimated realizable value reclassified finance receivables operating leases nonearning assets related adjustments valuation allowance included operating expenses nonretail finance receivables reduced lower book value estimated fair value collateral determined impaired uncollectible valuation longlived assets gm periodically evaluates carrying value longlived assets held used including goodwill intangible assets events circumstances warrant review carrying value longlived asset considered impaired anticipated undiscounted cash flow asset separately identifiable less carrying value event loss recognized based amount carrying value exceeds fair market value longlived asset fair market value determined primarily using anticipated cash flows discounted rate commensurate risk involved losses longlived assets disposed determined similar manner except fair market values reduced cost dispose ii35 general motors corporation subsidiaries notes consolidated financial statements continued note 1 significant accounting policies continued derivative instruments gm party variety foreign exchange interest rate commodity forward contracts options entered connection management exposure fluctuations foreign exchange rates interest rates certain commodity prices financial exposures managed accordance corporate policies procedures gms risk management committee reviews approves monitors corporations financial risk strategies policies procedures committee reviews approves new risk management strategies establishes approval authority guidelines approved programs monitors compliance performance existing risk management programs gm enter derivative transactions trading purposes part hedging program approval process gms management required identify specific financial risk derivative transaction minimize appropriate hedging instrument used reduce risk correlation financial risk hedging instrument purchase orders letters intent vehicle production forecasts capital planning forecasts historical data used basis determining anticipated values transactions hedged generally gm enter derivative transactions high correlation underlying financial risk infrequent instances derivative transaction entered high correlation underlying exposure derivative marked market related gains losses included net income current basis hedge positions well correlation transaction risks hedging instruments reviewed management ongoing basis foreign exchange forward option contracts accounted hedges extent designated effective hedges firm foreign currency commitments additionally certain foreign exchange option contracts receive hedge accounting treatment extent contracts hedge certain anticipated foreign currency transactions foreign exchange contracts options marked market related gains losses included net income current basis interest rate swaps options designated effective hedges underlying debt obligations marked market related gains losses included net income used adjust interest expense recognized lives underlying debt agreements gains losses terminated hedge contracts deferred amortized remaining period original swap remaining term underlying exposure whichever shorter open interest rate contracts reviewed regularly ensure remain effective hedges interest rate exposure written options including swaptions interest rate caps collars swaps embedded swaptions swaps qualify hedge accounting marked market related gains losses included net income current basis gm also enters commodity forward option contracts since gm discretion settle transactions either cash taking physical delivery contracts considered financial instruments accounting purposes commodity forward contracts options accounted hedges extent designated effective hedges firm anticipated commodity purchase contracts commodity forward contracts options marked market related gains losses included net income current basis postemployment benefits employee termination benefits gms postemployment benefits primarily relate gms extended disability benefit program united states employee job security supplemental unemployment compensation benefits mainly pursuant union contractual agreements extended disability benefits accrued servicedriven basis employee job security supplemental unemployment compensation benefits accrued eventdriven basis accruals postemployment benefits represent discounted future cash expenditures expected period idling affected employees time employees redeployed retire otherwise terminate employment voluntary termination benefits accrued employees accept offer involuntary termination benefits accrued management committed termination plan benefit arrangement communicated affected employees environmental liabilities gm recognizes environmental liabilities loss probable reasonably estimated liabilities generally subject insurance coverage cost environmental liability estimated engineering financial legal specialists within gm based current law estimates based primarily upon estimated cost investigation remediation required likelihood potentially responsible parties prps able fulfill commitments sites gm may jointly severally liable sites addressed us comprehensive environmental response compensation liability act similar state laws superfund sites gm typically recognizes loss named prp determined loss ii36 general motors corporation subsidiaries notes consolidated financial statements continued note 1 significant accounting policies continued environmental liabilities concluded probable estimable superfund sites primarily multiprp sites owned operated gm gms operating plants estimated liability typically recognized either upon completion environmental assessment gm proposes agreement appropriate regulatory agency take action site closed closing plants owned gm properties sold estimated liability typically recognized time closure decision made sale recorded based environmental assessment plant property gms estimates environmental obligations dependent primarily nature extent historical information physical data relating contaminated site complexity site uncertainty remedy technology required outcome discussions regulatory agencies prps multiparty sites number financial viability prps timing expenditures accordingly estimates could change materially gm periodically evaluates revises estimates based expenditures established reserves availability additional information new accounting standards june 1999 financial accounting standards board fasb issued sfas 137 accounting derivative instruments hedging activities deferral effective date fasb statement 133 amendment fasb statement 133 statement defers one year effective date sfas 133 accounting derivative instruments hedging activities fiscal years beginning june 15 2000 sfas 133 requires derivatives recorded either assets liabilities instruments measured fair value gains losses resulting changes values derivatives recognized immediately deferred depending use derivative whether qualifies hedge gm adopt sfas 133 january 1 2001 required management currently assessing impact statement gms results operations financial position labor force gm worldwide basis concentration labor supply employees working union collective bargaining agreements certain contracts expired 1999 united auto workers uaw labor contract ratified october 13 1999 covering fouryear term 19992003 contract included annual salary increase 3 per year upfront signing bonus 1350 per uaw employee amortized evenly life contract pension benefit increases addition retiree benefit increases include lump sum payments 125 monthly benefit increase per year service retiree lump sum payments resulted charge gms 1999 fourth quarter earnings approximately 408 million aftertax pension benefit increases paid plan assets 1999 contract includes job security sourcing provisions containing employment floor set 95 1996 employment levels event net outsourcing also requires level attrition replacement based 1999 benchmark minimum employment level reduced 5 life contract 1999 canadian auto workers caw labor agreement ratified october 241999 covering threeyear term 19992002 contract included annual salary increase 3 per year upfront signing bonus 1000 canadian equivalent approximately 679 december 31 1999 exchange rate per active caw employee amortized evenly life contract addition hourly actives retirees granted pension benefit increases paid plan assets 1999 labor agreement continues provide flexibility cut costs streamline operations hughes transactions december 17 1997 gm former hughes completed series related transactions hughes transactions designed address strategic challenges facing three principal businesses former hughes unlock stockholder value gm hughes transactions included taxfree spinoff defense electronics business former hughes defense holders 123 par value class h common stocks followed immediately merger hughes defense raytheon company raytheon concurrently delco electronics corporation delco automotive electronics subsidiary former hughes transferred former hughes delphi finally class h common stock recapitalized gm tracking stock gm class h common stock linked telecommunications space businesses hughes ii37 general motors corporation subsidiaries notes consolidated financial statements continued note 1 significant accounting policies concluded hughes transactions concluded spinoff hughes defense merger raytheon total value gm stockholders approximately 98 billion consisted approximately 40 billion cash retained hughes debt proceeds incurred hughes defense prior spinoff 58 billion hughes defense class common stock distributed holders 123 par value gm class h common stock substantially proceeds debt obligation hughes defense made available hughes distribution hughes defense 123 par value gm class h common stockholders recorded gm fair value resulted recognition 43 billion gain included income addition gms total stockholders equity reduced approximately 15 billion result hughes transactions gm distributed total 102630503 shares class common stock hughes defense 44308316 shares 432 123 par value stockholders 58322187 shares 568 gm class h stockholders represented approximately 30 total equity newly combined hughes defenseraytheon company distribution gm class h common stockholders total value approximately 33 billion accounted tracking stock interest hughes defense valued approximately 15 billion plus additional amount compensate elimination tracking stock interest delco factors valued approximately 18 billion note 2 discontinued operations delphi diverse supplier automotive systems components delphi offers products services areas electronics mobile communication safety thermal electrical architecture dynamics propulsion february 5 1999 delphi completed initial public offering ipo 100 million shares common stock represented 177 outstanding common shares april 12 1999 gm board directors gm board approved complete separation delphi gm means spinoff taxfree gm stockholders us federal income tax purposes may 28 1999 gm distributed holders 123 par value common stock 801 outstanding shares delphi resulted 069893 shares delphi common stock distributed share gm 123 par value common stock outstanding record date may 25 1999 addition gm contributed remaining 22 delphi shares around 124 million shares voluntary employee beneficiary association veba trust established gm fund benefits hourly retirees financial data related gms investment delphi may 28 1999 classified discontinued operations periods presented financial data delphi reflect historical results operations cash flows businesses considered part delphi business segment gm respective period reflect many significant changes occur operations funding delphi result separation gm ipo delphi financial data classified discontinued operations reflect assets liabilities transferred delphi accordance terms master separation agreement delphi gm parties separation agreement delphi delco common control gm periods therefore delphi financial data includes amounts relating delco periods presented although delco integrated delphi december 1997 delphi net sales including sales gm included discontinued operations totaled 125 billion 285 billion 314 billion years ended december 31 1999 1998 1997 respectively income loss delphi discontinued operations 426 million 93 million 215 million years ended december 31 1999 1998 1997 reported net income tax expense benefit 314 million 173 million 44 million respectively ii38 general motors corporation subsidiaries notes consolidated financial statements continued note 2 discontinued operations concluded net assets delphi follows millions december 31 current assets 6405 property equipment net 4965 deferred income taxes assets 4136 current liabilities 4057 longterm debt 3141 liabilities 8299 accumulated translation adjustments 68 net assets discontinued operations 77 first quarter 1999 gm recorded increase stockholders equity 12 billion reflecting gain result delphis ipo 17 billion less cost gms investment delphi costs ipo establishing delphi independent entity result complete separation delphi means spinoff taxfree gm stockholders us federal income tax purposes veba trust contribution may 28 1999 gm recorded decrease stockholders equity 52 billion second quarter 1999 amount reflects elimination delphi net assets 34 billion allocation delphi pension plan assets obligations related adjustments totaling 18 billion see note 15 gm consolidated financial statements fourth quarter 1999 gm recorded increase stockholders equity 585 million result deferred tax asset established increased pension postretirement benefit liabilities discussed total complete separation delphi year ended december 31 1999 resulted reduction stockholders equity approximately 33 billion separation agreement provided delphis us hourly employees would continue participate defined benefit pension plan hourly workers postretirement benefit plans administered gm full separation gm generally delphi would assume pension postretirement benefit obligations us hourly employees retire october 1 1999 gm would retain pension postretirement benefit obligations us hourly employees retire october 1 1999 connection 1999 uaw labor contract see note 1 gm consolidated financial statements october 1 1999 date delphis assumption retirement obligations extended january 1 2000 allocation pension postretirement benefit obligations delphi gm assumed certain levels employee retirements prior october 1 1999 based historical experience conditions surrounding separation prior spinoff delphi gm agreed recalculate allocation liabilities based actual level retirements october 1 1999 subsequently extended january 1 2000 connection 1999 uaw labor contract accordingly extent greater assumed number employees retire january 1 2000 delphi would required make payment gm extent less assumed number employees retire january 1 2000 gm would required make payment delphi december 31 1999 estimate employee retirements exceeded amount used allocation gms delphis pension postretirement benefit liabilities time separation result gm increased pension postretirement benefit liabilities 498 million 10 billion respectively reflect increased estimate delphi retirees yearend recorded receivable delphi total 15 billion see note 12 gm consolidated financial statements accordance terms separation agreement uaw labor contract provision explained addition interest shall accrue outstanding amount paid full rate 675 per annum agreed parties gm received 714 million delphi january 2000 related outstanding receivable balance finalization amount receivable delphi occur 2000 time adjustment recorded gm anticipate finalization retirement obligations significant effect financial position note 3 competitiveness studies gm periodically evaluates carrying value longlived assets held used events circumstances warrant review evaluations reviews generally done conjunction annual business planning cycle ii39 general motors corporation subsidiaries notes consolidated financial statements continued note 3 competitiveness studies concluded based results reviews gm record pretax charges income 1999 1998 1997 gm recorded pretax charges income totaling 224 million 228 million aftertax 034 per share 123 par value common stock 51 billion 32 billion aftertax 436 per share 123 par value common stock respectively following pretax components charges years ended december 31 1998 1997 dollars millions underperforming assets including vehicle componentmanufacturing assets 122 2941 capacity reductions employee separation programs 102 1318 803 total 224 5062 1998 pretax charges comprised 105 million 80 million aftertax gmna 82 million 51 million aftertax gmlaam 37 million 97 million aftertax gmap overall charges effect increasing 1998 cost sales depreciation amortization expenses 92 million 67 million 65 million respectively 1997 pretax charges comprised 38 billion 24 billion aftertax gmna 848 million 488 million aftertax gme 174 million 170 million aftertax gmap 205 million 128 million aftertax gm automotive communications services operations segment charges reduced 1997 net sales revenues 548 million increased cost sales depreciation amortization expenses 14 billion 30 billion 72 million respectively amounts related capacity reduction expenses recorded 1998 1997 still remain december 31 1999 total 795 million going forward gms future cash requirements relating 1998 1997 charges expected occur primarily next five years anticipated spending approximately 61 2000 15 2001 1998 amount included underperforming assets represents charges recorded pursuant gms policy valuation longlived assets gm reevaluated carrying values longlived assets annual business planning cycle reevaluation performed using product specific cash flow information result carrying values certain tooling property plant equipment determined impaired separately identifiable anticipated undiscounted future cash flows assets less respective carrying values resulting pretax impairment charges represented amount carrying values assets exceeded respective fair market values amount included employee separation programs represents voluntary early retirement separation programs affecting approximately 3300 1150 gmlaam employees involved restructuring us sales service field organizations respectively 1997 amount included underperforming assets principally tooling property plant equipment investments joint ventures represents charges recorded pursuant gms policy valuation longlived assets amount included capacity reductions represents postemployment benefits payable employees pursuant contractual agreements costs associated disposal assets facilities subject capacity reductions affects approximately 10000 employees gmnas buick city assembly v6 powertrain plants flint michigan detroit truck assembly detroit michigan certain gme facilities pursuant actions additional charges 74 million 44 million aftertax related work schedule modifications opel belgium recorded second quarter 1998 amount included primarily represents losses contracts associated pricing pressures used vehicles related effect gms retaillease commitments pricing pressures primarily result increased industry sales incentives new vehicles connection 1997 evaluation longlived assets gm reviewed remaining previously recorded reserve plant closings reclassified reserve consolidated balance sheet accounts reflected nature specified reserve components primarily accrual postemployment benefit costs accrual postemployment benefit costs together certain postemployment benefit costs provided connection 1997 competitiveness studies adjusted 1999 refer note 4 gm consolidated financial statements details ii40 general motors corporation subsidiaries notes consolidated financial statements continued note 4 1999 adjustment postemployment benefit costs past gm recorded liabilities termination postemployment benefits paid pursuant union contractual agreements connection closed plants north america december 31 1998 total liabilities represented approximately 5500 employees totaled approximately 13 billion gm reviews adequacy continuing need liabilities annual basis conjunction yearend production labor forecasts furthermore gm reviews reasonableness liabilities quarterly basis four factors occurred 1999 significantly changed assumptions previously used measuring liabilities stronger expected us vehicle market renewed strengthened relationship gm uaw higher expected levels attrition delphi following 1999 separation delphi gm changes national labor agreement gm uaw ratified october 1999 gms redeployment assumptions forecast excess us hourly employees used evaluate postemployment benefits liabilities assumptions largely dependent forecast us vehicle production due unanticipated sustained strength us economy resulted 174 million units produced us 1999 gm increased 1999 production created unanticipated demand us hourly employees gms relationship uaw also key factor determining redeployment assumptions may 28 1999 gm successfully completed separation delphi subsequently october 1999 negotiated new national labor agreement uaw without work stoppage delphi separation gm also significant impact gms redeployment assumptions separation delphi resulted approximately 14000 delphi us hourly employees electing retirement order take advantage provisions allowing retire gms retirement program january 1 2000 high level retirements created shortage hourly employees delphi allowed gm place excess employees closed plants positions delphi plants limited number delphi employees could elect return open positions gm 1999 uawgm national agreement ratified october 1999 changed gms ability place excess employees closed plants open positions plants change enabled gm place workers closed plants much quickly gm management expected quickly past experience result factors fourth quarter 1999 gm reversed postemployment benefits liabilities employees closed plants adjustment cost sales totaling approximately 892 million 553 million aftertax 084 earnings per share 123 par value common stock 1999 adjustment postemployment benefit costs reflects decrease number excess employees december 31 1999 compared december 31 1998 well shortened duration benefit payments based current redeployment assumptions remaining liability postemployment benefits december 31 1999 totals approximately 295 million representing approximately 2700 employees approximately 222 million expected paid cash next three years following table summarizes activity december 31 1998 december 31 1999 liability dollar amounts 000s 1the reduction excess employees buick city assembly flint v6 engine plants result redeployment gm delphi plants 1239 retirement 481 ii41 general motors corporation subsidiaries notes consolidated financial statements continued note 5 marketable securities marketable securities held gm classified availableforsale except certain mortgagerelated securities gmac classified trading securities unrealized gains losses net related income taxes availableforsale securities included separate component stockholders equity unrealized gains losses trading securities included income current basis gm determines cost specific identification basis automotive communications services operations investments marketable securities follows millions december 31 1999 fair unrealized cost value gains losses type security bonds notes securities united states government governmental agencies authorities 533 528 5 states municipalities political subdivisions 21 corporate debt securities 1154 1149 1 6 total marketable securities 1708 1698 1 11 december 31 1998 fair unrealized cost value gains losses type security bonds notes securities united states government governmental agencies authorities 286 states municipalities political subdivisions 11 corporate debt securities 98 105 7 total marketable securities 395 402 7 debt securities totaling 11 billion mature within one year 590 million mature one five years proceeds sales marketable securities totaled 20 billion 1999 44 billion 1998 109 billion 1997 gross gains related sales marketable securities 21 million 17 million 121 million 1999 1998 1997 respectively gross losses related sales marketable securities 6 million 11 million 51 million 1999 1998 1997 respectively securities classified cash equivalents consisted primarily commercial paper repurchase agreements certificates deposit 34 billion 92 billion december 31 1999 1998 respectively financing insurance operations investments securities follows millions december 31 1999 fair unrealized cost value gains losses type security bonds notes securities united states government governmental agencies authorities 488 476 12 states municipalities political subdivisions 1534 1540 47 41 mortgagebacked securities 480 453 10 37 corporate debt securities 2515 2491 39 63 total debt securities availableforsale 5017 4960 96 153 mortgagebacked securities held trading purposes 2889 total debt securities 7906 7849 96 153 equity securities 685 1261 634 58 total investment securities 8591 9110 730 211 ii42 general motors corporation subsidiaries notes consolidated financial statements continued note 5 marketable securities concluded december 31 1998 fair unrealized cost value gains losses type security bonds notes securities united states government governmental agencies authorities 445 456 12 1 states municipalities political subdivisions 1495 1600 117 12 mortgagebacked securities 415 383 6 38 corporate debt securities 1895 1926 66 35 total debt securities availableforsale 4250 4365 201 86 mortgagebacked securities held trading purposes 3173 total debt securities 7423 7538 201 86 equity securities 779 1210 534 103 total investment securities 8202 8748 735 189 debt securities totaling 940 million mature within one year 15 billion mature one five years 11 billion mature five years 10 years 43 billion mature 10 years proceeds sales marketable securities totaled 29 billion 1999 36 billion 1998 27 billion 1997 gross gains related sales marketable securities 292 million 218 million 176 million 1999 1998 1997 respectively gross losses related sales marketable securities 126 million 49 million 45 million 1999 1998 1997 respectively securities classified cash equivalents consisted primarily commercial paper repurchase agreements certificates deposit 119 million 155 million december 31 1999 1998 respectively note 6 finance receivables net finance receivables net included following millions december 31 1999 1998 us retail 35608 33321 wholesale 17717 17722 commercial 2383 71 leasing lease financing 627 632 term loans dealers others 8774 4853 total us 65109 56599 canada mexico international retail 10428 9337 wholesale 6270 6668 commercial 1167 leasing lease financing 2054 2023 term loans dealers others 866 857 total canada mexico international 20785 18885 total finance receivables 85894 75484 less unearned income 4153 4027 allowance financing losses 1114 1021 total finance receivables net 80627 70436 aggregate amount total finance receivables maturing five years following december 31 1999 follows 2000461 billion 2001155 billion 2002133 billion 200364 billion 200429 billion 2005 thereafter17 billion ii43 general motors corporation subsidiaries notes consolidated financial statements continued note 6 finance receivables net concluded gmac participates various sales receivables programs sold retail finance receivables special purpose subsidiaries principal aggregating 51 billion 1999 16 billion 1998 subsidiaries generally retain subordinated investment greater 70 total receivables pool market remaining portion pretax gains relating sales amounted 64 million 1999 31 million 1998 gmacs sold retail finance receivables servicing portfolio amounted 56 billion 40 billion december 31 1999 1998 respectively gmac sold wholesale receivables revolving basis resulting decreases wholesale outstandings 84 billion 33 billion december 31 1999 1998 respectively gmac committed sell eligible wholesale receivables arising certain dealer accounts gmacs interestonly strip receivables cash flows cash deposits related amounts generally restricted assets subject limited recourse provisions note 7 inventories included following automotive communications services operations millions december 31 1999 1998 productive material work process supplies 5505 5377 finished product service parts etc 7023 6962 total inventories fifo 12528 12339 less lifo allowance 1890 1902 total inventories less allowances 10638 10437 inventories stated generally cost excess market cost substantially us inventories saturn corporation saturn hughes determined lastin firstout lifo method cost nonus saturn hughes inventories determined generally either firstin firstout fifo average cost methods note 8 equipment operating leases corporation significant investments residual values leasing portfolios residual values represent estimate values assets end lease contracts initially recorded based appraisals estimates realization residual values dependent corporations future ability market vehicles prevailing market conditions management reviews residual values periodically determine recorded amounts appropriate automotive communications services operations equipment operating leases assets follows millions december 31 1999 1998 equipment operating leases 10754 9064 less accumulated depreciation 1099 935 net book value 9655 8129 current 5744 4954 noncurrent note 12 3911 3175 net book value 9655 8129 financing insurance operations equipment operating leases included investment leases receivables follows millions december 31 1999 1998 equipment operating leases 41522 35952 less accumulated depreciation 8336 6965 net book value 33186 28987 lease payments received related equipment operating leases maturing five years following december 31 1999 follows automotive communications services operations 200022 billion 2001626 million 2002575 million 2003539 million 2004503 million financing insurance operations 200068 billion 200146 billion 200220 billion 2003200 million 200427 million ii44 general motors corporation subsidiaries notes consolidated financial statements continued note 9 income taxes income continuing operations income taxes minority interests included following millions years ended december 31 1999 1998 1997 us income 4156 1783 3536 foreign income 4891 3161 4033 total 9047 4944 7569 provision income taxes estimated follows millions years ended december 31 1999 1998 1997 income taxes estimated payable currently us federal 156 83 458 foreign 1368 1952 1590 us state local 308 295 166 total payable currently 1832 2330 2214 deferred income tax expense credit net us federal 1026 373 552 foreign 244 852 349 us state local 34 196 261 total deferred 1304 675 1162 investment tax credits 18 19 27 total income taxes 3118 1636 1025 annual tax provisions include amounts considered sufficient pay assessments may result examination prior year tax returns however amount ultimately paid upon resolution issues raised may differ materially amount accrued provisions made estimated us foreign income taxes less available tax credits deductions may incurred remittance corporations share subsidiaries undistributed earnings deemed permanently invested taxes provided foreign subsidiaries earnings deemed essentially permanently reinvested 132 billion december 31 1999 98 billion december 31 1998 quantification deferred tax liability associated permanently reinvested earnings practicable reconciliation provision income taxes compared amounts us federal statutory rate follows millions years ended december 31 1999 1998 1997 tax us federal statutory income tax rate 3166 1730 2649 hughes defense spinoff 1494 foreign rates 35 109 1 154 taxes unremitted earnings subsidiaries 138 92 73 tax credits 207 203 161 subsidiary settlement affirmative claim irs 92 adjustments 130 108 112 total income tax 3118 1636 1025 deferred income tax assets liabilities 1999 1998 reflect impact temporary differences amounts assets liabilities financial reporting purposes bases assets liabilities measured tax laws net deferred tax asset us 161 billion 179 billion december 31 1999 1998 respectively ii45 general motors corporation subsidiaries notes consolidated financial statements continued note 9 income taxes concluded temporary differences carryforwards gave rise deferred tax assets liabilities included following millions december 31 1999 1998 deferred tax deferred tax assets liabilities assets liabilities postretirement benefits pensions 14351 14560 minimum pension liability adjustment 897 3054 employee benefit plans 2292 7596 1063 5816 policy warranty reserves 2471 2534 sales product reserves 2587 2176 profits longterm contracts 105 213 146 156 alternative minimum tax credit carryforwards 845 690 depreciation amortization expense 577 3696 594 3263 capitalized research experimentation 358 82 us state net operating loss carryforwards 529 559 financing losses 424 407 tax credit carryforwards 1452 879 lease transactions 3844 3624 tax unremitted profits 225 330 us 6189 3811 5461 2850 miscellaneous foreign 3233 887 2763 922 subtotal 36310 20272 34968 16961 valuation allowances 789 607 total deferred taxes 35521 20272 34361 16961 realization net deferred tax assets dependent future reversals existing taxable temporary differences adequate future taxable income exclusive reversing temporary differences carryforwards although realization assured management believes likely net deferred tax assets realized amount net deferred tax assets considered realizable however could reduced near term actual future income taxes lower estimated differences timing amount future reversals existing taxable temporary differences alternative minimum tax credit carried forward indefinitely us state net operating loss carryforwards expire years 2000 2014 2018 2019 used however substantial portion expire year 2004 tax credit carryforwards expire years 2004 2010 2012 2018 2019 used note 10 property net property net included following automotive communications services operations millions estimated december 31 useful lives years 1999 1998 land 751 714 land improvements 730 1682 1709 leasehold improvements less amortization 210 225 207 buildings 2940 11779 11425 machinery equipment 330 39650 39914 furniture office equipment 320 1092 925 capitalized leases 540 811 1026 construction progress 3787 3645 real estate plants equipment 59777 59565 less accumulated depreciation 34363 34641 real estate plants equipment net 25414 24924 special tools net 7365 7298 total property net 32779 32222 ii46 general motors corporation subsidiaries notes consolidated financial statements continued note 10 property net concluded financing insurance operations net property 496 million 386 million recorded assets december 31 1999 1998 respectively note 11 intangible assets net intangible assets net included following automotive communications services operations millions december 31 1999 1998 pensions 713 6434 intangible assets relating acquisition hac 409 427 goodwill relating acquisitions 7405 3133 total intangible assets net 8527 9994 intangible assets related pensions decreased due hourly pension plan becoming fully funded 1999 see note 15 gm consolidated financial statements intangible assets relating acquisition hughes aircraft company hac applicable hughes intangible assets relate patents related technology intangible assets originally recorded 1985 goodwill relating acquisitions includes approximately 31 billion associated hughes 1997 merger additional 1998 investment panamsat corporation well approximately 35 billion associated hughes acquisitions primestar tempo satellite assets united states satellite broadcasting company inc ussb galaxy brazil 1999 financing insurance operations net intangible assets 29 billion 855 million recorded assets december 31 1999 1998 respectively increase primarily relates acquisition assetbased lending factoring business unit bank new york 1999 note 12 assets automotive communications services operations assets included following millions december 31 1999 1998 equipment operating leases noncurrent note 8 3911 3175 notes receivable delphi note 2 1538 3141 investments equity securities 1 1970 1088 us prepaid pension assets note 15 15267 5903 deferred charges 833 1579 1839 1176 total assets 25358 16062 1amounts represent fair value investments equity securities classified availableforsale periods presented gms intent hold securities greater one year balances include historical costs 13 billion 989 million unrealized gains 687 million 109 million unrealized losses 36 million 10 million december 31 1999 1998 respectively ii47 general motors corporation subsidiaries notes consolidated financial statements continued note 12 assets concluded financing insurance operations assets included following millions december 31 1999 1998 mortgage servicing rights 3422 2435 real estate mortgage held sale 5678 7970 held investment 1497 1297 lending receivables 1801 2064 mortgage related assets 1094 723 receivables purchased factored clients 765 due deferred receivables sales 742 454 rental car buybacks 712 658 intangible assets 2898 855 2703 2694 total assets 21312 19150 note 13 accrued expenses liabilities deferred income taxes automotive communications services operations accrued expenses liabilities deferred income taxes included following millions december 31 1999 1998 warranties dealer customer allowances claims discounts 15284 14634 deferred revenue 9504 8548 payrolls employee benefits excludes postemployment 5211 6436 unpaid losses selfinsurance programs 1923 1774 taxes income taxes 1084 942 interest 1542 1227 income taxes 1006 368 deferred income taxes 2926 2635 postemployment benefits 1802 3110 9998 8681 total accrued expenses liabilities deferred income taxes 50280 48355 financing insurance operations liabilities deferred income taxes included following millions december 31 1999 1998 unpaid insurance losses loss adjustment expenses unearned insurance premiums 3811 3918 postemployment benefits 722 704 income taxes 439 552 deferred income taxes 3730 2910 interest 1602 1276 978 644 total liabilities deferred income taxes 11282 10004 ii48 general motors corporation subsidiaries notes consolidated financial statements continued note 14 longterm debt loans payable automotive communications services operations longterm debt loans payable follows millions december 31 weightedaverage interest rate1 1999 1998 longterm debt loans payable within one year current portion longterm debt 63 681 256 commercial paper 2 58 405 381 2 48 905 567 payable beyond one year 2000 759 2001 90 438 419 2002 47 848 36 2003 49 603 595 2004 13 510 12 2005 108 5045 5314 unamortized discount 29 17 total longterm debt loans payable 9406 8322 1 1999 weightedaverage interest rate commercial paper includes impact interest rate swap agreements 2 1998 weightedaverage interest rate commercial paper shortterm borrowings 57 82 respectively amounts payable beyond one year consideration foreign currency swaps december 31 1999 included 742 million currencies us dollar primarily brazilian real 152 million canadian dollar 60 million swiss franc 12 million japanese yen 488 million december 31 1999 1998 longterm debt loans payable automotive communications services operations included 74 billion 72 billion respectively obligations fixed interest rates 20 billion 11 billion respectively obligations variable interest rates predominantly based london interbank offering rate ie libor considering impact interest rate swap agreements achieve desired balance fixed variable rate debt within prescribed limits gm entered interest rate swap cap agreements notional amounts agreements december 31 1999 automotive communications services operations approximately 600 million 400 million pay variable 200 million pay fixed 100 million respectively notional amounts agreements december 31 1998 approximately 18 billion 600 million pay variable 12 billion pay fixed 100 million respectively gm subsidiaries maintain substantial bank lines credit various banks totaled 96 billion december 31 1999 39 billion represented shortterm credit facilities 57 billion represented longterm credit facilities december 31 1998 bank lines credit totaled 145 billion 67 billion represented shortterm credit facilities 78 billion represented longterm credit facilities unused shortterm longterm portions credit lines totaled 35 billion 48 billion december 31 1999 compared 62 billion 72 billion december 31 1998 certain bank lines credit contain covenants corporation applicable subsidiaries compliance year ended december 31 1999 ii49 general motors corporation subsidiaries notes consolidated financial statements continued note 14 longterm debt loans payable concluded financing insurance operations debt follows millions december 31 weightedaverage interest rate1 1999 1998 debt payable within one year current portion debt 66 14996 12701 commercial paper 2 58 33229 34487 2 46 18727 15208 payable beyond one year 2000 13154 2001 60 16854 10322 2002 57 15100 8561 2003 61 8786 7919 2004 66 5550 1208 2005 74 9662 4864 unamortized discount 622 671 total debt 122282 107753 1 1999 weightedaverage interest rate commercial paper includes impact interest rate swap agreements 2 1998 weightedaverage interest rate commercial paper shortterm borrowings 53 75 respectively amounts payable beyond one year consideration foreign currency swaps december 31 1999 included 103 billion currencies us dollar primarily canadian dollar 55 billion euro 19 billion uk pound sterling 15 billion australian dollar 10 billion december 31 1999 1998 debt financing insurance operations included 783 billion 728 billion respectively obligations fixed interest rates 440 billion 350 billion respectively obligations variable interest rates predominantly based london interbank offering rate ie libor considering impact interest rate swap agreements achieve desired balance fixed variable rate debt within prescribed limits gm entered interest rate swap cap floor option agreements notional amounts agreements december 31 1999 financing insurance operations approximately 261 billion 181 billion pay variable 80 billion pay fixed 483 million 93 million 0 respectively notional amounts interest rate swap cap floor option agreements december 31 1998 approximately 132 billion 95 billion pay variable 37 billion pay fixed 400 million 10 billion 10 billion respectively gms financing insurance subsidiaries maintain substantial bank lines credit various banks totaled 469 billion december 31 1999 168 billion represented shortterm credit facilities 301 billion represented longterm credit facilities december 31 1998 bank lines credit totaled 443 billion 173 billion represented shortterm credit facilities 270 billion represented longterm credit facilities unused shortterm longterm portions credit lines totaled 63 billion 293 billion december 31 1999 compared 75 billion 257 billion december 31 1998 certain bank lines credit contain covenants corporation applicable subsidiaries compliance year ended december 31 1999 ii50 general motors corporation subsidiaries notes consolidated financial statements continued note 15 pensions postretirement benefits gm number defined benefit pension plans covering substantially employees plans covering us canadian represented employees generally provide benefits negotiated stated amounts year service well significant supplemental benefits employees retire 30 years service normal retirement age benefits provided plans covering us canadian salaried employees certain foreign locations generally based years service salary history gm also certain nonqualified pension plans covering executives based targeted wage replacement percentages unfunded measurement dates used principal us pension plans corporation hughes december 31 december 1 respectively nonus pension plans measurement dates december 1 canadian plans october 1 foreign plans pension plan assets primarily invested us government obligations equity fixed income securities commingled pension trust funds insurance contracts corporations 123 par value common stock valued 1999 measurement date 42 million eds common stock valued 1999 measurement date 47 billion march 1995 terms agreement corporation pension benefit guarantee corporation pbgc corporation contributed gm hourlyrate employees pension plan hourly plan 1732 million shares class e common stock valued 63 billion date subsequent splitoff eds class e stock held hourly plan exchanged eds common stock trustees hourly plan timetotime sold shares former class e common stock eds common stock effect reducing number shares eds common stock held hourly plan gms funding policy respect qualified pension plans contribute annually less minimum required applicable law regulations gm made pension contributions us hourly salary plans 794 million 1999 11 billion 1998 15 billion 1997 addition gm made pension contributions us plans 67 million 51 million 35 million 1999 1998 1997 respectively additionally gm maintains hourly salary benefit plans provide postretirement medical dental vision life insurance us retirees eligible dependents cost benefits recognized consolidated financial statements period employees provide service gm postretirement plan assets gms veba trust invested primarily fixed income securities certain corporations nonus subsidiaries postretirement plans although participants covered governmentsponsored administered programs cost programs generally significant gm ii51 general motors corporation subsidiaries notes consolidated financial statements continued note 15 pensions postretirement benefits continued us plans nonus plans pension benefits pension benefits 1999 1998 1999 1998 1999 1998 change benefit obligations millions benefit obligation beginning year 76963 73570 10283 9824 47346 44294 service cost 1007 1270 202 214 502 663 interest cost 4722 4974 604 643 2802 3113 plan participants contributions 37 43 29 28 41 31 amendments 5326 208 381 81 4 actuarial gainslosses 4565 1973 700 92 32 1622 benefits paid 5636 5196 391 349 2368 2287 divestituresdelphi spinoff 4652 3590 curtailment charges 67 121 680 250 86 90 benefit obligation end year 73269 76963 9728 10283 44683 47346 change plan assets fair value plan assets beginning year 75007 72280 5976 6075 4574 3000 actual return plan assets 13582 6438 965 328 207 249 employer contributions 861 1151 566 206 1970 1700 plan participants contributions 37 43 29 28 benefits paid 5636 5196 391 349 460 375 divestituresdelphi spinoff 3369 settlement charges 20 291 83 312 fair value plan assets end year 80462 75007 7062 5976 6291 4574 funded status 7193 1956 2666 4307 38392 42772 unrecognized actuarial gainloss 2463 10368 586 1880 1842 2209 unrecognized prior service cost 9850 7064 1048 764 212 448 unrecognized transition asset obligation 47 64 52 48 net amount recognized including discontinued operations 14533 15412 980 1615 36338 41011 discontinued operations 1635 4573 net amount recognized 14533 17047 980 16153633836438 amounts recognized consolidated balance sheets consist prepaid benefit cost 15267 5903 809 898 accrued benefit liability 815 2181 2612 3814 36338 36438 intangible asset 13 5961 700 504 accumulated comprehensive income 68 7364 123 797 net amount recognized 14533 17047 980 16153633836438 projected benefit obligation accumulated benefit obligation fair value plan assets pension plans accumulated benefit obligations excess plan assets 73 billion 68 billion 35 billion respectively december 31 1999 567 billion 560 billion 478 billion respectively december 31 1998 ii52 general motors corporation subsidiaries notes consolidated financial statements continued measurement purposes approximate 88 annual rate increase per capita cost covered health care benefits assumed 2000 rate assumed decrease linear basis 50 2006 remain level thereafter one percentage point increase assumed health care trend rate would increased accumulated projected benefit obligation apbo 46 billion december 31 1999 increased aggregate service interest cost components nonpension postretirement benefit expense 1999 443 million one percentage point decrease would decreased apbo 39 billion decreased aggregate service interest cost components nonpension postretirement benefit expense 1999 368 million allocation pension postretirement benefit obligations delphi gm assumed certain levels employee retirements prior october 1 1999 based historical experience conditions surrounding separation see note 2 gm consolidated financial statements prior spinoff delphi gm agreed recalculate allocation liabilities based actual level retirements october 1 1999 subsequently extended january 1 2000 connection 1999 uaw labor contract accordingly extent greater assumed number employees retire january 1 2000 delphi would required make payment gm extent less assumed number employees retire january 1 2000 gm would required make payment delphi gm disclosed consolidated financial statements certain amounts associated estimated future postretirement benefits pensions characterized amounts accumulated postretirement benefit obligations liabilities obligations notwithstanding recording amounts use terms gm admit otherwise acknowledge amounts existing postretirement benefit plans gm pensions represent legally enforceable liabilities gm note 16 commitments contingent matters commitments gm following minimum commitments noncancelable operating leases terms excess one year primarily real property 2000565 million 2001488 million 2002423 million 2003396 million 2004306 million 11 billion 2005 thereafter certain leases contain escalation clauses renewal purchase options rental expenses operating leases 825 million 1999 826 million 1998 1997 gm sponsors credit card program entitled gm card program offers rebates applied purchase lease gm vehicles amount rebates available qualified cardholders december 31 1999 1998 1997 37 billion 37 billion 35 billion respectively provisions gm card rebates recorded reductions revenues time vehicle sale part marketing agreement entered america online inc aol june 21 1999 hughes committed increase sales marketing expenditures next three years approximately 15 billion relating direcpcaolplus dlrectv dlrectvaol tv direcduo december 10 1999 gm fuji heavy industries ltd fuji entered agreement strategic alliance agreement gm subscribe purchase number newlyissued shares fujis voting common stock par value 50 yen y50 per share shall equal equity interest fuji 20 fully diluted basis time payment investment accounted using equity method accounting fuji remain independent company gm largest shareholder transaction expected completed second quarter 2000 estimated price 12 billion alliance agreement allow gm fuji collaborate design development manufacturing cars trucks related technology ii53 general motors corporation subsidiaries notes consolidated financial statements continued note 16 commitments contingent matters continued contingent matters pending grand jury investigation whether hughes accused criminal violations export control laws arising participation two employees committee formed review findings chinese engineers regarding failure long march rocket china 1996 hughes also subject authority state department impose sanctions noncriminal violations arms export control act possible criminal andor civil sanctions could include fines well debarment various export privileges participating government contracts hughes enter settlement matter prior closing boeing company boeing transaction see note 27 gm consolidated financial statements involves debarment sales us government material suspension hughes export licenses material limitation projected business activities satellite systems manufacturing businesses boeing would obligated complete purchase hughes satellite systems manufacturing businesses hughes expect grand jury investigation state department review result material adverse effect upon business however assurance favorable outcome connection 1997 spinoff hughes defense subsequent merger raytheon terms merger agreement provided processes resolving disputes might arise connection postclosing financial adjustments also called terms merger agreement financial adjustments might require cash payment raytheon hughes vice versa disputes currently exist regarding postclosing adjustments hughes raytheon proposed one another related issues regarding adequacy disclosures made hughes raytheon period prior consummation merger raytheon hughes proceeding dispute resolution processes matters possible ultimate resolution postclosing financial adjustment related disclosure issues may result hughes making payment raytheon would material hughes however amount payment either party might required make cannot determined time hughes intends vigorously pursue resolution disputes arbitration processes opposing adjustments proposed raytheon seeking payment raytheon hughes proposed general electric capital corporation gecc directv inc directv entered contract july 31 1995 gecc agreed establish manage private label consumer credit program consumer purchases hardware related directv programming contract gecc also agreed provide certain related services directv including credit risk scoring billing collections services directv agreed act surety loans complying terms contract hughes guaranteed directvs performance contract complaint counterclaim filed parties us district court district connecticut concerning geccs performance directvs obligation act surety gecc claims damages directv excess 140 million directv seeking damages gecc excess 45 million hughes intends vigorously contest geccs allegations pursue hughes contractual rights remedies hughes believe litigation material adverse impact results operations financial position pretrial discovery completed specific trial date set trial may held 2000 hughes space communications international hsci wholly owned subsidiary hughes space communications company certain contracts ico global communications operations ico global build satellites related components global wireless communications system hughes owns approximately 26 equity icos parent company ico global communications holdings ico hughes agreed sell boeing part sale hughes satellite systems manufacturing businesses see note 27 gm consolidated financial statements august 27 1999 ico filed bankruptcy protection chapter 11 us bankruptcy court wilmington delaware december 3 1999 us bankruptcy court case granted final approval debtorinpossession financing amount 500 million group led craig mccaw chairman teledesic llc company establishing global broadband internetinthesky satellite communications network october 1999 mccaw group also agreed provide additional 700 million financing upon icos emergence bankruptcy court protection extent financing provided investors exit financing expected completed mid2000 upon court approval consummation ico reorganization plan assurance consummation reorganization plan occur ico successful confirming plan reorganization unable likely outcome would liquidation proceeding event liquidation becomes probable hughes would expect record pretax charge income approximately 350 million portion purchase price paid boeing placed escrow certain circumstances prior completing sale boeing hughes contracts ico assumed ico bankruptcy court approval new similar contracts entered bankruptcy court approval june 3 1999 national rural telecommunications cooperative nrtc filed lawsuit directv inc hughes communications galaxy inc together directv united states district court central district california alleging directv breached dbs distribution agreement dbs agreement nrtc dbs agreement provides nrtc certain rights certain specified portions united states respect directv programming delivered 27 32 frequencies 101 degrees west longitude orbital location nrtc claims directv wrongfully deprived exclusive right distribute programming formerly provided ussb five frequencies 101 degrees directv denies nrtc entitled exclusive distribution rights former ussb programming among things nrtcs exclusive distribution rights limited programming distributed 27 32 frequencies 101 degrees nrtcs complaint seeks alternative right distribute former ussb programming nonexclusive basis recovery related revenues date ussb acquired hughes ii54 general motors corporation subsidiaries notes consolidated financial statements continued note 16 commitments contingent matters concluded contingent matters concluded directv maintains nrtcs right dbs agreement market sell former ussb programming agent entitled claimed revenues directv intends vigorously defend nrtc claims directv also filed counterclaim nrtc seeking declaration parties rights dbs agreement august 26 1999 nrtc filed second lawsuit directv alleges directv breached agreement nrtc lawsuit nrtc asking court require directv pay nrtc proportionate share unspecified financial benefits directv derives programming providers third parties directv denies owes sums nrtc account allegations matters plans vigorously defend claims pegasus satellite television inc golden sky systems inc two largest nrtc affiliates filed action january 11 2000 directv united states district court los angeles plaintiffs allege among things directv interfered contractual relationship nrtc plaintiffs plead rights damages derivative rights claims asserted nrtc two cases directv plaintiffs also allege directv interfered contractual relationships manufacturers distributors preventing parties selling receiving equipment plaintiffs dealers directv denies wrongly interfered plaintiffs business relationships vigorously defend lawsuit although amount loss cannot estimated time unfavorable outcome could reached nrtc pegasus litigation could material hughes results operations financial position anderson et al v general motors corporation jury los angeles superior court returned verdict 49 billion gm product liability lawsuit involving postcollision fuel fed fire 1979 chevrolet malibu posttrial developments trial court reduced punitive damages 48 billion 11 billion entered order stays execution judgment pending resolution appeals gm released bond gm posted punitive compensatory damages cost material corporation gm continues pursue appellate rights including efforts secure new trial complete elimination responsibility pay damages matter consistent gms view design chevrolet malibu responsible plaintiffs injuries connection gms disposition certain businesses including delphi gm granted uaw guarantees covering benefits provided certain former us hourly employees gm became employees disposed businesses guarantees limited terms extend beyond october 2007 connection guarantees relating certain delphis us hourly employees gm delphi entered agreement provisions designed prevent mitigate risk gms guarantee relating delphis employees would ever called upon payments thereunder gm would result obligation delphi indemnify hold gm harmless amounts gm believes likelihood make payments various guarantees remote payments made material gms financial position results operations gm subject potential liability government regulations various claims legal actions pending may asserted pending actions purport class actions aggregate ultimate liability gm government regulations claims actions determinable december 31 1999 discussion counsel opinion management liability expected material adverse effect corporations consolidated financial condition results operations note 17 preferred securities subsidiary trusts general motors obligated mandatorily redeemable preferred securities subsidiary trusts july 1997 general motors capital trust series trust issued approximately 79 million 867 trust originated preferred securitiessm toprssm series preferred securities oneforone exchange 3055255 outstanding gm series 792 depositary shares representing onefourth share gm series preference stock 010 par value per share addition general motors capital trust g series g trust issued approximately 143 million 987 toprs series g series g preferred securities oneforone exchange 5064489 outstanding gm series g 912 depositary shares representing onefourth share gm series g preference stock 010 par value per share ii55 general motors corporation subsidiaries notes consolidated financial statements continued note 17 preferred securities subsidiary trusts concluded concurrently exchanges related purchases gm series g trusts common securities trusts represent approximately 3 total assets trusts gm issued whollyowned trusts series trusts sole assets 867 junior subordinated deferrable interest debentures series due july 1 2012 series g trusts sole assets 987 junior subordinated deferrable interest debentures series g due july 1 2012 series debentures series g debentures collectively debentures aggregate principal amounts equal aggregate stated liquidation amounts series g preferred securities related common securities respectively 79 million respect series debentures 131 million respect series g debentures series debentures redeemable whole part gms option august 1 1999 redemption price equal 100 outstanding principal amount series debentures plus accrued unpaid interest series preferred securities redeemed upon maturity earlier redemption series debentures see note 27 gm consolidated financial statements series g debentures redeemable whole part gms option january 1 2001 redemption price equal 100 outstanding principal amount series g debentures plus accrued unpaid interest certain circumstances prior january 1 2001 redemption price equal 114 outstanding principal series g debentures series g expiration date december 31 1997 declining ratably january 1 thereafter 100 january 1 2001 plus accrued unpaid interest series g preferred securities redeemed upon maturity earlier redemption series g debentures gm guaranteed payment full holders series g preferred securities collectively preferred securities distributions payments preferred securities extent paid trusts extent trusts assets gm made payments interest principal related debentures guarantees taken together gms obligations preferred securities guarantees debentures indentures relating thereto obligations declaration trust trusts including obligations pay certain costs expenses trusts constitute full unconditional guarantees gm trusts obligations preferred securities sm trust originated preferred securities toprs service trademarks merrill lynch co note 18 stockholders equity see notes next page ii56 general motors corporation subsidiaries notes consolidated financial statements continued note 18 stockholders equity continued 1the following describes corporations preference stocks millions except par value stated value per share amounts preference stock 010 par value authorized 100 shares series b 918 preference stock represented series b 918 depositary shares liquidation preference 100 per share series 792 preference stock represented series 792 depositary shares stated value 25 per share redeemable corporation option august 1 1999 outstanding december 31 1999 one series 792 depositaty share equivalent onefourth share series 792 preference stock see note 17 gm consolidated financial statements series g 912 preference stock represented series g 912 depositary shares stated value 25 per share redeemable corporation option january 1 2001 outstanding december 31 1999 one series g 912 depositary share equivalent onefourth share series g 912 preference stock see note 17 gm consolidated financial statements series h 625 automatically convertible preference stock stated value 561875 per share automatically convertible gm class h stock june 24 2002 2 subsequent recapitalization december 17 1997 3 prior recapitalization december 17 1997 4 includes approximately 85 million shares repurchased using forward contract gm entered december 31 1999 see note 19 gm consolidated financial statements common stocks voting liquidation rights 123 par value common stock one vote per share one liquidation unit per share voting liquidation rights recapitalized gm class h common stock 06 votes per share 06 liquidation units per share liquidation rights 123 par value gm class h common stocks subject certain adjustments outstanding common stock subdivided stock split otherwise shares one class common stock issued dividend holders another class common stock holders gm class h common stock direct rights equity assets hughes rather rights equity assets gm includes 100 stock hughes outstanding shares gm class h common stock may recapitalized shares 123 par value common stock time december 31 2002 sole discretion gm board automatically time corporation sell liquidate otherwise dispose 80 business hughes based fair market value assets tangible intangible hughes date proposed transaction approved gm board event recapitalization outstanding shares gm class h common stock automatically converted corporations 123 par value common stock exchange rate would provide gm class h common stockholders number shares 123 par value common stock would value equal 120 value gm class h common stock date recapitalization type described prior sentence would occur triggering events took place unless holders gm common stock including holders 123 par value common stock holders gm class h common stock voting separately individual classes vote approve alternative proposal gm board common stock repurchases 1999 gm used 26 billion acquire approximately 36 million shares 123 par value common stock complete corporations 40 billion stock repurchase program announced february 1998 gm also used approximately 727 million 13 million repurchase shares 123 par value common stock gm class h common stock certain employee benefit plans respectively preference stocks april 5 1999 approximately 20 million outstanding depositary shares gms series b 918 preference stock repurchased retired approximately 501 million june 24 1999 part strategic alliance hughes aol invested 15 billion return approximately 27 million shares gm series h 625 automatically convertible preference stock par ii57 general motors corporation subsidiaries notes consolidated financial statements continued note 18 stockholders equity concluded value 010 per share preference stock automatically convert gm class h common stock three years based upon variable conversion factor linked gm class h common stock price time conversion accrues quarterly dividends rate 625 per year may converted earlier certain limited circumstances gm immediately invested 15 billion received aol shares hughes series preferred stock designed correspond financial terms gm series h 625 automatically convertible preference stock dividends hughes series preferred stock payable gm quarterly annual rate 625 preferred stock dividends payable gm reduce hughes earnings used computation available separate consolidated net income loss ascni hughes effect equivalent payment dividends gm series h 625 automatically convertible preference stock dividends paid hughes upon conversion gm series h 625 automatically convertible preference stock gm class h common stock hughes redeem series preferred stock cash payment gm equal fair market value gm class h common stock issuable upon conversion simultaneous gms receipt cash redemption proceeds gm make capital contribution hughes amount connection capital contribution denominator fraction used computation ascni hughes increased corresponding number shares gm class h common stock issued accordingly upon conversion gm series h 625 automatically convertible preference stock gm class h common stock numerator denominator used computation ascni increase amount gm class h common stock issued comprehensive income changes components comprehensive income loss reported net income taxes follows millions note 19 earnings per share attributable common stocks earnings per share attributable class gm common stock determined based attribution earnings class common stock period divided weightedaverage number common shares class outstanding period diluted earnings per share attributable class gm common stock considers impact potential common shares unless inclusion potential common shares would antidilutive effect attribution earnings class gm common stock follows millions years ended december 31 1999 1998 1997 earnings losses attributable common stocks 123 par value continuing operations 5592 2914 6149 discontinued operations 426 93 127 earnings attributable 123 par value 6018 2821 6276 class h prior recapitalization december 17 1997 continuing operations 234 discontinued operations 88 earnings attributable class h prior recapitalization december 17 1997 322 losses earnings attributable class h subsequent recapitalization december 17 1997 96 72 2 ii58 general motors corporation subsidiaries notes consolidated financial statements continued note 19 earnings per share attributable common stocks continued earnings attributable 123 par value common stock period represent earnings attributable gm common stocks period reduced ascni former hughes respective period losses attributable gm class h common stock 1999 represent ascni hughes losses used computation ascni hughes based separate consolidated net income loss hughes excluding effects gm purchase accounting adjustments arising gms acquisition hac remains spinoff hughes defense reduced amount dividends accrued series preferred stock hughes equivalent measure effect gms payment dividends gm series h 625 automatically convertible preference stock would paid hughes calculated loss used computation ascni hughes multiplied fraction numerator equal weightedaverage number shares gm class h common stock outstanding 1999 125 million denominator number equal weightedaverage number shares gm class h common stock issued outstanding would represent 100 interest earnings hughes average class h dividend base average class h dividend base 419 million 1999 upon conversion gm series h 625 automatically convertible preference stock gm class h common stock numerator denominator used computation ascni increase number shares gm class h common stock issued earnings attributable gm class h common stock 1998 represent ascni hughes excluding effects gm purchase accounting adjustments arising gms acquisition hac remains spinoff hughes defense calculated period multiplied fraction numerator equal weightedaverage number shares gm class h common stock outstanding 1998 105 million denominator number equal weightedaverage number shares gm class h common stock issued outstanding would represent 100 interest earnings hughes average class h dividend base 400 million 1998 earnings attributable gm class h common stock prior recapitalization december 17 1997 represented ascni former hughes ascni former hughes determined quarterly amounts equal separate consolidated net income former hughes respective quarter excluding effects purchase accounting adjustments arising time corporations acquisition hac calculated period multiplied fraction numerator number equal weightedaverage number shares gm class h common stock outstanding quarter 103 million fourth quarter 1997 denominator 400 million fourth quarter 1997 earnings attributable gm class h common stock period subsequent recapitalization gm class h common stock 1997 represent ascni hughes period december 18 1997 december 31 1997 excluding effects purchase accounting adjustments arising gms acquisition hac remains spinoff hughes defense calculated period multiplied fraction numerator number equal weightedaverage number shares gm class h common stock outstanding period 104 million denominator 400 million addition denominator used determining ascni hughes may adjusted timetotime deemed appropriate gm board reflect subdivisions combinations gm class h common stock certain transfers capital hughes contribution shares capital stock gm benefit hughes employees retirement gm class h common stock purchased hughes gm boards discretion make adjustments limited criteria set forth gms restated certificate incorporation connection primestar ussb transactions see discussion note 23 gm consolidated financial statements gm contributed hughes amount cash sufficient enable hughes purchase gm fair value determined gm board number shares gm class h common stock delivered hughes accordance gm restated certificate incorporation gm class h dividend base increased reflect number shares number shares issued part primestar acquisition ussb merger included calculation numerator denominator fraction described since consummation dates transactions ii59 general motors corporation subsidiaries notes consolidated financial statements continued note 19 earnings per share attributable common stocks continued effective january 1 1999 shares gm class h common stock delivered gm connection award shares exercise stock options employees hughes increase numerator denominator fraction referred prior january 1 1999 dilutive effect resulting assumed exercise stock options exercise stock options affect gm class h common stock dividend base denominator time anticipation exercises stock options hughes purchases gm class h common stock open market upon purchase shares retired therefore decrease numerator denominator fraction referred december 31 1999 part gms 123 par value common stock repurchase program corporation entered forward contract purchase approximately 85 million shares 123 par value common stock specified price forward contract structured give gm option settling contract either cash net shares since forward contract gives gm settlement option considered equity instrument rather derivative instrument accounting purposes changes fair value forward contract recorded final settlement recorded equity upon entering contract gm immediately reduced common shares outstanding used calculate basic diluted eps net gain loss forward contract included calculation diluted eps ii60 general motors corporation subsidiaries notes consolidated financial statements continued note 19 earnings per share attributable common stocks concluded reconciliation amounts used basic diluted earnings per share computations income continuing operations follows millions except per share amounts ii61 general motors corporation subsidiaries notes consolidated financial statements continued note 20 dividends common stock connection consummation hughes transactions gm board determined amount available payment dividends outstanding shares 123 par value common stock would cumulative amount available payment dividends 123 par value common stock immediately prior closing hughes transactions reduced pro rata portion net reduction gms total stockholders equity resulting hughes transactions addition gm board determined amount initially available payment dividends shares gm class h common stock would cumulative amount available payment dividends gm class h common stock immediately prior closing hughes transactions reduced pro rata portion net reduction gms total stockholders equity resulting hughes transactions pro rata allocation net reduction gms total stockholders equity resulting hughes transactions based fraction used determining ascni former hughes immediately prior consummation hughes transactions dividends may paid 123 par value common stock extent amount determined available payment dividends 123 par value common stock connection consummation hughes transactions plus earnings gm consummation hughes transactions earnings attributed gm class h common stock dividends may paid gm class h common stock extent amount initially determined available payment dividends gm class h common stock plus portion earnings gm closing hughes transactions attributed gm class h common stock amount available payment dividends class common stock reduced timetotime dividends paid class adjusted timetotime changes amount surplus attributed class resulting repurchase issuance shares class december 31 1999 amount available payment dividends 123 par value gm class h common stock 137 billion 54 billion respectively dividends may paid common stocks declared gm board sole discretion gms policy distribute dividends 123 par value common stock based outlook indicated capital needs business gm board currently intend pay cash dividends gm class h common stock recapitalized december 17 1997 part hughes transactions cash dividends per share 123 par value common stock 200 1999 1998 1997 cash dividends per share gm class h common stock prior recapitalization december 17 1997 100 1997 note 21 derivative financial instruments risk management gm party financial instruments offbalancesheet risk financial instruments used normal course business manage exposure fluctuations interest rates foreign exchange rates meet financing needs customers primary classes derivatives used gm foreign exchange forward contracts options interest rate swaps options forward contracts purchase sell mortgages mortgagebacked securities instruments involve varying degrees market risk instruments subject rate price fluctuations elements credit risk event counterparty default credit risk managed approval periodic monitoring financially sound counterparties derivative transactions used hedge underlying business exposures market risk instruments offset opposite movements underlying exposure cash receipts payments contracts normally occur maturity interest rate swap agreements periodic contractually defined intervals foreign exchange forward contracts options gm international corporation operations 50 countries foreign currency exposures operations related buying selling financing currencies local currency gms significant foreign currency exposures relate canada mexico western european countries primarily germany united kingdom spain italy belgium france australia japan brazil magnitude exposures significantly varies time depending upon strength local automotive markets sourcing decisions gm enters agreements seeks manage certain foreign exchange exposures accordance established policy guidelines primarily foreign exchange forward contracts purchased written foreign exchange options agreements primarily hedge cash flows debt firm commitments anticipated transactions involving vehicles components fixed assets subsidiary dividends general practice gm hedged foreign exchange exposure related ii62 general motors corporation subsidiaries notes consolidated financial statements continued note 21 derivative financial instruments risk management continued foreign exchange forward contracts options concluded either translation overseas earnings us dollars translation overseas equity positions back us dollars december 31 1999 1998 automotive communications services operations held foreign exchange forward contracts 35 billion 63 billion including crosscurrency swaps 0 70 million respectively december 31 1999 1998 automotive communications services operations entered foreign exchange options 10 billion 28 billion respectively december 31 1999 1998 financing insurance operations held foreign exchange forward contracts 133 billion 80 billion including crosscurrency swaps 52 billion 34 billion respectively automotive communications services operations deferred hedging losses outstanding foreign exchange forward contracts hedging firm commitments purchase inventory fixed assets totaling 21 million 3 million december 31 1999 1998 respectively deferred hedging losses outstanding purchased foreign exchange option contracts hedging firm anticipated transactions purchase inventory fixed assets totaled 1 million 2 million december 31 1999 1998 respectively financing insurance operations deferred hedging gains outstanding foreign exchange forward contracts hedging firm commitments purchase assets totaling 1 million 13 million december 31 1999 1998 respectively deferred amounts outstanding foreign exchange forward option contracts included cost assets purchased subsequently recognized operations part basis assets event contract terminated early anticipated transaction longer likely occur derivative marked market foreign exchange forward contracts hedge foreign exchange exposures anticipated inventory fixed assets sales transactions marked market recognized gains losses foreign exchange transactions consolidated statement income gms firm commitments typically one year may extend periods three years interest rate swaps options gms financing cash management activities subject market risk exposure changes interest rates gm entered various financial instrument transactions maintain desired level exposure risk interest rate fluctuations minimize interest expense achieve objective gm times use written options management exposures limited number cases interest rate swaps matched anticipated rollover investments wholesale assets debt executed portfolio basis achieve specific interest rate management objectives swaps also matched operating lease payments interest rate exposure exists differential paid received swaps recorded adjustment expense income term underlying agreement matched portfolio interest rate swaps contractual agreements gm another party exchange fixed floating interest rate payments periodically life agreements without exchange underlying principal amounts interest rate options including swaptions interest rate caps floors may result future exchange interest payments market interest rates reach certain levels december 31 1999 1998 total notional amount agreements offbalancesheet risk 10 billion 21 billion respectively automotive communications services operations december 31 1999 1998 financing insurance operations held agreements offbalancesheet risk notional amounts totaling 334 billion 200 billion respectively interest rate swaps used hedge underlying debt obligation marked market used adjust interest expense recognized life underlying debt agreement gains losses terminated interest rate swaps deferred recognized yield adjustments underlying debt automotive communications services operations unamortized net gains interest rate swaps totaled approximately 3 million 6 million december 31 1999 1998 respectively unamortized net gains interest rate swaps financing insurance operations totaled approximately 45 million 37 million december 31 1999 1998 respectively written options including embedded interest rate swaps written interest rate caps interest rate collars written swaptions interest rate swaps meet settlement accounting criteria marked market related gains losses recognized income current basis ii63 general motors corporation subsidiaries notes consolidated financial statements continued note 21 derivative financial instruments risk management concluded mortgage contracts gmac also entered contracts purchase sell mortgages specific future dates entered certain exchangetraded futures option contracts reduce exposure interest rate risk december 31 1999 1998 commitments sell mortgage loans securities totaled 16 billion 62 billion respectively commitments purchase originate mortgage loans totaled 48 billion 52 billion respectively gmacs exchangetraded futures option contracts used hedge mortgage loans held sale notional values 63 billion 50 billion december 31 1999 1998 respectively gains losses derivatives including exchangetraded futures option contracts used hedge interest rate risk associated ratelocked funding commitments mortgage loans held sale deferred considered reporting underlying mortgages lower cost market basis notional values derivatives used hedge price interest rate risk associated mortgagerelated securities totaled 75 billion 97 billion december 31 1999 1998 respectively gains losses associated instruments recognized income current period marked market basis derivatives used hedge mortgage servicing rights notional values 172 billion 651 billion december 31 1999 1998 respectively gains losses contracts recorded adjustment amortization expense gmac also entered interest rate swaps effort stabilize shortterm borrowing costs maintain minimum return certain mortgage loans held investment amounts received paid interest rate swaps recorded adjustment interest expense december 31 1999 1998 notional values instruments totaled 100 million credit risk forward contracts swaps options lines credit previously discussed contain element risk counterparties may unable meet terms agreements however gm minimizes risk exposure forward contracts swaps options limiting counterparties major international banks financial institutions meet established credit guidelines limiting amount risk exposure one bank financial institution management also reduces credit risk unused lines credit applying credit policies making commitments extending loans management expect incur losses result counterparty default gm generally require place collateral financial instruments except lines credit extends gm business activities customers dealers associates around world corporations receivables guarantees parties well diversified warranted secured collateral consequently managements opinion significant concentration credit risk exists gm note 22 fair value financial instruments estimated fair value financial instruments determined using available market information appropriate valuation methodologies however considerable judgment required interpreting market data develop estimates fair value therefore estimates necessarily indicative amounts could realized would paid current market exchange effect using different market assumptions andor estimation methodologies may material estimated fair value amounts fair value information presented herein based information available december 31 1999 1998 although management aware factors would significantly affect estimated fair value amounts updated since dates therefore current estimates fair value dates subsequent december 31 1999 1998 may differ significantly amounts ii64 general motors corporation subsidiaries notes consolidated financial statements continued note 22 fair value financial instruments continued book estimated fair values financial instruments practicable estimate fair value follows millions december 31 1999 1998 book fair book fair value automotive communications services operations assets cash marketable securities 11428 10130 accounts notes receivable less allowances 4901 4501 assets 4450 4431 1644 1659 liabilities accounts payable 17254 13542 longterm debt loans payable within one year 1991 1204 payable beyond one year 7415 7139 7118 7531 liabilities 535 559 524 585 preferred securities subsidiary trusts note 17 218 206 220 226 financing insurance operations assets cash investments securities 9822 8894 finance receivables net 80287 79934 70258 70457 accounts notes receivable less allowances 3218 3797 assets 10484 10509 11784 11808 liabilities accounts payable 4262 4148 debt payable within one year 66952 66943 62396 62442 payable beyond one year 55330 53936 45357 46600 prior tables exclude book values estimated fair values financial instrument derivatives follows millions fair value open contracts december 31 1999 1998 asset liability asset liability position automotive communications services operations 1 foreign exchange forward contracts 2 13 83 126 107 foreign exchange options 17 2 71 10 interest rate swaps 2 16 34 38 interest rate options 2 1 financing insurance operations 3 foreign exchange forward contracts 4 386 862 499 161 interest rate swaps 81 586 180 93 interest rate options 1 mortgage contracts 105 102 344 55 see notes next page ii65 general motors corporation subsidiaries notes consolidated financial statements continued note 22 fair value financial instruments continued 1the related liability asset recorded balance sheet foreign exchange forward contracts foreign exchange options interest rate swaps interest rate options totaled 32 million 17 million 10 million 2 million respectively december 31 1999 22 million 62 million 7 million 1 million respectively december 31 1998 2foreign exchange forward contracts included certain derivatives foreign exchange interest rate exposures fair value 0 54 million december 31 1999 1998 respectively 3the related liability asset recorded balance sheet foreign exchange forward contracts interest rate swaps totaled 374 million 33 million respectively december 31 1999 related asset recorded balance sheet foreign exchange forward contracts interest rate swaps totaled 233 million 14 million respectively december 31 1998 related asset recorded balance sheet mortgage contracts 23 million 284 million december 31 1999 1998 respectively 4foreign exchange forward contracts included certain derivatives foreign exchange interest rate exposures fair value 368 million 154 million december 31 1999 1998 respectively following methods assumptions used estimate fair value class financial instrument cash marketable securities fair value cash equivalents marketable securities determined principally based quoted market prices finance receivables fair value estimated discounting future cash flows using applicable spreads approximate current rates applicable category finance receivables carrying value wholesale receivables whose interest rates adjust shortterm basis applicable market indices generally prime rate assumed approximate fair value either due short maturities due interest rate adjustment feature accounts notes receivable accounts payable receivables payables short maturities book values approximate fair values assets liabilities assets reported december 31 1999 1998 include various financial instruments eg longterm receivables certain investments fair values based discounted cash flows market quotations appropriate valuation techniques fair values retained subordinated interests trusts excess servicing assets net deferred costs derived discounting expected cash flows using current market rates estimated values industrial development bonds included liabilities based quoted market prices similar issues debt loans payable fair value debt payable within one year determined using quoted market prices available calculating estimated value bank loan note debenture portfolio applicable rate effect commercial paper master notes demand notes original term less 90 days therefore carrying amounts liabilities considered fair values debt payable beyond one year estimated fair value based quoted market prices similar issues based current rates offered gm debt similar remaining maturities foreign exchange forward contracts options fair value foreign exchange forward contracts determined using current exchange rates fair value foreign exchange options estimated using pricing models indicative quotes obtained market variables preferred securities subsidiary trusts fair value gmobligated mandatorily redeemable preferred securities subsidiary trusts see note 17 gm consolidated financial statements determined based quoted market prices ii66 general motors corporation subsidiaries notes consolidated financial statements continued note 22 fair value financial instruments concluded interest rate swaps options fair value interest rate swaps including contracts optionality estimated using pricing models based upon current market interest rates exchange traded options valued quoted market prices mortgage contracts fair value mortgage contracts estimated based upon amount would received paid terminate contracts based market prices similar financial instruments current rates mortgage loans unused lines credit loans extended commitments market interest rates significant fair value position related outstanding commitments note 23 acquisitions investments april 28 1999 hughes completed acquisition primestars 23 million subscriber mediumpower directtohome satellite business purchase price consisted 11 billion cash 49 million shares gm class h common stock total purchase price 13 billion part agreement acquire primestar hughes agreed purchase highpower satellite assets related orbital frequencies tempo satellite inc whollyowned subsidiary tci satellite entertainment inc december 1998 hughes agreed acquire merger outstanding capital stock united states satellite broadcasting company inc ussb provided directtohome premium satellite programming conjunction directvs basic programming service ussb acquisition closed may 20 1999 july 6 1999 based upon elections made former ussb shareholders hughes paid approximately 360 million cash issued approximately 226 million shares gm class h common stock total purchase price approximately 16 billion july 22 1999 gmac completed acquisition assetbased lending factoring business unit bank new york bnyfc consideration approximately 18 billion purchase expands gmacs existing assetbased lending internationally enables enter factoring business substantial way gmac also completed acquisition fullservice leasing business arriva automotive solutions limited arriva july 30 1999 valued pound484 million approximately 775 million july 30 1999 exchange rate included debt refinancing financial information presented periods ended december 31 1999 reflects effects primestar tempo satellite ussb bnyfc arriva transactions discussed respective dates acquisition transactions accounted using purchase method accounting however adjustments made december 31 1999 financial statements reflect preliminary allocation primestar purchase price transactions based upon information currently available adjustments relating tangible assets including equipment located customer premises intangible assets including customer lists dealer network accrued liabilities programming contracts leases abovemarket rates estimates pending completion independent appraisals currently process additionally adjustment recognize benefit net operating loss carryforwards ussb represents preliminary estimate pending review analysis management hughes foregoing appraisals review analysis expected completed march 31 2000 accordingly final purchase price allocations may different amounts reflected herein gm 1999 financial statements include ussbs primestars bnyfcs arrivas results operations since dates acquisition following selected unaudited pro forma information provided present summary combined results gm ussb primestar bnyfc arriva acquisitions occurred beginning respective periods giving effect purchase accounting adjustments pro forma data presented informational purposes may necessarily reflect results operations gm ussb primestar bnyfc ii67 general motors corporation subsidiaries notes consolidated financial statements continued note 23 acquisitions investments concluded arriva operated part gm entire years ended december 31 1999 december 31 1998 necessarily indicative results future operations pro forma information excludes effect nonrecurring charges pro forma information follows millions except per share amounts year ended year ended december 31 1999 december 31 1998 total net sales revenues 178070 158037 net income continuing operations 5589 2951 net income loss discontinued operations 426 93 net income 6015 2858 basic earnings losses per share attributable common stocks 123 par value continuing operations 873 428 discontinued operations 066 014 earnings per share attributable 123 par value 939 414 losses earnings per share attributable class h 076 040 diluted earnings losses per share attributable common stocks 123 par value continuing operations 856 420 discontinued operations 065 014 earnings per share attributable 123 par value 921 406 losses earnings per share attributable class h 076 040 separately march 2 1999 gm invested additional 440 million isuzu motors ltd isuzu taking common ownership interest isuzu 49 gm arranged appraisals valuations studies performed aid allocation 440 million investment interest isuzu allocation expected completed first quarter 2000 march 9 1999 gmac completed acquisition majority interest online finance holdings subsidiaries online finance one largest independent retail used car finance providers united kingdom acquisition expanded gmacs range finance products available dealers automotive customers july 28 1999 galaxy latin america llc gla subsidiary hughes acquired galaxy brasil ltda exclusive distributor directv services brazil tevecap sa approximately 114 million plus assumption debt connection transaction tevecap sold 10 equity interest gla hughes cisneros group companies remaining gla partners increased hughes ownership interest gla 778 part transaction hughes also increased ownership interest surfin 591 750 total consideration paid transactions amounted approximately 101 million september november 1999 directv japan raised approximately 281 million total issuance bonds convertible common stock five major shareholders including approximately 245 million issued hughes see note 27 gm consolidated financial statements ii68 general motors corporation subsidiaries notes consolidated financial statements continued note 24 stock incentive plans stockbased compensation gm accounts stockbased compensation consistent sfas 123 accounting stockbased compensation permitted standard continue apply recognition measurement principles accounting principles board opinion 25 stock options stockbased employee compensation awards compensation cost stock options stockbased employee compensation awards determined based fair value grant date consistent method prescribed sfas 123 gms pro forma net income earnings attributable common stocks basic diluted earnings per share attributable common stocks would follows millions except per share amounts 1999 1998 1997 net income reported 6002 2956 6698 pro forma 5791 2763 6558 earnings losses attributable common stocks 123 reported 6018 2821 6276 pro forma 5826 2648 6147 class h prior recapitalization reported 322 pro forma 315 class h subsequent recapitalization reported 96 72 2 pro forma 115 52 2 basic earnings losses per share attributable common stocks 123 reported 936 426 870 pro forma 906 400 852 class h prior recapitalization reported 317 pro forma 310 class h subsequent recapitalization reported 077 068 002 pro forma 092 049 002 diluted earnings losses per share attributable common stocks 123 reported 918 418 862 pro forma 889 392 844 class h prior recapitalization reported 317 pro forma 310 class h subsequent recapitalization reported 077 068 002 pro forma 092 049 002 fair value option grant estimated date grant using blackscholes option pricing model following weightedaverage assumptions 1999 1998 1997 hughes gmsip plan gmssop gmsip plan gmssop gmsip plan interest rate 48 52 48 52 56 52 62 68 expected life years 50 70 50 62 50 70 expected volatility 279 380 279 62 328 262 263 207 dividend yield 23 36 34 21 ii69 general motors corporation subsidiaries notes consolidated financial statements continued note 24 stock incentive plans continued effects hughes transactions delphi spinoff adjustments number options related exercise prices described considered sfas 123 modifications terms outstanding options accordingly pro forma disclosure includes compensation cost incremental fair value sfas 123 resulting modifications pro forma amounts compensation cost indicative effects operating results future periods gms stock incentive plans consist general motors 1997 stock incentive plan formerly general motors amended stock incentive plan gmsip hughes electronics corporation incentive plan hughes plan general motors 1998 salaried stock option plan gmssop gmsip gmssop administered executive compensation committee gm board hughes plan administered executive compensation committee board directors hughes gmsip 60 million shares 123 par value 25 million shares gm class h common stocks may granted june 1 1997 may 31 2002 approximately 382 million 24 million available grants december 31 1999 options granted prior 1997 gmsip generally exercisable onehalf one year onehalf two years dates grant stock option grants awarded since 1997 vest ratably three years following grant date option prices 100 fair market value dates grant options generally expire 10 years dates grant subject earlier termination certain conditions hughes plan hughes may grant shares rights options acquire 776 million shares gm class h common stock december 31 1999 431 million available grants december 31 1999 option prices 100 fair market value dates grant options generally vest two four years expire 10 years dates grant subject earlier termination certain conditions gmssop 50 million shares 123 par value may granted january 1 1998 december 31 2007 approximately 425 million available grants december 31 1999 stock options exercisable two years date grant vest one year following date grant subject earlier termination certain conditions option prices 100 fair market value dates grant options generally expire 10 years two days dates grant connection delphi spinoff hughes transactions number options related exercise prices outstanding options affected plans adjusted reflect change fair market value 123 par value gm class h common stocks resulted transactions number shares option exercise price adjusted aggregate intrinsic value options immediately transactions remained unchanged ii70 general motors corporation subsidiaries notes consolidated financial statements continued note 24 stock incentive plans concluded changes status outstanding options follows gmsip hughes plan 123 class h gmssop par value common 123 par value common weighted shares average shares average shares average exercise option price option price option price options outstanding january 1 1997 29957947 4694 8699803 3551 granted 8989460 5881 5750600 5490 exercised 9273674 4295 2158728 3021 terminated 330727 5705 2694982 4256 hughes transactions adjustment 3023651 5897936 options outstanding december 31 1997 32366657 5140 15494629 2870 granted 9854805 5614 4234620 5078 4332305 5600 exercised 8242624 4408 2055168 2271 terminated 454558 5445 980464 3195 328630 5600 options outstanding december 31 1998 33524280 5072 16693617 3485 4003675 5600 granted 9811209 8579 5092420 4814 4473610 8597 exercised 7902380 4604 3599373 2950 terminated 3198739 5525 1431582 4046 2271557 7353 delphi spinoff adjustment 6774777 1288914 options outstanding december 31 1999 39009147 5130 16755082 3929 7494642 5872 options exercisable december 31 1999 18933705 4147 6669761 3294 following table summarizes information gms stock option plans december 31 1999 weighted average weighted range options remaining avgerage options average exercise outstanding contractual exercise exercisable exercise prices life yrs price gmsip 123 par value common 1300 3802169 39 3124 3802169 3124 3999 4000 23686915 69 4474 15094567 4401 4999 5000 11520063 90 7142 36969 5551 7750 1300 39009147 72 5130 18933705 4147 7750 gmsip hughes plan class h common 986 420990 29 1518 420990 1518 2000 2001 952192 50 2230 952192 2230 3000 3001 7083140 71 3194 4247148 3230 4000 4001 5661920 90 4632 17712 4763 5000 5001 2636840 85 5578 1031719 5479 8572 986 16755082 77 3929 6669761 3294 8572 gmssop 123 par value common 4659 3848682 80 4659 7153 3645960 90 7153 4659 7494642 85 5872 7153 ii71 general motors corporation subsidiaries notes consolidated financial statements continued note 25 income expenses income expenses consisted following millions years ended december 31 1999 1998 1997 income interest income 2248 2105 2127 insurance premiums 1339 1426 1161 rental car lease revenue 1765 1229 1137 mortgage operations investment income servicing fees 2742 1836 1525 gain hughes defense spinoff 4269 1095 988 1456 total income 9189 7584 11675 expenses provision financing losses 404 463 523 insurance losses loss adjustment expenses 882 1013 747 503 792 210 total expenses 1789 2268 1480 note 26 segment reporting sfas 131 disclosures segments enterprise related information established standards reporting information operating segments financial statements operating segments defined components enterprise separate financial information available evaluated regularly chief operating decision maker decision making group deciding allocate resources assessing performance gms chief operating decision maker chairman chief executive officer operating segments managed separately operating segment represents strategic business unit offers different products serves different markets gms reportable operating segments within automotive communications services operations business consist general motors automotive gma comprised four regions gm north america gmna gm europe gme gm asiapacific gmap gm latin americaafricamideast gmlaam hughes gmna designs manufactures markets vehicles primarily north america following nameplates chevrolet pontiac gmc oldsmobile buick cadillac saturn gme gmap gmlaam meet demands customers outside north america vehicles designed manufactured marketed following nameplates opel vauxhall holden isuzu saab buick chevrolet gmc cadillac hughes includes activities relating digital entertainment information communications services satellitebased private business networks segment includes design manufacturing marketing locomotives heavyduty transmissions elimination intersegment transactions certain nonsegment specific revenues expenditures well former hughes defense business prior hughes transactions gms reportable operating segments within financing insurance operations business consist gmac provides broad range financial services including consumer vehicle financing fullservice leasing fleet leasing dealer financing car truck extended service contracts residential commercial mortgage services commercial vehicle homeowners insurance assetbased lending financing insurance operations segment includes financing entities operating canada germany brazil associated gmac accounting policies operating segments described summary significant accounting policies except disaggregated financial results prepared using management approach consistent basis manner gm management internally disaggregates financial information purposes assisting making internal operating decisions gm evaluates performance based standalone operating segment net income generally accounts intersegment sales transfers sales transfers third parties current market prices revenues attributed geographic areas based location assets producing revenues ii72 see notes next page ii73 general motors corporation subsidiaries notes consolidated financial statements continued athe operating results 1997 presented reflect changes gms organizational structure resulting hughes transactions occurred december 1997 hughes excludes hughes defense includes hughes defense bother includes 43 billion gain resulting hughes transactions year ended december 31 1997 income loss discontinued operations related delphi 426 million 93 million 215 million years ended december 31 1999 1998 1997 respectively cthe amount reported hughes excludes amortization gm purchase accounting adjustments approximately 21 million 1999 1998 1997 related gms acquisition hughes aircraft company amortization allocated gms segment consistent basis upon segments evaluated dexcludes expenditures related satellite services directtohome broadcast totaling 669 million 797 million 606 million 1999 1998 1997 respectively also excludes expenditures related early buyout satellite saleleasebacks totaling 370 million 156 million 1999 1998 respectively ii74 general motors corporation subsidiaries notes consolidated financial statements continued note 26 segment reporting concluded information concerning principal geographic areas follows millions 1999 1998 1997 net sales net sales net sales net revenues property revenues property revenues property north america united states 130073 20634 105672 19454 131076 17592 canada mexico 12661 3760 11009 2358 7953 2506 total north america 142734 24394 116681 21812 139029 20098 europe france 2130 151 2042 186 1327 157 germany 8968 2912 10567 3349 9358 2902 spain 2001 542 1966 422 1185 480 united kingdom 5390 1070 5379 1192 5085 1176 9407 1635 9679 1748 7854 1566 total europe 27896 6310 29633 6897 24809 6281 latin america brazil 2830 1409 4773 1879 4719 1873 latin america 1686 403 2909 409 2914 440 total latin america 4516 1812 7682 2288 7633 2313 1412 759 1449 1611 1109 888 total 176558 33275 155445 32608 172580 29580 note 27 subsequent events january 10 2000 gm announced intends exercise option buy remaining 50 saab automobile ab saab investor ab end january 2000 january 28 2000 acquisition remaining 50 saab completed 125 million accounted using purchase method accounting january 13 2000 hughes announced reached agreement sell satellite systems manufacturing businesses boeing company boeing 38 billion cash transaction subject regulatory approval expected close second third quarter 2000 addition hughes enter settlement china investigation see note 16 gm consolidated financial statements prior closing boeing transaction involves debarment sales us government material suspension hughes export licenses material limitation projected business activities satellite systems manufacturing businesses boeing would obligated complete purchase hughes satellite systems manufacturing businesses also january 13 2000 hughes announced discontinuation mobile cellular narrowband local loop product lines hughes network systems result decision hughes recorded fourth quarter 1999 pretax charge continuing operations 272 million charge represents writeoff receivables inventories licenses software equipment alternative use echostar communications corporation others commenced action united states district court colorado february 1 2000 directv hughes network systems thomson consumer electronic inc seeking among things injunctive relief unspecified damages including treble damages connection allegations defendants entered agreements retailers program providers engage conduct violates antitrust laws constitutes unfair competition directv believes complaint without merit intends vigorously defend allegations raised although amount loss cannot estimated time unfavorable outcome could reached could material hughes results operations financial position february 1 2000 gm announced offer repurchase 123 par value common stock exchange 80 billion gm class h common stock contribute 70 billion gm class h common stock us hourlyrate employee pension plan veba trust connection transactions gm issue approximately 150 billion gm class h common stock gm expects complete proposed transaction second quarter 2000 march 1 2000 hughes announced directv japans operations discontinued subscribers would migrate skyperfectv japanese company providing directtohome satellite broadcasting result transaction hughes acquire 68 interest skyperfectv expected complete ipo fiscal year ending march 31 2001 hughes required fund substantial portion costs incurred next six nine months exit directv japan business hughes accrue exit costs first quarter fiscal 2000 first quarter charge offset fair value skyperfectv interest received however amounts yet estimable addition hughes continue record share directv japans operating losses fiscal 2000 ii75 general motors corporation subsidiaries notes consolidated financial statements concluded note 27 subsequent events concluded march 6 2000 gm announced seek stockholder approval increase number authorized shares gm class h common stock 600 million 36 billion shares approved gm expects declare stock split gm class h common stock form stock dividend shortly annual stockholders meeting held june 2000 march 7 2000 gm announced intends redeem approximately 3 million outstanding seriesd 792 depositary shares approximately 31 million outstanding seriesd 867 toprssm may 2 2000 securities together total face value approximately 150 million seriesd 792 depositary shares redeemed price 25 per share plus accrued unpaid dividends 018 per share seriesd 867 toprssm redeemed price 25 per security plus accrued unpaid distribution 001 per share see note 17 gm consolidated financial statements ii76 general motors corporation subsidiaries supplementary information selected quarterly data unaudited 1999 quarters 1st 2nd 3rd 4th 1 dollars millions except per share amounts total net sales revenues 42435 45067 42794 46262 income continuing operations income taxes minority interests 2940 2784 1518 1805 income tax expense 1029 956 553 580 minority interests 14 7 losses nonconsolidated associates 77 87 81 80 income continuing operations 1820 1734 877 1145 income discontinued operations 242 184 net income 2062 1918 877 1145 dividends preference stocks 16 7 28 29 earnings attributable common stocks 2046 1911 849 1116 earnings losses attributable common stocks 123 par value continuing operations 1783 1754 866 1196 discontinued operations 242 184 earnings attributable 123 par value 2025 1938 866 1196 earnings losses attributable class h 21 27 17 80 basic earnings losses per share attributable common stocks 123 par value continuing operations 273 271 135 190 discontinued operations 037 028 earnings per share attributable 123 par value 310 299 135 190 earnings losses per share attributable class h 020 023 013 058 average number shares common stocks outstanding basic millions 123 par value 654 648 641 630 class h 106 121 135 136 diluted earnings losses per share attributable common stocks 123 par value continuing operations 268 266 133 186 discontinued operations 036 028 earnings per share attributable 123 par value 304 294 133 186 earnings losses per share attributable class h 019 023 013 058 average number shares common stocks outstanding diluted millions 123 par value 667 660 652 643 class h 112 121 135 136 ii77 general motors corporation subsidiaries supplementary information continued selected quarterly data unaudited continued 1 fourth quarter 1999 results impacted net charges income continuing operations 110 million 009 per share 123 par value common stock consisted following special items increase income 892 million 553 million aftertax 086 earnings per share 123 par value common stock related reversal liability benefits payable excess us hourly employees see note 4 gm consolidated financial statements charge 658 million 408 million aftertax 063 loss per share 123 par value common stock related benefit increase granted hourly retirees connection uaw agreement gm expenses benefit period contract uaw ratified charge 147 million 90 million aftertax 014 loss per share 123 par value common stock related us salaried early retirement program approximately 1700 people elected participation program charge 272 million 165 million aftertax 018 loss per share 123 par value common stock 038 loss per share gm class h common stock related hughes decision discontinue certain wireless manufacturing operations hughes network systems ii78 general motors corporation subsidiaries supplementary information continued selected quarterly data unaudited continued 1998 quarters 1st 2nd1 3rd 4th 2 dollars millions except per share amounts total net sales revenues 40024 37272 33525 44624 income loss continuing operations income taxes minority interests 2083 511 419 2769 income tax expense benefit 695 159 144 926 minority interests 10 1 9 losses nonconsolidated associates 10 46 33 150 income loss continuing operations 1368 306 309 1684 income loss discontinued operations 236 83 500 88 net income loss 1604 389 809 1772 dividends preference stocks 16 15 earnings losses attributable common stocks 1588 373 825 1757 earnings losses attributable common stocks 123 par value continuing operations 1338 275 336 1637 discontinued operations 236 83 500 88 earnings losses attributable 123 par value 1574 358 836 1725 earnings attributable class h 14 15 11 32 basic earnings losses per share attributable common stocks 123 par value continuing operations 196 041 052 251 discontinued operations 035 013 076 013 earnings losses per share attributable 123 par value 231 054 128 264 earnings per share attributable class h 013 014 011 030 average number shares common stocks outstanding basic millions 123 par value 682 661 654 class h 104 105 106 diluted earnings losses per share attributable common stocks 123 par value continuing operations 193 040 052 248 discontinued operations 034 012 076 013 earnings losses per share attributable 123 par value 227 052 128 261 earnings per share attributable class h 013 014 011 030 average number shares common stocks outstanding diluted millions 123 par value 693 672 654 665 class h 109 111 110 109 ii79 general motors corporation subsidiaries supplementary information concluded selected quarterly data unaudited concluded 1second quarter 1998 results included charge income continuing operations 74 million 44 million aftertax 006 loss per share 123 par value common stock related work schedule modifications opel belgium 2fourth quarter 1998 results included charges income continuing operations totaling 224 million 228 million aftertax 034 loss per share 123 par value common stock resulting gms competitiveness studies ii80 general motors corporation subsidiaries item 9 item 8 consolidated statements income years ended december 31 2001 2000 1999 dollars millions except per share amounts general motors corporation subsidiaries total net sales revenues notes 1 2 23 177260 184632 176558 cost sales expenses notes 2 3 23 143850 145664 140708 selling general administrative expenses 23302 22252 19053 interest expense note 13 8590 9552 7750 total costs expenses 175742 177468 167511 income continuing operations income taxes minority interests 1518 7164 9047 income tax expense note 8 768 2393 3118 equity income loss minority interests 149 319 353 income continuing operations 601 4452 5576 income discontinued operations note 1 426 net income 601 4452 6002 dividends preference stocks note 17 99 110 80 earnings attributable common stocks 502 4342 5922 basic earnings losses per share attributable common stocks note 18 123 par value continuing operations 178 680 870 discontinued operations note 1 066 earnings per share attributable 123 par value 178 680 936 earnings per share attributable class h 055 056 026 earnings losses per share attributable common stocks assuming dilution note 18 123 par value continuing operations 177 668 853 discontinued operations note 1 065 earnings per share attributable 123 par value 177 668 918 earnings per share attributable class h 055 026 reference made notes consolidated financial statements ii20 consolidated statements income concluded years ended december 31 2001 2000 1999 dollars millions automotive communications services operations total net sales revenues notes 1 2 23 151491 160627 156107 cost sales expenses notes 2 3 23 135620 138303 134111 selling general administrative expenses 16043 16246 14324 total costs expenses 151663 154549 148435 interest expense note 13 751 815 828 net expense transactions financing insurance operations note 1 435 682 308 income loss continuing operations income taxes minority interests 1358 4581 6536 income tax benefit expense note 8 270 1443 2167 equity income loss minority interests 79 299 327 income loss continuing operations 1167 2839 4042 income discontinued operations note 1 426 net income loss automotive communications services operations 1167 2839 4468 years ended december 31 2001 2000 1999 dollars millions financing insurance operations total revenues 25769 24005 20451 interest expense note 13 7839 8737 6922 depreciation amortization expense note 9 5857 5982 5445 operating expenses 7105 5805 4595 provisions financing insurance losses notes 1 23 2527 1580 1286 total costs expenses 23328 22104 18248 net income transactions automotive communications services operations note 1 435 682 308 income taxes minority interests 2876 2583 2511 income tax expense note 8 1038 950 951 equity income loss minority interests 70 20 26 net income financing insurance operations 1768 1613 1534 supplemental consolidating information explained note 1 nature operations reference made notes consolidated financial statements ii21 consolidated balance sheets december 31 general motors corporation subsidiaries 2001 2000 assets dollars millions automotive communications services operations cash equivalents note 1 8432 9119 marketable securities note 4 790 1161 total cash marketable securities 9222 10280 accounts notes receivable less allowances 5406 5835 inventories less allowances note 6 10034 10945 equipment operating leases net note 7 4524 5699 deferred income taxes current assets note 8 7877 8388 total current assets 37063 41147 equity net assets nonconsolidated associates 4950 3497 property net note 9 34908 33977 intangible assets net notes 1 10 13721 7622 deferred income taxes note 8 22294 14870 assets note 11 17274 32243 total automotive communications services operations assets 130210 133356 financing insurance operations cash equivalents note 1 10123 1165 investments securities note 4 10669 9595 finance receivables net note 5 99813 92415 investment leases receivables note 7 34618 36752 assets note 11 36979 27846 net receivable automotive communications services operations note 1 1557 1971 total financing insurance operations assets 193759 169744 total assets 323969 303100 liabilities stockholders equity automotive communications services operations accounts payable principally trade 18297 18309 loans payable note 13 2402 2208 accrued expenses note 12 34090 33252 net payable financing insurance operations note 1 1557 1971 total current liabilities 56346 55740 longterm debt note 13 10726 7410 postretirement benefits pensions note 14 34515 34306 pensions note 14 10790 3480 liabilities deferred income taxes note 12 13794 15768 total automotive communications services operations liabilities 126171 116704 financing insurance operations accounts payable 7900 7416 debt note 13 153186 135037 liabilities deferred income taxes note 12 16259 12922 total financing insurance operations liabilities 177345 155375 total liabilities 303516 272079 minority interests 746 707 general motors obligated mandatorily redeemable preferred securities subsidiary trusts holding solely junior subordinated debentures general motors note 16 series g 139 stockholders equity note 17 123 par value common stock issued 559044427 548181757 shares 932 914 class h common stock issued 877505382 875286559 shares 88 capital surplus principally additional paidin capital 21519 21020 retained earnings 9463 10119 subtotal 32002 32141 accumulated foreign currency translation adjustments 2919 2502 net unrealized loss derivatives 307 net unrealized gains securities 512 581 minimum pension liability adjustment 9581 45 accumulated comprehensive loss 12295 1966 total stockholders equity 19707 30175 total liabilities stockholders equity 323969 303100 reference made notes consolidated financial statements ii22 ii23 ii24 general motors corporation subsidiaries notes consolidated financial statements note 1 significant accounting policies principles consolidation consolidated financial statements include accounts general motors corporation domestic foreign subsidiaries 50 owned principally general motors acceptance corporation subsidiaries gmac hughes electronics corporation subsidiaries hughes collectively referred corporation general motors gm general motors share earnings losses associates least 20 voting securities owned included consolidated operating results using equity method accounting except investments gm able exercise significant influence operating financial decisions investee case cost method accounting used financial data related delphi automotive systems corporation delphi presented discontinued operations period ended december 31 1999 gm encourages reference gmac hughes annual reports form 10k period ended december 31 2001 filed separately securities exchange commission hughes consolidated financial statements included exhibit 99 gm annual report form 10k period ended december 31 2001 certain amounts 2000 1999 reclassified conform 2001 classifications special purpose entities spes used connection securitization sale finance receivables mortgage loans consolidated gm gmac surrendered control financial assets spes used connection leasing property consolidated owner spe made substantial investment risk life spe assets unconsolidated spes follows dollars millions december 31 2001 2000 automotive communications services operations assets leased operating leases 2412 1729 trade receivables sold 868 897 total 3280 2626 financing insurance operations receivables sold securitized mortgage loans 104678 86344 retail finance receivables 11978 6957 wholesale finance receivables 16227 9988 total 132883 103289 nature operations gm presents separate supplemental consolidating statements income financial information following businesses 1 automotive communications services operations consists design manufacturing marketing cars trucks locomotives heavyduty transmissions related parts accessories well operations hughes 2 financing insurance operations consists primarily gmac provides broad range financial services including consumer vehicle financing fullservice leasing fleet leasing dealer financing car truck extended service contracts residential commercial mortgage services vehicle homeowners insurance assetbased lending transactions businesses eliminated corporations consolidated statements income transactions consist principally borrowings financial services provided financing insurance operations automotive communications services operations use estimates preparation financial statements preparation financial statements conformity accounting principles generally accepted us requires management make estimates assumptions affect amounts reported therein due inherent uncertainty involved making estimates actual results reported future periods may differ estimates ii25 general motors corporation subsidiaries notes consolidated financial statements continued note 1 significant accounting policies continued revenue recognition sales generally recorded products shipped title risks rewards ownership passed services rendered independent dealers third parties provisions dealer customer sales incentives allowances rebates made time vehicle sales incentives allowances rebates related vehicles previously sold recognized reductions sales announced financing revenue recorded terms receivables using interest method income operating lease assets recognized straightline basis scheduled lease terms insurance premiums earned basis related coverage provided terms policies commissions premium taxes costs incurred acquiring new business deferred amortized terms related policies basis premiums earned liability losses loss expenses includes provision unreported losses based past experience net estimated salvage subrogation recoverable productrelated expenses advertising sales promotion research development productrelated costs charged expense incurred provisions estimated expenses related product warranties made time products sold advertising expense 40 billion 2001 43 billion 2000 45 billion 1999 research development expense 62 billion 2001 66 billion 2000 68 billion 1999 depreciation amortization january 1 2001 corporation adopted straightline method depreciation real estate plants equipment placed service january 1 2001 assets placed service january 1 2001 continue generally depreciated using accelerated methods accelerated methods accumulate depreciation approximately twothirds depreciable cost first half estimated useful lives property groups compared straightline method allocates depreciable costs equally estimated useful lives property groups management believes adoption straightline depreciation method assets placed service january 1 2001 better reflects consistent utilization asset useful life effect change results operations year ended december 31 2001 material equipment operating leases depreciated straightline basis term lease agreement difference net book value proceeds sale salvage items disposed accounted charge credit provision depreciation expenditures special tools amortized estimated useful lives primarily using units production method replacements special tools reasons changes products charged directly cost sales goodwill amortized straightline basis periods ranging 20 40 years valuation longlived assets gm periodically evaluates carrying value longlived assets held used longlived assets disposed including goodwill intangible assets events circumstances warrant review evaluations reviews generally done conjunction annual business planning cycle carrying value longlived asset considered impaired loss recognized based amount carrying value exceeds fair market value longlived asset assets held used amount carrying value exceeds fair market value less cost dispose assets disposed fair market value determined primarily using anticipated cash flows discounted rate commensurate risk involved foreign currency translation foreign currency exchange transaction translation losses aftertax basis included consolidated net income 2001 2000 1999 pursuant statement financial accounting standards sfas 52 foreign currency translation amounted 107 million 100 million 162 million respectively stockbased compensation permitted sfas 123 accounting stockbased compensation gm applies recognition measurement principles accounting principles board opinion 25 stock options stockbased employee compensation awards ii26 general motors corporation subsidiaries notes consolidated financial statements continued note 1 significant accounting policies continued cash equivalents cash equivalents defined shortterm highly liquid investments original maturities 90 days less statement cash flows supplementary information years ended december 31 automotive communications services operations 2001 2000 1999 dollars millions increase decrease cash due changes operating assets liabilities follows accounts receivable 111 625 659 prepaid expenses deferred charges 254 66 623 inventories 522 297 66 accounts payable 558 1254 5606 deferred taxes income taxes payable 1444 629 160 accrued expenses liabilities 1549 955 3425 total 2056 724 7523 cash paid interest income taxes follows interest 1259 968 526 income taxes 1149 2310 2166 2000 automotive communications services operations made investments companies net cash acquired approximately 43 billion amount consists primarily gms purchase 20 equity interest fuji heavy industries ltd fuji approximately 13 billion gms acquisition 20 interest fiat auto holdings bv fiat auto 24 billion addition 2000 fiat spa purchased approximately 32 million shares gm 123 par value common stock 24 billion included proceeds issuing common stocks years ended december 31 financing insurance operations 2001 2000 1999 dollars millions increase decrease cash due changes operating assets liabilities follows receivables 2622 726 269 assets 49 29 83 accounts payable 483 3155 114 deferred taxes liabilities 2940 105 215 total 850 2505 23 cash paid interest income taxes follows interest 7239 8511 6618 income taxes 694 475 214 derivative instruments gm party variety foreign exchange interest rate commodity forward contracts options entered connection management exposure fluctuations foreign exchange interest rates certain commodity prices financial exposures managed accordance corporate policies procedures derivatives recorded fair value balance sheet effective changes fair value derivatives designated cash flow hedges net investment foreign operation recorded net unrealized loss derivatives separate component accumulated comprehensive loss amounts reclassified accumulated comprehensive loss underlying hedged item impacts earnings ineffective changes fair value recorded currently earnings changes fair value derivatives designated fair value hedges recorded currently earnings offset extent derivative effective changes fair value hedged item changes fair value derivatives designated hedging instruments recorded currently earnings ii27 general motors corporation subsidiaries notes consolidated financial statements continued note 1 significant accounting policies continued new accounting standards june 2001 financial accounting standards board fasb issued sfas 141 business combinations sfas 141 requires purchase method accounting used business combinations initiated june 30 2001 statement specifies certain acquired intangible assets business combination recognized assets separately goodwill existing intangible assets goodwill evaluated new separation requirements management expect statement material impact gms consolidated financial position results operations june 2001 fasb issued sfas 142 goodwill intangible assets sfas 142 changes accounting goodwill amortization method impairmentonly approach amortization goodwill including goodwill recorded past business combinations cease upon adoption statement addition statement requires goodwill tested impairment least annually reporting unit level corporation implemented sfas 142 january 1 2002 accordance statement gm required complete transitional goodwill impairment test june 30 2002 corporation evaluating yet determined whether adoption statement result impairment goodwill management estimates goodwill indefinite lived intangible asset amortization required previous accounting standards 383 million pretax 302 million aftertax charged income statement 2002 june 2001 fasb issued sfas 143 accounting asset retirement obligations statement addresses financial accounting reporting obligations associated retirement tangible longlived assets associated asset retirement costs corporation required implement sfas 143 january 1 2003 management expect statement material impact gms consolidated financial position results operations august 2001 fasb issued sfas 144 accounting impairment disposal longlived assets statement supercedes sfas 121 accounting impairment longlived assets longlived assets disposed statement retains previously existing accounting requirements related recognition measurement impairment longlived assets held used expanding measurement requirements longlived assets disposed sale include discontinued operations also expands previously existing reporting requirements discontinued operations include component entity either disposed classified held sale corporation implemented sfas 144 january 1 2002 management expect statement material impact gms consolidated financial position results operations discontinued operations february 5 1999 delphi completed initial public offering ipo 100 million shares common stock represented 177 outstanding common shares april 12 1999 gm board directors gm board approved complete separation delphi gm means spinoff taxfree gm stockholders us federal income tax purposes may 28 1999 gm distributed holders 123 par value common stock 801 outstanding shares delphi resulted 069893 shares delphi common stock distributed share gm 123 par value common stock outstanding record date may 25 1999 addition gm contributed remaining 22 delphi shares around 124 million shares voluntary employee beneficiary association veba trust established gm fund benefits hourly retirees total complete separation delphi year ended december 31 1999 resulted reduction stockholders equity approximately 33 billion financial data related gms investment delphi may 28 1999 classified discontinued operations period ended december 31 1999 delphi net sales including sales gm included discontinued operations totaled 125 billion year ended december 31 1999 income delphi discontinued operations 426 million year ended december 31 1999 reported net income tax expense 314 million ii28 general motors corporation subsidiaries notes consolidated financial statements continued note 2 asset impairments gm recorded pretax charges income asset impairments 140 million 90 million aftertax 016 per share gm 123 par value common stock 2001 917 million 587 million aftertax 099 per share gm 123 par value common stock 2000 gm record pretax charges income 1999 charges components following line items income statement years ended december 31 2001 2000 dollars millions total net sales revenues 315 cost sales expenses 140 602 total 140 917 2001 charges related writedown equipment result announcement closing ste therese quebec assembly plant 2002 writedown certain equipment operating leases determined impaired gm north america gmna 2000 pretax charges comprised 572 million 356 million aftertax gmna 345 million 231 million aftertax gm europe gme amount related writedown special tools equipment operating leases result phaseout oldsmobile division current model lineup product lifecycles come end models longer economically viable reduction production capacity gme including restructuring vauxhall motors limiteds manufacturing operations uk note 3 postemployment benefit costs gm records liabilities termination postemployment benefits paid pursuant union contractual agreements connection closed plants north america gm reviews adequacy continuing need liabilities annual basis conjunction yearend production labor forecasts furthermore gm reviews reasonableness liabilities quarterly basis 2001 gm recognized postemployment benefit liabilities related announced closing ste therese quebec assembly plant 2002 2001 charge relates 1350 employees increased cost sales 137 million 89 million aftertax 016 per share gm 123 par value common stock 2000 gm recognized postemployment benefit liabilities associated reductions production capacity conversions following us plants oklahoma city oklahoma delta engine lansing michigan spring hill tennessee wilmington delaware 2000 charge relates approximately 4000 us employees increased cost sales 473 million 294 million aftertax 050 per share gm 123 par value common stock ii29 general motors corporation subsidiaries notes consolidated financial statements continued note 3 postemployment benefit costs concluded note 4 marketable securities marketable securities held gm classified availableforsale except certain mortgagerelated securities classified held maturity trading securities unrealized gains losses net related income taxes availableforsale held maturity securities included separate component stockholders equity unrealized gains losses trading securities included income current basis gm determines cost specific identification basis ii30 general motors corporation subsidiaries notes consolidated financial statements continued note 4 marketable securities continued automotive communications services operations investments marketable securities follows dollars millions december 31 2001 book fair unrealized cost value gains losses type security bonds notes securities corporate debt securities 777 790 13 total marketable securities 777 790 13 december 31 2000 book fair unrealized cost value gains losses type security bonds notes securities united states government agencies 90 91 1 states municipalities 9 corporate debt securities 1063 1061 2 total marketable securities 1162 1161 1 2 debt securities totaling 265 million mature within one year 504 million mature one five years 21 million mature ten years proceeds sales marketable securities totaled 373 million 2001 13 billion 2000 20 billion 1999 gross gains related sales marketable securities 6 million 1 million 21 million 2001 2000 1999 respectively gross losses related sales marketable securities 5 million 12 million 6 million 2001 2000 1999 respectively financing insurance operations investments securities follows dollars millions december 31 2001 book fair unrealized cost value gains losses type security bonds notes securities united states government agencies 615 626 14 3 states municipalities 931 970 43 4 mortgagebacked securities 924 913 17 28 corporate debt securities 2725 2749 50 26 total debt securities availableforsale 5195 5258 124 61 mortgagebacked securities held maturity 371 mortgagebacked securities held trading purposes 4305 3722 583 total debt securities 9871 9351 124 644 equity securities 1214 1318 246 142 total investment securities 11085 10669 370 786 ii31 general motors corporation subsidiaries notes consolidated financial statements continued note 4 marketable securities concluded december 31 2000 book fair unrealized cost value gains losses type security bonds notes securities united states government agencies 556 565 10 1 states municipalities 1492 1567 81 6 mortgagebacked securities 387 384 14 17 corporate debt securities 2520 2506 47 61 total debt securities availableforsale 4955 5022 152 85 mortgagebacked securities held maturity 218 mortgagebacked securities held trading purposes 3445 3298 147 total debt securities 8618 8538 152 232 equity securities 766 1057 395 104 total investment securities 9384 9595 547 336 debt securities availableforsale totaling 896 million mature within one year 23 billion mature one five years 716 million mature five years 10 years 14 billion mature 10 years proceeds sales marketable securities totaled 51 billion 2001 35 billion 2000 29 billion 1999 gross gains related sales marketable securities 228 million 315 million 292 million 2001 2000 1999 respectively gross losses related sales marketable securities 145 million 147 million 126 million 2001 2000 1999 respectively note 5 finance receivables securitizations finance receivables net finance receivables net included following dollars millions december 31 2001 2000 retail 71845 51337 wholesale 15537 26993 commercial 5743 5546 leasing lease financing 1862 2178 term loans dealers others 12652 12565 total finance receivables 107639 98619 less unearned income 5766 4872 allowance financing losses 2060 1332 total finance receivables net 99813 92415 finance receivables originated outside us 207 billion 214 billion december 31 2001 2000 respectively aggregate amount total finance receivables maturing five years following december 31 2001 follows 2002476 billion 2003237 billion 2004181 billion 2005105 billion 200656 billion 2007 thereafter21 billion securitizations finance receivables mortgage loans corporation sold retail finance receivables special purpose subsidiaries principal aggregating 84 billion 2001 52 billion 2000 51 billion 1999 subsidiaries generally retain subordinated investment greater 525 total receivables pool sell remaining portion net pretax gains relating sales amounted 210 million 2001 14 million 2000 64 million 1999 corporations sold retail finance receivable servicing portfolio amounted 120 billion 70 billion december 31 2001 2000 respectively ii32 general motors corporation subsidiaries notes consolidated financial statements continued note 5 finance receivables securitizations continued securitizations finance receivables mortgage loans continued corporation sold wholesale receivables revolving basis resulting decreases wholesale outstandings 162 billion 100 billion december 31 2001 2000 respectively corporation committed sell eligible wholesale receivables arising certain dealer accounts years 2001 2000 1999 gains recorded sale wholesale receivables due shortterm nature wholesale receivables fair value retained interests wholesale securitizations assumed approximate cost corporation securitizes retail wholesale receivables retains interestonly strips portion senior subordinated tranches servicing rights cash reserve accounts retained interests securitized receivables interestonly strip receivables cash deposits related amounts generally restricted assets subject limited recourse provisions respect retained servicing responsibilities corporation receives annual servicing fees approximating 2 retail receivables 1 wholesale receivables outstanding balance additionally corporation receives rights future cash flows arising investors securitization trust received contracted return 2001 gm sold residential commercial mortgage loans securitization transactions generally retaining servicing responsibilities cases subordinated interests 2001 2000 1999 gm recognized pretax gains 995 million 723 million 603 million respectively securitization residential commercial mortgages december 31 2001 total mortgage loans owned securitized totaled 1034 billion 896 billion securitized 104 billion held sale 34 billion held investment see note 11 date mortgage loans owned securitized 60 days past due totaled 31 billion investors securitization trusts associated sales finance receivables mortgage loans recourse gms assets failure debtors pay due corporations retained interests subordinate investors interests fair value subject credit prepayment interest rate risks transferred assets resulting gain loss securitization transactions determined allocating carrying amount loans finance receivables securities sold interests retained based relative fair value date sale fair values based quoted market prices available otherwise fair values retained interests estimated based present value expected future cash flows key economic assumptions used measuring fair value retained interests date securitization securitizations completed 2001 follows mortgage loans retail finance receivables residential commercial prepayment speed 08 13 98 380 00 500 weightedaverage life years 15 18 17 82 12 133 residual cash flows discounted 95 120 65 135 69 547 variable returns transferees one month libor forward benchmark plus contractual interest rate yield curve spread ranging plus contractual spread 4 35 basis points expected credit losses used measuring fair value retained interests residential commercial mortgage loans securitized 2001 00 229 00 19 respectively date securitization december 31 2001 key economic assumptions sensitivity current fair value residual cash flows immediate 10 20 adverse changes assumptions follows dollars millions ii33 general motors corporation subsidiaries notes consolidated financial statements continued note 5 finance receivables securitizations concluded securitizations finance receivables mortgage loans concluded mortgage loans retail finance receivables residential commercial carrying amountfair value retained interests 1678 2675 782 prepayment speed annual rate 06 18 99 470 00 500 reduction fair value due 10 adverse change 2 199 2 reduction fair value due 20 adverse change 4 387 2 residual cash flows discount rate annual rate 77 120 65 135 69 584 reduction fair value due 10 adverse change 7 78 40 reduction fair value due 20 adverse change 15 152 75 variable returns transferees reduction fair value due 10 adverse change 30 17 reduction fair value due 20 adverse change 61 31 expected credit losses used calculation fair value residual cash flows december 31 2001 residential commercial mortgage loans 00 229 00 23 respectively immediate 10 adverse change assumptions would reduce fair value cash flows 136 million 8 million residential commercial mortgage loans respectively immediate 20 adverse change assumptions would reduce fair value cash flows 271 million 11 million residential commercial mortgage loans respectively sensitivities hypothetical used caution figures indicate changes fair value based 10 variation assumptions generally cannot extrapolated relationship change assumption change fair value may linear also table effect variation particular assumption fair value retained interest calculated without changing assumption reality changes one factor may result changes another example increases market interest rates may result lower prepayments increased credit losses might magnify counteract sensitivities show change asset balances show expected changes fair value derivative financial instruments used manage interest rate prepayment risks associated assets discussed note 19 following summarizes cash flows received paid securitization trusts year ended december 31 2001 dollars millions mortgage loans retail finance receivables residential commercial proceeds new securitizations 7354 34803 3262 servicing fees received 292 255 16 cash flows received retained interests 1560 763 64 pool buybacks purchases delinquent assets 510 320 servicing advances 88 616 95 repayments servicing advances 66 613 71 mortgage servicing rights fair value gms mortgage servicing rights totaled 54 billion 41 billion december 31 2001 2000 respectively key economic assumptions used calculation fair values prepayment speeds discount rates december 31 2001 prepayment speed 124 discount rate 91 used calculation fair value date immediate 10 20 adverse change assumed prepayment speed would reduce fair value mortgage servicing rights 162 million 310 million respectively immediate 10 20 adverse change assumed discount rate would reduce fair value mortgage servicing rights 162 million 314 million respectively sensitivities hypothetical used caution reasons similar discussed ii34 general motors corporation subsidiaries notes consolidated financial statements continued note 6 inventories included following automotive communications services operations dollars millions december 31 2001 2000 productive material work process supplies 5069 5544 finished product service parts etc 6779 7257 total inventories fifo 11848 12801 less lifo allowance 1814 1856 total inventories less allowances 10034 10945 inventories stated generally cost excess market cost approximately 90 us inventories determined lastin firstout lifo method generally cost inventories determined either firstin firstout fifo average cost methods note 7 equipment operating leases corporation significant investments residual values leasing portfolios residual values represent estimate values assets end lease contracts initially recorded based appraisals estimates realization residual values dependent corporations future ability market vehicles prevailing market conditions management reviews residual values periodically determine recorded amounts appropriate automotive communications services operations equipment operating leases included equipment operating leases assets follows dollars millions december 31 2001 2000 equipment operating leases 11107 11268 less accumulated depreciation 1767 1335 net book value 9340 9933 current 4524 5699 noncurrent note 11 4816 4234 net book value 9340 9933 financing insurance operations equipment operating leases included investment leases receivables follows dollars millions december 31 2001 2000 equipment operating leases 36534 41295 less accumulated depreciation 8544 8762 net book value 27990 32533 lease payments received related equipment operating leases maturing five years following december 31 2001 follows automotive communications services operations 200218 billion 2003644 million 2004607 million 2005 556 million 2006 516 million financing insurance operations 200265 billion 200336 billion 200416 billion 2005 265 million 2006 8 million ii35 general motors corporation subsidiaries notes consolidated financial statements continued note 8 income taxes income continuing operations income taxes minority interests included following dollars millions years ended december 31 2001 2000 1999 us income loss 1190 3019 4156 foreign income 2708 4145 4891 total 1518 7164 9047 provision income taxes estimated follows dollars millions years ended december 31 2001 2000 1999 income taxes estimated payable currently us federal 34 45 156 foreign 1347 971 1368 us state local 9 72 308 total payable currently 1372 1088 1832 deferred income tax expense credit net us federal 246 742 1008 foreign 401 281 244 us state local 43 282 34 total deferred 604 1305 1286 total income taxes 768 2393 3118 annual tax provisions include amounts considered sufficient pay assessments may result examination prior year tax returns however amount ultimately paid upon resolution issues raised may differ materially amount accrued provisions made estimated us foreign income taxes less available tax credits deductions may incurred remittance corporations share subsidiaries undistributed earnings deemed permanently invested taxes provided foreign subsidiaries earnings deemed essentially permanently reinvested 131 billion december 31 2001 134 billion december 31 2000 quantification deferred tax liability associated permanently reinvested earnings practicable reconciliation provision income taxes compared amounts us federal statutory rate follows dollars millions years ended december 31 2001 2000 1999 tax us federal statutory income tax rate 485 2507 3166 foreign rates 35 134 78 109 taxes unremitted earnings subsidiaries 29 138 tax credits 50 45 207 raytheon settlement 1 180 adjustments 10 147 130 total income tax 768 2393 3118 1 nontax deductible settlement raytheon company purchase price adjustment related raytheons 1997 merger hughes defense deferred income tax assets liabilities 2001 2000 reflect impact temporary differences amounts assets liabilities equity financial reporting purposes bases assets liabilities equity measured tax laws well tax loss tax credit carryforwards ii36 general motors corporation subsidiaries notes consolidated financial statements continued note 8 income taxes concluded temporary differences carryforwards gave rise deferred tax assets liabilities included following dollars millions december 31 2001 2000 deferred tax deferred tax assets liabilities assets liabilities postretirement benefits pensions 15057 14393 employee benefit plans 8721 8046 2884 8182 warranties dealer customer allowances claims discounts 4376 4952 depreciation amortization 412 3671 652 3742 tax carryforwards 3993 3125 lease transactions 4044 3911 miscellaneous foreign 4465 1463 4150 1372 7683 4948 7287 4493 subtotal 44707 22172 37443 21700 valuation allowances 604 640 total deferred taxes 44103 22172 36803 21700 tax carryforwards approximately 20 relates alternative minimum tax credit carried forward indefinitely approximately 14 relates us state net operating loss carryforwards expire years 20022021 used however substantial portion us state net operating loss carryforwards expire year 2005 tax credit carryforwards consisting primarily research experimentation credits expire years 2004 20112012 20182021 used note 9 property net property net included following automotive communications services operations dollars millions estimated december 31 useful lives years 2001 2000 land 899 924 buildings land improvements 240 13294 12997 machinery equipment 330 41091 40900 construction progress 4464 4664 real estate plants equipment 59748 59485 less accumulated depreciation 33404 32875 real estate plants equipment net 26344 26610 special tools net 8564 7367 total property net 34908 33977 financing insurance operations net property 15 billion 14 billion recorded assets december 31 2001 2000 respectively depreciation amortization expense follows dollars millions years ended december 31 automotive communications services operations 2001 2000 1999 depreciation 4383 4368 4155 amortization special tools 2360 2753 2492 amortization intangible assets note 10 308 226 total 7051 7429 6873 financing insurance operations depreciation amortization expense 5857 5982 5445 ii37 general motors corporation subsidiaries notes consolidated financial statements continued note 10 intangible assets net automotive communications services operations net intangible assets 137 billion 76 billion december 31 2001 december 31 2000 respectively december 31 2001 net intangible assets consisted primarily goodwill 68 billion pension intangible assets 62 billion goodwill cost acquired businesses excess fair value identifiable net assets pension intangible asset resulted us hourly pension plan becoming underfunded 2001 december 31 2000 net intangible assets consisted primarily goodwill 68 billion financing insurance operations net intangible assets 32 billion recorded assets consisting primarily goodwill december 31 2001 2000 note 11 assets automotive communications services operations assets included following dollars millions december 31 2001 2000 equipment operating leases noncurrent note 7 4816 4234 investments equity securities 3408 4666 us prepaid pension assets note 14 7006 20184 2044 3159 total assets 17274 32243 balance investments equity securities december 31 2001 2000 includes gms 20 interest fiat auto 24 billion connection gms acquisition 20 interest fiat auto gm acquire ability right appoint directors board fiat auto controlling stockholder fiat spa companies fiat group fact officer director employee gm controlled affiliate gm serves director officer employee fiat auto fiat spa companies fiat group accordingly gm able exercise significant influence operating financial decisions fiat auto investment accounted using cost method accounting see note 15 discussion balance investments equity securities december 31 2001 2000 also includes fair value investments equity securities classified availableforsale periods presented gms intent hold securities longer one year balances include historical costs 704 million 19 billion unrealized gains 311 million 495 million unrealized losses 38 million 146 million december 31 2001 2000 respectively financing insurance operations assets included following dollars millions december 31 2001 2000 mortgage servicing rights 4840 3985 real estate mortgages held sale 10187 5759 held investment 3384 1895 lending receivables 4521 2960 mortgage related assets 1800 1451 receivables purchased factoring clients 1419 2291 due deferred receivables sales 2260 1097 rental car buybacks 235 826 intangible assets 3206 3188 5127 4394 total assets 36979 27846 ii38 general motors corporation subsidiaries notes consolidated financial statements continued note 12 accrued expenses liabilities deferred income taxes automotive communications services operations accrued expenses liabilities deferred income taxes included following dollars millions december 31 2001 2000 warranties dealer customer allowances claims discounts 16421 15993 deferred revenue 1 8331 9974 payrolls employee benefits excludes postemployment 6069 4609 unpaid losses selfinsurance programs 2016 2031 taxes income taxes 1082 1009 interest 904 1401 deferred income taxes 2420 2430 postemployment benefits including extended disability benefits 2218 2380 8423 9193 total accrued expenses liabilities deferred income taxes 47884 49020 financing insurance operations liabilities deferred income taxes included following dollars millions december 31 2001 2000 unpaid insurance losses loss adjustment expenses unearned insurance premiums 4375 3870 postemployment benefits 766 761 income taxes 483 571 deferred income taxes 4305 4021 interest 2428 1828 interest rate derivatives 2 2942 960 1871 total liabilities deferred income taxes 16259 12922 1 principally relates sales vehicles rental companies 2 effective january 1 2001 corporation began recording fair market value derivatives balance sheet due implementation sfas 133 accounting derivative instruments hedging activities see note 1 discussion note 13 longterm debt loans payable automotive communications services operations longterm debt loans payable follows dollars millions weightedaverage interest rate december 31 2001 2000 2001 2000 longterm debt loans payable within one year current portion longterm debt 1 25 63 64 415 commercial paper 1 27 58 129 519 38 48 2209 1274 total loans payable 2402 2208 payable beyond one year 1 82 81 10720 7438 unamortized discount 27 28 mark market adjustment 33 total longterm debt loans payable 13128 9618 1 weightedaverage interest rates include impact interest rate swap agreements ii39 general motors corporation subsidiaries notes consolidated financial statements continued note 13 longterm debt loans payable continued longterm debt payable beyond one year december 31 2001 included maturities follows 2003 767 million 2004 620 million 2005 796 million 2006 311 million 2007 82 billion amounts payable beyond one year consideration foreign currency swaps december 31 2001 included 840 million currencies us dollar primarily japanese yen 601 million brazilian real 149 million canadian dollar 65 million december 31 2001 2000 longterm debt loans payable automotive communications services operations included 109 billion 83 billion respectively obligations fixed interest rates 22 billion 13 billion respectively obligations variable interest rates predominantly libor considering impact interest rate swap agreements achieve desired balance fixed variable rate debt gm entered interest rate swap cap agreements notional amounts agreements december 31 2001 automotive communications services operations approximately 17 billion 239 million pay fixed 15 billion pay variable 90 million respectively notional amounts agreements december 31 2000 automotive communications services operations approximately 12 billion 200 million pay fixed 10 billion pay variable 90 million respectively gm subsidiaries maintain substantial lines credit various banks totaled 110 billion december 31 2001 23 billion represented shortterm credit facilities 87 billion represented longterm credit facilities december 31 2000 bank lines credit totaled 116 billion 43 billion represented shortterm credit facilities 73 billion represented longterm credit facilities unused shortterm longterm portions credit lines totaled 18 billion 67 billion december 31 2001 compared 31 billion 62 billion december 31 2000 certain bank lines credit contain covenants corporation applicable subsidiaries compliance year ended december 31 2001 financing insurance operations debt follows dollars millions weightedaverage interest rate december 31 2001 2000 2001 2000 debt payable within one year current portion debt 1 43 65 22014 18603 commercial paper 1 27 65 16620 43634 31 46 20640 14506 total loans payable 59274 76743 payable beyond one year 1 55 64 93717 58846 unamortized discount 693 552 mark market adjustment 2 888 total debt 153186 135037 1 weightedaverage interest rates include impact interest rate swap agreements 2 effective january 1 2001 corporation began recording hedged debt fair market value balance sheet due implementation sfas 133 accounting derivative instruments hedging activities debt payable beyond one year december 31 2001 included maturities follows 2003 235 billion 2004 185 billion 2005 75 billion 2006 157 billion 2007 285 billion amounts payable beyond one year consideration foreign currency swaps december 31 2001 included 120 billion currencies us dollar primarily canadian dollar 63 billion euro 31 billion gb pound sterling 995 million australian dollar 769 million december 31 2001 2000 debt financing insurance operations included 657 billion 861 billion respectively obligations fixed interest rates 873 billion 489 billion respectively obligations variable interest rates predominantly libor considering impact interest rate swap agreements ii40 general motors corporation subsidiaries notes consolidated financial statements continued note 13 longterm debt loans payable concluded achieve desired balance fixed variable rate debt gm entered interest rate swap cap floor agreements notional amounts agreements december 31 2001 financing insurance operations approximately 462 billion 413 billion pay variable 49 billion pay fixed 23 million 73 million respectively notional amounts agreements december 31 2000 financing insurance operations approximately 352 billion 240 billion pay variable 112 billion pay fixed 74 million 83 million respectively gms financing insurance subsidiaries maintain substantial lines credit various banks totaled 498 billion december 31 2001 264 billion represented shortterm credit facilities 234 billion represented longterm credit facilities december 31 2000 bank lines credit totaled 485 billion 175 billion represented shortterm credit facilities 310 billion represented longterm credit facilities unused shortterm longterm portions credit lines totaled 157 billion 233 billion december 31 2001 compared 81 billion 305 billion december 31 2000 certain bank lines credit contain covenants corporation applicable subsidiaries compliance year ended december 31 2001 note 14 pensions postretirement benefits gm number defined benefit pension plans covering substantially employees plans covering us canadian represented employees generally provide benefits negotiated stated amounts year service well significant supplemental benefits employees retire 30 years service normal retirement age benefits provided plans covering us canadian salaried employees certain foreign locations generally based years service salary history gm also certain nonqualified pension plans covering executives based targeted wage replacement percentages unfunded pension plan assets primarily invested us government obligations equity fixed income securities commingled pension trust funds insurance contracts gm 123 par value common stock valued december 31 2001 50 million gm class h common stock valued december 31 2001 23 billion gms funding policy respect qualified pension plans contribute annually less minimum required applicable law regulations gm made pension contributions us hourly salary plans 2001 made contributions 50 billion 2000 consisting entirely gm class h common stock contributed second quarter 2000 794 million 1999 addition gm made pension contributions us plans 99 million 69 million 67 million 2001 2000 1999 respectively additionally gm maintains hourly salary benefit plans provide postretirement medical dental vision life insurance us retirees eligible dependents cost benefits recognized consolidated financial statements period employees provide service gm postretirement plan assets gms veba trust invested primarily fixed income securities gm class h common stock valued december 31 2001 296 million certain corporations nonus subsidiaries postretirement plans although participants covered governmentsponsored administered programs cost programs generally significant gm ii41 general motors corporation subsidiaries notes consolidated financial statements continued ii42 general motors corporation subsidiaries notes consolidated financial statements continued note 14 pensions postretirement benefits concluded nonus us plans pension benefits 2001 2000 1999 2001 2000 1999 2001 2000 1999 weightedaverage assumptions discount rate 73 78 68 71 73 77 expected return plan assets 100 89 90 79 81 83 rate compensation increase 50 38 40 47 43 44 measurement purposes approximate 6 annual rate increase per capita cost covered health care benefits assumed 2002 73 assumed 2003 rate assumed decrease linear basis 50 2008 remain level thereafter lower assumed rate 2002 2003 compared assumed rate 2001 86 reflects impact various initiatives put place 2001 lower 2002 claims experience one percentage point increase assumed health care trend rate would increased accumulated projected benefit obligation apbo 54 billion december 31 2001 increased aggregate service interest cost components nonpension postretirement benefit expense 2001 472 million one percentage point decrease would decreased apbo 45 billion decreased aggregate service interest cost components nonpension postretirement benefit expense 2001 394 million gms asset return assumption derived detailed study conducted gms actuaries gms asset management group based longterm historical data although 2000 2001 asset returns gms longterm asset return assumption 10 year period last 15 years gm achieved pension asset returns 10 per annum greater note 15 commitments contingent matters commitments gm following minimum commitments noncancelable operating leases remaining terms excess one year primarily property 2002630 million 2003566 million 2004464 million 2005411 million 2006468 million 21 billion 2007 thereafter certain minimum commitments fund obligations nonconsolidated spes certain leases contain escalation clauses renewal purchase options rental expenses operating leases 849 million 861 million 825 million 2001 2000 1999 respectively gm sponsors credit card program entitled gm card program offers rebates applied primarily purchase lease gm vehicles amount rebates available qualified cardholders net deferred program income 39 billion 38 billion 37 billion december 31 2001 2000 1999 respectively part marketing agreement entered america online inc aol june 21 1999 hughes committed increase sales marketing expenditures 2002 approximately 15 billion related direcpcaolplus directv directvaol tv direcduo december 31 2001 hughes remaining commitment agreement approximately 10 billion contingent matters litigation subject uncertainties outcome individual litigated matters predictable assurance various legal actions governmental investigations claims proceedings pending corporation including arising alleged product defects employmentrelated matters governmental regulations relating safety emissions fuel economy product warranties financial services dealer supplier contractual relationships environmental matters connection disposition hughes satellite systems manufacturing businesses boeing company 2000 disputes regarding purchase price matters may result payments hughes boeing company would material hughes connection dispute hughes general electric capital corporation gecc judgment currently appealed hughes entered geccs favor overturned could material hughes gm established reserves matters losses probable reasonably estimated matters may involve compensatory punitive treble damage claims demands recall campaigns environmental remediation programs sanctions granted could require corporation pay damages make expenditures amounts could estimated december 31 2001 discussion counsel opinion management liability expected material adverse effect corporations consolidated financial condition results operations ii43 general motors corporation subsidiaries notes consolidated financial statements continued note 15 commitments contingent matters concluded beginning january 2004 fiat spa fiat right exercise put option require gm purchase 80 fiat auto bv fiat auto fair market value put expires july 24 2009 process establishing value would paid gm fiat involves determination fair market value investment banks would retained parties pursuant provisions set master agreement gm fiat made public filings sec put exercised gm would option pay 80 interest fiat auto entirely shares gm 123 common stock entirely cash whatever combination thereof gm may choose extent gm chooses pay cash portion purchase price may paid fiat four installments threeyear period note 16 preferred securities subsidiary trust general motors obligated mandatorily redeemable preferred securities subsidiary trust july 1997 general motors capital trust g trust issued approximately 143 million 987 trust originated preferred securities sm toprs sm series g series g preferred securities oneforone exchange approximately 5 million outstanding gm series g 912 depositary shares representing onefourth share gm series g preference stock 010 par value per share concurrently exchange related purchase gm trust common securities trust represent approximately 3 total assets trust gm issued whollyowned trust trusts sole assets 987 junior subordinated deferrable interest debentures series g due july 1 2012 series g debentures aggregate principal amount equal aggregate stated liquidation amount series g preferred securities related common securities 131 million respect series g debentures april 2 2001 gm redeemed series g trusts sole assets causing series g trust redeem approximately 5 million outstanding series g 987 toprs series g toprs redeemed price 25 per share plus accrued unpaid dividends 042 per share also april 2 2001 gm redeemed approximately 5 million outstanding series g 912 depositary shares represents onefourth interest gm series g preference stock price 25 per share plus accrued unpaid dividends 059 per share securities together total face value approximately 252 million sm trust originated preferred securities toprs service trademarks merrill lynch co note 17 stockholders equity following table presents changes capital stock period january 1 1999 december 31 2001 dollars millions common stocks total preference 123 capital stocks par value class h stock balance january 1 1999 1 1092 11 1104 shares reacquired 1 75 76 shares issued 16 3 19 balance december 31 1999 1033 14 1047 shares reacquired 184 shares issued 65 74 139 balance december 31 2000 914 88 1002 shares reacquired shares issued 18 balance december 31 2001 932 88 1020 ii44 general motors corporation subsidiaries notes consolidated financial statements continued note 17 stockholders equity continued preference stocks june 24 1999 part strategic alliance hughes aol invested 15 billion return approximately 27 million shares gm series h 625 automatically convertible preference stock par value 010 per share preference stock automatically convert gm class h common stock june 2002 based upon variable conversion factor linked gm class h common stock price time conversion accrues quarterly dividends rate 625 per year may converted earlier certain limited circumstances gm immediately invested 15 billion received aol shares hughes series preferred stock designed correspond financial terms gm series h 625 automatically convertible preference stock dividends hughes series preferred stock payable gm quarterly annual rate 625 upon conversion gm series h 625 automatically convertible preference stock gm class h common stock hughes redeem series preferred stock cash payment gm equal fair market value gm class h common stock issuable upon conversion simultaneous gms receipt cash redemption proceeds gm make capital contribution hughes amount common stocks second quarter 2000 gm completed exchange offer gm repurchased 86 million shares gm 123 par value common stock issued 92 million shares gm class h common stock addition june 12 2000 gm contributed approximately 54 million shares approximately 7 million shares gm class h common stock us hourlyrate employees pension plan veba trust respectively total value contributions approximately 56 billion result exchange offer employee benefit plan contributions economic interest hughes attributable gm 123 par value common stock decreased approximately 62 approximately 30 economic interest hughes attributable gm class h common stock increased approximately 38 70 fully diluted basis june 6 2000 gm board declared threeforone stock split gm class h common stock split form 200 stock dividend paid june 30 2000 gm class h common stockholders record june 13 2000 gm class h common stock per share amounts numbers shares periods presented adjusted reflect stock split furthermore result stock split voting liquidation rights gm class h common stock reduced 06 votes per share 06 liquidation units per share 02 votes per share 02 liquidation units per share order avoid dilution aggregate voting liquidation rights class voting liquidation rights gm 123 par value common stock changed voting liquidation rights gm 123 par value common stock one vote per share one liquidation unit per share july 24 2000 fiat spa purchased 24 billion approximately 32 million shares gm 123 par value common stock approximately 54 gms 123 par value common stock outstanding date liquidation rights gm 123 par value gm class h common stocks subject certain adjustments outstanding common stock subdivided stock split otherwise shares one class common stock issued dividend holders another class common stock holders gm class h common stock direct rights equity assets hughes rather rights equity assets gm includes 100 stock hughes outstanding shares gm class h common stock may recapitalized shares gm 123 par value common stock time december 31 2002 sole discretion gm board automatically time corporation sell liquidate otherwise dispose 80 business hughes based fair market value assets tangible intangible hughes date proposed transaction approved gm board event recapitalization outstanding shares gm class h common stock automatically converted gms 123 par value common stock exchange rate would provide gm class h common stockholders number shares gm 123 par value common stock would value equal 120 value gm class h common stock date recapitalization type described prior sentence would occur triggering events took place unless holders gm common stock including holders gm 123 par value common stock holders gm class h common stock voting separately individual classes vote approve alternative proposal gm board ii45 general motors corporation subsidiaries notes consolidated financial statements continued note 17 stockholders equity concluded note 18 earnings per share attributable common stocks earnings per share eps attributable class gm common stock determined based attribution earnings class common stock period divided weightedaverage number common shares class outstanding period diluted eps attributable class gm common stock considers impact potential common shares unless inclusion potential common shares would antidilutive effect gm class h common stock per share amounts numbers shares 2000 1999 adjusted reflect threeforone stock split form 200 stock dividend paid june 30 2000 attribution earnings class gm common stock follows dollars millions years ended december 31 2001 2000 1999 earnings attributable common stocks 123 par value continuing operations 984 3957 5592 discontinued operations 426 earnings attributable 123 par value 984 3957 6018 earnings losses attributable class h 482 385 96 earnings attributable gm 123 par value common stock period represent earnings attributable gm common stocks period reduced available separate consolidated net income ascni hughes respective period earnings losses attributable gm class h common stock represent ascni hughes excluding effects gm purchase accounting adjustments arising gms acquisition hughes aircraft company reduced amount dividends accrued series preferred stock hughes equivalent measure effect gms payment dividends gm series h 625 automatically convertible preference stock would paid hughes calculated earnings losses used computation ascni hughes multiplied fraction numerator equal weightedaverage number shares gm class h common stock outstanding 876 million 681 million 374 million 2001 2000 1999 respectively denominator number equal weightedaverage number shares gm class h common stock issued outstanding would represent 100 interest earnings hughes average class h dividend base average class h dividend base 13 billion 2001 2000 1999 respectively upon conversion gm series h 625 automatically convertible preference stock gm class h common stock redemption series preferred stock simultaneous capital contribution hughes numerator denominator used computation ascni increase number shares gm class h common stock issued ii46 general motors corporation subsidiaries notes consolidated financial statements continued note 18 earnings per share attributable common stocks concluded addition denominator used determining ascni hughes may adjusted occasion deemed appropriate gm board reflect subdivisions combinations gm class h common stock certain transfers capital hughes contribution shares capital stock gm benefit hughes employees retirement gm class h common stock purchased hughes gm boards discretion make adjustments limited criteria set forth gms restated certificate incorporation shares gm class h common stock delivered gm connection award shares exercise stock options employees hughes increase numerator denominator fraction referred occasion anticipation exercises stock options hughes purchases gm class h common stock open market upon purchase shares retired therefore decrease numerator denominator fraction referred reconciliation amounts used basic diluted earnings per share computations income continuing operations follows dollars millions except per share amounts ii47 general motors corporation subsidiaries notes consolidated financial statements continued note 19 derivative financial instruments risk management effective january 1 2001 gm adopted sfas 133 accounting derivative instruments hedging activities amended requires derivatives recorded fair value balance sheet establishes criteria designation effectiveness derivative transactions hedge accounting applied gm assesses initial ongoing effectiveness hedging relationships accordance documented policies adoption standard material impact gms consolidated financial position results operations gm exposed market risk changes foreign currency exchange rates interest rates certain commodity equity security prices normal course business gm enters variety foreign exchange interest rate commodity forward contracts swaps options objective minimizing exposure arising risks risk management control system utilized monitor foreign exchange interest rate commodity equity price risks related hedge positions cash flow hedges gm uses financial instruments designated cash flow hedges hedge corporations exposure foreign currency exchange risk associated buying selling financing currencies local currencies operates exposure commodity price risk associated changes prices commodities used automotive business primarily nonferrous metals used manufacture automotive components transactions denominated foreign currencies gm typically hedges forecasted firm commitment exposures one year future commodities gm hedges exposures 6 years future year ended december 31 2001 hedge ineffectiveness associated instruments designated cash flow hedges changes time value instruments excluded assessment hedge effectiveness increased cost sales expenses 5 million 101 million respectively derivative gains losses included comprehensive income reclassified earnings time associated hedged transactions impact income statement year ended december 31 2001 net derivative gains 2 million reclassified cost sales expenses net gains offset net losses transactions hedged approximately 139 million net derivative losses included comprehensive income december 31 2001 reclassified earnings within twelve months date fair value hedges gm uses financial instruments designated fair value hedges manage certain corporations exposure interest rate risk gm subject market risk exposures changes interest rates due financing investing cash management activities variety instruments used hedge gms exposure associated fixed rate debt mortgage servicing rights msrs year ended december 31 2001 hedge ineffectiveness associated instruments designated fair value hedges primarily due hedging msrs increased selling general administrative expenses 218 million period fair value hedges derecognized undesignated derivative instruments forward contracts options designated hedging instruments sfas 133 also used hedge certain foreign currency commodity interest rate exposures unrealized gains losses instruments recognized currently earnings ii48 general motors corporation subsidiaries notes consolidated financial statements continued note 20 fair value financial instruments estimated fair value financial instruments determined using available market information appropriate valuation methodologies however considerable judgment required interpreting market data develop estimates fair value therefore estimates necessarily indicative amounts could realized would paid current market exchange effect using different market assumptions andor estimation methodologies may material estimated fair value amounts book estimated fair values financial instruments practicable estimate fair value follows dollars millions december 31 2001 2000 book fair book fair value automotive communications services operations assets 1 4076 4040 5431 5433 derivative assets 187 46 144 liabilities longterm debt 2 10726 11817 7410 7019 liabilities 1 487 510 516 548 derivative liabilities 281 30 106 preferred securities subsidiary trusts 3 note 16 139 136 financing insurance operations assets finance receivables net 4 99813 101368 92415 92343 assets 1 21770 21971 14260 14285 derivative assets 1673 408 1290 liabilities debt payable beyond one year 2 93024 93398 58295 57863 derivative liabilities 2942 987 1840 1 assets include various financial instruments eg longterm receivables certain investments fair values based discounted cash flows market quotations appropriate valuation techniques fair values retained subordinated interests trusts excess servicing assets net deferred costs derived discounting expected cash flows using current market rates estimated values industrial development bonds included liabilities based quoted market prices similar issues 2 longterm debt estimated fair value based quoted market prices similar issues based current rates offered gm debt similar remaining maturities 3 fair value gmobligated mandatorily redeemable preferred securities subsidiary trusts see note 16 determined based quoted market prices 4 fair value estimated discounting future cash flows using applicable spreads approximate current rates applicable category finance receivables due shortterm nature book value approximates fair value cash marketable securities accounts notes receivable less allowances accounts payable principally trade automotive communications services operations loans payable financing insurance operations debt payable within one year periods ending december 31 2001 2000 ii49 general motors corporation subsidiaries notes consolidated financial statements continued note 21 stock incentive plans stockbased compensation cost stock options stockbased employee compensation awards determined based fair value grant date consistent method prescribed sfas 123 gms pro forma net income earnings attributable common stocks basic diluted earnings per share attributable common stocks would follows dollars millions except per share amounts 2001 2000 1999 net income reported 601 4452 6002 pro forma 227 4125 5788 earnings losses attributable common stocks 123 reported 984 3957 6018 pro forma 769 3709 5823 class h reported 482 385 96 pro forma 642 306 115 basic earnings losses per share attributable common stocks 123 reported 178 680 936 pro forma 139 638 906 class h reported 055 056 026 pro forma 073 045 031 diluted earnings losses per share attributable common stocks 123 reported 177 668 918 pro forma 138 626 888 class h reported 055 026 pro forma 073 044 031 fair value option grant estimated date grant using blackscholes optionpricing model following weightedaverage assumptions 2001 2000 1999 gm hughes gm hughes gm hughes gm sip plan ssop sip plan ssop sip plan ssop interest rate 46 51 46 64 65 48 52 48 expected life years 50 70 50 69 50 70 50 expected volatility 312 513 311 278 421 276 279 380 279 dividend yield 38 27 23 effects delphi spinoff adjustment number options related exercise prices described considered sfas 123 modifications terms outstanding options accordingly pro forma disclosure includes compensation cost incremental fair value sfas 123 resulting modifications pro forma amounts compensation cost indicative effects operating results future periods gms stock incentive plans consist general motors 1997 stock incentive plan formerly general motors amended stock incentive plan gmsip hughes electronics corporation incentive plan hughes plan general motors 1998 salaried stock option plan gmssop gmsip gmssop administered executive compensation committee gm board hughes plan administered executive compensation committee board directors hughes gmsip 60 million shares gm 123 par value 75 million shares gm class h common stocks may granted june 1 1997 may 31 2002 approximately 153 million 69 million available grants december 31 2001 options granted prior 1997 gmsip generally exercisable onehalf one year onehalf two years dates grant stock option grants awarded since 1997 vest ratably three years date grant option prices 100 fair market value dates grant options generally expire 10 years dates grant subject earlier termination certain conditions ii50 general motors corporation subsidiaries notes consolidated financial statements continued note 21 stock incentive plans continued hughes plan hughes may grant shares rights options acquire 233 million shares gm class h common stock december 31 2001 75 million available grants december 31 2001 option prices 100 fair market value dates grant options generally vest two five years expire 10 years dates grant subject earlier termination certain conditions gmssop 50 million shares gm 123 par value common stock may granted january 1 1998 december 31 2007 approximately 34 million available grants december 31 2001 stock options vest one year following date grant exercisable two years date grant option prices 100 fair market value dates grant options generally expire 10 years two days dates grant subject earlier termination certain conditions connection delphi spinoff number options related exercise prices outstanding options affected plans adjusted reflect change fair market value gm 123 par value common stock resulted transaction number shares option exercise price adjusted aggregate intrinsic value options immediately transaction remained unchanged class h common stock share amounts numbers shares 2000 1999 adjusted reflect threeforone stock split form 200 stock dividend paid june 30 2000 ii51 general motors corporation subsidiaries notes consolidated financial statements continued following table summarizes information gms stock option plans december 31 2001 ii52 general motors corporation subsidiaries notes consolidated financial statements continued note 22 hughesechostar transactions october 28 2001 gm wholly owned subsidiary hughes together echostar communications corporation echostar announced signing definitive agreements subject stockholder approval regulatory clearance certain conditions provide splitoff hughes gm subsequent merger hughes business echostar transactions designed address strategic challenges currently facing hughes business provide liquidity value gm would help support credit position gm transactions splitoff hughes gm would occur means distribution holders gm class h common stock one share class c common stock hughes holding company stock hughes time splitoff exchange share gm class h common stock held immediately prior splitoff immediately following splitoff businesses hughes echostar would combined hughesechostar merger form new echostar share hughes holding company class c common stock shares would remain outstanding become share class c common stock new echostar holders class b common stock echostar would receive 1073 13699 shares stock merged entity exchange share class b common stock echostar held prior hughesechostar merger transactions structured manner result recapitalization gm class h common stock gm 123 par value common stock 120 exchange ratio currently provided certain circumstances general motors restated certificate incorporation amended gm 123 par value common stock would remain outstanding would gms class common stock transactions part transactions gm would receive dividend hughes 42 billion cash approximately 30 retained economic interest hughes would reduced commensurate amount addition gm may achieve additional liquidity respect portion retained economic interest hughes represented 100 million shares gm class h common stock transactions new echostar class c common stock including exchanging shares gm outstanding obligations following transactions subject irs approval based number assumptions gm may retain interest merged entity gm hughes echostar agreed event transactions occur certain specified regulatoryrelated conditions satisfied echostar required purchase hughes interest panamsat corporation aggregate purchase price approximately 27 billion payable depending circumstances solely cash combination cash either debt equity securities echostar addition event transactions occur certain specified regulatory clearances approvals relating united states antitrust federal communication commission matters satisfied echostar required pay 600 million termination fee hughes ii53 general motors corporation subsidiaries notes consolidated financial statements continued note 23 income expenses income included total net sales revenues expenses included cost sales expenses consisted following dollars millions years ended december 31 2001 2000 1999 automotive communications services operations income interest income 771 619 769 rental car lease revenue 1424 1584 1632 gain sale hughes satellite systems 1 2036 claims commissions grants 767 756 782 369 247 289 total income 3331 5242 3472 total expenses 316 348 503 1 represents gain sale hughes satellite systems manufacturing businesses boeing company 38 billion cash financing insurance operations income interest income 2269 1794 1479 insurance premiums 1524 1394 1339 mortgage operations investment income servicing fees 4800 3445 2742 1082 870 157 total income 9675 7503 5717 expenses provision financing losses 1347 552 404 insurance losses loss adjustment expenses 1180 1028 882 total expenses 2527 1580 1286 note 24 segment reporting sfas 131 disclosures segments enterprise related information established standards reporting information operating segments financial statements operating segments defined components enterprise separate financial information available evaluated regularly chief operating decision maker decision making group deciding allocate resources assessing performance gms chief operating decision maker chief executive officer operating segments managed separately operating segment represents strategic business unit offers different products serves different markets gms reportable operating segments within automotive communications services operations aco business consist general motors automotive gma comprised four regions gmna gme gmlaam gmap hughes gmna designs manufactures andor markets vehicles primarily north america following nameplates chevrolet pontiac gmc oldsmobile buick cadillac saturn hummer gme gmlaam gmap meet demands customers outside north america vehicles designed manufactured marketed following nameplates opel vauxhall holden isuzu saab buick chevrolet gmc cadillac hughes includes activities relating digital entertainment information communications services satellitebased private business networks segment includes design manufacturing marketing locomotives heavyduty transmissions elimination intersegment transactions certain nonsegment specific revenues expenditures certain corporate activities gms reportable operating segments within financing insurance operations business consist gmac provides broad range financial services including consumer vehicle financing fullservice leasing fleet leasing dealer financing car truck extended service contracts residential commercial mortgage services commercial vehicle homeowners insurance assetbased lending financing insurance operations segment includes financing entities operating us canada brazil mexico associated gmac accounting policies operating segments described summary significant accounting policies except disaggregated financial results prepared using management approach consistent basis manner gm management internally disaggregates financial information purposes assisting making internal operating decisions gm evaluates performance based standalone operating segment net income generally accounts intersegment sales transfers sales transfers third parties current market prices revenues attributed geographic areas based location assets producing revenues ii54 general motors corporation subsidiaries notes consolidated financial statements continued see notes next page ii55 general motors corporation subsidiaries notes consolidated financial statements continued amount reported hughes excludes amortization gm purchase accounting adjustments related gms acquisition hughes aircraft company approximately 3 million 16 million 3 million related panamsat 13 million related satellite systems manufacturing businesses prior sale boeing company october 6 2000 21 million 2001 2000 1999 respectively adjustments allocated gms segment consistent basis upon segments evaluated b excludes satellite expenditures totaling 936 million 766 million 789 million 2001 2000 1999 respectively also excludes expenditures related early buyout satellite saleleasebacks totaling 0 370 million 2001 2000 1999 respectively c amount reported hughes includes writeoff approximately 329 million unamortized goodwill related satellite systems manufacturing businesses time sale boeing company includes income loss discontinued operations related delphi 426 million year ended december 31 1999 ii56 general motors corporation subsidiaries notes consolidated financial statements continued note 24 segment reporting concluded information concerning principal geographic areas follows dollars millions 2001 2000 1999 net sales net sales net sales net revenues property revenues property revenues property north america united states 132004 25123 136399 22798 130073 20634 canada mexico 11769 3400 13986 3687 12661 3760 total north america 143773 28523 150385 26485 142734 24394 europe france 1829 130 1986 139 2130 151 germany 6133 2640 6582 2687 8968 2912 spain 1772 713 1650 709 2001 542 united kingdom 5024 582 5035 834 5390 1070 11139 1905 11935 2397 9407 1635 total europe 25897 5970 27188 6766 27896 6310 latin america brazil 2889 946 3395 1047 2830 1409 latin america 2249 273 1843 380 1686 403 total latin america 5138 1219 5238 1427 4516 1812 2452 728 1821 698 1412 759 total 177260 36440 184632 35376 176558 33275 note 25 subsequent events february 2002 hughes completed series financing activities fund certain future anticipated cash requirements expand available borrowing capacity hughes consolidated subsidiary panamsat borrowed 18 billion consisting private placement debt offering amount 800 million 10 billion borrowed new 125 billion bank facility notes issued private placement bear interest annual rate 85 payable semiannually mature 2012 unsecured 125 billion bank facility comprised 250 million revolving credit facility tranche term loan amount 300 million tranche b term loan amount 700 million revolving credit facility tranche term loan bear interest libor plus 300 spread tranche b term loan bears interest libor plus 35 spread interest rate spreads revolving credit facility tranche term loan may increased decreased based upon terms credit agreement facilities secured ratably substantially panamsats operating assets including satellites revolving credit facility terminate 2007 tranche term loan matures 2007 tranche b term loan matures 2008 principal payments tranche term loan due varying amounts 2004 2007 principal payments tranche b term loan due primarily maturity also february 2002 hughes utilized 17 billion proceeds 19 billion loan obtained gmac repay 1 amounts outstanding existing 750 million unsecured revolving credit facility 2 directv latin america dla 450 million revolving credit facility 3 613 million surfin revolving credit facilities hughes existing 750 million multiyear revolving credit facility amended expanded 12 billion secured substantially hughes assets dla panamsat march 2002 hughes process adding term loan 12 billion multiyear revolving credit facility would increase total funding available least 18 billion term loan expected close march 2002 hughes secured loan gmac 15 billion cash deposit hughes gmac intend offset 15 billion cash deposit amounts owed hughes gmac accordingly amounts offset aco finance insurance operations balance sheets march 6 2002 gm issued 38 billion convertible debt securities part comprehensive effort improve corporations financial flexibility offering includes 12 billion principal amount 45 series convertible senior debentures due 2032 26 billion principal amount 525 series b convertible senior debentures due 2032 securities mature 30 years convertible gm 123 common stock specific conditions satisfied proceeds offering combined cash generation initiatives used rebuild gms liquidity position reduce underfunded pension liability fund postretirement health care obligations ii57 general motors corporation subsidiaries supplementary information selected quarterly data unaudited 2001 quarters 1st 1 2nd 2 3rd 3 4th dollars millions except per share amounts total net sales revenues 42615 46220 42475 45950 income losses income taxes minority interests 504 925 285 374 income tax expense 208 304 76 180 minority interests 2 7 10 13 earnings losses nonconsolidated associates 57 151 3 74 net income loss 237 477 368 255 dividends preference stocks 28 23 25 23 earnings losses attributable common stocks 209 454 393 232 earnings losses attributable 123 par value 296 574 223 337 losses attributable class h 87 120 170 105 basic earnings losses per share attributable 123 par value 054 105 041 061 basic losses per share attributable class h 010 014 019 012 average number shares common stocks outstanding basic millions 123 par value 548 549 551 556 class h 875 876 877 diluted earnings losses per share attributable 123 par value 053 103 041 060 diluted losses per share attributable class h 010 014 019 012 average number shares common stocks outstanding diluted millions 123 par value 554 559 551 559 class h 875 876 877 ii58 general motors corporation subsidiaries supplementary information continued selected quarterly data unaudited continued 1 first quarter 2001 results include 12 million increase income aftertax basis net impact initially adopting sfas 133 accounting derivatives hedging activities 2 second quarter 2001 results include 133 million aftertax restructuring charge related general motors portion severance payments asset impairments part second quarter restructuring affiliate isuzu motors ltd 3 third quarter 2001 results include following 194 million aftertax charge announced closing ste therese quebec assembly plant 474 million aftertax charge related hughes settlement raytheon purchase price adjustment related raytheons 1997 merger hughes defense 67 million aftertax gain related hughes sale 41 million shares thomson multimedia common stock 133 million aftertax charge related hughes noncash charge revaluation skyperfectv investment 40 million aftertax severance charge related hughes 10 companywide workforce reduction us 21 million aftertax favorable adjustment expected costs associated shutdown hughes directv japan business ii59 general motors corporation subsidiaries supplementary information selected quarterly data unaudited 2000 quarters 1st 2nd 3rd 4th4 dollars millions except per share amounts total net sales revenues 46858 48743 42690 46341 income taxes minority interests 2632 2835 1266 431 income tax expense 783 929 436 245 minority interests 2 11 earnings losses nonconsolidated associates 68 157 1 108 net income 1783 1751 829 89 dividends preference stocks 29 27 earnings attributable common stocks 1754 1724 802 62 earnings losses attributable 123 par value 1786 1762 878 635 earnings losses attributable class h 32 38 76 697 basic earnings losses per share attributable 123 par value 288 299 157 114 basic earnings losses per share attributable class h 5 008 007 009 080 average number shares common stocks outstanding basic millions 123 par value 620 590 559 class h 5 413 563 874 875 diluted earnings losses per share attributable 123 par value 280 293 155 116 diluted earnings losses per share attributable class h 5 008 007 009 076 average number shares common stocks outstanding diluted millions 123 par value 637 602 567 559 class h 5 413 563 874 962 ii60 general motors corporation subsidiaries supplementary information continued selected quarterly data unaudited continued 4 fourth quarter 2000 results include 939 million aftertax charge phaseout oldsmobile aftertax charge 294 million related postemployment costs termination postemployment benefits associated four north american manufacturing facilities slated conversion capacity reduction 419 million aftertax charge related reduction production capacity gme including restructuring vauxhall motors limiteds manufacturing operations uk 11 billion aftertax gain hughes related sale satellite systems manufacturing businesses boeing company 38 billion cash 5 adjusted reflect threeforone stock split gm class h common stock form 200 stock dividend paid june 30 2000 ii61 general motors corporation subsidiaries item 9 item 8 financial statements supplementary data reference made notes consolidated financial statements general motors corporation subsidiaries consolidated balance sheets dollars millions reference made notes consolidated financial statements general motors corporation subsidiaries consolidated statements cash flows dollars millions general motors corporation subsidiaries consolidated statements cash flows continued dollars millions reference made notes consolidated financial statements general motors corporation subsidiaries consolidated statements stockholders’ equity deficit years ended december 31 2008 2007 2006 millions reference made notes consolidated financial statements general motors corporation subsidiaries notes consolidated financial statements note 1 nature operations primarily engaged worldwide production marketing cars trucks operate two businesses consisting automotive operations also refer automotive gm automotive gma includes four automotive segments consisting gm north america gmna gm europe gme gm latin americaafricamideast gmlaam gm asia pacific gmap financing insurance operations fio financing insurance operations primarily conducted gmac llc gmac whollyowned subsidiary november 2006 november 30 2006 sold 51 controlling ownership interest gmac consortium investors sale accounted remaining ownership interest gmac equity method gmac provides broad range financial services including consumer vehicle financing automotive dealership commercial financing residential mortgage services automobile service contracts personal automobile insurance coverage selected commercial insurance coverage corporate includes elimination intersegment transactions corporate automotive segments certain nonsegment specific revenue expenditures including costs related postretirement benefits delphi retirees certain corporate activities note 2 basis presentation going concern accompanying consolidated financial statements prepared assuming continue going concern contemplates realization assets liquidation liabilities normal course business incurred significant losses 2005 2008 attributable operations restructurings charges support delphi past present future cost cutting measures managed liquidity time series cost reduction initiatives capital markets transactions sales assets however global credit market crisis dramatic effect industry second half 2008 increased turmoil mortgage overall credit markets particularly lack financing buyers lessees vehicles continued reductions us housing values volatility price oil recession united states western europe slowdown economic growth rest world created substantially difficult business environment ability execute capital markets transactions sales assets extremely limited vehicle sales north america western europe contracted severely pace vehicle sales rest world slowed liquidity position well operating performance negatively affected economic industry conditions financial business factors many beyond control conditions improved january 2009 sales total vehicles us industry falling 657000 vehicles seasonally adjusted rate 98 million vehicles lowest level january since 1982 believe likely adverse economic conditions effect automotive industry improve significantly 2009 notwithstanding unprecedented intervention governments united states countries global banking financial systems due sudden rapid decline industry sales particularly three months ended december 31 2008 determined despite far reaching actions restructure us business would unable pay obligations normal course business 2009 service debt timely fashion required development new plan depended financial assistance us government december 31 2008 entered loan security agreement ust loan agreement united states department treasury ust pursuant ust agreed provide us 134 billion secured term loan facility ust loan facility borrowed 40 billion ust loan facility december 31 2008 additional 54 billion january 21 2009 40 billion february 17 2009 condition obtaining ust loan facility agreed achieve certain restructuring targets within designated time frames fully described note 15 pursuant terms ust loan facility described fully note 15 submitted ust february 17 2009 plan return profitability operate going concern viability plan order execute viability plan general motors corporation subsidiaries notes consolidated financial statements continued requested additional us government funding 225 billion cover baseline scenario liquidity requirements 300 billion cover downside sensitivity liquidity requirements proposed funding could met combination secured term loan 60 billion preferred equity 165 billion viability plan baseline scenario representing increase 45 billion december 2008 request reflecting changes various assumptions subsequent december 2 2008 submission 91 billion incremental 134 billion currently outstanding suggested ust current amount outstanding february 28 2009 134 billion ust loan facility plus incremental 31 billion requested 2009 could provided form preferred stock believe structure would provide necessary mediumterm funding need provide higher return ust commensurate higher returns ust receives preferred stock investments financial institutions viability plan downside sensitivity scenario additional 75 billion funding would required amounts described requested form secured revolving credit facility collateral used support current 134 billion ust loan facility would used support proposed 75 billion secured revolving credit facility 60 billion term loan viability plan also assumes 77 billion loans provisions energy independence security act 2007 section 136 loans department energy 2009 baseline vehicle sales forecast 105 million vehicles united states 575 million vehicles globally 2009 liquidity baseline plan dependent obtaining 46 billion funding ust addition 134 billion received date net 23 billion nonus governmental entities receipt 20 billion section 136 loans sale certain assets net proceeds 15 billion funding additional amounts described required provide necessary working capital operate business global economy recovers consumers available credit begin purchasing automobiles historical volume levels addition viability plan dependent ability execute bond exchange voluntary employee beneficiary association veba modifications contemplated submissions ust ability achieve revenue targets execute cost reduction restructuring plans currently approximately 1 billion outstanding series convertible debentures mature june 1 2009 funding plan described include payment maturity principal amount debentures unable restructure series convertible debentures prior june 1 2009 otherwise satisfactorily address payment due june 1 2009 default would arise respect payment obligations could also trigger cross defaults outstanding debt thereby potentially requiring us seek relief us bankruptcy code following summary significant cost reduction restructuring actions contemplated viability plan us brands nameplates focus resources us primarily core brands chevrolet cadillac buick gmc remaining brands pontiac part buickpontiacgmc retail channel highly focused niche brand hummer subject strategic review including potential sale hummer sale phase decision made three months ended march 31 2009 final resolution expected later 2010 saturn remain operation end planned lifecycle saturn products 20102011 interim saturn retailers group investors present plan would allow spinoff sale saturn distribution corporation indirect whollyowned subsidiary would open possibility spinoff sale occur intend phase saturn brand end current product lifecycle february 20 2009 saab automobile ab saab filed protection reorganization laws sweden could reorganize standalone entity independent us product plan calls 25 reduction number vehicle nameplates 2012 48 2008 36 2012 anticipate lead higher per vehicle profit able provide additional marketing support concentrate engineering capital spending higher volume vehicles dealers due long operating history legacy locations many dealerships operate outdated facilities also longer prime locations required succeed result broad dealer network major markets become disadvantage dealerships us intend reduce dealers 6246 2008 4700 2012 25 reduction 4100 2014 reduction take place metro suburban markets dealership overcapacity prevalent manufacturing operations reduce total number powertrain stamping assembly plants us 47 2008 33 2012 addition consolidations implementing integrated global manufacturing strategy general motors corporation subsidiaries notes consolidated financial statements continued based common lean manufacturing principles processes implementation strategy provide flexible production assembly facilities multiple body styles different architectures built given plant flexible manufacturing enables us respond changing market conditions quickly contribute higher overall capacity utilization resulting lower fixed costs per vehicle sold lower capital investment labor cost reduce salaried employment levels 10000 employees 2009 reduce us salaries 3 10 depending management level employee reduce salaried retiree benefits addition negotiated suspension jobs bank program international union united automobile aerospace agricultural implement workers america uaw refer note 21 addition actions also begun negotiations unions represent certain employees united states canada western europe reduce hourly labor costs discussions ongoing reached tentative agreement uaw subject ratification members obtain additional us hourly labor cost reductions united states asset sales actively marketing certain assets sale including hummer brand ac delco business transmission facility strasbourg france however continuation current global economic conditions lack available credit make difficult complete transactions possible receive net proceeds contemplated viability plan currently engaged negotiations uaw counsel class gm retirees respective advisors pursue modifications settlement agreement responsibility providing uaw retiree health care would permanently shift us new retiree plan funded new veba accordance requirements ust loan agreement consistent terms ust loan agreement seeking convert least half stated value future payments new veba common stock rather cash total stated value veba payments exceed amount provided settlement agreement extensive due diligence regarding current situation future prospects plans underway uaw class counsel advisors parties understand restructuring veba obligations necessary component viability plan agreed work toward executing agreement modify settlement agreement march 31 2009 yet reached agreement restructure veba payments also currently engaged negotiations advisors unofficial committee unsecured bondholders reduce public unsecured debt less twothirds exchange bonds equity appropriate means accordance requirements ust loan agreement negotiations ongoing committed commencing exchange offer march 31 2009 required ust loan agreement addition request additional funding ust included viability plan success viability plan conditioned financial support nonus governments provide necessary funding operate business 2009 summary items includes australia continued local production become challenging due changes market preferences together australian government developed plan bring market new fuel efficient vehicle project funding provided australian government form grants 118 million canada canadian market well canadian operations gm canada highly integrated overall north american strategy operations approximately 90 gm canada’s production 2008 exported outside canada primarily us approximately 88 gm canada’s domestic sales imports us operations recent unprecedented industry volume downturn north america coupled gap cost competitiveness related active employees retirees accelerated need restructure canadian operations order achieve longterm viability general motors corporation subsidiaries notes consolidated financial statements continued discussions canadian federal ontario provincial governments secure longterm financial assistance execute necessary restructuring actions longterm viability addition discussion canadian auto workers caw union reduce labor costs competitive levels caw committed achieving hourly cost structure consistent ultimately negotiate uaw discussions canadian federal ontario provincial governments based principle maintaining proportionate levels manufacturing canada gm canada receiving longterm financial assistance proportional total support provided us government sweden conducted strategic review global saab business offered sale given urgency stemming sizeable outflows associated saab operations saab automobile ab filed reorganization protection laws sweden february 20 2009 anticipate losing controlling interest saab anticipate longer consolidate saab beginning three months ending march 31 2009 anticipate recording significant loss may excess 10 billion deconsolidation europe highly competitive automotive market currently unprofitable many vehicle manufacturers costly restructuring environment engaged european labor unions achieve 12 billion cost reductions include several possible closures spinoffs manufacturing facilities high cost locations addition restructuring sales organization become brand focused better optimize advertising expenses also discussions german government liquidity support fund operations certain liabilities sustainable strategy european operations may include partnerships german government andor european governments asiapacific lower gdp industry volume outlooks prompted reconsideration pace capacity expansion plans india planned selffunded addition two sizeable manufacturing expansion projects thailand tooling assembly new midsized pickup model diesel engine facility longer feasible without support government thailand local banks partners suspended indefinitely success viability plan necessarily depends global economic conditions level automotive sales particularly united states western europe plans also assume required provide additional financial support delphi gmac beyond level contemplated viability plan trade suppliers continue conduct business us terms consistent historical practice suppliers might respond apparent weakening liquidity position address liquidity needs requesting faster payment invoices assurances happen need cash would intensified might unable make payments suppliers become due believe supplier liquidity issues could potentially arise soon march 2009 suppliers restart operations period limited reduced production january february 2009 ability continue going concern dependent many events outside direct control including among things approval viability plan ust obtaining additional financing ust governmental entities sources continue operations successful execution restructuring actions discussed successful negotiation uaw reduce labor costs funding obligations retiree health care ability successfully complete debt exchange offer contemplated viability plan ability continue procure necessary parts delphi gmac’s ability continue provide financing dealers customers consumers’ purchasing products substantially higher volumes significant recent operating losses negative cash flows negative working capital stockholders’ deficit uncertainty ust approval viability plan ust funding viability plan successful execution viability plan among factors raise substantial doubt ability continue going concern accompanying consolidated financial statements include adjustments might result outcome uncertainty principles consolidation consolidated financial statements include accounts subsidiaries control due ownership majority voting interest addition consolidate variable interest entities vie primary beneficiary general motors corporation subsidiaries notes consolidated financial statements continued share earnings losses nonconsolidated affiliates included consolidated operating results using equity method accounting able exercise significant influence operating financial decisions affiliate use cost method accounting able exercise significant influence operating financial decisions affiliate intercompany balances transactions eliminated consolidation certain reclassifications made 2007 2006 financial information conform current period presentation use estimates preparation financial statements consolidated financial statements prepared conformity accounting principles generally accepted united states america require use estimates judgments assumptions affect reported amounts assets liabilities date financial statements reported amounts revenue expenses periods presented believe accounting estimates employed appropriate resulting balances reasonable however due inherent uncertainties making estimates actual results could differ original estimates requiring adjustments balances future periods note 3 significant accounting policies revenue recognition automotive sales automotive sales consist primarily revenue generated sale vehicles vehicle sales recorded title risks rewards ownership passed generally vehicle released carrier responsible transporting dealer collectability reasonably assured provisions recurring dealer customer sales leasing incentives consisting allowances rebates recorded reductions automotive sales time vehicle sales incentives allowances rebates related vehicles previously sold recognized reductions automotive sales announced vehicle sales daily rental car companies guaranteed repurchase obligations accounted operating leases estimated lease revenue recognized ratably term lease based difference net sales proceeds guaranteed repurchase amount difference cost vehicle estimated residual value depreciated straightline basis estimated term lease agreement sales parts accessories gm dealers recognized goods arrive dealership collectability reasonably assured sales aftermarket products powertrain components recognized title risks rewards ownership passed generally product released carrier responsible transporting customer revenue onstar customer subscriptions related comprehensive invehicle security communications diagnostic systems vehicles deferred recognized straightline basis subscription period offer oneyear onstar subscription part sale lease new vehicle fair value subscription recorded deferred revenue vehicle sold amortized oneyear subscription period prepaid minutes handsfree calling system deferred recognized straightline basis life contract payments received banks credit card programs redemption liability recognized straightline basis estimated period time customer accumulate redeem rebate points currently time period estimated 60 months majority credit card programs redemption period reviewed periodically determine remains appropriate estimate accrue redemption liability anticipated paid dealer time specific vehicles sold dealer redemption cost classified reduction automotive sales financial services insurance revenue financial services revenue 2006 consists revenue generated purchase retail installment loans providing dealer floor plan financing lines credit dealers fleet leasing factoring receivables financing revenue recorded using general motors corporation subsidiaries notes consolidated financial statements continued interest method accounting terms receivables income operating lease assets recognized straightline basis term lease agreement insurance revenue 2006 consists premiums earned terms policies commissions premium taxes costs incurred acquiring new business deferred amortized basis premiums earned terms related policies mortgage service revenue 2006 generated origination purchase servicing sale securitization consumer ie residential commercial mortgage loans mortgage related products typically mortgage loans originated sold investors secondary market including securitization sales advertising costs 53 billion 55 billion 54 billion 2008 2007 2006 respectively expensed incurred research development expenditures research development expenditures 80 billion 81 billion 66 billion 2008 2007 2006 respectively expensed incurred property net property plant equipment including internal use software recorded cost major improvements extend useful life property capitalized expenditures repairs maintenance charged expense incurred january 1 2001 adopted straightline method depreciation real estate facilities equipment placed service date assets placed service january 1 2001 continue depreciated using accelerated methods accelerated methods accumulate depreciation approximately twothirds depreciable cost first half estimated useful lives property groups compared straightline method allocates depreciable costs equally estimated useful lives property groups leasehold improvements amortized period lease life asset whichever shorter upon retirement disposition property plant equipment cost related accumulated depreciation removed accounts resulting gain loss recognized earnings special tools special tools represent productspecific tools dies molds items used manufacturing process vehicles expenditures special tools capitalized amortized using straightline method estimated useful lives range one year 10 years goodwill intangible assets goodwill represents excess cost acquisition fair value net assets acquired test goodwill impairment annually utilizing twostep process time every year event occurs circumstances change reasonably possible impairment may exist first step impairment test requires identification reporting units comparison fair value reporting units respective carrying value fair values reporting units determined based valuation techniques using best information available discounted cash flow projections carrying value less fair value impairment exists second step performed carrying value higher fair value indication impairment may exist second step must performed compute amount impairment second step impairment computed estimating fair values recognized general motors corporation subsidiaries notes consolidated financial statements continued unrecognized assets liabilities reporting unit comparing implied fair value reporting unit goodwill carrying amount unit’s goodwill annual impairment tests performed fourth quarter year reporting units gmna gme gmap gmlaam fio correspond segments three months ended december 31 2008 2007 2006 performed annual goodwill impairment analysis reporting units based analysis three months ended december 31 2008 charges 154 million 456 million recorded impair goodwill gmna gme reporting units respectively charges result sharply reduced forecast automotive sales regions near mediumterm fully described note 2 determined fair values discounting estimated future cash flows consistent derived viability plan reporting unit using discount rates commensurate risk involved recording impairment charges remaining goodwill balance sheet december 31 2008 previously result deteriorating market conditions three months ended june 30 2008 performed goodwill impairment analysis gmna reporting unit concluded adjustment carrying value goodwill necessary goodwill impairment charges recorded 2007 based analysis 2006 recognized goodwill impairment charge 828 million related gmac commercial finance reporting unit intangible assets include customer lists trademarks intellectual property rights identifiable intangible assets amortized straightline basis estimated useful lives generally three 15 years valuation longlived assets events circumstances warrant evaluate carrying value longlived assets held used business goodwill intangible assets indefinite lives assets held sale carrying value longlived asset group considered impaired loss recognized based amount carrying value exceeds fair value assets held used assets classified held sale recorded lower carrying value fair value less cost sell fair value determined primarily using anticipated cash flows consistent derived viability plan discounted rate commensurate risk involved longlived assets disposed sale considered held use disposition result triggering events primarily decreased volumes deteriorating economic conditions tested certain longlived assets impairment 2008 2007 2006 based analysis recorded longlived asset impairment charges 10 billion 259 million 685 million 2008 2007 2006 respectively valuation cost equity method investments events circumstances warrant equity investments accounted cost equity method accounting evaluated impairment charge recorded whenever decline value equity investment carrying amount determined temporary determining decline temporary consider factors length time extent fair value investment less carrying amount equity affiliate nearterm longerterm operating financial prospects affiliate intent ability hold investment period time sufficient allow anticipated recovery equipment operating leases net equipment operating leases net reported cost less accumulated depreciation net origination fees costs estimated income operating lease assets includes lease origination fees net lease origination costs recognized operating lease revenue straightline basis term lease agreement depreciation vehicles generally provided straightline basis estimated residual value term lease agreement significant investments vehicles operating lease portfolios exposed changes residual values assets residual values represent estimate values assets end lease contracts determined general motors corporation subsidiaries notes consolidated financial statements continued consulting independently published residual value guide realization residual values dependent future ability market vehicles prevailing market conditions life lease evaluate adequacy estimate residual value may make adjustments extent expected value vehicle lease termination changes adjustment may form revisions depreciation rate recognition impairment charge impairment determined exist undiscounted expected future cash flows lower carrying value asset lease vehicle returned us asset reclassified equipment operating leases net inventory lower cost estimated fair value less costs sell operating leases arising vehicles sold dealers adjustment made estimate marketing incentive accruals residual support programs initially recognized vehicles sold dealers refer note 22 note 27 foreign currency transactions translation assets liabilities foreign subsidiaries using local currency functional currency translated us dollars based current exchange rate prevailing balance sheet date resulting translation adjustments included comprehensive loss assets liabilities foreign subsidiaries use local currency functional currency remeasured local currency functional currency translated us dollars revenue expenses translated us dollars using average exchange rates prevailing period presented gains losses arising foreign currency transactions include effects remeasurement discussed included automotive cost sales effects foreign currency transactions gain 17 billion loss 661 million loss 337 million 2008 2007 2006 respectively policy warranty provisions estimated expenses related policy product warranties made time products sold estimates established using historical information nature frequency average cost claims revision reserves estimated policy product warranties made necessary based changes factors actively study trends claims take action improve vehicle quality minimize claims recall campaigns provisions estimated expenses related product recalls based formal campaign soliciting return product made deemed probable reasonably estimated environmental costs record liability environmental remediation costs loss probable reasonably estimated environmental sites potentially multiple responsible parties record liability allocable share costs related involvement site well allocable share costs related insolvent parties unidentified shares neither reduced possible recoveries insurance carriers environmental sites potentially responsible party record liability total estimated costs remediation consideration recovery insurers third parties process estimating environmental remediation liabilities complex dependent primarily nature extent historical information physical data relating contaminated site complexity site uncertainty remediation technology required outcome discussions regulatory agencies potentially responsible parties multiparty sites established process develop environmental reserve used globally process consists number phases begins visual site inspections examination historical site records potential problem identified physical sampling site may include analysis ground water soil borings performed evidence obtained evaluated based upon evaluation remediation strategy developed submitted appropriate regulatory body approval final phase process involves commencement remediation activities according approved plan general motors corporation subsidiaries notes consolidated financial statements continued applicable also include estimated environmental liabilities costs ongoing operating maintenance monitoring environmental sites remediation put place liabilities fixed reliably determinable cash flows discounted using riskfree rate return periods ongoing maintenance expected occur generally five 30 years subsequent adjustments initial estimates recorded necessary based upon additional information developed subsequent periods future periods new laws regulations advances remediation technologies additional information ultimate remediation methodology used could significantly change estimates cash equivalents cash equivalents defined shortterm highlyliquid investments original maturities 90 days less marketable securities marketable securities classified availableforsale except certain mortgagerelated securities classified heldtomaturity availableforsale securities recorded fair value unrealized gains losses reported net related income taxes accumulated comprehensive loss realized heldtomaturity securities recorded amortized cost determine realized gains losses using specific identification method derivative instruments party variety foreign currency exchange rate interest rate commodity derivative contracts entered connection management exposure fluctuations foreign currency exchange rates interest rates certain commodity prices financial exposures managed accordance corporate policies procedures derivatives recorded fair value consolidated balance sheets effective changes fair value derivatives designated cash flow hedges recorded net unrealized gains losses derivatives within separate component comprehensive income loss amounts reclassified accumulated comprehensive income loss underlying hedged item affects earnings ineffective changes fair value recorded currently earnings changes fair value derivatives designated fair value hedges recorded currently earnings offset changes fair value hedged item extent derivative effective changes fair value derivatives designated hedging instruments recorded currently earnings effect resulting change fair value derivative instruments recorded line item consolidated statements operations underlying exposure hedged also classify cash flows derivative instruments categories hedged items consolidated statement cash flows part quarterly tests hedge effectiveness fourth quarter 2008 unable conclude cash flow fair value hedging relationships continued highly effective therefore discontinued application hedge accounting derivative instruments used cash flow fair value hedging relationships refer note 17 additional information related derivative activities accounting income taxes use liability method accounting income taxes deferred tax assets liabilities recorded temporary differences tax basis assets liabilities reported amounts consolidated financial statements using statutory tax rates effect year differences expected reverse effect deferred tax assets liabilities change tax rates recognized results operations period includes enactment date law valuation allowance recorded reduce carrying amounts deferred tax assets unless likely assets realized general motors corporation subsidiaries notes consolidated financial statements continued accounting early retirement programs offer early retirement program certain employees located gme region allows employees transition employment retirement legal retirement age eligible employees elect participate preretirement leave program work full time half preretirement period active period work remaining half inactive period receive 50 salary preretirement period employees also receive bonus equal 35 annual net pay beginning preretirement period additionally required make contributions german government pension program participants preretirement period entitled government subsidy certain conditions met date entitled program subsidy january 1 2006 adopted eitf 055 “accounting early retirement postemployment programs specific features” began recognizing bonus additional contributions german government pension plan collectively additional compensation period employee signed program contract end employee’s active service period prior 2006 recognized full additional compensation fiscal year prior employee entering active service period change reported change accounting estimate effected change accounting principle resulted additional compensation expense 68 million 2006 accounting extended disability benefits accrue estimated extended disability benefits ratably employees’ active service period using measurement provisions similar used measure postretirement benefits opeb obligations liability consists future obligations income replacement healthcare costs life insurance premiums employees currently disabled active workforce may become disabled estimate future disabilities current workforce using actuarial methods based historical experience labor force worldwide basis concentration workforce working guidelines unionized collective bargaining agreements current labor contract uaw effective fouryear term began october 2007 expires september 2011 contract included 3000 lump sum payment 2007 performance bonuses 30 40 30 wages 2008 2009 2010 respectively uaw employee amortize payments 12month period following respective payment dates active uaw employees current retirees surviving spouses also granted pension benefit increases refer note 16 previous uaw labor contract effective fouryear term began october 2003 expired september 2007 contract provided 3000 lump sum payment uaw employee paid october 2003 30 performance bonus uaw employee paid october 2004 amortized payments 12month period following respective payment dates changes accounting principles accounting servicing financial assets january 1 2006 adopted sfas 156 “accounting servicing financial assets amendment fasb statement 140” 1 provides revised guidance servicing asset servicing liability recognized 2 requires separately recognized servicing assets liabilities initially measured fair value practicable 3 permits entity elect measure servicing assets liabilities fair value reporting date report changes fair value earnings period changes occur 4 provides upon initial adoption onetime reclassification availableforsale securities trading securities identified offsetting company’s exposure changes fair value servicing assets general motors corporation subsidiaries notes consolidated financial statements continued liabilities servicer elects subsequently measure fair value 5 requires separate presentation servicing assets liabilities subsequently measured fair value balance sheet additional disclosures recorded reduction retained earnings january 1 2006 13 million cumulative effect change accounting principle adoption sfas 156 fair value measurements january 1 2008 adopted sfas 157 “fair value measurements” provides consistent definition fair value focuses exit price prioritizes within measurement fair value use marketbased inputs companyspecific inputs sfas 157 requires expanded disclosures fair value measurements establishes threelevel hierarchy fair value measurements based observable inputs valuation asset liability measurement date standard also requires company consider nonperformance risk measuring liabilities carried fair value including derivatives february 2008 fasb approved fsp fas 1572 “effective date fasb statement 157” permits companies partially defer effective date sfas 157 one year nonfinancial assets nonfinancial liabilities recognized disclosed fair value financial statements nonrecurring basis fsp fas 1572 permit companies defer recognition disclosure requirements financial assets financial liabilities nonfinancial assets nonfinancial liabilities remeasured least annually decided defer adoption sfas 157 one year nonfinancial assets nonfinancial liabilities recognized disclosed fair value financial statements nonrecurring basis effect adoption sfas 157 january 1 2008 material adjustment accumulated deficit required refer note 9 effect adoption standard gmac financial condition refer note 20 information regarding effect adoption sfas 157 respect financial assets liabilities currently unable quantify effect adoption sfas 157 nonfinancial assets nonfinancial liabilities financial condition results operations october 2008 fasb issued fsp 1573 “determining fair value financial asset market asset active” clarifies application sfas 157 determining fair value financial asset market active effect applying guidance fsp 1573 beginning september 30 2008 insignificant fair value option financial assets financial liabilities including amendment sfas 115 january 1 2008 adopted sfas 159 “the fair value option financial assets financial liabilities including amendment fasb statement 115” permits company measure certain financial assets financial liabilities fair value previously required measured fair value elected measure financial assets financial liabilities fair value previously required measured fair value therefore adoption standard effect results operations refer note 9 effect adoption standard gmac financial condition accounting uncertainty income taxes january 1 2007 adopted fin 48 “accounting uncertainty income taxes interpretation fasb statement 109” supplements sfas 109 “accounting income taxes” defining confidence level tax position must meet order recognized financial statements fin 48 requires tax effects position recognized likely sustained based solely technical merits reporting date likely threshold represents positive assertion management company entitled economic benefit tax position tax position considered likely sustained based solely technical merits benefits tax position recognized likely threshold must continue met reporting period support continued recognition benefit adoption fin 48 companies required adjust financial statements reflect tax positions likely sustained adopted fin 48 january 1 2007 recorded increase retained earnings 137 million cumulative effect change accounting principle corresponding decrease liability uncertain tax positions general motors corporation subsidiaries notes consolidated financial statements continued employers’ accounting defined benefit pension postretirement plans recognized funded status benefit plans december 31 2006 accordance recognition provisions sfas 158 “employers’ accounting defined benefit pension postretirement plans amendment fasb statements 87 88 106 132r” additionally elected adopt early measurement date provisions sfas 158 january 1 2007 provisions require measurement date plan assets liabilities coincide sponsor’s year end refer note 16 accounting standards yet adopted business combinations december 2007 fasb issued sfas 141r “business combinations” retained underlying concepts existing standards business combinations accounted fair value acquisition method accounting however sfas 141r changes method applying acquisition method number significant aspects sfas 141r require 1 business combinations acquirer record assets liabilities acquired business including goodwill generally fair values 2 certain preacquisition contingent assets liabilities acquired recognized fair values acquisition date 3 contingent consideration recognized fair value acquisition date certain arrangements changes fair value recognized earnings settled 4 acquisitionrelated transaction restructuring costs expensed rather treated part cost acquisition included amount recorded assets acquired 5 step acquisitions previous equity interests acquiree held prior obtaining control remeasured acquisitiondate fair values gain loss recognized earnings 6 making adjustments finalize initial accounting companies revise previously issued postacquisition financial information future financial statements reflect adjustments recorded acquisition date sfas 141r effective prospective basis business combinations acquisition date beginning first annual period subsequent december 15 2008 exception accounting valuation allowances deferred taxes acquired tax contingencies sfas 141r amends sfas 109 adjustments made valuation allowances deferred taxes acquired tax contingencies associated acquisitions closed prior effective date sfas 141r also apply provisions standard effective standard applied future business combinations noncontrolling interests consolidated financial statements december 2007 fasb issued sfas 160 “noncontrolling interests consolidated financial statements amendment arb 51” amends arb 51 “consolidated financial statements” establish new standards govern accounting reporting noncontrolling interests partiallyowned consolidated subsidiaries loss control subsidiaries also sfas 160 requires 1 noncontrolling interest previously referred minority interest reported part equity consolidated financial statements 2 losses allocated noncontrolling interest even allocation might result deficit balance reducing losses attributed controlling interest 3 changes ownership interests treated equity transactions control maintained 4 gain loss recognized earnings 5 noncontrolling interest’s share recorded fair value net assets acquired plus share goodwill sfas 160 effective prospective basis fiscal years interim periods within fiscal years beginning december 15 2008 except presentation disclosure requirements applied retrospectively significant effect sfas 160 adoption reclassify retrospectively minority interest 814 million december 31 2008 liability separate component stockholders’ deficit reclassify retrospectively income attributable minority interest adjustment net income allocation net income noncontrolling interest 108 million 2008 decrease previously reported stockholders’ deficit periods presented general motors corporation subsidiaries notes consolidated financial statements continued disclosures derivative instruments hedging activities amendment fasb statement 133 march 2008 fasb issued sfas 161 “disclosures derivative instruments hedging activities amendment fasb statement 133” expands disclosure requirements sfas 133 “accounting derivative instruments hedging activities” sfas 161 requires additional disclosures regarding 1 company uses derivative instruments 2 derivative instruments related hedged items accounted sfas 133 3 derivative instruments related hedged items affect company’s financial position financial performance cash flows addition sfas 161 requires qualitative disclosures objectives strategies using derivatives described context company’s risk exposures quantitative disclosures location fair value derivative instruments associated gains losses disclosures creditriskrelated contingent features derivative instruments sfas 161 effective fiscal years interim periods within fiscal years beginning november 15 2008 accounting convertible debt instruments may 2008 fasb ratified fsp apb 141 “accounting convertible debt instruments may settled cash upon conversion including partial cash settlement” requires issuers convertible debt securities within scope separate securities debt component equity component resulting debt component recorded fair value without consideration given conversion feature issuance costs also allocated debt equity components fsp apb 141 require convertible debt within scope reflect company’s nonconvertible debt borrowing rate interest expense recognized fsp apb 141 effective financial statements issued fiscal years beginning december 15 2008 interim periods within fiscal years shall applied retrospectively prior periods estimate upon adoption interest expense increase periods presented fiscal year 2009 pretax interest expense increasing approximately 90 million based current level indebtedness participating sharebased payment awards june 2008 fasb ratified fsp eitf 0361 “determining whether instruments granted sharebased payment transactions participating securities” addresses whether instruments granted sharebased payment awards participating securities prior vesting therefore must included earnings allocation calculating earnings per share twoclass method described sfas 128 “earnings per share” fsp eitf 0361 requires unvested sharebased payment awards contain nonforfeitable rights dividends dividendequivalents treated participating securities calculating earnings per share fsp eitf 0361 effective financial statements issued fiscal years beginning december 15 2008 interim periods within fiscal years shall applied retrospectively prior periods anticipate adoption fsp eitf 0361 effect previously reported losses per share 2006 2008 anticipated 2009 loss per share 1 participating securities participate losses 2 incurred losses since 2006 determination whether equitylinked financial instrument embedded feature indexed entity’s stock june 2008 fasb ratified eitf 075 “determining whether instrument embedded feature indexed entity’s stock” requires instrument’s contingent exercise provisions analyzed first evaluation preclude consideration instrument indexed company’s stock instrument’s settlement provisions analyzed eitf 075 effective financial statements issued fiscal years beginning december 15 2008 interim periods within fiscal years requires reporting cumulative effect change accounting principle retained earnings instruments existing effective date balance retained earnings currently anticipate adoption eitf 075 significant effect consolidated financial statements accounting collaborative arrangements december 2007 fasb ratified eitf 071 “accounting collaborative arrangements” requires revenue generated costs incurred parties collaborative arrangement reported appropriate line company’s general motors corporation subsidiaries notes consolidated financial statements continued financial statements pursuant guidance eitf 9919 “reporting revenue gross principal versus net agent” account arrangements using equity method accounting eitf 071 also includes enhanced disclosure requirements regarding nature purpose arrangement rights obligations arrangement accounting policy amount income statement classification collaboration transactions parties eitf 071 effective fiscal years beginning december 15 2008 interim periods within fiscal years shall applied retrospectively practicable prior periods presented collaborative arrangements existing effective date anticipate adoption eitf 071 significant effect consolidated financial statements accounting lessees maintenance deposits june 2008 fasb ratified eitf 083 “accounting lessees maintenance deposits” specifies maintenance deposits contractually substantively related maintenance leased assets refundable lessee performs specified maintenance activities shall accounted deposit assets eitf 083 effective financial statements issued fiscal years beginning december 15 2008 recognition cumulative effect change accounting principle opening balance retained earnings first year presented note 4 disposal businesses sale allison transmission business august 2007 completed sale commercial military operations allison business formerly division powertrain operations negotiated purchase price 56 billion cash plus assumed liabilities paid closing purchase price subject adjustment based amount allison’s net working capital debt closing date resulted adjusted purchase price 54 billion gain sale allison amount 53 billion 43 billion aftertax inclusive final purchase price adjustments recognized 2007 allison designs manufactures commercial military automatic transmissions global provider commercial vehicle automatic transmissions onhighway vehicles including trucks specialty vehicles buses recreational vehicles offhighway military vehicles well hybrid propulsion systems transit buses retained powertrain operations’ facility near baltimore maryland manufactures automatic transmissions primarily trucks hybrid propulsion systems results operations cash flows allison reported consolidated financial statements discontinued operations 2007 2006 historically allison reported within gmna automotive business following table summarizes results discontinued operations part transaction entered agreement buyers allison whereby may provide new parent company allison contingent financing 100 million financing would made available defined period time allison compliance financial maintenance covenant separate credit agreement financing would contingent stockholders new parent company allison committing provide equivalent amount funding allison either form equity loan would granted terms loan general motors corporation subsidiaries notes consolidated financial statements continued new parent company allison december 31 2008 provided financing pursuant agreement commitment expires december 31 2010 additionally parties entered noncompete arrangements term 10 years united states term five years europe sale 51 controlling interest gmac november 2006 completed gmac transaction purchase price 74 billion fim holdings fim holdings consortium investors including cerberus fim investors llc citigroup inc aozora bank limited subsidiary pnc financial services group inc retained 49 interest gmac’s common membership interests addition fim holdings purchased 555000 gmac’s preferred membership interests cash purchase price 500 million purchased 1555000 preferred membership interests cash purchase price 14 billion total value cash proceeds distributions us repayment certain intercompany obligations purchased preferred membership interests gmac expected 140 billion three years comprised 74 billion purchase price 27 billion cash dividend closing transaction related cash flows including monetization certain retained assets january 2007 made capital contribution gmac 10 billion restore adjusted tangible equity balance contractually required amount due decrease adjusted tangible equity balance gmac november 30 2006 eleven months ended november 30 2006 gmac’s earnings cash flows fully consolidated statements operations consolidated statements cash flows november 30 2006 remaining 49 interest gmac’s common membership interests recorded equity method investment also interest gmac’s preferred membership interests recorded cost method investment assets refer note 12 part agreement retained option 10 years closing date repurchase gmac certain assets related automotive finance business north american operations international operations gmac value assigned option part gmac’s conversion bank holding company bhc status call option terminated also entered number agreements gmac intended continue mutuallybeneficial global relationship us gmac december 2008 signed preliminary term sheet gmac connection gmac’s application become bhc indicated intention amend terms sale agreement including terminating call option within 90 days gmac becoming bhc gmac approved become bhc bank holding company act 1956 amended december 2008 refer note 27 additional information concerning amendments arrangements recognized impairment charge 29 billion expenses 2006 charge comprised writedown carrying value gmac assets sold november 30 2006 partially offset realization 51 recognized net gains recorded gmac’s comprehensive income sale gmac commercial mortgage march 2006 gmac sold 79 equity gmac commercial mortgage 15 billion cash subsequent sale remaining interest gmac commercial mortgage recorded using equity method gmac note 5 marketable securities marketable securities hold classified availableforsale except certain mortgagerelated securities classified heldtomaturity part steps required dissolve national motors bank subsidiary 2008 sold mortgagebacked securities classified heldtomaturity december 31 2007 unrealized gains losses net related income taxes availableforsale securities included separate component stockholders’ deficit determine cost specific identification basis general motors corporation subsidiaries notes consolidated financial statements continued following table summarizes information regarding investments marketable securities held 40 billion 147 billion december 31 2008 2007 respectively securities classified cash equivalents due maturity dates within 90 days acquisition following table summarizes results marketable securities transactions following table summarizes fair value investments classified availableforsale debt securities contractual maturity december 31 2008 general motors corporation subsidiaries notes consolidated financial statements continued monthly basis evaluate whether unrealized losses related investments debt equity securities temporary nature factors considered determining whether loss temporary include length time extent fair value cost financial condition nearterm prospects issuer ability intent hold investment period time sufficient allow anticipated recovery losses determined temporary investment carrying amount considered impaired adjusted fair market value recorded temporary impairments 62 million 72 million certain marketable securities 2008 2007 respectively temporary impairments recorded 2006 held investments december 31 2008 unrealized loss position temporarily impaired following tables summarize fair value gross unrealized losses investments unrealized loss position temporarily impaired discussed note 9 hold investment gmac preferred membership interests recorded cost basis assets 43 million 10 billion december 31 2008 2007 respectively fair value investment 299 million 933 million december 31 2008 2007 respectively addition december 31 2007 held suzuki common stock cost basis 236 million fair value 492 million accounted noncurrent availableforsale marketable security classified assets sold investment november 2008 loss 12 million recorded automotive interest income nonoperating income net note 6 finance receivables securitizations generate receivables sales vehicles dealer network well service parts powertrain sales certain receivables sold whollyowned bankruptcyremote special purpose entities spe spes separate legal entities assume risks rewards ownership receivables september 2008 entered one year revolving securitization borrowing program provides financing 197 million trade receivables serve security agreement isolated whollyowned bankruptcyremote spes turn pledge receivables lending institutions pledged receivables reported accounts notes receivable net borrowings reported shortterm borrowings december 31 2008 receivables 145 million pledged borrowings 140 million outstanding program addition securitization program participate trade receivable securitization programs primarily europe financing providers beneficial interest pool eligible european receivables 16 million 26 million december 31 2008 2007 respectively related securitization programs general motors corporation subsidiaries notes consolidated financial statements continued since april 2006 certain trade accounts receivables related vehicle sales dealers primarily mideast pledged collateral onbalance sheet securitized borrowing program trade receivables serve security agreement isolated whollyowned bankruptcyremote spe turn pledges receivables lending institutions receivables pledged reported accounts notes receivable net amount receivables pledged program 504 million 504 million december 31 2008 2007 respectively outstanding borrowings program 395 million 205 million december 31 2008 2007 respectively amounts also reported shortterm borrowings prior september 2008 previous securitization program expired spe participated trade accounts receivable securitization program whereby entered agreement sell undivided interests eligible pool trade receivables limited 600 million 2008 2007 directly banks bank conduit funded purchases issuance commercial paper receivables program sold fair value removed consolidated balance sheet time sale loss recorded trade receivables sold included automotive cost sales 3 million 2 million 30 million 2008 2007 2006 respectively banks bank conduits beneficial interest eligible pool receivables december 31 2007 retained interest receivables sold provide guarantees credit enhancements performed collection administrative functions gross amount proceeds collections reinvested revolving securitizations 16 billion 600 million 90 billion 2008 2007 2006 respectively december 31 2008 amounts remained outstanding program securitizations finance receivables mortgage loans prior consummation gmac transaction gmac transferred us two bankruptcyremote subsidiaries functioned spes held equity interests 10 trusts parties lease asset securitizations balance lease securitization debt two spes 12 billion 48 billion december 31 2008 2007 respectively completion gmac transaction 2006 gmac’s finance receivables longer part consolidated balance sheet information gmac finance receivables eleven months ended november 30 2006 gmac sold retail finance receivables wholesale dealer loans residential mortgage loans following discussion related information applicable transfers finance receivables loans qualified offbalance sheet securitizations gmac retained servicing responsibilities subordinated interests securitizations retail finance receivables wholesale loans servicing responsibilities retained majority residential commercial mortgage loan securitizations gmac retained subordinated interests securitizations gmac also held subordinated interests acted collateral manager collateralized debt obligation cdo securitization program servicer gmac received monthly fee stated percentage outstanding sold receivables typically retail automotive finance receivables gmac paid fee concluded fee represented adequate compensation servicer servicing asset liability recognized considering shortterm revolving nature wholesale loans servicing asset liability recognized upon securitization loans additionally gmac retained rights cash flows remaining investors securitization trusts received contractual payments certain retail securitization transactions retail receivables sold servicing retained basis servicing compensation servicing liability established recorded liabilities mortgage servicing gmac capitalized value expected realized performing specified residential commercial mortgage servicing activities mortgage servicing rights general motors corporation subsidiaries notes consolidated financial statements continued following table summarizes gains securitizations certain cash flows received paid securitization trusts transfers finance receivables loans following table summarizes key economic assumptions used measuring estimated fair value retained interests sales completed dates sales fair value retained interests wholesale securitizations approximated cost shortterm floating rate nature wholesale loans b included within residential mortgage loans home equity loans lines high loantovalue loans residential first second mortgage loans c assumptions used measure expected yield variable rate retained interests based benchmark interest rate yield curve plus contractual spread appropriate actual yield curve utilized varies depending specific retained interests based weightedaverage maturity finance receivables constant prepayment rate mortgage loans commercial mortgage securities general motors corporation subsidiaries notes consolidated financial statements continued gmac hedged interest rate prepayment risks associated certain retained interests effects hedge strategies considered herein expected static pool net credit losses include actual incurred losses plus projected net credit losses divided original balance outstandings comprising securitization pool following table summarizes expected static pool net credit losses based securitization transactions static pool losses applicable wholesale finance receivable securitizations shortterm nature note 7 inventories following table summarizes components inventory inventories valued lower cost market cost determined lifo method 21 inventories fifo average cost methods inventories accordance lower cost market analysis analyze inventory adjust carrying amount downward determined carried market values determined based category inventory analyzed finished vehicle inventory analyzed product line basis estimated selling price based current selling prices takes account general market economic conditions periodic reviews current profitability vehicles effect current incentive offers balance sheet date offlease vehicles compared current auction sales proceeds productive material work process supplies service parts reviewed determine inventory quantities excess forecasted usage become obsolete analysis determines estimated market value less cost determined lifo fifo basis depending inventory costing methodology category inventory reduce carrying value affected inventory market value 2008 2007 us lifo eligible inventory quantities reduced reduction resulted liquidation lifo inventory quantities carried lower costs prevailing prior years compared cost 2008 2007 purchases effect decreased automotive cost sales approximately 355 million 100 million 2008 2007 respectively 2008 2007 2006 recorded impairments finished goods inventories including rental car returns company vehicles 336 million 249 million 290 million respectively general motors corporation subsidiaries notes consolidated financial statements continued note 8 equipment operating leases net automotive leases relate vehicle sales daily rental car companies guaranteed repurchase obligations accounted operating leases fio leases retail customers retained us gmac transaction following table summarizes information related equipment operating leases net related accumulated depreciation refer note 22 additional information impairments related equipment operating leases net following table summarizes scheduled minimum rental payments received equipment operating leases net payment received lease inception revenue deferred lease period note 9 investment nonconsolidated affiliates nonconsolidated affiliates entities equity interest use equity method accounting ability exert significant influence decisions relating operating financial affairs following table summarizes information regarding share net income loss nonconsolidated affiliates general motors corporation subsidiaries notes consolidated financial statements continued investment gmac following tables summarize financial information gmac conversion bank holding company related transactions previously disclosed november 2006 sold 51 controlling interest gmac retained 49 interest account equity method adverse domestic international market conditions 2008 resulted significant losses gmac’s mortgage lending subsidiary residential capital llc rescap gmac’s automotive finance operation experienced pressure lower used vehicle prices weaker consumer dealer credit performance result market conditions gmac tightened credit standards exited several markets difficult rescap maintain adequate capital liquidity levels gmac took several actions address liquidity issues included submitting application board governors federal reserve system approval whollyowned subsidiary gmac financial services become bhc bank holding company act 1956 amended bhc gmac would expanded opportunities funding access capital would provide increased flexibility stability general motors corporation subsidiaries notes consolidated financial statements continued order obtain approval convert bhc status board governors federal reserve system required gmac undertake certain actions agree certain conditions actions described detail conversion participation agreement common membership interests june 2008 along cerberus rescap financing llc cerberus fund entered participation agreement gmac participation agreement provided would fund 368 million loans made gmac rescap 35 billion secured loan facility gmac provided rescap facility cerberus fund would fund 382 million rescap facility expire may 1 2010 funding pursuant participation agreement done prorata basis us cerberus fund december 2008 funded maximum obligation rescap facility 368 million december 2008 fim holdings assignee cerberus fund entered exchange agreement gmac pursuant exchange agreement fim holdings exchanged respective amounts funded participation agreement 79368 class b common membership interests 82608 class common membership interests respectively gain loss recognized conversion fair value gmac common membership interests received equal carrying value participation agreement interest purchase additional common membership interests december 2008 fim holdings entered subscription agreement gmac agreed purchase additional common membership interests gmac ust committed provide us additional funding order purchase additional interests january 2009 entered loan security agreement ust gmac loan pursuant borrowed 884 million utilized funds purchase 190921 class b common membership interests gmac ust gmac loan scheduled mature january 16 2012 bears interest payable quarterly rate interest loans ust loan agreement ust loans ust gmac loan secured common preferred membership interests gmac part loan agreement ust option convert outstanding amounts maximum 190921 shares class b common membership interests prorata basis result purchase interest gmac’s common membership interests increased 49 60 refer note 15 additional commitments gmac’s conversion bhc status including future divestitures furtherance gmac’s effort become bhc committed following • 190921 class b common membership interests purchased proceeds ust gmac loan placed one trusts treasury trust later march 24 2009 beneficiary ust right appoint trustee treasury trust independent us authority vote dispose class b common membership interests treasury trust • hold 99 remaining economic interests directly currently consist common preferred membership interests excess common membership interests placed trust establish gm trust later march 24 2009 beneficiary appoint trustee gm trust independent us subject approval federal reserve system trustee gm trust sole authority vote dispose common membership interests gm trust • reduce ownership gmac including common membership interests treasury gm trusts less 10 voting total equity gmac december 24 2011 general motors corporation subsidiaries notes consolidated financial statements continued • exercise controlling influence gmac including agreeing seek representation gmac’s board managers one nonvoting observer blocking rights gmac llc agreement terminated additionally agreed use current 60 ownership gmac exercise controlling influence gmac including board managers business activities approval bank holding company status application gmac financial services become bhc bank holding company act 1956 amended approved board governors federal reserve system december 2008 gmac sale 51 controlling interest november 2006 completed gmac transaction sale 51 controlling interest gmac price 74 billion fim holdings retained 49 interest gmac’s common membership interests addition fim holdings purchased 555000 gmac’s preferred membership interests cash purchase price 500 million purchased 1555000 preferred membership interests cash purchase price 14 billion november 2007 converted 533236 preferred membership interests fim holdings converted 555000 preferred membership interests 3912 4072 respectively common membership interests order strengthen gmac’s capital position percentage ownership common membership interests gmac remained unchanged conversion accounted conversion fair value recorded loss 27 million 2007 loss conversion represents difference fair value carrying value preferred membership interests converted gmac accounted conversion preferred membership interests recapitalization recorded book value proportionate share increase gmac’s net equity attributable common membership interest holders result conversion exceeded fair value preferred membership interests converted 27 million difference recorded increase additional paidin capital 2007 december 31 2008 2007 hold remaining 1021764 preferred membership interests 49 132280 52912 respectively common membership interests gmac may required make certain quarterly cash distributions us based upon preferred membership interests hold preferred membership interests issued units 1000 accrue yield rate 10 per annum noncumulative gmac board managers may reduce distribution extent required avoid reduction equity capital gmac minimum amount equity capital equal net book value gmac november 30 2006 may reduce suspend distribution certain circumstances part agreement retained option ten years closing date repurchase gmac certain assets related automotive finance business north american operations international operations gmac part gmac’s conversion bhc status call option terminated change classification voting interest entity variable interest entity three months ended december 31 2008 gmac engaged agreed several transactions including exchange cash tender offers purchase andor exchange certain subsidiaries’ outstanding notes new notes 9 cumulative perpetual preferred stock issuance series d2 fixed rate cumulative perpetual preferred membership interests ust conversion participation agreement common membership interests issuance additional common membership interests us result changes gmac’s capital structure required reconsider previous conclusion gmac voting interest entity hold controlling financial interest gmac part qualitative quantitative analyses determined gmac vie accordance fin 46r “consolidation variable interest entities” sufficient equity risk also determined related party group term defined fin 46r exists us ust de facto agency provisions fin 46r however determined based qualitative quantitative analysis related party group belong absorb majority gmac’s expected losses residual returns therefore member related party group primary beneficiary general motors corporation subsidiaries notes consolidated financial statements continued gmac accordingly consolidate gmac quantitative analysis performed using blackscholes model compute price purchasing hypothetical put gmac’s net assets exclusive variable interests estimate expected losses variable interests gmac blackscholes model used estimate expected losses allocated individual variable interests identified gmac’s capital structure significant estimates assumptions judgments used analysis include outstanding unsecured debt gmac variable interest gmac trading sufficient discount face value indicate absorbing significant portion gmac’s expected losses receiving portion expected returns expected return gmac’s net assets exclusive variable interests normally distributed mean return equal riskfree rate return expected volatility approximately 22 estimates fair value gmac’s variable interests components capital structure estimates expected outstanding term gmac’s nonperpetual variable interests estimate weighted average term approximately 5 years qualitative considerations include fact required reduce common investment gmac 10 within three years voting members gmac board managers contractual provisions cannot attempt influence operations gmac manner common membership interests voted refer note 1 additional information regarding nature operations gmac note 27 description significant agreements gmac maximum exposure agreements gmac preferred common membership interests following table summarizes information related preferred common membership interests gmac periodically evaluate carrying value investments gmac including preferred common membership interests assess whether investments impaired various dates 2008 determined investments gmac preferred common membership interests impaired impairments temporary following table summarizes impairment charges recorded related investment gmac common preferred membership interests 2008 dollars millions impairment charges recorded equity loss gmac llc automotive interest income nonoperating income net investment gmac common preferred membership interests respectively measurements fair value determined accordance sfas 157 utilizing level 3 inputs fair value hierarchy established sfas 157 refer note 20 information specific valuation methodology gmac transactions january 1 2008 gmac adopted sfas 157 159 upon adoption sfas 157 gmac recorded adjustment retained earnings related recognition dayone gains purchased mortgage servicing rights certain residential loan general motors corporation subsidiaries notes consolidated financial statements continued commitments upon adoption sfas 159 gmac elected measure fair value certain financial assets liabilities including certain cdos certain mortgage loans held investment financing securitization structures result reduced equity net assets gmac llc increased accumulated deficit 76 million 2008 reflecting proportionate share cumulative effect gmac’s adoption sfas 157 159 2007 result deteriorating conditions residential home building markets recent credit downgrades unsecured debt obligations significant yeartodate losses residential mortgage business gmac conducted interim goodwill impairment test rescap business gmac concluded carrying amount rescap including goodwill exceeded fair value recorded impairment charge 455 million share impairment charge decreased investment gmac 223 million december 31 2007 recorded equity loss gmac llc 2007 refer note 27 description related party transactions gmac investment nonconsolidated affiliates following table summarizes information regarding significant nonconsolidated affiliates shanghai general motors co ltd saicgmwuling automobile co ltd share significant nonconsolidated affiliates’ net income 312 million 430 million 345 million december 31 2008 2007 2006 respectively transactions nonconsolidated affiliates nonconsolidated affiliates involved various aspects development production marketing cars trucks parts following tables summarize effects transactions nonconsolidated affiliates eliminated consolidation results operations financial position general motors corporation subsidiaries notes consolidated financial statements continued cash flows investment electromotive diesel inc april 2008 converted note receivable basis 37 million resulted sale electromotive division april 2005 30 common equity interest electromotive diesel inc successor company subsequently sold common equity interest electromotive diesel inc 80 million cash note receivable 7 million subsequently collected december 2008 recognized gain sale common equity interest 50 million recorded automotive interest income nonoperating income net note 10 property net following table summarizes components property net property net includes capitalized software 537 million 478 million 175 million 198 million process developed capitalized interest 576 million 404 million december 31 2008 2007 respectively general motors corporation subsidiaries notes consolidated financial statements continued following table summarizes depreciation impairment amortization including asset impairment charges included automotive cost sales selling general administrative expenses financial services insurance expense depreciation property held gmac ceased april 2006 time assets classified held sale total consolidated depreciation impairment amortization includes capitalized software amortization expense 209 million 192 million 189 million 2008 2007 2006 respectively december 2006 sold proving grounds facility mesa arizona 283 million cash subsequently leased back threeyear period recognized gain 270 million note 11 goodwill intangible assets following table summarizes components goodwill intangible assets general motors corporation subsidiaries notes consolidated financial statements continued aggregate amortization expense existing acquired intangible assets 83 million 74 million 84 million 2008 2007 2006 respectively following table summarizes estimated amortization expense next five years following table summarizes changes carrying amounts goodwill august 2007 completed sale allison resulted disposition goodwill based relative fair value allison gmna reporting unit refer note 4 note 12 assets following table summarizes components assets general motors corporation subsidiaries notes consolidated financial statements continued restricted cash automotive consists primarily required prefunded amounts various suppliers certain governments governmental agencies restricted cash fio consists primarily cash held securitization trusts certificate deposit purchased gmac title note 13 variable interest entities part normal business operations transactions vies entities equity investors characteristics controlling financial interest sufficient equity risk entity finance activities without additional subordinated financial support evaluate involvement vies determine whether variable interests vies whether primary beneficiary vie case required consolidate vie vies consolidate primary beneficiary include leasing spes hold real estate assets related liabilities provided residual guarantees previously divested suppliers made significant guarantees provide financial support vehicles sales marketing joint ventures manufacture market sell vehicles certain markets carrying amount consolidated vie assets liabilities december 31 2008 109 million 137 million respectively 330 million 364 million december 31 2007 respectively assets primarily recorded property net liabilities primarily current longterm debt reporting date certain creditors beneficial interest holders vies limited insignificant recourse general credit vies consolidate included troubled suppliers leasing entities made guarantees provided financial support vehicles sales marketing joint ventures manufacture market sell vehicles certain markets result capital transactions occurred prior december 31 2008 determined gmac vie primary beneficiary refer note 9 additional information concerning gmac’s change classification voting interest entity vie following table summarizes amounts recorded consolidated financial statements related nonconsolidated vies related maximum exposure loss excluding gmac december 31 2008 amount includes 40 million related equity investments nonconsolidated affiliates b december 31 2008 amount includes 80 million related residual value guarantees certain operating leases 70 million related troubled suppliers 40 million related equity investment nonconsolidated affiliate december 31 2007 amount reflects residual value guarantees certain operating leases general motors corporation subsidiaries notes consolidated financial statements continued note 14 accrued expenses liabilities deferred income taxes following table summarizes components accrued expenses liabilities deferred income taxes following table summarizes activity policy product warranty recall campaigns certified used vehicle warranty liabilities general motors corporation subsidiaries notes consolidated financial statements continued review adjust estimates periodic basis based differences actual experience historical estimates available information note 15 shortterm borrowings longterm debt automotive shortterm borrowings current portion longterm debt following table summarizes components shortterm borrowings primarily dealer financing gmac dealerships owned us b includes ust loans 38 billion net 913 million discount secured revolving credit facility 45 billion us term loan 15 billion c includes interest rates debt denominated various currencies pay commitment fees credit facilities rates negotiated agreement amounts paid expensed commitment fees insignificant amounts available shortterm line credit agreements 186 million 18 billion december 31 2008 2007 respectively connection preparation consolidated financial statements year ended december 31 2008 concluded substantial doubt ability continue going concern independent auditors included statement audit report related existence substantial doubt ability continue going concern auditors included statement audit report secured amendments waivers 45 billion secured revolving credit facility 15 billion us term loan 125 million secured credit facility going concern statement shall applicable reports provided year ended december 31 2008 consequently default covenants conclude substantial doubt ability continue going concern year ending december 31 2009 seek similar amendments waivers time order secure amendments waivers agreed lenders incorporate crossdefault provisions ust facility ust terminate ust facility certify viability plan ust facility revolving credit facility us term loan secured credit facility classified shortterm borrowings general motors corporation subsidiaries notes consolidated financial statements continued longterm debt following table summarizes components longterm debt included current portion longterm debt b includes secured revolving credit facility 45 billion us term loan 15 billion included current portion longterm debt c adjust hedged fixed rate debt fair value changes attributable hedged risk refer note 17 united states department treasury loan facility december 31 2008 entered ust loan agreement pursuant ust agreed provide us ust loan facility borrowed 40 billion ust loan facility december 31 2008 additional 54 billion january 21 2009 additional 40 billion february 17 2009 ust loans scheduled mature december 30 2011 unless maturity date accelerated event ust certified restructuring plan deadline certification described amounts outstanding ust loan facility accrue interest rate per annum equal threemonth libor rate less 20 plus 30 accrued interest payable quarterly beginning march 31 2009 required repay ust loans net cash proceeds received certain dispositions collateral securing ust loans incurrence certain debt certain dispositions unencumbered assets may also voluntarily repay ust loans whole part time repaid amounts borrowed ust loan facility may reborrowed domestic subsidiaries executed ust loan agreement guarantors guaranteed obligations ust loan facility guarantors’ obligations loan documents pursuant guaranty security agreement made guarantors favor ust loan facility secured substantially guarantors’ us assets previously encumbered including equity interests guarantors’ domestic subsidiaries intellectual property real estate manufacturing plants facilities inventory pledged lenders cash equivalents us subject certain exclusions ust loan facility also secured guarantors’ equity interests certain foreign subsidiaries limited cases 65 equity interests pledged foreign subsidiaries due tax considerations subject certain exclusions assets excluded ust’s security interest include among things assets extent grant security interest asset 1 prohibited law requires consent law obtained 2 contractually prohibited general motors corporation subsidiaries notes consolidated financial statements continued would result breach termination contract would require third party consent obtained 3 would result lien obligation grant lien asset secure obligations agreed ust take use best efforts take certain actions respect ust’s security interests ust loan facility collateral property including using best efforts obtain consent certain lenders existing liens assets enable us grant junior liens assets favor ust secure ust loan facility subsequent december 31 2008 negotiated amendments part securing waivers revolving credit facility inventory financing facility granted junior liens assets facilities ust loan agreement contains various representations warranties made us guarantors initial funding date required made subsequent funding date certain dates ust loan agreement also contains various affirmative covenants requiring us guarantors take certain actions negative covenants restricting guarantors’ ability take certain actions affirmative covenants generally applicable us guarantors impose obligations us respect among things financial reporting ust including periodic confirmation compliance certain expense policies executive privilege compensation requirements financial covenants may required ust beginning march 31 2009 corporate existence use proceeds maintenance ust loan facility collateral property payment obligations compliance certain laws compliance various restrictions executive privileges compensation divestment corporate aircraft corporate expense policy progressing restructuring plan discussed cash management plan guarantors also required provide presidential designee advance notice proposed transactions outside ordinary course business valued 100 million ust may prohibit transaction determines would inconsistent detrimental guarantors’ longterm viability presidential designee defined one officers executive branch appointed president us monitor oversee restructuring us domestic automobile industry officer appointed secretary treasury negative covenants ust loan agreement generally apply us guarantors restrict parties respect among things fundamental changes lines business transactions affiliates liens distributions amendments waivers certain documents prepayments senior loans negative pledge clauses indebtedness investments employee retirement income security act 1974 pension fund matters ust loan facility collateral sales assets joint venture agreements pursuant ust loan agreement february 17 2009 submitted ust viability plan achieve sustain longterm viability international competitiveness energy efficiency viability plan included description specific actions intended result following • repayment ust loans period extending beyond current maturity date december 30 2011 • ability comply federal fuel efficiency emissions requirements commence domestic manufacturing advanced technology vehicles • achievement positive net present value using reasonable assumptions taking account existing projected future costs • rationalization costs capitalization capacity respect manufacturing workforce suppliers dealerships • product mix cost structure competitive us marketplace general motors corporation subsidiaries notes consolidated financial statements continued developing implementing viability plan agreed use best efforts achieve following restructuring targets • reduction outstanding unsecured public debt respect pension employee benefit obligations less twothirds conversion existing public debt equity debt andor cash appropriate means bond exchange • reduction total amount compensation including wages benefits paid us employees later december 31 2009 average total amount per hour per person amount competitive average total amount compensation certified secretary united states department labor paid per hour per person employees nissan toyota honda whose site employment us • elimination payment compensation benefits us employees fired laidoff furloughed idled customary severance pay • application december 31 2009 work rules us employees manner competitive work rules employees nissan toyota honda whose site employment us • less onehalf value future payment contribution made us veba account similar account shall made form stock value payment contribution shall exceed amount required period settlement agreement dated february 21 2008 among us certain unions class representatives place december 31 2008 required ust loan agreement february 17 2009 required submit ust 1 term sheet signed us leadership major union represents subsidiaries’ employees described 2 term sheet signed us representatives veba described 3 term sheet signed us representatives holders consolidated subsidiaries’ public debt described february 17 2009 ust loan agreement amended waive requirement provide term sheets relative conversion least two thirds public unsecured debt least onehalf value outstanding veba obligation equity bond exchange veba modifications executed planned expect issue significant amounts new common stock result upon consummation bond exchange veba modifications without regard additional dilution related warrants issued pursuant ust loan agreement current stockholders’ interest would almost entirely diluted effect voting share future dividends common stock would virtually eliminated march 31 2009 required pursuant ust loan agreement submit ust written certification report detailing progress made implementing viability plan report must identify explain deviations restructuring targets described viability plan explain deviations jeopardize longterm viability report must also include evidence satisfactory ust 1 labor modifications described approved unions 2 necessary approvals veba modifications described regulatory judicial approvals diligently pursuing received 3 exchange offer implementing public debt conversion described commenced ust review viability plan report materials submitted us determine whether taken necessary steps achieve sustain longterm viability international competitiveness energy efficiency ust determines standards met ust issue plan completion certificate ust issued plan completion certificate march 31 2009 later date exceed 30 days march 31 2009 determined ust maturity outstanding ust loans accelerate ust loans general motors corporation subsidiaries notes consolidated financial statements continued become due payable thirtieth day certification deadline result uncertainty surrounding provision loan classified current portion longterm debt december 31 2008 ust loan agreement also contains various events default entitles ust accelerate repayment ust loans upon occurrence continuation event default addition upon occurrence continuation default event default ust’s option interest rate applicable ust loans increased rate per annum equal 50 per annum plus interest rate otherwise applicable ust loans interest rate otherwise applicable threemonth libor rate plus 30 events default relate among things failure pay principal interest ust loans guarantors’ failure pay guarantees failure pay amounts due loan documents failure perform covenants loan documents representations warranties ust loan agreement false misleading material respect undischarged judgments excess 500 million certain bankruptcy events termination loan documents invalidity security interests collateral unenforceability guarantors’ obligations certain prohibited transactions employee retirement income security act 1974 change control default indebtedness default permits causes holder accelerate maturity indebtedness excess 100 million failure comply law results material adverse effect entry transaction prohibited ust failure comply warrant agreement us ust entered december 31 2008 warrant agreement connection ust loan agreement refer note 24 terms warrant issued ust pursuant warrant agreement december 31 2008 pursuant warrant agreement also issued ust promissory note amount 749 million ust additional note additional consideration amounts outstanding ust additional note due december 30 2011 ust additional note bears interest payable quarterly rate interest ust loans ust loan agreement payment ust additional note paid due subsidiaries default fail perform required otherwise materially breach terms instrument contract indebtedness us ust accrued interest principal amounts owing ust additional note would become immediately due payable amounts owing time occurrence continuation default events default bear interest post default interest rate ust loans ust loan agreement december 31 2008 advances ust loan facility ust additional note carried 38 billion current portion longterm debt net issuance discount 913 million comprised 749 million ust additional note 164 million fair value warrant issued connection ust loan carrying value debt accreted full face value ust loan facility ust additional note discount charged interest expense us dollar denominated bonds us dollar denominated bonds represent obligations various annual coupons ranging 675 945 maturities ranging 2011 2052 bonds unsecured contingent convertible debt following table summarizes unsecured contingent convertible debt general motors corporation subsidiaries notes consolidated financial statements continued unilaterally irrevocably waived relinquished right use common stock committed use cash settle principal amount debentures 1 holders choose convert debentures 2 required holders repurchase debentures retain right use either cash common stock settle amount may become due debt holders excess principal amount majority series debentures put us settled cash march 2007 11 billion series b c debentures convertible holders outlined • closing sale price common stock exceeds 120 conversion price least 20 trading days 30 consecutive trading days ending last trading day preceding fiscal quarter • five business day period nine consecutive trading day period trading price debentures day period less 95 product closing sale price common stock multiplied number shares issuable upon conversion 2500 principal amount debentures • debentures called redemption series march 6 2007 series b march 6 2009 series c july 20 2010 • series anytime march 1 2009 second business day immediately preceding maturity date series mature june 1 2009 • upon occurrence specified corporate events requirement repurchase portion notes described • investor exercises right require us repurchase portion debentures specified repurchase dates security series march 6 2007 2012 2017 2022 2027 series b march 6 2014 2019 2024 2029 series c july 15 2018 2023 2028 days business day next succeeding business day connection issuance series debentures purchased convertible note hedge series debentures private transaction convertible note hedge expected reduce potential dilution respect common stock upon conversion series debentures extent market value per share common stock exceed specified cap resulting effective conversion price 4571 per share transaction terminate earlier maturity date series debentures series debentures longer outstanding due conversion otherwise may 2007 received net proceeds issuance series debentures net issue costs purchase convertible note hedge 14 billion debt issue costs 32 million incurred amortized using effective interest method term series debentures recorded cost convertible note hedge 99 million reduction additional paidin capital subsequent changes fair value convertible note hedge recognized september 2008 entered agreements qualified institutional holder series debentures pursuant agreements issued aggregate 44 million shares common stock exchange 498 million principal amount series debentures accordance agreements amount common stock exchanged series debentures based daily volume weightedaverage price common stock new york stock exchange contractual three four day pricing periods entered agreements part reduce debt interest costs increase equity thereby improve liquidity receive cash proceeds exchange common stock series debentures retired cancelled result exchange recorded settlement gain 19 million automotive interest income nonoperating income net general motors corporation subsidiaries notes consolidated financial statements continued foreign currency denominated bonds foreign currency denominated bonds unsecured include bonds denominated euros annual coupons ranging 725 8375 maturity dates ranging 2013 2033 also included within foreign currency denominated bonds denominated british pounds annual coupons ranging 8375 8875 maturity dates ranging 2015 2023 mitigate foreign currency exchange exposure created bonds enter cross currency swaps notional value swaps 23 billion 27 billion december 31 2008 2007 respectively longterm debt longterm debt 97 billion 58 billion december 31 2008 2007 respectively consisted revolving credit agreements described us term loan capital leases municipal bonds longterm obligations revolving credit agreements august 2007 entered revolving credit agreement provides borrowings 10 billion facility expires august 2009 borrowings facility bear interest based either commercial paper rate libor borrowings used general corporate purposes including working capital needs facility borrowings limited amount based value underlying collateral consists residual interests trusts leased vehicles issue assetbacked securities collateralized vehicles associated leases underlying collateral held bankruptcyremote subsidiaries pledged trustee benefit lender underlying collateral supported borrowing base 323 million 13 billion december 31 2008 2007 respectively consolidate bankruptcyremote subsidiaries trusts financial reporting purposes december 31 2008 310 million outstanding agreement leaving 13 million available 45 billion standby revolving credit facility syndicate banks terminates july 2011 december 31 2008 45 billion outstanding credit facility availability 5 million addition outstanding amount december 31 2008 10 million letters credit issued credit facility borrowings limited amount based value underlying collateral consists certain north american accounts receivable certain inventory gm saturn corporation gm canada certain facilities property equipment gm canada pledge 65 stock holding company indirect subsidiary gm de mexico carrying value assets 56 billion 62 billion december 31 2008 2007 respectively collateral also secures 155 million certain lines credit automatic clearinghouse overdraft arrangements letters credit provided secured lenders december 31 2008 addition 10 million letters credit issued revolving credit facility 81 million utilized secure facilities december 31 2007 addition 91 million letters credit issued revolving credit facility 16 billion utilized secure facilities event certain work stoppages secured revolving credit facility would temporarily reduced 35 billion available longterm borrowings line credit arrangements various banks 5 million 58 billion december 31 2008 2007 respectively addition consolidated affiliates nongm minority shareholders primarily gm daewoo lines credit various banks 13 billion 21 billion december 31 2008 2007 respectively represented longterm facilities unused portion credit lines 452 million 16 billion december 31 2008 2007 respectively interest rate risk management achieve desired balance fixed variable rate debt entered interest rate swaps notional amount pay variable swap agreements december 31 2008 2007 automotive 45 billion 84 billion respectively december 31 2008 2007 longterm debt included 247 billion 262 billion respectively obligations fixed interest rates 49 billion 72 billion respectively obligations variable interest rates predominantly libor interest rate swap agreements general motors corporation subsidiaries notes consolidated financial statements continued financing arrangements consisting principally obligations connection saleleaseback transactions derivative contracts lease obligations including offbalance sheet arrangements view 2006 restatement prior financial statements evaluated effect restatement agreements including legal rights ability cure respect claims could asserted based review believe amounts subject possible claims acceleration termination remedies likely exceed 36 billion consisting primarily offbalance sheet arrangements derivative contracts although assurances given likelihood nature amount claims may asserted based review reclassified 187 million 212 million obligations longterm debt shortterm debt december 31 2008 2007 respectively longterm debt maturities following table summarizes longterm debt maturities including capital leases december 31 2008 dollars millions december 31 2008 future interest payments capital lease obligations 704 million fio following table summarizes components debt prior consummation gmac transaction gmac transferred us two bankruptcyremote subsidiaries hold number trusts parties lease asset securitizations secured debt 12 billion 49 billion december 31 2008 2007 respectively primarily comprised assetbacked debt securities issued trusts part lease securitizations entered interest rate swaps cap agreements achieve desired balance fixed variable rate debt bankruptcyremote subsidiaries notional amount agreements december 31 2008 fio 469 million pay floating fixed interest rates ranged 45 57 notional amount agreements december 31 2007 fio 30 billion pay floating fixed interest rates ranged 39 57 general motors corporation subsidiaries notes consolidated financial statements continued note 16 pensions postretirement benefits employee pension postretirement benefit plans defined benefit pension plans sponsor number qualified defined benefit pension plans covering eligible hourly salaried us employees certain nonus employees defined benefit pension plans covering eligible us canadian hourly employees generally provide benefits negotiated stated amounts year service supplemental benefits employees retire 30 years service normal retirement age benefits provided defined benefit pension plans covering eligible us canadian salaried employees salaried employees certain nonus locations generally based years service compensation history cost benefits recognized period employees provide service us cost plan amendments provide benefits already earned plan participants amortized expected period benefit may 1 duration applicable collective bargaining agreement specific plan 2 expected future working lifetime 3 life expectancy plan participants also unfunded nonqualified pension plans covering certain executives based targeted wage replacement percentages refer “significant plan amendments benefit modifications related events” concerning changes defined benefit pension plans certain us canadian hourly salaried employees 2008 net effect actual losses plan assets curtailments settlements plan amendments resulted reduction funded status global pension plans 338 billion 2008 defined contribution plans also sponsor savings stock purchase plan sspp defined contribution retirement savings plan eligible us salaried employees sspp provides discretionary matching contributions certain predefined limits based upon eligible base salary matching contribution suspended matching contribution effective january 1 2006 reinstated matching contribution effective january 1 2007 october 2008 announced suspension matching contribution sspp effective november 1 2008 addition matching contribution also contribute benefit contribution equal 1 eligible base salary us salaried employees service commencement date january 1 1993 cover certain benefits retirement different us salaried employees service commencement date prior january 1 1993 effective january 1 2007 established new retirement contribution sspp eligible us salaried employees service commencement date january 1 2001 began automatically contributing amount equal 4 eligible base salary program contributions sspp 128 million 82 million 12 million 2008 2007 2006 respectively effective october 1 2007 certain eligible us hourly participants began contributing 1 per hour personal savings plan lieu providing retiree healthcare contributions personal savings plan insignificant 2008 2007 also contribute certain nonus defined contribution plans contributions nonus defined contribution plans approximately 169 million 153 million 137 million 2008 2007 2006 respectively postretirement benefit plans additionally sponsor hourly salaried benefit plans provide postretirement medical dental legal service life insurance eligible us canadian retirees eligible dependents cost benefits generally recognized period employees provide service us cost plan amendments provide benefits already earned plan participants amortized expected period benefit may average expected future working lifetime full eligibility average life expectancy plan participants refer section “significant plan amendments benefit modifications related events” concerning changes postretirement healthcare plans certain us canadian hourly salaried employees 2008 certain nonus subsidiaries postretirement benefit plans although nonus employees covered government sponsored administered programs cost nonus postretirement plans insignificant periods presented general motors corporation subsidiaries notes consolidated financial statements continued 2005 entered 2005 uaw health care settlement agreement reduced healthcare coverage individual uaw retirees partially mitigate effects reduced coverage 2005 uaw health care settlement agreement also provided make contributions new independent veba contributions constitute mitigation plan capped defined benefit plan expected available pay benefits number years depending level mitigation obligation make contributions mitigation plan determined formula consisting fixed variable components defined 2005 uaw health care settlement agreement obligations limited contributions 2005 uaw health care settlement agreement provided guarantee ability assets mitigation plan mitigate retiree healthcare costs furthermore mitigation plan completely independent us administered independent trust committee include representatives assets mitigation plan veba uaw retirees responsibility independent trust committee full fiduciary responsibility investment strategy safeguarding assets execution benefit plan designed mitigation plan partially funded contributions 10 billion 2007 2006 third contribution 10 billion originally scheduled made 2011 refer “significant plan amendments benefit modifications related events” concerning 2008 gmuaw settlement agreement effect mitigation plan adoption sfas 158 recognize funded status defined benefit plans accordance provisions sfas 158 elected early adopt measurement date provisions january 1 2007 provisions require measurement date plan assets obligations coincide sponsor’s year end using twomeasurement approach defined benefit plans measurement date historically consistent year end recorded increase accumulated deficit 728 million 425 million aftertax representing net periodic benefit expense period measurement date utilized 2006 beginning 2007 previously would recorded three months ended march 31 2007 delayed basis also performed measurement january 1 2007 benefit plans whose previous measurement dates historically consistent year end result january 1 2007 measurement recorded decrease accumulated comprehensive loss 23 billion 15 billion aftertax representing changes fair value plan assets benefit obligations period measurement date utilized 2006 january 1 2007 amounts offset partially immaterial adjustment 390 million 250 million aftertax correct certain demographic information used determining amount cumulative effect change accounting principle reported december 31 2006 adopt recognition provisions sfas 158 general motors corporation subsidiaries notes consolidated financial statements continued significant plan amendments benefit modifications related events table summarizing significant 2008 defined benefit plan interim remeasurements related changes obligations associated curtailments settlements termination benefits applicable recognized statement operations 2008 event remeasurement date affected plans increase decrease apbo pbo since recent remeasurement date curtailments settlements termination benefits 2008 special attrition programs may 31 us hourly pension plan pbo increase 08 billion curtailment loss 24 billion special termination benefits expense 08 billion various us hourly retiree medical plans insignificant change curtailment gain 01 billion special termination benefits expense 01 billion 2008 caw agreement facility idlings may 31 canadian hourly salaried pension plans pbo increase 03 billion curtailment loss contractual termination benefits expense 02 billion salaried retiree benefit plan changes july 1 us salaried retiree medical plan apbo decrease 40 billion settlement loss 17 billion us salaried pension plan pbo increase 32 billion applicable settlement agreement uaw september 1 uaw hourly retiree medical plan apbo decrease 131 billion curtailment gain 63 billion mitigation plan apbo decrease 01 billion curtailment loss 14 billion us hourly pension plan pbo increase 06 billion applicable delphigm settlement agreement september 30 various us hourly retiree medical plans apbo increase 12 billion applicable us hourly pension plan pbo increase 11 billion applicable addition events listed number events related benefit plans occurred result interim remeasurement listed • october 2008 members international union electronic electrical salaried machine furniture workers america communication workers america iuecwa ratified closure agreement moraine ohio facility contingent among factors upon establishment new iuecwa independent trust iuecwa retirees funded entirely iuecwa veba would assume responsibility providing retiree healthcare benefits general motors corporation subsidiaries notes consolidated financial statements continued iuecwa retirees light contingencies associated agreement including fact executed memorandum understanding concerning iuecwa veba recognition effect iuecwa veba agreement made consolidated financial statements additionally recognized effects pension benefit enhancement three months ended december 31 2008 cost 255 million also result closure moraine facility recognized 257 million curtailment gain three months ended december 31 2008 • november 2008 notified nine unions uaw iuecwa effective january 1 2009 5000 retirees subject revised healthcare benefits requiring retirees make monthly healthcare contributions well copayments deductibles settlement agreement october 2007 signed memorandum understanding uaw superseded settlement agreement entered february 2008 settlement agreement provides responsibility providing retiree healthcare permanently shift us new plan funded new veba implementation date us district court eastern district michigan certified class granted preliminary approval settlement agreement mailed notices class march 2008 fairness hearing held june 2008 july 2008 us district court eastern district michigan approved settlement agreement could become effective settlement agreement subject exhaustion appeals july 2008 approval completion discussions us staff securities exchange commission sec regarding accounting treatment transactions contemplated settlement agreement basis believe reasonably satisfactory september 2 2008 became final effective date judgment became final period file appeals related us district court eastern district michigan’s order expired september 2008 determined discussions us staff sec regarding accounting treatment transaction contemplated settlement agreement completed basis believe reasonably satisfactory therefore settlement agreement became effective september 2008 implementation date january 1 2010 result settlement agreement obligation provide retiree healthcare coverage uaw retirees beneficiaries terminate implementation date obligation retiree medical claims incurred implementation date responsibility new plan new veba result settlement agreement becoming effective remeasured obligations plan assets uaw hourly medical plan mitigation plan using updated assumptions september 1 2008 remeasured accumulated postretirement benefit obligations apbo included 1 expected benefit payments final effective date implementation date discounted rate 51 2 expected payments new veba implementation date discounted contractual discount rate 90 3 450 million payment new veba contingent upon substantial consummation delphi’s plan reorganization por discount rate 51 determined based yield optimized hypothetical portfolio highquality bonds rated aa higher recognized rating agency maturities december 31 2009 sufficient fully defease obligation expected benefit payments implementation date expected payments new veba implementation date assume 1 required make twenty annual shortfall payments 165 million new veba discussed 2 elect prepay contributions new veba 3 contribute 450 million payment new veba contingent upon delphi’s por 4 amend us hourly pension plan add flat monthly special lifetime benefit 6670 payable plan participants commencing january 1 2010 september 1 2008 remeasurement uaw hourly medical plan resulted reduction apbo 131 billion previous plan remeasurement discussed “2008 special attrition programs” concerning may 31 2008 remeasurement uaw hourly healthcare plan substantially 131 billion reduction apbo recorded actuarial gain accumulated comprehensive loss subject amortization net actuarial gains losses remaining life expectancy plan participants decrease apbo includes reduced retiree healthcare benefits 17 billion offset flat monthly special lifetime benefit 6670 commencing january 1 2010 paid plan participants general motors corporation subsidiaries notes consolidated financial statements continued us hourly pension plan 17 billion decrease apbo recorded actuarial gain comprehensive loss recognized component settlement gain loss uaw hourly medical plan recorded implementation date additionally recorded benefit 622 million 2008 pursuant settlement agreement reduction postimplementation date liability related assumption delphi healthcare obligation certain active retired delphiuaw employees remeasurement mitigation plan resulted 137 million reduction plan’s apbo recorded actuarial gain comprehensive loss subject amortization net actuarial gains losses expected period economic benefit plan refer note 18 additional information regarding delphi part september 1 2008 plan remeasurements recorded net curtailment gain 49 billion 2008 recorded automotive cost sales representing accelerated recognition portion net prior service credits previously scheduled amortization implementation date net curtailment gain comprised curtailment gain 63 billion related uaw hourly medical plan partially offset 14 billion curtailment loss related mitigation plan final effective date implementation date record net periodic postretirement healthcare cost including service cost uaw hourly medical plan participants working toward eligibility amortization remaining net prior service credits implementation date service cost recorded active uaw participants continue work toward eligibility new plan implementation date account establishment funding new veba termination uaw hourly medical plan mitigation plan settlement gain loss recognized implementation date include net effect following 1 difference fair value consideration provided new veba carrying value uaw hourly medical plan mitigation plan obligations 2 unamortized actuarial gains losses remaining accumulated comprehensive loss date less 3 cost increased pension benefit described us hourly pension plan amended part settlement agreement reflect flat monthly special lifetime benefit 6670 commencing january 1 2010 paid plan participants help offset retiree’s increased costs monthly contributions required terms new veba result remeasured us hourly pension plan september 1 2008 reflect change benefits using discount rate 670 reflects 25 basis point increase may 31 2008 plan remeasurement september 1 2008 remeasurement resulted increase projected benefit obligation pbo 563 million cost flat monthly benefit 27 billion september 1 2008 recorded component net actuarial loss recognized component settlement gain loss uaw hourly healthcare plan recorded implementation date also experienced actual plan asset losses 21 billion september 1 2008 remeasurement date since previous measurement date may 31 2008 exchange transfer uaw hourly medical plan mitigation plan obligations new plan terms settlement agreement amended agreed class counsel representing class uaw retirees regarding postretirement healthcare coverage require us make contributions new veba described • obligated contribute 56 billion implementation date make annual payments varying amounts 436 million 33 billion 2020 election time implementation date option prepay remaining payments discount rate 90 • february 2008 issued 40 billion shortterm note lbk llc lbk delaware limited liability company sole member shortterm note pays interest rate 90 matures 20th business day implementation date lbk hold shortterm note maturity point proceeds transferred new veba • february 2008 issued 44 billion 675 series u convertible senior debentures due december 31 2012 convertible note lbk hold convertible note transferred new veba convertible note convertible 109 million shares common stock interest convertible note payable semiannually general motors corporation subsidiaries notes consolidated financial statements continued deferred payment interest 2008 2009 2010 interest payments 295 million due 2010 2011 2012 addition deferred interest payments convertible note contributed new veba made directly new veba holder convertible note • conjunction issuance convertible note entered certain cashsettled derivative instruments maturing june 30 2011 lbk economic effect reducing conversion price convertible note 40 36 per share derivative instruments also entitle us partially recover additional economic value provided common stock price appreciates 6348 7053 per share june 30 2011 fully recover additional economic value provided common stock price reaches 7053 per share june 30 2011 lbk transfer interests derivatives new veba convertible note transferred lbk new veba following implementation date • lbk whollyowned consolidated subsidiary shortterm note convertible note derivatives related interest income expense continue eliminated consolidated financial statements implementation date • must make remaining contribution originally payable mitigation plan veba 10 billion due 2011 • payments 285 million made implementation date • may required contribute shortfall payments 165 million per year limited maximum 20 payments new veba annual cash flow projections show new veba become insolvent rolling 25year basis measuring obligation september 1 2008 september 30 2008 december 31 2008 assumed required make 20 payments time implementation date option prepay remaining payments discount rate 90 • effective january 1 2008 divided amount existing internal veba separate bookkeeping accounts related uaw represented employees retirees eligible spouses surviving spouses dependents uaw related account nonuaw represented employees retirees eligible spouses surviving spouses dependents nonuaw related account amounts withdrawn uaw related account including investment returns transfer assets new veba implementation date uaw related account balance 100 billion mitigation plan veba balance 12 billion december 31 2008 foregoing description required timing contributions new veba reflects deferral payments 19 billion originally required contributed 2008 2009 allowed settlement agreement consented class counsel deferral amount includes interest convertible note january 1 2010 shortfall payment 165 million due 2008 required annual payments deferred implementation date increased annual interest rate factor 90 2008 special attrition programs february 2008 entered agreements uaw iuecwa regarding special attrition programs intended reduce number hourly employees 2008 uaw special attrition program offered 74000 uawrepresented employees consists wage benefit packages normal voluntary retirements buyouts preretirement leaves employees 26 29 years service addition vested pension benefits employees retirement eligible received lump sum payment amount depended upon job classification funded us hourly pension plan employees retirement eligible buyout options offered terms 2008 iuecwa special attrition program similar offered 2008 uaw special attrition program result 2008 special attrition programs 2008 recognized curtailment loss us hourly pension plan 24 billion measured may 31 2008 due significant reduction expected aggregate years future service result employees accepting general motors corporation subsidiaries notes consolidated financial statements continued voluntary program addition recorded charge special termination benefits 800 million irrevocable employee acceptances 2008 combined curtailment loss special termination benefit charges 32 billion recorded automotive cost sales us hourly pension plan remeasurement may 31 2008 resulted increase pbo 842 million insignificant effect net periodic pension expense 2008 remeasurement included effect previously announced facility idlings us well changes certain actuarial assumptions discount rate used determine pbo may 31 2008 645 represents 15 basis point increase 630 used december 31 2007 anticipation possibility curtailment result 2008 uaw special attrition program also remeasured uaw hourly medical plan may 31 2008 subsequent remeasurement determined curtailment occur however recorded effects may 31 2008 remeasurement uaw hourly medical plan remeasurement resulted insignificant adjustment apbo net periodic pension opeb income expense result 2008 special attrition programs number smaller opeb plans curtailed remeasurements plans 2008 resulted 104 million curtailment gain addition recorded charge special termination benefits costs 68 million 2008 related opeb plans canada facility idlings canadian auto workers union negotiations may 2008 entered agreement caw resulted increased pension benefits 2008 caw agreement subsequent reaching agreement caw announced plan cease production oshawa ontario truck facility due decrease consumer demand fullsize trucks triggered curtailment canadian hourly salaried pension plans canadian pension plans accordingly remeasured canadian pension plans may 31 2008 remeasurement performed using discount rate 60 reflects 25 basis point increase december 31 2007 also included remeasurement effects previously announced facility idlings well changes certain actuarial assumptions 2008 remeasurements resulted curtailment loss 177 million related canadian pension plans increase pbo 262 million excluding effects foreign currency exchange rates addition recorded charge contractual termination benefits 37 million automotive cost sales 2008 prior 2008 caw agreement amortized prior service cost related canadian hourly defined benefit pension plan remaining service period active employees time amendment previously estimated 10 years conjunction entering 2008 caw agreement evaluated 2008 caw agreement relationship caw determined contractual life labor agreements appropriate reflection period future economic benefit received pension plan amendments negotiated part collectively bargained agreement change accelerated recognition prior service cost three years resulting additional net periodic pension expense 334 million 2008 related pension increases canada prior collectively bargained agreements combined pension related charges 548 million recorded automotive cost sales 2008 additionally remeasured canadian hourly retiree medical plan may 31 2008 remeasurement reflected plan amendment 2008 caw agreement well announced capacity reductions utilized updated actuarial assumptions including discount rate discount rate used determine apbo may 31 2008 60 reflects 25 basis point increase discount rate used december 31 2007 remeasurement resulted insignificant adjustments apbo net periodic pension opeb income expense continuing operations 2008 iuecwa agreements october 2008 members iuecwa ratified closure agreement moraine ohio facility iuecwa represented facility agreement contingent upon establishment new healthcare plan iuecwa retirees funded entirely iuecwa veba would assume responsibility providing retiree medical benefits iuecwa retirees regard october 2008 iuecwa agreed principle subject conditions described general motors corporation subsidiaries notes consolidated financial statements continued framework establishing veba included incremental cash payments us well nonescalating increase pension benefits iuecwa retirees partially offset increased costs receipt healthcare benefits retirement proposed framework included among things requirements iuecwa reach settlement agreement class iuecwa retirees settlement agreement receive court approval due unprecedented declining economic circumstances leading obtaining ust loan facility however unable formally consummate agreement iuecwa would permitted parties proceed classwide settlement negotiations included among terms ust loan agreement prohibition increasing pension benefits effect terms pension plan december 31 2008 appears restrain parties including pension increases part negotiations terms ust loan agreement call question composition incremental payments would make continuing work iuecwa toward reaching agreement within parameters established ust light contingencies recognition effect iuecwa veba agreement made consolidated financial statements terms agreement obligation provide retiree healthcare coverage iuecwa retirees beneficiaries terminate january 1 2012 obligation retiree medical claims incurred thereafter responsibility iuecwa veba funding iuecwa veba begin final effective date january 1 2012 part closure agreement reached iuecwa october 22 2008 agreed certain pension benefit enhancements patterned 2008 uaw settlement agreement current future iuecwa retirees cost associated pension benefit enhancement 255 million amount recorded expense three months ending december 31 2008 consistent period future economic benefit due closure moraine ohio facility three months ending december 31 2008 result closure moraine facility accelerated substantially iuecwa retiree healthcare plan’s negative prior service cost resulting 257 million curtailment gain three months ended december 31 2008 salaried retiree benefit plan changes july 2008 amended us salaried retiree medical pension plans eliminate healthcare coverage us salaried retirees age 65 upon reaching age 65 effective january 1 2009 affected retirees surviving spouses receive pension increase 300 per month partially offset retiree’s increased cost medicare supplemental healthcare coverage result plan changes remeasured us salaried retiree medical us salaried pension plans july 1 2008 participants age 65 january 1 2009 elimination medical benefits considering cost increased pension benefits provided resulted settlement loss 17 billion 17 billion settlement loss primarily result previously unamortized actuarial losses recorded automotive cost sales 2008 participants age 65 future elimination healthcare benefits upon turning age 65 increased pension benefits provided resulted negative plan amendment us salaried retiree medical plan positive plan amendment us salaried pension plan us salaried retiree medical plan apbo reduced net 40 billion july 1 2008 remeasurement date december 31 2007 included 28 billion reduction attributable settlement 900 million reduction due negative plan amendment negative plan amendment us salaried retiree medical plan positive plan amendment us salaried pension plan amortized seven years represents average remaining years full eligibility us salaried retiree medical plan participants us salaried retiree medical plan remeasured using discount rate 675 represents 35 basis point increase december 31 2007 us salaried pension plan pbo increased net 32 billion july 1 2008 remeasurement date december 31 2007 included 26 billion increase attributable settlement 956 million increase due positive plan amendment also experienced actual plan asset losses 700 million july 1 2008 remeasurement date since previous measurement pension plan remeasured using discount rate 660 represents 15 basis point increase december 31 2007 result elimination healthcare benefits participants age 65 us salaried retiree medical plan almost participants plan longer general motors corporation subsidiaries notes consolidated financial statements continued inactive accordingly changed us salaried retiree medical plan’s amortization period plan amendments actuarial gains losses effective july 1 2008 remeasurement plan amendments july 1 2008 amortized period full eligibility actuarial gains losses amortized average years future service salaried workforce reductions salaried benefit program modifications september 2008 extended voluntary early retirement offers salaried window program certain us salaried employees part july 15 2008 plan reduce salary related costs december 31 2008 3700 employees irrevocably accepted salaried window program recorded special termination benefit charges 259 million selling general administrative expense 52 million automotive cost sales 2008 october 2008 announced would initiate involuntary separations areas business achieve targeted personnel reduction levels still process assessing size effect reductions december 31 2008 involuntary terminations initiated amount accrued terminations delphigm settlement agreements discussed note 18 delphi reached agreements three months ended september 30 2008 delphi’s unions regarding plan freeze benefits related delphi’s hourly rate employee pension plan delphi hrp cessation delphi opeb delphi hourly unionrepresented employees retirees transfers pursuant internal revenue service irs code section 414l certain assets obligations delphi hrp us hourly pension plan result assuming delphi opeb obligations transferred liabilities 28 billion delphi related accrual us opeb obligation remeasured certain opeb plans september 30 2008 include delphi hourly employees effects announced facility idlings us well changes certain actuarial assumptions remeasurements increased apbo 12 billion september 30 2008 used weightedaverage discount rate 685 reflects 45 basis point increase december 31 2007 transfer certain assets obligations delphi hrp us hourly pension plan pursuant irs code section 414l resulted decrease delphi related accrual offsetting increase pbo 28 billion accordingly remeasured us hourly pension plan september 30 2008 include 1 assets liabilities certain employees transferred accordance delphi settlement agreement 2 obligation benefit guarantee agreement provide seven years credited service covered employees 3 effects announced facility idlings us 4 changes certain actuarial assumptions including discount rate 710 reflects 40 basis point increase september 1 2008 remeasurement september 30 2008 including transfer certain obligations resulted net increase pbo 11 billion september 1 2008 also experienced actual plan asset losses 39 billion september 30 2008 remeasurement date since previous measurement date september 1 2008 hourly retiree benefit changes november 2008 notified nine unions uaw iuecwa effective january 1 2009 5000 retirees subject revised healthcare benefits requiring retirees make monthly healthcare contributions well copayments deductibles change reduced apbo plan 141 million amortized life expectancy plan’s participants result increased pension benefits granted part 2007 national agreement collective bargaining agreement uaw included among terms twotiered wage structure lower wages benefits employees hired certain noncore jobs remeasured us hourly defined benefit pension plan october 1 2007 generating 41 million increase pension expense 2007 remeasurement increased us hourly pbo 42 billion terms 2007 national agreement also provided pension benefits certain future current retirees delphi transferred general motors corporation subsidiaries notes consolidated financial statements continued time spinoff future delphi retirees received incremental pension increase consistent employees current delphi retirees receive four lumpsum payments terms received retirees pension benefits granted future current retirees delphi funded hourly pension plan included october 1 2007 remeasurement hourly pension plan value increased pension benefits 552 million future current delphi retirees recorded expenses 2007 result 2007 national agreement recognized net negative prior service cost following changes uaw hourly medical plan 1 changes prescription drug benefits 2 elimination preferred provider organization option reduction number health maintenance organization options available uaw retirees offset 3 credited service fillin periods leavelayoff prior december 31 1995 net effect changes reduction apbo 847 million december 31 2007 prior 2007 national agreement amortized prior service cost related hourly defined benefit pension plans us average remaining service period active employees time amendment previously estimated 101 years also expensed lump sum payments granted retirees quarter associated contract approved conjunction entering 2007 national agreement determined contractual life labor agreements better reflected period future economic benefit received pension plan amendments collectively bargained hourly pension plans therefore amortizing amounts four year period also recorded additional pension expense 16 billion three months ended september 30 2007 related accelerated recognition previously unamortized prior service cost related pension increases us prior collectively bargained agreements due determination period future economic benefit remaining charge recorded component automotive costs sales 15 billion component selling general administrative expense 77 million general motors corporation subsidiaries notes consolidated financial statements continued general motors corporation subsidiaries notes consolidated financial statements continued table include nonus employee benefit arrangements total pbo 95 million 116 million december 31 2008 december 31 2007 respectively b table include extended disability plans total apbo 535 million 701 million december 31 2008 december 31 2007 respectively 2008 experienced actual losses us pension plan assets 114 billion compared expected returns 85 80 billion recognized 2008 pension expense result us pension plans interim remeasurements occurred prior december 31 2008 remeasurement portion effect actual plan asset losses amortized earnings remainder year subsequent interim remeasurements historical accounting policy utilize marketrelated value plan assets determination future pension expense marketrelated value averages gains losses period years define marketrelated value amount recognizes 60 difference actual fair value assets expected calculated value initially 10 difference next four years marketrelated value assets used calculation expected return us pension plan assets fiscal 2009 58 billion higher actual fair value plan assets therefore despite multiple remeasurements pension plans 2008 effect recent downturn financial markets yet fully affected net pension expense weightedaverage expected longterm rate return us plan assets used determine net pension expense 2008 85 compared 85 2007 90 2006 return nonus pension plan assets actual loss 29 billion less expected return 78 969 million following table summarizes total accumulated benefit obligations abo fair value plan assets defined benefit pension plans abo excess plan assets pbo fair value plan assets defined benefit pension plans pbo excess plan assets general motors corporation subsidiaries notes consolidated financial statements continued following table summarizes components net periodic pension opeb income expense continuing operations along assumptions used determine benefit obligations table include extended disability plans total net expense 21 million 63 million 105 million 2008 2007 2006 respectively excluding curtailments amounts insignificant b result allison divestiture recorded adjustment unamortized prior service cost us hourly salaried defined benefit pension plans 18 million us hourly salaried opeb plans 223 million 2007 general motors corporation subsidiaries notes consolidated financial statements continued adjustments included determination gain recognized sale allison net periodic pension opeb benefit expenses related allison reported component discontinued operations amounts related allison reflected table effects amounts shown adjustment arrive net periodic pension opeb income expense continuing operations c determined end year determined beginning year updated remeasurements appropriate discount rates used 2008 2007 measure effects curtailments plan amendments various plans following table summarizes estimated amounts amortized accumulated comprehensive income net periodic benefit cost 2009 based december 31 2008 plan measurements changed us salaried retiree medical plan’s amortization period plan amendments actuarial gains losses effective july 1 2008 remeasurement plan amendments july 1 2008 amortized period full eligibility actuarial gains losses amortized average years future service effective december 31 2007 remeasurement began amortizing actuarial gains losses new prior service costs credits us hourly healthcare plans time period corresponding average life expectancy plan participants assumptions discount rate establish discount rate assumption retirementrelated us benefit plans respective measurement dates reflect yield hypothetical portfolio high quality fixedincome debt instruments would produce cash flows sufficient timing amount satisfy projected future benefits weightedaverage discount rate us defined benefit pension plans 63 weightedaverage discount rate us opeb plans 83 december 31 2008 establish discount rate assumption retirementrelated nonus benefit plans respective measurement dates utilizing published indices adjustments made reflect underlying duration expected benefit payments weightedaverage discount rate nonus defined benefit pension plans 62 weightedaverage discount rate nonus opeb plans 70 december 31 2008 general motors corporation subsidiaries notes consolidated financial statements continued healthcare trend rate determine healthcare trend rate assumptions inclusion us healthcare opeb valuation remeasurement healthcare trend rates developed using historical estimated retiree cash expenditures health care information supplemented information gathered actuarial based models information obtained healthcare providers known significant events effect aggregate healthcare trend rates developed 2008 differ effect trend rates developed 2007 2008 rates include healthcare trend data post january 1 2010 associated uaw hourly healthcare plan due implementation date new veba uaw hourly retiree medical plan obligations subsequent implementation date contractually fixed result settlement agreement one percentage point increase assumed healthcare trend rates future periods would increased us apbo 04 billion december 31 2008 aggregate us service interest cost components nonpension postretirement benefit expense 2008 03 billion one percentage point decrease would decreased us apbo 04 billion aggregate us service interest cost components nonpension postretirement benefit expense 2008 03 billion onepercentage point increase assumed nonus healthcare trend rates would increased nonus apbo 03 billion nonus aggregate service interest cost components nonpension postretirement benefit expense annualized basis 27 million onepercentage point decrease would decreased nonus apbo 02 billion nonus aggregate service interest cost components nonpension postretirement benefit expense annualized basis 22 million longterm rate return plan assets use detailed periodic studies conducted outside actuaries asset management group determine longterm strategic mix among asset classes expected return asset assumptions us pension plans us study includes review alternative asset allocation strategies anticipated future longterm performance individual asset classes risks standard deviations correlations among asset classes comprise plans’ asset mix primary nonus pension plans conduct similar studies conjunction outside actuaries asset managers studies give appropriate consideration recent fund performance historical returns assumptions primarily longterm prospective rates return based study performed 2008 asset management group implemented relatively minor adjustments longrun strategic asset allocations us defined benefit pension plans significantly essential elements major changes implemented 2006 2003 reaffirmed 2006 modified target allocations increase fixed income exposure 200 total plan assets reduce equity exposure corresponding amount 2003 liability hedging program initiated changes strategic asset allocation intended significantly lower expected volatility asset returns plan funded status well probability future contribution requirements setting new strategic asset mix consider likelihood selected mix effectively fund projected pension plan liabilities aligning risk tolerance plans’ fiduciaries strategic asset mix us defined benefit pension plans intended reduce exposure equity market risks utilize asset classes reduce surplus volatility utilize asset classes active management historically generated excess returns market returns therefore expected longterm return assumption developed expectation active management achieve excess returns market returns general motors corporation subsidiaries notes consolidated financial statements continued asset mix intended place greater emphasis investment manager skills general market returns produce expected longterm returns employing various risk mitigation strategies reduce surplus volatility refinements asset mix implemented 2008 reexamination expected asset return assumptions necessitate change expected longterm annual return rate assumption us defined benefit plans remains 85 december 31 2008 taking account refinements recent study us pension assets following target allocation relative total assets publicly traded equity securities 280 debt securities 570 real estate 90 alternative investments 60 2007 target allocations assets publicly traded equity securities 290 debt securities 520 real estate 80 alternative investments 110 expected return plan assets included pension expense nonus pension plans determined similar manner us plans except different assumptions utilized determining excess returns market returns due lower level active management plan assets compared us plan assets 2008 nonus pension assets following target allocation relative total assets equity securities 600 debt securities 240 real estate 120 alternative investments 40 2007 nonus pension plan assets target allocations equity securities 640 debt securities 260 real estate 90 alternative investments 10 plan assets pension plan assets invested trusts permit commingling assets one employee benefit plan investment administrative purposes plans participating trust interests net assets underlying investment pools trusts plans’ investments trusts recorded estimated fair value compliance fair value measurement requirements sfas 157 determined plan’s ownership interest underlying investment pools trust underlying assets underlying investment pools investments grouped primarily publicly traded equities high quality high yield bonds real estate private markets asset groups made individual investments cash equivalents equity securities debt securities assetbacked securities structured debt derivative instruments hedge funds direct investments real estate private equity commingled investment funds commingled investment funds may hold investments types assets included table based nature underlying holdings following table summarizes actual percentage plan assets asset category defined benefit pension plans us opeb plans market quotations readily available equity debt securities including assetbacked securities held investment pools valued based upon last traded current bid price securities traded exchange structured debt valued primarily using independent pricing vendors using dealer counterparty supplied valuations fair value determined internal valuation committee equity securities include common stock amounts less 1 million 0 total pension plan assets 17 million less 1 total pension plan assets december 31 2008 2007 respectively general motors corporation subsidiaries notes consolidated financial statements continued real estate investments valued using information independent real estate appraisals internal appraisals prepared investment managers marketbased information individual property independent real estate appraisals prepared least every three years include detailed market studies multiple valuation methodologies typical real estate industry sales comparison approach replacement cost approach income capitalization approach periods independent appraisals prepared models using one approaches developed property asset managers means determining changes fair value review values investment quarterly warranted market property level changes factors values appropriately adjusted based management’s best estimate changes fair value private equity investment valuations provided general partners investments performed using income marketbased approaches internal investment managers perform due diligence inception investments formally update understanding various investment matters including valuation policies twice year informal discussions occur circumstances warrant investment managers review asset valuation investment quarterly warranted market factors valuations appropriately adjusted based management’s best estimate changes fair value derivative instruments recorded fair value based last traded current bid price market quotations readily available based industry standard derivative valuation models fair value derivative liabilities incorporates nonperformance risk derivative instruments primarily include financial futures contracts options including foreign currency options swaps including swaptions interest rate swaps credit default swaps forward foreign currency contracts investments commingled funds recorded fair value based net asset value nav fund provided fund manager general partner depending nature underlying assets fair value may derived methods described various assets categories nav reviewed reasonableness gm investment managers certain circumstances adjusted fair value determined internal investment committee annually gm obtains audited financial statements funds compares nav provided fund manager underlying nav audited fund financial statements investments funds specific asset allocation strategies include global fixed income real estate private equity index hedge funds due lack timely available market information certain investments inherent uncertainty valuation estimated fair values may differ fair values would used readily available market information available plan funding policy contributions funding policy respect qualified defined benefit pension plans contribute annually less minimum required applicable law regulations directly pay benefit payments appropriate following table summarizes pension contributions us hourly salaried us nonus defined benefit pension plans direct payments 2009 contributions due expect make discretionary contributions us hourly salaried defined benefit pension plans expect contribute pay benefits 112 million us defined benefit pension plans 962 million nonus pension plans general motors corporation subsidiaries notes consolidated financial statements continued make contributions us hourly salaried vebas opeb plans 2008 2007 withdrew total 14 billion 27 billion plan assets nonuaw vebas opeb plans 2008 2007 respectively us nonuaw hourly salaried vebas effectively liquidated december 31 2008 contributions participants us opeb plans 401 million 354 million 2008 2007 respectively benefit payments following table summarizes benefit payments include assumptions related estimated future employee service appropriate expected paid future benefits us pension plans certain nonus pension plans paid plan assets rather cash b benefit payments presented table reflect estimates changes result implementation settlement agreement note 17 derivative financial instruments risk management derivatives hedge accounting exposed market risk changes foreign currency exchange rates interest rates certain commodity prices normal course business enter variety foreign currency exchange interest rate commodity forward contracts swaps options objective managing financial operational exposure arising risks offsetting gains losses underlying exposures gains losses derivatives used economically hedge global demand automobiles declined last half 2008 forecasted financial operational exposures also declined consequently instances notionals derivative contracts economically hedging forecasted exposure exceed underlying exposure occurs enter offsetting derivative contracts appropriate long economically feasible risk management control system used assist monitoring hedging program derivative positions hedging strategies hedging documentation includes hedging objectives practices procedures related accounting treatment hedges receive designated hedge accounting treatment evaluated effectiveness time designated well throughout hedging period cash flow hedges use derivative financial instruments manage foreign currency risk arises buying selling inventory currencies local currencies operate historically derivatives designated hedging instruments cash flow hedges forecasted foreign currency denominated purchases sales forecasted exposures three years future addition also designated derivative financial instruments hedging relationships manage risk variability cash flows related interest principal payments foreign currency denominated bonds typically hedged maturity bond longest maturity date extending july 2033 general motors corporation subsidiaries notes consolidated financial statements continued derivatives designated cash flow hedging relationships recorded changes fair value accumulated comprehensive loss reclassified amounts accumulated comprehensive loss earnings period hedged forecasted transactions affected earnings hedging relationship terminated forecasted transaction probable occurring cumulative change fair value derivative recorded accumulated comprehensive loss reclassified earnings part quarterly tests hedge effectiveness fourth quarter 2008 unable conclude cash flow hedging relationships continued highly effective achieving offsetting cash flows underlying forecasted transactions requirement application hedge accounting treatment result ceased hedge accounting treatment effective october 1 2008 previously designated cash flow hedging instruments subsequent date recorded gains losses arising changes fair value derivative instruments earnings resulting net gain 157 million recorded line item underlying hedged items recorded statement operations three months ended december 31 2008 concluded forecasted transactions related previously designated hedging derivatives probable occurring amounts recorded accumulated comprehensive loss september 30 2008 continue reclassified earnings period originally hedged transactions affect earnings following table summarizes amounts reclassified accumulated comprehensive loss earnings effective portion hedging relationship extent prior hedging relationships effective ineffective portion change fair value derivative instrument recorded earnings hedge ineffectiveness related instruments designated cash flow hedges insignificant 2008 2007 increased automotive cost sales 17 million 2006 fair value hedges use derivative financial instruments interest rate swaps manage exposure interest rate risk related fixed rate debt prior 2007 mortgage servicing rights historically financial instruments designated hedging instruments fair value hedging relationships received hedge accounting treatment hedged exposures maturity date underlying interest rate exposure longest interest exposure hedged december 31 2008 extended april 2016 derivatives designated fair value hedges changes fair value derivatives recorded earnings offset recording corresponding changes fair value hedged item extent hedge effective recorded hedging ineffectiveness 2008 2007 hedge ineffectiveness 2006 insignificant part quarterly tests hedge effectiveness fourth quarter 2008 unable conclude fair value hedging relationships continued highly effective achieving offsetting changes fair value underlying hedged item requirement application hedge accounting treatment result ceased hedge accounting treatment effective october 1 2008 previously designated fair value hedging instruments subsequent date continued record gains losses arising changes fair value derivative instruments earnings longer recorded change fair value hedged debt earnings resulted recording net gain 279 million automotive interest expense statement operations three months ended december 31 2008 previously recorded adjustments carrying value debt amortized automotive interest expense remaining debt term amount expected amortized earnings 2009 gain 8 million general motors corporation subsidiaries notes consolidated financial statements continued net investment hedges designated certain foreign currency denominated bonds hedge foreign currency exposure related net investment certain foreign subsidiaries foreign currency transaction gains losses related debt instruments recorded foreign currency translation adjustments unrealized gains losses 106 million 224 million 139 million recorded foreign currency translation adjustments 2008 2007 2006 respectively derivatives designated hedging relationships use derivative instruments forward contracts options including caps floors collars economically hedge variety exposures unrealized realized gains losses related derivatives instruments designated accounting hedges recorded statement operations line item underlying economically hedged items recorded purchase commodities parts commodity content use production vehicles purchase prices vary based commodity price indices hedge commodity price risk economically entering derivative contracts unrealized realized gains losses related derivatives designated accounting hedges recorded automotive cost sales exposed foreign currency exchange risk related forecasted foreign currency denominated purchases machinery equipment forecasted foreign currency denominated inventory purchases sales forecasted foreign currency denominated interest principal debt payments hedge foreign currency exchange risk economically entering derivative contracts unrealized realized gains losses related derivatives designated accounting hedges recorded statement operations line item underlying economically hedged items recorded exposed market risk related changes fair value fixed rate debt hedge risk economically entering interest rate swaps effectively convert fixed interest payments variable interest payments unrealized realized gains losses related interest rate swaps designated accounting hedges recorded automotive interest expense december 31 2008 issued warrant ust met definition derivative prospective changes fair value recorded earnings refer note 24 terms warrant derivatives meeting scope exception fair value accounting enter purchase contracts hedge physical exposure availability certain commodities used production vehicles purchase contracts accounted derivatives changes fair value recorded currently automotive cost sales contracts qualify normal purchases normal sales scope exception sfas 133 net change accumulated comprehensive loss following table summarizes net change accumulated comprehensive loss related cash flow hedging activities general motors corporation subsidiaries notes consolidated financial statements continued net derivative losses 552 million included accumulated comprehensive loss december 31 2008 expected reclassified earnings within 12 months date note 18 commitments contingencies commitments noncancelable operating leases following table summarizes minimum commitments noncancelable operating leases remaining terms excess one year primarily property certain minimum commitments fund obligations nonconsolidated vies certain leases contain escalation clauses renewal purchase options rental expense operating leases 934 million 812 million 12 billion 2008 2007 2006 respectively credit card programs sponsor credit card programs offer rebates applied primarily purchase lease vehicles amount rebates available qualified cardholders net deferred program income 34 billion 39 billion december 31 2008 2007 respectively refer note 3 additional information regarding accounting policy credit card programs sponsor following table summarizes information regarding credit card program deferred revenue redemption liability estimated rebates applicable sold vehicles guarantees provided guarantees related residual value certain operating leases december 31 2008 maximum potential amount future undiscounted payments could required pay guarantees 118 million guarantees terminate years ranging 2011 2035 certain leases contain renewal options may 2008 purchased headquarters’ building detroit prior purchase leased building operating lease guaranteed 626 million related residual value performed guarantee conjunction acquisition general motors corporation subsidiaries notes consolidated financial statements continued agreements third parties guarantee fulfillment certain suppliers’ commitments related obligations december 31 2008 maximum potential future undiscounted payments could required pay guarantees 520 million included amount 481 million relates guarantee provided gmac brazil connection dealer floor plan financing guarantee secured 481 million certificate deposit purchased gmac title guarantees expire years ranging 2009 2017 upon occurrence specific events company’s cessation business december 31 2008 recorded liabilities 24 million related guarantees instances certain assets party whose debt performance guaranteed may offset degree cost guarantee offset certain payables guaranteed parties may also offset certain guarantees triggered also provide payment guarantees commercial loans made gmac outstanding certain third parties dealers rental car companies december 31 2008 maximum commercial obligations guaranteed related loans 42 million guarantees either expire years ranging 2009 2012 ongoing determined value ascribed guarantees insignificant based credit worthiness third parties connection certain divestitures assets operating businesses entered agreements indemnifying certain buyers parties respect environmental conditions pertaining real property owned also connection divestitures provided guarantees respect benefits paid former employees relating pensions postretirement health care life insurance aside indemnifications guarantees related delphi specific divested unit discussed possible estimate maximum exposure indemnifications guarantees due conditional nature obligations amounts recorded obligations probable estimable time addition guarantees indemnifying agreements mentioned periodically enter agreements incorporate indemnification provisions normal course business due nature agreements maximum potential amount future undiscounted payments may exposed cannot estimated amounts recorded indemnities obligations probable estimable time refer note 27 additional information guarantees provide gmac asset retirement obligations conditional asset retirement obligations relate legal obligations associated retirement tangible longlived assets result acquisition construction development normal operation longlived asset performed analysis obligations associated real property owned leased including facilities warehouses offices estimates conditional asset retirement obligations relate case owned properties costs estimated necessary legally required removal remediation various regulated materials primarily asbestos abatement estimated using sitespecific surveys available per square foot estimate surveys unavailable leased properties obligations relate estimated cost contractually required property restoration general motors corporation subsidiaries notes consolidated financial statements continued recording conditional asset retirement obligations results increased fixed asset balances corresponding increase liabilities asset balances 132 million 89 million december 31 2008 2007 respectively recorded building land improvement related liabilities included liabilities following table summarizes activity asset retirement obligations environmental operations like operations companies engaged similar businesses subject wide range environmental protection laws including laws regulating air emissions water discharges waste management environmental remediation various stages investigation remediation sites contamination alleged involved number actions remediate hazardous wastes required federal state laws statutes require responsible parties fund remediation actions regardless fault legality original disposal ownership disposal site future effect environmental matters including potential liabilities often difficult estimate record environmental reserve probable liability incurred amount liability reasonably estimated practice followed whether claims asserted unasserted expect amounts reserved 297 million 314 million december 31 2008 2007 respectively paid periods remediation applicable sites typically range five 30 years amounts recorded 97 million 103 million recorded within accrued expenses december 31 2008 2007 respectively remainder recorded within liabilities many sites remediation costs damages ultimately may responsible may vary uncertainties respect factors connection site materials involvement potentially responsible parties application laws standards regulations site conditions nature scope investigations studies remediation undertaken including technologies required extent duration success remediation final outcome environmental matters cannot predicted certainty time accordingly possible resolution one environmental matters could exceed amounts accrued amount could material financial condition results operations product liability respect product liability claims involving products believe judgment us actual damages adequately covered recorded accruals applicable excess insurance coverage although punitive damages claimed lawsuits claims inherently unpredictable accruals incorporate historic experience types claims recorded liabilities 921 million 11 billion december 31 2008 2007 respectively expected cost known products liability claims plus estimate expected cost product liability claims already incurred expected filed future selfinsured including related legal fees expected general motors corporation subsidiaries notes consolidated financial statements continued incurred amounts recorded within accrued expenses december 31 2008 2007 respectively exclude asbestos claims discussed separately asbestos claims like automobile manufacturers subject asbestosrelated claims recent years seen claims primarily arise three circumstances • majority claims seek damages illnesses alleged resulted asbestos used brake components • limited numbers claims arisen asbestos contained insulation brakes used manufacturing locomotives • claims brought contractors allege exposure asbestoscontaining products working premises owned resolved many asbestosrelated cases years continue strategic litigation reasons avoiding defense costs possible exposure excessive verdicts believe small proportion claimants develop asbestosrelated physical impairment small percentage claims pending us allege causation disease associated asbestos exposure amount expended asbestosrelated matters year depends number claims filed amount pretrial proceedings number trials settlements period record estimated liability associated asbestos personal injury claims expected loss probable reasonably estimated three months ended december 31 2007 retained since continued retain hamilton rabinovitz associates inc firm specializing estimating asbestos claims assist us determining potential liability pending unasserted future asbestos personal injury claims analyses rely include following information factors • third party forecast projected incidence malignant asbestosrelated disease likely occur general population individuals occupationally exposed asbestos • asbestos claims experience based data concerning claims filed us resolved amounts paid nature asbestosrelated disease condition asserted approximately last four years • estimated rate asbestosrelated claims likely asserted us future based asbestos claims experience projected incidence asbestosrelated disease general population individuals occupationally exposed asbestos • estimated rate dismissal claims disease type based asbestos claims experience • estimated indemnity value projected claims based asbestos claims experience adjusted inflation review number factors including analyses provided hamilton rabinovitz associates inc order determine reasonable estimate probable liability pending future asbestosrelated claims projected asserted next ten years including legal defense costs monitor actual claims experience consistency estimate make periodic adjustments appropriate believe analyses based relevant information available combined reasonable assumptions may prudently rely conclusions determine estimated liability asbestosrelated claims note however general motors corporation subsidiaries notes consolidated financial statements continued analyses inherently subject significant uncertainties data sources assumptions used connection analyses may prove reliable predictors respect claims asserted us experience recent past includes substantial variation relevant factors change assumptions include source claiming population filing rate value claims could significantly increase decrease estimate addition external factors legislation affecting format timing litigation actions entities sued asbestos personal injury actions distribution assets various trusts established pay asbestos claims outcome cases litigated final verdict could affect estimate liability recorded asbestosrelated matters 648 million 637 million december 31 2008 2007 respectively reserve balance september 30 2007 december 31 2007 increased primarily result 349 million increase reserve probable pending future asbestos claims partially offset reduction reserve existing claims 251 million resulting fewer claims lower expenses previously estimated contingent matterslitigation various legal actions governmental investigations claims proceedings pending us including number shareholder class actions bondholder class actions class actions employee retirement income security act 1974 amended matters arising alleged product defects including asbestosrelated claims employmentrelated matters governmental regulations relating safety emissions fuel economy product warranties financial services dealer supplier contractual relationships environmental matters regard litigation matters discussed previous paragraph established reserves matters believe losses probable reasonably estimated matters may involve compensatory punitive treble damage claims demands recall campaigns incurred reported asbestosrelated claims environmental remediation programs sanctions granted could require us pay damages make expenditures amounts could reasonably estimated december 31 2008 believe appropriately accrued matters sfas 5 “accounting contingencies” based information currently available us december 31 2008 accrued reserves litigation losses 277 million december 31 2007 accrued reserves litigation losses 139 million recorded accrued expenses accrued reserves include reserves asbestosrelated product liability claims disclosed previously “asbestos claims” “product liability” respectively represent best estimate amounts believe liable within range expected losses litigation inherently unpredictable however unfavorable resolutions could occur accordingly possible adverse outcome proceedings could exceed amounts accrued amount could material financial condition results operations particular reporting period july 2008 reached tentative settlement general motors securities litigation suit recorded additional charge 277 million 139 million paid 2008 also 2008 recorded 215 million reduction selling general administrative expense associated insurancerelated indemnification proceeds previously recorded litigation related costs including cost incurred settle general motors securities litigation suit delphi corporation benefit guarantee 1999 spunoff delphi automotive systems corporation became delphi largest supplier automotive systems components parts delphi’s largest customer 2005 2008 annual purchases delphi ranged approximately 65 billion approximately 102 billion time spinoff employees delphi automotive systems corporation became employees delphi part separation agreements delphi assumed pension postretirement benefit obligations transferred us hourly employees retired october 1 2000 retained pension postretirement obligations us hourly employees retired october 1 2000 additionally time spinoff entered separate agreements uaw iuecwa united steel paper forestry general motors corporation subsidiaries notes consolidated financial statements continued rubber manufacturing energy allied industrial service workers union usw providing contingent benefit guarantees whereby would make payments certain pension benefits opeb certain former us hourly employees became employees delphi individually collectively benefit guarantee agreements benefit guarantee agreement contains separate benefit guarantees relating pension opeb obligations different triggering events uaw iuecwa usw required benefit guarantee agreements event delphi successor companies ceases business becomes subject financial distress could liable delphi fails provide corresponding benefits required level benefit guarantee agreements obligate us guarantee benefits delphi retirees excess corresponding benefits provide time hourly retirees accordingly reduction benefits provide hourly retirees reduces obligation corresponding benefit guarantee turn delphi entered indemnification agreement us required delphi indemnify us required perform uaw benefit guarantee agreement addition respect pension benefits guarantee arises extent pension benefits provided delphi pension benefit guaranty corporation fall short guaranteed amount received notice delphi dated october 8 2005 likely would become obligated provide benefits pursuant benefit guarantee agreements connection commencement date chapter 11 proceedings us bankruptcy code notice stated delphi unable estimate timing scope benefits might required provide benefit guarantee agreements trigger benefit guarantee agreements however 2005 believed probable incurred liability benefit guarantee agreements june 2007 entered memorandum understanding delphi uaw delphi uaw mou included terms relating consensual triggering uaw benefit guarantee agreement well additional terms relating delphi’s restructuring delphi uaw mou also agreed pay certain healthcare costs delphi retirees beneficiaries order provide level benefits consistent provided retirees beneficiaries mitigation plan veba formed pursuant delphi uaw mou also committed pay 450 million settle uaw claim asserted delphi uaw directed us pay directly either mitigation plan new veba depending upon timing payment amount paid upon substantial consummation delphi por consistent delphi uaw mou incorporates approves consistent comprehensive settlement agreement delphi us august 2007 also entered memorandums understanding delphi iuecwa delphi iuecwa mou delphi usw mou terms delphi iuecwa mou usw mous similar delphi uaw mou regard consensual triggering benefit guarantee agreements delphigm settlement agreements september 2007 amended october december 2007 entered delphigm settlement agreements consisting global settlement agreement amended gsa master restructuring agreement amended mra gsa intended resolve outstanding issues delphi us arisen may arise delphi’s emergence chapter 11 mra intended govern certain aspects ongoing commercial relationship delphi memoranda understanding discussed preceding paragraphs incorporated agreements september 2008 entered amended delphigm settlement agreements consisting amended gsa amended mra part negotiations delphi regarding amended delphigm settlement agreements also entered implementation agreements uaw iuecwa usw implementation agreements addressed transfer pension assets liabilities 4141 irs code triggering basis set forth implementation agreements “term sheet delphi pension freeze cessation opeb gm consensual triggering benefit guarantee” negotiated respective unions 2007 release unions members retirees delphi us claims related matters september 2008 bankruptcy court entered order approving amended delphigm settlement agreements implementation agreements became effective september 29 2008 general motors corporation subsidiaries notes consolidated financial statements continued addition significant items contained amended delphigm settlement agreements included commitment • reimburse delphi costs provide opeb certain delphi’s hourly retirees december 31 2006 date delphi ceases provide benefits assume responsibility opeb going forward • reimburse delphi normal cost credited service delphi’s pension plan january 1 2007 date pension plans frozen • first hourly pension transfer irs code section 414l net liabilities 21 billion delphi hrp us hourly pension plan september 29 2008 • second hourly pension transfer remaining delphi hrp net liabilities estimated 32 billion december 31 2008 upon delphi’s substantial consummation por provides consideration received us described consistent terms amended delphigm settlement agreements actual amounts second hourly pension transfer depend among factors valuation pension liability transfer date proportion obligation assumed pbgc performance pension plan assets • reimburse delphi retirement incentives half buyout payments made pursuant various attrition program provisions reimburse certain us hourly buydown payments made certain hourly employees delphi • award certain future product programs delphi provide delphi ongoing preferential sourcing product programs eliminate certain previously agreed upon price reductions restrict ability resource certain production alternative suppliers • labor cost subsidy reimburse certain us hourly labor costs incurred produce systems components parts us october 1 2006 september 14 2015 certain us facilities owned divested delphi • production cash burn support reimburse delphi’s cash flow deficiency attributable production certain us facilities continue produce systems components parts us facilities either closed sold delphi • facilitation support pay delphi 110 million 2009 2010 quarterly installments connection certain us facilities owned delphi • temporarily accelerate payment terms delphi’s north american sales us upon substantial consummation por 2012 • reimburse delphi beginning january 1 2009 actual cash payments related workers compensation disability supplemental employment benefits severance obligations current former uawrepresented hourly active inactive employees • guarantee minimum recovery net working capital delphi invested certain businesses held sale delphi agreed provide us designee option purchase certain delphi businesses one dollar businesses sold certain specified deadlines business sold either third party us affiliate pursuant option applicable deadline option affiliate deemed exercised purchase option unsold business including materially assets liabilities automatically transfer gm buyer similarly delphi uaw mou transfer occurred applicable deadline responsibility affected uaw hourly employees unsold business would automatically transfer us designated affiliate general motors corporation subsidiaries notes consolidated financial statements continued amended gsa also resolves claims existence effective date amended delphigm settlement agreements certain limited exceptions either delphi may including delphi’s motion march 2006 us bankruptcy code reject certain supply contracts us amended gsa related agreements delphi’s unions release us related parties defined claims delphi related parties defined well employee benefit related claims delphi’s unions hourly employees also pursuant amended gsa released delphi related parties defined claims us related parties defined additionally amended gsa provides receive • administrative claim regarding first hourly pension transfer 16 billion share equally general unsecured creditors first 600 million recoveries event delphi emerge bankruptcy • administrative claim 21 billion total delphi hrp transfer inclusive administrative claim first hourly pension transfer paid preferred stock upon substantial consummation delphi’s por delphi emerges 1 principal core businesses 2 exit financing exceed 30 billion plus revolving credit facility 3 equity securities senior pari passu preferred stock issued us • general unsecured claim amount 25 billion subordinated general unsecured creditors receive recoveries equal 20 general unsecured claims receive 20 general unsecured claim preferred stock recovery shared ratably us general unsecured creditors ultimate value consideration may receive contingent fair value delphi’s assets event delphi fails emerge bankruptcy upon fair market value delphi’s securities delphi emerges bankruptcy result implementation amended delphigm settlement agreements paid 14 billion delphi 2008 settlement net amounts accrued date commitments delphi por bankruptcy court entered order january 2008 confirming delphi’s por april 2008 delphi announced although met conditions required substantially consummate por including obtaining 61 billion exit financing delphi’s plan investors refused participate closing transaction contemplated por commenced completed plan investors’ position continued work delphi stakeholders delphi’s efforts emerge bankruptcy including implementation amended delphigm settlement agreements october 2008 delphi filed modified por contemplated delphi obtaining 38 billion exit financing consummate modified por delphi advance agreement may 2008 agreed advance 650 million delphi 2008 within amounts would owed delphigm settlement agreements delphi emerged bankruptcy april 2008 august 2008 entered new agreement advance additional 300 million increased amount agreed advance 950 million 2008 within amounts would owe delphigm settlement agreements delphi emerge bankruptcy december 2008 upon effectiveness amended delphigm settlement agreements original 650 million advance agreement matured leaving 300 million advance agreement october 2008 subject delphi obtaining extension accommodation debtor possession financing june 30 2009 agreed extend 300 million advance agreement june 30 2009 temporarily accelerate north american payables delphi three months ended june 30 2009 expected result additional liquidity delphi 100 million april may june 2009 december 2008 delphi reached accommodation lender june 30 2009 agreed change general motors corporation subsidiaries notes consolidated financial statements continued commencement date temporary acceleration north american payables delphi april 2009 march 2009 temporary acceleration payment terms occur upon substantial consummation delphi’s por amended delphigm settlement agreements also subject delphi’s actual liquidity requirements january 2009 agreed immediately accelerate 50 million advances towards temporary acceleration north american payables february 2009 agreed increase advance agreement commitment 300 million 350 million become effective march 24 2009 subject approval ust terms ust loan agreement march 2009 agreed increase advance agreement commitment 350 million 450 million become effective march 24 2009 subject 1 board approval 2 ust approval terms ust loan agreement 3 bankruptcy court approval increase advance agreement 4 achievement certain milestones steering option exercise agreement described including limited bankruptcy court approval steering option exercise agreement execution definitive agreements sale global steering business us march 4 2009 advanced 245 million agreement assurances delphi able repay amounts advanced steering option exercise agreement march 2009 reached preliminary agreement delphi terms us acquire delphi’s global steering business provided amended delphigm settlement agreements option exercise agreement subject board approval ust approval bankruptcy court approval following table summarizes charges recorded respect agreements delphi charges reflect best estimate obligations associated implementation agreements amended delphigm settlement agreements updated 2008 reflect current conditions related credit markets challenges auto industry charges assume obligation respect pension benefits arises extent pension benefits provided delphi pension benefit guaranty corporation fall short guaranteed amount estimated obligation could increase 20 billion december 31 2008 become obligated assume delphi pension related obligations beyond currently required terms implementation agreements amended delphigm settlement agreements assuming amounts would otherwise covered pension benefit guaranty corporation addition 2008 charge expenses reflected benefit 622 million due reduction estimated liability associated delphi opeb related costs delphi active employees retirees based terms new veba currently participants plans terms new veba also reduced 36 billion opeb obligation delphi employees returned us primarily 2006 became participants uaw hourly medical plan benefit included actuarial gain recorded component comprehensive loss 2008 associated uaw hourly medical plan refer note 16 since 2005 recorded total charges 123 billion expenses connection benefit guarantee agreements amended delphigm settlement agreements december 31 2008 reflect estimate recovery unsecured bankruptcy claims commitments amended delphigm settlement agreements workers compensation disability supplemental employment benefits included amounts recorded expenses addition ongoing commitments amended delphigm settlement agreements labor cost subsidy production cash burn support 2008 included amounts recorded automotive cost sales including facilitation support expected result additional expense range 500 million 750 million 2009 2010 reducing range 100 million 250 million per year thereafter 2015 expenses treated period cost expensed incurred general motors corporation subsidiaries notes consolidated financial statements continued due uncertainties surrounding delphi’s ability emerge bankruptcy reasonably possible additional losses may substantial could arise future currently unable estimate amount range losses benefit guarantees related divested facilities entered various guarantees regarding benefits former employees two previously divested facilities manufacture component parts whose results continue included consolidated financial statements divested facilities entered agreements purchasers indemnify defend hold purchaser harmless liabilities arising divested facilities uaw guaranteeing certain postretirement healthcare benefits payment postemployment benefits 2006 recorded charge 206 million related closure two facilities permanent idling 2000 employees primarily consisting 214 million charge recognize wage benefit costs associated employees accepting retirement packages buyouts supplemental unemployment reduced curtailment gain 11 million respect postretirement benefits 2007 recognized favorable adjustments 44 million related facility closures addition 38 million curtailment gain respect opeb 2008 recognized favorable adjustments 27 million respect postemployment benefits adjustments mainly associated return 100 employees us divested units note 19 income taxes following table summarizes loss continuing operations income taxes equity income minority interests following table summarizes provision income taxes annual tax provisions include amounts considered sufficient pay assessments may result examination prior year tax returns cash paid income taxes 718 million 404 million 259 million 2008 2007 2006 respectively general motors corporation subsidiaries notes consolidated financial statements continued provisions made estimated us nonus income taxes less available tax credits deductions may incurred remittance share subsidiaries’ undistributed earnings deemed permanently reinvested taxes provided nonus subsidiaries’ earnings deemed permanently reinvested 63 billion 61 billion december 31 2008 2007 respectively quantification deferred tax liability associated permanently reinvested earnings practicable following table summarizes reconciliation provision benefit income taxes compared amounts us federal statutory rate see discussion related valuation allowances certain deferred tax assets b changes tax laws two jurisdictions 2007 significant effect consolidated financial statements follows • december 2007 canadian government enacted legislation reduce combined statutory corporate tax rates 35 addition 05 rate reduction enacted june 2007 combined 40 reduction phased gradually period five years began 2008 effect change reduction carrying amount canadian deferred tax assets 376 million december 31 2007 valuation allowance discussed adjusted reflect change statutory rates • july 2007 german parliament passed legislation lower statutory corporate tax rate president signed legislation law august 2007 new law reduces 90 effective january 1 2008 combined german business tax rate consists corporate tax rate local trade tax rate solidarity levy tax rate effect change reduction carrying amount german deferred tax assets 475 million included charge related valuation allowance discussed deferred income tax assets liabilities december 31 2008 2007 reflect effect temporary differences amounts assets liabilities equity financial reporting purposes bases assets liabilities equity measured tax laws well tax loss tax credit carryforwards general motors corporation subsidiaries notes consolidated financial statements continued following table summarizes components temporary differences carryforwards give rise deferred tax assets liabilities following table summarizes deferred tax assets liabilities following table summarizes amount expiration dates operating loss tax credit carryforwards december 31 2008 general business credits principally consist research experimentation credits general motors corporation subsidiaries notes consolidated financial statements continued evaluate deferred income taxes quarterly determine valuation allowances required adjusted assess whether valuation allowances established deferred tax assets based consideration available evidence positive negative using likely standard assessment considers among matters nature frequency severity recent losses forecasts future profitability duration statutory carryforward periods experience tax attributes expiring unused tax planning alternatives making judgments significant weight given evidence objectively verified valuation allowances established deferred tax assets based likely threshold ability realize deferred tax assets depends ability generate sufficient taxable income within carryback carryforward periods provided tax law applicable tax jurisdiction considered following possible sources taxable income assessing realization deferred tax assets • future reversals existing taxable temporary differences • future taxable income exclusive reversing temporary differences carryforwards • taxable income prior carryback years • taxplanning strategies valuation allowances recognized relate certain net deferred tax assets us nonus jurisdictions following table summarizes change valuation allowance related considerations south korea full valuation allowance historically recorded gm daewoo several positive events occurred 2006 lead us conclude valuation allowance longer necessary accordingly reversed full valuation allowance net deferred tax assets 2006 however three months ended december 31 2008 determined likely would realize net deferred tax assets whole part gm daewoo recorded full valuation allowances 725 million net deferred tax assets gm daewoo threeyear adjusted cumulative loss position nearterm midterm financial outlook automotive market conditions challenging believed three months ended september 30 2008 australia three months ended december 31 2008 determined likely would realize net deferred tax assets whole part australia recorded full valuation allowance 284 million net deferred tax assets tax jurisdictions general motors corporation subsidiaries notes consolidated financial statements continued australia threeyear adjusted cumulative loss position 2008 anticipated position throughout midterm forecast period current economic downturn affected australian forecasted production volumes caused significant actual forecast pretax profit deterioration three months ended december 31 2008 jurisdictions three months ended december 31 2008 significant additional negative evidence arose form corporate going concern environment significant decline worldwide revenues profits period midterm forecast period result determined likely would realize net deferred tax assets jurisdictions net deferred tax assets even though entities threeyear adjusted cumulative loss positions established additional valuation allowances 481 million net deferred tax assets entities argentina austria belgium brazil separate legal entity described chile colombia ecuador finland germany separate legal entities described hungary indonesia ireland italy kenya korea separate legal entity described netherlands new zealand norway peru philippines poland portugal russia south africa switzerland taiwan turkey uruguay us state jurisdiction texas venezuela united kingdom spain three months ended march 31 2008 determined likely would realize net deferred tax assets whole part spain united kingdom recorded full valuation allowances 379 million net deferred tax assets tax jurisdictions united kingdom threeyear adjusted cumulative loss position nearterm midterm financial outlook automotive market conditions challenging believed three months ended december 31 2007 outlook deteriorated based projections combined effects challenging foreign currency exchange environment unfavorable commodity prices additionally increased estimate potential costs may arise regulatory tax environment relating co2 emissions european union including legislation enacted announced 2008 spain although threeyear adjusted cumulative loss position nearterm midterm financial outlook deteriorated significantly three months ended march 31 2008 anticipated threeyear adjusted cumulative loss position near midterm spain united kingdom outlook deteriorated based projections combined effects foreign currency exchange environment commodity prices including estimate potential costs may arise regulatory tax environment relating co2 emissions established valuation allowance 2007 spanish deferred tax assets related investment tax credits expect realizable likely threshold united states canada germany three months ended september 30 2007 recorded charge 390 billion related establishing full valuation allowances net deferred tax assets us canada germany concluding valuation allowance required difficult significant negative evidence objective verifiable cumulative losses recent years utilize rolling twelve quarters results measure cumulative losses recent years adjust historical results remove certain unusual items charges us canada germany analysis performed three months ended september 30 2007 indicated cumulative three year historical losses adjusted basis considered significant negative evidence objective verifiable therefore difficult overcome addition nearterm financial outlook us canada germany deteriorated three months ended december 31 2007 longterm financial outlook us canada germany remains positive concluded ability rely longterm outlook future taxable income limited due uncertainty created weight negative evidence particularly • possibility continued increasing price competition highly competitive us market seen three months ended september 30 2007 competitor introduced new fullsize trucks offered customer incentives gain market share accordingly increased customer incentives recently launched fullsize trucks previously anticipated general motors corporation subsidiaries notes consolidated financial statements continued • continued volatile oil prices possible effect may consumer preferences related profitable products fullsize trucks sport utility vehicles • uncertainty effect cost structure stringent us fuel economy global emissions standards may require us sell significant volume alternative fuel vehicles across portfolio • uncertainty future operating results gmac’s whollyowned subsidiary rescap’s mortgage business • acceleration tax deductions opeb liabilities compared prior expectations due changes associated settlement agreement accordingly based circumstances uncertainty regarding future taxable income recorded full valuation allowances net deferred tax assets three months ended september 30 2007 us valuation allowance recorded 2006 related 2006 losses allocable certain us state jurisdictions previously determined tax attributes related jurisdictions realizable brazil currently recorded full valuation allowances net deferred tax assets brazil valuation allowances initially recorded 2005 2008 2007 2006 generated taxable income brazil accordingly reversed portion valuation allowances offset portion tax provision income earned periods december 31 2008 brazil longer threeyear adjusted cumulative loss position however even though brazilian operation forecasting future taxable income time global economic conditions become increasingly unstable possible objectively verify information december 31 2008 accordingly continued conclude likely realize deferred tax assets brazil future generate threeyear adjusted cumulative profits tax jurisdictions recorded full valuation allowances conclusion regarding need valuation allowances tax jurisdictions could change resulting reversal valuation allowances generate taxable income tax jurisdictions prior overcoming negative evidence corporate going concern environment andor threeyear adjusted cumulative loss would reverse portion valuation allowance related corresponding realized tax benefit period without changing conclusions need full valuation allowance remaining net deferred tax assets allocate income tax expense benefit continuing operations discontinued operations comprehensive income loss allocation applied tax jurisdiction periods pretax loss continuing operations pretax income another category discontinued operations comprehensive income tax expense first allocated sources income related benefit recorded continuing operations upon adoption fin 48 january 1 2007 recorded increase retained earnings 137 million cumulative effect change accounting principle corresponding decrease liability uncertain tax positions january 1 2007 total gross unrecognized tax benefits 27 billion 21 billion represented amount unrecognized tax benefits recognized would favorably affect effective income tax rate future periods december 31 2008 amount gross unrecognized tax benefits valuation allowances amount would favorably affect effective income tax rate future periods valuation allowances 28 billion 260 million respectively december 31 2007 amount gross unrecognized tax benefits valuation allowances amount would favorably affect effective income tax rate future periods valuation allowances 28 billion 68 million respectively amounts consider guidance fsp fin 481 “definition settlement fasb interpretation 48” december 31 2008 2007 12 billion 22 billion liability uncertain tax positions reduced deferred tax assets relating tax jurisdictions respectively remaining uncertain tax positions classified noncurrent asset liability general motors corporation subsidiaries notes consolidated financial statements continued following table summarizes reconciliation total amounts unrecognized tax benefits practice classify interest income uncertain tax positions automotive interest income nonoperating income net interest expense automotive interest expense penalties selling general administrative expense following tables summarize information regarding interest penalties file income tax returns multiple jurisdictions subject examination taxing authorities throughout world us federal income tax returns 2001 2003 reviewed irs examinations concluded 2008 submitted requests competent authority assistance one transfer pricing matter related years competent authorities interpret implementation treaties achieve effect eliminating double taxation irs currently reviewing 2004 2006 federal income tax returns addition previously filed tax returns currently review argentina australia austria belgium canada ecuador france germany hungary india indonesia italy mexico new zealand russia spain thailand turkey united kingdom venezuela reviews previously filed tax returns korea concluded three months ended december 31 2008 conclusion reviews resulted release amounts accrued interest penalties 4 million 4 million respectively payment korean taxing authorities 23 million tax audits greece mexico united kingdom certain us states concluded 2008 conclusion audits resulted release amounts accrued interest penalties 62 million 23 million respectively december 31 2008 possible reasonably estimate expected change total amount unrecognized tax benefits next 12 months open tax years 1999 2007 various significant taxing jurisdictions including australia brazil canada germany korea mexico spain united kingdom us open years contain matters could subject differing interpretations applicable tax laws regulations relate amount timing inclusion revenue expenses sustainability income tax credits given audit cycle recorded tax benefit positions meet likely standard general motors corporation subsidiaries notes consolidated financial statements continued note 20 fair value financial instruments effective january 1 2008 adopted sfas 157 accordance provisions fsp fas 1572 decided defer adoption sfas 157 one year nonfinancial assets nonfinancial liabilities recognized disclosed fair value financial statements nonrecurring basis adjustment accumulated deficit result adoption sfas 157 sfas 157 provides following • defines fair value price would received sell asset paid transfer liability orderly transaction market participants measurement date establishes framework measuring fair value • establishes threelevel hierarchy fair value measurements based upon observable inputs valuation asset liability measurement date • requires consideration nonperformance risk valuing liabilities • expands disclosures instruments measured fair value threelevel valuation hierarchy fair value measurements based upon observable unobservable inputs observable inputs reflect market data obtained independent sources unobservable inputs reflect market assumptions two types inputs create following fair value hierarchy • level 1 quoted prices identical instruments active markets • level 2 quoted prices similar instruments active markets quoted prices identical similar instruments markets active modelderived valuations whose significant inputs observable • level 3 instruments whose significant inputs unobservable following description valuation methodologies used instruments measured fair value well general classification instruments pursuant valuation hierarchy securities classify securities within level 1 valuation hierarchy quoted prices available active market level 1 securities include exchangetraded equities generally classify securities within level 2 valuation hierarchy quoted market prices available quoted market prices available determine fair values securities using pricing models quoted prices securities similar characteristics discounted cash flow models primarily industrystandard models consider various assumptions including time value yield curve well relevant economic measures examples securities include u government agency securities certificates deposit commercial paper corporate debt securities classify securities within level 3 valuation hierarchy certain cases limited activity less observable inputs valuation inputs level 3 security fair value measurements consider various assumptions including time value yield curve prepayment speeds default rates loss severity current market contractual prices underlying financial instruments well relevant economic measures securities classified within level 3 include certain mortgagebacked securities derivatives majority derivatives valued using internal models use basis readily observable market inputs time value forward interest rates volatility factors current forward market prices commodities foreign currency general motors corporation subsidiaries notes consolidated financial statements continued exchange rates generally classify instruments within level 2 valuation hierarchy derivatives include interest rate swaps cross currency swaps foreign currency derivatives commodity derivatives classify derivative contracts valued based upon models significant unobservable market inputs level 3 valuation hierarchy examples include foreign currency derivatives warrant ust certain longdated commodity derivatives interest rate swaps notional amounts fluctuate time models fair value measurements include unobservable inputs based estimated forward rates prepayment speeds sfas 157 requires valuation derivative liabilities must take account company’s nonperformance risk effective january 1 2008 updated derivative liability valuation methodology consider nonperformance risk observed credit default swap market bond market based prices recent trades three months ended december 31 2008 concluded due recent deterioration credit markets financial condition adjustments fair value derivatives due nonperformance risk required significant judgment derivative contracts certain foreign consolidated subsidiaries party nonperformance risk associated subsidiaries estimated based credit rating sovereign comparable companies similar credit profiles observable credit ratings together internal bank credit ratings obtained subsidiary’s counterparty banks derivatives valued using measurements transferred level 2 level 3 december 31 2008 following table summarizes financial instruments measured fair value recurring basis general motors corporation subsidiaries notes consolidated financial statements continued tables summarize activity balance sheet accounts financial instruments classified within level 3 valuation hierarchy determination made classify financial instrument within level 3 determination based upon significance unobservable inputs overall fair value measurement level 3 financial instruments typically include addition unobservable level 3 components observable components validated external sources realized gains losses temporary impairments marketable securities ust warrant recorded automotive interest nonoperating income net b reflects fair value interest rate swap assets net liabilities c realized unrealized gains losses commodity derivatives recorded automotive cost sales changes fair value attributable changes base metal precious metal prices realized unrealized gains losses foreign currency derivatives recorded line item associated economically hedged item unrealized securities holding gains losses excluded earnings reported comprehensive loss realized gains losses realized instrument settled sold monthly basis evaluate whether unrealized losses related investments debt equity securities temporary factors considered determining whether loss temporary include length time extent fair value cost financial condition nearterm prospects issuer ability intent hold investment period time sufficient allow anticipated recovery losses determined temporary loss recognized investment carrying amount adjusted revised fair value temporary impairment losses 62 million recorded 2008 general motors corporation subsidiaries notes consolidated financial statements continued following table summarizes financial instruments measured fair value nonrecurring basis periods subsequent initial recognition review carrying value equity method investments events circumstances warrant review requires comparison fair value investments respective carrying values fair value investments determined based valuation techniques using best information available may include quoted market prices market comparables discounted cash flow projections impairment charge recorded whenever decline fair value carrying value determined temporary investments gmac common preferred membership interests 2008 global economy steadily deteriorated united states entered recessionary period beginning december 2007 result instability credit mortgage markets severe declines residential homebuilding markets significant volatility prices oil commodities 2008 factors continued deteriorate spread beyond united states initially western europe recently emerging markets south america asia economic factors initially affected consumer demand less fuel efficient vehicles particularly fullsize pickup trucks sport utility vehicles profitable products continued instability credit markets resulted extreme lack liquidity resulting prominent north american financial institutions declaring bankruptcy seized federal deposit insurance corporation sold distressed valuations culminated us foreign governments providing various forms capital infusions financial institutions recently consumer demand automobiles contracted due decline availability financing significant contraction consumer spending based continued recession united states resulting automobile sales lowest levels 16 years economic factors negatively affected gmac’s global automotive business well rescap’s residential mortgage business resulted significant losses businesses including impairments 12 billion gmac’s portfolio equipment operating leases net 2008 additional factor gmac’s need future ability continue provide support rescap allow continue operate refer note 9 information concerning gmac’s conversion bhc status result events evaluated investments gmac common preferred membership interests determined impaired impairments temporary general motors corporation subsidiaries notes consolidated financial statements continued following table summarizes activity respect investment gmac common preferred membership interests impairment charges recorded equity loss gmac llc automotive interest income nonoperating income net investment gmac common preferred membership interests respectively continued low decreased demand vehicles continued increased instability global credit mortgage markets lack available credit lengthy recession north america europe south america asia could negatively affect gmac’s lines business result future impairments investment gmac common preferred membership interests additionally gmac provides financing dealers well retail purchasers vehicles deterioration economic factors could cause vehicle sales decline order determine fair value investment gmac common membership interests first determined fair value gmac applying various valuation techniques significant business units applied 49 equity interest resulting fair value march 31 june 30 september 30 2008 determination fair value gmac encompassed applying valuation techniques included level 3 inputs gmac’s significant business units follows • auto finance obtained industry data equity earnings ratios industry participants developed average multiples companies based upon comparison businesses auto finance • insurance developed peer group based upon factors equity earnings ratios developed average multiples companies • rescap previously obtained industry data industry participant believe comparable also utilized implied valuation based acquisition industry participant believe comparable due prevailing market conditions september 30 2008 believe comparable industry participants existed however believe previous data used conjunction certain publicly available information incorporated analysis results appropriate valuation september 30 2008 • commercial finance group obtained industry data price earnings ratios industry participants developed average multiples companies based upon comparison businesses commercial finance group december 31 2008 determination fair value gmac common membership interests utilized data gmac’s discussions board governors federal reserve system approval become bhc bank holding general motors corporation subsidiaries notes consolidated financial statements continued company act 1956 amended addition gmac’s negotiations ust regarding potential borrowings capital infusions automotive industry financing program created troubled asset relief program established ust emergency economic stabilization act 2008 part process cerberus fund agreed convert interests participation agreement gmac common membership interests december 2008 purchase subsequent december 2008 additional gmac common membership interests conversion participation agreement subsequent purchase additional gmac common membership interests utilized specified value per gmac common membership interest determined agreed relevant parties various transactions subsequently utilized determination gmac’s fair value believe per share value representative fair value order determine fair value investment gmac preferred membership interests applied valuation techniques included level 3 inputs various characteristics gmac preferred membership interests follows • utilizing information pricing similar investments changes yields gmac securities developed discount rate valuation • utilizing assumptions receipt dividends gmac preferred membership interests expected call date discounted cash flow model developed present value related cash flows march 31 june 30 september 30 december 31 2008 adjusted assumptions appropriate discount rate utilize valuation due changes market conditions occurred periods additionally adjusted assumptions likelihood payments dividends expected call date preferred membership interests investment nummi cami nummi cami equity method investees involved various aspects development production vehicles decline industry sales north america negatively affected nummi’s cami’s net income cash flows 2008 addition weakness economy continue result challenging shortterm market conditions result events evaluated nummi cami impairment based discounted projected cash flows determined fair values investments carrying values impairments temporary recognized impairment charges 94 million 25 million nummi cami respectively following methods assumptions used estimate fair value class financial instruments practicable estimate value shortterm longterm debt estimated fair value based quoted market prices similar issues based current rates offered us debt similar remaining maturities capital lease obligations 09 billion 13 billion december 31 2008 2007 respectively excluded fair value disclosure obligations required following table summarizes book estimated fair values financial instruments practicable estimate fair value due shortterm nature book value approximates fair value accounts notes receivable net accounts payable principally trade general motors corporation subsidiaries notes consolidated financial statements continued note 21 restructuring initiatives executed various restructuring initiatives may execute additional initiatives future response deterioration global economy preserve adequate liquidity align manufacturing capacity structural costs prevailing global automotive production improve utilization remaining facilities costs idle consolidate close facilities provide postemployment benefits employees idled temporary basis accrued based best estimate wage benefit costs incurred costs related idling employees expected temporary expensed incurred estimates restructuring initiative charges based information available time charges recorded due inherent uncertainty involved actual amounts paid activities may differ amounts initially recorded accordingly may record revisions previous estimates adjusting previously established reserves collective bargaining agreement uaw includes job security provision commonly referred job opportunity bank jobs bank provision stated provision required continue paying idled employees certain wages benefits costs idle consolidate close facilities provide postemployment benefits recorded described current jobs bank provisions existing labor agreement costs related idling employees expected temporary expensed incurred review adequacy continuing need liabilities quarterly basis conjunction quarterly production labor forecasts estimates restructuring initiative charges based information available time charges recorded due inherent uncertainty involved actual amounts paid activities may differ amounts initially recorded accordingly may record revisions previous estimates adjusting previously established reserves refer note 22 asset impairment charges related restructuring initiatives note 16 pension curtailments postretirement benefit charges related hourly salary employee separation initiatives following table summarizes restructuring reserves charges region including postemployment benefit reserves charges general motors corporation subsidiaries notes consolidated financial statements continued 2008 activities gmna recorded charges interest accretion revisions estimates 25 billion separation programs related following initiatives • postemployment benefit costs united states canada 21 billion consisting 17 billion related previously announced capacity actions 407 million special attrition programs majority hourly employees working within us canada represented uaw caw respectively specific labor contracts union require us pay idled employees certain wage benefit costs postemployment benefit costs reflect estimated future wages benefits 19000 employees idled facilities 3000 employees subject special attrition programs • separation charges 33 million us salaried severance program allows voluntarily terminated employees receive ongoing wages benefits longer 12 months • separation charges 7 million us salaried severance program allows involuntarily terminated employees receive ongoing wages benefits longer 12 months • interest accretion 41 million revisions estimates increase reserve 320 million gme recorded charges interest accretion revisions estimates 286 million separation programs related following initiatives • separation charges germany 107 million related early retirement programs along additional minor separations current programs approximately 4600 employees leave early retirement programs germany 2013 • additional liability adjustments germany 24 million related postemployment programs employees provide service receive partial salary active phase employment continue receive specified payments passive idle period separation program total remaining cost early retirements recognized remaining required service period employees • separation programs affecting 1900 employees antwerp belgium facility announced three months ended june 30 2007 recorded 92 million separation charges related current previously announced programs previously recorded 341 million 2007 • separation charges 16 million related separation programs strasbourg france facility announced three months ended june 30 2008 • separation charges 27 million related cost previously announced initiatives include voluntary separations sweden united kingdom spain • interest accretion 38 million primarily related previously announced programs belgium revisions estimates decrease reserve 18 million primarily related favorable resolution claims government portugal filed conjunction facility closure azambuja 2006 gmlaam recorded charges revisions estimates 51 million related following initiatives • separation charges gm brasil 28 million related severance program sao caetano sao jose dos campos plants affecting 400 employees general motors corporation subsidiaries notes consolidated financial statements continued • separation charges 16 million related south african severance programs affecting 400 salaried hourly employees • separation charges argentina 6 million related involuntary salaried hourly severance program affecting 400 employees • separation charges chile 4 million related closing arica facility affecting 400 employees • revisions estimates decrease reserve 3 million gmap recorded charges 76 million related following initiatives • separation charges australia 64 million related facility idling gm holden manufactures fam ii 4 cylinder engines program affect 600 employees leave december 2009 total estimated cost 67 million remaining cost program recognized remaining required service period employees • separation charges australia 12 million related gm holden implementing early separation program offered salaried employees program announced september 2008 completed december 2008 2007 activities gmna recorded charges interest accretion revisions estimates 336 million separation programs related following initiatives • postemployment benefit costs 364 million consisting 333 million previously announced capacity actions united states canada 31 million special attrition programs postemployment benefit costs reflect estimated future wages benefits 8900 employees idled facilities 3800 employees subject special attrition programs • separation charges 9 million us salaried severance program allows voluntarily terminated employees receive ongoing wages benefits longer 12 months • separation charges 9 million us salaried severance program allows involuntarily terminated employees receive ongoing wages benefits longer 12 months • interest accretion 21 million revisions estimates decrease reserve 67 million gme recorded charges interest accretion revisions estimates 552 million separation programs related following initiatives • separation charges germany 151 million postemployment liability adjustments 21 million charges adjustments primarily related early retirement programs along additional minor separations • separation charges belgium 341 million related current previously announced programs • separation charges 45 million related initiatives announced 2006 include separations sweden united kingdom closure portugal assembly facility • interest accretion 9 million revisions estimates decrease reserve 15 million primarily related programs germany belgium general motors corporation subsidiaries notes consolidated financial statements continued gmlaam recorded charges 22 million primarily employee separations gm brasil initiatives announced completed three months ended june 30 2007 resulted separation 600 employees gmap recorded charges 41 million voluntary employee separation program gm holden’s vehicle operations facility charges related voluntary employee separation program gm holden announced three months ended march 31 2007 initiative reduced facility’s workforce 650 employees 2006 activities gmna recorded charges interest accretion revisions estimates 12 billion separation programs related following initiatives • accelerated attrition program agreed delphi uaw three months ended march 31 2006 intended reduce number us hourly employees 34400 hourly employees agreed terms attrition program result recorded charges 21 billion recognize wage benefit cost accepting normal voluntary retirements buyouts preretirement leaves result attrition program jobs bank substantially reduced employees jobs bank retired accepted buyout filled openings created attrition program • postemployment benefit costs 94 million related special attrition actions estimated future wages benefits employees idled facilities • separation charges 18 million us salaried severance program allows voluntarily terminated employees receive ongoing wages benefits longer 12 months • us salaried severance program charges 146 million allows involuntarily terminated employees receive ongoing wages benefits longer 12 months • interest accretion 31 million revisions estimates decrease reserve 12 billion revisions estimate result 1 transfer employees idled plants plant sites replace positions previously held employees accepted retirements buyouts preretirement leaves 2 higher anticipated level participation special attrition program employees idled facilities idled previously accrued jobs bank provisions 3 higher anticipated headcount reductions associated gmna plant idling activities announced 2005 gme recorded charges interest accretion revisions estimates 309 million separation programs related following initiatives • restructuring initiatives germany announced three months ended december 31 2004 targeting total reduction 12000 employees 2005 2007 separation programs early retirements selected outsourcing initiatives separation charges 98 million postemployment liability adjustments 8 million related initiatives announced 2004 • closure azambuja portugal assembly facility transfer production lower cost facility zaragoza spain announced three months ended september 30 2006 portugal facility ceased production december 2006 resulting total separation 1100 employees separation charges 53 million contract cancellation charges 25 million recorded closure • reduction one shift ellesmere port facility united kingdom reduce costs improve competitiveness announced three months ended june 30 2006 shift reduction achieved primarily offering general motors corporation subsidiaries notes consolidated financial statements continued voluntary separation package reduced work force united kingdom 1200 employees end 2006 separation charges 66 million contract cancellation charges 3 million recorded shift reduction • new separation programs belgium sweden announced three months ended december 31 2006 separation charges 28 million recorded separation 300 employees • interest accretion 11 million primarily related current previously announced programs belgium sweden revisions estimates increase reserve 17 million primarily related initiatives germany gmlaam recorded charges 47 million related costs voluntary employee separations gm brasil initiative resulted separations 1500 hourly administrative employees sao jose dos campos sao caetano sul facilities 2006 gmap recorded charges 16 million related voluntary separation program gm holden gmap announced three months ended december 31 2006 program provided voluntary separation 200 employees gm holden engine facility note 22 impairments periodically review carrying value longlived assets held used events circumstances warrant conjunction annual business planning cycle carrying value longlived asset group considered impaired impairment charge recorded amount carrying amount exceeds fair value fair value determined primarily using anticipated cash flows discounted rate commensurate risk involved productspecific assets may become impaired result declines profitability due changes volume pricing costs refer note 21 additional detail restructuring initiatives due current unstable global economy credit markets reasonably possible conditions could deteriorate negatively affect anticipated cash flows extent could required record impairment charges longlived assets fio segment’s portfolio equipment operating leases primarily comprised vehicle leases retail customers lease terms 48 months automotive segment’s portfolio equipment operating leases primarily comprised vehicles leased rental car companies lease terms average 11 months less respect portfolios periodically review carrying value portfolios equipment operating leases impairment events circumstances warrant conjunction quarterly review residual values associated depreciation rates part quarterly review residual values fio segment’s portfolio equipment operating leases determined based current auction proceeds respect residual values automotive segment’s portfolio equipment operating leases due shortterm nature operating leases historically forecast auction proceeds lease termination previously method actual auction results materially different estimated three months ended december 31 2008 forecasted auction proceeds united states differed significantly actual auction proceeds due highly volatile economic conditions particularly decline consumer confidence lack available consumer credit affected residual values automobiles auction significantly due significant uncertainties inherent current economy determined longer reliable basis forecast auction proceeds united states accordingly utilized current auction proceeds determine estimated residual values impairment analysis automotive segment result change estimate recorded incremental impairment 144 million related equipment operating lease included automotive cost sales carrying value considered impaired impairment charge recorded amount carrying value exceeds fair value fair value determined primarily using anticipated cash flows including estimated residual values discounted rate commensurate risk involved general motors corporation subsidiaries notes consolidated financial statements continued impairment charges property net equipment operating leases net recorded automotive cost sales automotive segment financial services insurance expense fio segment goodwill impairment charges recorded expenses impairment charges equity method investments recorded equity income net taxes addition test goodwill impairment annually event occurs circumstances change reasonably possible impairment may exist annual impairment test requires identification reporting units comparison fair value reporting units respective carrying value fair value reporting units determined based valuation techniques using best information available primarily discounted cash flow projections carrying value reporting unit greater fair value reporting unit impairment may exist events circumstances warrant equity investments accounted cost equity method accounting evaluated impairment charge recorded whenever decline value equity investment carrying amount determined temporary determining decline temporary consider factors length time extent fair value investment less carrying amount equity affiliate nearterm longerterm operating financial prospects affiliate intent ability hold investment period time sufficient allow anticipated recovery following table summarizes impairment charges includes related increase 220 million intersegment residual support risk sharing reserves recorded reduction revenue gmna 2008 impairments recorded goodwill impairment charges 456 million gme 154 million gmna 2008 due sharply reduced forecasts automotive sales regions near mediumterm fully described note 2 recording impairment charges remaining goodwill balance sheet december 31 2008 periodically review vehicle platform profitability analyses vehicle platform means identifying potential vehicle platform specific tooling may recoverable vehicle platform identified possible impairment undiscounted cash flows expected generated specific vehicle platform compared carrying value related tooling long undiscounted cash flows exceed carrying value tooling impairment exists cash flow deficiency discount estimated future cash flows determine fair value tooling impairment charge recognized excess carrying value fair value fourth quarter 2008 recorded asset impairment charges 11 billion related productspecific tooling 30 million related restructuring initiatives 2008 following segments 1 gmna recorded longlived asset impairment charges 291 million relating productspecific tooling assets primarily related hummer 120 million related cancelled powertrain programs 119 million related impairments investments nummi cami 2 gme recorded longlived asset impairment charges 497 million relating productspecific tooling assets saab 3 gmap recorded longlived general motors corporation subsidiaries notes consolidated financial statements continued asset impairment charges 39 million related productspecific tooling assets 28 million related restructuring initiatives gm holden 4 gmlaam recorded longlived asset impairment charges 33 million related productspecific assets 2 million related restructuring initiatives arica city facility chile second quarter 2008 residual values sport utility fullsize pickup trucks experienced sudden significant decline result shift customer preference passenger cars crossover vehicles away fullsize pickup trucks sport utility vehicles primarily due volatile oil prices residual values remained flat slightly higher third quarter 2008 due continued instability credit markets resulting reduction availability financing significant contraction consumer spending continued declines vehicle sales result recession united states residual values including passenger cars crossover vehicles declined fourth quarter 2008 primarily result declines residual values recorded impairment charges second quarter 2008 271 million includes increase 166 million intersegment residual support risk sharing reserves fourth quarter 2008 106 million includes increase 55 million intersegment residual support risk sharing reserves related fio equipment operating leases net recorded impairment charges 160 million gmna 222 million gme related equipment operating leases net automotive segment result decline residual values due factors noted 2007 impairments recorded longlived asset impairment charges 259 million 2007 following segments 1 gmna recorded impairment charges 240 million productspecific tooling assets 2 gmap recorded impairment charges 14 million related cessation production vz commodore passenger car derivatives gm holden 3 gmlaam recorded impairment charges 5 million related south africa chile facilities recorded impairment charges 44 million gmna 90 million gme related equipment operating leases net automotive segment 2006 impairments recorded longlived asset impairment charges 685 million 2006 amount 424 million related productspecific assets including 1 303 million gmna 2 60 million gme 3 61 million gmap addition gmna recorded impairment charges 172 million included 102 million related productspecific assets 70 million related writedown various plant assets due decreased profitability production associated planned cessation production doraville georgia assembly facility 2008 additionally gme recorded impairment charge 89 million connection december 2006 closure portugal assembly facility three months ended september 30 2006 gmac recognized goodwill impairment charge 828 million related commercial finance business fair value commercial finance business determined using internally developed discounted cash flow analysis based five year projected net income market driven terminal value multiple gmac whollyowned subsidiary three months ended september 30 2006 entire amount impairment charge included financial services insurance expense recorded impairment charges 31 million gme related equipment operating leases net automotive segment general motors corporation subsidiaries notes consolidated financial statements continued note 23 expenses following table summarizes components expenses note 24 stockholders’ equity preferred stock 6 million shares preferred stock authorized without par value preferred stock ranks senior common stock class stock issued holders preferred stock shall entitled receive cumulative dividends declared board directors quarterly basis shares preferred stock issued outstanding december 31 2008 2007 preference stock 100 million shares preference stock authorized par value 010 preference stock issuable series voting powers designations powers privileges rights qualifications limits restrictions may determined board directors without stockholder approval preference stock ranks junior preferred stock senior common stock holders preference stock shall entitled receive dividends may cumulative declared board directors shares preference stock issued outstanding december 31 2008 2007 common stock 2 billion shares common stock authorized par value 1 23 liquidation rights common stock subject certain adjustments outstanding common stock subdivided stock split otherwise 800937541 610483231 shares issued outstanding respectively december 31 2008 756637541 566059249 shares issued outstanding respectively december 31 2007 additional consideration entering ust loan issued warrant ust 122035597 shares common stock exercisable 357 per share 1999 number shares common stock outstanding december 31 2008 warrant perpetual assigned fair value 164 million december 31 2008 determined fair value warrant issued ust 164 million determining value utilized observable market value tradable call options common stock difference terms warrant observable call options common stock determined insignificant effect value warrant key inputs value call options common stock price expected volatility common stock returns increase 10 common stock price would increase fair value warrant 28 million decrease 10 common stock price would decrease fair value warrant 26 million increase decrease volatility 10 would cause increase decrease fair value warrant 16 million warrant meet accounting requirements classified equity instrument recorded liabilities meets definition derivative recorded fair value prospectively changes fair value recognized earnings entitled repurchase warrant shares issued exercise warrant fair value repaid amounts outstanding ust loan general motors corporation subsidiaries notes consolidated financial statements continued treasury stock held 190454310 190578292 shares treasury stock net reissuances december 31 2008 2007 respectively account treasury stock cost amount excess par value charged capital surplus principally additional paidin capital accumulated comprehensive loss following table summarizes components accumulated comprehensive loss net taxes comprehensive income loss following table summarizes components comprehensive income loss general motors corporation subsidiaries notes consolidated financial statements continued note 25 loss per share basic diluted loss per share computed dividing loss continuing operations weightedaverage number shares outstanding period following table summarizes amounts used basic diluted loss per share computations due net losses continuing operations periods presented assumed exercise stock options warrants antidilutive effect therefore excluded computation diluted loss per share number options warrants included computation diluted loss per share 101 million 104 million 106 million 2008 2007 2006 respectively shares potentially issuable satisfy inthemoney amount convertible debentures included computation diluted loss per share 2008 2007 2006 conversion options various series convertible debentures inthemoney note 26 stock incentive plans stock incentive plans consist 2007 gm longterm incentive plan gmltip 2002 gm stock incentive plan gmsip 2002 gmltip 1998 gm salaried stock option plan gmssop 2007 gm cashbased restricted stock unit plan gmcrsu 2006 gmcrsu collectively stock incentive plans gmltip gmsip gmcrsu plans administered executive compensation committee board directors gmssop administered vice president global human resources january 2006 adopted sfas 123r “sharebased payment” accordingly awards 2008 2007 2006 accounted fair value compensation expense benefit plans 65 million 136 million 170 million 2008 2007 2006 respectively total income tax expense benefit recognized sharebased compensation arrangements 18 million 43 million 53 million 2008 2007 2006 respectively november 2006 sold 51 controlling interest gmac employees participated stock incentive plans changed status employee nonemployee based change status certain outstanding sharebased payment awards forfeited original terms modified allow continued vesting resulted cancellation original awards issuance new awards nonemployees remainder awards forfeited original terms thus modification outstanding awards gm awards require future service gmac accounted awards nonemployees remaining service period effect compensation cost insignificant august 2007 completed sale commercial military operations allison business allison employees participated stock incentive plans considered terminated employees date sale based change employment status certain outstanding nonvested sharebased payment awards forfeited remaining outstanding sharebased payment awards prorated previous employment services provided original terms award remain exercisable earlier three years date termination expiration option general motors corporation subsidiaries notes consolidated financial statements continued 2008 extended voluntary early retirement offers salaried window program certain us salaried employees including certain us executives part plan reduce salary related expenses terms salaried window program option awards granted executives modified vest immediately remain exercisable expiration date grant approximately 200 us executives accepted salaried window program modifications stock option awards accounted cancellation original award issuance new award effect award modification compensation expense insignificant stock options gmsip 274 million shares common stock eligible grants june 2002 may 2007 stock option grants awarded since 1997 generally exercisable onethird one year another onethird two years fully exercisable three years date grant option prices 100 fair market value date grant options generally expire 10 years date grant subject earlier termination certain conditions policy issue treasury shares upon exercise employee stock options 2007 gmsip replaced 2007 gmltip 2007 gmltip 160 million shares common stock may granted june 2007 may 2012 december 31 2008 125 million shares available grant stock options granted plan generally exercisable onethird one year another onethird two years fully exercisable three years date grant option prices 100 fair market value date grant options generally expire 10 years date grant subject earlier termination certain conditions policy issue treasury shares upon exercise employee stock options gmssop commenced january 1998 shares available grants december 2006 number shares could awarded year determined management stock options awarded plan exercisable two years date grant option grants made plan since 2004 option prices 100 fair market value date grant options generally expire ten years two days date grant subject earlier termination certain conditions fair value option grant except performancecontingent option awards described estimated date grant using blackscholes optionpricing model weightedaverage assumptions noted following table expected volatility based implied historical volatilities common stock expected term options represents period time options expected outstanding used historical data estimate option exercise employee termination within valuation model option grants made prior 2008 used modified prospective application method dividend yield based stock price date grant interest rate expected term option based us treasury yield curve effect time grant following table summarizes assumptions used estimate date grant fair value awards primary grants executives march 2008 gmltip march 2007 february 2006 made gmsip 33 million 28 million 27 million shares respectively date grant fair value 729 875 706 respectively general motors corporation subsidiaries notes consolidated financial statements continued following table summarizes assumptions used estimate date grant fair value awards executives following table summarizes changes status outstanding options including performancecontingent stock options described weightedaverage grant date fair value 729 876 719 2007 gmltip options granted 2008 gmsip options granted 2007 2006 respectively gmssop options granted exercised 2008 2007 2006 total intrinsic value options exercised gmltip 0 2008 2006 3 million 2007 tax benefits realized exercise sharebased payment arrangements 2008 2007 2006 performancecontingent stock options march 2008 granted performancecontingent option awards 2007 gmltip awards minimum one year service vesting period followed four year performance period options vest common stock trades general motors corporation subsidiaries notes consolidated financial statements continued 40 10 days within 30 day trading period vesting conditions met option expires seven years date grant however performance condition met option expire five years date grant option prices 100 fair market value date grant recognize fair value options weightedaverage derived service period 18 years interest rates used determine grant date fair value options based term structure us treasury yield curve grant date volatility used blend implied historical volatilities common stock expected term derived using montecarlo simulation model used determine fair value dividend yield based upon historical dividend yields following assumptions used estimate grant date fair value awards granted 700000 performancecontingent option awards march 2008 weightedaverage exercise price 2313 awards exercised forfeited expired 2008 december 31 2008 700000 options outstanding intrinsic value weightedaverage grant date fair value 700 options granted 2008 remaining weightedaverage contractual term december 31 2008 62 years summary nonvested awards following table summarizes status nonvested options december 31 2008 total unrecognized compensation expense related nonvested option awards granted stock incentive plans 5 million expense expected recognized weightedaverage period 08 years cash received option exercises insignificant 2008 2007 2006 stock performance plans 2007 gmltip formerly 2002 gmltip consists awards granted participants based minimum percentile ranking total stockholder return compared companies sp 500 performance period target number shares common stock may granted year determined management 2008 2007 grants four separate performance periods consisting three oneyear performance periods one threeyear performance period final award payouts may vary based total shareholder return described previously 2006 grant made 2002 gmltip single threeyear performance measurement period final award total stockholder return period time meet minimum percentile ranking achieve payout general motors corporation subsidiaries notes consolidated financial statements continued following table summarizes outstanding stock performance plan shares december 31 2008 excludes shares met performance condition required settle awards cash result cashsettled awards recorded liability date final award payout fair value cashsettled award remeasured end reporting period liability expense adjusted based change fair value shares indicated preceding table targeted number shares would used final award calculation targeted performance condition achieved final payout subject approval executive compensation committee board directors fair value performance plan shares december 31 2008 267 133 0 awards granted 2008 2007 2006 respectively fair value cashsettled award gmltip plans estimated date grant subsequent reporting period remeasured using montecarlo simulation model uses multiple input variables noted following table expected volatility based upon combination implied volatility tradable options historical volatility including historical volatilities stocks sp 500 expected term target awards represents remaining time performance period riskfree rate periods contractual life performance shares based us treasury yield curve effect time valuation since payout depends total stockholder return performance ranked total stockholder return performance sp 500 companies valuation also depends performance stocks sp 500 date grant exercise date well estimates correlations among future performance following table summarizes assumptions used december 31 2008 value open award years primary grants executives march 2008 march 2007 february 2006 made gmltip plans 13 million 17 million 24 million shares respectively grant date fair value 1843 3370 2481 respectively assumptions used estimate fair value december 31 2008 2007 2006 noted table weightedaverage remaining contractual term 13 years target awards outstanding december 31 2008 threshold performance required payment 20062008 award achieved cash payments made award 2008 20072009 20082010 performance periods remain open december 31 2008 cashbased restricted stock units 2007 2006 gmcrsu plans provide cash equal value underlying restricted share units certain global executives predetermined vesting dates awards plan vest paid onethird increments anniversary date general motors corporation subsidiaries notes consolidated financial statements continued award compensation expense recognized straightline basis requisite service period separately vesting portion award since awards settled cash cashsettled awards recorded liability date payment fair value cashsettled award remeasured end reporting period liability related expense adjusted based new fair value fair value gmcrsu based common stock price date grant subsequent reporting period date settlement 63 million 52 million 43 million gmcrsus granted weightedaverage date grant fair value 2301 2939 2104 per share 2008 2007 2006 respectively fair value december 31 2008 320 per share 99 million gmcrsus outstanding weightedaverage remaining contractual term 17 years gmcrsus outstanding december 31 2008 total payments made gmcrsus vested 2008 60 million note 27 transactions gmac entered various operating financing arrangements gmac services agreements following describes significant global transactions gmac related financial statement effects included consolidated financial statements marketing incentives operating lease residuals marketing incentive may sponsor interest rate support residual support risk sharing capitalized cost reduction programs way lower customers’ monthly lease retail contractual payments addition may sponsor lease pullahead programs encourage customers terminate leases early conjunction acquisition new gm vehicle interest rate support program paid amount gmac time lease retail contract origination adjust interest rate retail contract implicit lease gmac’s standard interest rate marketing incentives referred rate support subvention amount paid contract origination represents present value difference customer’s contractual rate gmac’s standard rate given program residual support program customer’s contract residual value adjusted gmac’s standard residual value lease contracts originated 2008 reimburse gmac extent sales proceeds less customer’s contract residual value limited gmac’s standard residual value relates us lease originations us balloon retail contract originations occurring april 30 2006 gmac retained gmac transaction agreed begin payment present value expected residual support owed gmac time contract origination opposed contract termination related used vehicle sold actual residual support amount owed gmac calculated contracts terminate cases actual amount differs expected amount paid contract origination may owe gmac may owe us difference depending sales proceeds lower higher respectively estimated contract origination participated risksharing arrangement gmac amended november 30 2006 whereby share equally residual losses extent remarketing proceeds gmac’s standard residual value limited floor beginning first quarter 2009 ending fourth quarter 2014 also pay gmac quarterly fee accrued 108 million fourth quarter 2008 related arrangement result revisions arrangements gmac event publicly announce discontinue phaseout sell considering strategic options related gm vehicle brand residual value related vehicles may change announcement us canada results estimated decrease residual value related vehicles reimburse gmac estimated decrease certain vehicles certain period time announcement results increase residual value related vehicles gmac pay us increase sale proceeds received auction general motors corporation subsidiaries notes consolidated financial statements continued capitalized cost reduction program pay amount gmac time lease retail contract origination reduce principal amount implicit lease retail contract standard manufacturers suggested retail price value lease pullahead program customer encouraged terminate lease early buy lease new gm vehicle part program gmac waives customer’s remaining payment obligation current lease compensate gmac foregone revenue waived payments since programs generally accelerate resale vehicle proceeds typically higher vehicle sold contract maturity reimbursement gmac foregone payments reduced amount benefit make anticipated payments gmac month based estimated number customers expected participate leasepull ahead program estimates adjusted actual vehicles could pulledahead terminated vehicles resold settle difference original estimates actual amounts owed gmac accordance revenue recognition accounting policy marketing incentives lease pullahead programs risk sharing arrangement recorded reductions automotive sales time vehicle sold dealer based estimated gmac lease retail contract penetration terms conditions interest rate support residual support risk sharing capitalized cost reduction lease pullahead programs included gmac services agreements december 2008 gmac agreed among things modify certain terms conditions gmac services agreements pursuant preliminary term sheet gmac term sheet primary objective gmac services agreements continues supporting distribution marketing products gmac agreed work good faith execute definitive documentation respect amendment gmac services agreements march 29 2009 see exclusivity arrangement section discussion following table summarizes recorded liabilities maximum exposures related residual support risk sharing programs marketing incentives operating lease residuals exclusivity arrangement part gmac transaction november 30 2006 granted gmac exclusivity us canadian international gmsponsored consumer wholesale marketing incentives products specified markets around world exception saturn branded products return exclusivity gmac pay us annual exclusivity fee 105 million 75 million us retail business 15 million canadian retail business 10 million retail business international operations 5 million dealer business result gmac term sheet gmac agreed modify certain terms related exclusivity arrangements 1 twoyear period offer retail financing incentive programs third party financing source certain specified circumstances cases subject limitation pricing offered third party meets certain restrictions general motors corporation subsidiaries notes consolidated financial statements continued twoyear period offer incentive programs graduated basis third parties nonexclusive sidebyside basis gmac provided pricing third parties meets certain requirements 2 gmac obligation provide operating lease financing products 3 gmac targets could assessed penalties december 24 2013 right offer retail financing incentive programs third party financing source including gmac without restrictions limitations recognized exclusivity fee revenue 105 million 105 million 9 million 2008 2007 2006 respectively beginning 2009 gmac term sheet agreed prorate exclusivity fee us canada certain circumstances offer incentives third party financing source international exclusivity fee arrangement remains unchanged dealer exclusivity fee terminated participation agreement june 2008 along cerberus fund entered participation agreement gmac participation agreement provided would fund 368 million loans made gmac rescap 35 billion rescap facility cerberus fund would fund 382 million rescap facility expire may 1 2010 funding pursuant participation agreement done prorata basis us cerberus fund december 2008 funded maximum obligation 368 million recorded interest income 21 million 2008 related participation agreement december 2008 fim holdings assignee cerberus fund entered exchange agreement gmac pursuant exchange agreement fim holdings exchanged respective amounts funded participation agreement 79368 class b common membership interests 82608 class common membership interest respectively carrying value amount funded participation agreement approximated fair value recognize gain loss exchange unsecured exposure contractual limit agreement gmac us limited certain unsecured obligations us gmac arising gmac services agreements 15 billion accordance gmac term sheet gmac agreed increase unsecured obligation limit 15 billion united states 21 billion globally addition gmac’s maximum potential unsecured exposure us cannot exceed 41 billion globally gmac also agreed reduce global unsecured obligation limit 21 billion 15 billion next 24 months vehicle repurchase obligations november 2008 gmac agreed expand repurchase obligations gmac financed inventory certain dealers previously obligated pursuant dealer agreements repurchase certain gmac financed inventory limited current model year vehicles prior model year vehicles less 120 days dealer inventory event termination related dealer’s dealer sales service agreement us current agreement gmac requires us repurchase gmac financed inventory invoiced dealers september 1 2007 limited exclusions event qualifying voluntary involuntary termination dealer’s dealer sales service agreement us repurchase obligation excludes vehicles damaged excessive mileage altered repurchase obligation ends august 31 2009 vehicles invoiced august 31 2008 august 31 2010 vehicles invoiced august 31 2009 maximum potential amount future payments could required make guarantee would based repurchase value total eligible vehicles financed gmac dealer stock estimated 198 billion december 31 2008 general motors corporation subsidiaries notes consolidated financial statements continued gm required repurchase vehicles arrangement total exposure would reduced extent gm able resell vehicle another dealer fair value guarantee considers likelihood dealers terminating estimated loss exposure ultimate disposition vehicles recorded reduction revenue 8 million december 31 2008 equipment operating leases transferred us gmac november 2006 gmac transferred certain us lease assets us along related debt assets gmac retained investment note balance 35 million december 31 2008 2007 respectively secured lease assets transferred us gmac continues service portfolio leased assets related debt behalf receives servicing fee gmac obligated servicer repurchase lease asset breach covenants securitization agreements addition number transactions securitizing lease assets trusts issued one series floating rate debt obligations entered derivative transactions eliminate market risk associated funding fixed payment lease assets floating interest rate debt facilitate securitization transactions gmac entered secondary derivative transactions primary derivative counterparties essentially offsetting primary derivatives part transfer assumed rights obligations primary derivative gmac retained secondary leaving companies exposed market value movements respective derivatives subsequently entered derivative transactions gmac intended offset exposure party component primary secondary derivatives lease impairment charges second quarter 2008 residual values sport utility fullsize pickup trucks experienced sudden significant decline result shift customer preference passenger cars crossover vehicles away fullsize pickup trucks sport utility vehicles primarily due volatile oil prices residual values remained flat slightly higher third quarter 2008 due continued instability credit markets resulting reduction availability financing significant contraction consumer spending continued declines vehicle sales result recession united states residual values including passenger cars crossover vehicles declined fourth quarter 2008 primarily result declines residual values recorded impairment charges 377 million including increase intersegment residual support risk sharing reserves 2008 fio equipment operating leases net similarly gmac recorded impairment charges 12 billion operating lease assets 2008 determination vehicle residual values significant assumption impairment analyses determination amounts accrue residual support risk sharing agreements discussed reasonably possible vehicle residual values could decline future gmac may required record impairment charges may significant addition reasonably possible declines residual values may result increases required payments residual support risk sharing agreements discussed royalty arrangement certain insurance products entered 10year intellectual property license agreements gmac giving gmac right use gm name certain insurance products exchange gmac pay royalty fee 325 revenue net cancellations related products minimum annual guarantee 15 million us recognized royalty income 16 million 18 million 1 million 2008 2007 2006 respectively general motors corporation subsidiaries notes consolidated financial statements continued balance sheet following table summarizes consolidated balance sheet effects transactions gmac represents wholesale settlements due gmac certificate deposit purchased gmac title discussed note 18 amounts owed gmac respect equipment operating leases net transferred us receivables exclusivity fees royalties b primarily represents distributions due gmac preferred membership interests c primarily represents amounts billed us payable december 31 related incentive programs represents wholesale financing sales receivable transactions shortterm portion term loans provided certain dealerships equity interest addition includes borrowing arrangements gme locations arrangements related gmac’s funding companyowned vehicles rental car vehicles awaiting sale auction funding sale vehicles retain title vehicles consigned gmac dealers primarily united kingdom financing remains outstanding title transferred dealers amount also includes shortterm portion note related equipment operating leases net e primarily represents accruals marketing incentives vehicles sold anticipated sold customers dealers financed gmac us includes estimated amount residual support accrued residual support risk sharing programs rate support interest rate support programs operating lease finance receivable capitalized cost reduction incentives paid gmac reduce capitalized cost automotive lease contracts retail automotive contracts amounts owed lease pullahead programs addition includes interest accrued transactions f primarily represents longterm portion term loans gmac certain dealerships consolidated us note payable respect equipment operating leases net transferred us mentioned general motors corporation subsidiaries notes consolidated financial statements continued statement operations following table summarizes consolidated income statement effects transactions gmac years ended december 31 2008 2007 month december 2006 primarily represents reduction net sales revenue marketing incentives vehicles sold anticipated sold customers dealers financed gmac includes estimated amount residual support accrued residual support risk sharing programs rate support interest rate support programs operating lease finance receivable capitalized cost reduction incentives paid gmac reduce capitalized cost automotive lease contracts retail automotive contracts costs lease pullahead programs amount offset net sales vehicles sold gmac employee governmental lease programs third party resale purposes b primarily represents cost sales sale vehicles gmac employee governmental lease programs third party resale purposes also includes miscellaneous expenses services performed us gmac c represents income preferred membership interests gmac interest earned amounts outstanding participation agreement exclusivity royalty fee income reimbursements gmac certain services provided included amount rental income related gmac’s primary executive administrative offices located renaissance center detroit michigan lease agreement expires november 30 2016 represents interest incurred term loans notes payable wholesale settlements e represents servicing fees paid gmac automotive leases retained f represents gains losses recognized connection derivative transaction entered gmac counterparty general motors corporation subsidiaries notes consolidated financial statements continued note 28 supplementary quarterly financial information unaudited net sales revenue three months ended march 31 2008 three month period 2007 reclassified conform current period presentation results three months ended december 31 2008 included • impairment charges 51 billion related investment gmac common membership interests proportionate share gmac’s net income 37 billion included 56 billion gain related gmac bond exchange • charges 11 billion related establishing valuation allowances net deferred tax assets various tax jurisdictions • impairment charges 25 billion related longlived assets automotive equipment operating leases net fio equipment operating leases net goodwill refer note 22 • expenses 662 million related estimated obligations amended delphigm settlement agreements benefit guarantee agreements general motors corporation subsidiaries notes consolidated financial statements continued • charges 604 million related capacity actions us canada results three months ended september 30 2008 included • impairment charges 251 million related investment gmac preferred membership interests • expenses 652 million related estimated obligations amended delphigm settlement agreements • net curtailment gain 49 billion related accelerated recognition unamortized net prior service credit due settlement agreement becoming effective • charges 17 billion related settlement loss associated elimination healthcare coverage us salaried retirees age 65 • charges 591 million related capacity actions us canada results three months ended june 30 2008 included • impairment charges 13 billion related investment gmac common preferred membership interests • expenses 28 billion related estimated obligations delphigm settlement agreements • curtailment charges 33 billion related 2008 special attrition programs • charges 11 billion related capacity actions us canada • immaterial correction previous accounting derivatives gm daewoo recognizing automotive sales losses 407 million inappropriately deferred accumulated comprehensive loss amount 250 million recognized earnings three months ended march 31 2008 remainder recognized prior periods predominantly 2007 results three months ended march 31 2008 included • impairment charges 15 billion related investment gmac common preferred membership interests • charges 394 million related deferred tax asset valuation allowances spain united kingdom results three months ended december 31 2007 included • expenses 622 million related amendment delphigm settlement agreements support delphi’s disposition businesses retiree healthcare expenses • expenses 552 million related pension benefit increases pursuant 2007 national agreement • income tax expense sale allison net purchase price adjustments amount 805 million reallocated discontinued operations continuing operations comprehensive income results three months ended september 30 2007 included • charges 390 billion related establishing valuation allowances net deferred tax assets us canada germany general motors corporation subsidiaries notes consolidated financial statements continued note 29 segment reporting operate two businesses consisting automotive operations also refer gm automotive gma includes four automotive reportable segments consisting gmna gme gmlaam gmap fio manufacture cars trucks 34 countries following brands buick cadillac chevrolet gmc gm daewoo holden hummer opel pontiac saab saturn vauxhall wuling substantially vehicles marketed retail dealers north america distributors dealers outside north america substantial majority independently owned 2008 2007 month december 2006 fio business consists 49 share gmac’s operating results account equity method financing comprised primarily two special purpose entities holding automotive leases previously owned gmac affiliates retained elimination intersegment transactions gma corporate eleven months ended november 30 2006 fio business consisted consolidated operating results gmac’s lines business follows automotive finance operations mortgage operations insurance included commercial finance business gmac’s equity investment capmark financial group also included fio equity earnings financing entities consolidated gmac elimination intersegment transactions gma either gmac corporate includes elimination intersegment transactions corporate automotive segments certain nonsegment specific revenue expenditures including costs related postretirement benefits delphi retirees certain corporate activities amounts presented automotive sales interest income interest expense tables follow principally relate intersegment transactions eliminated corporate intersegment balances transactions eliminated consolidation general motors corporation subsidiaries notes consolidated financial statements continued measure segment profitability based income loss continuing operations income taxes equity income net tax minority interest net tax general motors corporation subsidiaries notes consolidated financial statements continued general motors corporation subsidiaries notes consolidated financial statements continued general motors corporation subsidiaries notes consolidated financial statements continued attribute revenue geographic areas based country product sold except revenue certain joint ventures case revenue attributed based geographic location joint venture following table summarizes information concerning principal geographic areas following table summarizes aggregation principal geographic information us nonus general motors corporation subsidiaries notes consolidated financial statements continued note 30 supplemental information consolidated statements cash flows following table summarizes sources uses cash provided changes operating assets liabilities note 31 subsequent events february 3 2009 announced 2009 special attrition program us hourly employees 2009 special attrition program offers cash incentive 20000 coupled car voucher 25000 individuals elect retire early voluntarily terminate employment consistent terms ust loan agreement incentives paid employees electing participate program paid operating funds point unable estimate number employees elect participate 2009 special attrition program consequently cannot currently evaluate effects announcement us hourly employee benefit plans february 10 2009 announced intention involuntarily reduce global salaried workforce 10000 employees additionally announced temporary salary reductions us salaried employees effective may 1 2009 ranging 2 10 pay dependent upon salary grade level currently evaluating effects announcements us international employee benefit plans february 17 2009 uaw tentatively agreed addendum subject union ratification 2007 gmuaw national agreement suspends certain compensation employee benefits available uaw employees pursuant 2007 gmuaw national agreement including payments jobs bank still assessing potential accounting implications result addendum conducted strategic review global saab business february 2009 determined would sell otherwise dispose given urgency stemming sizeable outflows associated saab operations saab automobile ab filed reorganization protection laws sweden february 20 2009 anticipate longer consolidate saab beginning three months ending march 31 2009 anticipate recording significant loss could exceed 10 billion related reorganization general motors corporation subsidiaries item 9 item 8 consolidated statements income years ended december 31 2000 1999 1998 dollars millions except per share amounts general motors corporation subsidiaries total net sales revenues notes 1 2 22 184632 176558 155445 cost sales expenses notes 2 3 22 145664 140708 127785 selling general administrative expenses 22252 19053 16087 interest expense note 13 9552 7750 6629 total costs expenses 177468 167511 150501 income continuing operations income taxes minority interests 7164 9047 4944 income tax expense note 8 2393 3118 1636 equity incomeloss minority interests 319 353 259 income continuing operations 4452 5576 3049 income loss discontinued operations note 1 426 93 net income 4452 6002 2956 dividends preference stocks note 17 110 80 63 earnings attributable common stocks 4342 5922 2893 basic earnings losses per share attributable common stocks note 18 123 par value continuing operations 680 870 440 discontinued operations note 1 066 014 earnings per share attributable 123 par value 680 936 426 earnings per share attributable class h 056 026 023 earnings losses per share attributable common stocks assuming dilution note 18 123 par value continuing operations 668 853 432 discontinued operations note 1 065 014 earnings per share attributable 123 par value 668 918 418 earnings per share attributable class h 055 026 023 reference made notes consolidated financial statements ii15 consolidated statements income concluded years ended december 31 2000 1999 1998 dollars millions automotive communications services operations total net sales revenues notes 1 2 22 160627 156107 137161 cost sales expenses notes 2 3 22 138303 134111 121491 selling general administrative expenses 16246 14324 11918 total costs expenses 154549 148435 133409 interest expense note 13 815 828 786 net expense transactions financing insurance operations note 1 682 308 82 income continuing operations income taxes minority interests 4581 6536 2884 income tax expense note 8 1443 2167 1018 equity incomeloss minority interests 299 327 239 income continuing operations 2839 4042 1627 income loss discontinued operations note 1 426 93 net income automotive communications services operations 2839 4468 1534 years ended december 31 2000 1999 1998 dollars millions financing insurance operations total revenues 24005 20451 18284 interest expense note 13 8737 6922 5843 depreciation amortization expense note 9 5982 5445 4920 operating expenses 5805 4595 4067 provisions financing insurance losses notes 1 22 1580 1286 1476 total costs expenses 22104 18248 16306 net income transactions automotive communications services operations note 1 682 308 82 income taxes minority interests 2583 2511 2060 income tax expense note 8 950 951 618 equity incomeloss minority interests 20 26 20 net income financing insurance operations 1613 1534 1422 supplemental consolidating information explained note 1 nature operations reference made notes consolidated financial statements ii16 consolidated balance sheets december 31 general motors corporation subsidiaries 2000 1999 assets dollars millions automotive communications services operations cash equivalents note 1 9119 9730 marketable securities note 4 1161 1698 total cash marketable securities 10280 11428 accounts notes receivable less allowances 5835 5093 inventories less allowances note 6 10945 10638 equipment operating leases less accumulated depreciation note 7 5699 5744 deferred income taxes current assets note 8 8388 9006 total current assets 41147 41909 equity net assets nonconsolidated associates 3497 1711 property net note 9 33977 32779 intangible assets net notes 1 10 7622 8527 deferred income taxes note 8 14870 15277 assets note 11 32243 25358 total automotive communications services operations assets 133356 125561 financing insurance operations cash equivalents note 1 1165 712 investments securities note 4 9595 9110 finance receivables net note 5 92415 80627 investment leases receivables note 7 36752 36407 assets note 11 27846 21312 net receivable automotive communications services operations note 1 1971 1001 total financing insurance operations assets 169744 149169 total assets 303100 274730 liabilities stockholders equity automotive communications services operations accounts payable principally trade 18309 17254 loans payable note 13 2208 1991 accrued expenses note 12 33252 32854 net payable financing insurance operations note 1 1971 1001 total current liabilities 55740 53100 longterm debt note 13 7410 7415 postretirement benefits pensions note 14 34306 34166 pensions note 14 3480 3339 liabilities deferred income taxes note 12 15768 17426 total automotive communications services operations liabilities 116704 115446 financing insurance operations accounts payable 7416 4262 debt note 13 135037 122282 liabilities deferred income taxes note 12 12922 11282 total financing insurance operations liabilities 155375 137826 minority interests 707 596 general motors obligated mandatorily redeemable preferred securities subsidiary trusts holding solely junior subordinated debentures general motors note 16 series 79 series g 139 stockholders equity note 17 123 par value common stock issued 548181757 619412233 shares 914 1033 class h common stock issued 875286559 411345561 shares 88 14 capital surplus principally additional paidin capital 21020 13794 retained earnings 10119 6961 subtotal 32141 21802 accumulated foreign currency translation adjustments 2502 2033 net unrealized gains securities 581 996 minimum pension liability adjustment 45 121 accumulated comprehensive loss 1966 1158 total stockholders equity 30175 20644 total liabilities stockholders equity 303100 274730 reference made notes consolidated financial statements ii17 reference made notes consolidated financial statements ii18 ii19 general motors corporation subsidiaries notes consolidated financial statements note 1 significant accounting policies principles consolidation consolidated financial statements include accounts general motors corporation hereinafter referred corporation domestic foreign subsidiaries 50 owned principally general motors acceptance corporation subsidiaries gmac hughes electronics corporation subsidiaries hughes collectively referred general motors gm general motors share earnings losses associates least 20 voting securities owned included consolidated operating results using equity method accounting except investments gm able exercise significant influence operating financial decisions investee case cost method accounting used financial data related delphi automotive systems corporation delphi presented discontinued operations periods ended december 31 1999 1998 gm encourages reference gmac annual report form 10k period ended december 31 2000 filed separately securities exchange commission hughes consolidated financial statements included exhibit 99 gm annual report form 10k period ended december 31 2000 related hughes annual report form 10k filed separately securities exchange commission certain amounts 1999 1998 reclassified conform 2000 classifications nature operations gm presents separate supplemental consolidating statements income financial information following businesses 1 automotive communications services operations consists design manufacturing marketing cars trucks locomotives heavyduty transmissions related parts accessories well operations hughes 2 financing insurance operations consists primarily gmac provides broad range financial services including consumer vehicle financing fullservice leasing fleet leasing dealer financing car truck extended service contracts residential commercial mortgage services vehicle homeowners insurance assetbased lending transactions businesses eliminated corporations consolidated statements income transactions consist principally borrowings financial services provided financing insurance operations automotive communications services operations use estimates preparation financial statements preparation financial statements conformity accounting principles generally accepted us requires management make estimates assumptions affect amounts reported therein due inherent uncertainty involved making estimates actual results reported future periods may differ estimates revenue recognition sales generally recorded products shipped title risks rewards ownership passed services rendered independent dealers third parties provisions dealer sales incentives allowances rebates made time vehicle sales incentives related vehicles previously sold recognized reductions sales announced financing revenue recorded terms receivables using interest method income operating lease assets recognized straightline basis scheduled lease term insurance premiums earned basis related coverage provided terms policies commission premium taxes costs incurred acquiring new business deferred amortized terms related policies basis premiums earned liability losses loss expenses includes provision unreported losses based past experience net estimated salvage subrogation recoverable productrelated expenses advertising sales promotion research development productrelated costs charged expense incurred provisions estimated expenses related product warranty made time products sold advertising expense 43 billion 2000 45 billion 1999 37 billion 1998 research development expense 66 billion 2000 68 billion 1999 63 billion 1998 ii20 general motors corporation subsidiaries notes consolidated financial statements continued note 1 significant accounting policies continued depreciation amortization depreciation real estate plants equipment provided based estimated useful lives property groups generally using accelerated methods accumulate depreciation approximately twothirds depreciable cost first half estimated useful lives equipment operating leases depreciated straightline basis term lease agreement difference net book value proceeds sale salvage items disposed accounted charge credit provision depreciation expenditures special tools amortized estimated useful lives primarily using units production method replacement special tools reasons changes products charged directly cost sales goodwill amortized straightline basis periods ranging 20 40 years internaluse software january 1 1999 gm adopted statement position 981 accounting costs computer software developed obtained internal use prospective basis revised accounting software development costs based accounting standard certain internaluse software costs historically expensed capitalized specific criteria met costs amortized straightline basis threeyear period adoption statement material impact corporations financial statements valuation longlived assets gm periodically evaluates carrying value longlived assets held used longlived assets disposed including goodwill intangible assets events circumstances warrant review carrying value longlived asset considered impaired loss recognized based amount carrying value exceeds fair market value longlived asset assets held used amount carrying value exceeds fair market value less cost dispose assets disposed fair market value determined primarily using anticipated cash flows discounted rate commensurate risk involved foreign currency translation foreign currency exchange transaction translation losses aftertax basis included consolidated net income 2000 1999 1998 pursuant statement financial accounting standards sfas 52 foreign currency translation amounted 100 million 162 million 298 million respectively stockbased compensation permitted sfas 123 accounting stockbased compensation gm applies recognition measurement principles accounting principles board opinion 25 stock options stockbased employee compensation awards cash equivalents cash equivalents defined shortterm highly liquid investments original maturities 90 days less statement cash flows supplementary information years ended december 31 2000 1999 1998 dollars millions automotive communications services operations changes operating assets liabilities follows accounts receivable 625 659 80 prepaid expenses deferred charges 66 623 217 inventories 297 66 494 accounts payable 1254 5606 1249 deferred taxes income taxes payable 629 160 2315 accrued expenses liabilities 955 3425 1513 total 724 7523 90 cash paid interest income taxes follows interest 968 526 435 income taxes 2310 2166 1132 ii21 general motors corporation subsidiaries notes consolidated financial statements continued note 1 significant accounting policies continued statement cash flows supplementary information concluded 2000 automotive communications services operations made investments companies net cash acquired approximately 43 billion amount consists primarily gms purchase 20 equity interest fuji heavy industries ltd fuji approximately 13 billion gms acquisition 20 interest fiat auto holdings bv fiat auto 24 billion addition fiat spa purchased approximately 32 million shares gm 123 par value common stock 24 billion included proceeds issuing common preference stocks years ended december 31 financing insurance operations 2000 1999 1998 dollars millions changes operating assets liabilities follows receivables 726 269 206 assets 29 83 36 accounts payable 3155 114 858 deferred taxes liabilities 105 215 440 total 2505 23 1468 cash paid interest income taxes follows interest 8511 6618 5695 income taxes 475 214 138 derivative instruments gm party variety foreign exchange interest rate commodity forward contracts options entered connection management exposure fluctuations foreign exchange rates interest rates certain commodity prices financial exposures managed accordance corporate policies procedures foreign exchange forward option contracts accounted hedges extent designated effective hedges firm foreign currency commitments additionally certain foreign exchange option contracts receive hedge accounting treatment extent contracts hedge certain anticipated foreign currency transactions gains losses contracts deferred recognized related transactions gains losses interest rate swaps options designated effective hedges underlying debt obligations used adjust interest expense recognized lives underlying debt agreements gains losses terminated hedge contracts deferred amortized remaining period original swap remaining term underlying exposure whichever shorter open interest rate contracts reviewed regularly ensure remain effective hedges interest rate exposure gm also enters commodity forward option contracts since gm discretion settle transactions either cash taking physical delivery contracts considered financial instruments accounting purposes commodity forward contracts options accounted hedges extent designated effective hedges firm anticipated commodity purchase contracts gains losses contracts deferred recognized related transactions derivative instruments qualify hedge accounting treatment marked market related gains losses included net income new accounting standards june 1998 financial accounting standards board fasb issued sfas 133 accounting derivative instruments hedging activities june 2000 fasb issued sfas 138 amended certain provisions sfas 133 gm adopted sfas 133 amended january 1 2001 gm record onetime aftertax charge income initial adoption sfas 133 totaling 6 million well aftertax unrealized loss 77 million comprehensive income january 1 2001 outcome pending issues fasb derivatives implementation group could impact amount cumulative transition adjustment presented herein september 2000 fasb issued sfas 140 accounting transfers servicing financial assets extinguishments liabilities replacement fasb statement 125 statement effective transfers servicing financial assets extinguishments liabilities occurring march 31 2001 effective recognition reclassification collateral disclosures relating securitization transactions collateral fiscal years ending december 15 2000 management expect statement material impact gms results operations financial position ii22 general motors corporation subsidiaries notes consolidated financial statements continued note 1 significant accounting policies concluded discontinued operations february 5 1999 delphi completed initial public offering ipo 100 million shares common stock represented 177 outstanding common shares april 12 1999 gm board directors gm board approved complete separation delphi gm means spinoff taxfree gm stockholders us federal income tax purposes may 28 1999 gm distributed holders 123 par value common stock 801 outstanding shares delphi resulted 069893 shares delphi common stock distributed share gm 123 par value common stock outstanding record date may 25 1999 addition gm contributed remaining 22 delphi shares around 124 million shares voluntary employee beneficiary association veba trust established gm fund benefits hourly retirees total complete separation delphi year ended december 31 1999 resulted reduction stockholders equity approximately 33 billion financial data related gms investment delphi may 28 1999 classified discontinued operations periods ended december 31 1999 1998 delphi net sales including sales gm included discontinued operations totaled 125 billion 285 billion years ended december 31 1999 1998 respectively income loss delphi discontinued operations 426 million 93 million years ended december 31 1999 1998 reported net income tax expense benefit 314 million 173 million respectively note 2 asset impairments gm periodically evaluates carrying value longlived assets held used longlived assets disposed events circumstances warrant review evaluations reviews generally done conjunction annual business planning cycle 2000 gm recorded pretax charges income asset impairments 917 million 587 million aftertax 099 per share gm 123 par value common stock gm record pretax charges income 1999 1998 gm recorded pretax charges income 122 million 165 million aftertax 024 per share gm 123 par value common stock charges components following line items income statement years ended december 31 2000 1999 1998 dollars millions total net sales revenues 315 cost sales expenses 602 122 total 917 122 2000 pretax charges comprised 572 million 356 million aftertax gm north america gmna 345 million 231 million aftertax gm europe gme amount related writedown special tools equipment operating leases result phaseout oldsmobile division current model lineup product lifecycles come end models longer economically viable reduction production capacity gme including restructuring vauxhall motors limiteds manufacturing operations uk 1998 pretax charges comprised 37 million 38 million aftertax gmna 48 million 30 million aftertax gm latin americaafricamideast gmlaam 37 million 97 million aftertax gm asia pacific gmap amount represents writedown certain tooling property plant equipment determined impaired note 3 postemployment benefit costs gm records liabilities termination postemployment benefits paid pursuant union contractual agreements connection closed plants north america gm reviews adequacy continuing need liabilities annual basis conjunction yearend production labor forecasts furthermore gm reviews reasonableness liabilities quarterly basis fourth quarter 2000 gm recognized postemployment benefits liabilities associated reductions production capacity conversions following us plants oklahoma city oklahoma delta engine lansing michigan spring hill tennessee wilmington delaware 2000 charge relates approximately 4000 us employees increased cost sales 473 million 294 million aftertax 050 per share gm 123 par value common stock ii23 general motors corporation subsidiaries notes consolidated financial statements continued note 3 postemployment benefit costs concluded fourth quarter 1999 result several factors including separation delphi gm stronger expected us vehicle market changes national labor agreement gm uaw gm reversed postemployment benefits liabilities employees closed plants adjustment cost sales totaling approximately 892 million 553 million aftertax 084 per share gm 123 par value common stock 1999 adjustment postemployment benefit costs reflects decrease number excess employees december 31 1999 compared december 31 1998 well shortened duration benefit payments based current redeployment assumptions liability postemployment benefits december 31 2000 totals approximately 665 million anticipated spending approximately 86 next three years following tables summarize activity december 31 1998 december 31 2000 liability dollars millions 1the reduction excess employees buick city assembly flint v6 engine plants result redeployment gm delphi plants 1239 retirement 481 note 4 marketable securities marketable securities held gm classified availableforsale except certain mortgagerelated securities classified trading securities unrealized gains losses net related income taxes availableforsale securities included separate component stockholders equity unrealized gains losses trading securities included income current basis gm determines cost specific identification basis ii24 general motors corporation subsidiaries notes consolidated financial statements continued note 4 marketable securities continued automotive communications services operations investments marketable securities follows dollars millions december 31 2000 fair unrealized cost value gains losses type security bonds notes securities united states government agencies 90 91 1 states municipalities 9 corporate debt securities 1063 1061 2 total marketable securities 1162 1161 1 2 december 31 1999 fair unrealized cost value gains losses type security bonds notes securities united states government agencies 533 528 5 states municipalities 21 corporate debt securities 1154 1149 1 6 total marketable securities 1708 1698 1 11 debt securities totaling 256 million mature within one year 905 million mature one five years proceeds sales marketable securities totaled 13 billion 2000 20 billion 1999 44 billion 1998 gross gains related sales marketable securities 1 million 21 million 17 million 2000 1999 1998 respectively gross losses related sales marketable securities 12 million 6 million 11 million 2000 1999 1998 respectively financing insurance operations investments securities follows dollars millions december 31 2000 fair unrealized cost value gains losses type security bonds notes securities united states government agencies 556 565 10 1 states municipalities 1492 1567 81 6 mortgagebacked securities 387 384 14 17 corporate debt securities 2520 2506 47 61 total debt securities availableforsale 4955 5022 152 85 mortgagebacked securities held trading purposes 3516 total debt securities 8471 8538 152 85 equity securities 766 1057 395 104 total investment securities 9237 9595 547 189 ii25 general motors corporation subsidiaries notes consolidated financial statements continued note 4 marketable securities concluded investments securities follows dollars millions december 31 1999 fair unrealized cost value gains losses type security bonds notes securities united states government agencies 488 476 12 states municipalities 1534 1540 47 41 mortgagebacked securities 480 453 10 37 corporate debt securities 2515 2491 39 63 total debt securities availableforsale 5017 4960 96 153 mortgagebacked securities held trading purposes 2889 total debt securities 7906 7849 96 153 equity securities 685 1261 634 58 total investment securities 8591 9110 730 211 debt securities availableforsale totaling 891 million mature within one year 21 billion mature one five years 797 million mature five years 10 years 13 billion mature 10 years proceeds sales marketable securities totaled 35 billion 2000 29 billion 1999 36 billion 1998 gross gains related sales marketable securities 315 million 292 million 218 million 2000 1999 1998 respectively gross losses related sales marketable securities 147 million 126 million 49 million 2000 1999 1998 respectively note 5 finance receivables securitizations finance receivables net finance receivables net included following dollars millions december 31 2000 1999 retail 51337 46036 wholesale 26993 23987 commercial 5546 3550 leasing lease financing 2178 2681 term loans dealers others 12565 9640 total finance receivables 98619 85894 less unearned income 4872 4153 allowance financing losses 1332 1114 total finance receivables net 92415 80627 finance receivables originated outside us 214 billion 208 billion december 31 2000 1999 respectively aggregate amount total finance receivables maturing five years following december 31 2000 follows 2001525 billion 2002181 billion 2003149 billion 200473 billion 200538 billion 2006 thereafter20 billion securitizations finance receivables mortgage loans corporation sold retail finance receivables special purpose subsidiaries principal aggregating 52 billion 2000 51 billion 1999 16 billion 1998 subsidiaries generally retain subordinated investment greater 625 total receivables pool sell remaining portion net pretax gains relating sales amounted 14 million 2000 64 million 1999 31 million 1998 corporations sold retail finance receivable servicing portfolio amounted 70 billion 56 billion december 31 2000 1999 respectively ii26 general motors corporation subsidiaries notes consolidated financial statements continued note 5 finance receivables securitizations continued securitizations finance receivables mortgage loans continued corporation sold wholesale receivables revolving basis resulting decreases wholesale outstandings 100 billion 84 billion december 31 2000 1999 respectively corporation committed sell eligible wholesale receivables arising certain dealer accounts years 2000 1999 1998 gains recorded sale wholesale receivables due shortterm nature wholesale receivables fair value retained interests wholesale securitizations assumed approximate cost corporation securitizes retail wholesale receivables retains interestonly strips portion senior subordinated tranches servicing rights cash reserve accounts retained interests securitized receivables interestonly strip receivables cash deposits related amounts generally restricted assets subject limited recourse provisions respect retained servicing responsibilities corporation receives annual servicing fees approximating 20 retail receivables 10 wholesale receivables outstanding balance additionally corporation receives rights future cash flows arising investors securitization trust received contracted return 2000 gm sold residential commercial mortgage loans securitization transactions generally retaining servicing responsibilities cases subordinated interests 2000 1999 1998 gm recognized pretax gains 723 million 603 million 320 million respectively securitization residential commercial mortgages december 31 2000 total mortgage loans owned securitized totaled 868 billion 791 billion securitized 58 billion held sale 19 billion held investment see note 11 date mortgage loans owned securitized 60 days past due totaled 30 billion investors securitization trusts associated sales finance receivables mortgage loans recourse gms assets failure debtors pay due corporations retained interests subordinate investors interests fair value subject credit prepayment interest rate risks transferred assets resulting gain loss securitization transactions determined allocating carrying amount loans finance receivables securities sold interests retained based relative fair value date sale fair values based quoted market prices available otherwise fair value retained interests estimated based present value expected future cash flows key economic assumptions used measuring fair value retained interests date securitization securitizations completed 2000 follows mortgage loans retail finance receivables residential commercial prepayment speed 12 17 105 380 00 680 weightedaverage life years 14 17 63 26 104 residual cash flows discounted 95 120 65 140 127 340 variable returns transferees one month libor forward benchmark plus contractual interest rate yield curve spread ranging plus contractual spread 7 9 basis points expected credit losses used measuring fair value retained interests residential commercial mortgage loans securitized 2000 00 217 00 20 respectively date securitization ii27 general motors corporation subsidiaries notes consolidated financial statements continued note 5 finance receivables securitizations concluded securitization finance receivables mortgage loans concluded december 31 2000 key economic assumptions sensitivity current fair value residual cash flows immediate 10 20 adverse changes assumptions follows dollars millions mortgage loans retail finance receivables residential commercial carrying amountfair value retained interests 1196 2368 292 prepayment speed annual rate 12 17 127 389 00 680 reduction fair value due 10 adverse change 3 160 1 reduction fair value due 20 adverse change 6 313 1 residual cash flows discount rate annual rate 93 120 65 139 99 340 reduction fair value due 10 adverse change 4 89 23 reduction fair value due 20 adverse change 9 168 37 variable returns transferees reduction fair value due 10 adverse change 4 27 reduction fair value due 20 adverse change 7 55 expected credit losses used calculation fair value residual cash flows december 31 2000 residential commercial mortgage loans 00 217 00 30 respectively immediate 10 adverse change assumptions would reduce fair value cash flows 97 million 2 million residential commercial mortgage loans respectively immediate 20 adverse change assumptions would reduce fair value cash flows 191 million 4 million residential commercial mortgage loans respectively sensitivities hypothetical used caution figures indicate changes fair value based 10 variation assumptions generally cannot extrapolated relationship change assumption change fair value may linear also table effect variation particular assumption fair value retained interest calculated without changing assumption reality changes one factor may result changes another example increases market interest rates may result lower prepayments increased credit losses might magnify counteract sensitivities show change asset balances show expected changes fair value instruments used manage interest rate prepayment risks associated assets discussed note 19 following summarizes cash flows received paid securitization trusts year ended december 31 2000 dollars millions mortgage loans retail finance receivables residential commercial proceeds new securitizations 3717 24959 2476 servicing fees received 190 212 13 cash flows received retained interests 2181 483 46 pool buybacks purchases delinquent assets 530 282 servicing advances 75 616 82 repayments servicing advances 66 586 74 mortgage servicing rights fair value gms mortgage servicing rights totaled 41 billion 35 billion december 31 2000 1999 respectively key economic assumptions used calculation fair values prepayment speeds discount rates december 31 2000 prepayment speed 136 discount rate 106 used calculation fair value date immediate 10 20 adverse change assumed prepayment speed would reduce fair value mortgage servicing rights 135 million 262 million respectively immediate 10 20 adverse change assumed discount rate would reduce fair value mortgage servicing rights 113 million 218 million respectively sensitivities hypothetical used caution reasons similar discussed ii28 general motors corporation subsidiaries notes consolidated financial statements continued note 6 inventories included following automotive communications services operations dollars millions december 31 2000 1999 productive material work process supplies 5555 5505 finished product service parts etc 7319 7023 total inventories fifo 12874 12528 less lifo allowance 1929 1890 total inventories less allowances 10945 10638 inventories stated generally cost excess market cost approximately 90 us inventories determined lastin firstout lifo method generally cost inventories determined either firstin firstout fifo average cost methods note 7 equipment operating leases corporation significant investments residual values leasing portfolios residual values represent estimate values assets end lease contracts initially recorded based appraisals estimates realization residual values dependent corporations future ability market vehicles prevailing market conditions management reviews residual values periodically determine recorded amounts appropriate automotive communications services operations equipment operating leases assets follows dollars millions december 31 2000 1999 equipment operating leases 11268 10754 less accumulated depreciation 1335 1099 net book value 9933 9655 current 5699 5744 noncurrent note 11 4234 3911 net book value 9933 9655 financing insurance operations equipment operating leases included investment leases receivables follows dollars millions december 31 2000 1999 equipment operating leases 41295 41522 less accumulated depreciation 8762 8336 net book value 32533 33186 lease payments received related equipment operating leases maturing five years following december 31 2000 follows automotive communications services operations 200121 billion 2002580 million 2003544 million 2004505 million 2005 450 million financing insurance operations 200172 billion 200247 billion 200317 billion 2004171 million 2005 10 million ii29 general motors corporation subsidiaries notes consolidated financial statements continued note 8 income taxes income continuing operations income taxes minority interests included following dollars millions years ended december 31 2000 1999 1998 us income 3019 4156 1783 foreign income 4145 4891 3161 total 7164 9047 4944 provision income taxes estimated follows dollars millions years ended december 31 2000 1999 1998 income taxes estimated payable currently us federal 45 156 83 foreign 971 1368 1952 us state local 72 308 295 total payable currently 1088 1832 2330 deferred income tax expense credit net us federal 742 1008 354 foreign 281 244 852 us state local 282 34 196 total deferred 1305 1286 694 total income taxes 2393 3118 1636 annual tax provisions include amounts considered sufficient pay assessments may result examination prior year tax returns however amount ultimately paid upon resolution issues raised may differ materially amount accrued provisions made estimated us foreign income taxes less available tax credits deductions may incurred remittance corporations share subsidiaries undistributed earnings deemed permanently invested taxes provided foreign subsidiaries earnings deemed essentially permanently reinvested 134 billion december 31 2000 132 billion december 31 1999 quantification deferred tax liability associated permanently reinvested earnings practicable reconciliation provision income taxes compared amounts us federal statutory rate follows dollars millions years ended december 31 2000 1999 1998 tax us federal statutory income tax rate 2507 3166 1730 foreign rates 35 78 109 1 taxes unremitted earnings subsidiaries 138 92 tax credits 45 207 203 subsidiary settlement affirmative claim irs 92 adjustments 147 130 108 total income tax 2393 3118 1636 deferred income tax assets liabilities 2000 1999 reflect impact temporary differences amounts assets liabilities equity financial reporting purposes bases assets liabilities equity measured tax laws well tax loss tax credit carryforwards ii30 general motors corporation subsidiaries notes consolidated financial statements continued note 8 income taxes concluded temporary differences carryforwards gave rise deferred tax assets liabilities included following dollars millions december 31 2000 1999 deferred tax deferred tax assets liabilities assets liabilities postretirement benefits pensions 14393 14351 employee benefit plans 2884 8182 3189 7596 policy warranty reserves 2405 2471 sales product reserves 2547 2587 depreciation amortization 652 3742 577 3696 tax carryforwards 3202 3184 lease transactions 3911 3844 miscellaneous foreign 4150 1372 3233 887 7287 4493 6718 4249 subtotal 37520 21700 36310 20272 valuation allowances 717 789 total deferred taxes 36803 21700 35521 20272 tax carryforwards approximately 26 relates alternative minimum tax credit carried forward indefinitely approximately 18 relates us state net operating loss carryforwards expire years 20012020 used however substantial portion us state net operating loss carryforwards expire year 2005 tax credit carryforwards consisting primarily research experimentation credits expire years 2004 20112012 20182020 used note 9 property net property net included following automotive communications services operations dollars millions estimated december 31 useful lives years 2000 1999 land 924 751 buildings land improvements 240 12997 13898 machinery equipment 330 40900 41341 construction progress 4664 3787 real estate plants equipment 59485 59777 less accumulated depreciation 32875 34363 real estate plants equipment net 26610 25414 special tools net 7367 7365 total property net 33977 32779 financing insurance operations net property 14 billion 496 million recorded assets december 31 2000 1999 respectively ii31 general motors corporation subsidiaries notes consolidated financial statements continued note 9 property net concluded depreciation amortization expense follows dollars millions years ended december 31 2000 1999 1998 automotive communications services operations depreciation 4368 4155 3772 amortization special tools 2753 2492 2350 amortization intangible assets note 10 308 226 105 total 7429 6873 6227 financing insurance operations depreciation amortization expense 5982 5445 4920 note 10 intangible assets net automotive communications services operations net intangible assets 76 billion 85 billion december 31 2000 december 31 1999 respectively financing insurance operations net intangible assets 32 billion 29 billion recorded assets december 31 2000 1999 respectively intangible assets primarily consist goodwill cost acquired businesses excess fair value identifiable net assets note 11 assets automotive communications services operations assets included following dollars millions december 31 2000 1999 equipment operating leases noncurrent note 7 4234 3911 notes receivable delphi 1538 investments equity securities 1 4666 1970 us prepaid pension assets note 14 20184 15267 3159 2672 total assets 32243 25358 1the balance december 31 2000 includes gms 20 interest fiat auto 24 billion investment accounted using cost method accounting amounts also include fair value investments equity securities classified availableforsale periods presented gms intent hold securities greater one year balances include historical costs 19 billion 13 billion unrealized gains 495 million 687 million unrealized losses 146 million 36 million december 31 2000 1999 respectively ii32 general motors corporation subsidiaries notes consolidated financial statements continued note 11 assets concluded financing insurance operations assets included following dollars millions december 31 2000 1999 mortgage servicing rights 3985 3422 real estate mortgage held sale 5759 5678 held investment 1895 1497 lending receivables 2960 1801 mortgage related assets 1451 1094 receivables purchased factored clients 2291 765 due deferred receivables sales 1097 742 rental car buybacks 826 712 intangible assets 3188 2898 4394 2703 total assets 27846 21312 note 12 accrued expenses liabilities deferred income taxes automotive communications services operations accrued expenses liabilities deferred income taxes included following dollars millions december 31 2000 1999 warranties dealer customer allowances claims discounts 15993 15284 deferred revenue 9974 9504 payrolls employee benefits excludes postemployment 4609 5211 unpaid losses selfinsurance programs 2031 1923 taxes income taxes 1009 1084 interest 1401 1542 income taxes 445 1006 deferred income taxes 2430 2926 postemployment benefits including extended disability benefits 2380 2097 8748 9703 total accrued expenses liabilities deferred income taxes 49020 50280 financing insurance operations liabilities deferred income taxes included following dollars millions december 31 2000 1999 unpaid insurance losses loss adjustment expenses unearned insurance premiums 3870 3811 postemployment benefits 761 722 income taxes 571 439 deferred income taxes 4021 3730 interest 1828 1602 1871 978 total liabilities deferred income taxes 12922 11282 ii33 general motors corporation subsidiaries notes consolidated financial statements continued note 13 longterm debt loans payable automotive communications services operations longterm debt loans payable follows dollars millions weightedaverage interest rate december 31 2000 1999 2000 1999 longterm debt loans payable within one year current portion longterm debt 63 415 681 commercial paper 1 58 519 405 48 1274 905 total loans payable 2208 1991 payable beyond one year 81 89 7438 7444 unamortized discount 28 29 total longterm debt loans payable 9618 9406 1 weightedaverage interest rates commercial paper include impact interest rate swap agreements longterm debt payable beyond one year december 31 2000 included maturities follows 2002 426 million 2003 715 million 2004 454 million 2005 799 million 2006 50 billion amounts payable beyond one year consideration foreign currency swaps december 31 2000 included 15 billion currencies us dollar primarily swedish krona 776 million japanese yen 435 million brazilian real 151 million canadian dollar 64 million december 31 2000 1999 longterm debt loans payable automotive communications services operations included 83 billion 74 billion respectively obligations fixed interest rates 13 billion 20 billion respectively obligations variable interest rates predominantly libor considering impact interest rate swap agreements achieve desired balance fixed variable rate debt gm entered interest rate swap cap agreements notional amounts agreements december 31 2000 automotive communications services operations approximately 12 billion 200 million pay variable 10 billion pay fixed 90 million respectively notional amounts agreements december 31 1999 approximately 600 million 400 million pay variable 200 million pay fixed 100 million respectively gm subsidiaries maintain substantial lines credit various banks totaled 116 billion december 31 2000 43 billion represented shortterm credit facilities 73 billion represented longterm credit facilities december 31 1999 bank lines credit totaled 96 billion 39 billion represented shortterm credit facilities 57 billion represented longterm credit facilities unused shortterm longterm portions credit lines totaled 31 billion 62 billion december 31 2000 compared 35 billion 48 billion december 31 1999 certain bank lines credit contain covenants corporation applicable subsidiaries compliance year ended december 31 2000 ii34 general motors corporation subsidiaries notes consolidated financial statements continued note 13 longterm debt loans payable concluded financing insurance operations debt follows dollars millions weightedaverage interest rate december 31 2000 1999 2000 1999 debt payable within one year current portion debt 65 66 18603 14996 commercial paper 1 65 58 43634 33229 46 14506 18727 payable beyond one year 64 63 58846 55952 unamortized discount 552 622 total debt 135037 122282 1 weightedaverage interest rates commercial paper include impact interest rate swap agreements debt payable beyond one year december 31 2000 included maturities follows 2002 199 billion 2003 141 billion 2004 72 billion 2005 59 billion 2006 117 billion amounts payable beyond one year consideration foreign currency swaps december 31 2000 included 98 billion currencies us dollar primarily canadian dollar 66 billion euro 16 billion uk pound sterling 738 million australian dollar 573 million december 31 2000 1999 debt financing insurance operations included 861 billion 783 billion respectively obligations fixed interest rates 489 billion 440 billion respectively obligations variable interest rates predominantly libor considering impact interest rate swap agreements achieve desired balance fixed variable rate debt gm entered interest rate swap cap floor agreements notional amounts agreements december 31 2000 financing insurance operations approximately 352 billion 240 billion pay variable 112 billion pay fixed 74 million 83 million respectively notional amounts interest rate swap cap floor agreements december 31 1999 approximately 261 billion 181 billion pay variable 80 billion pay fixed 483 million 93 million respectively gms financing insurance subsidiaries maintain substantial lines credit various banks totaled 485 billion december 31 2000 175 billion represented shortterm credit facilities 310 billion represented longterm credit facilities december 31 1999 bank lines credit totaled 469 billion 168 billion represented shortterm credit facilities 301 billion represented longterm credit facilities unused shortterm longterm portions credit lines totaled 81 billion 305 billion december 31 2000 compared 63 billion 293 billion december 31 1999 certain bank lines credit contain covenants corporation applicable subsidiaries compliance year ended december 31 2000 note 14 pensions postretirement benefits gm number defined benefit pension plans covering substantially employees plans covering us canadian represented employees generally provide benefits negotiated stated amounts year service well significant supplemental benefits employees retire 30 years service normal retirement age benefits provided plans covering us canadian salaried employees certain foreign locations generally based years service salary history gm also certain nonqualified pension plans covering executives based targeted wage replacement percentages unfunded pension plan assets primarily invested us government obligations equity fixed income securities commingled pension trust funds insurance contracts gm class h common stock valued december 31 2000 34 billion ii35 general motors corporation subsidiaries notes consolidated financial statements continued note 14 pensions postretirement benefits continued gms funding policy respect qualified pension plans contribute annually less minimum required applicable law regulations gm made pension contributions us hourly salary plans 50 billion 2000 consisting entirely gm class h common stock contributed second quarter 2000 794 million 1999 11 billion 1998 addition gm made pension contributions us plans 69 million 67 million 51 million 2000 1999 1998 respectively additionally gm maintains hourly salary benefit plans provide postretirement medical dental vision life insurance us retirees eligible dependents cost benefits recognized consolidated financial statements period employees provide service gm postretirement plan assets gms veba trust invested primarily fixed income securities gm class h common stock valued december 31 2000 438 million certain corporations nonus subsidiaries postretirement plans although participants covered governmentsponsored administered programs cost programs generally significant gm ii36 general motors corporation subsidiaries notes consolidated financial statements continued projected benefit obligation accumulated benefit obligation fair value plan assets pension plans accumulated benefit obligations excess plan assets 40 billion 34 billion 0 respectively december 31 2000 73 billion 68 billion 35 billion respectively december 31 1999 ii37 general motors corporation subsidiaries notes consolidated financial statements continued measurement purposes approximate 86 annual rate increase per capita cost covered health care benefits assumed 2001 rate assumed decrease linear basis 50 2007 remain level thereafter one percentage point increase assumed health care trend rate would increased accumulated projected benefit obligation apbo 52 billion december 31 2000 increased aggregate service interest cost components nonpension postretirement benefit expense 2000 450 million one percentage point decrease would decreased apbo 44 billion decreased aggregate service interest cost components nonpension postretirement benefit expense 2000 375 million note 15 commitments contingent matters commitments gm following minimum commitments noncancelable operating leases terms excess one year primarily real property 2001541 million 2002484 million 2003406 million 2004319 million 2005273 million 13 billion 2006 thereafter certain leases contain escalation clauses renewal purchase options rental expenses operating leases 861 million 825 million 826 million 2000 1999 1998 respectively gm sponsors credit card program entitled gm card program offers rebates applied primarily purchase lease gm vehicles amount rebates available qualified cardholders december 31 2000 38 billion 37 billion december 31 1999 1998 respectively part marketing agreement entered america online inc aol june 21 1999 hughes committed increase sales marketing expenditures 2002 approximately 15 billion related direcpcaolplus directv directvaol tv direcduo december 31 2000 hughes remaining commitment agreement approximately 11 billion contingent matters litigation subject uncertainties outcome individual litigated matters predictable assurance various legal actions governmental investigations claims proceedings pending corporation including arising alleged product defects employmentrelated matters governmental regulations relating safety emissions fuel economy product warranties financial services dealer supplier contractual relationships environmental matters connection disposition hughes defense electronics business raytheon company 1997 satellite systems manufacturing businesses boeing company 2000 disputes regarding purchase price matters may result payments hughes acquiring companies would material hughes gm established reserves matters losses probable reasonably estimated matters may involve compensatory punitive treble damage claims demands recall campaigns environmental remediation programs sanctions granted could require corporation pay damages make expenditures amounts could estimated december 31 2000 discussion counsel opinion management liability expected material adverse effect corporations consolidated financial condition results operations ii38 general motors corporation subsidiaries notes consolidated financial statements continued note 16 preferred securities subsidiary trusts general motors obligated mandatorily redeemable preferred securities subsidiary trusts july 1997 general motors capital trust series trust issued approximately 79 million 867 trust originated preferred securitiessm toprssm series preferred securities oneforone exchange 3055255 outstanding gm series 792 depositary shares representing onefourth share gm series preference stock 010 par value per share addition general motors capital trust g series g trust issued approximately 143 million 987 toprs series g series g preferred securities oneforone exchange 5064489 outstanding gm series g 912 depositary shares representing onefourth share gm series g preference stock 010 par value per share concurrently exchanges related purchases gm series g trusts common securities trusts represent approximately 3 total assets trusts gm issued whollyowned trusts series trusts sole assets 867 junior subordinated deferrable interest debentures series due july 1 2012 series g trusts sole assets 987 junior subordinated deferrable interest debentures series g due july 1 2012 series debentures series g debentures collectively debentures aggregate principal amounts equal aggregate stated liquidation amounts series g preferred securities related common securities respectively 79 million respect series debentures 131 million respect series g debentures may 2 2000 gm redeemed series trusts sole assets causing series trust redeem approximately 3 million series preferred securities series preferred securities redeemed price 25 per share plus accrued unpaid distributions 001 per share also may 2 2000 gm redeemed approximately 3 million outstanding series 792 depositary shares series 792 depositary shares redeemed price 25 per share plus accrued unpaid dividends 018 per share securities together total face value approximately 154 million april 2 2001 gm redeem 5064489 outstanding series g 987 toprs series g toprs redeemed price 25 per security plus accrued unpaid dividends 042 per share total redemption price 2542 per share sm trust originated preferred securities toprs service trademarks merrill lynch co note 17 stockholders equity following table presents changes capital stock period january 1 1998 december 31 2000 dollars millions common stocks total preference 123 capital stocks par value class h stock balance january 1 1998 1 1156 10 1167 shares reacquired 75 shares issued 11 1 12 balance december 31 1998 1 1092 11 1104 shares reacquired 1 75 76 shares issued 16 3 19 balance december 31 1999 1033 14 1047 shares reacquired 184 shares issued 65 74 139 balance december 31 2000 914 88 1002 ii39 general motors corporation subsidiaries notes consolidated financial statements continued note 17 stockholders equity continued preference stocks june 24 1999 part strategic alliance hughes aol invested 15 billion return approximately 27 million shares gm series h 625 automatically convertible preference stock par value 010 per share preference stock automatically convert gm class h common stock 2002 based upon variable conversion factor linked gm class h common stock price time conversion accrues quarterly dividends rate 625 per year may converted earlier certain limited circumstances gm immediately invested 15 billion received aol shares hughes series preferred stock designed correspond financial terms gm series h 625 automatically convertible preference stock dividends hughes series preferred stock payable gm quarterly annual rate 625 upon conversion gm series h 625 automatically convertible preference stock gm class h common stock hughes redeem series preferred stock cash payment gm equal fair market value gm class h common stock issuable upon conversion simultaneous gms receipt cash redemption proceeds gm make capital contribution hughes amount common stocks second quarter 2000 gm completed exchange offer gm repurchased 86 million shares gm 123 par value common stock issued 92 million shares gm class h common stock addition june 12 2000 gm contributed approximately 54 million shares approximately 7 million shares gm class h common stock us hourlyrate employees pension plan veba trust respectively total value contributions approximately 56 billion result exchange offer employee benefit plan contributions economic interest hughes attributable gm 123 par value common stock decreased approximately 62 approximately 30 economic interest hughes attributable gm class h common stock increased approximately 38 70 fully diluted basis june 6 2000 gm board declared threeforone stock split gm class h common stock split form 200 stock dividend paid june 30 2000 gm class h common stockholders record june 13 2000 gm class h common stock per share amounts numbers shares periods presented adjusted reflect stock split furthermore result stock split voting liquidation rights gm class h common stock reduced 06 votes per share 06 liquidation units per share 02 votes per share 02 liquidation units per share order avoid dilution aggregate voting liquidation rights class voting liquidation rights gm 123 par value common stock changed voting liquidation rights gm 123 par value common stock one vote per share one liquidation unit per share july 24 2000 fiat spa purchased 24 billion approximately 32 million shares gm 123 par value common stock approximately 54 gms 123 par value common stock outstanding date liquidation rights gm 123 par value gm class h common stocks subject certain adjustments outstanding common stock subdivided stock split otherwise shares one class common stock issued dividend holders another class common stock holders gm class h common stock direct rights equity assets hughes rather rights equity assets gm includes 100 stock hughes outstanding shares gm class h common stock may recapitalized shares gm 123 par value common stock time december 31 2002 sole discretion gm board automatically time corporation sell liquidate otherwise dispose 80 business hughes based fair market value assets tangible intangible hughes date proposed transaction approved gm board event recapitalization outstanding shares gm class h common stock automatically converted gms 123 par value common stock exchange rate would provide gm class h common stockholders number shares gm 123 par value common stock would value equal 120 value gm class h common stock date recapitalization type described prior sentence would occur triggering events took place unless holders gm common stock including holders gm 123 par value common stock holders gm class h common stock voting separately individual classes vote approve alternative proposal gm board ii40 general motors corporation subsidiaries notes consolidated financial statements continued note 17 stockholders equity concluded note 18 earnings per share attributable common stocks earnings per share eps attributable class gm common stock determined based attribution earnings class common stock period divided weightedaverage number common shares class outstanding period diluted eps attributable class gm common stock considers impact potential common shares unless inclusion potential common shares would antidilutive effect gm class h common stock per share amounts numbers shares periods presented adjusted reflect threeforone stock split form 200 stock dividend paid june 30 2000 attribution earnings class gm common stock follows dollars millions years ended december 31 2000 1999 1998 earnings losses attributable common stocks 123 par value continuing operations 3957 5592 2914 discontinued operations 426 93 earnings attributable 123 par value 3957 6018 2821 earnings losses attributable class h 385 96 72 earnings attributable gm 123 par value common stock period represent earnings attributable gm common stocks period reduced available separate consolidated net income ascni hughes respective period earnings losses attributable gm class h common stock represent ascni hughes excluding effects gm purchase accounting adjustments arising gms acquisition hughes aircraft company reduced amount dividends accrued series preferred stock hughes equivalent measure effect gms payment dividends gm series h 625 automatically convertible preference stock would paid hughes calculated earnings losses used computation ascni hughes multiplied fraction numerator equal weightedaverage number shares gm class h common stock outstanding 681 million 374 million 316 million 2000 1999 1998 respectively denominator number equal weightedaverage number shares gm class h common stock issued outstanding would represent 100 interest earnings hughes average class h dividend base average class h dividend base 13 billion 13 billion 12 billion 2000 1999 1998 respectively upon conversion gm series h 625 automatically convertible preference stock gm class h common stock redemption series preferred stock simultaneous capital contribution hughes numerator denominator used computation ascni increase number shares gm class h common stock issued ii41 general motors corporation subsidiaries notes consolidated financial statements continued note 18 earnings per share attributable common stocks continued addition denominator used determining ascni hughes may adjusted occasion deemed appropriate gm board reflect subdivisions combinations gm class h common stock certain transfers capital hughes contribution shares capital stock gm benefit hughes employees retirement gm class h common stock purchased hughes gm boards discretion make adjustments limited criteria set forth gms restated certificate incorporation effective january 1 1999 shares gm class h common stock delivered gm connection award shares exercise stock options employees hughes increase numerator denominator fraction referred prior january 1 1999 dilutive effect resulting assumed exercise stock options exercise stock options affect gm class h common stock dividend base denominator occasion anticipation exercises stock options hughes purchases gm class h common stock open market upon purchase shares retired therefore decrease numerator denominator fraction referred reconciliation amounts used basic diluted earnings per share computations income continuing operations follows dollars millions except per share amounts ii42 general motors corporation subsidiaries notes consolidated financial statements continued note 19 derivative financial instruments risk management gm party financial instruments offbalancesheet risk financial instruments used normal course business manage exposure fluctuations interest rates foreign exchange rates meet financing needs customers primary classes derivatives used gm foreign exchange forward contracts options interest rate swaps options forward contracts purchase sell mortgages mortgagebacked securities instruments involve varying degrees market risk instruments subject rate price fluctuations elements credit risk event counterparty default credit risk managed approval periodic monitoring financially sound counterparties derivative transactions used hedge underlying business exposures market risk instruments offset opposite movements underlying exposure cash receipts payments contracts normally occur maturity interest rate swap agreements periodic contractually defined intervals foreign exchange forward contracts options gm international corporation operations 50 countries foreign currency exposures operations related buying selling financing currencies local currency gms significant foreign currency exposures relate canada mexico western european countries primarily germany united kingdom spain italy belgium france australia japan brazil magnitude exposures significantly varies time depending upon strength local automotive markets sourcing decisions gm uses derivative financial instruments manage certain foreign exchange exposures primarily foreign exchange forward contracts purchased written foreign exchange options agreements primarily hedge cash flows debt firm commitments anticipated transactions involving vehicles components fixed assets subsidiary dividends december 31 2000 1999 automotive communications services operations held foreign exchange forward contracts options 62 billion 45 billion respectively december 31 2000 1999 financing insurance operations held foreign exchange forward contracts options 153 billion 133 billion including crosscurrency swaps 47 billion 52 billion respectively automotive communications services operations deferred hedging gains losses outstanding foreign exchange forward contracts options totaling 34 million 22 million december 31 2000 1999 respectively financing insurance operations deferred hedging gains outstanding foreign exchange forward contracts options including crosscurrency swaps december 31 2000 compared deferred hedging gain 1 million december 31 1999 fair value foreign exchange forward contracts including crosscurrency swaps determined using current exchange rates fair value foreign exchange options estimated using pricing models indicative quotes obtained market variables interest rate swaps options gms financing cash management activities subject market risk exposure changes interest rates gm entered various financial instrument transactions maintain desired level exposure risk interest rate fluctuations minimize interest expense achieve objective gm times use written options management exposures december 31 2000 1999 total notional amount interest rate contracts offbalancesheet risk 16 billion 10 billion respectively automotive communications services operations december 31 2000 1999 financing insurance operations held agreements offbalancesheet risk notional amounts totaling 443 billion 334 billion respectively automotive communications services operations net gains interest rate swaps totaled approximately 6 million 3 million december 31 2000 1999 respectively net losses gains interest rate swaps financing insurance operations totaled approximately 5 million 45 million december 31 2000 1999 respectively fair value interest rate swaps including contracts optionality estimated using pricing models based upon current market interest rates exchange traded options valued quoted market prices mortgage contracts corporation also entered contracts purchase sell mortgages specific future dates entered certain exchangetraded futures option contracts reduce exposure interest rate risk december 31 2000 1999 commitments sell mortgage loans securities totaled 22 billion 16 billion respectively commitments purchase originate mortgage ii43 general motors corporation subsidiaries notes consolidated financial statements continued note 19 derivative financial instruments risk management concluded mortgage contracts concluded loans totaled 50 billion 48 billion respectively exchangetraded futures option contracts used hedge mortgage loans held sale notional values 11 billion 63 billion december 31 2000 1999 respectively gains losses derivatives including exchangetraded futures option contracts used hedge interest rate risk associated ratelocked funding commitments mortgage loans held sale deferred considered reporting underlying mortgages lower cost market basis notional values derivatives used hedge price interest rate risk associated mortgagerelated securities totaled 118 billion 75 billion december 31 2000 1999 respectively gains losses associated instruments recognized income current period marked market basis derivatives used hedge mortgage servicing rights notional values 311 billion 172 billion december 31 2000 1999 respectively gains losses contracts recorded adjustment amortization expense fair value mortgage contracts estimated based upon amount would received paid terminate contracts based market prices similar financial instruments current rates mortgage loans book values estimated fair values financial instrument derivatives follows dollars millions fair value open contracts december 31 2000 1999 asset liability asset liability position automotive communications services operations foreign exchange contracts 1 111 103 30 85 interest rate contracts 2 33 3 2 18 financing insurance operations foreign exchange contracts 35 239 1106 386 862 interest rate contracts 4 605 633 82 586 mortgage contracts 6 446 101 105 102 1the related asset liability recorded balance sheet totaled 14 million 15 million december 31 2000 1999 respectively 2the related asset liability recorded balance sheet totaled 2 million 12 million december 31 2000 1999 respectively 3the related liability recorded balance sheet totaled 959 million 374 million december 31 2000 1999 respectively 4the related asset recorded balance sheet totaled 114 million 33 million december 31 2000 1999 respectively 5foreign exchange forward contracts included certain derivatives foreign exchange interest rate exposures fair value 613 million 368 million december 31 2000 1999 respectively 6the related asset recorded balance sheet totaled 266 million 23 million december 31 2000 december 31 1999 respectively credit risk financial instruments previously discussed contain element risk counterparties may unable meet terms agreements however gm minimizes risk exposure limiting counterparties major international banks financial institutions meet established credit guidelines limiting amount risk exposure one bank financial institution management also reduces credit risk unused lines credit applying credit policies making commitments extending loans management expect incur losses result counterparty default gm generally require place collateral financial instruments except lines credit extends loans extended commitments market interest rates significant fair value position related outstanding commitments gm business activities customers dealers associates around world corporations receivables guarantees parties well diversified warranted secured collateral consequently managements opinion significant concentration credit risk exists gm ii44 general motors corporation subsidiaries notes consolidated financial statements continued note 20 fair value financial instruments estimated fair value financial instruments determined using available market information appropriate valuation methodologies however considerable judgment required interpreting market data develop estimates fair value therefore estimates necessarily indicative amounts could realized would paid current market exchange effect using different market assumptions andor estimation methodologies may material estimated fair value amounts book estimated fair values financial instruments practicable estimate fair value follows dollars millions december 31 2000 1999 book fair book fair value automotive communications services operations assets 1 3269 3244 4450 4431 liabilities longterm debt 2 7410 7019 7415 7139 liabilities 1 516 548 535 559 preferred securities subsidiary trusts 3 note 16 139 136 218 206 financing insurance operations assets finance receivables net 4 91853 91781 80287 79934 assets 1 14002 14054 10484 10509 liabilities debt payable beyond one year 2 58295 57863 55330 53936 1 assets include various financial instruments eg longterm receivables certain investments fair values based discounted cash flows market quotations appropriate valuation techniques fair values retained subordinated interests trusts excess servicing assets net deferred costs derived discounting expected cash flows using current market rates estimated values industrial development bonds included liabilities based quoted market prices similar issues 2 longterm debt estimated fair value based quoted market prices similar issues based current rates offered gm debt similar remaining maturities 3 fair value gmobligated mandatorily redeemable preferred securities subsidiary trusts see note 16 determined based quoted market prices 4 fair value estimated discounting future cash flows using applicable spreads approximate current rates applicable category finance receivables due shortterm nature book value approximates fair value cash marketable securities accounts notes receivable less allowances accounts payable principally trade automotive communications services operations loans payable financing insurance operations debt payable within one year periods ending december 31 2000 1999 refer note 19 fair value derivative financial instruments ii45 general motors corporation subsidiaries notes consolidated financial statements continued note 21 stock incentive plans stockbased compensation cost stock options stockbased employee compensation awards determined based fair value grant date consistent method prescribed sfas 123 gms pro forma net income earnings attributable common stocks basic diluted earnings per share attributable common stocks would follows dollars millions except per share amounts 2000 1999 1998 net income reported 4452 6002 2956 pro forma 4125 5788 2761 earnings losses attributable common stocks 123 reported 3957 6018 2821 pro forma 3709 5823 2646 class h reported 385 96 72 pro forma 306 115 52 basic earnings losses per share attributable common stocks 123 reported 680 936 426 pro forma 638 906 400 class h reported 056 026 023 pro forma 045 031 016 diluted earnings losses per share attributable common stocks 123 reported 668 918 418 pro forma 626 888 392 class h reported 055 026 023 pro forma 044 031 016 fair value option grant estimated date grant using blackscholes option pricing model following weightedaverage assumptions 2000 1999 1998 gm hughes gm hughes gm hughes gm sip plan ssop sip plan ssop sip plan ssop interest rate 64 65 48 52 48 52 56 52 expected life years 50 69 50 70 50 62 50 expected volatility 278 421 276 279 380 279 262 328 262 dividend yield 27 23 36 effects delphi spinoff adjustment number options related exercise prices described considered sfas 123 modifications terms outstanding options accordingly pro forma disclosure includes compensation cost incremental fair value sfas 123 resulting modifications pro forma amounts compensation cost indicative effects operating results future periods gms stock incentive plans consist general motors 1997 stock incentive plan formerly general motors amended stock incentive plan gmsip hughes electronics corporation incentive plan hughes plan general motors 1998 salaried stock option plan gmssop gmsip gmssop administered executive compensation committee gm board hughes plan administered executive compensation committee board directors hughes gmsip 60 million shares gm 123 par value 75 million shares gm class h common stocks may granted june 1 1997 may 31 2002 approximately 272 million 70 million available grants december 31 2000 options granted prior 1997 gmsip generally exercisable onehalf one year onehalf two years dates grant stock option grants awarded since 1997 vest ratably three years date grant option prices 100 fair market value dates grant options generally expire 10 years dates grant subject earlier termination certain conditions ii46 general motors corporation subsidiaries notes consolidated financial statements continued note 21 stock incentive plans continued hughes plan hughes may grant shares rights options acquire 2328 million shares gm class h common stock december 31 2000 1067 million available grants december 31 2000 option prices 100 fair market value dates grant options generally vest two five years expire 10 years dates grant subject earlier termination certain conditions gmssop 50 million shares gm 123 par value common stock may granted january 1 1998 december 31 2007 approximately 380 million available grants december 31 2000 stock options vest one year following date grant exercisable two years date grant option prices 100 fair market value dates grant options generally expire 10 years two days dates grant subject earlier termination certain conditions connection delphi spinoff number options related exercise prices outstanding options affected plans adjusted reflect change fair market value gm 123 par value common stock resulted transaction number shares option exercise price adjusted aggregate intrinsic value options immediately transaction remained unchanged class h common stock share amounts numbers shares periods presented adjusted reflect threeforone stock split form 200 stock dividend paid june 30 2000 ii47 general motors corporation subsidiaries notes consolidated financial statements continued note 21 stock incentive plans concluded following table summarizes information gms stock option plans december 31 2000 ii48 general motors corporation subsidiaries notes consolidated financial statements continued note 22 income expenses income included total net sales revenues expenses included cost sales expenses consisted following dollars millions years ended december 31 2000 1999 1998 automotive communications services operations income interest income 619 769 726 rental car lease revenue 1722 1765 1229 gain sale hughes satellite systems 1 2036 865 938 930 total income 5242 3472 2885 total expenses 348 503 792 1represents gain sale hughes satellite systems manufacturing businesses boeing company 38 billion cash financing insurance operations income interest income 1794 1479 1379 insurance premiums 1394 1339 1426 mortgage operations investment income servicing fees 3445 2742 1836 870 157 58 total income 7503 5717 4699 expenses provision financing losses 552 404 463 insurance losses loss adjustment expenses 1028 882 1013 total expenses 1580 1286 1476 note 23 segment reporting sfas 131 disclosures segments enterprise related information established standards reporting information operating segments financial statements operating segments defined components enterprise separate financial information available evaluated regularly chief operating decision maker decision making group deciding allocate resources assessing performance gms chief operating decision maker chief executive officer operating segments managed separately operating segment represents strategic business unit offers different products serves different markets gms reportable operating segments within automotive communications services operations business consist general motors automotive gmawhich comprised four regions gmna gme gmlaam gmap hughes gmna designs manufactures markets vehicles primarily north america following nameplates chevrolet pontiac gmc oldsmobile buick cadillac saturn gme gmlaam gmap meet demands customers outside north america vehicles designed manufactured marketed following nameplates opel vauxhall holden isuzu saab buick chevrolet gmc cadillac hughes includes activities relating digital entertainment information communications services satellitebased private business networks segment includes design manufacturing marketing locomotives heavyduty transmissions elimination intersegment transactions certain nonsegment specific revenues expenditures certain corporate activities gms reportable operating segments within financing insurance operations business consist gmac provides broad range financial services including consumer vehicle financing fullservice leasing fleet leasing dealer financing car truck extended service contracts residential commercial mortgage services commercial vehicle homeowners insurance assetbased lending financing insurance operations segment includes financing entities operating us canada brazil germany sweden mexico associated gmac accounting policies operating segments described summary significant accounting policies except disaggregated financial results prepared using management approach consistent basis manner gm management internally disaggregates financial information purposes assisting making internal operating decisions gm evaluates performance based standalone operating segment net income generally accounts intersegment sales transfers sales transfers third parties current market prices revenues attributed geographic areas based location assets producing revenues ii49 see notes next page ii50 general motors corporation subsidiaries notes consolidated financial statements continued aother includes income loss discontinued operations related delphi 426 million 93 million years ended december 31 1999 1998 respectively bthe amount reported hughes excludes amortization gm purchase accounting adjustments related gms acquisition hughes aircraft company approximately 16 million 3 million related panamsat 13 million related satellite systems manufacturing businesses prior sale boeing october 6 2000 21 million 21 million 2000 1999 1998 respectively cexcludes satellite expenditures totaling 766 million 789 million 797 million 2000 1999 1998 respectively also excludes expenditures related early buyout satellite saleleasebacks totaling 0 370 million 156 million 2000 1999 1998 respectively dthe amount reported hughes includes writeoff approximately 329 million unamortized goodwill related satellite systems manufacturing businesses time sale boeing ii51 general motors corporation subsidiaries notes consolidated financial statements continued note 23 segment reporting concluded information concerning principal geographic areas follows dollars millions 2000 1999 1998 net sales net sales net sales net revenues property revenues property revenues property north america united states 136399 22798 130073 20634 105672 19454 canada mexico 13986 3687 12661 3760 11009 2358 total north america 150385 26485 142734 24394 116681 21812 europe france 1986 139 2130 151 2042 186 germany 6582 2687 8968 2912 10567 3349 spain 1650 709 2001 542 1966 422 united kingdom 5035 834 5390 1070 5379 1192 11935 2397 9407 1635 9679 1748 total europe 27188 6766 27896 6310 29633 6897 latin america brazil 3395 1047 2830 1409 4773 1879 latin america 1843 380 1686 403 2909 409 total latin america 5238 1427 4516 1812 7682 2288 1821 698 1412 759 1449 1611 total 184632 35376 176558 33275 155445 32608 ii52 general motors corporation subsidiaries selected quarterly data unaudited 2000 quarters 1st 2nd 3rd 4th 1 dollars millions except per share amounts total net sales revenues 46858 48743 42690 46341 income taxes minority interests 2632 2835 1266 431 income tax expense 783 929 436 245 minority interests 2 11 losses nonconsolidated associates 68 157 1 108 net income 1783 1751 829 89 dividends preference stocks 29 27 earnings attributable common stocks 1754 1724 802 62 earnings losses attributable 123 par value 1786 1762 878 635 losses earnings attributable class h 32 38 76 697 basic earnings losses per share attributable 123 par value 288 299 157 114 basic losses earnings per share attributable class h 2 008 007 009 080 average number shares common stocks outstanding basic millions 123 par value 620 590 559 class h 2 413 563 874 875 diluted earnings losses per share attributable 123 par value 280 293 155 116 diluted losses earnings per share attributable class h 2 008 007 009 076 average number shares common stocks outstanding diluted millions 123 par value 637 602 567 559 class h 2 413 563 874 962 ii53 general motors corporation subsidiaries supplementary information continued selected quarterly data unaudited continued 1 fourth quarter 2000 results include 939 million aftertax charge phaseout oldsmobile aftertax charge 294 million related postemployment costs termination postemployment benefits associated four north american manufacturing facilities slated conversion capacity reduction see note 3 gm consolidated financial statements 419 million aftertax charge related reduction production capacity gme including restructuring vauxhall motors limiteds manufacturing operations uk 11 billion aftertax gain hughes related sale satellite systems manufacturing businesses boeing company 38 billion cash 2 adjusted reflect threeforone stock split gm class h common stock form 200 stock dividend paid june 30 2000 ii54 general motors corporation subsidiaries supplementary information continued selected quarterly data unaudited continued 1999 quarters 1st 2nd 3rd 4th 1 dollars millions except per share amounts total net sales revenues 42435 45067 42794 46262 income continuing operations income taxes minority interests 2940 2784 1518 1805 income tax expense 1029 956 553 580 minority interests 14 7 losses nonconsolidated associates 77 87 81 80 income continuing operations 1820 1734 877 1145 income discontinued operations 242 184 net income 2062 1918 877 1145 dividends preference stocks 16 7 28 29 earnings attributable common stocks 2046 1911 849 1116 earnings losses attributable common stocks 123 par value continuing operations 1783 1754 866 1196 discontinued operations 242 184 earnings attributable 123 par value 2025 1938 866 1196 earnings losses attributable class h 21 27 17 80 basic earnings losses per share attributable common stocks 123 par value continuing operations 273 271 135 190 discontinued operations 037 028 earnings per share attributable 123 par value 310 299 135 190 earnings losses per share attributable class h 2 007 008 004 019 average number shares common stocks outstanding basic millions 123 par value 654 648 641 630 class h 2 319 363 405 409 earnings losses per share attributable common stocks assuming dilution 123 par value continuing operations 268 266 133 186 discontinued operations 036 028 earnings per share attributable 123 par value 304 294 133 186 earnings losses per share attributable class h 2 006 008 004 019 average number shares common stocks outstanding diluted millions 123 par value 667 660 652 643 class h 2 335 363 405 409 ii55 general motors corporation subsidiaries supplementary information continued selected quarterly data unaudited continued 1 fourth quarter 1999 results included aftertax charge 553 million postemployment benefits related reversal liability benefits payable excess us hourly employees see note 3 gm consolidated financial statements aftertax charge 408 million hourly retiree benefits related benefit increase granted hourly retirees connection 1999 united auto workers uaw agreement 90 million aftertax charge termination benefits related us salaried early retirement program aftertax charge 165 million related hughes decision discontinue certain wireless manufacturing operations 2 adjusted reflect threeforone stock split gm class h common stock form 200 stock dividend paid june 30 2000 ii56 general motors corporation subsidiaries item 9 item 8 financial statements supplementary data motors liquidation company guc trust financial statements report independent registered public accounting firm trust administrator trust monitor trust beneficiaries motors liquidation company guc trust audited accompanying statements net assets liquidation motors liquidation company guc trust march 31 2014 2013 related statements changes net assets liquidation cash flows years ended march 31 2014 2013 2012 financial statements responsibility trust administrator motors liquidation company guc trust responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audits obtain reasonable assurance whether financial statements free material misstatement motors liquidation company guc trust required engaged perform audit internal control financial reporting audits included consideration internal control financial reporting basis designing audit procedures appropriate circumstances purpose expressing opinion effectiveness motors liquidation company guc trust’s internal control financial reporting accordingly express opinion audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects net assets liquidation motors liquidation company guc trust march 31 2014 2013 related statements changes net assets liquidation cash flows years ended march 31 2014 2013 2012 conformity accounting principles generally accepted united states america plante moran pllc auburn hills michigan may 22 2014 motors liquidation company guc trust statements net assets liquidation basis march 31 2014 2013 dollars thousands see accompanying notes financial statements motors liquidation company guc trust statements changes net assets liquidation basis years ended march 31 2014 2013 2012 dollars thousands see accompanying notes financial statements motors liquidation company guc trust statements cash flows liquidation basis years ended march 31 2014 2013 2012 dollars thousands guc trust presented reconciliation net income cash flow operations entity liquidation guc trust continuing operations result measurement net income term used generally accepted accounting principles measure results operations see accompanying notes financial statements motors liquidation company guc trust notes financial statements march 31 2014 1 purpose trust motors liquidation company guc trust “guc trust” successor motors liquidation company formerly known general motors corp “mlc” within meaning section 1145 united states bankruptcy code “bankruptcy code” guc trust holds administers directs distribution certain assets pursuant terms conditions amended restated motors liquidation company guc trust agreement “guc trust agreement” dated june 11 2012 amended time pursuant second amended joint chapter 11 plan “plan” dated march 18 2011 mlc debtor affiliates collectively along mlc “debtors” benefit holders allowed general unsecured claims debtors “allowed general unsecured claims” guc trust formed march 30 2011 statutory trust delaware statutory trust act purposes implementing plan distributing guc trust’s distributable assets plan generally provides distribution certain shares common stock “new gm common stock” new general motors company “new gm” certain warrants purchase shares stock “new gm warrants” together new gm common stock “new gm securities” holders allowed general unsecured claims pro rata amount claims addition plan provides holder allowed general unsecured claim obtain form guc trust units defined contingent right receive pro rata basis additional shares new gm common stock new gm warrants extent new gm common stock new gm warrants required satisfaction previously disputed general unsecured claims defined liquidation payment expenses guc trust cash remaining dissolution guc trust guc trust administered wilmington trust company solely capacity trust administrator trustee “guc trust administrator” among rights duties subject terms conditions limitations set forth guc trust agreement guc trust administrator power authority hold manage sell invest distribute assets comprising guc trust corpus consult retain professionals administration guc trust prosecute resolve objections disputed general unsecured claims take necessary actions administer winddown affairs debtors upon dissolution upon dissolution resolve satisfy extent allowed residual winddown claims defined activities guc trust administrator overseen fti consulting inc solely capacity monitor “guc trust monitor” 2 plan liquidation march 31 2011 date plan became effective “effective date” approximately 29771 million allowed general unsecured claims addition effective date approximately 8154 million disputed general unsecured claims reflects liquidated disputed claims bankruptcy court ordered distribution reserve unliquidated disputed claims “disputed general unsecured claims” reflect potential term loan avoidance action claims total aggregate amount general unsecured claims allowed disputed asserted debtors inclusive potential term loan avoidance action claims approximately 39425 million effective date pursuant guc trust agreement holders disputed general unsecured claims become entitled receive distribution new gm securities guc trust extent disputed general unsecured claims become allowed general unsecured claims guc trust agreement guc trust administrator authority file objections disputed general unsecured claims bankruptcy court extended time guc trust may object disputed general unsecured claims administrative expenses defined plan september 16 2014 date may extended application bankruptcy court claims may prosecuted alternative dispute resolution proceedings including mediation arbitration “adr proceedings” appropriate march 31 2014 approximately 795 million disputed general unsecured claims amount significantly reduced approximately 8154 million effective date extent portion disputed general unsecured claim deemed invalidor “disallowed”by order bankruptcy court order tribunal presiding adr proceeding applicable settlement guc trust portion disputed general unsecured claim disallowed entitled distribution guc trust subject appeal rights claimant however extent disputed general unsecured claim fully resolved resolution results portion original disputed general unsecured claim deemed validor “allowed”by order bankruptcy court order tribunal presiding adr proceeding applicable settlement guc trust portion disputed general unsecured claim allowed considered allowed general unsecured claim effective date claims “resolved disputed claims” one avoidance action captioned official committee unsecured creditors motors liquidation co v jpmorgan chase bank na et al adv pro no0900504 bankr sdny july 31 2009 “term loan avoidance action” commenced prior statutory deadline commencing actions term loan avoidance action commenced official committee unsecured creditors motors liquidation company “committee” seeks return approximately 15 billion transferred debtors funds advanced commencement debtors’ chapter 11 cases united states treasury export development canada together “dip lenders” consortium prepetition lenders pursuant terms order bankruptcy court december 15 2011 accordance plan upon dissolution mlc term loan avoidance action transferred avoidance action trust defined extent wilmington trust company individual capacity solely capacity trustee trust administrator avoidance action trust “avoidance action trust administrator” successful obtaining judgment defendants term loan avoidance action allowed general unsecured claims arise amount transfers actually avoided disgorged pursuant thereto general unsecured claims “term loan avoidance action claims” together resolved disputed claims “resolved allowed claims” still unclear whether amounts actually avoided pursuant term loan avoidance action would benefit holders allowed general unsecured claims committee taken position dip lenders entitled proceeds term loan avoidance action interests trust established action plan “avoidance action trust” b holders allowed general unsecured claims exclusive right receive proceeds term loan avoidance action exclusive beneficiaries avoidance action trust respect thereto litigation respect issues ongoing term loan avoidance action currently pending us court appeals second circuit rights recoveries term loan avoidance action still disputed event however funds reclaimed prepetition lenders transferred otherwise benefit guc trust distributed holders guc trust units guc trust distributable assets pursuant terms plan bankruptcy court authorized distribution 150 million shares new gm common stock issued new gm warrants acquire 136363635 newly issued shares new gm stock exercise price set 1000 per share “new gm series warrants” warrants acquire 136363635 newly issued shares new gm stock exercise price set 1833 per share “new gm series b warrants” securities “new gm securities” record ownership new gm securities held mlc benefit guc trust dissolution mlc december 15 2011 time record ownership transferred guc trust funding guc trust costs liquidation guc trust incurred continue incur certain costs liquidate trust assets implement plan effective date pursuant plan mlc contributed approximately 527 million guc trust held maintained guc trust administrator “guc trust administrative fund” purpose paying certain fees expenses including certain tax obligations incurred guc trust including fees guc trust administrator guc trust monitor fees expenses professionals retained guc trust reporting costs defined “winddown costs” march 31 2014 remaining administrative fund aggregated 116 million consisting cash equivalents marketable securities aggregating 106 million prepaid expenses 10 million amount approximately 80 million separately designated satisfaction certain costs liabilities guc trust reporting costs defined 36 million available winddown costs funds must exhausted prior use administrative cash defined purposes cash investments guc trust administrative fund remain winding conclusion guc trust must returned dip lenders guc trust agreement authorized guc trust liquidate approximately 57 million new gm securities “initial reporting cash” shortly effective date purposes funding certain fees expenses guc trust “reporting costs” including directly indirectly relating reports prepared filed guc trust pursuant applicable rules regulations interpretations securities exchange commission ii transfer registration transfer certification guc trust units iii application committee defined internal revenue service private letter ruling regarding tax treatment guc trust holders allowed general unsecured claims respect distribution new gm securities guc trust agreement provides administrative fund may utilized satisfy reporting costs guc trust agreement provides guc trust administrator determines administrative fund sufficient satisfy current projected winddown costs initial reporting cash sufficient satisfy current projected reporting costs guc trust administrator approval guc trust monitor authorized set aside new gm securities distribution purposes guc trust administrator may liquidate “set aside” new gm securities fund winddown costs andor reporting costs required approval bankruptcy court new gm securities set aside andor sold manner available distribution beneficiaries guc trust units cash proceeds sale including related dividend cash classified “other administrative cash” guc trust agreement although liquidation set aside new gm securities reflected financial statements guc trust time liquidation setting aside new gm securities including dividend cash reflected statement net assets liquidation financial statements guc trust separate process setting aside new gm securities satisfy unfunded projected costs expenses guc trust matter financial reporting guc trust records reserve statement net assets liquidation source funding addressed therein expected costs liquidation reasonable basis estimation reason among others direct relationship amount reserve reflected statement net assets liquidation value new gm securities set aside current projected costs expenses guc trust adjustments reserve expected costs liquidation reported statement net assets liquidation recorded reasonable basis estimation expected incurrence additional costs reduction expected costs information regarding reserves expected costs liquidation reflected statement net assets liquidation see note 8 bankruptcy court previously approved march 2012 december 2012 sale new gm securities fund current projected costs expenses guc trust march 2012 bankruptcy court order also authorized sale new gm securities purpose funding certain fees costs expenses avoidance action trust described heading “funding avoidance action trust” march 31 2013 sales new gm securities fund projected reporting costs winddown costs calendar year 2013 aggregated approximately 502 million including initial reporting cash amounts comprised part guc trust’s administrative cash securities sold aggregated 902228 shares new gm common stock 820205 new gm series warrants 820205 new gm series b warrants subsequent sales securities fund winddown costs reporting costs march 31 2014 administrative cash aggregated 132 million extent administrative cash ultimately required held guc trust time dissolution remaining administrative cash distributed guc trust holders guc trust units march 31 2014 new gm securities aggregate fair market value date 516 million related dividend cash 02 million set aside projected guc trust fees costs expenses incurred beyond 2014 including 35 million set aside projected income taxes dividends received declared holdings new gm common stock described “funding potential tax liabilities dispositions new gm securities dividends new gm common stock” accordingly new gm securities currently available distribution beneficiaries guc trust units funding potential tax liabilities dispositions new gm securities dividends new gm common stock guc trust subject us federal income tax realized net gains distribution sale shares new gm common stock new gm warrants taxes “taxes distribution” guc trust also subject us federal income tax dividends received new gm common stock held guc trust taxes “dividend taxes” guc trust agreement provides administrative fund may utilized satisfy taxes distribution dividend taxes guc trust administrator authorized approval guc trust monitor set aside distribution certain numbers new gm securities liquidated proceeds along related dividend cash would sufficient satisfy potential taxes distribution dividend taxes new gm securities set aside dividend taxes included setaside winddown costs described “funding guc trust costs liquidation” guc trust administrator may liquidate “set aside” new gm securities fund taxes distribution dividend taxes approval guc trust monitor respect taxes distributions without necessity obtaining approval bankruptcy court new gm securities set aside subsequently sold manner available distribution beneficiaries guc trust units cash proceeds sale along related dividend cash classified “other administrative cash” guc trust agreement new gm securities set aside included holdings new gm securities accompanying statement net assets liquidation event setaside new gm securities sold fund taxes distribution dividend taxes proceeds sale would reflected cash equivalents andor marketable securities expended pay taxes distribution dividend taxes setaside new gm securities related dividend cash available distribution corresponding liability reserve related set aside assets reflected statement net assets liquidation financial statements guc trust year ended march 31 2014 guc trust administrator reviewed current potential taxes distribution result review guc trust administrator determined new gm securities aggregate fair market value march 31 2014 5363 million related dividend cash 22 million set aside potential taxes distribution based 1 guc trust’s method calculating potential net gains distributions sales new gm securities reduced carryforward net operating capital losses future deductible expenses march 31 2014 2 guc trust’s method converting potential tax liability number securities set aside new gm securities currently available distribution beneficiaries guc trust units guc trust administrator intends continue reevaluate numbers new gm securities set aside quarterly basis previously disclosed quarter ended september 30 2013 guc trust made determination file us federal income tax returns taking position beneficial ownership substantial majority new gm securities transferred mlc guc trust march 31 2011 tax basis new gm securities determined reference value securities date instead december 15 2011 record ownership remaining new gm securities still held mlc transferred mlc guc trust remaining substantial minority new gm securities transferred mlc guc trust guc trust determined transfer beneficial ownership occurred dates tax basis determined reference value securities dates subsequently guc trust filed us federal income tax return year ended march 31 2013 internal revenue service using new tax position described new tax position resulted increased tax basis new gm securities prior tax position therefore reduced taxable gains increased taxable losses distributions sales new gm securities since march 31 2011 new tax position sustained examination internal revenue service date hereof however guc trust believes based available evidence consultation guc trust professionals likely new tax position sustained examination internal revenue service based technical merits position accordingly new tax position reflected amounts recognized current deferred income tax liabilities income tax benefit provision guc trust’s financial statements since september 30 2013 contrast conservative measure calculation “set aside” new gm securities potential taxes distribution utilizes prior tax position rather new tax position calculation “set aside” new gm securities potential taxes distribution reflect new tax position unless new tax position sustained examination internal revenue service liability guc trust taxes distribution otherwise finally determined accordance section 505b bankruptcy code applicable income tax returns including guc trust’s us federal income tax returns year ended march 31 2014 subsequent years funding avoidance action trust based analysis avoidance action trust potential funding sources guc trust administrator conjunction avoidance action trust administrator determined would best interest holders allowed general unsecured claims fund certain fees costs expenses avoidance action trust subject approval bankruptcy court march 2012 bankruptcy court approved sale new gm securities aggregating approximately 137 million transfer sales proceeds avoidance action trust funding sale occurred march 2012 comprising 269422 shares new gm common stock 244929 new gm series warrants 244929 new gm series b warrants sales proceeds transferred avoidance action trust may 2012 residual winddown claims costs upon dissolution debtors occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining disputed administrative expenses priority tax claims priority nontax claims secured claims “residual winddown claims” december 15 2011 plan debtors transferred guc trust amount cash necessary “residual winddown assets” satisfy ultimate allowed amount residual winddown claims including certain litigation defense costs related term loan avoidance action “avoidance action defense costs” estimated debtors costs fees expenses relating satisfying resolving residual winddown claims “residual winddown costs” residual winddown assets initially aggregated approximately 428 million amount consisted approximately 400 million cash including approximately 14 million payment avoidance action defense costs transferred benefit approximately 28 million prepaid expenses residual winddown costs residual winddown claims less residual winddown assets excess funds returned dip lenders time guc trust administrator determines residual winddown assets adequate satisfy residual winddown claims including actual amount avoidance action defense costs residual winddown costs satisfied administrative cash remaining administrative cash guc trust administrator authorized guc trust monitor approval set aside bankruptcy court approval sell new gm securities cover shortfall extent new gm securities set aside sold obtain funding complete winddown debtors securities available distribution beneficiaries guc trust therefore amount residual winddown claims residual winddown costs could reduce assets guc trust available distribution although sale set aside new gm securities would reflected financial statements guc trust period sale setting aside new gm securities related dividend cash would reflected statement net assets liquidation financial statements guc trust guc trust concluded affairs funds remaining obtained sale new gm securities fund winddown process resolution satisfaction residual winddown claims distributed holders guc trust units amount avoidance action defense costs incurred date exceeds corresponding cash 14 million received guc trust mlc dissolution date approximately 07 million result new residual winddown claims arisen amount excess expected additional avoidance action defense costs incurred additional residual winddown claims arise paid remaining residual winddown assets following depletion assets administrative cash sale new gm securities march 31 2014 305 million residual winddown assets held guc trust recorded cash equivalents marketable securities assets deposits accompanying statement net assets liquidation comparison approximately 131 million residual winddown claims assets march 31 2014 subject increase new residual winddown claims expected arise avoidance action defense costs addition residual winddown assets guc trust also received dissolution date approximately 34 million cash mlc purposes funding 1 14 million respect certain costs fees expenses payable plan indenture trustees fiscal paying agents previously outstanding debt mlc indenture trustee fiscal paying agent costs 2 20 million respect reporting costs funds received credited reserve expected costs liquidation unused portion funds designated indenture trustee fiscal paying agent costs must returned dip lenders available distribution holders guc trust units winding conclusion guc trust march 31 2014 funds designated indenture trustee fiscal paying agents costs held guc trust approximated 05 million recorded cash equivalents accompanying statement net assets liquidation 3 basis presentation significant accounting policies liquidation basis accounting guc trust exists solely purposes described note 1 finite life accordingly guc trust prepared accompanying financial statements liquidation basis accounting accordance accounting principles generally accepted united states america us gaap liquidation basis accounting prescribed financial accounting standards board fasb accounting standards codification assets stated estimated net realizable value nondiscounted amount cash asset expected converted liquidation period liabilities continue recognized amount required us gaap remeasured reflect anticipation entity legally released obligation additionally liquidation basis accounting reserve established estimated costs expected incurred liquidation period costs accrued reasonable basis estimation estimates periodically reviewed adjusted appropriate valuation assets net realizable value reserves residual winddown claims reserves expected liquidation costs represent estimates based present facts circumstances known guc trust administrator subject change described beneficiaries guc trust future extent liquidating distributions yet paid current holders allowed general unsecured claims future current holders guc trust units “trust beneficiaries” disputed general unsecured claims resolved allowed thereby become allowed general unsecured claims holders thereof become entitled receive liquidating distributions new gm securities related dividend cash guc trust units pro rata amount claims upon occurrence guc trust incurs obligation distribute securities accordingly liquidating distributions payable recorded fair value new gm securities related dividend cash end period disputed general unsecured claims resolved allowed general unsecured claims similarly extent potential term loan avoidance action claims defined arise would become allowed manner described note 2 liquidating distributions payable would recorded new gm securities related dividend cash fair value would become distributable holders term loan avoidance action claims upon occurrence prior resolution allowance disputed general unsecured claims potential term loan avoidance action claims liabilities recorded conditional obligations associated disputed general unsecured claims rather beneficial interests trust beneficiaries residual assets guc trust reflected net assets liquidation guc trust accompanying financial statements liquidation basis accounting guc trust presents two principal financial statements statement net assets liquidation statement changes net assets liquidation addition although required liquidation basis accounting guc trust also presents statement cash flows accordance requirements guc trust agreement fiscal year guc trust’s fiscal year begins april 1 ends following march 31 guc trust created march 30 2011 effective date plan march 31 2011 financial reporting purposes guc trust assumed established april 1 2011 received initial funding april 1 2011 cash equivalents cash equivalents consist amounts held bank accounts money market funds marketable securities marketable securities consist short term investments corporate commercial paper municipal government commercial paper variable demand notes guc trust valued securities fair value based carrying value municipal corporate commercial paper carrying value approximates fair value par value variable demand notes par value equals fair value holdings new gm securities dividends received new gm common stock holdings new gm securities represent guc trust’s holdings new gm securities held future distribution respect allowed general unsecured claims guc trust units include amounts set aside distribution fund estimated projected winddown reporting costs including projected dividend taxes potential taxes distribution described note 2 securities held consist shares new gm common stock new gm warrants described notes 1 6 guc trust valued holdings securities fair value based quoted market prices last trading day fiscal year dividends holdings new gm common stock recorded received accrued record date declared unpaid dividends future declared dividends new gm common stock required applied purpose new gm common stock dividends relate shares new gm common stock distributed holders subsequently resolved allowed claims guc trust units dividends relating shares also distributed holders however shares new gm common stock sold guc trust accordance guc trust agreement fund costs liabilities guc trust case dividends relating shares applied costs liabilities guc trust like cash proceeds sale shares new gm common stock maintained administrative cash dividends applied purpose new gm common stock references new gm common stock new gm securities set aside distribution reserved sold understood include dividends relating new gm common stock unless expressly indicated otherwise amount cash equivalents held guc trust relates dividends received guc trust new gm common stock held guc trust referred dividend cash assets deposits assets deposits consist principally prepaid insurance prepaid expenses retainers professionals accounts payable liabilities accounts payable liabilities represent amounts due professionals service providers vendors services rendered goods received end period income taxes guc trust considered “disputed ownership fund” pursuant treasury regulation section 1468b9 assets transferred guc trust passive investments guc trust taxed qualified settlement fund qsf pursuant treasury regulation section 1468b9c1ii qsf tax status guc trust approved internal revenue service private letter ruling issued march 2 2011 general qsf considered c corporation pays federal income tax using trust income tax rates modified gross income modified gross income includes gross income pursuant internal revenue code section 61 less administrative expenses certain losses sale exchange worthlessness property net operating losses general disputed ownership fund taxed qsf recognize gross income assets transferred therefore guc trust recognized gross income transfer assets mlc guc trust currently expected generate gross income form interest income dividends new gm common stock recognize gains andor losses upon disposition shares new gm common stock new gm warrants holds reduced administrative expenses accumulated net operating capital losses compute modified gross income year ended march 31 2014 guc trust made determination file us federal income tax returns taking tax position beneficial ownership substantial majority new gm securities transferred mlc guc trust march 31 2011 tax basis new gm securities determined reference value securities date instead december 15 2011 record ownership remaining new gm securities still held mlc transferred mlc guc trust accordingly guc trust filed us federal income tax returns year ended march 31 2013 internal revenue service using new tax position new tax position however date hereof sustained examination internal revenue service guc trust taxable federal income tax purposes current income tax liability asset recognized estimated taxes payable receivable year deferred tax liabilities assets recognized estimated future tax effects temporary differences financial reporting tax accounting deferred tax assets reviewed recoverability valuation allowances provided necessary guc trust subject state income taxes current law accordingly current deferred state income tax liabilities assets recorded guc trust recognizes tax benefit uncertain tax position likely tax position sustained examination taxing authority based technical merits position guc trust’s federal income tax returns years ended march 31 2012 2013 longer subject examination result application section 505b bankruptcy code however net operating capital loss carryovers generated years ended march 31 2012 2013 could subject examination internal revenue service subsequent years losses utilized march 31 2014 known items would result significant accrual uncertain tax positions reserves residual winddown claims residual winddown costs upon dissolution mlc occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining residual winddown claims date dissolution debtors transferred guc trust cash amount necessary satisfy ultimate allowed amount residual winddown claims residual winddown costs estimated debtors residual winddown claims residual winddown costs less cash amount transferred debtors excess funds returned dip lenders reserves expected costs liquidation basis accounting guc trust required estimate accrue costs associated implementing plan distributing guc trust’s distributable assets costs described winddown costs reporting costs note 2 consist principally professional fees costs governance administrative expenses amounts may vary significantly due among things time effort required complete distributions plan guc trust recorded reserves expected costs liquidation represent estimated costs incurred remaining liquidation period guc trust reasonable basis estimation amount liquidation costs ultimately incurred depends period time extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities march 31 2014 remaining liquidation period estimated probabilityweighted basis guc trust believes appropriate measurement basis circumstances reasonably possible guc trust’s estimates regarding costs remaining liquidation period could change near term guc trust incurs costs reserves released offset costs incurred liability service provider recognized accounts payable accrued expense paid process recording reserves matter financial reporting separate distinct process new gm securities including related dividend cash set aside distribution purposes funding estimated projected winddown reporting costs potential taxes distribution described note 2 use estimates preparation financial statements liquidation basis conformity us gaap requires use estimates assumptions affect reported amounts assets liabilities estimates subject known unknown risks uncertainties factors could materially impact amounts reported disclosed financial statements related footnotes significant estimates include anticipated amounts timing future cash flows expected liquidation costs residual winddown claims fair value marketable securities fair value new gm warrants held mlc benefit guc trust april 1 2011 actual results could differ estimates new accounting standard april 2013 fasb issued accounting standards update 201307 liquidation basis accounting amended fasb accounting standards codification provides guidance entity apply liquidation basis accounting addition guidance establishes principles recognition measurement assets liabilities requirements financial statements prepared using liquidation basis accounting provisions accounting standards update effective beginning april 1 2014 guc trust provisions require income cash expected received liquidation period estimated accrued extent reasonable basis estimation exists respect dividends new gm common stock held guc trust dividends recorded received accrued record date declared unpaid dividends accompanying financial statements guc trust yet determined impact adoption provisions financial statements 4 net assets liquidation description guc trust agreement plan described fully note 1 beneficiaries guc trust future extent liquidating distributions yet paid current holders allowed general unsecured claims future current holders guc trust units “trust beneficiaries” certain assets guc trust reserved funding expected costs liquidation potential tax liabilities available trust beneficiaries assets guc trust primarily holdings new gm securities described notes 1 6 available distributed trust beneficiaries “guc trust distributable assets” accordance plan amounts net assets liquidation presented accompanying statements net assets liquidation march 31 2014 2013 correspond amounts guc trust distributable assets march 31 2014 2013 trust units described note 1 holder allowed general unsecured claim retain contingent right receive pro rata basis additional shares new gm common stock new gm warrants extent shares new gm common stock new gm warrants required satisfaction previously disputed general unsecured claims liquidation payment expenses tax liabilities guc trust certain cash remaining dissolution guc trust guc trust issues units representing contingent rights “guc trust units” rate one guc trust unit per 1000 allowed general unsecured claims holder allowed general unsecured claim subject rounding pursuant guc trust agreement connection initial recognition allowed general unsecured claim guc trust makes quarterly liquidating distributions holders guc trust units extent certain previously disputed general unsecured claims asserted debtors’ estates either disallowed otherwise resolved favorably guc trust thereby reducing amount guc trust assets reserved distribution respect asserted claims amount excess guc trust distributable assets defined guc trust agreement end relevant quarter exceeds thresholds set forth guc trust agreement following presents changes years ended march 31 2014 2013 2012 numbers guc trust units outstanding guc trust obligated issue 1 1644941 guc trust units issued year ended march 31 2014 1550000 related special nova scotia distribution applicable nova scotia settlement described note 5 2 number guc trust units issuable time represents guc trust units issuable respect allowed general unsecured claims newly allowed fiscal quarter 3 number guc trust units outstanding time represents guc trust units issued respect allowed general unsecured claims allowed prior periods including guc trust units held guc trust benefit holders allowed general unsecured claims yet supplied information required guc trust order effect initial distribution entitled b governmental entities precluded applicable law receiving distributions guc trust units new gm securities allowed disputed claims total cumulative pro rata liquidating distributions ultimately received trust beneficiaries dependent upon current amount allowed general unsecured claims final resolution outstanding disputed general unsecured claims potential term loan avoidance action claims described note 2 disputed general unsecured claims march 31 2014 2013 reflect claim amounts originally filed amounts court ordered distribution “set aside” certain claims filed without claim amount adjustments ordered court permitted plan disputed general unsecured claims may settle amounts differ significantly amounts differ significantly historical pattern claims settled allowed proportion claims resolved disallowed described note 3 prior resolution allowance disputed general unsecured claims potential term loan avoidance action claims liabilities recorded conditional obligations associated disputed general unsecured claims liquidating distributions payable recorded fair value new gm securities distributed end period disputed general unsecured claims resolved allowed general unsecured claims similarly extent potential term loan avoidance action claims arise would become allowed manner described note 2 liquidating distributions payable would recorded new gm securities fair value would become distributable holders term loan avoidance action claims upon occurrence following table presents summary allowed disputed general unsecured claims term loan avoidance action claims years ended march 31 2014 2013 1 maximum amount unresolved claims represents sum disputed general unsecured claims term loan avoidance action claims 2 total claim amount represents sum allowed general unsecured claims maximum amount unresolved claims october 21 2013 bankruptcy court entered order “nova scotia order” approving settlement agreement “nova scotia settlement” relating claims arising 8375 guaranteed notes due december 7 2015 8875 guaranteed notes due july 10 2023 case issued 2003 general motors nova scotia finance company “nova scotia claims” pursuant nova scotia settlement nova scotia claims reduced allowed aggregate amount 155 billion result december 2 2013 accordance nova scotia settlement nova scotia order guc trust made distribution solely holders allowed nova scotia claims consisting aggregate 6174015 shares new gm common stock 5612741 new gm series warrants 5612741 new gm series b warrants 1550000 guc trust units “special nova scotia distribution” addition december 23 2013 accordance nova scotia settlement nova scotia order guc trust made special distribution excess guc trust distributable assets holders guc trust units consisting 6735070 shares new gm common stock 6122789 new gm series warrants 6122789 new gm series b warrants “special excess distribution” 5 liquidating distributions liquidating distributions years ended march 31 2014 2013 2012 consisted following distributions year ended march 31 2014 consisted 1 special nova scotia distribution 2 special excess distribution 3 distributions holders resolved disputed claims exclusive nova scotia distribution 4 distributions holders allowed general unsecured claims previously failed fulfill informational requirements distribution established accordance guc trust agreement subsequently successfully fulfilled information requirements see note 4 additional information regarding special nova scotia distribution special excess distribution distributions year ended march 31 2013 consisted distributions 1 holders resolved disputed claims 2 holders allowed general unsecured claims previously failed fulfill informational requirements distribution established accordance guc trust agreement subsequently successfully fulfilled information requirements distributions year ended march 31 2012 included distributions two distributions respect outstanding guc trust units guc trust obligated march 31 2014 2013 distribute 575278 288600 shares respectively new gm stock 522865 262306 respectively new gm series warrants 522865 262306 respectively new gm series b warrants aggregate following 1 holders resolved disputed claims 2 certain holders allowed general unsecured claims satisfied certain informational requirements necessary receive securities 3 excess distributions holders guc trust units march 31 2014 addition march 31 2014 2013 cash 02 million 06 million respectively distributable governmental entities precluded applicable law receiving distributions new gm securities distributions lieu fractional shares warrants dividend cash associated new gm common stock guc trust obligated distribute march 31 2014 6 holdings new gm securities march 31 2014 2013 holdings new gm securities fair value consisted following described note 5 march 31 2014 2013 guc trust accrued liquidating distributions payable 421 million 166 million respectively respect new gm securities cash 02 million 06 million respectively distributable result numbers new gm securities reflected include shares warrants liquidating distributions pending march 31 2014 2013 securities distributions pending aggregated 575278 288600 shares new gm common stock respectively 522865 262306 series warrants respectively 522865 262306 series b warrants respectively march 31 2014 number common stock shares warrants table also includes new gm securities aggregating 516 million excluding related dividend cash reserved set aside projected guc trust fees costs expenses incurred beyond 2014 including 35 million projected dividend taxes 5363 million excluding related dividend cash new gm securities reserved set aside potential taxes distribution march 31 2013 number common stock shares warrants table also includes new gm securities aggregating 410 million reserved set aside projected guc trust fees costs expenses incurred beyond 2013 4073 million new gm securities reserved set aside potential taxes distribution result march 31 2014 2013 numbers new gm securities table include aggregate 8072042 8092231 shares new gm common stock respectively 7338194 7356545 new gm series warrants respectively 7338194 7356545 new gm series b warrants respectively set aside set forth aggregate number fair value shares warrants pending distribution reserved set aside available distribution march 31 2014 2013 7 fair value measurements accounting standards require certain assets liabilities reported fair value financial statements provide framework establishing fair value framework determining fair value based hierarchy prioritizes inputs valuation techniques used measure fair value trust’s cash equivalents marketable securities holdings new gm securities liquidating distributions payable presented provided hierarchy level 1in general fair values determined level 1 inputs use quoted prices active markets identical assets liabilities guc trust ability access level 2fair values determined level 2 inputs use inputs observable either directly indirectly level 2 inputs include quoted prices similar assets liabilities active markets inputs interest rates yield curves observable commonly quoted intervals level 3level 3 inputs unobservable inputs including inputs available situations little market activity related asset liability level 3 fair value measurements based primarily management’s estimates using pricing models discounted cash flow methodologies similar techniques taking account characteristics asset liability guc trust assets liabilities measured level 3 inputs march 31 2014 2013 instances inputs used measure fair value fall different levels fair value hierarchy fair value measurements entirety categorized based lowest level input significant valuation guc trust’s assessment significance particular inputs fair value measurements requires judgment considers factors specific asset liability guc trust also holds financial instruments measured fair value recurring basis including accounts payable liabilities fair value liabilities approximates carrying amounts accompanying financial statements due short maturity instruments following table presents information guc trust’s assets liabilities measured fair value recurring basis march 31 2014 2013 valuation techniques used guc trust determine fair values following descriptions valuation methodologies used assets liabilities measured fair value • due shortterm liquid nature fair value cash equivalents approximates carrying value • holdings new gm securities valued closing prices reported active market securities traded • marketable securities include municipal commercial paper variable demand notes corporate commercial paper municipal variable demand notes trade daily par value therefore fair value equal par value due short term maturities fair value municipal corporate commercial paper approximates carrying value • liquidating distributions payable valued closing prices new gm securities reported active market securities traded guc trust’s policy recognize transfers levels fair value hierarchy actual date event change circumstances caused transfer transfers years ended march 31 2014 2013 8 reserves expected costs liquidation residual winddown claims following summary activity reserves expected costs liquidation years ended march 31 2014 2013 2012 year ended march 31 2014 estimates expected winddown costs estimates expected reporting costs decreased 38 million 41 million respectively year ended march 31 2013 estimates expected winddown costs estimates expected reporting costs increased 52 million 123 million respectively year ended march 31 2012 estimates expected winddown costs estimates expected reporting costs increased 324 million 206 million respectively revisions estimates recorded reductions additions reserves expected costs liquidation years estimates expected winddown costs year ended march 31 2013 reflect execution letter agreement dip lenders providing relief certain restrictions utilization winddown assets guc trust recorded reserves expected costs liquidation represent amounts expected incurred estimated remaining liquidation period guc trust reasonable basis estimation amount liquidation costs ultimately incurred depends time period extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities march 31 2014 recorded reserves expected costs liquidation reflect estimated costs remaining liquidation period extending december 31 2016 estimated probabilityweighted basis permitted us gaap guc trust believes appropriate measurement basis circumstances remaining liquidation period dependent predominantly estimate remaining period time resolution term loan avoidance action well certain additional estimated time necessary wind guc trust addition certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued reasonably possible guc trust’s estimates regarding costs remaining liquidation period could change near term following summary activity reserves residual winddown claims years ended march 31 2014 2013 2012 9 income tax benefit provision income tax benefit provision statements changes net assets liquidation years ended march 31 2014 2013 determined computing deferred tax provisions using guc trust’s statutory tax rate 396 became effective april 1 2013 year ended march 31 2012 guc trust’s statutory tax rate 35 applied current tax benefit provision years due cumulative net operating capital losses income taxes paid guc trust components income tax benefit provision statements changes net assets liquidation years ended march 31 2014 2013 2012 follows deferred taxes accompanying statement net assets liquidation march 31 2014 2013 comprised following components income tax benefit 1648 million year ended march 31 2014 primarily resulted decrease net deferred tax liability year decrease net deferred tax liability primarily resulted decrease deferred tax liability excess fair value tax basis holdings new gm securities increase deferred tax asset net operating capital loss carryovers offset part establishment valuation allowance net deferred tax assets 712 million decrease deferred tax liability excess fair value tax basis new gm securities increase deferred tax asset net operating capital loss carryovers primarily resulted new tax position taken guc trust’s us federal income tax returns previously disclosed guc trust’s form 10q quarter ended september 30 2013 guc trust made determination file us federal income tax returns taking tax position beneficial ownership substantial majority new gm securities transferred mlc guc trust march 31 2011 tax basis new gm securities determined reference value securities date instead december 15 2011 record ownership remaining new gm securities still held mlc transferred mlc guc trust remaining substantial minority new gm securities transferred mlc guc trust guc trust determined transfer beneficial ownership occurred dates tax basis determined reference value securities dates new tax position resulted increased tax basis new gm securities prior tax position therefore reduced taxable gains increased taxable losses distributions sales new gm securities since march 31 2011 result tax benefit 4116 million net establishment valuation allowance deferred tax assets 1039 million related new tax position recognized financial statements three months ended september 30 2013 benefit recognized guc trust believes based available evidence consultation guc trust professionals likely new tax position amounts reflected guc trust’s income tax returns sustained examination internal revenue service based technical merits position subsequently guc trust filed us federal income tax returns year ended march 31 2013 internal revenue service using new tax position although guc trust’s us federal income tax returns years ended march 31 2012 2013 longer subject examination internal revenue service result application section 505b bankruptcy code new tax position date hereof sustained examination internal revenue service accordingly capital loss carryovers generated years ended march 31 2012 2013 new tax position could subject examination internal revenue service subsequent years losses utilized income tax benefit recognized three months ended september 30 2013 partially offset year ended march 31 2014 primarily increase deferred tax liability associated increase fair value holdings new gm securities since march 31 2013 valuation allowance deferred tax assets referred 1039 million established quarter ended september 30 2013 reversed quarter ended december 31 2013 reversal due anticipated taxable gains exceeding deductible items primarily result utilization capital loss carryovers quarter ended december 31 2013 capital loss carryovers utilized result generation taxable gains distribution new gm securities quarter year ended march 31 2014 guc trust recorded full valuation allowance net deferred tax assets 712 million march 31 2014 due uncertainty whether deferred tax assets realizable realization net deferred tax assets dependent upon generation taxable gains upon distribution sale new gm securities future determinable prior occurrence receipt future dividends new gm common stock held guc trust reasonable basis estimation exist time march 31 2014 guc trust net operating loss carryforwards 845 million begin expire march 2032 capital loss carryforwards 1854 million giving effect new tax position respect tax basis new gm securities described begin expire march 2017 resulting deferred tax asset 1069 million aggregate carryforwards 10 related party transactions addition serving guc trust administrator wilmington trust company continues serve trustee pursuant indentures certain series previously outstanding debt mlc wilmington trust company received continue receive certain customary fees amounts consistent wilmington trust company’s standard rates service bankruptcy court previously approved creation segregated fund purposes funding fees wilmington trust company well indenture trustees fiscal paying agents previously outstanding debt mlc fees wilmington trust company years ended march 31 2014 2013 fees year ended march 31 2012 480000 addition wilmington trust company also entered certain arrangements guc trust pursuant affiliates previously received may future receive reasonable customary fees commissions services capacity guc trust administrator arrangements include provision custodial investment advisory brokerage services guc trust fees commissions charged wilmington trust company affiliates pursuant arrangements consistent standard fees commissions charged wilmington trust company unrelated thirdparties negotiated transactions years ended march 31 2014 2013 2012 total amount fees commissions approximately 53000 147000 210000 respectively item 9 item 8 general motors corporation subsidiaries consolidated statements income years ended december 31 2002 2001 2000 dollars millions except per share amounts general motors corporation subsidiaries total net sales revenues notes 1 2 23 186763 177260 184632 cost sales expenses notes 2 3 153344 144093 145664 selling general administrative expenses 23624 23302 22252 interest expense note 13 7715 8347 9552 total costs expenses 184683 175742 177468 income taxes minority interests 2080 1518 7164 income tax expense note 8 533 768 2393 equity income loss minority interests 189 149 319 net income 1736 601 4452 dividends preference stocks 47 99 110 earnings attributable common stocks 1689 502 4342 basic earnings losses per share attributable common stocks earnings per share attributable 123 par value 337 178 680 earnings per share attributable class h 021 055 056 earnings losses per share attributable common stocks assuming dilution earnings per share attributable 123 par value 335 177 668 earnings per share attributable class h 021 055 reference made notes consolidated financial statements ii21 general motors corporation subsidiaries supplemental information consolidated statements income years ended december 31 2002 2001 2000 dollars millions automotive communications services operations total net sales revenues notes 1 2 23 159737 151491 160627 cost sales expenses notes 2 3 144550 135620 138303 selling general administrative expenses 14993 16043 16246 total costs expenses 159543 151663 154549 interest expense note 13 789 751 815 net expense transactions financing insurance operations note 1 296 435 682 loss income taxes minority interests 891 1358 4581 income tax benefit expense note 8 489 270 1443 equity income loss minority interests 256 79 299 net income loss automotive communications services operations 146 1167 2839 financing insurance operations total revenues 27026 25769 24005 interest expense note 13 6926 7596 8737 depreciation amortization expense note 9 5541 5857 5982 operating expenses 8356 7348 5805 provisions financing insurance losses note 1 3528 2527 1580 total costs expenses 24351 23328 22104 net income transactions automotive communications services operations note 1 296 435 682 income taxes minority interests 2971 2876 2583 income tax expense note 8 1022 1038 950 equity income loss minority interests 67 70 20 net income financing insurance operations 1882 1768 1613 supplemental information intended facilitate analysis general motors corporations businesses 1 automotive communications services operations 2 financing insurance operations reference made notes consolidated financial statements ii22 general motors corporation subsidiaries consolidated balance sheets december 31 2002 2001 assets dollars millions cash equivalents note 1 21449 18555 marketable securities note 4 16825 12069 total cash marketable securities 38274 30624 finance receivables net note 5 134647 109211 accounts notes receivable less allowances 15715 10798 inventories less allowances note 6 9967 10034 deferred income taxes note 8 41649 28239 equipment operating leases less accumulated depreciation note 7 34811 36087 equity net assets nonconsolidated associates 5044 4950 property net note 9 37973 36440 intangible assets net notes 1 10 17954 16927 assets note 11 34748 39102 total assets 370782 322412 liabilities stockholders equity accounts payable principally trade 27452 26197 notes loans payable note 13 201940 166314 postretirement benefits pensions note 14 38187 38393 pensions note 14 22762 10839 deferred income taxes notes 8 12 8964 6690 accrued expenses liabilities note 12 63829 53526 total liabilities 363134 301959 minority interests 834 746 stockholders equity note 17 123 par value common stock outstanding 560447797 558439976 shares 936 932 class h common stock outstanding 958284272 877386595 shares 96 88 capital surplus principally additional paidin capital 21583 21519 retained earnings 10031 9463 subtotal 32646 32002 accumulated foreign currency translation adjustments 2784 2919 net unrealized losses derivatives 205 307 net unrealized gains securities 372 512 minimum pension liability adjustment 23215 9581 accumulated comprehensive loss 25832 12295 total stockholders equity 6814 19707 total liabilities stockholders equity 370782 322412 reference made notes consolidated financial statements ii23 general motors corporation subsidiaries supplemental information consolidated balance sheets december 31 general motors corporation subsidiaries 2002 2001 assets dollars millions automotive communications services operations cash equivalents note 1 13291 8432 marketable securities note 4 2174 790 total cash marketable securities 15465 9222 accounts notes receivable less allowances 5861 5406 inventories less allowances note 6 9967 10034 equipment operating leases less accumulated depreciation note 7 5305 4524 deferred income taxes current assets note 8 11273 7877 total current assets 47871 37063 equity net assets nonconsolidated associates 5044 4950 property net note 9 36152 34908 intangible assets net notes 1 10 14611 13721 deferred income taxes note 8 32759 22294 assets note 11 7323 17274 total automotive communications services operations assets 143760 130210 financing insurance operations cash equivalents note 1 8158 10123 investments securities note 4 14651 11279 finance receivables net note 5 134647 109211 investment leases receivables note 7 35517 33382 assets note 11 34049 28207 net receivable automotive communications services operations note 1 1089 1557 total financing insurance operations assets 228111 193759 total assets 371871 323969 liabilities stockholders equity automotive communications services operations accounts payable principally trade 20169 18297 loans payable note 13 1516 2402 accrued expenses note 12 40976 34090 net payable financing insurance operations note 1 1089 1557 total current liabilities 63750 56346 longterm debt note 13 16651 10726 postretirement benefits pensions note 14 34275 34515 pensions note 14 22709 10790 liabilities deferred income taxes notes 8 12 16789 13794 total automotive communications services operations liabilities 154174 126171 financing insurance operations accounts payable 7283 7900 debt note 13 183773 153186 liabilities deferred income taxes notes 8 12 18993 16259 total financing insurance operations liabilities 210049 177345 total liabilities 364223 303516 minority interests 834 746 stockholders equity note 17 123 par value common stock outstanding 560447797 936 932 558439976 shares class h common stock outstanding 958284272 96 88 877386595 shares capital surplus principally additional paidin capital 21583 21519 retained earnings 10031 9463 subtotal 32646 32002 accumulated foreign currency translation adjustments 2784 2919 net unrealized losses derivatives 205 307 net unrealized gains securities 372 512 minimum pension liability adjustment 23215 9581 accumulated comprehensive loss 25832 12295 total stockholders equity 6814 19707 total liabilities stockholders equity 371871 323969 supplemental information intended facilitate analysis general motors corporations businesses 1 automotive communications services operations 2 financing insurance operations reference made notes consolidated financial statements ii24 general motors corporation subsidiaries consolidated statements cash flows years ended december 31 2002 2001 2000 cash flows operating activities dollars millions net income 1736 601 4452 adjustments reconcile net income net cash provided operating activities depreciation amortization expenses 12938 12908 13411 postretirement benefits pensions net payments 208 1881 799 veba contributions pension expense net contributions 3380 148 128 net change mortgage loans 4376 4241 242 net change mortgage securities 656 777 577 rental fleet vehicle acquisitions 5595 4997 6000 rental fleet vehicle dispositions 4774 6116 6008 change investments miscellaneous assets 6195 1235 538 change operating assets liabilities note 1 4600 101 3229 1081 2682 291 net cash provided operating activities 17109 12985 21445 cash flows investing activities expenditures property 7443 8631 9722 investments marketable securities acquisitions 39386 35130 27119 investments marketable securities liquidations 35688 34352 27171 net change mortgage servicing rights 1711 2075 1084 increase finance receivables 143166 107440 73754 proceeds sales finance receivables 117276 95949 59221 operating leases acquisitions 16624 12938 15415 operating leases liquidations 13994 11892 10085 investments companies net cash acquired 872 1285 6379 note 1 867 1184 2597 net cash used investing activities 41377 26490 34399 cash flows financing activities net decrease increase loans payable 404 20044 7865 longterm debt borrowings 53144 64371 27760 longterm debt repayments 24889 21508 22459 repurchases common preference stocks 97 264 1613 proceeds issuing common stocks 62 100 2792 proceeds sales treasury stocks 19 418 cash dividends paid stockholders 1168 1201 1294 net cash provided financing activities 26667 21872 13051 effect exchange rate changes cash equivalents 495 96 255 net increase decrease cash equivalents 2894 8271 158 cash equivalents beginning year 18555 10284 10442 cash equivalents end year 21449 18555 10284 reference made notes consolidated financial statements ii25 supplemental information intended facilitate analysis general motors corporations businesses 1 automotive communications services operations 2 financing insurance operations reference made notes consolidated financial statements ii26 resolution workers compensation pension postemployment liabilities owed gm delphi automotive systems gm spun 1999 reference made notes consolidated financial statements ii27 general motors corporation subsidiaries notes consolidated financial statements note 1 significant accounting policies principles consolidation consolidated financial statements include accounts general motors corporation domestic foreign subsidiaries 50 owned principally general motors acceptance corporation subsidiaries gmac hughes electronics corporation subsidiaries hughes collectively referred corporation general motors gm general motors share earnings losses associates least 20 voting securities owned included consolidated operating results using equity method accounting except investments gm able exercise significant influence operating financial decisions investee case cost method accounting used gm encourages reference gmac hughes annual reports form 10k period ended december 31 2002 filed separately u securities exchange commission hughes consolidated financial statements included exhibit 99 gm annual report form 10k period ended december 31 2002 certain amounts 2001 2000 reclassified conform 2002 classifications nature operations financial statement presentation supplemental information gm presents primary financial statements fully consolidated basis transactions businesses eliminated corporations consolidated financial statements transactions consist principally borrowings financial services provided financing insurance operations fio automotive communications services operations aco facilitate analysis gm presents supplemental information statements income balance sheets statements cash flows following businesses 1 aco consists design manufacturing marketing cars trucks locomotives heavyduty transmissions related parts accessories well operations hughes 2 fio consists primarily gmac provides broad range financial services including consumer vehicle financing fullservice leasing fleet leasing dealer financing car truck extended service contracts residential commercial mortgage services vehicle homeowners insurance assetbased lending use estimates preparation financial statements preparation financial statements conformity accounting principles generally accepted united states requires management make estimates assumptions affect amounts reported therein due inherent uncertainties involved making estimates actual results reported future periods may differ estimates revenue recognition sales generally recorded products shipped title risks rewards ownership passed services rendered independent dealers third parties provisions dealer customer sales incentives allowances rebates made time vehicle sales incentives allowances rebates related vehicles previously sold recognized reductions sales announced financing revenue recorded terms receivables using interest method income operating lease assets recognized straightline basis scheduled lease terms insurance premiums earned basis related coverage provided terms policies commissions premium taxes costs incurred acquiring new business deferred amortized terms related policies basis premiums earned advertising research development advertising research development productrelated costs charged expense incurred advertising expense 46 billion 2002 43 billion 2001 46 billion 2000 research development expense 58 billion 2002 62 billion 2001 66 billion 2000 ii28 general motors corporation subsidiaries notes consolidated financial statements note 1 significant accounting policies continued depreciation amortization expenditures special tools placed service january 1 2002 amortized using straightline method estimated useful lives expenditures special tools placed service prior january 1 2002 amortized estimated useful lives primarily using units production method replacements special tools reasons changes products charged directly cost sales january 1 2001 corporation adopted straightline method depreciation real estate plants equipment placed service date assets placed service january 1 2001 continue generally depreciated using accelerated methods accelerated methods accumulate depreciation approximately twothirds depreciable cost first half estimated useful lives property groups compared straightline method allocates depreciable costs equally estimated useful lives property groups management believes adoption straightline amortizationdepreciation method special tools placed service january 1 2002 real estate plants equipment placed service january 1 2001 better reflects consistent use assets useful lives effect changes results operations years ended december 31 2002 2001 estimated 7 million 26 million aftertax respectively equipment operating leases depreciated using straightline method term lease agreement difference net book value proceeds sale salvage items disposed accounted charge credit provision depreciation valuation longlived assets gm periodically evaluates carrying value longlived assets held used business goodwill intangible assets indefinite lives assets held sale events circumstances warrant generally conjunction annual business planning cycle carrying value longlived asset considered impaired loss recognized based amount carrying value exceeds fair market value assets held used assets held sale loss increased costs sell fair market value determined primarily using anticipated cash flows discounted rate commensurate risk involved longlived assets disposed sale considered held used disposed goodwill intangible assets prior january 1 2002 goodwill amortized using straightline method 20 40 year periods january 1 2002 corporation implemented statement financial accounting standards sfas 142 goodwill intangible assets ceased amortization method accounting goodwill changed impairmentonly approach accordingly goodwill longer amortized tested impairment least annually gms reported net income earnings per share information exclusive amortization expense recognized related goodwill amortization intangibles indefinite lives required previous accounting standards aftertax basis follows dollars millions except per share amounts yearended december 31 2002 2001 2000 reported net income 1736 601 4452 add goodwill amortization 327 318 amortization intangibles indefinite lives 7 adjusted net income 1736 935 4777 basic earnings losses per share attributable common stocks eps attributable gm 123 par value reported 337 178 680 adjusted 337 211 716 eps attributable gm class h reported 021 055 056 adjusted 021 038 074 earnings losses per share attributable common stocks assuming dilution eps attributable gm 123 par value reported 335 177 668 adjusted 335 210 703 eps attributable gm class h reported 021 055 adjusted 021 038 072 ii29 general motors corporation subsidiaries notes consolidated financial statements note 1 significant accounting policies continued foreign currency transactions translation foreign currency exchange transaction translation losses net taxes included consolidated net income 2002 2001 2000 pursuant sfas 52 foreign currency translation amounted 98 million 147 million 57 million respectively stockbased compensation december 31 2002 permitted sfas 123 accounting stockbased compensation gm applied intrinsic value method recognition measurement accounting principles board opinion 25 apb 25 stock options stockbased employee compensation awards compensation expense related employee stock options reflected net income options granted exercise price equal market value underlying common stock date grant august 2002 gm announced beginning january 1 2003 corporation expense fair market value stock options newly granted employees pursuant sfas 123 following table illustrates effect net income earnings per share compensation cost outstanding unvested stock option stockbased employee compensation awards determined based fair values grant date consistent method prescribed sfas 123 dollars millions except per share amounts yearended december 31 2002 2001 2000 net income reported 1736 601 4452 less stockbased compensation expense determined using fair value based method sfas 123 318 374 327 pro forma net income 1418 227 4125 earnings losses attributable common stocks 123 par value reported 1885 984 3957 pro forma 1687 769 3709 class h reported 196 482 385 pro forma 316 642 306 basic earnings losses per share attributable common stocks 123 par value reported 337 178 680 pro forma 301 139 638 class h reported 021 055 056 pro forma 034 073 045 diluted earnings losses per share attributable common stocks 123 par value reported 335 177 668 pro forma 300 138 626 class h reported 021 055 pro forma 034 073 044 policy warranty provisions estimated expenses related product warranties made time products sold estimates established using historical information nature frequency average cost warranty claims management actively studies trends warranty claims takes action improve vehicle quality minimize warranty claims see note 12 cash equivalents cash equivalents defined shortterm highly liquid investments original maturities 90 days less ii30 general motors corporation subsidiaries notes consolidated financial statements note 1 significant accounting policies continued statement cash flows supplementary information years ended december 31 automotive communications services 2002 2001 2000 operations dollars millions increase decrease cash due changes operating assets liabilities follows accounts receivable 116 111 625 prepaid expenses deferred charges 289 254 66 inventories 350 522 297 accounts payable 861 558 1254 deferred taxes income taxes payable 1921 1444 629 accrued expenses liabilities 5186 1549 955 total 4649 2056 724 cash paid interest income taxes follows interest 1341 892 968 income taxes 1726 1149 2310 2002 aco made investments companies net cash acquired approximately 700 million amount consists primarily gms purchase 421 equity interest gm daewoo auto technology company gm daewoo approximately 251 million gms investments isuzurelated entities 180 million 2001 majority 740 million investments made aco consisted gms purchase additional 10 ownership suzuki motor corporation suzuki approximately 520 million 2000 aco made investments companies net cash acquired approximately 43 billion amount consists primarily gms purchase 20 equity interest fuji heavy industries ltd fuji approximately 13 billion gms acquisition 20 interest fiat auto holdings bv fah 24 billion addition 2000 fiat spa purchased approximately 32 million shares gm 123 par value common stock 24 billion included proceeds issuing common stocks years ended december 31 financing insurance operations 2002 2001 2000 dollars millions increase decrease cash due changes operating assets liabilities follows receivables 3673 1386 726 assets 23 82 29 accounts payable 617 483 3155 deferred taxes liabilities 4218 2940 105 total 49 1955 2505 cash paid interest income taxes follows interest 6639 7239 8511 income taxes 471 694 475 fio made investments companies net cash acquired approximately 180 million 540 million 21 billion 2002 2001 2000 respectively 2001 investments primarily mortgage warehouse lending business 2000 investments primarily commercial factoring business japanese real estate holding company derivative instruments gm party variety foreign exchange rate interest rate commodity forward contracts options entered connection management exposure fluctuations foreign exchange rates interest rates certain commodity prices financial exposures managed accordance corporate policies procedures ii31 general motors corporation subsidiaries notes consolidated financial statements note 1 significant accounting policies continued derivative instruments concluded derivatives recorded fair value consolidated balance sheet effective changes fair value derivatives designated cash flow hedges net investment foreign operation recorded net unrealized gain loss derivatives separate component accumulated comprehensive loss amounts reclassified accumulated comprehensive loss underlying hedged item impacts earnings ineffective changes fair value recorded currently earnings changes fair value derivatives designated fair value hedges recorded currently earnings offset extent derivative effective changes fair value hedged item changes fair value derivatives designated hedging instruments recorded currently earnings new accounting standards april 2002 financial accounting standards board fasb issued sfas 145 rescission fasb statements 4 44 64 amendment fasb statement 13 technical corrections statement eliminates required classification gain loss extinguishment debt extraordinary item income states gain loss evaluated extraordinary classification criteria accounting principles board opinion 30 reporting results operations statement also requires saleleaseback accounting certain lease modifications economic effects similar saleleaseback transactions makes various technical corrections existing pronouncements corporation implemented sfas 145 january 1 2003 management expect statement material impact gms consolidated financial position results operations june 2002 fasb issued sfas 146 accounting costs associated exit disposal activities statement nullifies emerging issues task force eitf issue 943 liability recognition certain employee termination benefits costs exit activity including certain costs incurred restructuring statement requires liability cost associated exit disposal activity recognized liability incurred rather date entitys commitment exit plan establishes fair value objective initial measurement liability corporation implemented sfas 146 january 1 2003 transactions occur december 31 2002 management expect statement material impact gms consolidated financial position results operations december 2002 fasb issued sfas 148 accounting stockbased compensation transition disclosure statement amends sfas 123 accounting stockbased compensation provide alternative methods transition voluntary change fair value based method accounting stockbased employee compensation august 6 2002 pursuant sfas 123 gm announced corporation would expense fair market value stock options newly granted employees beginning january 1 2003 december 2002 fasb issued interpretation 45 guarantors accounting disclosure requirements guarantees including indirect guarantees indebtedness others fin 45 fin 45 requires time company issues guarantee company must recognize initial liability fair value market value obligations assumes guarantee interpretation applicable prospective basis guarantees issued modified december 31 2002 management currently evaluating impact recognizing liabilities gms consolidated financial position results operations fin 45 also contains disclosure provisions surrounding existing guarantees effective financial statements interim annual periods ending december 15 2002 see note 15 january 2003 fasb issued interpretation 46 consolidation variable interest entities fin 46 requires consolidation certain entities considered variable interest entities vies entity considered vie equity investors lack characteristics controlling financial interest capital insufficient permit finance activities without additional subordinated financial support consolidation vie investor required determined investor absorb majority vies expected losses residual returns occur fin 46 provides certain exceptions rules including qualifying spes subject requirements sfas 140 accounting transfers servicing financial assets extinguishments liabilities vies created january 31 2003 must consolidated immediately vies existed prior february 1 2003 must consolidated july 1 2003 gm may required consolidate certain vies previously collectively referred spes business management currently reviewing existing vies may require consolidation however reasonably possible certain vies assets totaling approximately 11 billion established exclusively facilitate gms leasing activities related aco business may require consolidation gm default obligations respect involvement entities gms maximum exposure loss would approximately 11 billion respect fio business vie structures used facilitate various activities gmac including securitization loans mortgage funding investing activities based managements preliminary assessment reasonably possible vies assets totaling approximately 175 billion may require consolidation management considering restructuring alternatives ensure continued nonconsolidation assets absence successful alternatives consolidation vies would effect increasing assets liabilities amount equal assets vies gms exposure loss related entities approximately 32 billion ii32 general motors corporation subsidiaries notes consolidated financial statements continued note 1 significant accounting policies concluded new accounting standards concluded labor force gm worldwide basis concentration labor supply employees working union collective bargaining agreements significant number expire 2003 note 2 asset impairments gm recorded pretax charges income asset impairments 254 million 158 million aftertax 028 per share gm 123 par value common stock 2002 140 million 90 million aftertax 016 per share gm 123 par value common stock 2001 917 million 587 million aftertax 099 per share gm 123 par value common stock 2000 charges components following line items income statement years ended december 31 2002 2001 2000 dollars millions total net sales revenues 315 cost sales expenses 254 140 602 total 254 140 917 2002 pretax charges comprised 113 million 70 million aftertax gm europe gme 141 million 88 million aftertax gm north america gmna charges related writedown equipment associated gmes restructuring initiative implemented first quarter 2002 see note 24 gmna charges relate equipment writedowns associated changes regions production facilities writedown special tools 2001 charges related writedown equipment result announcement closing ste therese quebec assembly plant 2002 writedown certain equipment operating leases determined impaired gmna 2000 pretax charges comprised 572 million 356 million aftertax gmna 345 million 231 million aftertax gme charges related writedown special tools equipment operating leases result phaseout oldsmobile division current model lineup product life cycles come end models longer economically viable reduction production capacity gme including restructuring vauxhall motors limiteds manufacturing operations uk note 3 postemployment benefit costs gm records liabilities termination postemployment benefits paid pursuant union contractual agreements connection closed plants north america gm reviews adequacy continuing need liabilities annual basis conjunction yearend production labor forecasts furthermore gm reviews reasonableness liabilities quarterly basis 2002 gm recognized postemployment benefit liabilities 281 million 174 million aftertax 031 per share gm 123 par value common stock primarily related transfer commercial truck production janesville wisconsin flint michigan janesville charge relates 772 employees included cost sales ii33 general motors corporation subsidiaries notes consolidated financial statements continued note 3 postemployment benefit costs concluded adjustments 159 million 99 million aftertax 018 per share gm 123 par value common stock recorded cost sales primarily result reversal postemployment benefit liabilities employees spring hill tennessee plant reversal recorded due approximately 400 employees included planned production capacity reduction instead absorbed continuing workforce due change plan 2001 gm recognized postemployment benefit liabilities related announced closing ste therese quebec assembly plant 2002 2001 charge relates 1350 employees increased cost sales 137 million 89 million aftertax 016 per share gm 123 par value common stock liability postemployment benefits december 31 2002 totals approximately 613 million relating 11 plants approximately 3400 employees anticipated spending approximately 70 next three years liability postemployment benefits 626 million relating 12 plants approximately 5600 employees december 31 2001 liability postemployment benefits 665 million relating 12 plants approximately 5800 employees december 31 2000 following tables summarize activity december 31 2000 december 31 2002 liability dollars millions balance december 31 2000 665 spending 214 interest accretion 38 additions 137 adjustments balance december 31 2001 626 spending 182 interest accretion 47 additions 281 adjustments 159 balance december 31 2002 613 note 4 marketable securities marketable securities held gm classified availableforsale except certain mortgagerelated securities classified heldtomaturity trading securities unrealized gains losses net related income taxes availableforsale heldtomaturity securities included separate component stockholders equity unrealized gains losses trading securities included income current basis gm determines cost specific identification basis automotive communications services operations investments marketable securities follows dollars millions book fair unrealized cost value gains losses december 31 2002 type security bonds notes securities corporate debt securities 1915 1932 22 5 us government agencies 240 242 2 total marketable securities 2155 2174 24 5 december 31 2001 type security bonds notes securities corporate debt securities 777 790 13 total marketable securities 777 790 13 ii34 general motors corporation subsidiaries notes consolidated financial statements continued note 4 marketable securities concluded debt securities totaling 342 million mature within one year 17 billion mature one five years 27 million mature five ten years 90 million mature ten years proceeds sales marketable securities totaled 261 million 2002 373 million 2001 13 billion 2000 gross gains related sales marketable securities 3 million 3 million 1 million 2002 2001 2000 respectively gross losses related sales marketable securities zero 7 million 12 million 2002 2001 2000 respectively financing insurance operations investments securities follows dollars millions book fair unrealizedunrealized cost value gains losses december 31 2002 type security bonds notes securities united states government agencies 2836 2875 39 states municipalities 599 650 52 1 foreign government securities 479 497 19 1 mortgagebacked securities 2479 2708 292 63 corporate debt securities 1886 1986 110 10 total debt securities availableforsale 8279 8716 512 75 mortgagebacked securities heldtomaturity 305 mortgagebacked securities held trading purposes 5029 4378 651 total debt securities 13613 13399 512 726 equity securities 1224 1252 163 135 total investment securities 14837 14651 675 861 total consolidated marketable securities 16992 16825 699 866 december 31 2001 type security bonds notes securities united states government agencies 615 626 14 3 states municipalities 931 970 43 4 foreign government securities 35 37 2 mortgagebacked securities 2334 2509 203 28 corporate debt securities 1704 1721 43 26 total debt securities availableforsale 5619 5863 305 61 mortgagebacked securities held maturity 375 mortgagebacked securities held trading purposes 4306 3722 584 total debt securities 10300 9960 305 645 equity securities 1215 1319 246 142 total investment securities 11515 11279 551 787 total consolidated marketable securities 12292 12069 564 787 debt securities availableforsale totaling 514 million mature within one year 17 billion mature one five years 13 billion mature five years 10 years 52 billion mature 10 years proceeds sales marketable securities totaled 128 billion 2002 51 billion 2001 35 billion 2000 gross gains related sales marketable securities 402 million 228 million 316 million 2002 2001 2000 respectively gross losses related sales marketable securities 121 million 145 million 148 million 2002 2001 2000 respectively ii35 general motors corporation subsidiaries notes consolidated financial statements continued note 5 finance receivables securitizations finance receivables net finance receivables net included following dollars millions december 31 consumer 2002 2001 retail automotive 77392 66560 residential mortgages 15238 2879 total consumer 92630 69439 commercial automotive wholesale 21462 15580 leasing lease financing 5985 8572 term loans dealers others 5584 5545 commercial industrial 9461 10350 commercial real estate commercial mortgage 621 473 construction 1963 1419 total commercial 45076 41939 total finance receivables loans 137706 111378 allowance financing losses 3059 2167 total consolidated finance receivables net1 134647 109211 1 net unearned income 65 billion 58 billion december 31 2002 2001 respectively finance receivables originated outside united states 234 billion 202 billion december 31 2002 2001 respectively aggregate amounts total finance receivables maturing five years following december 31 2002 follows 2003604 billion 2004256 billion 2005194 billion 2006130 billion 200771 billion 2008 thereafter187 billion actual maturities may differ scheduled due prepayments securitizations finance receivables mortgage loans corporation securitizes automotive mortgage financial assets funding source corporation sells retail finance receivables wholesale loans residential mortgage loans commercial mortgage loans commercial investment securities corporation retains servicing responsibilities subordinated interests securitizations retail finance receivables wholesale loans servicing responsibilities retained majority residential commercial mortgage loan securitizations subordinate interests retained securitizations december 31 2002 weighted average servicing fees gms primary servicing activities 190 basis points 100 basis points 33 basis points 9 basis points outstanding principal balance sold retail finance receivables wholesale loans residential mortgage loans commercial mortgage loans respectively additionally corporation receives rights cash flows remaining investors securitization trusts received contractual payments corporation maintains cash reserve accounts predetermined amounts certain securitization activities unlikely event deficiencies occur cash flows owed investors amounts available cash reserve accounts recorded assets totaled 280 million 937 million 365 million 24 million december 31 2002 retail finance receivable wholesale loan residential mortgage loan commercial mortgage loan securitizations respectively 255 million 893 million 378 million 7 million december 31 2001 respectively ii36 general motors corporation subsidiaries notes consolidated financial statements continued note 5 finance receivables securitizations continued securitizations finance receivables mortgage loans continued following table summarizes pretax gains securitizations certain cash flows received paid securitization trusts sales finance receivables loans completed 2002 2001 2000 retail mortgage loans year ended december 31 finance wholesale millions receivables loans residential commercial pretax gains securitizations 239 619 30 cash flow information proceeds new securitizations 9982 2327 38025 1848 servicing fees received 251 146 268 17 cash flows received retained interests 1120 235 1044 86 purchases delinquent foreclosed assets 299 131 pool buyback cash flows 289 55 714 servicing advances 117 2470 122 repayments servicing advances 117 2352 116 proceeds collections reinvested revolving securitizations 482 104485 retail mortgage loans year ended december 31 finance wholesale millions receivables loans residential commercial pretax gains securitizations 210 966 24 cash flow information proceeds new securitizations 7331 7055 35137 2934 servicing fees received 168 124 256 16 cash flows received retained interests 1160 400 844 60 purchases delinquent forecloed assets 240 34 pool buyback cash flows 270 390 servicing advances 88 1861 95 repayments servicing advances 66 1817 71 proceeds collections reinvested revolving securitizations 81563 364 retail mortgage loans year ended december 31 finance wholesale millions receivables loans residential commercial pretax gains securitizations 14 682 33 cash flow information proceeds ne securitizations 4559 4199 24959 2310 servicing fees received 105 85 212 13 cash flows received retained interest 1550 631 483 44 purchases delinquent foreclosed assets 182 282 pool buyback cash flows 348 servicing advances 75 617 82 repayments servicing advances 66 586 74 proceeds collections reinvested revolving securitizations 50463 pretax gains recognized commercial investment securities 18 million 17 million 7 million years ended december 31 2002 2001 2000 respectively cash proceeds new securitizations commercial investment securities 439 million 643 million 382 million years ended december 31 2002 2001 2000 respectively addition cash flows received retained interests commercial investment securities aggregated 37 million 16 million 2 million years ended december 31 2002 2001 2000 respectively key economic assumptions used measuring estimated fair value retained interests sales completed 2002 2001 dates sales follows retail mortgage loans commercial year ended december 31 finance investment millions receivablesa residentialb commercial securities key assumptions rates per annum annual prepayment rate c 0813 69547 00500 00900 weighted average life years 1526 1345 1078 27164 expected credit losses 00248 0015 0009 discount rate 95120 65135 28374 34239 variable returns 1 month libor interest rate yield curve transferees contractual spread contractual spread retail mortgage loans commercial year ended december 31 finance investment millions receivablesa residentialb commercial securities key assumptions rates per annum annual prepayment rate c 0813 98380 00500 00250 weighted average life years 1518 1764 1293 35149 expected credit losses 00229 0019 0008 discount rate 95120 65135 69547 98195 variable returns 1 month libor interest rate yield curve transferees contractual spread contractual spread fair value retained interests wholesale securitizations approximates cost due shortterm floating rate nature wholesale loans b included within residential mortgage loans home equity loans lines high loantovalue loans residential first second mortgage loans c based weighted average maturity wam finance receivables constant prepayment rate cpr mortgage loans commercial investment securities reserve totaling 127 million 92 million december 31 2002 2001 respectively established expected credit losses sold retail finance receivables ii37 general motors corporation subsidiaries notes consolidated financial statements continued note 5 finance receivables securitizations continued securitizations finance receivables mortgage loans continued table outlines key economic assumptions sensitivity estimated fair value retained interests december 31 2002 immediate 10 20 adverse changes assumptions retail finance mortgage loans commercial receivables investment millions residential commercial securities carrying valuefair value retained interests 1850 b 1661 624 336 weighted average life years 0126 1346 01194 12209 annual prepayment rate 0215 66807 00500 00900 wam cpr impact 10 adverse change 144 1 impact 20 adverse change 267 2 loss assumption b 00248 0041 00368 impact 10 adverse chnnge 13 205 4 5 impact 20 adverse change 26 399 8 9 discount rate 95140 65135 28450 36285 impact 10 adverse change 11 39 14 21 impact 20 adverse change 21 78 27 41 market rate 1336 c impact 10 adverse change 13 33 impact 20 adverse change 26 62 fair value retained interests wholesale securitizations approximates cost due shortterm floating rate nature wholesale receivables b fair value retained interests retail securitizations net reserve expected credit losses totaling 127 million december 31 2002 c forward benchmark interest rate yield curve plus contractual spread represents rate return paid investors sensitivities hypothetical used caution figures indicate changes fair value based 10 variation assumptions generally cannot extrapolated relationship change assumption change fair value may linear also table effect variation particular assumption fair value retained interest calculated without changing assumption reality changes one factor may result changes another may magnify counteract sensitivities additionally corporation hedges interest rate prepayment risks associated certain retained interests effects hedge strategies considered herein expected static pool net credit losses include actual incurred losses plus projected net credit losses divided original balance outstandings comprising securitization pool table displays expected static pool net credit losses based securitizations occurring year loans securitized years ended december 31 2002 2001 2000 retail automotive 04 10 residential mortgage 00248 00229 00217 commercial mortgage 0041 0023 0030 commercial investment securities 00368 00170 0008 static pool losses applicable wholesale finance receivable securitizations due shortterm nature ii38 general motors corporation subsidiaries notes consolidated financial statements continued note 5 finance receivables securitizations concluded securitizations finance receivables mortgage loans concluded following table presents components securitized financial assets managed along quantitative information delinquencies net credit losses total finance amount 60 days receivables net credit loans past due losses december 31 millions 2002 2001 2002 2001 2002 2001 retail automotive 92890 78071 637 358 844 575 residential mortgage 102525 95076 4012 3388 864 305 total consumer 195415 173147 4649 3746 1708 880 wholesale 38877 31807 88 64 15 6 commercial mortgage 18356 16503 350 250 8 1 automotive commercial 22994 25885 317 376 176 281 total commercial 80227 74195 755 690 169 288 total managed portfolio 275642 247342 5404 4436 1877 1168 securitized finance 123337125735 receivable loans held sale 14599 10229 total finance receivables loans 137706 111378 managed portfolio represents finance receivables loans balance sheet securitized excluding securitized finance receivables loans corporation continues service continuing involvement note 6 inventories included following aco dollars millions december 31 2002 2001 productive material work process supplies 4915 5069 finished product service parts etc 6859 6779 total inventories fifo 11774 11848 less lifo allowance 1807 1814 total inventories less allowances 9967 10034 inventories stated generally cost excess market cost approximately 84 us inventories determined lastin firstout lifo method generally cost inventories determined either firstin firstout fifo average cost methods note 7 equipment operating leases corporation significant investments residual values leasing portfolios residual values represent estimate values assets end lease contracts initially recorded based appraisals estimates realization residual values dependent corporations future ability market vehicles prevailing market conditions management reviews residual values periodically determine recorded amounts appropriate ii39 general motors corporation subsidiaries notes consolidated financial statements continued note 7 equipment operating leases concluded automotive communications services operations equipment operating leases included equipment operating leases assets follows dollars millions december 31 2002 2001 equipment operating leases 11070 9864 less accumulated depreciation 1922 1767 net book value 9148 8097 current 5305 4524 noncurrent note 11 3843 3573 net book value 9148 8097 financing insurance operations equipment operating leases included investment leases receivables follows dollars millions december 31 2002 2001 equipment operating leases 33427 36534 less accumulated depreciation 7764 8544 net book value 25663 27990 total consolidated net book value 34811 36087 lease payments received related equipment operating leases maturing five years following december 31 2002 follows aco 2003568 million 2004526 million 2005 502 million 2006 503 million 2007409 million 2008 beyond 19 billion fio 200356 billion 200440 billion 2005 21 billion 2006 511 million 200726 million leases maturing 2007 note 8 income taxes income taxes minority interests included following dollars millions years ended december 31 2002 2001 2000 us income loss 70 1190 3019 foreign income 2010 2708 4145 total 2080 1518 7164 provision income taxes estimated follows dollars millions years ended december 31 2002 2001 2000 income taxes estimated payable currently us federal 48 34 45 foreign 1472 1347 971 us state local 310 9 72 total payable currently 1830 1372 1088 deferred income tax expense credit net us federal 98 246 742 foreign 958 401 281 us state local 241 43 282 total deferred 1297 604 1305 total income taxes 533 768 2393 ii40 general motors corporation subsidiaries notes consolidated financial statements continued note 8 income taxes continued annual tax provisions include amounts considered sufficient pay assessments may result examination prior year tax returns however amount ultimately paid upon resolution issues raised may differ materially amount accrued provisions made estimated us foreign income taxes less available tax credits deductions may incurred remittance corporations share subsidiaries undistributed earnings deemed permanently reinvested taxes provided foreign subsidiaries earnings deemed permanently reinvested 119 billion december 31 2002 131 billion december 31 2001 quantification deferred tax liability associated permanently reinvested earnings practicable reconciliation provision income taxes compared amounts us federal statutory rate follows dollars millions years ended december 31 2002 2001 2000 tax us federal statutory income tax rate 728 485 2507 foreign rates 35 27 134 78 taxes unremitted earnings subsidiaries 13 29 tax credits 40 50 45 raytheon settlement 1 180 esop dividend deduction 2 85 adjustments 84 10 147 total income tax 533 768 2393 1 nontax deductible settlement raytheon company purchase price adjustment related raytheons 1997 merger hughes defense 2 deduction dividends paid gm 123 par value held employee stock ownership portion gm savings plans pursuant economic growth tax relief reconciliation act 2001 deferred income tax assets liabilities 2002 2001 reflect impact temporary differences amounts assets liabilities equity financial reporting purposes bases assets liabilities equity measured tax laws well tax loss tax credit carryforwards temporary differences carryforwards gave rise deferred tax assets liabilities included following dollars millions december 31 2002 2001 deferred tax deferred tax assets liabilities assets liabilities postretirement benefits pensions 14945 15057 pension employee benefit plans 8009 461 753 78 warranties dealer customer allowancesclaims discounts 6047 4376 depreciation amortization 380 4110 412 3671 tax carryforwards 4630 3993 lease transactions 4732 4426 miscellaneous foreign 6175 2007 4465 1463 9483 4365 8048 4948 subtotal 49669 15675 37104 14586 valuation allowances 1309 969 total deferred taxes 48360 15675 36135 14586 net deferred tax asset 32685 21549 ii41 general motors corporation subsidiaries notes consolidated financial statements continued note 8 income taxes concluded deferred tax detail included consolidated balance sheet supplemental information follows 2002 2001 current deferred tax assets 8890 5945 current deferred tax liabilities 5806 4877 non current deferred tax assets 32759 22294 non current deferred tax liabilities 3158 1813 total 32685 21549 tax carryforwards approximately 16 relates alternative minimum tax credit carried forward indefinitely approximately 11 relates us state net operating loss carryforwards expire years 20032022 used however substantial portion us state net operating loss carryforwards expire year 2006 tax credit carryforwards consisting primarily research experimentation credits expire years 20192022 used valuation allowance principally relates us state certain foreign operating loss carryforwards note 9 property net property net follows dollars millions estimated useful lives years december 31 2002 2001 automotive communications services operations land 963 899 buildings land improvements 240 14259 13294 machinery equipment 330 44468 41091 construction progress 3134 4464 real estate plants equipment 62824 59748 less accumulated depreciation 35907 33404 real estate plants equipment net 26917 26344 special tools net 9235 8564 total property net 36152 34908 financing insurance operations equipment 210 2329 2150 less accumulated depreciation 508 618 total property net 1821 1532 total consolidated property net 37973 36440 depreciation amortization expense follows dollars millions years ended december 31 automotive communications services 2002 2001 2000 operations depreciation note 7 4701 4383 4368 amortization special tools 2647 2360 2753 amortization intangible assets note 10 49 308 total 7397 7051 7429 financing insurance operations depreciation note 7 5522 5684 5842 amortization intangible assets note 10 19 173 140 total 5541 5857 5982 ii42 general motors corporation subsidiaries notes consolidated financial statements continued note 10 goodwill acquired intangible assets components corporations acquired intangible assets december 31 2002 follows dollars millions gross accumulated net carrying amortization carrying amount automotive communications services operations amortizing intangible assets patents intellectual property rights 305 1 304 dealer network subscriber base 356 165 191 total 661 166 495 nonamortizing intangible assets license fees orbital slots 432 total acquired intangible assets 927 goodwill 6992 prepaid pension asset note 14 6692 total intangible assets 14611 financing insurance operations amortizing intangible assets customer lists contracts 67 24 43 trademarks 39 12 27 covenants compete 18 total 124 54 70 total acquired intangible assets 70 nonamortizing intangible assets goodwill 3273 total intangible assets 3343 total consolidated intangible assets 17954 aggregate amortization expense existing acquired intangible assets 54 million year ended december 31 2002 estimated amortization expense next five years follows 2003 121 million 2004 78 million 2005 56 million 2006 56 million 2007 56 million changes carrying amounts goodwill year ended december 31 2002 follows dollars millions 1 amount recorded hughes excludes gms purchase accounting adjustments related gms acquisition hughes aircraft company carrying value 57 million goodwill associated purchase reported segment fourth quarter 2002 hughes stand alone financial statements wrote 739 million goodwill impairments directv latin america directv broadband however accordance sfas 142 gm evaluated carrying value goodwill associated hughes directtohome broadcast reporting unit aggregate determined goodwill impaired ii43 general motors corporation subsidiaries notes consolidated financial statements continued note 11 assets automotive communications services operations assets included following dollars millions december 31 2002 2001 equipment operating leases noncurrent note 7 3843 3573 satellites 1080 1243 investments equity securities 582 3408 us prepaid pension benefit cost note 14 1 7006 1817 2044 total assets 7323 17274 investments equity securities december 31 2002 2001 include gms 20 investment common stock fah entity sole shareholder fiat auto spa fiat auto acquired 24 billion 2000 subsequent acquisition european market new vehicles experienced continued decrease volumes manufacturers experienced increased pricing general competitive pressures market conditions factors led deterioration performance fiat auto accordingly gm commenced review appropriate carrying value gms investment fah review completed third quarter 2002 resulted noncash charge 22 billion 14 billion aftertax recorded cost sales expenses aco segment writedown brings carrying value gms investment fah 24 billion 220 million carrying value based gms 20 interest estimated market value fah equity comprises fahs ownership fiat auto including 50 ownership interests purchasing powertrain joint ventures gm fiat auto connection acquisition 20 common stock fah gm acquire ability right appoint directors board fiat auto controlling stockholder fiat spafiat companies fiat group fact officer director employee gm controlled affiliate gm serves director officer employee fiat auto fiat companies fiat group accordingly gm able exercise significant influence operating financial decisions fiat auto investment accounted using cost method see note 15 discussion gms investment alliance fiat balance investments equity securities december 31 2002 2001 also includes fair value investments equity securities classified availableforsale periods presented gms intent hold securities longer one year balances include historical costs 309 million 704 million unrealized gains 76 million 311 million unrealized losses 24 million 38 million december 31 2002 2001 respectively financing insurance operations assets included following dollars millions december 31 2002 2001 mortgage servicing rights 2683 4840 real estate mortgages held sale 14563 10187 mortgage related assets 2555 1791 premiums insurance receivables 1742 1501 deferred policy acquisition costs 584 165 rental car buybacks 377 235 intangible assets note 10 3343 3206 property note 9 1821 1532 cash deposits held securitization trusts 1481 1281 restricted cash collections securitization trusts 1244 447 3656 3022 total assets 34049 28207 ii44 general motors corporation subsidiaries notes consolidated financial statements continued note 11 assets concluded reclassification consolidated balance sheet presentation december 31 2002 2001 aco assets detailed 7323 17274 fio assets detailed 34049 28207 subtotal 41372 45481 equipment operating leases noncurrent note 7 3843 3573 prepaid assets 2383 1932 intangible assets note 10 3343 3206 property note 9 1821 1532 total consolidated assets 34748 39102 note 12 accrued expenses liabilities deferred income taxes automotive communications services operations accrued expenses liabilities deferred income taxes included following dollars millions december 31 2002 2001 dealer customer allowances claims discounts 10388 8080 deferred revenue principally sales vehicles rental companies 10496 8331 policy product warranty recall campaigns 8856 8177 payrolls employee benefits excludes postemployment 4331 3419 unpaid losses selfinsurance programs 1996 2016 taxes 1985 1052 interest 725 904 postemployment benefits including extended disability benefits 1251 2218 9425 8090 total accrued expenses liabilities 49453 42287 pensions 53 49 postretirement benefits 3146 3128 deferred income taxes 5113 2420 total accrued expenses liabilities deferred income taxes 57765 47884 current 40976 34090 noncurrent 16789 13794 total accrued expenses liabilities deferred income taxes 57765 47884 year ended policy product warranty recall campaigns liability december 31 2002 beginning balance 8177 payments 4106 increase liability warranties issued period 4335 adjustments liability preexisting warranties 450 ending balance 8856 ii45 general motors corporation subsidiaries notes consolidated financial statements continued note 12 accrued expenses liabilities deferred income taxes concluded financing insurance operations liabilities deferred income taxes included following dollars millions december 31 2002 2001 unpaid insurance losses loss adjustment expenses unearned insurance premiums 5637 4375 income taxes 1659 483 interest 2741 2428 interest rate derivatives 843 2942 payable securitization trusts 1082 485 2414 526 total liabilities 14376 11239 postretirement benefits 766 750 deferred income taxes 3851 4270 total liabilities deferred income taxes 18993 16259 total consolidated accrued expenses liabilities 63829 53526 total deferred income tax liability note 8 8964 6690 note 13 longterm debt loans payable automotive communications services operations longterm debt loans payable follows dollars millions weightedaverage interest rate december 31 2002 2001 2002 2001 longterm debt loans payable within one year current portion longterm debt 1 27 25 624 64 commercial paper 1 27 129 57 38 892 2209 total loans payable 1516 2402 payable beyond one year 1 60 66 16625 10720 unamortized discount 22 27 mark market adjustment 2 48 33 total longterm debt loans payable 18167 13128 1 weightedaverage interest rates include impact interest rate swap agreements 2 effective january 1 2001 corporation began recording hedged debt fair market value balance sheet due implementation sfas 133 accounting derivative instruments hedging activities longterm debt payable beyond one year december 31 2002 included maturities follows 2004 140 million 2005 16 billion 2006 462 million 2007 130 million 2008 143 billion amounts payable beyond one year consideration foreign currency swaps december 31 2002 included 17 billion currencies us dollar primarily canadian dollar 815 million japanese yen 676 million brazilian real 108 million december 31 2002 2001 longterm debt loans payable aco included 156 billion 109 billion respectively obligations fixed interest rates 26 billion 22 billion respectively obligations variable interest rates predominantly libor considering impact interest rate swap agreements ii46 general motors corporation subsidiaries notes consolidated financial statements continued note 13 longterm debt loans payable continued achieve desired balance fixed variable rate debt gm entered interest rate swap cap agreements notional amounts agreements december 31 2002 aco approximately 17 billion relating swap agreements 988 million pay fixed 745 million pay variable cap agreements existed december 31 2002 notional amounts agreements december 31 2001 aco approximately 17 billion relating swap agreements 239 million pay fixed 15 billion pay variable 90 million relating cap agreements gms aco business maintains substantial lines credit various banks totaled 115 billion december 31 2002 26 billion represented shortterm credit facilities 89 billion represented longterm credit facilities december 31 2001 bank lines credit totaled 110 billion 23 billion represented shortterm credit facilities 87 billion represented longterm credit facilities unused shortterm longterm portions credit lines totaled 18 billion 66 billion december 31 2002 compared 18 billion 67 billion december 31 2001 certain bank lines credit contain covenants corporation applicable subsidiaries compliance throughout year ended december 31 2002 financing insurance operations debt follows dollars millions weightedaverage interest rate december 31 2002 2001 2002 2001 debt payable within one year current portion longterm debt 1 35 43 27344 22014 commercial paper 1 27 13425 16620 30 31 25383 20640 total loans payable 66152 59274 payable beyond one year 1 52 55 115218 93717 unamortized discount 717 693 mark market adjustment 2 3120 total debt 183773 153186 total consolidated notes loans payable 201940 166314 1the weightedaverage interest rates include impact interest rate swap agreements 2effective january 1 2001 corporation began recording hedged debt fair market value balance sheet due implementation sfas 133 accounting derivative instruments hedging activities debt payable beyond one year december 31 2002 included maturities follows 2004 263 billion 2005 165 billion 2006 179 billion 2007 84 billion 2008 461 billion amounts payable beyond one year consideration foreign currency swaps december 31 2002 included 129 billion currencies us dollar primarily canadian dollar 60 billion euro 33 billion uk pound sterling 17 billion australian dollar 926 million december 31 2002 2001 debt fio included 689 billion 657 billion respectively obligations fixed interest rates 1124 billion 873 billion respectively obligations variable interest rates predominantly libor considering impact interest rate swap agreements achieve desired balance fixed variable rate debt gm entered interest rate swap cap floor agreements notional amounts agreements december 31 2002 fio approximately 564 billion relating swap agreements 537 billion pay variable 27 billion pay fixed cap floor agreements existed december 31 2002 notional amounts agreements december 31 2001 fio approximately 462 billion relating swap agreements 413 billion pay variable 49 billion pay fixed 23 million relating cap agreements 73 million relating floor agreements ii47 general motors corporation subsidiaries notes consolidated financial statements continued note 13 longterm debt loans payable concluded gms fio business maintains substantial lines credit various banks totaled 530 billion december 31 2002 178 billion represented shortterm credit facilities 352 billion represented longterm credit facilities december 31 2001 bank lines credit totaled 498 billion 190 billion represented shortterm credit facilities 308 billion represented longterm credit facilities unused shortterm longterm portions credit lines totaled 74 billion 347 billion december 31 2002 compared 82 billion 307 billion december 31 2001 certain bank lines credit contain covenants corporation applicable subsidiaries compliance throughout year ended december 31 2002 note 14 pensions postretirement benefits gm number defined benefit pension plans covering substantially employees plans covering us canadian represented employees generally provide benefits negotiated stated amounts year service well significant supplemental benefits employees retire 30 years service normal retirement age benefits provided plans covering us canadian salaried employees certain foreign locations generally based years service compensation history gm also certain nonqualified pension plans covering executives based targeted wage replacement percentages unfunded pension plan assets primarily invested equity fixed income securities us government obligations commingled pension trust funds insurance contracts gm 123 par value common stock valued december 31 2002 approximately 30 million gm class h common stock valued december 31 2002 16 billion gms funding policy respect qualified pension plans contribute annually less minimum required applicable law regulations gm made pension contributions us hourly salary plans 48 billion 2002 pension contributions 2001 contributions 50 billion 2000 consisting entirely gm class h common stock contributed second quarter 2000 addition gm made pension contributions us plans 106 million 99 million 69 million 2002 2001 2000 respectively additionally gm maintains hourly salary benefit plans provide postretirement medical dental vision life insurance us retirees eligible dependents cost benefits recognized consolidated financial statements period employees provide service gm postretirement plan assets gms hourly veba trust invested primarily equity securities fixed income securities gm class h common stock valued december 31 2002 approximately 200 million ii48 general motors corporation subsidiaries notes consolidated financial statements continued note 14 pensions postretirement benefits continued certain corporations nonus subsidiaries postretirement plans although participants covered governmentsponsored administered programs cost programs generally significant gm projected benefit obligation accumulated benefit obligation fair value plan assets pension plans accumulated benefit obligations excess plan assets 92 billion 89 billion 66 billion respectively december 31 2002 59 billion 59 billion 48 billion respectively december 31 2001 ii49 general motors corporation subsidiaries notes consolidated financial statements continued measurement purposes approximate 72 annual rate increase per capita cost covered healthcare benefits assumed 2003 rate assumed decrease linear basis 50 2009 remain level thereafter one percentage point increase assumed healthcare trend rate would increased accumulated postretirement benefit obligation apbo 63 billion december 31 2002 increased aggregate service interest cost components nonpension postretirement benefit expense 2002 523 million one percentage point decrease would decreased apbo 53 billion decreased aggregate service interest cost components nonpension postretirement benefit expense 2002 416 million gm sets discount rate assumption annually retirementrelated benefit plans respective measurement dates reflect yield high quality fixedincome debt instruments gms expected return assets assumption derived detailed periodic study conducted gms actuaries gms asset management group study includes review anticipated future longterm performance individual asset classes consideration appropriate asset allocation strategy given anticipated requirements respective plans determine average rate earnings expected funds invested provide pension plan benefits study gives appropriate consideration recent fund performance historical returns assumption primarily longterm prospective rate based recent study gm revising expected longterm return assumption us plans effective january 1 2003 9 reduction previous level 10 following table illustrates sensitivity change certain assumptions us pension plans december 31 2002 projected benefit obligation pbo us pension plans 801 billion minimum pension liability charged equity respect us pension plans 212 billion net tax impact 2003 impact pretax pension december 31 december 31 change assumption expense 2002 equity pbo net tax 25 basis point decrease discount 120 million 19 billion 11 billion rate 25 basis point increase discount 120 million 18 billion 11 billion rate 25 basis point decrease expected 170 million return assets 25 basis point increase expected 170 million return assets ii50 general motors corporation subsidiaries notes consolidated financial statements continued note 14 pensions postretirement benefits concluded changes assumptions would impact gms funding requirements following table illustrates sensitivity change discount rate assumption related gms us opeb plans us apbo significant portion gms worldwide apbo 572 billion december 31 2002 impact 2003 impact pretax opeb december 31 2002 change assumption expense apbo 25 basis point decrease discount 150 million 16 billion rate 25 basis point increase discount 140 million 15 billion rate note 15 commitments contingent matters commitments gm following minimum commitments noncancelable operating leases remaining terms excess one year primarily property 2003822 million 2004685 million 2005533 million 2006526 million 2007405 million 14 billion 2008 thereafter certain minimum commitments fund obligations nonconsolidated spes certain leases contain escalation clauses renewal purchase options rental expenses operating leases 985 million 849 million 861 million 2002 2001 2000 respectively gm sponsors credit card program entitled gm card program offers rebates applied primarily purchase lease gm vehicles amount rebates available qualified cardholders net deferred program income 40 billion 39 billion 38 billion december 31 2002 2001 2000 respectively december 31 2002 gm unconditionally guaranteed approximately 45 million debt unaffiliated suppliers debt fully collateralized supplier company assets accordingly liability recorded addition gm entered agreements certain suppliers may require gm make payments based changes suppliers costs gms maximum exposure agreements approximately 38 million liabilities recorded respect agreements gm guaranteed minimum value 16 billion upon expiration various leases approximately 87 appraised fair value time leases terms six years many contain renewal options expiration fair values properties expected fully mitigate gms obligations guarantees liabilities recorded respect guarantees corporation guaranteed certain amounts related securitization mortgage loans addition gmac issues financial standby letters credit part financing mortgage operations december 31 2002 approximately 50 million recorded respect guarantees maximum exposure approximately 27 billion addition guarantees gm entered agreements indemnifying certain parties respect environmental conditions pertaining ongoing sold gm properties due nature indemnifications gms maximum exposure agreements cannot estimated amounts recorded indemnities corporations obligations probable estimable addition normal course business gm periodically enters agreements incorporate indemnification provisions maximum amount gm may exposed agreements cannot estimated opinion management guarantees indemnifications expected material adverse effect corporations consolidated financial position results operations contingent matters litigation subject uncertainties outcome individual litigated matters predictable assurance various legal actions governmental investigations claims proceedings pending corporation including arising alleged product defects employmentrelated matters governmental regulations relating safety emissions fuel economy product warranties financial services dealer supplier contractual relationships environmental matters ii51 general motors corporation subsidiaries notes consolidated financial statements continued note 15 commitments contingent matters continued contingent matters concluded connection 2000 sale hughes satellite systems manufacturing businesses boeing company boeing stock purchase agreement provides potential adjustment purchase price based upon final closing date financial statements satellite systems manufacturing businesses stock purchase agreement also provides dispute resolution process resolve disputes arise determining purchase price adjustment based upon final closing date financial statements satellite systems manufacturing businesses prepared hughes boeing owed purchase price adjustment 164 million plus interest rate 95 date sale total amount provided hughes consolidated financial statements however boeing submitted additional proposed adjustments resolved dispute resolution process december 31 2002 approximately 670 million proposed adjustments remain unresolved hughes contesting matter arbitration process result binding decision unless matter otherwise settled although hughes believes adequately provided disposition matter impact disposition cannot determined time possible final resolution matter could result hughes making cash payment boeing would material hughes consolidated results operations financial position gm established reserves matters losses probable reasonably estimated matters may involve compensatory punitive treble damage claims demands recall campaigns environmental remediation programs sanctions granted could require corporation pay damages make expenditures amounts could estimated december 31 2002 discussion counsel opinion management liability expected material adverse effect corporations consolidated financial condition results operations investment fiat auto holdings march 13 2000 gm entered contract master agreement fiat gm acquired 20 fah copy master agreement made public filings united states securities exchange commission sec fiat continues hold 80 fah various subsidiaries fah sole stockholder fiat auto owns operates global automotive group fiat ferrari maserati iveco businesses held separately fiat additionally gm fiat auto formed joint ventures relating powertrain purchasing initiated collaborative activities master agreement provides january 24 2004 july 24 2009 fiat right exercise put option put require gm purchase fiats fah shares fair market value whether fiat may seek exercise put unknown uncertain whether put would ever exercised due possibilities could affected subsequent agreements companies could become nonexercisable provisions master agreement could rendered unenforceable reason actions fiat may taken fiat may choose exercise put implemented fair market value fah shares would determined investment banks procedures set forth master agreement valuation completed amount gm might pay fiats fah shares quantifiable gm acquire fiats fah shares thus become sole owner fiat auto gm would decide additional capitalization would appropriate fiat auto specifically fiat auto need additional funding gm would decide whether provide funding conditions provide funding unless fah fiat auto subject liquidation insolvency fahs consolidated financial statements would required financial reporting purposes consolidated gm indebtedness losses capital needs fah fiat auto acquisition gm presently determinable could material adverse effect gm fiat discussed potential alternatives master agreement changes agreed upon ii52 general motors corporation subsidiaries notes consolidated financial statements continued note 16 preferred securities subsidiary trust april 2 2001 gm redeemed series g trusts sole assets causing series g trust redeem approximately 5 million outstanding series g 987 trust originated preferred securitiessm toprssm series g toprs redeemed price 25 per share plus accrued unpaid dividends 042 per share also april 2 2001 gm redeemed approximately 5 million outstanding series g depositary shares represents onefourth interest gm series g 912 preference share price 25 per share plus accrued unpaid dividends 059 per share securities together total face value approximately 252 million note 17 stockholders equity following table presents changes capital stock period january 1 2000 december 31 2002 dollars millions common stocks 123 total par capital value class h stock balance january 1 2000 1033 14 1047 shares reacquired 184 shares issued 65 74 139 balance december 31 2000 914 88 1002 shares reacquired shares issued 18 balance december 31 2001 932 88 1020 shares reacquired shares issued 4 8 12 balance december 31 2002 936 96 1032 preference stock june 24 2002 approximately 27 million shares gm series h 625 automatically convertible preference stock held aol time warner aol mandatorily converted approximately 80 million shares gm class h common stock provided pursuant terms preference stock gm originally issued shares preference stock aol 1999 connection aols 15 billion investment strategic alliance hughes preference stock accrued quarterly dividends rate 625 per year gm immediately invested 15 billion received aol shares hughes series preferred stock designed correspond financial terms preference stock dividends hughes series preferred stock payable gm quarterly annual rate 625 underwriting discount hughes series preferred stock amortized three years original terms hughes series preferred stock required hughes redeem series preferred stock cash payment gm immediately upon conversion preference stock held aol shares gm class h common stock simultaneous gms receipt cash redemption proceeds gm committed make capital contribution hughes amount connection capital contribution denominator fraction used computation available separate consolidated net income ascni hughes increased corresponding number shares gm class h common stock issued accordingly upon conversion gm series h 625 automatically convertible preference stock gm class h common stock numerator denominator used computation ascni increased amount gm class h common stock issued june 24 2002 prior conversion preference stock date prior time hughes series preferred stock would redeemed date gm approved gm hughes boards directors contributed hughes series preferred stock hughes connection contribution hughes series preferred stock hughes issued gm shares hughes series b convertible preferred stock hughes series b convertible preferred stock accrue dividends redeemable hughes series b convertible preferred stock affect net income hughes allocation earnings per share amounts available payment dividends gm class h common stock ii53 general motors corporation subsidiaries notes consolidated financial statements continued note 17 stockholders equity continued contribution gm effect respect numerator denominator fraction used computation ascni hughes cash redemption hughes series preferred stock cash contribution gm redemption amount would hughes series b convertible preferred stock may converted hughes class b common stock option gm time june 24 2003 common stocks second quarter 2000 gm completed exchange offer gm repurchased 86 million shares gm 123 par value common stock issued 92 million shares gm class h common stock addition june 12 2000 gm contributed approximately 54 million shares approximately 7 million shares gm class h common stock us hourlyrate employees pension plan veba trust respectively total value contributions approximately 56 billion result exchange offer employee benefit plan contributions economic interest hughes attributable gm 123 par value common stock decreased approximately 62 approximately 30 economic interest hughes attributable gm class h common stock increased approximately 38 70 fully diluted basis june 6 2000 gm board declared threeforone stock split gm class h common stock split form 200 stock dividend paid june 30 2000 gm class h common stockholders record june 13 2000 gm class h common stock per share amounts numbers shares periods presented adjusted reflect stock split furthermore result stock split voting liquidation rights gm class h common stock reduced 06 votes per share 06 liquidation units per share 02 votes per share 02 liquidation units per share order avoid dilution aggregate voting liquidation rights class voting liquidation rights gm 123 par value common stock changed voting liquidation rights gm 123 par value common stock one vote per share one liquidation unit per share july 24 2000 fiat purchased 24 billion approximately 32 million shares gm 123 par value common stock approximately 54 gms 123 par value common stock outstanding date fiat sold entire stake gm 12 billion december 2002 see notes 11 15 liquidation rights gm 123 par value gm class h common stocks subject certain adjustments outstanding common stock subdivided stock split otherwise shares one class common stock issued dividend holders another class common stock holders gm class h common stock direct rights equity assets hughes rather rights equity assets gm includes 100 stock hughes outstanding shares gm class h common stock may recapitalized shares gm 123 par value common stock time december 31 2002 sole discretion gm board automatically time corporation sell liquidate otherwise dispose 80 business hughes based fair market value assets tangible intangible hughes date proposed transaction approved gm board event recapitalization outstanding shares gm class h common stock automatically converted gms 123 par value common stock exchange rate would provide gm class h common stockholders number shares gm 123 par value common stock would value equal 120 value gm class h common stock date recapitalization type described prior sentence would occur triggering events took place unless holders gm common stock including holders gm 123 par value common stock holders gm class h common stock voting separately individual classes vote approve alternative proposal gm board ii54 general motors corporation subsidiaries notes consolidated financial statements continued note 17 stockholders equity concluded comprehensive income changes components comprehensive income loss reported net income taxes follows dollars millions note 18 earnings per share attributable common stocks earnings per share eps attributable class gm common stock determined based attribution earnings class common stock period divided weightedaverage number common shares class outstanding period diluted eps attributable class gm common stock considers effect potential common shares unless inclusion potential common shares would antidilutive effect gm class h common stock per share amounts numbers shares 2000 adjusted reflect threeforone stock split form 200 stock dividend paid june 30 2000 attribution earnings class gm common stock follows dollars millions years ended december 31 2002 2001 2000 earnings attributable common stocks earnings attributable 123 par value 1885 984 3957 earnings losses attributable class h 196 482 385 earnings attributable gm 123 par value common stock period represent earnings attributable gm common stocks reduced available separate consolidated net income ascni hughes respective period 2001 prior years losses attributable gm class h common stock represent ascni hughes excluding effects gm purchase accounting adjustments arising gms acquisition hughes aircraft company reduced amount dividends accrued series preferred stock hughes equivalent measure effect gms payment dividends gm series h 625 automatically convertible preference stock would paid hughes beginning 2002 losses attributable gm class h common stock adjusted effects gm purchase accounting mentioned related goodwill longer amortized accordance sfas 142 goodwill intangible assets calculated losses used computation ascni hughes multiplied fraction numerator equal weightedaverage number shares gm class h common stock outstanding 920 million 876 million 681 million 2002 2001 2000 respectively denominator number equal weightedaverage number shares gm class h common stock issued outstanding would represent 100 interest earnings hughes average class h dividend base average class h dividend base 13 billion 2002 2001 2000 ii55 general motors corporation subsidiaries notes consolidated financial statements continued note 18 earnings per share attributable common stocks continued addition denominator used determining ascni hughes may adjusted occasion deemed appropriate gm board reflect subdivisions combinations gm class h common stock certain transfers capital hughes contribution shares capital stock gm benefit hughes employees retirement gm class h common stock purchased hughes gm boards discretion make adjustments limited criteria set forth gms restated certificate incorporation shares gm class h common stock delivered gm connection award shares exercise stock options employees hughes increase numerator denominator fraction referred occasion anticipation exercises stock options hughes purchases gm class h common stock open market upon purchase shares retired therefore decrease numerator denominator fraction referred reconciliation amounts used basic diluted earnings per share computations follows dollars millions except per share amounts certain stock options included computation diluted earnings per share periods presented since options underlying exercise prices greater average market prices gm 123 par value common stock gm class h common stock addition periods adjusted loss attributable common stocks options purchase shares gm 123 par value common stock gm class h common stock underlying exercise prices less average market prices outstanding excluded calculations diluted loss per share inclusion securities would antidilutive net loss per share ii56 general motors corporation subsidiaries notes consolidated financial statements continued note 19 derivative financial instruments risk management effective january 1 2001 gm adopted sfas 133 accounting derivative instruments hedging activities amended interpreted requires derivatives recorded fair value balance sheet establishes criteria designation effectiveness derivative transactions hedge accounting applied gm assesses initial ongoing effectiveness hedging relationships accordance documented policies result adoption standard january 1 2001 gm recorded transition adjustment representing onetime aftertax charge income totaling 23 million well aftertax unrealized gain 4 million comprehensive income gm exposed market risk changes foreign currency exchange rates interest rates certain commodity equity security prices normal course business gm enters variety foreign exchange interest rate commodity forward contracts swaps options objective minimizing exposure arising risks risk management control system utilized monitor foreign exchange interest rate commodity equity price risks related hedge positions cash flow hedges gm uses financial instruments designated cash flow hedges hedge corporations exposure foreign currency exchange risk associated buying selling financing currencies local currencies operates exposure commodity price risk associated changes prices commodities used automotive business primarily non ferrous metals used manufacture automotive components transactions denominated foreign currencies gm typically hedges forecasted firm commitment exposure one year future commodities gm hedges exposures six years future years ended december 31 2002 december 31 2001 hedge ineffectiveness associated instruments designated cash flow hedges increased cost sales expenses 01 million 5 million respectively changes time value instruments excluded assessment hedge effectiveness exclude transition adjustment increased cost sales expenses 19 million 53 million respectively derivative gains losses included comprehensive income reclassified earnings time associated hedged transactions impact income statement year ended december 31 2002 net derivative losses 58 million reclassified cost sales expenses year ended december 31 2001 net derivative gains 2 million likewise reclassified net lossesgains offset net gainslosses transactions hedged approximately 6 million net derivative losses included comprehensive income december 31 2002 reclassified earnings within 12 months date 2002 net losses approximately 4 million reclassified earnings result discontinuance certain cash flow hedges fair value hedges gm uses financial instruments designated fair value hedges manage certain corporations exposure interest rate risk gm subject market risk exposures changes interest rates due financing investing cash management activities variety instruments used hedge gms exposure associated fixed rate debt mortgage servicing rights msrs year ended december 31 2002 hedge ineffectiveness associated instruments designated fair value hedges primarily due hedging msrs decreased selling general administrative expenses 458 million increased selling general administrative expenses 218 million 2001 changes time value instruments excluded assessment hedge effectiveness decreased selling general administrative expenses 212 million 2002 46 million 2001 undesignated derivative instruments forward contracts options designated hedging instruments sfas 133 also used hedge certain foreign currency commodity interest rate exposures unrealized gains losses instruments recognized currently earnings ii57 general motors corporation subsidiaries notes consolidated financial statements continued note 20 fair value financial instruments estimated fair value financial instruments determined using available market information appropriate valuation methodologies however considerable judgment required interpreting market data develop estimates fair value therefore estimates necessarily indicative amounts could realized would paid current market exchange effect using different market assumptions andor estimation methodologies may material estimated fair value amounts book estimated fair values financial instruments practicable estimate fair value follows dollars millions december 31 2002 2001 automotive communications services book fair book fair operations value assets 1 752 582 4076 4040 derivative assets 364 187 liabilities longterm debt 2 16651 15595 10726 11817 liabilities 1 531 580 487 510 derivative liabilities 298 281 december 31 2002 2001 book fair book fair financing insurance operations value assets finance receivables net 3 134647 135890 109211 110877 derivative assets 6369 1673 liabilities debt 2 183773 184837 153186 153680 derivative liabilities 843 2942 1 assets include various financial instruments eg longterm receivables certain investments fair values based discounted cash flows market quotations appropriate valuation techniques fair values retained subordinated interests trusts excess servicing assets net deferred costs derived discounting expected cash flows using current market rates estimated values industrial development bonds included liabilities based quoted market prices similar issues 2 longterm debt estimated fair value based quoted market prices similar issues based current rates offered gm debt similar remaining maturities 3 fair value estimated discounting future cash flows using applicable spreads approximate current rates applicable category finance receivables due shortterm nature book value approximates fair value cash marketable securities accounts notes receivable less allowances accounts payable principally trade aco loans payable financing insurance operations debt payable within one year periods ending december 31 2002 2001 ii58 general motors corporation subsidiaries notes consolidated financial statements continued note 21 stock incentive plans stockbased compensation gm applied intrinsic value method recognition measurement accounting principles board opinion 25 stock options stockbased employee compensation awards accordingly compensation expense related employee stock options reflected net income options granted exercise price equal market value underlying common stock date grant refer note 1 gms pro forma net income earnings attributable common stocks basic diluted earnings per share attributable common stocks compensation cost outstanding unvested stock option stockbased employee compensation awards determined based fair value grant date consistent method prescribed sfas 123 effects delphi spinoff adjustment number options related exercise prices described considered sfas 123 modifications terms outstanding options accordingly pro forma disclosure includes compensation cost incremental fair value sfas 123 resulting modifications pro forma amounts compensation cost indicative effects operating results future periods gms stock incentive plans consist general motors 2002 stock incentive plan formerly 1997 general motors amended stock incentive plan gmsip hughes electronics corporation incentive plan hughes plan general motors 1998 salaried stock option plan gmssop gmsip administered executive compensation committee gm board gmssop administered vice president global human resources hughes plan administered executive compensation committee board directors hughes gmsip december 31 2002 28 million shares gm 123 par value common stock may granted june 1 2002 may 31 2007 approximately 28 million available grants december 31 2002 shares granted undelivered gmsip due primarily expiration termination become available grant options granted prior 1997 gmsip generally exercisable onehalf one year onehalf two years dates grant stock option grants awarded since 1997 vest ratably three years date grant option prices 100 fair market value dates grant options generally expire 10 years dates grant subject earlier termination certain conditions hughes plan hughes may grant shares rights options acquire 159 million shares gm class h common stock december 31 2002 5 million available grants december 31 2002 option prices 100 fair market value dates grant options generally vest two five years expire 10 years dates grant subject earlier termination certain conditions gmssop commenced january 1 1998 ends december 31 2007 number shares gm 123 par value common stock may granted year determined management approximately 6 million shares gm 123 par value common stock available grants december 31 2002 stock options vest one year following date grant exercisable two years date grant option prices 100 fair market value dates grant options generally expire 10 years two days dates grant subject earlier termination certain conditions column b column c number securities number remaining securities available issued upon weighted average future issuance exercise price equity outstanding compensation options plans excluding warrants reflected plan category rights column equity compensation plans approved security holders gmsip 65822160 5645 28108941 gmsip hughes plan 95195978 2299 4645893 equity compensation plans approved security holders 1 gmssop 18957199 5991 6000000 total 179975337 3911 38754834 1 equity compensation plans except gmssop approved shareholders gmssop adopted board directors 1998 expires december 31 2007 purpose plan recognize importance contribution gm employees creation stockholder value align compensation business success provide employees opportunity longterm capital accumulation grant options acquire shares general motors common stock ii59 general motors corporation subsidiaries notes consolidated financial statements continued note 21 stock incentive plans continued fair value option grant estimated date grant using blackscholes optionpricing model following weightedaverage assumptions 2002 2001 2000 gm hughes gm hughes gm hughes gm sip plan ssop sip plan ssop sip plan ssop interest rate 43 47 43 46 51 46 64 65 expected life years 50 70 50 70 50 69 50 expected volatility 346 516 346 312 513 311 278 421 276 dividend yield 40 38 27 class h common stock share amounts numbers shares 2000 adjusted reflect threeforone stock split form 200 stock dividend paid june 30 2000 changes status outstanding options follows ii60 general motors corporation subsidiaries notes consolidated financial statements continued note 21 stock incentive plans concluded following table summarizes information gms stock option plans december 31 2002 weighted average weighted range remaining average exercise options contractual exercise options exercise prices outstanding life yrs price exercisable price gmsip 123 par value common 2100 3999 1113007 23 3240 1041527 3213 4000 4999 15551259 42 4493 15444416 4493 5000 5999 28560745 86 5142 4358047 5257 6000 8350 20597149 65 7340 17250956 7303 2100 8350 65822160 68 5645 38094946 5818 gmsip hughes plan class h common 300 899 1600977 18 718 1600977 718 900 1699 29469411 50 1260 28487187 1254 1700 2499 22917549 76 1957 11412872 1910 2500 3299 17519754 80 2780 7000140 2834 3300 4199 23688287 73 3709 7721276 4033 300 4199 95195978 67 2299 56222452 1940 gmssop 123 par value common 4659 2282027 50 4659 2282027 4659 5046 5000719 90 5046 5235 3857486 80 5235 7153 3778487 60 7153 3778487 7153 7550 4038480 70 7550 4038480 7550 4659 7550 18957199 73 5991 10098994 6748 note 22 hughes transactions december 9 2002 hughes gm echostar communications corporation echostar entered termination settlement release agreement termination agreement parties agreed terminate agreement plan merger dated october 28 2001 amended hughes echostar merger agreement certain related agreements terms termination agreement echostar paid hughes 600 million cash hughes retained 81 ownership position panamsat resulted gain 600 million 372 million aftertax 021 diluted earnings per share gm 123 par value common stock recorded total net sales revenue companies entered termination agreement merger could completed within time allowed merger agreement due regulatory opposition gm announced currently evaluating variety strategic options hughes including reduction elimination retained economic interest hughes transactions would involve strategic investors public offerings gm class h common stock related securities cash exchange outstanding gm debt obligations see note 26 transaction might involve separation hughes gm hughes engaged preliminary discussions parties decisions made regarding options combinations options gm pursue due numerous uncertainties involved matters assurance transaction offering announced completed time transaction offering might completed ii61 general motors corporation subsidiaries notes consolidated financial statements continued note 23 income included total net sales revenues consisted following dollars millions years ended december 31 2002 2001 2000 automotive communications services operations income interest income 929 771 619 rental car lease revenue 1214 1424 1584 gain echostar termination payment note 22 600 gain sale hughes satellite systems 1 2036 claims commissions grants 781 767 756 239 369 247 total income 3763 3331 5242 1 represents gain sale hughes satellite systems manufacturing businesses boeing company 38 billion cash income included total revenues consisted following dollars millions years ended december 31 2002 2001 2000 financing insurance operations income interest income 2951 2269 1794 insurance premiums 2188 1524 1394 mortgage banking income 2064 1862 1518 automotive securitization income 1352 1179 786 3035 2841 2011 total income 11590 9675 7503 note 24 european matters 2001 gme announced plan turn around business implementation project olympia initial stages project olympia sought identify initiatives could deliver solid profitable business performance 2003 strengthened optimized sales structure revitalized opelvauxhall brand market growth opportunities continuous improvement refocusing organizational structure project identified several initiatives aim address goals mentioned initiatives include among things reducing gmes manufacturing capacity restructuring dealer network germany redefining way vehicles marketed initiatives resulted decrease gms pretax earnings recorded gme segment first quarter 2002 follows 1 298 million related employee separation costs approximately 4000 employees 2 235 million related asset writedowns 3 108 million related dealer network restructuring germany net income impact charges first quarter 2002 407 million 072 per diluted share gm 123 par value common stock 553 million included cost sales expenses 88 million included selling general administrative expenses 234 million included income tax expense september 2000 european parliament passed directive requiring member states adopt legislation regarding endoflife vehicles responsibility manufacturers dismantling recycling vehicles sold european union member states required transform concepts detailed directive national law 2002 directive manufacturers financially responsible least portion cost takeback vehicles placed service july 2002 vehicles placed service prior july 2002 still operation january 2007 laws developed individual national legislatures throughout europe significant impact amount ultimately paid manufacturers issue gm recorded cost sales expenses gme segment aftertax charge 55 million 010 per diluted share gm 123 par value common stock 2002 member states passed national laws december 31 2002 management assessing impact potential legislation gms financial position results operations may include charges earnings future periods additional national laws passed ii62 general motors corporation subsidiaries notes consolidated financial statements continued note 25 segment reporting sfas 131 disclosures segments enterprise related information established standards reporting information operating segments financial statements operating segments defined components enterprise separate financial information available evaluated regularly chief operating decision maker decision making group deciding allocate resources assessing performance gms chief operating decision maker chief executive officer operating segments managed separately operating segment represents strategic business unit offers different products serves different markets gms reportable operating segments within aco business consist general motors automotive gma comprised four regions gmna gme gmlaam gmap hughes gmna designs manufactures andor markets vehicles primarily north america following nameplates chevrolet pontiac gmc oldsmobile buick cadillac saturn hummer gme gmlaam gmap meet demands customers outside north america vehicles designed manufactured marketed following nameplates opel vauxhall holden saab buick chevrolet gmc cadillac hughes includes activities relating digital entertainment information communications services satellitebased private business networks segment includes design manufacturing marketing locomotives heavyduty transmissions elimination intersegment transactions certain nonsegment specific revenues expenditures certain corporate activities gms reportable operating segments within fio business consist gmac provides broad range financial services including consumer vehicle financing fullservice leasing fleet leasing dealer financing car truck extended service contracts residential commercial mortgage services commercial vehicle insurance assetbased lending financing insurance operations segment includes financing entities operating us canada brazil mexico associated gmac accounting policies operating segments described summary significant accounting policies except disaggregated financial results prepared using management approach consistent basis manner gm management internally disaggregates financial information purposes assisting making internal operating decisions gm evaluates performance based standalone operating segment net income generally accounts intersegment sales transfers sales transfers third parties current market prices revenues attributed geographic areas based location assets producing revenues ii63 general motors corporation subsidiaries notes consolidated financial statements continued note 25 segment reporting continued see notes next page ii64 general motors corporation subsidiaries notes consolidated financial statements continued interest income included net sales revenues external customers b amount reported hughes excludes amortization gm purchase accounting adjustments related gms acquisition hughes aircraft company hac approximately 3 million 16 million 2001 2000 respectively adjustment 2002 related goodwill longer amortized effective january 1 2002 accordance sfas 142 goodwill intangible assets c net income loss aco includes noncash charge 14 billion tax related writedown gms investment fah see note 11 excludes satellite expenditures totaling 732 million 944 million 777 million 2002 2001 2000 respectively e amount reported hughes includes writeoff approximately 329 million unamortized goodwill related satellite systems manufacturing businesses time sale boeing company f amount reported hughes excludes unamortized gm purchase accounting adjustments approximately 57 million december 31 2002 57 million december 31 2001 60 million december 31 2000 g amount reported hughes excludes writeoff 739 million recorded fourth quarter 2002 hughes stand alone financial statements goodwill impairments directv latin america directv broadband however accordance sfas 142 gm evaluated carrying value goodwill associated hughes directtohome broadcast reporting unit aggregate determined goodwill impaired ii65 general motors corporation subsidiaries notes consolidated financial statements continued note 25 segment reporting concluded 1 primarily consist property note 9 equipment operating leases note 7 satellites note 11 net accumulated depreciation note 26 subsequent events fourth quarter 2002 corporation announced agreement sell gm defense operations light armored vehicle business general dynamics corporation approximately 13 billion cash transaction closed march 1 2003 estimated result aftertax gain approximately 600 million march 12 2003 gm contributed 1492 million shares gm class h common stock certain us employee benefit plans shares held united states trust company new york trustee employee benefit plans independent valuation firm retained value shares applied discount market value due among things various restrictions transfer shares provided agreements gm trustee resulting aggregate contribution value approximately 124 billion contribution increased amount gm class h common stock held gms employee benefit plans approximately 330 million shares reduced gms retained economic interest hughes approximately 199 307 consequence contribution gm expects 2003 us pretax pension expense approximately 28 billion instead 29 billion originally estimated first quarter 2003 hughes completed series financing transactions replace previous credit facilities capital structure longterm nature february 28 2003 directv issued 14 billion senior notes due 2013 tenyear senior notes unsecured indebtedness bear interest 8375 addition march 6 2003 directv entered new senior secured credit facility total term loan revolving loan commitments 17 billion new senior secured credit facility comprised 375 million tranche term loan 200 million undrawn march 12 2003 11 billion tranche b term loan 250 million revolving credit facility undrawn march 12 2003 new senior secured credit facility term five seven years secured substantially directvs assets revolving credit facility term loans bear interest libor plus 35 directv distributed hughes net proceeds senior secured credit facility sale senior notes totaling 26 billion 200 million undrawn portion tranche term loan expected drawn december 31 2003 net proceeds distributed hughes revolving portion senior secured credit facility available directv fund working capital requirements distribution enabled hughes repay amounts outstanding previous credit facilities terminated february 28 2003 il66 general motors corporation subsidiaries supplementary information ii67 general motors corporation subsidiaries supplementary information continued selected quarterly data unaudited continued 1 first quarter 2002 results include following 407 million aftertax restructuring charge related severance payments asset impairments gme part restructuring gms automotive operations europe 59 million aftertax favorable adjustment related hughes resolution lawsuit filed us government relating national aeronautics space administrations nasa breach contract launch ten satellites space shuttle 51 million aftertax charge related hughes expected loss associated contractual dispute general electric capital corporation 18 million aftertax charge related hughes loan guarantee hughes network systems affiliate india 2 second quarter 2002 results include 55 million aftertax charge gme related european unions directive requiring member states enact legislation regarding endoflife vehicles responsibility manufacturers dismantling recycling vehicles sold 3 third quarter 2002 results include following 14 billion aftertax charge related writedown gms investment fiat auto holdings bv result completion impairment study carrying value gms investment 116 million aftertax charge primarily related gms costs associated transfer commercial truck production janesville wisconsin flint michigan 68 million aftertax favorable adjustment related hughes sale equity interests primarily related investment thomson multimedia sa 4 fourth quarter 2002 results include following 372 million aftertax gain related hughes receipt 600 million echostar paid connection termination october 28 2001 merger agreement hughes echostar 27 million aftertax charge related hughes writedown investment crown media result temporary decline market value investment 63 million aftertax charge related hughes writedown investment xm satellite radio result temporary decline market value investment 97 million aftertax charge related hughes shutdown directv broadband business services costs close business including contract termination payments writeoffs equipment severance payments 15 million aftertax charge related hughes loss exchange hughes ownership hughes telecom india limited equity interest longterm receivables tata teleservices limited ii68 general motors corporation subsidiaries supplementary information ii69 general motors corporation subsidiaries supplementary information continued selected quarterly data unaudited continued 5 first quarter 2001 results include 12 million aftertax increase income net impact initially adopting sfas 133 accounting derivatives hedging activities 6 second quarter 2001 results include 133 million aftertax restructuring charge related general motors portion severance payments asset impairments part second quarter restructuring affiliate isuzu motors ltd 7 third quarter 2001 results include following 194 million aftertax charge announced closing stetherese quebec assembly plant 474 million aftertax charge related hughes settlement raytheon purchase price adjustment related raytheons 1997 merger hughes defense 67 million aftertax gain related hughes sale 41 million shares thomson multimedia sacommon stock 133 million aftertax charge related hughes noncash charge revaluation sky perfect investment 40 million aftertax severance charge related hughes 10 companywide work force reduction united states 21 million aftertax favorable adjustment expected costs associated shutdown hughes directv japan business ii70 general motors corporation subsidiaries item 9 item 8 financial statements supplementary data general motors corporation subsidiaries consolidated statements operations dollars millions except per share amounts reference made notes consolidated financial statements general motors corporation subsidiaries consolidated balance sheets dollars millions reference made notes consolidated financial statements general motors corporation subsidiaries consolidated statements cash flows dollars millions reference made notes consolidated financial statements general motors corporation subsidiaries consolidated statements stockholders’ equity deficit years ended december 31 2006 2005 2004 dollars millions reference made notes consolidated financial statements general motors corporation subsidiaries notes consolidated financial statements note 1 nature operations gm primarily engaged worldwide production marketing cars trucks gm develops manufactures markets vehicles worldwide four regions gm’s four automotive regions consist gm north america gmna gm europe gme gm latin americaafricamideast gmlaam gm asia pacific gmap also gm’s finance insurance operations primarily conducted gmac llc successor general motors acceptance corporation together gmac llc gmac whollyowned subsidiary november 2006 november 30 2006 gm sold 51 controlling ownership interest gmac consortium investors sale gm accounted 49 ownership interest gmac using equity method gmac provides broad range financial services including consumer vehicle financing automotive dealership commercial financing residential mortgage services automobile service contracts personal automobile insurance coverage selected commercial insurance coverage note 2 restatement previously issued consolidated financial statements accompanying 2005 2004 consolidated financial statements restated correct accounting certain derivative transactions statement financial accounting standards sfas 133 accounting derivative instruments hedging activities amended sfas 133 accounting deferred income taxes sfas 109 accounting income taxes sfas 109 various accounting adjustments following table sets forth reconciliation previously reported restated net income loss retained earnings dates periods shown millions general motors corporation subsidiaries notes consolidated financial statements continued note 2 restatement previously issued consolidated financial statements continued following table sets forth reconciliation previously reported restated earnings loss per share periods shown millions restatement adjustments revisions described derivatives hedge accounting adjustments commodity contracts reviewing accounting certain commodity purchase contracts gm determined incorrectly concluded “normal purchases normal sales” scope exception paragraph 10b sfas 133 applied therefore commodity purchase contracts accounted derivatives financial statements restated record fair value purchase contracts 2005 consolidated balance sheet record changes fair value commodity contracts charges credits consolidated statements operations adjustment resulted recording derivative assets liabilities 1788 million 71 million respectively december 31 2005 additionally pretax earnings increased reduction automotive cost sales 1114 million 724 million tax 647 million 420 million tax 2005 2004 respectively additionally gm entered various commodity derivatives contracts including swaps options hedge forecasted purchases precious nonferrous metals energy commodity derivatives designated cash flow hedges sfas 133 hedge accounting appropriate hedging relationships company expects highly effective achieving offsetting changes fair value cash flows attributable risk hedged determine whether transactions satisfy requirements companies must periodically assess document effectiveness hedging relationships retrospectively prospectively measure recognize ineffectiveness certain commodity cash flow hedges gm inappropriately applied “matched terms” method assessing hedge effectiveness outlined paragraph 65 sfas 133 considering assessment certain terms underlying commodity contracts created ineffectiveness cash flow hedging relationship addition commodity cash flow hedges gm properly document hedging relationship properly perform periodic retrospective assessment effectiveness necessary qualify hedge accounting properly measure hedge ineffectiveness general motors corporation subsidiaries notes consolidated financial statements continued note 2 restatement previously issued consolidated financial statements continued properly reclassify amounts comprehensive income oci underlying hedged forecasted transaction affected earnings accordingly commodity derivatives markedtomarket gains losses recorded cost sales changes fair value commodity derivatives recorded oci part cash flow hedging relationships reversed recorded automotive cost sales pretax earnings increased reduction automotive cost sales 1195 million 776 million tax 2466 million 1603 million tax 2005 2004 respectively foreign exchange contracts gm enters foreign currency forward contracts crosscurrency swaps hedge foreigncurrencydenominated debt forecasted transactions gm also designates foreigncurrencydenominated debt hedges net investments foreign operations gm concluded properly apply “matched terms” method assessing hedge effectiveness outlined paragraph 65 sfas 133 inadequately measured hedging effectiveness lacked contemporaneous hedge documentation therefore incorrectly applied hedge accounting certain cash flow hedges net investment hedges changes fair value certain derivatives used cash flow hedging relationships amounts related net investment hedge previously recorded oci released oci recorded automotive cost sales pretax earnings increased 388 million 252 million tax 2005 decreased 869 million 565 million tax 2004 addition gm determined incorrectly applied cash flow hedge accounting treatment one two concurrent offsetting derivatives accounting two derivatives separately instead treating one combined arrangement accordance sfas 133 implementation issue concurrent offsetting matching swaps use one hedging instrument sfas 133 implementation issue k1 determining whether separate transactions viewed unit changes fair value derivatives used hedging strategy previously accounted cash flow hedges released oci recorded automotive cost sales pretax earnings increased 753 million 489 million tax 2005 decreased 1217 million 791 million tax 2004 interest rate contracts gmac determined hedge accounting documentation hedge effectiveness assessment methodologies meet requirements paragraph 20b sfas 133 certain hedges callable fixed rate debt instruments sfas 133 hedge accounting appropriate hedging relationships company sufficiently documented expectation relationship highly effective achieving offsetting changes fair values attributable risk hedged inception hedging relationship determine whether transactions satisfy requirements company must periodically assess effectiveness hedging relationships prospectively retrospectively review gmac determined interest rate derivatives qualify hedge accounting accordingly hedge accounting applied hedging relationships strategy therefore market value adjustments debt instruments included hedging relationships related changes fair value due movements designated benchmark interest rate recorded changes fair value debt instruments recorded earnings fair value hedge relationships reversed pretax earnings decreased increase interest expense 256 million 1572 million tax 143 million 878 million tax 2005 2004 respectively general motors corporation subsidiaries notes consolidated financial statements continued note 2 restatement previously issued consolidated financial statements continued net effect derivative hedge accounting adjustments decreased retained earnings january 1 2004 46 million deferred income tax adjustments result comprehensive deferred tax account reconciliation performed 2006 gm determined deferred income tax liabilities overstated net income understated approximately 11 billion principally result duplicate incorrect recording deferred income tax expense related temporary differences primarily arising years prior 2002 adjustments increased net loss 2005 352 million increased net income 2004 16 million increased retained earnings january 1 2004 approximately 11 billion addition inappropriately provided deferred income taxes translation adjustments certain nonus subsidiaries resulted overstatement deferred tax assets oci 423 million 74 million 680 million december 31 2005 december 31 2004 january 1 2004 respectively outofperiod adjustments subsequent completion previously filed consolidated financial statements period restated identified adjustments recorded earlier periods outofperiod adjustments upon identification determined adjustments immaterial individually aggregate previously filed consolidated financial statements recorded adjustments periods identified due adjustments discussed required restatement previously filed consolidated financial statements also correcting outofperiod adjustments recording proper periods outofperiod adjustments table include following unemployment benefit payments subsequent december 31 2005 prior issuance 2005 consolidated financial statements notified german labor office released certain contingent unemployment benefit payment obligations previously recorded part restatement pretax earnings increased reduction automotive cost sales 502 million 311 million tax 2005 automotive revenue recognition recorded adjustment correct deferred revenue related data disks provided customers update vehicle’s navigational system compute deferred revenue using fair value determined vendor specific objective evidence required eitf 0021 revenue arrangements multiple deliverables additionally defer revenue correct number 2006 models year vehicles containing navigation systems part restatement pretax earnings decreased reduction automotive sales 331 million 215 million tax 2005 addition incorrectly recognized revenue sponsorship gm card program offers rebates applied primarily purchase lease gm vehicles corrected accounting deferring recognizing additional revenue average utilization period points earned retail customers part restatement pretax earnings increased increase automotive sales 423 million 275 million tax 197 million 128 million tax 2005 2004 respectively retained earnings decreased january 1 2004 147 million impairment longlived assets incorrectly determined impairment charges associated plant closing part restatement pretax earnings decreased increase automotive cost sales 242 million 159 million tax 428 million 278 million tax 2005 2004 respectively retained earnings decreased january 1 2004 40 million general motors corporation subsidiaries notes consolidated financial statements continued note 2 restatement previously issued consolidated financial statements concluded cooperative advertising program cooperative advertising program dealers obligated match portion funds contributed dealers advertising recorded adjustment correctly reflect timing obligation arrangement previously matching portion advertising costs expensed incurred part restatement pretax earnings decreased increase selling general administrative expenses 57 million 37 million tax pretax earnings increased decrease selling general administrative expenses 114 million 74 million tax 2005 2004 respectively retained earnings january 1 2004 decreased 466 million environmental operation maintenance recorded adjustment properly reflect obligation ongoing operation maintenance costs certain environmental sites part restatement pretax earnings decreased increase automotive cost sales 14 million 09 million tax 49 million 32 million tax 2005 2004 respectively retained earnings january 1 2004 decreased 322 million availableforsale securities incorrectly recorded foreign exchange component changes market value foreigncurrencydenominated availableforsale debt securities earnings rather oci part restatement pretax earnings increased decrease automotive cost sales 158 million 1027 million tax 2005 pretax earnings decreased increase automotive cost sales 1071 million 696 million tax 2004 retained earnings january 1 2004 decreased 331 million lifo inventory reserve recorded adjustment properly include certain inventories lifo inventory reserve part restatement pretax earnings decreased increase automotive cost sales 92 million 6 million tax 225 million 146 million tax 2005 2004 respectively retained earnings january 1 2004 decreased approximately 15 million development costs recorded adjustment correctly expense supplier development costs part restatement pretax aftertax earnings increased reduction automotive cost sales 144 million 2005 2004 retained earnings january 1 2004 decreased 855 million inventory recorded adjustment correct automotive cost sales associated inventory errors identified one international subsidiaries part restatement retained earnings january 1 2004 decreased 377 million addition items listed also recorded less significant outofperiod pretax income tax adjustments net effect decreased pretax earnings 733 million decreased aftertax earnings 94 million 2005 decreased pretax earnings 1402 million decreased aftertax earnings 29 million 2004 decreased retained earnings january 1 2004 1983 million restatement also included adjustment comply eitf 0010 accounting shipping handling fees costs related shipping handling costs incurred transport product customers correction reclassification increased automotive sales automotive cost sales 36 billion 2005 2004 correction affect net income loss earnings loss per share general motors corporation subsidiaries notes consolidated financial statements continued following summary effect restatement originally issued consolidated statements operations consolidated balance sheets consolidated statements cash flows consolidated statements operations dollars millions general motors corporation subsidiaries notes consolidated financial statements continued consolidated balance sheets dollars millions general motors corporation subsidiaries notes consolidated financial statements continued consolidated statements cash flows dollars millions general motors corporation subsidiaries notes consolidated financial statements continued note 3 significant accounting policies principles consolidation financial statement presentation consolidated financial statements include accounts general motors corporation subsidiaries 50 owned addition accordance financial accounting standards board fasb interpretation 46r “consolidation variable interest entities interpretation arb 51” fin 46r gm consolidates variable interest entities vies deemed primary beneficiary gm’s share earnings losses investees included consolidated operating results using equity method accounting gm able exercise significant influence operating financial decisions investee gm able exercise significant influence operating financial decisions investee cost method accounting used intercompany balances transactions eliminated consolidation transactions segments eliminated transactions consist principally borrowings financial services provided fio business automotive business master intercompany agreement effect november 30 2006 governed nature transactions ensure done accordance commercially reasonable standards use estimates preparation financial statements consolidated financial statements gm prepared conformity accounting principles generally accepted united states require use estimates judgments assumptions affect reported amounts assets liabilities date financial statements reported amounts revenues expenses periods presented management believes accounting estimates employed appropriate resulting balances reasonable however due inherent uncertainties making estimates actual results could differ original estimates requiring adjustments balances future periods revenue recognition automotive sales consist primarily revenue generated sale vehicles vehicle sales recorded title risks rewards ownership passed generally vehicle released carrier responsible transporting vehicles dealers provisions dealer customer sales leasing incentives consisting allowances rebates recorded reductions automotive sales time vehicle sales incentives allowances rebates related vehicles previously sold recognized reductions automotive sales announced vehicle sales daily rental car companies guaranteed repurchase obligations accounted equipment operating leases lease revenue recognized ratably term lease based difference net sales proceeds guaranteed repurchase amount equipment operating lease depreciated based difference cost vehicle estimated residual value using straightline method term lease agreement management reviews residual values periodically determine estimates remain appropriate asset impaired losses recognized time impairment gm also generates revenue customer subscriptions related offering services comprehensive invehicle security communications diagnostic systems vehicles well sale prepaid minutes handsfree calling hfc system subscription service revenue deferred recognized straightline basis subscription period onstar offers oneyear free subscription part sale lease new gm vehicle fair value subscription recorded deferred revenue vehicle sold amortized one year subscription period hfc revenue deferred recognized straightline basis life contract financial services revenues generated purchase retail installment loans dealer floor plan financing lines credit dealers fleet leasing factoring receivables financing revenue general motors corporation subsidiaries notes consolidated financial statements continued note 3 significant accounting policies continued recorded terms receivables using interest method income operating lease assets recognized straightline basis scheduled lease terms insurance revenues consist premiums earned basis related coverage provided terms policies commissions premium taxes costs incurred acquiring new business deferred amortized terms related policies basis premiums earned mortgage service revenues generated origination purchase servicing sale securitization consumer ie residential commercial mortgage loans mortgage related products typically mortgage loans originated sold investors secondary market including securitization sales advertising expenses amounted 54 billion 2006 58 billion 2005 52 billion 2004 expensed incurred research development expenditures research development productrelated costs 66 billion 67 billion 65 billion 2006 2005 2004 respectively charged expense incurred depreciation amortization expenditures special tools placed service january 1 2002 capitalized amortized using straightline method estimated useful lives range one year 12 years expenditures special tools placed service prior january 1 2002 capitalized amortized estimated useful lives using units production method also january 1 2001 gm adopted straightline method depreciation real estate plants equipment placed service date assets placed service january 1 2001 continue depreciated using accelerated methods accelerated methods accumulate depreciation approximately twothirds depreciable cost first half estimated useful lives property groups compared straightline method allocates depreciable costs equally estimated useful lives property groups management believes adoption straightline amortization depreciation method special tools placed service january 1 2002 real estate plants equipment placed service january 1 2001 better reflects consistent use assets useful lives goodwill intangibles goodwill intangible assets net accumulated amortization reported assets goodwill represents excess cost acquisition fair value net assets acquired accordance sfas 142 “goodwill intangible assets” goodwill reviewed impairment utilizing twostep process first step impairment test requires identification reporting units comparison fair value reporting units respective carrying value fair value reporting units determined based valuation techniques using best information available discounted cash flow projections carrying value less fair value impairment exists second step performed carrying value higher fair value indication impairment may exist second step must performed compute amount impairment second step impairment computed comparing implied fair value reporting unit goodwill carrying amount goodwill sfas 142 requires goodwill tested impairment annually time every year event occurs circumstances change reasonably possible impairment may exist annual impairment tests performed fourth quarter year intangible assets include customer lists trademarks identifiable intangible assets amortized straightline basis estimated useful lives three 10 years general motors corporation subsidiaries notes consolidated financial statements continued note 3 significant accounting policies continued valuation longlived assets gm periodically evaluates carrying value longlived assets held used business goodwill intangible assets indefinite lives assets held sale events circumstances warrant conjunction annual business planning cycle carrying value longlived asset considered impaired loss recognized based amount carrying value exceeds fair market value assets held used assets classified held sale assets reflected lower carrying value fair value less cost sell fair market value determined primarily using anticipated cash flows discounted rate commensurate risk involved longlived assets disposed sale considered held use disposition equipment operating leases net equipment operating leases reported cost less accumulated depreciation net origination fees costs income operating lease assets includes lease origination fees net lease origination costs recognized operating lease revenue straightline basis scheduled lease term depreciation vehicles generally provided straightline basis estimated residual value period time consistent term underlying operating lease agreement evaluate depreciation policy leased vehicles regular basis significant investments vehicles operating lease portfolio exposed changes residual values assets residual values represent estimate values assets end lease contracts determined consulting independently published residual value guide realization residual values dependent future ability market vehicles prevailing market conditions life lease evaluate adequacy estimate residual value may make adjustments extent expected value vehicle lease termination changes operating leases arising vehicle sales daily rental car companies adjustment may form revisions depreciation rate recognition impairment loss impairment determined exist undiscounted expected future cash flows lower carrying value asset operating leases arising vehicles sold dealers adjustment made estimate marketing incentive accruals residual support programs initially recognized vehicles sold dealers see note 28 transactions gmac marketing incentives operating lease residuals lease vehicle returned us asset reclassified investment operating leases inventory lower cost estimated fair value less costs sell foreign currency transactions translation assets liabilities gm’s foreign subsidiaries using local currency functional currency translated us dollars based current exchange rate prevailing balance sheet date resulting translation adjustments included accumulated comprehensive income loss included net income loss gains losses arising foreign currency transactions gm’s revenues expenses translated us dollars using average exchange rates prevailing period presented impact net income loss foreign currency transactions including results foreign currency hedging activities amounted gain 296 million loss 118 million loss 22 million 2006 2005 2004 respectively policy warranty provisions estimated expenses related policy product warranties made time products sold estimates established using historical information nature frequency average cost claims revision reserves estimated policy product warranties made necessary based general motors corporation subsidiaries notes consolidated financial statements continued note 3 significant accounting policies continued changes factors management actively studies trends claims takes action improve vehicle quality minimize claims recall campaigns provisions estimated expenses related product recalls based formal campaign soliciting return product made deemed probable reasonably estimable upon approval recall campaign management environmental costs gm records liability environmental cleanup costs probable reasonably estimable environmental sites potentially multiple responsible parties gm records liability allocable share costs related involvement site well allocable share costs related insolvent parties unidentified shares environmental sites gm potentially responsible party gm records liability total estimated costs remediation consideration recovery insurers third parties gm established process develop environmental reserve process consists number phases begins visual site inspections examination historical site records potential problem identified physical sampling site may include analysis ground water soil borings evidence obtained evaluated based upon evaluation remediation strategy submitted approval final phase process involves commencement remediation activities according approved plan process used globally sites included estimated environmental liabilities costs ongoing operating maintenance monitoring environmental sites remediation put place subsequent adjustments initial estimates recorded necessary based upon additional information developed subsequent periods liability determined based upon historical experience discounted using riskfree rate return periods ongoing maintenance expected occur generally five 30 years postemployment benefits costs idle consolidate close facilities provide postemployment benefits employees temporary basis accrued based management’s best estimate wage benefits costs incurred qualified employees jobs bank provisions current labor agreement date expiration september 2007 plus estimated costs expected paid consideration changes gm intends negotiate jobs program expiration current collective bargaining agreement accrual established 2005 related gmna’s restructuring plan assumed 45 9 projected level acceptance normal early retirement offers respectively made pursuant current labor agreement estimates acceptance based gm’s historical experience offering programs costs related idling employees expected temporary expensed incurred costs terminate contract without economic benefit gm expensed time contract terminated onetime termination benefits subject contractual arrangements provided employees involuntarily terminated recorded management commits detailed plan termination plan communicated employees actions required complete plan indicate significant changes plan likely employees required render service terminated order earn termination benefit benefits recognized ratably future service period cash equivalents cash equivalents defined shortterm highlyliquid investments original maturities 90 days less general motors corporation subsidiaries notes consolidated financial statements continued note 3 significant accounting policies continued marketable securities marketable securities classified availableforsale except certain mortgagerelated securities classified heldtomaturity trading securities availableforsale securities recorded fair value unrealized gains losses reported net related income taxes comprehensive income loss realized trading securities recorded fair value unrealized gains losses recorded currently earnings heldtomaturity securities recorded amortized cost gm determines realized gains losses using specific identification method derivative instruments gm party variety foreign exchange rate interest rate commodity derivative contracts entered connection management exposure fluctuations foreign exchange rates interest rates certain commodity prices financial exposures managed accordance corporate policies procedures derivatives recorded fair value consolidated balance sheets effective changes fair value derivatives designated cash flow hedges recorded net unrealized gains losses derivatives within separate component comprehensive income loss amounts reclassified accumulated comprehensive income loss underlying hedged item affects earnings ineffective changes fair value recorded currently earnings changes fair value derivatives designated fair value hedges recorded currently earnings offset changes fair value hedged item extent derivative effective changes fair value derivatives designated hedging instruments recorded currently earnings accounting income taxes gm uses liability method accounting income taxes deferred tax assets liabilities recorded temporary differences tax basis assets liabilities reported amounts consolidated financial statements using statutory tax rates effect year differences expected reverse effect deferred tax assets liabilities change tax rates recognized results operations period includes enactment date valuation allowance recorded reduce carrying amounts deferred tax assets unless likely assets realized gm recognizes accrued interest related unrecognized tax benefits penalties interest expense amount interest penalties recognized immaterial periods presented accounting early retirement programs gm offers early retirement program certain employees located gme region allows employees early transition employment retirement legal retirement age eligible employees elect participate preretirement leave program work full time half preretirement period active period work remaining half inactive period receive 50 salary preretirement period employees also receive annual bonus equal approximately 35 net pay beginning preretirement period additionally gm required make contributions german government pension program participants preretirement period programs companies entitled government subsidy certain conditions met gm entitled program subsidy january 1 2006 gm adopted eitf 055 “accounting early retirement postemployment programs specific features” states bonus contributions made german government pension program accounted guidance sfas 112 “employers’ accounting postemployment benefit costs” government subsidy recognized company meets necessary conditions entitled subsidy clarified eitf 055 beginning 2006 gm recognized bonus general motors corporation subsidiaries notes consolidated financial statements continued note 3 significant accounting policies continued additional contributions collectively additional compensation german government pension plan period employee signed program contract end active service period prior 2006 gm recognized full additional compensation oneyear employee entered active service period change reported change accounting estimate effected change accounting principle resulted additional compensation expense 68 million 2006 accounting extended disability benefits gm accrues estimated disability pay ratably employees’ active service period using delayed recognition provisions prescribed sfas 106 “employers’ accounting postretirement benefits pensions” prior december 31 2006 discussed note 19 december 31 2006 gm adopted recognition provisions sfas 158 “employers’ accounting defined benefit pension postretirement plans” amendment fasb statements 87 88 106 132r liability consists future obligations income replacement healthcare costs life insurance premiums employees currently disabled active workforce may become disabled gm estimates future disabilities current workforce using actuarial methods based sufficient historical experience labor force gm worldwide basis concentration labor supply employees working union collective bargaining agreements current international union united automobile aerospace agricultural implement workers america uaw labor contract effective fouryear term began october 2003 expires september 2007 contract included 3000 lump sum payment uaw employee paid october 2003 3 performance bonus uaw employee paid october 2004 gm amortized payments 12month period following respective payment dates uaw employees received gross wage increase 2 2005 2006 employees also granted 3 gross wage increase labor contract subsequently agreed gm uaw contributed mitigation veba wage deferral connection uaw healthcare settlement agreement refer note 19 active uaw employees also granted pension benefit increases pension benefit increases granted current retirees surviving spouses however contract provide four lump sum payments two vehicle discount vouchers current retirees surviving spouses changes accounting principles accounting servicing financial assets january 1 2006 gm adopted sfas 156 “accounting servicing financial assets” 1 provides revised guidance servicing asset servicing liability recognized 2 requires separately recognized servicing assets liabilities initially measured fair value practicable 3 permits entity elect measure servicing assets liabilities fair value reporting date report changes fair value earnings period changes occur 4 provides upon initial adoption onetime reclassification availableforsale securities trading securities identified offsetting entity’s exposure changes fair value servicing assets liabilities servicer elects subsequently measure fair value 5 requires separate presentation servicing assets liabilities subsequently measured fair value balance sheet additional disclosures gm recorded reduction retained earnings january 1 2006 13 million cumulative effect change accounting principle adoption sfas 156 general motors corporation subsidiaries notes consolidated financial statements continued note 3 significant accounting policies continued accounting conditional asset retirement obligations effective december 31 2005 gm adopted financial accounting standards board fasb interpretation 47 “accounting conditional asset retirement obligations” fin 47 fin 47 relates legal obligations associated retirement tangible longlived assets result acquisition construction development normal operation longlived asset gm performed analysis obligations associated real property owned leased including plants warehouses offices gm’s estimates conditional asset retirement obligations relate case owned properties costs estimated necessary legally required removal remediation various regulated materials primarily asbestos abatement estimated using sitespecific surveys available per square foot estimate surveys unavailable leased properties obligations relate estimated cost contractually required property restoration refer note 20 application fin 47 resulted charge 109 million aftertax 2005 presented cumulative effect change accounting principle liability conditional asset retirement obligations december 31 2006 2005 193 million 181 million respectively pro forma amounts fin 47 applied 2005 2004 follows asset retirement obligations included longterm liabilities consolidated balance sheets following table reconciles asset retirement obligations december 31 2006 2005 december 31 2006 asset retirement obligation primarily related removal remediation various regulated materials primarily asbestos general motors corporation subsidiaries notes consolidated financial statements continued note 3 significant accounting policies continued new accounting standards accordance disclosure requirements sfas 148 “accounting stockbased compensation transition disclosure” gm adopted fair value based method accounting stockbased employee compensation pursuant sfas 123 effective january 1 2003 newly granted stockbased compensation awards january 1 2006 gm adopted sfas 123r “accounting stockbased compensation” 2006 2005 awards accounted fair value following table illustrates effect net income earnings per share 2004 compensation cost outstanding unvested stock options stockbased employee compensation awards determined based fair values grant date dollars millions except per share amounts june 2006 fasb issued interpretation 48 “accounting uncertainty income taxes” fin 48 supplements sfas 109 “accounting income taxes” defining confidence level tax position must meet order recognized financial statements interpretation requires tax effects position recognized “morelikelythannot” sustained based solely technical merits reporting date morelikelythannot threshold represents positive assertion management company entitled economic benefits tax position tax position considered morelikelythannot sustained based solely technical merits benefits position recognized moreover morelikelythannot threshold must continue met reporting period support continued recognition benefit adoption companies must adjust financial statements reflect tax positions morelikelythannot sustained adoption date necessary adjustment would recorded directly retained earnings period adoption reported change accounting principle interpretation effective beginning first fiscal year beginning december 15 2006 management estimates upon adoption cumulative effect adjustment approximately 50 million 100 million decrease reserves uncertain tax positions increase retained earnings estimate subject revision management completes analysis september 2006 sec issued staff accounting bulletin sab 108 “quantifying financial misstatements” expresses staff’s views regarding process quantifying financial statement misstatements registrants required quantify impact correcting misstatements including carryover reversing effects prior year misstatements current year financial statements general motors corporation subsidiaries notes consolidated financial statements continued note 3 significant accounting policies continued techniques commonly used practice accumulate quantify misstatements generally referred “rollover” current year income statement perspective “iron curtain” yearend balance sheet perspective approaches financial statements would require adjustment either approach results quantifying misstatement material considering relevant quantitative qualitative factors bulletin effective financial statements first fiscal year ending november 15 2006 prior issuance bulletin gm quantified impact errors using iron curtain approach rollover approach therefore sab financial statement impact gm september 2006 fasb issued sfas 157 “fair value measurements” sfas 157 provides definition fair value establishes framework measuring fair value requires expanded disclosures fair value measurements sfas 157 effective financial statements issued fiscal years beginning november 15 2007 interim periods within fiscal years provisions sfas 157 applied prospectively management assessing potential impact standard gm’s financial condition results operations september 2006 fasb issued sfas 158 “employers’ accounting defined benefit pension postretirement plans” sfas 158 amends sfas 87 “employers’ accounting pensions” sfas 87 sfas 88 “employers’ accounting settlements curtailments defined benefit pension plans termination benefits” sfas 88 sfas 106 “employers’ accounting postretirement benefits pensions” sfas 106 sfas 132r “employers’ disclosures pensions postretirement benefits revised 2003” sfas 132r statement requires companies recognize asset liability overfunded underfunded status benefit plans financial statements sfas 158 also requires measurement date plan assets liabilities coincide sponsor’s year end standard provides two transition alternatives related change measurement date provisions recognition asset liability related funded status provision effective fiscal years ending december 15 2006 change measurement date provisions effective fiscal years ending december 15 2008 gm adopted recognition asset liability related funded status provisions sfas 158 december 31 2006 additional pension opeb liability included balance sheet 274 billion impact adoption also resulted additional net deferred tax assets 108 billion impact adoption stockholders’ equity reduction 169 billion impact pension opeb expense cash flow benefits plans see note 19 consolidated financial statements discussion implementation recognition provisions sfas 158 management elected early adopt measurementdate provisions sfas 158 requires new measurement dates coinciding gm’s fiscal year plans 2007 gm use “twomeasurement” approach adopting measurementdate provisions sfas 158 see note 19 consolidated financial statements discussion measurementdate provisions sfas 158 early adopted gm january 1 2007 october 2006 fasb issued fsp fas 123r5 “amendment fasb staff position fas 123r1” fsp fas 123r5 amends fsp fas 123r1 “classification measurement freestanding financial instruments originally issued exchange employee services sfas 123r” clarify freestanding financial instruments originally issued employee compensation subject sfas 123r subsequently modified solely reflect equity restructuring occurs holders longer employees continue subject recognition measurement provisions sfas 123r certain conditions met provisions fsp fas 123r5 effective first reporting period beginning october 10 2006 gm adopted provisions fsp fas 123r5 january 1 2007 guidance material effect gm’s financial condition results operations october 2006 fasb issued fsp fas 123r6 “technical corrections fasb statement 123r” fsp fas 123r6 revises computation minimum compensation cost must recognized general motors corporation subsidiaries notes consolidated financial statements continued note 3 significant accounting policies concluded defined paragraph 42 sfas 123r also fsp fas 123r6 amends definition “shortterm inducement” exclude offer settle award provisions fsp effective first reporting period beginning october 20 2006 gm adopted provisions fsp fas 123r6 january 1 2007 guidance material effect gm’s financial condition results operations february 2007 fasb issued sfas 159 “the fair value option financial assets financial liabilities including amendment sfas 115” sfas 159 permits entity measure many financial assets financial liabilities fair value currently required measured fair value entities elect fair value option report unrealized gains losses earnings subsequent reporting date fair value option may elected instrumentbyinstrument basis exceptions sfas 159 amends previous guidance extend use fair value option availableforsale heldtomaturity securities statement also establishes presentation disclosure requirements help financial statement users understand effect election sfas 159 effective beginning first fiscal year beginning november 15 2007 management currently assessing potential impact standard gm’s financial condition results operations note 4 acquisition disposal businesses sale 51 controlling interest gmac november 30 2006 gm completed sale 51 controlling interest gmac purchase price 74 billion fim holdings llc fim holdings fim holdings consortium investors including cerberus fim investors llc citigroup inc aozora bank limited subsidiary pnc financial services group inc gm retained 49 interest gmac’s common membership interests addition fim holdings purchased 555000 gmac’s preferred membership interests cash purchase price 500 million gm purchased 1555000 preferred membership interests cash purchase price 14 billion total value cash proceeds distributions gm repayment certain intercompany obligations purchased preferred membership interests gmac expected approximately 14 billion three years comprised 74 billion purchase price 27 billion cash dividend closing transaction related cash flows including monetization certain retained assets subsequent december 31 2006 determined gm would required make capital contribution gmac approximately 1 billion restore adjusted tangible equity balance contractually required amount 144 billion due decrease adjusted tangible equity balance gmac november 30 2006 prior consummation transaction certain assets respect automotive leases owned gmac affiliates net book value approximately 4 billion related deferred tax liabilities 18 billion transferred gm ii gm assumed retained certain gmac’s postemployment benefit obligations totaling 842 million related deferred tax assets 302 million iii gmac transferred gm certain entities hold fee interest certain real properties iv gmac paid cash dividends gm based upon gmac’s anticipated net income period september 30 2005 november 30 2006 totaling 19 billion v gm repaid certain indebtedness owing gmac specified intercompany unsecured obligations owing gmac vi gmac made onetime distribution gm 27 billion cash reflect increase gmac’s equity resulting transfer portion gmac’s net deferred tax liabilities arising conversion gmac certain subsidiaries limited liability company form accordance terms sale agreement second quarter 2006 gm settled estimated outstanding liability respect residual support risk sharing agreement place gmac related certain operating lease portfolios amount 14 billion arrangement customer’s contractual residual value set gmac’s standard residual values gm reimbursed gmac extent remarketing sales proceeds less customer’s contractual residual value limited gmac’s general motors corporation subsidiaries notes consolidated financial statements continued note 4 acquisition disposal businesses continued standard residual sales value gm also participated risk sharing arrangement whereby gm shared equally residual losses extent remarketing proceeds gmac standard residual values limited floor amount liability previously recorded gm amounted approximately 18 billion resulting gain settlement approximately 390 million approximately 252 million gain recognized 2006 remainder reflected deferred gain recognized future periods leases terminate gm recognized noncash impairment charge approximately 29 billion expenses 2006 charge comprised writedown carrying value gmac assets sold november 30 2006 partially offset realization 51 unrecognized net gains reflected gmac’s comprehensive income eleven months ended november 30 2006 gmac’s earnings cash flows fully consolidated gm’s consolidated statements operations statements cash flows november 30 2006 gm’s remaining 49 interest gmac’s common membership interests reflected equity method investment also gm’s interest gmac’s preferred membership interests reflected cost method investment refer note 7 part agreement gm retained option 10 years closing date repurchase gmac certain assets related automotive finance business north american operations international operations gmac gm’s exercise option conditional gm’s credit rating investment grade higher gmac’s credit rating call option price calculated higher fair market value ii 95 times consolidated net income gmac’s automotive finance business either calendar year call option exercised calendar year immediately following year call option exercised value assigned fair value option gm gmac entered number agreements intended continue mutuallybeneficial global relationship gm gmac agreements substance consistent existing historical practices gm gmac including requiring gmac continue allocate capital automotive financing thereby continuing provide critical financing support significant share gm’s global sales gmac retains right make individual credit decisions gmac committed fund broad spectrum customers dealers consistent historical practice relevant jurisdiction subject gmac’s fulfillment certain conditions gm granted gmac exclusivity us canadian international gmsponsored consumer wholesale marketing incentives gm products specified markets around world exception saturn branded products refer note 28 additional information ongoing arrangements gm gmac sale gmac commercial mortgage march 23 2006 gm gmac sold approximately 79 equity gmac commercial mortgage approximately 15 billion cash subsequent sale remaining interest gmac commercial mortgage reflected using equity method december 31 2005 gmac commercial mortgage’s assets liabilities classified held sale gm’s consolidated balance sheet acquisition gm daewoo february 3 2005 gm completed purchase 166 million newlyissued shares common stock gm daewoo approximately 49 million increased gm’s ownership gm daewoo 482 446 shareholders gm daewoo participated issue june 28 2005 gm purchased suzuki motor corporation suzuki 69 million shares outstanding common stock gm daewoo approximately 21 million increased gm’s ownership gm daewoo 509 accordingly gm began consolidating operations gm daewoo june 2005 increased gm’s total assets liabilities june 30 2005 general motors corporation subsidiaries notes consolidated financial statements continued note 4 acquisition disposal businesses concluded approximately 47 billion 45 billion respectively including onetime increases 16 billion cash marketable securities 13 billion longterm debt pro forma unaudited impact automotive sales gm consolidated gm daewoo 2005 2004 would increase revenue 28 billion 43 billion respectively pro forma effect net income loss significant compared equity income recognized sale electromotive division april 4 2005 gm completed sale electromotive division emd investor group led greenbriar equity group llc berkshire partners llc total consideration 201 million sale covered substantially emd businesses lagrange illinois london ontario manufacturing facilities transaction material effect gm’s consolidated financial position results operations note 5 impairments restructuring initiatives impairments 2006 gm recorded impairment charges totaling 424 million related product specific assets based gm’s periodic review longlived assets classified held used 303 million gmna 60 million gme 61 million gmap addition gmna recorded impairment charges totaling 172 million 2006 includes 102 million related product specific assets 70 million related writedown various plant assets due decreased profitability production associated planned cessation production doraville georgia assembly plant 2008 additionally gme recorded asset impairment charge 2006 89 million connection announced closure gm’s portugal assembly plant closed december 2006 november 2005 gmna announced restructuring initiative cease operations nine assembly stamping powertrain facilities three service parts operations facilities 2008 result capacity reduction initiatives gm recorded charge 700 million write fair market value property plants equipment assets still service december 31 2005 see note 6 discussion employee costs associated restructuring 2005 business planning cycle accelerated result lack improved performance second quarter 2005 connection process gm reviewed carrying value certain longlived assets held used goodwill intangible assets indefinite lives reviews resulted impairment charges gmna gme addition restructuring initiatives announced third quarter 2005 gmap related production australia resulting additional impairment charges gmlaam unusually strong south american currencies adversely affected profitability gmlaam’s export business management’s decision adjust gmlaam’s export volumes resulted lower expected future cash flows resulting impairment charge region reviews initiatives resulted impairment charges totaling 12 billion recognized 2005 743 million gmna 262 million gme 150 million gmlaam 64 million gmap assets still service 2005 gmna also recorded charge 134 million write fair market value various plant assets connection first quarter 2005 announcement discontinue production lansing michigan assembly plant second quarter 2005 2004 impairment analyses resulted charges totaling 609 million respect productspecific assets additional charges 161 million recorded gmna writedown fair market value various plant general motors corporation subsidiaries notes consolidated financial statements continued note 5 impairments restructuring initiatives continued assets connection facilities rationalization actions assembly plants baltimore maryland linden new jersey restructuring initiatives gmna results 2006 included charge 115 million related costs incurred 2006 new salaried severance program allows involuntarily terminated employees receive continued salary benefits period time termination results 2005 include charges recognized 223 million gmna 13 million operations related voluntary early retirement separation programs respect certain salaried employees united states gme results 2006 include charges separations contract cancellations 437 million charges related restructuring plan announced fourth quarter 2004 closure gm’s portugal assembly plant reduction one shift ellesmere port plant united kingdom new separation programs belgium united kingdom sweden germany announced fourth quarter 2006 charge 2006 restructuring plan announced 2004 184 million gme’s restructuring plan targeted total reduction 12000 employees period 2005 2007 separation programs early retirements selected outsourcing initiatives december 31 2006 approximately 11600 employees left gm restructuring program target achieve total headcount reduction achieved targeted annual structural cost reduction 600 million 2006 charge 2006 closure portugal plant 79 million related separations contract cancellations plant closed december 2006 resulting total separation approximately 1100 employees charge 2006 shift reduction ellesmere port 134 million shift reduction reduced work force uk approximately 1200 employees end 2006 charge 2006 related separation programs belgium united kingdom sweden 32 million charges relate separation approximately 280 employees primarily sweden addition charge 8 million recorded 2006 relating early retirement program germany approved fourth quarter 2006 approximately 2600 employees leave program 2013 cost recognized remaining service period employee gme results 2005 included restructuring charges 11 billion separations mainly related restructuring plan announced fourth quarter 2004 also included costs related dissolution powertrain joint venture fiat second quarter 2005 contract cancellation charges gmlaam results 2006 include restructuring charges 43 million restructuring charges relate costs voluntary employee separations gm brasil gmap results 2006 include restructuring charges 15 million restructuring charges relate costs voluntary employee separations gm holden note 6 gmna postemployment benefit costs idle consolidate close facilities provide postemployment benefits employees idled temporary basis accrued based management’s best estimate wage benefits costs incurred qualified employees jobs bank provisions current labor agreement date expiration september 2007 plus estimated costs expected paid thereafter taking account policy changes gm intends negotiate jobs program expiration current collective bargaining agreement costs related idling employees expected temporary expensed incurred gm general motors corporation subsidiaries notes consolidated financial statements continued note 6 gmna postemployment benefit costs continued reviews adequacy continuing need liabilities annual basis conjunction yearend production labor forecasts furthermore gm reviews reasonableness liabilities quarterly basis 2005 gm recognized charge 18 billion postemployment benefits related restructuring north american operations announced november 2005 approximately 17500 employees included charge locations included action leaving company attrition transferring sites march 22 2006 gm delphi uaw reached agreement uaw attrition agreement intended reduce number us hourly employees accelerated attrition program attrition program offered us gm hourly employees select uawrepresented members delphi’s hourly work force program also permitted return uawrepresented delphi employees back gm september 2007 addition eligible uawrepresented delphi employees could elect retire delphi return gm retire agreement gm agreed assume financial obligations related lump sum payments made eligible delphi us hourly employees accepting normal voluntary retirement incentives certain postretirement employee benefit obligations related delphi employees returned gm plan refer note 20 additional information regards gm’s financial obligation respect delphi uaw attrition program gm provided certain uawrepresented employees gm lump sum payment 35000 normal early voluntary retirements retroactive october 1 2005 ii mutually satisfactory retirement employees least 10 years credited service 50 years age older iii payment gross monthly wages ranging 2750 2900 employees participate special voluntary preretirement program depending years credited service plant work location iv buyout 140000 employees ten years seniority 70000 employees less 10 years seniority provided employees sever ties gm except vested pension benefits approximately 34400 gm hourly employees agreed terms attrition program gm recorded charge approximately 21 billion 2006 recognize wage benefit cost accepting normal voluntary retirements buyouts preretirement leaves result attrition program jobs bank substantially reduced employees bank retired took buyout filled openings created attrition program employees chose leave gm retired left january 1 2007 throughout 2006 gm recorded favorable adjustments totaling approximately 10 billion postemployment benefits reserve primarily result transfer employees idled plants plant sites replace positions previously held employees accepted retirements buyouts preretirement leaves ii higher anticipated level attrition program participation employees idled facilities idled previously accrued jobs bank provisions iii higher anticipated headcount reductions associated previously announced gmna plant idling activities employees’ wage benefit costs included charge attributable attrition program 2006 discussed paragraph addition charge 81 million recorded 2006 reflect gm’s commitment uaw attrition agreement pay lumpsum certain uaw iuerepresented gm retirees recent retirements gm also announced plans idle shift lordstown assembly plant 2006 idle service parts operations drayton plains facility 2008 resulted charge 13 million 2006 recognize future wages benefit obligations associated idling workforce two facilities december 31 2006 postemployment benefit cost reserve reflects estimated future wages benefits 13 billion related approximately 8500 employees primarily located idled facilities idled result previous announcements approximately 10900 employees terms attrition program december 31 2005 reserve approximately 2 billion related estimated future wages benefits approximately 18400 employees primarily idled facilities idled result general motors corporation subsidiaries notes consolidated financial statements continued note 6 gmna postemployment benefit costs concluded previous announcements 2005 postemployment benefits reserve 237 million december 31 2004 related numerous facilities approximately 1900 employees following table summarizes activity reserve years 2006 2005 2004 note 7 investment nonconsolidated affiliates nonconsolidated affiliates gm identified herein entities gm owns equity interest gm uses equity method accounting gm ability exert significant influence decisions relating operating financial affairs gm’s significant affiliates percent gm’s equity ownership voting interest include following united states gmac 49 december 31 2006 japan fuji heavy industries ltd fhi sold december 31 2005 201 2004 suzuki motor corporation 37 december 31 2006 204 2005 2004 china shanghai general motors co ltd 50 2006 2005 2004 saicgmwuling automobile co ltd 34 2006 2005 2004 south korea gm daewoo 509 december 31 2006 2005 446 2004 increase ownership 50 gm consolidated gm daewoo june 30 2005 see note 4 italy gmfiat powertrain fgp dissolved december 31 2005 50 2004 general motors corporation subsidiaries notes consolidated financial statements continued note 7 investment nonconsolidated affiliates continued information regarding gm’s significant nonconsolidated affiliates described following countries included table discussed note 4 gm sold 51 ownership interest gmac november 2006 remaining 49 ownership interest held gm accounted equity method addition fim holdings purchased 555000 gmac’s preferred membership interests cash purchase price 500 million gm purchased 1555000 preferred membership interests cash purchase price 14 billion investment gmac preferred membership interests cost method investment initially recorded fair value date acquisition excess fair value purchase price preferred membership interests reduced corporation’s investment gmac common membership interests gmac required make certain quarterly distributions holders preferred membership interest cash pro rata basis preferred membership interests issued units 1000 accrue yield rate 10 per annum gmac’s board managers gmac board may reduce distribution extent required avoid reduction equity capital gmac minimum amount equity capital equal net book value gmac november 30 2006 addition gmac board may suspend payment preferred membership interest distributions consent majority preferred membership interests distributions made respect fiscal quarter distributions would cumulative accrued yield gmac’s preferred membership interests fiscal quarter fully paid preferred holders portion excess net financial book income gmac fiscal quarter amount yield distributed holders preferred membership interests quarter distributed holders common membership interests follows least 40 excess paid fiscal quarters ending prior december 31 2008 least 70 excess paid fiscal quarters ending december 31 2008 2006 gmac recognized gain 415 million sale entire equity interest regional home builder equity method accounting gmac’s share income recorded investment approximately 424 million 352 million 2006 2005 respectively also 2006 gm sold 9236 million shares investment suzuki reducing gm’s equity stake suzuki 204 37 163 million shares sale gm’s interest generated cash proceeds 2 billion gain general motors corporation subsidiaries notes consolidated financial statements continued note 7 investment nonconsolidated affiliates concluded sale 666 million 2006 effective completion sale gm’s remaining investment suzuki accounted availableforsale equity security refer note 8 fourth quarter 2005 gm completed sale 201 investment common stock fhi second quarter 2005 gm recorded impairment charge 812 million associated investment common stock fhi fourth quarter 2005 gm recorded gain 78 million due appreciation fair value stock june 30 2005 date fhi impairment charge sale generated net proceeds approximately 775 million february 13 2005 gm fiat spa fiat reached settlement agreement whereby gm agreed pay fiat approximately 20 billion return 10 equity interest fiat auto holdings bv fah terminate master agreement including put option entered march 2000 settle various disputes related thereto acquire interest key strategic diesel engine assets important rights respect diesel engine technology knowhow settlement agreement resulted charge approximately 14 billion recorded expenses consolidated statements operations since underlying events disputes giving rise gm’s fiat’s agreement settle disputes terminate master agreement including put option existed december 31 2004 gm recognized charge fourth quarter 2004 addition settlement agreement included among things following actions provisions • fgp joint venture company dissolved gm regained complete ownership gm assets originally contributed • gm would retain coownership fiat key powertrain intellectual property including sde jtd diesel engines m2032 sixspeed manual transmission • gm would hold 50 interest fiat gm powertrain polska joint venture limited operating powertrain manufacturing plant bielskobiala poland currently produces 13 liter sde diesel engine • companies continue supply powertrains longterm contracts provide considerable ongoing savings effective may 13 2005 liquidation joint ventures gm’s acquisition certain strategic assets fiat completed gm fiat exchanged broad releases claims liabilities fourth quarter 2004 gm completed annual review investment fah result continued deterioration performance fiat auto spa debt structure gm recorded noncash charge 220 million reduce carrying value gm’s investment fah zero note 8 marketable securities marketable securities held gm classified availableforsale except certain mortgagerelated securities classified heldtomaturity trading securities unrealized gains losses net related income taxes availableforsale securities included separate component stockholders’ equity unrealized gains losses trading securities recorded currently earnings gm determines cost specific identification basis general motors corporation subsidiaries notes consolidated financial statements continued note 8 marketable securities continued investments marketable securities follows millions proceeds sales marketable securities totaled 79 billion 2006 204 billion 2005 18 billion 2004 gross gains related sales marketable securities 11 billion 223 million 163 million 2006 2005 2004 respectively gross losses related sales marketable securities 105 million 2006 132 million 2005 79 million 2004 amortized cost fair value investments availableforsale securities contractual maturity december 31 2006 follows millions general motors corporation subsidiaries notes consolidated financial statements continued note 8 marketable securities concluded fair value gross unrealized losses investments unrealized loss position deemed otherthantemporarily impaired summarized following table general motors corporation subsidiaries notes consolidated financial statements continued addition december 31 2006 gm holds strategic 37 stake suzuki recorded assets fair value 460 million gm’s cost basis investment approximately 236 million prior 2006 gm held 204 interest accounted investment using equity method note 9 variable interest entities gm providing information concerning vies 1 consolidated since gm deemed primary beneficiary 2 entities gm consolidate although gm significant interests vies gm primary beneficiary vies listed related financing insurance operations consolidated 2004 2005 period january 1 2006 november 30 2006 synthetic leases gm leases real estate equipment various spes established facilitate financing assets gm nationally prominent creditworthy lessors assets consist principally office buildings warehouses machinery equipment use spes allows parties providing financing isolate particular assets single entity thereby syndicate financing multiple third parties conventional financing technique used lower cost borrowing thus lease cost lessee gm wellestablished market institutions participate financing property purchase interests spes certain spes determined vies fin 46r gm consolidates entities leases gm provides residual value guarantee leased property considered primary beneficiary fin 46r december 31 2006 carrying amount assets liabilities consolidated fin 46r amounted 636 million 797 million respectively compared 780 million 1 billion december 31 2005 assets consolidated reflected propertynet gm’s consolidated financial statements gm’s maximum exposure loss related consolidated vies amounted 695 million december 31 2006 lease arrangements involving vies gm holds significant variable interests considered primary beneficiary fin 46r gm’s maximum exposure loss related vies gm significant variable interest consolidate entity amounted 624 million december 31 2006 financing insurance operations automotive finance receivables certain securitization transactions gmac transfers consumer finance receivables wholesale lines credit banksponsored multiseller commercial paper conduits provide funding source gmac well transferors conduit fund purchase receivables issuance commercial paper total assets outstanding banksponsored conduits approximated 153 billion december 31 2005 gmac variable interest conduits considered primary beneficiary gmac retain majority expected losses returns mortgage warehouse funding gmac’s mortgage operations transfer commercial residential mortgage loans lending receivables home equity loans lines credit pending permanent sale securitization various structured finance arrangements order provide funds origination purchase future loans structured finance arrangements include transfers warehouse funding entities including gmac banksponsored commercial paper conduits transfers assets gmac facility accounted either sales offbalance sheet secured financings onbalance sheet based provisions sfas 140 “accounting transfers servicing financial assets extinguishments liabilities” sfas 140 however either case creditors facilities legal recourse general credit gmac warehouse funding entities represent variable interest entities fin 46r management determined certain mortgage warehouse funding facilities gmac primary beneficiary consolidates entities accordance fin 46r assets residential mortgage warehouse entities totaled 72 billion december 31 2005 majority included loans held sale finance receivables net consolidated balance sheet general motors corporation subsidiaries notes consolidated financial statements continued note 9 variable interest entities continued residential mortgage loan alliances gmac invested strategic alliances several mortgage loan originators alliances may include common preferred equity investments working capital subordinated lending warrants addition warehouse lending arrangements management determined gmac majority expected losses returns consolidation appropriate fin 46r total assets alliances 139 million december 31 2005 construction real estate lending gmac uses spe finance construction lending receivables spe purchases holds receivables funds majority purchases financing obtained thirdparty assetbacked commercial paper conduits gmac primary beneficiary consolidates entity accordance fin 46r assets entity totaled 16 billion december 31 2005 included finance receivables net consolidated balance sheet beneficial interest holders variable interest entity legal recourse general credit gmac subordinated real estate lending arrangements certain entities entitles created develop land construct residential homes management determined gmac majority expected losses returns consolidation appropriate fin 46r total assets entities 496 million december 31 2005 warehouse lending gmac facility transfers mortgage warehouse lending receivables 100 owned spe sells senior participation interest receivables unconsolidated qualifying special purpose entity qspe funds purchase participation interest spe financing obtained thirdparty assetbacked commercial paper conduits spe funds purchase receivables gmac cash obtained qspe well subordinated loan andor equity contribution gmac senior participation interest sold qspe commercial paper issued included assets liabilities gmac receivables sold may purchased gmac except limited circumstances breach representations warranties management determined gmac primary beneficiary spe consolidates entity accordance fin 46r assets entity totaled 35 billion december 31 2005 included finance receivables net unearned income consolidated balance sheet collateralized debt obligations cdos gmac’s mortgage operations sponsor serve collateral manager cdos cdo transactions trust established purchases portfolio securities issues debt equity certificates representing interests portfolio assets addition receiving variable compensation managing portfolio gmac sometimes retains equity investments cdos majority cdos sponsored gmac initially structured restructured approval senior beneficial interest holders qspes therefore exempt fin 46r event asset credit impaired call option triggered whereby gmac collateral manager may buy asset pool sell third party call triggered events outside gmac’s control downgrade rating agency asset pool event specified percentage mortgage loans underlying security greater 60 days delinquent liquidated event conditions gmac exercise call option met gmac recognizes assets accordance provisions gmac recognize assets december 31 2005 management determined certain cdo entities gmac primary beneficiary general motors corporation subsidiaries notes consolidated financial statements continued note 9 variable interest entities concluded consolidates entities accordance fin 46r assets entities totaled 569 million december 31 2005 majority included marketable securities consolidated balance sheet interests real estate partnerships gmac’s commercial mortgage operations syndicate investments real estate partnerships unaffiliated investors certain partnerships guaranteed timely payments specified return investors investor returns principally generated partnership’s share affordable housing tax credits tax losses derived partnership’s investments entities develop operate affordable housing properties throughout united states entities considered vie’s fin 46r determination whether gmac primary beneficiary given tax credit fund depends many factors including number limited partners rights obligations general limited partners fund gmac variable interests underlying operating partnerships primarily form limited partnership interests results variable interest analysis indicated gmac primary beneficiary partnerships result required consolidate entities fin 46r assets outstanding underlying operating partnerships approximated 65 billion december 31 2005 gmac’s maximum exposure loss related partnerships 682 million addition management determined certain partnerships gmac primary beneficiary consolidates partnerships accordance fin 46r impact consolidation results increase assets totaling 452 million december 31 2005 included corporation’s consolidated balance sheet consolidation impact reported net income real estate assets held collateral entities totaled 252 million december 31 2005 gmac holds variable interests syndicated affordable housing partnerships provides unaffiliated investors guaranteed yield investment partnerships reflected held sale gm’s consolidated balance sheet december 31 2005 financing method accordance statement financial accounting standards 66 “accounting sales real estate” sfas 66 gmac’s exposure loss december 31 2005 14 billion representing 10 billion financing liability reflected consolidated balance sheet ie real estate syndication proceeds well 04 billion additional unpaid equity installments maximum exposure amount represents amount payable investors unaffiliated investors place additional guaranteed commitments gmac decreases tax benefits delivered investors considering amounts gmac exposure loss future periods expected exceed 19 billion new markets tax credit funds gmac syndicates manages investments partnerships make investments typically mortgage loans turn qualify partnerships earn new markets tax credits new markets tax credits permit taxpayers receive federal income tax credit making qualified equity investments community development entities one particular tax credit fund management determined gmac majority expected losses returns consolidation appropriate fin 46r assets investments totaled 62 million december 31 2005 41 million represents gmac’s maximum exposure loss addition entity management determined tax credit funds gmac primary beneficiary consolidates entities accordance fin 46r impact consolidation results increase assets classified held sale consolidated balance sheet totaling 206 million december 31 2005 note 10 finance receivables securitizations gm generates receivables sales vehicles dealer network domestically internationally well service parts transmission powertrain sales certain receivables sold gm whollyowned bankruptcyremote spe separate legal entity assumes risks rewards ownership receivables turn spe participates trade accounts receivable securitization program whereby enters agreement sell undivided interests eligible pool trade receivables limited general motors corporation subsidiaries notes consolidated financial statements continued note 10 finance receivables securitizations continued 085 billion 1 billion 2006 2005 respectively bank conduit funds purchases issuance commercial paper via direct bank funding receivables program sold fair market value excluded gm’s consolidated balance sheet loss recorded trade receivables sold included automotive cost sales 30 million 23 million 3 million 2006 2005 2004 respectively december 31 2006 2005 bank conduit beneficial interest 02 billion 04 billion respectively spe’s pool eligible trade receivables gm retained interest receivables sold performs collection administrative functions gross amount proceeds collections reinvested revolving securitizations 90 billion 128 billion 69 billion 2006 2005 2004 respectively addition securitization program gm participates trade receivable securitization programs primarily europe financing providers beneficial interest gm’s pool eligible european receivables 01 billion 03 billion december 31 2006 2005 respectively related securitization programs since april 2006 certain gm trade accounts receivables related vehicle sales dealers primarily middle east pledged collateral balance sheet securitized borrowing program receivables pledged reported separately trade accounts receivables consolidated balance sheet amount receivables pledged program december 31 2006 approximately 03 billion amount also reported shortterm borrowings addition gm balance sheet trade receivable financing programs gmac counterparty balance programs 18 billion december 31 2006 reported debt since completion gmac transaction finance receivables net finance receivables net included following december 31 2005 1 december 31 2005 30 billion 21 billion domestic 949 million foreign gmac commercial mortgage’s finance receivables loans transferred held sale consolidated balance sheet 2 net unearned income 59 billion december 31 2005 general motors corporation subsidiaries notes consolidated financial statements continued note 10 finance receivables securitizations continued finance receivables originated outside united states 325 billion december 31 2005 securitizations finance receivables mortgage loans described note 4 gmac transferred gm two bankruptcyremote subsidiaries spes hold equity interests ten trusts parties lease asset securitizations balance lease securitization debt two spes december 31 2006 94 billion gmac significant finance receivables completion gmac transaction yearend 2006 gmac’s finance receivables longer part consolidated balance sheet information gmac finance receivables december 31 2005 gmac sells retail finance receivables wholesale dealer loans residential mortgage loans following discussion related information applicable transfers finance receivables loans qualify offbalance sheet securitizations requirements sfas 140 gmac retains servicing responsibilities subordinated interests securitizations retail finance receivables wholesale loans servicing responsibilities retained majority residential commercial mortgage loan securitizations gmac may retain subordinated interests securitizations gmac also holds subordinated interests acts collateral manager collateralized debt obligation cdo securitization program servicer gmac receives monthly fee stated percentage outstanding sold receivables typically retail automotive finance receivables gmac paid fee concluded fee represents adequate compensation servicer servicing asset liability recognized considering shortterm revolving nature wholesale loans servicing asset liability recognized upon securitization loans december 31 2005 weighted average basic servicing fees primary servicing activities 100 basis points 100 basis points 40 basis points outstanding principal balance sold retail finance receivables wholesale loans residential mortgage loans commercial mortgage loans respectively additionally gmac retain rights cash flows remaining investors securitization trusts received contractual payments certain retail securitization transactions retail receivables sold servicing retained basis servicing compensation servicing liability established recorded liabilities december 31 2005 servicing liabilities 32 million outstanding related retail securitization transactions addition 2005 gmac completed retail automotive securitization servicing fee received considered greater adequate compensation requiring recording servicing asset december 31 2005 fair value servicing asset 30 million mortgage servicing gmac capitalizes value expected realized performing specified residential commercial mortgage servicing activities mortgage servicing rights general motors corporation subsidiaries notes consolidated financial statements continued note 10 finance receivables securitizations continued following tables summarize gains securitizations certain cash flows received paid securitization trusts transfers finance receivables loans completed eleven months ended november 30 2006 years ended december 31 2005 2004 general motors corporation subsidiaries notes consolidated financial statements continued note 10 finance receivables securitizations continued general motors corporation subsidiaries notes consolidated financial statements continued note 10 finance receivables securitizations continued key economic assumptions used measuring estimated fair value retained interests sales completed eleven months ended november 30 2006 year ended december 31 2005 dates sales follows fair value retained interests wholesale securitizations approximates cost shortterm floating rate nature wholesale loans b included within residential mortgage loans home equity loans lines high loantovalue loans residential first second mortgage loans c assumptions used measure expected yield variable rate retained interests based benchmark interest rate yield curve plus contractual spread appropriate actual yield curve utilized varies depending specific retained interests based weighted average maturity finance receivables constant prepayment rate mortgage loans commercial mortgage securities gm hedges interest rate prepayment risks associated certain retained interests effects hedge strategies considered herein expected static pool net credit losses include actual incurred losses plus projected net credit losses divided original balance outstandings comprising securitization pool table displays expected static pool net credit losses based gm’s securitization transactions static pool losses applicable wholesale finance receivable securitizations shortterm nature b represents eleven months ended november 30 2006 general motors corporation subsidiaries notes consolidated financial statements continued note 10 finance receivables securitizations concluded following table presents components securitized financial assets managed along quantitative information delinquencies net credit losses december 31 2005 excludes 263 billion managed assets gmac’s commercial mortgage business b managed portfolio represent finance receivables loans balance sheet securitized excluding securitized finance receivables loans gmac continues service continuing involvement ie gmac retains interest risk loss underlying receivables note 11 inventories included following inventories stated cost excess market cost approximately 52 us inventories determined lastin firstout lifo method cost inventories determined either firstin firstout fifo average cost methods general motors corporation subsidiaries notes consolidated financial statements continued note 11 inventories concluded 2006 2005 us lifo eligible inventory quantities reduced reduction resulted liquidation lifo inventory quantities carried lower costs prevailing prior years compared cost 2006 2005 purchases effect decreased cost goods sold approximately 50 million 2006 100 million 2005 note 12 equipment operating leases equipment operating leases accumulated depreciation follows lease payments received related equipment operating leases maturing five years following december 31 2006 follows auto none payment received lease inception income deferred lease period fio 200722 billion 200814 billion 2009534 million 201056 million leases maturing 2010 note 13 income taxes income loss income taxes equity income loss minority interests cumulative effect change accounting principle included following general motors corporation subsidiaries notes consolidated financial statements continued note 13 income taxes continued provision income taxes estimated follows annual tax provisions include amounts considered sufficient pay assessments may result examination prior year tax returns cash paid income taxes 2006 2005 2004 259 million 305 million 293 million respectively provisions made estimated us foreign income taxes less available tax credits deductions may incurred remittance corporation’s share subsidiaries’ undistributed earnings deemed permanently reinvested taxes provided foreign subsidiaries’ earnings deemed permanently reinvested 85 billion december 31 2006 126 billion december 31 2005 quantification deferred tax liability associated permanently reinvested earnings practicable general motors corporation subsidiaries notes consolidated financial statements continued note 13 income taxes continued reconciliation provision income taxes compared amounts us federal statutory rate follows 1 deduction dividends paid gm 123 par value common stock held employee stock ownership portion gm savings plans pursuant economic growth tax relief reconciliation act 2001 deferred income tax assets liabilities 2006 2005 reflect effect temporary differences amounts assets liabilities equity financial reporting purposes bases assets liabilities equity measured tax laws well tax loss tax credit carryforwards general motors corporation subsidiaries notes consolidated financial statements continued note 13 income taxes continued temporary differences carryforwards gave rise deferred tax assets liabilities included following deferred tax balances included consolidated balance sheet tax carryforwards december 31 2006 approximately 5 relates alternative minimum tax credit carried forward indefinitely approximately 32 relates us federal net operating loss carryforwards approximately 11 relates us state net operating loss carryforwards expire 20072026 used approximately 84 us state net operating loss carryforwards expire 2009 approximately 29 tax carryforwards relate general business credits consist primarily research experimentation credits us foreign tax credits expire 2007 2026 used remaining tax carryforwards relate accumulated foreign operating losses approximately 77 carried forward indefinitely remaining 23 expire 2021 general motors corporation subsidiaries notes consolidated financial statements continued note 13 income taxes continued gm following net deferred tax assets applicable following taxing jurisdictions corporation’s operations recent history cumulative losses financial reporting purposes need establish valuation allowances net deferred tax assets assessed periodically based morelikelythannot realization threshold accordance sfas 109 appropriate consideration given positive negative evidence related realization assessment considers among matters nature frequency severity recent losses forecasts future profitability duration statutory carryforward periods gm’s experience tax attributes expiring unused tax planning alternatives weight given considerations depends upon degree objectively verified valuation allowances gm recognized relate certain us state foreign jurisdiction net deferred tax assets change valuation allowance related considerations follows united states canada valuation allowance established gm’s us federal canadian net deferred tax assets gm believes likely realized expectation based part fact gm incurred cumulative losses last three years united states canada losses largely driven gm’s restructuring gmna foreign exchange accordingly losses unusual nature former incurred order improve future profitability addition consideration given lengthy period net deferred tax assets realized gm’s history never lost significant us federal canadian tax attribute expiration gm also given consideration forecast future profitability includes following key elements • launch new sport utility vehicles fullsize pickup trucks beginning 2006 expected produce substantially higher revenues profits predecessor models segments 2006 • reductions gmna’s cost structure result implementation restructuring plan general motors corporation subsidiaries notes consolidated financial statements continued note 13 income taxes concluded • participation anticipated gmac earnings united states anticipated outcome events expected improve north america operating results forecast levels future profitability us federal canadian net deferred tax assets considered likely realizable periods underlying transactions become deductible us federal canadian tax purposes future events andor outcome gm’s cost reduction actions significantly different gm currently forecasts substantial valuation allowance us canadian net deferred tax assets might required additional valuation allowance recorded 2006 related 2006 loss allocable certain us state jurisdictions previously determined tax attributes related jurisdictions realizable brazil 2005 determined morelikelythannot deferred taxes gm’s brazilian operations would realized therefore gm recorded full valuation allowance tax credit carryforwards net timing differences brazil decision based consideration historical results gm’s operations brazil coupled governmentimposed 30 annual limitation net operating loss utilization germany united kingdom valuation allowances established gm’s net deferred tax assets germany united kingdom although gm’s german uk operations incurred cumulative losses recent years gm believes considerations overcome fact accordingly deferred tax assets morelikelythannot realized determination based particular unlimited expiration net operating loss carryforwards germany united kingdom together operations’ histories utilizing tax attributions past earnings strong prospects future earnings spain valuation allowance established gm’s spanish net deferred tax assets gm believes morelikelythannot realized spanish net operating loss carryforwards expire 15 years losses spanish operations largely caused nonrecurring transactions addition gm believes spanish operations continue strong prospects future earnings south korea full valuation allowance historically recorded net deferred tax assets south korea several positive events occurred 2006 leading gm conclude valuation allowance longer necessary corporation expects continuing profitability south korea net deferred tax asset likely realized gm open tax years primarily 1999 2006 various significant taxing jurisdictions including united states canada mexico germany brazil open years contain matters could subject differing interpretations applicable tax laws regulations relate amount timing inclusion revenue expenses sustainability income tax credits given audit cycle gm established liability 28 billion matters amount loss probable reasonably estimable amount liability based management’s best estimate given corporation’s history similar matters interpretations current laws regulations general motors corporation subsidiaries notes consolidated financial statements continued note 14 property net property net follows depreciation impairment amortization expense follows depreciation property held gmac ceased april 2006 time assets classified held sale december 2006 gm sold proving grounds facility mesa arizona 283 million cash subsequently leased back three year period gm recognized gain 270 million general motors corporation subsidiaries notes consolidated financial statements continued note 15 goodwill intangible assets components intangible assets follows aggregate amortization expense existing acquired intangible assets 84 million year ended december 31 2006 estimated amortization expense next five years follows 2007 57 million 2008 50 million 2009 46 million 2010 23 million 2011 21 million general motors corporation subsidiaries notes consolidated financial statements continued note 15 goodwill intangible assets concluded changes carrying amounts goodwill years ended december 31 2006 2005 follows 1 2005 gmac recorded impairment charge 712 million related goodwill commercial mortgage business 2 december 31 2005 59 million gmac’s commercial mortgage goodwill reclassified assets held sale 3 2006 gmac recorded goodwill 151 million primarily result purchase regional insurance company 4 changes key personnel commercial finance business gmac initiated goodwill impairment test accordance sfas 142 “goodwill intangible assets” sfas 142 outside annual goodwill impairment testing period thorough review business new leadership particular focus longterm strategy performed result review operating divisions reorganized decision made implement different exit strategy workout portfolio exit product lines lower returns decisions significant impact expected asset levels growth rate assumptions used estimate fair value business particular analysis performed third quarter 2006 incorporates management’s decision discontinue activity equipment finance business portfolio 1 billion representing approximately 20 commercial finance business average assets outstanding 2006 fair value commercial finance business determined using internally developed discounted cash flow analysis based five year projected net income market driven terminal value multiple based upon results assessment impairment charge 828 million recorded 2006 5 november 30 2006 gm completed sale 51 controlling interest gmac see note 4 general motors corporation subsidiaries notes consolidated financial statements continued note 16 assets included following general motors corporation subsidiaries notes consolidated financial statements continued note 17 accrued expenses liabilities deferred income taxes accrued expenses liabilities deferred income taxes included following policy product warranty recall campaigns certified used vehicles liability included following management reviews adjusts estimates regular basis based differences actual experience historical estimates available information general motors corporation subsidiaries notes consolidated financial statements continued note 18 shortterm borrowings longterm debt shortterm borrowings gm shortterm borrowings 33 billion 09 billion december 31 2006 2005 respectively december 31 2006 shortterm borrowings included related party debt 28 billion mainly dealer financing gmac amounts available shortterm line credit agreements 45 billion 24 billion december 31 2006 2005 respectively interest rate shortterm borrowings outstanding 25 112 december 31 2006 11 92 december 31 2005 longterm debt longterm debt consisted following millions adjust hedged fixed rate debt fair value changes attributable hedged risk accordance sfas 133 unsecured bonds represent obligations various annual coupons ranging 6375 945 maturities ranging 2008 2052 convertible bonds include 12 billion principal amount 45 series convertible senior debentures due 2032 series 26 billion principal amount 525 series b convertible senior debentures due 2032 series b 43 billion principal amount 625 series c convertible senior debentures due 2033 series c gm unilaterally irrevocably waived relinquished right use stock committed use cash settle principal amount debentures 1 holders choose convert debentures 2 gm required holders repurchase debentures gm retains right use either cash stock settle amount may become due debt holders excess principal amount conversion prices bonds follows 7020 series securities 6490 series b securities 4762 series c securities 2007 series convertible debentures put gm settled entirely cash march 6 2007 11 billion convertible debentures included current portion longterm debt december 31 2006 notes convertible holder outlined • closing sale price gm’s 123 par value common stock exceeds 120 conversion price least 20 trading days 30 consecutive trading days ending last trading day preceding fiscal quarter • five business day period nine consecutive trading day period trading price debentures day period less 95 product closing sale price general motors corporation subsidiaries notes consolidated financial statements continued note 18 shortterm borrowings longterm debt continued gm’s 123 par value common stock multiplied number shares issuable upon conversion 2500 principal amount debentures • debentures called redemption series march 6 2007 series b march 6 2009 series c july 20 2010 • upon occurrence specified corporate events gm’s requirement repurchase portion notes described • investor exercises right require gm repurchase portion debentures specified repurchase dates security series march 6 2007 2012 2017 2022 2027 series b march 6 2014 2019 2024 2029 series c july 15 2018 2023 2028 days business day next succeeding business day foreign currency denominated bonds include eurodenominated bonds annual coupons ranging 725 8375 maturity dates ranging 2013 2033 also included within foreigncurrencydenominated bonds british pounds bonds annual coupons ranging 8375 8875 maturity dates ranging 2015 2023 mitigate foreign exchange exposure created debt gm enters cross currency swaps notional values swaps 24 billion 2006 2005 longterm debt 68 billion 48 billion december 31 2006 2005 respectively consisted municipal bonds capital leases longterm obligations gm also 46 billion standby revolving credit facility syndicate banks 150 million terminates june 2008 45 billion terminates july 2011 approximately 69 million letters credit issued credit facility loans currently outstanding 45 billion secured facility borrowings limited amount based value underlying collateral consists certain north american accounts receivable inventory gm saturn corporation gm canada certain plants property equipment gm canada pledge 65 stock holding company gm’s indirect subsidiary gm de mexico addition 45 billion secured line credit collateral also secures certain lines credit automatic clearinghouse overdraft arrangements letters credit provided secured lenders totaling approximately 15 billion event certain work stoppages secured facility would temporarily reduced 35 billion gm’s available longterm borrowings line credit arrangements various banks totaled 47 billion 56 billion december 31 2006 2005 respectively unused portion credit lines totaled 46 billion december 31 2006 addition gm’s consolidated affiliates nongm minority shareholders primarily gm daewoo lines credit various banks totaled 27 billion december 31 2006 represented longterm facilities compared 25 billion december 31 2005 unused portion credit lines totaled 16 billion december 31 2006 achieve desired balance fixed variable debt gm entered interest rate swaps notional amount pay variable swap agreements december 31 2006 2005 automotive approximately 53 billion 55 billion respectively december 31 2006 2005 longterm unsecured bonds convertible bonds secured debt capital lease obligations included 255 billion 261 billion respectively obligations fixed interest rates 76 billion 65 billion respectively obligations variable interest rates predominantly libor interest rate swap agreements gm financing arrangements consisting principally obligations connection saleleaseback transactions lease obligations including offbalance sheet arrangements view recent general motors corporation subsidiaries notes consolidated financial statements continued note 18 shortterm borrowings longterm debt concluded restatement prior financial statements gm evaluated effect restatement agreements including legal rights ability cure respect claims could asserted based review gm believes amounts subject possible claims acceleration termination remedies likely exceed 27 billion consisting primarily offbalance sheet arrangements although assurances given likelihood nature amount claims may asserted based review gm reclassified approximately 257 million obligations longterm debt shortterm debt longterm debt maturities including capital leases december 31 2006 follows 2007 23 billion 2008 28 billion 2009 07 billion 2010 02 billion 2011 17 billion financing insurance operations debt consisted following millions described note 4 gmac transferred gm two bankruptcyremote subsidiaries hold number trusts parties lease asset securitizations 94 billion secured debt december 31 2006 primarily comprised assetbacked debt securities issued trusts part lease securitizations achieve desired balance fixed variable debt gm entered interest rate swaps cap agreements gmac counterparty notional amount agreements december 31 2006 fio approximately 72 billion pay floating variable interest rates ranged 53 66 notional amount agreements december 31 2005 fio approximately 1045 billion relating swap agreements 754 billion pay variable 291 billion pay fixed december 31 2005 certain fio’s debt obligations denominated currencies currency issuing country amounted canadian dollar 81 billion euro 66 billion uk pound sterling 61 billion australian dollar 14 billion longterm debt maturities december 31 2006 follows 2007 44 billion 2008 38 billion 2009 12 billion 2010 0 2011 5 million general motors corporation subsidiaries notes consolidated financial statements continued note 19 pensions postretirement benefits gm sponsors number defined benefit pension plans covering substantially us canadian employees well certain nonus employees plans covering us canadian represented employees generally provide benefits negotiated stated amounts year service well significant supplemental benefits employees retire 30 years service normal retirement age benefits provided plans covering us canadian salaried employees certain nonus locations generally based years service compensation history gm also certain nonqualified pension plans covering executives based targeted wage replacement percentages unfunded gm also sponsors defined contribution retirement savings plans hourly salaried employees gm matches contributions us salaried employees certain predefined limits based upon eligible base salary gm suspended corporation’s match effective january 1 2006 gm reinstated match us salaried employees effective january 1 2007 addition gm matching contribution gm makes contribution equal 1 eligible base salary us salaried employees service date january 1 1993 cover certain benefits retirement different us salaried employees service date prior january 1 1993 charge expense us salaried contributions 117 million 2006 652 million 2005 1128 million 2004 addition gm established new gm contribution savings stock purchase program sspp us salaried employees length service date january 1 2001 effective january 1 2007 gm automatically contribute amount equal 4 eligible base salary program gm also provides contributions certain international defined contribution plans contributions immaterial periods presented additionally gm maintains hourly salaried benefit plans provide postretirement medical dental vision life insurance us canadian retirees eligible dependents cost benefits recognized consolidated financial statements period employees provide service gm certain nonus subsidiaries postretirement benefit plans although participants covered government sponsored administered programs cost programs generally significant gm also provides postemployment extended disability benefits comprised income security health care life insurance us canadian employees become disabled longer actively work cost benefits recognized period employees provide service september 2006 fasb issued sfas 158 requires companies recognize asset liability overfunded underfunded status benefit plans financial statements year ending december 15 2006 gm recognized funded status benefit plans december 31 2006 sfas 158 also requires measurement date plan assets liabilities coincide sponsor’s year end gm elected early adopt measurementdate provisions sfas 158 requires new measurement dates coinciding gm’s year end plans 2007 using “twomeasurement” approach gm perform measurement using prior year yearend reporting covering period previous measurement date december 31 2006 net benefit expenseincome period recorded adjustment beginning retained earnings january 1 2007 gm perform another measurement january 1 2007 determine net benefit expenseincome recorded 2007 changes fair value plan assets benefit obligations prior measurement date january 1 2007 recorded adjustment accumulated comprehensive income net taxes january 1 2007 adopting measurement date provisions 2007 gm record adjustment retained earnings 07 billion accumulated comprehensive income 21 billion january 1 2007 general motors corporation subsidiaries notes consolidated financial statements continued note 19 pensions postretirement benefits continued incremental effect applying recognition provisions sfas 158 individual line items consolidated balance sheet december 31 2006 follows gm’s funding policy respect qualified pension plans contribute annually less minimum required applicable law regulations directly pay benefit payments appropriate gm made pension contributions us hourly salaried us nonus pension plans made direct payments appropriate follows 2007 gm contributions due us hourly salaried pension plans gm expect make discretionary contributions us hourly salaried pension plans 2007 gm expects contribute pay benefits approximately 100 million us pension plans 600 million primary nonus pension plans include gm canada limited adam opel vauxhall gm contributes us hourly salaried voluntary employees beneficiary association veba trusts opeb plans contributions made gm veba trust 2006 2005 contributions participants opeb plans 129 million 89 million 87 million 2006 2005 2004 respectively gm withdrew total 41 billion 32 billion plan assets veba trusts opeb plans 2006 2005 respectively gm uses december 31 measurement date majority us pension plans september 30 measurement date us opeb plans gm’s measurement dates canadian adam opel vauxhall motors primary pension plans november 30 september 30 september 30 respectively gm’s measurement dates canadian south african opeb plans december 31 discussed adoption general motors corporation subsidiaries notes consolidated financial statements continued note 19 pensions postretirement benefits continued measurementdate provisions sfas 158 2007 plans december 31 measurement date coincides gm’s yearend general motors corporation subsidiaries notes consolidated financial statements continued table include extended disability plans total apbo 866 million december 31 2006 11 billion december 31 2005 due materiality 1 includes overfunded status combined us hourly salaried pension plans 171 billion 75 billion december 31 2006 2005 total accumulated benefit obligation accumulated benefit obligation fair value plan assets gm’s pension plans accumulated benefit obligations excess plan assets projected benefit obligation fair value plan assets pension plans projected benefit obligations excess plan assets follows general motors corporation subsidiaries notes consolidated financial statements continued note 19 pensions postretirement benefits continued components pension opeb expense along assumptions used determine benefit obligations follows table include extended disability plans total net expense 105 million excluding curtailments 2006 79 million 2005 64 million 2004 due materiality 1 determined end year 2 determined beginning year appropriate discount rates used 2006 measure effects curtailments plan amendments various plans following estimated amounts amortized accumulated comprehensive income net periodic benefit cost 2007 based december 31 2006 january 1 2007 plan measurements dollars millions general motors corporation subsidiaries notes consolidated financial statements continued note 19 pensions postretirement benefits continued february 7 2006 gm announced would increase us salaried workforce’s participation cost health care capping gm’s contributions salaried retiree health care level 2006 expenditures remeasurement us salaried opeb plans february 9 2006 result benefit modifications generated 05 billion reduction opeb expense 2006 reflected components expense table remeasurement reduced us accumulated postretirement benefit obligation apbo 47 billion march 7 2006 gm announced would modify terms us salaried pension plan freeze benefits current plan december 31 2006 implement new plan using new pension formula thereafter remeasurement gm’s us salaried pension plans march 31 2006 result benefit modifications generated 04 billion reduction pension expense 2006 reflected components expense table remeasurement reduced us projected benefit obligation pbo 28 billion effective march 31 2006 us district court eastern district michigan approved tentative settlement agreement uaw settlement agreement related reductions hourly retiree health care approval appeal uaw settlement agreement remain effect least september 2011 either gm uaw may cancel agreement upon 90 days written notice similarly gm’s contractual obligations provide health care benefits uaw hourly retirees extends least september 2011 continue thereafter terminated either gm uaw result provisions uaw settlement agreement continue effect uaw retirees beyond expiration september 2007 current collective bargaining agreement gm uaw given significance effect uaw settlement agreement plans remeasured remeasurement us hourly opeb plans march 31 2006 due uaw settlement agreement generated 13 billion reduction opeb expense 2006 reflected components expense table remeasurement reduced us apbo 145 billion gm accounted reduced health care coverage provisions uaw settlement agreement amendment gm’s health care program hourly employees modified plan gm previously estimated reduced health care coverage provisions uaw settlement agreement would result approximately 15 billion reduction gm’s opeb obligations related modified plan conjunction measurement modified plan march 31 2006 estimated reduction gm’s opeb obligations increased 15 billion 174 billion attributable primarily increase discount rate utilized march 31 2006 measurement modified plan apbo reduction 174 billion amortized straightline basis remaining service lives active uaw hourly employees 74 years reduction opeb expense reduction expense partially offset amortization period 29 billion related capped benefits expected paid contributions mitigation plan discussed expense related previously negotiated wage increases active employees diverted mitigation plan mentioned uaw settlement agreement also provides gm make contributions new independent veba mitigation plan assets mitigation plan used mitigate effect reduced gm health care coverage individual uaw retirees depending level mitigation expected available number years new independent mitigation plan partially funded gm contributions 1 billion 2006 2007 2011 contribution may accelerated specified circumstances gm also make future contributions subject provisions uaw settlement agreement relate profit sharing payments increases value notional number shares gm’s 123 par value common stock collectively supplemental contributions well wage deferral payments dividend payments gm’s obligation make contributions mitigation plan fixed determined formula defined uaw settlement agreement gm’s obligations limited contributions gm obligated general motors corporation subsidiaries notes consolidated financial statements continued note 19 pensions postretirement benefits continued provide incremental funding event asset shortfall mitigation plan uaw settlement agreement provides ability assets mitigation plan mitigate retiree health care costs guaranteed gm furthermore mitigation plan completely independent gm administered independent trust committee shall include gm representatives assets independent veba trust uaw retirees gm responsibility committee full fiduciary responsibility investment strategy safeguarding assets execution benefit plan designed gm accounted mitigation plan defined benefit plan cap gm’s opeb obligation plan limited present value three 1 billion cash payments minimum supplemental contributions required settlement agreement present value gm’s obligation mitigation plan 29 billion amortized straightline basis remaining service lives active uaw hourly employees 74 years opeb expense payments gm mitigation plan related wage deferrals dividends changes estimate supplemental contributions recorded expense quarter hours worked dividend declared change estimate occurs respectively gm recognize expense wage deferrals future services rendered since activeuaw representedhourlyemployees elected forgo contractual wage increases amounts contributed mitigation plan 2006 required uaw settlement agreement gm made 1 billion contribution mitigation plan measurement date mitigation plan benefit obligation totaling 28 billion plan assets totaling 09 billion detailed table 19 billion net underfunded status mitigation plan reflected gm’s financial statements changes benefit obligation “us benefits” table following represent changes plan assets benefit obligation mitigation plan year ended december 31 2006 dollars millions detailed note 6 gm delphi uaw reached agreement march 22 2006 intended reduce number us hourly employees attrition program result attrition program gm recognized curtailment losses sfas 88 sfas 106 due significant reduction expected aggregate years future service employees us hourly pension opeb extended disability plans respectively curtailment losses include recognition change pbo apbo portion previously unrecognized prior service cost reflecting reduction expected future service gm recognized general motors corporation subsidiaries notes consolidated financial statements continued note 19 pensions postretirement benefits continued curtailment loss related us hourly pension plan approximately 44 billion april 30 2006 gm recognized curtailment loss 23 million 2006 related us hourly opeb plans measured may 31 2006 gm recognized curtailment gain 132 million related us hourly extended disability plan measured june 30 2006 impacts pension opeb plans reflected components expense table remeasurement gm’s us hourly pension plan april 30 2006 result attrition program generated 07 billion reduction pension expense 2006 remeasurement reduced us pension pbo 12 billion remeasurement us hourly opeb plans may 31 2006 result attrition program generated approximate 143 million reduction opeb expense 2006 remeasurement reduced us opeb apbo 07 billion effects restatements reflected components expense table october 2006 gm board directors approved reduction levels coverage corporatepaid life insurance salaried retirees eligible salaried employees retire may 1 2007 coverage reduce 50 tenth anniversary retirement date salaried employees retire may 1 2007 coverage reduced 50 january 1 2017 change reduced gm’s yearend us opeb apbo 05 billion reflected 2007 opeb expense november 30 2006 gm sold 51 controlling interest gmac result sale gmac salaried employees pension benefits frozen current gm pension plans remeasurement gm’s us salaried pension plans november 30 2006 result benefit modification generated 01 billion curtailment gain 8 million reduction pension expense 2006 remeasurement increased us pbo 02 billion gm also maintain salaried opeb obligation current gmac retirees opeb eligible employees gmac employees nonopeb eligible offered cash lump sum payment based credited service lieu gm provided opeb date retirement remeasurement us nonus opeb plans november 30 2006 result modifications generated 563 million curtailment gain 27 million settlement loss 536 million reduction opeb expense 2006 remeasurement reduced us nonus apbo 01 billion impact extended disability benefits generated curtailment gain 14 million gm sets discount rate assumption annually retirementrelated us benefit plans respective measurement dates reflect yield portfolio high quality fixedincome debt instruments would produce cash flows sufficient defease projected future benefits gm established us pension plans us opeb plans discount rate 590 yearend 2006 one percentage point increase assumed health care trend rates future periods would increased us apbo 60 billion december 31 2006 us aggregate service interest cost components nonpension postretirement benefit expense 2006 502 million one percentage point decrease would decreased us apbo 50 billion us aggregate service interest cost components nonpension postretirement benefit expense 2006 413 million gm’s longterm strategic mix among asset classes expected return asset assumptions us pension plans derived detailed periodic studies conducted gm’s outside actuaries gm’s asset management group us study includes review alternative asset allocation strategies anticipated future general motors corporation subsidiaries notes consolidated financial statements continued note 19 pensions postretirement benefits continued longterm performance individual asset classes risks standard deviations correlations among asset classes comprise plans’ asset mix primary nonus plans conduct similar studies conjunction local actuaries asset managers studies give appropriate consideration recent fund performance historical returns assumptions primarily longterm prospective rates return based study performed 2006 gm’s asset management group commenced implementation certain changes longrun strategic asset allocations us pension plans specifically target allocations modified increase fixed income exposure 20 total plan assets reduce equity exposure corresponding amount change strategic asset allocation intended significantly lower expected volatility asset returns plan funded status well probability future contribution requirements setting new strategic asset mix gm considered likelihood selected mix would effectively fund projected pension plan liabilities aligning risk tolerance plans’ fiduciaries gm’s strategic asset mix us pension plans intended reduce exposure equity market risks utilize asset classes reduce surplus volatility utilize asset classes active management historically generated excess returns market returns asset mix intended place greater emphasis investment manager skills general market returns produce expected longterm returns employing various risk mitigation strategies reduce surplus volatility based new target asset allocations reexamination expected asset return assumptions gm revised expected longterm annual return rate assumption us plans effective january 1 2007 85 reduction previous level 90 new strategic mix fully implemented gm’s us pension assets following target allocation relative total assets global equity 29 global bonds 52 real estate 8 alternative investments 11 2006 gm’s target allocations assets global equity 49 global bonds 32 real estate 8 alternative investments 11 2004 gm made significant contributions hourly veba plan adopted new investment policy manage veba plan assets single investment policy expanded range asset classes hourly veba managed achieve longterm asset returns maintaining adequate liquidity reimbursement benefit payments needed new asset allocation implemented october 1 2004 addition late 2004 new salaried veba plan created funded primarily invested shorterterm liquid securities 2006 expected annual return hourly veba plan 90 expected annual return salaried veba plan 45 based reexamination expected longterm asset return assumptions gm revised expected longterm annual return assumptions effective january 1 2007 hourly veba salaried veba plans 85 60 respectively general motors corporation subsidiaries notes consolidated financial statements continued us nonus pension plans opeb plans following asset allocations respective measurement dates 2006 2005 equity securities include gm common stock amounts 24 million less 1 total pension plan assets 11 million less 1 total pension plan assets december 31 2006 2005 respectively following benefit payments includes assumptions related estimated future employee service appropriate expected paid future benefits us pension plans certain nonus pension plans paid plan assets rather cash note 20 commitments contingent matters commitments gm following minimum commitments noncancelable capital leases remaining terms excess one year primarily property dollars millions general motors corporation subsidiaries notes consolidated financial statements continued note 20 commitments contingent matters continued gm following minimum commitments noncancelable operating leases remaining terms excess one year primarily property dollars millions certain minimum commitments fund obligations nonconsolidated vies certain leases contain escalation clauses renewal purchase options rental expenses operating leases 12 billion 10 billion 973 million 2006 2005 2004 respectively gm sponsors credit card program entitled gm card program offers rebates applied primarily purchase lease gm vehicles amount rebates available qualified cardholders net deferred program income 49 billion 47 billion december 31 2006 2005 respectively guarantees gm provided guarantees relation residual value certain operating leases primarily related lease gm’s corporate headquarters december 31 2006 maximum potential amount future undiscounted payments could required made guarantees amount 624 million years expiration pertaining guarantees range 2008 2018 certain leases contain renewal options gm agreements third parties guarantee fulfillment certain suppliers’ commitments december 31 2006 maximum potential amount future undiscounted payments could required made guarantees amount 61 million years expiration pertaining guarantees range 2007 2035 guarantees maximum potential amount future undiscounted payments could required amounted 4 million period expiration determined business conditions ie emergence bankruptcy sale business addition instances certain assets party whose debt performance guaranteed may offset degree effect triggering guarantee offset certain payables gm may also apply certain guarantees accordingly liabilities recorded respect guarantees gm also provides payment guarantees commercial loans made gmac outstanding certain thirdparty customers primarily related rental car companies december 31 2006 maximum commercial obligations guaranteed gm 169 million years expiration pertaining guarantees range 2007 2012 based credit worthiness rental car companies value ascribed guarantee provided gm determined insignificant addition gm also entered agreements gmac fim holdings llc related disposal 51 gmac incorporate indemnification provisions maximum potential amount future undiscounted payments gm may exposed terms indemnification provisions amounts 25 billion amounts recorded indemnities gm’s obligations probable estimable fair value indemnifications immaterial gm entered agreements indemnifying certain parties respect environmental conditions pertaining existing sold gm properties due nature indemnifications gm’s maximum exposure guarantees cannot estimated amounts recorded indemnities gm’s obligations probable estimable time general motors corporation subsidiaries notes consolidated financial statements continued note 20 commitments contingent matters continued gm provided guarantees respect benefits former gm employees relating pensions postretirement health care life insurance connection certain divestitures benefits related delphi another divested unit possible predict maximum potential amount future undiscounted payments agreements due conditional nature gm’s obligations amounts recorded indemnities gm’s obligations probable estimable time addition guarantees indemnifying agreements mentioned gm periodically enters agreements incorporate indemnification provisions normal course business due nature agreements maximum potential amount future undiscounted payments gm may exposed cannot estimated amounts recorded indemnities gm’s obligations probable estimable time environmental gm’s operations like operations companies engaged similar businesses subject wide range environmental protection laws including laws regulating air emissions water discharges waste management environmental cleanup gm various stages investigation remediation sites contamination alleged involved number remediation actions clean hazardous wastes required federal state laws statutes require responsible parties fund remediation actions regardless fault legality original disposal ownership disposal site future impact environmental matters including potential liabilities often difficult estimate record environmental reserve probable liability incurred amount liability reasonably estimable practice followed whether claims asserted unasserted management expects amounts reserved paid periods remediation applicable sites typically range five 30 years expenditures site remediation actions including ongoing operations maintenance amounted 107 million 127 million 2006 2005 respectively possible remediation actions could require average annual expenditures range 90 million 130 million next five years gm liability approximately 323 million 336 million december 31 2006 2005 respectively worldwide environmental investigation remediation including future ongoing maintenance requirements many sites remediation costs damages ultimately may responsible reasonably estimable uncertainties respect factors connection site materials involvement potentially responsible parties application laws standards regulations site conditions nature scope investigations studies remediation undertaken including technologies required extent duration success remediation result unable determine reasonably estimate amount costs damages potentially responsible connection sites although total could substantial final outcome environmental matters cannot predicted certainty opinion gm none items finally resolved material adverse effect company’s financial position liquidity however number items occur period could material adverse effect results operations particular quarter fiscal year asbestos claims like automobile manufacturers gm subject recent years asbestosrelated claims gm seen claims primarily arise three circumstances majority claims seek damages illnesses general motors corporation subsidiaries notes consolidated financial statements continued note 20 commitments contingent matters continued alleged resulted asbestos used brake components limited numbers claims arisen asbestos contained insulation brakes used manufacturing locomotives claims brought contractors allege exposure asbestoscontaining products working premises owned gm resolved many asbestosrelated cases years continues strategic litigation reasons avoiding defense costs possible exposure excessive verdicts management believes small proportion claimants ever develop asbestosrelated impairment small percentage claims pending gm allege causation malignant disease associated asbestos exposure amount expended asbestosrelated matters year depends number claims filed amount pretrial proceedings number trials settlements period gm records estimated liability associated reported asbestos claims believes expected loss probable reasonably estimated prior 2006 respect incurred yet reported claims gm concluded range probable losses reasonably estimable last several years gm continued accumulate data associated asbestos claims based review data management determined enough information could determine reasonable estimate projected incurred yet reported claims could asserted next two years based analysis gm recorded additional 127 million charge unasserted asbestos claims fourth quarter 2006 charge reduced net income 82 million earnings per share 015 year ended december 31 2006 amounts recorded gm asbestosrelated claims based upon currently known information future events number new claims filed year average cost disposing claims well numerous uncertainties surrounding asbestos litigation united states could cause actual costs significantly different projected due uncertainty inherent factors used determine gm’s asbestosrelated liabilities reasonably possible future costs resolve asbestos claims may greater estimate however gm believe reasonably estimate much greater could however gm believes 127 million recorded december 31 2006 best estimate minimum probable future obligation resolution incurred yet reported asbestos claims final outcome asbestosrelated matters cannot predicted certainty discussion counsel considering among things liabilities recorded opinion management none items finally resolved expected material adverse effect gm’s financial position liquidity however many items occur period could material adverse effect results operations particular quarter year contingent matters litigation subject uncertainties outcome individual litigated matters predictable assurance various legal actions governmental investigations claims proceedings pending corporation including number shareholder class actions bondholder class actions shareholder derivative suits erisa class actions matters arising alleged product defects including asbestosrelated claims employmentrelated matters governmental regulations relating safety emissions fuel economy product warranties financial services dealer supplier contractual relationships environmental matters gm established reserves matters believes losses probable reasonably estimated matters may involve compensatory punitive treble damage claims demands recall campaigns incurred reported asbestosrelated claims environmental remediation programs sanctions granted could require corporation pay damages make expenditures amounts could reasonably estimated december 31 2006 final outcome matters cannot predicted certainty discussion counsel opinion management claims general motors corporation subsidiaries notes consolidated financial statements continued note 20 commitments contingent matters continued expected material adverse effect gm’s consolidated financial condition results operations however many items occur period could material adverse effect results operations particular quarter year delphi mentioned gm provided guarantees respect benefits former gm employees related pensions postretirement health care life insurance opeb certain divestitures made prior january 1 2003 connection gm’s spinoff delphi 1999 gm entered separate agreements uaw iuecwa united steel workers benefit guarantee agreements providing contingent benefit guarantees make payments limited pension opeb expenses certain former gm us hourly employees transferred delphi meet eligibility requirements payments covered employees benefit guarantee agreement contains separate benefit guarantees relating pension opeb obligations different triggering events gm could liable delphi fails provide corresponding benefit required level therefore gm could incur liability one guarantees eg opeb without triggering guarantees eg pension addition respect pension benefits gm’s guarantee pension benefits arises extent pension benefits provided delphi pension benefit guaranty corporation falls short guaranteed amount benefit guarantees expire october 18 2007 unless delphi fails date pay specified benefits would trigger related guarantee benefit guarantee triggered expiration date gm’s obligation could extend lives affected covered employees subject applicable terms pertinent benefit plans relevant agreements separate agreement gm delphi also expires october 18 2007 requires delphi indemnify gm payments benefit guarantees uaw employees retirees recovery gm indemnity claims delphi might subject partial complete discharge delphi reorganization proceeding result gm’s claims indemnity may paid part full discussed note 6 2006 gm together delphi uaw entered uaw attrition agreement provided combination early retirement payments incentives reduce number us hourly employees gm delphi december 31 2006 12400 uawrepresented delphi employees elected one retirement options available uaw agreement uaw attrition agreement gm agreed assume certain costs regarding uawrepresented delphi employees specifically gm agreed 1 pay lump sums 35000 certain employees participate attrition program 2 allow delphi employees agree retire attrition program return gm purposes retirement whereby gm would assume opeb obligations retiree 3 subsidize opeb costs delphi employees participating special voluntary preretirement program interim period delphi reduces eliminates health care andor life insurance coverage provided active uaw employees 4 accept 5000 active flowback employees gm prepetition general unsecured claim assertable delphi 35000 lump sum payment subject objections grounds claim arise terms preexisting contractual agreements gm delphi december 31 2006 approximately 6200 iuecwarepresented delphi employees approximately 1400 uawrepresented delphi employees elected participate attrition buyout programs similar program uaw attrition agreements described gm delphi share cost programs gm believes probable incurred contingent liability due delphi’s chapter 11 filing october 2005 gm established liability 55 billion 2005 recorded additional charge 05 billion 2006 opeb obligations associated previously divested delphi business units certain labor restructuring costs including limited expenditures related attrition programs discussed based currently available data ongoing discussions delphi stakeholders gm believes range contingent exposures 6 billion 75 billion amounts near low end range considered general motors corporation subsidiaries notes consolidated financial statements continued note 20 commitments contingent matters concluded possible amounts near high end range gm’s claims delphi debtors recoveries would satisfied payment 263 billion cash 7 million shares common stock delphi reorganized total 135 million fully diluted shares contemplated range contingent exposure provided framework parties negotiating also gm would expect receive 2 billion cash andor notes receivable gm would expect monetize within 10 days assuming portion delphi’s us hourly pension plan obligations views reflect gm’s current assessment unlikely chapter 11 process result termination delphi’s pension plan addition complete elimination opeb plans amount charge may change depending result discussions among gm delphi’s unions factors addition charges gm may agree reimburse delphi certain labor expenses incurred upon delphi’s emergence bankruptcy gm’s current estimate expenses involves initial payment 2007 expected exceed approximately 400 million ongoing expenses limited duration estimated average less 100 million annually result ongoing negotiations actual impact delphi matter known consensual agreement reached approved bankruptcy court december 31 2006 2005 gm’s contingent liability related delphi matters 15 billion 55 billion respectively 2006 amounts previously recorded benefit guarantee reclassified gm’s opeb liability gm assumed opeb obligation approximately 17800 delphi employees returned back gm continue working retire gm covered employees remain delphi march 2006 delphi also filed motion us bankruptcy code seeking authority reject certain supply contracts gm hearing motion adjourned indefinitely court pending developments related delphi’s us labor agreements retiree welfare benefits although delphi rejected gm contracts time assured gm intend disrupt production gm assembly facilities risk delphi one affiliates may reject threaten reject individual contracts gm either purpose exiting specific lines business attempt increase price gm pays certain parts components result gm could materially adversely affected disruption supply automotive systems components parts could force suspension production gm assembly facilities delphi gm’s largest supplier automotive systems components parts gm delphi’s largest customer gm worked continue work constructively court proceedings delphi’s unions participants delphi’s restructuring process gm’s goal achieve outcomes best interests gm stockholders extent conducive goal enable delphi continue important supplier gm benefit guarantees related divested unit gm entered various guarantees regarding benefits former gm employees two previously divested plants manufacture component parts whose results continue included gm’s financial statements accordance fin 46r consolidation variable interest entities divested plants gm entered agreements purchaser indemnify defend hold purchaser harmless liabilities arising divested plants uaw guaranteeing certain postretirement health care benefits payment postemployment benefits october 2006 announced production would cease two plants would permanently idle approximately 2000 workers accordingly fourth quarter 2006 gm results include charge 206 million comprised following related closure plants 1 214 million charge recognize wage benefit costs associated employees accepting retirement packages buyouts supplemental general motors corporation subsidiaries notes consolidated financial statements continued note 20 commitments contingent matters concluded unemployment benefit costs connection plant closure 2 curtailment loss 3 million related pension benefits 3 11 million curtailment gain respect postretirement benefits note 21 stockholders’ equity common stock gm 20 billion shares 123 par value common stock authorized liquidation rights gm 123 par value common stock subject certain adjustments outstanding common stock subdivided stock split otherwise preferred stock gm 60 million shares preferred stock authorized without par value preferred stock issuable series voting powers designations powers privileges rights qualifications limits restrictions may determined gm’s board directors without stockholder approval preferred stock ranks senior gm common stock class stock issued corporation holders preferred stock shall entitled receive cumulative dividends declared board directors quarterly basis december 31 2006 2005 shares preferred stock issued outstanding accumulated comprehensive income loss following table summarizes components accumulated comprehensive income loss net taxes general motors corporation subsidiaries notes consolidated financial statements continued note 21 stockholders’ equity concluded comprehensive income changes components comprehensive income loss reported net income taxes follows note 22 earnings loss per share earnings per share eps attributable gm common stock determined based earnings period divided weightedaverage number common shares outstanding period diluted eps attributable gm common stock considers effect potential common shares unless inclusion potential common shares would antidilutive effect general motors corporation subsidiaries notes consolidated financial statements continued note 22 earnings loss per share concluded reconciliation amounts used basic diluted earnings per share computations follows dollars millions except per share amounts certain stock options convertible securities included computation diluted earnings per share periods presented since instruments’ underlying exercise prices greater average market prices gm 123 par value common stock inclusion would antidilutive shares included computation diluted earnings per share 106 million 111 million 88 million december 31 2006 2005 2004 respectively addition periods loss attributable common stock options purchase shares gm 123 par value common stock underlying exercise prices less average market prices outstanding excluded calculations diluted loss per share inclusion securities would antidilutive shares potentially issuable satisfy inthemoneyamount convertible debentures included diluted earnings per share december 31 2006 convertible debentures met requirements conversion general motors corporation subsidiaries notes consolidated financial statements continued note 23 derivative financial instruments risk management derivatives hedges gm exposed market risk changes foreign currency exchange rates interest rates certain commodity prices normal course business gm enters variety foreign exchange interest rate commodity forward contracts swaps options objective managing financial operational exposure arising risks offsetting gains losses underlying exposures gains losses derivatives used hedge gm’s risk management control system used assist monitoring hedging program derivative positions hedging strategies gm’s hedging documentation includes hedging objectives practices procedures related accounting treatment hedges receive designated hedge accounting treatment evaluated effectiveness time designated well throughout hedging period discussed note 2 gm restated 2005 2004 financial statements certain derivative transactions cash flow hedges gm uses financial instruments designated cash flow hedges hedge exposure foreign currency exchange risk associated buying selling financing currencies local currencies operates variability cash flows related exposure commodity price risk associated changes prices commodities used automotive business primarily precious metals nonferrous metals energy hedge exposure variability cash flows related foreigncurrencydenominated debt foreign currency transactions gm typically hedges forecasted exposures three years future commodities gm typically hedges exposure three years future derivatives designated cash flow hedges gm records changes fair value oci releases changes earnings contemporaneously earnings effects hedged item hedge relationship terminated forecasted transaction longer probable occurring cumulative change fair value derivative recorded oci recognized earnings extent hedging relationship effective ineffective portion change fair value derivative instrument recorded earnings year ended december 31 2006 hedge ineffectiveness associated instruments designated cash flow hedges increased automotive cost sales 174 million year ended december 31 2005 hedge ineffectiveness associated instruments designated cash flow hedges decreased automotive cost sales 95 million year ended december 31 2006 net derivative gains 4842 million reclassified oci automotive cost sales net derivative gains 6931 million reclassified oci automotive revenue year ended december 31 2005 net derivative gains 2056 million reclassified oci cost sales 1998 million reclassified oci revenue net losses gains offset net gains losses transactions hedged approximately 2927 million net derivative gains included oci december 31 2006 expected reclassified earnings within 12 months date years ended december 31 2006 2005 net loss approximately 178 million net gain approximately 466 million respectively reclassified earnings result discontinuance certain commodity cash flow hedges probable original forecasted transactions would occur fair value hedges gm uses financial instruments designated fair value hedges manage certain exposure interest rate risk gm subject market risk exposures changes interest rates due financing investing cash management activities variety instruments used hedge gm’s exposure associated fixed rate debt mortgage servicing rights msrs gm records changes fair value derivative designated fair value hedge earnings offset corresponding changes fair value hedged item extent hedge effective general motors corporation subsidiaries notes consolidated financial statements continued note 23 derivative financial instruments risk management concluded year ended december 31 2006 2005 hedge ineffectiveness associated instruments designated fair value hedges primarily due hedging msrs increased selling general administrative expenses 1 million decreased selling general administrative expenses 26 million respectively net investment hedges gm uses foreigncurrencydenominateddebt offset translation economic exposures related investment foreign entities foreign currency transaction gains losses related debt instruments recorded accumulated foreign currency translation adjustment year ended december 31 2006 2005 unrealized losses 1385 million loss unrealized gains 505 million respectively recorded accumulated foreign currency translation adjustment derivatives qualifying hedge accounting gm purchases raw materials parts comprising various commodities whose purchase price varies based changes price related commodity corporation hedges commodity price risk economically entering derivative contracts previously designated instruments cash flow hedges however discussed note 2 gm determined certain derivative instruments qualify hedge accounting treatment sfas 133 therefore certain derivative instruments markedtomarket automotive cost sales 2006 2005 2004 additionally gm exposed foreign exchange risk related forecasted foreign currency sales purchases net investments foreign subsidiaries gm hedges foreign exchange risk economically entering derivative contracts previously designated certain instruments cash flow hedges net investment hedges however discussed note 2 gm determined derivative instruments qualify hedge accounting therefore derivative instruments markedtomarket automotive cost sales 2006 2005 2004 derivatives meeting scope exception fair value accounting gm enters purchase contracts hedge physical exposure availability certain commodities used production cars trucks gm previously account contracts derivatives instead gm applied “normal purchases normal sales” npns scope exception sfas 133 described note 2 gm determined contracts qualify npns scope exception fair value accounting sfas 133 therefore commodity purchase contracts accounted derivatives gains losses recorded automotive cost sales 2006 2005 2004 derivatives designated hedges gm uses derivatives forward contracts options including caps floors collars economically hedge exposures unrealized gains losses related derivatives designated accounting hedges recognized currently automotive cost sales note 24 fair value financial instruments estimated fair value financial instruments determined using available market information appropriate valuation methodologies however considerable judgment required interpreting market data develop estimates fair value therefore estimates necessarily indicative amounts could realized would paid current market exchange effect using different market assumptions andor estimation methodologies may material estimated fair value amounts general motors corporation subsidiaries notes consolidated financial statements continued note 24 fair value financial instruments concluded book estimated fair values financial instruments practicable estimate fair value follows dollars millions 1 longterm debt estimated fair value based quoted market prices similar issues based current rates offered gm debt similar remaining maturities estimated values industrial development bonds included longterm debt based quoted market prices similar issues 2 fair value estimated discounting future cash flows using applicable spreads approximate current rates applicable category receivables 3 fair value loans held sale based upon actual prices recent sales loans securities investors projected prices obtained investor indications considering interest rates loan type credit quality 4 fair value gmac preferred membership interest estimated discounting future cash flows considering dividend rate interest rate credit spreads due shortterm nature book value approximates fair value cash marketable securities accounts notes receivable less allowances accounts payable principally trade auto loans payable fio debt payable within one year years ended december 31 2006 2005 note 25 stock incentive plans gm’s stock incentive plans consist general motors 2002 stock incentive plan formerly 1997 general motors amended stock incentive plan gmsip general motors 1998 salaried stock option plan gmssop general motors 2002 long term incentive plan gmltip general motors 2006 cashbased restricted stock unit plan gmcrsu collectively plans gmsip gmltip gmcrsu administered executive compensation committee gm’s board directors gmssop administered vice president global human resources general motors corporation subsidiaries notes consolidated financial statements continued note 25 stock incentive plans continued compensation cost plans approximately 170 million 887 million 66 million years ended december 31 2006 2005 2004 respectively total income tax benefit recognized sharebased compensation arrangements approximately 533 million 31 million 231 million years ended december 31 2006 2005 2004 respectively november 30 2006 gm sold 51 controlling interest gmac employees participated gm stock incentive plans changed status employee nonemployee based change status certain outstanding sharebased payment awards forfeited original terms modified allow continued vesting resulted cancellation original awards issuance new award nonemployees remainder awards forfeited original terms thus modification outstanding awards gm awards require future service gmac accounted awards nonemployees remaining service period effect compensation cost significant gm gmsip gmssop gmsip 274 million shares gm 123 par value common stock may granted june 1 2002 may 31 2007 approximately 49 million available grants december 31 2006 shares granted undelivered gmsip due primarily expiration termination become available grant stock option grants awarded since 1997 generally exercisable onethird one year onethird two years fully three years dates grant option prices 100 fair market value dates grant options generally expire 10 years dates grant subject earlier termination certain conditions gm’s policy issue treasury shares upon exercise employee stock options gmssop commenced january 1 1998 ends december 31 2007 number shares gm 123 par value common stock may granted year determined management based amendment gmssop 2006 shares gm 123 par value common stock available grants december 31 2006 stock options granted 1998 2004 exercisable two years date grant option grants made plan since 2004 option prices 100 fair market value dates grant options generally expire ten years two days dates grant subject earlier termination certain conditions fair value option grant estimated date grant using blackscholes optionpricing model weightedaverage assumptions noted following table expected volatilities based implied historical volatility corporation’s stock corporation uses historical data estimate option exercise employee termination within valuation model expected term options represents period time options granted expected outstanding interest rate periods expected life option based us treasury yield curve effect time grant primary grant executives february 23 2006 january 24 2005 january 23 2004 made stock incentive plan 2702796 7619250 7920660 shares respectively grant date fair value general motors corporation subsidiaries notes consolidated financial statements continued note 25 stock incentive plans continued 706 721 1285 respectively assumptions used estimate grant date fair value grants detailed table changes status outstanding options year follows weightedaverage grantdate fair value 719 723 1282 gmsip options granted 2006 2005 2004 respectively weightedaverage grantdate fair value 0 1285 gmssop options granted 2006 2005 2004 respectively total intrinsic value gmsip options exercised years ended december 31 2006 2005 2004 0 21 million 96 million respectively total intrinsic value gmssop options exercised years ended december 31 2006 2005 2004 0 01 million respectively tax benefit exercise sharebased payment arrangements years ended december 31 2006 2005 2004 totaled 0 07 million 34 million respectively general motors corporation subsidiaries notes consolidated financial statements continued note 25 stock incentive plans continued summary status corporation’s options december 31 2006 changes year ended presented december 31 2006 122 million total unrecognized compensation cost related nonvested sharebased compensation arrangements granted plans cost expected recognized weightedaverage period 08 years cash received option exercise sharebased payment arrangements years ended december 31 2006 2005 2004 0 million 04 million 15 million respectively gmltip consists award opportunities granted participants based achievement specific corporate business criteria target number shares gm 123 par value common stock may granted year determined management grants subject three year performance period final award payout may vary based achievement criteria condition awards minimum percentile ranking gm’s tsr among companies sp 500 december 31 2006 approximately 57 million target shares outstanding gmltip outstanding shares total 13 million granted 2004 grantdate fair value 5392 minimum performance criteria achieved management intends settle awards gm 123 par value common stock remaining outstanding shares approximately 24 million 20 million granted 2006 2005 grant date fair value 2481 3637 respectively management required settle awards cash result cashsettled awards recorded liability date final award payout accordance sfas 123r fair value cashsettled award recalculated end reporting period liability expense adjusted based change fair value preceding targeted number shares would used final award calculation targeted performance condition achieved final payout subject approval executive compensation committee board directors fair value december 31 2006 4380 1190 awards granted years ended december 31 2006 2005 respectively prior adoption sfas 123r fair value award gmltip equal fair market value underlying shares date grant beginning january 1 2006 accordance adoption sfas 123r fair value cashsettled award gmltip estimated date grant subsequent reporting period using latticebased option valuation model uses assumptions noted following table latticebased valuation models incorporate ranges assumptions inputs ranges disclosed expected volatilities based implied volatility gm’s general motors corporation subsidiaries notes consolidated financial statements continued note 25 stock incentive plans concluded tradable options expected term target awards represent remaining time performance period riskfree rate periods contractual life performance shares based us treasury yield curve effect time valuation payout depends corporation’s performance ranked sp 500 valuation also depends performance stocks sp 500 grant date exercise date well estimates correlations among future performances primary grant executives february 23 2006 january 24 2005 made gmltip 2427869 1959490 shares respectively grant date fair value 2481 3637 respectively assumptions used estimate fair value december 31 2006 detailed table weighted average remaining contractual term 12 years target awards outstanding december 31 2006 threshold performance required payment 20042006 ltip achieved shares delivered plan 2006 20052007 20062008 performance periods remain open december 31 2006 gm crsu 2006 corporation established cashbased restricted stock unit plan provides cash equal value underlying restricted share units certain global executives predetermined vesting dates awards plan vest paid onethird increments anniversary date award three year period compensation expense recognized straightline basis requisite service period separately vesting portion award since awards settled cash cashsettled awards recorded liability date payment accordance sfas 123r fair value cashsettled award recalculated end reporting period liability expense adjusted based new fair value fair value crsu based corporation’s stock price date grant subsequent reporting period date settlement 43 million crsus granted year ended december 31 2006 weighted average grant date fair value 2104 per share fair value december 31 2006 3072 per share 39 million crsus outstanding weighted average remaining contractual term 22 years crsus outstanding december 31 2006 share units vested delivered year ended december 31 2006 share units related gmac employees received prorata settlements based service gm prior gmac sale share units related gmac employees delivered 2007 general motors corporation subsidiaries notes consolidated financial statements continued note 26 supplemental information statements cash flows statements cash flows supplementary information note 27 segment reporting sfas 131 “disclosures segments enterprise related information” established standards reporting information operating segments financial statements operating segments defined components enterprise separate financial information available evaluated regularly chief operating decision maker decision making group deciding allocate resources assessing performance gm’s chief operating decision maker chief executive officer operating segments managed separately operating segment represents strategic business unit offers different products serves different markets gm’s automotive business consists gm’s four automotive regions gmna gme gmlaam gmap together constitute gm automotive gma gmna develops manufactures andor markets vehicles primarily north america following brands chevrolet pontiac gmc buick cadillac saturn saab hummer gme gmlaam gmap primarily meet demands customers outside north america vehicles developed manufactured marketed following brands opel vauxhall holden saab buick chevrolet gmc cadillac daewoo gm’s fio business consists gmac 2004 2005 eleven months ended november 30 2006 gm’s 49 share gmac’s operating results month december 2006 equity method financing includes financing entities consolidated gmac provides broad range financial services including consumer vehicle financing fullservice leasing fleet leasing dealer financing car truck extended service contracts residential commercial mortgage services commercial vehicle insurance assetbased lending corporate includes elimination intersegment transactions certain nonsegment specific revenues expenditures including legacy costs related postretirement benefits certain delphi retirees certain corporate activities disaggregated financial results prepared using management approach consistent basis manner gm management internally disaggregates financial information purposes assisting making internal operating decisions transactions segments eliminated general motors corporation subsidiaries notes consolidated financial statements continued note 27 segment reporting continued transactions consist principally borrowings financial services provided fio auto master intercompany agreement effect november 30 2006 governed nature transactions ensure done accordance commercially reasonable standards gm evaluates performance based standalone operating segment net income generally accounts intersegment sales transfers sales transfers third parties current market prices revenues attributed geographic areas based location assets producing revenues general motors corporation subsidiaries notes consolidated financial statements continued note 27 segment reporting continued general motors corporation subsidiaries notes consolidated financial statements continued note 27 segment reporting continued general motors corporation subsidiaries notes consolidated financial statements continued note 27 segment reporting concluded effective january 1 2006 four powertrain entities transferred gmna gme management reporting purposes accordingly 2005 amounts revised comparability reclassifying 466 million revenue 99 million net income 221 million segment assets gmna gme 2004 amounts revised reclassifying 667 million revenue 124 million net income 10 million segment assets gmna gme b 2006 gm recognized noncash impairment charge 29 billion connection sale controlling interest gmac reflected column “other financing” refer note 4 c gm sold 51 ownership interest gmac november 2006 remaining 49 ownership interest held gm accounted equity method gm’s investment included gmac’s segment assets financing includes elimination net receivables total assets auto receivables eliminated 41 billion 45 billion 24 billion december 31 2006 2005 2004 respectively information concerning principal geographic areas follows 1 consists property note 14 equipment operating leases note 12 net accumulated depreciation note 28 transactions gmac part sale 51 controlling interest gmac gm entered various operating financing arrangements gmac nature terms arrangements negotiated arm’s length general motors corporation subsidiaries notes consolidated financial statements continued note 28 transactions gmac continued following describes transactions related impacts occurred gm gmac month december 2006 eliminated gm’s consolidated financial statements marketing incentives operating lease residuals marketing incentive gm may sponsor interest rate support residual support programs way lower customers’ monthly lease payments interest rate support programs gm pays amount gmac time lease contract origination adjust interest rate implicit lease contract gmac’s standard interest rate residual support programs customers’ contractual residual value adjusted gmac’s standard residual values gm reimburses gmac extent remarketing sales proceeds less customers’ contractual residual value limited gmac’s standard residual value addition interest rate support residual support programs gm also participates risk sharing arrangement gmac gm certain circumstances reimburses gmac portion shortfall standard residual value resale proceeds terms conditions interest rate support residual support programs well risk sharing arrangement included us canadian international consumer financing services agreements expire november 2016 addition relates us lease originations us balloon retail contract originations occurring april 30 2006 gmac retained consummation sale transaction gm agreed begin payment present value expected residual support owed gmac time contract origination opposed contract termination time sale related used vehicle residual support amount gm owes gmac adjusted leases terminate cases estimate incorrect gm may obligated pay gmac may obliged reimburse gm terms residual support programs affected contracts originated december 2006 gm paid agreed pay gmac total 486 million based us operating lease portfolio outstanding december 31 2006 maximum additional amount could paid gm residual support programs approximately 276 million would paid unlikely event proceeds entire lease portfolio assets would lower contractual residual value gmac’s standard residual rates based us operating lease portfolio outstanding december 31 2006 maximum amount could paid risk sharing arrangement approximately 339 million would paid unlikely event proceeds outstanding lease vehicles would lower gmac’s standard residual rates exclusivity arrangement subject gmac’s fulfillment certain conditions gm granted gmac exclusivity us canadian international gmsponsored consumer wholesale marketing incentives gm products specified markets around world exception saturn branded products return exclusivity gmac pay gm annual exclusivity fee 105 million 75 million us retail business 15 million canadian retail business 10 million retail business international operations 5 million dealer business committed provide financing gm customers dealers consistent historical practices marketing service agreement gm gmac entered tenyear marketing promoting advertising customer support arrangement related gm products gmac products retail financing gm products royalty arrangement certain insurance products gm gmac entered tenyear intellectual property license agreements giving gmac right use gm name certain insurance products exchange gmac general motors corporation subsidiaries notes consolidated financial statements continued note 28 transactions gmac continued pay gm royalty fee 325 revenue net cancellations related products minimum annual guarantee 15 million amount royalty recognized year ended december 31 2006 approximately 1 million shared transition services agreement gm gmac entered shared transition services agreement continue provide global support services treasury tax real estate human resources transition period one two years gm expects shared transition services agreement expires gm gmac either renew services agreement gm gmac perform related services internally outsource providers balance sheet summary balance sheet effects transactions gmac follows millions represents wholesale settlements due gmac well amounts owing gmac respect operating lease assets transferred gm b represents mainly preferred membership interest distributions due gmac c represents approximately 10 billion capital contribution gmac restore adjusted tangible equity balance contractually required amount 144 billion due decrease adjusted tangible equity balance gmac november 30 2006 represents wholesale financing sales receivable transactions short term portion term loans provided certain dealerships wholly owned gm equity interest addition includes borrowing arrangements adam opel arrangements related gmac’s funding gm companyowned vehicles rental car vehicles awaiting sale auction funding sale gm vehicles gm retains title vehicles consigned gmac dealers united kingdom financing gm remains outstanding title transferred dealers also includes short term portion note provided wholly owned subsidiary gm holding debt related operating leases transferred gm e represents mainly interest accrued transactions f represents long term portion term loans note payable respect operating leases transferred gm mentioned general motors corporation subsidiaries notes consolidated financial statements continued note 28 transactions gmac concluded statement operations summary income statement effects transactions gmac month december 2006 follows millions represents reduction net sales revenues related amount residual support accrued residual support risk sharing programs rate support interest rate support programs operating lease finance receivable capitalized cost reduction incentives paid gmac reduce capitalized cost automotive lease contracts retail automotive contracts costs lease pullahead programs gm sponsors lease pullahead programs consumers encouraged terminate lease contracts early conjunction acquisition new gm vehicle customer’s remaining payment obligation waived certain programs gm compensates gmac waived payments adjusted remarketing results associated underlying vehicle b represents preferred membership interest distributions payments gm services rent c represents interest term loans notes payable wholesale settlements settlement terms related wholesale financing certain gm products shipment date extent wholesale settlements gm made prior expiration transit gm pays interest gmac represents servicing fee paid gmac related automotive leases distributed gm prior closing gmac sale transaction e represents loss related derivative transaction entered gmac counterparty note 29 expenses included following general motors corporation subsidiaries notes consolidated financial statements continued note 30 supplementary quarterly financial information unaudited general motors corporation subsidiaries notes consolidated financial statements continued note 30 supplementary quarterly financial information unaudited continued general motors corporation subsidiaries notes consolidated financial statements continued note 30 supplementary quarterly financial information unaudited continued general motors corporation subsidiaries notes consolidated financial statements continued note 30 supplementary quarterly financial information unaudited continued general motors corporation subsidiaries notes consolidated financial statements continued note 30 supplementary quarterly financial information unaudited continued general motors corporation subsidiaries notes consolidated financial statements continued note 30 supplementary quarterly financial information unaudited continued general motors corporation subsidiaries notes consolidated financial statements continued note 30 supplementary quarterly financial information unaudited continued general motors corporation subsidiaries notes consolidated financial statements continued note 30 supplementary quarterly financial information unaudited continued 1 reported corporation’s form 10q applicable periods ended 2 gm previously disclosed would restate consolidated financial statements correct accounting 1 certain derivative transactions sfas 133 2 deferred income taxes sfas 109 3 various adjustments restatement effects first three quarters 2006 summarized restatement affect cash flows refer note 2 consolidated financial statements background related adjustments b gm erroneously determined gain sale portion equity method investment c gm erroneously recorded employeerelated costs related special attrition program see note 19 consolidated financial statements restructuring activities gme see note 5 consolidated financial statements adjustments recorded correct automotive cost sales quarterly period shown subsequent completion previously filed consolidated financial statements period restated identified adjustments recorded earlier periods upon identification determined adjustments immaterial individually aggregate previously filed consolidated financial statements recorded outofperiod adjustments periods identified due adjustments required restatement previously filed consolidated financial statements also reversing outofperiod adjustments recording proper periods addition adjustments comply eitf 0010 “accounting shipping handling fees costs” 2006 gm reclassified shipping handling costs incurred transport product customers correction reclassification increased automotive sales automotive cost sales first second third quarters year ended december 31 2006 amount 10 billion 11 billion 900 million respectively correction affect net income loss earnings loss per share 3 fourth quarter 2006 results include following aftertax items • gain 175 million related sale desert proving grounds mesa arizona general motors corporation subsidiaries notes consolidated financial statements continued note 30 supplementary quarterly financial information unaudited continued • charge 111 million severance costs associated previously announced restructuring plan gme • charge 53 million associated plant product impairments separation costs gm holden • gains approximately 712 million associated pensionopeb curtailment related gmac salaried employees longer receiving credited service gm benefit plans sales marketable securities held gmac’s insurance business • gain 208 million related settlement residual support risk sharing obligations part gmac transaction existing leases may 1 2006 new lease originations subsequent date see note 4 restatement effects quarterly results 2005 summarized restatement affect cash flows refer note 2 consolidated financial statements background related adjustments b gm erroneously recorded utilityrelated accruals improper periods adjustment recorded correct automotive cost sales quarterly period shown c subsequent completion previously filed consolidated financial statements period restated identified adjustments recorded earlier periods upon identification determined adjustments immaterial individually aggregate previously filed consolidated financial statements recorded period adjustments periods identified due adjustments required restatement previously filed consolidated financial statements also reversing outofperiod adjustments recording proper periods addition adjustments comply eitf 0010 “accounting shipping handling fees costs” 2006 gm reclassified shipping handling costs incurred transport product customers correction reclassification increased automotive sales automotive cost sales first second third fourth quarters year ended december 31 2005 amount general motors corporation subsidiaries notes consolidated financial statements concluded note 30 supplementary quarterly financial information unaudited concluded 850 million 846 million 890 million 10 billion respectively correction affect net income loss earnings loss per share gm erroneously recorded adjustment income taxes payable part 2005 provision return reconciliation process 5 fourth quarter 2005 results include following aftertax items • charge 17 billion connection north american manufacturing capacity actions announced november 2005 charge includes 12 billion associated hourly employees facilities gm idling 455 million noncash writedown property plants equipment • charge 36 billion gm’s contingent exposures relating delphi’s chapter 11 filing including benefit guarantees certain former gm us hourly employees transferred delphi • gain 71 million related sale gm’s investment common stock fhi due appreciation fair value stock june 30 2005 date fhi impairment charge also fourth quarter gme recorded cancellation charges 20 million related fhi resulting net adjustment 51 million fourth quarter • restructuring charges totaling 114 million follows additional charge related gme restructuring plan noted 69 million approximately 800 additional separations well charges related previous separations required amortized future periods 38 million gmap 7 million • charge 109 million related adoption fin 47 “accounting conditional asset retirement obligations” december 31 2005 recorded cumulative effect change accounting principle • benefit 49 million related effect changes polish tax law gm powertrain joint venture amount included equity income • recognition valuation allowance 617 million deferred tax assets gm brasil item 9 item 8 financial statements supplementary data motors liquidation company guc trust financial statements report independent registered public accounting firm trust administrator trust monitor trust beneficiaries motors liquidation company guc trust opinion financial statements audited accompanying statements net assets liquidation motors liquidation company guc trust “trust” march 31 2020 2019 related statements changes net assets liquidation cash flows years ended march 31 2020 2019 2018 related notes collectively referred “financial statements” opinion financial statements referred present fairly material respects net assets liquidation motors liquidation company guc trust march 31 2020 2019 changes net assets liquidation cash flows years threeyear period ended march 31 2020 conformity accounting principles generally accepted united states america basis opinion trust administrator responsible financial statements responsibility express opinion trust’s financial statements based audits public accounting firm registered public company accounting oversight board united states “pcaob” required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement whether due error fraud trust required engaged perform audit internal control financial reporting part audits required obtain understanding internal control financial reporting purpose expressing opinion effectiveness trust’s internal control financial reporting accordingly express opinion audits included performing procedures assess risks material misstatement financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures financial statements audits also included evaluating accounting principles used significant estimates made trust administrator well evaluating overall presentation financial statements believe audits provide reasonable basis opinion plante moran pllc served trust’s auditor since 2011 cleveland ohio june 3 2020 motors liquidation company guc trust statements net assets liquidation basis march 31 2020 2019 thousands see accompanying notes financial statements motors liquidation company guc trust statements changes net assets liquidation basis years ended march 31 2020 2019 2018 thousands see accompanying notes financial statements motors liquidation company guc trust statements cash flows liquidation basis years ended march 31 2020 2019 2018 thousands guc trust presented reconciliation net income cash flow operations entity liquidation guc trust continuing operations result measurement net income term used generally accepted accounting principles measure results operations see accompanying notes financial statements motors liquidation company guc trust notes financial statements march 31 2019 1 purpose trust motors liquidation company guc trust “guc trust” successor motors liquidation company formerly known general motors corp “mlc” within meaning section 1145 united states bankruptcy code “bankruptcy code” guc trust holds administers directs distribution certain assets pursuant terms conditions second amended restated motors liquidation company guc trust agreement “guc trust agreement” dated july 30 2015 amended time pursuant second amended joint chapter 11 plan “plan” dated march 18 2011 mlc debtor affiliates collectively along mlc “debtors” benefit holders allowed general unsecured claims debtors “allowed general unsecured claims” guc trust formed march 30 2011 statutory trust delaware statutory trust act purposes implementing plan distributing guc trust’s distributable assets prior liquidation july august 2015 new gm securities defined held guc trust pursuant liquidation order defined plan qualified liquidation order generally provided distribution certain shares common stock “new gm common stock” new general motors company formerly known ngmco inc “new gm” associated dividend cash defined certain warrants purchase shares stock “new gm warrants” together new gm common stock “new gm securities” holders allowed general unsecured claims pro rata amount claims since liquidation new gm securities distributions holders allowed general unsecured claims consist entirely cash distributions lieu new gm securities addition prior qualification liquidation order resulting subsequent liquidation new gm securities plan provided holder allowed general unsecured claim would obtain form guc trust units defined contingent right receive pro rata basis additional shares new gm common stock associated dividend cash new gm warrants extent new gm common stock new gm warrants required satisfaction previously disputed general unsecured claims defined note 2 term loan avoidance action claims defined note 2 liquidation payment expenses liabilities guc trust certain cash remaining dissolution guc trust since liquidation new gm securities previously held guc trust described holders guc trust units contingent right receive additional cash lieu new gm securities remaining dissolution guc trust order dated july 2 2015 “liquidation order” bankruptcy court approved conversion guc trust’s holdings new gm securities cash effect conversion july 7 2015 guc trust converted holdings new gm warrants new gm common stock cashless exercise total guc trust converted 10352556 new gm series warrants defined 7407155 shares new gm common stock ii 10352556 new gm series b warrants defined 4953635 shares new gm common stock thereafter guc trust sold holdings new gm common stock net proceeds aggregating 7417 million completed sales august 5 2015 result distributions guc trust thereafter respect allowed general unsecured claims including respect guc trust units made solely cash pursuant liquidation order proceeds liquidations net applicable costs fees expenses paid respect thereof allocated beneficiaries guc trust pro rata basis following manner guc trust beneficiary’s entitlement particular number new gm warrants exercised converted entitlement receive number shares new gm common stock new gm warrants exercised conversions 071549 shares new gm common stock new gm series warrant 047849 shares common stock new gm series b warrant b guc trust beneficiary’s entitlement particular number shares new gm common stock liquidated including exercised new gm warrants set forth converted entitlement receive amount cash equal weighted average sales price net applicable costs fees expenses paid respect thereof new gm common stock sold multiplied number shares new gm common stock guc trust beneficiary would otherwise entitled including exercised new gm warrants set forth weighted average sales price guc trust’s holdings new gm common stock sold subsequent june 30 2015 3123 per share following liquidation described guc trust invested proceeds certain marketable securities permitted guc trust agreement amount cash equivalents marketable securities held distribution guc trust beneficiaries including dividend cash referred herein distributable cash guc trust administered wilmington trust company individual capacity solely capacity trust administrator trustee “guc trust administrator” among rights duties subject terms conditions limitations set forth guc trust agreement guc trust administrator power authority hold manage sell invest distribute assets comprising guc trust corpus consult retain professionals administration guc trust prosecute resolve objections disputed general unsecured claims take necessary actions administer winddown affairs debtors upon dissolution upon dissolution resolve satisfy extent allowed residual winddown claims defined activities guc trust administrator overseen fti consulting inc solely capacity monitor “guc trust monitor” 2 plan liquidation march 31 2011 date plan became effective “effective date” approximately 29771 million allowed general unsecured claims addition effective date approximately 8154 million disputed general unsecured claims “disputed general unsecured claims” reflects liquidated disputed claims bankruptcy court ordered distribution reserve unliquidated disputed claims reflect term loan avoidance action claims total aggregate amount general unsecured claims allowed disputed asserted debtors inclusive term loan avoidance action claims approximately 39425 million effective date pursuant guc trust agreement holders disputed general unsecured claims became entitled receive distribution distributable cash guc trust extent disputed general unsecured claims become allowed general unsecured claims “resolved disputed claims” guc trust agreement guc trust administrator authority file objections disputed general unsecured claims could prosecuted alternative dispute resolution proceedings including mediation arbitration appropriate march 31 2020 remaining disputed general unsecured claims see “allowed disputed claims” note 4 one avoidance action captioned official committee unsecured creditors motors liquidation co v jpmorgan chase bank na et al adv pro 0900504 bankr sdny july 31 2009 “term loan avoidance action” commenced prior statutory deadline commencing actions term loan avoidance action commenced official committee unsecured creditors motors liquidation company “committee” among things sought return approximately 15 billion transferred debtors funds advanced commencement debtors’ chapter 11 cases united states treasury export development canada together “dip lenders” consortium prepetition lenders pursuant terms order bankruptcy court december 15 2011 accordance plan upon dissolution mlc term loan avoidance action transferred trust established plan purpose holding prosecuting term loan avoidance action avoidance action trust previously disclosed described item 3 “legal proceedings” settlement reached among parties term loan avoidance action pursuant approximately 2310 million recovered july 1 2019 avoidance action trust defendants term loan avoidance action pursuant guc trust agreement july 1 2019 defendants received allowed general unsecured claims guc trust amount disgorged avoidance action trust allowed general unsecured claims “resolved term loan avoidance action claims” together resolved disputed claims “resolved allowed claims” accordingly holders resolved term loan avoidance action claims became entitled receive distribution guc trust approximately 685 million march 31 2020 approximately 678 million distributed guc trust holders pursuant plan funds reclaimed prepetition lenders term loan avoidance action transferred otherwise benefited guc trust distributed account guc trust units guc trust distributable assets pursuant terms plan bankruptcy court authorized distribution new gm 150 million shares new gm common stock warrants acquire 136363635 newly issued shares new gm stock exercise price set 1000 per share scheduled expire july 10 2016 “new gm series warrants” warrants acquire 136363635 newly issued shares new gm stock exercise price set 1833 per share scheduled expire july 10 2019 “new gm series b warrants” record ownership new gm securities held mlc benefit guc trust dissolution mlc december 15 2011 time record ownership transferred guc trust described pursuant liquidation order july august 2015 guc trust’s holdings new gm securities liquidated following liquidation guc trust’s distributable assets principally consist distributable cash distributable cash substantially invested certain marketable securities permitted guc trust agreement prior liquidation holdings new gm common stock guc trust received dividends new gm common stock aggregating 247 million dividends required applied purpose new gm common stock dividends relate portion distributable cash applicable proceeds liquidation new gm common stock distributed holders subsequently allowed disputed general unsecured claims term loan avoidance action claims guc trust units dividends relating distributable cash also distributed holders however distributable cash appropriated accordance guc trust agreement fund costs liabilities guc trust case dividends relating distributable cash applied costs liabilities guc trust like appropriated distributable cash maintained administrative cash defined dividends applied purposes associated distributable cash references form 10k distributable cash understood include dividends relating distributable cash unless expressly indicated otherwise amount cash equivalents marketable securities held guc trust relates dividends received guc trust new gm common stock previously held guc trust referred dividend cash included amount cash equivalents marketable securities held distribution guc trust beneficiaries referred herein distributable cash except extent dividends relating appropriated distributable cash classified administrative cash following appropriation funding guc trust costs liquidation guc trust incurred continue incur certain costs liquidate trust assets implement plan effective date pursuant plan mlc contributed approximately 527 million guc trust held maintained guc trust administrator “administrative fund” purpose paying certain fees expenses including certain tax obligations incurred guc trust including fees guc trust administrator guc trust monitor fees expenses professionals retained guc trust reporting costs defined “winddown costs” march 31 2020 remaining administrative fund aggregated 11 million consisting cash equivalents marketable securities remaining amount administrative fund designated satisfaction certain specifically identified costs liabilities guc trust amount may used payment guc trust professionals fees expenses winddown costs pursuant guc trust agreement cash investments administrative fund remain winding conclusion guc trust must returned dip lenders guc trust agreement authorized guc trust liquidate approximately 57 million new gm securities “initial reporting cash” shortly effective date purposes funding certain fees expenses guc trust “reporting costs” including directly indirectly relating reports prepared filed guc trust pursuant applicable rules regulations interpretations sec ii transfer registration transfer certification guc trust units iii application committee internal revenue service “irs” private letter ruling regarding tax treatment guc trust holders allowed general unsecured claims respect distribution new gm securities iv certain legal proceedings relating term loan avoidance action guc trust agreement provides administrative fund may utilized satisfy reporting costs guc trust agreement provides extent guc trust administrator determines administrative fund sufficient satisfy current projected winddown costs initial reporting cash sufficient satisfy current projected reporting costs guc trust administrator approval guc trust monitor authorized set aside distributable cash distribution purposes guc trust administrator may appropriate distributable cash fund winddown costs andor reporting costs required approval bankruptcy court distributable cash set aside andor appropriated manner available distribution beneficiaries guc trust units appropriation distributable cash including related dividend cash classified “other administrative cash” guc trust agreement setting aside appropriation distributable cash including dividend cash reflected statement net assets liquidation financial statements guc trust separate process setting aside appropriating distributable cash satisfy unfunded projected costs expenses guc trust matter financial reporting guc trust records reserves statement net assets liquidation source funding addressed therein expected costs liquidation reasonable basis estimation reason among others direct relationship amount reserves reflected statement net assets liquidation amount distributable cash set aside appropriated current projected costs expenses guc trust adjustments reserves expected costs liquidation reported statement net assets liquidation recorded reasonable basis estimation expected incurrence additional costs reduction expected costs information regarding reserves expected costs liquidation reflected accompanying statement net assets liquidation see note 7 prior liquidation new gm securities july august 2015 described guc trust authorized approval guc trust monitor set aside distribution new gm securities funding purposes described sell set aside new gm securities approval bankruptcy court bankruptcy court previously approved march december 2012 january 2015 sale new gm securities fund current projected costs expenses guc trust march 2012 bankruptcy court order also authorized sale new gm securities aggregating 137 million purpose funding certain fees costs expenses avoidance action trust transfer sale proceeds avoidance action trust sale proceeds transferred may 2012 prior liquidation new gm securities described sales new gm securities fund projected winddown costs reporting costs calendar year 2015 aggregated approximately 617 million including dividend cash 02 million initial reporting cash amounts comprised part guc trust’s administrative cash securities sold aggregated 1043801 shares new gm common stock 948887 new gm series warrants 948887 new gm series b warrants december 2015 february 2017 march 2018 january 2019 january 2020 bankruptcy court approved appropriation distributable cash aggregating approximately 588 million fund projected costs expenses guc trust calendar year 2020 appropriation reduced distributable cash increased administrative cash march 31 2020 administrative cash aggregated 408 million march 27 2020 guc trust administrator filed motion seeking authority bankruptcy court appropriate distributable cash 500 million purpose satisfying settlement consideration pursuant amended settlement agreement described item 3 “legal proceedings” april 23 2020 bankruptcy court issued order approving motion extent administrative cash ultimately required held guc trust time dissolution remaining administrative cash distributed guc trust holders guc trust units march 31 2020 distributable cash 415 million set aside projected guc trust fees costs expenses incurred beyond 2020 accordingly distributable cash available distribution beneficiaries guc trust units set aside andor appropriated distributable cash reflected cash equivalents marketable securities statement net assets liquidation expended funding potential tax liabilities dispositions new gm securities dividends new gm common stock investment income guc trust subject us federal income tax realized net gains distribution sale new gm securities taxes “taxes distribution” guc trust also subject us federal income tax dividends received new gm common stock held guc trust taxes “dividend taxes” investment income earned distributable cash taxes “investment income taxes” guc trust agreement provides administrative fund may utilized satisfy taxes distribution dividend taxes investment income taxes guc trust administrator authorized approval guc trust monitor set aside distribution distributable cash amounts would sufficient satisfy potential taxes distribution dividend taxes investment income taxes distributable cash set aside dividend taxes investment income taxes included setaside winddown costs described “funding guc trust costs liquidation” guc trust administrator may appropriate set aside distributable cash fund taxes distribution dividend taxes investment income taxes approval guc trust monitor respect dividend taxes investment income taxes approval bankruptcy court distributable cash appropriated manner available distribution beneficiaries guc trust units appropriation distributable cash including dividend cash classified “other administrative cash” guc trust agreement set aside andor appropriated distributable cash reflected cash equivalents marketable securities expended pay taxes distribution dividend taxes investment income taxes setaside appropriated distributable cash including dividend cash available distribution corresponding liability reserve related setaside assets reflected statement net assets liquidation financial statements guc trust prior liquidation new gm securities july august 2015 described guc trust authorized approval guc trust monitor set aside distribution new gm securities fund potential taxes distribution dividend taxes investment income taxes sell set aside new gm securities fund taxes distribution dividend taxes investment income taxes approval guc trust monitor respect dividend taxes investment income taxes approval bankruptcy court quarter ended march 31 2020 guc trust administrator reviewed potential taxes distribution dividend taxes investment income taxes result review guc trust administrator determined distributable cash set aside potential taxes distribution dividend taxes investment income taxes result application section 505b bankruptcy code guc trust’s federal income tax returns year ended march 31 2019 prior years longer subject examination internal revenue service “irs” income taxes may assessed year ended march 31 2019 prior year guc trust’s remaining capital loss carryovers expired longer utilized guc trust net operating loss carryovers still subject examination irs subsequent years losses utilized utilization net basis expected result sale previously held new gm securities year ended march 31 2016 accordingly income taxes expected paid future see note 8 “critical accounting policies estimates income taxes” item 7 “management’s discussion analysis financial condition results operations” information regarding income taxes remaining capital net operating loss carryovers generated prior years still subject examination irs potentially could succeed claimants defined pursuant tax rules material uncertainties associated therewith guc trust administrator intends continue reevaluate amount distributable cash set aside quarterly basis additional information see “net assets liquidationdistributable cash set aside distribution” item 7 “management’s discussion analysis financial condition results operations” residual winddown claims costs upon dissolution debtors occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining disputed administrative expenses priority tax claims priority nontax claims secured claims “residual winddown claims” december 15 2011 plan debtors transferred guc trust amount assets necessary “residual winddown assets” satisfy ultimate allowed amount residual winddown claims including certain reasonable litigation defense costs related term loan avoidance action “avoidance action defense costs” estimated debtors costs fees expenses relating satisfying resolving residual winddown claims “residual winddown costs” residual winddown assets initially aggregated approximately 428 million amount consisted approximately 400 million cash including approximately 14 million designated payment avoidance action defense costs transferred benefit approximately 28 million prepaid expenses extent residual winddown claims residual winddown costs less residual winddown assets excess funds returned dip lenders also expected time guc trust administrator determines residual winddown assets adequate satisfy residual winddown claims including actual amount avoidance action defense costs residual winddown costs satisfied administrative cash remaining administrative cash guc trust administrator authorized guc trust monitor approval set aside bankruptcy court approval appropriate distributable cash cover shortfall extent distributable cash set aside andor appropriated obtain funding complete winddown debtors distributable cash available distribution beneficiaries guc trust therefore amount residual winddown claims residual winddown costs could reduce assets guc trust available distribution setting aside appropriation distributable cash including dividend cash reflected statement net assets liquidation financial statements guc trust rather set aside appropriated distributable cash including dividend cash reflected cash equivalents marketable securities accompanying statement net assets liquidation expended guc trust concluded affairs funds remaining obtained sale new gm securities appropriation distributable cash fund winddown process resolution satisfaction residual winddown claims distributed holders guc trust units amount avoidance action defense costs incurred exceeded corresponding cash 14 million received guc trust mlc dissolution date approximately 302 million result new residual winddown claims arose amount excess result term loan avoidance action settlement described virtue terms associated settlement agreement guc trust responsible payment avoidance action defense costs march 31 2020 residual winddown assets aggregating 02 million held guc trust recorded cash equivalents marketable securities accompanying statement net assets liquidation remaining expected residual winddown claims costs assets march 31 2020 accordingly guc trust expects return remaining residual winddown assets dip lenders upon winding conclusion guc trust corresponding amount recorded reserves residual winddown claims costs accompanying statement net assets liquidation addition residual winddown assets guc trust also received dissolution date approximately 34 million cash mlc amount included 14 million respect certain costs fees expenses payable plan indenture trustees fiscal paying agents previously outstanding debt mlc “indenture trustee fiscal paying agent costs” ii 20 million respect reporting costs funds received credited reserve expected costs liquidation unused portion funds designated indenture trustee fiscal paying agent costs must returned dip lenders available distribution holders guc trust units winding conclusion guc trust march 31 2020 funds designated indenture trustee fiscal paying agents costs held guc trust approximated 01 million recorded cash equivalents accompanying statement net assets liquidation none approximately 20 million funds designated reporting costs remained march 31 2020 3 basis presentation significant accounting policies liquidation basis accounting guc trust exists solely purposes described note 1 finite life accordingly guc trust prepared accompanying financial statements liquidation basis accounting accordance accounting principles generally accepted united states america “us gaap” liquidation basis accounting assets stated estimated realizable value nondiscounted amount cash asset expected converted liquidation period liabilities continue recognized amount required us gaap remeasured reflect anticipation entity legally released obligation additionally liquidation basis accounting reserve established estimated costs expected incurred liquidation period costs accrued reasonable basis estimation also accrual made estimated income cash expected received liquidation period extent reasonable basis estimation exists estimates periodically reviewed adjusted appropriate valuation assets realizable value accrual investment income marketable securities expected received liquidation period reserves expected liquidation costs represent estimates based present facts circumstances known guc trust administrator subject change guc trust beneficiaries holders allowed general unsecured claims extent liquidating distributions yet paid holders guc trust units disputed general unsecured claims term loan avoidance action claims resolved allowed thereby became allowed general unsecured claims holders thereof became entitled receive liquidating distributions distributable cash including dividend cash guc trust units pro rata amount claims upon occurrence guc trust incurred obligation distribute distributable cash accordingly liquidating distributions payable recorded amount distributable cash previously fair value new gm securities guc trust obligated distribute end period disputed general unsecured claims term loan avoidance action claims resolved allowed general unsecured claims prior resolution allowance disputed general unsecured claims term loan avoidance action claims liabilities recorded conditional obligations associated disputed general unsecured claims term loan avoidance action claims rather beneficial interests guc trust beneficiaries residual assets guc trust reflected net assets liquidation guc trust financial statements liquidation basis accounting guc trust presents two principal financial statements statement net assets liquidation statement changes net assets liquidation addition although required liquidation basis accounting guc trust also presents statement cash flows accordance requirements guc trust agreement fiscal year guc trust’s fiscal year begins april 1 ends following march 31 cash equivalents marketable securities accrued investment income cash equivalents marketable securities cash equivalents consist balances held money market funds marketable securities consist shortterm investments us treasury bills guc trust valued securities fair value based carrying value approximates fair value receivables associated interest income earned included accrued investment income accompanying statements net assets liquidation combined carrying value us treasury bills estimated investment income expected received holdings marketable securities cash equivalents accrued liquidation basis accounting extent reasonable basis estimation exists accrual estimated principally based forecasted cash outflows expected returns based recent yields expected yields resulting recent changes federal funds rate us treasury bills marketable securities invested modifications made accrual yields holdings us treasury bills date financial statement significantly differ recent yields estimates forecasted cash outflows consider amount timing distributions respect guc trust units estimates may change near term change may material dividends new gm common stock dividends previously received new gm common stock previously held guc trust required applied purpose new gm common stock dividends relate portion distributable cash applicable liquidated new gm common stock distributed holders subsequently resolved allowed claims guc trust units dividends relating distributable cash also distributed holders however distributable cash appropriated guc trust accordance guc trust agreement fund costs liabilities guc trust case dividends relating appropriated distributable cash applied costs liabilities guc trust like appropriated distributable cash maintained administrative cash dividends applied purpose associated distributable cash references distributable cash understood include dividends relating distributable cash unless expressly indicated otherwise amount cash equivalents marketable securities held guc trust relates dividends received guc trust new gm common stock previously held guc trust referred dividend cash included amount cash equivalents marketable securities held distribution guc trust beneficiaries referred distributable cash except extent dividends relating appropriated distributable cash classified administrative cash following appropriation accounts payable liabilities accounts payable liabilities represent amounts due professionals service providers vendors services rendered goods received end period contingent settlement obligation guc trust accrues loss contingencies probable liability incurred date financial statements amount liability reasonably estimated assessing whether liability incurred date financial statements guc trust considers events occurring date financial statements provide additional evidence respect conditions existed date financial statements including estimates inherent process preparing financial statements accordingly quarter ended march 31 2020 guc trust accrued contingent settlement obligation pursuant amended settlement agreement described item 3 “legal proceedings” quarter ended march 31 2018 guc trust accrued contingent settlement obligation pursuant previously executed settlement agreement result developments related litigation accrual reversed quarter ended september 30 2018 due uncertainties associated effectiveness settlement agreement effect time estimates regarding incurrence contingent settlement obligation may change near term change may material reserves residual winddown claims costs upon dissolution mlc occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining residual winddown claims date dissolution debtors transferred guc trust residual winddown assets amount necessary satisfy ultimate allowed amount residual winddown claims including certain avoidance action defense costs residual winddown costs estimated debtors corresponding amount recorded reserves residual winddown claims costs residual winddown claims residual winddown costs less residual winddown assets excess funds returned dip lenders expected collectively actual amounts residual winddown claims including certain avoidance action defense costs allowed residual winddown costs exceed residual winddown assets guc trust administrator may required set aside distribution appropriate distributable cash fund shortfall appropriation would reduce amount distributable cash including dividend cash available distribution holders guc trust units reserves expected costs liquidation basis accounting guc trust required estimate accrue costs associated implementing plan distributing guc trust’s distributable assets costs described winddown costs reporting costs note 2 consist principally professional fees costs governance administrative expenses amounts may vary significantly due among things time effort required complete activities distributions plan guc trust recorded reserves expected costs liquidation represent estimated costs incurred remaining liquidation period guc trust reasonable basis estimation amount liquidation costs ultimately incurred depends period time extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities result estimates expected costs liquidation may change near term change could material march 31 2020 remaining liquidation period estimated extend july 2021 estimated predominantly modified probabilityweighted basis guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome addition consistent liquidation basis accounting consideration given potential outcomes extent exist reasonable basis estimation remaining liquidation period dependent predominantly estimate remaining period time resolution litigation involving certain general motors vehicle recalls described item 3 “legal proceedings” addition certain additional estimated time wind guc trust following resolution litigation included estimated liquidation period future developments general motors vehicle recall litigation could extend current estimate minimum remaining period time resolution therefore extend estimated minimum remaining liquidation period guc trust beyond july 2021 addition certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued guc trust’s estimates regarding costs remaining liquidation period may change near term change may material guc trust incurs liquidation costs reserves released offset costs incurred liability service provider recognized accounts payable accrued liability paid addition guc trust records reserves expected costs reasonable basis estimation applicable us gaap additional costs may identified time additional reserves must recorded costs identified guc trust records increase reserves charges increase addition reserves statement changes net assets liquidation process recording reserves expected costs liquidation matter financial reporting separate distinct process distributable cash set aside distribution purposes funding projected costs liquidation projected costs generally estimated conservative ie inclusive basis include contingencies permitted accrued reserves expected costs liquidation applicable us gaap complete description process setting aside distributable cash fund projected costs potential liabilities guc trust see item 7 “management’s discussion analysis financial condition results operationsnet assets liquidation” heading “distributable cash set aside distribution” income taxes guc trust considered disputed ownership fund pursuant treasury regulation section 1468b9 assets transferred guc trust passive investments guc trust taxed qualified settlement fund qsf pursuant treasury regulation section 1468b9c1ii qsf tax status guc trust approved irs private letter ruling issued march 2 2011 general qsf computes taxable income manner corporation pays federal income tax using trust income tax rates modified gross income modified gross income includes gross income pursuant internal revenue code section 61 less administrative expenses certain losses sale exchange worthlessness property net operating losses general disputed ownership fund taxed qsf recognize gross income assets transferred therefore guc trust recognized gross income transfer assets mlc guc trust generates gross income form interest dividend income including dividends received previous holdings new gm common stock recognizes capital gains andor losses upon disposition new gm securities reduced administrative expenses accumulated net operating capital losses compute modified gross income guc trust taxable federal income tax purposes current income tax liability asset recognized estimated taxes payable receivable deferred tax liabilities assets recognized estimated future tax effects temporary differences financial reporting tax accounting deferred tax assets reviewed recoverability valuation allowances provided necessary guc trust subject state income taxes current law accordingly current deferred state income tax liabilities assets recorded process recognizing deferred tax assets liabilities current income taxes payable matter financial reporting separate distinct process distributable cash set aside distribution purposes funding potential income tax liabilities potential income tax liabilities generally estimated conservative ie inclusive basis may include amounts potential income tax liabilities beyond amounts permitted recorded applicable accounting standards complete description process setting aside distributable cash fund projected costs potential income tax liabilities guc trust see item 7 “management’s discussion analysis financial condition results operationsnet assets liquidation” heading “distributable cash set aside distribution” guc trust recognizes tax benefit uncertain tax position likely tax position sustained examination taxing authority based technical merits position review available evidence consultation guc trust professionals guc trust’s tax liability respect federal income tax returns year ended march 31 2019 prior years longer subject examination result application section 505b bankruptcy code however remaining net operating loss carryovers generated march 31 2020 aggregating 1406 million could subject examination irs subsequent years losses utilized expected losses utilized net basis future march 31 2020 known items would result significant accrual uncertain tax positions use estimates preparation financial statements liquidation basis conformity us gaap requires use estimates assumptions affect reported amounts assets liabilities estimates subject known unknown risks uncertainties factors could materially impact amounts reported disclosed financial statements related footnotes significant estimates include estimated investment income expected received expected liquidation costs incurrence contingent settlement obligation fair value marketable securities actual results could differ estimates recent accounting standards changes us gaap made fasb form accounting standards updates asus fasb’s accounting standards codification guc trust considers applicability impact asus noted herein assessed determined applicable 4 net assets liquidation description guc trust agreement plan described fully note 1 beneficiaries guc trust current holders allowed general unsecured claims extent liquidating distributions yet paid current holders guc trust units assets guc trust consisting primarily distributable cash including dividend cash described note 1 available distributed trust beneficiaries “guc trust distributable assets” accordance plan guc trust agreement except extent set aside appropriated funding expected costs liquidation guc trust amounts net assets liquidation presented accompanying statements net assets liquidation correspond amounts guc trust distributable assets respective dates certain adjustments including reductions amounts set aside distributable cash appropriated distributable cash march 31 2020 guc trust distributable assets aggregated approximately 3494 million additional information see “net assets liquidationdistributable assets” item 7 “management’s discussion analysis financial condition results operations” cash equivalents marketable securities march 31 2020 2019 cash equivalents marketable securities aggregated 4356 million 5051 million respectively comprised following described note 5 march 31 2020 guc trust accrued liquidating distributions payable aggregating 3519 million amount includes 3494 million distributions payable holders guc trust units respect excess guc trust distributable assets described “net assets liquidationdistributable assets” item 7 “management’s discussion analysis financial condition results operations” guc trust made distribution 3000 million holders guc trust units may 28 2020 addition march 31 2020 amount distributable cash reflected table includes 415 million amounts set aside projected guc trust fees costs expenses incurred beyond 2020 aggregate amount distributable cash pending distribution set aside available distribution march 31 2020 440 million exclusive distributions payable holders guc trust units described note 2 march 27 2020 guc trust administrator filed motion seeking authority bankruptcy court appropriate distributable cash 500 million purpose satisfying settlement consideration pursuant amended settlement agreement described item 3 “legal proceedings” april 23 2020 bankruptcy court issued order approving motion accrued investment income cash equivalents marketable securities march 31 2020 2019 guc trust accrued approximately 08 million 303 million respectively investment income marketable securities cash equivalents expected earned remaining liquidation period accordance liquidation basis accounting accrual estimated principally based forecasted cash outflows expected returns based recent yields expected yields resulting recent changes federal funds rate us treasury bills marketable securities invested estimates forecasted cash outflows consider amount timing distributions respect guc trust units year ended march 31 2020 accrual reduced approximately 295 million primarily due reduction yields us treasury bills along shortenings expected dates make distributions respect guc trust units shortenings expected dates make distributions respect guc trust units associated execution amended settlement agreement described item 3 “legal proceedings” accrual along receivables investment income earned march 31 2020 2019 included accrued investment income accompanying statements net assets liquidation potential distributable capital net operating loss carryovers described note 8 described “critical accounting policies estimatesincome taxes” item 7 “management’s discussion analysis financial condition results operations” guc trust’s unused capital net operating loss carryovers potentially could succeed claimants defined pursuant tax rules upon termination guc trust reference made thereto information regarding potential distributable loss carryovers material uncertainties associated therewith trust units described note 1 plan holder allowed general unsecured claim retained contingent right receive pro rata basis additional distributable cash extent required satisfaction previously disputed general unsecured claims term loan avoidance action claims appropriation payment expenses tax liabilities guc trust guc trust issued units representing contingent rights “guc trust units” rate one guc trust unit per 1000 allowed general unsecured claims holder allowed general unsecured claim subject rounding pursuant guc trust agreement connection initial recognition allowed general unsecured claim guc trust may make discretion quarterly liquidating distributions holders guc trust units extent ia previously disputed general unsecured claims asserted debtors’ estates term loan avoidance action claims either disallowed otherwise resolved favorably guc trust thereby reducing amount guc trust assets reserved distribution respect asserted potential claims b certain excess guc trust distributable assets defined guc trust agreement previously set aside distribution released manner permitted guc trust agreement ii result foregoing amount excess guc trust distributable assets defined guc trust agreement end relevant quarter exceeds thresholds set forth guc trust agreement following table presents changes years ended march 31 2020 2019 2018 numbers guc trust units outstanding guc trust obligated issue 1 number guc trust units outstanding time represents guc trust units issued respect allowed general unsecured claims allowed prior periods including guc trust units held guc trust benefit holders allowed general unsecured claims yet supplied information required guc trust order effect initial distribution entitled b governmental entities precluded applicable law receiving distributions guc trust units 2 number guc trust units outstanding end year equal amount allowed general unsecured claims 1 1000 basis corresponding date additional guc trust units issued due rounding contingent settlement obligation described item 3 “legal proceedings” guc trust executed amended settlement agreement certain representatives proposed class economic loss plaintiffs avoidance action trust new gm finally approved mdl court amended settlement agreement result guc trust paying 500 million settlement consideration consisting 480 million payment fund benefit economic loss plaintiffs pay 20 million portion noticing costs expected payment 480 million fund accrued contingent settlement obligation expected payment noticing costs 20 million accrued reserves expected costs liquidation accompanying statement net assets liquidation march 31 2020 allowed disputed claims following table presents summary activity respect allowed disputed general unsecured claims term loan avoidance action claims years ended march 31 2020 2019 1 remaining disputed general unsecured claims march 31 2019 2018 represented general claim contingency future disputed claims obligations guc trust year ended march 31 2020 guc trust released general claim contingency deemed longer necessary 2 maximum amount unresolved claims represents sum disputed general unsecured claims term loan avoidance action claims 3 total claim amount represents sum allowed general unsecured claims maximum amount unresolved claims described note 2 year ended march 31 2020 term loan avoidance action settled among parties resulting recoveries avoidance action trust approximately 2310 million result allowed general unsecured claims arose corresponding amount holders became entitled receive distributions guc trust aggregating approximately 685 million march 31 2020 approximately 678 million distributed guc trust holders 5 liquidating distributions liquidating distributions net reversal liquidating distributions years ended march 31 2020 2019 2018 consisted following distributions year ended march 31 2020 consisted distributions holders resolved term loan avoidance action claims b holders allowed general unsecured claims previously failed fulfill informational requirements distribution established accordance guc trust agreement subsequently fulfilled information requirements distributions year ended march 31 2019 consisted distributions holders allowed general unsecured claims previously failed fulfill information requirements distribution established accordance guc trust agreement subsequently fulfilled information requirements distributions year ended march 31 2018 consisted distributions holders allowed general unsecured claims previously failed fulfill informational requirements distribution established accordance guc trust agreement subsequently fulfilled information requirements b holders certain resolved term loan avoidance action claims obligation distribute distributable cash holders guc trust units excess distributions payable march 31 2018 decreased balances march 31 2017 resulting net reversal liquidating distributions 69 million year ended march 31 2018 guc trust obligated march 31 2020 distribute distributable cash 24 million certain holders allowed general unsecured claims satisfied certain informational requirements necessary effect distribution entitled 6 fair value measurements accounting standards provide framework establishing fair value assets liabilities presented financial statements framework determining fair value based hierarchy prioritizes inputs valuation techniques used measure fair value trust’s cash equivalents marketable securities liquidating distributions payable presented provided hierarchy level 1in general fair values determined level 1 inputs use quoted prices active markets identical assets liabilities guc trust ability access level 2fair values determined level 2 inputs use inputs observable either directly indirectly level 2 inputs include quoted prices similar assets liabilities active markets inputs interest rates yield curves observable commonly quoted intervals level 3level 3 inputs unobservable inputs including inputs available situations little market activity related asset liability level 3 fair value measurements based primarily management’s estimates using pricing models discounted cash flow methodologies similar techniques taking account characteristics asset liability guc trust assets liabilities measured level 3 inputs march 31 2020 2019 instances inputs used measure fair value fall different levels fair value hierarchy fair value measurements entirety categorized based lowest level input significant valuation guc trust’s assessment significance particular inputs fair value measurements requires judgment considers factors specific asset liability guc trust also holds financial instruments measured fair value recurring basis including accounts payable liabilities fair value liabilities approximates carrying amounts accompanying financial statements due short maturity instruments following table presents information guc trust’s assets liabilities presented fair value march 31 2020 2019 valuation techniques used guc trust determine fair values following descriptions valuation methodologies used assets liabilities measured fair value • due shortterm liquid nature fair value cash equivalents approximates carrying value • marketable securities consist us treasury bills due shortterm maturities fair value us treasury bills approximates carrying value receivables associated interest income earned included accrued investment income accompanying statements net assets liquidation combined carrying value us treasury bills • liquidating distributions payable valued amount cash guc trust obligated distribute 7 reserves expected costs liquidation residual winddown claims costs following summary activity reserves expected costs liquidation years ended march 31 2020 2019 2018 year ended march 31 2020 estimates expected winddown costs reasonable basis estimation increased 51 million estimates expected reporting costs reasonable basis estimation decreased 35 million year ended march 31 2019 estimates expected winddown costs estimates expected reporting costs reasonable basis estimation increased 41 million 54 million respectively year ended march 31 2018 estimates expected winddown costs estimates expected reporting costs increased 254 million 86 million respectively revisions estimates recorded additions reductions reserves expected costs liquidation years guc trust recorded reserves expected costs liquidation represent amounts expected incurred estimated remaining liquidation period guc trust reasonable basis estimation amount liquidation costs ultimately incurred depends time period extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities march 31 2020 recorded reserves expected costs liquidation reflect estimated costs remaining liquidation period estimated extend july 31 2021 reduced twentyseven months prior quarter remaining liquidation period estimated predominately modified probabilityweighted basis permitted us gaap guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome addition consistent liquidation basis accounting consideration given potential outcomes extent exist reasonable basis estimation remaining liquidation period dependent predominantly estimate remaining period time resolution litigation involving certain general motors vehicle recalls described item 3 “legal proceedings” addition certain additional estimated time wind guc trust following resolution litigation included estimated liquidation period future developments general motors vehicle recall litigation could extend current estimate remaining period time resolution therefore extend estimated minimum remaining liquidation period guc trust beyond july 2021 addition certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued guc trust’s estimates regarding costs remaining liquidation period may change near term change may material following summary activity reserve residual winddown claims costs years ended march 31 2020 2019 2018 residual winddown claims allowed year ended march 31 2018 primarily consist avoidance action defense costs result term loan avoidance action settlement described item 3 virtue terms associated settlement agreement guc trust responsible payment avoidance action defense costs 8 income taxes current tax benefit provision years ended march 31 2020 2019 2018 due cumulative net operating capital losses income taxes paid guc trust also deferred tax benefit provision years ended march 31 2020 2019 2018 result establishment full valuation allowance net deferred tax assets beginning end periods result enactment “tax cuts jobs act” december 2017 guc trust’s federal income tax rate reduced 396 37 effective april 1 2018 first day guc trust’s fiscal year ended march 31 2019 december 2017 guc trust expected 37 tax rate would effect temporary differences reversed accordingly guc trust’s deferred tax assets liabilities adjusted enacted 37 tax rate december 31 2017 impact deferred tax provision result establishment full valuation allowance net deferred tax assets december 31 2017 deferred taxes accompanying statement net assets liquidation march 31 2020 2019 comprised following components previously disclosed quarter ended september 30 2013 guc trust made determination file us federal income tax returns taking position beneficial ownership substantial majority new gm securities transferred mlc guc trust march 31 2011 tax basis new gm securities determined reference value securities date instead december 15 2011 record ownership remaining new gm securities still held mlc transferred mlc guc trust remaining substantial minority new gm securities transferred mlc guc trust guc trust determined transfer beneficial ownership occurred dates tax basis determined reference value securities dates new tax position resulted increased tax basis new gm securities prior tax position therefore reduced taxable gains increased taxable losses distributions sales new gm securities since march 31 2011 new tax position sustained examination irs date hereof however guc trust believes based available evidence consultation guc trust professionals likely new tax position sustained examination irs based technical merits position accordingly new tax position recognized current deferred income tax liabilities income tax provision guc trust’s financial statements since quarter ended september 30 2013 following guc trust’s determination utilize new tax position set forth guc trust filed us federal income tax returns years ended march 31 2013 thereafter irs using new tax position tax returns accompanied requests prompt determination tax liability pursuant section 505b bankruptcy code 60day statutory notification periods set forth section 505b bankruptcy code respect guc trust’s us federal income tax returns year ended march 31 2019 prior years expired accordingly tax liabilities set forth guc trust’s us federal income tax returns year ended march 31 2019 prior years longer subject examination irs income taxes assessed years also income taxes expected paid future result liquidation guc trust’s holdings new gm securities year ended march 31 2016 remaining net operating loss carryovers generated march 31 2020 aggregating 1406 million could subject examination irs subsequent years losses utilized guc trust expect utilize net basis net operating loss carryovers future capital loss carryovers expired march 31 2020 net operating loss carryovers begin expire march 31 2032 however pursuant enactment “tax cuts jobs act” december 2017 net operating losses generated guc trust tax years beginning april 1 2018 expire loss carryovers aggregate result deferred tax asset 520 million march 31 2020 reflected table described “critical accounting policies estimatesincome taxes” item 7 “management’s discussion analysis financial condition results operations” guc trust’s loss carryovers including longer available utilization guc trust potentially could succeed claimants defined pursuant tax rules reference made thereto information regarding potential distributable loss carryovers material uncertainties associated therewith full valuation allowance net deferred tax assets aggregating 587 million 547 million established march 31 2020 2019 respectively result liquidation guc trust’s holdings new gm securities determined deferred tax assets realizable valuation allowance increased 40 million decreased 54 million years ended march 31 2020 2019 respectively 9 related party transactions addition serving guc trust administrator wilmington trust company continues serve trustee pursuant indentures certain series previously outstanding debt mlc wilmington trust company received may future receive certain customary fees amounts consistent wilmington trust company’s standard rates service bankruptcy court previously approved creation segregated fund purposes funding fees wilmington trust company well indenture trustees fiscal paying agents previously outstanding debt mlc fees wilmington trust company years ended march 31 2020 2019 2018 addition wilmington trust company also entered certain arrangements guc trust pursuant affiliates previously received may future receive reasonable customary fees commissions services capacity guc trust administrator arrangements include provision custodial investment advisory brokerage services guc trust years ended march 31 2020 2019 2018 total amount fees commissions approximately 02 million 03 million 03 million respectively addition serving guc trust monitor year ended march 31 2019 fti consulting inc provided professional services associated review certain expert reports connection litigation involving certain general motors vehicle recalls fees expenses services aggregated approximately 02 million item 9 item 8 financial statements supplementary data motors liquidation company guc trust financial statements report independent registered public accounting firm trust administrator trust monitor trust beneficiaries motors liquidation company guc trust opinion financial statements audited accompanying statements net assets liquidation motors liquidation company guc trust “trust” march 31 2018 2017 related statements changes net assets liquidation cash flows years ended march 31 2018 2017 2016 related notes collectively referred “financial statements” opinion financial statements referred present fairly material respects net assets liquidation motors liquidation company guc trust march 31 2018 2017 changes net assets liquidation cash flows years threeyear period ended march 31 2018 conformity accounting principles generally accepted united states america basis opinion trust administrator responsible financial statements responsibility express opinion trust’s financial statements based audits public accounting firm registered public company accounting oversight board united states “pcaob” required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement whether due error fraud trust required engaged perform audit internal control financial reporting part audits required obtain understanding internal control financial reporting purpose expressing opinion effectiveness trust’s internal control financial reporting accordingly express opinion audits included performing procedures assess risks material misstatement financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures financial statements audits also included evaluating accounting principles used significant estimates made trust administrator well evaluating overall presentation financial statements believe audits provide reasonable basis opinion plante moran pllc served trust’s auditor since 2011 clinton township michigan june 11 2018 motors liquidation company guc trust statements net assets liquidation basis march 31 2018 2017 thousands see accompanying notes financial statements motors liquidation company guc trust statements changes net assets liquidation basis years ended march 31 2018 2017 2016 thousands see accompanying notes financial statements motors liquidation company guc trust statements cash flows liquidation basis years ended march 31 2018 2017 2016 thousands guc trust presented reconciliation net income cash flow operations entity liquidation guc trust continuing operations result measurement net income term used generally accepted accounting principles measure results operations see accompanying notes financial statements motors liquidation company guc trust notes financial statements march 31 2018 1 purpose trust motors liquidation company guc trust “guc trust” successor motors liquidation company formerly known general motors corp “mlc” within meaning section 1145 united states bankruptcy code “bankruptcy code” guc trust holds administers directs distribution certain assets pursuant terms conditions second amended restated motors liquidation company guc trust agreement “guc trust agreement” dated july 30 2015 amended time pursuant second amended joint chapter 11 plan “plan” dated march 18 2011 mlc debtor affiliates collectively along mlc “debtors” benefit holders allowed general unsecured claims debtors “allowed general unsecured claims” guc trust formed march 30 2011 statutory trust delaware statutory trust act purposes implementing plan distributing guc trust’s distributable assets prior liquidation july august 2015 new gm securities defined held guc trust pursuant liquidation order defined plan qualified liquidation order generally provided distribution certain shares common stock “new gm common stock” new general motors company formerly known ngmco inc “new gm” associated dividend cash defined certain warrants purchase shares stock “new gm warrants” together new gm common stock “new gm securities” holders allowed general unsecured claims pro rata amount claims since liquidation new gm securities distributions holders allowed general unsecured claims consist entirely cash distributions lieu new gm securities addition prior qualification liquidation order resulting subsequent liquidation new gm securities plan provided holder allowed general unsecured claim would obtain form guc trust units defined contingent right receive pro rata basis additional shares new gm common stock associated dividend cash new gm warrants extent new gm common stock new gm warrants required satisfaction previously disputed general unsecured claims defined note 2 term loan avoidance action claims defined note 2 liquidation payment expenses liabilities guc trust certain cash remaining dissolution guc trust since liquidation new gm securities previously held guc trust described holders guc trust units contingent right receive additional cash lieu new gm securities remaining dissolution guc trust order dated july 2 2015 “liquidation order” bankruptcy court approved conversion guc trust’s holdings new gm securities cash effect conversion july 7 2015 guc trust converted holdings new gm warrants new gm common stock cashless exercise total guc trust converted 10352556 new gm series warrants defined 7407155 shares new gm common stock ii 10352556 new gm series b warrants defined 4953635 shares new gm common stock thereafter guc trust sold holdings new gm common stock net proceeds aggregating 7417 million completed sales august 5 2015 result distributions guc trust thereafter respect allowed general unsecured claims including respect guc trust units made solely cash pursuant liquidation order proceeds liquidations net applicable costs fees expenses paid respect thereof allocated beneficiaries guc trust pro rata basis following manner guc trust beneficiary’s entitlement particular number new gm warrants exercised converted entitlement receive number shares new gm common stock new gm warrants exercised conversions 071549 shares new gm common stock new gm series warrant 047849 shares common stock new gm series b warrant b guc trust beneficiary’s entitlement particular number shares new gm common stock liquidated including exercised new gm warrants set forth converted entitlement receive amount cash equal weighted average sales price net applicable costs fees expenses paid respect thereof new gm common stock sold multiplied number shares new gm common stock guc trust beneficiary would otherwise entitled including exercised new gm warrants set forth weighted average sales price guc trust’s holdings new gm common stock sold subsequent june 30 2015 3123 per share following liquidation described guc trust invested proceeds certain marketable securities permitted guc trust agreement amount cash equivalents marketable securities held distribution guc trust beneficiaries including dividend cash referred herein distributable cash guc trust administered wilmington trust company individual capacity solely capacity trust administrator trustee “guc trust administrator” among rights duties subject terms conditions limitations set forth guc trust agreement guc trust administrator power authority hold manage sell invest distribute assets comprising guc trust corpus consult retain professionals administration guc trust prosecute resolve objections disputed general unsecured claims take necessary actions administer winddown affairs debtors upon dissolution upon dissolution resolve satisfy extent allowed residual winddown claims defined activities guc trust administrator overseen fti consulting inc solely capacity monitor “guc trust monitor” 2 plan liquidation march 31 2011 date plan became effective “effective date” approximately 29771 million allowed general unsecured claims addition effective date approximately 8154 million disputed general unsecured claims “disputed general unsecured claims” reflects liquidated disputed claims bankruptcy court ordered distribution reserve unliquidated disputed claims reflect term loan avoidance action claims total aggregate amount general unsecured claims allowed disputed asserted debtors inclusive term loan avoidance action claims approximately 39425 million effective date pursuant guc trust agreement holders disputed general unsecured claims become entitled receive distribution distributable cash guc trust extent disputed general unsecured claims become allowed general unsecured claims “resolved disputed claims” guc trust agreement guc trust administrator authority file objections disputed general unsecured claims could prosecuted alternative dispute resolution proceedings including mediation arbitration appropriate march 31 2018 remaining disputed general unsecured claims remained 500 million claim amount associated particular claim set aside guc trust administrator general claim contingency see “allowed disputed claims” note 4 one avoidance action captioned official committee unsecured creditors motors liquidation co v jpmorgan chase bank na et al adv pro 0900504 bankr sdny july 31 2009 “term loan avoidance action” commenced prior statutory deadline commencing actions term loan avoidance action commenced official committee unsecured creditors motors liquidation company “committee” among things seeks return approximately 15 billion transferred debtors funds advanced commencement debtors’ chapter 11 cases united states treasury export development canada together “dip lenders” consortium prepetition lenders pursuant terms order bankruptcy court december 15 2011 accordance plan upon dissolution mlc term loan avoidance action transferred avoidance action trust defined pursuant guc trust agreement extent wilmington trust company individual capacity solely capacity trustee trust administrator avoidance action trust “avoidance action trust administrator” successful obtaining recovery way judgment settlement defendants term loan avoidance action defendants shall receive allowed general unsecured claim guc trust amount disgorged avoidance action trust allowed general unsecured claims “resolved term loan avoidance action claims” together resolved disputed claims “resolved allowed claims” described item 3 “legal proceedings” committee dip lenders avoidance action trust reached settlement agreement concerning among things allocation potential distributable recoveries term loan avoidance action bankruptcy court approved settlement agreement opinion order entered august 24 2016 order affirmed appeal fully effect funds reclaimed prepetition lenders term loan avoidance action transferred otherwise benefit guc trust distributed account guc trust units guc trust distributable assets pursuant terms plan bankruptcy court authorized distribution new gm 150 million shares new gm common stock warrants acquire 136363635 newly issued shares new gm stock exercise price set 1000 per share scheduled expire july 10 2016 “new gm series warrants” warrants acquire 136363635 newly issued shares new gm stock exercise price set 1833 per share scheduled expire july 10 2019 “new gm series b warrants” record ownership new gm securities held mlc benefit guc trust dissolution mlc december 15 2011 time record ownership transferred guc trust described pursuant liquidation order july august 2015 guc trust’s holdings new gm securities liquidated following liquidation guc trust’s distributable assets principally consist distributable cash distributable cash substantially invested certain marketable securities permitted guc trust agreement prior liquidation holdings new gm common stock guc trust received dividends new gm common stock aggregating 247 million dividends required applied purpose new gm common stock dividends relate portion distributable cash applicable proceeds liquidation new gm common stock distributed holders subsequently allowed disputed general unsecured claims term loan avoidance action claims guc trust units dividends relating distributable cash also distributed holders however distributable cash appropriated accordance guc trust agreement fund costs liabilities guc trust case dividends relating distributable cash applied costs liabilities guc trust like appropriated distributable cash maintained administrative cash defined dividends applied purposes associated distributable cash references form 10k distributable cash understood include dividends relating distributable cash unless expressly indicated otherwise amount cash equivalents marketable securities held guc trust relates dividends received guc trust new gm common stock previously held guc trust referred dividend cash included amount cash equivalents marketable securities held distribution guc trust beneficiaries referred herein distributable cash except extent dividends relating appropriated distributable cash classified administrative cash following appropriation funding guc trust costs liquidation guc trust incurred continue incur certain costs liquidate trust assets implement plan effective date pursuant plan mlc contributed approximately 527 million guc trust held maintained guc trust administrator “administrative fund” purpose paying certain fees expenses including certain tax obligations incurred guc trust including fees guc trust administrator guc trust monitor fees expenses professionals retained guc trust reporting costs defined “winddown costs” march 31 2018 remaining administrative fund aggregated 17 million consisting cash equivalents marketable securities remaining amount administrative fund designated satisfaction certain specifically identified costs liabilities guc trust amount may used payment trust professionals fees expenses winddown costs pursuant guc trust agreement cash investments administrative fund remain winding conclusion guc trust must returned dip lenders november 2016 guc trust administrator returned 60 million remaining administrative fund dip lenders return associated potential tax liability guc trust administrator consultation trust professionals determined would incurred therefore would expended guc trust guc trust agreement authorized guc trust liquidate approximately 57 million new gm securities “initial reporting cash” shortly effective date purposes funding certain fees expenses guc trust “reporting costs” including directly indirectly relating reports prepared filed guc trust pursuant applicable rules regulations interpretations sec ii transfer registration transfer certification guc trust units iii application committee internal revenue service “irs” private letter ruling regarding tax treatment guc trust holders allowed general unsecured claims respect distribution new gm securities iv certain legal proceedings relating term loan avoidance action guc trust agreement provides administrative fund may utilized satisfy reporting costs guc trust agreement provides extent guc trust administrator determines administrative fund sufficient satisfy current projected winddown costs initial reporting cash sufficient satisfy current projected reporting costs guc trust administrator approval guc trust monitor authorized set aside distributable cash distribution purposes guc trust administrator may appropriate distributable cash fund winddown costs andor reporting costs required approval bankruptcy court distributable cash set aside andor appropriated manner available distribution beneficiaries guc trust units appropriation distributable cash including related dividend cash classified “other administrative cash” guc trust agreement setting aside appropriation distributable cash including dividend cash reflected statement net assets liquidation financial statements guc trust separate process setting aside appropriating distributable cash satisfy unfunded projected costs expenses guc trust matter financial reporting guc trust records reserves statement net assets liquidation source funding addressed therein expected costs liquidation reasonable basis estimation reason among others direct relationship amount reserves reflected statement net assets liquidation amount distributable cash set aside appropriated current projected costs expenses guc trust adjustments reserves expected costs liquidation reported statement net assets liquidation recorded reasonable basis estimation expected incurrence additional costs reduction expected costs information regarding reserves expected costs liquidation reflected accompanying statement net assets liquidation see note 7 prior liquidation new gm securities july august 2015 described guc trust authorized approval guc trust monitor set aside distribution new gm securities funding purposes described sell set aside new gm securities approval bankruptcy court bankruptcy court previously approved march december 2012 january 2015 sale new gm securities fund current projected costs expenses guc trust march 2012 bankruptcy court order also authorized sale new gm securities aggregating 137 million purpose funding certain fees costs expenses avoidance action trust transfer sale proceeds avoidance action trust sale proceeds transferred may 2012 prior liquidation new gm securities described sales new gm securities fund projected winddown costs reporting costs calendar year 2015 aggregated approximately 617 million including dividend cash 02 million initial reporting cash amounts comprised part guc trust’s administrative cash securities sold aggregated 1043801 shares new gm common stock 948887 new gm series warrants 948887 new gm series b warrants december 2015 february 2017 march 2018 bankruptcy court approved appropriation distributable cash aggregating approximately 356 million fund projected costs expenses guc trust calendar year 2018 appropriation reduced distributable cash increased administrative cash march 31 2018 administrative cash aggregated 212 million may 2 may 3 2018 respectively guc trust administrator filed motions seeking authority bankruptcy court appropriate distributable cash 60 million purpose satisfying noticing costs 150 million purpose satisfying settlement payment pursuant settlement agreement described item 3 “legal proceedings” hearing date set respect settlement payment noticing costs extent administrative cash ultimately required held guc trust time dissolution remaining administrative cash distributed guc trust holders guc trust units march 31 2018 distributable cash 247 million set aside projected guc trust fees costs expenses incurred beyond 2018 accordingly distributable cash available distribution beneficiaries guc trust units set aside andor appropriated distributable cash reflected cash equivalents marketable securities statement net assets liquidation expended funding potential tax liabilities dispositions new gm securities dividends new gm common stock investment income guc trust subject us federal income tax realized net gains distribution sale new gm securities taxes “taxes distribution” guc trust also subject us federal income tax dividends received new gm common stock held guc trust taxes “dividend taxes” investment income earned distributable cash taxes “investment income taxes” guc trust agreement provides administrative fund may utilized satisfy taxes distribution dividend taxes investment income taxes guc trust administrator authorized approval guc trust monitor set aside distribution distributable cash amounts would sufficient satisfy potential taxes distribution dividend taxes investment income taxes distributable cash set aside dividend taxes investment income taxes included setaside winddown costs described “funding guc trust costs liquidation” guc trust administrator may appropriate set aside distributable cash fund taxes distribution dividend taxes investment income taxes approval guc trust monitor respect dividend taxes investment income taxes approval bankruptcy court distributable cash appropriated manner available distribution beneficiaries guc trust units appropriation distributable cash including dividend cash classified “other administrative cash” guc trust agreement set aside andor appropriated distributable cash reflected cash equivalents marketable securities expended pay taxes distribution dividend taxes investment income taxes setaside appropriated distributable cash including dividend cash available distribution corresponding liability reserve related setaside assets reflected statement net assets liquidation financial statements guc trust prior liquidation new gm securities july august 2015 described guc trust authorized approval guc trust monitor set aside distribution new gm securities fund potential taxes distribution dividend taxes investment income taxes sell set aside new gm securities fund taxes distribution dividend taxes investment income taxes approval guc trust monitor respect dividend taxes investment income taxes approval bankruptcy court quarter ended march 31 2018 guc trust administrator reviewed potential taxes distribution dividend taxes investment income taxes result review guc trust administrator determined distributable cash set aside potential taxes distribution dividend taxes investment income taxes result application section 505b bankruptcy code guc trust’s federal income tax returns year ended march 31 2017 prior years longer subject examination internal revenue service “irs” income taxes may assessed year ended march 31 2017 prior year however guc trust’s remaining capital loss carryovers net operating loss carryovers still subject examination irs subsequent years losses utilized utilization expected result sale previously held new gm securities year ended march 31 2016 except potentially respect recovery guc trust member settlement class related proposed settlement securities class action new gm described item 3 “legal proceedings” b receipt subsequent distribution sale guc trust additional shares fair market value additional shares date distribution sale greater fair market value shares date receipt determinable estimable time accordingly income taxes expected paid future except potentially respect taxes due recovery proposed settlement securities class action new gm b taxes distribution resulting receipt subsequent distribution sale guc trust additional shares determinable estimable time see note 8 “critical accounting policies estimates income taxes” item 7 “management’s discussion analysis financial condition results operations” information regarding income taxes remaining capital net operating loss carryovers generated prior years still subject examination irs potentially could succeed claimants defined pursuant tax rules material uncertainties associated therewith guc trust administrator intends continue reevaluate amount distributable cash set aside quarterly basis additional information see “net assets liquidationdistributable cash set aside distribution” item 7 “management’s discussion analysis financial condition results operations” residual winddown claims costs upon dissolution debtors occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining disputed administrative expenses priority tax claims priority nontax claims secured claims “residual winddown claims” december 15 2011 plan debtors transferred guc trust amount assets necessary “residual winddown assets” satisfy ultimate allowed amount residual winddown claims including certain reasonable litigation defense costs related term loan avoidance action “avoidance action defense costs” estimated debtors costs fees expenses relating satisfying resolving residual winddown claims “residual winddown costs” residual winddown assets initially aggregated approximately 428 million amount consisted approximately 400 million cash including approximately 14 million designated payment avoidance action defense costs transferred benefit approximately 28 million prepaid expenses extent residual winddown claims residual winddown costs less residual winddown assets excess funds returned dip lenders also expected time guc trust administrator determines residual winddown assets adequate satisfy residual winddown claims including actual amount avoidance action defense costs residual winddown costs satisfied administrative cash remaining administrative cash guc trust administrator authorized guc trust monitor approval set aside bankruptcy court approval appropriate distributable cash cover shortfall extent distributable cash set aside andor appropriated obtain funding complete winddown debtors distributable cash available distribution beneficiaries guc trust therefore amount residual winddown claims residual winddown costs could reduce assets guc trust available distribution setting aside appropriation distributable cash including dividend cash reflected statement net assets liquidation financial statements guc trust rather set aside appropriated distributable cash including dividend cash reflected cash equivalents marketable securities accompanying statement net assets liquidation expended guc trust concluded affairs funds remaining obtained sale new gm securities appropriation distributable cash fund winddown process resolution satisfaction residual winddown claims distributed holders guc trust units march 31 2018 amount avoidance action defense costs incurred date exceeds corresponding cash 14 million received guc trust mlc dissolution date approximately 302 million result new residual winddown claims arisen amount excess april 2017 guc trust entered letter agreement administrative agent prepetition lenders defendants term loan avoidance action “administrative agent” letter agreement provides guc trust’s obligation pay avoidance action defense costs administrative agent limited amount approximating remaining designated residual winddown assets cap avoidance action defense costs shall remain place unless term loan avoidance action resolved full final court order settlement court order settlement contains determination administrative agent oversecured respect loan subject term loan avoidance action otherwise contains voluntary agreement guc trust respect payment avoidance action defense costs time guc trust expect incur additional avoidance action defense costs march 31 2018 residual winddown assets aggregating 02 million held guc trust recorded cash equivalents accompanying statement net assets liquidation march 31 2018 remaining expected residual winddown claims costs assets march 31 2018 accordingly guc trust expects return remaining residual winddown assets dip lenders upon winding conclusion guc trust corresponding amount recorded reserves residual winddown claims costs accompanying statement net assets liquidation addition residual winddown assets guc trust also received dissolution date approximately 34 million cash mlc amount included 14 million respect certain costs fees expenses payable plan indenture trustees fiscal paying agents previously outstanding debt mlc “indenture trustee fiscal paying agent costs” ii 20 million respect reporting costs funds received credited reserve expected costs liquidation unused portion funds designated indenture trustee fiscal paying agent costs must returned dip lenders available distribution holders guc trust units winding conclusion guc trust march 31 2018 funds designated indenture trustee fiscal paying agents costs held guc trust approximated 01 million recorded cash equivalents accompanying statement net assets liquidation none approximately 20 million funds designated reporting costs remained march 31 2018 3 basis presentation significant accounting policies liquidation basis accounting guc trust exists solely purposes described note 1 finite life accordingly guc trust prepared accompanying financial statements liquidation basis accounting accordance accounting principles generally accepted united states america “us gaap” liquidation basis accounting prescribed financial accounting standards board “fasb” accounting standards codification assets stated estimated realizable value nondiscounted amount cash asset expected converted liquidation period liabilities continue recognized amount required us gaap remeasured reflect anticipation entity legally released obligation additionally liquidation basis accounting reserve established estimated costs expected incurred liquidation period costs accrued reasonable basis estimation also accrual made estimated income cash expected received liquidation period extent reasonable basis estimation exists estimates periodically reviewed adjusted appropriate valuation assets realizable value accrual investment income marketable securities expected received liquidation period reserves residual winddown claims reserves expected liquidation costs represent estimates based present facts circumstances known guc trust administrator subject change guc trust beneficiaries future extent liquidating distributions yet paid current holders allowed general unsecured claims future current holders guc trust units disputed general unsecured claims term loan avoidance action claims resolved allowed thereby become allowed general unsecured claims holders thereof become entitled receive liquidating distributions distributable cash including dividend cash guc trust units pro rata amount claims upon occurrence guc trust incurs obligation distribute distributable cash accordingly liquidating distributions payable recorded amount distributable cash previously fair value new gm securities guc trust obligated distribute end period disputed general unsecured claims term loan avoidance action claims resolved allowed general unsecured claims prior resolution allowance disputed general unsecured claims term loan avoidance action claims liabilities recorded conditional obligations associated disputed general unsecured claims term loan avoidance action claims rather beneficial interests guc trust beneficiaries residual assets guc trust reflected net assets liquidation guc trust financial statements liquidation basis accounting guc trust presents two principal financial statements statement net assets liquidation statement changes net assets liquidation addition although required liquidation basis accounting guc trust also presents statement cash flows accordance requirements guc trust agreement fiscal year guc trust’s fiscal year begins april 1 ends following march 31 cash equivalents cash equivalents consist amounts held bank accounts money market funds cash equivalents marketable securities accrued investment income cash equivalents marketable securities cash equivalents consist balances held money market funds marketable securities consist shortterm investments us treasury bills guc trust valued securities fair value based carrying value approximates fair value beginning quarter ended june 30 2014 estimated investment income expected received shortterm investments marketable securities accrued liquidation basis accounting extent reasonable basis estimation exists accrual estimated principally based forecasted cash outflows expected returns based recent yields treasury bills marketable securities invested holdings new gm securities accrued dividends new gm common stock guc trust previously held new gm securities future distribution respect allowed general unsecured claims guc trust units previously set aside distribution fund potential administrative costs income tax liabilities including taxes distribution dividend taxes investment income taxes securities held consisted shares new gm common stock new gm warrants described note 1 pursuant liquidation order guc trust liquidated holdings new gm securities july august 2015 guc trust valued holdings securities fair value based quoted closing market prices last trading day fiscal year beginning quarter ended june 30 2014 quarter ended march 31 2015 estimated dividends expected received holdings new gm common stock accrued liquidation basis accounting extent reasonable basis estimation existed quarter ended june 30 2015 based determination would best interests trust beneficiaries guc trust made determination file motion bankruptcy court seeking authority liquidate substantially guc trust’s holdings new gm securities motion approved bankruptcy court liquidation order described note 1 guc trust’s holdings new gm securities liquidated july august 2015 result guc trust longer expected receive dividends new gm common stock previously accrued estimated future dividends net dividends received june 2015 reversed quarter ended june 30 2015 dividends received new gm common stock required applied purpose new gm common stock dividends relate portion distributable cash applicable liquidated new gm common stock distributed holders subsequently resolved allowed claims guc trust units dividends relating distributable cash also distributed holders however distributable cash appropriated guc trust accordance guc trust agreement fund costs liabilities guc trust case dividends relating appropriated distributable cash applied costs liabilities guc trust like appropriated distributable cash maintained administrative cash dividends applied purpose associated distributable cash references distributable cash understood include dividends relating distributable cash unless expressly indicated otherwise amount cash equivalents marketable securities held guc trust relates dividends received guc trust new gm common stock previously held guc trust referred dividend cash included amount cash equivalents marketable securities held distribution guc trust beneficiaries referred distributable cash except extent dividends relating appropriated distributable cash classified administrative cash following appropriation accounts payable liabilities accounts payable liabilities represent amounts due professionals service providers vendors services rendered goods received end period contingent settlement obligation guc trust accrues loss contingencies probable liability incurred date financial statements amount liability reasonably estimated assessing whether liability incurred date financial statements guc trust considers events occurring date financial statements provide additional evidence respect conditions existed date financial statements including estimates inherent process preparing financial statements accordingly march 31 2018 guc trust accrued contingent settlement obligation pursuant settlement agreement described item 3 “legal proceedings” reserves residual winddown claims costs upon dissolution mlc occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining residual winddown claims date dissolution debtors transferred guc trust residual winddown assets amount necessary satisfy ultimate allowed amount residual winddown claims including certain avoidance action defense costs residual winddown costs estimated debtors corresponding amount recorded reserves residual winddown claims costs prior execution letter agreement administrative agent described reserves increased expected increases avoidance action defense costs reasonable basis estimation expected exceed recorded reserves residual winddown claims residual winddown costs less residual winddown assets excess funds returned dip lenders expected time collectively actual amounts residual winddown claims including certain avoidance action defense costs allowed residual winddown costs exceed residual winddown assets guc trust administrator may required set aside distribution appropriate distributable cash fund shortfall appropriation would reduce amount distributable cash including dividend cash available distribution holders guc trust units reserves expected costs liquidation basis accounting guc trust required estimate accrue costs associated implementing plan distributing guc trust’s distributable assets costs described winddown costs reporting costs note 2 consist principally professional fees costs governance administrative expenses amounts may vary significantly due among things time effort required complete activities distributions plan guc trust recorded reserves expected costs liquidation represent estimated costs incurred remaining liquidation period guc trust reasonable basis estimation amount liquidation costs ultimately incurred depends period time extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities march 31 2018 remaining liquidation period extends november 2020 estimated predominantly modified probabilityweighted basis guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome beginning quarter ended december 31 2016 remaining liquidation period dependent predominantly estimate remaining period time resolution litigation involving certain general motors vehicle recalls described item 3 “legal proceedings” quarter developments vehicle recall litigation resulted extension estimated length time resolution litigation exceeds estimate remaining period time resolution term loan avoidance action previously primary determinant addition certain additional estimated time wind guc trust following resolution litigation included estimated liquidation period possible future developments general motors vehicle recall litigation well term loan avoidance action could extend current estimate remaining period time resolution therefore extend estimated remaining liquidation period guc trust beyond november 2020 addition certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued guc trust incurs liquidation costs reserves released offset costs incurred liability service provider recognized accounts payable accrued liability paid addition guc trust records reserves expected costs reasonable basis estimation applicable us gaap additional costs may identified time additional reserves must recorded costs identified guc trust records increase reserves charges increase addition reserves statement changes net assets liquidation process recording reserves expected costs liquidation matter financial reporting separate distinct process distributable cash set aside distribution purposes funding projected costs liquidation projected costs generally estimated conservative ie inclusive basis include contingencies permitted accrued reserves expected costs liquidation applicable us gaap complete description process setting aside distributable cash fund projected costs potential liabilities guc trust see item 7 “management’s discussion analysis financial condition results operationsnet assets liquidation” heading “distributable cash set aside distribution” income taxes guc trust considered disputed ownership fund pursuant treasury regulation section 1468b9 assets transferred guc trust passive investments guc trust taxed qualified settlement fund qsf pursuant treasury regulation section 1468b9c1ii qsf tax status guc trust approved irs private letter ruling issued march 2 2011 general qsf computes taxable income manner corporation pays federal income tax using trust income tax rates modified gross income modified gross income includes gross income pursuant internal revenue code section 61 less administrative expenses certain losses sale exchange worthlessness property net operating losses general disputed ownership fund taxed qsf recognize gross income assets transferred therefore guc trust recognized gross income transfer assets mlc guc trust generates gross income form interest dividend income including dividends received previous holdings new gm common stock recognizes capital gains andor losses upon disposition new gm securities b recovery guc trust member settlement class related proposed settlement securities class action new gm described item 3 “legal proceedings” c receipt subsequent distribution sale guc trust additional shares fair market value additional shares date distribution sale differs fair market value shares date receipt reduced administrative expenses accumulated net operating capital losses compute modified gross income guc trust taxable federal income tax purposes current income tax liability asset recognized estimated taxes payable receivable year deferred tax liabilities assets recognized estimated future tax effects temporary differences financial reporting tax accounting deferred tax assets reviewed recoverability valuation allowances provided necessary guc trust subject state income taxes current law accordingly current deferred state income tax liabilities assets recorded process recognizing deferred tax assets liabilities current income taxes payable matter financial reporting separate distinct process distributable cash set aside distribution purposes funding potential income tax liabilities potential income tax liabilities generally estimated conservative ie inclusive basis may include amounts potential income tax liabilities beyond amounts permitted recorded applicable accounting standards complete description process setting aside distributable cash fund projected costs potential income tax liabilities guc trust see item 7 “management’s discussion analysis financial condition results operationsnet assets liquidation” heading “distributable cash set aside distribution” guc trust recognizes tax benefit uncertain tax position likely tax position sustained examination taxing authority based technical merits position review available evidence consultation guc trust professionals guc trust’s tax liability respect federal income tax returns year ended march 31 2017 prior years longer subject examination result application section 505b bankruptcy code however remaining capital loss carryovers generated years new tax position aggregate 17 million expiration march 31 2018 2017 respectively capital loss carryovers 226 million 1581 million attributable years ended march 31 2013 2012 respectively along net operating loss carryovers generated march 31 2018 aggregating 1395 million could subject examination irs subsequent years losses utilized expected losses utilized future except potentially respect recovery guc trust member settlement class related proposed settlement securities class action new gm referred b receipt subsequent distribution sale guc trust additional shares referred fair market value additional shares date distribution sale greater fair market value shares date receipt determinable estimable time march 31 2018 known items would result significant accrual uncertain tax positions use estimates preparation financial statements liquidation basis conformity us gaap requires use estimates assumptions affect reported amounts assets liabilities estimates subject known unknown risks uncertainties factors could materially impact amounts reported disclosed financial statements related footnotes significant estimates include estimated investment income expected received expected liquidation costs residual winddown claims costs fair value marketable securities actual results could differ estimates recent accounting standards changes us gaap made fasb form accounting standards updates asus fasb’s accounting standards codification guc trust considers applicability impact asus noted herein assessed determined applicable 4 net assets liquidation description guc trust agreement plan described fully note 1 beneficiaries guc trust future extent liquidating distributions yet paid current holders allowed general unsecured claims future current holders guc trust units assets guc trust consisting primarily distributable cash including dividend cash described note 1 available distributed trust beneficiaries “guc trust distributable assets” accordance plan guc trust agreement except extent set aside appropriated funding expected costs liquidation guc trust amounts net assets liquidation presented accompanying statements net assets liquidation correspond amounts guc trust distributable assets respective dates certain adjustments including reductions amounts set aside distributable cash appropriated distributable cash march 31 2018 guc trust distributable assets aggregated approximately 4580 million additional information see “net assets liquidationdistributable assets” item 7 “management’s discussion analysis financial condition results operations” cash equivalents marketable securities march 31 2018 2017 cash equivalents marketable securities aggregated 5077 million 5268 million respectively comprised following described note 5 march 31 2018 guc trust accrued liquidating distributions payable aggregating 18 million addition march 31 2018 amount distributable cash reflected table includes 247 million amounts set aside projected guc trust fees costs expenses incurred beyond 2018 aggregate amount distributable cash pending distribution set aside available distribution march 31 2018 265 million described note 2 may 2 may 3 2018 respectively guc trust administrator filed motions seeking authority bankruptcy court appropriate distributable cash 60 million purpose satisfying noticing costs 150 million purpose satisfying settlement payment pursuant settlement agreement described item 3 “legal proceedings” hearing date scheduled respect settlement payment noticing costs potential recovery new gm shareholder class action proposed settlement described item 3 “legal proceedings” guc trust filed proof claim settlement administrator connection proposed settlement class action new gm amount potential recovery guc trust proposed settlement estimable time accrued investment income cash equivalents marketable securities march 31 2018 2017 guc trust accrued approximately 167 million 34 million respectively investment income marketable securities cash equivalents expected earned remaining liquidation period accordance liquidation basis accounting accrual estimated principally based forecasted cash outflows expected returns based recent yields treasury bills marketable securities invested accrual along receivables investment income earned march 31 2018 included accrued investment income accompanying statement net assets liquidation march 31 2018 potential distributable capital net operating loss carryovers described “critical accounting policies estimatesincome taxes” item 7 “management’s discussion analysis financial condition results operations” guc trust’s unused capital net operating loss carryovers potentially could succeed claimants defined pursuant tax rules upon termination guc trust reference made thereto information regarding potential distributable loss carryovers material uncertainties associated therewith trust units described note 1 plan holder allowed general unsecured claim retains contingent right receive pro rata basis additional distributable cash extent required satisfaction previously disputed general unsecured claims term loan avoidance action claims appropriation payment expenses tax liabilities guc trust guc trust issues units representing contingent rights “guc trust units” rate one guc trust unit per 1000 allowed general unsecured claims holder allowed general unsecured claim subject rounding pursuant guc trust agreement connection initial recognition allowed general unsecured claim guc trust makes quarterly liquidating distributions holders guc trust units extent ia previously disputed general unsecured claims asserted debtors’ estates term loan avoidance action claims either disallowed otherwise resolved favorably guc trust thereby reducing amount guc trust assets reserved distribution respect asserted potential claims b certain excess guc trust distributable assets defined guc trust agreement previously set aside distribution released manner permitted guc trust agreement ii result foregoing amount excess guc trust distributable assets defined guc trust agreement end relevant quarter exceeds thresholds set forth guc trust agreement following table presents changes years ended march 31 2018 2017 2016 numbers guc trust units outstanding guc trust obligated issue 1 number guc trust units issuable time represents guc trust units issuable respect allowed general unsecured claims newly allowed fiscal year 2 number guc trust units outstanding time represents guc trust units issued respect allowed general unsecured claims allowed prior periods including guc trust units held guc trust benefit holders allowed general unsecured claims yet supplied information required guc trust order effect initial distribution entitled b governmental entities precluded applicable law receiving distributions guc trust units 3 number guc trust units outstanding issuable end year equal amount allowed general unsecured claims 1 1000 basis corresponding date additional guc trust units issued due rounding allowed disputed claims total cumulative pro rata liquidating distributions ultimately received trust beneficiaries dependent upon current amount allowed general unsecured claims final resolution outstanding disputed general unsecured claims term loan avoidance action claims described note 2 disputed general unsecured claims march 31 2018 reflect distribution “set aside” permitted plan guc trust agreement described note 1 prior resolution allowance disputed general unsecured claims term loan avoidance action claims liabilities recorded conditional obligations associated disputed general unsecured claims term loan avoidance action claims liquidating distributions payable recorded amount distributable cash previously fair value new gm securities distributed end period disputed general unsecured claims term loan avoidance action claims resolved allowed general unsecured claims following table presents summary activity respect allowed disputed general unsecured claims term loan avoidance action claims years ended march 31 2018 2017 1 remaining disputed general unsecured claims represent general claim contingency future disputed claims obligations guc trust guc trust set aside distribution aggregate 148 million general claim contingency ie 296 distributable cash per 1000 allowed general unsecured claims provided plan 2 maximum amount unresolved claims represents sum disputed general unsecured claims term loan avoidance action claims 3 total claim amount represents sum allowed general unsecured claims maximum amount unresolved claims years ended march 31 2018 2017 avoidance action trust reached settlements certain defendants term loan avoidance action resulting recoveries avoidance action trust approximately 14 million 03 million respectively result corresponding term loan avoidance action claims allowed guc trust agreement described item 3 “legal proceedings” guc trust executed settlement agreement certain plaintiffs approved bankruptcy court settlement agreement would provide settlement payment plaintiffs 150 million among provisions march 31 2018 settlement payment 150 million accrued contingent settlement obligation statement net assets liquidation 5 liquidating distributions liquidating distributions net reversal liquidating distributions years ended march 31 2018 2017 2016 consisted following distributions year ended march 31 2018 consisted distributions holders allowed general unsecured claims previously failed fulfill informational requirements distribution established accordance guc trust agreement subsequently successfully fulfilled information requirements b holders certain resolved term loan avoidance action claims distributions years ended march 31 2017 2016 consisted distributions holders guc trust units excess distributions payable b holders allowed general unsecured claims previously failed fulfill informational requirements distribution established accordance guc trust agreement subsequently successfully fulfilled information requirements c holders certain resolved term loan avoidance action claims obligation distribute distributable cash holders guc trust units excess distributions payable march 31 2018 decreased balances march 31 2017 resulting net reversal liquidating distributions 69 million year ended march 31 2018 distributions holders guc trust units years ended march 31 2017 2016 resulted primarily release distributable assets guc trust previously set aside respect potential taxes distribution guc trust obligated march 31 2018 distribute distributable cash 18 million certain holders allowed general unsecured claims satisfied certain informational requirements necessary effect distribution entitled 6 fair value measurements accounting standards require certain assets liabilities reported fair value financial statements provide framework establishing fair value framework determining fair value based hierarchy prioritizes inputs valuation techniques used measure fair value trust’s cash equivalents marketable securities liquidating distributions payable presented provided hierarchy level 1in general fair values determined level 1 inputs use quoted prices active markets identical assets liabilities guc trust ability access level 2fair values determined level 2 inputs use inputs observable either directly indirectly level 2 inputs include quoted prices similar assets liabilities active markets inputs interest rates yield curves observable commonly quoted intervals level 3level 3 inputs unobservable inputs including inputs available situations little market activity related asset liability level 3 fair value measurements based primarily management’s estimates using pricing models discounted cash flow methodologies similar techniques taking account characteristics asset liability guc trust assets liabilities measured level 3 inputs march 31 2018 2017 instances inputs used measure fair value fall different levels fair value hierarchy fair value measurements entirety categorized based lowest level input significant valuation guc trust’s assessment significance particular inputs fair value measurements requires judgment considers factors specific asset liability guc trust also holds financial instruments measured fair value recurring basis including accounts payable liabilities fair value liabilities approximates carrying amounts accompanying financial statements due short maturity instruments following table presents information guc trust’s assets liabilities measured fair value recurring basis march 31 2018 2017 valuation techniques used guc trust determine fair values following descriptions valuation methodologies used assets liabilities measured fair value • due shortterm liquid nature fair value cash equivalents approximates carrying value • marketable securities consist us treasury bills due shortterm maturities fair value us treasury bills approximates carrying value • liquidating distributions payable valued amount cash guc trust obligated distribute guc trust’s policy recognize transfers levels fair value hierarchy actual date event change circumstances caused transfer transfers years ended march 31 2018 2017 7 reserves expected costs liquidation residual winddown claims costs following summary activity reserves expected costs liquidation years ended march 31 2018 2017 2016 year ended march 31 2018 estimates expected winddown costs estimates expected reporting costs reasonable basis estimation increased 253 million 86 million respectively year ended march 31 2017 estimates expected winddown costs estimates expected reporting costs increased 53 million 68 million respectively year ended march 31 2016 estimates expected winddown costs estimates expected reporting costs increased 56 million 21 million respectively revisions estimates recorded additions reserves expected costs liquidation years guc trust recorded reserves expected costs liquidation represent amounts expected incurred estimated remaining liquidation period guc trust reasonable basis estimation amount liquidation costs ultimately incurred depends time period extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities march 31 2018 recorded reserves expected costs liquidation reflect estimated costs remaining liquidation period extending november 2020 extended ten months quarter ended march 31 2018 remaining liquidation period previously extending january 2020 remaining liquidation period estimated predominately modified probabilityweighted basis permitted us gaap guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome beginning quarter ended december 31 2016 remaining liquidation period dependent predominantly estimate remaining period time resolution litigation involving certain general motors vehicle recalls described item 3 “legal proceedings” quarter developments vehicle recall litigation resulted extension estimated length time resolution litigation exceeds estimate remaining period time resolution term loan avoidance action previously primary determinant addition certain additional estimated time wind guc trust following resolution litigation included estimated liquidation period possible future developments general motors vehicle recall litigation well term loan avoidance action could extend current estimate remaining period time resolution therefore extend estimated remaining liquidation period guc trust beyond november 2020 addition certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued guc trust’s estimates regarding costs remaining liquidation period may change near term change may material following summary activity reserves residual winddown claims costs years ended march 31 2018 2017 2016 residual winddown claims allowed years ended march 31 2018 2017 2016 primarily consist avoidance action defense costs described note 2 april 2017 guc trust entered letter agreement administrative agent letter agreement provides guc trust’s obligation pay avoidance action defense costs administrative agent limited amount approximating remaining designated residual winddown assets cap avoidance action defense costs shall remain place unless term loan avoidance action resolved full final court order settlement court order settlement contains determination administrative agent oversecured respect loan subject term loan avoidance action otherwise contains voluntary agreement guc trust respect payment avoidance action defense costs time guc trust expect incur additional avoidance action defense costs 8 income taxes current tax benefit provision years ended march 31 2018 2017 2016 due cumulative net operating capital losses income taxes paid guc trust also deferred tax benefit provision years ended march 31 2018 2017 2016 result establishment full valuation allowance net deferred tax assets beginning end periods result enactment “tax cuts jobs act” december 2017 guc trust’s federal income tax rate reduced 396 37 effective april 1 2018 first day guc trust’s fiscal year ending march 31 2019 december 2017 guc trust expected 37 tax rate would effect temporary differences reversed accordingly guc trust’s deferred tax assets liabilities adjusted enacted 37 tax rate december 31 2017 impact deferred tax provision result establishment full valuation allowance net deferred tax assets december 31 2017 deferred tax assets liabilities march 31 2017 table calculated utilizing tax rate 396 deferred taxes accompanying statement net assets liquidation march 31 2018 2017 comprised following components previously disclosed quarter ended september 30 2013 guc trust made determination file us federal income tax returns taking position beneficial ownership substantial majority new gm securities transferred mlc guc trust march 31 2011 tax basis new gm securities determined reference value securities date instead december 15 2011 record ownership remaining new gm securities still held mlc transferred mlc guc trust remaining substantial minority new gm securities transferred mlc guc trust guc trust determined transfer beneficial ownership occurred dates tax basis determined reference value securities dates new tax position resulted increased tax basis new gm securities prior tax position therefore reduced taxable gains increased taxable losses distributions sales new gm securities since march 31 2011 new tax position sustained examination irs date hereof however guc trust believes based available evidence consultation guc trust professionals likely new tax position sustained examination irs based technical merits position accordingly new tax position recognized current deferred income tax liabilities income tax provision guc trust’s financial statements since quarter ended september 30 2013 following guc trust’s determination utilize new tax position set forth guc trust filed us federal income tax returns years ended march 31 2013 thereafter irs using new tax position tax returns accompanied requests prompt determination tax liability pursuant section 505b bankruptcy code 60day statutory notification periods set forth section 505b bankruptcy code respect guc trust’s us federal income tax returns year ended march 31 2017 prior years expired accordingly tax liabilities set forth guc trust’s us federal income tax returns year ended march 31 2017 prior years longer subject examination irs income taxes assessed years also income taxes expected paid future result liquidation guc trust’s holdings new gm securities year ended march 31 2016 except potentially respect taxes due recoveries guc trust member settlement class related proposed settlement securities class action new gm described item 3 “legal proceedings” b taxes distribution receipt subsequent distribution sale guc trust additional shares determinable estimable time however income taxes recovery proposed settlement securities class action new gm become payable anticipated income taxes would funded proceeds recovery taxes distribution resulting receipt subsequent distribution sale additional shares become payable anticipated income taxes would funded sale portion additional shares remaining capital loss carryovers generated prior years utilizing new tax position aggregate 17 million expiration march 31 2018 2017 respectively capital loss carryovers 226 million 1581 million attributable year ended march 31 2013 2012 along net operating loss carryovers generated march 31 2018 aggregating 1395 million could subject examination irs subsequent years losses utilized guc trust expect utilize capital net operating loss carryovers future except respect recovery guc trust member settlement class related proposed settlement securities class action new gm referred b receipt subsequent distribution sale guc trust additional shares referred fair market value additional shares date distribution sale greater fair market value shares date receipt determinable estimable time remaining capital loss carryovers 17 million expire march 31 2020 net operating loss carryovers begin expire march 31 2032 however pursuant enactment “tax cuts jobs act” december 2017 net operating losses generated guc trust tax years beginning april 1 2018 expire loss carryovers aggregate result deferred tax asset 522 million reflected table described “critical accounting policies estimatesincome taxes” item 7 “management’s discussion analysis financial condition results operations” guc trust’s loss carryovers potentially could succeed claimants defined pursuant tax rules reference made thereto information regarding potential distributable loss carryovers material uncertainties associated therewith full valuation allowance net deferred tax assets aggregating 602 million 673 million established march 31 2018 2017 respectively result liquidation guc trust’s holdings new gm securities determined deferred tax assets realizable time valuation allowance decreased 71 million 542 million years ended march 31 2018 2017 respectively 9 related party transactions addition serving guc trust administrator wilmington trust company continues serve trustee pursuant indentures certain series previously outstanding debt mlc wilmington trust company received may future receive certain customary fees amounts consistent wilmington trust company’s standard rates service bankruptcy court previously approved creation segregated fund purposes funding fees wilmington trust company well indenture trustees fiscal paying agents previously outstanding debt mlc fees wilmington trust company years ended march 31 2018 2017 2016 addition wilmington trust company also entered certain arrangements guc trust pursuant affiliates previously received may future receive reasonable customary fees commissions services capacity guc trust administrator arrangements include provision custodial investment advisory brokerage services guc trust years ended march 31 2018 2017and 2016 total amount fees commissions approximately 03 million 03 million 02 million respectively item 9 item 8 financial statements supplementary data general motors corporation subsidiaries consolidated statements income reference made notes consolidated financial statements ii53 general motors corporation subsidiaries supplemental information consolidated statements income supplemental information intended facilitate analysis general motors corporation’s businesses 1 automotive operations 2 financing insurance operations reference made notes consolidated financial statements ii54 general motors corporation subsidiaries consolidated balance sheets reference made notes consolidated financial statements ii55 general motors corporation subsidiaries supplemental information consolidated balance sheets supplemental information intended facilitate analysis general motors corporation’s businesses 1 automotive operations 2 financing insurance operations reference made notes consolidated financial statements ii56 general motors corporation subsidiaries consolidated statements cash flows reference made notes consolidated financial statements ii57 general motors corporation subsidiaries supplemental information consolidated statements cash flows supplemental information intended facilitate analysis general motors corporation’s businesses 1 automotive operations 2 financing insurance operations classification cash flows financing insurance operations consistent presentation gm’s consolidated statement cash flows see note 1 reference made notes consolidated financial statements ii58 general motors corporation subsidiaries consolidated statements stockholders’ equity years ended december 31 2005 2004 2003 write deferred taxes related 1999 spinoff delphi automotive systems reference made notes consolidated financial statements ii59 general motors corporation subsidiaries notes consolidated financial statements note 1 significant accounting policies principles consolidation consolidated financial statements include accounts general motors corporation domestic foreign subsidiaries 50 owned principally general motors acceptance corporation subsidiaries gmac collectively referred “corporation” “general motors” “gm” addition gm consolidates variable interest entities vies deemed primary beneficiary general motors’ share earnings losses associates least 20 voting securities owned included consolidated operating results using equity method accounting except investments gm able exercise significant influence operating financial decisions investee case cost method accounting used gm encourages reference gmac annual report form 10k period ended december 31 2005 filed separately us securities exchange commission sec incorporated herein reference certain amounts 2004 2003 reclassified conform 2005 classifications nature operations financial statement presentation supplemental information gm presents primary financial statements fully consolidated basis transactions reportable operating segments automotive operations auto financing insurance operations fio eliminated corporation’s consolidated financial statements transactions consist principally borrowings financial services provided fio auto master intercompany agreement governs nature transactions ensure done accordance commercially reasonable standards facilitate analysis gm presents separate supplemental financial information reportable operating segments gm’s auto reportable operating segment consists • gm’s four automotive regions gm north america gmna gm europe gme gm latin america africa mideast gmlaam gm asia pacific gmap constitute gm automotive gma • includes elimination intersegment transactions certain nonsegment specific revenues expenditures including legacy costs related postretirement benefits certain delphi retirees certain corporate activities gm’s fio reportable operating segment consists gmac financing includes financing entities consolidated gmac use estimates preparation financial statements preparation financial statements conformity accounting principles generally accepted united states requires management make estimates assumptions affect amounts reported therein due inherent uncertainties involved making estimates actual results reported future periods may differ estimates revenue recognition sales generally recorded products shipped title risks rewards ownership passed services rendered independent dealers third parties provisions dealer customer sales incentives customer leasing incentives allowances rebates made time ii60 general motors corporation subsidiaries notes consolidated financial statements continued note 1 significant accounting policies continued vehicle sales incentives allowances rebates related vehicles previously sold recognized reductions sales announced sales daily rental car companies guaranteed repurchase options accounted equipment operating leases lease revenue recognized term lease management reviews residual values periodically determine estimates remain appropriate asset impaired losses recognized time impairment financing revenue recorded terms receivables using interest method income operating lease assets recognized straightline basis scheduled lease terms insurance premiums earned basis related coverage provided terms policies commissions premium taxes costs incurred acquiring new business deferred amortized terms related policies basis premiums earned advertising research development advertising research development productrelated costs charged expense incurred advertising expense 58 billion 2005 52 billion 2004 47 billion 2003 research development expense 67 billion 2005 65 billion 2004 62 billion 2003 depreciation amortization expenditures special tools placed service january 1 2002 amortized using straightline method estimated useful lives expenditures special tools placed service prior january 1 2002 amortized estimated useful lives primarily using units production method replacements special tools reasons changes products charged directly cost sales january 1 2001 corporation adopted straightline method depreciation real estate plants equipment placed service date assets placed service january 1 2001 continue generally depreciated using accelerated methods accelerated methods accumulate depreciation approximately twothirds depreciable cost first half estimated useful lives property groups compared straightline method allocates depreciable costs equally estimated useful lives property groups management believes adoption straightline amortizationdepreciation method special tools placed service january 1 2002 real estate plants equipment placed service january 1 2001 better reflects consistent use assets useful lives equipment operating leases depreciated using straightline method term lease agreement auto difference net book value proceeds sale salvage items disposed accounted charge credit sales allowances goodwill intangibles goodwill intangible assets net accumulated amortization reported assets accordance statement financial accounting standards 142 “goodwill intangible assets” sfas 142 goodwill represents excess cost acquisition fair value net assets acquired goodwill reviewed impairment utilizing two step process first step impairment test requires us identify reporting units compare fair value reporting units respective carrying value fair value reporting units determined based various analyses including discounted cash flow projections carrying value less fair value impairment exists second step need completed carrying value higher ii61 general motors corporation subsidiaries notes consolidated financial statements continued note 1 significant accounting policies continued fair value indication impairment may exist second step must performed compute amount impairment sfas 142 requires goodwill tested impairment annually time every year event occurs circumstances change reasonably possible impairment may exist generally perform annual impairment tests third fourth quarters intangible assets include customer lists trademarks identifiable intangible assets amortized straightline basis estimated useful life three 10 years valuation longlived assets gm periodically evaluates carrying value longlived assets held used business goodwill intangible assets indefinite lives assets held sale events circumstances warrant generally conjunction annual business planning cycle carrying value longlived asset considered impaired loss recognized based amount carrying value exceeds fair market value assets held used assets held sale loss increased costs sell fair market value determined primarily using anticipated cash flows discounted rate commensurate risk involved longlived assets disposed sale considered held used disposed foreign currency transactions translation foreign currency exchange transaction translation losses including effect derivatives net taxes included consolidated net income 2005 2004 2003 pursuant sfas 52 “foreign currency translation” amounted 262 million 167 million 122 million respectively policy warranty provisions estimated expenses related product warranties made time products sold estimates established using historical information nature frequency average cost warranty claims management actively studies trends warranty claims takes action improve vehicle quality minimize warranty claims see note 16 exit disposal activities costs idle consolidate close facilities provide postemployment benefits employees temporary basis accrued based management’s best estimate wage benefits costs incurred qualified employees jobs bank provisions current labor agreement date expiration september 2007 plus estimated costs expected paid thereafter estimates include 45 9 projected level acceptance normal early retirement offers respectively made pursuant current labor agreement costs related idlings employees expected temporary expensed incurred costs terminate contract without economic benefit corporation expensed time contract terminated onetime termination benefits subject contractual arrangements provided employees involuntarily terminated recorded management commits detailed plan termination plan communicated employees actions required complete plan indicate significant changes likely employees required render service terminated order earn termination benefit benefits recognized ratably future service period ii62 general motors corporation subsidiaries notes consolidated financial statements continued note 1 significant accounting policies continued cash equivalents cash equivalents defined shortterm highlyliquid investments original maturities 90 days less statements cash flows supplementary information 2005 auto cash inflows related investments companies net cash acquired approximately 14 billion amount driven primarily gm’s acquisition 2005 majority interest gm daewoo resulted gm consolidating gm daewoo’s cash balance approximately 16 billion net 70 million cash paid gm acquire additional 63 interest gm daewoo 2004 2003 auto cash outflows related investments companies net cash acquired approximately 50 million 60 million respectively 2005 fio made investments companies net cash acquired approximately 2 million 2004 2003 fio made investments companies net cash acquired approximately 12 million 144 million respectively ii63 general motors corporation subsidiaries notes consolidated financial statements continued note 1 significant accounting policies continued derivative instruments gm party variety foreign exchange rate interest rate commodity forward contracts options entered connection management exposure fluctuations foreign exchange rates interest rates certain commodity prices financial exposures managed accordance corporate policies procedures derivatives recorded fair value consolidated balance sheet effective changes fair value derivatives designated cash flow hedges net investment foreign operation recorded net unrealized gainloss derivatives separate component comprehensive income loss amounts reclassified accumulated comprehensive income loss underlying hedged item affects earnings ineffective changes fair value recorded currently earnings changes fair value derivatives designated fair value hedges recorded currently earnings offset extent derivative effective changes fair value hedged item changes fair value derivatives designated hedging instruments recorded currently earnings assets liabilities classified held sale august 3 2005 gmac announced entered definitive agreement sell majority equity interest gmac commercial holding corp gmac commercial mortgage see note 27 subsequent events year ended december 31 2005 gmac commercial mortgage’s earnings cash flows fully consolidated gm’s consolidated statements income statements cash flows however result agreement sell majority equity interest assets liabilities gmac commercial mortgage classified held sale separately gm’s consolidated balance sheet december 31 2005 following table presents gmac commercial mortgage’s major classes assets liabilities classified held sale december 31 2005 dollars millions labor force gm worldwide basis concentration labor supply employees working union collective bargaining agreements certain contracts expired 2003 international union united automobile aerospace agricultural implement workers america uaw labor contract effective october 6 2003 covering fouryear term 20032007 contract included 3000 lump sum payment per uaw employee paid october 2003 3 ii64 general motors corporation subsidiaries notes consolidated financial statements continued note 1 significant accounting policies continued performance bonus per uaw employee paid october 2004 gm amortizes payments 12month period following respective payment dates uaw employees received gross wage increase 2 2005 3 2006 active uaw employees also granted pension benefit increases pension benefit increases granted current retirees surviving spouses however contract provide four lump sum payments two vehicle discount vouchers current retirees surviving spouses retiree lump sum payments vehicle discount vouchers resulted charge gm’s 2003 cost sales approximately 12 billion 725 million tax change accounting principle conditional asset retirement obligations effective december 31 2005 corporation adopted financial accounting standards board fasb interpretation 47 “accounting conditional asset retirement obligations” fin 47 fin 47 relates legal obligations associated retirement tangible longlived assets result acquisition construction development normal operation longlived asset gm performed analysis obligations associated real property owned leased including plants warehouses offices gm’s estimates conditional asset retirement obligations relate case owned properties costs estimated necessary legally required removal remediation various regulated materials primarily asbestos leased properties obligations relate estimated cost contractually required property restoration application fin 47 resulted charge net tax 109 million included consolidated statement income year ended december 31 2005 cumulative effect change accounting principle attributable auto liability conditional asset retirement obligations recognized december 31 2005 result application fin 47 181 million pro forma amounts fin 47 applied periods follow dollars millions except per share amounts new accounting standards december 2004 financial accounting standards board fasb revised sfas 123 “accounting stockbased compensation” sfas 123r requiring companies record sharebased payment transactions compensation expense fair market value sfas 123r defines concept fair market value relates arrangements based sec guidance issued staff accounting bulletin sab 107 april 2005 provisions statement effective general motors ii65 general motors corporation subsidiaries notes consolidated financial statements continued note 1 significant accounting policies continued january 1 2006 corporation began expensing fair market value newly granted stock options stock based compensation awards employees pursuant sfas 123 2003 therefore statement expected material effect gm’s consolidated financial position results operations accordance disclosure requirements sfas 148 “accounting stockbased compensation transition disclosure” since gm adopted fair value based method accounting stockbased employee compensation pursuant sfas 123 effective january 1 2003 newly granted stockbased compensation awards following table illustrates effect net income earnings per share compensation cost outstanding unvested stock options stockbased employee compensation awards determined based fair values grant date dollars millions except per share amounts december 2005 fasb released fasb staff position fsp sfas 123r3 “transition election related accounting tax effects sharebased payment awards” provides practical transition election related accounting tax effects sharebased payment awards employees corporation currently reviewing transition alternatives elect appropriate alternative within one year adoption sfas 123r april 2005 fasb issued sfas 154 “accounting changes error corrections” requiring retrospective application required method reporting change accounting principle unless impracticable pronouncement includes specific transition provisions statement also requires change depreciation amortization depletion method longlived nonfinancial assets accounted change accounting estimate effected change accounting principle statement carries forward guidance apb opinion 20 “accounting changes” reporting correction error change accounting estimate statement effective accounting changes correction errors made fiscal years beginning december 15 2005 november 2005 fasb released fsp fin 453 “application fasb interpretation 45 minimum revenue guarantees granted business owners” requiring companies disclose minimum revenue guarantees accordance guidelines provided fin 45 interim annual financial statements gm adopted fin 453 upon issuance interpretation material effect gm’s consolidated financial position results operations effective july 1 2003 corporation began consolidating certain variable interest entities conform fasb interpretation 46 “consolidation variable interest entities” fin 46 gm adopted ii66 general motors corporation subsidiaries notes consolidated financial statements continued note 1 significant accounting policies concluded revision fin 46 fin 46r clarified certain provisions original interpretation exempted certain entities requirements january 1 2004 adoption fin 46r significant effect corporation’s financial condition results operations note 2 acquisition disposal businesses february 3 2005 gm completed purchase 166 million newlyissued shares common stock gm daewoo approximately 49 million increased gm’s ownership gm daewoo 482 446 shareholders gm daewoo participated issue june 28 2005 gm purchased suzuki motor corporation suzuki 69 million shares outstanding common stock gm daewoo approximately 21 million increased gm’s ownership gm daewoo 509 accordingly june 30 2005 gm began consolidating gm daewoo increased gm’s total assets liabilities june 30 2005 approximately 47 billion 45 billion respectively including onetime increases 16 billion cash marketable securities 13 billion longterm debt following unaudited financial information periods ended december 31 2005 2004 2003 represents amounts attributable gm daewoo basis consistent giving effect increased ownership consolidation january 1 2003 dollars millions pro forma effect net income loss significant compared equity income recognized february 13 2005 gm fiat spa fiat reached settlement agreement whereby gm agreed pay fiat approximately 20 billion return 10 equity interest fiat auto holdings bv fah terminate master agreement including put option entered march 2000 settle various disputes related thereto acquire interest key strategic diesel engine assets important rights respect diesel engine technology knowhow settlement agreement resulted pretax charge earnings approximately 14 billion 886 million tax since underlying events disputes giving rise gm’s fiat’s agreement settle disputes terminate master agreement including put option existed december 31 2004 gm recognized charge fourth quarter 2004 charge recorded cost sales expenses operations addition settlement agreement included among things following actions provisions • fiatgm powertrain fgp joint venture company would dissolved gm would regain complete ownership gm assets originally contributed transition period fgp would continue supply companies respective operations would disrupted • gm retain coownership fiat key powertrain intellectual property including sde jtd diesel engines m2032 sixspeed manual transmission • gm hold 50 interest joint venture limited operating powertrain manufacturing plant bielskobiala poland currently produces 13 liter sde diesel engine • companies continue supply powertrains longterm contracts provide considerable ongoing savings • gm fiat also continue work together develop certain car programs • fiat participate gm’s purchasing alliance program • gm fiat exchanged broad releases claims liabilities ii67 general motors corporation subsidiaries notes consolidated financial statements continued note 2 acquisition disposal businesses concluded effective may 13 2005 liquidation joint ventures gm’s acquisition certain strategic assets fiat completed april 4 2005 gm completed sale electromotive division emd investor group led greenbriar equity group llc berkshire partners llc sale covered substantially emd businesses lagrange illinois london ontario manufacturing facilities transaction material effect gm’s consolidated financial position results operations fourth quarter 2005 gm completed sale 201 investment common stock fuji heavy industries ltd fhi second quarter 2005 gm recorded tax impairment charge 788 million associated investment common stock fhi fourth quarter 2005 gm recorded gain 71 million tax due appreciation fair value stock june 30 2005 date fhi impairment charge sale generated net proceeds approximately 775 million august 3 2005 gmac announced entered definitive agreement sell 60 equity interest gmac commercial holding corp gmac commercial mortgage see note 27 subsequent events result agreement assets liabilities gmac commercial mortgage classified held sale separately gm’s consolidated balance sheet december 31 2005 see note 1 note 3 discontinued operations december 22 2003 gm completed series transactions resulted splitoff hughes gm simultaneous sale gm’s approximately 198 retained economic interest hughes news corporation limited news corporation transactions gm split hughes distributing hughes common stock holders gm class h common stock exchange outstanding shares gm class h common stock simultaneously gm sold 198 retained economic interest hughes news corporation exchange cash news corporation preferred american depositary shares preferred adss shares gm class h common stock cancelled news corporation acquired former gm class h common stockholders additional 142 outstanding shares hughes common stock exchange news corporation preferred adss gm sold 80 198 retained economic interest hughes news corporation total approximately 31 billion cash gm sold remaining 20 retained economic interest hughes news corporation approximately 286 million news corporation preferred adss valued 819 million december 22 2003 including hughes’ transaction expenses approximately 90 million gm recorded net gain 12 billion sale gm’s approximately 198 economic interest hughes reported gain sale discontinued operations gm’s consolidated statement income 2003 addition result transactions net reduction gm’s stockholders’ equity approximately 70 billion gm sold news corporation preferred adss january 2004 financial data related gm’s investment hughes december 22 2003 classified discontinued operations year ended december 31 2003 hughes’ net sales included discontinued operations 98 billion hughes’ net losses discontinued operations 219 million ii68 general motors corporation subsidiaries notes consolidated financial statements continued note 4 asset impairments gm reassesses carrying value longlived assets held used goodwill intangible assets indefinite lives connection annual business planning cycle events circumstances indicate need review impairment analysis performed comparing projected cash flows book value specific productrelated assets include special tools assets related product lines facilities first quarter 2005 gmna recorded tax charge 84 million writedown fair market value various plant assets connection cessation production lansing michigan assembly plant second quarter 2005 gmap determined value investment common stock fuji heavy industries ltd fhi impaired otherthantemporary basis accordingly gmap recorded aftertax impairment charge 788 million associated investment common stock fhi fourth quarter 2005 gm completed sale investment fhi recorded gain 71 million tax due appreciation fair value stock june 30 2005 date fhi impairment charge third quarter 2005 business planning cycle accelerated result lack improved performance second quarter 2005 connection process gm reviewed carrying value certain longlived assets held used goodwill intangible assets indefinite lives reviews resulted impairment charges gmna gme addition restructuring initiatives announced third quarter 2005 gmap related production australia resulting additional impairment charges gmlaam unusually strong south american currencies adversely affected profitability gmlaam’s export business management’s decision adjust gmlaam’s export volumes resulted lower expected future cash flows resulting impairment charge region reviews initiatives resulted aftertax impairment charges totaling 788 million recognized third quarter 2005 468 million gmna 176 million gme 99 million gmlaam 45 million gmap assets still service fourth quarter 2005 gmna announced restructuring initiative cease operations nine assembly stamping powertrain facilities three service parts operations facilities 2008 result capacity reduction initiatives gm recorded aftertax charge 455 million writedown fair market value property plants equipment assets still service december 31 2005 see note 5 discussion employee costs associated restructuring total aftertax impairment charges recognized 2005 20 billion including 767 million productspecific assets 560 million production office facilities 717 investments equity securities charges recorded cost sales expenses consolidated statement income unless otherwise noted employee idling separation costs lease contracts terminated 2004 impairment analyses resulted aftertax charges totaling 383 million 118 million gmna 234 million gme 31 million respect productspecific assets additional aftertax charges 78 million recorded gmna writedown fair market value various plant assets connection facilities rationalization actions assembly plants baltimore maryland linden new jersey fourth quarter 2004 gm completed annual review investment fah result continued deterioration performance fiat auto spa debt structure gm recorded noncash charge 220 million 136 million aftertax reduce carrying value gm’s investment fah zero see note 2 ii69 general motors corporation subsidiaries notes consolidated financial statements continued note 4 asset impairments concluded 2003 impairment analyses described resulted aftertax charges totaling 491 million 400 million gmna 11 million gme 55 million gmlaam 25 million gmap respect productspecific assets additional aftertax charges 42 million recorded gmna writedown fair market value various facilities note 5 postemployment benefit costs plant idling reserve costs idle consolidate close facilities provide postemployment benefits employees temporary basis accrued based management’s best estimate wage benefits costs incurred qualified employees jobs bank provisions current labor agreement date expiration september 2007 plus estimated costs expected paid thereafter costs related idling employees expected temporary expensed incurred gm reviews adequacy continuing need liabilities annual basis conjunction yearend production labor forecasts furthermore gm reviews reasonableness liabilities quarterly basis 2005 gm recognized pretax charge 18 billion 12 billion tax postemployment benefit liabilities related restructuring north american operations announced november 2005 gmna restructuring approximately 17500 employees included charge locations included action leaving company attrition transferring sites gm’s overall fouryear employment reduction 2008 remains approximate 30000 employee level previously announced charge composed two elements first element includes costs gm expects incur existing jobs bank provisions current collective bargaining agreement cba expiration september 2007 element charge calculated based substantive postemployment benefits plan gm developed time regard jobs bank including historical experience related acceptance routine retirement offers gm currently discussing jobs bank provisions cba uaw effort develop agreed upon accelerated attrition program active employees corporation able reduce number employees jobs bank cost effective manner see note 27 subsequent events regard gm believes likely jobs bank provisions modified current cba expires consequently second element charge includes gm’s best estimate costs paid expiration current cba including costs employees locations expected idled cba expiration determining best estimate gm considered effect accelerated attrition program discussion employees jobs bank creates opportunities return active service ii policy changes intends negotiate jobs program 18 billion reflects gm’s best estimate based information current time outcome discussions uaw may differ gm’s current best estimate could increase decrease material amounts subsequent periods gm also considered alternative approach estimating charge would excluded anticipated impact accelerated attrition program changes terms jobs bank next cba accrued amount based terms current jobs bank reflect payments would made idled employees estimated retirement dates including normal attrition early retirement approach would increased pretax charge 48 billion total 66 billion gm rejected approach believes probability payment amount remote measurement methodology result amount probable terms jobs bank existing ii70 general motors corporation subsidiaries notes consolidated financial statements continued note 5 postemployment benefit costs plant idling reserve concluded cba reflect substantive plan gm expects continue beyond end cba employees’ remaining service period liability postemployment benefits primarily wage benefit continuation december 31 2005 totals approximately 20 billion relating multiple plants approximately 18400 employees liability postemployment benefits 237 million relating numerous plants approximately 1900 employees december 31 2004 liability postemployment benefits 384 million relating approximately 2900 employees december 31 2003 following tables summarize activity december 31 2003 december 31 2005 liability dollars millions note 6 investment nonconsolidated affiliates nonconsolidated affiliates gm identified herein investees gm owns equity interest gm uses equity method accounting gm ability exert significant influence decisions relating operating financial affairs gm’s significant affiliates percentage gm’s yearend equity ownership voting interest include following japan fhi sold december 31 2005 201 2004 211 2003 suzuki motor corporation 204 2005 2004 203 2003 china shanghai general motors co ltd 50 2005 2004 2003 saic gm wuling automobile co ltd 34 2005 2004 2003 south korea gmdaewoo 509 december 31 2005 446 2004 2003 increase ownership 50 gm consolidated gm daewoo june 30 2005 see note 2 italy gmfiat powertrain fgp dissolved december 31 2005 50 2004 2003 information regarding gm’s share income nonconsolidated affiliates defined following countries included table millions ii71 general motors corporation subsidiaries notes consolidated financial statements continued note 6 investment nonconsolidated affiliates concluded note 7 marketable securities marketable securities held gm classified availableforsale except certain mortgagerelated securities classified heldtomaturity trading securities unrealized gains losses net related income taxes availableforsale securities included separate component stockholders’ equity unrealized gains losses trading securities included income current basis gm determines cost specific identification basis automotive operations investments available sale marketable securities follows dollars millions debt securities totaling 99 million mature within one year 938 million mature one five years 79 million mature five ten years 300 million mature ten years proceeds sales marketable securities totaled 147 billion 2005 148 billion 2004 71 billion 2003 gross gains related sales marketable securities 37 million 25 million 7 million 2005 2004 2003 respectively gross losses related sales marketable securities 66 million 2005 30 million 2004 11 million 2003 ii72 general motors corporation subsidiaries notes consolidated financial statements continued note 7 marketable securities continued financing insurance operations investments marketable securities follows dollars millions ii73 general motors corporation subsidiaries notes consolidated financial statements continued note 7 marketable securities continued debt securities availableforsale totaling 17 billion mature within one year 60 billion mature one five years 20 billion mature five years ten years 10 billion mature ten years mortgagebacked securities interests securitization trusts totaled 13 billion proceeds sales marketable securities totaled 57 billion 2005 32 billion 2004 76 billion 2003 gross gains related sales marketable securities 186 million 138 million 270 million 2005 2004 2003 respectively gross losses related sales marketable securities 66 million 49 million 202 million 2005 2004 2003 respectively fair value gross unrealized losses corporation’s investments unrealized loss position deemed otherthantemporarily impaired summarized following table ii74 general motors corporation subsidiaries notes consolidated financial statements continued note 7 marketable securities concluded note 8 variable interest entities gm applied provisions fin 46 later clarified fin 46r variable interest entities beginning july 1 2003 connection application fin 46r gm providing information concerning variable interest entities 1 consolidated gm deemed primary beneficiary 2 entities gm consolidate although gm significant interests variable interest entities gm primary beneficiary automotive operations synthetic leases gm leases real estate equipment various special purpose entities spes established facilitate financing assets gm nationally prominent creditworthy lessors assets consist principally office buildings warehouses machinery equipment use spes allows parties providing financing isolate particular assets single entity thereby syndicate financing multiple third parties conventional financing technique used lower cost borrowing thus lease cost lessee gm wellestablished market institutions participate financing property purchase interests spes certain spes determined vies fin 46 gm consolidates entities ii75 general motors corporation subsidiaries notes consolidated financial statements continued note 8 variable interest entities continued leases gm provides residual value guarantee leased property considered primary beneficiary fin 46 december 31 2005 carrying amount assets liabilities consolidated fin 46r amounted 780 million 10 billion respectively compared 883 million 10 billion december 31 2004 assets consolidated classified “property” gm’s consolidated financial statements gm’s maximum exposure loss related consolidated vies amounts 853 million lease arrangements involving vies gm holds significant variable interests considered primary beneficiary fin 46r gm’s maximum exposure loss related vie’s gm significant variable interest consolidate entity amounts 639 million financing insurance operations automotive finance receivables certain securitization transactions gmac transfers consumer finance receivables wholesale lines credit banksponsored multiseller commercial paper conduits provide funding source gmac well transferors conduit fund purchase receivables issuance commercial paper total assets outstanding banksponsored conduits approximated 153 billion december 31 2005 gmac variable interest conduits considered primary beneficiary gmac retain majority expected losses returns gmac’s maximum exposure loss result involvement nonconsolidated variable interest entities 132 million would incurred event complete loss assets gmac transferred mortgage warehouse funding gmac’s mortgage operations transfer commercial residential mortgage loans lending receivables home equity loans lines credit pending permanent sale securitization various structured finance arrangements order provide funds origination purchase future loans structured finance arrangements include transfers warehouse funding entities including gmac banksponsored commercial paper conduits transfers assets gmac facility accounted either sales offbalance sheet secured financings onbalance sheet based provisions sfas 140 “accounting transfers servicing financial assets extinguishments liabilities” however either case creditors facilities legal recourse general credit gmac warehouse funding entities represent variable interest entities fin 46r management determined certain mortgage warehouse funding facilities gmac primary beneficiary consolidates entities accordance fin 46r assets residential mortgage warehouse entities totaled 72 billion december 31 2005 majority included loans held sale finance receivables net corporation’s consolidated balance sheet 2005 use commercial mortgage warehouse entities terminated assets commercial mortgage warehouse entities totaled 526 million december 31 2004 majority included loans held sale finance receivables loans net unearned income included corporation’s consolidated balance sheet beneficial interest holders variable interest entities legal recourse general credit gmac residential mortgage loan alliances gmac invested strategic alliances several mortgage loan originators alliances may include common preferred equity investments working capital subordinated lending warrants addition warehouse lending arrangements management determined gmac majority expected losses returns consolidation appropriate fin 46r total assets alliances 139 million ii76 general motors corporation subsidiaries notes consolidated financial statements continued note 8 variable interest entities continued december 31 2005 gmac’s maximum exposure loss alliances including commitments lend additional funds purchase loans abovemarket rates 265 million december 31 2005 construction real estate lending gmac uses spe finance construction lending receivables spe purchases holds receivables funds majority purchases financing obtained thirdparty assetbacked commercial paper conduits gmac primary beneficiary consolidates entity accordance fin 46r assets entity totaled 16 billion december 31 2005 included finance receivables net corporation’s consolidated balance sheet beneficial interest holders variable interest entity legal recourse general credit gmac subordinated real estate lending arrangements certain entities entitles created develop land construct residential homes management determined gmac majority expected losses returns consolidation appropriate fin 46r total assets entities 496 million december 31 2005 134 million represents gmac’s maximum exposure loss warehouse lending gmac facility transfers mortgage warehouse lending receivables 100 owned spe sells senior participation interest receivables unconsolidated qualifying special purpose entity qspe funds purchase participation interest spe financing obtained thirdparty assetbacked commercial paper conduits spe funds purchase receivables gmac cash obtained qspe well subordinated loan andor equity contribution gmac senior participation interest sold qspe commercial paper issued included assets liabilities gmac receivables sold may purchased gmac except limited circumstances breach representations warranties management determined gmac primary beneficiary spe consolidates entity accordance fin 46r assets entity totaled 35 billion december 31 2005 included finance receivables net unearned income corporation’s consolidated balance sheet beneficial interest holders variable interest entity legal recourse general credit gmac collateralized debt obligations cdos gmac’s mortgage operations sponsor purchase subordinate equity interests serve collateral manager cdos cdo transactions trust established purchases portfolio securities issues debt equity certificates representing interests portfolio assets addition receiving variable compensation managing portfolio gmac sometimes retains equity investments cdos majority cdos sponsored gmac initially structured restructured approval senior beneficial interest holders qspes therefore exempt fin 46r gmac receives asset management fee purposes surveillance existing collateral performance event asset credit impaired call option triggered whereby gmac collateral manager may buy asset pool sell third party call triggered events outside gmac’s control downgrade rating agency asset pool event specified percentage mortgage loans underlying security greater 60 days delinquent liquidated event conditions gmac exercise call option met gmac recognizes assets accordance provisions gmac recognize assets december 31 2005 2004 majority gmac’s remaining cdos results primary beneficiary analysis support conclusion consolidation appropriate fin 46r gmac majority expected losses returns assets cdos totaled 31 billion december 31 2005 ii77 general motors corporation subsidiaries notes consolidated financial statements continued note 8 variable interest entities continued gmac’s maximum exposure loss 43 million representing gmac’s retained interests entities maximum exposure loss would occur unlikely event complete loss gmac’s retained interests entities addition management determined certain cdo entities gmac primary beneficiary consolidates entities accordance fin 46r assets entities totaled 569 million december 31 2005 majority included marketable securities corporation’s consolidated balance sheet beneficiary interest holders variable interest entities legal recourse general credit gmac interests real estate partnerships gmac’s commercial mortgage operations syndicate investments real estate partnerships unaffiliated investors certain partnerships guaranteed timely payments specified return investors investor’ returns principally generated partnership’s share affordable housing tax credits tax losses derived partnership’s investments entities develop operate affordable housing properties throughout united states entities considered vie’s fin 46r determination whether gmac primary beneficiary given tax credit fund depends many factors including number limited partners rights obligations general limited partners fund gmac variable interests underlying operating partnerships primarily form limited partnership interests results variable interest analysis indicated gmac primary beneficiary partnerships result required consolidate entities fin 46r assets outstanding underlying operating partnerships approximated 65 billion december 31 2005 gmac’s maximum exposure loss related partnerships 682 million addition management determined certain partnerships gmac primary beneficiary consolidates partnerships accordance fin 46r impact consolidation results increase assets totaling 452 million december 31 2005 included corporations’ consolidated balance sheet consolidation impact reported net income real estate assets held collateral entities totaled 252 million december 31 2005 beneficial interest holders variable interest entities legal recourse gmac’s general credit hold variable interests syndicated affordable housing partnerships provide unaffiliated investors guaranteed yield investment partnerships reflected reporting segment held sale corporation’s consolidated balance sheet financing method accordance statement financial accounting standards 66 accounting sales real estate sfas 66 gmac’s exposure loss december 31 2005 14 billion representing 10 billion financing liability reflected corporation’s consolidated balance sheet ie real estate syndication proceeds well 04 billion additional unpaid equity installments maximum exposure amount represents amount payable investors unaffiliated investors place additional guaranteed commitments gmac decreases tax benefits delivered investors considering amounts gmac exposure loss future periods expected exceed 19 billion new market tax credit funds corporation syndicates manages investments partnerships make investments typically mortgage loans turn qualify partnerships earn new markets tax credits new markets tax credits permit taxpayers receive federal income tax credit making qualified equity investments community development entities one particular tax credit fund management determined gmac majority expected losses returns consolidation appropriate fin 46r assets investments totaled 62 million december 31 2005 41 million represents gmac’s maximum exposure loss addition entity management determined tax credit funds gmac primary beneficiary consolidates entities accordance fin 46r impact consolidation results increase assets totaling 206 million december 31 2005 included reporting segment ii78 general motors corporation subsidiaries notes consolidated financial statements continued note 8 variable interest entities concluded held sale corporation’s consolidated balance sheet beneficial interest holders variable interest entities legal recourse general credit gmac note 9 finance receivables securitizations finance receivables net finance receivables net included following dollars millions 1 december 31 2005 30 billion 21 billion domestic 949 million foreign gmac commercial mortgage’s finance receivables loans transferred reporting segment held sale corporation’s consolidated balance sheet refer note 1 details 2 net unearned income 59 billion 76 billion december 31 2005 2004 respectively finance receivables originated outside united states 325 billion 354 billion december 31 2005 2004 respectively aggregate amounts total finance receivables maturing five years following december 31 2005 follows 2006 614 billion 2007 233 billion 2008 168 billion 2009 106 billion 2010 65 billion 2011 thereafter 712 billion actual maturities may differ scheduled due prepayments ii79 general motors corporation subsidiaries notes consolidated financial statements continued note 9 finance receivables securitizations continued securitizations finance receivables mortgage loans corporation securitizes automotive mortgage financial assets funding source gmac sells retail finance receivables wholesale loans residential mortgage loans commercial mortgage loans commercial mortgage securities information contained relates transfers finance receivables loans qualify offbalance sheet securitizations requirements sfas 140 corporation retains servicing responsibilities subordinated interests securitizations retail finance receivables wholesale loans servicing responsibilities retained majority residential commercial mortgage loan securitizations corporation may retain subordinated interests securitizations gmac also holds subordinated interests acts collateral manager corporation’s collateralized debt obligation cdo securitization program servicer gmac generally receives monthly fee stated percentage outstanding sold receivables retail automotive finance receivables gmac paid fee corporation concluded fee represents adequate compensation servicer servicing asset liability recognized considering shortterm revolving nature wholesale loans servicing asset liability recognized upon securitization loans december 31 2005 weighted average basic servicing fees gmac’s primary servicing activities 100 basis points 100 basis points 40 basis points 7 basis points outstanding principal balance sold retail finance receivables wholesale loans residential mortgage loans commercial mortgage loans respectively additionally corporation retains rights cash flows remaining investors securitization trusts received contractual payments certain retail securitization transactions retail receivables sold servicing retained basis servicing compensation servicing liability established recorded liabilities december 31 2005 december 31 2004 servicing liabilities 32 million 30 million respectively outstanding related retail securitization transactions 2005 gmac completed retail automotive securitization servicing fee received considered greater adequate compensation requiring recording servicing asset december 31 2005 fair value servicing asset 30 million mortgage servicing corporation capitalizes value expected realized performing specified residential commercial mortgage servicing activities mortgage servicing rights gmac maintains cash reserve accounts predetermined amounts certain securitization activities unlikely event deficiencies occur cash flows owed investors amounts available cash reserve accounts totaled 52 million 10 billion 88 million 7 million december 31 2005 related securitizations retail finance receivables wholesale loans residential mortgage loans commercial mortgage loans respectively 118 million 10 billion 44 million 10 million december 31 2004 respectively ii80 general motors corporation subsidiaries notes consolidated financial statements continued note 9 finance receivables securitizations continued following tables summarize pretax gains securitizations certain cash flows received paid securitization trusts transfers finance receivables loans completed 2005 2004 2003 dollars millions ii81 general motors corporation subsidiaries notes consolidated financial statements continued note 9 finance receivables securitizations continued ii82 general motors corporation subsidiaries notes consolidated financial statements continued note 9 finance receivables securitizations continued key economic assumptions used measuring estimated fair value retained interests sales completed 2005 2004 dates sales follows fair value retained interests wholesale securitizations approximates cost shortterm floating rate nature wholesale loans b included within residential mortgage loans home equity loans lines high loantovalue loans residential first second mortgage loans c assumptions used measure expected yield variable rate retained interests based benchmark interest rate yield curve plus contractual spread appropriate actual yield curve utilized varies depending specific retained interests based weighted average maturity wam finance receivables constant prepayment rate cpr mortgage loans commercial mortgage securities ii83 general motors corporation subsidiaries notes consolidated financial statements continued note 9 finance receivables securitizations continued table outlines key economic assumptions sensitivity fair value retained interests december 31 2005 immediate 10 20 adverse changes assumptions dollars millions fair value retained interests wholesale securitizations approximates cost 690 million shortterm floating rate nature wholesale receivables b net reserve expected credit losses totaling 14 million december 31 2005 amounts included fair value retained interests classified investment securities c forward benchmark interest rate yield curve plus contractual spread represents rate return paid investors sensitivities hypothetical used caution figures indicate changes fair value based 10 20 variation assumptions generally cannot extrapolated relationship change assumption change fair value may linear also table effect variation particular assumption fair value retained interest calculated without changing assumption reality changes one factor may result changes another may magnify counteract sensitivities additionally corporation hedges interest rate prepayment risks associated certain retained interests effects hedge strategies considered herein expected static pool net credit losses include actual incurred losses plus projected net credit ii84 general motors corporation subsidiaries notes consolidated financial statements continued note 9 finance receivables securitizations concluded losses divided original balance outstandings comprising securitization pool table displays expected static pool net credit losses based corporation’s securitization transactions static pool losses applicable wholesale finance receivable securitizations shortterm nature following table presents components securitized financial assets managed along quantitative information delinquencies net credit losses excludes 26320 million gmac commercial mortgage’s managed assets december 31 2005 commercial mortgage 281 million accounts past due net credit losses 228 million b managed portfolio represents finance receivables loans balance sheet securitized excluding securitized finance receivables loans gmac continues service continuing involvement ie gmac retains interest risk loss underlying receivables ii85 general motors corporation subsidiaries notes consolidated financial statements continued note 10 inventories automotive operations inventories included following dollars millions inventories stated generally cost excess market cost approximately 67 us inventories determined lastin firstout lifo method generally cost inventories determined either firstin firstout fifo average cost methods 2005 2004 us lifo eligible inventory quantities reduced reduction resulted liquidation lifo inventory quantities carried lower costs prevailing prior years compared cost 2005 2004 purchases effect decreased cost goods sold approximately 100 million pretax 2005 2004 financing insurance operations inventories included following dollars millions note 11 equipment operating leases corporation significant investments vehicle leasing portfolios residual values vehicles lease represent estimate values assets end lease contracts initially determined based appraisals estimates realization residual values dependent corporation’s future ability market vehicles prevailing market conditions management reviews residual values periodically determine estimates remain appropriate automotive operations equipment operating leases accumulated depreciation follows dollars millions ii86 general motors corporation subsidiaries notes consolidated financial statements continued note 11 equipment operating leases concluded financing insurance operations equipment operating leases accumulated depreciation follows dollars millions lease payments received related equipment operating leases maturing five years following december 31 2005 follows auto none payment received lease inception income deferred lease period fio 200663 billion 200744 billion 2008 24 billion 2009665 million 201027 million leases maturing 2010 note 12 income taxes income loss continuing operations income taxes minority interests included following dollars millions provision income taxes estimated follows dollars millions annual tax provisions include amounts considered sufficient pay assessments may result examination prior year tax returns cash paid income taxes 2005 2004 2003 305 million 293 million 542 million respectively ii87 general motors corporation subsidiaries notes consolidated financial statements continued note 12 income taxes continued provisions made estimated us foreign income taxes less available tax credits deductions may incurred remittance corporation’s share subsidiaries’ undistributed earnings deemed permanently reinvested taxes provided foreign subsidiaries’ earnings deemed permanently reinvested 126 billion december 31 2005 110 billion december 31 2004 quantification deferred tax liability associated permanently reinvested earnings practicable reconciliation provision income taxes compared amounts us federal statutory rate follows dollars millions 1 deduction dividends paid gm 123 par value common stock held employee stock ownership portion gm savings plans pursuant economic growth tax relief reconciliation act 2001 2 additional tax benefit related gm class h common stock contribution pension veba plans deferred income tax assets liabilities 2005 2004 reflect effect temporary differences amounts assets liabilities equity financial reporting purposes bases assets liabilities equity measured tax laws well tax loss tax credit carryforwards ii88 general motors corporation subsidiaries notes consolidated financial statements continued note 12 income taxes continued temporary differences carryforwards gave rise deferred tax assets liabilities included following dollars millions deferred tax balances included following captions consolidated balance sheet supplemental information tax carryforwards december 31 2005 approximately 5 relates alternative minimum tax credit carried forward indefinitely approximately 26 relates us federal net operating loss carryforwards approximately 12 relates us state net operating loss carryforwards expire 20062025 used approximately 85 us state net operating loss carryforwards expire 2008 approximately 38 tax carryforwards relate general business credits consist primarily research experimentation credits us foreign tax credits expire 20092025 used remaining tax carryforwards relate accumulated foreign operating losses approximately 93 carried forward indefinitely remaining 7 expire 2015 ii89 general motors corporation subsidiaries notes consolidated financial statements continued note 12 income taxes continued corporation following net deferred tax assets applicable following taxing jurisdictions corporation’s operations recent history pretax cumulative losses financial reporting purposes need establish valuation allowances net deferred tax assets assessed periodically based morelikelythannot realization threshold accordance sfas 109 “accounting income taxes” appropriate consideration given positive negative evidence related realization assessment considers among matters nature frequency severity recent losses forecasts future profitability duration statutory carryforward periods gm’s experience tax attributes expiring unused tax planning alternatives weight given considerations depends upon degree objectively verified valuation allowances gm recognized relate certain us state foreign jurisdiction net deferred tax assets change valuation allowance related considerations follows united states valuation allowance established gm’s us federal net deferred tax assets gm believes likely realized expectation based part fact gm incurred cumulative losses last three years united states losses occurred 2005 moreover 2005 us losses largely driven corporation’s restructuring north american operations accordingly losses unusual nature incurred order improve future profitability addition consideration given lengthy period net deferred tax assets realized gm’s history never lost significant us federal tax attribute expiration gm also given consideration forecast future profitability includes following key elements • launch new sport utility vehicles full size pickup trucks primarily 2006 expected produce substantially higher revenues profits predecessor models segments 2005 • amendment gm health care program hourly employees establishment defined contribution health care plan result substantial reduction health care costs ii90 general motors corporation subsidiaries notes consolidated financial statements continued note 12 income taxes concluded us beginning 2006 amendment ratified uaw granted preliminary approval us district court eastern district michigan • reductions gmna’s cost structure result implementation restructuring plan • continued strength gmac earnings us anticipated outcome events expected improve gmna’s pretax results united states forecast levels future profitability us net deferred tax assets considered likely realizable periods underlying transactions become deductible us federal tax purposes future events andor outcome gm’s cost reduction actions significantly different gm currently forecasts substantial valuation allowance us net deferred tax assets might required furthermore gmac’s us pretax income declines significant portion gmac’s us pretax income longer available gm sale controlling interest gmac otherwise substantial valuation allowance may required additional valuation allowance recorded 2005 related 2005 loss allocable certain us state jurisdictions previously determined tax attributes related jurisdictions realizable brazil 2005 determined morelikelythannot deferred taxes gm’s brazilian operations would realized therefore gm recorded full valuation allowance tax credit carryforwards net timing differences brazil decision based consideration historical results gm’s operations brazil coupled governmentimposed 30 annual limitation net operating loss utilization germany united kingdom uk valuation allowances established gm’s net deferred tax assets germany uk although gm’s german uk operations incurred cumulative losses recent years gm believes considerations overcome fact accordingly deferred tax assets morelikelythannot realized determination based particular unlimited expiration net operating loss carryforwards germany uk together operations’ histories utilizing tax attributions past earnings strong prospects future earnings spain valuation allowance established gm’s spanish net deferred tax assets gm believes morelikelythannot realized spanish net operating loss carryforwards expire 15 years losses spanish operations largely caused nonrecurring transactions addition gm believes spanish operations continue strong prospects future earnings corporation open tax years primarily 1998 2005 various significant taxing jurisdictions including us canada mexico germany brazil open years contain matters could subject differing interpretations applicable tax laws regulations relate amount timing inclusion revenue expenses sustainability income tax credits given audit cycle corporation established liability 36 billion matters amount loss probable reasonably estimable amount liability based management’s best estimate given corporation’s history similar matters interpretations current laws regulations ii91 general motors corporation subsidiaries notes consolidated financial statements continued note 13 property net property net follows dollars millions depreciation amortization expense follows dollars millions ii92 general motors corporation subsidiaries notes consolidated financial statements continued note 14 goodwill intangible assets components corporation’s intangible assets december 31 2005 2004 follows dollars millions ii93 general motors corporation subsidiaries notes consolidated financial statements continued note 14 goodwill intangible assets concluded aggregate amortization expense existing acquired intangible assets 93 million year ended december 31 2005 estimated amortization expense next five years follows 2006 59 million 2007 59 million 2008 56 million 2009 49 million 2010 23 million changes carrying amounts goodwill follows dollars millions 1 fourth quarter 2005 gmac recorded goodwill impairment pretax charge 734 million relating primarily goodwill recognized conjunction 1999 acquisition bank new york’s commercial finance business 2 december 31 2005 59 million gmac commercial mortgage goodwill reclassified assets held sale ii94 general motors corporation subsidiaries notes consolidated financial statements continued note 15 assets automotive operations assets included following dollars millions investments equity securities december 31 2005 2004 include fair value investments equity securities classified availableforsale periods presented gm’s intent hold securities longer one year balances include historical costs 225 million 144 million unrealized gains 287 million 209 million unrealized losses 77 million 3 million december 31 2005 2004 respectively “other” table includes restricted cash balances 157 million 57 million december 31 2005 2004 respectively fourth quarter 2004 gm completed annual review investment fah result deterioration performance fiat auto spa current debt structure gm recorded noncash charge 220 million 136 million tax reduce carrying value gm’s investment fah zero financing insurance operations assets included following dollars millions ii95 general motors corporation subsidiaries notes consolidated financial statements continued note 15 assets concluded reclassification consolidated balance sheet presentation note 16 accrued expenses liabilities deferred income taxes automotive operations accrued expenses liabilities deferred income taxes included following dollars millions ii96 general motors corporation subsidiaries notes consolidated financial statements continued note 16 accrued expenses liabilities deferred income taxes concluded policy product warranty recall campaigns liability dollars millions policy product warranty recall campaigns liability amounts table include amounts respect certifiedused vehicles december 31 2004 disclosure revised accordingly provide comparative basis financing insurance operations liabilities deferred income taxes included following dollars millions ii97 general motors corporation subsidiaries notes consolidated financial statements continued note 17 longterm debt loans payable automotive operations longterm debt loans payable follows dollars millions 1 weightedaverage interest rates include impact interest rate swap agreements 2 effective january 1 2001 corporation recording hedged debt fair market value balance sheet due adoption sfas 133 “accounting derivative instruments hedging activities” longterm debt payable beyond one year december 31 2005 includes scheduled maturities follows 2007 1 billion 2008 19 billion 2009 04 billion 2010 02 billion 2011 276 billion included longterm debt payable beyond one year certain convertible debentures approximately 12 billion may put gm cash settlement 2007 ahead scheduled maturity 2011 protect foreign exchange risk gm entered cross currency swap agreements notional amount agreements december 31 2005 2004 auto approximately 24 billion 22 billion respectively amounts payable beyond one year cross currency swaps december 31 2005 included 39 billion currencies us dollar primarily euro 18 billion korean 15 billion australian dollar 239 million brazilian real 225 million canadian dollar 115 million december 31 2005 2004 longterm debt loans payable auto included 260 billion 253 billion respectively obligations fixed interest rates 65 billion 72 billion respectively obligations variable interest rates predominantly libor interest rate swap agreements achieve desired balance fixed variable rate debt gm entered interest rate swaps notional amount pay variable swap agreements december 31 2005 2004 auto approximately 55 billion 59 billion respectively gm’s auto business maintains substantial lines credit various banks totaled 80 billion december 31 2005 24 billion represented shortterm credit facilities 56 billion represented longterm credit facilities december 31 2004 bank lines credit totaled 90 billion ii98 general motors corporation subsidiaries notes consolidated financial statements continued note 17 longterm debt loans payable continued 34 billion represented shortterm credit facilities 56 billion represented longterm credit facilities unused shortterm longterm portions credit lines totaled 09 billion 56 billion december 31 2005 compared 27 billion 56 billion december 31 2004 addition gm’s consolidated affiliates nongm minority shareholders primarily gm daewoo lines credit various banks totaled 25 billion december 31 2005 represented longterm facilities unused portion credit lines totaled 15 billion december 31 2005 certain bank lines credit contain covenants corporation applicable subsidiaries compliance throughout year ended december 31 2005 view gm’s recent restatement prior financial statements gm believes substantial uncertainty whether bank syndicate would required honor borrowing request 56 billion longterm credit facility therefore high risk gm would able borrow facility gm believes issues also may arise restatement various financing agreements consist principally obligations sale leaseback transactions lease obligations include gm’s public debt indentures gm party gm evaluated effect restatement financing agreements including legal rights respect claims could asserted believes sufficient access liquidity mitigate likely impact matters financing insurance operations debt follows dollars millions 1 weightedaverage interest rates include effect interest rate swap agreements debt payable beyond one year december 31 2005 included maturities follows 2007 339 billion 2008 256 billion 2009 100 billion 2010 88 billion 2011 934 billion amounts payable beyond one year consideration foreign currency swaps december 31 2005 included 239 billion currencies us dollar primarily canadian dollar 81 billion euro 66 billion uk pound sterling 61 billion australian dollar 14 billion ii99 general motors corporation subsidiaries notes consolidated financial statements continued note 17 longterm debt loans payable concluded december 31 2005 2004 debt fio included 932 billion 137 billion respectively obligations fixed interest rates 1600 billion 1308 billion respectively obligations variable interest rates predominantly libor considering impact interest rate swap agreements achieve desired balance fixed variable rate debt gm entered interest rate swap cap floor agreements notional amounts agreements december 31 2005 fio approximately 1045 billion relating swap agreements 754 billion pay variable 291 billion pay fixed notional amounts agreements december 31 2004 fio approximately 859 billion relating swap agreements 567 billion pay variable 292 billion pay fixed gm’s fio business maintains substantial lines credit various banks totaled 472 billion december 31 2005 112 billion represented shortterm credit facilities 36 billion represented longterm credit facilities december 31 2004 bank lines credit totaled 603 billion 23 billion represented shortterm credit facilities 373 billion represented longterm credit facilities unused shortterm longterm portions credit lines totaled 31 billion 322 billion december 31 2005 compared 85 billion 359 billion december 31 2004 certain bank lines credit contain covenants corporation applicable subsidiaries compliance throughout year ended december 31 2005 note 18 pensions postretirement benefits gm sponsors number defined benefit pension plans covering substantially us canadian employees well certain nonus employees plans covering us canadian represented employees generally provide benefits negotiated stated amounts year service well significant supplemental benefits employees retire 30 years service normal retirement age benefits provided plans covering us canadian salaried employees certain nonus locations generally based years service compensation history gm also certain nonqualified pension plans covering executives based targeted wage replacement percentages unfunded gm’s funding policy respect qualified pension plans contribute annually less minimum required applicable law regulations directly pay benefit payments appropriate gm made pension contributions us hourly salaried us nonus pension plans made direct payments appropriate follows dollars millions 2006 gm contributions due us hourly plan february 2006 gm contributed 17 million salaried pension plan contribution required contribution behalf gm employees former participants saturn pcrp plan merged salaried pension plan 2005 gm expect make additional contributions salaried pension plan 2006 gm expects contribute pay benefits approximately 100 million us pension plans 500 million primary nonus pension plans include gm canada limited adam opel vauxhall ii100 general motors corporation subsidiaries notes consolidated financial statements continued note 18 pensions postretirement benefits continued additionally gm maintains hourly salaried benefit plans provide postretirement medical dental vision life insurance us retirees eligible dependents cost benefits recognized consolidated financial statements period employees provide service gm certain corporation’s nonus subsidiaries postretirement benefit plans although participants covered government sponsored administered programs cost programs generally significant gm 2004 gm contributed total 90 billion plan assets including 88 billion us hourly salaried voluntary employees beneficiary association veba trusts opeb plans consisting 84 billion cash 04 billion xm satellite radio holdings inc common stock shares 02 billion salaried 401h account first contribution related salaried opeb plan 401h account contributions participants opeb plans 89 million 87 million years ended december 31 2005 2004 respectively 2005 gm withdrew total 32 billion plan assets veba trusts opeb plans gm withdrew 1 billion veba trust february 1 2006 another 1 billion veba trust march 1 2006 gm uses december 31 measurement date majority us pension plans september 30 measurement date us opeb plans gm’s measurement dates canadian adam opel vauxhall motors primary nonus pension plans november 30 september 30 september 30 respectively gm’s measurement dates canadian south african nonus opeb plans december 31 ii101 general motors corporation subsidiaries notes consolidated financial statements continued note 18 pensions postretirement benefits continued 1 includes overfunded status combined us hourly salaried pension plans 75 billion december 31 2005 16 billion december 31 2004 ii102 general motors corporation subsidiaries notes consolidated financial statements continued note 18 pensions postretirement benefits continued total accumulated benefit obligation accumulated benefit obligation fair value plan assets gm’s pension plans accumulated benefit obligations excess plan assets projected benefit obligation fair value plan assets pension plans projected benefit obligations excess plan assets follows dollars millions components pension opeb expense along assumptions used determine benefit obligations follows dollars millions 1 determined end year 2 determined beginning year ii103 general motors corporation subsidiaries notes consolidated financial statements continued note 18 pensions postretirement benefits continued recent years gm estimated discount rate us pension opeb obligations reference moody’s aa index citibank salomon smith barney’s abovemedian curve watson wyatt’s bondmatching model well benchmarking beginning 2005 yearend valuations gm estimates discount rate us pension opeb obligations using iterative process based hypothetical investment portfolio highquality bonds hypothetical reinvestment proceeds bonds upon maturity forward rates derived yield curve us pension opeb obligations fully defeased gm incorporates reinvestment component methodology feasible light magnitude time horizon us pension opeb obligations extend accomplish full defeasance direct cash flows actual set bonds selected given measurement date improved methodology considered change estimate developed 2005 adopted deemed superior previously available algorithms estimating assumed discount rates particular approach permits better match future cash outflows related benefit payments future cash inflows associated bond coupons maturities hypothetical described gm’s discount rate estimation iterative process involves four steps first gm identifies bond universe consists aarated higher bonds amount outstanding greater 25 million gm excludes universe callable convertible bonds mortgagebacked assetbacked securities bonds negative credit watch bond universe data including amounts outstanding market prices credit ratings relevant data obtained bloomberg second gm creates defeasance portfolio bond universe selecting set bonds would yield cash flows coupons maturation reinvestment sufficient defease us pension opeb obligations reinvestments assumed occur forward rates calculated using yield curve developed following methodology years bond universe sufficient number bonds yield curve based yields bonds future years bond universe sufficient number bonds yield curve extrapolated follows • gm computes spread yield curve swap curve marketbased curve • extrapolate yield curve period beginning last year substantial bonds available bond universe ending year 50 gm adds spread swap curve observable 50 years • extrapolate yield curve beyond 50th year gm assumes last oneyear forward rate yield curve 49th year remains constant remaining years third gm determines market value defeasance portfolio using actual initial market value bonds selected part defeasance portfolio fourth gm computes internal rate return irr defeasance portfolio based market value measurement date final net cash flows coupons maturations reinvestments gm uses irr discount rate us pension opeb obligations beginning 2005 yearend valuations gm rounds discount rates us pensions us opeb plans nearest 005 percentage point rather nearest 025 percentage point prior years using new methodology gm established us pension plans us opeb plans discount rates 570 545 respectively yearend 2005 ii104 general motors corporation subsidiaries notes consolidated financial statements continued note 18 pensions postretirement benefits continued gm sets discount rate assumption annually retirementrelated benefit plans respective measurement dates reflect yield portfolio high quality fixedincome debt instruments matched timing amounts projected future benefits one percentage point increase assumed health care trend rates future periods would increased us accumulated postretirement benefit obligation apbo 93 billion december 31 2005 us aggregate service interest cost components nonpension postretirement benefit expense 2005 629 million onepercentage point decrease would decreased us apbo 77 billion us aggregate service interest cost components nonpension postretirement benefit expense 2005 516 million gm’s longterm strategic mix expected return assets assumptions derived detailed periodic studies conducted gm’s actuaries gm’s asset management group us study includes review alternative asset allocation strategies anticipated future longterm performance individual asset classes risks standard deviations correlations asset classes comprise funds’ asset mix primary nonus plans conduct similar studies conjunction local actuaries asset managers studies give appropriate consideration recent fund performance historical returns assumptions primarily longterm prospective rates capital market assumptions underpinning gm’s longterm strategic mix longterm expected return assumptions reexamined annually reexaminations capital market assumptions 2005 reaffirmed 9 longterm expected return assumption gm’s longterm strategic allocation us pension plans gm’s strategic asset mix us pension plans intended reduce exposure equity market risks utilize asset classes highly correlated well asset classes active management historically generated excess returns places greater emphasis manager skills produce excess return employing various risk mitigation strategies reduce volatility 2005 gm’s target allocations pension assets fell within following ranges global equity 4149 global bonds 3036 real estate 812 alternative 913 significant contributions made gm’s hourly veba 2004 new investment policy adopted year manage plan assets single investment policy expanded range assets classes hourly veba managed achieve longterm asset returns maintaining adequate liquidity reimbursement benefit payments needed new asset allocation implemented october 1 2004 addition late 2004 new salaried veba created funded primarily invested shorterterm liquid securities 2005 expected return hourly veba 90 expected return salaried veba 45 blended expected rate return veba assets 88 2005 ii105 general motors corporation subsidiaries notes consolidated financial statements continued note 18 pensions postretirement benefits concluded us nonus pension plans opeb plans following asset allocations respective measurement dates 2004 2005 equity securities include gm common stock amounts 11 million less 1 total pension plan assets 29 million less 1 total pension plan assets december 31 2005 2004 respectively addition due marketneutral investment strategies place gm’s external asset managers pension plan trusts also hold short positions gm common stock value 18 million december 31 2005 december 8 2003 president bush signed law medicare prescription drug improvement modernization act 2003 act introduces prescription drug benefit beginning 2006 medicare part well federal subsidy sponsors retiree health care benefit plans provide benefit least actuarially equivalent medicare part due levels benefits provided gm’s us health care plans management concluded gm’s us health care plans least actuarially equivalent medicare part gm elected defer accounting effects act remeasured gm’s postretirement benefit obligation december 8 2003 remeasurement reduced gm’s december 31 2004 apbo 41 billion increased plan assets 04 billion decreased unrecognized actuarial loss 46 billion effect act 2005 2004 opeb expense included tables following benefit payments reflect estimated future employee service appropriate expected paid dollars millions ii106 general motors corporation subsidiaries notes consolidated financial statements continued note 19 commitments contingent matters commitments gm following minimum commitments noncancelable capital leases remaining terms excess one year primarily property dollars millions gm following minimum commitments noncancelable operating leases remaining terms excess one year primarily property dollars millions certain minimum commitments fund obligations nonconsolidated vies certain leases contain escalation clauses renewal purchase options rental expenses operating leases 1034 million 990 million 926 million 2005 2004 2003 respectively gm sponsors credit card program entitled gm card program offers rebates applied primarily purchase lease gm vehicles amount rebates available qualified cardholders net deferred program income 45 billion 45 billion 41 billion december 31 2005 2004 2003 respectively gm guarantees related performance operating lease arrangements residual value leased assets totaling 639 million included table expiration dates vary certain leases contain renewal options fair value underlying assets expected fully mitigate gm’s obligations guarantees accordingly liabilities recorded respect guarantees also gm entered agreements certain suppliers service providers guarantee value supplier’s assets agreements third parties guarantee fulfillment certain suppliers’ commitments maximum exposure commitments amounts 106 million gmac guaranteed certain amounts related securitization mortgage loans agency loan programs loans sold recourse repayment thirdparty debt addition gmac issues financial standby letters credit part financing mortgage operations december 31 2005 approximately 28 million recorded respect guarantees maximum exposure approximately 103 billion connection certain divestitures prior january 1 2003 gm provided guarantees respect benefits former gm employees relating pensions postretirement health care life insurance items pertaining fourth quarter 2005 charge respect contingent exposures relating delphi chapter 11 filing including benefit guarantees maximum exposure agreements cannot estimated due nature indemnities amounts recorded indemnities corporation’s obligations probable estimable ii107 general motors corporation subsidiaries notes consolidated financial statements continued note 19 commitments contingent matters continued addition guarantees gm entered agreements indemnifying certain parties respect environmental conditions pertaining ongoing sold gm properties due nature indemnifications gm’s maximum exposure agreements cannot estimated amounts recorded indemnities corporation’s obligations probable estimable addition normal course business gm periodically enters agreements incorporate indemnification provisions maximum amount gm may exposed agreements cannot estimated opinion management guarantees indemnifications expected material adverse effect corporation’s consolidated financial position results operations contingent matters litigation subject uncertainties outcome individual litigated matters predictable assurance various legal actions governmental investigations claims proceedings pending corporation including number shareholder class actions bondholder class actions shareholder derivative suits erisa class actions matters arising alleged product defects including asbestosrelated claims employmentrelated matters governmental regulations relating safety emissions fuel economy product warranties financial services dealer supplier contractual relationships environmental matters gm established reserves matters losses probable reasonably estimated matters may involve compensatory punitive treble damage claims demands recall campaigns incurred reported asbestosrelated claims environmental remediation programs sanctions granted could require corporation pay damages make expenditures amounts could estimated december 31 2005 discussion counsel opinion management liability expected material adverse effect corporation’s consolidated financial condition results operations delphi bankruptcy october 8 2005 delphi filed petition chapter 11 proceedings united states bankruptcy code many us subsidiaries delphi gm’s largest supplier automotive systems components parts gm delphi’s largest customer gm continue work constructively court proceedings delphi’s unions participants delphi’s restructuring process gm’s goal pursue outcomes best interests gm stockholders enable delphi continue important supplier gm delphi indicated gm expects disruption ability supply gm systems components parts needs delphi pursues restructuring plan chapter 11 process although challenges faced delphi restructuring process could create operating financial risks gm process also expected present opportunities gm assurance gm able realize benefits risk delphi one affiliates may reject threaten reject individual contracts gm either purpose exiting specific lines business attempt increase price gm pays certain parts components result gm might materially adversely affected disruption supply automotive systems components parts could force suspension production gm assembly facilities ii108 general motors corporation subsidiaries notes consolidated financial statements continued note 19 commitments contingent matters continued addition various financial obligations delphi gm date delphi’s chapter 11 filing including 951 million payable amounts delphi owed gm relating delphi employees formerly gm employees subsequently transferred back gm job openings became available certain employee “flowback” arrangements date delphi’s filing chapter 11 may subject compromise bankruptcy proceedings may result gm receiving payment portion face amount owed delphi gm seek minimize risk protecting right setoff 115 billion owed delphi date chapter 11 filing procedure determining setoff claims put place bankruptcy court however extent obligations covered right setoff may subject dispute delphi creditors committee delphi’s creditors limitation court gm cannot provide assurance able fully partially setoff amounts however date setoffs approximately 525 million agreed delphi taken gm although gm believes probable able collect amounts due delphi financial impact substantial compromise right setoff could material adverse impact financial position connection gm’s spinoff delphi 1999 gm entered separate agreements uaw international union electrical workers united steel workers three agreements benefit guarantee agreements gm provided contingent benefit guarantees make payments limited pension opeb expenses certain former gm us hourly employees transferred delphi part spinoff meet eligibility requirements payments covered employees benefit guarantee agreement contains separate benefit guarantees relating pension postretirement health care life insurance benefits limited benefit guarantees separate triggering events initiate potential gm liability delphi fails provide corresponding benefit required level therefore possible gm could incur liability one guarantees eg pension without triggering guarantees eg postretirement health care life insurance addition respect pension benefits gm’s obligation pension benefit guarantees arises extent combination pension benefits provided delphi pension benefit guaranty corporation pbgc falls short amounts gm guaranteed chapter 11 filing delphi trigger benefit guarantees addition benefit guarantees expire october 18 2007 previously triggered delphi’s failure pay specified benefits benefit guarantee triggered expiration date gm’s obligation could extend lives affected covered employees subject applicable terms pertinent benefit plans relevant agreements benefit guarantees obligate gm guarantee benefits delphi retirees excess levels corresponding benefits gm provides given time gm’s hourly retirees accordingly benefits gm provides hourly retirees reduced would similar reduction gm’s obligations corresponding benefit guarantee separate agreement gm delphi requires delphi indemnify gm extent gm makes payments benefit guarantees uaw employees retirees gm received notice delphi dated october 8 2005 likely gm would become obligated provide benefits pursuant benefit guarantees uaw employees retirees notice stated delphi unable time estimate timing scope benefits gm might required provide benefit guarantees recovery gm indemnity claims delphi might ii109 general motors corporation subsidiaries notes consolidated financial statements continued note 19 commitments contingent matters concluded subject partial complete discharge delphi reorganization proceeding result gm’s claims indemnity may paid full part discussion attain gm’s tentative healthcare agreement uaw gm provided former gm employees became delphi employees potential earn seven years credited service purposes eligibility certain healthcare benefits gm uaw benefit guarantee agreement gm believes probable incurred contingent liability due delphi’s chapter 11 filing gm believes range contingent exposures 55 billion 12 billion amounts near low end range considered possible amounts near high end range assuming agreement reached among gm delphi’s unions result gm established reserve 55 billion 36 billion tax noncash charge fourth quarter 2005 views reflect gm’s current assessment unlikely chapter 11 process result termination delphi’s pension plan complete elimination opeb plans amount charge may change depending result discussions among gm delphi’s unions factors gm currently unable estimate amount additional charges may arise delphi’s chapter 11 filing consensual agreement resolve delphi matter may cause gm incur additional costs exchange benefits would accrue gm time respect possible cash flow effect gm related ability make either pension opeb payments required benefit guarantees gm would expect make payments ongoing operating cash flow financings payments expected material effect gm’s cash flows shortterm however payable payments would likely increase time could material effect gm’s liquidity coming years reference delphi’s 2004 form 10k reported total cash outlay opeb 2004 226 million included 154 million hourly salaried retirees latter covered benefit guarantees plus 72 million payments gm certain former delphi hourly employees flowed back retire gm benefits delphi’s us hourly employees delphi’s pension plan reduced terminated resulting effect gm cash flows future years due benefit guarantee agreements currently reasonably estimable see note 27 subsequent events note 20 stockholders’ equity following table presents changes capital stock period january 1 2003 december 31 2005 dollars millions ii110 general motors corporation subsidiaries notes consolidated financial statements continued note 20 stockholders’ equity concluded gm class h stock effective december 22 2003 gm split hughes distributing hughes common stock holders gm class h common stock exchange outstanding shares gm class h common stock shares gm class h common stock cancelled common stock liquidation rights gm 123 par value common stock subject certain adjustments outstanding common stock subdivided stock split otherwise comprehensive income changes components comprehensive income loss reported net income taxes follows dollars millions note 21 earnings loss per share attributable common stock earnings per share eps attributable class gm common stock determined based attribution earnings class common stock period divided weightedaverage number common shares class outstanding period diluted eps attributable class gm common stock considers effect potential common shares unless inclusion ii111 general motors corporation subsidiaries notes consolidated financial statements continued note 21 earnings loss per share attributable common stock continued potential common shares would antidilutive effect attribution earnings class gm common stock follows dollars millions period prior december 22 2003 date gm completed splitoff hughes earnings attributable gm 123 par value common stock represent earnings attributable gm common stocks reduced available separate consolidated net income ascni hughes period gm class h common stock outstanding calculated loss used computation ascni hughes multiplied fraction numerator equal weightedaverage number shares gm class h common stock outstanding 11 billion december 22 2003 denominator number equal weightedaverage number shares gm class h common stock issued outstanding would represent 100 interest earnings hughes “average class h dividend base” average class h dividend base 14 billion december 22 2003 date gm completed splitoff hughes gm class h common stock ceased outstanding ii112 general motors corporation subsidiaries notes consolidated financial statements continued note 21 earnings loss per share attributable common stock continued reconciliation amounts used basic diluted earnings per share computations income continuing operations follows dollars millions except per share amounts certain stock options convertible securities included computation diluted earnings per share periods presented since instruments’ underlying exercise prices greater average market prices gm 123 par value common stock inclusion would antidilutive shares included computation diluted earnings per share 111 million 88 million 176 million december 31 2005 2004 2003 respectively addition periods loss attributable common stocks options purchase shares gm 123 par value common stock underlying exercise prices less average market prices outstanding excluded calculations diluted loss per share inclusion securities would reduced net loss per share december 31 2005 gm 81 billion convertible debentures outstanding including 12 billion principal amount 45 series convertible senior debentures due 2032 series 26 billion principal amount 525 series b convertible senior debentures due 2032 series b 43 billion principal amount 625 series c convertible senior debentures due 2033 series c october 2004 ii113 general motors corporation subsidiaries notes consolidated financial statements continued note 21 earnings loss per share attributable common stocks concluded fasb ratified consensus eitf respect issue 048 “the effect contingently convertible debt diluted earnings per share” november 5 2004 gm unilaterally irrevocably waived relinquished right waiver use stock committed use cash settle principal amount securities 1 holders ever choose convert securities 2 gm ever required holders repurchase securities gm retains right use either cash stock settle amount might become due security holders excess principal amount inthemoney amount various circumstances conversion securities may occur described paragraphs 14 paragraph 5 describes circumstances gm might required repurchase securities 1 closing sale price gm’s 123 par value common stock exceeds 120 conversion price security closing prices 7020 series securities 6490 series b securities 4762 series c securities least 20 trading days 30 consecutive trading days ending last trading day preceding fiscal quarter 2 five business day period nine consecutive trading day period trading price debentures day period less 95 product closing sale price gm’s 123 par value common stock multiplied number shares issuable upon conversion 2500 principal amount debentures 3 debentures called redemption series march 6 2007 series b march 6 2009 series c july 20 2010 4 upon occurrence specified corporate events 5 investor requires gm repurchase debentures specified repurchase dates security series march 6 2007 2012 2017 2022 2027 days business day next succeeding business day series b march 6 2014 2019 2024 2029 days business day next succeeding business day series c july 15 2018 2023 2028 days business day next succeeding business day shares potentially issuable satisfy inthemoneyamount convertible debentures included diluted earnings per share december 31 2005 convertible debentures met requirements conversion note 22 derivative financial instruments risk management gm exposed market risk changes foreign currency exchange rates interest rates certain commodity prices normal course business gm enters variety foreign exchange interest rate commodity forward contracts swaps options objective minimizing exposure arising risks risk management control system utilized monitor foreign exchange interest rate commodity related hedge positions cash flow hedges gm uses financial instruments designated cash flow hedges hedge corporation’s exposure foreign currency exchange risk associated buying selling financing currencies local currencies operates variability cash flows related exposure commodity price risk associated changes prices commodities used automotive business primarily nonferrous metals used manufacture automotive components hedge exposure variability cash flows related floating rate foreign currency financial instruments transactions denominated foreign currencies gm typically hedges forecasted firm commitment exposures three years future ii114 general motors corporation subsidiaries notes consolidated financial statements continued note 22 derivative financial instruments risk management concluded commodities gm typically hedges exposures three years future year ended december 31 2005 hedge ineffectiveness associated instruments designated cash flow hedges decreased cost sales expenses 37 million year ended december 31 2004 hedge ineffectiveness associated instruments designated cash flow hedges decreased cost sales expenses 26 million derivative gains losses included comprehensive income reclassified earnings time associated hedged transactions impact income statement year ended december 31 2005 net derivative losses 208 million reclassified cost sales expenses net derivative gains 200 million reclassified revenue year ended december 31 2004 net derivative gains 245 million reclassified cost sales expenses net lossesgains offset net gainslosses transactions hedged approximately 103 million net derivative gains included comprehensive income december 31 2005 expected reclassified earnings within 12 months date years ended december 31 2005 2004 net gains approximately 47 million 26 million respectively reclassified earnings result discontinuance certain commodity cash flow hedges probable original forecasted transactions occur fair value hedges gm uses financial instruments designated fair value hedges manage certain corporation’s exposure interest rate risk gm subject market risk exposures changes interest rates due financing investing cash management activities variety instruments used hedge gm’s exposure associated fixed rate debt mortgage servicing rights msrs year ended december 31 2005 hedge ineffectiveness associated instruments designated fair value hedges primarily due hedging msrs decreased selling general administrative expenses 34 million decreased selling general administrative expenses 104 million 2004 changes time value instruments excluded assessment hedge effectiveness decreased selling general administrative expenses 59 million 2005 180 million 2004 net investment hedges gm uses foreign currency denominated debt hedge foreign currency exposure net investments foreign operations foreign currency translation gains losses related debt instruments recorded comprehensive loss foreign currency translation adjustment years ended december 31 2005 2004 142 million 64 million unrealized loss recorded accumulated foreign currency translation undesignated derivative instruments forward contracts options designated hedging instruments sfas 133 may also used hedge certain foreign currency commodity interest rate exposures unrealized gains losses instruments recognized currently earnings note 23 fair value financial instruments estimated fair value financial instruments determined using available market information appropriate valuation methodologies however considerable judgment required interpreting market data develop estimates fair value therefore estimates necessarily indicative amounts could realized would paid current market exchange effect using different market assumptions andor estimation methodologies may material estimated fair value amounts ii115 general motors corporation subsidiaries notes consolidated financial statements continued note 23 fair value financial instruments concluded book estimated fair values financial instruments practicable estimate fair value follows dollars millions 1 assets include various financial instruments eg longterm receivables certain investments fair values based discounted cash flows market quotations appropriate valuation techniques fair values retained subordinated interests trusts excess servicing assets net deferred costs derived discounting expected cash flows using current market rates estimated values industrial development bonds included liabilities based quoted market prices similar issues 2 longterm debt estimated fair value based quoted market prices similar issues based current rates offered gm debt similar remaining maturities 3 fair value estimated discounting future cash flows using applicable spreads approximate current rates applicable category finance receivables due shortterm nature book value approximates fair value cash marketable securities accounts notes receivable less allowances accounts payable principally trade auto loans payable fio debt payable within one year periods ending december 31 2005 2004 note 24 stock incentive plans gm’s stock incentive plans consist general motors 2002 stock incentive plan formerly 1997 general motors amended stock incentive plan gmsip general motors 1998 salaried stock option plan gmssop general motors 2002 long term incentive plan gmltip gmsip gmltip administered executive compensation committee gm board gmssop administered vice president global human resources ii116 general motors corporation subsidiaries notes consolidated financial statements continued note 24 stock incentive plans continued gmsip 274 million shares gm 123 par value common stock may granted june 1 2002 may 31 2007 approximately 49 million available grants december 31 2005 shares granted undelivered gmsip due primarily expiration termination become available grant options granted prior 1997 gmsip generally exercisable onehalf one year onehalf two years dates grant stock option grants awarded since 1997 vest ratably three years date grant option prices 100 fair market value dates grant options generally expire 10 years dates grant subject earlier termination certain conditions gmssop commenced january 1 1998 ends december 31 2007 number shares gm 123 par value common stock may granted year determined management approximately 08 million shares gm 123 par value common stock available grants december 31 2005 stock options vest one year following date grant exercisable two years date grant option prices 100 fair market value dates grant options generally expire 10 years two days dates grant subject earlier termination certain conditions gmltip consists award opportunities granted participants based achievement specific corporate business criteria target number shares gm 123 par value common stock may granted year determined management grants subject threeyear performance period final award payout may vary based achievement criteria condition three plans minimum percentile ranking gm’s total shareholder return among companies sp 500 december 31 2005 approximately 48 million target shares outstanding gmltip outstanding shares total 28 million granted 2003 2004 grantdate fair value 3728 4933 respectively management intends settle awards gm 123 par value common stock remaining outstanding shares approximately 20 million shares granted 2005 fair value 3913 management intends settle awards cash preceding targeted number shares would finally granted targeted performance condition achieved final payout subject approval executive compensation committee board directors fair value option grant estimated date grant using blackscholes optionpricing model following weightedaverage assumptions ii117 general motors corporation subsidiaries notes consolidated financial statements continued note 24 stock incentive plans continued changes status outstanding options follows weightedaverage grantdate fair value 723 1282 858 gmsip options granted 2005 2004 2003 respectively grantdate fair value 1285 2004 858 2003 gmssop options granted ii118 general motors corporation subsidiaries notes consolidated financial statements continued note 24 stock incentive plans concluded following table summarizes information gm’s stock option plans december 31 2005 note 25 income ii119 general motors corporation subsidiaries notes consolidated financial statements continued note 26 segment reporting sfas 131 “disclosures segments enterprise related information” established standards reporting information operating segments financial statements operating segments defined components enterprise separate financial information available evaluated regularly chief operating decision maker decision making group deciding allocate resources assessing performance gm’s chief operating decision maker chief executive officer operating segments managed separately operating segment represents strategic business unit offers different products serves different markets gm’s auto reportable operating segment consists gm’s four automotive regions gm north america gmna gm europe gme gm latin americaafricamideast gmlaam gm asia pacific gmap constitute gm automotive gma gmna designs manufactures andor markets vehicles primarily north america following nameplates chevrolet pontiac gmc buick cadillac saturn hummer gme gmlaam gmap primarily meet demands customers outside north america vehicles designed manufactured marketed following nameplates opel vauxhall holden saab buick chevrolet gmc cadillac daewoo includes elimination intersegment transactions certain nonsegment specific revenues expenditures including legacy costs related postretirement benefits certain delphi retirees certain corporate activities gm’s fio reportable operating segment consists gmac financing includes financing entities consolidated gmac provides broad range financial services including consumer vehicle financing fullservice leasing fleet leasing dealer financing car truck extended service contracts residential commercial mortgage services commercial vehicle insurance assetbased lending accounting policies operating segments described summary significant accounting policies except disaggregated financial results prepared using management approach consistent basis manner gm management internally disaggregates financial information purposes assisting making internal operating decisions gm evaluates performance based standalone operating segment net income generally accounts intersegment sales transfers sales transfers third parties current market prices revenues attributed geographic areas based location assets producing revenues ii120 general motors corporation subsidiaries notes consolidated financial statements continued note 26 segment reporting continued see notes next page ii121 general motors corporation subsidiaries notes consolidated financial statements continued note 26 segment reporting continued interest income included net sales revenues external customers ii122 general motors corporation subsidiaries notes consolidated financial statements continued note 26 segment reporting concluded information concerning principal geographic areas follows dollars millions 1 consists property note 13 equipment operating leases note 11 net accumulated depreciation note 27 subsequent events gm withdrew 1 billion hourly veba trust february 1 2006 additional 1 billion hourly veba trust march 1 2006 february 6 2006 board declared quarterly cash dividend 025 per share reduction quarterly rate 050 per share followed since first quarter 1997 march 7 2006 gm sold 9236 million shares investment suzuki approximately 20 billion cash reducing equity stake 204 approximately 37 163 million shares gm expects pretax gain range 600 million 650 million march 22 2006 gm announced gm delphi uaw reached tentative agreement intended reduce number us hourly employees gm delphi accelerated attrition program agreement subject approval bankruptcy court delphi’s participation agreement approved agreement provide combination early retirement programs incentives designed help reduce employment levels gm delphi agreement also calls flowback 5000 uawrepresented delphi employees gm september 2007 subject extension eligible uawrepresented delphi employees may elect retire delphi flow back gm ii123 general motors corporation subsidiaries notes consolidated financial statements continued note 27 subsequent events concluded retire agreement gm agreed assume financial obligations relating lump sum payments made eligible delphi us hourly employees accepting normal voluntary retirement incentives certain postretirement employee benefit obligations relating delphi employees flow back gm agreement gm expects record costs associated eligible gm employees attrition program 2006 employees agree participate estimated costs associated eligible uawrepresented delphi employees elect flow back gm included reserve recorded gm 2005 related contingent liabilities associated delphi’s chapter 11 filing march 23 2006 gmac sold 78 equity gmac commercial mortgage approximately 15 billion cash closing gmac commercial mortgage repaid gmac approximately 73 billion intercompany loans bringing gmac’s total cash proceeds 88 billion furthermore closing gmac commercial mortgage changed name capmark financial group inc capmark gmac also invest additional 250 million capmark trust preferred stock gmac’s remaining interest gmac commercial mortgage reflected equity method investment ii124 general motors corporation subsidiaries supplementary information selected quarterly data unaudited ii125 general motors corporation subsidiaries supplementary information selected quarterly data unaudited continued ii126 general motors corporation subsidiaries supplementary information selected quarterly data unaudited continued 1 restatement quarterly results previously announced restatements gm previously disclosed current report form 8k dated november 9 2005 would restate financial statements correct accounting credits lump sum payments suppliers additionally gm subsequently chosen restate financial statements errors identified periods presented filing restatement gm’s previously reported financial results years ended december 31 2004 2003 2002 reflected annual report form 10ka year ended december 31 2004 restatement effects first three quarters 2005 previously announced fourth quarter calendar year 2005 results summarized quarterly results previously reported first three quarters 2005 include adjustments estimated effect supplier credits discussed included announced fourth quarter calendar year 2005 results accordingly sum quarterly results equal announced calendar year results b gm erroneously recorded reduction cost sales certain payments credits received suppliers prior completion earnings process gm concluded payments credits received associated agreements award future services products rights privileges recognized subsequently earned “quarterly basis” adjustments reflect totals net tax correct original accounting credits quarter 2005 calendar year results 2005 previously announced included estimate effects accordingly final adjustment estimate shown annual basis c gm’s portfolio vehicles operating lease daily rental car entities impaired lease inception prematurely revalued 2005 reflect increased anticipated proceeds upon disposal ii127 general motors corporation subsidiaries supplementary information selected quarterly data unaudited continued gm originally estimated discount rate us hourly pension plan referencing certain indicators view evolving guidance provide best estimate defease pension liability adjustments represent amounts net tax correct original accounting estimates e quarters covered filing gm recorded accounting adjustments identified recorded proper period outofperiod adjustments material financial statements originally reported however part restatement recognized period underlying transactions occurred effect adjustments netoftax 30 million 43 million 43 million 137 million quarter 2005 respectively significant outofperiod adjustments related following matters 1 engineering facilityrelated expenses recorded improper periods 2 overdepreciation certain fixed assets 3 reconciliation prior year tax provisions actual tax returns 43 million adjustment third quarter 96 million relates engineering facilityrelated expenses 113 relates overdepreciation certain fixed assets 137 million adjustment fourth quarter 118 million relates tax matters adjustments preliminary results reported form 8k dated january 26 2006 addition restatement adjustments gm’s fourth quarter calendar year 2005 preliminary results reported form 8k dated january 26 2006 adjusted following items f delphi contingent exposures range contingent exposures reported preliminary results refined reflect developments gm believes range contingent exposures 55 billion 12 billion amounts near low end range considered possible amounts near high end range assuming agreement reached among gm delphi’s unions g gmna restructuring charges reported preliminary results revised include gm’s best estimate costs incurred expiration current labor agreement september 2007 h goodwill impairment recognition goodwill impairment charges relating gmac’s commercial finance operating segment impairment charges pertain primarily goodwill recognized connection 1999 acquisition bank new york’s commercial finance business 2 restatement interim statements cash flows gm restated statements cash flows correct erroneous classification cash flows certain mortgage transactions within financing insurance operations certain mortgage loan originations purchases appropriately classified either operating cash flows investing cash flows consistent original designation loans held sale loans held investment addition proceeds sales repayments related certain mortgage loans initially classified mortgage loans held investment subsequently transferred mortgage loans held sale reported operating cash flows instead investing cash flows consolidated statements cash flows finally certain noncash proceeds transfers appropriately presented statements cash ii128 general motors corporation subsidiaries supplementary information selected quarterly data unaudited continued flows effects restatement adjustments gm’s previously reported interim statements cash flows 2005 summarized 3 first quarter 2005 results include following aftertax items • charge 148 million salaried attrition program relating voluntary early retirement separation programs us • charge 84 million plant facility impairments relating writedown fair market value various plant assets connection action discontinue production lansing assembly plant • charge 422 million gme restructuring plan announced fourth quarter 2004 targeting reduction annual structural costs estimated 600 million 2006 total reduction 12000 employees including 10000 germany 20052007 separation programs early retirements selected outsourcing initiatives expected charge first quarter 2005 covers approximately 5650 people 4900 germany 4 second quarter 2005 results include following aftertax items • charge 788 million related writedown fair market value june 30 2005 gm’s investment approximately 20 common stock fuji heavy industries fhi • additional charge 126 million related gme restructuring plan noted costs related dissolving gm’s powertrain purchasing joint ventures fiat charge covers approximately 600 additional separations well charges related previous separations required amortized future periods ii129 general motors corporation subsidiaries supplementary information selected quarterly data unaudited continued 5 third quarter 2005 results include following aftertax items • charge 788 million 468 million gmna 176 million gme 99 million gmlaam 45 million gmap plant facility impairments reflecting results third quarter reviews carrying value longlived assets held used goodwill intangible assets indefinite lives impairments consist 672 million tax related productspecific assets written 116 million tax related office production facilities still service yearend 2005 employee idling separation costs lease contracts terminated • additional charge related gme restructuring plan noted 56 million approximately 500 additional separations well charges related previous separations required amortized future periods 6 fourth quarter 2005 results include following aftertax items • charge 17 billion connection north american manufacturing capacity actions announced november 2005 charge includes 12 billion associated hourly employees facilities gm idling 455 million noncash writedown property plants equipment • charge pretax 55 billion 36 billion tax gm’s contingent exposures relating delphi’s chapter 11 filing including benefit guarantees certain former gm us hourly employees transferred delphi gm believes range contingent exposures 55 billion 12 billion • gain 71 million related sale gm’s investment common stock fhi due appreciation fair value stock june 30 2005 date fhi impairment charge also fourth quarter gme recorded cancellation charges 20 million tax related fhi resulting net adjustment 51 million fourth quarter • restructuring charges totaling 114 million follows additional aftertax charge related gme restructuring plan noted 69 million approximately 800 additional separations well charges related previous separations required amortized future periods 38 million gmap 7 million • charge 109 million related adoption fin 47 “accounting conditional asset retirement obligations” december 31 2005 recorded cumulative effect change accounting principle • benefit 49 million related effect changes polish tax law gm powertrain joint venture amount included equity income • recognition valuation allowance 617 million deferred tax assets gm brasil ii130 general motors corporation subsidiaries supplementary information selected quarterly data unaudited continued 1 fourth quarter 2004 results include following • aftertax gain 118 million resulting contribution 11 million shares xm satellite radio holdings inc class common stock valued 432 million gm’s voluntary employees’ beneficiary association veba • 78 million aftertax charge related primarily previously announced facilities rationalization actions gm’s baltimore md linden nj plants • 383 million aftertax charge related results gm’s annual review carrying value longlived assets held used goodwill intangible assets indefinite lives • 136 million aftertax charge related writeoff gm’s remaining investment balance fiat auto holdings bv reflects completion impairment study relating carrying value investment ii131 general motors corporation subsidiaries supplementary information selected quarterly data unaudited concluded • 540 million aftertax favorable adjustment various adjustments resulting changes tax laws us overseas capital loss carryforwards • aftertax charge 886 million related february 13 2005 gm fiat agreement gm pay fiat approximately 20 billion return 10 equity interest fah settle various disputes terminate master agreement including put option entered march 2000 acquire interest key strategic diesel engine assets important rights respect diesel engine technology knowhow item 8 also read conjunction part ii item 8 financial statements supplementary data gmac annual report form 10k period ended december 31 2005 filed separately sec incorporated document reference item 9 item 8 financial statements supplementary data motors liquidation company guc trust financial statements report independent registered public accounting firm trust administrator trust monitor trust beneficiaries motors liquidation company guc trust audited accompanying statements net assets liquidation motors liquidation company guc trust march 31 2013 2012 related statements changes net assets liquidation cash flows years ended financial statements responsibility trust administrator motors liquidation company guc trust responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audits obtain reasonable assurance whether financial statements free material misstatement motors liquidation company guc trust required engaged perform audit internal control financial reporting audits included consideration internal control financial reporting basis designing audit procedures appropriate circumstances purpose expressing opinion effectiveness motors liquidation company guc trust’s internal control financial reporting accordingly express opinion audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects net assets liquidation motors liquidation company guc trust march 31 2013 2012 related statements changes net assets liquidation cash flows years ended conformity accounting principles generally accepted united states america plante moran pllc auburn hills michigan may 21 2013 motors liquidation company guc trust statements net assets liquidation basis march 31 2013 2012 dollars thousands see accompanying notes financial statements motors liquidation company guc trust statements changes net assets liquidation basis years ended march 31 2013 2012 dollars thousands see accompanying notes financial statements motors liquidation company guc trust statements cash flows liquidation basis years ended march 31 2013 2012 dollars thousands guc trust presented reconciliation net income cash flow operations entity liquidation guc trust continuing operations result measurement net income term used generally accepted accounting principles measure results operations see accompanying notes financial statements motors liquidation company guc trust notes financial statements march 31 2013 1 purpose trust motors liquidation company guc trust “guc trust” successor motors liquidation company formerly known general motors corp “mlc” within meaning section 1145 united states bankruptcy code “bankruptcy code” guc trust holds administers directs distribution certain assets pursuant terms conditions amended restated motors liquidation company guc trust agreement “guc trust agreement” dated june 11 2012 amended time pursuant second amended joint chapter 11 plan “plan” dated march 18 2011 mlc debtor affiliates collectively along mlc “debtors” benefit holders allowed general unsecured claims debtors “allowed general unsecured claims” guc trust formed march 30 2011 statutory trust delaware statutory trust act purposes implementing plan distributing guc trust’s distributable assets plan generally provides distribution certain shares common stock “new gm common stock” new general motors company “new gm” certain warrants purchase shares stock “new gm warrants” together new gm common stock “new gm securities” holders allowed general unsecured claims pro rata amount claims addition plan provides holder allowed general unsecured claim obtain form guc trust units defined contingent right receive pro rata basis additional shares new gm common stock new gm warrants extent new gm common stock new gm warrants required satisfaction previously disputed general unsecured claims defined liquidation payment expenses guc trust cash remaining dissolution guc trust guc trust administered wilmington trust company solely capacity trust administrator trustee “guc trust administrator” among rights duties subject terms conditions limitations set forth guc trust agreement guc trust administrator power authority hold manage sell invest distribute assets comprising guc trust corpus consult retain professionals administration guc trust prosecute resolve objections disputed general unsecured claims take necessary actions administer winddown affairs debtors upon dissolution upon dissolution resolve satisfy extent allowed residual winddown claims defined activities guc trust administrator overseen fti consulting inc solely capacity monitor “guc trust monitor” motors liquidation company guc trust notes financial statements march 31 2013 2 plan liquidation march 31 2011 date plan became effective “effective date” approximately 29771 million allowed general unsecured claims addition effective date approximately 8154 million disputed general unsecured claims reflects liquidated disputed claims bankruptcy court ordered distribution reserve unliquidated disputed claims “disputed general unsecured claims” reflect potential term loan avoidance action claims total aggregate amount general unsecured claims allowed disputed asserted debtors inclusive potential term loan avoidance action claims approximately 39425 million effective date pursuant guc trust agreement holders disputed general unsecured claims become entitled receive distribution new gm securities guc trust extent disputed general unsecured claims become allowed general unsecured claims guc trust agreement guc trust administrator authority file objections disputed general unsecured claims bankruptcy court extended time guc trust may object disputed general unsecured claims administrative expenses defined plan september 21 2013 date may extended application bankruptcy court claims may prosecuted alternative dispute resolution proceedings including mediation arbitration “adr proceedings” appropriate guc trust administrator professionals currently prosecuting multiple objections disputed general unsecured claims extent portion disputed general unsecured claim deemed invalidor “disallowed”by order bankruptcy court order tribunal presiding adr proceeding applicable settlement guc trust portion disputed general unsecured claim disallowed entitled distribution guc trust subject appeal rights claimant however extent disputed general unsecured claim fully resolved resolution results portion original disputed general unsecured claim deemed validor “allowed”by order bankruptcy court order tribunal presiding adr proceeding applicable settlement guc trust portion disputed general unsecured claim allowed considered allowed general unsecured claim entitled distribution guc trust allowed general unsecured claim effective date claims “resolved disputed claims” one avoidance action captioned official committee unsecured creditors motors liquidation co v jpmorgan chase bank na et al adv pro no0900504 bankr sdny july 31 2009 “term loan avoidance action” commenced prior statutory deadline commencing actions term loan avoidance action commenced official committee unsecured creditors motors liquidation company “committee” seeks return approximately 15 billion transferred debtors funds advanced commencement debtors’ chapter 11 cases united states treasury export development canada together “dip lenders” consortium prepetition lenders pursuant terms order bankruptcy court december 15 2011 accordance plan upon dissolution mlc term loan avoidance action transferred avoidance action trust defined extent trustee trust administrator avoidance action trust “avoidance action trust administrator” successful obtaining judgment defendants term loan avoidance action allowed general unsecured claims arise amount transfers actually avoided disgorged pursuant thereto general unsecured claims “term loan avoidance action claims” together resolved disputed claims “resolved allowed claims” still unclear whether amounts actually avoided pursuant term loan avoidance action would benefit holders allowed general unsecured claims committee taken position dip lenders entitled proceeds term loan avoidance action interests trust established action plan “avoidance action trust” b holders allowed general unsecured claims exclusive right receive proceeds term loan avoidance action exclusive beneficiaries avoidance action trust respect thereto litigation respect issues ongoing rights recoveries term loan avoidance action still disputed event however funds reclaimed prepetition lenders transferred otherwise benefit guc trust distributed holders guc trust units motors liquidation company guc trust notes financial statements march 31 2013 guc trust distributable assets pursuant terms plan bankruptcy court authorized distribution 150 million shares new gm common stock issued new gm warrants acquire 136363635 newly issued shares new gm stock exercise price set 1000 per share “new gm series warrants” warrants acquire 136363635 newly issued shares new gm stock exercise price set 1833 per share “new gm series b warrants” securities “new gm securities” new gm securities held mlc benefit guc trust dissolution mlc december 15 2011 time transferred guc trust addition agreement governing sale substantially assets debtors related sale documentation together provide event bankruptcy court enters order includes finding estimated aggregate allowed general unsecured claims debtors exceed 35 billion new gm required issue additional shares new gm common stock benefit guc trust’s beneficiaries “additional shares” number additional shares issued equal number shares rounded next whole share calculated multiplying 30 million shares adjusted take account stock dividend stock split combination shares recapitalization merger consolidation reorganization similar transaction respect new gm common stock closing sale issuance additional shares ii fraction numerator amount allowed general unsecured claims exceed 35 billion excess amount capped 7 billion b denominator 7 billion additional shares issued funding guc trust costs liquidation guc trust incurred continue incur certain costs liquidate trust assets implement plan effective date pursuant plan mlc contributed approximately 527 million guc trust held maintained guc trust administrator “guc trust administrative fund” purpose paying certain fees expenses incurred guc trust including fees guc trust administrator guc trust monitor fees expenses professionals retained guc trust “winddown costs” cash investments guc trust administrative fund remain winding conclusion guc trust must returned dip lenders guc trust agreement provides guc trust administrator determines guc trust administrative fund sufficient satisfy current projected costs expenses guc trust guc trust administrator approval guc trust monitor authorized setaside “reserve” new gm securities distribution purpose guc trust administrator may liquidate reserved new gm securities fund winddown costs cases required approval bankruptcy court new gm securities reserved andor sold manner available distribution beneficiaries guc trust units cash proceeds sale classified “other guc trust administrative cash” guc trust agreement separate process reserving setting aside new gm securities satisfy projected costs expenses guc trust matter financial reporting guc trust records reserve statement net assets liquidation source funding addressed thereon expected costs liquidation reasonable basis estimation reason among others direct relationship amount reserve reflected statement net assets liquidation value new gm securities set aside current projected costs adjustments reserve expected costs liquidation reported statement net assets recorded reasonable basis estimation expected incurrence additional costs bankruptcy court previously approved soon effective date march 2012 “march 2012 order” sale new gm securities certain specified costs fees expenses referred reporting costs including directly indirectly relating reports prepared filed guc trust pursuant applicable rules regulations interpretations securities exchange commission ii transfer registration transfer certification guc trust units iii application internal revenue service private letter ruling regarding tax treatment guc trust holders allowed general unsecured claims respect distribution new gm securities march 2012 order additionally authorized sale new gm securities purpose funding accrued projected winddown costs well certain fees costs expenses avoidance action trust described heading “funding avoidance action trust” march 31 2012 sales new gm securities fund estimated projected reporting costs along estimated projected winddown costs calendar years 2011 2012 aggregated approximately 322 million amount comprised part guc trust’s guc trust administrative cash motors liquidation company guc trust notes financial statements march 31 2013 bankruptcy court approved december 2012 “december 2012 order” sale new gm securities amount sufficient generate approximately 179 million fund estimated projected guc trust fees costs expenses 2013 liquidation new gm securities occurred january 2013 sales proceeds approximately 180 million amount comprised part guc trust’s guc trust administrative cash extent guc trust administrative cash ultimately required held guc trust time dissolution remaining guc trust administrative cash distributed guc trust holders allowed general unsecured claims holders guc trust units case may march 31 2013 902228 shares new gm common stock 820205 new gm series warrants 820205 new gm series b warrants sold fund estimated projected winddown reporting costs 2013 march 31 2013 new gm securities aggregate fair market value 410 million reserved set aside projected guc trust fees costs expenses incurred beyond december 31 2013 accordingly new gm securities available distribution beneficiaries guc trust units funding potential tax liabilities guc trust subject us federal income tax realized gains disposition shares new gm common stock new gm warrants transferred mlc guc trust december 15 2011 taxes “taxes distribution” guc trust agreement provides guc trust administrative fund may utilized satisfy taxes distribution guc trust administrator authorized approval guc trust monitor reserve set aside distribution amount new gm securities liquidated proceeds would sufficient satisfy current potential taxes distribution guc trust administrator may liquidate reserved new gm securities fund taxes distribution approval guc trust monitor without necessity obtaining approval bankruptcy court new gm securities reserved sold manner available distribution beneficiaries guc trust units cash proceeds sale classified “other guc trust administrative cash” guc trust agreement year ended march 31 2013 guc trust administrator reviewed current potential taxes distribution result review guc trust administrator determined necessary reserve set aside new gm securities aggregate fair market value 4073 million potential taxes distribution based guc trust’s method calculating potential gains distributions sales new gm securities reduced current period carryforward net operating losses future deductible expenses march 31 2013 well guc trust’s method converting potential tax liability number securities reserved accordingly new gm securities currently available distribution beneficiaries guc trust units guc trust administrator intends continue reevaluate reserve set aside new gm securities quarterly basis new gm securities transferred mlc guc trust still held march 31 2013 tax basis approximately 1073 million 1987 per share new gm common stock 1138 per warrant new gm series warrants 788 per warrant new gm series b warrants tax basis used determine taxable gain loss disposition new gm securities since transfer described note 9 financial reporting purposes guc trust recorded deferred tax liability fair value new gm securities excess tax basis march 31 2013 2012 funding avoidance action trust based analysis avoidance action trust potential funding sources guc trust administrator conjunction avoidance action trust administrator determined would best interest holders allowed general unsecured claims fund certain fees costs expenses avoidance action trust subject approval bankruptcy court march 2012 bankruptcy court approved sale new gm securities aggregating approximately 137 million transfer sales proceeds avoidance action trust funding sale occurred march 2012 comprising 269422 shares new gm common stock 244929 new gm series warrants 244929 new gm series b warrants sales proceeds held guc trust march 31 2012 pending receipt written confirmation internal revenue service transfer sale proceeds would affect prior rulings regarding tax characterization 2009 section 363 sale mlc’s subsequent liquidation ii guc trust “disputed ownership fund” within meaning treasury regulation section 1468b9 sale proceeds transferred avoidance action trust may 2012 following receipt written confirmation motors liquidation company guc trust notes financial statements march 31 2013 mlc winddown upon dissolution debtors occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining disputed administrative expenses priority tax claims priority nontax claims secured claims “residual winddown claims” december 15 2011 plan debtors transferred guc trust amount cash necessary “residual winddown assets” satisfy ultimate allowed amount residual winddown claims including certain litigation defense costs related term loan avoidance action “avoidance action defense costs” estimated debtors costs fees expenses relating satisfying resolving residual winddown claims “residual winddown costs” residual winddown costs residual winddown claims less residual winddown assets aggregating approximately 428 million including certain prepaid expenses assigned guc trust approximately 14 million designated payment avoidance action defense costs transferred guc trust december 15 2011 excess funds returned dip lenders time guc trust administrator determines residual winddown assets adequate satisfy residual winddown claims including actual amount avoidance action defense costs residual winddown costs satisfied guc trust administrative cash remaining guc trust administrative cash guc trust administrator authorized guc trust monitor approval reserve bankruptcy court approval sell new gm securities cover shortfall extent new gm securities reserved sold obtain funding complete winddown debtors securities available distribution beneficiaries guc trust therefore amount residual winddown claims residual winddown costs could reduce assets guc trust available distribution guc trust concluded affairs funds remaining obtained new gm securities sold fund winddown process resolution satisfaction residual winddown claims distributed holders guc trust units actual amount avoidance action defense costs exceeds corresponding cash 14 million received guc trust mlc dissolution date new residual winddown claim arise amount shortfall addition residual winddown assets guc trust also received dissolution date approximately 34 million cash mlc purposes funding 1 certain costs fees expenses payable plan indenture trustees fiscal paying agents previously outstanding debt mlc indenture trustee fiscal paying agent costs 2 reporting costs funds received credited reserve expected costs liquidation unused portion funds designated indenture trustee fiscal paying agent costs 14 million must returned dip lenders available distribution holders guc trust units winding conclusion guc trust addition december 15 2011 mlc transferred remaining new gm securities guc trust previously reported securities due motors liquidation company since reported holdings new gm securities 3 basis presentation significant accounting policies liquidation basis accounting guc trust exists solely purposes described note 1 finite life accordingly guc trust prepared accompanying financial statements liquidation basis accounting accordance accounting principles generally accepted united states america us gaap liquidation basis accounting prescribed financial accounting standards board fasb accounting standards codification assets stated estimated net realizable value nondiscounted amount cash asset expected converted liquidation period liabilities continue recognized amount required us gaap remeasured reflect anticipation entity legally released obligation additionally liquidation basis accounting reserve established estimated costs expected incurred liquidation period costs accrued reasonable basis estimation estimates periodically reviewed adjusted appropriate valuation assets net realizable value reserves residual winddown claims reserves expected liquidation costs represent estimates based present facts circumstances known guc trust administrator subject change motors liquidation company guc trust notes financial statements march 31 2013 described beneficiaries guc trust future extent liquidating distributions yet paid current holders allowed general unsecured claims future current holders guc trust units “trust beneficiaries” disputed general unsecured claims resolved allowed thereby become allowed general unsecured claims holders thereof become entitled receive liquidating distributions new gm securities guc trust units pro rata amount claims upon occurrence guc trust incurs obligation distribute securities accordingly liquidating distributions payable recorded fair value new gm securities end period disputed general unsecured claims resolved allowed general unsecured claims similarly extent potential term loan avoidance action claims defined arise would become allowed manner described note 2 liquidating distributions payable would recorded new gm securities fair value would become distributable holders term loan avoidance action claims upon occurrence prior resolution allowance disputed general unsecured claims potential term loan avoidance action claims liabilities recorded conditional obligations associated disputed general unsecured claims rather beneficial interests trust beneficiaries residual assets guc trust reflected net assets liquidation guc trust accompanying financial statements liquidation basis accounting guc trust presents two principal financial statements statement net assets liquidation statement changes net assets liquidation addition although required liquidation basis accounting guc trust also presents statement cash flows accordance requirements guc trust agreement fiscal year guc trust’s fiscal year begins april 1 ends following march 31 guc trust created march 30 2011 effective date plan march 31 2011 financial reporting purposes guc trust assumed established april 1 2011 received initial funding april 1 2011 beginning year ended march 31 2012 presented accompanying financial statements cash equivalents cash equivalents consist amounts held bank accounts money market funds marketable securities marketable securities consist short term investments corporate commercial paper municipal government commercial paper variable demand notes us government agency bonds guc trust valued securities fair value based carrying value municipal corporate commercial paper carrying value approximates fair value par value variable demand notes par value equals fair value pricing models quoted prices securities similar characteristics broker quotes us government agency bonds holdings new gm securities holdings new gm securities represent guc trust’s interest new gm securities held future distribution respect allowed general unsecured claims guc trust units include amounts set aside distribution fund estimated projected winddown reporting costs potential taxes distribution described note 2 securities held consist shares new gm common stock new gm warrants described note 1 note 6 guc trust valued holdings securities fair value based quoted market prices last trading day fiscal year prior december 15 2011 mlc held new gm securities benefit guc trust guc trust reported interest securities due mlc previous financial statements quoted market prices new gm warrants held mlc benefit guc trust available april 20 2011 accordingly fair value new gm warrants held mlc benefit guc trust april 1 2011 estimated using blackscholes pricing model quoted market prices new gm common stock held mlc benefit guc trust available april 1 2011 accordingly used valuing common stock assets deposits assets deposits consist principally prepaid insurance prepaid expenses retainers professionals motors liquidation company guc trust notes financial statements march 31 2013 accounts payable liabilities accounts payable liabilities represent amounts due professionals service providers vendors services rendered goods received end period income taxes guc trust considered “disputed ownership fund” pursuant treasury regulation section 1468b9 assets transferred guc trust passive investments guc trust taxed qualified settlement fund qsf pursuant treasury regulation section 1468b9c1ii qsf tax status guc trust approved internal revenue service private letter ruling issued march 2 2011 general qsf considered c corporation pays federal income tax using trust income tax rates modified gross income modified gross income includes gross income pursuant internal revenue code section 61 less administrative expenses certain losses sale exchange worthlessness property net operating losses general disputed ownership fund taxed qsf recognize gross income assets transferred therefore guc trust recognized gross income transfer assets mlc guc trust currently expected generate gross income form interest dividend income recognize gains andor losses upon disposition shares new gm common stock new gm warrants holds reduced administrative expenses accumulated net operating losses compute modified gross income tax basis new gm securities held march 31 2013 2012 used calculate gain loss disposition new gm common stock new gm warrants approximately 1073 1123 million respectively guc trust taxable federal income tax purposes current income tax liability asset recognized estimated taxes payable receivable year deferred tax liabilities assets recognized estimated future tax effects temporary differences financial reporting tax accounting deferred tax assets reviewed recoverability valuation allowances provided necessary guc trust subject state income taxes current law accordingly current deferred state income tax liabilities assets recorded guc trust recognizes tax benefit uncertain tax position likely tax position sustained examination taxing authority based technical merits position guc trust’s federal income tax return year ended march 31 2012 longer subject examination march 31 2013 known items would result significant accrual uncertain tax positions funding obligation avoidance action trust based analysis avoidance action trust potential funding sources guc trust administrator conjunction avoidance action trust administrator determined would best interest holders allowed general unsecured claims fund certain fees costs expenses avoidance action trust subject approval bankruptcy court described note 2 march 2012 bankruptcy court approved sale new gm securities aggregating approximately 137 million transfer sales proceeds avoidance action trust funding accordingly funding obligation avoidance action trust established accompanying statement net assets march 31 2012 amount expected transferred guc trust avoidance action trust may 14 2012 reserves residual winddown claims residual winddown costs upon dissolution mlc occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining residual winddown claims date dissolution debtors transferred guc trust cash amount necessary satisfy ultimate allowed amount residual winddown claims residual winddown costs estimated debtors residual winddown claims residual winddown costs less cash amount transferred debtors excess funds returned dip lenders reserves expected costs liquidation basis accounting guc trust required estimate accrue costs associated implementing plan distributing guc trust’s distributable assets costs described winddown costs reporting costs note 2 consist principally professional fees costs governance administrative expenses amounts may vary significantly due among things time effort required complete distributions plan guc trust recorded reserves expected costs liquidation represent estimated costs incurred remaining liquidation period guc trust reasonable basis estimation amount liquidation costs ultimately incurred depends period time extent activities required guc trust complete functions responsibilities plan guc trust agreement motors liquidation company guc trust notes financial statements march 31 2013 significant uncertainty remains time period extent activities march 31 2013 remaining liquidation period estimated probabilityweighted basis guc trust believes appropriate measurement basis circumstances reasonably possible guc trust’s estimates regarding costs remaining liquidation period could change near term guc trust incurs costs reserves released offset costs incurred liability service provider recognized accounts payable accrued expense paid process recording reserves matter financial reporting separate distinct process new gm securities set aside distribution purposes funding estimated projected winddown reporting costs potential taxes distribution described note 2 use estimates preparation financial statements liquidation basis conformity us gaap requires use estimates assumptions affect reported amounts assets liabilities estimates subject known unknown risks uncertainties factors could materially impact amounts reported disclosed financial statements related footnotes significant estimates include anticipated amounts timing future cash flows expected liquidation costs residual winddown claims fair value marketable securities fair value new gm warrants held mlc benefit guc trust april 1 2011 actual results could differ estimates new accounting standard april 2013 fasb issued accounting standards update 201307 liquidation basis accounting amended fasb accounting standards codification provides guidance entity apply liquidation basis accounting addition guidance provides principles recognition measurement assets liabilities requirements financial statements prepared using liquidation basis accounting provisions effective annual periods beginning december 15 2013 interim periods therein early adoption permitted guc trust expect adoption provisions material impact financial statements 4 net assets liquidation description guc trust agreement plan described fully note 1 beneficiaries guc trust future extent liquidating distributions yet paid current holders allowed general unsecured claims future current holders guc trust units “trust beneficiaries” certain assets guc trust reserved funding expected costs liquidation potential tax liabilities available trust beneficiaries assets guc trust primarily holdings new gm securities described notes 1 6 available distributed trust beneficiaries “guc trust distributable assets” accordance plan amounts net assets liquidation presented accompanying statements net assets liquidation basis march 31 2013 2012 correspond amounts guc trust distributable assets march 31 2013 2012 trust units described note 1 holder allowed general unsecured claim retain contingent right receive pro rata basis additional shares new gm common stock new gm warrants extent shares new gm common stock new gm warrants required satisfaction previously disputed general unsecured claims liquidation payment expenses tax liabilities guc trust cash remaining dissolution guc trust guc trust issues units representing contingent rights “guc trust units” rate one guc trust unit per 1000 allowed general unsecured claims holder allowed general unsecured claim subject rounding pursuant guc trust agreement connection initial recognition allowed general unsecured claim guc trust makes quarterly liquidating distributions holders guc trust units extent certain previously disputed general unsecured claims asserted debtors’ estates either disallowed otherwise resolved favorably guc trust thereby reducing amount guc trust assets reserved distribution respect asserted claims amount excess guc trust distributable assets defined guc trust agreement end relevant quarter exceeds thresholds set forth guc trust agreement motors liquidation company guc trust notes financial statements march 31 2013 following presents changes years ended march 31 2013 2012 numbers guc trust units outstanding guc trust obligated issue allowed disputed claims total cumulative pro rata liquidating distributions ultimately received trust beneficiaries dependent upon current amount allowed general unsecured claims final resolution outstanding disputed general unsecured claims reflect liquidated disputed claims bankruptcy court ordered reserve unliquidated disputed claims “disputed general unsecured claims” potential term loan avoidance action claims described note 2 disputed general unsecured claims march 31 2013 2012 reflect claim amounts originally filed amounts court ordered distribution reserve certain claims filed without claim amount disputed general unsecured claims may settle amounts differ significantly amounts differ significantly historical pattern claims settled allowed proportion claims resolved disallowed described note 3 prior resolution allowance disputed general unsecured claims potential term loan avoidance action claims liabilities recorded conditional obligations associated disputed general unsecured claims liquidating distributions payable recorded fair value new gm securities distributed end period disputed general unsecured claims resolved allowed general unsecured claims similarly extent potential term loan avoidance action claims arise would become allowed manner described note 2 liquidating distributions payable would recorded new gm securities fair value would become distributable holders term loan avoidance action claims upon occurrence following table presents summary allowed disputed general unsecured claims term loan avoidance action claims years ended march 31 2013 2012 1 maximum amount unresolved claims represents sum disputed general unsecured claims term loan avoidance action claims 2 total claim amount represents sum allowed general unsecured claims maximum amount unresolved claims motors liquidation company guc trust notes financial statements march 31 2013 disputed general unsecured claims aggregating 360 billion march 31 2013 table approximately 268 billion relates litigation currently pursued guc trust “nova scotia matter” disallow equitably subordinate reduce following claims debtors’ chapter 11 cases claims aggregating approximately 107 billion filed behalf certain holders notes “nova scotia notes” issued 2003 general motors nova scotia finance company nova scotia unlimited liability company subsidiary mlc “nova scotia finance” guaranteed mlc collectively “guarantee claims” ii claim approximately 161 billion filed bankruptcy trustee nova scotia finance collectively guarantee claims “disputed nova scotia claims” addition guc trust determined march 31 2013 approximately 407 million relates claims filed directly former beneficial owners notes previously issued guaranteed debtors proofs claim otherwise filed indirectly behalf beneficial owners members broader class guc trust expects petition bankruptcy court disallowance claims upon final resolution claims classes beneficial owners otherwise belong nova scotia matter involves prior settlement agreement “lockup agreement” entered day mlc filed bankruptcy among mlc nova scotia finance certain holders nova scotia notes among parties lockup agreement purported settle certain prepetition litigation commenced canada relating nova scotia notes exchange among things cash payment approximately 367 million funded mlc ii allowance claims extent permitted law chapter 11 cases mlc aggregating approximately 268 billion prior lockup agreement aggregate amount claims holders nova scotia notes approximately 10 billion trial nova scotia matter commenced bankruptcy court august 7 2012 yet concluded resolution nova scotia matter favor guc trust would result portion disputed nova scotia claims disallowed 5 liquidating distributions liquidating distributions years ended march 31 2013 2012 consisted following distributions year ended march 31 2013 consisted distributions 1 holders resolved disputed claims 2 holders allowed general unsecured claims previously failed fulfill informational requirements distribution established accordance guc trust agreement subsequently successfully fulfilled information requirements distributions year ended march 31 2012 included distributions two distributions respect outstanding guc trust units guc trust obligated march 31 2013 2012 distribute 288600 622637 shares respectively new gm stock 262306 565896 respectively new gm series warrants 262306 565896 respectively new gm series b warrants aggregate following 1 holders resolved disputed claims 2 certain holders allowed general unsecured claims satisfied certain informational requirements necessary receive securities 3 holders guc trust units march 31 2012 addition march 31 2013 cash 06 million distributable lieu shares warrants cash distributions payable governmental entities precluded applicable law receiving distributions new gm securities distributions lieu fractional shares warrants motors liquidation company guc trust notes financial statements march 31 2013 6 holdings new gm securities march 31 2013 2012 holdings new gm securities fair value consisted following described note 5 march 31 2013 2012 guc trust accrued liquidating distributions payable 166 million 317 million respectively respect new gm securities cash 06 million march 31 2013 distributable result numbers new gm securities reflected include shares warrants liquidating distributions pending march 31 2013 2012 securities distributions pending aggregated 288600 622637 shares new gm common stock respectively 262306 565896 series warrants respectively 262306 565896 series b warrants respectively march 31 2013 number common stock shares warrants table also includes new gm securities aggregating 410 million reserved set aside projected guc trust fees costs expenses incurred beyond 2013 4073 million new gm securities reserved set aside potential taxes distribution march 31 2012 number common stock shares warrants table also includes new gm securities aggregating 284 million reserved set aside projected guc trust fees costs expenses incurred beyond 2012 1086 million new gm securities reserved set aside potential taxes distribution result march 31 2013 2012 numbers new gm securities table include aggregate 8092231 2688527 shares new gm common stock respectively 7356545 2444116 new gm series warrants respectively 7356545 2444116 new gm series b warrants respectively set aside set forth aggregate number fair value shares warrants pending distribution reserved set aside available distribution march 31 2013 2012 motors liquidation company guc trust notes financial statements march 31 2013 7 fair value measurements accounting standards require certain assets liabilities reported fair value financial statements provide framework establishing fair value framework determining fair value based hierarchy prioritizes inputs valuation techniques used measure fair value trust’s marketable securities holdings new gm securities liquidating distributions payable presented provided hierarchy level 1in general fair values determined level 1 inputs use quoted prices active markets identical assets liabilities guc trust ability access level 2fair values determined level 2 inputs use inputs observable either directly indirectly level 2 inputs include quoted prices similar assets liabilities active markets inputs interest rates yield curves observable commonly quoted intervals level 3level 3 inputs unobservable inputs including inputs available situations little market activity related asset liability level 3 fair value measurements based primarily management’s estimates using pricing models discounted cash flow methodologies similar techniques taking account characteristics asset liability guc trust assets liabilities measured level 3 inputs march 31 2013 2012 instances inputs used measure fair value fall different levels fair value hierarchy fair value measurements entirety categorized based lowest level input significant valuation guc trust’s assessment significance particular inputs fair value measurements requires judgment considers factors specific asset liability guc trust also holds financial instruments measured fair value recurring basis including accounts payable liabilities fair value liabilities approximates carrying amounts accompanying financial statements due short maturity instruments following table presents information guc trust’s assets liabilities measured fair value recurring basis march 31 2013 march 31 2012 valuation techniques used guc trust determine fair values motors liquidation company guc trust notes financial statements march 31 2013 following descriptions valuation methodologies used assets liabilities measured fair value • due shortterm liquid nature fair value cash equivalents approximates carrying value • holdings new gm securities valued closing prices reported active market securities traded • marketable securities include municipal commercial paper variable demand notes corporate commercial paper us government agency bonds municipal variable demand notes trade daily par value therefore fair value equal par value due short term maturities fair value municipal corporate commercial paper approximates carrying value fair value us government agency bonds based pricing models quoted prices securities similar characteristics broker quotes • liquidating distributions payable valued closing prices new gm securities reported active market securities traded guc trust’s policy recognize transfers levels fair value hierarchy actual date event change circumstances caused transfer transfers year ended march 31 2013 year ended march 31 2012 result dissolution mlc new gm securities previously held mlc transferred guc trust accordingly securities became direct holdings guc trust quoted prices active markets reclassified level 2 level 1 motors liquidation company guc trust notes financial statements march 31 2013 8 reserves expected costs liquidation residual winddown claims following summary activity reserves expected costs liquidation years ended march 31 2013 2012 motors liquidation company guc trust notes financial statements march 31 2013 year ended march 31 2013 estimates expected winddown costs estimates expected reporting costs increased 52 million 123 million respectively year ended march 31 2012 estimates expected winddown costs estimates expected reporting costs increased 324 million 206 million respectively revisions estimates recorded additions reserves expected costs liquidation years estimates expected winddown costs year ended march 31 2013 reflect execution letter agreement dip lenders providing relief certain restrictions utilization winddown assets guc trust recorded reserves expected costs liquidation represent amounts expected incurred estimated remaining liquidation period guc trust reasonable basis estimation march 31 2013 amount liquidation costs ultimately incurred depends time period extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities guc trust changed estimate length remaining liquidation period year ended march 31 2013 resulted increase estimates expected winddown costs estimates expected reporting costs year march 31 2013 recorded reserves expected costs liquidation reflect estimated costs remaining liquidation period extending december 31 2016 estimated probabilityweighted basis permitted us gaap guc trust believes appropriate measurement basis circumstances addition certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued reasonably possible guc trust’s estimates regarding costs remaining liquidation period could change near term following summary activity reserves residual winddown claims years ended march 31 2013 2012 9 income tax provision components income tax provision statements changes net assets liquidation years ended march 31 2013 2012 follows motors liquidation company guc trust notes financial statements march 31 2013 current income tax expense benefit years ended march 31 2013 2012 due current prior year net operating losses net operating losses expire march 2032 2033 following summarizes sources expected tax consequences future taxable deductions income comprise net deferred tax liability march 31 2013 2012 net deferred tax liability march 31 2013 established using enacted statutory tax rate 396 goes effect guc trust’s fiscal year beginning april 1 2013 march 31 2012 guc trust’s statutory tax rate 35 applied adjustment increase net deferred tax liability existing march 31 2012 increase statutory tax rate resulted increase deferred tax provision year ended march 31 2013 approximately 143 million 10 related party transactions addition serving guc trust administrator wilmington trust company continues serve trustee pursuant indentures certain series previously outstanding debt mlc wilmington trust company received continue receive certain customary fees amounts consistent wilmington trust company’s standard rates service bankruptcy court previously approved creation segregated fund purposes funding fees wilmington trust company well indenture trustees fiscal paying agents previously outstanding debt mlc fees wilmington trust company year ended march 31 2013 fees year ended march 31 2012 480000 addition wilmington trust company also entered certain arrangements guc trust pursuant affiliates previously received may future receive reasonable customary fees commissions services capacity guc trust administrator arrangements include provision custodial investment advisory brokerage services guc trust fees commissions charged wilmington trust company affiliates pursuant arrangements consistent standard fees commissions charged wilmington trust company unrelated thirdparties negotiated transactions year ended march 31 2013 2012 total amount fees commissions approximately 147000 210000 respectively item 9 item 8 financial statements supplementary data motors liquidation company guc trust financial statements report independent registered public accounting firm trust administrator trust monitor trust beneficiaries motors liquidation company guc trust audited accompanying statements net assets liquidation motors liquidation company guc trust march 31 2015 2014 related statements changes net assets liquidation cash flows years ended march 31 2015 2014 2013 financial statements responsibility trust administrator motors liquidation company guc trust responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audits obtain reasonable assurance whether financial statements free material misstatement motors liquidation company guc trust required engaged perform audit internal control financial reporting audits included consideration internal control financial reporting basis designing audit procedures appropriate circumstances purpose expressing opinion effectiveness motors liquidation company guc trust’s internal control financial reporting accordingly express opinion audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects net assets liquidation motors liquidation company guc trust march 31 2015 2014 related statements changes net assets liquidation cash flows years ended march 31 2015 2014 2013 conformity accounting principles generally accepted united states america plante moran pllc auburn hills michigan may 22 2015 motors liquidation company guc trust statements net assets liquidation basis march 31 2015 2014 dollars thousands see accompanying notes financial statements motors liquidation company guc trust statements changes net assets liquidation basis years ended march 31 2015 2014 2013 dollars thousands see accompanying notes financial statements motors liquidation company guc trust statements cash flows liquidation basis years ended march 31 2015 2014 2013 dollars thousands guc trust presented reconciliation net income cash flow operations entity liquidation guc trust continuing operations result measurement net income term used generally accepted accounting principles measure results operations see accompanying notes financial statements motors liquidation company guc trust notes financial statements march 31 2015 1 purpose trust motors liquidation company guc trust “guc trust” successor motors liquidation company formerly known general motors corp “mlc” within meaning section 1145 united states bankruptcy code “bankruptcy code” guc trust holds administers directs distribution certain assets pursuant terms conditions amended restated motors liquidation company guc trust agreement “guc trust agreement” dated june 11 2012 amended time pursuant second amended joint chapter 11 plan “plan” dated march 18 2011 mlc debtor affiliates collectively along mlc “debtors” benefit holders allowed general unsecured claims debtors “allowed general unsecured claims” guc trust formed march 30 2011 statutory trust delaware statutory trust act purposes implementing plan distributing guc trust’s distributable assets plan generally provides distribution certain shares common stock “new gm common stock” new general motors company together consolidated subsidiaries “new gm” certain warrants purchase shares stock “new gm warrants” together new gm common stock “new gm securities” holders allowed general unsecured claims pro rata amount claims addition plan provides holder allowed general unsecured claim obtain form guc trust units defined contingent right receive pro rata basis additional shares new gm common stock new gm warrants extent new gm common stock new gm warrants required satisfaction previously disputed general unsecured claims defined term loan avoidance action claims defined liquidation payment expenses guc trust cash remaining dissolution guc trust guc trust administered wilmington trust company solely capacity trust administrator trustee “guc trust administrator” among rights duties subject terms conditions limitations set forth guc trust agreement guc trust administrator power authority hold manage sell invest distribute assets comprising guc trust corpus consult retain professionals administration guc trust prosecute resolve objections disputed general unsecured claims take necessary actions administer winddown affairs debtors upon dissolution upon dissolution resolve satisfy extent allowed residual winddown claims defined activities guc trust administrator overseen fti consulting inc solely capacity monitor “guc trust monitor” 2 plan liquidation march 31 2011 date plan became effective “effective date” approximately 29771 million allowed general unsecured claims addition effective date approximately 8154 million disputed general unsecured claims “disputed general unsecured claims” reflects liquidated disputed claims bankruptcy court ordered distribution reserve unliquidated disputed claims reflect potential term loan avoidance action claims total aggregate amount general unsecured claims allowed disputed asserted debtors inclusive potential term loan avoidance action claims approximately 39425 million effective date pursuant guc trust agreement holders disputed general unsecured claims become entitled receive distribution new gm securities guc trust extent disputed general unsecured claims become allowed general unsecured claims guc trust agreement guc trust administrator authority object disputed general unsecured claims may prosecuted alternative dispute resolution proceedings including mediation arbitration “adr proceedings” appropriate march 31 2015 approximately 20 million disputed general unsecured claims subject pending objections guc trust addition march 31 2015 guc trust held reserves disputed general unsecured claims approximately 50 million claim amount associated particular claim set aside guc trust administrator general claim contingency see note 4 heading “allowed disputed claims” extent portion disputed general unsecured claim deemed invalidor “disallowed”by order bankruptcy court order tribunal presiding adr proceeding applicable settlement guc trust portion disputed general unsecured claim disallowed entitled distribution guc trust subject appeal rights claimant however extent disputed general unsecured claim fully resolved resolution results portion original disputed general unsecured claim deemed validor “allowed”by order bankruptcy court order tribunal presiding adr proceeding applicable settlement guc trust portion disputed general unsecured claim allowed subject appeal rights guc trust considered allowed general unsecured claim effective date claims “resolved disputed claims” one avoidance action captioned official committee unsecured creditors motors liquidation co v jpmorgan chase bank na et al adv pro 0900504 bankr sdny july 31 2009 “term loan avoidance action” commenced prior statutory deadline commencing actions term loan avoidance action commenced official committee unsecured creditors motors liquidation company “committee” among things seeks return approximately 15 billion transferred debtors funds advanced commencement debtors’ chapter 11 cases united states treasury export development canada together “dip lenders” consortium prepetition lenders pursuant terms order bankruptcy court december 15 2011 accordance plan upon dissolution mlc term loan avoidance action transferred avoidance action trust defined extent wilmington trust company individual capacity solely capacity trustee trust administrator avoidance action trust “avoidance action trust administrator” successful obtaining judgment defendants term loan avoidance action allowed general unsecured claims arise amount transfers actually avoided disgorged pursuant thereto general unsecured claims “term loan avoidance action claims” together resolved disputed claims “resolved allowed claims” still unclear whether amounts actually avoided pursuant term loan avoidance action would benefit holders allowed general unsecured claims committee taken position except reimbursement certain costs expenses avoidance action trust dip lenders entitled proceeds term loan avoidance action interests trust established action plan “avoidance action trust” b except reimbursement certain costs expenses avoidance action trust payable dip lenders holders allowed general unsecured claims exclusive right receive proceeds term loan avoidance action exclusive beneficiaries avoidance action trust respect thereto described item 3 “legal proceedings” litigation respect issues ongoing rights recoveries term loan avoidance action still disputed pursuant plan however funds reclaimed prepetition lenders transferred otherwise benefit guc trust distributed holders guc trust units guc trust distributable assets pursuant terms plan bankruptcy court authorized distribution 150 million shares new gm common stock warrants acquire 136363635 newly issued shares new gm stock exercise price set 1000 per share expiring july 10 2016 “new gm series warrants” warrants acquire 136363635 newly issued shares new gm stock exercise price set 1833 per share expiring july 10 2019 “new gm series b warrants” record ownership new gm securities held mlc benefit guc trust dissolution mlc december 15 2011 time record ownership transferred guc trust march 31 2015 guc trust received dividends new gm common stock held aggregating 206 million new gm also declared dividend 036 per share holders new gm common stock record june 10 2015 dividends future declared dividends new gm common stock required applied purpose new gm common stock dividends relate shares new gm common stock distributed holders subsequently resolved allowed claims guc trust units dividends relating shares also distributed holders however shares new gm common stock sold guc trust accordance guc trust agreement fund costs liabilities guc trust case dividends relating shares applied costs liabilities guc trust like cash proceeds sale shares new gm common stock maintained administrative cash defined dividends applied purposes associated new gm common stock references form 10k new gm common stock new gm securities set aside distribution reserved sold understood include dividends relating new gm common stock unless expressly indicated otherwise amount cash equivalents held guc trust relates dividends received guc trust new gm common stock held guc trust referred dividend cash dividend cash aggregated 170 million march 31 2015 funding guc trust costs liquidation guc trust incurred continue incur certain costs liquidate trust assets implement plan effective date pursuant plan mlc contributed approximately 527 million guc trust held maintained guc trust administrator “administrative fund” purpose paying certain fees expenses including certain tax obligations incurred guc trust including fees guc trust administrator guc trust monitor fees expenses professionals retained guc trust reporting costs defined “winddown costs” march 31 2015 remaining administrative fund aggregated 83 million consisting cash equivalents marketable securities remaining amount separately designated satisfaction certain costs liabilities guc trust amounts may used payment winddown costs cash investments administrative fund remain winding conclusion guc trust must returned dip lenders guc trust agreement authorized guc trust liquidate approximately 57 million new gm securities “initial reporting cash” shortly effective date purposes funding certain fees expenses guc trust “reporting costs” including directly indirectly relating reports prepared filed guc trust pursuant applicable rules regulations interpretations securities exchange commission ii transfer registration transfer certification guc trust units iii application committee defined internal revenue service private letter ruling regarding tax treatment guc trust holders allowed general unsecured claims respect distribution new gm securities guc trust agreement provides administrative fund may utilized satisfy reporting costs guc trust agreement provides guc trust administrator determines administrative fund sufficient satisfy current projected winddown costs initial reporting cash sufficient satisfy current projected reporting costs guc trust administrator approval guc trust monitor authorized set aside new gm securities distribution purposes guc trust administrator may liquidate “set aside” new gm securities fund winddown costs andor reporting costs required approval bankruptcy court new gm securities set aside andor sold manner available distribution beneficiaries guc trust units cash proceeds sale including related dividend cash classified “other administrative cash” guc trust agreement although liquidation set aside new gm securities reflected financial statements guc trust time liquidation setting aside new gm securities including dividend cash reflected statement net assets liquidation financial statements guc trust separate process setting aside new gm securities satisfy unfunded projected costs expenses guc trust matter financial reporting guc trust records reserve statement net assets liquidation source funding addressed therein expected costs liquidation reasonable basis estimation reason among others direct relationship amount reserve reflected statement net assets liquidation value new gm securities set aside current projected costs expenses guc trust adjustments reserve expected costs liquidation reported statement net assets liquidation recorded reasonable basis estimation expected incurrence additional costs reduction expected costs information regarding reserves expected costs liquidation reflected statement net assets liquidation see note 8 bankruptcy court previously approved march december 2012 january 2015 sale new gm securities fund current projected costs expenses guc trust march 2012 bankruptcy court order also authorized sale new gm securities purpose funding certain fees costs expenses avoidance action trust described heading “funding avoidance action trust” march 31 2015 sales new gm securities fund projected reporting costs winddown costs calendar year 2015 aggregated approximately 617 million including dividend cash 02 million initial reporting cash amounts comprised part guc trust’s administrative cash securities sold aggregated 1043801 shares new gm common stock 948887 new gm series warrants 948887 new gm series b warrants subsequent sales securities fund winddown costs reporting costs march 31 2015 administrative cash aggregated 145 million extent administrative cash ultimately required held guc trust time dissolution remaining administrative cash distributed guc trust holders guc trust units march 31 2015 new gm securities aggregate fair market value date 675 million related dividend cash 13 million set aside projected guc trust fees costs expenses incurred beyond 2015 including 197 million set aside projected income taxes dividends received holdings new gm common stock described “funding potential tax liabilities dispositions new gm securities dividends new gm common stock” accordingly new gm securities currently available distribution beneficiaries guc trust units funding potential tax liabilities dispositions new gm securities dividends new gm common stock guc trust subject us federal income tax realized net gains distribution sale shares new gm common stock new gm warrants taxes “taxes distribution” guc trust also subject us federal income tax dividends received new gm common stock held guc trust taxes “dividend taxes” guc trust agreement provides administrative fund may utilized satisfy taxes distribution dividend taxes guc trust administrator authorized approval guc trust monitor set aside distribution new gm securities liquidated proceeds along related dividend cash would sufficient satisfy potential taxes distribution dividend taxes new gm securities set aside dividend taxes included setaside winddown costs described “funding guc trust costs liquidation” guc trust administrator may liquidate “set aside” new gm securities fund taxes distribution dividend taxes approval guc trust monitor respect dividend taxes approval bankruptcy court new gm securities set aside subsequently sold manner available distribution beneficiaries guc trust units cash proceeds sale along related dividend cash classified “other administrative cash” guc trust agreement new gm securities set aside included holdings new gm securities accompanying statements net assets liquidation event setaside new gm securities sold fund taxes distribution dividend taxes proceeds sale would reflected cash equivalents andor marketable securities expended pay taxes distribution dividend taxes setaside new gm securities related dividend cash available distribution corresponding liability reserve related setaside assets reflected statements net assets liquidation financial statements guc trust quarter ended march 31 2015 guc trust administrator reviewed current potential taxes distribution result review guc trust administrator determined new gm securities aggregate fair market value march 31 2015 2972 million related dividend cash 55 million set aside potential taxes distribution based 1 guc trust’s method calculating potential gains distributions sales new gm securities reduced certain net operating losses estimated future deductible expenses march 31 2015 2 guc trust’s method converting potential tax liability number securities set aside new gm securities currently available distribution beneficiaries guc trust units guc trust administrator intends continue reevaluate numbers new gm securities set aside quarterly basis previously disclosed quarter ended september 30 2013 guc trust made determination file us federal income tax returns taking position beneficial ownership substantial majority new gm securities transferred mlc guc trust march 31 2011 tax basis new gm securities determined reference value securities date instead december 15 2011 record ownership remaining new gm securities still held mlc transferred mlc guc trust remaining substantial minority new gm securities transferred mlc guc trust guc trust determined transfer beneficial ownership occurred dates tax basis determined reference value securities dates new tax position resulted increased tax basis new gm securities prior tax position therefore reduced taxable gains increased taxable losses distributions sales new gm securities since march 31 2011 new tax position sustained examination internal revenue service date hereof however guc trust believes based available evidence consultation guc trust professionals likely new tax position sustained examination internal revenue service based technical merits position accordingly new tax position recognized current deferred income tax liabilities income tax provision guc trust’s financial statements since quarter ended september 30 2013 following guc trust’s determination utilize new tax position set forth guc trust filed us federal income tax returns years ended march 31 2014 2013 internal revenue service using new tax position tax returns accompanied requests prompt determination tax liability pursuant section 505b bankruptcy code statutory notification periods set forth section 505b bankruptcy code respect guc trust’s us federal income tax return year ended march 31 2014 prior years expired accordingly tax liabilities set forth guc trust’s us federal income tax returns years ended march 31 2014 prior years longer subject examination internal revenue service however remaining capital loss carryovers generated years combined capital losses generated year ended march 31 2015 new tax position aggregate 1871 million along net operating loss carryovers generated march 31 2015 aggregating 862 million could subject examination internal revenue service subsequent years losses utilized contrast guc trust’s financial statements conservative measure calculation “set aside” new gm securities potential taxes distribution utilizes prior tax position rather new tax position extent guc trust’s liability taxes distribution finally determined accordance section 505b bankruptcy code new tax position sustained examination internal revenue service accordingly potential tax liability guc trust’s us federal income tax returns year ending march 31 2015 subsequent years calculated purposes “set aside” new gm securities potential taxes distribution using prior tax position rather new tax position addition “set aside” calculation recognize reductions related remaining net operating loss carryovers capital loss carryovers losses distributions sales new gm securities attributable march 31 2015 tax year prior tax years carryovers utilized utilization finally determined accordance section 505b bankruptcy code new tax position sustained examination internal revenue service respect dividend taxes prior quarter ended march 31 2015 set aside dividend taxes based dividends received guc trust holdings new gm common stock b dividends declared yet paid new gm expected received guc trust holdings new gm common stock additional set aside new gm securities made potential dividends declared new gm future beginning quarter ended march 31 2015 guc trust administrator consultation trust professionals determined necessary increase set aside winddown costs amount sufficient reasonable estimation guc trust administrator cover estimated dividend taxes associated anticipated potential future dividends estimated declared new gm future received guc trust holdings new gm common stock december 2016 additional information see “net assets liquidationnew gm securities set aside distribution” item 7 “management’s discussion analysis financial condition results operations” residual winddown claims costs upon dissolution debtors occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining disputed administrative expenses priority tax claims priority nontax claims secured claims “residual winddown claims” december 15 2011 plan debtors transferred guc trust amount assets necessary “residual winddown assets” satisfy ultimate allowed amount residual winddown claims including certain reasonable litigation defense costs related term loan avoidance action “avoidance action defense costs” estimated debtors costs fees expenses relating satisfying resolving residual winddown claims “residual winddown costs” residual winddown assets initially aggregated approximately 428 million amount consisted approximately 400 million cash including approximately 14 million designated payment avoidance action defense costs transferred benefit approximately 28 million prepaid expenses residual winddown costs residual winddown claims less residual winddown assets excess funds returned dip lenders time guc trust administrator determines residual winddown assets adequate satisfy residual winddown claims including actual amount avoidance action defense costs residual winddown costs satisfied administrative cash remaining administrative cash guc trust administrator authorized guc trust monitor approval set aside bankruptcy court approval sell new gm securities cover shortfall extent new gm securities set aside sold obtain funding complete winddown debtors securities available distribution beneficiaries guc trust therefore amount residual winddown claims residual winddown costs could reduce assets guc trust available distribution although sale setaside new gm securities would reflected financial statements guc trust period sale setting aside new gm securities related dividend cash would reflected statement net assets liquidation financial statements guc trust guc trust concluded affairs funds remaining obtained sale new gm securities fund winddown process resolution satisfaction residual winddown claims distributed holders guc trust units amount avoidance action defense costs incurred date exceeds corresponding cash 14 million received guc trust mlc dissolution date approximately 40 million result new residual winddown claims arisen amount excess expected additional avoidance action defense costs incurred additional residual winddown claims arise paid remaining residual winddown assets following depletion assets administrative fund extent excess amounts remaining administrative fund funds separately designated satisfaction certain costs liabilities guc trust administrative cash sale new gm securities march 31 2015 283 million residual winddown assets held guc trust recorded cash equivalents marketable securities aggregating approximately 282 million assets deposits approximately 01 million accompanying statement net assets liquidation comparison approximately 05 million residual winddown claims assets march 31 2015 subject increase new residual winddown claims expected arise avoidance action defense costs addition residual winddown assets guc trust also received dissolution date approximately 34 million cash mlc purposes funding 1 14 million respect certain costs fees expenses payable plan indenture trustees fiscal paying agents previously outstanding debt mlc “indenture trustee fiscal paying agent costs” 2 20 million respect reporting costs funds received credited reserve expected costs liquidation unused portion funds designated indenture trustee fiscal paying agent costs must returned dip lenders available distribution holders guc trust units winding conclusion guc trust march 31 2015 funds designated indenture trustee fiscal paying agents costs held guc trust approximated 04 million recorded cash equivalents accompanying statement net assets liquidation 3 basis presentation significant accounting policies liquidation basis accounting guc trust exists solely purposes described note 1 finite life accordingly guc trust prepared accompanying financial statements liquidation basis accounting accordance accounting principles generally accepted united states america us gaap liquidation basis accounting prescribed financial accounting standards board fasb accounting standards codification assets stated estimated net realizable value nondiscounted amount cash asset expected converted liquidation period liabilities continue recognized amount required us gaap remeasured reflect anticipation entity legally released obligation additionally liquidation basis accounting reserve established estimated costs expected incurred liquidation period costs accrued reasonable basis estimation described heading “new accounting standard” beginning quarter ended june 30 2014 accrual made estimated income cash expected received liquidation period extent reasonable basis estimation exists estimates periodically reviewed adjusted appropriate reserves expected liquidation costs accrual dividends expected received guc trust’s holdings new gm common stock represent estimates based present facts circumstances known guc trust administrator subject change reasonably possible estimates accrued dividends expected costs liquidation could change near term beneficiaries guc trust future extent liquidating distributions yet paid current holders allowed general unsecured claims future current holders guc trust units “trust beneficiaries” disputed general unsecured claims resolved allowed thereby become allowed general unsecured claims holders thereof become entitled receive liquidating distributions new gm securities related dividend cash guc trust units pro rata amount claims upon occurrence guc trust incurs obligation distribute securities accordingly liquidating distributions payable recorded fair value new gm securities related dividend cash end period disputed general unsecured claims resolved allowed general unsecured claims similarly extent potential term loan avoidance action claims defined arise would become allowed manner described note 2 liquidating distributions payable would recorded new gm securities related dividend cash fair value would become distributable holders term loan avoidance action claims upon occurrence prior resolution allowance disputed general unsecured claims potential term loan avoidance action claims liabilities recorded conditional obligations associated disputed general unsecured claims rather beneficial interests trust beneficiaries residual assets guc trust reflected net assets liquidation guc trust accompanying financial statements liquidation basis accounting guc trust presents two principal financial statements statement net assets liquidation statement changes net assets liquidation addition although required liquidation basis accounting guc trust also presents statement cash flows accordance requirements guc trust agreement fiscal year guc trust’s fiscal year begins april 1 ends following march 31 cash equivalents cash equivalents consist amounts held bank accounts money market funds marketable securities marketable securities consist shortterm investments corporate commercial paper municipal government commercial paper variable demand notes guc trust valued securities fair value based carrying value municipal corporate commercial paper carrying value approximates fair value par value variable demand notes par value equals fair value holdings new gm securities accrued dividends new gm common stock holdings new gm securities represent guc trust’s holdings new gm securities held future distribution respect allowed general unsecured claims guc trust units include amounts set aside distribution fund estimated projected winddown reporting costs including projected dividend taxes potential taxes distribution described note 2 securities held consist shares new gm common stock new gm warrants described notes 1 6 guc trust valued holdings securities fair value based quoted market prices last trading day fiscal year beginning quarter ended june 30 2014 estimated dividends expected received holdings new gm common stock accrued liquidation basis accounting extent reasonable basis estimation exists march 31 2015 dividends approximately 265 million accrued relating dividends 036 per share declared new gm april 2015 payable common stockholders record june 10 2015 aggregating 41 million b estimated dividends aggregating 224 million expected declared new gm future based new gm’s recent dividend history factors received guc trust estimated remaining liquidation period accrued dividends estimated using current dividend rate 036 per share guc trust’s estimated holdings new gm common stock remaining liquidation period reasonably possible guc trust’s estimates regarding future dividends could change near term prior quarter ended june 30 2014 dividends recorded received accrued record date declared unpaid dividend dividends received new gm common stock required applied purpose new gm common stock dividends relate shares new gm common stock distributed holders subsequently resolved allowed claims guc trust units dividends relating shares also distributed holders however shares new gm common stock sold guc trust accordance guc trust agreement fund costs liabilities guc trust case dividends relating shares applied costs liabilities guc trust like cash proceeds sale shares new gm common stock maintained administrative cash dividends applied purpose new gm common stock references new gm common stock new gm securities set aside distribution reserved sold understood include dividends relating new gm common stock unless expressly indicated otherwise amount cash equivalents held guc trust relates dividends received guc trust new gm common stock held guc trust referred dividend cash assets deposits assets deposits consist principally accrued investment income march 31 2015 prepaid expenses retainers professionals accounts payable liabilities accounts payable liabilities represent amounts due professionals service providers vendors services rendered goods received end period reserves residual winddown claims residual winddown costs upon dissolution mlc occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining residual winddown claims date dissolution debtors transferred guc trust residual winddown assets amount necessary satisfy ultimate allowed amount residual winddown claims including certain avoidance action defense costs residual winddown costs estimated debtors residual winddown claims residual winddown costs less residual winddown assets excess funds returned dip lenders collectively actual amounts residual winddown claims including certain avoidance action defense costs allowed residual winddown costs exceed residual winddown assets guc trust administrator may required set aside distribution sell additional new gm securities fund shortfall sale securities would reduce numbers new gm securities related dividend cash available distribution holders guc trust units reserves expected costs liquidation basis accounting guc trust required estimate accrue costs associated implementing plan distributing guc trust’s distributable assets costs described winddown costs reporting costs note 2 consist principally professional fees costs governance administrative expenses amounts may vary significantly due among things time effort required complete distributions plan guc trust recorded reserves expected costs liquidation represent estimated costs incurred remaining liquidation period guc trust reasonable basis estimation amount liquidation costs ultimately incurred depends period time extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities march 31 2015 remaining liquidation period extends february 2017 estimated predominantly probabilityweighted basis guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome remaining liquidation period dependent predominantly estimate remaining period time resolution term loan avoidance action well certain additional estimated time necessary wind guc trust possible future developments term loan avoidance action could extend current estimate remaining period time resolution therefore extend estimated remaining liquidation period guc trust beyond february 2017 described item 3 “legal proceedings” guc trust participating interested party litigation involving certain general motors vehicle recalls impact litigation remaining liquidation period guc trust subject reasonable estimation time possible litigation could extend remaining liquidation period guc trust beyond february 2017 reasonably possible guc trust’s estimates regarding expected costs liquidation remaining liquidation period change near term guc trust incurs costs reserves released offset costs incurred liability service provider recognized accounts payable accrued expense paid addition guc trust records reserves expected costs reasonable basis estimation applicable us gaap additional costs may identified time additional reserves must recorded costs identified guc trust records increase reserves charges increase addition reserves statement changes net assets liquidation process recording reserves expected costs liquidation matter financial reporting separate distinct process new gm securities set aside distribution purposes funding projected costs liquidation projected costs generally estimated conservative ie inclusive basis include contingencies permitted accrued reserves expected costs liquidation applicable us gaap complete description process setting aside new gm securities fund projected costs potential liabilities guc trust see item 7 “management’s discussion analysis financial condition results operationsnet assets liquidation” heading “new gm securities set aside distribution” income taxes guc trust considered “disputed ownership fund” pursuant treasury regulation section 1468b9 assets transferred guc trust passive investments guc trust taxed qualified settlement fund qsf pursuant treasury regulation section 1468b9c1ii qsf tax status guc trust approved internal revenue service private letter ruling issued march 2 2011 general qsf considered c corporation pays federal income tax using trust income tax rates modified gross income modified gross income includes gross income pursuant internal revenue code section 61 less administrative expenses certain losses sale exchange worthlessness property net operating losses general disputed ownership fund taxed qsf recognize gross income assets transferred therefore guc trust recognized gross income transfer assets mlc guc trust generates gross income form interest dividend income including dividends received holdings new gm common stock recognizes gains andor losses upon disposition shares new gm common stock new gm warrants reduced administrative expenses accumulated net operating capital losses compute modified gross income guc trust taxable federal income tax purposes current income tax liability asset recognized estimated taxes payable receivable year deferred tax liabilities assets recognized estimated future tax effects temporary differences financial reporting tax accounting deferred tax assets reviewed recoverability valuation allowances provided necessary guc trust subject state income taxes current law accordingly current deferred state income tax liabilities assets recorded guc trust recognizes tax benefit uncertain tax position likely tax position sustained examination taxing authority based technical merits position review available evidence consultation guc trust professionals guc trust’s tax liability respect federal income tax returns year ended march 31 2014 prior years longer subject examination result application section 505b bankruptcy code however remaining capital loss carryovers generated years new tax position combined capital losses generated year ended march 31 2015 aggregate 1871 million along net operating loss carryovers generated march 31 2015 aggregating 862 million could subject examination internal revenue service subsequent years losses utilized march 31 2015 known items would result significant accrual uncertain tax positions process recognizing deferred tax assets liabilities current income taxes payable matter financial reporting separate distinct process new gm securities set aside distribution purposes funding potential income tax liabilities potential income tax liabilities generally estimated conservative ie inclusive basis include amounts potential income tax liabilities beyond amounts permitted recorded applicable accounting standards complete description process setting aside new gm securities fund projected costs potential income tax liabilities guc trust see item 7 “management’s discussion analysis financial condition results operationsnet assets liquidation” heading “new gm securities set aside distribution” funding avoidance action trust based analysis avoidance action trust potential funding sources guc trust administrator conjunction avoidance action trust administrator determined would best interest holders allowed general unsecured claims fund certain fees costs expenses avoidance action trust subject approval bankruptcy court described note 2 “plan liquidation” financial statements march 2012 bankruptcy court approved sale new gm securities aggregating approximately 137 million transfer resulting proceeds avoidance action trust funding sale occurred march 2012 proceeds transferred guc trust avoidance action trust may 14 2012 use estimates preparation financial statements liquidation basis conformity us gaap requires use estimates assumptions affect reported amounts assets liabilities estimates subject known unknown risks uncertainties factors could materially impact amounts reported disclosed financial statements related footnotes significant estimates include anticipated amounts timing future cash flows expected dividends received holdings new gm common stock expected liquidation costs actual results could differ estimates new accounting standard quarter ended june 30 2014 guc trust adopted accounting standards update 201307 “liquidation basis accounting” effect adoption standard material guc trust’s financial statements quarter standard requires income cash expected received liquidation period estimated accrued extent reasonable basis estimation exists march 31 2015 guc trust accrued dividends approximately 265 million relating dividends 036 per share declared new gm april 2015 payable common stockholders record june 10 2015 aggregating 41 million b estimated dividends aggregating 224 million expected declared new gm future based new gm’s recent dividend history factors received guc trust estimated remaining liquidation period accrued dividends estimated using current dividend rate 036 per share guc trust’s estimated holdings new gm common stock remaining liquidation period addition march 31 2015 guc trust accrued approximately 07 million investment income expected earned cash equivalents marketable securities estimated remaining liquidation period guc trust 4 net assets liquidation description guc trust agreement plan described fully note 1 beneficiaries guc trust future extent liquidating distributions yet paid current holders allowed general unsecured claims future current holders guc trust units certain assets guc trust reserved funding expected costs liquidation potential tax liabilities currently available trust beneficiaries assets guc trust primarily holdings new gm securities described notes 1 6 available distributed trust beneficiaries “guc trust distributable assets” accordance plan guc trust agreement amounts net assets liquidation presented accompanying statements net assets liquidation march 31 2015 2014 correspond amounts guc trust distributable assets march 31 2015 2014 certain adjustments trust units described note 1 holder allowed general unsecured claim retain contingent right receive pro rata basis additional shares new gm common stock new gm warrants extent shares new gm common stock new gm warrants required satisfaction previously disputed general unsecured claims potential term loan avoidance action claims liquidation payment expenses tax liabilities guc trust certain cash remaining dissolution guc trust guc trust issues units representing contingent rights “guc trust units” rate one guc trust unit per 1000 allowed general unsecured claims holder allowed general unsecured claim subject rounding pursuant guc trust agreement connection initial recognition allowed general unsecured claim guc trust makes quarterly liquidating distributions holders guc trust units extent ia certain previously disputed general unsecured claims asserted debtors’ estates potential term loan avoidance action claims either disallowed otherwise resolved favorably guc trust thereby reducing amount guc trust assets reserved distribution respect asserted potential claims b certain excess guc trust distributable assets defined guc trust agreement previously set aside distribution released manner permitted guc trust agreement ii result foregoing amount excess guc trust distributable assets defined guc trust agreement end relevant quarter exceeds thresholds set forth guc trust agreement following presents changes years ended march 31 2015 2014 2013 numbers guc trust units outstanding guc trust obligated issue 1 1644941 guc trust units issued year ended march 31 2014 1550000 related special nova scotia distribution applicable nova scotia settlement described 2 number guc trust units issuable time represents guc trust units issuable respect allowed general unsecured claims newly allowed fiscal year 3 number guc trust units outstanding time represents guc trust units issued respect allowed general unsecured claims allowed prior periods including guc trust units held guc trust benefit holders allowed general unsecured claims yet supplied information required guc trust order effect initial distribution entitled b governmental entities precluded applicable law receiving distributions guc trust units new gm securities allowed disputed claims total cumulative pro rata liquidating distributions ultimately received trust beneficiaries dependent upon current amount allowed general unsecured claims final resolution outstanding disputed general unsecured claims potential term loan avoidance action claims described note 2 disputed general unsecured claims march 31 2015 2014 reflect claim amounts originally filed amounts court ordered distribution “set aside” certain claims filed without claim amount adjustments ordered court permitted plan disputed general unsecured claims may settle amounts differ significantly amounts differ significantly historical pattern claims settled allowed proportion claims resolved disallowed described note 3 prior resolution allowance disputed general unsecured claims potential term loan avoidance action claims liabilities recorded conditional obligations associated disputed general unsecured claims potential term loan avoidance action claims liquidating distributions payable recorded fair value new gm securities dividend cash distributed end period disputed general unsecured claims resolved allowed general unsecured claims similarly extent potential term loan avoidance action claims arise would become allowed manner described note 2 liquidating distributions payable would recorded new gm securities dividend cash fair value would become distributable holders term loan avoidance action claims upon occurrence following table presents summary activity respect allowed disputed general unsecured claims potential term loan avoidance action claims years ended march 31 2015 2014 1 maximum amount unresolved claims represents sum disputed general unsecured claims term loan avoidance action claims 2 total claim amount represents sum allowed general unsecured claims maximum amount unresolved claims disputed general unsecured claims resolved disallowed year ended march 31 2014 primarily relate nova scotia settlement defined october 21 2013 bankruptcy court entered order “nova scotia order” approving settlement agreement “nova scotia settlement” relating claims arising 8375 guaranteed notes due december 7 2015 8875 guaranteed notes due july 10 2023 case issued 2003 general motors nova scotia finance company “nova scotia claims” pursuant nova scotia settlement nova scotia claims reduced allowed aggregate amount 155 billion result december 2 2013 accordance nova scotia settlement nova scotia order guc trust made distribution solely holders allowed nova scotia claims consisting aggregate 6174015 shares new gm common stock 5612741 new gm series warrants 5612741 new gm series b warrants 1550000 guc trust units “special nova scotia distribution” addition december 23 2013 accordance nova scotia settlement nova scotia order guc trust made special distribution excess guc trust distributable assets holders guc trust units consisting 6735070 shares new gm common stock 6122789 new gm series warrants 6122789 new gm series b warrants “special excess distribution” 5 liquidating distributions liquidating distributions years ended march 31 2015 2014 2013 consisted following distributions year ended march 31 2015 consisted 1 distributions holders guc trust units 2 distributions holders allowed general unsecured claims previously failed fulfill informational requirements distribution established accordance guc trust agreement subsequently successfully fulfilled information requirements distributions holders guc trust units year ended march 31 2015 resulted primarily release distributable assets guc trust previously set aside respect potential taxes distribution distributions year ended march 31 2014 consisted 1 special nova scotia distribution 2 special excess distribution 3 distributions holders resolved disputed claims exclusive nova scotia distribution 4 distributions holders allowed general unsecured claims previously failed fulfill informational requirements distribution established accordance guc trust agreement subsequently successfully fulfilled information requirements see note 4 additional information regarding special nova scotia distribution special excess distribution distributions year ended march 31 2013 consisted distributions 1 holders resolved disputed claims 2 holders allowed general unsecured claims previously failed fulfill informational requirements distribution established accordance guc trust agreement subsequently successfully fulfilled information requirements guc trust obligated march 31 2015 2014 distribute 93114 575278 shares respectively new gm common stock 84570 522865 respectively new gm series warrants 84570 522865 respectively new gm series b warrants aggregate following 1 holders resolved disputed claims march 31 2014 2 certain holders allowed general unsecured claims satisfied certain informational requirements necessary receive securities 3 excess distributions holders guc trust units addition march 31 2015 2014 cash 02 million distributable follows dividend cash associated new gm common stock guc trust obligated distribute b governmental entities precluded applicable law receiving distributions new gm securities c distributions lieu fractional shares warrants 6 holdings new gm securities march 31 2015 2014 holdings new gm securities fair value consisted following described note 5 march 31 2015 2014 guc trust accrued liquidating distributions payable 77 million 421 million respectively respect new gm securities cash 02 million distributable result numbers new gm securities reflected include shares warrants liquidating distributions pending march 31 2015 2014 securities distributions pending aggregated 93114 575278 shares new gm common stock respectively 84570 522865 series warrants respectively 84570 522865 series b warrants respectively march 31 2015 number common stock shares warrants table also includes new gm securities aggregating 675 million excluding related dividend cash reserved set aside projected guc trust fees costs expenses incurred beyond 2015 including 194 million projected dividend taxes 2972 million excluding related dividend cash new gm securities reserved set aside potential taxes distribution march 31 2014 number common stock shares warrants table also includes new gm securities aggregating 516 million excluding related dividend cash reserved set aside projected guc trust fees costs expenses incurred beyond 2014 including 35 million projected dividend taxes 5363 million excluding related dividend cash new gm securities reserved set aside potential taxes distribution result march 31 2015 2014 numbers new gm securities table include aggregate 4525790 8072042 shares new gm common stock respectively 4114331 7338194 new gm series warrants respectively 4114331 7338194 new gm series b warrants respectively set aside set forth aggregate number fair value shares warrants pending distribution set aside available distribution march 31 2015 2014 7 fair value measurements accounting standards require certain assets liabilities reported fair value financial statements provide framework establishing fair value framework determining fair value based hierarchy prioritizes inputs valuation techniques used measure fair value trust’s cash equivalents marketable securities holdings new gm securities liquidating distributions payable presented provided hierarchy level 1in general fair values determined level 1 inputs use quoted prices active markets identical assets liabilities guc trust ability access level 2fair values determined level 2 inputs use inputs observable either directly indirectly level 2 inputs include quoted prices similar assets liabilities active markets inputs interest rates yield curves observable commonly quoted intervals level 3level 3 inputs unobservable inputs including inputs available situations little market activity related asset liability level 3 fair value measurements based primarily management’s estimates using pricing models discounted cash flow methodologies similar techniques taking account characteristics asset liability guc trust assets liabilities measured level 3 inputs march 31 2015 2014 instances inputs used measure fair value fall different levels fair value hierarchy fair value measurements entirety categorized based lowest level input significant valuation guc trust’s assessment significance particular inputs fair value measurements requires judgment considers factors specific asset liability guc trust also holds financial instruments measured fair value recurring basis including accounts payable liabilities fair value liabilities approximates carrying amounts accompanying financial statements due short maturity instruments following table presents information guc trust’s assets liabilities measured fair value recurring basis march 31 2015 2014 valuation techniques used guc trust determine fair values following descriptions valuation methodologies used assets liabilities measured fair value • due shortterm liquid nature fair value cash equivalents approximates carrying value • holdings new gm securities valued closing prices reported active market securities traded • marketable securities include municipal commercial paper variable demand notes corporate commercial paper municipal variable demand notes trade daily par value therefore fair value equal par value due short term maturities fair value municipal corporate commercial paper approximates carrying value • liquidating distributions payable valued closing prices new gm securities reported active market securities traded guc trust’s policy recognize transfers levels fair value hierarchy actual date event change circumstances caused transfer transfers years ended march 31 2015 2014 8 reserves expected costs liquidation residual winddown claims following summary activity reserves expected costs liquidation years ended march 31 2015 2014 2013 year ended march 31 2015 estimates expected winddown costs estimates expected reporting costs increased 90 million 04 million respectively year ended march 31 2014 estimates expected winddown costs estimates expected reporting costs decreased 38 million 41 million respectively year ended march 31 2013 estimates expected winddown costs estimates expected reporting costs increased 52 million 123 million respectively revisions estimates recorded additions reductions reserves expected costs liquidation years estimates expected winddown costs year ended march 31 2013 reflect execution letter agreement dip lenders providing relief certain restrictions utilization winddown assets guc trust recorded reserves expected costs liquidation represent amounts expected incurred estimated remaining liquidation period guc trust reasonable basis estimation amount liquidation costs ultimately incurred depends time period extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities march 31 2015 recorded reserves expected costs liquidation reflect estimated costs remaining liquidation period extending february 2017 estimated predominately probabilityweighted basis permitted us gaap guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome remaining liquidation period dependent predominantly estimate remaining period time resolution term loan avoidance action well certain additional estimated time necessary wind guc trust possible future developments term loan avoidance action could extend current estimate remaining period time resolution therefore extend estimated remaining liquidation period guc trust beyond february 2017 addition certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued reasonably possible guc trust’s estimates regarding costs remaining liquidation period could change near term described item 3 “legal proceedings” guc trust participating interested party litigation involving certain general motors vehicle recalls impact litigation remaining liquidation period guc trust subject reasonable estimation time possible litigation could extend remaining liquidation period guc trust beyond february 2017 following summary activity reserves residual winddown claims years ended march 31 2015 2014 2013 9 income tax benefit provision income tax benefit provision statements changes net assets liquidation years ended march 31 2015 2014 2013 determined computing deferred tax provisions using guc trust’s statutory tax rate 396 became effective april 1 2013 current tax benefit provision years due cumulative net operating capital losses income taxes paid guc trust components income tax benefit provision statements changes net assets liquidation years ended march 31 2015 2014 2013 follows deferred taxes accompanying statement net assets liquidation march 31 2015 2014 comprised following components previously disclosed quarter ended september 30 2013 guc trust made determination file us federal income tax returns taking position beneficial ownership substantial majority new gm securities transferred mlc guc trust march 31 2011 tax basis new gm securities determined reference value securities date instead december 15 2011 record ownership remaining new gm securities still held mlc transferred mlc guc trust remaining substantial minority new gm securities transferred mlc guc trust guc trust determined transfer beneficial ownership occurred dates tax basis determined reference value securities dates new tax position resulted increased tax basis new gm securities prior tax position therefore reduced taxable gains increased taxable losses distributions sales new gm securities since march 31 2011 new tax position sustained examination internal revenue service date hereof however guc trust believes based available evidence consultation guc trust professionals likely new tax position sustained examination internal revenue service based technical merits position accordingly new tax position recognized current deferred income tax liabilities income tax provision guc trust’s financial statements since quarter ended september 30 2013 following guc trust’s determination utilize new tax position set forth guc trust filed us federal income tax returns years ended march 31 2014 2013 internal revenue service using new tax position tax returns accompanied requests prompt determination tax liability pursuant section 505b bankruptcy code statutory notification period set forth section 505b bankruptcy code respect guc trust’s us federal income tax returns years ended march 31 2014 prior years expired accordingly tax liabilities set forth guc trust’s us federal income tax returns years ended march 31 2014 prior years longer subject examination internal revenue service however remaining capital loss carryovers generated years combined capital losses generated year ended march 31 2015 new tax position aggregate 1871 million along net operating loss carryovers generated march 31 2015 aggregating 862 million could subject examination internal revenue service subsequent years losses utilized capital loss carryovers begin expire march 31 2017 net operating loss carryovers begin expire march 31 2032 loss carryovers aggregate result deferred tax asset 1082 million reflected table full valuation allowance net deferred tax assets aggregating 360 million 712 million established march 31 2015 2014 respectively due uncertainty whether deferred tax assets realizable valuation allowance march 31 2015 decreased 352 million full valuation allowance net deferred tax assets established march 31 2014 valuation allowance increased 712 million year ended march 31 2014 realization net deferred tax assets primarily dependent upon generation taxable gains upon distribution sale new gm securities future determinable prior occurrence 10 related party transactions addition serving guc trust administrator wilmington trust company continues serve trustee pursuant indentures certain series previously outstanding debt mlc wilmington trust company received continue receive certain customary fees amounts consistent wilmington trust company’s standard rates service bankruptcy court previously approved creation segregated fund purposes funding fees wilmington trust company well indenture trustees fiscal paying agents previously outstanding debt mlc fees wilmington trust company years ended march 31 2015 2014 2013 addition wilmington trust company also entered certain arrangements guc trust pursuant affiliates previously received may future receive reasonable customary fees commissions services capacity guc trust administrator arrangements include provision custodial investment advisory brokerage services guc trust fees commissions charged wilmington trust company affiliates pursuant arrangements consistent standard fees commissions charged wilmington trust company unrelated thirdparties negotiated transactions years ended march 31 2015 2014 2013 total amount fees commissions approximately 35000 53000 147000 respectively item 9 item 8 general motors corporation subsidiaries consolidated statements income years ended december 31 2003 2002 2001 dollars millions except per share amounts general motors corporation subsidiaries total net sales revenues notes 1 24 185524 177324 169051 cost sales expenses note 5 152071 146793 138847 selling general administrative expenses 21008 20690 19433 interest expense note 16 9464 7503 8317 total costs expenses 182543 174986 166597 income continuing operations income taxes equity income minority interests 2981 2338 2454 income tax expense note 11 731 644 1094 equity income loss minority interests 612 281 138 income continuing operations 2862 1975 1222 loss discontinued operations note 2 219 239 621 gain sale discontinued operations 1179 net income 3822 1736 601 dividends preference stocks 46 99 earnings attributable common stocks note 20 3822 1690 502 basic earnings loss per share attributable common stocks 123 par value continuing operations 510 353 221 discontinued operations 214 016 042 earnings per share attributable 123 par value 724 337 179 losses per share discontinued operations attributable class h 022 021 055 earnings loss per share attributable common stocks assuming dilution 123 par value continuing operations 503 351 220 discontinued operations 211 016 043 earnings per share attributable 123 par value 714 335 177 losses per share discontinued operations attributable class h 022 021 055 reference made notes consolidated financial statements ii24 general motors corporation subsidiaries supplemental information consolidated statements income years ended december 31 2003 2002 2001 dollars millions automotive operations total net sales revenues notes 1 24 155831 150250 143173 cost sales expenses note 5 143464 138359 130158 selling general administrative expenses 11863 11749 12430 total costs expenses 155327 150108 142588 interest expense note 16 1780 479 572 net expense transactions financing insurance operations note 1 232 296 435 loss continuing operations income taxes equity income minority interests 1508 633 422 income tax benefit expense note 11 869 378 56 equity income loss minority interests 674 348 68 income loss continuing operations 35 93 546 loss discontinued operations note 2 219 239 621 gain sale discontinued operations 1179 net income loss automotive operations 995 146 1167 financing insurance operations total revenues 29693 27074 25878 interest expense note 16 7684 7024 7745 depreciation amortization expense note 12 6032 5541 5857 operating expenses 8529 8306 7308 provisions financing insurance losses note 1 3191 3528 2527 total costs expenses 25436 24399 23437 net income transactions automotive operations note 1 232 296 435 income taxes equity income minority interests 4489 2971 2876 income tax expense note 11 1600 1022 1038 equity income loss minority interests 62 67 70 net income financing insurance operations 2827 1882 1768 supplemental information intended facilitate analysis general motors corporations businesses 1 automotive operations 2 financing insurance operations reference made notes consolidated financial statements ii25 general motors corporation subsidiaries consolidated balance sheets december 31 2003 2002 assets dollars millions cash equivalents note 1 32554 20320 marketable securities note 6 22215 16825 total cash marketable securities 54769 37145 finance receivables net note 8 173137 134643 loans held sale 19609 15720 accounts notes receivable less allowances 20532 16337 inventories less allowances note 9 10960 9737 assets discontinued operations 18653 deferred income taxes note 11 27190 39767 net equipment operating leases less accumulated depreciation note 10 34383 31026 equity net assets nonconsolidated affiliates 6032 5097 property net note 12 38211 35956 intangible assets net notes 1 13 4760 10796 assets note 14 58924 14176 total assets 448507 369053 liabilities stockholders equity accounts payable principally trade 25422 21138 notes loans payable note 16 271756 200168 liabilities discontinued operations 7956 postretirement benefits pensions note 17 36292 38152 pensions note 17 8024 22679 deferred income taxes notes 11 15 7508 6523 accrued expenses liabilities note 15 73930 65344 total liabilities 422932 361960 minority interests 307 279 stockholders equity note 19 123 par value common stock outstanding 561997725 560447797 shares 937 936 class h common stock outstanding 958284272 shares 2002 96 capital surplus principally additional paidin capital 15185 21583 retained earnings 12752 10031 subtotal 28874 32646 accumulated foreign currency translation adjustments 1815 2784 net unrealized gains losses derivatives 51 205 net unrealized gains securities 618 372 minimum pension liability adjustment 2460 23215 accumulated comprehensive loss 3606 25832 total stockholders equity 25268 6814 total liabilities stockholders equity 448507 369053 reference made notes consolidated financial statements ii26 general motors corporation subsidiaries supplemental information consolidated balance sheets december 31 general motors corporation subsidiaries 2003 2002 assets dollars millions automotive operations cash equivalents note 1 14424 12162 marketable securities note 6 9067 2174 total cash marketable securities 23491 14336 accounts notes receivable less allowances 5380 4735 inventories less allowances note 9 10960 9737 assets discontinued operations 18653 net equipment operating leases less accumulated depreciation note 10 7173 5305 deferred income taxes current assets note 11 10851 9631 total current assets 57855 62397 equity net assets nonconsolidated affiliates 6032 5097 property net note 12 36071 34135 intangible assets net notes 1 13 1479 7453 deferred income taxes note 11 18086 31431 assets note 14 42262 1461 total automotive operations assets 161785 141974 financing insurance operations cash equivalents note 1 18130 8158 investments securities note 6 13148 14651 finance receivables net note 8 173137 134643 loans held sale 19609 15720 net equipment operating leases less accumulated depreciation note 10 27210 25721 assets note 14 35488 28186 net receivable automotive operations note 1 1492 1089 total financing insurance operations assets 288214 228168 total assets 449999 370142 liabilities stockholders equity automotive operations accounts payable principally trade 21542 17919 loans payable note 16 2813 1994 liabilities discontinued operations 7956 accrued expenses note 15 45417 39113 net payable financing insurance operations note 1 1492 1089 total current liabilities 71264 68071 longterm debt note 16 29593 14261 postretirement benefits pensions note 17 32285 34244 pensions note 17 7952 22633 liabilities deferred income taxes notes 11 15 15567 13734 total automotive operations liabilities 156661 152943 financing insurance operations accounts payable 3880 3219 debt note 16 239350 183913 liabilities deferred income taxes note 11 15 24533 22974 total financing insurance operations liabilities 267763 210106 total liabilities 424424 363049 minority interests 307 279 total stockholders equity 25268 6814 total liabilities stockholders equity 449999 370142 supplemental information intended facilitate analysis general motors corporations businesses 1 automotive operations 2 financing insurance operations reference made notes consolidated financial statements ii27 general motors corporation subsidiaries consolidated statements cash flows years ended december 31 2003 2002 2001 cash flows operating activities dollars millions income continuing operations 2862 1975 1222 adjustments reconcile income continuing operations net cash provided operating activities depreciation amortization expenses 13978 11865 11764 mortgage servicing rights amortization 1602 3871 948 provision financing losses 1608 2028 1472 postretirement employee benefit opeb expense 4599 4108 3720 opeb payments 3536 3334 3120 veba contributions withdrawls 3000 1000 1300 pension expense 3412 1780 540 pension contributions 18168 5156 317 retiree lump sum vehicle voucher expense net payments 923 254 136 net change mortgage loans 456 4715 4615 net change mortgage securities 236 656 777 change investments miscellaneous assets 1741 1335 180 change operating assets liabilities note 1 792 4477 234 95 842 233 net cash provided operating activities 7600 15482 12180 cash flows investing activities expenditures property 7330 6871 7832 investments marketable securities acquisitions 28660 39386 38248 investments marketable securities liquidations 24253 35688 37560 net change mortgage servicing rights 2557 1711 2075 increase finance receivables 149419 143024 107566 proceeds sale finance receivables 107505 117276 95949 proceeds sale business units 4148 operating leases acquisitions 11761 16624 12938 operating leases liquidations 9952 13994 11892 investments companies net cash acquired note 1 201 870 1283 1422 1004 126 net cash used investing activities 55492 40524 24415 cash flows financing activities net increase decrease loans payable 235 770 21740 longterm debt borrowings 97391 51411 62956 longterm debt repayments 38963 24365 19789 repurchases common preference stocks 97 264 proceeds issuing common stocks 62 100 proceeds sales treasury stocks 60 19 418 cash dividends paid stockholders 1121 1105 1320 333 924 net cash provided financing activities 58922 27012 21500 net cash provided discontinued operations 275 effect exchange rate changes cash equivalents 929 495 96 net increase cash equivalents 12234 2465 9169 cash equivalents beginning year 20320 17855 8686 cash equivalents end year 32554 20320 17855 reference made notes consolidated financial statements ii28 supplemental information intended facilitate analysis general motors corporations businesses 1 automotive operations 2 financing insurance operations reference made notes consolidated financial statements ii29 resolution workers compensation pension postemployment liabilities owed gm delphi automotive systems gm spun 1999 b write deferred taxes related 1999 spinoff delphi automotive systems reference made notes consolidated financial statements ii30 general motors corporation subsidiaries notes consolidated financial statements note 1 significant accounting policies principles consolidation consolidated financial statements include accounts general motors corporation domestic foreign subsidiaries 50 owned principally general motors acceptance corporation subsidiaries gmac collectively referred corporation general motors gm addition gm consolidates variable interest entities vies deemed primary beneficiary general motors share earnings losses associates least 20 voting securities owned included consolidated operating results using equity method accounting except investments gm able exercise significant influence operating financial decisions investee case cost method accounting used gm encourages reference gmac annual report form 10k period ended december 31 2003 filed separately us securities exchange commission sec certain amounts 2002 2001 reclassified conform 2003 classifications nature operations financial statement presentation supplemental information gm presents primary financial statements fully consolidated basis transactions businesses eliminated corporations consolidated financial statements transactions consist principally borrowings financial services provided financing insurance operations fio automotive operations auto facilitate analysis gm presents supplemental information statements income balance sheets statements cash flows following businesses 1 auto consists design manufacturing marketing cars trucks locomotives related parts accessories 2 fio consists primarily gmac provides broad range financial services including consumer vehicle financing fullservice leasing fleet leasing dealer financing car truck extended service contracts residential commercial mortgage services vehicle homeowners insurance assetbased lending use estimates preparation financial statements preparation financial statements conformity accounting principles generally accepted united states requires management make estimates assumptions affect amounts reported therein due inherent uncertainties involved making estimates actual results reported future periods may differ estimates revenue recognition sales generally recorded products shipped title risks rewards ownership passed services rendered independent dealers third parties provisions dealer customer sales incentives allowances rebates made time vehicle sales incentives allowances rebates related vehicles previously sold recognized reductions sales announced financing revenue recorded terms receivables using interest method income operating lease assets recognized straightline basis scheduled lease terms insurance premiums earned basis related coverage provided terms policies commissions premium taxes costs incurred acquiring new business deferred amortized terms related policies basis premiums earned advertising research development advertising research development productrelated costs charged expense incurred advertising expense 47 billion 2003 44 billion 2002 41 billion 2001 research development expense 57 billion 2003 2002 61 billion 2001 depreciation amortization expenditures special tools placed service january 1 2002 amortized using straightline method estimated useful lives expenditures special tools placed service prior january 1 2002 amortized estimated useful lives primarily using units production method replacements special tools reasons changes products charged directly cost sales january 1 2001 corporation adopted straightline method depreciation real estate plants equipment placed service date assets placed service january 1 2001 continue generally depreciated using accelerated methods accelerated methods accumulate depreciation approximately twothirds depreciable cost first half ii31 general motors corporation subsidiaries notes consolidated financial statements note 1 significant accounting policies continued depreciation amortization concluded estimated useful lives property groups compared straightline method allocates depreciable costs equally estimated useful lives property groups management believes adoption straightline amortizationdepreciation method special tools placed service january 1 2002 real estate plants equipment placed service january 1 2001 better reflects consistent use assets useful lives equipment operating leases depreciated using straightline method term lease agreement difference net book value proceeds sale salvage items disposed accounted charge credit provision depreciation valuation longlived assets gm periodically evaluates carrying value longlived assets held used business goodwill intangible assets indefinite lives assets held sale events circumstances warrant generally conjunction annual business planning cycle carrying value longlived asset considered impaired loss recognized based amount carrying value exceeds fair market value assets held used assets held sale loss increased costs sell fair market value determined primarily using anticipated cash flows discounted rate commensurate risk involved longlived assets disposed sale considered held used disposed goodwill intangible assets prior january 1 2002 goodwill amortized using straightline method 20 40 year periods january 1 2002 corporation implemented statement financial accounting standards sfas 142 goodwill intangible assets ceased amortization method accounting goodwill changed impairmentonly approach accordingly goodwill longer amortized tested impairment least annually gms reported income earnings per share continuing operations information exclusive amortization expense recognized related goodwill required previous accounting standards aftertax basis follows dollars millions except per share amounts yearsended december 31 2003 2002 2001 net income continuing operations reported 2862 1975 1222 add goodwill amortization 107 adjusted net income 2862 1975 1329 basic earnings per share continuing operations attributable gm 123 par value reported 510 353 221 adjusted 510 353 241 earnings per share continuing operations attributable gm 123 par value assuming dilution reported 503 351 220 adjusted 503 351 239 foreign currency transactions translation foreign currency exchange transaction translation losses including effect derivatives net taxes included consolidated net income 2003 2002 2001 pursuant sfas 52 foreign currency translation amounted 122 million 103 million 129 million respectively policy warranty provisions estimated expenses related product warranties made time products sold estimates established using historical information nature frequency average cost warranty claims management actively studies trends warranty claims takes action improve vehicle quality minimize warranty claims see note 15 ii32 general motors corporation subsidiaries notes consolidated financial statements note 1 significant accounting policies continued cash equivalents cash equivalents defined shortterm highlyliquid investments original maturities 90 days less statements cash flows supplementary information years ended december 31 automotive operations 2003 2002 2001 dollars millions increase decrease cash due changes operating assets liabilities follows accounts receivable 575 93 76 prepaid expenses deferred charges 578 268 93 inventories 518 221 545 accounts payable 2400 1053 545 deferred taxes income taxes payable 2219 1825 1404 accrued expenses liabilities 3049 5517 1384 fleet rental acquisitions 7761 5595 4997 fleet rental liquidations 4831 4262 5560 total 3067 3808 1152 cash paid interest 1398 1033 700 2003 auto made investments companies net cash acquired approximately 60 million 2002 auto made investments companies net cash acquired approximately 700 million amount consists primarily gms purchase 446 equity interest gm daewoo auto technology company gm daewoo approximately 251 million gms investments isuzurelated entities 180 million 2001 majority 740 million investments made auto consisted gms purchase additional 10 ownership suzuki motor corporation suzuki approximately 520 million years ended december 31 financing insurance operations 2003 2002 2001 dollars millions increase decrease cash due changes operating assets liabilities follows receivables 1050 278 736 accounts payable liabilities 733 264 1306 deferred taxes income taxes payable 1958 683 348 total 2275 669 918 cash paid interest 6965 6333 6932 fio made investments companies net cash acquired approximately 140 million 180 million 540 million 2003 2002 2001 respectively 2001 investments primarily mortgage warehouse lending business ii33 general motors corporation subsidiaries notes consolidated financial statements note 1 significant accounting policies continued derivative instruments gm party variety foreign exchange rate interest rate commodity forward contracts options entered connection management exposure fluctuations foreign exchange rates interest rates certain commodity prices financial exposures managed accordance corporate policies procedures derivatives recorded fair value consolidated balance sheet effective changes fair value derivatives designated cash flow hedges net investment foreign operation recorded net unrealized gain loss derivatives separate component income loss amounts reclassified accumulated comprehensive loss underlying hedged item affects earnings ineffective changes fair value recorded currently earnings changes fair value derivatives designated fair value hedges recorded currently earnings offset extent derivative effective changes fair value hedged item changes fair value derivatives designated hedging instruments recorded currently earnings new accounting standards beginning january 1 2003 corporation began expensing fair market value newly granted stock options stock based compensation awards employees pursuant sfas 123 accounting stockbased compensation fair value stock option grants estimated date grant using blackscholes optionpricing model fair value stock compensation awards determined market price gm 123 common stock date grant total expense 2003 229 million 142 million net tax recorded cost sales expenses 2002 prior years permitted sfas 123 gm applied intrinsic value method recognition measurement accounting principles board opinion 25 apb 25 accounting stock issued employees stock options stockbased employee compensation awards compensation expense related employee stock options reflected net income periods options granted exercise price equal market value underlying common stock date grant accordance disclosure requirements sfas 148 accounting stockbased compensation transition disclosure since gm adopted fair value based method accounting stockbased employee compensation pursuant sfas 123 effective january 1 2003 newly granted stock based compensation awards following table illustrates effect net income earnings per share compensation cost outstanding unvested stock options stockbased employee compensation awards determined based fair values grant date dollars millions except per share amounts yearended december 31 2003 2002 2001 net income continuing operations reported 2862 1975 1222 add stockbased compensation expense included reported net income net related tax effects 142 44 18 deduct total stockbased compensation expense determined fair value based method awards net related tax effects 195 187 156 pro forma net income continuing operations 2809 1832 1084 earnings continuing operations attributable gm 123 par value common stock reported 2862 1975 1220 pro forma 2809 1832 1082 basic earnings per share continuing operations attributable gm 123 par value reported 510 353 221 pro forma 501 327 196 diluted earnings per share continuing operations attributable gm 123 par value reported 503 351 220 pro forma 493 326 195 ii34 general motors corporation subsidiaries notes consolidated financial statements note 1 significant accounting policies continued new accounting standards continued december 2002 financial accounting standards board fasb issued interpretation 45 guarantors accounting disclosure requirements guarantees including indirect guarantees indebtedness others fin 45 fin 45 requires time company issues guarantee company must recognize initial liability fair value obligations assumes guarantee interpretation applicable prospective basis guarantees issued modified december 31 2002 fin 45 also contains disclosure provisions surrounding existing guarantees effective financial statements interim annual periods ending december 15 2002 see note 18 january 2003 fasb issued interpretation 46 consolidation variable interest entities fin 46 requires consolidation certain entities considered variable interest entities vies entity considered vie equity investors lack characteristics controlling financial interest capital insufficient permit finance activities without additional subordinated financial support consolidation vie investor required determined investor absorb majority vies expected losses residual returns occur fin 46 provides certain exceptions rules relating qualifying special purpose entities qspes subject requirements sfas 140 upon original issuance fin 46 required vies created january 31 2003 would consolidated immediately vies created prior february 1 2003 consolidated july 1 2003 october 2003 fasb deferred effective date consolidation vies created prior february 1 2003 december 31 2003 calendar yearend companies earlier application encouraged gm adopted fin 46 original effective date july 1 2003 entities created prior february 1 2003 application consolidation provisions fin 46 resulted increase assets debt approximately 46 billion 917 million auto 37 billion fio cumulative effect accounting change recorded cost sales 27 million aftertax related auto net income effect fio refer note 7 discussion gms involvement variable interest entities december 2003 fasb published revision fin 46 fin 46r clarify provisions original interpretation exempt certain entities requirements fin 46r provides special effective date provisions enterprises fully partially applied fin 46 prior issuance revised interpretation particular entities already adopted fin 46 required adopt fin 46r quarterly reporting period ended march 31 2004 corporation currently reviewing provisions fin 46r adopt fin 46r quarterly reporting period ending march 31 2004 april 2003 fasb issued sfas 149 amendments statement 133 derivative instruments hedging activities sfas 149 amends clarifies accounting derivative instruments including certain derivative instruments embedded contracts hedging activities statement effective contracts entered modified june 30 2003 hedging relationships designated june 30 2003 adoption standard material effect corporations financial condition results operations may 2003 fasb issued sfas 150 accounting certain financial instruments characteristics liabilities equity provides standards issuer classifies measures certain financial instruments characteristics liabilities equity statement effective financial instruments entered modified may 31 2003 preexisting instruments beginning first interim period beginning june 15 2003 adoption standard material effect corporations financial condition results operations december 2003 fasb issued sfas 132 revised 2003employers disclosures pensions postretirement benefits revisions sfas 132 intended improve financial statement disclosures defined benefit plans initiated 2003 response concerns raised investors users financial statements need greater transparency pension information particular standard requires companies provide details plan assets benefit obligations cash flows benefit costs relevant quantitative qualitative information guidance effective fiscal years ending december 15 2003 refer note 17 discussion gms pension postretirement benefits obligations ii35 general motors corporation subsidiaries notes consolidated financial statements note 1 significant accounting policies concluded labor force gm worldwide basis concentration labor supply employees working union collective bargaining agreements certain contracts expired 2003 united auto workers uaw labor contract ratified october 6 2003 covering fouryear term 20032007 contract included 3000 lump sum payment per uaw employee paid october 2003 3 performance bonus per uaw employee paid october 2004 gm amortize payments 12month period following respective payment dates uaw employees receive gross wage increase 2 2005 3 2006 active uaw employees also granted pension benefit increases pension benefit increases granted current retirees surviving spouses however contract provide four lump sum payments two vehicle discount vouchers current retirees surviving spouses retiree lump sum payments vehicle discount vouchers resulted charge gms 2003 fourth quarter cost sales approximately 12 billion 725 million aftertax note 2 discontinued operations december 22 2003 gm completed series transactions resulted splitoff hughes gm simultaneous sale gms approximately 198 percent economic interest hughes news corporation ltd news corporation transactions gm splitoff hughes distributing hughes common stock holders gm class h common stock exchange outstanding shares gm class h common stock simultaneously gm sold 198 percent economic interest hughes news corporation exchange cash news corporation preferred american depositary shares preferred adss shares gm class h common stock cancelled news corporation acquired former gm class h common stockholders additional 142 percent outstanding shares hughes common stock exchange news corporation preferred adss gm sold 80 percent 198 percent retained economic interest hughes news corporation total approximately 31 billion cash gm sold remaining 20 percent retained economic interest hughes news corporation approximately 286 million news corporation preferred adss valued 819 million december 22 2003 including hughes transaction expenses approximately 90 million gm recorded net gain 12 billion sale gms approximately 198 economic interest hughes reported gain sale discontinued operations gms consolidated statement income 2003 addition result transactions net reduction gms stockholders equity approximately 70 billion news corporation preferred adss sold gm january 2004 financial data related gms investment hughes december 22 2003 classified discontinued operations periods presented financial data hughes reflect historical results operations cash flows businesses considered part hughes business segment gm respective period assets liabilities hughes respective dates hughes net sales included discontinued operations 98 billion 95 billion 83 billion 2003 2002 2001 respectively hughes net losses discontinued operations 219 million 239 million 621 million 2003 2002 2001 respectively hughes amounts reported assets liabilities discontinued operations follows millions december 31 current assets 3670 property equipment net 1558 intangible assets net 7158 assets 6267 assets discontinued operations 18653 current liabilities 3177 longterm debt 2390 liabilities 2389 liabilities discontinued operations 7956 ii36 general motors corporation subsidiaries notes consolidated financial statements note 3 asset impairments gm recorded pretax charges income asset impairments 835 million 533 million aftertax 094 per diluted share 2003 254 million 158 million aftertax 028 per diluted share 2002 140 million 90 million aftertax 016 per diluted share 2001 charges recorded cost sales expenses income statement 2003 pretax charges comprised 767 million 491 million aftertax related special tools assets related product lines 68 million 42 million aftertax related real estate 2002 charges related production facilities special tools 2001 charges related writedown equipment result announcement closing ste therese quebec assembly plant 2002 writedown certain equipment operating leases determined impaired gmna note 4 investment nonconsolidated affiliates nonconsolidated affiliates investees gm uses equity method accounting gm ability exert significant influence operating financial decisions affiliate gms significant affiliates gms ownership percentage include following italy gmfiat powertrain 50 2003 2002 2001 japan fuji heavy industries ltd 20 2003 21 2002 2001 suzuki motor corporation 201 202 203 2003 2002 2001 respectively china shanghai general motors corporation 50 2003 2002 2001 korea gm daewoo 446 2003 2002 0 2001 information regarding book value gms investments share income affiliates well total assets liabilities significant affiliates included table 2003 italy japan china korea book value gms investments affiliates 946 2781 964 200 gms share affiliates net income loss 95 196 437 74 total assets significant affiliates 1 7939 29622 2723 3263 total liabilities significant affiliates 1 5309 17764 1175 2892 book value gms investments affiliates 753 2322 659 252 gms share affiliates net income loss 80 133 142 45 total assets significant affiliates 1 6589 24579 1698 2277 total liabilities significant affiliates 1 4479 14966 634 1771 book value gms investment affiliates 699 2214 486 0 gms share affiliates net income loss 32 102 38 0 total assets significant affiliates 1 5361 23960 1374 0 total liabilities significant affiliates 1 3936 14911 530 0 1 defined ii37 general motors corporation subsidiaries notes consolidated financial statements continued note 5 postemployment benefit costs gm records liabilities termination postemployment benefits paid pursuant union contractual agreements connection closed plants north america gm reviews adequacy continuing need liabilities annual basis conjunction yearend production labor forecasts furthermore gm reviews reasonableness liabilities quarterly basis liability postemployment benefits december 31 2003 totals approximately 384 million relating 9 plants approximately 2900 employees anticipated spending approximately 96 next three years liability postemployment benefits 613 million relating 11 plants approximately 3400 employees december 31 2002 liability postemployment benefits 626 million relating 12 plants approximately 5800 employees december 31 2001 following table summarizes activity december 31 2001 december 31 2003 liability dollars millions balance december 31 2001 626 spending 182 interest accretion 47 additions 281 adjustments 159 balance december 31 2002 613 spending 189 interest accretion 31 additions adjustments 71 balance december 31 2003 384 2003 gm recognized adjustments 71 million reduce liability balance existing closed plants 44 million tax 008 per share gm 123 par value common stock recorded cost sales adjustments primarily result reversal remaining postemployment liabilities employees janesville wisconsin plant location reduction respective liabilities employees oklahoma city oklahoma plant increase respective liabilities wilmington delaware plant janesville charge established 2002 relating 772 employees impacted transfer commercial truck production janesville flint michigan reversal primarily due earlier anticipated retirements 479 employees adjustments also include reduction reserve oklahoma city plant employees absorbed continuing workforce due increased manpower requirements wilmington plant reserve increased account increased duration employees absorbed continuing workforce due change production plan 2002 gm recognized postemployment benefit liabilities 281 million 174 million tax 031 per share gm 123 par value common stock primarily related transfer commercial truck production janesville flint janesville charge related 772 employees included cost sales adjustments 159 million 99 million tax 018 per share gm 123 par value common stock recorded cost sales primarily result reversal postemployment benefit liabilities employees spring hill tennessee plant reversal recorded due approximately 400 employees included planned production capacity reduction instead absorbed continuing workforce due change plan note 6 marketable securities marketable securities held gm classified availableforsale except certain mortgagerelated securities classified heldtomaturity trading securities news corporation adss classified trading securities unrealized gains losses net related income taxes availableforsale heldtomaturity securities included separate component stockholders equity unrealized gains losses trading securities included income current basis gm determines cost specific identification basis ii38 general motors corporation subsidiaries notes consolidated financial statements continued note 6 marketable securities continued automotive operations investments marketable securities follows dollars millions bookfair unrealized cost value gains losses december 31 2003 type security corporate debt securities 5246 9 us government agencies 2865 2867 9 7 mortgage backed securities 90 total debt securities available sale 8201 8203 news corporation adss 819 864 total marketable securities 9020 9067 18 16 december 31 2002 type security corporate debt securities 1456 1469 18 5 us government agencies 606 612 6 mortgage backed securities 93 total marketable securities 2155 2174 24 5 debt securities totaling 752 million mature within one year 71 billion mature one five years 79 million mature five ten years 247 million mature ten years proceeds sales marketable securities totaled 71 billion 2003 47 billion 2002 373 million 2001 gross gains related sales marketable securities 7 million 3 million 3 million 2003 2002 2001 respectively gross losses related sales marketable securities 11 million 2003 1 million 2002 7 million 2001 financing insurance operations investments marketable securities follows dollars millions bookfair unrealized cost value gains losses december 31 2003 type security bonds notes securities united states government agencies 716 722 7 1 states municipalities 595 647 52 foreign government securities 543 550 8 1 mortgage assetbacked securities 1806 1949 150 7 corporate debt securities 3078 3200 129 7 total debt securities availableforsale 6738 7068 346 16 mortgagebacked securities heldtomaturity 240 mortgagebacked securities held trading purposes 4483 4142 341 total debt securities 11461 11450 346 357 equity securities 1185 1698 522 9 total investment marketable securities 12646 13148 868 366 total consolidated marketable securities 21666 22215 886 382 ii39 general motors corporation subsidiaries notes consolidated financial statements continued note 6 marketable securities concluded bookfair unrealized cost value gains losses december 31 2002 type security bonds notes securities united states government agencies 2836 2875 39 states municipalities 599 650 52 1 foreign government securities 479 497 19 1 mortgage assetbacked securities 2529 2761 296 64 corporate debt securities 1836 1933 106 9 total debt securities availableforsale 8279 8716 512 75 mortgagebacked securities heldtomaturity 305 mortgagebacked securities held trading purposes 5176 4378 798 total debt securities 13760 13399 512 873 equity securities 1224 1252 163 135 total investment marketable securities 14984 14651 675 1008 total consolidated marketable securities 17139 16825 699 1013 debt securities availableforsale totaling 11 billion mature within one year 20 billion mature one five years 16 billion mature five years 10 years 24 billion mature 10 years proceeds sales marketable securities totaled 76 billion 2003 128 billion 2002 51 billion 2001 gross gains related sales marketable securities 270 million 402 million 228 million 2003 2002 2001 respectively gross losses related sales marketable securities 202 million 121 million 145 million 2003 2002 2001 respectively note 7 variable interest entities discussed note 1 gm applied provisions fin 46 variable interest entities beginning july 1 2003 connection application fin 46 gm providing information concerning variable interest entities 1 consolidated gm deemed primary beneficiary 2 entities gm consolidate although gm significant interests variable interest entities gm primary beneficiary automotive operations synthetic leases gm leases real estate equipment various special purpose entities spes established facilitate financing assets gm nationally prominent creditworthy lessors assets consist principally office buildings warehouses machinery equipment use spes allows parties providing financing isolate particular assets single entity thereby syndicate financing multiple third parties conventional financing technique used lower cost borrowing thus lease cost lessee gm wellestablished market institutions participate financing property purchase interests spes certain spes determined vies fin 46 leases gm provides residual value guarantee leased property considered primary beneficiary fin 46 gm consolidated entities july 1 2003 resulted auto initial increase assets debt 917 million cumulative effect accounting change recorded cost sales 27 million aftertax december 31 2003 carrying amount assets liabilities consolidated fin 46 amounted 878 million 945 million respectively assets consolidated classified property gms consolidated financial statements gms maximum exposure loss related consolidated vies amounts 795 million lease arrangements involving vies gm holds significant variable interests considered primary beneficiary fin 46 gms maximum exposure loss related vies gm significant variable interest consolidate entity amounts 557 million ii40 general motors corporation subsidiaries notes consolidated financial statements continued note 7 variable interest entities concluded financing insurance operations mortgage warehouse funding gmacs mortgage operations sell commercial residential mortgage loans various structured finance arrangements order provide funds origination purchase future loans structured finance arrangements include sales offbalance sheet warehouse funding entities including gmac banksponsored commercial paper conduits transfers assets gmac facility accounted sales based provisions sfas 140 creditors facilities recourse general credit gmac warehouse funding entities represent variable interest entities fin 46 certain mortgage warehouse entities management determined gmac majority expected losses returns consolidation appropriate fin 46 assets entities totaled 24 billion 08 billion represents gmacs maximum exposure loss maximum exposure would occur unlikely event complete loss underlying assets entities gmac considered primary beneficiary activities entities either terminated prior july 1 2003 gmac consolidated entities pursuant fin 46 december 31 2003 consolidated entities assets remaining terminated interests real estate partnerships corporations mortgage operations syndicate investments real estate partnerships unaffiliated investors certain partnerships guarantee timely payment specified return investors returns investors partnerships syndicated corporation derived tax credits tax losses generated underlying operating partnership entities develop operate affordable housing properties throughout united states syndicated tax credit partnerships contain guarantee reflected corporations financial statements financing method addition corporation variable interests underlying operating partnerships primarily form limited partnership interests results corporations variable interest analysis indicated gmac primary beneficiary partnerships result required consolidate entities fin 46 assets outstanding partnerships approximated 3 billion december 31 2003 gmacs exposure loss time 675 million representing amount payable investors event liquidation partnerships corporations exposure loss increases unaffiliated investors place additional guaranteed commitments corporation considering committed amounts corporations exposure loss future periods expected exceed 12 billion collateralized debt obligations cdos gmacs mortgage operations sponsor purchase subordinate equity interests serve collateral manager cdos cdo transactions trust established purchases portfolio securities issues debt equity certificates representing interests portfolio assets addition receiving variable compensation managing portfolio corporation sometimes retains equity investments cdos majority cdos sponsored corporation initially structured restructured approval senior beneficial interest holders qualifying special purpose entities therefore exempt fin 46 corporations remaining cdos results primary beneficiary analysis support conclusion consolidation appropriate fin 46 gmac majority expected losses returns assets cdos totaled 20 billion gmacs maximum exposure loss 40 million representing gmacs retained interests entities maximum exposure loss would occur unlikely event complete loss underlying assets entities automotive finance receivables certain securitization transactions gmac securitizes consumer commercial finance receivables banksponsored multiseller commercial paper conduits provide funding source gmac well sellers conduit fund purchase receivables issuance commercial paper total assets outstanding banksponsored conduits approximated 13 billion december 31 2003 gmac variable interest conduits corporation deemed primary beneficiary gmac retain majority expected losses returns gmacs maximum exposure loss result involvement nonconsolidated variable interest entities 179 million would realized event complete loss assets gmac sold ii41 general motors corporation subsidiaries notes consolidated financial statements continued note 8 finance receivables securitizations finance receivables net finance receivables net included following dollars millions december 31 consumer 2003 2002 retail automotive 87163 78857 residential mortgages 46307 15238 total consumer 133470 94095 commercial automotive wholesale 25517 21459 leasing lease financing 1465 5910 term loans dealers others 3912 4190 commercial industrial 9783 9464 commercial real estate commercial mortgage 180 621 construction 2053 1963 total commercial 42910 43607 total finance receivables loans 176380 137702 allowance financing losses 3243 3059 total consolidated finance receivables net 1 173137 134643 1 net unearned income 72 billion 65 billion december 31 2003 2002 respectively finance receivables originated outside united states 291 billion 231 billion december 31 2003 2002 respectively aggregate amounts total finance receivables maturing five years following december 31 2003 follows 2004640 billion 2005256 billion 2006220 billion 2007150 billion 200873 billion 2009 thereafter491 billion actual maturities may differ scheduled due prepayments securitizations finance receivables mortgage loans corporation securitizes automotive mortgage financial assets funding source gmac sells retail finance receivables wholesale loans residential mortgage loans commercial mortgage loans commercial investment securities corporation retains servicing responsibilities subordinated interests securitizations retail finance receivables wholesale loans servicing responsibilities retained majority residential commercial mortgage loan securitizations corporation may retain subordinated interests securitizations gmac also holds subordinated interests acts collateral manager securitizations commercial investment securities december 31 2003 weighted average servicing fees gms primary servicing activities 200 basis points 100 basis points 27 basis points 8 basis points outstanding principal balance sold retail finance receivables wholesale loans residential mortgage loans commercial mortgage loans respectively additionally corporation retains rights cash flows remaining investors securitization trusts received contractual payments corporation maintains cash reserve accounts predetermined amounts certain securitization activities unlikely event deficiencies occur cash flows owed investors amounts available cash reserve accounts totaled 162 million 12 billion 6 million 5 million 70 million december 31 2003 related securitizations retail finance receivables wholesale loans residential mortgage loans commercial mortgage loans commercial investment securities respectively 280 million 937 million 21 million 4 million 20 million december 31 2002 respectively ii42 general motors corporation subsidiaries notes consolidated financial statements continued note 8 finance receivables securitizations continued following table summarizes pretax gains securitizations certain cash flows received paid securitization trusts sales finance receivables loans completed 2003 2002 2001 retail mortgage loans year ended december 31 finance wholesale millions receivables loans residential commercial pretax gains securitizations 37 522 75 cash flow information proceeds new securitizations 1604 3625 29566 3342 servicing fees received 228 164 250 20 cash flows received retained interests 753 174 955 317 purchases delinquent foreclosed assets 275 262 5 pool buyback cash flows 885 1953 servicing advances 118 1944 117 repayments servicing advances 114 2017 116 proceeds collections reinvested revolving securitizations 862 97829 5 retail mortgage loans year ended december 31 finance wholesale millions receivables loans residential commercial pretax gains securitizations 239 562 30 cash flow information proceeds new securitizations 9982 2327 28241 1848 servicing fees received 247 146 201 17 cash flows received retained interests 1361 318 1044 86 purchases delinquent foreclosed assets 299 504 pool buyback cash flows 289 55 216 servicing advances 117 1582 122 repayments servicing advances 117 1447 116 proceeds collections reinvested revolving securitizations 482 104485 retail mortgage loans year ended december 31 finance wholesale millions receivables loans residential commercial pretax gains securitizations 210 966 24 cash flow information proceeds new securitizations 7331 7055 35137 2934 servicing fees received 168 124 256 16 cash flows received retained interests 1282 417 844 60 purchases delinquent forecloed assets 240 34 pool buyback cash flows 270 390 servicing advances 88 1861 95 repayments servicing advances 66 1817 71 proceeds collections reinvested revolving securitizations 81563 364 addition information presented preceding table pretax gains recognized commercial investment securities 14 million 18 million 17 million years ended december 31 2003 2002 2001 respectively cash proceeds new securitizations commercial investment securities 19 billion 439 million 643 million years ended december 31 2003 2002 2001 respectively addition cash flows received retained interests commercial investment securities aggregated 69 million 37 million 16 million years ended december 31 2003 2002 2001 respectively key economic assumptions used measuring estimated fair value retained interests sales completed 2003 2002 dates sales follows retail mortgage loans commercial year ended december 31 finance investment receivablesa residentialb commercial securities key assumptions c rates per annum annual prepayment rate 09 31599 00500 00 weighted average life years 16 1759 1462 25251 expected credit losses e 0073 0008 0016 discount rate 95 65145 26108 86100 retail mortgage loans commercial year ended december 31 finance investment receivablesa residentialb commercial securities key assumptions c rates per annum annual prepayment rate 0813 66547 00500 00900 weighted average life years 1526 1345 1078 30360 expected credit losses e 00248 0015 0009 discount rate 95120 65135 28201 36127 athe fair value retained interests wholesale securitizations approximates cost shortterm floating rate nature wholesale loans bincluded within residential mortgage loans home equity loans lines high loantovalue loans residential first second mortgage loans cthe assumptions used measure expected yield variable rate retained interests based benchmark interest rate yield curve plus contractual spread appropriate actual yield curve utlized varies depending specific retained interests dbased weighted average maturity wam finance receivables constant prepayment rate cpr mortgage loans commercial investment securities ea reserve totaling 83 million 127 million december 31 2003 2002 respectively established expected credit losses finance receivables securitized offbalance sheet transactions ii43 general motors corporation subsidiaries notes consolidated financial statements continued note 8 finance receivables securitizations continued table outlines key economic assumptions sensitivity estimated fair value retained interests december 31 2003 immediate 10 20 adverse changes assumptions retail mortgage loans commercial millions finance investment receivablesa residentialb commercial securities carrying valuefair value retained interests 1045 b 1171 620 318 weighted average life years 0110 1159 01184 05251 annual prepayment rate 0716 wam 70650cpr 00500 cpr 00370 cpr impact 10 adverse change 69 2 impact 20 adverse change 1 132 3 loss assumption b 00261 0066 09337 impact 10 adverse change 8 123 5 10 impact 20 adverse change 17 252 10 19 discount rate 95120 65145 25201 36132 impact 10 adverse change 5 31 8 18 impact 20 adverse change 10 61 16 34 market rate 2132 c impact 10 adverse change 6 19 impact 20 adverse change 11 39 athe fair value retained interests wholesale securitizations approximates cost shortterm floating rate nature wholesale receivables b fair value retained interests securitizations net reserve expected credit losses totaling 83 million december 31 2003 cforward benchmark interest rate yield curve plus contractual spread drepresents rate return paid investors sensitivities hypothetical used caution figures indicate changes fair value based 10 variation assumptions generally cannot extrapolated relationship change assumption change fair value may linear also table effect variation particular assumption fair value retained interest calculated without changing assumption reality changes one factor may result changes another may magnify counteract sensitivities additionally corporation hedges interest rate prepayment risks associated certain retained interests effects hedge strategies considered herein expected static pool net credit losses include actual incurred losses plus projected net credit losses divided original balance outstandings comprising securitization pool table displays expected static pool net credit losses based securitizations completed year loans securitized december 31 2003 2002 2001 retail automotive 04 06 07 residential mortgage 00260 00248 00229 commercial mortgage 0066 0041 0023 commercial investment securities 09337 03368 00170 static pool losses applicable wholesale finance receivable securitizations shortterm nature ii44 general motors corporation subsidiaries notes consolidated financial statements continued note 8 finance receivables securitizations concluded following table presents components securitized financial assets managed along quantitative information delinquencies net credit losses amanaged portfolio represents finance receivables loans balance sheet securitized excluding securitized finance receivables loans gmac continues service continuing involvement ie gmac retains interest risk loss underlying receivables note 9 inventories included following automotive operations dollars millions december 31 2003 2002 productive material work process supplies 4899 4803 finished product service parts etc 7642 6741 total inventories fifo 12541 11544 less lifo allowance 1581 1807 total inventories less allowances 10960 9737 inventories stated generally cost excess market cost approximately 92 us inventories determined lastin firstout lifo method generally cost inventories determined either firstin firstout fifo average cost methods 2003 us lifo eligible inventory quantities reduced reduction resulted liquidation lifo inventory quantities carried lower costs prevailing prior years compared cost 2003 purchases effect decreased cost goods sold approximately 200 million pretax note 10 equipment operating leases corporation significant investments residual values leasing portfolios residual values represent estimate values assets end lease contracts initially recorded based appraisals estimates realization residual values dependent corporations future ability market vehicles prevailing market conditions management reviews residual values periodically determine recorded amounts appropriate automotive operations equipment operating leases accumulated depreciation follows dollars millions december 31 2003 2002 equipment operating leases 7994 5729 less accumulated depreciation 821 424 net book value 7173 5305 ii45 general motors corporation subsidiaries notes consolidated financial statements continued note 10 equipment operating leases concluded financing insurance operations equipment operating leases accumulated depreciation follows dollars millions december 31 2003 2002 equipment operating leases 35800 33422 less accumulated depreciation 8590 7701 net book value 27210 25721 total consolidated net book value 34383 31026 lease payments received related equipment operating leases maturing five years following december 31 2003 follows auto none payment received upfront income deferred lease period fio 2004 64 billion 200543 billion 2006 24 billion 2007 711 million 200754 million leases maturing 2008 note 11 income taxes income continuing operations income taxes minority interests included following dollars millions years ended december 31 2003 2002 2001 us income loss 1786 126 329 foreign income 1195 2212 2783 total 2981 2338 2454 provision income taxes estimated follows dollars millions years ended december 31 2003 2002 2001 income taxes estimated payable currently us federal 123 48 34 foreign 1701 1394 1292 us state local 414 325 45 total payable currently 2238 1767 1371 deferred income tax expense credit net us federal 239 81 86 foreign 1712 958 400 us state local 34 246 37 total deferred 1507 1123 277 total income taxes 731 644 1094 ii46 general motors corporation subsidiaries notes consolidated financial statements continued note 11 income taxes continued annual tax provisions include amounts considered sufficient pay assessments may result examination prior year tax returns cash paid income taxes 2003 2002 2001 17 billion 22 billion 21 billion respectively provisions made estimated us foreign income taxes less available tax credits deductions may incurred remittance corporations share subsidiaries undistributed earnings deemed permanently reinvested taxes provided foreign subsidiaries earnings deemed permanently reinvested 116 billion december 31 2003 118 billion december 31 2002 quantification deferred tax liability associated permanently reinvested earnings practicable reconciliation provision income taxes compared amounts us federal statutory rate follows dollars millions years ended december 31 2003 2002 2001 tax us federal statutory income tax rate 1043 818 859 state local tax expense 261 91 56 foreign rates 35 31 16 131 taxes unremitted earnings subsidiaries 6 13 29 tax credits 52 82 57 raytheon settlement 1 180 settlement prior year tax matters 194 18 esop dividend deduction 2 53 85 stock contribution pension plans 3 87 adjustments 162 119 104 total income tax 731 644 1094 1 nontax deductible settlement raytheon company purchase price adjustment related raytheons 1997 merger hughes defense 2 deduction dividends paid gm 123 par value common stock held employee stock ownership portion gm savings plans pursuant economic growth tax relief reconciliation act 2001 3 additional tax benefit related gm class h common stock contribution pension veba plans deferred income tax assets liabilities 2003 2002 reflect effect temporary differences amounts assets liabilities equity financial reporting purposes bases assets liabilities equity measured tax laws well tax loss tax credit carryforwards temporary differences carryforwards gave rise deferred tax assets liabilities included following dollars millions december 31 2003 2002 deferred tax deferred tax assets liabilities assets liabilities postretirement benefits pensions 15280 14945 pension employee benefit plans 4060 12521 8009 461 warranties dealer customer allowances claims discounts 6541 108 6047 depreciation amortization 3901 2832 2386 2967 tax carryforwards 3313 3707 lease transactions 10 4297 4732 miscellaneous foreign 6363 2602 5165 2007 7136 2885 8277 3942 subtotal 46604 25245 48536 14109 valuation allowances 1677 1183 total deferred taxes 44927 25245 47353 14109 net deferred tax assets 19682 33244 ii47 general motors corporation subsidiaries notes consolidated financial statements continued note 11 income taxes concluded deferred tax detail included consolidated balance sheet supplemental information follows 2003 2002 current deferred tax assets 9104 8336 current deferred tax liabilities 5671 5348 noncurrent deferred tax assets 18086 31431 noncurrent deferred tax liabilities 1837 1175 total 19682 33244 tax carryforwards approximately 172 relates alternative minimum tax credit carried forward indefinitely approximately 177 relates us state net operating loss carryforwards expire years 20042022 used however substantial portion us state net operating loss carryforwards expire year 2006 tax credit carryforwards consisting primarily research experimentation credits expire years 20192022 used valuation allowance principally relates us state certain foreign operating loss carryforwards note 12 property net property net follows dollars millions estimated december 31 useful lives years 2003 2002 automotive operations land 1004 913 buildings land improvements 240 15272 13912 machinery equipment 330 44851 41500 construction progress 2722 2757 real estate plants equipment 63849 59082 less accumulated depreciation 37535 34182 real estate plants equipment net 26314 24900 special tools net 9757 9235 total property net 36071 34135 financing insurance operations equipment 210 3160 2329 less accumulated depreciation 1020 508 total property net 2140 1821 total consolidated property net 38211 35956 depreciation amortization expense follows dollars millions years ended december 31 automotive operations 2003 2002 2001 depreciation 4526 3675 3533 amortization special tools 3391 2648 2360 amortization intangible assets 29 1 14 total 7946 6324 5907 financing insurance operations depreciation 6021 5522 5684 amortization intangible assets 11 19 173 total 6032 5541 5857 ii48 general motors corporation subsidiaries notes consolidated financial statements continued note 13 goodwill intangible assets components corporations intangible assets december 31 2003 2002 follows dollars millions gross accumulated net december 31 2003 carrying amortization carrying amount automotive operations amortizing intangible assets patents intellectual property rights 303 31 272 nonamortizing intangible assets goodwill 567 prepaid pension asset note 17 640 total goodwill intangible assets 1479 financing insurance operations amortizing intangible assets customer lists contracts 65 31 34 trademarks 40 16 24 covenants compete 18 total 123 65 58 nonamortizing intangible assets goodwill 3223 total goodwill intangible assets 3281 total consolidated goodwill intangible assets 4760 december 31 2002 automotive operations amortizing intangible assets patents intellectual property rights 305 28 277 nonamortizing intangible assets goodwill 477 prepaid pension asset note 17 6699 total goodwill intangible assets 7453 financing insurance operations amortizing intangible assets customer lists contracts 67 24 43 trademarks 39 12 27 covenants compete 18 total 124 54 70 nonamortizing intangible assets goodwill 3273 total goodwill intangible assets 3343 total consolidated goodwill intangible assets 10796 aggregate amortization expense existing acquired intangible assets 37 million year ended december 31 2003 estimated amortization expense next five years follows 2004 38 million 2005 38 million 2006 37 million 2007 37 million 2008 34 million ii49 general motors corporation subsidiaries notes consolidated financial statements continued note 13 goodwill intangible assets concluded changes carrying amounts goodwill year ended december 31 2003 follows dollars millions total auto gmna gme gmac total gm balance december 31 2001 29 283 312 3144 3456 goodwill acquired period 118 96 214 goodwill written related sale business units 8 9 17 effect foreign currency 55 42 97 translation balance december 31 2002 139 338 477 3273 3750 goodwill acquired period 18 goodwill written related sale business units 4 effect foreign currency translation 6 75 81 51 132 impairmentother 13 1191 106 balance december 31 2003 154 413 567 3223 3790 1in september 2003 gmac received 110 million related settlement claim involving 1999 acquisition assetbased lending factoring business bank new york settlement amount 109 million considered purchase price adjustment reducing related goodwill remainder represented reimbursement tax claims paid behalf bank new york note 14 assets automotive operations assets included following dollars millions december 31 2003 2002 investments equity securities 470 334 us prepaid pension benefit cost note 17 39904 1888 1127 total assets 42262 1461 investments equity securities december 31 2003 2002 includes fair value investments equity securities classified availableforsale periods presented gms intent hold securities longer one year balances include historical costs 114 million 60 million unrealized gains 142 million 75 million unrealized losses 6 million 21 million december 31 2003 2002 respectively also included investments equity securities gms investment common stock fiat auto holdings bv fah entity sole shareholder fiat auto spa fiat auto acquired 24 billion 2000 subsequent acquisition unfavorable european market conditions factors led deterioration performance fiat auto accordingly gm commenced review appropriate carrying value gms investment fah completed third quarter 2002 resulted noncash charge 22 billion 14 billion aftertax recorded cost sales expenses segment auto writedown brought carrying value gms investment fah 24 billion 220 million carrying value based gms interest estimated market value fah equity comprises fahs ownership fiat auto including 50 ownership interests purchasing powertrain joint ventures gm fiat auto gms investment fah reduced 20 10 fiat recapitalized fah 2003 ii50 general motors corporation subsidiaries notes consolidated financial statements continued note 14 assets concluded financing insurance operations assets included following dollars millions december 31 2003 2002 mortgage servicing rights 3720 2683 premiums insurance receivables 1960 1742 deferred policy acquisition costs 1038 584 derivative assets 10026 7185 repossessed foreclosed assets net 786 418 equity investments 1560 587 intangible assets note 13 3281 3343 property note 12 2140 1821 cash deposits held securitization trusts 1922 1481 restricted cash collections securitization trusts 2291 1244 accrued interest rent receivable 767 673 real estate investments 788 819 debt issuance costs 716 508 servicer advances 946 838 3547 4260 total assets 35488 28186 reclassification consolidated balance sheet presentation december 31 2003 2002 ao assets detailed 42262 1461 fio assets detailed 35488 28186 subtotal 77750 29647 prepaid assets 1747 1295 accounts notes receivable 15152 11602 intangible assets note 13 3281 3343 property note 12 2140 1821 total consolidated assets 58924 14176 note 15 accrued expenses liabilities deferred income taxes automotive operations accrued expenses liabilities deferred income taxes included following dollars millions december 31 2003 2002 dealer customer allowances claims discounts 11145 10388 deferred revenue principally sales vehicles rental companies 13157 10311 policy product warranty recall campaigns 8674 8850 payrolls employee benefits excludes postemployment 5081 4283 unpaid losses selfinsurance programs 2027 1990 taxes 3437 1670 interest 932 669 postemployment benefits including extended disability benefits 1212 1251 8492 7576 total accrued expenses liabilities 54157 46988 pensions 72 46 postretirement benefits 3210 3142 deferred income taxes 3545 2671 total accrued expenses liabilities deferred income taxes 60984 52847 current 45417 39113 noncurrent 15567 13734 total accrued expenses liabilities deferred income taxes 60984 52847 ii51 general motors corporation subsidiaries notes consolidated financial statements continued note 15 accrued expenses liabilities deferred income taxes continued automotive operations concluded december 31 2003 2002 policy product warranty recall campaigns liability beginning balance 8850 8171 payments 4435 4182 increase liability warranties issued period 4390 4418 adjustments liability preexisting warranties 367 323 effect foreign currency translation 236 120 ending balance 8674 8850 financing insurance operations liabilities deferred income taxes included following dollars millions december 31 2003 2002 unpaid insurance losses loss adjustment expenses unearned insurance premiums 6568 5637 income taxes 139 1659 interest 3135 2741 deposits 5074 3732 interest rate derivatives 1121 843 3736 3744 total liabilities 19773 18356 postretirement benefits 797 766 deferred income taxes 3963 3852 total liabilities deferred income taxes 24533 22974 total consolidated accrued expenses liabilities 73930 65344 total consolidated deferred income tax liability note 11 7508 6523 note 16 longterm debt loans payable automotive operations longterm debt loans payable follows dollars millions weightedaverage interest rate december 31 2003 2002 2003 2002 longterm debt loans payable within one year current portion longterm debt 1 14 38 1090 424 33 29 1723 1570 total loans payable 2813 1994 payable beyond one year 1 68 60 29632 14234 unamortized discount 108 21 mark market adjustment 2 69 48 total longterm debt loans payable 32406 16255 1 weightedaverage interest rates include impact interest rate swap agreements 2 effective january 1 2001 corporation began recording hedged debt fair market value balance sheet due implementation sfas 133 accounting derivative instruments hedging activities ii52 general motors corporation subsidiaries notes consolidated financial statements continued note 16 longterm debt loans payable continued longterm debt payable beyond one year december 31 2003 included maturities follows 2005 575 million 2006 541 million 2007 198 million 2008 16 billion 2009 268 billion protect foreign exchange risk gm entered cross currency swap agreements notional amounts agreements december 31 2003 auto approximately 24 billion notional amounts agreements december 31 2002 auto approximately 238 million amounts payable beyond one year cross currency swaps december 31 2003 included 23 billion currencies us dollar primarily euro 19 billion brazilian real 197 million australian dollar 186 million december 31 2003 2002 longterm debt loans payable auto included 274 billion 148 billion respectively obligations fixed interest rates 50 billion 15 billion respectively obligations variable interest rates predominantly libor interest rate swap agreements achieve desired balance fixed variable rate debt gm entered interest rate swap swaption agreements notional amount pay variable swap agreements december 31 2003 auto approximately 35 billion swaption agreements december 31 2003 notional amount agreements december 31 2002 auto approximately 745 million 645 million pay variable swap agreements 100 million relating pay variable swaption agreements gms auto business maintains substantial lines credit various banks totaled 86 billion december 31 2003 26 billion represented shortterm credit facilities 60 billion represented longterm credit facilities december 31 2002 bank lines credit totaled 85 billion 26 billion represented shortterm credit facilities 59 billion represented longterm credit facilities unused shortterm longterm portions credit lines totaled 21 billion 59 billion december 31 2003 compared 18 billion 58 billion december 31 2002 certain bank lines credit contain covenants corporation applicable subsidiaries compliance throughout year ended december 31 2003 financing insurance operations debt follows dollars millions weightedaverage interest rate december 31 2003 2002 2003 2002 debt payable within one year current portion longterm debt 1 31 35 34284 27344 commercial paper 1 21 25 13182 13425 26 30 30344 22063 total loans payable 77810 62832 payable beyond one year 1 50 51 160108 118678 unamortized discount 679 717 mark market adjustment 2 2111 3120 total debt 239350 183913 total consolidated notes loans payable 271756 200168 1 weightedaverage interest rates include impact interest rate swap agreements 2 effective january 1 2001 corporation began recording hedged debt fair market value balance sheet due implementation sfas 133 accounting derivative instruments hedging activities debt payable beyond one year december 31 2003 included maturities follows 2005 336 billion 2006 309 billion 2007 119 billion 2008 81 billion 2009 756 billion amounts payable beyond one year consideration foreign currency swaps december 31 2003 included 196 billion currencies us dollar primarily canadian dollar 87 billion euro 39 billion uk pound sterling 38 billion australian dollar 13 billion ii53 general motors corporation subsidiaries notes consolidated financial statements continued note 16 longterm debt loans payable concluded december 31 2003 2002 debt fio included 969 billion 715 billion respectively obligations fixed interest rates 1425 billion 1124 billion respectively obligations variable interest rates predominantly libor considering impact interest rate swap agreements achieve desired balance fixed variable rate debt gm entered interest rate swap cap floor agreements notional amounts agreements december 31 2003 fio approximately 944 billion relating swap agreements 709 billion pay variable 235 billion pay fixed notional amounts agreements december 31 2002 fio approximately 564 billion relating swap agreements 537 billion pay variable 27 billion pay fixed gms fio business maintains substantial lines credit various banks totaled 544 billion december 31 2003 185 billion represented shortterm credit facilities 359 billion represented longterm credit facilities december 31 2002 bank lines credit totaled 530 billion 178 billion represented shortterm credit facilities 352 billion represented longterm credit facilities unused shortterm longterm portions credit lines totaled 6 billion 352 billion december 31 2003 compared 74 billion 347 billion december 31 2002 certain bank lines credit contain covenants corporation applicable subsidiaries compliance throughout year ended december 31 2003 note 17 pensions postretirement benefits gm sponsors number defined benefit pension plans covering substantially us canadian employees plans covering us canadian represented employees generally provide benefits negotiated stated amounts year service well significant supplemental benefits employees retire 30 years service normal retirement age benefits provided plans covering us canadian salaried employees certain foreign locations generally based years service compensation history gm also certain nonqualified pension plans covering executives based targeted wage replacement percentages unfunded gms funding policy respect qualified pension plans contribute annually less minimum required applicable law regulations gm made pension contributions us hourly salaried pension plans 185 billion 2003 48 billion 2002 pension contributions 2001 addition gm made pension contributions us plans 117 million 98 million 93 million 2003 2002 2001 respectively gm contributions due 2004 us hourly salaried pension plans meet erisa minimum funding requirements avoid paying variable rate premiums pension benefit guaranty corporation also anticipate discretionary contributions us hourly salaried pension plans gm expects contribute approximately 120 million us pension plans 2004 additionally gm maintains hourly salaried benefit plans provide postretirement medical dental vision life insurance us retirees eligible dependents cost benefits recognized consolidated financial statements period employees provide service gm certain corporations nonus subsidiaries postretirement benefit plans although participants covered governmentsponsored administered programs cost programs generally significant gm contributed 33 billion 10 billion voluntary employees beneficiary association veba trust postretirement employee benefit plans opeb 2003 2002 respectively made contributions 2001 gm also contributed 50 billion veba trust first quarter 2004 contributions participants opeb plans 84 million 55 million years ended december 31 2003 2002 respectively ii54 general motors corporation subsidiaries notes consolidated financial statements continued note 17 pensions postretirement benefits continued gm uses december 31 measurement date majority us pension plans september 30 measurement date us opeb plans us plans nonus plans pension benefits pension benefits 2003 2002 2003 2002 2003 2002 change benefit dollars millions obligations benefit obligation beginning year 79617 75927 12129 9950 57195 52461 service cost 919 864 228 194 537 505 interest cost 5162 5273 803 700 3798 3686 plan participants contributions 22 23 25 84 55 amendments 2244 83 31 actuarial losses 5684 3652 222 1040 9026 3796 benefits paid 6501 6420 732 641 3621 3389 exchange rate movements 2398 776 curtailments settlements 138 215 17 54 523 81 benefit obligation end year 87285 79617 15088 12129 67542 57195 change plan assets fair value plan assets beginning year 60498 66906 5943 6340 5794 4944 actual return plan assets 13452 4911 703 329 865 150 employer contributions 18621 4898 442 258 3339 1000 plan participants contributions 22 23 25 benefits paid 6501 6420 732 641 exchange rate movements 1181 259 curtailments settlements 77 3 31 fair value plan assets end year 86169 60499 7560 5943 9998 5794 funded status 1 1116 19118 7528 6186 57544 51401 unrecognized actuarial loss 32997 36105 4401 3802 21821 13542 unrecognized prior service cost 7087 5981 694 691 569 293 unrecognized transition obligation 43 46 net amount recognized 38968 22968 239016473629238152 amounts recognized consolidated balance sheets consist prepaid benefit cost 39904 344 218 accrued benefit liability 1139 17163 6885 5525 36292 38152 intangible asset 1 6009 639 690 accumulated comprehensive income 202 34122 3512 2970 net amount recognized 38968 22968 239016473629238152 1includes overfunded status combined us hourly salaried pension plans 03 billion december 31 2003 ii55 general motors corporation subsidiaries notes consolidated financial statements continued note 17 pensions postretirement benefits continued accumulated benefit obligation pension plans 99 billion december 31 2003 89 billion december 31 2002 accumulated benefit obligation fair value plan assets pension plans accumulated benefit obligations excess plan assets 15 billion 7 billion respectively december 31 2003 89 billion 66 billion respectively december 31 2002 projected benefit obligation fair value plan assets pension plans projected benefit obligations excess plan assets 45 billion 35 billion respectively december 31 2003 91 billion 66 billion respectively december 31 2002 1 determined end year 2 determined beginning year gm sets discount rate assumption annually retirementrelated benefit plans respective measurement dates reflect yield portfolio high quality fixedincome debt instruments matched timing amounts projected future benefits assumed health care trend rates december 31 2003 2002 initial health care cost trend rate 85 72 ultimate health care cost trend rate 50 number years ultimate trend rate 6 one percentage point increase assumed health care trend rate would increased accumulated postretirement benefit obligation apbo 76 billion december 31 2003 aggregate service interest cost components nonpension postretirement benefit expense 2003 539 million one percentage point decrease would decreased apbo 64 billion aggregate service interest cost components nonpension postretirement benefit expense 2003 444 million gms expected return assets assumption derived detailed periodic study conducted gms actuaries gms asset management group study includes review asset allocation strategy anticipated future longterm performance individual asset classes risks standard deviations correlations asset classes comprise funds asset mix study gives appropriate consideration recent fund performance historical returns assumption primarily longterm prospective rate ii56 general motors corporation subsidiaries notes consolidated financial statements continued note 17 pensions postretirement benefits concluded based study performed 2002 gm revised expected longterm return assumption us plans effective january 1 2003 9 reduction previous level 10 anticipation 2003 contributions gms asset management group conjunction gms actuaries studied alternatives lower asset return volatility us pension plans result study gm us pension plans approved commenced implementation certain changes longrun strategic allocations pension funds second half 2003 setting strategic mix ability selected mix fund pension plan liabilities effectively meet longterm asset return target 9 align selected mix risk tolerance plans fiduciaries taken account current strategic mix us pension plans reduced exposure equity market risks increased allocation asset classes highly correlated well asset classes active management historically generated excess returns places greater emphasis manager skills produce excess return employing various risk mitigation strategies reduce volatility fully implemented gm pension assets following allocations global equity 4149 global bonds 3236 real estate 812 alternatives 913 overall current strategic policy mix expected result comparable less volatile returns gms prior asset mix veba assets managed shortterm portion intended maintain adequate liquidity benefit payments longterm portion targets achieving longterm asset returns following investment strategies similar us pension plans based asset allocation shortterm longterm portion blended expected return assets assumption veba 70 2003 us pension plans opeb plans following asset allocations respective measurement dates 2002 2003 plan assets us pension plans plan assets opeb actual percentage actual percentage plan assets plan assets december 31 september 30 asset category 2003 2002 2003 2002 equity securities 49 55 38 23 debt securities 31 34 58 71 real estate 8 10 1 2 12 1 3 4 total 100 equity securities include gm common stock amounts 41 million less 1 total pension plan assets 30 million less 1 total pension plan assets december 31 2003 2002 respectively december 8 2003 president bush signed law medicare prescription drug improvement modernization act 2003 act introduces prescription drug benefit beginning 2006 medicare part well federal subsidy sponsors retiree health care benefit plans provide benefit least actuarially equivalent medicare part due levels benefits provided gms us health care plans management concluded gms us health care plans least actuarially equivalent medicare part gm elected defer accounting effects act remeasured gms postretirement benefit obligation december 8 2003 remeasurement reduce gms apbo approximately 6 634 billion increase plan assets 04 billion decrease unrecognized actuarial loss 43 billion impact remeasurement amortized average working life gms employees eligible postretirement benefits beginning january 1 2004 despite favorable impact gm expects 2004 opeb expense consistent 2003 expense due changes discount rate healthcare trend rate accordance gaap impact act reflected table specific authoritative guidance accounting act pending guidance issued could result adjustment accounting treatment described ii57 general motors corporation subsidiaries notes consolidated financial statements continued note 18 commitments contingent matters commitments gm following minimum commitments noncancelable capital leases remaining terms excess one year primarily property dollars millions 2004 2005 2006 2007 2008 minimum commitments 119 117 116 121 366 816 sublease income 14 167 net minimum commitments 105 103 102 107 352 649 gm following minimum commitments noncancelable operating leases remaining terms excess one year primarily property dollars millions 2004 2005 2006 2007 2008 minimum commitments 918 850 811 778 1326 4628 sublease income 250 235 233 2865 net minimum commitments 668 615 576 545 1093 1763 certain minimum commitments fund obligations nonconsolidated spes certain leases contain escalation clauses renewal purchase options rental expenses operating leases 926 million 985 million 849 million 2003 2002 2001 respectively gm sponsors credit card program entitled gm card program offers rebates applied primarily purchase lease gm vehicles amount rebates available qualified cardholders net deferred program income 41 billion 40 billion 39 billion december 31 2003 2002 2001 respectively gm guarantees related performance operating lease arrangements residual value leased assets totaling 604 million expiration dates vary certain leases contain renewal options fair value underlying assets expected fully mitigate gms obligations guarantees accordingly liabilities recorded respect guarantees corporation guaranteed certain amounts related securitization mortgage loans addition gmac issues financial standby letters credit part financing mortgage operations december 31 2003 approximately 51 million recorded respect guarantees maximum exposure approximately 29 billion connection certain divestitures prior january 1 2003 gm provided guarantees respect benefits former gm employees relating income protection pensions postretirement healthcare life insurance due nature indemnities maximum exposure agreements cannot estimated amounts recorded indemnities corporations obligations probable estimable addition guarantees gm entered agreements indemnifying certain parties respect environmental conditions pertaining ongoing sold gm properties due nature indemnifications gms maximum exposure agreements cannot estimated amounts recorded indemnities corporations obligations probable estimable addition normal course business gm periodically enters agreements incorporate indemnification provisions maximum amount gm may exposed agreements cannot estimated opinion management guarantees indemnifications expected material adverse effect corporations consolidated financial position results operations ii58 general motors corporation subsidiaries notes consolidated financial statements continued note 18 commitments contingent matters concluded contingent matters litigation subject uncertainties outcome individual litigated matters predictable assurance various legal actions governmental investigations claims proceedings pending corporation including arising alleged product defects employmentrelated matters governmental regulations relating safety emissions fuel economy product warranties financial services dealer supplier contractual relationships environmental matters gm established reserves matters losses probable reasonably estimated matters may involve compensatory punitive treble damage claims demands recall campaigns environmental remediation programs sanctions granted could require corporation pay damages make expenditures amounts could estimated december 31 2003 discussion counsel opinion management liability expected material adverse effect corporations consolidated financial condition results operations investment fiat auto holdings april 23 2003 annual general shareholders meeting fah adopted euro 5 billion recapitalization plan provides shareholders option make prorata capital contributions eighteen months following adoption plan adopted fiat spa fiat held 80 fah gm 20 fiat participated recapitalization making euro 3 billion contribution fah used repay intercompany debts owed fiat affiliates currently gm plan participate due fiats participation recapitalization gms nonparticipation fiat reported gms interest fah reduced 20 10 discussed gms annual report form 10k period ended december 31 2002 master agreement provides january 24 2004 july 24 2009 fiat may seek exercise put option put require gm purchase fiats fah shares fair market value whether fiat may seek exercise put unknown although fiat stated 2002 annual report form 20f filed us securities exchange commission views exercise put secondary possibility fiat also stated form 20f believes put enforceable accordance terms master agreement gm however asserted fiat sale certain assets financing business fiat auto recapitalization fah represent material breaches master agreement result master agreement including put terminable gm notwithstanding different views gm continuing build cooperation parties worked past several years joint ventures cooperative contractual arrangements entered independent master agreement pursuing resolution different views towards end fiat gm entered standstill agreement october 26 2003 provisions enable gm defer december 15 2004 necessity electing remedy termination master agreement put without deferral prejudicing right gm elect remedy december 15 2004 october 26 2003 fiat gm also entered amendment master agreement shifts put period one year begins january 24 2005 runs july 24 2010 put implemented fair market value fah shares would determined averaging three closest four valuations would prepared four investment banks conducting due diligence procedures set forth master agreement based upon terms conditions incorporated purchase agreement time parties prepared unless process valuation completed amount gm might pay fiats fah shares valid exercise put quantifiable valid exercise put gm would option pay fiats fah shares entirely shares gm 123 par value common stock entirely cash whatever combination thereof gm may choose circumstances extent gm chose pay cash portion purchase price could paid fiat four installments threeyear period gm would expect fund payments normal operating cash flows financing activities gm acquire fiats fah shares thus become sole owner fah gm would decide additional capitalization would appropriate fah fiat auto specifically fiat auto need additional funding gm would decide whether provide funding conditions might unless fah fiat auto subject liquidation insolvency fahs consolidated financial statements would required financial reporting purposes consolidated gm indebtedness losses capital needs fah fiat auto acquisition gm presently determinable could material adverse effect gm chooses fund needs allows consolidation gms financial statements fah fiat auto gm discussed fiat potential alternatives master agreement expects discussions regarding relationship parties ii59 general motors corporation subsidiaries notes consolidated financial statements continued note 19 stockholders equity following table presents changes capital stock period january 1 2001 december 31 2003 dollars millions common stocks total 123 capital par value class h stock balance january 1 2001 914 88 1002 shares issued 18 balance december 31 2001 932 88 1020 shares issued 4 8 12 balance december 31 2002 936 96 1032 shares issued 1 15 16 hughes splitoff 111 balance december 31 2003 937 gm split hughes distributing hughes common stock holders gm class h common stock exchange outstanding shares gm class h common stock shares gm class h common stock cancelled preference stock june 24 2002 approximately 27 million shares gm series h 625 automatically convertible preference stock held aol time warner aol mandatorily converted approximately 80 million shares gm class h common stock provided pursuant terms preference stock gm originally issued shares preference stock aol 1999 connection aols 15 billion investment strategic alliance hughes preference stock accrued quarterly dividends rate 625 per year gm preference stock issued outstanding since common stocks liquidation rights gm 123 par value common stock subject certain adjustments outstanding common stock subdivided stock split otherwise convertible debentures december 31 2003 gm 81 billion convertible senior debentures outstanding including 12 billion principal amount 45 series convertible senior debentures series due 2032 26 billion principal amount 525 series b convertible senior debentures series b due 2032 43 billion principal amount gm 625 series c convertible senior debentures series c due 2033 securities convertible shares gms 123 par value common stock investors option following circumstances 1 closing sale price gms 123 par value common stock exceeds 120 conversion price 7020 series 6490 series b 4762 series c respectively least 20 trading days 30 consecutive trading days ending last trading day preceding fiscal quarter 2 five business day period nine consecutive trading day period trading price debentures day period less 95 product closing sale price gms 123 par value common stock multiplied number shares issuable upon conversion 2500 principal amount debentures 3 debentures called redemption 4 upon occurrence specified corporate events number shares potentially convertible 16380600 series 40060800 series b 90300000 series c contingently convertible shares included diluted earnings per share december 31 2003 met requirements conversion ii60 general motors corporation subsidiaries notes consolidated financial statements continued note 19 stockholders equity concluded comprehensive income changes components comprehensive income loss reported net income taxes follows dollars millions note 20 earnings per share attributable common stocks earnings per share eps attributable class gm common stock determined based attribution earnings class common stock period divided weightedaverage number common shares class outstanding period diluted eps attributable class gm common stock considers effect potential common shares unless inclusion potential common shares would antidilutive effect attribution earnings class gm common stock follows dollars millions years ended december 31 2003 2002 2001 earnings attributable common stocks 123 par value continuing operations 2862 1975 1220 discontinued operations 48 90 234 gain sale discontinued operations 1249 earnings attributable 123 par value 4063 1885 986 earnings discontinued operations attributable class h 241 195 484 total earnings attributable common stocks 3822 1690 502 earnings attributable gm 123 par value common stock period represent earnings attributable gm common stocks reduced available separate consolidated net income ascni hughes respective period 2001 prior years losses attributable gm class h common stock represent ascni hughes reduced amount dividends accrued series preferred stock hughes equivalent measure effect gms payment dividends gm series h 625 automatically convertible preference stock would paid hughes ii61 general motors corporation subsidiaries notes consolidated financial statements continued note 20 earnings per share attributable common stocks concluded calculated losses used computation ascni hughes multiplied fraction numerator equal weightedaverage number shares gm class h common stock outstanding 11 billion december 22 2003 920 million december 31 2002 876 million december 31 2001 denominator number equal weightedaverage number shares gm class h common stock issued outstanding would represent 100 interest earnings hughes average class h dividend base average class h dividend base 14 billion december 22 2003 13 billion december 31 2002 2001 reconciliation amounts used basic diluted earnings per share computations income continuing operations follows dollars millions except per share amounts 123 par value common stock per share income shares amount year ended december 31 2003 basic eps income continuing operations attributable common stocks 2862 561 510 effect dilutive securities assumed exercise dilutive stock options 8 diluted eps adjusted income attributable common stocks 2862 569 503 year ended december 31 2002 basic eps income continuing operations attributable common stocks 1975 560 353 effect dilutive securities assumed exercise dilutive stock options 2 diluted eps adjusted income attributable common stocks 1975 562 351 year ended december 31 2001 income continuing operations 1222 less dividends preference stocks 2 basic eps income continuing operations attributable common stocks 1220 551 221 effect dilutive securities assumed exercise dilutive stock options 5 diluted eps adjusted income attributable common stocks 1220 556 220 certain stock options convertible securities included computation diluted earnings per share periods presented since instruments underlying exercise prices greater average market prices gm 123 par value common stock inclusion would antidilutive shares included computation diluted earnings per share 176 million 66 million 29 million december 31 2003 2002 2001 respectively note 21 derivative financial instruments risk management effective january 1 2001 gm adopted sfas 133 accounting derivative instruments hedging activities amended interpreted requires derivatives recorded fair value balance sheet establishes criteria designation effectiveness derivative transactions hedge accounting applied gm assesses initial ongoing effectiveness hedging relationships accordance documented policies result adoption standard january 1 2001 gm recorded transition adjustment representing onetime aftertax charge income totaling 15 million well aftertax unrealized gain 4 million comprehensive income ii62 general motors corporation subsidiaries notes consolidated financial statements continued note 21 derivative financial instruments risk management concluded gm exposed market risk changes foreign currency exchange rates interest rates certain commodity equity security prices normal course business gm enters variety foreign exchange interest rate commodity forward contracts swaps options objective minimizing exposure arising risks risk management control system utilized monitor foreign exchange interest rate commodity equity price risks related hedge positions cash flow hedges gm uses financial instruments designated cash flow hedges hedge corporations exposure foreign currency exchange risk associated buying selling financing currencies local currencies operates variability cash flows related floating rate debt exposure commodity price risk associated changes prices commodities used automotive business primarily non ferrous metals used manufacture automotive components transactions denominated foreign currencies gm typically hedges forecasted firm commitment exposure one year future commodities gm hedges exposures five years future year ended december 31 2003 hedge ineffectiveness associated instruments designated cash flow hedges decreased cost sales expenses 50 million year ended december 31 2002 hedge ineffectiveness associated instruments designated cash flow hedges increased cost sales expenses 01 million changes time value instruments excluded assessment hedge effectiveness exclude transition adjustment increased cost sales expenses 30 million 19 million respectively derivative gains losses included comprehensive income reclassified earnings time associated hedged transactions impact income statement year ended december 31 2003 net derivative gains 245 million reclassified cost sales expenses year ended december 31 2002 net derivative losses 65 million likewise reclassified net lossesgains offset net gainslosses transactions hedged approximately 91 million net derivative gains included comprehensive income december 31 2003 reclassified earnings within 12 months date fair value hedges gm uses financial instruments designated fair value hedges manage certain corporations exposure interest rate risk gm subject market risk exposures changes interest rates due financing investing cash management activities variety instruments used hedge gms exposure associated fixed rate debt mortgage servicing rights msrs year ended december 31 2003 hedge ineffectiveness associated instruments designated fair value hedges primarily due hedging msrs decreased selling general administrative expenses 390 million increased selling general administrative expenses 458 million 2002 changes time value instruments excluded assessment hedge effectiveness decreased selling general administrative expenses 175 million 2003 212 million 2002 undesignated derivative instruments forward contracts options designated hedging instruments sfas 133 also used hedge certain foreign currency commodity interest rate exposures unrealized gains losses instruments recognized currently earnings note 22 fair value financial instruments estimated fair value financial instruments determined using available market information appropriate valuation methodologies however considerable judgment required interpreting market data develop estimates fair value therefore estimates necessarily indicative amounts could realized would paid current market exchange effect using different market assumptions andor estimation methodologies may material estimated fair value amounts ii63 general motors corporation subsidiaries notes consolidated financial statements continued note 22 fair value financial instruments concluded book estimated fair values financial instruments practicable estimate fair value follows dollars millions december 31 2003 2002 automotive operations book value fair value book value fair value assets 1 771 500 496 327 derivative assets 1234 364 liabilities longterm debt 2 29593 31859 14261 13832 liabilities 1 528 571 531 580 derivative liabilities 356 298 financing insurance operations assets finance receivables net 3 172423 174547 133964 135890 derivative assets 10026 7185 liabilities debt 2 239350 244642 183913 186360 derivative liabilities 1196 843 1 assets include various financial instruments eg longterm receivables certain investments fair values based discounted cash flows market quotations appropriate valuation techniques fair values retained subordinated interests trusts excess servicing assets net deferred costs derived discounting expected cash flows using current market rates estimated values industrial development bonds included liabilities based quoted market prices similar issues 2 longterm debt estimated fair value based quoted market prices similar issues based current rates offered gm debt similar remaining maturities 3 fair value estimated discounting future cash flows using applicable spreads approximate current rates applicable category finance receivables due shortterm nature book value approximates fair value cash marketable securities accounts notes receivable less allowances accounts payable principally trade auto loans payable fio debt payable within one year periods ending december 31 2003 2002 note 23 stock incentive plans gms stock incentive plans consist general motors 2002 stock incentive plan formerly 1997 general motors amended stock incentive plan gmsip general motors 1998 salaried stock option plan gmssop general motors 1997 performance achievement plan gmpap general motors 2002 long term incentive plan gmltip gmsip gmpap gmltip administered executive compensation committee gm board gmssop administered vice president global human resources gmsip 274 million shares gm 123 par value common stock may granted june 1 2002 may 31 2007 approximately 172 million available grants december 31 2003 shares granted undelivered gmsip due primarily expiration termination become available grant options granted prior 1997 gmsip generally exercisable onehalf one year onehalf two years dates grant stock option grants awarded since 1997 vest ratably three years date grant option prices 100 fair market value dates grant options generally expire 10 years dates grant subject earlier termination certain conditions ii64 general motors corporation subsidiaries notes consolidated financial statements continued note 23 stock incentive plans continued gmssop commenced january 1 1998 ends december 31 2007 number shares gm 123 par value common stock may granted year determined management approximately 36 million shares gm 123 par value common stock available grants december 31 2003 stock options vest one year following date grant exercisable two years date grant option prices 100 fair market value dates grant options generally expire 10 years two days dates grant subject earlier termination certain conditions gmpap gmltip consist award opportunities granted participants based achievement specific corporate business criteria target number shares gm 1 23 par value common stock may granted year determined management grants subject two threeyear performance period final award payout may vary based achievement criteria december 31 2003 total 38 million shares granted award opportunities gmpap gmltip targeted number shares would finally granted corporate business criteria achieved number securities weighted average securities issued upon exercise price remaining exercise outstanding available plan category outstanding options future issuance options warrants equity warrants rights compensation rights plans 1 equity compensation plans approved security holders gmsip 74485566 5438 17194942 equity compensation plans approved security holders 2 gmssop 24390056 5533 3626225 total 98875622 5461 20821167 1excludes securities reflected first column number securities issued upon exercise outstanding options warrants rights 2all equity compensation plans except gmssop approved shareholders gmssop adopted board directors 1998 expires december 31 2007 purpose plans recognize importance contribution gm employees creation stockholder value align compensation business success provide employees opportunity longterm capital accumulation grant options acquire shares general motors common stock fair value option grant estimated date grant using blackscholes optionpricing model following weightedaverage assumptions 2003 2002 2001 gm sip ssop sip ssop sip ssop interest rate 29 43 46 expected life years 50 expected volatility 354 346 312 311 dividend yield 50 40 38 ii65 general motors corporation subsidiaries notes consolidated financial statements continued note 23 stock incentive plans concluded changes status outstanding options follows gmsip gmssop 123 par value 123 par value common weighted shares average shares average exercise option price option price options outstanding january 1 2001 43125106 5849 10367464 6730 granted 13141725 5249 3902862 5235 exercised 1682731 3966 37655 4659 terminated 1641974 6108 154690 6627 options outstanding december 31 2001 52942126 5752 14077981 6322 granted 17294937 5053 5015553 5046 exercised 2729511 4046 71663 4659 terminated 1685392 5528 64672 6239 options outstanding december 31 2002 65822160 5645 18957199 5991 granted 11148605 4006 5666127 4005 exercised 1489170 4228 terminated 996029 5506 233270 5692 options outstanding december 31 2003 74485566 5438 24390056 5533 options exercisable december 31 2001 29890175 5393 6148695 6197 december 31 2002 38094946 5818 10098994 6748 december 31 2003 48932216 5856 13825058 6329 following table summarizes information gms stock option plans december 31 2003 weighted average weighted remaining average range options contractual exercise options exercise prices outstanding life yrs price exercisable price gmsip 123 par value common 2100 3999 886116 20 3351 804179 3324 4000 4999 24860743 59 4280 13971139 4493 5000 5999 28259174 76 5142 13696365 5178 6000 8350 20479533 55 7340 20460533 7341 2100 8350 74485566 64 5438 48932216 5856 gmssop 123 par value common 4005 5631365 91 4005 4659 2264335 40 4659 2264335 4659 5046 4933633 80 5046 5235 3824905 70 5235 3824905 5235 7153 3739403 50 7153 3739403 7153 7550 3996415 60 7550 3996415 7550 4005 7550 24390056 69 5533 13825058 6329 ii66 general motors corporation subsidiaries notes consolidated financial statements continued note 24 income included total net sales revenues consisted following dollars millions years ended december 31 2003 2002 2001 automotive operations income interest income 1389 905 714 rental car lease revenue 1460 1214 1424 claims commissions grants 916 846 767 gain sale gm defense 814 400 239 369 total income 4979 3204 3274 years ended december 31 2003 2002 2001 financing insurance operations income interest income 684 2951 2269 insurance premiums 2544 2188 1524 mortgage banking income 2696 2064 1862 automotive securitization income 1057 1357 1183 3419 3034 2840 total income 10400 11594 9678 note 25 european matters 2001 gm europe announced plan turn around business implementation project olympia initial stages project olympia sought identify initiatives could deliver solid profitable business performance 2003 strengthened optimized sales structure revitalized opelvauxhall brand market growth opportunities continuous improvement refocusing organizational structure project identified several initiatives aim address goals mentioned initiatives include among things reducing gmes manufacturing capacity restructuring dealer network germany redefining way vehicles marketed initiatives resulted decrease gms pretax earnings recorded gme region first quarter 2002 follows 1 298 million related employee separation costs approximately 4000 employees 2 235 million related asset writedowns 3 108 million related dealer network restructuring germany net income impact charges first quarter 2002 407 million 072 per diluted share gm 123 par value common stock 553 million included cost sales expenses 88 million included selling general administrative expenses 234 million included income tax expense 2003 gme recorded 311 million pretax 218 million aftertax charge improve competitiveness gms automotive operations europe charge comprised following 207 million related employee separation costs approximately 2900 employees 104 million related asset writedowns costs charges recorded cost sales expenses ii67 general motors corporation subsidiaries notes consolidated financial statements continued note 26 segment reporting sfas 131 disclosures segments enterprise related information established standards reporting information operating segments financial statements operating segments defined components enterprise separate financial information available evaluated regularly chief operating decision maker decision making group deciding allocate resources assessing performance gms chief operating decision maker chief executive officer operating segments managed separately operating segment represents strategic business unit offers different products serves different markets gms reportable operating segments within auto business consist general motors automotive gma comprised four regions gmna gme gmlaam gmap gmna designs manufactures andor markets vehicles primarily north america following nameplates chevrolet pontiac gmc oldsmobile buick cadillac saturn hummer gme gmlaam gmap primarily meet demands customers outside north america vehicles designed manufactured marketed following nameplates opel vauxhall holden saab buick chevrolet gmc cadillac segment includes design manufacturing marketing locomotives elimination intersegment transactions certain nonsegment specific revenues expenditures certain corporate activities gms reportable operating segments within fio business consist gmac provides broad range financial services including consumer vehicle financing fullservice leasing fleet leasing dealer financing car truck extended service contracts residential commercial mortgage services commercial vehicle insurance assetbased lending financing insurance operations segment includes financing entities consolidated gmac accounting policies operating segments described summary significant accounting policies except disaggregated financial results prepared using management approach consistent basis manner gm management internally disaggregates financial information purposes assisting making internal operating decisions gm evaluates performance based standalone operating segment net income generally accounts intersegment sales transfers sales transfers third parties current market prices revenues attributed geographic areas based location assets producing revenues ii68 general motors corporation subsidiaries notes consolidated financial statements continued note 26 segment reporting continued see notes next page ii69 general motors corporation subsidiaries notes consolidated financial statements continued note 26 segment reporting continued ainterest income included net sales revenues external customers bincludes assets discontinued operations 18653 19154 december 31 2002 2001 respectively ii70 general motors corporation subsidiaries notes consolidated financial statements continued note 26 segment reporting concluded 1 consists property note 12 equipment operating leases note 10 net accumulated depreciation il71 general motors corporation subsidiaries supplementary information selected quarterly data unaudited 1 2003 quarters 1st 2 2nd 3rd 4th 3 dollars millions except per share amounts total net sales revenues 47146 45944 43351 49084 income losses continuing operations income taxes minority interests 2198 931 387 536 income tax expense benefit 682 244 134 329 minority interests 20 11 19 103 earnings nonconsolidated associates 41 203 176 308 income losses continuing operations 1537 879 448 2 income losses discontinued operations 54 22 23 164 gain sale discontinued operations 1179 net income 1483 901 425 1013 earnings losses attributable 123 par value continuing operations 1537 879 448 2 discontinued operations 16 5 1218 earnings attributable 123 par value 1521 884 443 1216 earnings losses discontinued operations attributable class h 38 17 18 203 basic earnings losses per share attributable common stocks 123 par value continuing operations 274 157 080 discontinued operations 003 001 217 earnings per share attributable 123 par value 271 158 079 217 earnings losses per share discontinued operations attributable class h 004 002 018 average number shares common stocks outstanding basic millions 123 par value 561 class h 990 1108 1109 earnings loss per share attributable common stocks assuming dilution 123 par value continuing operations 274 157 080 discontinued operations 003 001 213 earnings per share attributable 123 par value 271 158 079 213 earnings losses per share discontinued operations attributable class h 004 002 018 average number shares common stocks outstanding diluted millions 123 par value 561 571 class h 990 1111 1108 1109 ii72 general motors corporation subsidiaries supplementary information selected quarterly data unaudited continued 1 previously reported quarters restated reflect results hughes discontinued operations 2 first quarter 2003 results include 505 million aftertax gain sale gms light armored vehicle business gm defense general dynamics corporation net proceeds approximately 11 billion 3 fourth quarter 2003 results include following 725 million aftertax charge lumpsum payments vehicle discount vouchers retirees provided october 2003 contract united auto workers 103 million aftertax favorable adjustment related primarily previously established reserves idled workers janesville wisconsin plant 218 million aftertax charge initiative implemented improve competitiveness gms automotive operations europe ii73 general motors corporation subsidiaries supplementary information selected quarterly data unaudited continued 4 2002 quarters 1st 5 2nd 6 3rd 7 4th dollars millions except per share amounts total net sales revenues 44210 46113 41417 45584 income losses continuing operations income taxes minority interests 585 2011 1410 1152 income tax expense 217 656 546 317 minority interests 15 16 28 13 earnings nonconsolidated associates 31 109 101 112 income continuing operations 384 1448 791 934 income loss discontinued operations 156 13 86 net income loss 228 1292 804 1020 dividends preference stocks 24 23 earnings losses attributable common stocks 204 1269 804 1020 earnings losses attributable 123 par value continuing operations 384 1448 791 934 discontinued operations 59 4 27 earnings losses attributable 123 par value 325 1389 795 961 earnings losses discontinued operations attributable class h 121 120 9 59 basic earnings losses per share attributable common stocks 123 par value continuing operations 069 258 141 167 discontinued operations 011 010 001 004 earnings per share attributable 123 par value 058 248 142 171 losses earnings per share discontinued operations attributable class h 014 001 006 average number shares common stocks outstanding basic millions 123 par value 559 560 class h 878 884 958 earnings losses per share attributable common stocks assuming dilution 123 par value continuing operations 067 253 141 167 discontinued operations 010 001 004 earnings losses per share attributable 123 par value 057 243 142 171 losses earnings per share discontinued operations attributable class h 014 001 006 average number shares common stocks outstanding diluted millions 123 par value 570 572 560 561 class h 878 884 958 959 ii74 general motors corporation subsidiaries supplementary information selected quarterly data unaudited concluded 4 previously reported quarters restated reflect results hughes discontinued operations 5 first quarter 2002 results include 407 million aftertax restructuring charge related severance payments asset impairments gme part restructuring gms automotive operations europe 6 second quarter 2002 results include 55 million aftertax charge gme related european unions directive requiring member states enact legislation regarding endoflife vehicles responsibility manufacturers dismantling recycling vehicles sold 7 third quarter 2002 results include following 14 billion aftertax charge related writedown gms investment fiat auto holdings bv result completion impairment study carrying value gms investment 116 million aftertax charge primarily related gms costs associated transfer commercial truck production janesville wisconsin flint michigan ii75 general motors corporation subsidiaries item 9 item 8 financial statements supplementary data reference made notes consolidated financial statements general motors corporation subsidiaries consolidated balance sheets dollars millions reference made notes consolidated financial statements general motors corporation subsidiaries consolidated statements cash flows dollars millions general motors corporation subsidiaries consolidated statements cash flows concluded dollars millions reference made notes consolidated financial statements general motors corporation subsidiaries consolidated statements stockholders’ equity deficit years ended december 31 2007 2006 2005 millions reference made notes consolidated financial statements general motors corporation subsidiaries notes consolidated financial statements note 1 nature operations also general motors corporation gm corporation primarily engaged worldwide production marketing cars trucks develop manufacture market vehicles worldwide four regions consist gm north america gmna gm europe gme gm latin americaafricamideast gmlaam gm asia pacific gmap also finance insurance operations primarily conducted gmac llc successor general motors acceptance corporation together gmac llc gmac whollyowned subsidiary november 2006 november 30 2006 sold 51 controlling ownership interest gmac consortium investors sale accounted 49 ownership interest gmac using equity method gmac provides broad range financial services including consumer vehicle financing automotive dealership commercial financing residential mortgage services automobile service contracts personal automobile insurance coverage selected commercial insurance coverage operate two businesses consisting automotive gm automotive gma financing insurance operations fio note 2 significant accounting policies principles consolidation consolidated financial statements include accounts general motors corporation majorityowned subsidiaries variable interest entities vies determined primary beneficiary share earnings losses nonconsolidated affiliates included consolidated operating results using equity method accounting able exercise significant influence operating financial decisions affiliates able exercise significant influence operating financial decisions affiliate cost method accounting used intercompany balances transactions eliminated consolidation change presentation financial statements 2007 changed statement operations presentation present costs expenses fio operations separate line reclassified fio’s portion selling general administrative expense interest expense financial services insurance expense also automotive interest expense presented within nonoperating income expenses additionally prior period results reclassified retroactive effect discontinued operations refer note 3 certain reclassifications made comparable 2006 2005 financial statements conform current period presentation use estimates preparation financial statements consolidated financial statements prepared conformity accounting principles generally accepted united states require use estimates judgments assumptions affect reported amounts assets liabilities date financial statements reported amounts revenues expenses periods presented management believes accounting estimates employed appropriate resulting balances reasonable however due inherent uncertainties making estimates actual results could differ original estimates requiring adjustments balances future periods revenue recognition automotive sales automotive sales consist primarily revenue generated sale vehicles vehicle sales recorded title risks rewards ownership passed generally vehicle released carrier responsible transporting vehicles dealers provisions recurring dealer customer sales leasing incentives consisting allowances rebates recorded reductions automotive sales time vehicle sales additionally incentives allowances rebates related vehicles previously sold recognized reductions automotive sales announced general motors corporation subsidiaries notes consolidated financial statements continued vehicle sales daily rental car companies guaranteed repurchase obligations accounted equipment operating leases net lease revenue recognized ratably term lease based difference net sales proceeds guaranteed repurchase amount equipment operating leases net depreciated based difference cost vehicle estimated residual value using straightline method term lease agreement management reviews residual values periodically determine estimates remain appropriate asset impaired losses recognized time impairment also generate revenue customer subscriptions related comprehensive invehicle security communications diagnostic systems vehicles well sale prepaid minutes handsfree calling hfc system subscription service revenue deferred recognized straightline basis subscription period onstar offers oneyear subscription part sale lease new vehicle fair value subscription recorded deferred revenue vehicle sold amortized one year subscription period beginning end user activates subscription hfc revenue deferred recognized straightline basis life contract credit card programs redemption liability recognize payments received bank estimate time period customer accumulate redeem rebate points currently time period estimated 60 months majority credit card programs revenue amortized using straightline method redemption period reviewed periodically determine remains appropriate estimate accrue redemption liability anticipated paid dealer time specific vehicles sold dealer redemption cost classified reduction automotive revenue statements operations financial services insurance revenues financial services revenues generated purchase retail installment loans dealer floor plan financing lines credit dealers fleet leasing factoring receivables financing revenue recorded terms receivables using interest method income operating lease assets recognized straightline basis scheduled lease terms insurance revenues consist premiums earned basis related coverage provided terms policies commissions premium taxes costs incurred acquiring new business deferred amortized terms related policies basis premiums earned mortgage service revenues generated origination purchase servicing sale securitization consumer ie residential commercial mortgage loans mortgage related products typically mortgage loans originated sold investors secondary market including securitization sales advertising costs 55 billion 54 billion 58 billion 2007 2006 2005 respectively expensed incurred research development expenditures research development expenditures 81 billion 66 billion 67 billion 2007 2006 2005 respectively expensed incurred property net property plant equipment including internal use software recorded cost major improvements extend useful life property capitalized expenditures repairs maintenance charged expense incurred january 1 2001 adopted straightline method depreciation real estate plants equipment placed service date assets placed service january 1 2001 continue depreciated using accelerated methods accelerated methods accumulate depreciation general motors corporation subsidiaries notes consolidated financial statements continued approximately twothirds depreciable cost first half estimated useful lives property groups compared straightline method allocates depreciable costs equally estimated useful lives property groups leasehold improvements amortized period lease life asset whichever shorter special tools special tools represent product specific tools dies molds items used manufacturing process vehicles expenditures special tools placed service january 1 2001 capitalized amortized using straightline method estimated useful lives range one year 10 years expenditures special tools placed service prior january 1 2001 capitalized amortized estimated useful lives using units production method goodwill intangible assets goodwill represents excess cost acquisition fair value net assets acquired accordance sfas 142 “goodwill intangible assets” sfas 142 goodwill reviewed impairment utilizing twostep process first step impairment test requires identification reporting units comparison fair value reporting units respective carrying value fair value reporting units determined based valuation techniques using best information available discounted cash flow projections carrying value less fair value impairment exists second step performed carrying value higher fair value indication impairment may exist second step must performed compute amount impairment second step impairment computed comparing implied fair value reporting unit goodwill carrying amount goodwill sfas 142 requires goodwill tested impairment annually time every year event occurs circumstances change reasonably possible impairment may exist annual impairment tests performed fourth quarter year intangible assets include customer lists trademarks identifiable intangible assets amortized straightline basis estimated useful lives three 10 years valuation longlived assets periodically evaluate carrying value longlived assets held used business goodwill intangible assets indefinite lives assets held sale events circumstances warrant carrying value longlived asset considered impaired loss recognized based amount carrying value exceeds fair market value assets held used assets classified held sale reflected lower carrying value fair value less cost sell fair market value determined primarily using anticipated cash flows discounted rate commensurate risk involved longlived assets disposed sale considered held use disposition valuation equity method investments investees accounted equity method accounting evaluated impairment accordance accounting principles board opinion 18 “the equity method accounting investments common stock” impairment loss would recorded whenever decline value equity investment carrying amount determined temporary determining decline temporary consider factors length time extent fair value investment less carrying amount equity affiliate nearterm longerterm operating financial prospects affiliate intent ability hold investment period time sufficient allow anticipated recovery equipment operating leases net equipment operating leases net reported cost less accumulated depreciation net origination fees costs income operating lease assets includes lease origination fees net lease origination costs recognized operating lease revenue general motors corporation subsidiaries notes consolidated financial statements continued straightline basis scheduled lease term depreciation vehicles generally provided straightline basis estimated residual value period time consistent term underlying operating lease agreement evaluate depreciation policy leased vehicles regular basis significant investments vehicles operating lease portfolio exposed changes residual values assets residual values represent estimate values assets end lease contracts determined consulting independently published residual value guide realization residual values dependent future ability market vehicles prevailing market conditions life lease evaluate adequacy estimate residual value may make adjustments extent expected value vehicle lease termination changes operating leases arising vehicle sales daily rental car companies adjustment may form revisions depreciation rate recognition impairment loss impairment determined exist undiscounted expected future cash flows lower carrying value asset operating leases arising vehicles sold dealers adjustment made estimate marketing incentive accruals residual support programs initially recognized vehicles sold dealers refer note 27 lease vehicle returned us asset reclassified equipment operating leases net inventory lower cost estimated fair value less costs sell foreign currency transactions translation assets liabilities foreign subsidiaries using local currency functional currency translated us dollars based current exchange rate prevailing balance sheet date resulting translation adjustments included accumulated comprehensive income loss revenues expenses translated us dollars using average exchange rates prevailing period presented included net income loss gains losses arising foreign currency transactions impact net income loss foreign currency transactions including results foreign currency hedging activities amounted loss 669 million gain 296 million loss 118 million 2007 2006 2005 respectively policy warranty provisions estimated expenses related policy product warranties made time products sold estimates established using historical information nature frequency average cost claims revision reserves estimated policy product warranties made necessary based changes factors actively study trends claims take action improve vehicle quality minimize claims recall campaigns provisions estimated expenses related product recalls based formal campaign soliciting return product made deemed probable reasonably estimated environmental costs record liability environmental cleanup costs loss probable reasonably estimated environmental sites potentially multiple responsible parties record liability allocable share costs related involvement site well allocable share costs related insolvent parties unidentified shares environmental sites potentially responsible party record liability total estimated costs remediation consideration recovery insurers third parties established process develop environmental reserve process consists number phases begins visual site inspections examination historical site records potential problem identified physical sampling site may include analysis ground water soil borings evidence obtained evaluated based upon evaluation general motors corporation subsidiaries notes consolidated financial statements continued remediation strategy submitted approval final phase process involves commencement remediation activities according approved plan process used globally sites included estimated environmental liabilities costs ongoing operating maintenance monitoring environmental sites remediation put place process estimating environmental remediation liabilities complex dependent primarily nature extent historical information physical data relating contaminated site complexity site uncertainty remediation technology required outcome discussions regulatory agencies potentially responsible parties multiparty sites liabilities fixed reliably determinable cash flows discounted using riskfree rate return periods ongoing maintenance expected occur generally five 30 years subsequent adjustments initial estimates recorded necessary based upon additional information developed subsequent periods future periods new laws regulations advances remediation technologies additional information ultimate remediation methodology used could significantly change estimates cash equivalents cash equivalents defined shortterm highlyliquid investments original maturities 90 days less marketable securities marketable securities classified availableforsale except certain mortgagerelated securities classified heldtomaturity availableforsale securities recorded fair value unrealized gains losses reported net related income taxes accumulated comprehensive income loss realized heldtomaturity securities recorded amortized cost determine realized gains losses using specific identification method derivative instruments party variety foreign exchange rate interest rate commodity derivative contracts entered connection management exposure fluctuations foreign exchange rates interest rates certain commodity prices financial exposures managed accordance corporate policies procedures derivatives recorded fair value consolidated balance sheets effective changes fair value derivatives designated cash flow hedges recorded net unrealized gains losses derivatives within separate component comprehensive income loss amounts reclassified accumulated comprehensive income loss underlying hedged item affects earnings ineffective changes fair value recorded currently earnings changes fair value derivatives designated fair value hedges recorded currently earnings offset changes fair value hedged item extent derivative effective changes fair value derivatives designated hedging instruments recorded currently earnings accounting income taxes use liability method accounting income taxes deferred tax assets liabilities recorded temporary differences tax basis assets liabilities reported amounts consolidated financial statements using statutory tax rates effect year differences expected reverse effect deferred tax assets liabilities change tax rates recognized results operations period includes enactment date law valuation allowance recorded reduce carrying amounts deferred tax assets unless likely assets realized accounting early retirement programs offer early retirement program certain employees located gme region allows employees early transition employment retirement legal retirement age eligible employees elect participate preretirement leave program work full time half preretirement period active period work general motors corporation subsidiaries notes consolidated financial statements continued remaining half inactive period receive 50 salary preretirement period employees also receive annual bonus equal 35 annual net pay beginning preretirement period additionally required make contributions german government pension program participants preretirement period programs companies entitled government subsidy certain conditions met entitled program subsidy january 1 2006 adopted emerging issue task force eitf 055 “accounting early retirement postemployment programs specific features” eitf 055 states bonus contributions made german government pension program accounted guidance sfas 112 “employers’ accounting postemployment benefit costs” sfas 112 government subsidy recognized company meets necessary conditions entitled subsidy clarified eitf 055 beginning 2006 recognized bonus additional contributions collectively additional compensation german government pension plan period employee signed program contract end active service period prior 2006 recognized full additional compensation oneyear employee entered active service period change reported change accounting estimate effected change accounting principle resulted additional compensation expense 68 million 2006 accounting extended disability benefits accrue estimated extended disability benefits ratably employees’ active service period using delayed recognition provisions prescribed sfas 106 “employers’ accounting postretirement benefits pensions” sfas 106 discussed note 15 december 31 2006 adopted recognition provisions sfas 158 “employers’ accounting defined benefit pension postretirement plans amendment fasb statements 87 88 106 132r” sfas 158 liability consists future obligations income replacement health care costs life insurance premiums employees currently disabled active workforce may become disabled estimate future disabilities current workforce using actuarial methods based sufficient historical experience labor force worldwide basis concentration workforce working guidelines unionized collective bargaining agreements current international union united automobile aerospace agricultural implement workers america uaw labor contract effective fouryear term began october 2007 expires september 2011 current contract established new wage benefit structure entrylevel employees hired effective date contract certain noncore positions material movement kitting sequencing functions certain stamping subassemblies positions employees receive base wages approximately 15 per hour higher cost sharing arrangement health care benefits additionally contract includes 3000 lump sum payment 2007 performance bonuses 3 4 3 wages 2008 2009 2010 respectively uaw employee amortize payments 12month period following respective payment dates active uaw employees current retirees surviving spouses also granted pension benefit increases refer note 15 previous uaw labor contract effective four year term began october 2003 expired september 2007 contract provided 3000 lump sum payment uaw employee paid october 2003 3 performance bonus uaw employee paid october 2004 amortized payments 12month period following respective payment dates uaw employees received gross wage increase 2 2005 2006 employees also granted 3 gross wage increase labor contract subsequently agreed us uaw contributed mitigation voluntary employee beneficiary association veba wage deferral connection 2005 uaw health care settlement agreement refer note 15 active uaw employees also granted pension benefit increases pension benefit increases granted current retirees surviving spouses however contract provide four lump sum payments two vehicle discount vouchers current retirees surviving spouses general motors corporation subsidiaries notes consolidated financial statements continued changes accounting principles accounting servicing financial assets january 1 2006 adopted sfas 156 “accounting servicing financial assets” sfas 156 1 provides revised guidance servicing asset servicing liability recognized 2 requires separately recognized servicing assets liabilities initially measured fair value practicable 3 permits entity elect measure servicing assets liabilities fair value reporting date report changes fair value earnings period changes occur 4 provides upon initial adoption onetime reclassification availableforsale securities trading securities identified offsetting entity’s exposure changes fair value servicing assets liabilities servicer elects subsequently measure fair value 5 requires separate presentation servicing assets liabilities subsequently measured fair value balance sheet additional disclosures recorded reduction retained earnings january 1 2006 13 million cumulative effect change accounting principle adoption sfas 156 accounting conditional asset retirement obligations effective december 31 2005 adopted fasb interpretation 47 “accounting conditional asset retirement obligations” fin 47 fin 47 relates legal obligations associated retirement tangible longlived assets result acquisition construction development normal operation longlived asset performed analysis obligations associated real property owned leased including plants warehouses offices estimates conditional asset retirement obligations relate case owned properties costs estimated necessary legally required removal remediation various regulated materials primarily asbestos abatement estimated using sitespecific surveys available per square foot estimate surveys unavailable leased properties obligations relate estimated cost contractually required property restoration application fin 47 resulted charge 109 million aftertax 2005 presented cumulative effect change accounting principle liability conditional asset retirement obligations december 31 2007 2006 222 million 193 million respectively pro forma amounts fin 47 applied 2005 follows dollars millions except per share amounts asset retirement obligations included longterm liabilities consolidated balance sheets following table reconciles asset retirement obligations december 31 2007 2006 general motors corporation subsidiaries notes consolidated financial statements continued december 31 2007 asset retirement obligation primarily related removal remediation various regulated materials primarily asbestos accounting uncertainty income taxes first quarter 2007 adopted fasb interpretation 48 “accounting uncertainty income taxes” fin 48 supplements sfas 109 “accounting income taxes” sfas 109 defining confidence level tax position must meet order recognized financial statements fin 48 requires tax effects position recognized “morelikelythannot” sustained based solely technical merits reporting date morelikelythannot threshold represents positive assertion management company entitled economic benefits tax position tax position considered morelikelythannot sustained based solely technical merits benefits tax position recognized morelikelythannot threshold must continue met reporting period support continued recognition benefit adoption fin 48 companies required adjust financial statements reflect tax positions morelikelythannot sustained necessary adjustment would recorded directly retained earnings reported change accounting principle adopted fin 48 january 1 2007 recorded increase retained earnings 137 million cumulative effect change accounting principle corresponding decrease liability uncertain tax positions refer note 18 information regarding impact adopting fin 48 employers’ accounting defined benefit pension postretirement plans recognized funded status benefit plans december 31 2006 accordance recognition provisions sfas 158 “employers’ accounting defined benefit pension postretirement plans” sfas 158 additionally elected adopt early measurement date provisions sfas 158 january 1 2007 provisions require measurement date plan assets liabilities coincide sponsor’s year end refer note 15 accounting standards yet adopted fair value measurements september 2006 fasb issued sfas 157 “fair value measurements” sfas 157 provides consistent definition fair value focuses exit price prioritizes within measurement fair value use marketbased inputs entityspecific inputs sfas 157 requires expanded disclosures fair value measurements establishes threelevel hierarchy fair value measurements based transparency inputs valuation asset liability measurement date standard also requires company use nonperformance risk measuring liabilities carried fair value including derivatives february 2008 fasb approved fasb staff position fsp permits companies partially defer effective date sfas 157 one year nonfinancial assets nonfinancial liabilities recognized disclosed fair value financial statements nonrecurring basis fsp permit companies defer recognition disclosure requirements financial assets financial liabilities nonfinancial assets nonfinancial liabilities remeasured least annually sfas 157 effective financial assets financial liabilities nonfinancial assets nonfinancial liabilities remeasured least annually financial statements issued fiscal years beginning november 15 2007 interim periods within fiscal years provisions sfas 157 applied prospectively intend defer adoption sfas 157 one year nonfinancial assets nonfinancial liabilities recognized disclosed fair value financial statements nonrecurring basis currently evaluating effects sfas 157 may financial condition results operations fair value option financial assets financial liabilities february 2007 fasb issued sfas 159 “the fair value option financial assets financial liabilities including amendment sfas 115” sfas 159 permits entity measure certain financial assets financial liabilities fair value currently required measured fair value entities elect fair value option report unrealized gains general motors corporation subsidiaries notes consolidated financial statements continued losses earnings subsequent reporting date fair value option may elected instrumentbyinstrument basis exceptions sfas 159 amends previous guidance extend use fair value option availableforsale heldtomaturity securities statement also establishes presentation disclosure requirements help financial statement users understand effect election sfas 159 effective beginning first fiscal year beginning november 15 2007 expect adoption standard material impact financial condition results operations accounting nonrefundable payments goods services used future research development activities june 2007 fasb ratified emerging issue task force eitf issue 073 “accounting nonrefundable payments goods services used future research development activities” eitf 073 requiring nonrefundable advance payments future research development activities deferred capitalized amounts expensed related goods delivered related services performed statement effective fiscal years beginning december 15 2007 management estimates upon adoption guidance material effect financial condition results operations accounting income tax benefits dividends sharebased payment awards june 2007 fasb ratified eitf issue 0611 “accounting income tax benefits dividends sharebased payment awards” eitf 0611 requires entities record additional paid capital tax benefits dividends dividend equivalents charged retained earnings certain sharebased awards sharebased payment arrangement employees may receive dividends dividend equivalents awards nonvested equity shares nonvested equity share units vesting period share options exercise date generally payment dividends treated deductible compensation tax purposes amount tax benefits recognized additional paidin capital included pool excess tax benefits available absorb tax deficiencies sharebased payment awards eitf 0611 effective fiscal years beginning december 15 2007 interim periods within years management estimates upon adoption guidance material effect financial condition results operations business combinations december 2007 fasb issued sfas 141r “business combinations” sfas 141r retained underlying concepts sfas 141 business combinations still required accounted fair value acquisition method accounting sfas 141r changed method applying acquisition method number significant aspects sfas 141r require 1 business combinations acquirer records assets liabilities acquired business including goodwill generally fair values 2 certain contingent assets liabilities acquired recognized fair values acquisition date 3 contingent consideration recognized fair value acquisition date certain arrangements changes fair value recognized earnings settled 4 acquisitionrelated transaction restructuring costs expensed rather treated part cost acquisition included amount recorded assets acquired 5 step acquisitions previous equity interests acquiree held prior obtaining control remeasured acquisitiondate fair values gain loss recognized earnings 6 making adjustments finalize initial accounting companies revise previously issued postacquisition financial information future financial statements reflect adjustments recorded acquisition date sfas 141r effective prospective basis business combinations acquisition date beginning first annual period subsequent december 15 2008 exception accounting valuation allowances deferred taxes acquired tax contingencies sfas 141r amends sfas 109 adjustments made valuation allowances deferred taxes acquired tax contingencies associated acquisitions closed prior effective date statement also apply provisions sfas 141r standard applied future business combinations noncontrolling interests consolidated financial statements december 2007 fasb issued sfas 160 “noncontrolling interests consolidated financial statements amendment arb 51” sfas 160 amends arb 51 establish new standards govern accounting reporting general motors corporation subsidiaries notes consolidated financial statements continued noncontrolling interests partially owned consolidated subsidiaries loss control subsidiaries also sfas 160 requires 1 noncontrolling interest previously referred minority interest reported part equity consolidated financial statements 2 losses allocated noncontrolling interest even allocation might result deficit balance reducing losses attributed controlling interest 3 changes ownership interests treated equity transactions control maintained 4 upon loss control gain loss interest sold recognized earnings sfas 160 effective prospective basis fiscal years interim periods within fiscal years beginning december 15 2008 except presentation disclosure requirements applied retrospectively currently evaluating effects sfas 160 may financial condition results operations note 3 acquisition disposal businesses sale allison transmission business august 2007 completed sale commercial military operations allison transmission allison business negotiated purchase price 56 billion cash plus assumed liabilities paid closing purchase price subject adjustment based amount allison’s net working capital debt closing date resulted adjusted purchase price 54 billion gain sale allison amount 53 billion 43 billion aftertax inclusive final purchase price adjustments recognized 2007 allison formerly division powertrain operations global leader design manufacture commercial military automatic transmissions premier global provider commercial vehicle automatic transmissions onhighway including trucks specialty vehicles buses recreational vehicles offhighway military vehicles well hybrid propulsion systems transit buses retained powertrain operations’ facility near baltimore manufactures automatic transmissions primarily trucks hybrid propulsion systems results operations cash flows allison reported consolidated financial statements discontinued operations periods presented historically allison reported within gmna automotive business following table summarizes results discontinued operations part transaction entered agreement buyers allison whereby may provide new parent company allison contingent financing 100 million financing would made available defined period time allison compliance financial maintenance covenant separate credit agreement gm financing would contingent stockholders new parent company allison committing provide equivalent amount funding allison either form equity loan would granted terms gm financing commitment expires december 31 2010 new parent company allison borrow facility 2007 additionally parties entered noncompete arrangements term 10 years united states term five years europe sale 51 controlling interest gmac november 2006 completed sale 51 controlling interest gmac transaction purchase price 74 billion fim holdings llc fim holdings fim holdings consortium investors including cerberus fim investors llc citigroup inc aozora bank limited subsidiary pnc financial services group inc retained 49 interest gmac’s general motors corporation subsidiaries notes consolidated financial statements continued common membership interests addition fim holdings purchased 555000 gmac’s preferred membership interests cash purchase price 500 million purchased 1555000 preferred membership interests cash purchase price 14 billion total value cash proceeds distributions us repayment certain intercompany obligations purchased preferred membership interests gmac expected 14 billion three years comprised 74 billion purchase price 27 billion cash dividend closing transaction related cash flows including monetization certain retained assets january 2007 made capital contribution gmac 1 billion restore adjusted tangible equity balance contractually required amount due decrease adjusted tangible equity balance gmac november 30 2006 prior consummation transaction 1 certain assets respect automotive leases owned gmac affiliates net book value 4 billion related deferred tax liabilities 18 billion transferred us 2 assumed retained certain gmac’s postemployment benefit obligations totaling 842 million related deferred tax assets 302 million 3 gmac transferred us certain entities hold fee interest certain real properties 4 gmac paid cash dividends us based upon gmac’s anticipated net income period september 30 2005 november 30 2006 totaling 19 billion 5 repaid certain indebtedness owing gmac specified intercompany unsecured obligations owing gmac 6 gmac made onetime distribution us 27 billion cash reflect increase gmac’s equity resulting transfer portion gmac’s net deferred tax liabilities arising conversion gmac certain subsidiaries limited liability company form accordance terms sale agreement second quarter 2006 settled estimated outstanding liability respect residual support risk sharing agreement place gmac related certain operating lease portfolios 14 billion arrangement customer’s contractual residual value set gmac’s standard residual values reimbursed gmac extent remarketing sales proceeds less customer’s contractual residual value limited gmac’s standard residual sales value also participated risk sharing arrangement whereby shared equally residual losses extent remarketing proceeds gmac standard residual values limited floor amount liability previously recorded amounted 18 billion resulting gain settlement 390 million recognized 252 million gain 2006 remainder reflected deferred gain recognized future periods leases terminate recognized noncash impairment charge 29 billion expenses 2006 charge comprised writedown carrying value gmac assets sold november 30 2006 partially offset realization 51 unrecognized net gains reflected gmac’s comprehensive income eleven months ended november 30 2006 gmac’s earnings cash flows fully consolidated statements operations consolidated statements cash flows november 30 2006 remaining 49 interest gmac’s common membership interests reflected equity method investment also interest gmac’s preferred membership interests reflected cost method investment refer note 11 part agreement retained option 10 years closing date repurchase gmac certain assets related automotive finance business north american operations international operations gmac exercise option conditional credit rating investment grade higher gmac’s credit rating call option price calculated higher 1 fair market value 2 95 times consolidated net income gmac’s automotive finance business either calendar year call option exercised calendar year immediately following year call option exercised value assigned fair value option entered number agreements gmac intended continue mutuallybeneficial global relationship us gmac agreements substance consistent existing historical practices us gmac including requiring gmac continue allocate capital automotive financing thereby continuing provide critical financing support significant share global sales gmac retains right make individual credit decisions gmac committed fund broad spectrum customers dealers consistent historical practice relevant jurisdiction subject gmac’s fulfillment certain conditions granted gmac exclusivity us canadian international gmsponsored consumer wholesale marketing incentives products specified markets around world exception saturn branded products refer note 27 additional information concerning ongoing arrangements general motors corporation subsidiaries notes consolidated financial statements continued sale gmac commercial mortgage march 2006 gmac sold 79 equity gmac commercial mortgage 15 billion cash subsequent sale remaining interest gmac commercial mortgage reflected using equity method sale electromotive division april 2005 completed sale electromotive division emd investor group led greenbriar equity group llc berkshire partners llc total consideration 201 million sale covered substantially emd businesses lagrange illinois london ontario manufacturing facilities transaction material effect consolidated financial position results operations acquisition gm daewoo auto technology company february 2005 completed purchase 166 million newlyissued shares common stock gm daewoo auto technology company gm daewoo 49 million increased ownership gm daewoo 482 446 shareholders gm daewoo participated issue june 2005 purchased suzuki motor corporation suzuki 69 million shares outstanding common stock gm daewoo 21 million increased ownership gm daewoo 509 accordingly began consolidating operations gm daewoo june 2005 pro forma unaudited impact automotive sales consolidated gm daewoo full year 2005 would increase revenue 28 billion pro forma effect net income loss significant compared equity income recognized note 4 marketable securities marketable securities hold classified availableforsale except certain mortgagerelated securities classified heldtomaturity unrealized gains losses net related income taxes availableforsale securities included separate component stockholders’ equity determine cost specific identification basis general motors corporation subsidiaries notes consolidated financial statements continued investments marketable securities follows proceeds sales marketable securities totaled 955 million 79 billion 204 billion 2007 2006 2005 respectively gross gains related sales marketable securities 10 million 11 billion 223 million 2007 2006 2005 respectively gross losses related sales marketable securities 4 million 105 million 132 million 2007 2006 2005 respectively amortized cost fair value investments availableforsale securities contractual maturity december 31 2007 follows monthly basis evaluate whether unrealized losses related investments debt equity securities temporary nature factors considered determining whether loss temporary include length time extent fair value cost financial condition nearterm prospects issuer ability intent hold investment period time sufficient allow anticipated recovery losses determined otherthantemporary investment carrying amount considered impaired adjusted fair value recorded otherthantemporary impairment 72 million certain marketable securities 2007 general motors corporation subsidiaries notes consolidated financial statements continued fair value gross unrealized losses investments unrealized loss position deemed otherthantemporarily impaired summarized following table addition hold strategic 37 stake suzuki recorded assets fair value 492 million 460 million december 31 2007 2006 respectively cost basis investment 236 million discussed note 8 also hold investment gmac preferred membership interests recorded assets 1 billion 16 billion december 31 2007 2006 respectively fair value investment 933 million 16 billion december 31 2007 2006 respectively note 5 finance receivables securitizations generate receivables sales vehicles dealer network domestically well service parts powertrain sales certain receivables sold whollyowned bankruptcyremote special purpose entity spe separate legal entity assumes risks rewards ownership receivables turn spe participates trade accounts receivable securitization program whereby enters agreement sell undivided interests eligible pool trade receivables limited 600 million 850 million 2007 2006 respectively directly banks bank conduit funds purchases issuance commercial paper receivables program sold fair market value removed consolidated balance sheet time sale loss recorded trade receivables sold included automotive cost sales 2 million 30 million 23 million 2007 2006 2005 respectively december 31 2007 banks bank conduit beneficial interest spe’s pool eligible trade receivables december 31 2006 banks bank conduit beneficial interest 200 million spe’s pool eligible trade receivables retained interest receivables sold provide guarantees credit enhancements perform collection administrative functions gross amount proceeds collections reinvested revolving securitizations 600 million 9 billion 128 billion 2007 2006 2005 respectively general motors corporation subsidiaries notes consolidated financial statements continued addition securitization program participate trade receivable securitization programs primarily europe financing providers beneficial interest pool eligible european receivables 87 million 109 million december 31 2007 2006 respectively related securitization programs since april 2006 certain trade accounts receivables related vehicle sales dealers primarily middle east pledged collateral onbalance sheet securitized borrowing program receivables pledged reported separately trade accounts receivables consolidated balance sheet amount receivables pledged program 215 million 300 million december 31 2007 2006 respectively amounts also reported shortterm borrowings securitizations finance receivables mortgage loans prior consummation gmac transaction gmac transferred us two bankruptcyremote subsidiaries function spes hold equity interests ten trusts parties lease asset securitizations balance lease securitization debt two spes 48 billion 94 billion december 31 2007 2006 respectively completion gmac transaction 2006 gmac’s finance receivables longer part consolidated balance sheet information gmac finance receivables eleven months ended november 30 2006 year ended december 31 2005 gmac sold retail finance receivables wholesale dealer loans residential mortgage loans following discussion related information applicable transfers finance receivables loans qualified offbalance sheet securitizations requirements sfas 140 “accounting transfers servicing financial assets extinguishments liabilities replacement fasb statement 125” sfas 140 gmac retained servicing responsibilities subordinated interests securitizations retail finance receivables wholesale loans servicing responsibilities retained majority residential commercial mortgage loan securitizations gmac retained subordinated interests securitizations gmac also held subordinated interests acted collateral manager collateralized debt obligation cdo securitization program servicer gmac received monthly fee stated percentage outstanding sold receivables typically retail automotive finance receivables gmac paid fee concluded fee represents adequate compensation servicer servicing asset liability recognized considering shortterm revolving nature wholesale loans servicing asset liability recognized upon securitization loans december 31 2005 weighted average basic servicing fees primary servicing activities 100 basis points 100 basis points 40 basis points outstanding principal balance sold retail finance receivables wholesale loans residential mortgage loans commercial mortgage loans respectively additionally gmac retained rights cash flows remaining investors securitization trusts received contractual payments certain retail securitization transactions retail receivables sold servicing retained basis servicing compensation servicing liability established recorded liabilities mortgage servicing gmac capitalizes value expected realized performing specified residential commercial mortgage servicing activities mortgage servicing rights general motors corporation subsidiaries notes consolidated financial statements continued following tables summarize gains securitizations certain cash flows received paid securitization trusts transfers finance receivables loans completed eleven months ended november 30 2006 year ended december 31 2005 general motors corporation subsidiaries notes consolidated financial statements continued key economic assumptions used measuring estimated fair value retained interests sales completed eleven months ended november 30 2006 year ended december 31 2005 dates sales follows fair value retained interests wholesale securitizations approximates cost shortterm floating rate nature wholesale loans b included within residential mortgage loans home equity loans lines high loantovalue loans residential first second mortgage loans c assumptions used measure expected yield variable rate retained interests based benchmark interest rate yield curve plus contractual spread appropriate actual yield curve utilized varies depending specific retained interests based weighted average maturity finance receivables constant prepayment rate mortgage loans commercial mortgage securities hedge interest rate prepayment risks associated certain retained interests effects hedge strategies considered herein expected static pool net credit losses include actual incurred losses plus projected net credit losses divided original balance outstandings comprising securitization pool table displays expected static pool net credit losses based securitization transactions static pool losses applicable wholesale finance receivable securitizations shortterm nature b represents eleven months ended november 30 2006 general motors corporation subsidiaries notes consolidated financial statements continued note 6 inventories comprised following inventories stated cost excess market cost 50 us inventories determined lastin firstout lifo method cost inventories determined either firstin firstout fifo average cost methods 2007 2006 us lifo eligible inventory quantities reduced reduction resulted liquidation lifo inventory quantities carried lower costs prevailing prior years compared cost 2007 2006 purchases effect decreased automotive cost sales approximately 100 million 50 million 2007 2006 respectively note 7 equipment operating leases net information related assets leased others accumulated depreciation follows lease payments received related equipment operating leases net maturing five years following december 31 2007 follows auto none payment received lease inception revenue deferred lease period fio 12 billion 477 million 51 million maturing 2008 2009 2010 respectively leases maturing 2010 general motors corporation subsidiaries notes consolidated financial statements continued note 8 investment nonconsolidated affiliates nonconsolidated affiliates entities equity interest use equity method accounting ability exert significant influence decisions relating operating financial affairs significant affiliates percent equity ownership voting interest include following • gmac 49 december 31 2007 2006 • shanghai general motors co ltd 50 december 31 2007 2006 2005 • saicgmwuling automobile co ltd 34 december 31 2007 2006 2005 • suzuki 204 december 31 2005 investment gmac summarized financial information gmac december 31 2007 2006 year ended december 31 2007 presented tables results operations financial position investment gmac 71 billion 75 billion december 31 2007 2006 respectively general motors corporation subsidiaries notes consolidated financial statements continued discussed note 3 sold 51 ownership interest gmac november 2006 remaining 49 ownership interest accounted equity method addition purchased 1555000 preferred membership interests cash purchase price 14 billion included within assets consolidated balance sheet refer note 11 investment gmac preferred membership interests cost method investment initially recorded fair value date acquisition excess fair value purchase price preferred membership interests reduced investment gmac common membership interests gmac required make certain quarterly distributions holders preferred membership interests cash pro rata basis preferred membership interests issued units 1000 accrue yield rate 10 per annum gmac’s board managers gmac board may reduce distribution extent required avoid reduction equity capital gmac minimum amount equity capital equal net book value gmac november 30 2006 addition gmac board may suspend payment preferred membership interest distributions consent majority preferred membership interests distributions made respect fiscal quarter distributions would cumulative accrued yield gmac’s preferred membership interests fiscal quarter fully paid preferred holders portion excess net financial book income gmac fiscal quarter amount yield distributed holders preferred membership interests quarter distributed holders common membership interests follows least 40 excess paid fiscal quarters ending prior december 31 2008 least 70 excess paid fiscal quarters ending december 31 2008 november 2007 converted 533236 preferred membership interests fim holdings converted 555000 preferred membership interests 3912 4072 respectively common membership interests order strengthen gmac’s capital position percentage ownership common membership interests gmac remained unchanged conversion accounted conversion fair value recorded loss 27 million 2007 loss conversion represents difference fair value carrying value preferred membership interests converted gmac accounted conversion preferred membership interests recapitalization recorded book value proportionate share increase gmac’s net equity attributable common membership interest holders result conversion exceeded fair value preferred membership interests converted 27 million difference recorded increase additional paidin capital 2007 december 31 2007 hold remaining 1021764 preferred membership interests 49 52912 common membership interests gmac periodically evaluate carrying value investment gmac including preferred membership interests assess whether investment impaired currently believe investment gmac impaired however many economic factors unstable december 31 2007 may affect gmac’s ability generate sustainable earnings continue distributions preferred membership interests accordingly assessment impairment factors include • instability global credit mortgage markets effect gmac’s residential capital llc rescap subsidiary well automotive finance insurance operations • deteriorating conditions residential home building markets including significant changes mortgage secondary market tightening underwriting guidelines reduced product offerings • recent credit downgrades gmac rescap effect ability raise capital necessary acceptable terms • effect expected nearterm automotive market conditions gmac’s automotive finance operations result deteriorating conditions residential home building markets recent credit downgrades unsecured debt obligations significant yeartodate losses residential mortgage business gmac conducted interim goodwill impairment test third quarter 2007 gmac concluded carrying amount reporting unit including goodwill exceeded fair value recorded impairment loss 455 million share impairment loss decreased investment gmac 223 million december 31 2007 included equity loss gmac llc 2007 general motors corporation subsidiaries notes consolidated financial statements continued prior gmac transaction november 2006 gmac recognized gain 415 million sale entire equity interest regional home builder recorded automotive interest income nonoperating income consolidated statements operations equity method accounting gmac’s share income recorded investment 42 million 35 million 2006 2005 respectively investment nonconsolidated affiliates information regarding remaining significant nonconsolidated affiliates excluding gmac presented table investment suzuki 2006 sold 924 million shares investment suzuki reducing equity stake suzuki 204 37 163 million shares sale interest generated cash proceeds 2 billion gain sale 666 million recorded automotive interest income nonoperating income consolidated statement operations effective completion sale remaining investment suzuki accounted availableforsale equity security refer note 4 investment fuji heavy industries fhi fourth quarter 2005 completed sale 201 investment common stock fhi second quarter 2005 recorded impairment charge 812 million associated investment common stock fhi fourth quarter 2005 recorded gain 78 million due appreciation fair value stock june 30 2005 date fhi impairment charge sale generated net proceeds 775 million note 9 property net property net comprised following general motors corporation subsidiaries notes consolidated financial statements continued depreciation impairment amortization expense follows depreciation property held gmac ceased april 2006 time assets classified held sale december 2006 sold proving grounds facility mesa arizona 283 million cash subsequently leased back threeyear period recognized gain 270 million included automotive interest income nonoperating income consolidated statement operations note 10 goodwill intangible assets components goodwill intangible assets follows aggregate amortization expense existing acquired intangible assets 74 million 84 million 84 million 2007 2006 2005 respectively estimated amortization expense next five years follows 2008 76 million 2009 70 million 2010 36 million 2011 22 million 2012 16 million general motors corporation subsidiaries notes consolidated financial statements continued changes carrying amounts goodwill 2007 2006 follows 2006 gmac recorded goodwill 151 million primarily result purchase regional insurance company b changes key personnel commercial finance business gmac initiated goodwill impairment test accordance sfas 142 outside annual goodwill impairment testing period thorough review business new leadership particular focus longterm strategy performed result review operating divisions reorganized decision made implement different exit strategy workout portfolio exit product lines lower returns decisions significant impact expected asset levels growth rate assumptions used estimate fair value business particular analysis performed third quarter 2006 incorporates management’s decision discontinue activity equipment finance business portfolio 1 billion representing 20 commercial finance business average assets outstanding 2006 fair value commercial finance business determined using internally developed discounted cash flow analysis based five year projected net income market driven terminal value multiple based upon results assessment impairment charge 828 million recorded 2006 c november 2006 completed sale 51 controlling interest gmac refer note 3 august 2007 completed sale allison resulted disposition goodwill based relative fair value allison refer note 3 note 11 assets comprised following general motors corporation subsidiaries notes consolidated financial statements continued note 12 variable interest entities providing information concerning vies 1 consolidated since deemed primary beneficiary 2 entities consolidate although significant interests vies primary beneficiary vies listed relate financing insurance operations consolidated 2005 period january 1 2006 november 30 2006 date sale 51 controlling interest gmac automotive lease real estate equipment various spes established facilitate financing assets us nationally prominent creditworthy lessors assets consist principally office buildings warehouses machinery equipment use spes allows parties providing financing isolate particular assets single entity thereby syndicate financing multiple third parties conventional financing technique used lower cost borrowing thus lease cost lessee wellestablished market institutions participate financing property purchase interests spes certain spes determined vies fin 46r “consolidation variable interest entities interpretation arb 51” fin 46r consolidate spes provide residual value guarantee leased property considered primary beneficiary fin 46r december 31 2007 carrying amount assets liabilities consolidated fin 46r amounted 287 million 335 million respectively compared 636 million 797 million december 31 2006 assets consolidated reflected propertynet consolidated financial statements liabilities consolidated reflected debt consolidated financial statements maximum exposure loss related consolidated vies amounted 335 million december 31 2007 lease arrangements involving vies hold significant variable interests considered primary beneficiary fin 46r maximum exposure loss related vies significant variable interest consolidate entity amounted 705 million december 31 2007 also concluded entity receive royalty payments exercise control hold equity interest meets definition vie entity modifies standard gm vehicles high performance vehicles sells gm dealer network concluded primary beneficiary consolidate entity fin 46r assets consolidated reflected assets liabilities reflected liabilities consolidated balance sheets december 31 2007 carrying amount assets liabilities consolidated fin 46r amounted 43 million 29 million respectively maximum exposure loss related consolidated vie december 31 2007 insignificant finance insurance operations mortgage warehouse funding gmac’s mortgage operations transferred warehouse funding entities commercial residential mortgage loans lending receivables home equity loans lines credit pending permanent sale securitization various structured finance arrangements order provide funds origination purchase future loans determined certain mortgage warehouse funding entities gmac primary beneficiary construction real estate lending gmac primary beneficiary spe used finance construction lending receivables warehouse lending gmac facility transferred mortgage warehouse lending receivables wholly owned spe sold senior participation interest receivables unconsolidated qualifying special purpose entity qspe gmac primary beneficiary spe collateralized debt obligations cdos gmac’s mortgage operations sponsored served collateral manager cdos cdo transactions trust established purchases portfolio securities issues debt equity certifications representing interests portfolio assets addition receiving variable compensation managing portfolio gmac sometimes retained equity investments cdos majority cdos sponsored gmac initially structured restructured qspes therefore exempt fin 46r certain cdo entities gmac primary beneficiary general motors corporation subsidiaries notes consolidated financial statements continued interests real estate partnerships gmac’s commercial mortgage operations syndicate investments real estate partnerships unaffiliated investors certain partnerships guaranteed timely payments specified returns investors gmac variable interests underlying operating partnerships certain partnerships determined gmac primary beneficiary however consolidation entities impact reported net income new market tax credit funds gmac syndicated managed investments partnerships make investments typically mortgage loans turn qualify partnerships earn new markets tax credits certain tax credit funds gmac primary beneficiary note 13 accrued expenses liabilities deferred income taxes accrued expenses liabilities deferred income taxes comprised following general motors corporation subsidiaries notes consolidated financial statements continued activity policy product warranty recall campaigns certified used vehicle warranty liabilities follows management reviews adjusts estimates regular basis based differences actual experience historical estimates available information note 14 shortterm borrowings longterm debt shortterm borrowings shortterm borrowings 42 billion 33 billion december 31 2007 2006 respectively december 31 2007 2006 shortterm borrowings included related party debt 25 billion 28 billion respectively mainly dealer financing gmac amounts available shortterm line credit agreements 33 billion 26 billion december 31 2007 2006 respectively interest rate shortterm borrowings outstanding ranged 17 173 december 31 2007 25 112 december 31 2006 weighted average interest rate outstanding borrowings 62 6 december 31 2007 2006 respectively weighted average interest rate outstanding borrowings includes interest rates debt denominated various currencies pay commitment fees credit facilities rates negotiated agreement amounts paid expensed commitments fees significant period general motors corporation subsidiaries notes consolidated financial statements continued longterm debt longterm debt comprised following adjust hedged fixed rate debt fair value changes attributable hedged risk accordance sfas 133 “accounting derivatives hedging activities” sfas 133 unsecured bonds unsecured bonds represent obligations various annual coupons ranging 6375 945 maturities ranging 2008 2052 contingent convertible debt may 2007 issued 15 billion 15 series convertible debentures series due 2009 interest payable semiannually debentures senior unsecured obligations ranking equally unsecured unsubordinated debt series may converted option holder 123 par value common stock common stock based initial conversion rate 6837 shares per 2500 principal amount debentures represents initial conversion price 3657 per share conversion price 3657 subject adjustment upon certain events including limited occurrence stock dividends issuance rights warrants distribution assets debt securities holders shares common stock addition event makewhole fundamental change defined underlying prospectus supplement conversion rate increased based 1 date makewhole fundamental change becomes effective 2 common stock price paid makewhole fundamental change average common stock price event conversion rate shall exceed 8205 per 2500 principal amount series subject adjustment events previously mentioned fundamental change occurs prior maturity debenture holders may require us repurchase portion debentures cash price equal principal amount plus accrued unpaid interest including date repurchase may elect redeem series prior maturity date connection issuance series purchased convertible note hedge series private transaction convertible note hedge expected reduce potential dilution respect common stock upon conversion series extent market value per share common stock exceed specified cap resulting effective conversion price 4571 per share transaction terminate earlier maturity date series longer outstanding due conversion otherwise received net proceeds issuance series net issue costs purchase convertible note hedge 14 billion net proceeds used general corporate purposes including working capital needs debt issue costs general motors corporation subsidiaries notes consolidated financial statements continued 32 million incurred amortized using effective interest method term series accordance eitf issue 0019 “accounting derivative financial instruments indexed potentially settled company’s stock” recorded cost convertible note hedge 99 million reduction additional paidin capital subsequent changes fair value convertible note hedge recognized convertible debt includes 12 billion original principal amount 45 series convertible senior debentures due 2032 series 26 billion principal amount 525 series b convertible senior debentures due 2032 series b 43 billion principal amount 625 series c convertible senior debentures due 2033 series c 15 billion principal amount 15 series due 2009 unilaterally irrevocably waived relinquished right use stock committed use cash settle principal amount debentures 1 holders choose convert debentures 2 required holders repurchase debentures retain right use either cash stock settle amount may become due debt holders excess principal amount conversion prices bonds follows 7020 series securities 6490 series b securities 4762 series c securities 3657 series securities 2007 majority series convertible debentures put us settled cash march 6 2007 11 billion december 31 2007 amount series convertible debentures outstanding 39 million notes convertible holder outlined • closing sale price common stock exceeds 120 conversion price least 20 trading days 30 consecutive trading days ending last trading day preceding fiscal quarter • five business day period nine consecutive trading day period trading price debentures day period less 95 product closing sale price common stock multiplied number shares issuable upon conversion 2500 principal amount debentures • debentures called redemption series march 6 2007 series b march 6 2009 series c july 20 2010 • series anytime march 1 2009 second business day immediately preceding maturity date series mature june 1 2009 • upon occurrence specified corporate events requirement repurchase portion notes described • investor exercises right require us repurchase portion debentures specified repurchase dates security series march 6 2007 2012 2017 2022 2027 series b march 6 2014 2019 2024 2029 series c july 15 2018 2023 2028 days business day next succeeding business day foreign currency denominated bonds foreign currency denominated bonds include eurodenominated bonds annual coupons ranging 725 8375 maturity dates ranging 2013 2033 also included within foreigncurrencydenominated bonds british pounds bonds annual coupons ranging 8375 8875 maturity dates ranging 2015 2023 mitigate foreign exchange exposure created debt enter cross currency swaps notional values swaps 27 billion 24 billion december 31 2007 2006 respectively general motors corporation subsidiaries notes consolidated financial statements continued longterm debt longterm debt 58 billion 68 billion december 31 2007 2006 respectively consisted municipal bonds capital leases longterm obligations revolving credit agreements august 2007 entered revolving credit agreement expiring august 2009 lender provides borrowings 13 billion borrowings facility bear interest based either commercial paper rate libor borrowings used general corporate purposes including working capital needs facility borrowings limited amount based value underlying collateral consists residual interests trusts leased vehicles issue assetbacked securities collateralized vehicles associated leases underlying collateral previously owned gmac transferred us part gmac transaction november 2006 underlying collateral held bankruptcyremote subsidiaries pledged trustee benefit lender consolidate bankruptcyremote subsidiaries trusts financial reporting purposes borrowings outstanding agreement december 31 2007 also 46 billion standby revolving credit facility syndicate banks 150 million terminates june 2008 45 billion terminates july 2011 december 31 2007 availability revolving credit facility 45 billion 91 million letters credit issued credit facility loans currently outstanding 45 billion secured facility borrowings limited amount based value underlying collateral consists certain north american accounts receivable certain inventory gm saturn corporation general motors canada limited gm canada certain plants property equipment gm canada pledge 65 stock holding company indirect subsidiary general motors de mexico de rl de cv collateral also secures certain lines credit automatic clearinghouse overdraft arrangements letters credit provided secured lenders facility totals 6 billion 45 billion maximum available revolving credit facility december 31 2007 addition 91 million letters credit issued revolving credit facility 16 billion utilized secure facilities facility event certain work stoppages secured revolving credit facility would temporarily reduced 35 billion available longterm borrowings line credit arrangements various banks totaled 59 billion 47 billion december 31 2007 2006 respectively unused portion credit lines totaled 58 billion december 31 2007 addition consolidated affiliates nongm minority shareholders primarily gm daewoo lines credit various banks totaled 21 billion december 31 2007 represented longterm facilities compared 27 billion december 31 2006 unused portion credit lines totaled 16 billion december 31 2007 may 2007 entered unsecured revolving credit agreement expiring june 2008 provided borrowings 500 million reviewing liquidity position december 2007 believe sufficient liquidity financial flexibility meet capital requirements first half 2008 without credit agreement result terminated credit agreement january 9 2008 never borrowed credit agreement interest rate risk management achieve desired balance fixed variable debt entered interest rate swaps notional amount pay variable swap agreements december 31 2007 2006 automotive 54 billion 53 billion respectively december 31 2007 2006 longterm debt included 262 billion 255 billion respectively obligations fixed interest rates 72 billion 76 billion respectively obligations variable interest rates predominantly libor interest rate swap agreements general motors corporation subsidiaries notes consolidated financial statements continued financing arrangements consisting principally obligations connection saleleaseback transactions lease obligations including offbalance sheet arrangements view restatement prior financial statements evaluated effect restatement agreements including legal rights ability cure respect claims could asserted based review believe amounts subject possible claims acceleration termination remedies likely exceed 27 billion consisting primarily offbalance sheet arrangements although assurances given likelihood nature amount claims may asserted based review reclassified 212 million obligations longterm debt shortterm debt longterm debt maturities including capital leases december 31 2007 follows 2008 19 billion 2009 23 billion 2010 2 billion 2011 17 billion 2012 2 billion thereafter 29 billion financing insurance operations debt comprised following prior consummation gmac transaction gmac transferred us two bankruptcyremote subsidiaries hold number trusts parties lease asset securitizations 49 billion secured debt december 31 2007 primarily comprised assetbacked debt securities issued trusts part lease securitizations achieve desired balance fixed variable rate debt entered interest rate swaps cap agreements gmac counterparty notional amount agreements december 31 2007 fio 32 billion pay floating variable interest rates ranged 52 65 notional amount agreements december 31 2006 fio 72 billion pay floating variable interest rates ranged 53 66 longterm debt maturities december 31 2007 follows 2008 36 billion 2009 12 billion 2010 0 2011 5 million 2012 17 million thereafter 45 million note 15 pensions postretirement benefits employee benefit plans defined benefit pension plans sponsor number qualified defined benefit pension plans covering eligible hourly salaried us employees well certain nonus employees defined benefit pension plans covering eligible hourly us canadian employees generally provide benefits negotiated stated amounts year service well significant supplemental benefits employees retire 30 years service normal retirement age benefits provided defined benefit pension plans covering eligible us canadian salaried employees salaried employees certain nonus locations generally based years service general motors corporation subsidiaries notes consolidated financial statements continued compensation history also unfunded nonqualified pension plans covering certain executives based targeted wage replacement percentages defined contribution plans also sponsor savingsstock purchase program sspp defined contribution retirement savings plan eligible us salaried employees sspp provides discretionary matching contributions certain predefined limits based upon eligible base salary matching contribution suspended matching contribution effective january 1 2006 reinstated matching contribution effective january 1 2007 addition matching contribution also contribute amount equal 1 eligible base salary us salaried employees service commencement date january 1 1993 cover certain benefits retirement different us salaried employees service commencement date prior january 1 1993 benefit contribution effective january 1 2007 established new contribution sspp eligible us salaried employees service commencement date january 1 2001 automatically contribute amount equal 4 eligible base salary program retirement contribution total contributions sspp 82 million 12 million 65 million 2007 2006 2005 respectively also contribute certain nonus defined contribution plans contributions nonus defined contribution plans immaterial periods presented postretirement benefit plans additionally sponsor hourly salaried benefit plans provide postretirement medical dental vision life insurance eligible us canadian retirees eligible dependents cost benefits recognized period employees provide service us certain nonus subsidiaries postretirement benefit plans although employees covered government sponsored administered programs cost nonus postretirement plans significant also provide postemployment extended disability benefits comprised income security health care life insurance eligible us canadian employees become disabled longer actively work cost benefits recognized period employees provide service 2005 entered 2005 uaw health care settlement agreement reduced health care coverage individual uaw retirees mitigate effects reduced coverage 2005 uaw health care settlement agreement also provided make contributions new independent veba contributions constitute defined benefit plan cap mitigation plan expected available pay benefits number years depending level mitigation obligation make contributions mitigation plan determined formula consisting fixed variable components defined 2005 uaw health care settlement agreement obligations limited contributions 2005 uaw health care settlement agreement provides guarantee ability assets mitigation plan mitigate retiree health care costs furthermore mitigation plan completely independent us administered independent trust committee include representatives assets independent veba trust uaw retirees gm responsibility committee full fiduciary responsibility investment strategy safeguarding assets execution benefit plan designed mitigation plan partially funded contributions 1 billion 2006 2007 third contribution 1 billion made 2011 shall also make future contributions subject provisions 2005 uaw health care settlement agreement relate profit sharing payments increases value notional number shares common stock collectively supplemental contributions well wage deferral payments dividend payments amounts contribute mitigation plan related wage deferrals dividends changes estimate supplemental contributions recorded expense quarter hours worked dividend declared change estimate occurs recognize expense wage deferrals future services rendered since activeuaw representedhourlyemployees elected forgo contractual wage increases amounts contributed mitigation plan general motors corporation subsidiaries notes consolidated financial statements continued net underfunded status mitigation plan reflected consolidated balance sheets changes benefit obligation us benefits detailed table following represents changes plan assets benefit obligation mitigation plan 2007 2006 legal services plans restatement financial information accompanying consolidated balance sheets statement stockholders’ equity deficit december 31 2006 january 1 2005 respectively restated correct accounting certain benefit plans provide legal services hourly employees represented uaw international union electrical workers communications workers america iuecwa canadian auto workers caw legal services plans historically legal services plans accounted pay go basis however concluded legal services plans accounted defined benefit plans provisions sfas 106 liability 323 million recorded consolidated balance sheet january 1 2005 earliest period included consolidated financial statements charge amount 211 million net deferred tax asset 112 million record liability related tax effects recorded adjustment retained earnings liability related legal service plans existed prior january 1 2005 evaluated effects misstatement prior periods’ consolidated financial statements accordance guidance provided sec staff accounting bulletin 108 codified sab topic 1n “considering effects prior year misstatements quantifying misstatements current year financial statements” sab 108 concluded prior period financial statements materially misstated however considered effect correcting misstatement interim annual results operations periods ended september 30 december 31 2007 respectively concluded impact recording cumulative effect periods may material therefore permitted sab 108 corrected prior period consolidated financial statements immaterial effect misstatement consolidated financial statements intend amend previous filings sec respect misstatement order correct consolidated balance sheet december 31 2006 increased deferred tax assets opeb liabilities 112 million 323 million respectively previously reported amounts deferred tax assets opeb liabilities 33 billion 501 billion respectively december 31 2006 restated 331 billion 504 billion respectively general motors corporation subsidiaries notes consolidated financial statements continued restating consolidated statements operations cash flows 2006 2005 interim periods years misstatement concluded impact immaterial periods presented adoption sfas 158 effective december 31 2006 adopted sfas 158 recognized funded status defined benefit plans december 31 2006 accordance recognition provisions sfas 158 incremental effect applying recognition provisions sfas 158 individual line items consolidated balance sheet december 31 2006 presented table additionally elected early adopt measurement date provisions sfas 158 january 1 2007 provisions require measurement date plan assets liabilities coincide sponsor’s year end using “twomeasurement” approach defined benefit plans measurement date historically consistent yearend recorded decrease retained earnings 728 million 425 million aftertax representing net periodic benefit cost period measurement date utilized 2006 beginning 2007 previously would recorded first quarter 2007 delayed basis also performed measurement january 1 2007 benefit plans whose previous measurement dates historically consistent year end result january 1 2007 measurement recorded increase accumulated comprehensive income 23 billion 15 billion aftertax representing changes fair value plan assets benefit obligations period measurement date utilized 2006 january 1 2007 amounts principally offset immaterial adjustment 390 million 250 million aftertax correct certain demographic information used determining amount cumulative effect change accounting principle reported december 31 2006 adopt recognition provisions sfas 158 significant plan amendments benefit modifications related events october 2007 signed memorandum understanding postretirement medical care retiree mou uaw superseded settlement agreement entered february 21 2008 currently pending court approval settlement agreement settlement agreement provides responsibility providing retiree health care permanently shift us new retiree plan funded new independent veba new veba fully implemented settlement agreement cap retiree healthcare obligations uaw associated employees retirees dependents defined settlement agreement supersede replace 2005 uaw health care settlement agreement transfer responsibility administering retiree healthcare benefits individuals new veba trust become effective settlement agreement subject class certification court approval completion discussions us sec regarding accounting treatment transactions contemplated settlement general motors corporation subsidiaries notes consolidated financial statements continued agreement basis reasonably satisfactory us light contingencies recognition effects settlement agreement made consolidated financial statements settlement agreement provides later january 1 2010 final court approval settlement agreement transfer obligations provide covered uaw employees postretirement medical benefits new retiree health care plan new plan established funded new veba accordance settlement agreement effective january 1 2008 bookkeeping purposes divide existing internal veba two bookkeeping accounts one account consist percentage existing internal veba’s assets january 1 2008 equal estimated percentage hourly opeb liability covered existing internal veba attributable nonuaw represented employees retirees eligible spouses surviving spouses dependents nonuaw related account balance approximately 12 billion second account consist remaining percentage assets existing internal veba january 1 2008 uaw related account balance approximately 145 billion amounts withdrawn uaw related account including investment returns january 1 2008 transfer new veba pursuant settlement agreement issued 44 billion principal amount 675 series u convertible senior debentures due december 31 2012 convertible note lbk llc delaware limited liability company sole member lbk hold convertible note transferred new veba accordance terms settlement agreement interest convertible note payable semiannually accordance settlement agreement lbk transfer interest receives convertible note temporary asset account maintain funds temporary asset account transferred new veba accordance terms settlement agreement conjunction issuance convertible note lbk entered certain cashsettled derivative instruments maturing june 30 2011 economic effect reducing conversion price convertible note 40 36 derivative instruments also entitle us partially recover additional economic value provided common stock price appreciates 6348 7053 per share fully recover additional economic value provided common stock price reaches 7053 per share pursuant settlement agreement lbk transfer interests derivatives new veba convertible note transferred lbk new veba also issued 4 billion short term note lbk short term note pursuant settlement agreement short term note pays interest rate 9 matures date face amount short term note paid interest new veba accordance terms settlement agreement lbk hold short term note matures lbk whollyowned consolidated subsidiary lbk hold convertible note short term note derivatives paid transferred new veba three securities effectively eliminated consolidated financial statements transferred new veba without restrictions april 1 2008 make additional contribution 165 million temporary asset account beginning 2009 may required contribute additional 165 million per year limited maximum additional 19 payments either temporary asset account new veba established contributions required annual cash flow projections show new veba become insolvent rolling 25year basis time option prepay remaining contingent 165 million payments additionally initial effective date settlement agreement may transfer additional 56 billion subject adjustment new veba may instead opt make annual payments varying amounts 421 million 33 billion 2020 result increased pension benefits granted part 2007 national agreement remeasured us hourly defined benefit pension plan october 1 2007 generating 41 million increase pension expense 2007 remeasurement increased us hourly projected benefit obligation pbo 42 billion terms 2007 national agreement also provided pension benefits certain future current retirees delphi corporation delphi transferred time spin us future delphi retirees received incremental pension increase consistent employees current delphi retirees general motors corporation subsidiaries notes consolidated financial statements continued receive four lumpsum payments terms received retirees pension benefits granted future current retirees delphi funded hourly pension plan included october 1 2007 remeasurement hourly pension plan value increased pension benefits 552 million future current delphi retirees charged expense 2007 prior 2007 national agreement amortized prior service cost related hourly defined benefit pension plans us average remaining service period active employees time amendment currently estimated 101 years also expensed lump sum payments granted retirees quarter associated contract approved conjunction entering 2007 national agreement determined contractual life labor agreements better reflected period future economic benefit received pension plan amendments collectively bargained hourly pension plans therefore amortizing amounts four year period also recorded 16 billion additional pension expense third quarter 2007 related accelerated recognition previously unamortized prior service cost related pension increases us prior collectively bargained agreements due determination period future economic benefit remaining change estimate resulted increase basic diluted loss per share 276 2007 charge included component automotive costs sales 15 billion component selling general administrative expense 77 million consolidated statements operations february 2006 announced would increase us salaried workforce’s participation cost health care capping contributions salaried retiree health care level 2006 expenditures resulting remeasurement us salaried opeb plans february 9 2006 due benefit modifications generated 500 million reduction opeb expense 2006 reflected components pension opeb expense table remeasurement reduced us accumulated postretirement benefit obligation apbo 47 billion march 2006 modified terms us salaried defined benefit pension plan freeze benefits current plan december 31 2006 implement new plan using new pension formula thereafter resulting remeasurement us salaried defined benefit pension plan march 31 2006 due benefit modifications generated 383 million reduction pension expense 2006 reflected components pension opeb expense table remeasurement reduced us pbo 28 billion march 2006 us district court eastern district michigan approved 2005 uaw health care settlement agreement reduced health care provisions health care program hourly employees modified plan upon court approval 2005 uaw health care settlement agreement remain effect least september 2011 either uaw could cancel agreement upon 90 days written notice 2005 uaw health care settlement agreement replaced settlement agreement discussed later final effective date january 1 2010 2005 uaw health care settlement agreement also provided make contributions mitigation plan described earlier result 2005 uaw health care settlement agreement remeasured modified plan march 31 2006 generating 13 billion reduction opeb expense remaining periods 2006 reducing 2006 us apbo 174 billion 174 billion reduction amortized straight line basis period full eligibility active uaw hourly employees 74 years reduction opeb expense measurement march 31 2006 mitigation plan generated us apbo 29 billion amortized straightline basis period full eligibility active uaw employees 74 years us opeb expense net result march 31 2006 remeasurement modified plan initial measurement mitigation plan 145 billion reduction 2006 us hourly apbo 13 billion reduction opeb expense 2006 march 2006 reached agreement delphi uaw significantly reduced number us hourly employees uaw attrition program thereby significantly reducing expected aggregate years future service employees covered us hourly defined benefit pension opeb extended disability plans resulting remeasurement us hourly defined benefit pension plan april 30 2006 generated 44 billion curtailment loss 704 million reduction pension expense 2006 reduction us hourly pbo 12 billion resulting remeasurement us hourly opeb plan may 31 2006 generated 23 million curtailment loss 143 million reduction opeb expense 2006 reduction general motors corporation subsidiaries notes consolidated financial statements continued us hourly apbo 700 million also recognized curtailment gain 132 million related us hourly extended disability plan measured june 30 2006 impacts pension opeb plans reflected components pension opeb expense table october 2006 reduced levels coverage corporatepaid life insurance salaried retirees eligible salaried employees retire may 1 2007 coverage reduced 50 tenth anniversary retirement date salaried employees retire may 1 2007 coverage reduced 50 january 1 2017 change reduced us apbo 500 million reflected 2007 opeb expense result sale gmac november 2006 described note 3 gmac salaried employees defined benefit pension benefits frozen defined benefit pension plans place time sale resulting remeasurement us salaried defined benefit pension plans november 30 2006 generated 86 million curtailment gain 8 million reduction pension expense 2006 remeasurement increased us pbo 200 million also agreed maintain salaried opeb obligation current gmac retirees opebeligible employees gmac employees non opebeligible offered cash lump sum payment based credited service lieu gm provided opeb date retirement resulting remeasurement us nonus opeb plans november 30 2006 generated 563 million curtailment gain 27 million settlement loss 536 million reduction opeb expense 2006 remeasurement reduced us nonus apbo 100 million impact extended disability benefits curtailment gain 14 million 2006 general motors corporation subsidiaries notes consolidated financial statements continued table include extended disability plans total apbo 701 million december 31 2007 866 million december 31 2006 total accumulated benefit obligation accumulated benefit obligation fair value plan assets defined benefit pension plans accumulated benefit obligations excess plan assets projected benefit obligation fair value plan assets defined benefit pension plans projected benefit obligations excess plan assets follows general motors corporation subsidiaries notes consolidated financial statements continued components pension opeb expense along assumptions used determine benefit obligations follows table include extended disability plans total net expense 63 million 105 million 79 million 2007 2006 2005 respectively excluding curtailments amounts material determined end year b determined beginning year updated remeasurements appropriate discount rates used 2007 measure effects curtailments plan amendments various plans c result allison divestiture recorded adjustment unamortized prior service cost us hourly salaried defined benefit pension plans 18 million us hourly salaried opeb plans 223 million adjustments included determination gain recognized sale allison net periodic pension opeb benefit expenses related allison reported component discontinued operations estimated amounts amortized accumulated comprehensive income net periodic benefit cost 2008 based december 31 2007 plan measurements follows effective december 31 2007 remeasurement begin amortizing actuarial gainslosses new prior service costscredits life expectancy inactive participants us hourly healthcare plan due changing demographics participants plan general motors corporation subsidiaries notes consolidated financial statements continued assumptions discount rate set discount rate assumption annually retirementrelated us benefit plans respective measurement dates reflect yield portfolio high quality fixedincome debt instruments would produce cash flows sufficient timing amount defease projected future benefits established us defined benefit pension plans us opeb plans discount rate 635 yearend 2007 health care trend rate one percentage point increase assumed health care trend rates future periods would increased us apbo 64 billion december 31 2007 us aggregate service interest cost components nonpension postretirement benefit expense 2007 511 million one percentage point decrease would decreased us apbo 54 billion us aggregate service interest cost components nonpension postretirement benefit expense 2007 420 million longterm rate return plan assets use detailed periodic studies conducted outside actuaries asset management group determine longterm strategic mix among asset classes expected return asset assumptions us pension plans us study includes review alternative asset allocation strategies anticipated future longterm performance individual asset classes risks standard deviations correlations among asset classes comprise plans’ asset mix primary nonus pension plans conduct similar studies conjunction outside actuaries asset managers studies give appropriate consideration recent fund performance historical returns assumptions primarily longterm prospective rates return based study performed 2006 asset management group implemented certain changes longrun strategic asset allocations us defined benefit pension plans specifically modified target allocations increase fixed income exposure 20 total plan assets reduce equity exposure corresponding amount change strategic asset allocation intended significantly lower expected volatility asset returns plan funded status well probability future contribution requirements setting new strategic asset mix considered likelihood selected mix would effectively fund projected pension plan liabilities aligning risk tolerance plans’ fiduciaries strategic asset mix us defined benefit pension plans intended reduce exposure equity market risks utilize asset classes reduce surplus volatility utilize asset classes active management historically generated excess returns market returns asset mix intended place greater emphasis investment manager skills general market returns produce expected longterm returns employing various risk mitigation strategies reduce surplus volatility based target asset allocations reexamination expected asset return assumptions revised expected longterm annual return rate assumption us defined benefit plans effective january 1 2007 85 reduction previous level 90 strategic mix fully implemented us pension assets following target allocation relative total assets equity securities 29 debt securities 52 real estate 8 alternative investments 11 2006 target allocations assets equity securities 49 debt securities 32 real estate 8 alternative investments 11 hourly veba managed achieve longterm asset returns maintaining adequate liquidity reimbursement benefit payments needed 2006 expected annual return hourly veba plan 90 expected annual return general motors corporation subsidiaries notes consolidated financial statements continued salaried veba 45 based reexamination expected longterm asset return assumptions revised expected annual return assumptions effective january 1 2007 hourly veba salaried veba 85 6 respectively plan assets plan assets valued using quoted market prices available assets quoted market prices available valued using independent pricing vendors dealer counterparty supplied valuations net asset values provided fund managers portfolio investment advisors whose fair value estimates may utilize appraisals underlying assets discounted cash flow models instances asset values estimated management absence readily determinable fair values inherent uncertainty valuation estimated fair values may differ significantly fair values would used ready market existed defined benefit pension plans us opeb plans following asset allocations respective measurement dates 2007 2006 equity securities include common stock amounts 17 million less 1 total pension plan assets 24 million less 1 total pension plan assets december 31 2007 2006 respectively plan funding policy contributions funding policy respect qualified defined benefit pension plans contribute annually less minimum required applicable law regulations directly pay benefit payments appropriate made pension contributions us hourly salaried us nonus defined benefit pension plans made direct payments appropriate follows 2008 contributions due expect make discretionary contributions us hourly salaried defined benefit pension plans expect contribute pay benefits approximately 100 million us defined benefit pension plans approximately 900 million nonus pension plans contribute us hourly salaried veba trusts us opeb plans contributions made veba trust 2007 2006 contributions participants us opeb plans 354 million 129 million 2007 2006 respectively withdrew total 27 billion 41 billion plan assets veba trusts opeb plans 2007 2006 respectively general motors corporation subsidiaries notes consolidated financial statements continued benefit payments following benefit payments include assumptions related estimated future employee service appropriate expected paid future benefits us pension plans certain nonus pension plans paid plan assets rather cash b us benefit payments exclude amounts would required settlement agreement approved note 16 derivative financial instruments risk management derivatives hedge accounting exposed market risk changes foreign currency exchange rates interest rates certain commodity prices normal course business enter variety foreign exchange interest rate commodity forward contracts swaps options objective managing financial operational exposure arising risks offsetting gains losses underlying exposures gains losses derivatives used hedge risk management control system used assist monitoring hedging program derivative positions hedging strategies hedging documentation includes hedging objectives practices procedures related accounting treatment hedges receive designated hedge accounting treatment evaluated effectiveness time designated well throughout hedging period cash flow hedges use financial instruments designated cash flow hedges sfas 133 purposes hedge exposure foreign currency exchange risk associated buying selling financing currencies local currencies operate also use financial instruments hedge exposure variability cash flows related foreigncurrencydenominated debt foreign currency transactions typically hedge forecasted exposures three years future derivatives designated cash flow hedges sfas 133 purposes record changes fair value comprehensive income oci release changes earnings contemporaneously earnings effects hedged item hedge relationship terminated forecasted transaction probable occurring cumulative change fair value derivative recorded accumulated oci aoci recognized earnings extent hedging relationship effective ineffective portion change fair value derivative instrument recorded earnings hedge ineffectiveness associated instruments designated cash flow hedges sfas 133 purposes increased automotive cost sales 17 million decreased automotive cost sales 10 million 2006 2005 respectively hedge ineffectiveness 2007 significant net derivative gains 51 million reclassified aoci automotive cost sales net derivative gains 225 million reclassified aoci automotive revenue 2007 net derivative gains 484 million reclassified aoci automotive cost sales 693 million reclassified aoci automotive revenue 2006 net general motors corporation subsidiaries notes consolidated financial statements continued derivative gains 206 million reclassified aoci automotive cost sales 200 million reclassified automotive revenue 2005 net losses gains offset net gains losses transactions hedged net derivative gains 122 million included aoci december 31 2007 expected reclassified earnings within 12 months date fair value hedges use financial instruments designated fair value hedges sfas 133 purposes manage certain exposures interest rate risk subject market risk exposures changes interest rates due financing investing cash management activities variety instruments used hedge exposure associated fixed rate debt prior 2007 mortgage servicing rights msrs record changes fair value derivative designated fair value hedge sfas 133 purposes earnings offset corresponding changes fair value hedged item extent hedge effective hedge ineffectiveness associated instruments designated fair value hedges primarily due hedging msrs increased selling general administrative expenses 1 million decreased selling general administrative expenses 26 million 2006 2005 respectively recorded hedging ineffectiveness 2007 net investment hedges designate foreigncurrencydenominateddebt hedge foreign currency exposure related net investment foreign entities foreign currency transaction gains losses related debt instruments recorded accumulated foreign currency translation adjustment unrealized losses 224 million 139 million recorded accumulated foreign currency translation adjustment 2007 2006 respectively derivatives designated hedges use derivatives forward contracts options including caps floors collars economically hedge exposures unrealized realized gains losses related derivatives designated accounting hedges recorded currently automotive cost sales purchase commodities parts commodity content use production vehicles purchase prices vary based commodity price indices hedge commodity price risk economically entering derivative contracts unrealized realized gains losses related derivatives designated accounting hedges recorded currently automotive cost sales additionally exposed foreign exchange risk related forecasted foreign currency purchases machinery equipment foreigncurrencydenominateddebt hedge foreign exchange risk economically entering derivative contracts unrealized realized gains losses related derivatives designated accounting hedges recorded currently automotive cost sales derivatives meeting scope exception fair value accounting enter purchase contracts hedge physical exposure availability certain commodities used production cars trucks determined contracts qualify normal purchases normal sales scope exception fair value accounting sfas 133 therefore purchase contracts accounted derivatives unrealized gains losses recorded currently automotive cost sales general motors corporation subsidiaries notes consolidated financial statements continued net change accumulated comprehensive income net change accumulated oci related cash flow hedging activities 2007 2006 follows note 17 commitments contingencies commitments following minimum commitments noncancelable operating leases remaining terms excess one year primarily property certain minimum commitments fund obligations nonconsolidated vies certain leases contain escalation clauses renewal purchase options rental expense operating leases 812 million 12 billion 1 billion 2007 2006 2005 respectively sponsor credit card programs offer rebates applied primarily purchase lease gm vehicles amount rebates available qualified cardholders net deferred program income 39 billion december 31 2007 2006 refer note 2 additional information regarding accounting policy credit card programs sponsor credit card program deferred revenue redemption liability estimated rebates applicable sold vehicles comprised following guarantees provided guarantees related residual value certain operating leases primarily related lease corporate headquarters december 31 2007 maximum potential amount future undiscounted payments could required made guarantees amount 754 million guarantees terminate years ranging 2008 2018 certain leases contain renewal options connection residual value guarantee related lease corporate headquarters general motors corporation subsidiaries notes consolidated financial statements continued recorded liabilities totaling 63 million december 31 2007 expect record additional 83 million respect residual value guarantees related lease prior expiration may 2008 agreements third parties guarantee fulfillment certain suppliers’ commitments related obligations december 31 2007 maximum potential future undiscounted payments could required made guarantees amount 171 million guarantees terminate years ranging 2008 2017 upon occurrence specific events entity’s cessation business connection guarantees recorded liabilities totaling 18 million addition instances certain assets party whose debt performance guaranteed may offset degree effect triggering guarantee offset certain payables may also apply certain guarantees accordingly liabilities recorded also provide payment guarantees outstanding commercial loans made gmac certain thirdparties dealers rental car companies december 31 2007 maximum commercial obligations guaranteed related loans 123 million years expiration related guarantees range 2008 2012 based creditworthiness third parties value ascribed guarantees provided determined insignificant entered agreements indemnifying certain parties respect environmental conditions related existing sold properties due nature indemnifications maximum exposure guarantees cannot estimated amounts recorded indemnities obligations probable estimable time connection certain divestitures assets operating businesses entered agreements indemnifying certain buyers parties respect environmental conditions pertaining real property owned also connection divestitures provided guarantees respect benefits paid former employees relating pensions postretirement health care life insurance aside indemnifications guarantees related delphi specific divested unit discussed due conditional nature obligations possible estimate maximum exposure indemnifications guarantees amounts recorded obligations probable estimable time addition guarantees indemnifying agreements mentioned periodically enter agreements incorporate indemnification provisions normal course business due nature agreements maximum potential amount future undiscounted payments may exposed cannot estimated amounts recorded indemnities obligations probable estimable time environmental operations like operations companies engaged similar businesses subject wide range environmental protection laws including laws regulating air emissions water discharges waste management environmental cleanup various stages investigation remediation sites contamination alleged involved number remediation actions clean hazardous wastes required federal state laws statutes require responsible parties fund remediation actions regardless fault legality original disposal ownership disposal site future impact environmental matters including potential liabilities often difficult estimate record environmental reserve probable liability incurred amount liability reasonably estimated practice followed whether claims asserted unasserted management expects amounts reserved paid periods remediation applicable sites typically range five 30 years many sites remediation costs damages ultimately may responsible cannot reasonably estimated uncertainties respect factors connection site materials involvement potentially responsible parties application laws standards regulations site conditions nature scope investigations studies remediation undertaken including technologies required extent duration success general motors corporation subsidiaries notes consolidated financial statements continued remediation result unable determine reasonably estimate amount costs damages potentially responsible connection sites although total could substantial final outcome environmental matters cannot predicted certainty opinion management none items finally resolved expected material adverse effect financial position liquidity however possible resolution one environmental matters could exceed amounts accrued amount could material results operations particular reporting period asbestos claims like automobile manufacturers subject asbestosrelated claims recent years seen claims primarily arise three circumstances 1 majority claims seek damages illnesses alleged resulted asbestos used brake components 2 limited numbers claims arisen asbestos contained insulation brakes used manufacturing locomotives 3 claims brought contractors allege exposure asbestoscontaining products working premises owned resolved many asbestosrelated cases years continue strategic litigation reasons avoiding defense costs possible exposure excessive verdicts management believes small proportion claimants develop asbestosrelated impairment small percentage claims pending us allege causation disease associated asbestos exposure amount expended asbestosrelated matters year depends number claims filed amount pretrial proceedings number trials settlements period record estimated liability associated asbestos personal injury claims expected loss probable reasonably estimated 2006 concluded could reasonably estimate losses could arise future asbestos related claims yet asserted us fourth quarter 2006 determined based ongoing analysis data regarding asbestos personal injury claims asserted us sufficient information determine reasonable estimate incurred yet reported claims could asserted following two years recognized liability 127 million continued monitor evaluate claims experience 2007 found incurred fewer claims lower expense projected 2006 result reduced reserve existing claims 251 million fourth quarter 2007 retained hamilton rabinovitz associates inc firm specializing estimating asbestos claims assist us determining potential liability pending unasserted future asbestos personal injury claims analysis relies upon includes following information factors 1 thirdparty forecast projected incidence malignant asbestos related disease likely occur general population individuals occupationally exposed asbestos 2 data concerning claims filed us resolved amounts paid nature asbestos related disease condition asserted approximately last four years asbestos claims experience 3 estimated rate asbestos related claims likely asserted us future based asbestos claims experience projected incidence asbestos related disease general population individuals occupationally exposed asbestos 4 estimated rate dismissal claims disease type based asbestos claims experience 5 estimated indemnity value projected claims based asbestos claims experience adjusted inflation reviewed number factors including analysis provided hamilton rabinovitz associates inc increased reserve 637 million reasonable estimate probable liability pending future asbestos related claims projected general motors corporation subsidiaries notes consolidated financial statements continued asserted next ten years including legal defense costs monitor actual claims experience consistency estimate make periodic adjustments appropriate believe analysis based relevant information available combined reasonable assumptions may prudently rely conclusions determine estimated liability asbestos related claims note however analysis inherently subject significant uncertainties data sources assumptions used connection analysis may prove reliable predictors respect claims asserted us experience recent past includes substantial variation relevant factors change assumptions include source claiming population filing rate value claims could affect estimate significantly addition external factors legislation affecting format timing litigation actions entities sued asbestos personal injury actions distribution assets various trusts established pay asbestos claims outcome cases litigated final verdict could affect estimate contingent matters litigation various legal actions governmental investigations claims proceedings pending us including number shareholder class actions bondholder class actions shareholder derivative suits class actions us employee retirement income security act 1974 amended erisa matters arising alleged product defects including asbestosrelated claims employmentrelated matters governmental regulations relating safety emissions fuel economy product warranties financial services dealer supplier contractual relationships environmental matters regard litigation matters discussed previous paragraph established reserves matters believe losses probable reasonably estimated matters may involve compensatory punitive treble damage claims demands recall campaigns incurred reported asbestosrelated claims environmental remediation programs sanctions granted could require us pay damages make expenditures amounts could reasonably estimated december 31 2007 believe appropriately accrued matters sfas 5 matters requiring accrual matters material adverse effect results operations financial position based information currently available us litigation inherently unpredictable however unfavorable resolutions could occur accordingly possible adverse outcome proceedings could exceed amounts accrued amount could material us respect results operations particular reporting period delphi corporation benefit guarantee 1999 spun automotive components group acg new entity became delphi largest supplier automotive systems components parts delphi’s largest customer time spinoff employees acg became employees delphi part separation agreements delphi assumed pension postretirement benefit obligations transferred us hourly employees retired october 1 2000 retained pension postretirement obligations us hourly employees retired october 1 2000 additionally time spinoff entered separate agreements uaw iuecwa usw benefit guarantee agreements providing contingent benefit guarantees whereby would make payments certain pension benefits opeb benefits certain former us hourly employees became employees delphi defined covered employees benefit guarantee agreement contains separate benefit guarantees relating pension opeb obligations different triggering events uaw iuecwa usw required benefit guarantee agreements event delphi successor companies ceases business becomes subject financial distress could liable delphi fails provide corresponding benefits required level benefit guarantee agreements obligate us guarantee benefits delphi retirees excess corresponding benefits provide time hourly retirees accordingly reduction benefits provide hourly retirees reduces obligation corresponding benefit guarantee turn delphi entered agreement indemnification agreement us requires delphi indemnify us required perform uaw benefit guarantee agreement addition respect pension benefits guarantee arises extent pension benefits provided delphi pension benefit guaranty general motors corporation subsidiaries notes consolidated financial statements continued corporation fall short guaranteed amount rights indemnification agreement obligations provide benefits benefit guarantees expire march 31 2008 unless agree delphi uaw extend period received notice delphi dated october 8 2005 likely would become obligated provide benefits pursuant benefit guarantee agreements connection commencement chapter 11 proceedings us bankruptcy code notice stated delphi unable estimate timing scope benefits might required provide benefit guarantees however 2005 believed probable incurred liability benefit guarantee agreements also october 8 2005 delphi filed petition chapter 11 proceedings us bankruptcy code many us subsidiaries june 22 2007 entered memorandum understanding delphi uaw delphi uaw mou included terms relating consensual triggering benefit guarantee agreement uaw well additional terms relating delphi’s restructuring delphi uaw mou also agreed pay certain healthcare costs delphi retirees beneficiaries order provide level benefits consistent provided retirees beneficiaries mitigation plan veba also committed pay 450 million settle uaw claim asserted delphi uaw directed us pay directly gm uaw veba trust amount expected amortized expense future years august 2007 entered memorandum understanding delphi iuecwa delphi iuecwa mou entered two separate memoranda understanding delphi usw collectively usw mous terms delphi iuecwa mou usw mous similar delphi uaw mou regard consensual triggering benefit guarantee agreements delphigm settlement agreements entered comprehensive settlement agreements delphi delphigm settlement agreements consisting global settlement agreement amended gsa master restructuring agreement amended mra would become effective upon delphi’s substantial consummation plan reorganization receipt consideration provided plan gsa intended resolve outstanding issues delphi us arisen may arise delphi’s emergence chapter 11 implemented delphi shortly emergence bankruptcy mra intended govern certain aspects commercial relationship following delphi’s emergence chapter 11 significant items contained delphigm settlement agreements include commitment • reimburse delphi costs provide opeb certain delphi’s hourly retirees january 1 2007 date delphi ceases provide benefits • reimburse delphi “normal cost” credited service delphi’s pension plan january 1 2007 date pension plans frozen • assume 15 billion net pension obligations delphi providing us 15 billion note receivable • reimburse delphi retirement incentives half buyout payments made pursuant various attrition program provisions reimburse certain us hourly buydown payments made hourly employees delphi • award future product programs delphi provide delphi ongoing preferential sourcing product programs delphi repricing existing awarded business • reimburse certain us hourly labor costs incurred produce systems components parts us october 1 2006 september 14 2015 certain us facilities owned divested delphi labor cost subsidy • reimburse delphi’s cash flow deficiency attributable production certain us facilities continue produce systems components parts us facilities either closed sold delphi production cash burn support • guarantee minimum recovery net working capital delphi invested certain businesses held sale addition delphi agreed provide us designee option purchase certain delphi businesses one dollar businesses sold certain specified deadlines business sold either third party us general motors corporation subsidiaries notes consolidated financial statements continued affiliate pursuant option applicable deadline option affiliate deemed exercised purchase option unsold business including materially assets liabilities automatically transfer gm “buyer” similarly delphi uaw mou transfer occurred applicable deadline responsibility uaw hourly employees unsold business affected would automatically transfer us designated affiliate gsa also resolves claims existence effective date delphi’s plan reorganization either delphi may additionally gsa provides delphi pay us 1 15 billion combination least 750 million cash second lien note 2 1 billion junior preferred convertible stock plan reorganization value upon delphi’s substantial consummation plan reorganization ultimate value consideration contingent fair market value delphi’s securities upon emergence bankruptcy recorded charges 11 billion 5 billion 55 billion 2007 2006 2005 respectively connection benefit guarantee agreements charges net estimated recoveries would due us upon emergence delphi bankruptcy addition 2007 recorded charges 5 billion related delphigm settlement agreements consisting primarily guarantee delphi’s recovery net working capital facilities held sale amounts due labor cost subsidy commitments delphigm settlement agreements labor cost subsidy production cash burn support expected result additional expense 300 million 400 million annually beginning 2008 2015 treated period cost expensed incurred part automotive cost sales january 2008 delphi withdrew march 2006 motion us bankruptcy code seeking reject certain supply contracts us bankruptcy court entered order january 25 2008 confirming delphi’s plan reorganization por including delphigm settlement agreements delphi pursuing approximately 61 billion exit financing support por may particularly difficult light weakness decline capacity credit markets informed delphi prepared reduce cash portion distributions significantly accept equivalent amount debt form first lien note help facilitate delphi’s successful emergence bankruptcy proceedings delphi cannot secure financing needs delphi por would consummated terms negotiated us interested parties believe delphi would likely seek alternative arrangements assurance delphi would successful obtaining alternative arrangements resulting uncertainty could disrupt ability plan future production realize cost reduction goals could affect relationship uaw result providing additional financial support delphi receiving less distributions expect resolution delphi’s bankruptcy proceedings assuming delphi’s obligations workforce retirees due uncertainties reasonably possible additional losses could arise future currently unable estimate amount range losses benefit guarantees related divested plants entered various guarantees regarding benefits former employees two previously divested plants manufacture component parts whose results continue included consolidated financial statements accordance fin 46r divested plants entered agreements purchasers indemnify defend hold purchaser harmless liabilities arising divested plants uaw guaranteeing certain postretirement health care benefits payment postemployment benefits 2006 recorded charge 206 million related closure two plants permanent idling 2000 employees primarily consisting 214 million charge recognize wage benefit costs associated employees accepting retirement packages buyouts supplemental unemployment reduced curtailment gain 11 million respect postretirement benefits 2007 recognized favorable adjustments 44 million related plant closures addition 38 million curtailment gain respect opeb general motors corporation subsidiaries notes consolidated financial statements continued note 18 income taxes income loss continuing operations income taxes equity income minority interests cumulative effect change accounting principle included following estimate provision income taxes follows annual tax provisions include amounts considered sufficient pay assessments may result examination prior year tax returns cash paid income taxes 404 million 259 million 305 million 2007 2006 2005 respectively provisions made estimated us nonus income taxes less available tax credits deductions may incurred remittance share subsidiaries’ undistributed earnings deemed permanently reinvested taxes provided nonus subsidiaries’ earnings deemed permanently reinvested 61 billion 56 billion december 31 2007 2006 respectively quantification deferred tax liability associated permanently reinvested earnings practicable general motors corporation subsidiaries notes consolidated financial statements continued reconciliation provision benefit income taxes compared amounts us federal statutory rate follows see discussion related valuation allowances certain deferred tax assets b changes tax laws two jurisdictions 2007 significant impact consolidated financial statements follows • december 2007 canadian government enacted legislation reduce combined statutory corporate tax rates 35 addition 5 rate reduction enacted june 2007 combined 4 reduction phased gradually period five years beginning 2008 impact change reduction carrying amount canadian deferred tax assets 376 million december 31 2007 valuation allowance discussed adjusted reflect change statutory rates • july 2007 german parliament passed legislation lower statutory corporate tax rate president signed legislation law august 14 2007 new law reduces approximately 9 effective january 1 2008 combined german business tax rate consists corporate tax rate local trade tax rate solidarity levy tax rate impact change reduction carrying amount german deferred tax assets 475 million included charge related valuation allowance discussed deferred income tax assets liabilities december 31 2007 2006 reflect effect temporary differences amounts assets liabilities equity financial reporting purposes bases assets liabilities equity measured tax laws well tax loss tax credit carryforwards general motors corporation subsidiaries notes consolidated financial statements continued temporary differences carryforwards give rise deferred tax assets liabilities comprised following deferred tax assets liabilities included consolidated balance sheet amount expiration dates operating loss tax credit carryforwards december 31 2007 follows general business credits principally consist research experimentation credits accordance sfas 109 “accounting income taxes” sfas 109 evaluate deferred income taxes quarterly determine valuation allowances required adjusted sfas 109 requires companies assess whether valuation allowances established deferred tax assets based consideration available evidence positive negative using “more likely not” standard assessment considers among matters nature frequency severity general motors corporation subsidiaries notes consolidated financial statements continued recent losses forecasts future profitability duration statutory carryforward periods experience tax attributes expiring unused tax planning alternatives making judgments significant weight given evidence objectively verified valuation allowances established deferred tax assets based “more likely not” threshold ability realize deferred tax assets depends ability generate sufficient taxable income within carryback carryforward periods provided tax law applicable tax jurisdiction considered following possible sources taxable income assessing realization deferred tax assets • future reversals existing taxable temporary differences • future taxable income exclusive reversing temporary differences carryforwards • taxable income prior carryback years • taxplanning strategies valuation allowances recognized relate certain net deferred tax assets us nonus jurisdictions change valuation allowance related considerations follows united states canada germany third quarter 2007 recorded charge 39 billion related establishing full valuation allowances net deferred tax assets us canada germany concluding valuation allowance required difficult significant negative evidence objective verifiable cumulative losses recent years utilize rolling twelve quarters results measure cumulative losses recent years adjust historical results remove certain unusual items charges us canada germany analysis indicates cumulative three year historical losses adjusted basis considered significant negative evidence objective verifiable therefore difficult overcome addition nearterm financial outlook us canada germany deteriorated third quarter longterm financial outlook us canada germany remains positive concluded ability rely longterm outlook future taxable income limited due uncertainty created weight negative evidence particularly • possibility continued increasing price competition highly competitive us market seen external market third quarter 2007 competitor introduced new fullsize trucks offered customer incentives gain market share accordingly increased customer incentives recently launched fullsize trucks previously anticipated • continued high fuel prices possible effect may consumer preferences related profitable products fullsize trucks utility vehicles general motors corporation subsidiaries notes consolidated financial statements continued • uncertainty effect cost structure stringent us fuel economy global emissions standards may require us sell significant volume alternative fuel vehicles across portfolio • uncertainty future operating results gmac’s residential capital llc mortgage business • acceleration tax deductions opeb liabilities compared prior expectations due changes associated settlement agreement accordingly based current circumstances uncertainty regarding future taxable income recorded full valuation allowances net deferred tax assets third quarter 2007 operating performance improves sustained basis conclusion regarding need full valuation allowances could change resulting reversal valuation allowances future us valuation allowance recorded 2006 2005 related 2006 2005 losses allocable certain us state jurisdictions previously determined tax attributes related jurisdictions realizable brazil 2005 determined likely net deferred taxes brazilian operations would realized accordingly recorded full valuation allowance tax credit carryforwards net timing differences brazil decision based consideration historical results operations brazil coupled government imposed 30 annual limitation net operating loss utilization 2007 reversed portion full valuation allowance utilized certain deferred tax assets however due appreciation brazilian real us dollar 2007 net increase valuation allowance arose upon translation valuation allowance us dollars event operating performance improves sustained basis conclusion regarding need full valuation allowance could change resulting reversal remaining valuation allowance future united kingdom valuation allowance established net deferred tax assets uk although uk operations incurred cumulative losses recent years believe considerations overcome fact accordingly deferred tax assets likely realized determination based particular unlimited expiration net operating loss carryforwards uk together operations’ histories utilizing tax attributions past earnings strong prospects future earnings spain established valuation allowance 2007 spanish deferred tax assets related investment tax credits expect realizable likely threshold although spanish net operating loss carryforwards expire 15 years believe spanish deferred tax assets related net operating loss carryforwards likely realized losses spanish operations largely caused nonrecurring transactions addition believe spanish operations continue strong prospects future earnings south korea full valuation allowance historically recorded several positive events occurred 2006 lead us conclude valuation allowance longer necessary accordingly reversed full valuation allowance net deferred tax assets south korea 2006 expect continuing profitability south korea net deferred tax asset likely realized allocate income tax expense benefit continuing operations discontinued operations comprehensive income accordance sfas 109 sfas 109 applied tax jurisdiction periods pretax loss continuing operations pretax income another category discontinued operations comprehensive income tax expense first allocated sources income related benefit recorded continuing operations upon adoption fin 48 january 1 2007 recorded increase retained earnings 137 million cumulative effect change accounting principle corresponding decrease liability uncertain tax positions january 1 2007 27 billion total gross unrecognized tax benefits 21 billion represents amount unrecognized tax benefits recognized would favorably affect effective income tax rate future periods december 31 2007 amount gross unrecognized tax benefits valuation allowances amount would favorably affect effective income tax rate future periods valuation allowances 28 billion 1 billion respectively amounts consider guidance fin 481 general motors corporation subsidiaries notes consolidated financial statements continued “definition settlement fasb interpretation 48” december 31 2007 22 billion liability uncertain tax positions reduces deferred tax assets relating tax jurisdictions remainder liability uncertain tax positions classified noncurrent liability reconciliation total amounts unrecognized tax benefits beginning end period follows dollars millions practice classify interest income uncertain tax positions automotive interest income nonoperating income interest expense automotive interest expense penalties selling general administrative expense recognized interest income 133 million 2007 uncertain tax positions recognized net reduction interest expense 32 million 2007 principally due reversal 88 million previously accrued interest expense statute limitations expired related uncertain tax positions additionally recognized 23 million penalties 2007 december 31 2007 132 million accrued receipt interest uncertain tax positions 192 million accrued payment interest uncertain tax positions 104 million accrued payment penalties open tax years 1999 2007 various taxing jurisdictions taxes remain subject examination including united states australia canada mexico germany united kingdom korea brazil united states federal income tax returns 2001 2006 currently review internal revenue service anticipate examination years 2001 2003 conclude early 2008 mexican subsidiary recently received income tax assessment related 2001 tax year covering warranty tooling costs withholding taxes addition previously filed tax returns currently review argentina australia belgium canada china colombia france germany greece hungary indonesia india italy korea portugal new zealand taiwan thailand turkey united kingdom venezuela vietnam received notices tax audits commence netherlands spain december 31 2007 possible reasonably estimate expected change total amount unrecognized tax benefits next twelve months note 19 fair value financial instruments estimated fair value financial instruments determined using available market information appropriate valuation methodologies however considerable judgment required interpreting market data develop estimates fair value therefore estimates necessarily indicative amounts could realized would paid current market exchange effect using different market assumptions andor estimation methodologies may material estimated fair value amounts general motors corporation subsidiaries notes consolidated financial statements continued book estimated fair values financial instruments practicable estimate fair value follows longterm debt estimated fair value based quoted market prices similar issues based current rates offered us debt similar remaining maturities estimated values industrial development bonds included longterm debt based quoted market prices similar issues b fair value gmac preferred membership interest estimated discounting future cash flows considering dividend rate interest rate credit spreads due shortterm nature book value approximates fair value cash marketable securities accounts notes receivable less allowances accounts payable principally trade automotive loans payable fio debt payable within one year december 31 2007 2006 note 20 gmna postemployment benefit costs majority hourly employees working within us represented uaw collective bargaining agreement uaw contains job security provision commonly referred job opportunity bank jobs bank provisions stated provision required pay idled employees certain wage benefit costs connection 2007 national agreement provisions jobs bank modified substantially reduce duration time idled employee remain inactive modifications also increases ability redeploy relocate idled employees active facilities based required manpower needs historically costs idle consolidate close facilities provide postemployment benefits employees idled temporary basis accrued based management’s best estimate wage benefit costs incurred qualified employees jobs bank provisions previous labor agreement september 2007 plus estimated costs expected paid thereafter factoring revisions anticipated policy changes new labor contracts third quarter 2007 revised estimate provide new jobs bank provisions negotiated 2007 national agreement revisions result significant change previous estimate used develop accrual wage benefit costs related idling employees expected temporary expensed incurred review adequacy continuing need liabilities quarterly basis conjunction quarterly production labor forecasts march 2006 reached agreement delphi uaw attrition program intended reduce number us hourly employees accelerated attrition program attrition program uaw attrition program provided certain uawrepresented employees gm 1 lump sum payment 35000 normal early voluntary retirements retroactive october 1 2005 2 mutually satisfactory retirement employees least 10 years credited service 50 years general motors corporation subsidiaries notes consolidated financial statements continued age older 3 payment gross monthly wages ranging 2750 2900 employees participate special voluntary preretirement program depending years credited service plant work location 4 buyout 140000 employees 10 years seniority 70000 employees less 10 years seniority provided employees severed ties us except vested pension benefits approximately 34400 gm hourly employees agreed terms uaw attrition program recorded charge 21 billion 2006 recognize wage benefit cost accepting normal voluntary retirements buyouts preretirement leaves result uaw attrition program jobs bank substantially reduced employees jobs bank retired accepted buyout filled openings created uaw attrition program certain employees chose leave gm retired left january 1 2007 continue receive payments 2010 throughout 2006 recorded favorable adjustments totaling 1 billion postemployment benefits reserve primarily result 1 transfer employees idled plants plant sites replace positions previously held employees accepted retirements buyouts preretirement leaves 2 higher anticipated level uaw attrition program participation employees idled facilities idled previously accrued jobs bank provisions 3 higher anticipated headcount reductions associated gmna plant idling activities announced 2005 recognized charge 18 billion postemployment benefits related restructuring north american operations 2005 charge included 17500 employees locations included action leaving attrition remainder transferring sites liability postemployment benefit costs 9 billion december 31 2007 reflects estimated future wages benefits 8900 employees primary located idled facilities idled 3800 employees subject terms 2006 attrition program december 31 2006 postemployment benefit cost reserve reflects estimated future wages benefits 13 billion related 8500 employees primarily located idled facilities idled result previous announcements 10900 employees terms uaw attrition program december 31 2005 reserve 2 billion related estimated future wages benefits 18400 employees primarily idled facilities idled result previous announcements 2005 following table summarizes activity reserve years 2007 2006 2005 note 21 restructuring initiatives executed various restructuring initiatives may execute additional initiatives future align manufacturing capacity prevailing global automotive production improve utilization remaining facilities initiatives may include plant closings consolidation operations functions production relocations reductions voluntary involuntary employee separation programs estimates restructuring initiative charges based information available time charges recorded due inherent uncertainty involved actual amounts paid activities may differ amounts initially recorded accordingly may record revisions previous estimates adjusting previously established reserves general motors corporation subsidiaries notes consolidated financial statements continued following table summarizes restructuring initiative charges segment 2007 2006 2005 refer note 20 discussion postemployment benefits costs related hourly employees gmna note 22 asset impairment charges related restructuring initiatives note 15 pension curtailments postretirement benefit charges related hourly employee separation initiatives activities following table details components 2007 restructuring charges region gmna recorded restructuring charges 9 million 2007 us salaried severance program allows involuntarily terminated employees receive ongoing wages benefits longer 12 months gme recorded charges 579 million separation programs 2007 charges related following restructuring initiatives • charges 162 million primarily related early retirement programs along additional minor separations current programs germany approximately 4600 employees leave early retirement programs germany 2013 total remaining cost early retirements recognized remaining service period employees • second quarter 2007 announced additional separation programs antwerp belgium facility programs impact 1900 employees leave july 2008 total estimated costs 430 million amount 353 million recorded 2007 connection separation programs remaining cost antwerp belgium program recognized remaining service period employees july 2008 • remaining 64 million separation charges relates initiatives announced 2006 include separations sweden united kingdom closure portugal assembly plant gmlaam recorded restructuring charges 18 million 2007 employee separations gm brasil initiatives announced completed second quarter 2007 resulted separation 600 employees general motors corporation subsidiaries notes consolidated financial statements continued gmap recorded charges 49 million voluntary employee separation program gm holden’s vehicle operations facility announced first quarter 2007 initiative reduces facility’s workforce 650 employees result increased plant operational efficiency activities following table details components 2006 restructuring charges region gmna recorded restructuring charges 115 million related costs incurred new salaried severance program allows involuntarily terminated employees receive continued salary benefits period time termination gme recorded restructuring charges 437 million 2006 charges consisted separation contract costs several restructuring initiatives details individual restructuring initiatives charges follow • announced european operations restructuring initiative fourth quarter 2004 european restructuring initiative targeted total reduction 12000 employees 2005 2007 separation programs early retirements selected outsourcing initiatives gme recorded charges 184 million 2006 activities related european restructuring initiative announced 2004 • third quarter 2006 announced closure azambuja portugal assembly plant transfer production lower cost facility zaragoza spain portugal plant ceased production december 2006 resulting total separation 1100 employees gme recorded separation charges 53 million contract cancellation charges 26 million closure • may 2006 announced reduction one shift ellesmere port plant united kingdom order reduce costs improve competitiveness shift reduction achieved primarily offering voluntary separation package reduced work force uk 1200 employees end 2006 gme recorded separation charges 131 million contract cancellation charges 3 million 2006 shift reduction ellesmere port • new separation programs belgium united kingdom sweden announced fourth quarter 2006 gme recorded 32 million restructuring charges programs related separation 280 employees primarily sweden addition gme also recorded charge 8 million early retirement program announced fourth quarter 2006 germany recognize cost remaining service period employee gmlaam recorded restructuring charges 43 million related costs voluntary employee separations gm brasil initiative resulted separations 1500 hourly administrative employees sao jose dos campos sao caetano sul facilities 2006 gmap recorded restructuring charges 16 million related voluntary separation program gm holden announced fourth quarter 2006 program provided voluntary separation 205 employees gm holden engine plant general motors corporation subsidiaries notes consolidated financial statements continued activities following table details components 2005 restructuring charges region 2005 gmna operations recorded restructuring charges 222 million 13 million respectively costs related voluntary early retirement separation programs certain salaried employees united states gme recorded restructuring charges 11 billion 2005 charges consisted primarily 1 billion separation costs european operations’ restructuring initiative announced fourth quarter 2004 addition also recorded contract cancellation charges 39 million dissolution fiat powertrain joint venture second quarter 2005 contract cancellation charges 20 million related sale investment fhi gmap recorded restructuring charges 65 million 2005 related elimination one shift reduction 1400 employees mid2006 adelaide australia plant note 22 impairments periodically review carrying value longlived assets held used events circumstances warrant conjunction annual business planning cycle carrying value longlived asset group considered impaired impairment charge recorded amount carrying amount exceeds fair market value fair market value determined primarily using anticipated cash flows discounted rate commensurate risk involved productspecific assets may become impaired result declines profitability due changes volume pricing costs asset impairment charges recorded automotive cost sales consolidated statements operations addition test goodwill impairment annually event occurs circumstances change reasonably possible impairment may exist annual impairment test requires identification reporting units comparison fair value reporting units respective carrying value fair value reporting units determined based valuation techniques using best information available primarily discounted cash flow projections carrying value reporting unit greater fair value reporting unit impairment may exist longlived asset goodwill impairment charges 2007 2006 2005 general motors corporation subsidiaries notes consolidated financial statements continued impairments recorded longlived asset impairment charges 259 million 2007 following segments 1 gmna recorded charges 240 million productspecific tooling assets 2 gmap recorded asset impairment charges 14 million related cessation production vz commodore passenger car derivatives holden facility 3 gmlaam recorded 5 million vehicle facility impairments south africa chile locations impairments recorded longlived asset impairment charges 685 million 2006 amount 424 million related productspecific assets including 1 303 million gmna 2 60 million gme 3 61 million gmap addition gmna recorded impairment charges totaling 172 million included 102 million related productspecific assets 70 million related writedown various plant assets due decreased profitability production associated planned cessation production doraville georgia assembly plant 2008 additionally gme recorded charge 89 million connection december 2006 closure portugal assembly plant third quarter 2006 gmac recognized goodwill impairment charge 828 million related commercial finance business fair value commercial finance business determined using internally developed discounted cash flow analysis based five year projected net income market driven terminal value multiple gmac whollyowned subsidiary third quarter 2006 entire amount impairment loss included financial services insurance expense impairments november 2005 announced north america restructuring initiative turnaround plan implemented improve capacity utilization manufacturing operations accelerate structural cost reductions plan includes ceasing operations nine assembly stamping powertrain facilities three service parts operations facilities 2008 result capacity reduction initiatives gmna recorded impairment charge 700 million writedown fair market value property plants equipment assets still service december 31 2005 refer note 20 discussion employee costs associated restructuring gmna recorded additional impairment charge 134 million writedown fair market value various plant assets charge related first quarter announcement discontinue production lansing michigan assembly plant second quarter 2005 accelerated business planning cycle 2005 result lack improved performance second quarter 2005 connection process reviewed carrying value certain longlived assets held used goodwill intangible assets indefinite lives reviews resulted impairment charges assets still service gmna gme 743 million 262 million respectively addition restructuring initiatives announced third quarter 2005 gmap related production australia resulting additional impairment charges 64 million gmlaam unusually strong south american currencies adversely affected profitability gmlaam’s export business management’s decision adjust gmlaam’s export volumes resulted lower expected future cash flows resulting 150 million impairment charge region 2005 fourth quarter 2005 gmac recognized goodwill impairment charge 712 million related commercial finance operating segment particular primarily goodwill recognized connection 1999 acquisition bank new york’s commercial finance business charge resulted annual impairment test performed reporting units gmac whollyowned subsidiary fourth quarter 2005 entire amount impairment loss included financial services insurance expense general motors corporation subsidiaries notes consolidated financial statements continued note 23 expenses comprised following note 24 stockholders’ equity common stock 2 billion shares common stock authorized liquidation rights common stock subject certain adjustments outstanding common stock subdivided stock split otherwise preferred stock 6 million shares preferred stock authorized without par value preferred stock issuable series voting powers designations powers privileges rights qualifications limits restrictions may determined board directors without stockholder approval preferred stock ranks senior common stock class stock issued holders preferred stock shall entitled receive cumulative dividends declared board directors quarterly basis shares preferred stock issued outstanding december 31 2007 2006 accumulated comprehensive income loss following table summarizes components accumulated comprehensive income loss net taxes general motors corporation subsidiaries notes consolidated financial statements continued comprehensive income following table summarizes components comprehensive income loss note 25 loss per share basic loss per share computed dividing loss continuing operations weighted average number common shares outstanding period diluted loss per share reflects potential dilution could occur securities contracts issue common stock exercised converted common stock options contingently convertible securities due net losses continuing operations periods presented assumed exercise certain stock option awards antidilutive effect therefore excluded computation diluted loss per share total shares considered inclusion computation diluted earnings per share 104 million 106 million 112 million years ended december 31 2007 2006 2005 respectively march 6 2007 series convertible debentures amount 11 billion put us settled entirely cash december 31 2007 amount outstanding series convertible debentures 39 million shares potentially issuable satisfy inthemoney amount convertible debentures included diluted earnings per share years ended december 31 2007 2006 2005 respectively convertible debentures notinthemoney general motors corporation subsidiaries notes consolidated financial statements continued note 26 stock incentive plans accordance disclosure requirements sfas 148 “accounting stockbased compensation transition disclosure” sfas 148 adopted fair value based method accounting stockbased employee compensation pursuant sfas 123 effective january 1 2003 newly granted stockbased compensation awards january 1 2006 adopted sfas 123r “accounting stockbased compensation” sfas 123r 2007 2006 2005 awards accounted fair value stock incentive plans consist general motors 2007 long term incentive plan 2007 gmltip general motors 2002 stock incentive plan gmsip general motors 2002 long term incentive plan 2002 gmltip general motors 1998 salaried stock option plan gmssop general motors 2007 cashbased restricted stock unit plan 2007 gmcrsu general motors 2006 cashbased restricted stock unit plan 2006 gmcrsu collectively plans 2007 gmltip gmsip gmcrsu plans administered executive compensation committee board directors gmssop administered vice president global human resources compensation cost plans 136 million 170 million 89 million 2007 2006 2005 respectively total income tax benefit recognized sharebased compensation arrangements 43 million 53 million 31 million 2007 2006 2005 respectively november 2006 sold 51 controlling interest gmac employees participated stock incentive plans changed status employee nonemployee based change status certain outstanding sharebased payment awards forfeited original terms modified allow continued vesting resulted cancellation original awards issuance new award nonemployees remainder awards forfeited original terms thus modification outstanding awards gm awards require future service gmac accounted awards nonemployees remaining service period effect compensation cost significant august 2007 completed sale commercial military operations allison business allison employees participated stock incentive plans considered terminated employees date sale based change employment status certain outstanding non vested sharebased payment awards forfeited remaining outstanding sharebased payment awards prorated previous services provided original terms award remain exercisable earlier three years date termination expiration option stock options gmsip 274 million shares common stock eligible grants june 1 2002 may 31 2007 stock option grants awarded since 1997 generally exercisable onethird one year another onethird two years fully three years dates grant option prices 100 fair market value dates grant options generally expire 10 years dates grant subject earlier termination certain conditions policy issue treasury shares upon exercise employee stock options 2007 gmsip replaced 2007 gmltip 2007 gmltip 16 million shares common stock may granted june 5 2007 may 31 2012 december 31 2007 163 million shares available grant result 3 million shares granted undelivered gmsip due primarily termination become available grant stock options granted plan generally exercisable onethird one year another onethird two years fully three years dates grant option prices 100 fair market value dates grant options generally expire 10 years dates grant subject earlier termination certain conditions policy issue treasury shares upon exercise employee stock options gmssop commenced january 1 1998 ended december 31 2006 number shares common stock could granted year determined management based amendment gmssop 2006 shares common stock available grants december 19 2006 stock options granted 1998 2004 exercisable two general motors corporation subsidiaries notes consolidated financial statements continued years date grant option grants made plan since 2004 option prices 100 fair market value dates grant options generally expire ten years two days grant date subject earlier termination certain conditions fair value option grant estimated date grant using blackscholes optionpricing model weightedaverage assumptions noted following table expected volatilities based implied historical volatility stock used historical data estimate option exercise employee termination within valuation model expected term options represents period time options granted expected outstanding interest rate periods expected life option based us treasury yield curve effect time grant primary grants executives march 20 2007 february 23 2006 january 24 2005 made gmsip 2771920 2702796 7612000 shares respectively grant date fair value 875 706 721 respectively assumptions used estimate grant date fair value grants detailed table changes status outstanding options 2007 follows general motors corporation subsidiaries notes consolidated financial statements continued weightedaverage grantdate fair value 876 719 723 gmsip options granted 2007 2006 2005 respectively gmssop options granted 2007 2006 2005 total intrinsic value options exercised gmsip 3 million 0 2 million 2007 2006 2005 respectively total intrinsic value gmssop options exercised 0 2007 2006 2005 tax benefit exercise sharebased payment arrangements totaled 0 million 0 1 million 2007 2006 2005 respectively summary status options december 31 2007 changes year presented december 31 2007 7 million total unrecognized compensation cost related nonvested sharebased compensation arrangements granted plans cost expected recognized weightedaverage period 09 years cash received option exercise sharebased payment arrangements 1 million 0 2007 2006 2005 respectively market condition awards 2007 gmltip formerly 2002 gmltip also consists award opportunities granted participants based minimum percentile ranking total stockholder return tsr among companies sp 500 target number shares common stock may granted year determined management 2006 2005 grants 2002 gmltip subject three year performance period final award payout may vary based achievement criteria 2007 grants 2002 gmltip subject four separate performance periods three oneyear performance periods one threeyear performance period final award payout may vary based achievement criteria general motors corporation subsidiaries notes consolidated financial statements continued summary outstanding 2002 gmltip shares follows required settle awards cash result cashsettled awards recorded liability date final award payout accordance sfas 123r fair value cashsettled award recalculated end reporting period liability expense adjusted based change fair value preceding targeted number shares would used final award calculation targeted performance condition achieved final payout subject approval executive compensation committee board directors fair value december 31 2007 2143 3111 0 awards granted 2007 2006 2005 respectively prior adoption sfas 123r fair value award gmltip equal fair market value underlying shares date grant beginning january 1 2006 accordance adoption sfas 123r fair value cashsettled award gmltip estimated date grant subsequent reporting period using monte carlo simulation valuation model uses multiple input variables noted following table expected volatilities based implied volatility tradeable options expected term target awards represent remaining time performance period riskfree rate periods contractual life performance shares based us treasury yield curve effect time valuation since payout depends performance ranked sp 500 valuation also depends performance stocks sp 500 grant date exercise date well estimates correlations among future performances following assumptions used december 31 2007 value open award years primary grant executives march 20 2007 february 23 2006 january 24 2005 made gmltip 17 million 24 million 2 million shares respectively grant date fair value 3370 2481 3637 respectively assumptions used estimate fair value december 31 2007 2006 detailed table weighted average remaining contractual term 14 years target awards outstanding december 31 2007 threshold performance required payment 20052007 gmltip achieved cash payments made plan 2007 20062008 20072009 performance periods remain open december 31 2007 cashbased restricted stock units 2006 established cashbased restricted stock unit plan provides cash equal value underlying restricted share units certain global executives predetermined vesting dates awards plan vest paid onethird increments anniversary date award three year period compensation expense recognized straightline basis requisite service period separately vesting portion award since awards settled cash cashsettled awards recorded liability date payment accordance sfas 123r fair value cashsettled award recalculated end reporting period liability expense adjusted based new fair value general motors corporation subsidiaries notes consolidated financial statements continued fair value gmcrsu based stock price date grant subsequent reporting period date settlement 52 million 43 million gmcrsus granted weighted average grant date fair value 2939 2104 per share respectively 2007 2006 respectively fair value december 31 2007 2489 per share 74 million gmcrsus outstanding weighted average remaining contractual term 19 years crsus outstanding december 31 2007 total payments made gmcrsus vested 2007 423 million note 27 transactions gmac entered various operating financing arrangements gmac following describes material transactions gmac related financial statement effects years ended december 31 2007 2006 included consolidated financial statements marketing incentives operating lease residuals marketing incentive may sponsor interest rate support capitalized cost reduction residual support programs way lower customers’ monthly lease retail contract payments addition may sponsor lease pullahead programs encourage customers terminate leases early conjunction acquisition new gm vehicle interest rate support program pay amount gmac time lease retail contract origination adjust interest rate implicit lease retail contract gmac’s standard interest rate marketing incentives referred rate support subvention amount paid contract origination represents present value difference customer rates gmac standard rates capitalized cost reduction program pay amount gmac time lease retail contract origination reduce principal amount implicit lease retail contract standard msrp manufacturers suggested retail price value residual support program customers’ contractual residual value adjusted gmac’s standard residual values reimburse gmac extent sales proceeds less customers’ contractual residual value limited gmac’s standard residual value relates us lease originations us balloon retail contract originations occurring april 30 2006 gmac retained consummation gmac sale agreed begin payment present value expected residual support owed gmac time contract origination opposed contract termination related used vehicle sold residual support amount owed gmac adjusted contracts terminate cases estimate adjusted may obligated pay difference december 31 2007 2006 maximum additional amount could paid us residual support program 11 billion 276 million respectively believe would unlikely proceeds entire portfolio assets would lower contractual residual value gmac’s standard residual rates december 31 2007 2006 total reserve recorded consolidated balance sheet 118 million 4 million respectively based estimated required future payments gmac associated maximum additional amount could paid us gmac us residual support program lease pullahead program customers encouraged terminate leases early buy lease new gm vehicle part program gmac waives customer’s remaining payment obligation current lease compensate gmac foregone revenue waived payments since programs generally accelerate resale vehicle proceeds typically higher vehicle sold contract maturity reimbursement gmac foregone payments reduced amount benefit make anticipated payments gmac end month following lease termination estimates adjusted actual vehicles could pulledahead terminated vehicles resold extent original estimates adjusted may obligated pay difference general motors corporation subsidiaries notes consolidated financial statements continued addition interest rate support capitalized cost reduction residual support lease pullahead programs also participate risk sharing arrangement amended november 30 2006 applies new lease contracts responsible risk sharing returns lease vehicles us canada whose resale proceeds less standard gmac residual values subject limitation also pay gmac quarterly leasing payment connection agreement beginning first quarter 2009 ending fourth quarter 2014 december 31 2007 2006 maximum amount guaranteed us risk sharing arrangement 11 billion 339 million respectively maximum amount would paid unlikely event proceeds outstanding lease vehicles would lower gmac’s standard residual rates subject limitation december 31 2007 2006 total reserve recorded consolidated balance sheet 144 million 50 million respectively based estimated future payments gmac associated maximum amount guaranteed us risk sharing arrangement accordance revenue recognition accounting policy marketing incentives lease pullahead programs risk sharing arrangement recorded reductions automotive sales time vehicle sold dealer based estimated gmac lease retail contract penetration paid 47 billion 2 billion us programs years ended december 31 2007 2006 respectively terms conditions interest rate support capitalized cost reduction residual support lease pullahead programs well risk sharing arrangement included us canadian international consumer financing services agreements expire november 2016 equipment operating leases transferred us gmac november 2006 gmac transferred certain us lease assets us along related debt assets gmac retained investment note balance 35 million 471 million december 31 2007 2006 respectively secured lease assets transferred us gmac continues service portfolio leased assets related debt behalf receives servicing fee gmac obligated servicer repurchase lease asset breach covenants securitization agreements addition number transactions securitizing lease assets trusts issued one series floating rate debt obligations entered derivative transactions eliminate market risk associated funding fixed payment lease assets floating interest rate debt facilitate securitization transactions gmac entered secondary derivative transactions primary derivative counterparties essentially offsetting primary derivatives part transfer assumed rights obligations primary derivative gmac retained secondary leaving companies exposed market value movements respective derivatives subsequently entered derivative transactions gmac intended offset exposure party component primary secondary derivatives exclusivity arrangement subject gmac’s fulfillment certain conditions granted gmac exclusivity us canadian international gmsponsored consumer wholesale marketing incentives gm products specified markets around world exception saturn branded products return exclusivity gmac pay us annual exclusivity fee 105 million 75 million us retail business 15 million canadian retail business 10 million retail business international operations 5 million dealer business committed provide financing customers dealers consistent historical practices amount exclusivity fee revenue recognized year ended december 31 2007 month december 2006 105 million 9 million respectively general motors corporation subsidiaries notes consolidated financial statements continued marketing service agreement entered 10year marketing promoting advertising customer support arrangement gmac related gm products gmac products retail financing gm products agreement expires november 2016 royalty arrangement certain insurance products entered 10year intellectual property license agreements gmac giving gmac right use gm name certain insurance products exchange gmac pay royalty fee 325 revenue net cancellations related products minimum annual guarantee 15 million us amount royalty income recognized us year ended december 31 2007 month ended december 31 2006 18 million 1 million respectively shared transition services agreement entered shared transition services agreement gmac continue provide global support services primarily treasury tax real estate human resources generally transition period one two years november 30 2006 gm expects shared transition services agreement expires either renew services agreement gmac gm gmac perform related services internally potentially outsource providers agreed continue provide certain services july 2011 balance sheet summary balance sheet effects transactions gmac december 31 2007 2006 follows represents wholesale settlements due gmac well amounts owed gmac respect equipment operating leases transferred us exclusivity fee royalty arrangement discussed b primarily represents distributions due gmac preferred membership interests c represents amounts accrued interest rate support capitalized cost reduction residual support lease pullahead programs risk sharing arrangement represents wholesale financing sales receivable transactions shortterm portion term loans provided certain dealerships whollyowned us equity interest addition includes borrowing arrangements adam opel arrangements related gmac’s funding companyowned vehicles rental car vehicles awaiting sale auction funding sale vehicles retain title vehicles consigned gmac dealers primarily united kingdom financing remains outstanding title transferred dealers amount also includes short general motors corporation subsidiaries notes consolidated financial statements continued term portion note provided whollyowned subsidiary holding debt related equipment operating leases transferred us gmac e december 31 2006 amount included note related overpayment 317 million income taxes gmac taxes refunded gmac december 2007 f primarily represents interest accrued transactions december 31 2006 amount also included 1 billion capital contribution owed gmac restore adjusted tangible equity balance contractually required amount due decrease adjusted tangible equity balance gmac november 30 2006 g primarily represents longterm portion term loans note payable respect equipment operating leases transferred us mentioned statement operations summary income statement effects transactions gmac year ended december 31 2007 month december 2006 follows primarily represents reduction net sales revenues marketing incentives vehicles sold customers dealers financed gmac includes estimated amount residual support accrued residual support risk sharing programs rate support interest rate support programs operating lease finance receivable capitalized cost reduction incentives paid gmac reduce capitalized cost automotive lease contracts retail automotive contracts costs lease pullahead programs amount offset net sales vehicles sold gmac employee governmental lease programs third party resale purposes b primarily represents cost sales sale vehicles gmac employee governmental lease programs third party resale purposes also includes miscellaneous expenses services performed us gmac c represents income preferred membership interests gmac exclusivity royalty fee income reimbursements gmac certain services provided included amount rental income related gmac’s primary executive administrative offices located renaissance center detroit michigan lease agreement expires november 30 2016 represents interest incurred term loans notes payable wholesale settlements e represents servicing fees paid gmac automotive leases retained f represents gains recognized connection derivative transaction entered gmac counterparty general motors corporation subsidiaries notes consolidated financial statements continued note 28 supplementary quarterly financial information unaudited results three months ended september 30 2007 included • charges 39 billion related establishing valuation allowances net deferred tax assets us canada germany results three months ended december 31 2007 included • expenses 622 million related amendment gmdelphi settlement agreements support delphi’s disposition businesses retiree healthcare expenses • expenses 552 million related pension benefit increases pursuant 2007 national agreement • income tax expense sale allison net purchase price adjustments amount 805 million reallocated discontinued operations continuing operations comprehensive income general motors corporation subsidiaries notes consolidated financial statements continued results three months ended june 30 2006 included • charges 65 billion related uaw special attrition program results three months ended december 31 2006 included • income 270 million resulting sale providing ground mesa arizona • adjustments 11 billion previously recorded estimates relating sale gmac note 29 segment reporting operate two businesses consisting gm automotive gma fio four automotive segments consist gmna gme gmlaam gmap manufacture cars trucks 35 countries following brands buick cadillac chevrolet gmc gm daewoo holden hummer opel pontiac saab saturn vauxhall wuling 2007 month december 2006 fio business consists 49 share gmac’s operating results account equity method financing comprised primarily two special purpose entities holding automotive leases previously owned gmac affiliates retained elimination intersegment transactions gm automotive corporate eleven months ended november 30 2006 2005 fio business consisted consolidated operating results gmac’s lines business follows automotive finance operations mortgage operations insurance included commercial finance business gmac’s equity investment capmark financial group previously gmac commercial finance also included fio equity earnings financing entities consolidated gmac elimination intersegment transactions gm automotive either gmac corporate includes elimination intersegment transactions certain nonsegment specific revenues expenditures including costs related postretirement benefits delphi retirees certain corporate activities amounts presented automotive sales interest income interest expense tables follow principally relate intersegment transactions eliminated corporate intersegment balances transactions eliminated consolidation fourth quarter 2007 changed measure segment profitability net income taxes plus equity income net tax minority interests net tax first quarter 2007 changed segment presentation reflect elimination transactions occur gm automotive segments auto eliminations column within total gma previously included gmna region transactions consist primarily intersegment vehicle service parts sales accordance transfer pricing policy amounts 2006 2005 revised reflect periods comparable basis changes discussed additionally 2006 2005 amounts reclassified retroactive effect discontinued operations discussed note 3 general motors corporation subsidiaries notes consolidated financial statements continued general motors corporation subsidiaries notes consolidated financial statements continued general motors corporation subsidiaries notes consolidated financial statements continued general motors corporation subsidiaries notes consolidated financial statements continued attribute revenues geographic areas based country product sold except revenues certain joint ventures case revenues attributed based geographic location joint venture information concerning principal geographic areas follows aggregation principal geographic information us nonus follows corporate includes charges 15 billion 5 billion 55 billion 2007 2006 2005 respectively related benefit guarantee agreements restructuring delphi’s operations addition corporate includes 552 million 2007 related pension benefit increases granted delphi employees retireessurviving spouses part 2007 national agreement b 2006 recognized noncash impairment charge 29 billion connection sale controlling interest gmac reflected financing refer note 3 financing also includes elimination net receivables total assets receivables eliminated december 31 2007 2006 2005 42 billion 41 billion 45 billion respectively general motors corporation subsidiaries notes consolidated financial statements continued c sold 51 ownership interest gmac november 2006 remaining 49 ownership interest accounted using equity method included gmac’s segment assets refer notes 8 27 summarized financial information gmac year ended december 31 2007 month december 2006 primarily consists property equipment operating leases net refer notes 7 9 note 30 supplemental information consolidated statements cash flows note 31 subsequent event february 12 2008 announced agreement reached uaw regarding special attrition program intended reduce number us hourly employees program offered 74000 uawrepresented employees consists wage benefit packages normal voluntary retirements buyouts preretirement employees 26 29 years service employees retirement eligible receive lump sum payment 45000 62500 depending upon classification funded us hourly pension plan addition vested pension benefits employees retirement eligible retirement buyout options offered options similar packages offered uaw attrition program cost special termination benefits employees participating program including effect curtailments related pension opeb extended disability benefit plans known effects recorded 2008 general motors corporation subsidiaries item 9 item 8 financial statements supplementary data motors liquidation company guc trust financial statements report independent registered public accounting firm trust administrator trust monitor trust beneficiaries motors liquidation company guc trust audited accompanying statements net assets liquidation motors liquidation company guc trust march 31 2016 2015 related statements changes net assets liquidation cash flows years ended march 31 2016 2015 2014 financial statements responsibility trust administrator motors liquidation company guc trust responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audits obtain reasonable assurance whether financial statements free material misstatement motors liquidation company guc trust required engaged perform audit internal control financial reporting audits included consideration internal control financial reporting basis designing audit procedures appropriate circumstances purpose expressing opinion effectiveness motors liquidation company guc trust’s internal control financial reporting accordingly express opinion audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects net assets liquidation motors liquidation company guc trust march 31 2016 2015 related statements changes net assets liquidation cash flows years ended march 31 2016 2015 2014 conformity accounting principles generally accepted united states america plante moran pllc auburn hills michigan may 25 2016 motors liquidation company guc trust statements net assets liquidation basis march 31 2016 2015 dollars thousands see accompanying notes financial statements motors liquidation company guc trust statements changes net assets liquidation basis years ended march 31 2016 2015 2014 dollars thousands see accompanying notes financial statements motors liquidation company guc trust statements cash flows liquidation basis years ended march 31 2016 2015 2014 dollars thousands guc trust presented reconciliation net income cash flow operations entity liquidation guc trust continuing operations result measurement net income term used generally accepted accounting principles measure results operations see accompanying notes financial statements motors liquidation company guc trust notes financial statements march 31 2016 1 purpose trust motors liquidation company guc trust “guc trust” successor motors liquidation company formerly known general motors corp “mlc” within meaning section 1145 united states bankruptcy code “bankruptcy code” guc trust holds administers directs distribution certain assets pursuant terms conditions second amended restated motors liquidation company guc trust agreement “guc trust agreement” dated july 30 2015 pursuant second amended joint chapter 11 plan “plan” dated march 18 2011 mlc debtor affiliates collectively along mlc “debtors” benefit holders allowed general unsecured claims debtors “allowed general unsecured claims” guc trust formed march 30 2011 statutory trust delaware statutory trust act purposes implementing plan distributing guc trust’s distributable assets prior liquidation july august 2015 new gm securities defined held guc trust pursuant liquidation order defined plan generally provided distribution certain shares common stock “new gm common stock” new general motors company together consolidated subsidiaries “new gm” associated dividend cash defined certain warrants purchase shares stock “new gm warrants” together new gm common stock “new gm securities” holders allowed general unsecured claims pro rata amount claims since liquidation new gm securities distributions holders allowed general unsecured claims consist entirely cash distributions lieu new gm securities addition prior qualification liquidation order resulting subsequent liquidation new gm securities plan provided holder allowed general unsecured claim would obtain form guc trust units defined contingent right receive pro rata basis additional shares new gm common stock new gm warrants extent new gm common stock new gm warrants required satisfaction previously disputed general unsecured claims defined term loan avoidance action claims defined liquidation payment expenses guc trust cash remaining dissolution guc trust since aforementioned liquidation new gm securities previously held guc trust holders guc trust units contingent right receive additional cash lieu new gm securities order dated july 2 2015 “liquidation order” bankruptcy court approved conversion guc trust’s holdings new gm securities cash effect conversion july 7 2015 guc trust converted holdings new gm warrants new gm common stock cashless exercise total guc trust converted 10352556 new gm series warrants defined 7407155 shares new gm common stock ii 10352556 new gm series b warrants defined 4953635 shares new gm common stock thereafter guc trust sold holdings new gm common stock net proceeds aggregating 7417 million completed sales august 5 2015 result distributions guc trust thereafter respect allowed general unsecured claims including respect guc trust units made solely cash pursuant liquidation order proceeds liquidations net applicable costs fees expenses paid respect thereof allocated beneficiaries guc trust pro rata basis following manner guc trust beneficiary’s entitlement particular number new gm warrants exercised converted entitlement receive number shares new gm common stock new gm warrants exercised conversions 071549 shares new gm common stock new gm series warrant 047849 shares common stock new gm series b warrant b guc trust beneficiary’s entitlement particular number shares new gm common stock liquidated including exercised new gm warrants set forth converted entitlement receive amount cash equal weighted average sales price net applicable costs fees expenses paid respect thereof new gm common stock sold multiplied number shares new gm common stock guc trust beneficiary would otherwise entitled including exercised new gm warrants set forth weighted average sales price guc trust’s holdings new gm common stock sold subsequent june 30 2015 3123 per share following liquidation described guc trust invested proceeds certain marketable securities permitted guc trust agreement amount cash equivalents marketable securities held distribution guc trust beneficiaries including dividend cash referred herein distributable cash guc trust administered wilmington trust company individual capacity solely capacity trust administrator trustee “guc trust administrator” among rights duties subject terms conditions limitations set forth guc trust agreement guc trust administrator power authority hold manage sell invest distribute assets comprising guc trust corpus consult retain professionals administration guc trust prosecute resolve objections disputed general unsecured claims take necessary actions administer winddown affairs debtors upon dissolution upon dissolution resolve satisfy extent allowed residual winddown claims defined activities guc trust administrator overseen fti consulting inc solely capacity monitor “guc trust monitor” 2 plan liquidation march 31 2011 date plan became effective “effective date” approximately 29771 million allowed general unsecured claims addition effective date approximately 8154 million disputed general unsecured claims “disputed general unsecured claims” reflects liquidated disputed claims bankruptcy court ordered distribution reserve unliquidated disputed claims reflect potential term loan avoidance action claims total aggregate amount general unsecured claims allowed disputed asserted debtors inclusive potential term loan avoidance action claims approximately 39425 million effective date pursuant guc trust agreement holders disputed general unsecured claims become entitled receive distribution distributable cash guc trust extent disputed general unsecured claims become allowed general unsecured claims guc trust agreement guc trust administrator authority file objections disputed general unsecured claims may prosecuted alternative dispute resolution proceedings including mediation arbitration “adr proceedings” appropriate march 31 2016 one remaining disputed general unsecured claim approximately 200 million subject pending objections filed guc trust addition march 31 2016 guc trust held reserves disputed general unsecured claims approximately 500 million claim amount associated particular claim set aside guc trust administrator general claim contingency see note 4 heading “allowed disputed claims” extent portion disputed general unsecured claim deemed invalidor “disallowed”by order bankruptcy court order tribunal presiding adr proceeding applicable settlement guc trust portion disputed general unsecured claim disallowed entitled distribution guc trust subject appeal rights claimant however extent disputed general unsecured claim fully resolved resolution results portion original disputed general unsecured claim deemed validor “allowed”by order bankruptcy court order tribunal presiding adr proceeding applicable settlement guc trust portion disputed general unsecured claim allowed subject appeal rights guc trust considered allowed general unsecured claim effective date claims “resolved disputed claims” one avoidance action captioned official committee unsecured creditors motors liquidation co v jpmorgan chase bank na et al adv pro 0900504 bankr sdny july 31 2009 “term loan avoidance action” commenced prior statutory deadline commencing actions term loan avoidance action commenced official committee unsecured creditors motors liquidation company “committee” among things seeks return approximately 15 billion transferred debtors funds advanced commencement debtors’ chapter 11 cases united states treasury export development canada together “dip lenders” consortium prepetition lenders pursuant terms order bankruptcy court december 15 2011 accordance plan upon dissolution mlc term loan avoidance action transferred avoidance action trust defined pursuant guc trust agreement extent wilmington trust company individual capacity solely capacity trustee trust administrator avoidance action trust “avoidance action trust administrator” successful obtaining recovery way judgment settlement defendants term loan avoidance action defendants shall receive allowed general unsecured claim guc trust amount disgorged avoidance action trust general unsecured claims “term loan avoidance action claims” together resolved disputed claims “resolved allowed claims” still unclear whether amounts actually transferred avoidance action trust pursuant term loan avoidance action would benefit holders allowed general unsecured claims committee taken position except reimbursement certain costs expenses avoidance action trust dip lenders entitled proceeds term loan avoidance action interests trust established action plan “avoidance action trust” b holders allowed general unsecured claims exclusive right receive proceeds term loan avoidance action exclusive beneficiaries avoidance action trust respect thereto described item 3 “legal proceedings” litigation respect issues ongoing rights recoveries term loan avoidance action still disputed pursuant plan however funds reclaimed prepetition lenders transferred otherwise benefit guc trust distributed holders guc trust units guc trust distributable assets pursuant terms plan bankruptcy court authorized distribution 150 million shares new gm common stock warrants acquire 136363635 newly issued shares new gm stock exercise price set 1000 per share expiring july 10 2016 “new gm series warrants” warrants acquire 136363635 newly issued shares new gm stock exercise price set 1833 per share expiring july 10 2019 “new gm series b warrants” record ownership new gm securities held mlc benefit guc trust dissolution mlc december 15 2011 time record ownership transferred guc trust described pursuant liquidation order july august 2015 guc trust’s holdings new gm securities liquidated following liquidation guc trust’s distributable assets principally consist distributable cash distributable cash substantially invested certain marketable securities permitted guc trust agreement prior liquidation holdings new gm common stock guc trust received dividends new gm common stock aggregating 247 million dividends required applied purpose new gm common stock dividends relate portion distributable cash applicable proceeds liquidation new gm common stock distributed holders subsequently allowed disputed general unsecured claims guc trust units dividends relating distributable cash also distributed holders however distributable cash appropriated accordance guc trust agreement fund costs liabilities guc trust case dividends relating distributable cash applied costs liabilities guc trust like appropriated distributable cash maintained administrative cash defined dividends applied purposes associated distributable cash references form 10k distributable cash understood include dividends relating distributable cash unless expressly indicated otherwise amount cash equivalents marketable securities held guc trust relates dividends received guc trust new gm common stock previously held guc trust referred dividend cash included amount cash equivalents marketable securities held distribution guc trust beneficiaries referred herein distributable cash except extent dividends relating appropriated distributable cash classified administrative cash following appropriation funding guc trust costs liquidation guc trust incurred continue incur certain costs liquidate trust assets implement plan effective date pursuant plan mlc contributed approximately 527 million guc trust held maintained guc trust administrator “administrative fund” purpose paying certain fees expenses including certain tax obligations incurred guc trust including fees guc trust administrator guc trust monitor fees expenses professionals retained guc trust reporting costs defined “winddown costs” march 31 2016 remaining administrative fund aggregated 82 million consisting cash equivalents marketable securities remaining amount administrative fund designated satisfaction certain specifically identified costs liabilities guc trust substantial majority likely incurred therefore likely returned dip lenders amount may used payment trust professionals fees expenses winddown costs cash investments administrative fund remain winding conclusion guc trust must returned dip lenders guc trust agreement authorized guc trust liquidate approximately 57 million new gm securities “initial reporting cash” shortly effective date purposes funding certain fees expenses guc trust “reporting costs” including directly indirectly relating reports prepared filed guc trust pursuant applicable rules regulations interpretations securities exchange commission ii transfer registration transfer certification guc trust units iii application committee defined internal revenue service private letter ruling regarding tax treatment guc trust holders allowed general unsecured claims respect distribution new gm securities iv certain legal proceedings relating term loan avoidance action guc trust agreement provides administrative fund may utilized satisfy reporting costs guc trust agreement provides guc trust administrator determines administrative fund sufficient satisfy current projected winddown costs initial reporting cash sufficient satisfy current projected reporting costs guc trust administrator approval guc trust monitor authorized set aside distributable cash distribution purposes guc trust administrator may appropriate distributable cash fund winddown costs andor reporting costs required approval bankruptcy court distributable cash set aside andor appropriated manner available distribution beneficiaries guc trust units appropriation distributable cash including related dividend cash classified “other administrative cash” guc trust agreement setting aside appropriation distributable cash including dividend cash reflected statement net assets liquidation financial statements guc trust separate process setting aside appropriating distributable cash satisfy unfunded projected costs expenses guc trust matter financial reporting guc trust records reserve statement net assets liquidation source funding addressed therein expected costs liquidation reasonable basis estimation reason among others direct relationship amount reserve reflected statement net assets liquidation amount distributable cash set aside appropriated current projected costs expenses guc trust adjustments reserve expected costs liquidation reported statement net assets liquidation recorded reasonable basis estimation expected incurrence additional costs reduction expected costs information regarding reserves expected costs liquidation reflected statement net assets liquidation see note 8 prior aforementioned liquidation new gm securities july august 2015 guc trust authorized approval guc trust monitor set aside distribution new gm securities funding purposes described sell set aside new gm securities approval bankruptcy court bankruptcy court previously approved march december 2012 january 2015 sale new gm securities fund current projected costs expenses guc trust march 2012 bankruptcy court order also authorized sale new gm securities aggregating 137 million purpose funding certain fees costs expenses avoidance action trust transfer sale proceeds avoidance action trust sale proceeds transferred may 2012 prior aforementioned liquidation new gm securities sales new gm securities fund projected reporting costs winddown costs calendar year 2015 aggregated approximately 617 million including dividend cash 02 million initial reporting cash amounts comprised part guc trust’s administrative cash securities sold aggregated 1043801 shares new gm common stock 948887 new gm series warrants 948887 new gm series b warrants december 2015 bankruptcy court approved appropriation distributable cash aggregating approximately 12 million fund projected costs expenses guc trust calendar year 2016 appropriation reduced distributable cash increased administrative cash march 31 2016 administrative cash aggregated 135 million extent administrative cash ultimately required held guc trust time dissolution remaining administrative cash distributed guc trust holders guc trust units march 31 2016 distributable cash 471 million set aside projected guc trust fees costs expenses incurred beyond 2016 including 23 million set aside potential income taxes dividends received holdings new gm common stock investment income described “funding potential tax liabilities dispositions new gm securities dividends new gm common stock investment income” accordingly distributable cash available distribution beneficiaries guc trust units set aside andor appropriated distributable cash reflected cash equivalents marketable securities statement net assets liquidation expended funding potential tax liabilities dispositions new gm securities dividends new gm common stock investment income guc trust subject us federal income tax realized net gains distribution sale new gm securities taxes “taxes distribution” guc trust also subject us federal income tax dividends received new gm common stock held guc trust taxes “dividend taxes” investment income earned distributable cash taxes “investment income taxes” guc trust agreement provides administrative fund may utilized satisfy taxes distribution dividend taxes investment income taxes guc trust administrator authorized approval guc trust monitor set aside distribution distributable cash amounts would sufficient satisfy potential taxes distribution dividend taxes investment income taxes distributable cash set aside dividend taxes investment income taxes included setaside winddown costs described “funding guc trust costs liquidation” guc trust administrator may appropriate set aside distributable cash fund taxes distribution dividend taxes investment income taxes approval guc trust monitor respect dividend taxes investment income taxes approval bankruptcy court distributable cash appropriated manner available distribution beneficiaries guc trust units appropriation distributable cash including dividend cash classified “other administrative cash” guc trust agreement set aside andor appropriated distributable cash reflected cash equivalents marketable securities expended pay taxes distribution dividend taxes investment income taxes setaside appropriated distributable cash including dividend cash available distribution corresponding liability reserve related setaside assets reflected statement net assets liquidation financial statements guc trust prior liquidation new gm securities july august 2015 described guc trust authorized approval guc trust monitor set aside distribution new gm securities fund potential taxes distribution dividend taxes investment income taxes sell set aside new gm securities fund taxes distribution dividend taxes investment income taxes approval guc trust monitor respect dividend taxes investment income taxes approval bankruptcy court set aside new gm securities included holdings new gm securities statement net assets liquidation quarter ended march 31 2016 guc trust administrator reviewed current potential taxes distribution result review guc trust administrator determined distributable cash 1075 million set aside potential taxes distribution realized gains still subject examination internal revenue service based tax basis new gm securities december 15 2011 date transfer record ownership new gm securities mlc guc trust guc trust administrator intends continue reevaluate amount distributable cash set aside quarterly basis previously disclosed quarter ended september 30 2013 guc trust made determination file us federal income tax returns taking position beneficial ownership substantial majority new gm securities transferred mlc guc trust march 31 2011 tax basis new gm securities determined reference value securities date instead december 15 2011 record ownership remaining new gm securities still held mlc transferred mlc guc trust remaining substantial minority new gm securities transferred mlc guc trust guc trust determined transfer beneficial ownership occurred dates tax basis determined reference value securities dates new tax position resulted increased tax basis new gm securities prior tax position therefore reduced taxable gains increased taxable losses distributions sales new gm securities since march 31 2011 new tax position sustained examination internal revenue service date hereof however guc trust believes based available evidence consultation guc trust professionals likely new tax position sustained examination internal revenue service based technical merits position accordingly new tax position recognized current deferred income tax liabilities income tax provision guc trust’s financial statements since quarter ended september 30 2013 following guc trust’s determination utilize new tax position set forth guc trust filed us federal income tax returns years ended march 31 2015 2014 2013 internal revenue service using new tax position tax returns accompanied requests prompt determination tax liability pursuant section 505b bankruptcy code statutory notification periods set forth section 505b bankruptcy code respect guc trust’s us federal income tax return year ended march 31 2015 prior years expired accordingly tax liabilities set forth guc trust’s us federal income tax returns years ended march 31 2015 prior years longer subject examination internal revenue service however remaining capital loss carryovers generated years combined net capital gains generated year ended march 31 2016 new tax position aggregate 1824 million along net operating loss carryovers generated march 31 2016 aggregating 1015 million could subject examination internal revenue service subsequent years losses utilized contrast guc trust’s financial statements conservative measure calculation “set aside” distributable cash potential taxes distribution utilizes prior tax position rather new tax position extent guc trust’s liability taxes distribution finally determined accordance section 505b bankruptcy code new tax position sustained examination internal revenue service accordingly potential tax liability guc trust’s us federal income tax returns year ended march 31 2016 subsequent years calculated purposes “set aside” distributable cash potential taxes distribution using prior tax position rather new tax position addition “set aside” calculation recognize reductions related remaining net operating loss carryovers capital loss carryovers losses distributions sales new gm securities attributable march 31 2015 tax year prior tax years carryovers utilized utilization finally determined accordance section 505b bankruptcy code new tax position sustained examination internal revenue service additional information see “net assets liquidationdistributable cash set aside distribution” item 7 “management’s discussion analysis financial condition results operations” residual winddown claims costs upon dissolution debtors occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining disputed administrative expenses priority tax claims priority nontax claims secured claims “residual winddown claims” december 15 2011 plan debtors transferred guc trust amount assets necessary “residual winddown assets” satisfy ultimate allowed amount residual winddown claims including certain reasonable litigation defense costs related term loan avoidance action “avoidance action defense costs” estimated debtors costs fees expenses relating satisfying resolving residual winddown claims “residual winddown costs” residual winddown assets initially aggregated approximately 428 million amount consisted approximately 400 million cash including approximately 14 million designated payment avoidance action defense costs transferred benefit approximately 28 million prepaid expenses residual winddown costs residual winddown claims less residual winddown assets excess funds returned dip lenders time guc trust administrator determines residual winddown assets adequate satisfy residual winddown claims including actual amount avoidance action defense costs residual winddown costs satisfied administrative cash remaining administrative cash guc trust administrator authorized guc trust monitor approval set aside bankruptcy court approval appropriate distributable cash cover shortfall extent distributable cash set aside andor appropriated obtain funding complete winddown debtors distributable cash available distribution beneficiaries guc trust therefore amount residual winddown claims residual winddown costs could reduce assets guc trust available distribution setting aside appropriation distributable cash including dividend cash reflected statement net assets liquidation financial statements guc trust rather set aside appropriated distributable cash including dividend cash reflected cash equivalents marketable securities accompanying statement net assets liquidation expended guc trust concluded affairs funds remaining obtained sale new gm securities appropriation distributable cash fund winddown process resolution satisfaction residual winddown claims distributed holders guc trust units amount avoidance action defense costs incurred date exceeds corresponding cash 14 million received guc trust mlc dissolution date approximately 106 million result new residual winddown claims arisen amount excess expected additional avoidance action defense costs incurred additional residual winddown claims arise paid remaining residual winddown assets following depletion assets administrative fund extent excess amounts remaining administrative fund funds designated satisfaction certain specifically identified costs liabilities guc trust administrative cash appropriation distributable cash march 31 2016 residual winddown assets aggregating 220 million held guc trust recorded cash equivalents marketable securities accompanying statement net assets liquidation march 31 2016 comparison approximately 05 million residual winddown claims assets march 31 2016 subject increase new residual winddown claims expected arise avoidance action defense costs addition residual winddown assets guc trust also received dissolution date approximately 34 million cash mlc amount included 14 million respect certain costs fees expenses payable plan indenture trustees fiscal paying agents previously outstanding debt mlc “indenture trustee fiscal paying agent costs” ii 20 million respect reporting costs funds received credited reserve expected costs liquidation unused portion funds designated indenture trustee fiscal paying agent costs must returned dip lenders available distribution holders guc trust units winding conclusion guc trust march 31 2016 funds designated indenture trustee fiscal paying agents costs held guc trust approximated 03 million recorded cash equivalents accompanying statement net assets liquidation 3 basis presentation significant accounting policies liquidation basis accounting guc trust exists solely purposes described note 1 finite life accordingly guc trust prepared accompanying financial statements liquidation basis accounting accordance accounting principles generally accepted united states america us gaap liquidation basis accounting prescribed financial accounting standards board fasb accounting standards codification assets stated estimated net realizable value nondiscounted amount cash asset expected converted liquidation period liabilities continue recognized amount required us gaap remeasured reflect anticipation entity legally released obligation additionally liquidation basis accounting reserve established estimated costs expected incurred liquidation period costs accrued reasonable basis estimation also accrual made estimated income cash expected received liquidation period extent reasonable basis estimation exists estimates periodically reviewed adjusted appropriate valuation assets realizable value accrual investment income marketable securities expected received liquidation period reserves residual winddown claims reserves expected liquidation costs represent estimates based present facts circumstances known guc trust administrator subject change guc trust beneficiaries future extent liquidating distributions yet paid current holders allowed general unsecured claims future current holders guc trust units disputed general unsecured claims resolved allowed term loan avoidance action claims resolved avoidance action trust claims thereby become allowed general unsecured claims holders thereof become entitled receive liquidating distributions distributable cash including dividend cash guc trust units pro rata amount claims upon occurrence guc trust incurs obligation distribute distributable cash accordingly liquidating distributions payable recorded amount distributable cash previously fair value new gm securities guc trust obligated distribute end period disputed general unsecured claims term loan avoidance action claims resolved allowed general unsecured claims similarly extent potential additional term loan avoidance action claims arise would become allowed manner described note 2 liquidating distributions payable would recorded distributable cash including related dividend cash would become distributable holders term loan avoidance action claims upon occurrence prior resolution allowance disputed general unsecured claims term loan avoidance action claims liabilities recorded conditional obligations associated disputed general unsecured claims potential term loan avoidance action claims rather beneficial interests guc trust beneficiaries residual assets guc trust reflected net assets liquidation guc trust financial statements liquidation basis accounting guc trust presents two principal financial statements statement net assets liquidation statement changes net assets liquidation addition although required liquidation basis accounting guc trust also presents statement cash flows accordance requirements guc trust agreement fiscal year guc trust’s fiscal year begins april 1 ends following march 31 cash equivalents cash equivalents consist amounts held bank accounts money market funds marketable securities accrued investment income marketable securities marketable securities march 31 2016 consist shortterm investments us treasury bills us government agency securities marketable securities march 31 2015 consist shortterm investments corporate commercial paper municipal government commercial paper variable demand notes guc trust valued securities fair value based carrying value us treasury bills municipal corporate commercial paper carrying value approximates fair value par value variable demand notes par value equals fair value based pricing models quoted market prices securities similar characteristics broker quotes us government agency securities beginning quarter ended june 30 2014 estimated investment income expected received shortterm investments marketable securities accrued liquidation basis accounting extent reasonable basis estimation exists holdings new gm securities accrued dividends new gm common stock holdings new gm securities march 31 2015 represent guc trust’s holdings new gm securities held future distribution respect allowed general unsecured claims guc trust units include amounts previously set aside distribution fund potential administrative costs income tax liabilities including taxes distribution dividend taxes investment income taxes securities held consisted shares new gm common stock new gm warrants described note 1 pursuant liquidation order guc trust liquidated holdings new gm securities july august 2015 guc trust valued holdings securities fair value based quoted closing market prices last trading day fiscal year beginning quarter ended june 30 2014 quarter ended march 31 2015 estimated dividends expected received holdings new gm common stock accrued liquidation basis accounting extent reasonable basis estimation existed quarter ended june 30 2015 based determination would best interests trust beneficiaries guc trust made determination file motion bankruptcy court seeking authority liquidate substantially guc trust’s holdings new gm securities motion approved bankruptcy court liquidation order described note 1 guc trust’s holdings new gm securities liquidated july august 2015 result guc trust longer expected receive dividends new gm common stock previously accrued estimated future dividends net dividends received june 2015 reversed quarter ended june 30 2015 dividends received new gm common stock required applied purpose new gm common stock dividends relate portion distributable cash applicable liquidated new gm common stock distributed holders subsequently resolved allowed claims guc trust units dividends relating distributable cash also distributed holders however distributable cash appropriated guc trust accordance guc trust agreement fund costs liabilities guc trust case dividends relating appropriated distributable cash applied costs liabilities guc trust like appropriated distributable cash maintained administrative cash dividends applied purpose associated distributable cash references distributable cash understood include dividends relating distributable cash unless expressly indicated otherwise amount cash equivalents marketable securities held guc trust relates dividends received guc trust new gm common stock previously held guc trust referred dividend cash included amount cash equivalents marketable securities held distribution guc trust beneficiaries referred distributable cash except extent dividends relating appropriated distributable cash classified administrative cash following appropriation assets deposits assets deposits consist principally accrued investment income prepaid expenses retainers professionals accounts payable liabilities accounts payable liabilities represent amounts due professionals service providers vendors services rendered goods received end period reserves residual winddown claims residual winddown costs upon dissolution mlc occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining residual winddown claims date dissolution debtors transferred guc trust residual winddown assets amount necessary satisfy ultimate allowed amount residual winddown claims including certain avoidance action defense costs residual winddown costs estimated debtors residual winddown claims residual winddown costs less residual winddown assets excess funds returned dip lenders collectively actual amounts residual winddown claims including certain avoidance action defense costs allowed residual winddown costs exceed residual winddown assets guc trust administrator may required set aside distribution appropriate distributable cash fund shortfall sale securities would reduce amount distributable cash including dividend cash available distribution holders guc trust units reserves expected costs liquidation basis accounting guc trust required estimate accrue costs associated implementing plan distributing guc trust’s distributable assets costs described winddown costs reporting costs note 2 consist principally professional fees costs governance administrative expenses amounts may vary significantly due among things time effort required complete distributions plan guc trust recorded reserves expected costs liquidation represent estimated costs incurred remaining liquidation period guc trust reasonable basis estimation amount liquidation costs ultimately incurred depends period time extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities march 31 2016 remaining liquidation period extends october 2017 estimated predominantly probabilityweighted basis guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome remaining liquidation period dependent predominantly estimate remaining period time resolution term loan avoidance action well certain additional estimated time necessary wind guc trust possible future developments term loan avoidance action could extend current estimate remaining period time resolution therefore extend estimated remaining liquidation period guc trust beyond october 2017 described item 3 “legal proceedings” guc trust participating interested party litigation involving certain general motors vehicle recalls unlikely time possible litigation could extend remaining liquidation period guc trust beyond october 2017 reasonably possible guc trust’s estimates regarding costs remaining liquidation period could change near term guc trust incurs costs reserves released offset costs incurred liability service provider recognized accounts payable accrued expense paid addition guc trust records reserves expected costs reasonable basis estimation applicable us gaap additional costs may identified time additional reserves must recorded costs identified guc trust records increase reserves charges increase addition reserves statement changes net assets liquidation process recording reserves expected costs liquidation matter financial reporting separate distinct process distributable cash set aside distribution purposes funding projected costs liquidation projected costs generally estimated conservative ie inclusive basis include contingencies permitted accrued reserves expected costs liquidation applicable us gaap complete description process setting aside distributable cash fund projected costs potential liabilities guc trust see item 7 “management’s discussion analysis financial condition results operationsnet assets liquidation” heading “distributable cash set aside distribution” income taxes guc trust considered “disputed ownership fund” pursuant treasury regulation section 1468b9 assets transferred guc trust passive investments guc trust taxed qualified settlement fund qsf pursuant treasury regulation section 1468b9c1ii qsf tax status guc trust approved internal revenue service private letter ruling issued march 2 2011 general qsf considered c corporation pays federal income tax using trust income tax rates modified gross income modified gross income includes gross income pursuant internal revenue code section 61 less administrative expenses certain losses sale exchange worthlessness property net operating losses general disputed ownership fund taxed qsf recognize gross income assets transferred therefore guc trust recognized gross income transfer assets mlc guc trust generates gross income form interest dividend income including dividends received previous holdings new gm common stock recognizes gains andor losses upon disposition shares new gm common stock new gm warrants reduced administrative expenses accumulated net operating capital losses compute modified gross income guc trust taxable federal income tax purposes current income tax liability asset recognized estimated taxes payable receivable year deferred tax liabilities assets recognized estimated future tax effects temporary differences financial reporting tax accounting deferred tax assets reviewed recoverability valuation allowances provided necessary guc trust subject state income taxes current law accordingly current deferred state income tax liabilities assets recorded guc trust recognizes tax benefit uncertain tax position likely tax position sustained examination taxing authority based technical merits position review available evidence consultation guc trust professionals guc trust’s tax liability respect federal income tax returns year ended march 31 2015 prior years longer subject examination result application section 505b bankruptcy code however remaining capital loss carryovers generated years new tax position combined net capital gains generated year ended march 31 2016 aggregate 1824 million along net operating loss carryovers generated march 31 2016 aggregating 1015 million could subject examination internal revenue service subsequent years losses utilized march 31 2016 known items would result significant accrual uncertain tax positions process recognizing deferred tax assets liabilities current income taxes payable matter financial reporting separate distinct process distributable cash set aside distribution purposes funding potential income tax liabilities potential income tax liabilities generally estimated conservative ie inclusive basis include amounts potential income tax liabilities beyond amounts permitted recorded applicable accounting standards complete description process setting aside distributable cash fund projected costs potential income tax liabilities guc trust see item 7 “management’s discussion analysis financial condition results operationsnet assets liquidation” heading “distributable cash set aside distribution” use estimates preparation financial statements liquidation basis conformity us gaap requires use estimates assumptions affect reported amounts assets liabilities estimates subject known unknown risks uncertainties factors could materially impact amounts reported disclosed financial statements related footnotes significant estimates include anticipated amounts timing future cash flows expected dividends received holdings new gm common stock march 31 2015 estimated investment income expected received expected liquidation costs residual winddown claims costs fair value marketable securities actual results could differ estimates recent accounting standards changes us gaap made fasb form accounting standards updates asu’s fasb’s accounting standards codification guc trust considers applicability impact asu’s asu’s noted herein assessed determined applicable 4 net assets liquidation description guc trust agreement plan described fully note 1 beneficiaries guc trust future extent liquidating distributions yet paid current holders allowed general unsecured claims future current holders guc trust units assets guc trust consisting primarily distributable cash including dividend cash described note 1 available distributed trust beneficiaries “guc trust distributable assets” accordance plan guc trust agreement except extent set aside appropriated funding expected costs liquidation potential income tax liabilities guc trust amounts net assets liquidation presented accompanying statements net assets liquidation correspond amounts guc trust distributable assets respective dates certain adjustments including reductions amounts set aside distributable cash appropriated distributable cash march 31 2016 guc trust distributable assets aggregated approximately 4643 million additional information see “net assets liquidationdistributable assets” item 7 “management’s discussion analysis financial condition results operations” cash equivalents marketable securities march 31 2016 2015 cash equivalents marketable securities aggregated 6655 million 684 million comprised following described note 5 march 31 2016 guc trust accrued liquidating distributions payable aggregating 62 million amount includes 43 million distributable cash distributable holders guc trust units respect excess guc trust distributable assets march 31 2016 addition march 31 2016 amount distributable cash reflected table includes 471 million amounts set aside projected guc trust fees costs expenses incurred beyond 2016 including 23 million projected dividend taxes investment income taxes distributable cash 1075 million set aside potential taxes distribution aggregate amount distributable cash pending distribution set aside available distribution march 31 2016 1608 million potential recovery new gm shareholder class action proposed settlement described part item 3 “legal proceedings” guc trust filed proof claim settlement administrator connection proposed settlement class action new gm amount potential recovery guc trust proposed settlement estimable time accrued dividends holdings new gm common stock march 31 2015 guc trust accrued approximately 224 million estimated dividends expected declared new gm future received guc trust holdings new gm common stock estimated remaining liquidation period subsequent thereto based determination would best interests trust beneficiaries guc trust made determination file motion bankruptcy court seeking authority liquidate substantially guc trust’s holdings new gm securities motion approved bankruptcy court liquidation order described guc trust’s holdings new gm securities liquidated july august 2015 accordingly guc trust longer expected receive dividends new gm common stock accordingly accrued dividends march 31 2015 net dividends received june 2015 reversed accrual dividends made since march 31 2015 trust units described note 1 plan holder allowed general unsecured claim retains contingent right receive pro rata basis additional distributable cash extent required satisfaction previously disputed general unsecured claims potential term loan avoidance action claims appropriation payment expenses income tax liabilities guc trust guc trust issues units representing contingent rights “guc trust units” rate one guc trust unit per 1000 allowed general unsecured claims holder allowed general unsecured claim subject rounding pursuant guc trust agreement connection initial recognition allowed general unsecured claim described “critical accounting policies estimatesincome taxes” item 7 “management’s discussion analysis financial condition results operations” guc trust considered disputed ownership fund pursuant treasury regulation section 1468b9 pursuant treasury regulation section 1468b9c6 upon termination guc trust certain capital losses net operating losses may distributable current previous holders guc trust units time amount losses may distributed determinable timing distribution dependent number factors affecting life guc trust termination date entitled receive distribution currently known guc trust initiated discussions internal revenue service get clarification issues time highly uncertain whether internal revenue service provide necessary guidance whether guc trust continue discussions internal revenue service guc trust makes quarterly liquidating distributions holders guc trust units extent ia certain previously disputed general unsecured claims asserted debtors’ estates potential term loan avoidance action claims either disallowed otherwise resolved favorably guc trust thereby reducing amount guc trust assets reserved distribution respect asserted potential claims b certain excess guc trust distributable assets defined guc trust agreement previously set aside distribution released manner permitted guc trust agreement ii result foregoing amount excess guc trust distributable assets defined guc trust agreement end relevant quarter exceeds thresholds set forth guc trust agreement following presents changes years ended march 31 2016 2015 2014 numbers guc trust units outstanding guc trust obligated issue 1 1644941 guc trust units issued year ended march 31 2014 1550000 related special nova scotia distribution applicable nova scotia settlement described note 5 2 number guc trust units issuable time represents guc trust units issuable respect allowed general unsecured claims newly allowed fiscal year 3 number guc trust units outstanding time represents guc trust units issued respect allowed general unsecured claims allowed prior periods including guc trust units held guc trust benefit holders allowed general unsecured claims yet supplied information required guc trust order effect initial distribution entitled b governmental entities precluded applicable law receiving distributions guc trust units allowed disputed claims total cumulative pro rata liquidating distributions ultimately received trust beneficiaries dependent upon current amount allowed general unsecured claims final resolution outstanding disputed general unsecured claims term loan avoidance action claims described note 2 disputed general unsecured claims march 31 2016 reflect claim amounts originally filed amounts court ordered distribution “set aside” certain claims filed without claim amount adjustments ordered court permitted plan disputed general unsecured claims may settle amounts differ significantly amounts differ significantly historical pattern claims settled allowed proportion claims resolved disallowed described note 1 prior resolution allowance disputed general unsecured claims recoveries term loan avoidance action claims avoidance action trust thereby arise allowed general unsecured claims liabilities recorded conditional obligations associated disputed general unsecured claims potential term loan avoidance action claims liquidating distributions payable recorded amount distributable cash previously fair value new gm securities distributed end period disputed general unsecured claims term loan avoidance action claims resolved allowed general unsecured claims similarly extent potential additional term loan avoidance action claims arise would become allowed manner described note 2 liquidating distributions payable would recorded amount distributable cash would become distributable holders term loan avoidance action claims upon occurrence following table presents summary activity respect allowed disputed general unsecured claims term loan avoidance action claims years ended march 31 2016 2015 1 maximum amount unresolved claims represents sum disputed general unsecured claims term loan avoidance action claims 2 total claim amount represents sum allowed general unsecured claims maximum amount unresolved claims year ended march 31 2016 avoidance action trust reached settlements certain defendants term loan avoidance action resulting recoveries avoidance action trust approximately 55000 result corresponding term loan avoidance action claims arose allowed guc trust pursuant plan 5 liquidating distributions liquidating distributions years ended march 31 2016 2015 2014 consisted following distributions year ended march 31 2016 consisted 1 distributions holders guc trust units excess distributions payable 2 distributions holders allowed general unsecured claims whose claims newly allowed quarter ended december 31 2015 3 distributions holders allowed general unsecured claims previously failed fulfill informational requirements distribution established accordance guc trust agreement subsequently successfully fulfilled information requirements distributions holders guc trust units year ended march 31 2016 resulted primarily release distributable assets guc trust previously set aside respect potential taxes distribution following liquidation new gm securities distributions year ended march 31 2015 consisted 1 distributions holders guc trust units 2 distributions holders allowed general unsecured claims previously failed fulfill informational requirements distribution established accordance guc trust agreement subsequently successfully fulfilled information requirements distributions holders guc trust units year ended march 31 2015 resulted primarily release distributable assets guc trust previously set aside respect potential taxes distribution distributions year ended march 31 2014 consisted 1 special nova scotia distribution defined 2 special excess distribution defined 3 distributions holders resolved disputed claims exclusive nova scotia distribution 4 distributions holders allowed general unsecured claims previously failed fulfill informational requirements distribution established accordance guc trust agreement subsequently successfully fulfilled information requirements october 21 2013 bankruptcy court entered order “nova scotia order” approving settlement agreement “nova scotia settlement” relating claims arising 8375 guaranteed notes due december 7 2015 8875 guaranteed notes due july 10 2023 case issued 2003 general motors nova scotia finance company “nova scotia claims” pursuant nova scotia settlement nova scotia claims reduced allowed aggregate amount 155 billion result december 2 2013 accordance nova scotia settlement nova scotia order guc trust made distribution solely holders allowed nova scotia claims consisting aggregate 6174015 shares new gm common stock 5612741 new gm series warrants 5612741 new gm series b warrants 1550000 guc trust units “special nova scotia distribution” addition december 23 2013 accordance nova scotia settlement nova scotia order guc trust made special distribution excess guc trust distributable assets holders guc trust units consisting 6735070 shares new gm common stock 6122789 new gm series warrants 6122789 new gm series b warrants “special excess distribution” guc trust obligated march 31 2016 distribute distributable cash 62 million march 31 2015 distribute 93114 shares new gm common stock 84570 new gm series warrants 84570 new gm series b warrants aggregate following 1 holders guc trust units excess distributions payable 2 certain holders allowed general unsecured claims satisfied certain informational requirements necessary receive securities addition march 31 2015 cash 02 million distributable follows dividend cash associated new gm common stock guc trust obligated distribute b governmental entities precluded applicable law receiving distributions new gm securities c distributions lieu fractional shares warrants 6 holdings new gm securities march 31 2015 described note 1 pursuant liquidation order july august 2015 guc trust’s holdings new gm securities liquidated substantially proceeds invested certain marketable securities march 31 2015 holdings new gm securities fair value consisted following described note 5 march 31 2015 guc trust accrued liquidating distributions payable 77 million respect new gm securities cash 02 million distributable result numbers new gm securities reflected include shares warrants liquidating distributions pending march 31 2015 securities distributions pending aggregated 93114 shares new gm common stock 84570 series warrants 84570 series b warrants march 31 2015 number common stock shares warrants table also includes new gm securities aggregating 675 million excluding related dividend cash reserved set aside projected guc trust fees costs expenses incurred beyond 2015 including 194 million projected dividend taxes 2972 million excluding related dividend cash new gm securities reserved set aside potential taxes distribution result march 31 2015 numbers new gm securities table include aggregate 4525790 shares new gm common stock 4114331 new gm series warrants 4114331 new gm series b warrants set aside set forth aggregate number fair value shares warrants pending distribution set aside available distribution march 31 2015 7 fair value measurements accounting standards require certain assets liabilities reported fair value financial statements provide framework establishing fair value framework determining fair value based hierarchy prioritizes inputs valuation techniques used measure fair value trust’s cash equivalents marketable securities holdings new gm securities march 31 2015 liquidating distributions payable presented provided hierarchy level 1in general fair values determined level 1 inputs use quoted prices active markets identical assets liabilities guc trust ability access level 2fair values determined level 2 inputs use inputs observable either directly indirectly level 2 inputs include quoted prices similar assets liabilities active markets inputs interest rates yield curves observable commonly quoted intervals level 3level 3 inputs unobservable inputs including inputs available situations little market activity related asset liability level 3 fair value measurements based primarily management’s estimates using pricing models discounted cash flow methodologies similar techniques taking account characteristics asset liability guc trust assets liabilities measured level 3 inputs march 31 2016 2015 instances inputs used measure fair value fall different levels fair value hierarchy fair value measurements entirety categorized based lowest level input significant valuation guc trust’s assessment significance particular inputs fair value measurements requires judgment considers factors specific asset liability guc trust also holds financial instruments measured fair value recurring basis including accounts payable liabilities fair value liabilities approximates carrying amounts accompanying financial statements due short maturity instruments following table presents information guc trust’s assets liabilities measured fair value recurring basis march 31 2016 2015 valuation techniques used guc trust determine fair values following descriptions valuation methodologies used assets liabilities measured fair value • due shortterm liquid nature fair value cash equivalents approximates carrying value • marketable securities march 31 2016 consist us treasury bills us government agency securities marketable securities march 31 2015 consist municipal commercial paper variable demand notes corporate commercial paper due shortterm maturities fair value us treasury bills corporate municipal commercial paper approximates carrying value fair value us government agency securities based pricing models quoted prices securities similar characteristics broker quotes municipal variable demand notes trade daily par value therefore fair value equal par value • holdings new gm securities march 31 2015 valued closing prices reported active market securities traded • liquidating distributions payable march 31 2016 valued amount cash guc trust obligated distribute liquidating distributions payable march 31 2015 valued closing prices new gm securities reported active market securities traded guc trust’s policy recognize transfers levels fair value hierarchy actual date event change circumstances caused transfer transfers years ended march 31 2016 2015 8 reserves expected costs liquidation residual winddown claims following summary activity reserves expected costs liquidation years ended march 31 2016 2015 2014 year ended march 31 2016 estimates expected winddown costs estimates expected reporting costs reasonable basis estimation increased 56 million 21 million respectively year ended march 31 2015 estimates expected winddown costs estimates expected reporting costs increased 90 million 04 million respectively year ended march 31 2014 estimates expected winddown costs estimates expected reporting costs decreased 38 million 41 million respectively revisions estimates recorded additions reductions reserves expected costs liquidation years guc trust recorded reserves expected costs liquidation represent amounts expected incurred estimated remaining liquidation period guc trust reasonable basis estimation amount liquidation costs ultimately incurred depends time period extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities march 31 2016 recorded reserves expected costs liquidation reflect estimated costs remaining liquidation period extending october 2017 estimated predominately probabilityweighted basis permitted us gaap guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome remaining liquidation period dependent predominantly estimate remaining period time resolution term loan avoidance action well certain additional estimated time necessary wind guc trust possible future developments term loan avoidance action could extend current estimate remaining period time resolution therefore extend estimated remaining liquidation period guc trust beyond october 2017 addition certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued reasonably possible guc trust’s estimates regarding costs remaining liquidation period could change near term described part item 3 “legal proceedings” guc trust participating interested party litigation involving certain general motors vehicle recalls unlikely time possible litigation could extend remaining liquidation period guc trust beyond october 2017 following summary activity reserves residual winddown claims years ended march 31 2016 2015 2014 9 income tax benefit current tax benefit provision years ended march 31 2016 2015 2014 due cumulative net operating capital losses income taxes paid guc trust also deferred tax benefit provision years ended march 31 2016 2015 result establishment full valuation allowance net deferred tax assets beginning end periods income tax benefit statement changes net assets liquidation year ended march 31 2014 determined computing deferred tax provision using guc trust’s statutory tax rate 396 became effective april 1 2013 deferred taxes accompanying statement net assets liquidation march 31 2016 2015 comprised following components previously disclosed quarter ended september 30 2013 guc trust made determination file us federal income tax returns taking position beneficial ownership substantial majority new gm securities transferred mlc guc trust march 31 2011 tax basis new gm securities determined reference value securities date instead december 15 2011 record ownership remaining new gm securities still held mlc transferred mlc guc trust remaining substantial minority new gm securities transferred mlc guc trust guc trust determined transfer beneficial ownership occurred dates tax basis determined reference value securities dates new tax position resulted increased tax basis new gm securities prior tax position therefore reduced taxable gains increased taxable losses distributions sales new gm securities since march 31 2011 new tax position sustained examination internal revenue service date hereof however guc trust believes based available evidence consultation guc trust professionals likely new tax position sustained examination internal revenue service based technical merits position accordingly new tax position recognized current deferred income tax liabilities income tax provision guc trust’s financial statements since quarter ended september 30 2013 following guc trust’s determination utilize new tax position set forth guc trust filed us federal income tax returns years ended march 31 2015 2014 2013 internal revenue service using new tax position tax returns accompanied requests prompt determination tax liability pursuant section 505b bankruptcy code statutory notification period set forth section 505b bankruptcy code respect guc trust’s us federal income tax returns year ended march 31 2015 prior years expired accordingly tax liabilities set forth guc trust’s us federal income tax returns year ended march 31 2015 prior years longer subject examination internal revenue service however remaining capital loss carryovers generated years combined net capital gains generated year ended march 31 2016 new tax position aggregate 1824 million along net operating loss carryovers generated march 31 2016 aggregating 1015 million could subject examination internal revenue service subsequent years losses utilized capital loss carryovers begin expire march 31 2017 net operating loss carryovers begin expire march 31 2032 loss carryovers aggregate result deferred tax asset 1124 million reflected table full valuation allowance net deferred tax assets aggregating 1215 million 360 million established march 31 2016 2015 respectively deferred tax assets realizable valuation allowance increased 855 million decreased 352 million years ended march 31 2016 2015 respectively 10 related party transactions addition serving guc trust administrator wilmington trust company continues serve trustee pursuant indentures certain series previously outstanding debt mlc wilmington trust company received continue receive certain customary fees amounts consistent wilmington trust company’s standard rates service bankruptcy court previously approved creation segregated fund purposes funding fees wilmington trust company well indenture trustees fiscal paying agents previously outstanding debt mlc fees wilmington trust company years ended march 31 2016 2015 2014 addition wilmington trust company also entered certain arrangements guc trust pursuant affiliates previously received may future receive reasonable customary fees commissions services capacity guc trust administrator arrangements include provision custodial investment advisory brokerage services guc trust fees commissions charged wilmington trust company affiliates pursuant arrangements consistent standard fees commissions charged wilmington trust company unrelated thirdparties negotiated transactions years ended march 31 2016 2015 2014 total amount fees commissions approximately 235000 35000 53000 respectively item 9 item 8 financial statements supplementary data motors liquidation company guc trust financial statements report independent registered public accounting firm trust administrator trust monitor trust beneficiaries motors liquidation company guc trust audited accompanying statements net assets liquidation motors liquidation company guc trust march 31 2017 2016 related statements changes net assets liquidation cash flows years ended march 31 2017 2016 2015 financial statements responsibility trust administrator motors liquidation company guc trust responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audits obtain reasonable assurance whether financial statements free material misstatement motors liquidation company guc trust required engaged perform audit internal control financial reporting audits included consideration internal control financial reporting basis designing audit procedures appropriate circumstances purpose expressing opinion effectiveness motors liquidation company guc trust’s internal control financial reporting accordingly express opinion audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects net assets liquidation motors liquidation company guc trust march 31 2017 2016 related statements changes net assets liquidation cash flows years ended march 31 2017 2016 2015 conformity accounting principles generally accepted united states america plante moran pllc clinton township michigan may 25 2017 motors liquidation company guc trust statements net assets liquidation basis march 31 2017 2016 dollars thousands see accompanying notes financial statements motors liquidation company guc trust statements changes net assets liquidation basis years ended march 31 2017 2016 2015 dollars thousands see accompanying notes financial statements motors liquidation company guc trust statements cash flows liquidation basis years ended march 31 2017 2016 2015 dollars thousands guc trust presented reconciliation net income cash flow operations entity liquidation guc trust continuing operations result measurement net income term used generally accepted accounting principles measure results operations see accompanying notes financial statements motors liquidation company guc trust notes financial statements march 31 2017 1 purpose trust motors liquidation company guc trust “guc trust” successor motors liquidation company formerly known general motors corp “mlc” within meaning section 1145 united states bankruptcy code “bankruptcy code” guc trust holds administers directs distribution certain assets pursuant terms conditions second amended restated motors liquidation company guc trust agreement “guc trust agreement” dated july 30 2015 amended time pursuant second amended joint chapter 11 plan “plan” dated march 18 2011 mlc debtor affiliates collectively along mlc “debtors” benefit holders allowed general unsecured claims debtors “allowed general unsecured claims” guc trust formed march 30 2011 statutory trust delaware statutory trust act purposes implementing plan distributing guc trust’s distributable assets prior liquidation july august 2015 new gm securities defined held guc trust pursuant liquidation order defined plan qualified liquidation order generally provided distribution certain shares common stock “new gm common stock” new general motors company formerly known ngmco inc “new gm” associated dividend cash defined certain warrants purchase shares stock “new gm warrants” together new gm common stock “new gm securities” holders allowed general unsecured claims pro rata amount claims since liquidation new gm securities distributions holders allowed general unsecured claims consist entirely cash distributions lieu new gm securities addition prior qualification liquidation order resulting subsequent liquidation new gm securities plan provided holder allowed general unsecured claim would obtain form guc trust units defined contingent right receive pro rata basis additional shares new gm common stock associated dividend cash new gm warrants extent new gm common stock new gm warrants required satisfaction previously disputed general unsecured claims defined note 2 term loan avoidance action claims defined note 2 liquidation payment expenses liabilities guc trust certain cash remaining dissolution guc trust since liquidation new gm securities previously held guc trust described holders guc trust units contingent right receive additional cash lieu new gm securities remaining dissolution guc trust order dated july 2 2015 “liquidation order” bankruptcy court approved conversion guc trust’s holdings new gm securities cash effect conversion july 7 2015 guc trust converted holdings new gm warrants new gm common stock cashless exercise total guc trust converted 10352556 new gm series warrants defined 7407155 shares new gm common stock ii 10352556 new gm series b warrants defined 4953635 shares new gm common stock thereafter guc trust sold holdings new gm common stock net proceeds aggregating 7417 million completed sales august 5 2015 result distributions guc trust thereafter respect allowed general unsecured claims including respect guc trust units made solely cash pursuant liquidation order proceeds liquidations net applicable costs fees expenses paid respect thereof allocated beneficiaries guc trust pro rata basis following manner guc trust beneficiary’s entitlement particular number new gm warrants exercised converted entitlement receive number shares new gm common stock new gm warrants exercised conversions 071549 shares new gm common stock new gm series warrant 047849 shares common stock new gm series b warrant b guc trust beneficiary’s entitlement particular number shares new gm common stock liquidated including exercised new gm warrants set forth converted entitlement receive amount cash equal weighted average sales price net applicable costs fees expenses paid respect thereof new gm common stock sold multiplied number shares new gm common stock guc trust beneficiary would otherwise entitled including exercised new gm warrants set forth weighted average sales price guc trust’s holdings new gm common stock sold subsequent june 30 2015 3123 per share following liquidation described guc trust invested proceeds certain marketable securities permitted guc trust agreement amount cash equivalents marketable securities held distribution guc trust beneficiaries including dividend cash referred herein distributable cash guc trust administered wilmington trust company individual capacity solely capacity trust administrator trustee “guc trust administrator” among rights duties subject terms conditions limitations set forth guc trust agreement guc trust administrator power authority hold manage sell invest distribute assets comprising guc trust corpus consult retain professionals administration guc trust prosecute resolve objections disputed general unsecured claims take necessary actions administer winddown affairs debtors upon dissolution upon dissolution resolve satisfy extent allowed residual winddown claims defined activities guc trust administrator overseen fti consulting inc solely capacity monitor “guc trust monitor” 2 plan liquidation march 31 2011 date plan became effective “effective date” approximately 29771 million allowed general unsecured claims addition effective date approximately 8154 million disputed general unsecured claims “disputed general unsecured claims” reflects liquidated disputed claims bankruptcy court ordered distribution reserve unliquidated disputed claims reflect potential term loan avoidance action claims total aggregate amount general unsecured claims allowed disputed asserted debtors inclusive potential term loan avoidance action claims approximately 39425 million effective date pursuant guc trust agreement holders disputed general unsecured claims become entitled receive distribution distributable cash guc trust extent disputed general unsecured claims become allowed general unsecured claims “resolved disputed claims” guc trust agreement guc trust administrator given authority file objections disputed general unsecured claims may prosecuted alternative dispute resolution proceedings including mediation arbitration “adr proceedings” appropriate march 31 2017 remaining disputed general unsecured claims year ended march 31 2017 legal remedies claimant holding last remaining disputed general unsecured claim asserted 200 million effectively exhausted claim expunged march 31 2017 remained 500 million claim amount associated particular claim set aside guc trust administrator general claim contingency see note 4 heading “allowed disputed claims” one avoidance action captioned official committee unsecured creditors motors liquidation co v jpmorgan chase bank na et al adv pro 0900504 bankr sdny july 31 2009 “term loan avoidance action” commenced prior statutory deadline commencing actions term loan avoidance action commenced official committee unsecured creditors motors liquidation company “committee” among things seeks return approximately 15 billion transferred debtors funds advanced commencement debtors’ chapter 11 cases united states treasury export development canada together “dip lenders” consortium prepetition lenders pursuant terms order bankruptcy court december 15 2011 accordance plan upon dissolution mlc term loan avoidance action transferred avoidance action trust defined pursuant guc trust agreement extent wilmington trust company individual capacity solely capacity trustee trust administrator avoidance action trust “avoidance action trust administrator” successful obtaining recovery way judgment settlement defendants term loan avoidance action defendants shall receive allowed general unsecured claim guc trust amount disgorged avoidance action trust general unsecured claims “term loan avoidance action claims” together resolved disputed claims “resolved allowed claims” described part item 3 “legal proceedings” committee dip lenders avoidance action trust reached settlement agreement concerning among things allocation potential distributable recoveries term loan avoidance action bankruptcy court approved settlement agreement opinion order entered august 24 2016 “approval order’ approval order effect subject appeal pending us district court southern district new york regardless outcome pending appeal funds reclaimed prepetition lenders term loan avoidance action transferred otherwise benefit guc trust distributed account guc trust units guc trust distributable assets pursuant terms plan bankruptcy court authorized distribution new gm 150 million shares new gm common stock warrants acquire 136363635 newly issued shares new gm stock exercise price set 1000 per share expired july 10 2016 “new gm series warrants” warrants acquire 136363635 newly issued shares new gm stock exercise price set 1833 per share expiring july 10 2019 “new gm series b warrants” record ownership new gm securities held mlc benefit guc trust dissolution mlc december 15 2011 time record ownership transferred guc trust described pursuant liquidation order july august 2015 guc trust’s holdings new gm securities liquidated following liquidation guc trust’s distributable assets principally consist distributable cash distributable cash substantially invested certain marketable securities permitted guc trust agreement prior liquidation holdings new gm common stock guc trust received dividends new gm common stock aggregating 247 million dividends required applied purpose new gm common stock dividends relate portion distributable cash applicable proceeds liquidation new gm common stock distributed holders subsequently allowed disputed general unsecured claims guc trust units dividends relating distributable cash also distributed holders however distributable cash appropriated accordance guc trust agreement fund costs liabilities guc trust case dividends relating distributable cash applied costs liabilities guc trust like appropriated distributable cash maintained administrative cash defined dividends applied purposes associated distributable cash references form 10k distributable cash understood include dividends relating distributable cash unless expressly indicated otherwise amount cash equivalents marketable securities held guc trust relates dividends received guc trust new gm common stock previously held guc trust referred dividend cash included amount cash equivalents marketable securities held distribution guc trust beneficiaries referred herein distributable cash except extent dividends relating appropriated distributable cash classified administrative cash following appropriation funding guc trust costs liquidation guc trust incurred continue incur certain costs liquidate trust assets implement plan effective date pursuant plan mlc contributed approximately 527 million guc trust held maintained guc trust administrator “administrative fund” purpose paying certain fees expenses including certain tax obligations incurred guc trust including fees guc trust administrator guc trust monitor fees expenses professionals retained guc trust reporting costs defined “winddown costs” march 31 2017 remaining administrative fund aggregated 17 million consisting cash equivalents marketable securities remaining amount administrative fund designated satisfaction certain specifically identified costs liabilities guc trust amount may used payment trust professionals fees expenses winddown costs pursuant guc trust agreement cash investments administrative fund remain winding conclusion guc trust must returned dip lenders november 2016 guc trust administrator returned 60 million remaining administrative fund dip lenders return associated potential tax liability guc trust administrator consultation trust professionals determined would incurred therefore would expended guc trust guc trust agreement authorized guc trust liquidate approximately 57 million new gm securities “initial reporting cash” shortly effective date purposes funding certain fees expenses guc trust “reporting costs” including directly indirectly relating reports prepared filed guc trust pursuant applicable rules regulations interpretations securities exchange commission ii transfer registration transfer certification guc trust units iii application committee internal revenue service private letter ruling regarding tax treatment guc trust holders allowed general unsecured claims respect distribution new gm securities iv certain legal proceedings relating term loan avoidance action guc trust agreement provides administrative fund may utilized satisfy reporting costs guc trust agreement provides extent guc trust administrator determines administrative fund sufficient satisfy current projected winddown costs initial reporting cash sufficient satisfy current projected reporting costs guc trust administrator approval guc trust monitor authorized set aside distributable cash distribution purposes guc trust administrator may appropriate distributable cash fund winddown costs andor reporting costs required approval bankruptcy court distributable cash set aside andor appropriated manner available distribution beneficiaries guc trust units appropriation distributable cash including related dividend cash classified “other administrative cash” guc trust agreement setting aside appropriation distributable cash including dividend cash reflected statement net assets liquidation financial statements guc trust separate process setting aside appropriating distributable cash satisfy unfunded projected costs expenses guc trust matter financial reporting guc trust records reserves statement net assets liquidation source funding addressed therein expected costs liquidation reasonable basis estimation reason among others direct relationship amount reserves reflected statement net assets liquidation amount distributable cash set aside appropriated current projected costs expenses guc trust adjustments reserves expected costs liquidation reported statement net assets liquidation recorded reasonable basis estimation expected incurrence additional costs reduction expected costs information regarding reserves expected costs liquidation reflected accompanying statement net assets liquidation see note 7 prior liquidation new gm securities july august 2015 described guc trust authorized approval guc trust monitor set aside distribution new gm securities funding purposes described sell set aside new gm securities approval bankruptcy court bankruptcy court previously approved march december 2012 january 2015 sale new gm securities fund current projected costs expenses guc trust march 2012 bankruptcy court order also authorized sale new gm securities aggregating 137 million purpose funding certain fees costs expenses avoidance action trust transfer sale proceeds avoidance action trust sale proceeds transferred may 2012 prior liquidation new gm securities described sales new gm securities fund projected winddown costs reporting costs calendar year 2015 aggregated approximately 617 million including dividend cash 02 million initial reporting cash amounts comprised part guc trust’s administrative cash securities sold aggregated 1043801 shares new gm common stock 948887 new gm series warrants 948887 new gm series b warrants december 2015 february 2017 bankruptcy court approved appropriation distributable cash aggregating approximately 220 million fund projected costs expenses guc trust calendar year 2017 appropriation reduced distributable cash increased administrative cash march 31 2017 administrative cash aggregated 146 million extent administrative cash ultimately required held guc trust time dissolution remaining administrative cash distributed guc trust holders guc trust units march 31 2017 distributable cash 298 million set aside projected guc trust fees costs expenses incurred beyond 2017 accordingly distributable cash available distribution beneficiaries guc trust units set aside andor appropriated distributable cash reflected cash equivalents marketable securities statement net assets liquidation expended funding potential tax liabilities dispositions new gm securities dividends new gm common stock investment income guc trust subject us federal income tax realized net gains distribution sale new gm securities taxes “taxes distribution” guc trust also subject us federal income tax dividends received new gm common stock held guc trust taxes “dividend taxes” investment income earned distributable cash taxes “investment income taxes” guc trust agreement provides administrative fund may utilized satisfy taxes distribution dividend taxes investment income taxes guc trust administrator authorized approval guc trust monitor set aside distribution distributable cash amounts would sufficient satisfy potential taxes distribution dividend taxes investment income taxes distributable cash set aside dividend taxes investment income taxes included setaside winddown costs described “funding guc trust costs liquidation” guc trust administrator may appropriate set aside distributable cash fund taxes distribution dividend taxes investment income taxes approval guc trust monitor respect dividend taxes investment income taxes approval bankruptcy court distributable cash appropriated manner available distribution beneficiaries guc trust units appropriation distributable cash including dividend cash classified “other administrative cash” guc trust agreement set aside andor appropriated distributable cash reflected cash equivalents marketable securities expended pay taxes distribution dividend taxes investment income taxes setaside appropriated distributable cash including dividend cash available distribution corresponding liability reserve related setaside assets reflected statement net assets liquidation financial statements guc trust prior liquidation new gm securities july august 2015 described guc trust authorized approval guc trust monitor set aside distribution new gm securities fund potential taxes distribution dividend taxes investment income taxes sell set aside new gm securities fund taxes distribution dividend taxes investment income taxes approval guc trust monitor respect dividend taxes investment income taxes approval bankruptcy court quarter ended march 31 2017 guc trust administrator reviewed potential taxes distribution dividend taxes investment income taxes result review guc trust administrator determined distributable cash set aside potential taxes distribution dividend taxes investment income taxes result application section 505b bankruptcy code guc trust’s federal income tax returns year ended march 31 2016 prior years longer subject examination internal revenue service income taxes may assessed year ended march 31 2016 prior years however guc trust’s remaining capital loss carryovers net operating loss carryovers still subject examination internal revenue service subsequent years losses utilized utilization expected result sale previously held new gm securities year ended march 31 2016 except potentially respect recovery guc trust member settlement class related proposed settlement securities class action new gm described part item 3 “legal proceedings” estimable time accordingly income taxes expected paid future except potentially respect taxes due recovery proposed settlement securities class action new gm estimable time recovery would potentially generate income tax liability unlikely event guc trust required recalculate previously recognized capital gains losses sale distribution new gm securities prior years using tax basis determined december 15 2011 record ownership previously held new gm securities transferred guc trust mlc rather march 31 2011 beneficial ownership substantial majority previously held new gm securities transferred guc trust mlc see note 8 “critical accounting policies estimates income taxes” item 7 “management’s discussion analysis” information regarding income taxes remaining capital net operating loss carryovers generated prior years still subject examination internal revenue service potentially could succeed claimants defined pursuant tax rules material uncertainties associated therewith guc trust administrator intends continue reevaluate amount distributable cash set aside quarterly basis additional information see “net assets liquidationdistributable cash set aside distribution” item 7 “management’s discussion analysis financial condition results operations” residual winddown claims costs upon dissolution debtors occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining disputed administrative expenses priority tax claims priority nontax claims secured claims “residual winddown claims” december 15 2011 plan debtors transferred guc trust amount assets necessary “residual winddown assets” satisfy ultimate allowed amount residual winddown claims including certain reasonable litigation defense costs related term loan avoidance action “avoidance action defense costs” estimated debtors costs fees expenses relating satisfying resolving residual winddown claims “residual winddown costs” residual winddown assets initially aggregated approximately 428 million amount consisted approximately 400 million cash including approximately 14 million designated payment avoidance action defense costs transferred benefit approximately 28 million prepaid expenses expected residual winddown claims residual winddown costs less residual winddown assets excess funds returned dip lenders also expected time guc trust administrator determines residual winddown assets adequate satisfy residual winddown claims including actual amount avoidance action defense costs residual winddown costs satisfied administrative cash remaining administrative cash guc trust administrator authorized guc trust monitor approval set aside bankruptcy court approval appropriate distributable cash cover shortfall extent distributable cash set aside andor appropriated obtain funding complete winddown debtors distributable cash available distribution beneficiaries guc trust therefore amount residual winddown claims residual winddown costs could reduce assets guc trust available distribution setting aside appropriation distributable cash including dividend cash reflected statement net assets liquidation financial statements guc trust rather set aside appropriated distributable cash including dividend cash reflected cash equivalents marketable securities accompanying statement net assets liquidation expended guc trust concluded affairs funds remaining obtained sale new gm securities appropriation distributable cash fund winddown process resolution satisfaction residual winddown claims distributed holders guc trust units march 31 2017 amount avoidance action defense costs incurred date exceeds corresponding cash 14 million received guc trust mlc dissolution date approximately 294 million result new residual winddown claims arisen amount excess april 2017 guc trust entered letter agreement administrative agent letter agreement provides guc trust’s obligation pay avoidance action defense costs administrative agent limited remaining designated residual winddown assets time term loan avoidance action resolved full final court order settlement court order settlement contains determination administrative agent oversecured respect loan subject term loan avoidance action otherwise contains voluntary agreement guc trust respect payment avoidance action defense costs accordingly time guc trust longer expects incur additional avoidance action defense costs beyond remaining designated residual winddown assets result decrease expected avoidance action defense costs reserves residual winddown claims costs decreased guc trust approximately 62 million quarter ended march 31 2017 decrease largely reversed increase 65 million reserves residual winddown claims costs quarter ended december 31 2016 expected avoidance action defense costs excess recorded reserves march 31 2017 residual winddown assets aggregating 119 million held guc trust recorded cash equivalents marketable securities 117 million deposits assets 02 million accompanying statement net assets liquidation march 31 2017 approximately 119 million expected residual winddown claims costs assets march 31 2017 including new residual winddown claims expected arise expected avoidance action defense costs remaining designated residual winddown assets corresponding amount aggregate recorded reserves residual winddown claims costs accounts payable accrued liabilities accompanying statement net assets liquidation march 31 2017 addition residual winddown assets guc trust also received dissolution date approximately 34 million cash mlc amount included 14 million respect certain costs fees expenses payable plan indenture trustees fiscal paying agents previously outstanding debt mlc “indenture trustee fiscal paying agent costs” ii 20 million respect reporting costs funds received credited reserve expected costs liquidation unused portion funds designated indenture trustee fiscal paying agent costs must returned dip lenders available distribution holders guc trust units winding conclusion guc trust march 31 2017 funds designated indenture trustee fiscal paying agents costs held guc trust approximated 02 million recorded cash equivalents accompanying statement net assets liquidation none approximately 20 million funds designated reporting costs remained march 31 2017 3 basis presentation significant accounting policies liquidation basis accounting guc trust exists solely purposes described note 1 finite life accordingly guc trust prepared accompanying financial statements liquidation basis accounting accordance accounting principles generally accepted united states america us gaap liquidation basis accounting prescribed financial accounting standards board fasb accounting standards codification assets stated estimated net realizable value nondiscounted amount cash asset expected converted liquidation period liabilities continue recognized amount required us gaap remeasured reflect anticipation entity legally released obligation additionally liquidation basis accounting reserve established estimated costs expected incurred liquidation period costs accrued reasonable basis estimation also accrual made estimated income cash expected received liquidation period extent reasonable basis estimation exists estimates periodically reviewed adjusted appropriate valuation assets realizable value accrual investment income marketable securities expected received liquidation period reserves residual winddown claims reserves expected liquidation costs represent estimates based present facts circumstances known guc trust administrator subject change guc trust beneficiaries future extent liquidating distributions yet paid current holders allowed general unsecured claims future current holders guc trust units disputed general unsecured claims resolved allowed thereby become allowed general unsecured claims holders thereof become entitled receive liquidating distributions distributable cash including dividend cash guc trust units pro rata amount claims upon occurrence guc trust incurs obligation distribute distributable cash accordingly liquidating distributions payable recorded amount distributable cash previously fair value new gm securities guc trust obligated distribute end period disputed general unsecured claims term loan avoidance action claims resolved allowed general unsecured claims similarly extent term loan avoidance action claims arise would become allowed manner described note 2 liquidating distributions payable would recorded distributable cash including related dividend cash would become distributable holders term loan avoidance action claims upon occurrence prior resolution allowance disputed general unsecured claims term loan avoidance action claims liabilities recorded conditional obligations associated disputed general unsecured claims potential term loan avoidance action claims rather beneficial interests guc trust beneficiaries residual assets guc trust reflected net assets liquidation guc trust financial statements liquidation basis accounting guc trust presents two principal financial statements statement net assets liquidation statement changes net assets liquidation addition although required liquidation basis accounting guc trust also presents statement cash flows accordance requirements guc trust agreement fiscal year guc trust’s fiscal year begins april 1 ends following march 31 cash equivalents cash equivalents consist amounts held bank accounts money market funds cash equivalents marketable securities accrued investment income cash equivalents marketable securities cash equivalents consist balances held money market funds marketable securities march 31 2017 2016 consist shortterm investments us treasury bills us government agency securities march 31 2016 guc trust valued securities fair value based carrying value us treasury bills carrying value approximates fair value based pricing models quoted market prices securities similar characteristics broker quotes us government agency securities beginning quarter ended june 30 2014 estimated investment income expected received shortterm investments marketable securities accrued liquidation basis accounting extent reasonable basis estimation exists holdings new gm securities accrued dividends new gm common stock guc trust previously held new gm securities future distribution respect allowed general unsecured claims guc trust units previously set aside distribution fund potential administrative costs income tax liabilities including taxes distribution dividend taxes investment income taxes securities held consisted shares new gm common stock new gm warrants described note 1 pursuant liquidation order guc trust liquidated holdings new gm securities july august 2015 guc trust valued holdings securities fair value based quoted closing market prices last trading day fiscal year beginning quarter ended june 30 2014 quarter ended march 31 2015 estimated dividends expected received holdings new gm common stock accrued liquidation basis accounting extent reasonable basis estimation existed quarter ended june 30 2015 based determination would best interests trust beneficiaries guc trust made determination file motion bankruptcy court seeking authority liquidate substantially guc trust’s holdings new gm securities motion approved bankruptcy court liquidation order described note 1 guc trust’s holdings new gm securities liquidated july august 2015 result guc trust longer expected receive dividends new gm common stock previously accrued estimated future dividends net dividends received june 2015 reversed quarter ended june 30 2015 dividends received new gm common stock required applied purpose new gm common stock dividends relate portion distributable cash applicable liquidated new gm common stock distributed holders subsequently resolved allowed claims guc trust units dividends relating distributable cash also distributed holders however distributable cash appropriated guc trust accordance guc trust agreement fund costs liabilities guc trust case dividends relating appropriated distributable cash applied costs liabilities guc trust like appropriated distributable cash maintained administrative cash dividends applied purpose associated distributable cash references distributable cash understood include dividends relating distributable cash unless expressly indicated otherwise amount cash equivalents marketable securities held guc trust relates dividends received guc trust new gm common stock previously held guc trust referred dividend cash included amount cash equivalents marketable securities held distribution guc trust beneficiaries referred distributable cash except extent dividends relating appropriated distributable cash classified administrative cash following appropriation assets deposits assets deposits consist principally accrued investment income prepaid expenses retainers professionals accounts payable liabilities accounts payable liabilities represent amounts due professionals service providers vendors services rendered goods received end period reserves residual winddown claims costs upon dissolution mlc occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining residual winddown claims date dissolution debtors transferred guc trust residual winddown assets amount necessary satisfy ultimate allowed amount residual winddown claims including certain avoidance action defense costs residual winddown costs estimated debtors corresponding amount recorded reserves residual winddown claims costs reserves increased expected increases avoidance action defense reasonable basis estimation expected exceed recorded reserves expected residual winddown claims residual winddown costs less residual winddown assets excess funds returned dip lenders also expected time collectively actual amounts residual winddown claims including certain avoidance action defense costs allowed residual winddown costs exceed residual winddown assets guc trust administrator may required set aside distribution appropriate distributable cash fund shortfall appropriation would reduce amount distributable cash including dividend cash available distribution holders guc trust units reserves expected costs liquidation basis accounting guc trust required estimate accrue costs associated implementing plan distributing guc trust’s distributable assets costs described winddown costs reporting costs note 2 consist principally professional fees costs governance administrative expenses amounts may vary significantly due among things time effort required complete distributions plan guc trust recorded reserves expected costs liquidation represent estimated costs incurred remaining liquidation period guc trust reasonable basis estimation amount liquidation costs ultimately incurred depends period time extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities march 31 2017 remaining liquidation period extends january 2019 estimated predominantly modified probabilityweighted basis guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome beginning quarter ended december 31 2016 remaining liquidation period dependent predominantly estimate remaining period time resolution litigation involving certain general motors vehicle recalls described part item 3 “legal proceedings” quarter developments vehicle recall litigation resulted extension estimated length time resolution litigation exceeds estimate remaining period time resolution term loan avoidance action previously primary determinant addition certain additional estimated time wind guc trust following resolution litigation included estimated liquidation period possible future developments general motors vehicle recall litigation well term loan avoidance action could extend current estimate remaining period time resolution therefore extend estimated remaining liquidation period guc trust beyond january 2019 addition certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued guc trust incurs liquidation costs reserves released offset costs incurred liability service provider recognized accounts payable accrued liability paid addition guc trust records reserves expected costs reasonable basis estimation applicable us gaap additional costs may identified time additional reserves must recorded costs identified guc trust records increase reserves charges increase addition reserves statement changes net assets liquidation process recording reserves expected costs liquidation matter financial reporting separate distinct process distributable cash set aside distribution purposes funding projected costs liquidation projected costs generally estimated conservative ie inclusive basis include contingencies permitted accrued reserves expected costs liquidation applicable us gaap complete description process setting aside distributable cash fund projected costs potential liabilities guc trust see item 7 “management’s discussion analysis financial condition results operationsnet assets liquidation” heading “distributable cash set aside distribution” income taxes guc trust considered disputed ownership fund pursuant treasury regulation section 1468b9 assets transferred guc trust passive investments guc trust taxed qualified settlement fund qsf pursuant treasury regulation section 1468b9c1ii qsf tax status guc trust approved internal revenue service private letter ruling issued march 2 2011 general qsf computes taxable income manner corporation pays federal income tax using trust income tax rates modified gross income modified gross income includes gross income pursuant internal revenue code section 61 less administrative expenses certain losses sale exchange worthlessness property net operating losses general disputed ownership fund taxed qsf recognize gross income assets transferred therefore guc trust recognized gross income transfer assets mlc guc trust generates gross income form interest dividend income including dividends received previous holdings new gm common stock recognizes capital gains andor losses upon disposition new gm securities recovery guc trust member settlement class related proposed settlement securities class action new gm described part item 3 “legal proceedings” reduced administrative expenses accumulated net operating capital losses compute modified gross income guc trust taxable federal income tax purposes current income tax liability asset recognized estimated taxes payable receivable year deferred tax liabilities assets recognized estimated future tax effects temporary differences financial reporting tax accounting deferred tax assets reviewed recoverability valuation allowances provided necessary guc trust subject state income taxes current law accordingly current deferred state income tax liabilities assets recorded process recognizing deferred tax assets liabilities current income taxes payable matter financial reporting separate distinct process distributable cash set aside distribution purposes funding potential income tax liabilities potential income tax liabilities generally estimated conservative ie inclusive basis may include amounts potential income tax liabilities beyond amounts permitted recorded applicable accounting standards complete description process setting aside distributable cash fund projected costs potential income tax liabilities guc trust see item 7 “management’s discussion analysis financial condition results operationsnet assets liquidation” heading “distributable cash set aside distribution” guc trust recognizes tax benefit uncertain tax position likely tax position sustained examination taxing authority based technical merits position review available evidence consultation guc trust professionals guc trust’s tax liability respect federal income tax returns year ended march 31 2016 prior years longer subject examination result application section 505b bankruptcy code however remaining capital loss carryovers generated years new tax position aggregate 243 million expiration march 31 2017 capital loss carryover 1581 million attributable year ended march 31 2012 along net operating loss carryovers generated march 31 2017 aggregating 1291 million could subject examination internal revenue service subsequent years losses utilized expected losses utilized future except potentially respect recovery guc trust member settlement class related proposed settlement securities class action new gm referred estimable time march 31 2017 known items would result significant accrual uncertain tax positions use estimates preparation financial statements liquidation basis conformity us gaap requires use estimates assumptions affect reported amounts assets liabilities estimates subject known unknown risks uncertainties factors could materially impact amounts reported disclosed financial statements related footnotes significant estimates include estimated investment income expected received expected liquidation costs residual winddown claims costs fair value marketable securities actual results could differ estimates recent accounting standards changes us gaap made fasb form accounting standards updates asu’s fasb’s accounting standards codification guc trust considers applicability impact asu’s asu’s noted herein assessed determined applicable reclassification certain balances statement net assets liquidation march 31 2016 made conform presentation march 31 2017 balance reserve residual winddown costs reclassified reserves expected costs liquidation reserves residual winddown claims costs reclassification also reflected note 7 periods presented 4 net assets liquidation description guc trust agreement plan described fully note 1 beneficiaries guc trust future extent liquidating distributions yet paid current holders allowed general unsecured claims future current holders guc trust units assets guc trust consisting primarily distributable cash including dividend cash described note 1 available distributed trust beneficiaries “guc trust distributable assets” accordance plan guc trust agreement except extent set aside appropriated funding expected costs liquidation expected avoidance action defense costs potential income tax liabilities guc trust amounts net assets liquidation presented accompanying statements net assets liquidation correspond amounts guc trust distributable assets respective dates certain adjustments including reductions amounts set aside distributable cash appropriated distributable cash march 31 2017 guc trust distributable assets aggregated approximately 4669 million additional information see “net assets liquidationdistributable assets” item 7 “management’s discussion analysis financial condition results operations” cash equivalents marketable securities march 31 2017 2016 cash equivalents marketable securities aggregated 5268 million 6655 million comprised following described note 5 march 31 2017 guc trust accrued liquidating distributions payable aggregating 92 million amount includes 74 million distributable cash distributable holders guc trust units respect excess guc trust distributable assets march 31 2017 addition march 31 2017 amount distributable cash reflected table includes 298 million amounts set aside projected guc trust fees costs expenses incurred beyond 2017 additional residual winddown claims expected arise additional avoidance action defense costs aggregate amount distributable cash pending distribution set aside available distribution march 31 2017 390 million potential recovery new gm shareholder class action proposed settlement described part item 3 “legal proceedings” guc trust filed proof claim settlement administrator connection proposed settlement class action new gm amount potential recovery guc trust proposed settlement estimable time accrued dividends holdings new gm common stock march 31 2015 guc trust accrued approximately 224 million estimated dividends expected declared new gm future received guc trust holdings new gm common stock estimated remaining liquidation period subsequent thereto based determination would best interests trust beneficiaries guc trust made determination file motion bankruptcy court seeking authority liquidate substantially guc trust’s holdings new gm securities motion approved bankruptcy court liquidation order described guc trust’s holdings new gm securities liquidated july august 2015 accordingly guc trust longer expects receive dividends new gm common stock accordingly accrued dividends march 31 2015 net dividends received june 2015 reversed accrual dividends made since march 31 2015 accrued investment income cash equivalents marketable securities march 31 2017 2016 guc trust accrued approximately 34 million 10 million respectively investment income marketable securities cash equivalents expected earned remaining liquidation period accordance liquidation basis accounting accrual march 31 2017 estimated principally based forecasted cash outflows expected returns based recent increases returns yields treasury bills marketable securities invested march 31 2016 accrual estimated principally using actual returns trailing number quarters approximates remaining period forecasted cash outflows potential distributable capital net operating loss carryovers described “critical accounting policies estimatesincome taxes” item 7 “management’s discussion analysis financial condition results operations” guc trust’s unused capital net operating loss carryovers potentially could succeed claimants defined pursuant tax rules upon termination guc trust reference made thereto information regarding potential distributable loss carryovers material uncertainties associated therewith trust units described note 1 plan holder allowed general unsecured claim retains contingent right receive pro rata basis additional distributable cash extent required satisfaction previously disputed general unsecured claims potential term loan avoidance action claims appropriation payment expenses residual winddown claims tax liabilities guc trust guc trust issues units representing contingent rights “guc trust units” rate one guc trust unit per 1000 allowed general unsecured claims holder allowed general unsecured claim subject rounding pursuant guc trust agreement connection initial recognition allowed general unsecured claim guc trust makes quarterly liquidating distributions holders guc trust units extent ia certain previously disputed general unsecured claims asserted debtors’ estates potential term loan avoidance action claims either disallowed otherwise resolved favorably guc trust thereby reducing amount guc trust assets reserved distribution respect asserted potential claims b certain excess guc trust distributable assets defined guc trust agreement previously set aside distribution released manner permitted guc trust agreement ii result foregoing amount excess guc trust distributable assets defined guc trust agreement end relevant quarter exceeds thresholds set forth guc trust agreement following table presents changes years ended march 31 2017 2016 2015 numbers guc trust units outstanding guc trust obligated issue 1 number guc trust units issuable time represents guc trust units issuable respect allowed general unsecured claims newly allowed fiscal year 2 number guc trust units outstanding time represents guc trust units issued respect allowed general unsecured claims allowed prior periods including guc trust units held guc trust benefit holders allowed general unsecured claims yet supplied information required guc trust order effect initial distribution entitled b governmental entities precluded applicable law receiving distributions guc trust units 3 number guc trust units outstanding issuable end year equal amount allowed general unsecured claims 1 1000 basis corresponding date additional guc trust units issued due rounding allowed disputed claims total cumulative pro rata liquidating distributions ultimately received trust beneficiaries dependent upon current amount allowed general unsecured claims final resolution outstanding disputed general unsecured claims potential term loan avoidance action claims described note 2 disputed general unsecured claims march 31 2017 reflect court ordered distribution “set aside” certain claims filed without claim amount adjustments ordered court permitted plan disputed general unsecured claims may settle amounts differ significantly amounts differ significantly historical pattern claims settled allowed proportion claims resolved disallowed described note 1 prior resolution allowance disputed general unsecured claims potential term loan avoidance action claims liabilities recorded conditional obligations associated disputed general unsecured claims potential term loan avoidance action claims liquidating distributions payable recorded amount distributable cash previously fair value new gm securities distributed end period disputed general unsecured claims resolved allowed general unsecured claims similarly extent potential term loan avoidance action claims arise would become allowed manner described note 2 liquidating distributions payable would recorded amount distributable cash would become distributable holders term loan avoidance action claims upon occurrence following table presents summary activity respect allowed disputed general unsecured claims term loan avoidance action claims years ended march 31 2017 2016 1 maximum amount unresolved claims represents sum disputed general unsecured claims term loan avoidance action claims 2 total claim amount represents sum allowed general unsecured claims maximum amount unresolved claims years ended march 31 2017 2016 avoidance action trust reached settlements certain defendants term loan avoidance action resulting recoveries avoidance action trust approximately 346000 55000 respectively result corresponding term loan avoidance action claims arose allowed guc trust agreement 5 liquidating distributions liquidating distributions years ended march 31 2017 2016 2015 consisted following distributions year ended march 31 2017 consisted distributions holders guc trust units excess distributions payable b holders allowed general unsecured claims previously failed fulfill informational requirements distribution established accordance guc trust agreement subsequently successfully fulfilled information requirements c holders certain term loan avoidance action claims distributions holders guc trust units year ended march 31 2017 resulted primarily release distributable assets guc trust previously set aside respect potential taxes distribution following expiration 60day statutory notification period set forth section 505b bankruptcy code respect guc trust’s us federal income tax return year ended march 31 2016 described note 8 distributions year ended march 31 2016 consisted 1 distributions holders guc trust units excess distributions payable 2 distributions holders allowed general unsecured claims whose claims newly allowed quarter ended december 31 2015 3 distributions holders allowed general unsecured claims previously failed fulfill informational requirements distribution established accordance guc trust agreement subsequently successfully fulfilled information requirements distributions holders guc trust units year ended march 31 2016 resulted primarily release distributable assets guc trust previously set aside respect potential taxes distribution following liquidation new gm securities distributions year ended march 31 2015 consisted 1 distributions holders guc trust units 2 distributions holders allowed general unsecured claims previously failed fulfill informational requirements distribution established accordance guc trust agreement subsequently successfully fulfilled information requirements distributions holders guc trust units year ended march 31 2015 resulted primarily release distributable assets guc trust previously set aside respect potential taxes distribution guc trust obligated march 31 2017 distribute distributable cash 92 million following 1 holders guc trust units excess distributions payable 2 certain holders allowed general unsecured claims satisfied certain informational requirements necessary effect distribution entitled 3 holders certain term loan avoidance action claims described note 3 6 fair value measurements accounting standards require certain assets liabilities reported fair value financial statements provide framework establishing fair value framework determining fair value based hierarchy prioritizes inputs valuation techniques used measure fair value trust’s cash equivalents marketable securities liquidating distributions payable presented provided hierarchy level 1in general fair values determined level 1 inputs use quoted prices active markets identical assets liabilities guc trust ability access level 2fair values determined level 2 inputs use inputs observable either directly indirectly level 2 inputs include quoted prices similar assets liabilities active markets inputs interest rates yield curves observable commonly quoted intervals level 3level 3 inputs unobservable inputs including inputs available situations little market activity related asset liability level 3 fair value measurements based primarily management’s estimates using pricing models discounted cash flow methodologies similar techniques taking account characteristics asset liability guc trust assets liabilities measured level 3 inputs march 31 2017 2016 instances inputs used measure fair value fall different levels fair value hierarchy fair value measurements entirety categorized based lowest level input significant valuation guc trust’s assessment significance particular inputs fair value measurements requires judgment considers factors specific asset liability guc trust also holds financial instruments measured fair value recurring basis including accounts payable liabilities fair value liabilities approximates carrying amounts accompanying financial statements due short maturity instruments following table presents information guc trust’s assets liabilities measured fair value recurring basis march 31 2017 2016 valuation techniques used guc trust determine fair values following descriptions valuation methodologies used assets liabilities measured fair value • due shortterm liquid nature fair value cash equivalents approximates carrying value • marketable securities march 31 2017 2016 consist us treasury bills us government agency securities march 31 2016 due shortterm maturities fair value us treasury bills approximates carrying value fair value us government agency securities based pricing models quoted prices securities similar characteristics broker quotes • liquidating distributions payable valued amount cash guc trust obligated distribute guc trust’s policy recognize transfers levels fair value hierarchy actual date event change circumstances caused transfer transfers years ended march 31 2017 2016 7 reserves expected costs liquidation residual winddown claims costs following summary activity reserves expected costs liquidation years ended march 31 2017 2016 2015 year ended march 31 2017 estimates expected winddown costs estimates expected reporting costs reasonable basis estimation increased 53 million 68 million respectively year ended march 31 2016 estimates expected winddown costs estimates expected reporting costs increased 56 million 21 million respectively year ended march 31 2015 estimates expected winddown costs estimates expected reporting costs increased 90 million 04 million respectively revisions estimates recorded additions reserves expected costs liquidation years guc trust recorded reserves expected costs liquidation represent amounts expected incurred estimated remaining liquidation period guc trust reasonable basis estimation amount liquidation costs ultimately incurred depends time period extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities march 31 2017 recorded reserves expected costs liquidation reflect estimated costs remaining liquidation period extending january 2019 estimated predominately modified probabilityweighted basis permitted us gaap guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome beginning quarter ended december 31 2016 remaining liquidation period dependent predominantly estimate remaining period time resolution litigation involving certain general motors vehicle recalls described part item 3 “legal proceedings” quarter developments vehicle recall litigation resulted extension estimated length time resolution litigation exceeds estimate remaining period time resolution term loan avoidance action previously primary determinant addition certain additional estimated time wind guc trust following resolution litigation included estimated liquidation period possible future developments general motors vehicle recall litigation well term loan avoidance action could extend current estimate remaining period time resolution therefore extend estimated remaining liquidation period guc trust beyond january 2019 addition certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued reasonably possible guc trust’s estimates regarding costs remaining liquidation period change near term following summary activity reserves residual winddown claims costs years ended march 31 2017 2016 2015 year ended march 31 2017 estimates expected residual winddown claims increased net amount 02 million increase charged addition reserves residual winddown claims costs described note 2 april 2017 guc trust entered letter agreement administrative agent letter agreement provides guc trust’s obligation pay avoidance action defense costs administrative agent limited remaining designated residual winddown assets time term loan avoidance action resolved full final court order settlement court order settlement contains determination administrative agent oversecured respect loan subject term loan avoidance action otherwise contains voluntary agreement guc trust respect payment avoidance action defense costs accordingly time guc trust longer expects incur additional avoidance action defense costs beyond remaining designated residual winddown assets result decrease expected avoidance action defense costs reserves residual winddown claims costs decreased guc trust approximately 62 million quarter ended march 31 2017 decrease largely reversed increase 65 million reserves residual winddown claims costs quarter ended december 31 2016 expected avoidance action defense costs excess recorded reserves 8 income taxes current tax benefit provision years ended march 31 2017 2016 2015 due cumulative net operating capital losses income taxes paid guc trust also deferred tax benefit provision years ended march 31 2017 2016 2015 result establishment full valuation allowance net deferred tax assets beginning end periods deferred taxes accompanying statement net assets liquidation march 31 2017 2016 comprised following components previously disclosed quarter ended september 30 2013 guc trust made determination file us federal income tax returns taking position beneficial ownership substantial majority new gm securities transferred mlc guc trust march 31 2011 tax basis new gm securities determined reference value securities date instead december 15 2011 record ownership remaining new gm securities still held mlc transferred mlc guc trust remaining substantial minority new gm securities transferred mlc guc trust guc trust determined transfer beneficial ownership occurred dates tax basis determined reference value securities dates new tax position resulted increased tax basis new gm securities prior tax position therefore reduced taxable gains increased taxable losses distributions sales new gm securities since march 31 2011 new tax position sustained examination internal revenue service date hereof however guc trust believes based available evidence consultation guc trust professionals likely new tax position sustained examination internal revenue service based technical merits position accordingly new tax position recognized current deferred income tax liabilities income tax provision guc trust’s financial statements since quarter ended september 30 2013 following guc trust’s determination utilize new tax position set forth guc trust filed us federal income tax returns years ended march 31 2013 thereafter internal revenue service using new tax position tax returns accompanied requests prompt determination tax liability pursuant section 505b bankruptcy code 60day statutory notification periods set forth section 505b bankruptcy code respect guc trust’s us federal income tax returns year ended march 31 2016 prior years expired accordingly tax liabilities set forth guc trust’s us federal income tax returns year ended march 31 2016 prior years longer subject examination internal revenue service income taxes assessed years also income taxes expected paid future result liquidation guc trust’s holdings new gm securities year ended march 31 2016 except potentially respect taxes due recoveries guc trust member settlement class related proposed settlement securities class action new gm described part item 3 “legal proceedings” estimable time recovery would potentially generate income tax liability unlikely event guc trust required recalculate previously recognized capital gains losses sale distribution new gm securities prior years using tax basis determined december 15 2011 record ownership previously held new gm securities transferred guc trust mlc rather march 31 2011 beneficial ownership substantial majority previously held new gm securities transferred guc trust mlc remaining capital loss carryovers generated prior years utilizing new tax position aggregate 243 million expiration march 31 2017 capital loss carryovers 1581 million attributable year ended march 31 2012 along net operating loss carryovers generated march 31 2017 aggregating 1291 million could subject examination internal revenue service subsequent years losses utilized guc trust expect utilize capital net operating loss carryovers future except respect recovery guc trust member settlement class related proposed settlement securities class action new gm described part item 3 “legal proceedings” estimable time remaining capital loss carryovers 243 million begin expire march 31 2018 net operating loss carryovers begin expire march 31 2032 loss carryovers aggregate result deferred tax asset 607 million reflected table described “critical accounting policies estimatesincome taxes” item 7 “management’s discussion analysis” guc trust’s loss carryovers potentially could succeed claimants defined pursuant tax rules reference made thereto information regarding potential distributable loss carryovers material uncertainties associated therewith full valuation allowance net deferred tax assets aggregating 673 million 1215 million established march 31 2017 2016 respectively result liquidation guc trust’s holdings new gm securities determined deferred tax assets realizable time valuation allowance decreased 542 million increased 855 million years ended march 31 2017 2016 respectively 9 related party transactions addition serving guc trust administrator wilmington trust company continues serve trustee pursuant indentures certain series previously outstanding debt mlc wilmington trust company received continue receive certain customary fees amounts consistent wilmington trust company’s standard rates service bankruptcy court previously approved creation segregated fund purposes funding fees wilmington trust company well indenture trustees fiscal paying agents previously outstanding debt mlc fees wilmington trust company years ended march 31 2017 2016 2015 addition wilmington trust company also entered certain arrangements guc trust pursuant affiliates previously received may future receive reasonable customary fees commissions services capacity guc trust administrator arrangements include provision custodial investment advisory brokerage services guc trust years ended march 31 2017 2016 2015 total amount fees commissions approximately 299000 235000 35000 respectively item 9 item 8 general motors corporation subsidiaries consolidated statements income years ended december 31 2004 2003 2002 dollars millions except per share amounts general motors corporation subsidiaries total net sales revenues notes 1 23 193517 185837 177867 cost sales expenses 159951 152435 147192 selling general administrative expenses 20394 20957 20834 interest expense note 15 11980 9464 7503 total costs expenses 192325 182856 175529 income continuing operations income taxes equity income minority interests 1192 2981 2338 income tax benefit expense note 10 911 731 644 equity income loss minority interests 702 612 281 income continuing operations 2805 2862 1975 loss discontinued operations note 2 219 239 gain sale discontinued operations 1179 net income 2805 3822 1736 dividends preference stocks 46 earnings attributable common stocks note 19 2805 3822 1690 basic earnings loss per share attributable common stocks 123 par value continuing operations 497 510 353 discontinued operations 214 016 earnings per share attributable 123 par value 497 724 337 losses per share discontinued operations attributable class h 022 021 earnings loss per share attributable common stocks assuming dilution 123 par value continuing operations 495 503 351 discontinued operations 211 016 earnings per share attributable 123 par value 495 714 335 losses per share discontinued operations attributable class h 022 021 reference made notes consolidated financial statements ii25 general motors corporation subsidiaries supplemental information consolidated statements income years ended december 31 2004 2003 2002 dollars millions automotive operations total net sales revenues notes 1 23 161545 155831 150250 cost sales expenses 150053 143525 138397 selling general administrative expenses 11863 11737 11680 total costs expenses 161916 155262 150077 interest expense note 15 2480 1780 479 net expense transactions financing insurance operations note 1 273 297 327 loss continuing operations income taxes equity income minority interests 3124 1508 633 income tax benefit note 10 2325 869 378 equity income loss minority interests 710 674 348 income loss continuing operations 89 35 93 loss discontinued operations note 2 219 239 gain sale discontinued operations 1179 net income loss automotive operations 89 995 146 financing insurance operations total revenues 31972 30006 27617 interest expense note 15 9500 7684 7024 depreciation amortization expense note 11 5523 5567 5245 operating expenses 8591 8604 8519 provisions financing insurance losses note 1 4315 3959 4185 total costs expenses 27929 25814 24973 net income transactions automotive operations note 1 273 297 327 income taxes equity income minority interests 4316 4489 2971 income tax expense note 10 1414 1600 1022 equity income loss minority interests 8 62 67 net income financing insurance operations 2894 2827 1882 supplemental information intended facilitate analysis general motors corporations businesses 1 automotive operations 2 financing insurance operations reference made notes consolidated financial statements ii26 general motors corporation subsidiaries consolidated balance sheets december 31 2004 2003 assets dollars millions cash equivalents note 1 35993 32554 marketable securities note 5 21737 22215 total cash marketable securities 57730 54769 finance receivables net note 7 199600 174769 loans held sale 19934 19609 accounts notes receivable less allowances 21236 20532 inventories less allowances note 8 12247 11602 deferred income taxes note 10 26241 27190 net equipment operating leases less accumulated depreciation note 9 34214 32751 equity net assets nonconsolidated affiliates 6776 6032 property net note 11 39020 37972 intangible assets net notes 1 12 4925 4760 assets note 13 57680 58521 total assets 479603 448507 liabilities stockholders equity accounts payable principally trade 28830 25422 notes loans payable note 15 300279 271756 postretirement benefits pensions note 16 28111 36292 pensions note 16 9455 8024 deferred income taxes notes 10 14 7078 7508 accrued expenses liabilities note 14 77727 73930 total liabilities 451480 422932 minority interests 397 307 stockholders equity note 18 123 par value common stock outstanding 565132021 561997725 shares 942 937 capital surplus principally additional paidin capital 15241 15185 retained earnings 14428 12752 subtotal 30611 28874 accumulated foreign currency translation adjustments 1194 1815 net unrealized gains derivatives 589 51 net unrealized gains securities 751 618 minimum pension liability adjustment 3031 2460 accumulated comprehensive loss 2885 3606 total stockholders equity 27726 25268 total liabilities stockholders equity 479603 448507 reference made notes consolidated financial statements ii27 general motors corporation subsidiaries supplemental information consolidated balance sheets december 31 general motors corporation subsidiaries 2004 2003 assets dollars millions automotive operations cash equivalents note 1 13148 14424 marketable securities note 5 6655 9067 total cash marketable securities 19803 23491 accounts notes receivable less allowances 6713 5380 inventories less allowances note 8 11717 10960 net equipment operating leases less accumulated depreciation note 9 6488 7173 deferred income taxes current assets note 10 10794 10851 total current assets 55515 57855 equity net assets nonconsolidated affiliates 6776 6032 property net note 11 37170 36071 intangible assets net notes 1 12 1599 1479 deferred income taxes note 10 17399 18086 assets note 13 40844 42262 total automotive operations assets 159303 161785 financing insurance operations cash equivalents note 1 22845 18130 investments securities note 5 15082 13148 finance receivables net note 7 199600 174769 loans held sale 19934 19609 net equipment operating leases less accumulated depreciation note 9 27726 25578 assets note 13 35113 35488 net receivable automotive operations note 1 2426 1492 total financing insurance operations assets 322726 288214 total assets 482029 449999 liabilities stockholders equity automotive operations accounts payable principally trade 24257 21542 loans payable note 15 2062 2813 accrued expenses note 14 46147 45417 net payable financing insurance operations note 1 2426 1492 total current liabilities 74892 71264 longterm debt note 15 30460 29593 postretirement benefits pensions note 16 23406 32285 pensions note 16 9371 7952 liabilities deferred income taxes notes 10 14 15657 15567 total automotive operations liabilities 153786 156661 financing insurance operations accounts payable 4573 3880 debt note 15 267757 239350 liabilities deferred income taxes note 10 14 27790 24533 total financing insurance operations liabilities 300120 267763 total liabilities 453906 424424 minority interests 397 307 total stockholders equity 27726 25268 total liabilities stockholders equity 482029 449999 supplemental information intended facilitate analysis general motors corporations businesses 1 automotive operations 2 financing insurance operations reference made notes consolidated financial statements ii28 general motors corporation subsidiaries consolidated statements cash flows years ended december 31 2004 2003 2002 cash flows operating activities dollars millions income continuing operations 2805 2862 1975 adjustments reconcile income continuing operations net cash provided operating activities depreciation amortization expenses 14152 13513 11569 mortgage servicing rights amortization 1384 1602 3871 provision financing losses 1944 1721 2153 postretirement employee benefit opeb expense 4567 4599 4108 opeb payments 3974 3536 3334 veba 401h contributions 8618 3000 1000 pension expense 2456 3412 1780 pension contributions 919 18168 5156 retiree lump sum vehicle voucher expense net payments 329 923 254 net change mortgage loans 445 456 4715 net change mortgage securities 597 236 656 change investments miscellaneous assets 57 416 1914 change operating assets liabilities note 1 1628 2277 3391 122 197 2211 net cash provided operating activities note 1 13061 2956 11075 cash flows investing activities expenditures property 7753 7091 6871 investments marketable securities acquisitions 15278 28660 39386 investments marketable securities liquidations 15350 24253 35688 net change mortgage servicing rights 1554 2557 1711 increase finance receivables 40278 59978 51081 proceeds sale finance receivables 23385 22182 30013 proceeds form sale business units 4148 operating leases acquisitions 14324 11032 16070 operating leases liquidations 7696 9604 13504 investments companies net cash acquired note 1 60 201 870 1048 1516 667 net cash used investing activities note 1 31768 50848 36117 cash flows financing activities net increase loans payable 2192 235 770 longterm debt borrowings 73511 97391 51411 longterm debt repayments 57822 38962 24365 repurchases common preference stocks 97 proceeds issuing common stocks 62 proceeds sales treasury stocks 60 19 cash dividends paid stockholders 1129 1121 4723 1319 333 net cash provided financing activities 21475 58922 27012 net cash provided discontinued operations 275 effect exchange rate changes cash equivalents 671 929 495 net increase cash equivalents 3439 12234 2465 cash equivalents beginning year 32554 20320 17855 cash equivalents end year 35993 32554 20320 reference made notes consolidated financial statements ii29 supplemental information intended facilitate analysis general motors corporations businesses 1 automotive operations 2 financing insurance operations classification cash flows financing insurance operations consistent presentation gms consolidated statement cash flows see note 1 reference made notes consolidated financial statements ii30 write deferred taxes related 1999 spin delphi automotive systems reference made notes consolidated financial statements ii31 general motors corporation subsidiaries notes consolidated financial statements note 1 significant accounting policies principles consolidation consolidated financial statements include accounts general motors corporation domestic foreign subsidiaries 50 owned principally general motors acceptance corporation subsidiaries gmac collectively referred corporation general motors gm addition gm consolidates variable interest entities vies deemed primary beneficiary general motors share earnings losses associates least 20 voting securities owned included consolidated operating results using equity method accounting except investments gm able exercise significant influence operating financial decisions investee case cost method accounting used gm encourages reference gmac annual report form 10k period ended december 31 2004 filed separately us securities exchange commission sec certain amounts 2003 2002 reclassified conform 2004 classifications nature operations financial statement presentation supplemental information gm presents primary financial statements fully consolidated basis transactions businesses eliminated corporations consolidated financial statements transactions consist principally borrowings financial services provided financing insurance operations fio automotive operations auto master intercompany agreement governs nature transactions ensure done arms length basis accordance commercially reasonable standards facilitate analysis gm presents supplemental information statements income balance sheets statements cash flows following businesses 1 auto consists design manufacturing marketing cars trucks locomotives related parts accessories 2 fio consists primarily gmac provides broad range financial services including consumer vehicle financing fullservice leasing fleet leasing dealer financing car truck extended service contracts residential commercial mortgage services vehicle homeowners insurance assetbased lending statements cash flows considering concerns raised staff sec management concluded certain prior year balances consolidated statements cash flows reclassified appropriately present net cash provided operating activities net cash used investing activities corporations previous policy classify cash flow effects providing wholesale loans independent dealers gms financing insurance operations investing activity consolidated statements cash flows policy applied financing inventory sales effect presenting investing cash outflow operating cash inflow even though cash inflow outflow consolidated basis corporation changed policy eliminate intersegment activity consolidated statements cash flows result change cash flow effects related wholesale loans reflected operating activities section consolidated statement cash flows 2004 reclassification better reflects financing sale inventory noncash transaction gm consolidated basis eliminates effects intercompany transactions following table shows effects reclassification prior years consistent 2004 presentation years ended december 31 2003 2002 dollars millions net cash provided operating activities previously reported 7600 15482 reclassification 4644 4407 revised net cash provided operating activities 2956 11075 net cash used investing activities previously reported 55492 40524 reclassification 4644 4407 revised net cash used investing activities 50848 36117 use estimates preparation financial statements preparation financial statements conformity accounting principles generally accepted united states requires management make estimates assumptions affect amounts reported therein due inherent uncertainties involved making estimates actual results reported future periods may differ estimates ii32 general motors corporation subsidiaries notes consolidated financial statements note 1 significant accounting policies continued revenue recognition sales generally recorded products shipped title risks rewards ownership passed services rendered independent dealers third parties provisions dealer customer sales incentives allowances rebates made time vehicle sales incentives allowances rebates related vehicles previously sold recognized reductions sales announced financing revenue recorded terms receivables using interest method income operating lease assets recognized straightline basis scheduled lease terms insurance premiums earned basis related coverage provided terms policies commissions premium taxes costs incurred acquiring new business deferred amortized terms related policies basis premiums earned advertising research development advertising research development productrelated costs charged expense incurred advertising expense 51 billion 2004 47 billion 2003 44 billion 2002 research development expense 65 billion 2004 62 billion 2003 60 billion 2002 depreciation amortization expenditures special tools placed service january 1 2002 amortized using straightline method estimated useful lives expenditures special tools placed service prior january 1 2002 amortized estimated useful lives primarily using units production method replacements special tools reasons changes products charged directly cost sales january 1 2001 corporation adopted straightline method depreciation real estate plants equipment placed service date assets placed service january 1 2001 continue generally depreciated using accelerated methods accelerated methods accumulate depreciation approximately twothirds depreciable cost first half estimated useful lives property groups compared straightline method allocates depreciable costs equally estimated useful lives property groups management believes adoption straightline amortizationdepreciation method special tools placed service january 1 2002 real estate plants equipment placed service january 1 2001 better reflects consistent use assets useful lives equipment operating leases depreciated using straightline method term lease agreement auto difference net book value proceeds sale salvage items disposed accounted charge credit sales allowances valuation longlived assets gm periodically evaluates carrying value longlived assets held used business goodwill intangible assets indefinite lives assets held sale events circumstances warrant generally conjunction annual business planning cycle carrying value longlived asset considered impaired loss recognized based amount carrying value exceeds fair market value assets held used assets held sale loss increased costs sell fair market value determined primarily using anticipated cash flows discounted rate commensurate risk involved longlived assets disposed sale considered held used disposed foreign currency transactions translation foreign currency exchange transaction translation losses including effect derivatives net taxes included consolidated net income 2004 2003 2002 pursuant sfas 52 foreign currency translation amounted 167 million 122 million 103 million respectively policy warranty provisions estimated expenses related product warranties made time products sold estimates established using historical information nature frequency average cost warranty claims management actively studies trends warranty claims takes action improve vehicle quality minimize warranty claims see note 14 ii33 general motors corporation subsidiaries notes consolidated financial statements note 1 significant accounting policies continued exit disposal activities costs consolidate close facilities relocate employees expensed incurred costs terminate contract without economic benefit corporation expensed time contract terminated onetime termination benefits subject contractual arrangements provided employees involuntarily terminated recorded management commits detailed plan termination plan communicated employees actions required complete plan indicate significant changes likely employees required render service terminated order earn termination benefit benefits recognized ratably future service period cash equivalents cash equivalents defined shortterm highlyliquid investments original maturities 90 days less statements cash flows supplementary information years ended december 31 automotive operations 2004 2003 2002 dollars millions increase decrease cash due changes operating assets liabilities follows accounts receivable 284 575 93 prepaid expenses deferred charges 42 578 268 inventories 156 518 221 accounts payable 1723 2400 1053 deferred taxes income taxes payable 329 2219 1825 accrued expenses liabilities 143 3049 5517 fleet rental acquisitions 7846 7761 5595 fleet rental liquidations 6686 4831 4262 total 307 3067 3808 cash paid interest 2508 1398 1033 2004 2003 auto made investments companies net cash acquired approximately 50 million 60 million respectively 2002 auto made investments companies net cash acquired approximately 700 million amount consists primarily gms purchase 446 equity interest gm daewoo auto technology company gmdat approximately 251 million gms investments isuzurelated entities 180 million years ended december 31 financing insurance operations 2004 2003 2002 dollars millions increase decrease cash due changes operating assets liabilities follows receivables 419 5236 6716 assets 111 186 241 accounts payable liabilities 1008 1664 925 deferred taxes income taxes payable 621 1958 683 total 1321 5344 7199 cash paid interest 8887 6965 6333 ii34 general motors corporation subsidiaries notes consolidated financial statements note 1 significant accounting policies continued fio made investments companies net cash acquired approximately 10 million 140 million 180 million 2004 2003 2002 respectively derivative instruments gm party variety foreign exchange rate interest rate commodity forward contracts options entered connection management exposure fluctuations foreign exchange rates interest rates certain commodity prices financial exposures managed accordance corporate policies procedures derivatives recorded fair value consolidated balance sheet effective changes fair value derivatives designated cash flow hedges net investment foreign operation recorded net unrealized gain loss derivatives separate component comprehensive income loss amounts reclassified accumulated comprehensive income loss underlying hedged item affects earnings ineffective changes fair value recorded currently earnings changes fair value derivatives designated fair value hedges recorded currently earnings offset extent derivative effective changes fair value hedged item changes fair value derivatives designated hedging instruments recorded currently earnings new accounting standards beginning january 1 2003 corporation began expensing fair market value newly granted stock options stockbased compensation awards employees pursuant sfas 123 accounting stockbased compensation fair value stock option grants estimated date grant using blackscholes optionpricing model fair value stock compensation awards determined market price gm 123 par value common stock date grant total expense 2004 2003 61 million 38 million net tax 229 million 142 million net tax respectively recorded cost sales expenses 2002 prior years permitted sfas 123 gm applied intrinsic value method recognition measurement accounting principles board opinion 25 apb 25 accounting stock issued employees stock options stockbased employee compensation awards compensation expense related employee stock options reflected net income periods options granted exercise price equal market value underlying common stock date grant accordance disclosure requirements sfas 148 accounting stockbased compensation transition disclosure since gm adopted fair value based method accounting stockbased employee compensation pursuant sfas 123 effective january 1 2003 newly granted stockbased compensation awards following table illustrates effect net income earnings per share compensation cost outstanding unvested stock options stockbased employee compensation awards determined based fair values grant date dollars millions except per share amounts ii35 general motors corporation subsidiaries notes consolidated financial statements note 1 significant accounting policies continued new accounting standards continued years ended december 31 2004 2003 2002 net income continuing operations reported 2805 2862 1975 add stockbased compensation expense included reported net income net related tax effects 38 142 44 deduct total stockbased compensation expense determined fair value based method awards net related tax effects 52 195 187 pro forma net income continuing operations 2791 2809 1832 basic earnings per share continuing operations attributable gm 123 par value reported 497 510 353 pro forma 494 501 327 diluted earnings per share continuing operations attributable gm 123 par value reported 495 503 351 pro forma 492 493 326 december 2004 financial accounting standards board fasb revised sfas 123 sfas 123r requiring companies record sharebased payment transactions compensation expense fair market value sfas 123r defines concept fair market value relates arrangements provisions statement effective beginning first interim annual reporting period begins june 15 2005 corporation began expensing fair market value newly granted stock options stockbased compensation awards employees pursuant sfas 123 2003 therefore statement expected material effect gms consolidated financial position results operations effective july 1 2003 corporation began consolidating certain variable interest entities conform fasb interpretation 46 consolidation variable interest entities fin 46 gm adopted revision fin 46 fin 46r clarified certain provisions original interpretation exempted certain entities requirements january 1 2004 adoption fin 46r significant effect corporations financial condition results operations may 19 2004 fasb released fasb staff position fas 1062 fsp 1062 provides accounting guidance respect medicare prescription drug improvement modernization act 2003 medicare act fsp 1062 provides guidance accounting prescription drug benefit medicare act prescribes transition new guidance sets forth new disclosure requirements gms adoption july 1 2004 accounting provisions fsp 1062 significant effect corporations financial condition results operations note 16 includes disclosures required fsp 1062 november 2004 fasb issued sfas 151 inventory costs amendment arb 43 chapter 4 sfas 151 amends guidance arb 43 inventory pricing abnormal amounts idle facility expense freight handling costs wasted material spoilage requiring items recognized currentperiod expenses regardless whether meet criterion abnormal statement also requires allocation fixed production overheads costs conversion based normal capacity production facilities statement effective inventory costs incurred fiscal years beginning june 15 2005 management expect statement material impact gms consolidated financial position results operations ii36 general motors corporation subsidiaries notes consolidated financial statements note 1 significant accounting policies concluded december 2004 fasb issued sfas 153 exchanges nonmonetary assets amendment apb opinion 29 apb opinion 29 accounting nonmonetary transactions based principle exchanges nonmonetary assets measured based fair value assets exchanged sfas 153 amends apb opinion 29 eliminating exception fair value accounting nonmonetary exchanges similar productive assets replaces general exception fair value accounting nonmonetary exchanges commercial substance nonmonetary exchange commercial substance future cash flows entity expected change significantly result exchange statement effective nonmonetary asset exchanges occurring fiscal periods beginning june 15 2005 management expect statement material impact gms consolidated financial position results operations labor force gm worldwide basis concentration labor supply employees working union collective bargaining agreements certain contracts expired 2003 united auto workers uaw labor contract ratified october 6 2003 covering fouryear term 20032007 contract included 3000 lump sum payment per uaw employee paid october 2003 3 performance bonus per uaw employee paid october 2004 gm amortizes payments 12month period following respective payment dates uaw employees receive gross wage increase 2 2005 3 2006 active uaw employees also granted pension benefit increases pension benefit increases granted current retirees surviving spouses however contract provide four lump sum payments two vehicle discount vouchers current retirees surviving spouses retiree lump sum payments vehicle discount vouchers resulted charge gms 2003 cost sales approximately 12 billion 725 million tax note 2 discontinued operations december 22 2003 gm completed series transactions resulted splitoff hughes gm simultaneous sale gms approximately 198 economic interest hughes news corporation ltd news corporation transactions gm split hughes distributing hughes common stock holders gm class h common stock exchange outstanding shares gm class h common stock simultaneously gm sold 198 economic interest hughes news corporation exchange cash news corporation preferred american depositary shares preferred adss shares gm class h common stock cancelled news corporation acquired former gm class h common stockholders additional 142 outstanding shares hughes common stock exchange news corporation preferred adss gm sold 80 198 retained economic interest hughes news corporation total approximately 31 billion cash gm sold remaining 20 retained economic interest hughes news corporation approximately 286 million news corporation preferred adss valued 819 million december 22 2003 including hughes transaction expenses approximately 90 million gm recorded net gain 12 billion sale gms approximately 198 economic interest hughes reported gain sale discontinued operations gms consolidated statement income 2003 addition result transactions net reduction gms stockholders equity approximately 70 billion news corporation preferred adss sold gm january 2004 financial data related gms investment hughes december 22 2003 classified discontinued operations periods presented financial data hughes reflect historical results operations cash flows businesses considered part hughes business segment gm respective period assets liabilities hughes respective dates hughes net sales included discontinued operations 98 billion 95 billion 2003 2002 respectively hughes net losses discontinued operations 219 million 239 million 2003 2002 respectively ii37 general motors corporation subsidiaries notes consolidated financial statements note 3 asset impairments gm recorded pretax charges income asset impairments 736 million 461 million tax 081 per diluted share 2004 835 million 533 million tax 094 per diluted share 2003 254 million 158 million 0tax 028 per diluted share 2002 charges recorded cost sales expenses income statement 2004 pretax charges comprised 609 million 383 million tax related special tools assets related product lines 127 million 78 million tax related facilities rationalization actions gms baltimore maryland linden new jersey plants 2003 pretax charges comprised 767 million 491 million tax related special tools assets related product lines 68 million 42 million tax related real estate 2002 charges related production facilities special tools note 4 investment nonconsolidated affiliates nonconsolidated affiliates gm identified herein investees gm owns equity interest gm uses equity method accounting gm ability exert significant influence decisions relating operating financial affairs gms significant affiliates percentage gms current equity ownership voting interest include following italy gmfiat powertrain fgp 50 2004 2003 2002 japan fuji heavy industries ltd 201 2004 211 2003 2002 suzuki motor corporation 204 2004 203 2003 2002 china shanghai general motors co ltd 50 2004 2003 2002 saic gm wuling automobile co ltd 34 2004 2003 2002 south korea gmdat 446 2004 2003 2002 february 13 2005 gm entered certain agreements fiat spa fiat refer note 25 result gm longer hold interest fgp information regarding book value gms investments share income affiliates well total assets liabilities significant affiliates included table millions south 2004 italy japan china korea book value gms investments affiliates 1293 3174 1173 193 gms share affiliates net income loss 87 255 417 53 total assets significant affiliates 1 8616 30582 3730 5288 total liabilities significant affiliates 1 5539 17417 1931 4447 book value gms investments affiliates 946 2781 964 200 gms share affiliates net income loss 95 196 414 74 total assets significant affiliates 1 7933 29622 3103 3263 total liabilities significant affiliates 1 5304 17764 1460 2892 book value gms investments 753 2322 659 252 affiliates gms share affiliates net income 80 133 123 45 loss total assets significant affiliates 1 6589 24579 1956 2277 total liabilities significant affiliates 1 4479 14966 813 1771 1 defined note 5 marketable securities marketable securities held gm classified availableforsale except certain mortgagerelated securities classified heldtomaturity trading securities news corporation adss classified trading securities unrealized gains losses net related income taxes availableforsale heldtomaturity securities included separate component stockholders equity unrealized gains losses trading securities included income current basis gm determines cost specific identification basis ii38 general motors corporation subsidiaries notes consolidated financial statements note 5 marketable securities continued automotive operations investments marketable securities follows dollars millions bookfair unrealized cost value gains losses december 31 2004 type security corporate debt securities 3697 3691 12 18 us government agencies 2146 2141 6 11 mortgagebacked securities 826 823 3 6 total marketable securities 6669 6655 21 35 december 31 2003 type security corporate debt securities 5246 9 us government agencies 2865 2867 9 7 mortgagebacked securities 90 total debt securities available 8201 8203 18 16 sale news corporation adss 819 864 total marketable securities 9020 9067 18 16 debt securities totaling 951 million mature within one year 48 billion mature one five years 358 million mature five ten years 574 million mature ten years proceeds sales marketable securities totaled 148 billion 2004 71 billion 2003 47 billion 2002 gross gains related sales marketable securities 25 million 7 million 3 million 2004 2003 2002 respectively gross losses related sales marketable securities 30 million 2004 11 million 2003 1 million 2002 financing insurance operations investments marketable securities follows dollars millions bookfair unrealized cost value gains losses december 31 2004 type security bonds notes securities united states government agencies 2198 2208 18 8 states municipalities 556 596 40 foreign government securities 792 805 14 1 mortgage assetbacked securities 1988 2074 97 11 corporate debt securities 3399 3489 97 7 total debt securities availableforsale 8933 9172 266 27 mortgagebacked securities heldtomaturity 135 mortgagebacked securities held trading purposes 3510 3545 35 total debt securities 12578 12852 301 27 equity securities 1505 2230 731 6 total investment marketable securities 14083 15082 1032 33 total consolidated marketable securities 20752 21737 1053 68 ii39 general motors corporation subsidiaries notes consolidated financial statements note 5 marketable securities continued bookfair unrealized cost value gains losses december 31 2003 type security bonds notes securities united states government agencies 716 722 7 1 states municipalities 575 626 51 foreign government securities 681 689 10 2 mortgage assetbacked securities 1801 1944 150 7 corporate debt securities 2965 3087 128 6 total debt securities availableforsale 6738 7068 346 16 mortgagebacked securities heldtomaturity 240 mortgagebacked securities held trading purposes 4483 4142 341 total debt securities 11461 11450 346 357 equity securities 1185 1698 522 9 total investment marketable securities 12646 13148 868 366 total consolidated marketable securities 21666 22215 886 382 debt securities availableforsale totaling 14 billion mature within one year 25 billion mature one five years 26 billion mature five years ten years 07 billion mature ten years mortgagebacked securities interests securitization trusts totaled 2 billion proceeds sales marketable securities totaled 32 billion 2004 76 billion 2003 128 billion 2002 gross gains related sales marketable securities 138 million 270 million 402 million 2004 2003 2002 respectively gross losses related sales marketable securities 49 million 202 million 121 million 2004 2003 2002 respectively gross unrealized losses fair value corporations investments unrealized loss position deemed otherthantemporarily impaired summarized following table december 31 2004 less 12 months 12 months longer unrealized fair value losses fair value losses dollars millions automotive operations available sale securities corporate debt securities 1698 16 81 3 us government agencies 1293 11 mortgage backed securities 418 4 33 1 total marketable securities 3409 31 114 4 financing insurance operations available sale securities debt securities us treasury federal agencies 971 8 foreign government securities 208 1 mortgagebacked securities residential 67 5 commercial 343 2 14 1 interestonly strips 27 3 corporate debt securities 547 5 35 2 total debt securities 2198 26 14 1 equity securities 88 6 total available sale securities 2286 32 14 1 total held maturity securities 15 1 ii40 general motors corporation subsidiaries notes consolidated financial statements continued note 6 variable interest entities discussed note 1 gm applied provisions fin 46 later clarified fin 46r variable interest entities beginning july 1 2003 connection application fin 46 gm providing information concerning variable interest entities 1 consolidated gm deemed primary beneficiary 2 entities gm consolidate although gm significant interests variable interest entities gm primary beneficiary automotive operations synthetic leases gm leases real estate equipment various special purpose entities spes established facilitate financing assets gm nationally prominent creditworthy lessors assets consist principally office buildings warehouses machinery equipment use spes allows parties providing financing isolate particular assets single entity thereby syndicate financing multiple third parties conventional financing technique used lower cost borrowing thus lease cost lessee gm wellestablished market institutions participate financing property purchase interests spes certain spes determined vies fin 46 leases gm provides residual value guarantee leased property considered primary beneficiary fin 46 gm consolidated entities july 1 2003 resulted auto initial increase assets debt 917 million cumulative effect accounting change recorded cost sales 27 million aftertax december 31 2004 carrying amount assets liabilities consolidated fin 46r amounted 883 million 10 billion respectively assets consolidated classified property gms consolidated financial statements gms maximum exposure loss related consolidated vies amounts 888 million lease arrangements involving vies gm holds significant variable interests considered primary beneficiary fin 46r gms maximum exposure loss related vies gm significant variable interest consolidate entity amounts 592 million financing insurance operations automotive finance receivables certain securitization transactions gmac transfers consumer finance receivables wholesale lines credit banksponsored multiseller commercial paper conduits provide funding source gmac well transferors conduit fund purchase receivables issuance commercial paper total assets outstanding banksponsored conduits approximated 161 billion december 31 2004 gmac variable interest conduits considered primary beneficiary gmac retain majority expected losses returns gmacs maximum exposure loss result involvement nonconsolidated variable interest entities 168 million would incurred event complete loss assets gmac transferred mortgage warehouse funding gmacs mortgage operations transfer commercial residential mortgage loans various structured finance arrangements order provide funds origination purchase future loans structured finance arrangements include transfers warehouse funding entities including gmac banksponsored commercial paper conduits transfers assets gmac facility accounted either sales offbalance sheet secured financings onbalance sheet based provisions sfas 140 accounting transfers servicing financial assets extinguishments liabilities however either case creditors facilities legal recourse general credit gmac warehouse funding entities represent variable interest entities fin 46r management determined certain mortgage warehouse funding facilities gmac primary beneficiary consolidates entities accordance fin 46r assets residential mortgage warehouse entities totaled 46 billion december 31 2004 majority included loans held sale finance receivables net corporations consolidated balance sheet assets commercial mortgage warehouse entities totaled 526 million december 31 2004 majority included loans held sale finance receivables loans net unearned income corporations consolidated balance sheet beneficial interest holders variable interest entities legal recourse general credit gmac ii41 general motors corporation subsidiaries notes consolidated financial statements continued note 6 variable interest entities continued residential mortgage loan alliances gmac invested strategic alliances several mortgage loan originators alliances may include common preferred equity investments working capital subordinated lending warrants addition warehouse lending arrangements management determined gmac majority expected losses returns consolidation appropriate fin 46r total assets alliances 174 million december 31 2004 gmacs maximum exposure loss alliances including commitments lend additional funds purchase loans abovemarket rates 285 million december 31 2004 construction real estate lending gmac uses spe finance construction lending receivables spe purchases holds receivables funds majority purchases financing obtained thirdparty assetbacked commercial paper conduits gmac primary beneficiary consolidates entity accordance fin 46r assets entity totaled 12 billion december 31 2004 included finance receivables net corporations consolidated balance sheet beneficial interest holders variable interest entity legal recourse general credit gmac subordinated real estate lending arrangements certain entities entitles created develop land construct residential homes management determined gmac majority expected losses returns consolidation appropriate fin 46r total assets entities 194 million december 31 2004 49 million represents gmacs maximum exposure loss warehouse lending gmac facility transfers mortgage warehouse lending receivables 100 owned spe sells senior participation interest receivables unconsolidated qualifying special purpose entity qspe funds purchase participation interest spe financing obtained thirdparty assetbacked commercial paper conduits spe funds purchase receivables gmac cash obtained qspe well subordinated loan andor equity contribution gmac senior participation interest sold qspe commercial paper issued included assets liabilities gmac receivables sold may purchased gmac except limited circumstances breach representations warranties management determined gmac primary beneficiary spe consolidates entity accordance fin 46r assets entity totaled 686 million december 31 2004 included finance receivables net unearned income corporations consolidated balance sheet beneficial interest holders variable interest entity legal recourse general credit gmac collateralized debt obligations cdos gmacs mortgage operations sponsors purchase subordinate equity interests serve collateral manager cdos cdo transactions trust established purchases portfolio securities issues debt equity certifications representing interests portfolio assets addition receiving variable compensation managing portfolio gmac sometimes retains equity investments cdos majority cdos sponsored gmac intitially structured restructured approval senior beneficial interest holders qspes therefore exempt fin 46r gmac receives asset management fee purposes surveillance existing collateral performance event asset credit impaired call option triggered whereby gmac collateral manager may buy asset pool sell third party call triggered events outside gmacs control downgrade rating agency asset pool event specified percentage mortgage loans underlying security greater 60 days delinquent liquidated event conditions gmac exercise call option met gmac recognizes assets accordance provisions gmac recognize assets december 31 2004 2003 ii42 general motors corporation subsidiaries notes consolidated financial statements continued note 6 variable interest entities continued majority gmacs remaining cdos results primary beneficiary analysis support conclusion consolidation appropriate fin 46r gmac majority expected losses returns assets cdos totaled 25 billion december 31 2004 gmacs maximum exposure loss 50 million representing gmacs retained interests entities maximum exposure loss would occur unlikely event complete loss gmacs retained interests entities addition management determined particular cdo entity gmac primary beneficiary consolidates entity accordance fin 46r assets entity totaled 294 million december 31 2004 majority included marketable securities corporations consolidated balance sheet beneficiary interest holders variable interest entity legal recourse general credit gmac interests real estate partnerships gmacs commercial mortgage operations syndicate investments real estate partnerships unaffiliated investors form limited partner ownership interests typically 9999 total interests syndicated real estate partnerships turn acquire limited partner ownership interests various operating partnerships develop operate affordable housing properties throughout united states returns investors partnerships syndicated gmac derived flowthrough lowincome housing tax credits tax losses enerated underlying operating partnership entities gmac loss exposure based limited partnership interest investors guaranteed syndicated real estate partnerships guaranteed rate return loss exposure represents potential underdelivery income tax benefits syndicated real estate partnerships investors certain syndicated real estate partnerships gmac guaranteed specified rate return investors event shortfall delivery tax benefits investors gmac required provide funding syndicated real estate partnerships syndicated real estate partnerships contain guarantee ie guaranteed syndicated real estate partnerships reflected corporations consolidated financial statements financing method accordance sfas 66 accounting sales real estate financing method assets liabilities guaranteed syndicated real estate partnerships reflected gms consolidated balance sheet specifically cash equivalents equity method investments underlying operating partnership entities guaranteed syndicated real estate partnerships consist almost entirely financing liability initially equal amount equity contributed investor payable tax credit fund investor financing liability investors extinguished life guaranteed syndicated real estate partnerships annual tax benefits guaranteed investor delivered addition reflecting assets liabilities guaranteed syndicated real estate partnerships gmac variable interests underlying operating partnerships primarily form limited partnership interests results gmacs variable interest analysis indicated primary beneficiary partnerships result required consolidate entities fin 46r assets outstanding underlying operating partnerships approximated 50 billion december 31 2004 gmacs exposure loss time 708 million representing financing liability reflected consolidated financial statements amount payable investors event liquidation partnerships gmacs exposure loss increases unaffiliated investors fund additional guaranteed commitments gmac decreases tax benefits delivered unaffiliated investors considering committed amounts gmacs exposure loss future periods expected exceed 16 billion residential mortgage loan alliances gmac invested strategic alliances several mortgage loan originators alliances may include common preferred equity investments working capital subordinated lending warrants addition warehouse lending arrangements management determined gmac majority expected losses returns consolidation appropriate fin 46r total assets alliances 174 million december 31 2004 gmacs maximum exposure loss alliances including commitments lend additional funds purchase loans abovemarket rates 285 million december 31 2004 construction real estate lending gmac uses special purpose entity finance construction lending receivables special purpose entity purchases holds receivables funds majority purchases financing obtained thirdparty assetbacked commercial paper conduits gmac primary beneficiary consolidates entity accordance fin 46r assets entity totaled 12 billion december 31 2004 included finance receivables net gms consolidated balance sheet beneficial interest holders variable interest entity legal recourse general credit gmac ii43 general motors corporation subsidiaries notes consolidated financial statements continued note 6 variable interest entities concluded gmac subordinated real estate lending arrangements certain entities created develop land construct residential homes management determined gmac majority expected losses returns consolidation appropriate fin 46r total assets entities 194 million december 31 2004 49 million represents gmacs maximum exposure loss new market tax credit funds corporation syndicates manages investments partnerships make investments typically mortgage loans turn qualify partnerships earn new markets tax credits new markets tax credits permit taxpayers receive federal income tax credit making qualified equity investments community development entities one particular tax credit fund management determined gmac majority expected losses returns consolidation appropriate fin 46r assets investments totaled 62 million december 31 2004 45 million represents gmacs maximum exposure loss addition entity management determined another tax credit fund gmac primary beneficiary consolidates entity accordance fin 46r assets entity totaled 76 million december 31 2004 included assets corporations consolidated balance sheet beneficial interest holders variable interest entity legal recourse general credit gmac note 7 finance receivables securitizations finance receivables net finance receivables net included following dollars millions december 31 consumer 2004 2003 retail automotive 92225 88594 residential mortgages 57709 46307 total consumer 149934 134901 commercial automotive wholesale 27796 25517 leasing lease financing 1466 1465 term loans dealers others 3662 3912 commercial industrial 14203 9783 commercial real estate commercial mortgage 3148 180 real estate construction 2810 2053 total commercial 53085 42910 total finance receivables loans 203019 177811 allowance financing losses 3419 3042 total consolidated finance receivables net1 199600 174769 1 net unearned income 76 billion 74 billion december 31 2004 2003 respectively finance receivables originated outside united states 354 billion 306 billion december 31 2004 2003 respectively aggregate amounts total finance receivables maturing five years following december 31 2004 follows 2005737 billion 2006297 billion 2007231 billion 2008146 billion 200984 billion 2010 thereafter612 billion actual maturities may differ scheduled due prepayments securitizations finance receivables mortgage loans corporation securitizes automotive mortgage financial assets funding source gmac sells retail finance receivables wholesale loans residential mortgage loans commercial mortgage loans commercial mortgage securities information contained relates transfers finance receivables loans qualify offbalance sheet securitizations requirements sfas 140 ii44 general motors corporation subsidiaries notes consolidated financial statements continued note 7 finance receivables securitizations continued corporation retains servicing responsibilities subordinated interests securitizations retail finance receivables wholesale loans servicing responsibilities retained majority residential commercial mortgage loan securitizations corporation may retain subordinated interests securitizations gmac also holds subordinated interests acts collateral manager corporations collateralized debt obligation cdo securitization program servicer gmac generally receives monthly fee stated percentage outstanding sold receivables retail automotive finance receivables gmac paid fee corporation concluded fee represents adequate compensation servicer servicing asset liability recognized considering shortterm revolving nature wholesale loans servicing asset liability recognized upon securitization loans december 31 2004 weighted average basic servicing fees gmacs primary servicing activities 100 basis points 100 basis points 29 basis points 8 basis points outstanding principal balance sold retail finance receivables wholesale loans residential mortgage loans commercial mortgage loans respectively additionally corporation retains rights cash flows remaining investors securitization trusts received contractual payments certain retail securitization transactions retail receivables sold servicing retained basis servicing compensation servicing liability established recorded liabilities december 31 2004 december 31 2003 servicing liabilities 30 million 22 million respectively outstanding related retail securitization transactions mortgage servicing corporation capitalizes value expected realized performing specified residential commercial mortgage servicing activities mortgage servicing rights gmac maintains cash reserve accounts predetermined amounts certain securitization activities unlikely event deficiencies occur cash flows owed investors amounts available cash reserve accounts totaled 118 million 10 billion 44 million 10 million december 31 2004 related securitizations retail finance receivables wholesale loans residential mortgage loans commercial mortgage loans respectively 167 million 12 billion 13 million 5 million december 31 2003 respectively following tables summarize pretax gains securitizations certain cash flows received paid securitization trusts transfers finance receivables loans completed 2004 2003 2002 dollars millions year ended december 31 2004 retail wholesale mortgage loans commercial finance loans mortgage receivables residential commercial securities pretax gains securitizations 9 497 602 54 11 cash flow information proceeds new 935 securitizations 1824 9188 29412 2108 servicing fees received 105 174 208 20 cash flows received 68 retained interests 340 808 729 216 proceeds collections reinvested revolving securitizations 91360 repayments servicing advances 75 947 147 cash outflow information servicing advances 64 1035 169 purchase obligations options representations warranties obligations 1 66 administrator servicer actions 75 asset performance conditional calls 137 cleanup calls 269 3797 ii45 general motors corporation subsidiaries notes consolidated financial statements continued note 7 finance receivables securitizations continued year ended december 31 2003 retail wholesale mortgage loans commercial finance loans mortgage receivables residential commercial securities pretax gains securitizations 37 488 522 75 14 cash flow information proceeds new 1870 securitizations 1604 3625 29566 3342 servicing fees received 228 164 250 20 cash flows received 69 retained interests 753 174 955 317 proceeds collections reinvested revolving securitizations 862 97829 5 repayments servicing advances 114 1208 116 cash outflow information servicing advances 118 1242 117 purchase obligations options representations warranties obligations 25 154 administrator servicer actions 146 asset performance conditional calls 122 cleanup calls 885 1919 year ended december 31 2002 retail wholesale mortgage loans commercial finance loans mortgage receivables residential commercial securities pretax gains securitizations 239 445 562 30 18 cash flow information proceeds new 439 securitizations 9982 2327 38025 1848 servicing fees received 247 146 268 17 cash flows received 37 retained interests 1361 318 1044 86 proceeds collections reinvested revolving securitizations 482 104485 repayments servicing advances 117 1333 116 cash outflow information servicing advances 117 1449 122 purchase obligations options representations warranties obligations 70 administrator servicer actions 198 asset performance conditional calls 58 cleanup calls 289 55 494 key economic assumptions used measuring estimated fair value retained interests sales completed 2004 2003 dates sales follows retail mortgage loans commercial year ended december 31 finance mortgage receivablesa residentialb commercial securities key assumptions c rates per annum annual prepayment rate 0910 00513 00500 00199 weighted average life years 1618 1155 0488 25174 expected credit losses e 00109 00 0031 discount rate 95 65248 4315 82117 retail mortgage loans commercial year ended december 31 finance mortgage receivablesa residentialb commercial securities key assumptions c rates per annum annual prepayment rate 09 31599 00500 00 weighted average life years 16 1159 1462 25251 expected credit losses e 0473 0008 0016 discount rate 95 65145 26108 86100 see notes next page ii46 general motors corporation subsidiaries notes consolidated financial statements continued note 7 finance receivables securitizations continued fair value retained interests wholesale securitizations approximates cost shortterm floating rate nature wholesale loans b included within residential mortgage loans home equity loans lines high loantovalue loans residential first second mortgage loans c assumptions used measure expected yield variable rate retained interests based benchmark interest rate yield curve plus contractual spread appropriate actual yield curve utilized varies depending specific retained interests based weighted average maturity wam finance receivables constant prepayment rate cpr mortgage loans commercial mortgage securities e amounts totaling 39 million 83 million december 31 2004 2003 respectively established expected credit losses automotive finance receivables securitized offbalance sheet transactions amounts included fair value retained interests classified investment securities table outlines key economic assumptions sensitivity fair value retained interests december 31 2004 immediate 10 20 adverse changes assumptions dollars millions retail mortgage loans commercial finance mortgage receivablesa residentialb commercial securities carrying valuefair value retained interests 748 1247 443 314 weighted average life years 0115 1154 01173 15241 annual prepayment rate 0516 00550 00211 wam cpr impact 10 adverse change 1 49 1 impact 20 adverse change 2 86 1 2 loss assumption b 03261 0042 00395 impact 10 adverse change 4 50 7 13 impact 20 adverse change 9 93 12 26 discount rate 95120 65400 38263 53150 impact 10 adverse change 3 36 5 18 impact 20 adverse change 7 68 11 35 market rate 2736 c impact 10 adverse change 4 15 impact 20 adverse change 8 30 fair value retained interests wholesale securitizations approximates cost shortterm floating rate nature wholesale receivables b net reserve expected credit losses totaling 39 million december 31 2004 amounts included fair value retained interests classified investment securities c forward benchmark interest rate yield curve plus contractual spread represents rate return paid investors sensitivities hypothetical used caution figures indicate changes fair value based 10 20 variation assumptions generally cannot extrapolated relationship change assumption change fair value may linear also table effect variation particular assumption fair value retained interest calculated without changing assumption reality changes one factor may result changes another may magnify counteract sensitivities additionally corporation hedges interest rate prepayment risks associated certain retained interests effects hedge strategies considered herein expected static pool net credit losses include actual incurred losses plus projected net credit losses divided original balance outstandings comprising securitization pool table displays expected static pool net credit losses based corporations securitization transactions ii47 general motors corporation subsidiaries notes consolidated financial statements continued note 7 finance receivables securitizations concluded loans securitized years ended december 31 2004 2003 2002 retail automotive 04 06 residential mortgage 00261 00248 commercial mortgage 0042 0066 0041 commercial investment securities 00395 09337 03368 static pool losses applicable wholesale finance receivable securitizations shortterm nature managed portfolio represents finance receivables loans balance sheet securitized excluding securitized finance receivables loans gmac continues service continuing involvement ie gmac retains interest risk loss underlying receivables note 8 inventories automotive operations inventories included following dollars millions december 31 2004 2003 productive material work process supplies 4838 4899 finished product service parts etc 8321 7642 total inventories fifo 13159 12541 less lifo allowance 1442 1581 total inventories less allowances 11717 10960 inventories stated generally cost excess market cost approximately 92 us inventories determined lastin firstout lifo method generally cost inventories determined either firstin firstout fifo average cost methods 2004 2003 us lifo eligible inventory quantities reduced reduction resulted liquidation lifo inventory quantities carried lower costs prevailing prior years compared cost 2004 2003 purchases effect decreased cost goods sold approximately 100 million pretax 200 million pretax respectively financing insurance operations inventories included following dollars millions december 31 2004 2003 offlease vehicles 530 642 total consolidated inventories less allowances 12247 11602 ii48 general motors corporation subsidiaries notes consolidated financial statements continued note 9 equipment operating leases corporation significant investments vehicle leasing portfolios residual values vehicles lease represent estimate values assets end lease contracts initially determined based appraisals estimates realization residual values dependent corporations future ability market vehicles prevailing market conditions management reviews residual values periodically determine estimates remain appropriate automotive operations equipment operating leases accumulated depreciation follows dollars millions december 31 2004 2003 equipment operating leases 7475 7994 less accumulated depreciation 987 821 net book value 6488 7173 financing insurance operations equipment operating leases accumulated depreciation follows dollars millions december 31 2004 2003 equipment operating leases 36002 33522 less accumulated depreciation 8276 7944 net book value 27726 25578 total consolidated net book value 34214 32751 lease payments received related equipment operating leases maturing five years following december 31 2004 follows auto none payment received lease inception income deferred lease period fio 200557 billion 200639 billion 2007 23 billion 2008712 million 200938 million leases maturing 2009 note 10 income taxes income continuing operations income taxes minority interests included following dollars millions years ended december 31 2004 2003 2002 us income 248 1786 126 foreign income 944 1195 2212 total 1192 2981 2338 provision income taxes estimated follows dollars millions years ended december 31 2004 2003 2002 income taxes estimated payable currently us federal 282 167 46 foreign 1018 1159 1702 us state local 36 414 325 total payable currently 772 1740 2073 deferred income tax expense credit net us federal 422 155 3 foreign 1239 1136 1187 us state local 22 28 245 total deferred 1683 1009 1429 total income taxes 911 731 644 ii49 general motors corporation subsidiaries notes consolidated financial statements continued note 10 income taxes concluded annual tax provisions include amounts considered sufficient pay assessments may result examination prior year tax returns cash paid income taxes 2004 2003 2002 293 million 542 million 12 billion respectively provisions made estimated us foreign income taxes less available tax credits deductions may incurred remittance corporations share subsidiaries undistributed earnings deemed permanently reinvested taxes provided foreign subsidiaries earnings deemed permanently reinvested 110 billion december 31 2004 116 billion december 31 2003 quantification deferred tax liability associated permanently reinvested earnings practicable reconciliation provision income taxes compared amounts us federal statutory rate follows dollars millions years ended december 31 2004 2003 2002 tax us federal statutory income tax rate 417 1043 818 state local tax expense 949 21 99 foreign rates 35 510 269 184 taxes unremitted earnings subsidiaries 366 125 124 tax credits 41 52 82 settlement prior year tax matters 191 194 18 change valuation allowance 1463 566 203 esop dividend deduction 1 53 85 realization basis differences due foreign reorganizations 483 medicare prescription drug benefit 211 loss carryforward related investment writedown 168 stock contribution pension plans 2 87 adjustments 181 119 19 total income tax 911 731 644 1 deduction dividends paid gm 123 par value common stock held employee stock ownership portion gm savings plans pursuant economic growth tax relief reconciliation act 2001 2 additional tax benefit related gm class h common stock contribution pension veba plans deferred income tax assets liabilities 2004 2003 reflect effect temporary differences amounts assets liabilities equity financial reporting purposes bases assets liabilities equity measured tax laws well tax loss tax credit carryforwards temporary differences carryforwards gave rise deferred tax assets liabilities included following dollars millions december 31 2004 2003 deferred tax deferred tax assets liabilities assets liabilities postretirement benefits pensions 9377 15280 pension employee benefit plans 3787 13408 4060 12521 warranties dealer customer allowances claims discounts 6907 42 6541 108 depreciation amortization 5043 3118 3901 2832 tax carryforwards 10422 3784 lease transactions 19 3801 10 4297 miscellaneous foreign 4762 2300 5892 2602 8732 3804 7409 2885 subtotal 49049 26473 46877 25245 valuation allowances 3413 1950 total deferred taxes 45636 26473 44927 25245 net deferred tax assets 19163 19682 ii50 general motors corporation subsidiaries notes consolidated financial statements continued note 10 income taxes concluded deferred tax detail included consolidated balance sheet supplemental information follows 2004 2003 current deferred tax assets 8883 9104 current deferred tax liabilities 5226 5671 noncurrent deferred tax assets 17358 18086 noncurrent deferred tax liabilities 1852 1837 total 19163 19682 tax carryforwards december 31 2004 approximately 6 relates alternative minimum tax credit carried forward indefinitely approximately 21 relates us federal net operating loss carryforwards approximately 15 relates us state net operating loss carryforwards expire 20062024 used approximately 83 us state net operating loss carryforwards expire 2008 approximately 25 tax carryforwards relate general business credits consist primarily research experimentation credits us foreign tax credits expire 20132023 used remaining tax carryforwards relate accumulated foreign operating losses approximately 86 carried forward indefinitely remaining 14 expire 2013 valuation allowance relates us state certain foreign operating loss carryforwards corporation open tax years primarily 1998 2003 various significant taxing jurisdictions including us canada mexico germany brazil open years contain matters could subject differing interpretations applicable tax laws regulations relate amount timing inclusion revenue expenses sustainability income tax credits given audit cycle corporation established liability 32 billion matters amount loss probable estimable amount liability based managements best estimate given corporations history similar matters interpretations current laws regulations note 11 property net property net follows dollars millions estimated useful december 31 lives years 2004 2003 automotive operations land 967 1004 buildings land improvements 240 15636 15272 machinery equipment 330 45796 44851 construction progress 3807 2722 real estate plants equipment 66206 63849 less accumulated depreciation 39405 37535 real estate plants equipment net 26801 26314 special tools net 10369 9757 total property net 37170 36071 financing insurance operations equipment 210 3086 2921 less accumulated depreciation 1236 1020 total property net 1850 1901 total consolidated property net 39020 37972 ii51 general motors corporation subsidiaries notes consolidated financial statements continued note 11 property net concluded depreciation amortization expense follows dollars millions years ended december 31 automotive operations 2004 2003 2002 depreciation 5028 4526 3675 amortization special tools 3563 3391 2648 amortization intangible assets 38 29 1 total 8629 7946 6324 financing insurance operations depreciation 5512 5556 5226 amortization intangible assets 11 19 total 5523 5567 5245 total consolidated depreciation amortization 14152 13513 11569 note 12 goodwill intangible assets components corporations intangible assets december 31 2004 2003 follows dollars millions gross net december 31 2004 carrying accumulated carrying amount amortization amount automotive operations amortizing intangible assets patents intellectual property rights 303 69 234 nonamortizing intangible assets goodwill 600 prepaid pension asset note 16 765 total goodwill intangible assets 1599 financing insurance operations amortizing intangible assets customer lists contracts 73 41 32 trademarks 40 20 covenants compete 18 total 131 79 52 nonamortizing intangible assets goodwill 3274 total goodwill intangible assets 3326 total consolidated goodwill intangible assets 4925 december 31 2003 automotive operations amortizing intangible assets patents intellectual property rights 303 31 272 nonamortizing intangible assets goodwill 567 prepaid pension asset note 16 640 total goodwill intangible assets 1479 financing insurance operations amortizing intangible assets customer lists contracts 65 31 34 trademarks 40 16 24 covenants compete 18 total 123 65 58 nonamortizing intangible assets goodwill 3223 total goodwill intangible assets 3281 total consolidated goodwill intangible assets 4760 ii52 general motors corporation subsidiaries notes consolidated financial statements continued note 12 goodwill intangible assets concluded aggregate amortization expense existing acquired intangible assets 49 million year ended december 31 2004 estimated amortization expense next five years follows 2005 49 million 2006 48 million 2007 48 million 2008 45 million 2009 35 million changes carrying amounts goodwill follows dollars millions total auto total gmna gme gmac gm balance december 31 2002 139 338 477 3273 3750 goodwill acquired period 18 goodwill written related sale business units 4 effect foreign currency 6 75 81 51 132 translation 13 1191106 balance december 31 2003 154 413 567 3223 3790 goodwill acquired period 16 effect foreign currency translation 5 33 38 35 73 5 balance december 31 2004 154 446 600 3274 3874 1 september 2003 gmac received 110 million related settlement claim involving 1999 acquisition assetbased lending factoring business bank new york settlement amount 109 million represented purchase price adjustment reducing related goodwill remainder represented reimbursement tax claims paid behalf bank new york note 13 assets automotive operations assets included following dollars millions december 31 2004 2003 investments equity securities 350 470 prepaid pension benefit cost note 16 38919 40248 1575 1544 total assets 40844 42262 investments equity securities december 31 2004 2003 include fair value investments equity securities classified availableforsale periods presented gms intent hold securities longer one year balances include historical costs 144 million 114 million unrealized gains 209 million 142 million unrealized losses 3 million 6 million december 31 2004 2003 respectively also included investments equity securities december 31 2003 gms investment common stock fiat auto holdings bv fah entity sole shareholder fiat auto spa fiat auto acquired 24 billion 2000 subsequent acquisition unfavorable european market conditions factors led deterioration performance fiat auto accordingly gm commenced review appropriate carrying value gms investment fah completed third quarter 2002 resulted noncash charge 22 billion 14 billion aftertax recorded cost sales expenses segment auto writedown brought carrying value gms investment fah 24 billion 220 million carrying value based gms interest estimated market value fah equity comprises fahs ownership fiat auto including 50 ownership interests purchasing powertrain joint ventures gm fiat auto gms investment fah reduced 20 10 fiat recapitalized fah 2003 fourth quarter 2004 gm completed annual review investment fah result deterioration performance fiat auto current debt structure gm recorded noncash charge 220 million 136 million aftertax reduce carrying value gms investment fah zero ii53 general motors corporation subsidiaries notes consolidated financial statements continued note 13 assets concluded financing insurance operations assets included following dollars millions december 31 2004 2003 mortgage servicing rights 3890 3720 premiums insurance receivables 1763 1960 deferred policy acquisition costs 1444 1038 derivative assets 9489 10026 repossessed foreclosed assets net 615 594 equity investments 1751 1560 intangible assets note 12 3326 3281 property note 11 1850 1901 cash deposits held securitization trusts 1836 1922 restricted cash collections securitization trusts 2217 2291 accrued interest rent receivable 1178 767 real estate investments 1473 1219 debt issuance costs 753 716 servicer advances 769 946 inventory note 8 530 642 2229 2905 total assets 35113 35488 reclassification consolidated balance sheet presentation december 31 2004 2003 auto assets detailed 40844 42262 fio assets detailed 35113 35488 subtotal 75957 77750 prepaid assets 1952 1747 inventory note 8 530 642 accounts receivable 14523 15152 intangible assets note 12 3326 3281 property note 11 1850 1901 total consolidated assets 57680 58521 note 14 accrued expenses liabilities deferred income taxes automotive operations accrued expenses liabilities deferred income taxes included following dollars millions december 31 2004 2003 dealer customer allowances claims discounts 11493 11145 deferred revenue deposits rental car companies 12691 13157 policy product warranty recall campaigns 9133 8674 payrolls employee benefits excludes postemployment 4642 5081 unpaid losses selfinsurance programs 1784 2027 taxes income 2993 3437 interest 922 932 postemployment benefits including extended disability benefits 1163 1212 fiat settlement note 25 1364 8573 8492 total accrued expenses liabilities 54758 54157 pensions 84 72 postretirement benefits 3890 3210 deferred income taxes 3072 3545 total accrued expenses liabilities deferred income taxes 61804 60984 current 46147 45417 noncurrent 15657 15567 total accrued expenses liabilities deferred income taxes 61804 60984 ii54 general motors corporation subsidiaries notes consolidated financial statements continued note 14 accrued expenses liabilities deferred income taxes concluded automotive operations concluded december 31 2004 2003 policy product warranty recall campaigns liability beginning balance 8674 8850 payments 4608 4435 increase liability warranties issued period 4980 4390 adjustments liability preexisting warranties 85 367 effect foreign currency translation 172 236 ending balance 9133 8674 financing insurance operations liabilities deferred income taxes included following dollars millions december 31 2004 2003 unpaid insurance losses loss adjustment expenses unearned insurance premiums 7232 6568 interest 3413 3135 deposits 7477 5074 interest rate derivatives 934 1121 3913 3875 total liabilities 22969 19773 postretirement benefits 815 797 deferred income taxes 4006 3963 total liabilities deferred income taxes 27790 24533 total consolidated accrued expenses liabilities 77727 73930 total consolidated deferred income tax liability note 10 7078 7508 note 15 longterm debt loans payable automotive operations longterm debt loans payable follows dollars millions weightedaverage interest rate december 31 2004 2003 2004 2003 longterm debt loans payable within one year current portion longterm debt 1 57 14 584 1090 30 33 1478 1723 total loans payable 2062 2813 payable beyond one year 1 68 30425 29632 unamortized discount 103 108 marktomarket adjustment 138 69 total longterm debt loans 32522 32406 payable 1 weightedaverage interest rates include impact interest rate swap agreements ii55 general motors corporation subsidiaries notes consolidated financial statements continued note 15 longterm debt loans payable continued longterm debt payable beyond one year december 31 2004 included maturities follows 2006 552 million 2007 262 million 2008 16 billion 2009 296 million 2010 277 billion protect foreign exchange risk gm entered cross currency swap agreements notional amounts agreements december 31 2004 2003 auto approximately 22 billion 24 billion respectively amounts payable beyond one year cross currency swaps december 31 2004 included 26 billion currencies us dollar primarily euro 22 billion australian dollar 238 million canadian dollar 105 million brazilian real 83 million december 31 2004 2003 longterm debt loans payable auto included 253 billion 274 billion respectively obligations fixed interest rates 72 billion 50 billion respectively obligations variable interest rates predominantly libor interest rate swap agreements achieve desired balance fixed variable rate debt gm entered interest rate swaps notional amount pay variable swap agreements december 31 2004 2003 auto approximately 59 billion 35 billion respectively gms auto business maintains substantial lines credit various banks totaled 90 billion december 31 2004 34 billion represented shortterm credit facilities 56 billion represented longterm credit facilities december 31 2003 bank lines credit totaled 83 billion 26 billion represented shortterm credit facilities 57 billion represented longterm credit facilities unused shortterm longterm portions credit lines totaled 27 billion 56 billion december 31 2004 compared 21 billion 57 billion december 31 2003 certain bank lines credit contain covenants corporation applicable subsidiaries compliance throughout year ended december 31 2004 financing insurance operations debt follows dollars millions weightedaverage interest rate december 31 2004 2003 2004 2003 payable within one year current portion longterm debt 1 39 31 37300 34284 commercial paper 1 25 21 8416 13182 28 26 45327 30344 total loans payable 91043 77810 payable beyond one year 1 49 50 176090 160108 unamortized discount 650 679 mark market adjustment 1274 2111 total debt 267757 239350 total consolidated notes loans payable 300279 271756 1 weightedaverage interest rates include impact interest rate swap agreements debt payable beyond one year december 31 2004 included maturities follows 2006 388 billion 2007 243 billion 2008 114 billion 2009 96 billion 2010 919 billion amounts payable beyond one year consideration foreign currency swaps december 31 2004 included 227 billion currencies us dollar primarily canadian dollar 72 billion euro 60 billion uk pound sterling 49 billion australian dollar 17 billion december 31 2004 2003 debt fio included 137 billion 969 billion respectively obligations fixed interest rates 1308 billion 1425 billion respectively obligations variable interest rates predominantly libor considering impact interest rate swap agreements achieve desired balance fixed variable rate debt gm entered interest rate swap cap floor agreements notional amounts agreements december 31 2004 fio approximately 859 billion relating swap agreements 567 billion pay variable 292 billion pay fixed notional amounts agreements december 31 2003 fio approximately 944 billion relating swap agreements 709 billion pay variable 235 billion pay fixed ii56 general motors corporation subsidiaries notes consolidated financial statements continued note 15 longterm debt loans payable concluded gms fio business maintains substantial lines credit various banks totaled 603 billion december 31 2004 23 billion represented shortterm credit facilities 373 billion represented longterm credit facilities december 31 2003 bank lines credit totaled 544 billion 185 billion represented shortterm credit facilities 359 billion represented longterm credit facilities unused shortterm longterm portions credit lines totaled 85 billion 359 billion december 31 2004 compared 6 billion 352 billion december 31 2003 certain bank lines credit contain covenants corporation applicable subsidiaries compliance throughout year ended december 31 2004 note 16 pensions postretirement benefits gm sponsors number defined benefit pension plans covering substantially us canadian employees well certain nonus employees plans covering us canadian represented employees generally provide benefits negotiated stated amounts year service well significant supplemental benefits employees retire 30 years service normal retirement age benefits provided plans covering us canadian salaried employees certain nonus locations generally based years service compensation history gm also certain nonqualified pension plans covering executives based targeted wage replacement percentages unfunded gms funding policy respect qualified pension plans contribute annually less minimum required applicable law regulations directly pay benefit payments appropriate gm made pension contributions us hourly salaried us primary nonus pension plans made direct payments appropriate follows dollars millions 2004 2003 2002 us hourly salaried 18504 4800 us 117 98 primary nonus1 763 374 210 1 gms primary nonus pension plans include gm canada limited adam opel vauxhall plans 2005 gm contributions due us hourly salaried pension plans also anticipate making discretionary contributions us hourly salaried pension plans gm expects contribute pay benefits approximately 117 million us pension plans 464 million primary nonus pension plans 2005 additionally gm maintains hourly salaried benefit plans provide postretirement medical dental vision life insurance us retirees eligible dependents cost benefits recognized consolidated financial statements period employees provide service gm certain corporations nonus subsidiaries postretirement benefit plans although participants covered government sponsored administered programs cost programs generally significant gm 2004 gm contributed total 90 billion plan assets including 88 billion us hourly salaried voluntary employees beneficiary association veba trusts postretirement employee benefit opeb plans consisting 84 billion cash 04 billion xm satellite radio holdings inc common stock shares 02 billion salaried 401h account first contribution related salaried opeb plan 401h account gm contributed 33 billion 10 billion hourly veba trust 2003 2002 respectively contributions participants opeb plans 87 million 84 million years ended december 31 2004 2003 respectively gm anticipate making contributions veba trusts 401h accounts opeb funding 2005 gm uses december 31 measurement date majority us pension plans september 30 measurement date us opeb plans gms measurement dates canadian adam opel vauxhall motors primary nonus pension plans december 1 october 1 october 1 respectively ii57 general motors corporation subsidiaries notes consolidated financial statements continued note 16 pensions postretirement benefits continued us plans nonus plans pension benefits pension benefits 2004 2003 2004 2003 2004 2003 change benefit dollars millions obligations benefit obligation beginning year 87285 79617 15088 12129 67542 57195 service cost 1097 919 247 228 605 537 interest cost 5050 5162 892 803 3927 3798 plan participants contributions 22 26 23 87 84 amendments 54 2244 163 10 actuarial losses 2306 5684 1040 222 8815 9026 benefits paid 6605 6501 806 732 3804 3621 exchange rate movements 1201 2398 curtailments settlements 175 138 205 17 292 523 benefit obligation end year 89384 87285 18056 15088 77474 67542 change plan assets fair value plan assets beginning year 86169 60498 7560 5943 9998 5794 actual return plan assets 11046 13452 814 703 981 865 employer contributions 117 18621 802 442 5037 3339 plan participants contributions 22 26 23 benefits paid 6605 6501 806 732 exchange rate movements 627 1181 curtailments settlements 137 77 fair value plan assets end year 90886 86169 9023 7560 16016 9998 funded status 1 1502 1116 9033 7528 61458 57544 unrecognized actuarial loss 30228 32997 5411 4401 28742 21079 unrecognized prior service cost 5862 7087 808 694 394 569 unrecognized transition obligation 39 43 employer contributions fourth quarter 4000 benefits paid fourth quarter 999 742 net amount recognized 37592 38968 2775 23902811136292 amounts recognized consolidated balance sheets consist prepaid benefit cost 38570 39904 349 344 accrued benefit liability 1152 1139 8303 6885 28111 36292 intangible asset 1 765 639 accumulated comprehensive income 174 202 4414 3512 net amount recognized 37592 38968 2775 23902811136292 1 includes overfunded status combined us hourly salaried pension plans 30 billion december 31 2004 03 billion december 31 2003 total accumulated benefit obligation accumulated benefit obligation fair value plan assets gms pension plans accumulated benefit obligations excess plan assets projected benefit obligation fair value plan assets pension plans projected benefit obligations excess plan assets follows dollars millions us plans nonus plans 2004 2003 2004 2003 accumulated benefit obligation 86676 84821 17097 14228 plans abo excess plan assets abo 1224 1310 16631 13838 fair value plan assets 85 187 8388 7003 plans pbo excess plan assets pbo 31176 30087 17907 14965 fair value plan assets 29548 27778 8708 7273 ii58 general motors corporation subsidiaries notes consolidated financial statements continued gm sets discount rate assumption annually retirementrelated benefit plans respective measurement dates reflect yield portfolio high quality fixedincome debt instruments matched timing amounts projected future benefits assumed healthcare trend rates december 31 2004 2003 initial healthcare cost trend rate 105 85 ultimate healthcare cost trend rate 50 number years ultimate trend rate 6 one percentage point increase initial ultimate assumed health care trend rates would increased accumulated postretirement benefit obligation apbo 84 billion december 31 2004 aggregate service interest cost components nonpension postretirement benefit expense 2004 543 million onepercentage point decrease would decreased apbo 70 billion aggregate service interest cost components nonpension postretirement benefit expense 2004 384 million gms longterm strategic mix expected return assets assumptions derived detailed periodic studies conducted gms actuaries gms asset management group us study includes review alternative asset allocation strategies anticipated future longterm performance individual asset classes risks standard deviations correlations asset classes comprise funds asset mix primary nonus plans conduct similar studies conjunction local actuaries asset managers studies give appropriate consideration recent fund performance historical returns assumptions primarily longterm prospective rates ii59 general motors corporation subsidiaries notes consolidated financial statements continued note 16 pensions postretirement benefits continued capital market assumptions underpinning gms longterm strategic mix longterm expected return assumptions reexamined annually based study conducted 2002 gm revised expected longterm return assumption us plans effective january 1 2003 9 reduction previous level 10 subsequent reexamination capital market assumptions 2004 reaffirmed 9 longterm expected return assumption changes gms longterm strategic allocation strategic mix us pension plans implemented latter part 2003 first half 2004 reduced exposure equity market risks increased allocation asset classes highly correlated well asset classes active management historically generated excess returns places greater emphasis manager skills produce excess return employing various risk mitigation strategies reduce volatility december 31 2004 gm pension assets following allocation ranges global equity 4149 global bonds 3036 real estate 812 alternatives 913 overall strategic policy mix expected result comparable less volatile returns gms prior asset mix prior september 30 2004 veba assets managed shortterm portion intended maintain adequate liquidity benefit payments longterm portion targets achieving longterm asset returns following investment strategies similar us pension plans based asset allocation shortterm longterm portion blended expected return assets assumption veba 80 2004 significant contributions made hourly veba 2004 new investment policy adopted year manage plan assets single investment policy expanded range asset classes new asset allocation implemented october 1 2004 2005 expected return hourly veba 90 addition late 2004 new salaried veba created funded primarily invested shorterterm liquid securities 2005 expected return salaried veba 45 us nonus pension plans opeb plans following asset allocations respective measurement dates 2003 2004 plan assets primary plan assets nonus pension us pension plans plan assets opeb actual percentage actual percentage actual percentage plan assets plan assets plan assets asset category 2004 2003 2004 2003 2004 2003 equity 47 49 61 41 38 securities debt 35 31 30 48 58 securities real estate 8 9 2 1 10 12 0 9 3 total 100 equity securities include gm common stock amounts 29 million less 1 total pension plan assets 41 million less 1 total pension plan assets december 31 2004 2003 respectively december 8 2003 president bush signed law medicare prescription drug improvement modernization act 2003 act introduces prescription drug benefit beginning 2006 medicare part well federal subsidy sponsors retiree health care benefit plans provide benefit least actuarially equivalent medicare part due levels benefits provided gms us health care plans management concluded gms us health care plans least actuarially equivalent medicare part gm elected defer accounting effects act remeasured gms postretirement benefit obligation december 8 2003 remeasurement reduced gms december 31 2004 apbo 41 billion increased plan assets 04 billion decreased unrecognized actuarial loss 46 billion effect act 2004 opeb expense reflected tables accordance gaap effect act reflected table december 31 2003 data however reflected december 31 2004 data ii60 general motors corporation subsidiaries notes consolidated financial statements continued note 16 pensions postretirement benefits concluded following benefit payments reflect estimated future employee service appropriate expected paid dollars millions pension benefits gross primary gross medicare nonus benefit part us plans payments receipts 2005 6721 854 4177 2006 6745 870 4306 190 2007 6786 902 4501 280 2008 6840 934 4731 306 2009 6874 969 4939 331 20102014 34371 5414 26847 1932 note 17 commitments contingent matters commitments gm following minimum commitments noncancelable capital leases remaining terms excess one year primarily property dollars millions 2005 2006 2007 2008 2009 minimum commitments 132 126 133 411 114 862 sublease income 19 317 net minimum commitments 113 107 114 392 95 545 gm following minimum commitments noncancelable operating leases remaining terms excess one year primarily property dollars millions 2005 2006 2007 2008 2009 minimum commitments 898 946 782 1290 674 4249 sublease income 236 237 239 237 230 2762 net minimum commitments 662 709 543 1053 444 1487 certain minimum commitments fund obligations nonconsolidated vies certain leases contain escalation clauses renewal purchase options rental expenses operating leases 990 million 926 million 985 million 2004 2003 2002 respectively gm sponsors credit card program entitled gm card program offers rebates applied primarily purchase lease gm vehicles amount rebates available qualified cardholders net deferred program income 45 billion 41 billion 40 billion december 31 2004 2003 2002 respectively gm guarantees related performance operating lease arrangements residual value leased assets totaling 639 million expiration dates vary certain leases contain renewal options fair value underlying assets expected fully mitigate gms obligations guarantees accordingly liabilities recorded respect guarantees also gm entered agreements certain suppliers service providers guarantee value suppliers assets agreements third parties guarantee fulfillment certain suppliers commitments maximum exposure commitments amounts 131 million corporation guaranteed certain amounts related securitization mortgage loans addition gmac issues financial standby letters credit part financing mortgage operations december 31 2004 approximately 55 million recorded respect guarantees maximum exposure approximately 78 billion ii61 general motors corporation subsidiaries notes consolidated financial statements continued note 17 commitments contingent matters concluded connection certain divestitures prior january 1 2003 gm provided guarantees respect benefits former gm employees relating pensions postretirement health care life insurance due nature indemnities maximum exposure agreements cannot estimated amounts recorded indemnities corporations obligations probable estimable addition guarantees gm entered agreements indemnifying certain parties respect environmental conditions pertaining ongoing sold gm properties due nature indemnifications gms maximum exposure agreements cannot estimated amounts recorded indemnities corporations obligations probable estimable addition normal course business gm periodically enters agreements incorporate indemnification provisions maximum amount gm may exposed agreements cannot estimated opinion management guarantees indemnifications expected material adverse effect corporations consolidated financial position results operations contingent matters litigation subject uncertainties outcome individual litigated matters predictable assurance various legal actions governmental investigations claims proceedings pending corporation including arising alleged product defects employmentrelated matters governmental regulations relating safety emissions fuel economy product warranties financial services dealer supplier contractual relationships environmental matters gm established reserves matters losses probable reasonably estimated matters may involve compensatory punitive treble damage claims demands recall campaigns environmental remediation programs sanctions granted could require corporation pay damages make expenditures amounts could estimated december 31 2004 discussion counsel opinion management liability expected material adverse effect corporations consolidated financial condition results operations note 18 stockholders equity following table presents changes capital stock period january 1 2002 december 31 2004 dollars millions common stocks total 123 capital par value class h stock balance january 1 2002 932 88 1020 shares issued 4 8 12 balance december 31 2002 936 96 1032 shares issued 1 15 16 hughes splitoff 111 balance december 31 2003 937 shares issued 5 balance december 31 2004 942 gm class h stock effective december 22 2003 gm split hughes distributing hughes common stock holders gm class h common stock exchange outstanding shares gm class h common stock shares gm class h common stock cancelled preference stock june 24 2002 approximately 27 million shares gm series h 625 automatically convertible preference stock held aol time warner aol mandatorily converted approximately 80 million shares gm class h common stock provided pursuant terms preference stock gm originally issued shares preference stock aol 1999 connection aols 15 billion investment strategic alliance hughes preference stock accrued quarterly dividends rate 625 per year gm preference stock issued outstanding since ii62 general motors corporation subsidiaries notes consolidated financial statements continued note 18 stockholders equity concluded common stocks liquidation rights gm 123 par value common stock subject certain adjustments outstanding common stock subdivided stock split otherwise comprehensive income changes components comprehensive income loss reported net income taxes follows dollars millions note 19 earnings per share attributable common stocks earnings per share eps attributable class gm common stock determined based attribution earnings class common stock period divided weightedaverage number common shares class outstanding period diluted eps attributable class gm common stock considers effect potential common shares unless inclusion potential common shares would antidilutive effect attribution earnings class gm common stock follows dollars millions years ended december 31 2004 2003 2002 earnings attributable common stocks 123 par value continuing operations 2805 2862 1975 discontinued operations 48 90 gain sale discontinued operations 1249 earnings attributable 123 par value 2805 4063 1885 earnings discontinued operations attributable class h 241 195 total earnings attributable common stocks 2805 3822 1690 earnings attributable gm 123 par value common stock period represent earnings attributable gm common stocks reduced available separate consolidated net income ascni hughes respective periods gm h stock outstanding calculated losses used computation ascni hughes multiplied fraction numerator equal weightedaverage number shares gm class h common stock outstanding 11 billion december 22 2003 920 million december 31 2002 denominator number equal weightedaverage number shares gm class h common stock issued outstanding would represent 100 interest earnings hughes average class h dividend base average class h dividend base 14 billion december 22 2003 13 billion december 31 2002 ii63 general motors corporation subsidiaries notes consolidated financial statements continued note 19 earnings per share attributable common stocks continued reconciliation amounts used basic diluted earnings per share computations income continuing operations follows dollars millions except per share amounts 123 par value common stock per share income shares amount year ended december 31 2004 basic eps income continuing operations attributable common stocks 2805 565 497 effect dilutive securities assumed exercise dilutive stock options 2 diluted eps adjusted income attributable common stocks 2805 567 495 year ended december 31 2003 basic eps income continuing operations attributable common stocks 2862 561 510 effect dilutive securities assumed exercise dilutive stock options 8 diluted eps adjusted income attributable common stocks 2862 569 503 year ended december 31 2002 basic eps income continuing operations attributable common stocks 1975 560 353 effect dilutive securities assumed exercise dilutive stock options 2 diluted eps adjusted income attributable common stocks 1975 562 351 certain stock options convertible securities included computation diluted earnings per share periods presented since instruments underlying exercise prices greater average market prices gm 123 par value common stock inclusion would antidilutive shares included computation diluted earnings per share 88 million 176 million 66 million december 31 2004 2003 2002 respectively december 31 2004 gm 81 billion convertible debentures outstanding including 12 billion principal amount 45 series convertible senior debentures due 2032 series 26 billion principal amount 525 series b convertible senior debentures due 2032 series b 43 billion principal amount 625 series c convertible senior debentures due 2033 series c october 2004 fasb ratified consensus eitf respect issue 048 effect contingently convertible debt diluted earnings per share november 5 2004 gm unilaterally irrevocably waived relinquished right waiver use stock committed use cash settle principal amount securities 1 holders ever choose convert securities 2 gm ever required holders repurchase securities gm retains right use either cash stock settle amount might become due security holders excess principal amount inthemoney amount various circumstances conversion securities may occur described paragraphs 14 paragraph 5 describes circumstances gm might required repurchase securities 1 closing sale price gms 123 par value common stock exceeds 120 conversion price 7020 series 6490 series b 4762 series c respectively least 20 trading days 30 consecutive trading days ending last trading day preceding fiscal quarter ii64 general motors corporation subsidiaries notes consolidated financial statements continued note 19 earnings per share attributable common stocks concluded 2 five business day period nine consecutive trading day period trading price debentures day period less 95 product closing sale price gms 123 par value common stock multiplied number shares issuable upon conversion 2500 principal amount debentures 3 debentures called redemption series march 6 2007 series b march 6 2009 series c july 20 2010 4 upon occurrence specified corporate events 5 investor requires gm repurchase debentures series march 6 2007 2012 2017 2022 2027 days business day next succeeding business day series b march 6 2014 2019 2024 2029 days business day next succeeding business day series c july 15 2018 2023 2028 days business day next succeeding business day shares potentially issuable satisfy inthemoneyamount convertible debentures included diluted earnings per share december 31 2004 convertible debentures met requirements conversion note 20 derivative financial instruments risk management gm exposed market risk changes foreign currency exchange rates interest rates certain commodity prices normal course business gm enters variety foreign exchange interest rate commodity forward contracts swaps options objective minimizing exposure arising risks risk management control system utilized monitor foreign exchange interest rate commodity related hedge positions cash flow hedges gm uses financial instruments designated cash flow hedges hedge corporations exposure foreign currency exchange risk associated buying selling financing currencies local currencies operates variability cash flows related exposure commodity price risk associated changes prices commodities used automotive business primarily nonferrous metals used manufacture automotive components hedge exposure variability cash flows related floating rate foreign currency financial instruments transactions denominated foreign currencies gm typically hedges forecasted firm commitment exposures three years future commodities gm typically hedges exposures three years future year ended december 31 2004 hedge ineffectiveness associated instruments designated cash flow hedges decreased cost sales expenses 26 million year ended december 31 2003 hedge ineffectiveness associated instruments designated cash flow hedges decreased cost sales expenses 19 million derivative gains losses included comprehensive income reclassified earnings time associated hedged transactions impact income statement year ended december 31 2004 net derivative gains 245 million reclassified cost sales expenses year ended december 31 2003 net derivative gains 245 million likewise reclassified net losses gains offset net gainslosses transactions hedged approximately 157 million net derivative gains included comprehensive income december 31 2004 expected reclassified earnings within 12 months date 2004 net gains approximately 26 million reclassified earnings result discontinuance cash flow hedges probable original forecasted transactions occur fair value hedges gm uses financial instruments designated fair value hedges manage certain corporations exposure interest rate risk gm subject market risk exposures changes interest rates due financing investing cash management activities variety instruments used hedge gms exposure associated fixed rate debt mortgage servicing rights msrs year ended december 31 2004 hedge ineffectiveness associated instruments designated fair value hedges primarily due hedging msrs decreased selling general administrative expenses 104 million decreased selling general administrative expenses 391 million 2003 changes time value instruments excluded assessment hedge effectiveness decreased selling general administrative expenses 180 million 2004 175 million 2003 ii65 general motors corporation subsidiaries notes consolidated financial statements continued note 20 derivative financial instruments risk management concluded net investment hedges gm uses foreign currency denominated debt hedge foreign currency exposure net investments foreign operations foreign currency translation gains losses related debt instruments recorded comprehensive loss foreign currency translation adjustment years ended december 31 2004 2003 64 million 48 million unrealized loss recorded accumulated foreign currency translation undesignated derivative instruments forward contracts options designated hedging instruments sfas 133 may also used hedge certain foreign currency commodity interest rate exposures unrealized gains losses instruments recognized currently earnings note 21 fair value financial instruments estimated fair value financial instruments determined using available market information appropriate valuation methodologies however considerable judgment required interpreting market data develop estimates fair value therefore estimates necessarily indicative amounts could realized would paid current market exchange effect using different market assumptions andor estimation methodologies may material estimated fair value amounts book estimated fair values financial instruments practicable estimate fair value follows dollars millions december 31 2004 2003 automotive operations book value fair value book value fair value assets 1 841 520 771 500 derivative assets 2089 1234 liabilities longterm debt 2 30460 31276 29593 31859 liabilities 1 537 591 528 571 derivative liabilities 724 356 financing insurance operations assets finance receivables net 3 199600 199827 174769 177216 derivative assets 9489 10026 liabilities debt 2 267757 268813 239350 244641 derivative liabilities 953 1196 liabilities 4230 4106 1754 1660 1 assets include various financial instruments eg longterm receivables certain investments fair values based discounted cash flows market quotations appropriate valuation techniques fair values retained subordinated interests trusts excess servicing assets net deferred costs derived discounting expected cash flows using current market rates estimated values industrial development bonds included liabilities based quoted market prices similar issues 2 longterm debt estimated fair value based quoted market prices similar issues based current rates offered gm debt similar remaining maturities 3 fair value estimated discounting future cash flows using applicable spreads approximate current rates applicable category finance receivables due shortterm nature book value approximates fair value cash marketable securities accounts notes receivable less allowances accounts payable principally trade auto loans payable fio debt payable within one year periods ending december 31 2004 2003 ii66 general motors corporation subsidiaries notes consolidated financial statements continued note 22 stock incentive plans gms stock incentive plans consist general motors 2002 stock incentive plan formerly 1997 general motors amended stock incentive plan gmsip general motors 1998 salaried stock option plan gmssop general motors 1997 performance achievement plan gmpap general motors 2002 long term incentive plan gmltip gmsip gmpap gmltip administered executive compensation committee gm board gmssop administered vice president global human resources gmsip 274 million shares gm 123 par value common stock may granted june 1 2002 may 31 2007 approximately 109 million available grants december 31 2004 shares granted undelivered gmsip due primarily expiration termination become available grant options granted prior 1997 gmsip generally exercisable onehalf one year onehalf two years dates grant stock option grants awarded since 1997 vest ratably three years date grant option prices 100 fair market value dates grant options generally expire 10 years dates grant subject earlier termination certain conditions gmssop commenced january 1 1998 ends december 31 2007 number shares gm 123 par value common stock may granted year determined management approximately 04 million shares gm 123 par value common stock available grants december 31 2004 stock options vest one year following date grant exercisable two years date grant option prices 100 fair market value dates grant options generally expire 10 years two days dates grant subject earlier termination certain conditions gmpap gmltip consist award opportunities granted participants based achievement specific corporate business criteria target number shares gm 1 23 par value common stock may granted year determined management grants subject threeyear performance period final award payout may vary based achievement criteria december 31 2004 total 40 million shares granted award opportunities gmpap gmltip targeted number shares would finally granted corporate business criteria achieved number securities weighted average securities issued upon exercise price remaining exercise outstanding available plan category outstanding options future issuance options warrants equity warrants rights compensation rights plans 1 equity compensation plans approved security holders gmsip 79455293 5453 10873308 equity compensation plans approved security holders 2 gmssop 27590626 5517 394335 total 107045919 5469 11267643 1 excludes securities reflected first column number securities issued upon exercise outstanding options warrants rights 2 equity compensation plans except gmssop approved stockholders gmssop adopted board directors 1998 expires december 31 2007 purpose plans recognize importance contribution gm employees creation stockholder value align compensation business success provide employees opportunity longterm capital accumulation grant options acquire shares general motors common stock ii67 general motors corporation subsidiaries notes consolidated financial statements continued note 22 stock incentive plans continued fair value option grant estimated date grant using blackscholes optionpricing model following weightedaverage assumptions 2004 2003 2002 gm sip ssop sip ssop sip ssop interest rate 31 29 43 expected life years 50 expected volatility 339 354 346 dividend yield 37 50 40 changes status outstanding options follows gmsip gmssop 123 par value common 123 par value common weighted shares average shares average exercise option price option price options outstanding january 1 2002 52942126 5752 14077981 6322 granted 17294937 5053 5015553 5046 exercised 2729511 4046 71663 4659 terminated 1685392 5528 64672 6239 options outstanding december 31 2002 65822160 5645 18957199 5991 granted 11148605 4006 5666127 4005 exercised 1489170 4228 terminated 996029 5506 233270 5692 options outstanding december 31 2003 74485566 5438 24390056 5533 granted 8055460 5383 3315479 5392 exercised 1346996 4077 31320 4792 terminated 1738737 5526 83589 5402 options outstanding december 31 2004 79455293 5453 27590626 5517 options exercisable december 31 2002 38094946 5818 10098994 6748 december 31 2003 48932216 5856 13825058 6329 december 31 2004 59445049 5669 18667303 5994 ii68 general motors corporation subsidiaries notes consolidated financial statements continued note 22 stock incentive plans concluded following table summarizes information gms stock option plans december 31 2004 weighted average weighted remaining average range options contractual exercise options exercise prices outstanding life yrs price exercisable price gmsip 123 par value common 2100 3999 475195 23 3416 403465 3361 4000 4999 23567137 50 4275 16514153 4389 5000 5999 35364084 71 5196 22478554 5162 6000 8350 20048877 45 7340 20048877 7340 2100 8350 79455293 58 5453 59445049 5669 gmssop 123 par value common 4005 5609069 81 4005 4659 2236818 30 4659 2236818 4659 5046 4908553 70 5046 4908553 5046 5235 3808686 60 5235 3808686 5235 5392 3314254 91 5392 7153 3728496 40 7153 3728496 7153 7550 3984750 50 7550 3984750 7550 4005 7550 27590626 63 5517 18667303 5994 note 23 income included total net sales revenues consisted following dollars millions years ended december 31 2004 2003 2002 automotive operations interest income 816 1389 905 rental car lease revenue 2112 1460 1214 claims commissions grants 1097 916 846 gain sale gm defense 814 792 400 239 total income 4817 4979 3204 years ended december 31 2004 2003 2002 financing insurance operations interest income 807 684 417 insurance premiums 3528 3178 2678 mortgage banking revenue 2969 4204 3417 automotive securitization income 753 760 1028 3280 2303 2448 total income 11337 11129 9988 ii69 general motors corporation subsidiaries notes consolidated financial statements continued note 24 segment reporting sfas 131 disclosures segments enterprise related information established standards reporting information operating segments financial statements operating segments defined components enterprise separate financial information available evaluated regularly chief operating decision maker decision making group deciding allocate resources assessing performance gms chief operating decision maker chief executive officer operating segments managed separately operating segment represents strategic business unit offers different products serves different markets gms reportable operating segments within auto business consist general motors automotive gma comprised four regions gmna gme gmlaam gmap gmna designs manufactures andor markets vehicles primarily north america following nameplates chevrolet pontiac gmc oldsmobile buick cadillac saturn hummer gme gmlaam gmap primarily meet demands customers outside north america vehicles designed manufactured marketed following nameplates opel vauxhall holden saab buick chevrolet gmc cadillac segment includes design manufacturing marketing locomotives elimination intersegment transactions certain nonsegment specific revenues expenditures certain corporate activities gms reportable operating segments within fio business consist gmac provides broad range financial services including consumer vehicle financing fullservice leasing fleet leasing dealer financing car truck extended service contracts residential commercial mortgage services commercial vehicle insurance assetbased lending financing insurance operations segment includes financing entities consolidated gmac accounting policies operating segments described summary significant accounting policies except disaggregated financial results prepared using management approach consistent basis manner gm management internally disaggregates financial information purposes assisting making internal operating decisions gm evaluates performance based standalone operating segment net income generally accounts intersegment sales transfers sales transfers third parties current market prices revenues attributed geographic areas based location assets producing revenues ii70 general motors corporation subsidiaries notes consolidated financial statements continued note 24 segment reporting continued see notes next page ii71 general motors corporation subsidiaries notes consolidated financial statements continued note 24 segment reporting continued interest income included net sales revenues external customers b includes assets discontinued operations 18653 december 31 2002 ii72 general motors corporation subsidiaries notes consolidated financial statements continued note 24 segment reporting concluded information concerning principal geographic areas follows dollars millions 2004 2003 2002 net sales long net sales long net sales long lived revenues assets 1revenues assets1 revenue assets1 north america united states 134380 46712 133955 47354 130552 45964 canada mexico 15484 10443 14667 8530 15049 6897 total north america 149864 57155 148622 55884 145601 52861 europe france 2669 262 2429 216 2073 183 germany 6710 4479 5945 3996 5363 3244 spain 2661 1181 2143 1256 1721 1076 united kingdom 7563 2273 6480 2244 5513 2096 13622 3805 12356 3537 10450 2953 total europe 33225 12000 29353 11249 25120 9552 latin america brazil 2987 609 2328 584 2487 619 latin america 2611 180 1685 186 2287 185 total latin america 5598 789 4013 770 4774 804 4830 3290 3849 2820 2372 2404 total 193517 73234 185837 70723 177867 65621 1 consists property note 11 equipment operating leases note 9 net accumulated depreciation note 25 subsequent events february 3 2005 gm completed purchase 166 million newlyissued shares common stock gmdat approximately 49 million increased gms ownership gmdat 482 446 shareholders gmdat participated issue february 13 2005 gm fiat reached settlement agreement whereby gm pay fiat approximately 20 billion return 10 equity interest fah terminate master agreement including put option entered march 2000 settle various disputes related thereto acquire interest key strategic diesel engine assets important rights respect diesel engine technology knowhow settlement agreement results pretax charge earnings approximately 14 billion 886 million tax 156 per fully diluted share since underlying events disputes giving rise gms fiats agreement settle disputes terminate master agreement including put option existed december 31 2004 gm recognized charge fourth quarter 2004 charge recorded cost sales expenses operations addition settlement agreement includes among things following actions provisions fiatgm powertrain fgp joint venture company dissolved gm regain complete ownership gm assets originally contributed transition period fgp continue supply companies respective operations disrupted gm retain coownership fiat key powertrain intellectual property including sde jtd diesel engines m2032 sixspeed manual transmission gm hold 50 interest joint venture limited operating powertrain manufacturing plant bielskobiala poland currently produces 13 liter sde diesel engine companies continue supply powertrains long term contracts provide considerable ongoing savings gm fiat also continue work together develop certain car programs fiat participate gms purchasing alliance program gm fiat exchanged broad releases claims liabilities ii73 general motors corporation subsidiaries notes consolidated financial statements concluded note 25 subsequent events concluded gm announced march 1 2005 would permanently lay approximately 3000 employees gms assembly plant lansing michigan products built chevrolet classic pontiac grand reached end lifecycles market demand products declined time support continuing production vehicles therefore products discontinued production plant discontinued overall gm expects layoffs occur second quarter 2005 gm recognize pretax charge approximately 121 million 79 million tax writedown fair market value various plant assets first quarter 2005 continued payment compensation benefits laidoff employees estimated 20 million per month expected decline employees redeployed retire otherwise terminate employment ii74 general motors corporation subsidiaries supplementary information selected quarterly data unaudited continued 1 outofperiod adjustments gm making certain adjustments restate previously reported financial results first three quarters 2004 revise previously announced fourth quarter 2004 results affect gms 2004 total annual results cash flows yearend 2004 financial position none adjustments gave rise restatements individually material corporations 2004 quarterly annual consolidated financial statements quarterly restatements initiated identification certain outofperiod adjustments fourth quarter 2004 internal controls put place connection gms sarbanesoxley section 404 program gmacs residential mortgage businesses majority amounts resulted items detected recorded fourth quarter 2004 relate prior 2004 quarters significant adjustments relate 1 estimation fair values certain interests securitized assets 2 accounting deferred income taxes related certain secured financing transactions 3 income statement effects consolidating certain mortgage transfers previously recognized sales upon identification outofperiod adjustments gm analyzed effect together effect outofperiod adjustments related auto previously considered immaterial gm consolidated basis concluded aggregate significant enough warrant restatement gms 2004 quarterly results significant auto outofperiod adjustments relates gms accounting medicare prescription drug improvement modernization act 2003 initially reported first quarter 2004 pursuant fasb staff position fsp fas 1061 fsp 1061 permitted companies recognize effect act beginning enactment date december 8 2003 defer recognition issuance final rules fasb second quarter 2004 fsp 1062 issued clarified account effect act circumstances companys opeb plan yearend different companys fiscal yearend second quarter clarification provided guidance accounting effect act manner different gm previously applied fiat settlement february 13 2005 gm fiat reached settlement agreement settlement agreement results pretax charge earnings approximately 14 billion 886 million tax 156 per fully diluted share since underlying events disputes giving rise gms fiats agreement existed december 31 2004 gm recognized charge fourth quarter 2004 recording cost sales expenses operations see note 25 consolidated financial statements result adjustments quarterly net income increased decreased follows dollars millions effect previously reported announced net income 2004 quarters 2004 calendar 1st 2nd 3rd 4th year outofperiod adjustments 72 36 125 161 fiat settlement 886 total increase decrease net income 72 36 125 725 886 previously reported forms 10q 1st 2nd 3rd quarters previously announced furnished form 8k 4th quarter ii76 general motors corporation subsidiaries supplementary information selected quarterly data unaudited continued 2 fourth quarter 2004 results include following aftertax gain 118 million resulting contribution 11 million shares xm satellite radio holdings inc class common stock valued 432 million gms voluntary employees beneficiary association veba 78 million aftertax charge related primarily previously announced facilities rationalization actions gms baltimore md linden nj plants 383 million aftertax charge related results gms annual review carrying value longlived assets held used goodwill intangible assets indefinite lives 136 million aftertax charge related writeoff gms remaining investment balance fiat auto holdings bv reflects completion impairment study relating carrying value investment 540 million aftertax favorable adjustment various adjustments resulting changes tax laws us overseas capital loss carryforwards aftertax charge 886 million related february 13 2005 gm fiat agreement gm pay fiat approximately 20 billion return 10 equity interest fah settle various disputes terminate master agreement including put option entered march 2000 acquire interest key strategic diesel engine assets important rights respect diesel engine technology knowhow ii77 general motors corporation subsidiaries supplementary information ii78 general motors corporation subsidiaries supplementary information selected quarterly data unaudited concluded 1 previously reported quarters restated reflect results hughes discontinued operations 2 first quarter 2003 results include 505 million aftertax gain sale gms light armored vehicle business gm defense general dynamics corporation net proceeds approximately 11 billion 3 fourth quarter 2003 results include following 725 million aftertax charge lumpsum payments vehicle discount vouchers retirees provided october 2003 contract united auto workers 103 million aftertax favorable adjustment related primarily previously established reserves idled workers janesville wisconsin plant 218 million aftertax charge initiative implemented improve competitiveness gms automotive operations europe ii79 general motors corporation subsidiaries item 9 item 8 financial statements supplementary data motors liquidation company guc trust financial statements report independent registered public accounting firm trust administrator trust monitor trust beneficiaries motors liquidation company guc trust opinion financial statements audited accompanying statements net assets liquidation motors liquidation company guc trust “trust” march 31 2019 2018 related statements changes net assets liquidation cash flows years ended march 31 2019 2018 2017 related notes collectively referred “financial statements” opinion financial statements referred present fairly material respects net assets liquidation motors liquidation company guc trust march 31 2019 2018 changes net assets liquidation cash flows years threeyear period ended march 31 2019 conformity accounting principles generally accepted united states america basis opinion trust administrator responsible financial statements responsibility express opinion trust’s financial statements based audits public accounting firm registered public company accounting oversight board united states “pcaob” required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement whether due error fraud trust required engaged perform audit internal control financial reporting part audits required obtain understanding internal control financial reporting purpose expressing opinion effectiveness trust’s internal control financial reporting accordingly express opinion audits included performing procedures assess risks material misstatement financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures financial statements audits also included evaluating accounting principles used significant estimates made trust administrator well evaluating overall presentation financial statements believe audits provide reasonable basis opinion plante moran pllc served trust’s auditor since 2011 clinton township michigan june 4 2019 motors liquidation company guc trust statements net assets liquidation basis march 31 2019 2018 thousands see accompanying notes financial statements motors liquidation company guc trust statements changes net assets liquidation basis years ended march 31 2019 2018 2017 thousands see accompanying notes financial statements motors liquidation company guc trust statements cash flows liquidation basis years ended march 31 2019 2018 2017 thousands guc trust presented reconciliation net income cash flow operations entity liquidation guc trust continuing operations result measurement net income term used generally accepted accounting principles measure results operations see accompanying notes financial statements motors liquidation company guc trust notes financial statements march 31 2019 1 purpose trust motors liquidation company guc trust “guc trust” successor motors liquidation company formerly known general motors corp “mlc” within meaning section 1145 united states bankruptcy code “bankruptcy code” guc trust holds administers directs distribution certain assets pursuant terms conditions second amended restated motors liquidation company guc trust agreement “guc trust agreement” dated july 30 2015 amended time pursuant second amended joint chapter 11 plan “plan” dated march 18 2011 mlc debtor affiliates collectively along mlc “debtors” benefit holders allowed general unsecured claims debtors “allowed general unsecured claims” guc trust formed march 30 2011 statutory trust delaware statutory trust act purposes implementing plan distributing guc trust’s distributable assets prior liquidation july august 2015 new gm securities defined held guc trust pursuant liquidation order defined plan qualified liquidation order generally provided distribution certain shares common stock “new gm common stock” new general motors company formerly known ngmco inc “new gm” associated dividend cash defined certain warrants purchase shares stock “new gm warrants” together new gm common stock “new gm securities” holders allowed general unsecured claims pro rata amount claims since liquidation new gm securities distributions holders allowed general unsecured claims consist entirely cash distributions lieu new gm securities addition prior qualification liquidation order resulting subsequent liquidation new gm securities plan provided holder allowed general unsecured claim would obtain form guc trust units defined contingent right receive pro rata basis additional shares new gm common stock associated dividend cash new gm warrants extent new gm common stock new gm warrants required satisfaction previously disputed general unsecured claims defined note 2 term loan avoidance action claims defined note 2 liquidation payment expenses liabilities guc trust certain cash remaining dissolution guc trust since liquidation new gm securities previously held guc trust described holders guc trust units contingent right receive additional cash lieu new gm securities remaining dissolution guc trust order dated july 2 2015 “liquidation order” bankruptcy court approved conversion guc trust’s holdings new gm securities cash effect conversion july 7 2015 guc trust converted holdings new gm warrants new gm common stock cashless exercise total guc trust converted 10352556 new gm series warrants defined 7407155 shares new gm common stock ii 10352556 new gm series b warrants defined 4953635 shares new gm common stock thereafter guc trust sold holdings new gm common stock net proceeds aggregating 7417 million completed sales august 5 2015 result distributions guc trust thereafter respect allowed general unsecured claims including respect guc trust units made solely cash pursuant liquidation order proceeds liquidations net applicable costs fees expenses paid respect thereof allocated beneficiaries guc trust pro rata basis following manner guc trust beneficiary’s entitlement particular number new gm warrants exercised converted entitlement receive number shares new gm common stock new gm warrants exercised conversions 071549 shares new gm common stock new gm series warrant 047849 shares common stock new gm series b warrant b guc trust beneficiary’s entitlement particular number shares new gm common stock liquidated including exercised new gm warrants set forth converted entitlement receive amount cash equal weighted average sales price net applicable costs fees expenses paid respect thereof new gm common stock sold multiplied number shares new gm common stock guc trust beneficiary would otherwise entitled including exercised new gm warrants set forth weighted average sales price guc trust’s holdings new gm common stock sold subsequent june 30 2015 3123 per share following liquidation described guc trust invested proceeds certain marketable securities permitted guc trust agreement amount cash equivalents marketable securities held distribution guc trust beneficiaries including dividend cash referred herein distributable cash guc trust administered wilmington trust company individual capacity solely capacity trust administrator trustee “guc trust administrator” among rights duties subject terms conditions limitations set forth guc trust agreement guc trust administrator power authority hold manage sell invest distribute assets comprising guc trust corpus consult retain professionals administration guc trust prosecute resolve objections disputed general unsecured claims take necessary actions administer winddown affairs debtors upon dissolution upon dissolution resolve satisfy extent allowed residual winddown claims defined activities guc trust administrator overseen fti consulting inc solely capacity monitor “guc trust monitor” 2 plan liquidation march 31 2011 date plan became effective “effective date” approximately 29771 million allowed general unsecured claims addition effective date approximately 8154 million disputed general unsecured claims “disputed general unsecured claims” reflects liquidated disputed claims bankruptcy court ordered distribution reserve unliquidated disputed claims reflect term loan avoidance action claims total aggregate amount general unsecured claims allowed disputed asserted debtors inclusive term loan avoidance action claims approximately 39425 million effective date pursuant guc trust agreement holders disputed general unsecured claims became entitled receive distribution distributable cash guc trust extent disputed general unsecured claims become allowed general unsecured claims “resolved disputed claims” guc trust agreement guc trust administrator authority file objections disputed general unsecured claims could prosecuted alternative dispute resolution proceedings including mediation arbitration appropriate march 31 2019 remaining disputed general unsecured claims remained 500 million claim amount associated particular claim set aside guc trust administrator general claim contingency see “allowed disputed claims” note 4 one avoidance action captioned official committee unsecured creditors motors liquidation co v jpmorgan chase bank na et al adv pro 0900504 bankr sdny july 31 2009 “term loan avoidance action” commenced prior statutory deadline commencing actions term loan avoidance action commenced official committee unsecured creditors motors liquidation company “committee” among things seeks return approximately 15 billion transferred debtors funds advanced commencement debtors’ chapter 11 cases united states treasury export development canada together “dip lenders” consortium prepetition lenders pursuant terms order bankruptcy court december 15 2011 accordance plan upon dissolution mlc term loan avoidance action transferred avoidance action trust defined pursuant guc trust agreement extent wilmington trust company individual capacity solely capacity trustee trust administrator avoidance action trust “avoidance action trust administrator” successful obtaining recovery way judgment settlement defendants term loan avoidance action defendants shall receive allowed general unsecured claim guc trust amount disgorged avoidance action trust allowed general unsecured claims “resolved term loan avoidance action claims” together resolved disputed claims “resolved allowed claims” described item 3 “legal proceedings” april may 2019 parties term loan avoidance action executed settlement agreement subject bankruptcy court approval pursuant settlement agreement expected approximately 2310 million recovered avoidance action trust defendants term loan avoidance action accordingly expected corresponding amount arise allowed general unsecured claims holders become entitled receive distribution guc trust approximately 685 million funds reclaimed prepetition lenders term loan avoidance action transferred otherwise benefit guc trust distributed account guc trust units guc trust distributable assets pursuant terms plan bankruptcy court authorized distribution new gm 150 million shares new gm common stock warrants acquire 136363635 newly issued shares new gm stock exercise price set 1000 per share scheduled expire july 10 2016 “new gm series warrants” warrants acquire 136363635 newly issued shares new gm stock exercise price set 1833 per share scheduled expire july 10 2019 “new gm series b warrants” record ownership new gm securities held mlc benefit guc trust dissolution mlc december 15 2011 time record ownership transferred guc trust described pursuant liquidation order july august 2015 guc trust’s holdings new gm securities liquidated following liquidation guc trust’s distributable assets principally consist distributable cash distributable cash substantially invested certain marketable securities permitted guc trust agreement prior liquidation holdings new gm common stock guc trust received dividends new gm common stock aggregating 247 million dividends required applied purpose new gm common stock dividends relate portion distributable cash applicable proceeds liquidation new gm common stock distributed holders subsequently allowed disputed general unsecured claims term loan avoidance action claims guc trust units dividends relating distributable cash also distributed holders however distributable cash appropriated accordance guc trust agreement fund costs liabilities guc trust case dividends relating distributable cash applied costs liabilities guc trust like appropriated distributable cash maintained administrative cash defined dividends applied purposes associated distributable cash references form 10k distributable cash understood include dividends relating distributable cash unless expressly indicated otherwise amount cash equivalents marketable securities held guc trust relates dividends received guc trust new gm common stock previously held guc trust referred dividend cash included amount cash equivalents marketable securities held distribution guc trust beneficiaries referred herein distributable cash except extent dividends relating appropriated distributable cash classified administrative cash following appropriation funding guc trust costs liquidation guc trust incurred continue incur certain costs liquidate trust assets implement plan effective date pursuant plan mlc contributed approximately 527 million guc trust held maintained guc trust administrator “administrative fund” purpose paying certain fees expenses including certain tax obligations incurred guc trust including fees guc trust administrator guc trust monitor fees expenses professionals retained guc trust reporting costs defined “winddown costs” march 31 2019 remaining administrative fund aggregated 12 million consisting cash equivalents marketable securities remaining amount administrative fund designated satisfaction certain specifically identified costs liabilities guc trust amount may used payment guc trust professionals fees expenses winddown costs pursuant guc trust agreement cash investments administrative fund remain winding conclusion guc trust must returned dip lenders november 2016 guc trust administrator returned 60 million remaining administrative fund dip lenders return associated potential tax liability guc trust administrator consultation guc trust professionals determined would incurred therefore would expended guc trust guc trust agreement authorized guc trust liquidate approximately 57 million new gm securities “initial reporting cash” shortly effective date purposes funding certain fees expenses guc trust “reporting costs” including directly indirectly relating reports prepared filed guc trust pursuant applicable rules regulations interpretations sec ii transfer registration transfer certification guc trust units iii application committee internal revenue service “irs” private letter ruling regarding tax treatment guc trust holders allowed general unsecured claims respect distribution new gm securities iv certain legal proceedings relating term loan avoidance action guc trust agreement provides administrative fund may utilized satisfy reporting costs guc trust agreement provides extent guc trust administrator determines administrative fund sufficient satisfy current projected winddown costs initial reporting cash sufficient satisfy current projected reporting costs guc trust administrator approval guc trust monitor authorized set aside distributable cash distribution purposes guc trust administrator may appropriate distributable cash fund winddown costs andor reporting costs required approval bankruptcy court distributable cash set aside andor appropriated manner available distribution beneficiaries guc trust units appropriation distributable cash including related dividend cash classified “other administrative cash” guc trust agreement setting aside appropriation distributable cash including dividend cash reflected statement net assets liquidation financial statements guc trust separate process setting aside appropriating distributable cash satisfy unfunded projected costs expenses guc trust matter financial reporting guc trust records reserves statement net assets liquidation source funding addressed therein expected costs liquidation reasonable basis estimation reason among others direct relationship amount reserves reflected statement net assets liquidation amount distributable cash set aside appropriated current projected costs expenses guc trust adjustments reserves expected costs liquidation reported statement net assets liquidation recorded reasonable basis estimation expected incurrence additional costs reduction expected costs information regarding reserves expected costs liquidation reflected accompanying statement net assets liquidation see note 7 prior liquidation new gm securities july august 2015 described guc trust authorized approval guc trust monitor set aside distribution new gm securities funding purposes described sell set aside new gm securities approval bankruptcy court bankruptcy court previously approved march december 2012 january 2015 sale new gm securities fund current projected costs expenses guc trust march 2012 bankruptcy court order also authorized sale new gm securities aggregating 137 million purpose funding certain fees costs expenses avoidance action trust transfer sale proceeds avoidance action trust sale proceeds transferred may 2012 prior liquidation new gm securities described sales new gm securities fund projected winddown costs reporting costs calendar year 2015 aggregated approximately 617 million including dividend cash 02 million initial reporting cash amounts comprised part guc trust’s administrative cash securities sold aggregated 1043801 shares new gm common stock 948887 new gm series warrants 948887 new gm series b warrants december 2015 february 2017 march 2018 january 2019 bankruptcy court approved appropriation distributable cash aggregating approximately 480 million fund projected costs expenses guc trust calendar year 2019 appropriation reduced distributable cash increased administrative cash march 31 2019 administrative cash aggregated 314 million february 1 2019 guc trust administrator filed motion seeking authority bankruptcy court appropriate distributable cash 1372 million purpose satisfying noticing costs 1372 million pursuant revised settlement agreement described note 4 item 3 “legal proceedings” hearing date set respect motion extent administrative cash ultimately required held guc trust time dissolution remaining administrative cash distributed guc trust holders guc trust units march 31 2019 distributable cash 124 million set aside projected guc trust fees costs expenses incurred beyond 2019 accordingly distributable cash available distribution beneficiaries guc trust units set aside andor appropriated distributable cash reflected cash equivalents marketable securities statement net assets liquidation expended funding potential tax liabilities dispositions new gm securities dividends new gm common stock investment income guc trust subject us federal income tax realized net gains distribution sale new gm securities taxes “taxes distribution” guc trust also subject us federal income tax dividends received new gm common stock held guc trust taxes “dividend taxes” investment income earned distributable cash taxes “investment income taxes” guc trust agreement provides administrative fund may utilized satisfy taxes distribution dividend taxes investment income taxes guc trust administrator authorized approval guc trust monitor set aside distribution distributable cash amounts would sufficient satisfy potential taxes distribution dividend taxes investment income taxes distributable cash set aside dividend taxes investment income taxes included setaside winddown costs described “funding guc trust costs liquidation” guc trust administrator may appropriate set aside distributable cash fund taxes distribution dividend taxes investment income taxes approval guc trust monitor respect dividend taxes investment income taxes approval bankruptcy court distributable cash appropriated manner available distribution beneficiaries guc trust units appropriation distributable cash including dividend cash classified “other administrative cash” guc trust agreement set aside andor appropriated distributable cash reflected cash equivalents marketable securities expended pay taxes distribution dividend taxes investment income taxes setaside appropriated distributable cash including dividend cash available distribution corresponding liability reserve related setaside assets reflected statement net assets liquidation financial statements guc trust prior liquidation new gm securities july august 2015 described guc trust authorized approval guc trust monitor set aside distribution new gm securities fund potential taxes distribution dividend taxes investment income taxes sell set aside new gm securities fund taxes distribution dividend taxes investment income taxes approval guc trust monitor respect dividend taxes investment income taxes approval bankruptcy court quarter ended march 31 2019 guc trust administrator reviewed potential taxes distribution dividend taxes investment income taxes result review guc trust administrator determined distributable cash set aside potential taxes distribution dividend taxes investment income taxes result application section 505b bankruptcy code guc trust’s federal income tax returns year ended march 31 2018 prior years longer subject examination internal revenue service “irs” income taxes may assessed year ended march 31 2018 prior year however guc trust’s remaining capital loss carryovers net operating loss carryovers still subject examination irs subsequent years losses utilized utilization net basis expected result sale previously held new gm securities year ended march 31 2016 except potentially respect receipt subsequent distribution sale guc trust additional shares fair market value additional shares date distribution sale greater fair market value shares date receipt determinable estimable time accordingly income taxes expected paid future except potentially respect taxes distribution resulting receipt subsequent distribution sale guc trust additional shares determinable estimable time see note 8 “critical accounting policies estimates income taxes” item 7 “management’s discussion analysis financial condition results operations” information regarding income taxes remaining capital net operating loss carryovers generated prior years still subject examination irs potentially could succeed claimants defined pursuant tax rules material uncertainties associated therewith guc trust administrator intends continue reevaluate amount distributable cash set aside quarterly basis additional information see “net assets liquidationdistributable cash set aside distribution” item 7 “management’s discussion analysis financial condition results operations” residual winddown claims costs upon dissolution debtors occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining disputed administrative expenses priority tax claims priority nontax claims secured claims “residual winddown claims” december 15 2011 plan debtors transferred guc trust amount assets necessary “residual winddown assets” satisfy ultimate allowed amount residual winddown claims including certain reasonable litigation defense costs related term loan avoidance action “avoidance action defense costs” estimated debtors costs fees expenses relating satisfying resolving residual winddown claims “residual winddown costs” residual winddown assets initially aggregated approximately 428 million amount consisted approximately 400 million cash including approximately 14 million designated payment avoidance action defense costs transferred benefit approximately 28 million prepaid expenses extent residual winddown claims residual winddown costs less residual winddown assets excess funds returned dip lenders also expected time guc trust administrator determines residual winddown assets adequate satisfy residual winddown claims including actual amount avoidance action defense costs residual winddown costs satisfied administrative cash remaining administrative cash guc trust administrator authorized guc trust monitor approval set aside bankruptcy court approval appropriate distributable cash cover shortfall extent distributable cash set aside andor appropriated obtain funding complete winddown debtors distributable cash available distribution beneficiaries guc trust therefore amount residual winddown claims residual winddown costs could reduce assets guc trust available distribution setting aside appropriation distributable cash including dividend cash reflected statement net assets liquidation financial statements guc trust rather set aside appropriated distributable cash including dividend cash reflected cash equivalents marketable securities accompanying statement net assets liquidation expended guc trust concluded affairs funds remaining obtained sale new gm securities appropriation distributable cash fund winddown process resolution satisfaction residual winddown claims distributed holders guc trust units march 31 2019 amount avoidance action defense costs incurred date exceeds corresponding cash 14 million received guc trust mlc dissolution date approximately 302 million result new residual winddown claims arisen amount excess april 2017 guc trust entered letter agreement administrative agent prepetition lenders defendants term loan avoidance action “administrative agent” letter agreement provides guc trust’s obligation pay avoidance action defense costs administrative agent limited amount approximating remaining designated residual winddown assets result term loan avoidance action settlement described item 3 “legal proceedings” virtue terms settlement agreement guc trust responsible payment avoidance action defense costs march 31 2019 residual winddown assets aggregating 02 million held guc trust recorded cash equivalents accompanying statement net assets liquidation remaining expected residual winddown claims costs assets march 31 2019 accordingly guc trust expects return remaining residual winddown assets dip lenders upon winding conclusion guc trust corresponding amount recorded reserves residual winddown claims costs accompanying statement net assets liquidation addition residual winddown assets guc trust also received dissolution date approximately 34 million cash mlc amount included 14 million respect certain costs fees expenses payable plan indenture trustees fiscal paying agents previously outstanding debt mlc “indenture trustee fiscal paying agent costs” ii 20 million respect reporting costs funds received credited reserve expected costs liquidation unused portion funds designated indenture trustee fiscal paying agent costs must returned dip lenders available distribution holders guc trust units winding conclusion guc trust march 31 2019 funds designated indenture trustee fiscal paying agents costs held guc trust approximated 01 million recorded cash equivalents accompanying statement net assets liquidation none approximately 20 million funds designated reporting costs remained march 31 2019 3 basis presentation significant accounting policies liquidation basis accounting guc trust exists solely purposes described note 1 finite life accordingly guc trust prepared accompanying financial statements liquidation basis accounting accordance accounting principles generally accepted united states america “us gaap” liquidation basis accounting assets stated estimated realizable value nondiscounted amount cash asset expected converted liquidation period liabilities continue recognized amount required us gaap remeasured reflect anticipation entity legally released obligation additionally liquidation basis accounting reserve established estimated costs expected incurred liquidation period costs accrued reasonable basis estimation also accrual made estimated income cash expected received liquidation period extent reasonable basis estimation exists estimates periodically reviewed adjusted appropriate valuation assets realizable value accrual investment income marketable securities expected received liquidation period reserves expected liquidation costs represent estimates based present facts circumstances known guc trust administrator subject change guc trust beneficiaries future extent liquidating distributions yet paid current holders allowed general unsecured claims future current holders guc trust units disputed general unsecured claims term loan avoidance action claims resolved allowed thereby become allowed general unsecured claims holders thereof become entitled receive liquidating distributions distributable cash including dividend cash guc trust units pro rata amount claims upon occurrence guc trust incurs obligation distribute distributable cash accordingly liquidating distributions payable recorded amount distributable cash previously fair value new gm securities guc trust obligated distribute end period disputed general unsecured claims term loan avoidance action claims resolved allowed general unsecured claims prior resolution allowance disputed general unsecured claims term loan avoidance action claims liabilities recorded conditional obligations associated disputed general unsecured claims term loan avoidance action claims rather beneficial interests guc trust beneficiaries residual assets guc trust reflected net assets liquidation guc trust financial statements liquidation basis accounting guc trust presents two principal financial statements statement net assets liquidation statement changes net assets liquidation addition although required liquidation basis accounting guc trust also presents statement cash flows accordance requirements guc trust agreement fiscal year guc trust’s fiscal year begins april 1 ends following march 31 cash equivalents marketable securities accrued investment income cash equivalents marketable securities cash equivalents consist balances held money market funds marketable securities consist shortterm investments us treasury bills guc trust valued securities fair value based carrying value approximates fair value beginning quarter ended june 30 2014 estimated investment income expected received holdings marketable securities cash equivalents accrued liquidation basis accounting extent reasonable basis estimation exists accrual estimated principally based forecasted cash outflows expected returns based recent yields us treasury bills marketable securities invested estimates forecasted cash outflows consider amount timing distributions respect guc trust units estimates may change near term change may material dividends new gm common stock dividends previously received new gm common stock previously held guc trust required applied purpose new gm common stock dividends relate portion distributable cash applicable liquidated new gm common stock distributed holders subsequently resolved allowed claims guc trust units dividends relating distributable cash also distributed holders however distributable cash appropriated guc trust accordance guc trust agreement fund costs liabilities guc trust case dividends relating appropriated distributable cash applied costs liabilities guc trust like appropriated distributable cash maintained administrative cash dividends applied purpose associated distributable cash references distributable cash understood include dividends relating distributable cash unless expressly indicated otherwise amount cash equivalents marketable securities held guc trust relates dividends received guc trust new gm common stock previously held guc trust referred dividend cash included amount cash equivalents marketable securities held distribution guc trust beneficiaries referred distributable cash except extent dividends relating appropriated distributable cash classified administrative cash following appropriation accounts payable liabilities accounts payable liabilities represent amounts due professionals service providers vendors services rendered goods received end period contingent settlement obligation guc trust accrues loss contingencies probable liability incurred date financial statements amount liability reasonably estimated assessing whether liability incurred date financial statements guc trust considers events occurring date financial statements provide additional evidence respect conditions existed date financial statements including estimates inherent process preparing financial statements accordingly quarter ended march 31 2018 guc trust accrued contingent settlement obligation pursuant settlement agreement described note 4 item 3 “legal proceedings” result developments related litigation specifically related impact rule 23 decision described item 3 “legal proceedings” accrual reversed quarter ended september 30 2018 due uncertainties associated effectiveness settlement agreement effect time reserves residual winddown claims costs upon dissolution mlc occurred december 15 2011 guc trust became responsible resolving satisfying extent allowed remaining residual winddown claims date dissolution debtors transferred guc trust residual winddown assets amount necessary satisfy ultimate allowed amount residual winddown claims including certain avoidance action defense costs residual winddown costs estimated debtors corresponding amount recorded reserves residual winddown claims costs prior execution letter agreement administrative agent described reserves increased expected increases avoidance action defense costs reasonable basis estimation expected exceed recorded reserves residual winddown claims residual winddown costs less residual winddown assets excess funds returned dip lenders expected collectively actual amounts residual winddown claims including certain avoidance action defense costs allowed residual winddown costs exceed residual winddown assets guc trust administrator may required set aside distribution appropriate distributable cash fund shortfall appropriation would reduce amount distributable cash including dividend cash available distribution holders guc trust units reserves expected costs liquidation basis accounting guc trust required estimate accrue costs associated implementing plan distributing guc trust’s distributable assets costs described winddown costs reporting costs note 2 consist principally professional fees costs governance administrative expenses amounts may vary significantly due among things time effort required complete activities distributions plan guc trust recorded reserves expected costs liquidation represent estimated costs incurred remaining liquidation period guc trust reasonable basis estimation amount liquidation costs ultimately incurred depends period time extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities result estimates expected costs liquidation may change near term change could material march 31 2019 remaining liquidation period estimated extend minimum april 2022 estimated predominantly modified probabilityweighted basis guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome addition consistent liquidation basis accounting consideration given potential outcomes extent exist reasonable basis estimation remaining liquidation period dependent predominantly estimate remaining period time resolution litigation involving certain general motors vehicle recalls described item 3 “legal proceedings” uncertainties associated resolution general motors vehicle recall litigation reasonable basis estimation respect certain outcomes exist result guc trust’s estimate remaining period time resolution represents minimum remaining length time estimated likely resolution litigation addition certain additional estimated time wind guc trust following resolution litigation included estimated liquidation period future developments general motors vehicle recall litigation could extend current estimate minimum remaining period time resolution therefore extend estimated minimum remaining liquidation period guc trust beyond april 2022 addition certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued guc trust’s estimates regarding costs remaining liquidation period may change near term change may material guc trust incurs liquidation costs reserves released offset costs incurred liability service provider recognized accounts payable accrued liability paid addition guc trust records reserves expected costs reasonable basis estimation applicable us gaap additional costs may identified time additional reserves must recorded costs identified guc trust records increase reserves charges increase addition reserves statement changes net assets liquidation process recording reserves expected costs liquidation matter financial reporting separate distinct process distributable cash set aside distribution purposes funding projected costs liquidation projected costs generally estimated conservative ie inclusive basis include contingencies permitted accrued reserves expected costs liquidation applicable us gaap complete description process setting aside distributable cash fund projected costs potential liabilities guc trust see item 7 “management’s discussion analysis financial condition results operationsnet assets liquidation” heading “distributable cash set aside distribution” income taxes guc trust considered disputed ownership fund pursuant treasury regulation section 1468b9 assets transferred guc trust passive investments guc trust taxed qualified settlement fund qsf pursuant treasury regulation section 1468b9c1ii qsf tax status guc trust approved irs private letter ruling issued march 2 2011 general qsf computes taxable income manner corporation pays federal income tax using trust income tax rates modified gross income modified gross income includes gross income pursuant internal revenue code section 61 less administrative expenses certain losses sale exchange worthlessness property net operating losses general disputed ownership fund taxed qsf recognize gross income assets transferred therefore guc trust recognized gross income transfer assets mlc guc trust generates gross income form interest dividend income including dividends received previous holdings new gm common stock recognizes capital gains andor losses upon disposition new gm securities b receipt subsequent distribution sale guc trust additional shares fair market value additional shares date distribution sale differs fair market value shares date receipt reduced administrative expenses accumulated net operating capital losses compute modified gross income guc trust taxable federal income tax purposes current income tax liability asset recognized estimated taxes payable receivable deferred tax liabilities assets recognized estimated future tax effects temporary differences financial reporting tax accounting deferred tax assets reviewed recoverability valuation allowances provided necessary guc trust subject state income taxes current law accordingly current deferred state income tax liabilities assets recorded process recognizing deferred tax assets liabilities current income taxes payable matter financial reporting separate distinct process distributable cash set aside distribution purposes funding potential income tax liabilities potential income tax liabilities generally estimated conservative ie inclusive basis may include amounts potential income tax liabilities beyond amounts permitted recorded applicable accounting standards complete description process setting aside distributable cash fund projected costs potential income tax liabilities guc trust see item 7 “management’s discussion analysis financial condition results operationsnet assets liquidation” heading “distributable cash set aside distribution” guc trust recognizes tax benefit uncertain tax position likely tax position sustained examination taxing authority based technical merits position review available evidence consultation guc trust professionals guc trust’s tax liability respect federal income tax returns year ended march 31 2018 prior years longer subject examination result application section 505b bankruptcy code however remaining capital loss carryovers generated years new tax position aggregate 17 million expiration march 31 2018 2017 respectively capital loss carryovers 226 million 1581 million attributable years ended march 31 2013 2012 respectively along net operating loss carryovers generated march 31 2019 aggregating 1393 million could subject examination irs subsequent years losses utilized expected losses utilized net basis future except potentially respect receipt subsequent distribution sale guc trust additional shares referred fair market value additional shares date distribution sale greater fair market value shares date receipt determinable estimable time march 31 2019 known items would result significant accrual uncertain tax positions use estimates preparation financial statements liquidation basis conformity us gaap requires use estimates assumptions affect reported amounts assets liabilities estimates subject known unknown risks uncertainties factors could materially impact amounts reported disclosed financial statements related footnotes significant estimates include estimated investment income expected received expected liquidation costs residual winddown claims costs fair value marketable securities actual results could differ estimates recent accounting standards changes us gaap made fasb form accounting standards updates asus fasb’s accounting standards codification guc trust considers applicability impact asus noted herein assessed determined applicable 4 net assets liquidation description guc trust agreement plan described fully note 1 beneficiaries guc trust future extent liquidating distributions yet paid current holders allowed general unsecured claims future current holders guc trust units assets guc trust consisting primarily distributable cash including dividend cash described note 1 available distributed trust beneficiaries “guc trust distributable assets” accordance plan guc trust agreement except extent set aside appropriated funding expected costs liquidation guc trust amounts net assets liquidation presented accompanying statements net assets liquidation correspond amounts guc trust distributable assets respective dates certain adjustments including reductions amounts set aside distributable cash appropriated distributable cash march 31 2019 guc trust distributable assets aggregated approximately 4579 million additional information see “net assets liquidationdistributable assets” item 7 “management’s discussion analysis financial condition results operations” cash equivalents marketable securities march 31 2019 2018 cash equivalents marketable securities aggregated 5051 million 5077 million respectively comprised following described note 5 march 31 2019 guc trust accrued liquidating distributions payable aggregating 18 million addition march 31 2019 amount distributable cash reflected table includes 124 million amounts set aside projected guc trust fees costs expenses incurred beyond 2019 aggregate amount distributable cash pending distribution set aside available distribution march 31 2019 142 million described note 2 february 1 2019 guc trust administrator filed motion seeking authority bankruptcy court appropriate distributable cash 1372 million purpose satisfying noticing costs 1372 million pursuant revised settlement agreement described “allowed disputed claims” item 3 “legal proceedings” hearing date scheduled respect motion accrued investment income cash equivalents marketable securities march 31 2019 2018 guc trust accrued approximately 303 million 167 million respectively investment income marketable securities cash equivalents expected earned remaining liquidation period accordance liquidation basis accounting accrual estimated principally based forecasted cash outflows expected returns based recent yields us treasury bills marketable securities invested accrual along receivables investment income earned march 31 2019 2018 included accrued investment income accompanying statements net assets liquidation potential distributable capital net operating loss carryovers described note 8 described “critical accounting policies estimatesincome taxes” item 7 “management’s discussion analysis financial condition results operations” guc trust’s unused capital net operating loss carryovers potentially could succeed claimants defined pursuant tax rules upon termination guc trust reference made thereto information regarding potential distributable loss carryovers material uncertainties associated therewith trust units described note 1 plan holder allowed general unsecured claim retains contingent right receive pro rata basis additional distributable cash extent required satisfaction previously disputed general unsecured claims term loan avoidance action claims appropriation payment expenses tax liabilities guc trust guc trust issues units representing contingent rights “guc trust units” rate one guc trust unit per 1000 allowed general unsecured claims holder allowed general unsecured claim subject rounding pursuant guc trust agreement connection initial recognition allowed general unsecured claim guc trust makes quarterly liquidating distributions holders guc trust units extent ia previously disputed general unsecured claims asserted debtors’ estates term loan avoidance action claims either disallowed otherwise resolved favorably guc trust thereby reducing amount guc trust assets reserved distribution respect asserted potential claims b certain excess guc trust distributable assets defined guc trust agreement previously set aside distribution released manner permitted guc trust agreement ii result foregoing amount excess guc trust distributable assets defined guc trust agreement end relevant quarter exceeds thresholds set forth guc trust agreement following table presents changes years ended march 31 2019 2018 2017 numbers guc trust units outstanding guc trust obligated issue 1 number guc trust units issuable time represents guc trust units issuable respect allowed general unsecured claims newly allowed fiscal year 2 number guc trust units outstanding time represents guc trust units issued respect allowed general unsecured claims allowed prior periods including guc trust units held guc trust benefit holders allowed general unsecured claims yet supplied information required guc trust order effect initial distribution entitled b governmental entities precluded applicable law receiving distributions guc trust units 3 number guc trust units outstanding issuable end year equal amount allowed general unsecured claims 1 1000 basis corresponding date additional guc trust units issued due rounding allowed disputed claims total cumulative pro rata liquidating distributions ultimately received trust beneficiaries dependent upon current amount allowed general unsecured claims final resolution outstanding disputed general unsecured claims term loan avoidance action claims described note 2 disputed general unsecured claims march 31 2019 reflect distribution “set aside” permitted plan guc trust agreement described note 1 prior resolution allowance disputed general unsecured claims term loan avoidance action claims liabilities recorded conditional obligations associated disputed general unsecured claims term loan avoidance action claims liquidating distributions payable recorded amount distributable cash previously fair value new gm securities distributed end period disputed general unsecured claims term loan avoidance action claims resolved allowed general unsecured claims following table presents summary activity respect allowed disputed general unsecured claims term loan avoidance action claims years ended march 31 2019 2018 1 remaining disputed general unsecured claims represent general claim contingency future disputed claims obligations guc trust guc trust set aside distribution aggregate 148 million general claim contingency ie 296 distributable cash per 1000 allowed general unsecured claims provided plan 2 maximum amount unresolved claims represents sum disputed general unsecured claims term loan avoidance action claims 3 total claim amount represents sum allowed general unsecured claims maximum amount unresolved claims year ended march 31 2018 avoidance action trust reached settlements certain defendants term loan avoidance action resulting recoveries avoidance action trust approximately 14 million result corresponding term loan avoidance action claims allowed guc trust agreement described item 3 “legal proceedings” april may 2019 parties term loan avoidance action executed settlement agreement providing recoveries avoidance action trust approximately 2310 million among provisions settlement agreement subject bankruptcy court approval result expected allowed general unsecured claims arise corresponding amount holders become entitled receive distributions guc trust aggregating approximately 685 million described item 3 “legal proceedings” december 2016 certain plaintiffs filed motions bankruptcy court seeking authority file late proofs claim guc trust late proofs claim filed following receipt authority bankruptcy court additional disputed general unsecured claims would arise described item 3 “legal proceedings” guc trust previously executed settlement agreement plaintiffs approved bankruptcy court would provided settlement payment plaintiffs 150 million among provisions quarter ended march 31 2018 guc trust accrued contingent settlement obligation 150 million settlement payment result developments related litigation specifically related impact rule 23 decision described item 3 “legal proceedings” accrual reversed quarter ended september 30 2018 due uncertainties associated effectiveness settlement agreement effect time described item 3 “legal proceedings” settlement agreement approved bankruptcy court described item 3 “legal proceedings” guc trust executed revised settlement agreement plaintiffs approved bankruptcy court revised settlement agreement would provide payment noticing costs 1372 million payments guc trust revised settlement agreement would required 5 liquidating distributions liquidating distributions net reversal liquidating distributions years ended march 31 2019 2018 2017 consisted following distributions year ended march 31 2019 consisted distributions holders allowed general unsecured claims previously failed fulfill information requirements distribution established accordance guc trust agreement subsequently fulfilled information requirements distributions year ended march 31 2018 consisted distributions holders allowed general unsecured claims previously failed fulfill informational requirements distribution established accordance guc trust agreement subsequently fulfilled information requirements b holders certain resolved term loan avoidance action claims obligation distribute distributable cash holders guc trust units excess distributions payable march 31 2018 decreased balances march 31 2017 resulting net reversal liquidating distributions 69 million year ended march 31 2018 distributions year ended march 31 2017 consisted distributions holders guc trust units excess distributions payable b holders allowed general unsecured claims previously failed fulfill informational requirements distribution established accordance guc trust agreement subsequently fulfilled information requirements c holders certain resolved term loan avoidance action claims distributions holders guc trust units year ended march 31 2017 resulted primarily release distributable assets guc trust previously set aside respect potential taxes distribution guc trust obligated march 31 2019 distribute distributable cash 18 million certain holders allowed general unsecured claims satisfied certain informational requirements necessary effect distribution entitled 6 fair value measurements accounting standards require certain assets liabilities reported fair value financial statements provide framework establishing fair value framework determining fair value based hierarchy prioritizes inputs valuation techniques used measure fair value trust’s cash equivalents marketable securities liquidating distributions payable presented provided hierarchy level 1in general fair values determined level 1 inputs use quoted prices active markets identical assets liabilities guc trust ability access level 2fair values determined level 2 inputs use inputs observable either directly indirectly level 2 inputs include quoted prices similar assets liabilities active markets inputs interest rates yield curves observable commonly quoted intervals level 3level 3 inputs unobservable inputs including inputs available situations little market activity related asset liability level 3 fair value measurements based primarily management’s estimates using pricing models discounted cash flow methodologies similar techniques taking account characteristics asset liability guc trust assets liabilities measured level 3 inputs march 31 2019 2018 instances inputs used measure fair value fall different levels fair value hierarchy fair value measurements entirety categorized based lowest level input significant valuation guc trust’s assessment significance particular inputs fair value measurements requires judgment considers factors specific asset liability guc trust also holds financial instruments measured fair value recurring basis including accounts payable liabilities fair value liabilities approximates carrying amounts accompanying financial statements due short maturity instruments following table presents information guc trust’s assets liabilities measured fair value recurring basis march 31 2019 2018 valuation techniques used guc trust determine fair values following descriptions valuation methodologies used assets liabilities measured fair value • due shortterm liquid nature fair value cash equivalents approximates carrying value • marketable securities consist us treasury bills due shortterm maturities fair value us treasury bills approximates carrying value • liquidating distributions payable valued amount cash guc trust obligated distribute guc trust’s policy recognize transfers levels fair value hierarchy actual date event change circumstances caused transfer transfers years ended march 31 2019 2018 7 reserves expected costs liquidation residual winddown claims costs following summary activity reserves expected costs liquidation years ended march 31 2019 2018 2017 year ended march 31 2019 estimates expected winddown costs estimates expected reporting costs reasonable basis estimation increased 41 million 54 million respectively year ended march 31 2018 estimates expected winddown costs estimates expected reporting costs increased 253 million 86 million respectively year ended march 31 2017 estimates expected winddown costs estimates expected reporting costs increased 53 million 68 million respectively revisions estimates recorded additions reserves expected costs liquidation years guc trust recorded reserves expected costs liquidation represent amounts expected incurred estimated remaining liquidation period guc trust reasonable basis estimation described item 3 “legal proceedings” noticing costs 1372 million paid revised settlement agreement approved bankruptcy court time reasonable basis estimation exist whether noticing costs incurred accordingly march 31 2019 accrual potential noticing costs recorded also described item 3 “legal proceedings” certain holders majority guc trust units asserted claim reimbursement legal fees approximately 67 million incurred connection litigation involving certain general motors vehicle recalls time reasonable basis estimation exist whether reimbursement made accordingly march 31 2019 accrual claim recorded amount liquidation costs ultimately incurred depends time period extent activities required guc trust complete functions responsibilities plan guc trust agreement significant uncertainty remains time period extent activities march 31 2019 recorded reserves expected costs liquidation reflect estimated costs remaining liquidation period estimated extend minimum april 2022 unchanged prior quarter remaining liquidation period estimated predominately modified probabilityweighted basis permitted us gaap guc trust believes appropriate measurement basis circumstances outcome estimated likely outcome used best estimate weight given unlikely outcome addition consistent liquidation basis accounting consideration given potential outcomes extent exist reasonable basis estimation remaining liquidation period dependent predominantly estimate remaining period time resolution litigation involving certain general motors vehicle recalls described item 3 “legal proceedings” uncertainties associated resolution general motors vehicle recall litigation reasonable basis estimation respect certain outcomes exist result guc trust’s estimate remaining period time resolution represents minimum remaining length time estimated likely resolution litigation addition certain additional estimated time wind guc trust following resolution litigation included estimated liquidation period future developments general motors vehicle recall litigation could extend current estimate minimum remaining period time resolution therefore extend estimated minimum remaining liquidation period guc trust beyond april 2022 addition certain liquidation costs expected prepaid guc trust upon dissolution also estimated accrued guc trust’s estimates regarding costs remaining liquidation period may change near term change may material following summary activity reserves residual winddown claims costs years ended march 31 2019 2018 2017 residual winddown claims allowed years ended march 31 2018 2017 primarily consist avoidance action defense costs described note 2 april 2017 guc trust entered letter agreement administrative agent letter agreement provides guc trust’s obligation pay avoidance action defense costs administrative agent limited amount approximating remaining designated residual winddown assets result term loan avoidance action settlement described item 3 “legal proceedings” virtue terms settlement agreement guc trust responsible payment avoidance action defense costs 8 income taxes current tax benefit provision years ended march 31 2019 2018 2017 due cumulative net operating capital losses income taxes paid guc trust also deferred tax benefit provision years ended march 31 2019 2018 2017 result establishment full valuation allowance net deferred tax assets beginning end periods result enactment “tax cuts jobs act” december 2017 guc trust’s federal income tax rate reduced 396 37 effective april 1 2018 first day guc trust’s fiscal year ended march 31 2019 december 2017 guc trust expected 37 tax rate would effect temporary differences reversed accordingly guc trust’s deferred tax assets liabilities adjusted enacted 37 tax rate december 31 2017 impact deferred tax provision result establishment full valuation allowance net deferred tax assets december 31 2017 deferred taxes accompanying statement net assets liquidation march 31 2019 2018 comprised following components previously disclosed quarter ended september 30 2013 guc trust made determination file us federal income tax returns taking position beneficial ownership substantial majority new gm securities transferred mlc guc trust march 31 2011 tax basis new gm securities determined reference value securities date instead december 15 2011 record ownership remaining new gm securities still held mlc transferred mlc guc trust remaining substantial minority new gm securities transferred mlc guc trust guc trust determined transfer beneficial ownership occurred dates tax basis determined reference value securities dates new tax position resulted increased tax basis new gm securities prior tax position therefore reduced taxable gains increased taxable losses distributions sales new gm securities since march 31 2011 new tax position sustained examination irs date hereof however guc trust believes based available evidence consultation guc trust professionals likely new tax position sustained examination irs based technical merits position accordingly new tax position recognized current deferred income tax liabilities income tax provision guc trust’s financial statements since quarter ended september 30 2013 following guc trust’s determination utilize new tax position set forth guc trust filed us federal income tax returns years ended march 31 2013 thereafter irs using new tax position tax returns accompanied requests prompt determination tax liability pursuant section 505b bankruptcy code 60day statutory notification periods set forth section 505b bankruptcy code respect guc trust’s us federal income tax returns year ended march 31 2018 prior years expired accordingly tax liabilities set forth guc trust’s us federal income tax returns year ended march 31 2018 prior years longer subject examination irs income taxes assessed years also income taxes expected paid future result liquidation guc trust’s holdings new gm securities year ended march 31 2016 except potentially respect taxes distribution receipt subsequent distribution sale guc trust additional shares determinable estimable time however taxes distribution resulting receipt subsequent distribution sale additional shares become payable anticipated income taxes would funded sale portion additional shares remaining capital loss carryovers generated prior years utilizing new tax position aggregate 17 million expiration march 31 2018 2017 respectively capital loss carryovers 226 million 1581 million attributable years ended march 31 2013 2012 along net operating loss carryovers generated march 31 2019 aggregating 1393 million could subject examination irs subsequent years losses utilized guc trust expect utilize net basis capital net operating loss carryovers future except potentially respect receipt subsequent distribution sale guc trust additional shares referred fair market value additional shares date distribution sale greater fair market value shares date receipt determinable estimable time remaining capital loss carryovers 17 million expire march 31 2020 net operating loss carryovers begin expire march 31 2032 however pursuant enactment “tax cuts jobs act” december 2017 net operating losses generated guc trust tax years beginning april 1 2018 expire loss carryovers aggregate result deferred tax asset 522 million march 31 2019 reflected table described “critical accounting policies estimatesincome taxes” item 7 “management’s discussion analysis financial condition results operations” guc trust’s loss carryovers including longer available utilization guc trust potentially could succeed claimants defined pursuant tax rules reference made thereto information regarding potential distributable loss carryovers material uncertainties associated therewith full valuation allowance net deferred tax assets aggregating 547 million 602 million established march 31 2019 2018 respectively result liquidation guc trust’s holdings new gm securities determined deferred tax assets realizable time valuation allowance decreased 54 million 71 million years ended march 31 2019 2018 respectively 9 related party transactions addition serving guc trust administrator wilmington trust company continues serve trustee pursuant indentures certain series previously outstanding debt mlc wilmington trust company received may future receive certain customary fees amounts consistent wilmington trust company’s standard rates service bankruptcy court previously approved creation segregated fund purposes funding fees wilmington trust company well indenture trustees fiscal paying agents previously outstanding debt mlc fees wilmington trust company years ended march 31 2019 2018 2017 addition wilmington trust company also entered certain arrangements guc trust pursuant affiliates previously received may future receive reasonable customary fees commissions services capacity guc trust administrator arrangements include provision custodial investment advisory brokerage services guc trust years ended march 31 2019 2018 2017 total amount fees commissions approximately 03 million addition serving guc trust monitor year ended march 31 2019 fti consulting inc provided professional services associated review certain expert reports connection litigation involving certain general motors vehicle recalls fees expenses services aggregated approximately 02 million item 9 item 15 exhibits financial statement schedule 1 financial statements supplemental information 2 financial statement schedule ii valuation qualifying accounts 3 consolidated financial statements gmac llc subsidiaries december 31 2008 2007 three years period ended december 31 2008 4 exhibits b exhibits listed filed sec pursuant securities act 1933 amended securities exchange act 1934 amended filed noted hereby incorporated reference made part report effect filed herewith general motors corporation subsidiaries general motors corporation subsidiaries general motors corporation subsidiaries general motors corporation subsidiaries management contract compensatory plan required filed exhibit pursuant item 15b form 10k  filed herewith certain confidential portions omitted pursuant request confidential treatment separately filed securities exchange commission general motors corporation subsidiaries schedule ii valuation qualifying accounts reflects allowances removed result sale 51 controlling interest gmac time sale gmac allowance credit loss balance miscellaneous allowance balance 35 billion 123 million respectively report independent registered public accounting firm board directors member interest holders gmac llc audited accompanying consolidated balance sheet gmac llc subsidiaries “company” december 31 2008 2007 related consolidated statements income changes equity cash flows three years period ended december 31 2008 financial statements responsibility company’s management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements present fairly material respects financial position company december 31 2008 2007 results operations cash flows three years period ended december 31 2008 conformity accounting principles generally accepted united states america deloitte touche llp deloitte touche llp detroit michigan february 26 2009 consolidated statement income gmac llc  form 10k notes consolidated financial statements integral part statements consolidated balance sheet gmac llc  form 10k notes consolidated financial statements integral part statements consolidated statement changes equity gmac llc  form 10k refer note 22 consolidated financial statements detail b refer note 20 consolidated financial statements detail notes consolidated financial statements integral part statements consolidated statement cash flows gmac llc  form 10k notes consolidated financial statements integral part statements consolidated statement cash flows gmac llc  form 10k includes securitieslending transactions cash collateral received corresponding liability recorded presented investing activities amount 856 million 2007 b 2007 includes 1 billion capital contribution general motors pursuant sale 51 gmac fim holdings llc c represents longterm debt exchanged preferred interests 2008 conversion preferred membership interests 2007 described note 20 consolidated financial statements e represents non cash effects loss portfolio transfer described note 13 consolidated financial statements notes consolidated financial statements integral part statements notes consolidated financial statements gmac llc  form 10k 1 description business significant accounting policies gmac llc referred herein gmac us founded 1919 wholly owned subsidiary general motors corporation general motors gm november 30 2006 gm sold 51 interest us approximately 74 billion sale transactions fim holdings llc fim holdings fim holdings investment consortium led cerberus fim investors llc sole managing member consortium also includes citigroup inc aozora bank ltd subsidiary pnc financial services group inc december 24 2008 board governors federal reserve system approved application become bank holding company bank holding company act 1956 amended bhc act connection approval become bank holding company board governors federal reserve system indicated approval order gm required reduce ownership interest gmac less 10 voting total equity gmac ii fim holdings required reduce aggregate direct indirect investments greater 149 voting 33 total equity gmac case march 24 2009 foregoing requirements could change event shareholders board governors federal reserve system agree modifications residential capital llc rescap mortgage subsidiary negatively impacted events conditions mortgage banking industry broader economy market deterioration led fewer sources significantly reduced levels liquidity available finance rescap’s operations recently widely publicized credit defaults andor acquisitions large financial institutions marketplace restricted credit united states international lending markets rescap highly leveraged relative cash flow continues recognize substantial losses resulting significant deterioration capital year rescap received capital contributions gmac 33 billion including 08 billion forgiveness debt gmac mortgage servicing rights facility 25 billion contributions forgiveness rescap debt gmac previously repurchased open market discount private debt exchange cash tender offers addition rescap completed several divestiture activities gmac affiliates part debt refinancing liquidity capital initiatives accordingly rescap’s consolidated tangible net worth defined 350 million december 31 2008 remained compliance restrictive consolidated tangible net worth covenant minimum 250 million purpose consolidated tangible net worth defined rescap’s consolidated equity excluding intangible assets equity gmac bank extent included rescap’s consolidated balance sheet continues risk rescap able meet debt service obligations default financial debt covenants due insufficient capital andor negative liquidity position 2009 rescap actively manages liquidity capital positions continually working initiatives address debt covenant compliance liquidity needs including debt maturing next twelve months identified risks uncertainties accompanying consolidated financial statements continue reflect rescap going concern basis contemplates realization assets satisfaction liabilities normal course business rescap’s initiatives include limited following working continually key credit providers optimize available liquidity options reducing assets performing restructuring activities focusing production government prime conforming products exploring strategic alternatives alliances joint ventures transactions third parties continually exploring opportunities funding capital support gmac affiliates initiatives outside rescap’s control resulting increased uncertainty successful execution currently substantive binding contracts agreements understandings respect particular transaction outside normal course business disclosed note 28 consolidated financial statements rescap remains heavily dependent gmac affiliates funding capital support assurance gmac affiliates continue actions disclosed form 8k filed january 8 2009 rescap important subsidiary believed support provided rescap best interests stakeholders disclosed rescap need additional support would provide support long best interests stakeholders assurances recently approved status regulated bank holding company increased importance support rescap core origination servicing business provides diversification us notes consolidated financial statements gmac llc  form 10k january 30 2009 gmac acquired 100 percent rescap’s nonvoting equity interest ib finance holding company llc ib finance parent company gmac bank transaction included gmac converting 806 million convertible preferred interests rescap ib finance interests forgiving 830 million rescap’s debt result voting economic interests ib finance owned directly gmac refer note 28 consolidated financial statements subsequent events disclosure completion sale ib finance increased rescap’s consolidated tangible net worth defined approximately 894 million subsequent january 30 2009 sale deconsolidation rescap ib finance rescap remains compliance date filing consolidated tangible net worth requirement defined 250 million although continued actions various funding capital initiatives demonstrate support rescap status bank holding company completion private debt exchange cash tender offers better position us capable supporting rescap currently commitments assurances future funding andor capital support except otherwise provided form 10k consequently remains substantial doubt rescap’s ability continue going concern longer continue support capital liquidity needs rescap unable successfully execute initiatives would material adverse effect rescap’s business results operations financial position gmac extensive financing hedging arrangements rescap could risk nonpayment rescap file bankruptcy january 31 2009 approximately 41 billion secured financing arrangements approximately 26 billion funded secured hedging agreements rescap owned approximately 500 million rescap notes amounts outstanding secured financing hedging arrangements fluctuate rescap file bankruptcy rescap’s repayments financing facilities including us could slower rescap filed bankruptcy addition could unsecured creditor rescap extent proceeds sale collateral insufficient repay rescap’s obligations us possible rescap creditors would seek recharacterize loans rescap equity contributions seek equitable subordination claims creditors would priority claims holder unsecured notes would receive distributions benefit creditors rescap bankruptcy secured creditors repaid addition rescap file bankruptcy investment related rescap’s equity position would likely reduced zero based january 31 2009 balances would result 31 billion charge investment rescap bankruptcy occur substantial amount credit exposure repaid us would adverse impact nearterm net income capital position believe would materially adverse impact gmac’s consolidated financial position longer term consolidation basis presentation consolidated financial statements include accounts majorityowned subsidiaries eliminating significant intercompany balances transactions includes variable interest entities vies primary beneficiary refer note 23 details vies accounting reporting policies conform accounting principles generally accepted united states america gaap certain amounts prior periods reclassified conform current period’s presentation operate international subsidiaries similar manner operate united states america us united states subject local laws circumstances may cause us modify procedures accordingly financial statements subsidiaries operate outside united states generally measured using local currency functional currency assets liabilities foreign subsidiaries translated us dollars yearend exchange rates resulting translation adjustments recorded accumulated comprehensive income component equity income expense items translated average exchange rates prevailing reporting period use estimates assumptions preparation financial statements conformity gaap requires management make estimates assumptions affect reported amounts assets liabilities date financial statements affect income expenses reporting period developing estimates assumptions management uses available evidence however actual results could differ uncertainties associated estimating amounts timing likelihood possible outcomes notes consolidated financial statements gmac llc  form 10k cash equivalents cash equivalents include cash hand shortterm highly liquid investments original maturities 90 days less cash equivalents restrictions ability withdraw funds included assets consolidated balance sheet balance cash equivalents 79 billion 141 billion december 31 2008 2007 respectively book value cash equivalents approximates fair value short maturities instruments certain securities original maturities less 90 days held portion longerterm investment portfolios primarily relating gmac insurance classified investment securities investment securities portfolio investment securities includes government securities corporate bonds equity securities asset mortgagebacked securities notes interests securitization trusts investments investment securities classified based management’s intent trading securities primarily consist retained purchased interests certain securitizations retained interests carried fair value changes fair value recorded current period earnings included portfolio debt securities management intent ability hold maturity classified heldtomaturity reported amortized cost premiums discounts debt securities amortized adjustment investment yield contractual term security investment securities classified availableforsale carried fair value unrealized gains losses included accumulated comprehensive income loss component equity aftertax basis employ systematic methodology considers available evidence evaluating potential otherthantemporary impairment investments classified availableforsale heldtomaturity cost investment exceeds fair value evaluate among factors magnitude duration decline fair value also evaluate financial health business outlook issuer performance underlying assets interests securitized assets intent ability hold investment decline fair value determined temporary impairment charge recorded investment income consolidated statement income new cost basis investment established realized gains losses investment securities reported investment income determined using specific identification method 2007 normal course business entered securitieslending agreements various counterparties agreements lent rights designated securities exchange collateral form cash governmental securities approximating 102 domestic 105 foreign value securities loaned agreements primarily overnight nature settled next business day engaged securities lending december 31 2008 loaned securities 850 million received corresponding cash collateral 856 million loans december 31 2007 loans heldforsale loans heldforsale may include automotive commercial finance residential mortgage receivables loans carried lower aggregate cost estimated fair value disaggregate delinquent nonprime mortgage loans evaluation fair value based contractually established commitments investors based current investor yield requirements finance receivables loans finance receivables loans reported principal amount outstanding net unearned income discounts allowances unearned income includes deferred origination fees reduced origination costs unearned rate support received gm amortized contractual life related finance receivable loan using interest method loan commitment fees generally deferred amortized commercial revenue commitment period classify finance receivables loans heldforsale loans heldforinvestment based management’s assessment intent ability hold loans foreseeable future maturity management’s intent ability respect certain loans may change time depending number factors including economic liquidity capital conditions management’s view foreseeable future generally twelvemonth period based longest reasonably reliable net income liquidity capital forecast period notes consolidated financial statements gmac llc  form 10k acquired loans nuvell operations acquired certain loans individually groups portfolios experienced deterioration credit quality origination acquisition amount paid loans reflects determination probable unable collect amounts due according loan’s contractual terms acquired loans accounted american institute certified public accountants statement position 033 accounting certain loans debt securities acquired transfer sop 033 recognize accretable yield excess estimate undiscounted expected principal interest cash flows expected acquisition collected initial investment acquired asset life loan pool update estimated cash flows expect collect balance sheet date evaluate whether expected cash flows loans changed adjust amount accretable yield loans pools increase expected cash flows record valuation allowance loans pools decrease expected cash flows accordance statement financial accounting standards 114 accounting creditors impairment loan sfas 114 measure impairments based upon present value expected future cash flows discounted using loan’s effective interest rate practical expedient reliable information available fair value collateral less expected costs sell present value subsequent increase loan’s pool’s actual cash flows cash flows expected collected used first reverse existing valuation allowance loan pool nonaccrual loans consumer commercial revenue recognition suspended finance receivables loans placed nonaccrual status prime retail automotive receivables placed nonaccrual status delinquent 120 days nonprime retail automotive receivables placed nonaccrual status delinquent 60 days residential mortgages commercial real estate loans placed nonaccrual status delinquent 60 days warehouse construction commercial automotive loans lending receivables placed nonaccrual status delinquent 90 days determined probable full collections revenue accrued collected date finance receivables loans placed nonaccrual status reversed subsequently recognized extent received cash qualifies return accrual status however doubt regarding ultimate collectibility loan principal cash received applied reduce carrying value loans finance receivables loans restored accrual status contractually current collection future payments reasonably assured impaired loans considered impaired determine probable unable collect amounts due according terms loan agreement income recognition consistent nonaccrual loans discussed recorded investment impaired loans exceeds fair value valuation allowance established component allowance credit losses addition commercial loans specifically identified impairment pools loans collectively evaluated impairment discussed within allowance credit losses accounting policy allowance credit losses allowance credit losses management’s estimate incurred losses lending portfolios portions allowance credit losses specified cover estimated losses commercial loans specifically identified impairment accordance sfas 114 unspecified portion allowance credit losses covers estimated losses homogeneous portfolios finance receivables loans collectively evaluated impairment accordance statement financial accounting standards 5 accounting contingencies sfas 5 amounts determined uncollectible charged allowance credit losses consolidated balance sheet additionally losses arising sale repossessed assets collateralizing automotive finance receivables loans charged allowance credit losses recoveries previously chargedoff amounts credited time collection loans outside scope sfas 114 loans individually evaluated determined impaired sfas 114 grouped pools based similar risk characteristics evaluated impairment accordance sfas 5 impairment loans determined impaired sfas 114 measured based present value expected future cash flows discounted loan’s effective interest rate observable market price fair value collateral notes consolidated financial statements gmac llc  form 10k whichever determined appropriate estimated costs sell realize value collateral discounted basis included impairment measurement perform periodic systematic detailed reviews lending portfolios identify inherent risks assess overall collectibility portfolios allowance relates portfolios collectively reviewed impairment generally consumer finance receivables loans based aggregated portfolio evaluations product type loss models utilized portfolios consider variety factors including limited historical loss experience current economic conditions anticipated repossessions foreclosures based portfolio trends delinquencies credit scores expected loss factors receivable loan type loans commercial portfolios generally reviewed individual loan basis necessary allowance established individual loan impairment loans subject individual reviews analyzed based factors including limited historical loss experience current economic conditions collateral performance trends within specific geographic portfolio segments pertinent information results estimation specific allowances credit losses evaluation factors consumer commercial finance receivables loans involves complex subjective judgments securitizations offbalance sheet transactions securitize sell service retail finance receivables operating leases wholesale loans securities residential loans securitizations accounted either sales secured financings interests securitized sold assets generally retained form interestonly strips senior subordinated interests cash reserve accounts servicing rights retained interests generally subordinate investors’ interests investors securitization trusts generally recourse assets failure debtors pay due retain servicing responsibilities retail finance receivable operating lease wholesale loan securitizations majority residential loan securitizations may receive servicing fees based securitized loan balances certain ancillary fees reported servicing fees consolidated statement income also retain right service residential loans sold result mortgagebacked security transactions ginnie mae fannie mae freddie mac also serve collateral manager securitizations commercial investment securities gains losses securitizations sales depend previous carrying amount assets involved transfer allocated assets sold retained interests based relative fair values except certain servicing assets liabilities initially recorded fair value date sale estimate fair value retained interests requires us exercise significant judgment timing amount future cash flows interests since quoted market prices generally available estimate fair value retained interests determining present value future expected cash flows using modeling techniques incorporate management’s best estimates key variables including credit losses prepayment speeds weighted average life discount rates commensurate risks involved applicable interest finance rates variable adjustable rate contracts credit loss assumptions based upon historical experience market information similar investments characteristics individual receivables loans underlying securities prepayment speed estimates determined utilizing data obtained market participants available based historical prepayment rates similar assets discount rate assumptions determined using data obtained market participants available based current relevant us treasury libor yields plus risk adjusted spread based analysis historical spreads similar types securities estimates interest rates variable adjustable contracts based spreads applicable benchmark interest rate using marketbased yield curves gains losses securitizations sales reported gain loss mortgage automotive sales net consolidated statement income retail finance receivables wholesale loans residential loans declines fair value retained interests carrying amount reflected comprehensive income component equity investment income loss consolidated statement income declines determined temporary interests classified trading retained interestonly strips senior subordinated interests generally included availableforsale investment securities trading investment securities depending management’s intent time securitization cash reserve accounts related securitizations included assets consolidated balance sheet notes consolidated financial statements gmac llc  form 10k time loan modifications performed within guidelines established pooling servicing agreements various securitization transactions course housing credit crises various programs loan modifications rolled various agencies industry groups special interest groups eg american securitization forum asf federal deposit insurance corporation fdic various classes mortgage loans sec’s office chief accountant oca released letter dated january 8 2008 related first programs issued asf stated following program oca would object continued status transferee qualifying specialpurpose entity qspe pursuant letter position following loan modification programs impact continued status transferee qspe management intends follow pooling servicing agreements special programs modifying loans continue comply qspe requirements sfas 140 accounting transfers servicing financial assets extinguishment liabilities sfas 140 investment operating leases investment operating leases reported cost less accumulated depreciation net impairment charges origination fees costs income operating lease assets includes lease origination fees net lease origination costs recognized operating lease revenue straightline basis scheduled lease term depreciation vehicles generally provided straightline basis estimated residual value period consistent term underlying operating lease agreement evaluate depreciation policy leased vehicles regular basis significant investments residual values assets operating lease portfolio residual values represent estimate values assets end lease contracts initially determined based residual values established contract inception consulting independently published residual value guides realization residual values dependent future ability market vehicles prevailing market conditions life lease evaluate adequacy estimate residual value may make adjustments depreciation rates extent expected value vehicle including residual support payments gm lease termination changes addition estimating residual value lease termination also evaluate current value operating lease asset test impairment extent necessary based market considerations portfolio characteristics impairment determined exist undiscounted expected future cash flows lower carrying value asset certain triggering events necessitated impairment review investment operating leases global automotive finance operations beginning second quarter 2008 refer note 8 discussion impairment charges recognized 2008 lease vehicle returned us asset reclassified investment operating leases assets lowerofcost estimated fair value less costs sell mortgage servicing rights primary servicing involves collection payments individual borrowers distribution payments investors master servicing rights represent right service mortgage assetbacked securities wholeloan packages issued investors master servicing involves collection borrower payments primary servicers distribution funds investors mortgage assetbacked securities wholeloan packages capitalize value expected realized performing specified mortgage servicing activities others mortgage servicing rights msrs capitalized servicing rights purchased retained upon sale securitization mortgage loans mortgage servicing rights recorded securitizations accounted secured financings measure mortgage servicing assets liabilities fair value date sale define classes servicing rights based availability market inputs manner manage risks servicing assets liabilities manage servicing rights legal entity level domestically reportable operating segment level internationally sufficient market inputs exist determine fair value recognized servicing assets liabilities since quoted market prices msrs available estimate fair value msrs determining present value future expected cash flows using modeling techniques incorporate management’s best estimates key variables including expected cash flows credit losses prepayment speeds return requirements commensurate risks notes consolidated financial statements gmac llc  form 10k involved cash flow assumptions based actual performance possible reasonableness assumptions periodically validated comparisons market participants credit loss assumptions based upon historical experience characteristics individual loans underlying msrs prepayment speed estimates determined historical prepayment rates similar assets obtained thirdparty data return requirement assumptions determined using data obtained market participants available based current relevant interest rates plus riskadjusted spread since many factors affect estimate fair value mortgage servicing rights regularly evaluate major assumptions modeling techniques used estimate review assumptions market comparables available monitor actual performance msrs regularly comparing actual cash flow credit prepayment experience modeled estimates repossessed foreclosed assets classified repossessed foreclosed included assets physical possession collateral taken regardless whether foreclosure proceedings taken place repossessed foreclosed assets carried lower outstanding balance time repossession foreclosure fair value asset less estimated costs sell losses revaluation repossessed foreclosed assets charged allowance credit losses time repossession subsequent holding period losses arising sale repossessed assets collateralizing automotive finance receivables loans expensed incurred operating expenses goodwill intangibles goodwill intangible assets net accumulated amortization reported assets accordance statement financial accounting standards 142 goodwill intangible assets sfas 142 goodwill represents excess cost acquisition fair value net assets acquired goodwill reviewed impairment utilizing twostep process first step impairment test requires us define reporting units compare fair value reporting units respective carrying value reporting units used 2006 testing represented operating segments disclosed note 24 third quarter 2007 reevaluated reporting units determined insurance rescap operating segments reporting units one level operating segment therefore goodwill evaluated lower level insurance four reporting units based product offerings rescap’s reporting units consistent reportable segments standalone financial statements primary factors considered change management operates reports manages segments fair value reporting units impairment test determined based various analyses including discounted cash flow projections carrying value less fair value impairment exists second step need completed carrying value higher fair value indication impairment may exist second step must performed compute amount impairment sfas 142 requires goodwill tested impairment annually time every year whenever event occurs circumstances change would likely reduce fair value reporting unit carrying amount annual goodwill impairment assessment concluded upon fourth quarter year triggering event necessitated impairment review fourth quarter 2008 insurance operations’ goodwill reporting units refer note 11 discussion related goodwill impairment charge intangible assets include customer lists trademarks identifiable intangible assets amortized straightline basis estimated useful life 3 15 years subject impairment testing impairment longlived assets carrying value longlived assets including property equipment certain identifiable intangibles evaluated impairment whenever events changes circumstances indicate carrying values may recoverable estimated undiscounted future cash flows expected result use eventual disposition recoverability assets held used measured comparison carrying amount future net undiscounted cash flows expected generated assets considered impaired impairment measured amount carrying amount assets exceeds fair value estimated discounted cash flows material impairment recognized 2008 2007 2006 refer previous section note titled investment operating leases discussion pertaining impairments related investment operating leases notes consolidated financial statements gmac llc  form 10k property equipment property equipment stated cost net accumulated depreciation amortization reported assets included property equipment certain buildings furniture fixtures leasehold improvements company vehicles hardware software capitalized software costs depreciation computed straightline basis estimated useful lives assets generally ranges 3 30 years capitalized software generally amortized straightline basis useful life period exceed three years capitalized software expected provide substantive service potential development costs significantly exceed amount originally expected considered impaired written fair value software expenditures considered general administrative maintenance nature expensed incurred deferred policy acquisition costs commissions including compensation paid producers automotive service contracts costs acquiring insurance primarily related vary production business deferred recorded assets deferred policy acquisition costs amortized terms related policies service contracts basis premiums revenue earned except direct response advertising costs amortized threeyear period based expected future benefit group costs incurred acquiring like contracts consider anticipated investment income determining recoverability costs private debt exchange cash tender offers evaluating accounting private debt exchange cash tender offers management required make determination whether offers accounted troubled debt restructuring tdr extinguishment gmac rescap debt concluding accounting management evaluated sfas 15 accounting creditors debtors troubled debt restructuring eitf 024 determining whether debtor’s modification exchange debt instruments within scope fasb statement 15 eitf 024 eitf 9619 debtor’s accounting modification loan eitf 9619 relevant accounting guidance required us determine whether exchanges debt instruments accounted tdr results determined evaluating six factors described eitf 024 considered indictors whether debtor experiencing financial difficulties debtor experiencing financial difficulties creditors grant concession otherwise exchanges accounted extinguishment modification debt assessment critical accounting estimate required management apply significant amount judgment evaluating inputs estimates internally generated forecast information conclude accounting offers assessing whether gmac experiencing financial difficulties purpose accounting offers management applied eitf 024 assessment considered internal analyses shortterm longterm liquidity projections net income forecasts runoff projections analyses based upon consolidated financial condition comprehensive ability service gmac rescap obligations based current business capabilities funding sources addition baseline projections analyses incorporated stressed scenarios reflecting continued deterioration credit markets gm financial distress significant curtailments loan originations management assigned probability weights scenario determine overall riskweighted projection ability meet consolidated obligations come due analyses indicated could service gmac rescap obligations came due normal course business assessment also considered capital market perceptions financial condition credit agency ratings market values debt analysts’ reports public statements made us stakeholders due rigor applied internal projections management placed weight internal projections less weight capital market expectations based analysis consideration applicable accounting guidance management concluded offers deemed tdr result conclusion offers accounted extinguishment debt eitf 9619 notes consolidated financial statements gmac llc  form 10k applying extinguishment accounting recognized gain time exchange difference carrying value exchanged notes fair value newly issued securities accordance sfas 157 fair value measurements guidance related level 3 fair value measures performed various analyses regard valuation newly issued instruments level 3 fair value measures valuations derived primarily unobservable inputs rely heavily management assessments assumptions judgments determining fair value newly issued instruments performed internal analysis using trading levels trade date december 29 2008 existing gmac unsecured debt adjusted features new instruments also obtained bidask spreads brokers attempting make market new instruments based determined fair values recognized pretax gain upon extinguishment 115 billion reflected newly issued preferred shares fair value estimated 234 million december 29 2008 majority costs associated offers deferred basis newly issued bonds aggregate offers resulted 117 billion increase consolidated equity position unearned insurance premiums service revenue insurance premiums net premiums ceded reinsurers service revenue earned terms policies portion premiums service revenue written applicable unexpired terms policies recorded unearned insurance premiums unearned service revenue extended service maintenance contracts premiums service revenues earned basis proportionate anticipated loss emergence short duration contracts premiums unearned service revenue earned pro rata basis reserves insurance losses loss adjustment expenses reserves insurance losses loss adjustment expenses established unpaid cost insured events occurred point time specifically reserves insurance losses loss adjustment expenses represent accumulation estimates reported losses incurred reported including claims adjustment expenses relating direct insurance assumed reinsurance agreements estimates salvage subrogation recoverable recognized time losses incurred netted provision insurance losses loss adjustment expenses reserves established business lowest meaningful level homogeneous data since reserves based estimates ultimate liability may vary estimates regularly reviewed adjustments potentially significant included earnings period deemed necessary derivative instruments hedging activities accordance statement financial accounting standards 133 accounting derivative instruments hedging activities sfas 133 derivative financial instruments whether designated hedging relationships required recorded balance sheet assets liabilities carried fair value inception hedging relationship designate qualifying derivative financial instrument hedge fair value specifically identified asset liability fair value hedge variability cash flows received paid related recognized asset liability cash flow hedge also use derivative financial instruments although acquired risk management purposes qualify hedge accounting gaap changes fair value derivative financial instruments designated qualify fair value hedges along gain loss hedged asset liability attributable hedged risk recorded current period earnings qualifying cash flow hedges effective portion change fair value derivative financial instruments recorded accumulated comprehensive income component equity recognized income statement hedged cash flows affect earnings changes fair value derivative financial instruments held risk management purposes meet criteria qualify hedges gaap reported current period earnings ineffective portions fair value cash flow hedges immediately recognized earnings formally document relationships hedging instruments hedged items risk management objectives undertaking various hedge transactions process includes linking derivatives designated fair value cash flow hedges specific assets liabilities consolidated balance sheet specific firm commitments forecasted transactions hedge’s inception ongoing basis formally assess whether derivatives used hedging relationships highly effective offsetting changes fair values cash flows hedged items notes consolidated financial statements gmac llc  form 10k hedge accounting treatment described herein longer applied derivative financial instrument terminated hedge designation removed assessed longer highly effective terminated fair value hedges changes hedged asset liability remain part basis asset liability recognized income remaining life asset liability 2007 discontinued hedge accounting mortgage loans heldforsale terminated cash flow hedges unless probable forecasted cash flows occur within specified period changes fair value derivative financial instrument previously recognized remain comprehensive income component equity reclassified earnings period hedged cash flows affect earnings loan commitments enter commitments make loans whereby interest rate loan set prior funding ie interest rate lock commitments interest rate lock commitments loans originated purchased sale loans purchased heldforinvestment derivative financial instruments carried fair value accordance sfas 133 staff accounting bulletin 105 application accounting principles loan commitments sab 105 november 2007 sec issued staff accounting bulletin 109 written loan commitments recorded fair value earnings sab 109 sab 109 superseded previous sec guidance written loan commitments requires expected net future cash flows related associated servicing loan included measurement written loan commitments accounted fair value earnings effective january 1 2008 expected net future cash flows related associated servicing loan accounted earnings written loan commitments accounted fair value servicing assets recognized distinct assets contractually separated underlying loan sale securitization interest rate lock commitments recorded fair value changes value recognized current period earnings determination change fair value includes estimate future msr arise loan sold securitized additionally emerging issues task force issue 023 issues involved accounting derivative contracts held trading purposes contracts involved energy trading risk management activities eitf 023 rescinded statement financial accounting standards 157 fair value measurements sfas 157 accordingly recognize dayone gains derivative interest rate lock commitments applicable income taxes prior november 30 2006 filed consolidated us federal income tax return gm portion consolidated tax recorded us subsidiaries included consolidated tax return generally equivalent liability would incurred separate return basis settled gm’s tax payments became due 2006 number us subsidiaries converted limited liability companies llcs effective november 28 2006 became passthrough entities us federal income tax purposes income taxes incurred converting entities provided november 30 2006 required taxsharing agreement gm gmac minor exceptions subsequent november 30 2006 us federal state local income taxes provided entities generally ceased taxable entities related deferred taxes eliminated respect entities ceased taxable enterprises entity level taxes still apply small number state local tax jurisdictions along foreign withholding taxes entity level withholding tax applies provided consolidated financial statements banking insurance foreign subsidiaries generally corporations continue subject provide us federal state foreign income taxes deferred tax assets liabilities established future tax consequences events recognized financial statements tax returns based upon enacted tax laws rates deferred tax assets recognized subject management’s judgment realization likely addition tax benefits related positions considered uncertain recognized based technical merits issue likely sustain position largest amount greater 50 likely realized upon ultimate settlement 2008 received approval become bank holding company change status result change methodology accounting current deferred income taxes either passthrough corporate entities notes consolidated financial statements gmac llc  form 10k common membership interests date filing currently authorized outstanding common voting membership interests consisting 216719 class membership interests class interests 323201 class b membership interests class b interests equal rights preferences assets constitute common voting interests gmac class interests class b interests collectively referred common membership interests currently fim holdings owns 216719 class interests 4014 total gmac common voting interests gm wholly owned subsidiary gm owns 323201 class b interests 5986 total gmac common voting interests authorized outstanding 8330 class c membership interests class c interests deemed “profits interests” “capital interests” terms defined applicable tax regulations held directly gmac management llc wholly owned subsidiary gmac class c interests issued pursuant gmac management llc class c membership interest plan incentive compensation plan gmac currently intention issue class c interests pursuant plan common membership interests class c interests privately held established trading market interests preferred membership interests series d1 series d2 preferred membership interests december 29 2008 part automotive industry financing program created troubled asset relief program tarp established us department treasury emergency economic stabilization act 2008 eesa entered agreement purchase agreement treasury pursuant issued sold treasury 5000000 units gmac’s fixed rate cumulative perpetual preferred membership interests series d1 capital amount 1000 per share series d1 preferred interests ii tenyear warrant purchase approximately 250000 units gmac’s fixed rate cumulative perpetual preferred membership interests series d2 warrant interests initial exercise price 001 per unit warrant aggregate purchase price 50 billion cash collectively tarp preferred interests december 29 2008 treasury exercised warrant 250000 warrant interests aggregate exercise price approximately 2500 cumulative distributions series d1 preferred interests accrue rate 8 per annum capital amount per unit series d1 preferred interests ii amount accrued unpaid distributions prior distribution period series d1 preferred interests distributions paid declared gmac’s board managers declared distributions series d1 preferred interests payable quarterly arrears series d1 preferred interests maturity date ranks senior gmac’s common membership interests class c interests collectively junior membership interests ranks equal gmac’s preferred membership interests respect payment distributions amounts payable upon liquidation dissolution windingup gmac series d1 preferred interests generally nonvoting classvoting certain matters certain circumstances including generally authorization senior membership interests amendment series d1 preferred interests exchange reclassification merger consolidation involving series d1 preferred interests conversion gmac corporation distributions series d1 preferred interests paid aggregate six quarterly distribution periods whether consecutive gmac’s authorized number managers constituting board managers automatically increased two holders series d1 preferred interests right elect managers fill newly created manager positions two managers serve accrued unpaid distributions series d1 preferred interests paid full date three years date issuance series d1 preferred interests gmac may option redeem whole part time series d1 preferred interests outstanding prior date gmac may redeem series d1 preferred interests gmac raised aggregate gross proceeds one qualified equity offerings defined amendment 6 llc agreement less 125 billion ii aggregate redemption price exceed aggregate net cash proceeds qualified equity offerings redemption series d1 preferred interests shall redemption price equal capital amount per unit series d1 preferred interests plus ii accrued unpaid distributions holders series d1 preferred interests notes consolidated financial statements gmac llc  form 10k right require redemption repurchase shares series d1 preferred interests redemption series d1 preferred interests subject consent board governors federal reserve system warrant interests rights preferences privileges voting rights terms series d1 preferred interests except warrant interests receive distributions rate 9 per annum ii warrant interests may redeemed series d1 preferred interests redeemed approved gmac board managers distributions series d1 preferred interests warrant interests payable quarterly february 15 may 15 august 15 november 15 year subject certain exceptions purchase agreement generally prohibits gmac subsidiaries paying dividends distributions redeeming repurchasing acquiring membership interests equity securities without consent treasury case tax distributions junior membership interests without consent president’s designee defined hr 7321 unless gmac redeemed series d1 preferred interests warrant interests treasury transferred series d1 preferred interests warrant interests third party exceptions restrictions include among others ability pay regular distributions preferred membership interests otherwise permitted terms tarp preferred interests series d1 preferred interests warrant interests issued treasury private placement exempt registration pursuant section 42 securities act 1933 amended gmac agreed register resale secondary offering series d1 preferred interests units warrant interests issued exercise warrant later march 31 2009 class e preferred membership interests december 31 2008 completed private exchange offers cash tender offers pursuant gmac purchased andor exchanged certain subsidiaries’ including rescap’s outstanding notes offers connection settlement offers gmac issued 2576601 units class e preferred membership interests class e interests preferred blocker inc blocker delaware corporation wholly owned nonconsolidated subsidiary gmac blocker entitled receive gmac respect class e interests declared gmac’s board managers funds legally available payment cash distributions rate per annum 1186 distributions shall payable quarterly february 15 may 15 august 15 november 15 year distributions declared gmac’s board managers accumulate january 16 2009 gmac completed 125 billion rights offering rights offering pursuant gmac issued additional common membership interests fim holdings subsidiary gm upon completion rights offering distribution rate class e interests reduced 1525 per annum 1186 per annum class e interests generally nonvoting classvoting certain matters certain circumstances specifically related class e interests pursuant terms offers blocker issued 2576601 units new 9 cumulative perpetual preferred stock blocker preferred stock holders blocker preferred stock entitled receive blocker declared blocker’s board directors funds legally available payment cash dividends rate per annum equal 7 upon completion rights offering interest rate blocker preferred reduced 9 7 distributions payable quarterly february 15 may 15 august 15 november 15 year cumulative gm preferred membership interests currently authorized outstanding 1021764 gm preferred membership interests held gm preferred finance co holdings inc wholly owned subsidiary gm required make distributions fiscal quarter respect gm preferred interests certain conditions met distributions made cash pro rata basis later tenth business day following delivery quarterly annual financial statements paid rate 10 per annum board managers permitted reduce distribution extent required avoid reduction equity capital gmac minimum amount equity capital equal approximately 155 billion net book value november 30 2006 determined accordance gaap addition notes consolidated financial statements gmac llc  form 10k board managers may suspend payment distributions respect one fiscal quarters majority members’ consent distributions made accumulate refer item 12 information regarding ownership foregoing common preferred membership interests recently adopted accounting standards sfas 157 january 1 2008 adopted statement financial accounting standards 157 fair value measurements sfas 157 sfas 157 provides definition fair value establishes framework measuring fair value gaap requires expanded disclosures fair value measurements standard applies gaap requires allows assets liabilities measured fair value therefore expand use fair value new circumstance adopted sfas 157 prospective basis sfas 157 required retrospective adoption rescission emerging issues task force issue 023 issues involved accounting derivative contracts held trading purposes contracts involved energy trading risk management activities eitf 023 certain guidance impact adopting sfas 157 rescission eitf 023 january 1 2008 increase beginning retained earnings cumulative effect change accounting principle approximately 23 million related recognition dayone gains purchased mortgage servicing rights msrs certain residential loan commitments refer note 22 consolidated financial statements detail sfas 158 september 2006 financial accounting standards board fasb issued sfas 158 employers’ accounting defined benefit pension postretirement plans sfas 158 amends sfas 87 employers’ accounting pensions sfas 88 employers’ accounting settlements curtailments defined benefit pension plans termination benefits sfas 106 employers’ accounting postretirement benefits pensions sfas 132r employers’ disclosures pensions postretirement benefits revised 2003 statement requires companies recognize asset liability overfunded underfunded status benefit plans financial statements asset liability offset accumulated comprehensive income consisting previously unrecognized prior service costs credits actuarial gains losses accumulated transition obligations assets sfas 158 also requires measurement date plan assets liabilities coincide sponsor’s yearend standard provides two transition alternatives companies make measurementdate provisions year ended december 31 2007 adopted recognition disclosure elements sfas 158 material effect consolidated financial position results operations cash flows addition adopted measurement elements sfas 158 year ended december 31 2008 change measurement date material impact consolidated financial condition results operations sfas 159 january 1 2008 adopted sfas 159 fair value option financial assets financial liabilities sfas 159 sfas 159 permits entities choose measure fair value many financial instruments certain items currently required measured fair value subsequent changes fair value designated items required reported earnings current period sfas 159 also establishes presentation disclosure requirements similar types assets liabilities measured fair value elected measure fair value certain financial assets liabilities including certain collateralized debt obligations certain mortgage loans heldforinvestment financing securitization structures cumulative effect beginning retained earnings decrease cumulative effect change accounting principle approximately 178 million january 1 2008 refer note 22 consolidated financial statements detail sfas 162 may 2008 fasb issued sfas 162 hierarchy generally accepted accounting principles sfas 162 sfas 162 identifies consistent framework hierarchy selecting accounting principles used preparing financial statements presented conformity gaap nongovernmental entities hierarchy within sfas 162 consistent previously defined american institute certified public accountants aicpa statement auditing standards 69 meaning “present fairly conformity generally accepted accounting principles” sas 69 sfas 162 effective 60 days following sec’s approval public company accounting oversight board amendments aicpa’s auditing section 411 meaning “present fairly conformity generally accepted accounting principles” sfas 162 material effect consolidated financial statements utilize guidance within sas 69 notes consolidated financial statements gmac llc  form 10k fasb staff position fsp fin 391 january 1 2008 adopted fsp fin 391 amendment fas interpretation 39 fsp fin 39 fsp fin 391 defines “right setoff” specifies conditions must met derivative contract qualify right setoff also addresses applicability right setoff derivative instruments clarifies circumstances appropriate offset amounts recognized instruments statement financial position addition fsp requires entity make election related offsetting fair value amounts recognized multiple derivative instruments executed counterparty master netting arrangement fair value amounts recognized right reclaim cash collateral receivable obligation return cash collateral payable arising master netting arrangement derivative instruments without regard company’s intent settle transactions net basis elected present items gross therefore upon adoption fsp fin 391 increased december 31 2007 assets liabilities equally approximately 12 billion sec staff accounting bulletin 109 january 1 2008 adopted staff accounting bulletin 109 written loan commitments recorded fair value earnings sab 109 sab 109 provides sec staff’s views accounting written loan commitments recorded fair value gaap revises rescinds portions sab 105 application accounting principles loan commitments sab 105 sab 105 provided views sec staff regarding derivative loan commitments accounted fair value earnings pursuant sfas 133 accounting derivative instruments hedging activities sfas 133 sab 105 states measuring fair value derivative loan commitment staff believed would inappropriate incorporate expected net future cash flows related associated servicing loan sab 109 supersedes sab 105 expresses current view sec staff consistent guidance sfas 156 accounting servicing financial assets sfas 159 expected net future cash flows related associated servicing loan included measurement written loan commitments accounted fair value earnings sab 105 also indicated sec staff believed internally developed intangible assets customer relationship intangible assets recorded part fair value derivative loan commitment sab 109 retains sec staff view broadens application written loan commitments accounted fair value earnings impact adopting sab 109 material impact consolidated financial condition results operations fsp fas 1573 october 2008 adopted fsp fas 1573 determining fair value financial asset market active fsp fas 1573 fsp applies financial assets within scope accounting pronouncements require permit fair value measurements accordance sfas 157 fsp clarifies application sfas 157 market active provides key considerations determining fair value financial asset market financial asset active fsp effective upon issuance including prior periods financial statements issued impact adopting fsp fas 1573 material impact consolidated financial condition results operations fsp fas 1404 fin 46r8 january 1 2008 adopted fsp fas 1404 fin 46r8 disclosures transfers financial assets interests variable interest entities amendment fasb statement 140 accounting transfers servicing financial assets extinguishments liabilities fsp fas 1404 fin 46r8 require public entities provide additional disclosures transfers financial assets also amends fasb interpretation 46 consolidation variable interest entities require public enterprises provide additional disclosures involvement vies additionally fsp requires certain disclosures provided public enterprise sponsor variable interest vie enterprise holds significant variable interest qspe transferor financial assets qspe disclosures intended provide greater transparency financial statement users transferor’s continuing involvement transferred financial assets enterprise’s involvement vies fsp fas 1404 fin 46r8 effective first reporting period ending december 15 2008 impacts disclosure accounting treatment transferred financial assets consolidation vies adoption fsp impact consolidated financial condition results operations fsp fas 1331 fin 454 january 1 2008 adopted fsp fas 1331 fin 454 disclosures credit derivatives certain guarantees amendment fasb statement 133 fasb interpretation 45 clarification effective date fasb statement 161 fsp fas 1331 fin 454 fsp fas 1331 fin 454 amends sfas 133 require disclosures sellers credit derivatives including credit derivatives embedded notes consolidated financial statements gmac llc  form 10k hybrid instrument fsp also amends fasb interpretation 45 guarantor’s accounting disclosure requirements guarantees including indirect guarantees indebtedness others require additional disclosure current status paymentperformance risk guarantee fsp clarifies board’s intent effective date sfas 161 fsp fas 1331 fin 454 effective annual interim reporting periods ending november 15 2008 addition fsp encourages amendments applied periods earlier effective date facilitate comparisons initial adoption impacts disclosure accounting treatment credit derivative instruments guarantees adoption fsp impact consolidated financial condition results operations fsp eitf 99201 january 2009 adopted fsp eitf 99201 amendments impairment interest income measurement guidance eitf issue 9920 fsp eitf 99201 achieve consistent determination whether otherthantemporary impairment occurred debt securities classified availableforsale heldtomaturity fsp amends issue 9920 align impairment guidance beneficial interests investments analyzed impairment statement financial accounting standards 115 accounting certain investment debt equity securities fsp shall effective interim annual reporting periods ending december 15 2008 shall applied prospectively impact adopting fsp eitf 99201 material impact consolidated financial condition results operations recently issued accounting standards sfas 141r december 2007 fasb issued sfas 141r business combinations sfas 141r replaces sfas 141 business combinations sfas 141r establishes principles requirements acquiring company recognizes measures financial statements identifiable assets acquired liabilities assumed noncontrolling interest acquiree recognizes measures goodwill acquired business combination gain bargain purchase determines information disclose enable users financial statements evaluate nature financial effects business combination sfas 141r effective gmac january 1 2009 applies transactions events gmac obtains control one businesses management assess transaction casebycase basis occur sfas 160 december 2007 fasb issued sfas 160 noncontrolling interests consolidated financial statements amendment arb 51 sfas 160 requires ownership interests subsidiaries held parties parent clearly identified labeled presented consolidated statement financial position within equity separate parent’s equity also requires amount consolidated net income attributable parent noncontrolling interest clearly identified presented face consolidated statement income sfas 160 effective gmac january 1 2009 sfas 160 shall applied prospectively beginning fiscal year initially applied except presentation disclosure requirements presentation disclosure requirements shall applied retrospectively periods presented believe retrospective impacts adoption material effect consolidated financial condition results operations new transactions assessed occur sfas 161 march 2008 fasb issued sfas 161 disclosures derivative instruments hedging activities sfas 161 sfas 161 requires specific disclosures regarding location amounts derivative instruments financial statements derivative instruments related hedged items accounted derivative instruments related hedged items affect financial position financial performance cash flows sfas 161 effective gmac january 1 2009 early adoption permitted sfas 161 impacts disclosure accounting treatment derivative instruments related hedged items adoption sfas 161 impact consolidated financial condition results operations fsp fas 1403 february 2008 fasb issued fsp fas 1403 accounting transfers financial assets repurchase financing transactions fsp fas 1403 provides consistent framework evaluation transfer financial asset subsequent repurchase agreement entered counterparty fsp fas 1403 provides guidelines must met order initial transfer subsequent repurchase agreement considered linked evaluation transactions meet specified criteria required accounted one transaction fsp effective gmac january 1 2009 applied prospectively initial transfers notes consolidated financial statements gmac llc  form 10k repurchase financings initial transfer executed adoption believe impact adopting fsp fas 1403 material effect consolidated financial condition results operations fsp fas 1423 april 2008 fasb issued fsp fas 1423 determination useful life intangible assets fsp fas 1423 fsp fas 1423 amends factors considered developing renewal extension assumptions used purposes determining useful life recognized intangible asset sfas 142 goodwill intangible assets sfas 142 fsp fas 1423 intended improve consistency useful life recognized intangible asset sfas 142 period expected cash flows used measure fair value asset sfas 141r gaap fsp fas 1423 effective fiscal years beginning december 15 2008 earlier application permitted believe impact adopting fsp fas 1423 material effect consolidated financial condition results operations eitf issue 085 september 2008 emerging issues task force eitf issued eitf 085 issuer’s accounting liabilities fair value thirdparty credit enhancement eitf 085 eitf 085 states issuer debt thirdparty credit enhancement inseparable debt instrument shall include effect credit enhancement fair value measurement liability eitf 085 effective prospective basis periods ending december 15 2008 impact adopting eitf 085 expected material impact consolidated financial condition results operations eitf issue 086 november 2008 emerging issues task force issued eitf 086 equity method investment accounting considerations eitf 086 addresses initial carrying value equity method investment determined impairment assessment underlying indefinitelived intangible asset equity method investment performed equity method investee’s issuance shares accounted account change investment equity method cost method eitf 086 shall effective fiscal years beginning december 15 2008 interim periods within fiscal years eitf 086 shall applied prospectively early application prohibited impact adopting eitf 086 expected material impact consolidated financial condition results operations fsp fas 132r1 december 2008 fasb issued fsp fas 132r 1 employers’ disclosures postretirement benefit plan assets provide guidance employer’s disclosure plan assets defined benefit pension postretirement plan fsp provides objectives disclosure employer’s 1 investment policies strategies 2 categories plan assets 3 fair value measurements 4 significant concentrations risk fsp effective fiscal years ending december 15 2009 upon initial application provisions fsp required earlier periods presented comparative purposes earlier adoption permitted impacts disclosure accounting treatment benefit postretirement plans adoption fsp material effect consolidated financial condition results operations 2 insurance premiums service revenue earned following table summary insurance premiums service revenue written earned notes consolidated financial statements gmac llc  form 10k 3 income net losses details income net losses follows refer note 20 description related party transactions b includes nonmortgage securitization fees c 2008 recognized 765 million losses related investment accounted using equity method losses included 195 million estimate share investee’s net loss impairment remaining investment interests 570 million december 31 2008 remaining balance investment financial obligations ceased equity method accounting furthermore audited financial statements related investee yet available due fact ultimate finalization financial information impact recognized losses providing summarized financial information refer note 16 description derivative instruments hedging activities e refer note 22 description sfas 159 fair value option elections 4 operating expenses details operating expenses follows notes consolidated financial statements gmac llc  form 10k 5 investment securities portfolio securities includes bonds equity securities asset mortgagebacked securities notes interests securitization trusts investments cost fair value gross unrealized gains losses availableforsale heldtomaturity securities follows connection certain borrowings letters credit relating certain assumed reinsurance contracts 154 million 162 million primarily us treasury securities pledged collateral december 31 2008 2007 respectively otherthantemporary impairment writedowns 223 million 5 million 12 million years ended december 31 2008 2007 2006 respectively gross unrealized gains losses investment securities availableforsale totaled 232 million 67 million respectively december 31 2006 fair value unrealized gains losses amount pledged collateral portfolio trading securities follows unrealized gains losses included investment income current period basis net unrealized gains totaled 118 million december 31 2006 notes consolidated financial statements gmac llc  form 10k maturity distribution availableforsale heldtomaturity debt securities outstanding summarized following table prepayments may cause actual maturities differ scheduled maturities following table presents gross gains losses realized upon sales availableforsale securities gains realized 2006 primarily relate rebalancing investment portfolio insurance operations certain availableforsale securities sold loss 2008 2007 2006 result market conditions within respective periods eg downgrade rating debt security opinion management gross unrealized losses table considered temporarily impaired refer note 1 consolidated financial statements information related investment securities methodology evaluating potential otherthantemporary impairment notes consolidated financial statements gmac llc  form 10k 6 finance receivables loans heldforsale composition finance receivables loans outstanding follows domestic residential mortgages include 19 billion fair value result election made sfas 159 december 31 2008 refer note 22 additional information b net unearned income 34 billion 40 billion december 31 2008 2007 respectively c aggregate unpaid principal balance finance receivables loans maturing next five years follows 43820 million 2009 10989 million 2010 8971 million 2011 7289 million 2012 4556 million 2013 35160 million 2014 thereafter prepayments chargeoffs may cause actual maturities differ scheduled maturities composition loans heldforsale follows notes consolidated financial statements gmac llc  form 10k following table presents analysis activity allowance credit losses finance receivables loans 2007 2008 rescap completed sale residual cash flows related number onbalance sheet securitizations rescap completed approved actions necessary cause securitization trusts satisfy qspe requirement sfas 140 accounting transfers servicing financial assets extinguishment liabilities actions resulted deconsolidation various securitization trusts following table presents information commercial finance receivables loans specifically identified impairment includes loans 106 million 20 million december 31 2008 2007 respectively related allowance loans acquired transfer acquisition evidence deterioration credit quality since origination probable acquisition contractually required payments would collected notes consolidated financial statements gmac llc  form 10k carrying amount loans included balance sheet amounts finance receivables loans follows loans acquired december 31 2005 aicpa statement position 033 accounting certain loans debt securities acquired transfer requires us record revenue using accretable yield method following table represents accretable yield activity loans acquired year probable acquisition contractually required payments would collected follows 7 offbalance sheet securitizations sell pools automotive residential mortgage loans via securitization transactions qualify offbalance sheet treatment gaap purpose securitizations provide permanent funding exit assets executing securitization transactions typically sell pools wholly owned specialpurpose entities spes sell loans separate transactionspecific bankruptcy remote spe securitization trust cash msrs transactions retained interests securitization trust issues sell interests investors collateralized secured loans entitle investors specified cash flows generated securitized loans securitization governed various legal documents limit specify activities securitization vehicle securitization vehicle generally allowed acquire loans sold issue interests investors fund acquisition loans enter derivatives yield maintenance contracts hedge mitigate certain risks related asset pool debt securities additionally securitization vehicle required service assets holds debt interest issued functions performed servicer appointed within underlying legal documents servicing functions include limited collecting payments borrowers performing escrow functions monitoring delinquencies liquidating assets investing funds distribution remitting payments investors accounting reporting information investors generally assets initially transferred securitization vehicle sole funding source investors various parties perform services transaction servicer trustee certain transactions liquidity provider facility may exist provide temporary liquidity structure liquidity provider generally reimbursed prior parties subsequent distribution periods bond insurance may also exist cover certain shortfalls notes consolidated financial statements gmac llc  form 10k certain investors certain securitizations servicer required advance scheduled principal interest payments due pool regardless whether received borrowers servicer allowed reimburse servicing advances lastly certain securitization transactions may allow acquisition additional loans subsequent initial loan loans generally funded principal collections loans andor issuance new interests variable funding notes often contractually required invest new interests additionally provide certain guarantees discussed note 26 part securitizations typically retain servicing responsibilities retained interests accordingly servicing responsibilities result continued involvement form servicing underlying asset primary servicing andor servicing bonds resulting securitization transactions master servicing platforms noted certain securitizations require servicer advance scheduled principal interest payments due pool regardless whether received borrowers accordingly required provide servicing advances applicable certain securitizations may required fund certain investor triggered put redemptions whereas allowed reimburse repurchasing loans par typically retail automotive finance receivables paid fee concluded fee represents adequate compensation servicer servicing asset liability recognized considering shortterm revolving nature wholesale loans servicing asset liability recognized upon securitization loans december 31 2008 weighted average basic servicing fees primary servicing activities 100 basis points 100 basis points 28 basis points outstanding principal balance sold retail finance receivables wholesale loans residential mortgage loans respectively additionally retain rights cash flows remaining investors securitization trusts received contractual payments certain retail securitization transactions retail receivables sold servicing retained basis servicing compensation servicing liability established reported liabilities december 31 2008 2007 servicing liabilities 1 million 9 million respectively outstanding related retail automotive securitization transactions refer note 1 note 22 regarding valuation servicing rights maintain cash reserve accounts predetermined amounts certain securitization activities event deficiencies occur cash flows owed investors amounts available cash reserve accounts related securitizations retail finance receivables wholesale loans residential mortgage loans totaled 136 million 576 million 202 million december 31 2008 respectively 100 million 756 million 277 million december 31 2007 respectively retained interests may receive represents continuing economic interest securitization retained interests include limited senior subordinate mortgage assetbacked securities interestonly strips principalonly strips residuals certain retained interests provide credit enhancement securitization structure may absorb credit losses cash shortfalls additionally securitization documents may require cash flows directed away certain retained interests due specific overcollateralization requirements may performance driven value interests continue held take consideration features securitization transaction generally subject credit prepayment andor interest rate risks transferred financial assets refer note 1 note 22 regarding valuation retained interests typically required continue retaining interests past sold certain retained interests best aligns economic strategic plans investors andor securitization trusts recourse us exception customary market representation warranty repurchase provisions certain transactions early payment default provisions representation warranty repurchase provisions generally require us repurchase loans extent subsequently determined loans ineligible otherwise defective time sale due market conditions early payment default provisions included certain securitization transactions require us repurchase loans borrower delinquent making certain specific payments subsequent sale hold certain conditional repurchase options allow us repurchase assets securitization majority securitizations provide us servicer call option allows us repurchase remaining assets outstanding debt asset pool reaches predefined level represents point servicing burdensome compared notes consolidated financial statements gmac llc  form 10k benefits servicing option referred cleanup call servicer allowed exercise option discretion anytime asset pool size falls predefined level repurchase price loans typically par plus accrued interest additionally may hold conditional repurchase options allow us repurchase asset certain events outside control met typical conditional repurchase option delinquent loan repurchase option give us option purchase loan exceeds certain prespecified delinquency level complete discretion regarding exercise options generally best interest purchased 6 million 262 million assets cleanup calls years ended december 31 2008 2007 respectively purchased 2 million 101 million mortgage loans delinquent loan repurchase options years ended december 31 2008 2007 respectively required gaap loans sold securitization transactions derecognized assets obtained securitization reported cash retained interests servicing rights elected fair value treatment existing mortgage servicing rights portfolio retained interest portfolio classified trading availableforsale securities therefore portfolio carried fair value valuation adjustments reported earnings equity valuation adjustments related trading securities reported investment income loss consolidated statement income valuation adjustments related unrealized gains losses availableforsale securities reported component accumulated comprehensive income consolidated balance sheet realized gains losses availableforsale securities reported investment income loss consolidated income statement except securitization trust income reported income net losses liabilities incurred part transaction representation warranties provisions early payment default provisions recorded fair value time sale reported accrued expenses liabilities consolidated balance sheet upon sale loans gain loss sale recognized difference assets recognized assets derecognized liabilities recognized part transaction following summarizes type amount loans held securitization trusts transactions qualified offbalance sheet treatment excludes 887 million loans held securitization trusts option repurchase eitf issue 029 accounting changes result transferor regaining control financial assets sold included consumer finance receivable loans notes consolidated financial statements gmac llc  form 10k key economic assumptions used measuring estimated fair value retained interests sales completed 2008 2007 2006 dates sales follows fair value retained interests wholesale securitizations approximates carrying value shortterm floatingrate nature wholesale loans b included within residential mortgage loans home equity loans lines high loantovalue loans residential first second mortgage loans c assumptions used measure expected yield variablerate retained interests based benchmark interest rate yield curve plus contractual spread appropriate actual yield curve utilized varies depending specific retained interests based weighted average maturity wam finance receivables constant prepayment rate cpr mortgage loans following table summarizes pretax gains securitizations certain cash flows received paid securitization trusts transfers finance receivables loans completed 2008 notes consolidated financial statements gmac llc  form 10k following table summarizes pretax gains securitizations certain cash flows received paid securitization trusts transfers finance receivables loans completed 2007 2006 following table summarizes key economic assumptions sensitivity fair value retained interests december 31 2008 2007 immediate 10 20 adverse changes assumptions fair value retained interests wholesale securitizations approximates carrying value 710 million inclusive 34 million valuation allowance shortterm floatingrate nature wholesale receivables b net reserve expected credit losses totaling 8 million 9 million december 31 2008 2007 respectively amounts included fair value retained interests classified investment securities c forward benchmark interest rate yield curve plus contractual spread notes consolidated financial statements gmac llc  form 10k sensitivities hypothetical used caution changes fair value based 10 20 variation assumptions generally cannot extrapolated relationship change assumption change fair value may linear also table effect variation particular assumption fair value retained interest calculated without changing assumption reality changes one factor may result changes another may magnify counteract sensitivities additionally utilize derivative instruments mitigate interest rate prepayment risks associated certain retained interests effects hedge strategies considered herein expected static pool net credit losses include actual incurred losses plus projected net credit losses divided original balance outstandings comprising securitization pool following table displays expected static pool net credit losses securitization transactions static pool losses applicable wholesale finance receivable securitizations shortterm nature following table presents components securitized financial assets managed along quantitative information delinquencies net credit losses managed portfolio represents finance receivables loans balance sheet securitized excluding securitized finance receivables loans continue service continuing involvement ie retain interest risk loss underlying receivables 8 investment operating leases investments operating leases follows future lease nonresidual rental payments due customers equipment operating leases december 31 2008 totaled 11841 million due follows 6149 million 2009 3901 million 2010 1530 million 2011 237 million 2012 24 million 2013 notes consolidated financial statements gmac llc  form 10k investments operating lease assets represents expected future cash flows expect realize operating leases includes customer payments expected residual value upon remarketing vehicle end lease described note 20 gm may sponsor residual support programs result contractual residual value excess standard residual value gm reimburses us remarketing sales proceeds less customer’s contract residual value limited standard residual value addition residual support programs gm also participates risksharing arrangement whereby gm shares equally residual losses extent remarketing proceeds standard residual rates limited floor connection sale 51 ownership interest gmac gm settled estimated liabilities respect residual support risk sharing portion operating lease portfolio based december 31 2008 outstanding us operating lease portfolio maximum amount could paid gm residual support programs risksharing arrangement approximately 14 billion 17 billion respectively fully discussed note 20 evaluate carrying value operating lease assets test impairment accordance sfas 144 accounting impairment disposal longlived assets sfas 144 events circumstances necessitate evaluation generally impairment determined exist undiscounted expected future cash flows lower carrying value asset light significant declines used vehicle prices 2008 united states canada several international markets concluded certain triggering events occurred year ended december 31 2008 requiring evaluation certain operating lease assets within global automotive finance operations recoverability grouped operating lease assets lowest level could reasonably estimate identifiable cash flows assessing recoverability compared estimates future cash flows related lease assets corresponding carrying values considered expected cash flows including customer payments expected residual value upon remarketing vehicle lease termination payments gm residual risksharing agreements extent undiscounted cash flows less respective carrying values discounted cash flows arrive estimated fair value result evaluation year ended december 31 2008 reduced carrying values equal estimated fair values realized impairment charges 1234 million impairments recognized north american automotive finance operations consisted 808 million related sportutility vehicles trucks united states canada 384 million related car portfolio united states impairment recognized international automotive finance operations totaled 42 million related fullservice leasing portfolio believe estimates discounted future cash flows used impairment analysis reasonable based current market conditions process required use significant estimates assumptions developing estimates assumptions management used available evidence however uncertainties associated estimating amounts timing likelihood possible outcomes actual cash flows could ultimately differ estimated part recoverability impairment analyses imbedded residual value projections estimates projected recoveries gm relative residual support risksharing agreements adjustment estimates made respect collectibility projected recoveries gm extent allowance would included estimate projected recoveries gm lease impairments depreciation rates could higher stated value lease assets could lower december 31 2008 expected residual values included estimates payments gm approximately 18 billion related residual support risksharing agreements extent gm able fully honor obligations relative agreements depreciation expense remarketing performance would negatively impacted 9 mortgage servicing rights define classes mortgage servicing rights msrs based availability market inputs manner manage risks servicing assets liabilities sufficient market inputs exist determine fair value recognized servicing assets servicing liabilities notes consolidated financial statements gmac llc  form 10k following table summarizes activity related msrs carried fair value refer note 20 additional information b year ended december 31 2008 rescap’s international operations recognized 16 million valuation writedown servicing assets included figure writedown related servicer obligations contingent upon actions taken bondholders securitization servicer obligation within underlying servicing contracts loss reflected writedown servicing assets also included balance foreign currency adjustments extinguishment mortgage servicing rights related exercise cleanup calls certain securitization transactions changes fair value due changes valuation inputs assumptions used valuation models include changes due revaluation model benchmarking exercise line item also includes changes fair value due change valuation assumptions andor model calculations changes fair value primarily include accretion present value discount related forecasted cash flows economic runoff portfolio foreign currency adjustments extinguishment mortgage servicing rights related cleanup calls securitization transactions key economic assumptions sensitivity current fair value msrs immediate 10 20 adverse changes assumptions follows sensitivities hypothetical considered caution changes fair value based 10 variation assumptions generally cannot extrapolated relationship change assumptions change fair value may linear also effect variation particular assumption fair value calculated without changing assumption reality changes one factor may result changes another eg increased market interest rates may result lower prepayments increased credit losses could magnify counteract sensitivities show change asset balances show expected change fair value instruments used manage interest rates prepayment risks associated assets primary risk relating msrs interest rate risk resulting impact prepayments significant decline interest rates could lead higher expected prepayments could reduce value mortgage servicing rights economically hedge income statement impact risks derivative nonderivative financial instruments include interest rate swaps caps floors options purchase items futures forward contracts andor purchasing selling us treasury principalonly securities december 31 2008 fair value derivative financial instruments nonderivative financial instruments used mitigate risks amounted 977 million 0 million respectively december 31 2007 fair value derivative financial instruments notes consolidated financial statements gmac llc  form 10k nonderivative financial instruments used mitigate risks amounted 900 million 257 million respectively change fair value derivative financial instruments amounted gains 2 billion 716 million years ended december 31 2008 2007 respectively included servicing asset valuation hedge activities net consolidated statement income components mortgage servicing fees follows pledged msrs 26 billion 27 billion collateral borrowings december 31 2008 2007 respectively active risk management program hedge value msrs risk management program contemplates use derivative financial instruments us treasury securities principalonly securities experience changes value offsetting msrs response changes market interest rates refer note 16 discussion derivative financial instruments used hedge mortgage servicing rights us treasury securities used connection risk management strategy designated trading availableforsale third quarter 2008 rescap’s consolidated tangible net worth defined fell 10 billion giving fannie mae right pursue certain remedies master agreement contract gmac mortgage llc consolidated subsidiary fannie mae rescap reached agreement fannie mae provide fannie mae collateral valued 200 million addition 100 million previously provided agreed sell transfer servicing mortgage loans unpaid principal balance approximately 126 billion approximately 9 total principal balance loans rescap services fannie mae return actions fannie mae agreed forbear january 31 2009 exercising contractual remedies otherwise available due decline rescap’s consolidated tangible net worth defined january 29 2009 fannie mae extended forbearance period march 31 2009 remedies could include among things reduction ability sell loans fannie mae reduction capacity service loans fannie mae could require rescap transfer servicing performs fannie mae management believes selling servicing related loans described incremental positive impact rescap’s liquidity overall cost servicing since longer required advance delinquent payments loans meeting fannie mae’s collateral request negative impact rescap’s liquidity fannie mae deems rescap’s consolidated tangible net worth defined inadequate following expiration forbearance period referred fannie mae determines exercise contractual remedies described would adversely affect rescap’s profitability financial condition also fourth quarter 2008 gmac mortgage llc subsidiary rescap received notice fannie mae breach servicer rating requirement set forth master agreement contract fannie mae gmac mortgage llc result breach fannie mae entitled exercise certain rights remedies permitted contract gmac mortgage llc fannie mae taking immediate action result breach servicer rating requirement granting temporary waiver requirement period date notification december 22 2008 including march 31 2009 subject however enhanced servicing reviews fannie mae fannie mae’s determination gmac mortgage llc continues provide satisfactory servicing performance march 31 2009 waiver expire gmac mortgage llc required compliance servicer rating requirement notes consolidated financial statements gmac llc  form 10k 10 premiums insurance receivables premiums insurance receivables consisted following net 18 million 9 million allowance uncollectible premiums receivables december 31 2008 2007 respectively 11 assets consisted represents credit enhancement form cash reserves various securitization transactions executed b represents cash collection customer payments securitized receivables funds distributed investors payments related secured debt c includes residential real estate investments 189 million 11 billion related accumulated depreciation 2 million 16 million years ended december 31 2008 2007 respectively aggregate amortization expense intangible assets 24 million 18 million years ended december 31 2008 2007 respectively amortization expense expected average 9 million per year next five fiscal years e three months ended june 30 2008 insurance operations ceased securitieslending activities within investment portfolio notes consolidated financial statements gmac llc  form 10k changes carrying amounts goodwill periods shown follows three months ended september 30 2007 initiated evaluation goodwill rescap potential impairment accordance sfas 142 goodwill intangible assets sfas 142 interim test initiated light deteriorating conditions residential home building markets including significant changes mortgage secondary market tightening underwriting guidelines reducing product offerings recent credit downgrades rescap’s unsecured debt obligations factors significant impact view rescap’s future expected asset levels growth rate assumptions consistent prior assessments fair value rescap business determined using internally developed discounted cash flow methodology addition took consideration relevant indicators value available marketplace recent market transactions trading values rescap goodwill exceeded fair value resulting impairment loss 455 million 2007 b three months ended december 31 2008 insurance operations initiated evaluation goodwill potential impairment accordance sfas 142 addition annual impairment evaluation test initiated light morethanlikely expectation one reporting units significant portion one reporting units sold fair value determined using offer provided willing purchaser based upon preliminary results assessment insurance operations concluded carrying value one reporting units exceeded fair value resulting impairment loss 42 million year ended december 31 2008 12 debt weighted average interest rates include effects derivative financial instruments designated hedges debt b repurchase agreements consist secured financing arrangements third parties rescap primarily includes nonbank secured borrowings notes payable gm refer note 20 details c secured longterm debt includes 19 billion fair value result election made sfas 159 refer note 22 additional information adjust fixedrate debt designated hedge item accordance sfas 133 notes consolidated financial statements gmac llc  form 10k following table presents scheduled maturity longterm debt december 31 2008 assuming early redemptions occur actual payment secured debt may vary based payment activity related pledged assets scheduled maturities rescap unsecured longterm debt follows 530 million 2009 1289 million 2010 209 million 2011 347 million 2012 539 million 2013 216 million 2014 thereafter maturities exclude rescap debt held gmac b scheduled maturities rescap secured longterm debt follows 597 million 2009 2115 million 2010 878 million 2011 1873 million 2012 3129 million 2013 4467 million 2014 thereafter maturities exclude rescap debt held gmac c scheduled amortization original issue discount follows 1489 million 2009 1262 million 2010 981 million 2011 336 million 2012 249 million 2013 1184 million 2014 thereafter debt issues totaling 14565 million redeemable par option anytime scheduled maturity dates latest november 2049 e collateralized borrowings securitization trust represents mortgage lendingrelated debt repaid upon principal payments underlying assets achieve desired balance fixed variablerate debt utilize interest rate swap interest rate cap agreements use derivative financial instruments effect synthetically converting 207 billion 696 billion fixedrate debt variablerate obligations 193 billion 615 billion variablerate debt fixedrate obligations december 31 2008 addition certain debt obligations denominated currencies currency issuing country foreign currency swap agreements used hedge exposure changes exchange rates obligations june 2008 entered new secured revolving credit facility capacity 114 billion facility secured us canadian automotive finance assets borrowers facility structured bankruptcyremote specialpurpose entities capacity facility declines 79 billion two years ultimately matures june 2011 notes consolidated financial statements gmac llc  form 10k facility includes leverage ratio covenant requires reporting segments excluding rescap reporting segment ratio consolidated borrowed funds consolidated net worth exceed 1101 purposes calculation numerator total debt consolidated basis excluding obligations bankruptcyremote specialpurpose entities less total debt rescap reporting segment consolidated balance sheet excluding obligations bankruptcyremote specialpurpose entities denominator consolidated net worth less rescap’s consolidated net worth certain extensions credit us rescap december 31 2008 leverage ratio 281 following table summarizes calculation leverage ratio covenant remain subject leverage ratio previously calculated prior formation june 2008 secured revolving credit facility significantly reduced debt balances relative prior periods december 31 2008 leverage ratio calculated based previous methodology 331 following summarizes assets restricted collateral payment related debt obligation primarily arising securitization transactions accounted secured borrowings repurchase agreements included part secured debt repurchase agreements 588 million 36 billion pledged assets collateral approximately amount debt december 31 2008 2007 respectively private debt exchange cash tender offers november 20 2008 commenced separate private exchange cash tender offers purchase andor exchange certain subsidiaries gmac offers rescap’s rescap offers outstanding notes held eligible holders cash newly issued notes gmac case gmac offers preferred stock wholly owned gmac subsidiary gmac offers offered purchase andor exchange certain old gmac notes gmac old notes held eligible holders election eligible holder either ai newly issued senior guaranteed notes consolidated financial statements gmac llc  form 10k gmac substantially terms applicable series gmac old notes exchanged guaranteed notes except guaranteed notes guaranteed certain subsidiaries gmac ii newly issued 9 perpetual senior preferred stock subsequently reduced 7 pursuant terms securities liquidation preference 1000 per share wholly owned nonconsolidated subsidiary gmac new preferred stock b cash case amounts per 1000 principal amount gmac old notes specified related offering materials extent cash required purchase gmac old notes tendered pursuant cash elections exceeded 2 billion eligible holder made cash election amount gmac old notes tendered cash accepted pro rata basis across series aggregate amount cash spent offers equaled 2 billion balance gmac old notes holder tendered accepted purchase cash exchanged new securities holder made new securities election accordance option described paragraph guaranteed notes guaranteed note guarantees joint several basis gmac latin america holdings llc gmac international holdings coöperatief ua gmac continental llc ib finance holding company llc gmac us llc note guarantor wholly owned subsidiaries gmac note guarantees senior obligations note guarantor rank equally existing future senior debt note guarantor note guarantees rank senior subordinated debt note guarantor rescap offers gmac offered purchase andor exchange certain rescap notes rescap old notes held eligible holders election eligible holder either ai case 850 notes rescap maturing may 15 2010 newly issued 750 senior notes gmac due 2013 new senior notes ii case series rescap old notes combination new senior notes newly issued 800 subordinated notes gmac due 2018 subordinated notes b cash cases amount 1000 principal amount rescap old notes specified related offering materials extent cash required purchase rescap old notes tendered pursuant cash elections exceeded 500 million eligible holder made cash election amount rescap old notes tendered cash accepted pro rata basis across series aggregate amount cash spent offers equaled 500 million balance rescap old notes holder tendered accepted purchase cash exchanged new securities holder made new securities election accordance option described paragraph gmac offers rescap offers collectively offers settled december 31 2008 approximately 175 billion aggregate principal amount 59 outstanding gmac old notes validly tendered accepted gmac offers approximately 37 billion aggregate principal amount 39 outstanding rescap old notes validly tendered accepted rescap offers gmac offers rescap offers accounted accordance eitf 9619 resulted pretax gain extinguishment debt 115 billion gain extinguishment consisted 38 billion principal discount 54 billion discount representing difference face value estimated fair value new gmac rescap notes 23 billion discount representing difference face value estimated fair value new preferred stock discount new gmac rescap notes amortized interest expense terms new notes using effective interest method accounting gmac offers rescap offers required use critical accounting judgments estimates refer note 1 additional information time repurchase publicly traded debt part cash liquidity management strategy fourth quarter 2007 paid 900 million openmarket repurchases 241 million tender offer publicly traded rescap debt securities resulting aftertax gain 563 million also fourth quarter 2007 paid 287 million openmarket repurchases gmac debt securities resulting aftertax gain 16 million notes consolidated financial statements gmac llc  form 10k liquidity facilities liquidity facilities represent additional funding sources financial institutions providing uncommitted facilities legally obligated advance funds facilities capacity secured facilities generally available extent contribute incremental collateral facility following table summarizes liquidity facilities maintain funding generally available upon request excess collateral resides certain facilities b funding generally available extent incremental collateral contributed facilities c potential capacity includes undrawn credit commitments serve backup liquidity support assetbacked commercial paper program ncat 90 billion 120 billion potential capacity supporting 80 billion 69 billion outstanding ncat commercial paper december 31 2008 2007 respectively ncat commercial paper outstanding included consolidated balance sheets november 25 2008 certain assetbacked securities owned ncat downgraded moody’s sp result downgrades terms ncat’s liquidity facility documents cure period provided gmac administrator ncat could work moody’s sp take steps secure ratings upgrade downgraded securities upgrade achieved prior end cure period january 23 2009 point orderly winddown ncat’s operations began winddown phase ncat continue issue commercial paper cannot use proceeds issuances purchase additional assetbacked securities increase principal amount revolving assetbacked securities currently owns represents commitments financial institutions purchase us automotive retail assets notes consolidated financial statements gmac llc  form 10k 13 reserves insurance losses loss adjustment expenses following table provides reconciliation activity reserves insurance losses loss adjustment expenses november 3 2008 entered loss portfolio transfer ceded losses loss adjustment expenses related business underwritten us reinsurance agency sold date loss portfolio transfer accounted retroactive reinsurance accordance sfas 113 accounting reporting reinsurance shortduration longduration contracts retroactive reinsurance balances result reinsurance placed cover losses insured events occurring prior inception reinsurance contract b incurred losses loss adjustment expenses 2008 2007 2006 reduced 57 million 71 million 93 million respectively result decreases prior years’ reserve estimates lower anticipated certain reinsurance coverages assumed private passenger automobile coverages united states internationally addition 2006 included 20 million reduction reserves related insurance program ultimately transferred gm c reflected net reinsurance recoveries totaling 405 million 246 million 306 million years ended december 31 2008 2007 2006 respectively includes exposure asbestos environmental claims reinsurance general liability commercial multiple peril homeowners’ workers’ compensation claims reported claim activity date significant net reserves loss adjustment expenses matters 4 million december 31 2008 5 million december 31 2007 2006 14 deposit liabilities deposit liabilities consisted following noninterest bearing deposits primarily represent thirdparty escrows associated rescap’s loan servicing portfolio escrow deposits subject executed agreement withdrawn without penalty time december 31 2008 2007 certificates deposit included 96 billion 66 billion respectively brokered certificates deposit notes consolidated financial statements gmac llc  form 10k following table presents scheduled maturity brokered deposits december 31 2008 15 accrued expenses liabilities accrued expenses liabilities consisted 16 derivative instruments hedging activities enter interest rate foreign currency futures forwards options swaps connection market risk management activities derivative instruments used manage interest rate risk relating specific groups assets liabilities including investment securities loans heldforsale mortgage servicing rights debt deposits offbalance sheet securitizations addition foreign exchange contracts used mitigate foreign currency risk associated foreigncurrencydenominated debt foreign exchange transactions accordance sfas 133 amended interpreted record derivative financial instruments consolidated balance sheet assets liabilities fair value changes fair value accounted depending use derivative financial instruments whether qualifies hedge accounting treatment primary objective utilizing derivative financial instruments manage market risk volatility associated interest rate foreign currency risks related assets liabilities automotive finance mortgage operations managing volatility enables us price finance mortgage offerings competitive rates minimize impact market risk earnings strategies applied decentralized basis respective global automotive finance rescap operations consistent level market risk managed subject various limits controls local unit consolidated level one key goals strategy modify asset liability interest rate mix including assets liabilities associated securitization transactions may recorded offbalance sheet spes addition use derivative financial instruments mitigate risk changes fair values mortgage loans heldforsale mortgage servicing rights derivative financial instruments also utilized manage foreign currency exposure related foreigncurrencydenominated debt following summarizes derivative activity based accounting hedge designation fair value hedges fair value hedges consist hedges fixedrate debt obligations interest rate swaps used modify exposure interest rate risk converting fixedrate debt floating rate generally individual swaps designated hedges specific debt time issuance terms swap matching terms underlying debt notes consolidated financial statements gmac llc  form 10k terms swap designed match terms debt significant portion debt obligation hedging relationships receive shortcut treatment sfas 133 resulting assumption hedge ineffectiveness certain fair value hedges debt however receive shortcut treatment differences option features interest rate swap companion hedged debt underlying debt hedged partially repurchased swap traded ineffectiveness measured based difference fair value movement swap related hedged debt effectiveness assessed using historical data assess hedge effectiveness employing statisticalbased approach must meet thresholds rsquared slope fstatistic tstatistic cash flow hedges enter derivative financial instrument contracts hedge exposure variability cash flows related floatingrate foreign currency financial instruments interest rate swaps used modify exposure variability expected future cash flows attributable variablerate debt currency swaps used hedge foreign exchange exposure foreigncurrencydenominated debt converting funding currency assets financed similar fair value hedges swaps generally entered traded concurrent debt issuance terms swap matching terms underlying debt economic hedges designated accounting hedges utilize certain derivative financial instruments qualify designated hedges sfas 133 facilitate securitization transactions manage risks related interest rate price foreign currency derivatives designated accounting hedges changes fair value derivative instruments recognized earnings period • mortgage servicing rights enter combination derivative contracts economic hedges servicing rights associated groups similar mortgage loans derivatives include interest rate caps floors futures options futures mortgagebacked security options interest rate swaps swaptions maturities instruments range six months twenty years entered written options us treasury futures notional amounts lower purchased options futures purchased option coverage strike price less equal corresponding written option coverage thereby mitigating loss exposure required deposit cash margin accounts maintained counterparties unrealized losses future contracts • loans heldforsale use derivative financial instruments hedge exposure risk associated mortgage automotive loans heldforsale mortgage loans funded generally sold secondary market various investors often mortgagebacked securities sponsored fannie mae freddie mac ginnie mae mortgage loans eligible agencysponsored securitization sold public private securitization transactions wholeloan sales automotive loans sold public private securitization transactions wholeloan sales primary risk associated closed loans awaiting sale change fair value loans attributable fluctuations interest rates primary strategies protect risk selling loans mortgagebacked securities forward investors using mandatory optional forward commitments use interest rate swaps • offbalance sheet securitization activities enter interest rate swaps facilitate securitization transactions underlying receivables sold nonconsolidated qspe underlying assets carried nonconsolidated entity interest rate swaps qualify hedge accounting treatment • foreign currency debt elected treat currency swaps used convert foreign denominated debt back functional currency floating rate hedges accounting purposes although currency swaps similar foreign currency cash flow hedges described foregoing designated hedges changes fair values currency swaps substantially offset foreign currency revaluation gains losses underlying debt • mortgagerelated securities use interest rate options futures swaps caps floors mitigate risk related mortgagerelated securities classified trading notes consolidated financial statements gmac llc  form 10k • callable debt obligations enter cancellable interest rate swaps economic hedges certain callable fixedrate debt connection market risk management policy hedging relationship meet specified effectiveness assessment threshold treated economic hedge prior may 2007 cancellable swaps hedging callable debt treated economic hedges • commitments purchase andor sell mortgages prior mortgage funding often enter interest rate lock commitments borrowers whereby commit purchase loans particular interest rate provided borrower elects close loan time loan’s funding sale secondary market exposed fluctuations interest rates primary strategy protect risk entering forward delivery commitments sell mortgages mortgagebacked securities interest rate lock commitments specifically prohibited designated hedged asset fair value hedging relationship however certain commitments purchase mortgages defined derivatives therefore recorded balance sheet assets liabilities measured fair value subsequent changes fair value recorded adjustments carrying value assets liabilities corresponding adjustment recognized current period earnings commitments originate purchase mortgage loans accounted derivatives unrealized gain position 47 million 11 million recorded assets unrealized loss position 0 million 11 million recorded liabilities december 31 2008 2007 respectively december 31 2008 2007 forward delivery commitments sell mortgages mortgagebacked securities commitments sell mortgage loans accounted derivatives unrealized gain position 135 million 6 million recorded assets unrealized loss position 46 million 30 million recorded liabilities december 31 2008 2007 respectively following table summarizes pretax earnings effect type hedge classification segregated asset liability hedged amount represents difference changes fair values currency swap net revaluation related foreign denominated debt foreign denominated receivable following table presents additional information related derivative financial instruments estimated occur next 12 months notes consolidated financial statements gmac llc  form 10k derivative financial instruments contain element credit risk counterparties unable meet terms agreements credit risk associated derivative financial instruments measured net replacement cost counterparties owe us contract completely fail perform terms contracts assuming recoveries underlying collateral measured market value derivative financial instrument december 31 2008 2007 market value derivative financial instruments asset receivable position perspective 50 billion 44 billion including accrued interest 271 million 400 million respectively minimize credit risk exposure limiting counterparties major banks financial institutions meet established credit guidelines december 31 2008 90 exposure counterparties fitch rating higher equivalent rating another rating agency counterparty rated fitch compared 88 december 31 2007 additionally reduce credit risk majority derivative financial instruments entering legally enforceable agreements permit closeout netting transactions counterparty upon occurrence certain events mitigate risk counterparty default maintain collateral agreements certain counterparties agreements require parties maintain cash deposits event fair values derivative financial instruments meet established thresholds placed cash deposits totaling 16 billion 67 million december 31 2008 2007 respectively accounts maintained counterparties received cash deposits counterparties totaling 15 billion 944 million december 31 2008 2007 respectively cash deposits placed received included consolidated balance sheet assets accrued expenses liabilities respectively refer note 22 additional information related valuation risk associated derivative instruments 17 pension postretirement benefits pension certain employees eligible participate separate retirement plans provide pension payments eligible employees upon retirement based factors length service salary pursuant sale transactions transferred froze terminated portion defined benefit plans 2006 froze benefits participation pension plan covering primarily rescap employees resulted curtailment gain approximately 43 million also curtailed gmac commercial finance uk gmac commercial finance canada cf canada retirement plans 2006 subsequently terminated cf canada plan 2007 recorded curtailment charge approximately 9 million 2006 plans revised approximately 4 million 2007 additionally april 30 2007 closed gmac uk car care pension plan future accrual thereby freezing benefits participants resulted minimal impact earnings 2006 also recorded expense payments approximately 48 million section 75 debt obligation fully fund gmac portion gm uk pension plans required uk pension act 2004 income expense noted pension accounting recorded compensation benefits expense consolidated statement income furthermore prior consummation sale transactions november 30 2006 number employees eligible participate various domestic foreign pension plans gm participating employer plans gm allocated us portion pension expense made pro rata basis affected various assumptions discount rate return plan assets etc gm utilized determining pension obligation upon completion sale employees longer eligible participate pension plans also transferred gm financial liability associated gmac portion certain gm plans canada sale date adopted sfas 158 fiscal year ended december 31 2007 resulting 21 million increase assets 3 million increase deferred tax assets 11 million increase liabilities 13 million increase accumulated comprehensive income net tax overfunded pension plan recognized asset underfunded pension plan recognized liability unrecognized prior service costs credits net actuarial gains losses net transition obligations subsequent changes funded status recognized component accumulated comprehensive loss equity sfas 158 also required benefit obligations plan assets measured fiscal yearend beginning 2008 required plans change measurement date change measurement date fiscal yearend material impact consolidated financial statements notes consolidated financial statements gmac llc  form 10k incremental effects adoption sfas 158 december 31 2007 follows following summarizes information relating pension plans underfunded status pension plans increased primarily due deterioration fair value plan assets 2008 result market performance accordance sfas 158 underfunded position recognized consolidated balance sheet change underfunded position recorded loss comprehensive income loss expected rate return plan assets estimate determine calculating expected inflation expected real rate return stocks bonds based allocation percentages within trust weighted average assumptions used determining net periodic benefit cost follows net periodic pension expense income includes curtailment gains losses transactions described totaled 3 million 2 million 3 million nongmsponsored plans 2008 2007 2006 respectively allocations received gm related net pension expense employees participated gmsponsored plans 2006 80 million employer contributions pension plans 2008 2007 approximately 5 million 3 million respectively expect contribution levels remain minimal 2009 weightedaverage asset allocations pension plans december 31 2008 asset category follows equity securities 49 debt securities 41 10 weightedaverage asset allocations pension plans december 31 2007 asset category follows equity securities 58 debt securities 35 7 postretirement benefits certain subsidiaries participated various postretirement medical dental vision life insurance plans gm whereas subsidiaries participated separately maintained postretirement plans benefits funded incurred general assets previously accrued postretirement benefit costs active service period employees date full eligibility benefits effective november 30 2006 upon completion sale employees longer eligible participate gm’s postretirement plans sale gm agreed assume retain approximately 801 million liabilities related usbased gmsponsored postretirement benefit programs employees approximately 302 million related deferred tax assets net amount recorded capital contribution provided certain amounts associated estimated future postretirement benefits pensions characterized amounts postretirement benefits notwithstanding recording amounts use terms notes consolidated financial statements gmac llc  form 10k admit otherwise acknowledge amounts existing postretirement benefit plans pensions represent legally enforceable liabilities postretirement benefits expense income recorded compensation benefits expense consolidated statement income totaled 1 million 2 million 35 million 2008 2007 2006 respectively decrease expense 2007 relates transactions described expect postretirement benefit expense minimal future years impact adoption sfas 158 postretirement benefits decrease liabilities 5 million increase deferred tax liabilities 2 million increase accumulated comprehensive income approximately 3 million net tax defined contribution plan significant number employees covered defined contribution plans employer contributions vary based criteria specific individual plan amounted 76 million 71 million 40 million 2008 2007 2006 respectively costs also recorded compensation benefit expenses consolidated statement income increase contributions 2008 2007 compared 2006 mainly resulted change benefit structure end 2006 defined benefit plans defined contribution plans expect contributions 2009 similar contributions made 2008 18 income taxes effective november 28 2006 gmac along certain us subsidiaries became passthrough entities us federal income tax purposes income taxes incurred converting entities provided november 30 2006 required taxsharing agreement gm gmac subsequent november 30 2006 us federal state local income taxes generally provided entities ceased taxable entities exception local jurisdictions continue tax llcs partnerships due change tax status net deferred tax liability eliminated income tax expense totaling 791 million 2006 members report share taxable income respective income tax returns banking insurance foreign subsidiaries generally corporations continue subject provide us federal foreign income taxes income tax expense related corporations included income tax expense along miscellaneous state local franchise taxes gmac certain subsidiaries december 24 2008 gmac llc received approval become bank holding company change bank holding company status result material change tax expense current deferred tax assets liabilities 2008 significant components income tax expense follows notes consolidated financial statements gmac llc  form 10k reconciliation statutory us federal income tax rate effective tax rate applicable income change tax status shown following table results segregated tax status provided effective tax rate consolidated gmac llc heavily dependent upon pretax income mix passthrough taxable entities 2008 income recognized passthrough entities private debt exchange cash tender offers subject slightly lower nominal state income tax rate operating losses incurred earlier year meanwhile taxable entities tax expense consisted ongoing tax provisions operating profits plus valuation allowance established certain foreign subsidiaries specifically operating losses incurred primarily foreign mortgage subsidiaries subject full valuation allowance resulted tax benefit subsidiaries 2008 losses incurred automotive finance mortgage passthrough entities combined tax adjustments resulted immaterial tax expense year overall consolidated tax expense decreased 397 million year ended december 31 2008 compared period 2007 included within tax expense related establishment valuation allowances years ended december 31 2008 2007 10 billion 91 million respectively valuation allowances primarily related deferred tax assets mortgage subsidiaries continental europe united kingdom canada australia valuation allowances established based historical losses expected future taxable income longer morelikelythannot net deferred tax assets would realized notes consolidated financial statements gmac llc  form 10k deferred tax assets liabilities result differences assets liabilities measured financial reporting purposes measured income tax return purposes significant components deferred tax assets liabilities consideration adjustments reflected following table december 31 2008 book basis net assets flowthrough entities exceeded tax basis approximately 98 billion compared 61 billion december 31 2007 primarily related debt transactions lease transactions mortgage servicing rights sales finance receivables foreign pretax loss totaled 36 billion 333 million 2008 2007 respectively foreign pretax income totaled 336 million 2006 foreign pretax income subject us taxation effectively repatriated entities disregarded us federal income tax purposes responsibility members provide federal income taxes undistributed earnings foreign subsidiaries extent earnings deemed indefinitely reinvested outside united states banking insurance subsidiaries continue subject us federal income taxes provide federal income taxes undistributed earnings foreign subsidiaries except extent earnings indefinitely reinvested outside united states december 31 2008 36 billion accumulated undistributed earnings foreign subsidiaries indefinitely reinvested quantification deferred tax liability associated indefinitely reinvested earnings practicable terms purchase sale agreement gm fim holdings llc taxsharing agreement gm us terminated november 30 2006 terms sale agreement stipulate gm indemnify us tax liabilities related periods november 30 2006 excess established sale date notes consolidated financial statements gmac llc  form 10k conversely gm entitled tax refunds excess established sale date december 31 2008 79 million remitted gm dividends adopted provisions fasb interpretation 48 accounting uncertainty income taxes january 1 2007 cumulative effect applying fin 48 recorded directly retained earnings reported change accounting principle adoption interpretation material impact consolidated financial position reconciliation beginning ending amount unrecognized tax benefits follows amount unrecognized tax benefits recognized would affect effective tax rate approximately 148 million recognize interest penalties accrued related uncertain income tax positions interest expense operating expenses respectively year ended december 31 2008 25 million accrued interest penalties cumulative accrued balance date totaling 132 million anticipate examination us income tax returns 2004 2006 along examinations various foreign state local jurisdictions completed within next twelve months reasonably possible certain tax positions may settled unrecognized tax benefits would decrease approximately 31 million file tax returns us federal jurisdiction various states foreign jurisdictions significant operations december 31 2008 oldest tax years remain subject examination united states 2004 canada 2001 germany 2003 united kingdom 1995 mexico 2001 brazil 2004 australia 2003 19 sharebased compensation plans 2006 compensation leadership committee approved longterm phantom interest plan ltip management profits interest plan mpi july 2008 committee approved longterm equity compensation incentive plan ltecip replace ltip mpi ltip awards granted ltecip provides future grants restricted share units rsus share appreciation rights sars compensation plans designed provide executives opportunity share future growth value gmac necessary attract retain key executives incentive plans sharebased compensation plans accounted statement financial accounting standards 123r sharebased payment sfas 123r third quarter 2008 committee approved gmac’s purchase substantially mpi equitybased awards participants mpi awards held senior executives throughout gmac time purchase portion awards vested total cash paid purchased mpi awards 28 million total compensation expense recognized year ended december 31 2008 mpi plan 26 million mainly represents accelerated recognition purchase date previously unrecognized compensation expense associated purchase nonvested awards required sfas 123r compared compensation expense 4 million year ended december 31 2007 mpi purchase agreements also contain provisions designed enhance gmac’s ability retain senior executives participated purchase provisions could require executive return portion cash received purchase program require executive comply certain restrictive covenants continue recognize insignificant amount compensation expense awards purchased notes consolidated financial statements gmac llc  form 10k also third quarter 2008 committee approved grants rsus majority ltip participants exchange forfeiture ltip awards based gmac’s results program requirements payout compensation expense accrued ltip awards time exchange recognized reduction compensation expense ltip awards 12 million year ended december 31 2008 compared compensation expense 12 million year ended december 31 2007 recognized reduction compensation expense due decline estimated fair value liability second quarter 2008 mainly result changes assumptions due updated market information obtained period award forfeitures rsu awards granted participants terms basis points fair value gmac majority awards vest ratably based continued service five years beginning december 31 2008 next four anniversaries thereafter certain awards vest three years beginning december 31 2008 next two anniversaries thereafter award payouts made quarter following vesting based fair value gmac yearend recommended committee approved board annually 2008 management recommended committee fair value gmac december 31 2008 based industry comparisons gmacspecific marketfacing data applicable subsequently approved board participants option grant date defer valuation payout tranche final year award sfas 123r awards require liability treatment remeasured quarterly fair value paid compensation costs related awards ratably charged expense fiveyear threeyear service period applicable utilize internal process estimate fair value rsu awards based estimated fair value gmac using changes performance market industry changes fair value relating portion awards vested paid recognized earnings period changes occur committee considered cash compensation expense impact mpi award purchase program described determining rsu award pool available grant total rsu awards outstanding december 31 2008 represented approximately 209 basis points fair value gmac recognized compensation expense 3 million year ended december 31 2008 associated outstanding awards notes consolidated financial statements gmac llc  form 10k 20 related party transactions balance sheet summary balance sheet effect transactions gm fim holdings affiliated companies follows november 2006 gmac retained investment note secured operating lease assets transferred gm part transfer gmac provided note trust wholly owned subsidiary gm note classified investment securities consolidated balance sheets b represents wholesale financing term loans certain dealerships wholly owned gm interest loans generally secured underlying vehicles assets dealerships c primarily represents loans various affiliates fim holdings includes vehicles buildings equipment classified operating lease assets leased gmaffiliated fim holdingsaffiliated entities leases secured underlying assets e represents wholesale financing provide gm vehicles parts accessories gm retains title consigned us dealers primarily uk italy germany financing gm remains outstanding title transferred dealers amount financing provided gm arrangement varies based inventory levels loans secured underlying vehicles assets f represents prepayments made gm pursuant terms sale transactions requiring aggregate amount certain unsecured obligations gm us exceed 15 billion subsequent december 31 2008 new agreement reached gmac gm respect new limitations unsecured exposure going forward generally unsecured exposure based believe time “probable” amounts owed gm limited 21 billion unsecured exposures based “maximum” possible amounts owed limited 41 billion distinction established easily manage exposures since certain amounts owed us gm eg pursuant risksharing similar arrangements based variables assumptions may change time notes consolidated financial statements gmac llc  form 10k income statement summary income statement effect transactions gm fim holdings affiliated companies follows represents total amount residual support risk sharing earned residual support risksharing programs earned revenue previously deferred related settlement residual support risksharing obligations 2006 portion lease portfolio 2007 amounts adjusted include onbalance sheet lease portfolio b gm sponsors lease pullahead programs whereby consumers encouraged terminate lease contracts early conjunction acquisition new gm vehicle customer’s remaining payment obligation waived certain programs gm compensates us waived payments adjusted based remarketing results associated underlying vehicle c settlement terms related wholesale financing certain gm products shipment date extent wholesale settlements gm made expiration transit receive interest gm represents income expense related derivative transactions enter gm counterparty e represents servicing income related automotive leases distributed gm november 22 2006 f agreement gm provides reimbursement certain selling expenses incurred us offlease vehicles sold gm auction g reimburse gm certain services provided us amount includes rental payments primary executive administrative offices located renaissance center detroit michigan exclusivity royalty fees notes consolidated financial statements gmac llc  form 10k statement changes equity summary changes statement changes equity related transactions gm fim holdings affiliated companies follows 2008 amount primarily represents remittances gm tax settlements refunds received related tax periods prior sale transactions required per terms purchase sale agreement gm fim holdings 2006 amount includes cash dividends 48 billion noncash dividends 49 billion 2006 fourth quarter 2006 connection sales transactions gmac paid 78 billion dividends gm composed following cash dividend 27 billion representing onetime distribution gm primarily reflect increase gmac’s equity resulting elimination portion net deferred tax liabilities arising conversion gmac certain subsidiaries limited liability company ii certain assets respect automotive leases owned gmac affiliates net book value approximately 40 billion related deferred tax liabilities 18 billion iii certain michigan properties carrying value approximately 12 billion gm iv intercompany receivables gm related tax attributes 11 billion v net contingent tax assets 491 million vi miscellaneous transactions b fourth quarter 2007 gm fim holdings converted 11 billion preferred membership interest common equity interests refer note 1 notes consolidated financial statements 2007 annual report form 10k discussion c december 29 2008 gm affiliate cerberus capital management contributed gmac 750 million subordinated participations 35 billion senior secured credit facility gmac rescap exchange additional common membership interests gmac first quarter 2007 terms sale transactions gm made capital contribution 1 billion gmac significant portion customers gm dealers gmrelated employees result significant adverse change gm’s business including significant adverse changes gm’s liquidity position access capital markets production sale gm vehicles quality resale value gm vehicles use gm marketing incentives gm’s relationships key suppliers gm’s relationship united auto workers labor unions factors impacting gm employees would significant adverse effect profitability financial condition provide vehicle financing purchases retail automotive lease contracts retail customers primarily gm dealers also finance purchase new used vehicles gm dealers wholesale financing extend financing gm dealers provide fleet financing gm dealers buy vehicles rent lease others provide wholesale vehicle inventory insurance gm dealers provide automotive extended service contracts gm dealers offer services gm dealers 2008 share gm retail sales dealers 32 81 respectively markets gm operates result gm’s level automobile production sales directly impacts financing leasing volume premium revenue wholesale vehicle inventory insurance volume automotive extended service contracts profitability financial condition gm dealers provide wholesale financing term loans fleet financing addition quality gm vehicles affects obligations automotive extended service contracts relating vehicles resale value gm vehicles may impacted various factors relating gm’s business brand image number new gm vehicles produced affects remarketing proceeds receive upon sale repossessed vehicles offlease vehicles lease termination global automotive finance operations highly dependent gm sales volume 2008 global vehicle sales declined rapidly assurance global automotive market gm’s share market suffer significant downturn vehicle sales volume could adversely impacted restructuring would reduce number gm retail channels core brands consolidate gm’s dealer network notes consolidated financial statements gmac llc  form 10k event gm significant subsidiaries file bankruptcy sales volume could decrease result reduction consumer confidence gm’s business could otherwise materially adversely affected would turn materially adverse impact business addition pursuant contractual arrangements gm whenever gm offers vehicle financing leasing incentives customers eg lower interest rates market rates exclusively gmac subject certain limitations exceptions event gm bankruptcy possible gm would reject exclusivity arrangement us gm could material adverse effect business profitability financial condition difficult predict certainty consequences gm bankruptcy however may systemic economic impacts increased unemployment rates could impact business credit exposure gm significant december 31 2008 approximately 25 billion secured exposure includes primarily wholesale vehicle financing gmowned dealerships notes receivable gm vehicles leased directly gm approximately 19 billion unsecured exposure includes estimates payments gm related residual support risksharing agreements gm file bankruptcy payment unsecured exposures could delayed might occur addition would become unsecured creditor gm extent proceeds sale collateral related secured exposures insufficient repay gm’s obligations us terms certain agreements gmac gm gmac right offset certain exposures gm amounts gmac owes gm connection dealer floorplan securitizations gm either 1 becomes subject liquidation chapter 7 us bankruptcy code similar provision state federal law 2 ceases operate automobile manufacturer undertakes sell substantially automobile manufacturing assets business either case petition filed chapter 11 us bankruptcy code similar provision state federal law early amortization event occur respect securitizations principal collections dealer accounts paid accordance transactions documents additional borrowings may made early amortization period addition either two gm specific events occur indicated immediate event default would occur 115 billion secured revolving credit facility entered june 2008 circumstance amounts outstanding facility would become immediately due payable amounts outstanding repaid collateral securing facility could sold lender facility retail lease programs gm may elect sponsor incentive programs retail contracts operating leases supporting financing rates standard market rates purchase retail contracts leases marketing incentives also referred rate support subvention gm utilizes marketing incentives pay us present value difference customer rate standard rate contract inception defer recognize yield adjustment life contract gm may also sponsor residual support programs way lower customer monthly payments residual support programs customer’s contractual residual value adjusted standard residual values prior sale transactions gm reimbursed us time vehicle’s disposal remarketing sales proceeds less customer’s contractual residual value limited standard residual value addition risksharing programs gm shares equally residual losses extent remarketing proceeds standard residual values limited floor connection sale transactions gm settled estimated liabilities respect residual support risk sharing portion operating lease portfolio us balloon retail receivables portfolio series lumpsum payments negotiated amount totaling approximately 14 billion agreed gm leases balloon contracts paid us 2006 payments recorded deferred amount accrued expenses liabilities consolidated balance sheets contracts terminate vehicles sold auction remaining payments treated component sales proceeds recognizing gain loss sale underlying assets december 31 2008 remaining deferred amount 18 million addition regard lease originations united states balloon retail contract originations occurring april 30 2006 remained us consummation sale transactions gm agreed begin payment present value expected residual support owed us time contract origination opposed contract notes consolidated financial statements gmac llc  form 10k termination time sale related vehicle residual support amount gm actually owes us finalized leases actually terminate terms residual support program cases estimate incorrect gm may obligated pay us may obligated reimburse gm affected contracts originated year ended december 31 2008 gm paid agreed pay us 601 million based december 31 2008 outstanding north american operating lease portfolio additional maximum amount could paid gm residual support programs approximately 14 billion would paid event proceeds entire portfolio lease assets lower contractual residual value standard residual rates based december 31 2008 outstanding north american operating lease portfolio maximum amount could paid risksharing arrangements approximately 17 billion would paid event proceeds outstanding lease vehicles lower standard residual rates retail lease contracts acquired us included rate residual subvention gm payable directly indirectly gm dealers percent total new retail lease contracts acquired follows distribution operating lease assets connection sale transactions gmac transferred gm certain gmac us lease assets related secured debt assets described notes 8 12 11 respectively gmac retained investment note balance december 31 2008 35 million secured lease assets distributed gm gmac continues service assets related secured debt behalf gm receives fee service securitization transactions gmac obligated servicer repurchase lease asset breach covenants securitization documents addition number transactions securitizing lease assets transferred gm trusts issued one series floatingrate debt obligations entered primary derivative transactions remove market risk associated funding fixed payment lease assets floating interest rate debt facilitate securitization transactions gmac entered secondary derivative transactions primary derivative counterparties essentially offsetting primary derivatives part distribution gm assumed rights obligations primary derivative whereas gmac retained secondary leaving companies exposed market value movements respective derivatives gmac gm subsequently entered derivative transactions intended offset exposure party component primary secondary derivatives exclusivity arrangement november 30 2006 connection sale transactions gm gmac entered several service agreements codified mutually beneficial historical relationship companies one agreement united states consumer financing services agreement financing services agreement financing services agreement among things provided subject certain conditions limitations whenever gm offers vehicle financing leasing incentives customers eg lower interest rates market rates would exclusively gmac requirement effective november 2016 consideration gmac paid gm annual exclusivity fee required meet certain targets respect consumer retail lease financings new gm vehicles effective december 29 2008 connection approval gmac’s application become bank holding company gm gmac agreed pursuant term sheet term sheet among things modify certain terms conditions financing services agreement certain amendments include following twoyear period gm offer retail financing incentive programs thirdparty financing source certain specified circumstances cases subject limitation pricing offered third party meets certain restrictions twoyear period gm offer incentive programs graduated basis third parties notes consolidated financial statements gmac llc  form 10k nonexclusive sidebyside basis gmac provided pricing third parties meets certain requirements ii gmac obligation provide operating lease financing products iii gmac targets could assessed penalties december 24 2013 gm right offer retail financing incentive programs thirdparty financing source including gmac without restrictions limitations primary objective financing services agreement continues supporting distribution marketing gm products parties agreed work good faith executive definitive documentation respect amendment financing services agreement march 29 2009 gm call option connection sale transactions gm acquired option repurchase certain assets us related automotive finance operations north american operations international operations option originally scheduled expire earlier november 2016 ii date upon gm’s common equity interest gmac falls 15 term sheet provides call option terminated upon execution definitive documentation related financing agreements described “exclusivity arrangement” royalty arrangement certain insurance products gm gmac entered intellectual property license agreement right gmac use gm name certain insurance products exchange gmac pay gm minimum annual guaranteed royalty fee 15 million entered various services agreements gm designed document maintain current historical relationship required pay gm fees connection certain agreements related financing gm consumers dealers certain parts world gm also provides payment guarantees certain commercial assets outstanding certain thirdparty customers december 31 2008 2007 commercial obligations guaranteed gm 88 million 107 million respectively additionally gm bound repurchase obligations repurchase new vehicle inventory certain circumstances dealer default addition consignment arrangement gm commercial inventories europe december 31 2008 2007 wholesale inventories related arrangement 141 million 90 million respectively reflected assets consolidated balance sheets june 4 2008 gmac entered loan agreement rescap facility residential funding company llc rfc gmac mortgage llc gmac mortgage guaranteed rescap certain subsidiaries pursuant gmac provides senior secured credit facility capacity 35 billion connection agreement gmac entered participation agreement participation agreement gm cerberus rescap financing llc cerberus fund pursuant gmac sold gm cerberus fund 750 million subordinated participations loans made pursuant rescap facility gm cerberus fund acquired 49 51 participations respectively december 29 2008 gm cerberus fund contributed participations gmac exchange additional common membership interests gmac june 2008 affiliate cerberus capital management lp cerberus purchased certain assets rescap carrying value approximately 479 million consideration consisting 230 million cash series b junior preferred membership interests newly formed entity cmh holdings llc cmh subsidiary rescap managing member affiliate cerberus cmh purchased model home lot option assets rescap cmh consolidated rescap thus gmac fin 46r consolidation variable interest entities rescap remains primary beneficiary conjunction agreement cerberus entered term revolving loans cmh term loan principal amount equal 230 million revolving loan maximum amount 10 million loans mature june 30 2013 secured pledge assets cmh december 31 2008 outstanding balance term loan 8 million interest expense 46 million year ended december 31 2008 notes consolidated financial statements gmac llc  form 10k second quarter 2008 cerberus committed purchase certain assets rescap’s option consisting performing nonperforming mortgage loans mortgagebacked securities assets net cash proceeds 300 million third quarter following transactions completed cerberus • july 14 15 2008 rescap consolidated subsidiary gmac mortgage agreed sell securitized excess servicing two populations loans cerberus consisting 138 billion unpaid principal balance freddie mac loans 248 billion unpaid principal balance fannie mae loans capturing 591 million 982 million notional interestonly securities respectively sales closed july 30 2008 net proceeds 175 million rescap loss sale 24 million • september 30 2008 rescap completed sale certain model home assets mhpool holdings llc mhpool holdings affiliate cerberus cash consideration consisting approximately 80 million subject certain adjustments primarily relating sales homes june 20 2008 september 30 2008 resulting net purchase price mhpool holdings approximately 59 million loss sale 41 million purchase price subject postclosing adjustments expected material transactions entered rescap cerberus satisfy previously announced commitment cerberus purchase assets 300 million addition cerberus committed make firm bids purchase auction assets net cash proceeds 650 million rescap intends obligated undertake orderly sale certain assets consisting performing nonperforming mortgage loans mortgagebacked securities arm’slength transactions retention nationally recognized brokers july 22 2008 made dividend 100 voting interest gmaci holdings llc holding company insurance operations current holders common membership equity include fim holdings subsidiaries gm dividend made pro rata accordance current common equity ownership percentages held entities continue hold 100 economic interests fully consolidate gmaci accordance gaap 21 comprehensive income loss comprehensive income composed net income comprehensive income loss includes aftertax change unrealized gains losses availableforsale securities foreign currency translation adjustments cash flow hedging activities sfas 158 adoption following table presents components annual activity comprehensive income loss primarily represents aftertax difference fair value amortized cost availableforsale securities portfolio b includes aftertax gains losses foreign currency translation operations functional currency us dollar net change amounts net tax benefit 61 million tax expense 11 million tax benefit 37 million years ended december 31 2008 2007 2006 respectively notes consolidated financial statements gmac llc  form 10k net changes following table represent sum net unrealized gains losses availableforsale securities net unrealized gains losses cash flow hedges respective reclassification adjustments reclassification adjustments amounts recognized net income current year reported comprehensive income loss previous years 2006 amounts also include cumulative effect change accounting principle due adoption sfas 156 sfas 156 upon initial adoption permitted onetime reclassification availableforsale securities trading securities identified offsetting entity’s exposure liabilities servicer elects subsequently measure fair value net tax benefit 153 million 2008 tax expense 24 million 2007 tax expense 106 million 2006 b net tax expense 49 million 2008 tax expense 8 million 2007 351 million 2006 c net tax benefit 12 million 2007 tax benefit 121 million 2006 tax impact 2008 net tax benefit 12 million 2007 1 million 2006 tax impact 2008 22 fair value fair value measurements sfas 157 adopted sfas 157 january 1 2008 provides definition fair value establishes framework measuring fair value requires expanded disclosures fair value measurements standard applies gaap requires allows assets liabilities measured fair value therefore expand use fair value new circumstance sfas 157 nullified guidance eitf 023 eitf 023 required deferral dayone gains derivative contracts unless fair value derivative contracts supported quoted market prices similar current market transactions accordance eitf 023 previously deferred dayone gains purchased msrs certain residential loan commitments sfas 157 adopted january 1 2008 dayone gains previously deferred eitf 023 recognized cumulative effect adjustment increased beginning retained earnings 23 million sfas 157 defines fair value price would received sell asset paid transfer liability orderly transaction market participants measurement date sfas 157 clarifies fair value based assumptions market participants would use pricing asset liability establishes fair value hierarchy prioritizes information used develop assumptions fair value hierarchy gives highest priority quoted prices available active markets ie observable inputs lowest priority data lacking transparency ie unobservable inputs additionally sfas 157 requires entity consider aspects nonperformance risk including entity’s credit standing measuring fair value liability sfas 157 establishes threelevel hierarchy used measuring disclosing fair value instrument’s categorization within fair value hierarchy based lowest level significant input valuation following description three hierarchy levels level 1 inputs quoted prices active markets identical asset liabilities measurement date additionally entity must ability access active market quoted prices cannot adjusted entity notes consolidated financial statements gmac llc  form 10k level 2 inputs quoted prices included within level 1 observable asset liability either directly indirectly level 2 inputs include quoted prices active markets similar assets liabilities quoted prices inactive markets identical similar assets liabilities inputs observable corroborated observable market data correlation means substantially full term assets liabilities level 3 unobservable inputs supported little market activity unobservable inputs represent management’s best assumptions market participants would price assets liabilities generally level 3 assets liabilities valued using pricing models discounted cash flow methodologies similar techniques require significant judgment estimation following descriptions valuation methodologies used measure material assets liabilities fair value details valuation models key inputs models significant assumptions utilized • availableforsale securities availableforsale securities carried fair value primarily based observable market prices observable market prices available valuations based internally developed discounted cash flow models use marketbased discount rate consider recent market transactions experience similar securities current business conditions analysis underlying collateral available order estimate cash flows required utilize various significant assumptions including market observable inputs eg forward interest rates internally developed inputs including prepayment speeds delinquency levels credit losses classified 13 availableforsale securities reported fair value level 3 availableforsale securities account 22 assets reported fair value december 31 2008 • trading securities trading securities recorded fair value include retained interests assets sold offbalance sheet securitizations purchased securities may assetbacked assetrelated assetbacked securities including senior subordinated interests interestonly principalonly residual interests may investment grade noninvestment grade unrated securities base valuation trading securities observable market prices available however observable market prices available significant portion assets due illiquidity markets observable market prices available valuations primarily based internally developed discounted cash flow models use marketbased discount rate valuation considers recent market transactions experience similar securities current business conditions analysis underlying collateral available order estimate cash flows utilize various significant assumptions including market observable inputs eg forward interest rates internally developed inputs eg prepayment speeds delinquency levels credit losses classified 75 trading securities reported fair value level 3 trading securities account 7 assets reported fair value december 31 2008 • loans heldforsale entire loans heldforsale portfolio accounted lower cost fair value loans currently carried fair value included within accompanying nonrecurring fair value measurement tables classified 63 loans heldforsale reported fair value level 3 loans heldforsale account 9 assets reported fair value december 31 2008 approximately 6 total loans heldforsale carried fair value automotive loans based valuation automotive loans heldforsale internally developed discounted cash flow models terms established fixedpricing forward flow agreements classified loans level 3 valuation models estimate exit price expect receive loan’s principal market depending upon characteristics loans may wholeloan market securitization market committed prices contained forward sale agreements although utilize give priority market observable inputs interest rates market spreads within models typically required utilize internal inputs prepayment speeds credit losses discount rates numerous controls exist calibrate corroborate validate internal inputs internal inputs require use judgment significant impact determination loan’s value accordingly classified automotive loans heldforsale level 3 notes consolidated financial statements gmac llc  form 10k approximately 94 total loans carried fair value mortgage loans originate purchase mortgage loans united states intend sell fannie mae freddie mac ginnie mae collectively agencies additionally originate purchase mortgage loans domestically internationally intend sell secondary markets via wholeloan sales securitizations mortgage loans heldforsale typically pooled together sold certain exit markets depending upon underlying attributes loan agency eligibility domestic product type interest rate credit quality two valuation methodologies used determine fair value loans heldforsale methodology used depends exit market described loans valued using observable market prices identical similar assets includes domestic loans sold agencies valued predominantly published forward agency prices also include nonagency domestic loans international loans recently negotiated market prices loan pool exist counterparty approximates fair value quoted market prices similar loans available valuations derived quoted market prices classify valuations level 2 fair value disclosures december 31 2008 40 mortgage loans heldforsale currently carried fair value classified level 2 due current illiquidity mortgage market may necessary look alternative sources value including wholeloan purchase market similar loans place reliance valuations using internal models loans valued using internal models extent observable market prices available determine fair value loans heldforsale using internally developed valuation models valuation models estimate exit price expect receive loan’s principal market depending upon characteristics loan may wholeloan securitization market although utilize give priority market observable inputs interest rates market spreads within models typically required utilize internal inputs prepayment speeds credit losses discount rates numerous controls exist calibrate corroborate validate internal inputs generation internal inputs requires use judgment significant impact determination loan’s fair value accordingly classify valuations level 3 fair value disclosures december 31 2008 60 mortgage loans heldforsale currently carried fair value classified level 3 due limited sales activity periodically unobservable prices certain markets certain loans heldforsale may transfer level 2 level 3 future periods • consumer finance receivables loans net unearned income sfas 159 elected fair value option certain mortgage loans heldforinvestment elected loans collateralized onbalance sheet securitization debt estimated credit reserves pertaining securitized assets could already exceeded economic exposure elected loans represent portion consumer finance receivable loans consolidated balance sheets balance elected sfas 159 reported balance sheet principal amount outstanding net chargeoffs allowance loan losses net deferred loan fees mortgage loans heldforinvestment collateralized securitization debt legally isolated us beyond reach creditors loans measured fair value using portfolio approach inuse premise objective fair valuing loans related securitization debt properly account retained economic interest securitizations result reduced liquidity capital markets values loans securitized bonds expected volatile notes consolidated financial statements gmac llc  form 10k since approach involves use significant unobservable inputs classified mortgage loans heldforinvestment elected sfas 159 level 3 december 31 2008 consumer finance receivables loans reported fair value classified level 3 consumer finance receivables loans account 7 assets reported fair value december 31 2008 refer section within note titled fair value option financial assets financial liabilities sfas 159 additional information • investment operating leases net light prevailing market conditions particularly weakness economy associated decline demand certain used vehicle values evaluated investment operating leases impairment accordance sfas 144 year ended december 31 2008 recognized impairment 12 billion related investment operating leases determined lease impaired undiscounted expected cash flows lower carrying value asset fair value impaired leases measured based upon discounted cash flows considered discounted expected cash flows determining fair value including customer payments expected residual value upon remarketing vehicle lease termination future payments gm residual risksharing agreements based upon use internally developed discounted cash flow models classified impaired leases level 3 investment operating leases accounts 17 assets reported fair value december 31 2008 details respect impaired operating leases refer note 8 impairment investment operating leases • mortgage servicing rights typically retain msrs sell assets secondary market msrs trade active market observable prices therefore use internally developed discounted cash flow models estimate fair value msrs internal valuation models estimate net cash flows based internal operating assumptions believe would used market participants combined marketbased assumptions loan prepayment rates interest rates discount rates believe approximate yields required investors asset cash flows primarily include servicing fees float income late fees case less operating costs service loans estimated cash flows discounted using optionadjusted spread derived discount rate msrs classified level 3 december 31 2008 msrs account 10 assets reported fair value december 31 2008 • derivative instruments manage risk balance loan production servicing businesses using portfolios financial instruments including derivatives manage risk related specifically value loans heldforsale loans heldforinvestment msrs foreign currency debt enter interest rate swaps facilitate transactions underlying receivables sold nonconsolidated qspe twelve months ended december 31 2008 recorded net economic hedge gains 12 billion refer note 16 additional information regarding changes fair value economic hedges enter variety derivative financial instruments part hedging strategies certain derivatives exchange traded eurodollar futures traded within highly active dealer markets agency tobeannounced securities determine fair value instruments utilize exchange price dealer market price particular derivative contract therefore contracts classified level 1 classified less 1 derivative assets 3 derivative liabilities reported fair value level 1 december 31 2008 also execute overthecounter derivative contracts interest rate swaps floors caps corridors swaptions utilize thirdpartydeveloped valuation models widely accepted market value overthecounter derivative contracts specific terms contract market observable inputs interest rate forward curves interpolated volatility assumptions entered model overthecounter derivative contracts classified level 2 december 31 2008 significant inputs markets market observable classified 69 derivative assets 44 derivative liabilities reported fair value level 2 december 31 2008 notes consolidated financial statements gmac llc  form 10k also hold certain derivative contracts structured specifically meet particular hedging objective derivative contracts often utilized hedge risks inherent within certain onbalance sheet securitizations hedge risks particular bond classes securitization collateral derivative’s notional amount often indexed hedged item result typically required use internally developed prepayment assumptions input model order forecast future notional amounts structured derivative contracts accordingly derivative contracts classified level 3 classified 31 derivative assets 53 derivative liabilities reported fair value level 3 december 31 2008 sfas 157 requires entity consider aspects nonperformance risk including entity’s credit standing measuring fair value liability consider credit risk credit risk counterparties valuation derivative instruments credit valuation adjustment cva calculation utilizes credit default swap spreads counterparty cva calculates probable potential future exposure derivative different interest currency exchange rate environments using simulation tool simulation cva calculated using either credit default spread default spread counterparty potential exposure simulation derivative assets account 17 assets reported fair value december 31 2008 derivative liabilities account 58 liabilities reported fair value december 31 2008 • repossessed foreclosed assets foreclosed upon repossessed assets resulting loan defaults carried lower either cost fair value less costs sell included assets consolidated balance sheets assets carried fair value less costs sell included fair value disclosures majority assets acquired due default foreclosed assets revalue foreclosed assets periodic basis properties valued based upon independent thirdparty appraisals less costs sell classified level 2 thirdparty appraisals obtained valuations typically obtained thirdparty broker price opinion however depending circumstances property list price sales price information may used lieu broker price opinion based historical experience values adjusted downward take account damage factors typically cause actual liquidation value foreclosed properties less broker price opinion price sources valuation adjustment necessary ensure valuation ascribed assets considers unique factors circumstances surrounding foreclosed asset result applying internally developed adjustments thirdpartyprovided valuation foreclosed property assets classified level 3 fair value disclosures december 31 2008 38 62 foreclosed repossessed properties carried fair value less costs sell classified level 2 level 3 respectively repossessed foreclosed assets account 2 assets reported fair value december 31 2008 • investment used vehicles heldforsale investment used vehicles carried lower either cost fair value less costs sell included assets consolidated balance sheets assets carried fair value less costs sell included nonrecurring fair value tables prevailing market conditions primarily weakness economy united states canada created decline used vehicle prices lowered fair value certain vehicles cost fair value determined based recent remarketing experience related investment used vehicles heldforsale classified assets level 3 investment used vehicles heldforsale accounts 2 assets reported fair value december 31 2008 • onbalance sheet securitization debt sfas 159 elected fair value option certain mortgage loans heldforinvestment onbalance sheet securitization debt particular elected fair value option securitization debt issued domestic onbalance sheet securitization vehicles january 1 2008 estimated credit reserves pertaining securitized assets could already exceeded economic exposure objective measuring loans related securitization debt fair value approximate retained economic interest economic exposure collateral securing securitization debt remaining onbalance sheet securitization debt elected sfas 159 reported balance sheet cost net premiums discounts issuance costs notes consolidated financial statements gmac llc  form 10k value securitization debt elected pursuant fair value option economically retained positions using market observables prices whenever possible securitization debt principally form asset mortgagebacked securities collateralized underlying mortgage loans heldforinvestment due attributes underlying collateral current market conditions observable prices instruments typically available active markets situations consider observed transactions level 2 inputs discounted cash flow models additionally discounted cash flow models utilize market observable inputs interest rates internally derived inputs including prepayment speeds credit losses discount rates fair value option elected financing securitization debt classified level 3 result reliance significant assumptions estimates model inputs onbalance sheet securitization debt accounts 42 liabilities reported fair value december 31 2008 result reduced liquidity capital markets values elected loans securitized debt expected volatile refer section within note fair value option financial assets financial liabilities sfas 159 complete description securitizations • collateralized debt obligations elected fair value option collateralized debt obligations cdos collateralized trading securities already carried fair value fourth quarter 2008 sold 100 ownership cdos resulted deconsolidation refer section within note titled fair value option financial assets financial liabilities sfas 159 complete description cdos recurring fair value following table displays assets liabilities measured fair value recurring basis including financial instruments elected fair value option sfas 159 often economically hedge fair value change assets liabilities derivatives financial instruments table displays hedges separately hedged items therefore directly display impact risk management activities carried fair value due fair value option election sfas 159 b december 31 2008 derivative assets within level 1 level 2 level 3 21 million 34 billion 15 billion respectively additionally derivative liabilities within level 1 level 2 level 3 72 million 11 billion 14 billion respectively notes consolidated financial statements gmac llc  form 10k following table presents reconciliation level 3 assets liabilities measured fair value recurring basis often economically hedge fair value change assets liabilities derivatives financial instruments level 3 items presented may hedged derivatives financial instruments classified level 1 level 2 thus following tables fully reflect impact risk management activities carried fair value due fair value option election sfas 159 b reported investment income loss consolidated statement income except securitization trust interests reported income net losses consolidated statement income c reported investment income loss consolidated statement income fair value adjustment reported income net losses related interest reported consumer financing revenue consolidated statement income e fair value adjustment reported servicing asset valuation hedge activities net consolidated statement income f derivative instruments relating risks associated debt reported interest expense consolidated statement income derivatives relating risks associated mortgage loans heldforsale reported investment income loss remaining derivative earnings reported income net losses consolidated statement income g reported operating expenses consolidated statement income h fair value adjustment reported income net losses related interest reported interest expense consolidated statement income reported investment income loss related interest reported interest expense consolidated statement income j includes foreign currency translation adjustments notes consolidated financial statements gmac llc  form 10k nonrecurring fair value may required measure certain assets liabilities fair value time periodic fair value measures typically result application lower cost fair value accounting certain impairment measures gaap items would constitute nonrecurring fair value measures sfas 157 following table displays assets liabilities measured fair value nonrecurring basis nm meaningful represents assets heldforsale required measured lower cost fair value accordance sfas 65 accounting certain mortgage banking activities sop 016 accounting certain entities including entities trade receivables lend finance activities others assets fair values cost december 31 2008 included table related valuation allowance represents cumulative adjustment fair value specific loans b represents portion commercial portfolio impaired december 31 2008 sfas 114 accounting creditors impairment loan related credit allowance represents cumulative adjustment fair value specific receivables refer note 1 additional information related impaired loans c represents assets impaired december 31 2008 sfas 144 accounting impairment disposal longlived assets total loss included earnings represents adjustments fair value portfolio based actual sales year ended december 31 2008 allowance provided repossessed foreclosed assets represents cumulative valuation adjustment recognized adjust assets fair value less costs sell e represents goodwill impaired december 31 2008 sfas 142 goodwill intangible assets entire goodwill balance north american automotive finance operations commercial finance group deemed fair value zero december 31 2008 f total loss included earnings relevant indicator impact earnings g consider applicable valuation credit loss allowance relevant indicator impact earnings caused fair value measurement accordingly table excludes total gains losses included earnings items carrying values inclusive respective valuation credit loss allowance notes consolidated financial statements gmac llc  form 10k fair value option financial assets financial liabilities sfas 159 effective january 1 2008 adopted sfas 159 permits entities choose measure fair value many financial instruments certain items currently required measured fair value subsequent changes fair value designated items required reported earnings current period sfas 159 also establishes presentation disclosure requirements similar types assets liabilities measured fair value elected measure fair value certain financial assets liabilities held rescap operations including certain collateralized debt obligations certain mortgage loans heldforinvestment related debt held financing securitization structures existed adoption intent electing fair value items mitigate divergence accounting losses economic exposure certain assets liabilities described paragraphs following table aftertax cumulative effect retained earnings fair value elections decrease 178 million january 1 2008 following table represents carrying value affected instruments changes accounting related adoption sfas 159 includes removal consolidated balance sheet 489 million allowance loan losses following descriptions financial assets financial liabilities elected measured fair value sfas 159 • onbalance sheet securitizations prior years rescap executed certain domestic securitizations meet sale criteria sfas 140 part domestic onbalance sheet securitizations typically retained economic residual interest securitization economic residual entitles us excess cash flows remain distribution date absorbing credit losses securitization sale treatment achieved sfas 140 mortgage loan collateral remained balance sheet classified consumer finance receivable loans securitization’s debt classified secured debt economic residuals carried balance sheet execution securitizations required gaap continue recording allowance credit losses heldforinvestment loans result market conditions deteriorating credit performance domestic residential mortgages economic exposure certain domestic onbalance sheet securitizations reduced zero approximating zero thus indicating expected minimal future cash flows received economic residual longer economically exposed credit losses securitizations required continue recording additional allowance credit losses securitization collateral credit performance deteriorated accordance gaap record offsetting reduction securitization’s debt balances even though nonperformance assets would ultimately pass reduction amount owed debt holders contractually extinguished result required record accounting losses beyond economic exposure notes consolidated financial statements gmac llc  form 10k mitigate divergence accounting losses economic exposure elected fair value option portion domestic onbalance sheet securitizations january 1 2008 particular elected fair value option domestic onbalance sheet securitization vehicles estimated credit reserves pertaining securitized assets could already exceeded economic exposure fair value option election made securitization level thus election made mortgage loans heldforinvestment related portion onbalance sheet securitized debt particular securitizations part cumulative effect adopting sfas 159 removed various items previously included carrying value respective consumer loans onbalance sheet securitization debt removed 489 million allowance credit losses net deferred upfront costs included carrying value fair valueelected loans debt removal items adjustment required carrying value equal fair value january 1 2008 resulted 38 billion decrease recorded beginning retained earnings fair valueelected mortgage loans heldforinvestment 556 million estimate decrease fair value credit quality offset 36 billion gain related elected onbalance sheet securitization debt fair value option elections material impact deferred tax balances subsequent fair value election loans heldforinvestment continued carry fair valueelected loans within consumer finance receivable loans net unearned income consolidated balance sheets longer record allowance credit losses fair valueelected loans amortization net deferred costsfees longer occurs deferred amounts removed part cumulative effect adopting sfas 159 policy separately record interest income fair valueelected loans unless loans placed nonaccrual status 60 days past due amounts continue classified within consumer financing revenue consolidated statement income fair value adjustment recorded loans classified income net losses consolidated statement income subsequent fair value election respective onbalance sheet securitization debt longer amortize upfront transaction costs fair valueelected securitization debt since deferred amounts removed part cumulative effect adopting sfas 159 fair valueelected debt balances continue recorded secured debt consolidated balance sheets policy separately record interest expense fair valueelected securitization debt continues classified within interest expense consolidated statement income fair value adjustment recorded fair valueelected debt classified within income net losses consolidated statement income • collateralized debt obligations rescap operations executed two collateralized debt obligation securitizations 2004 2005 named cdo ii similar onbalance sheet securitizations discussed retained certain economic interests cdos entitled us excess cash flows remain distribution date absorbing credit losses cdos required consolidated fin 46r thus cdo collateral remained consolidated balance sheets investment securities sfas 115 accounting certain investments debt equity securities collateral recorded fair value consolidated balance sheets revaluation adjustments recorded current period earnings fair value adjustments related investment securities classified within investment income consolidated statement income cdo debt issued third parties required carried amortized cost classified secured debt consolidated balance sheets retained economic interests carried consolidated balance sheets similar onbalance sheet securitizations discussed experienced significant devaluation retained economic interests onbalance sheet cdo transactions 2007 devaluation retained economic interests primarily result cash flows contractually diverted away retained interest build cash reserves direct result certain failed securitization triggers significant illiquidity cdo market economic exposure reduced approximately zero evidenced retained economic interest values continued writing cdo collateral offsetting reduction associated cdo debt balances thus prior fair value option election recording accounting losses notes consolidated financial statements gmac llc  form 10k beyond economic exposure order mitigate divergence accounting losses economic exposure elected fair value option debt balances recorded cdo ii january 1 2008 part cumulative effect adopting sfas 159 removed deferred upfront securitization costs related cdo ii removal deferred deal costs adjustment required carrying value equal fair value january 1 2008 resulted net cumulativeeffect adjustment recorded beginning retained earnings 35 million fair value option elections material impact deferred tax balances subsequent fair value option election cdo debt longer amortize upfront securitization costs transactions amounts removed part cumulative effect adopting sfas 159 fourth quarter 2008 sold 100 ownership cdos including management responsibilities following summarizes fair value option elections information regarding amounts recorded within earnings fair value option elected item factors credit quality impact fair value include changes market interest rates illiquidity marketability current marketplace lower levels observable data points illiquid markets generally result wide bidoffer spreads b credit impact consumer finance receivables loans quantified applying internal credit loss assumptions cash flow models c credit impact onbalance sheet securitization debt assumed zero economic interests particular securitization reduced zero point losses underlying collateral expected passed thirdparty bondholders losses allocated thirdparty bondholders including changes amount losses allocated result fair value changes due credit also monitor credit ratings make credit adjustments extent bond classes downgraded rating agencies credit impact collateralized debt obligations assumed zero economic interests securitization reduced zero point losses projected underlying collateral expected passed securitization’s bonds also monitor credit ratings make credit adjustments extent bond classes downgraded rating agencies interest income mortgage loans heldforinvestment measured multiplying unpaid principal balance loans coupon rate days interest due interest expense onbalance sheet securitizations measured multiplying bond principal coupon rate days interest due investor notes consolidated financial statements gmac llc  form 10k following table provides aggregate fair value aggregate unpaid principal balance fair value optionelected loans longterm debt instruments loans 90 days past due also presented within nonaccrual loan balance b fair value loans heldforsale calculated pooled basis allow us reliably estimate fair value loans 90 days past due nonaccrual loans result fair value loans included table unpaid principal balances provided allow assessment materiality loans 90 days past due nonaccrual loans relative total loans discussion regarding pooled basis refer previous section note titled consumer finance receivables net unearned income fair value financial instruments sfas 107 following table presents carrying estimated fair value assets liabilities considered financial instruments statements financial accounting standards 107 disclosures fair value financial instruments sfas 107 accordingly certain items considered financial instruments excluded table possible use quoted market prices determine fair value quoted market prices available fair value internally derived based upon appropriate valuation methodologies respect amount timing future cash flows estimated discount rates however considerable judgment required interpreting market data develop estimates fair value estimates necessarily indicative amounts could realized would paid current market exchange effect using different market assumptions estimation methodologies could material estimated fair values fair value information presented herein based information available december 31 2008 2007 although management aware factors would significantly affect estimated fair value amounts updated since dates therefore current estimates fair value dates december 31 2008 2007 could differ significantly amounts debt includes deferred interest zerocoupon bonds 450 million 399 million 2008 2007 respectively notes consolidated financial statements gmac llc  form 10k following describes methodologies assumptions used determine fair value respective classes financial instruments • investment securities bonds equity securities notes availableforsale investment securities carried fair value refer previous sections note titled availableforsale securities trading securities description methodologies assumptions used determine fair value heldtomaturity investment securities carried amortized cost fair value heldtomaturity investment securities based valuation models using marketbased assumptions • loans heldforsale refer previous section note also title loans heldforsale description methodologies assumptions used determine fair value • finance receivables loans net fair value finance receivables based discounted future cash flows using applicable spreads approximate current rates applicable category finance receivables income approach defined sfas 157 carrying value wholesale receivables certain automotive mortgage lending receivables interest rates reset shortterm basis applicable market indices assumed approximate fair value either shortterm nature interest rate adjustment feature fair value mortgage loans heldforinvestment based discounted cash flows using interest rates currently offered loans similar terms borrowers similar credit quality income approach defined sfas 157 net realizable value collateral market approach andor estimated sales price based quoted market prices available actual prices received comparable sales mortgage loans investors market approach addition previously mentioned valuation methods also followed fsp fas 1573 determining fair value financial asset market active assumed price would received orderly transaction forced liquidation distressed sale • notes receivable gm fair value estimated discounting future cash flows using applicable spreads approximate current rates applicable certain categories financing assets loans heavily collateralized shortterm nature • derivative assets liabilities refer previous section note titled derivative instruments description methodologies assumptions used determine fair value • debt fair value debt determined using quoted market prices similar issues available based current rates offered us debt similar remaining maturities • deposit liabilities deposit liabilities represent certain consumer bank deposits well mortgage escrow deposits fair value deposits stated maturity equal carrying amount fair value fixedmaturity deposits estimated discounting cash flows using currently offered rates deposits similar maturities 23 variable interest entities following describes vies consolidated significant variable interest described fasb interpretation 46 consolidation variable interest entities fin 46r • offbalance sheet securitization trusts sells pools residential loans securitization transactions qualify offbalance sheet treatment sfas 140 entities set trusts considered qspes consolidate qspes specifically scope fin 46r allowed consolidated sfas 140 additionally certain securitization transactions transfer consumer finance receivables wholesale lines credit banksponsored multiseller commercial paper conduits provide funding source us transferors conduit fund purchase receivables issuance commercial paper total assets outstanding banksponsored conduits approximated 39 billion notes consolidated financial statements gmac llc  form 10k december 31 2008 although variable interests conduits considered primary beneficiary retain majority expected losses returns consolidate conduits specifically scope fin 46r allowed consolidated sfas 140 maximum exposure loss involvement nonconsolidated vies 134 million would incurred event complete loss assets transferred • onbalance sheet securitization trusts certain securitization transactions qspes vies within scope fin 46r typically hold first loss position securitization transactions result anticipates absorbing majority expected losses vie accordingly primary beneficiary thus consolidated securitization trusts entities assets consolidated securitization trusts totaled 202 billion 358 billion december 31 2008 2007 respectively majority assets included finance receivables loans net unearned interest consolidated balance sheet liabilities securitization trust entities totaled 170 billion 328 billion december 31 2008 2007 respectively majority liabilities included secured debt consolidated balance sheet nature purpose activities continuing involvement consolidated securitization trusts virtually identical offbalance sheet securitization trusts discussed note 7 provided financial support consolidated securitization trusts previously contractually required provided assets securitization trusts generally sole source repayment securitization trusts’ liabilities creditors securitization trusts recourse general credit exception customary representation warranty repurchase provisions certain transactions early payment default provisions discussed note 26 fourth quarter 2008 completed sale residual cash flows related number onbalance sheet securitization trusts necessary actions cause securitization trusts satisfy qspe requirements sfas 140 combination actions resulted derecognition various securitization trusts removal 24 billion finance receivables unpaid principal balance net related allowance loan loss 127 million 37 million realestate owned assets 25 billion secured debt capitalization 7 million mortgage servicing rights year ended december 31 2008 similar actions taken second third fourth quarters 2007 resulting removal 259 billion finance receivables unpaid principal balance net related allowance loan loss 15 billion 626 million realestate owned assets 266 billion secured debt capitalization 76 million mortgage servicing rights gains sale totaling 526 million year ended december 31 2007 2008 executed amendment retail automotive securitization transaction classified qspe sfas 140 therefore unconsolidated amendment contractually required us deposit additional cash collateral account held trust management determined amendment caused trust longer classified qspe result trust became consolidated entity accordance fin 46r • mortgage warehouse funding rescap transfers international residential mortgage loans spes order obtain funding facilities advance rates less 100 pledged asset values certain cases rescap provided subordinated loan facility serve additional collateral certain facilities unconditional guarantee rescap entity’s repayment related debt facility provides facility provider recourse rescap’s general credit rescap continues service assets within mortgage warehouse facilities overcollateralization subordinated loan support liability balance primary source repayment entities’ liabilities assets sold facilities long rescap supports minimum cash reserve borrowing base eligibilityconcentration limit remaining assets require rescap entitled excess cash flows generated assets beyond necessary pay facility particular period therefore rescap holds economic residual forms support provided spe rescap beyond assets overcollateralization subordinated loan initially provided spes guarantee provided rescap entities’ performance notes consolidated financial statements gmac llc  form 10k entities vies within scope fin 46r due subordinated loan guarantee rescap anticipates absorbing majority expected losses vie accordingly rescap primary beneficiary thus consolidated entities assets residential mortgage warehouse entities totaled 14 billion liabilities totaled 15 billion december 31 2008 majority assets liabilities included loans heldforsale finance receivables loans net unearned income secured debt respectively consolidated balance sheet creditors vies legal recourse general credit • warehouse lending rescap facility transferred mortgage warehouselending receivables spe sold senior participation interest receivables unconsolidated qspe funds purchase participation interest spe financing obtained thirdparty assetbacked commercial paper conduits spe funds purchase receivables rescap cash obtained qspe well subordinated loan andor equity contribution rescap senior participation interest sold commercial paper issued included vie’s balance sheet receivables sold may purchased rescap except limited circumstances breach representation warranty management determined rescap primary beneficiary spe based circumstances discussed therefore entity consolidated accordance fin 46r 2008 rescap executed termination agreements cease underlying programs rescap utilizing facility normal course business assets spe totaled 05 billion december 31 2007 included finance receivables loans net unearned income consolidated balance sheet beneficial interest holders vie legal recourse general credit provided financial support vie year ended 2008 • collateralized debt obligations rescap previously sponsored managed underlying collateral certain cdos cdo transactions trust established purchases portfolio securities issues debt equity certificates represent interests portfolio assets cdos included bonds issued rescap part mortgage loan securitizations well issued thirdparties transactional activity related spes precluded meeting qspe criteria consequently sale treatment obtained sfas 140 cdo trusts vies within scope fin 46r prior fourth quarter 2008 rescap held equity certificates certain cdo trusts represented first loss position thus would absorb majority expected losses entity result rescap primary beneficiary collateralized debt obligations consolidated entities accordance fin 46r fourth quarter 2008 rescap sold 100 ownership cdo entities including equity cdo retained bonds asset management responsibilities rescap continuing involvement cdos result applied sale accounting assets transferred cdos rescap longer deemed primary beneficiary cdos thus cdo trusts deconsolidated resulting gain 3 million derecognition 148 million trading securities 158 million collateralized borrowings • construction real estate lending rescap uses spes finance constructionlending receivables real estateowned assets spes purchase hold assets financing obtained thirdparty assetbacked commercial paper conduits rescap primary beneficiary since absorbs majority losses consolidates entities accordance fin 46r assets entities totaled 12 billion 23 billion december 31 2008 2007 respectively included finance receivables loans net unearned income consolidated balance sheet liabilities entities totaled 06 billion 13 billion year ended december 31 2008 2007 respectively beneficial interest holders vies notes consolidated financial statements gmac llc  form 10k legal recourse general credit contractual obligation provide type financial support future provided noncontractual financial support type support entity 2008 rescap invests certain entities enters subordinated real estatelending arrangements entities created develop land construct properties management determined majority expected losses returns consolidation appropriate fin 46r total assets entities 65 million december 31 2008 43 million represents maximum exposure contractual obligation provide type financial support future provided noncontractual financial support type support entity year ended december 31 2008 • model home financings june 2008 cerberus purchased certain assets rescap carrying value approximately 480 million consideration consisting 230 million cash series b junior preferred membership interests newly formed entity cmh subsidiary rescap managing member affiliate cerberus cmh purchased model home lot option assets rescap conjunction agreement cerberus entered term loan revolving loan cmh term loan principal amount 230 million revolving loan maximum amount 10 million loans fiveyear term 15 interest rate term loan related interest paid dispositions model homes lot options december 31 2008 cmh llc repaid 8 million 230 million term loan cmh repaid loan paid accrued interest cash distributed following order first class senior preferred member unreturned preferred capital including preferred return equal 20 total cash outlay less aggregate amount interest payments made second class b junior preferred member unreturned preferred capital including preferred return equal 20 initial class b capital account third class b member reimbursable costs returned fourth common unit member cerberus based market conditions market valuation adjustments risk rescap receive tier 2 payments rescap primary beneficiary since absorbs majority losses consolidates entities accordance fin 46r assets cmh 186 million december 31 2008 included assets consolidated balance sheet liabilities cmh 47 million december 31 2008 classified debt accrued expenses liabilities consolidated balance sheet beneficial interest holders vie legal recourse general credit contractual obligation provide type financial support future provided noncontractual financial support type support entity 2008 rescap continues service account market sell assets without servicing fee however receive reimbursement expenses directly related assets property taxes direct outofpocket expenses vie conduct new business therefore new assets transferred cmh • servicing funding order assist financing rescap’s servicing advance receivables rescap formed spe issues term notes thirdparty investors collateralized servicing advance receivables servicing advance receivables transferred spe consist delinquent principal interest advances made rescap servicer various investors property taxes insurance premiums advanced taxing authorities insurance companies behalf borrowers amounts advanced mortgages foreclosure spe funds purchase receivables financing obtained thirdparty investors subordinated loan equity contribution rescap management determined rescap primary beneficiary spe consolidates entity accordance fin 46r assets entity totaled 12 billion december 31 2008 included assets consolidated balance sheet liabilities entity totaled 12 billion december 31 2008 consisting 700 million thirdparty term notes included within debt consolidated balance sheet 507 million affiliate payables notes consolidated financial statements gmac llc  form 10k rescap eliminated consolidation beneficial interest holder vie legal recourse general credit contractual obligation provide type financial support future provided noncontractual financial support entity year ended december 31 2008 • commercial finance receivables facility transfer commerciallending receivables 100 owned spe turn issues notes received thirdparty financial institutions gmac commercial finance assetbacked commercial paper conduits spe funds purchase receivables us cash obtained sale notes management determined primary beneficiary spe consolidates entity accordance fin 46r assets liabilities spe totaled 22 billion 11 billion respectively december 31 2008 included finance receivables loans net unearned income consolidated balance sheet beneficial interest holders variable interest entity legal recourse general credit securitization transactions transfer resort timeshare commercial trade receivables banksponsored multiseller commercial paper conduits provide funding source us transferors conduit fund purchase receivables issuance commercial paper total assets liabilities outstanding banksponsored conduits approximated 21 billion 781 million respectively december 31 2008 although variable interest conduits may discretion prepay portion loans time • preferred blocker inc connection fourth quarter 2008 private debt exchange transferred gmac preferred membership interests preferred blocker inc blocker newly formed taxable ccorporation blocker established sole purpose investing series gmac preferred membership interests financing issuance blocker preferred stock thirdparty investors connection private debt exchange blocker generally engage business activities hold assets incur liabilities connection issuance maintenance preferred stock connection arrangement hold 5000000 shares blocker common stock par value 001 additionally bound keepwell agreement blocker required make payment blocker event blocker’s expenses primarily income tax expense greater dividend spread gmac preferred membership interests 1186 dividend rate per annum blocker preferred stock 7 dividend rate per annum refer note 26 additional information regarding keepwell agreement due spread rates blocker’s tax rate would exceed 410 would required make payment keepwell agreement since rate excess common corporate taxable rates potential loss agreement considered remote although hold variable interests blocker considered primary beneficiary retain majority expected losses returns blocker wholly owned nonconsolidated subsidiary gmac notes consolidated financial statements gmac llc  form 10k 24 segment geographic information operating segments defined components enterprise engage business activity revenues earned expenses incurred discrete financial information available evaluated regularly chief operating decision makers deciding allocate resources assessing performance financial information reportable operating segments summarized follows north american operations consist automotive financing united states canada international operations consist automotive financing fullservice leasing countries puerto rico march 31 2006 beginning april 1 2006 puerto rico included north american operations b amounts include intrasegment eliminations north american operations international operations c represents commercial finance business certain equity investments corporate activities reclassifications eliminations reportable operating segments december 31 2008 total assets 60 billion commercial finance business 193 billion corporate intercompany activity reclassifications eliminations notes consolidated financial statements gmac llc  form 10k information concerning principal geographic areas follows revenue consists net financing revenue loss total revenue presented consolidated statement income b consists investment operating leases net property equipment 25 restructuring charges september 3 2008 rescap announced additional restructuring initiatives optimize mortgage business downturn credit mortgage market persist response conditions rescap enacted plan significantly streamline operations reduce costs adjust lending footprint refocus resources strategic lending servicing year ended december 31 2008 rescap incurred restructuring charges 114 million related plan previously october 17 2007 rescap announced restructuring plan would reduce workforce streamline operations revise cost structure year ended december 31 2008 rescap incurred restructuring charges 31 million related plan february 20 2008 north american automotive finance operations announced restructuring plan reduce costs streamline operations position business scalable growth year ended december 31 2008 north american automotive finance operations incurred restructuring charges 65 million related plan addition announced restructuring plans described international automotive finance operations insurance operations incurred additional restructuring charges 24 million year ended december 31 2008 notes consolidated financial statements gmac llc  form 10k restructuring charges primarily include severance pay buyout employee agreements lease terminations classified operating expenses consolidated statement income following table summarizes category restructuring charge activity year ended december 31 2008 26 guarantees commitments contingencies risks guarantees defined contracts indemnification agreements contingently require us make payments third parties based changes underlying agreement related guaranteed party following summarizes outstanding guarantees made third parties consolidated balance sheet periods shown • standby letters credit commercial finance group issues trade standby letters credit clients represent irrevocable guarantees payment specified financial obligations trade letters credit issued clients primarily used payment methods support buying selling merchandise thirdparty beneficiaries utilized primarily importation exportation goods standby letters credit represent various contingent liabilities event client defaults obligation thirdparty beneficiaries standby letters credit primarily utilized thirdparty beneficiaries insurance event nonperformance client letters credit generally collateralized assets client ie trade receivables inventory cash deposits expiration dates letters credit range certain ongoing commitments expire upcoming year terms several years certain letters credit nonperformance client occurs letters credit liable payment letter credit beneficiary likely recourse charge back client majority clients letter credit exposure fall “acceptable” risk rating category commercial finance group’s internal risk rating system category essentially midpoint risk rating classifications overall credit borrower category considered “acceptable” higher degree risk may evident borrower assessment factors may elements reflect marginally acceptable conditions warranting notes consolidated financial statements gmac llc  form 10k careful review analysis monitoring additionally tighter terms covenants greater collateral protection may necessary help mitigate risks associated financial condition borrower category addition rescap operations issue financial standby letters credit part warehouse constructionlending activities expiration dates letters credit range 2009 ongoing commitments generally collateralized borrower assets • high loantovalue hltv international securitizations rescap operations entered agreements provide credit loss protection certain hltv securitization transactions maximum potential obligation certain agreements equal lesser specified percentage original loan pool balance specified percentage current loan pool balance required perform guaranty obligation losses exceed cash available period pledged trading securities 10 million mortgage loans heldforsale 32 million collateral obligations december 31 2008 2007 respectively certain hltv securitizations maximum obligation equivalent pledged collateral amount pledged cash deposits totaling 11 million december 31 2008 mortgage loans heldforsale totaling 51 million december 31 2007 event require us perform guaranty obligation occurs security credit enhancements exhausted losses passed counter dealers guarantees terminate first calendar month aggregate note amount reduced zero • agency loan program rescap operations deliver loans certain agencies allow streamlined loan processing limited documentation requirements majority loans originated employee benefit plan available gm gmac employees including employees rescap event loans delivered programs reach specified delinquency status may required provide certain documentation cases repurchase loan indemnify investors losses sustained program includes termination features whereby loan performed satisfactorily specified time longer obligated program maximum liability represents principal balance loans sold programs currently carry liability consolidated balance sheet related agency loan program determined risk loss remote • guarantees repayment thirdparty debt certain arrangements guarantee repayment thirdparty debt obligations case default rescap operations guarantees collateralized letters credit international automotive finance operations guarantees collateralized retail loans finance leases commercial finance group provides credit protection customers guarantee payments specified financial obligations thirdparty beneficiaries without purchasing obligations primarily represent customer receivables due certain factoring clients specific receivables provide guarantees collected within 60 days arrangements typically ongoing nature event customer fails perform obligation liable payment obligation client majority customers guarantee fall “acceptable” risk rating category higher commercial finance group’s internal risk rating system acceptable rating category described standby letters credit section • credit enhancement guarantees rescap operations sold certain mortgage loans investors contain guarantee payment thirdparty debt event default loss • default repurchases rescap international automotive finance operations provide certain investors offbalance sheet arrangements securitizations wholeloan transactions repurchase commitments loans become contractually delinquent within specified period time date origination purchase maximum obligation represents principal balance loans sold covered stipulations refer note 7 note 23 information regarding securitization trusts notes consolidated financial statements gmac llc  form 10k • nonfinancial guarantees connection sale former commercial mortgage operations released financial guarantees related former gmac commercial holdings business certain nonfinancial guarantees survive closing indemnified payment made liabilities incurred us connection guarantees • guarantees standard indemnification clauses certain funding arrangements would require us pay lenders increased costs resulting certain changes laws regulations since changes would dictated legislative regulatory actions inherently unpredictable able estimate maximum exposure arrangements date made payments indemnification clauses rescap operations guaranteed certain amounts related servicing advances servicing custodial funds setaside letters connection fourth quarter 2008 private debt exchange transferred gmac preferred membership interests preferred blocker inc blocker newly formed taxable ccorporation blocker established sole purpose investing series gmac preferred membership interests financing issuance blocker preferred stock thirdparty investors connection private debt exchange bound keepwell agreement blocker required make payment blocker event blocker’s expenses primarily income tax expense greater dividend spread gmac preferred membership interests 1186 dividend rate per annum blocker preferred stock 7 dividend rate per annum due spread rates blocker’s tax rate would exceed 410 would required make payment keepwell agreement since rate excess common corporate taxable rates potential loss agreement considered remote accordingly liability reflected consolidated balance sheet december 31 2008 additionally payments made keepwell agreement 2008 blocker wholly owned nonconsolidated vie gmac refer note 23 additional information notes consolidated financial statements gmac llc  form 10k commitments financing commitments contract amount gain loss positions financial commitments follows fair value estimated using published market information associated commitments sell similar instruments included december 31 2008 2007 commitments accounted derivatives contract amount 9840 million 18118 million gain position 182 million 11 million loss position 46 million 41 million respectively b entered agreements thirdparty banks sell automotive retail receivables transfer credit risk purchaser wholeloan sales c committed lend equity capital certain private equity funds fair value commitments considered overall valuation underlying assets associated committed fund completion development certain lots model homes amount agreed upon amount per project e fair value commitments considered overall valuation related assets f committed fund remaining unused balances home equity lines credit unused lines credit reset prevailing market rates approximate market value included home equity lines credit lines credit consolidated balance sheet within certain offbalance sheet securitizations provided securitization structure become obligated fund incremental draws subject customary borrower requirements home equity lines credit borrowers certain triggers met draws referred excluded amounts funded directly borrower us return lending balances collected allocated portion remitted funds borrowers within trusts actively manage available lines credit within trusts reduce potential funding risk december 31 2008 cumulative funds drawn 313 million classified finance receivables loans net unearned income consolidated balance sheet receivables subject allowance credit losses december 31 2008 commitments fund home equity lines credit offbalance sheet securitizations represented 18 billion total unfunded commitments 43 billion g unused portions revolving lines credit reset prevailing market rates approximate market value mortgagelending revolving credit line commitments contain element credit risk management reduces credit risk unused mortgagelending unused revolving credit line commitments applying credit policies making commitments extending loans typically require collateral commitments drawn lease commitments future minimum rental payments required operating leases primarily real property noncancelable lease terms expiring december 31 2008 follows notes consolidated financial statements gmac llc  form 10k certain leases contain escalation clauses renewal purchase options rental expenses operating leases 189 million 227 million 230 million 2008 2007 2006 respectively contractual commitments entered multiple agreements information technology marketing advertising voice communication technology maintenance many agreements subject variable price provisions fixed minimum price provisions termination renewal provisions future payment obligations agreements totaled 604 million due follows 263 million 2009 306 million 2010 2011 26 million 2012 2013 9 million 2014 thereafter automotive service maintenance contract commitments automotive service contract programs provide consumers expansions extensions vehicle warranty coverage specified periods time mileages coverage generally provides repair replacement components event failure terms contracts sold automobile dealerships direct mail range 3 120 months following table presents analysis activity unearned service contract revenue legal contingencies subject potential liability laws government regulations various claims legal actions pending may asserted us named defendants number legal actions time involved governmental proceedings arising connection various businesses pending actions purport class actions establish reserves legal claims payments associated claims become probable costs reasonably estimated actual costs resolving legal claims may substantially higher lower amounts reserved claims based information currently available advice counsel available insurance coverage established reserves opinion management eventual outcome actions us material adverse effect consolidated financial condition results operations cash flows contingencies subject potential liability various exposures including tax nonrecourse loans selfinsurance miscellaneous contingencies establish reserves contingencies item becomes probable costs reasonably estimated actual costs resolving items may substantially higher lower amounts reserved one item based information currently available opinion management eventual outcome items material adverse effect consolidated financial condition results operations cash flows risks loan repurchases rescap operations sell loans wholeloan agency sales securitizations required make representations warranties loans purchaser securitization trust upon discovery breach representation either correct loans manner conforming provisions sale agreement replace loans similar loans conform provisions purchase loans price determined related transaction documents consistent industry practice purchased 988 million mortgage loans provisions 2008 13 billion 2007 addition reserve consolidated balance sheet expected future losses connection activities totaling 225 million 196 million december 31 2008 2007 respectively refer note 7 note 23 information regarding securitization trusts notes consolidated financial statements gmac llc  form 10k administrator servicer actions certain automotive securitization transaction documents capacity servicer covenant amend modify certain characteristics receivable initial sale date eg amount financed annual percentage rate addition required service sold receivables manner service owned receivables servicing owned receivables may make changes underlying contracts request borrower example changes may occur correct errors made origination process prevent imminent default result temporary economic hardship eg borrower requested deferrals extensions therefore would otherwise modify owned receivable accordance customary servicing practices also required modify sold serviced receivable accordance customary servicing procedures modification otherwise permitted securitization transaction documents required purchase serviced receivable sold repurchased 62 million 39 million automotive receivables provisions 2008 2007 respectively international serving obligations part rescap’s historical capital markets activity predominately international business group several securitizations certain servicer obligations contingent actions bondholders servicer obligations exist dutch german australian securitization structures certain securitizations provide investors spe ability put back securities spe specified date future price equal par less losses previously allocated bondholder servicer spe obligated advance funds required redeem bondholders option purchase loans spe par value proceeds used offset spe’s obligation repay servicer specific dates options exercised typically range seven twelve years securitization issuance date earliest exercise date options third quarter 2009 refer note 23 additional information regarding securitizations total estimated amount dutch german bonds subject servicer obligations approximately 82 billion beginning 2009 2019 estimated obligation considers contractual amortization prepayments defaults among management assumptions portion exercisable prior december 31 2009 2010 approximately 10 58 total respectively approximately 725 total estimated bonds eligible servicer obligation beginning 2013 total estimated amount australian bonds subject servicer obligations approximately 77 million exercisable 2011 currently hold residual interest first loss bond securitizations extent potential bonds put back spe loans repurchased recognize estimated future credit losses underlying mortgage loans fair market value retained residuals hold consolidated balance sheet extent losses expected arise factors liquidity market risk pursuant servicer obligation would losses beyond credit losses already reflected residual estimate record incremental loss likelihood bondholder exercise foreseeable incremental loss reasonably estimated twelve months ended december 31 2008 recorded 16 million incremental losses related servicer obligations servicer obligation within underlying servicing contracts loss reflected writedown servicing assets december 31 2008 liability related servicer obligations considering valuation residual interest 16 million concentrations primary business provide vehicle financing gm products gm dealers customers wholesale dealer loan financing relates primarily gm dealers collateral consisting primarily gm vehicles wholesale gm dealership property loans wholesale financing also provided protection gm factory repurchase programs retail installment contracts operating lease assets relate primarily secured sale lease respectively vehicles primarily gm protracted reduction suspension gm’s production sale vehicles resulting decline demand work stoppage governmental action event could substantial adverse effect us conversely increase production significant marketing program could positively impact results refer note 20 summary financial exposure gm december 31 2008 majority finance receivables loans operating lease assets geographically diversified throughout united states outside united states finance receivables loans operating lease assets concentrated canada germany brazil mexico united kingdom france australia notes consolidated financial statements gmac llc  form 10k insurance operations concentration credit risk related loss adjustment expenses prepaid reinsurance ceded certain state insurance funds michigan insurance law large market share north carolina result credit exposure michigan catastrophic claims association north carolina reinsurance facility totaling 860 million 819 million december 31 2008 2007 respectively december 31 2008 continue hold mortgage loans features expose us credit risk thereby could result concentration credit risk currently originate prime conforming government mortgages united states high quality insured mortgages canada reduces overall exposure products increase credit risk loan products include high loantovalue mortgage loans nonprime option adjustable rate mortgages prime nonconforming interest mortgages classified prime conforming nonconforming domestic production prime nonconforming nonprime international production teaser rate mortgages prime nonprime total loan production related products combined exposure related products recorded finance receivables loans heldforsale unpaid principal balance years ended december 31 2008 2007 summarized follows • interestonly mortgages allow interestonly payments fixed period end interestonly period loan payment includes principal payments increases significantly borrower’s new payment loan becomes amortizing ie includes principal payments greater borrower making principal payments since origination loan • option adjustable rate mortgages permit variety repayment options repayment options include minimum interestonly fully amortizing 30year fully amortizing 15year payments minimum payment option sets monthly payment initial interest rate first year loan interest rate resets first year borrower continue make minimum payment interestonly option sets monthly payment amount interest due loan interestonly option payment would less minimum payment interestonly option available borrower fully amortizing 30 15year payment options borrower’s monthly payment set based interest rate loan balance remaining loan term • high loantovalue mortgages defined firstlien loans loantovalue ratios excess 100 secondlien loans combined underlying firstlien mortgage loan result loantovalue ratio excess 100 • market rate teaser mortgages contain contractual features limit initial interest rate market interest rate specified time period increase market interest rate future period increase market interest rate could result significant increase borrower’s monthly payment amount mortgage loans originate mortgages purchase including higher risk loans preceding table subject underwriting guidelines loan origination standards includes guidelines standards tailored products include variety factors including borrower’s capacity repay loan credit history characteristics loan including certain characteristics summarized table may increase credit risk purchase mortgage loans correspondent lenders either underwrite loan prior closing reunderwrite loan purchase delegate underwriting responsibility correspondent lender originating loan underwriting delegated correspondent lender sample loans reunderwritten prior notes consolidated financial statements gmac llc  form 10k purchase believe underwriting procedures adequately consider unique risks may come products conduct variety quality control procedures periodic audits ensure compliance origination standards including criteria lending legal requirements leverage technology performing underwriting process quality control procedures capital requirements subject various regulatory financial requirements jurisdictions businesses operate following description primarily regulations establish capital requirements business • bank holding company bank holding company subject riskbased capital leverage guidelines set federal regulators require capitaltoassets ratios meet certain minimum standards additionally currently subject certain capital requirements result contractual obligations fdic riskbased capital ratio determined allocating assets specified offbalance sheet financial instruments four weighted categories higher levels capital required categories perceived representing greater risk guidelines total capital divided two tiers tier 1 capital tier 2 capital tier 1 capital general consists common equity minority interests qualifying preferred stock less goodwill adjustments tier 2 capital generally consists preferred stock qualifying tier 1 capital limited amounts subordinated debt adjustments amount tier 2 capital may exceed amount tier 1 capital total capital sum tier 1 capital tier 2 capital currently bank depository institution gmac bank required maintain “wellcapitalized” levels dictate total capital ratio 10 tier 1 capital ratio 6 additionally july 21 2008 gmac fim holdings ib finance gmac bank fdic collectively contracting parties entered parent company agreement pa requires gmac maintain total equity total assets ratio least 5 pa defines “total equity” “total assets” total equity total assets respectively reported consolidated balance sheet quarterly annual reports filed united states securities exchange commission pa requires gmac beginning december 31 2008 maintain ratio tangible equity tangible assets least 5 purpose “tangible equity” means “total equity” minus goodwill intangible assets net accumulated amortization mortgage servicing assets “tangible assets” means “total assets” less goodwill intangible assets mortgage servicing assets furthermore july 21 2008 contracting parties entered capital liquidity maintenance agreement clma requires capital gmac bank maintained level gmac bank’s leverage ratio least 11 threeyear period purpose leverage ratio determined accordance fdic’s regulations related capital maintenance • international banks finance companies certain international subsidiaries subject regulatory requirements jurisdictions operate entities either operate banks regulated finance companies local markets regulatory restrictions primarily dictate subsidiaries meet certain minimum capital requirements restrict dividend distributions require assets restricted date compliance various regulations materially adverse effect financial position results operations cash flows total assets entities approximated 167 billion 177 billion december 31 2008 2007 respectively • depository institutions december 24 2008 gmac bank received approval utah department financial institutions udfi convert industrial bank commercial nonmember state chartered bank gmac bank provides services north american automotive finance rescap operations previously chartered industrial bank pursuant laws utah deposits insured fdic gmac required file periodic reports fdic concerning financial condition assets gmac bank approximated 329 billion 284 billion december 31 2008 2007 respectively notes consolidated financial statements gmac llc  form 10k commercial nonmember bank chartered state utah gmac bank subject various regulatory capital requirements administered state federal banking agencies failure meet minimum capital requirements initiate certain mandatory discretionary actions regulators undertaken could direct material effect gmac bank’s results operations financial condition capital adequacy guidelines regulatory framework prompt corrective action gmac bank must meet specific capital guidelines involve quantitative measures gmac bank’s assets liabilities certain offbalance sheet items calculated regulatory accounting practices gmac bank’s capital amounts classification also subject qualitative judgments regulators components risk weightings factors quantitative measures established regulation ensure capital adequacy require gmac bank maintain minimum amounts ratios total tier 1 capital riskweighted assets tier 1 capital average assets december 31 2008 compliance regulatory capital requirements furthermore global automotive finance rescap operations subsidiaries required maintain regulatory capital requirements agreements freddie mac fannie mae ginnie mae department housing urban development utah state department financial institutions fdic • mortgage business june 24 2005 entered operating agreement gm rescap holding company residential mortgage business create separation gm us one hand rescap operating agreement restricts rescap’s ability declare dividends prepay subordinated indebtedness us operating agreement amended november 27 2006 november 30 2006 conjunction sale transactions among things amendments removed gm party agreement restrictions contained rescap operating agreement include requirements rescap’s member’s equity least 65 billion dividends paid rescap permitted pay dividends pursuant previous sentence cumulative amount dividends may exceed 50 cumulative net income excluding payments income taxes election federal income tax purposes treated limited liability company measured july 1 2005 time dividend paid restrictions cease effective rescap’s member’s equity least 12 billion end two consecutive fiscal quarters cease majority owner connection sale transactions gm released party operating agreement remains effect rescap us december 31 2008 rescap consolidated equity approximately 22 billion • insurance companies gmac insurance subject certain minimum aggregated capital requirements restricted net assets restricted dividend distributions applicable state insurance law national association securities dealers financial services authority england office superintendent financial institution canada national insurance bonding commission mexico date compliance various regulations materially adverse effect financial condition results operations cash flows various us state insurance regulations dividend distributions may made statutory unassigned surplus state regulatory authorities must approve distributions exceed certain statutory limitations december 31 2008 maximum dividend could paid insurance subsidiaries next twelve months without prior statutory approval approximates 345 million notes consolidated financial statements gmac llc  form 10k 27 quarterly financial statements unaudited 28 subsequent events governance agreement january 16 2009 connection approval application become bank holding company entered governance agreement governance agreement fim holdings gm finance co holdings llc united states department treasury pursuant parties agreed establish new composition gmac board managers new gmac board effective later march 24 2009 effective date new gmac board comprised seven members follows one member designated fim holdings affiliates cerberus capital management lp ii two members designated trust established treasury hold equity securities gmac iii chief executive officer gmac iv three independent members chosen members described iii capital markets transactions january 16 2009 gmac completed rights offering rights offering pursuant membership interest subscription agreement dated december 29 2008 subscription agreement among gmac gm fim holdings pursuant rights offering gmac issued 79039 class membership interests gmac fim holdings exchange purchase price 366 million ii 190921 class b membership interests gm holdco exchange purchase price 884 million class membership interests class b membership interests issued private placement exempt registration pursuant section 42 securities act 1933 amended addition january 2009 gmac completed privately negotiated transaction extinguished certain debt resulting gain approximately 600 million notes consolidated financial statements gmac llc  form 10k ib finance transaction january 30 2009 gmac exercised option convert 806344 units noncumulative nonparticipating perpetual preferred membership interests rescap number preferred membership interests ib finance holding company llc ib finance ib finance owns gmac bank commercial bank chartered laws state utah also january 30 2009 gmac rescap entered agreement consummated transaction pursuant gmac acquired 100 rescap’s remaining nonvoting common interests ib finance common interests attributable mortgage finance operations gmac bank exchange rescap’s interests ib finance gmac contributed rescap 8500 senior secured guaranteed notes due 2010 rescap gmac acquired recent exchange offer face amount approximately 831 million accrued interest fair value approximately 609 million gmac purchase price fair value rescap notes determined based average two price quotations gmac rescap obtained independent brokerdealers one selected party rescap extinguished 831 million face amount notes transaction determined independent thirdparty financial advisor fair rescap financial point view 60th day closing transaction rescap right offer transferred ib finance interests potential thirdparty purchasers cash rescap notes combination cash rescap notes event third party enters agreement rescap purchase ib finance interests price greater gmac purchase price gmac elect either 1 retain ib finance interests pay rescap additional consideration equal difference third party’s offered price gmac purchase price 2 transfer ib finance interests thirdparty purchaser exchange cash rescap notes combination cash rescap notes thirdparty purchaser receipt gmac remit rescap either cash rescap notes combination cash rescap notes case may equivalent value difference thirdparty purchase price gmac purchase price avoidance doubt gmac elects transfer ib finance interests thirdparty purchaser january 30 2009 closing thirdparty transaction gmac shall holder beneficially record ib finance interests shall bear assumed obligations liabilities ib finance llc agreement 1 gmac elects transfer ib finance interests thirdparty purchaser 2 third party makes payment rescap notes 3 value notes declined date binding purchase agreement signed third party closing thirdparty transaction value combined cash consideration less gmac purchase price rescap pay difference gmac similarly value notes combined cash consideration risen dates rescap receive difference gmac closing date thirdparty transaction saab automotive ab reorganization february 20 2009 saab automotive ab saab swedish automobile manufacturing company filed reorganization applicable law effort reorganize independent owner gm credit exposure saab substantially indirect wholesale retail financing products saab vehicles potential exposure automotive dealers consumers collateralized saab vehicles considered impact reorganization filing financial position results operations year ended december 31 2008 determined impact material cases dealers right return vehicles us exposes us risks remarketing vehicles additionally extent loss confidence market place subsequent deterioration saab vehicle values could result reduced lease residual values higher loan loss severity retail wholesale loans however existing contractual provisions gmac gm required reimburse us significant portion potential losses repurchase vehicles refer note 20 consolidated financial statements discussion relationship gm signatures pursuant requirements section 13 securities exchange act 1934 amended registrant duly caused report signed behalf undersigned hereunto duly authorized pursuant requirements securities exchange act 1934 report signed 4th day march 2009 following persons behalf registrant capacities indicated including majority directors signature title g richard wagoner jr g richard wagoner jr chairman chief executive officer ray g young ray g young executive vice president chief financial officer nick cyprus nick cyprus controller chief accounting officer erskine bowles erskine bowles director john h bryan john h bryan director armando codina armando codina director erroll b davis jr erroll b davis jr director george mc fisher george mc fisher director e neville isdell e neville isdell director karen katen karen katen director kent kresa kent kresa director item 15 exhibits financial statement schedules signatures pursuant requirements securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date may 22 2014 motors liquidation company guc trust wilmington trust company individual capacity solely capacity trust administrator trustee motors liquidation company guc trust david vanaskey name david vanaskey title vice president wilmington trust company exhibit index item 15 exhibits financial statement schedule reports page form 8k number 1 financial statements see part ii 2 financial statement schedule ii allowances years ended december 31 2002 2001 2000 iv3 3 exhibits including incorporated reference exhibit number 3a restated certificate incorporation filed exhibit 3i current report form 8k general motors corporation dated june 24 1999 amended amendment filed exhibit 3i current report form 8k general motors corporation dated june 6 2000 amendment article four certificate incorporation division iii preference stock reason certificates designations filed secretary state delaware september 14 1987 certificate decrease filed secretary state delaware september 29 1987 pertaining six series preference stock contributed general motors pension trusts incorporated reference exhibit 19 quarterly report form 10q general motors corporation quarter ended june 30 1990 form se general motors corporation dated august 6 1990 amended certificate designations filed secretary state delaware june 28 1991 pertaining series conversion preference stock incorporated reference exhibit 4a form s8 registration statement 3343744 form se general motors corporation dated november 1 1991 amended certificate designations filed secretary state delaware december 9 1991 pertaining series b 918 preference stock incorporated reference exhibit 4a form s3 registration statement 3345216 form se general motors corporation dated january 27 1992 amended certificate designations filed secretary state delaware february 14 1992 pertaining series c convertible preference stock incorporated reference exhibit 3a annual report form 10k general motors corporation year ended december 31 1991 form se general motors corporation dated march 20 1992 amended certificate designations filed secretary state delaware july 15 1992 pertaining series 792 preference stock incorporated reference exhibit 3a2 quarterly report form 10q general motors corporation quarter ended june 30 1992 form se general motors corporation dated august 10 1992 amended certificate designations filed secretary state delaware december 15 1992 pertaining series g 912 preference stock incorporated reference exhibit 4a form s3 registration statement 3349309 form se general motors corporation dated january 25 1993 amended certificate designations filed secretary state delaware june 24 1999 pertaining series h 625 automatically convertible preference stock incorporated reference exhibit 4a form s8 registration statement 33331846 form se general motors corporation dated march 6 2000 na 3b bylaws general motors corporation amended incorporated reference exhibit 3ii current report form 8k general motors corporation dated march 2 1998 amended incorporated reference exhibit 3ii current reports form 8k general motors corporation dated june 24 1999 august 2 1999 march 6 2000 june 6 2000 october 3 2000 june 5 2001 december 4 2001 december 3 2002 na iv1 general motors corporation subsidiaries part iv continued item 15 exhibits financial statement schedule reports form 8k continued exhibit page number 4a form indenture relating 500000000 818 debentures due april 15 2016 dated april 1 1986 general motors corporation citibank na trustee incorporated reference exhibit 4 amendment 1 form s3 registration statement 334452 na resolutions adopted special committee april 15 1986 incorporated reference exhibit 4a current report form 8k general motors corporation dated april 24 1986 na 4c form indenture relating 377377000 775 debentures due march 15 2036 dated december 7 1995 general motors corporation citibank na trustee filed exhibit 4a amendment 1 form s3 registration statement 3364229 na 4d instruments defining rights holders nonregistered debt registrant omitted exhibit index amount debt authorized instrument exceed 10 total assets registrant subsidiaries registrant agrees furnish copy instrument commission upon request na 4fi indenture general motors corporation wilmington trust company incorporated reference exhibit 4di current report form 8k general motors corporation dated july 1 1997 na 4fiifirst supplemental indenture dated march 4 2002 general motors corporation citibank na respect 450 series convertible senior debentures due 2032 525 series b convertible senior debentures due 2032 incorporated reference exhibit 2 current report form 8k general motors corporation dated march 6 2002 na 10a general motors 2002 annual incentive plan incorporated reference exhibit proxy statement general motors corporation dated april 18 2002 na 10b general motors 2002 stock incentive plan incorporated reference exhibit proxy statement general motors corporation dated april 18 2002 na 10c general motors 2002longterm incentive plan incorporated reference exhibit proxy statement general motors corporation dated april 18 2002 na 10d compensation plan nonemployee directors incorporated reference exhibit proxy statement general motors corporation dated april 16 1997 na 10f employment contract robert lutz dated september 1 2001 incorporated reference na 10g extension employment contract robert lutz dated december 20 2002 iv9 12 computation ratios earnings fixed charges years ended december 31 2002 2001 2000 iv10 21 subsidiaries registrant december 31 2002 iv11 23 consent independent auditors iv18 99 hughes electronics corporation financial statements managements discussion analysis financial condition results operations iv19 991 certification chief executive officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 iv104 992 certification chief financial officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 iv105 registrant hereby undertakes furnish supplementally copy omitted schedule attachment securities exchange commission upon request required filed exhibit pursuant item 14c form 10k iv2 general motors corporation subsidiaries part iv continued item 15 exhibits financial statement schedule reports form 8k concluded b reports form 8k fifteen reports form 8k filed october 1 2002 october 8 2002 october 15 2002 october 17 2002 october 23 2002 november 1 2002 november 4 2002 november 27 2002 december 3 2002 3 december 10 2002 december 16 2002 december 19 2002 december 19 2002 quarter ended december 31 2002 reporting matters item 5 events reporting certain agreements item 7 financial statements pro forma financial information exhibits reports submitted securities exchange commission item 9 regulation fd disclosure pursuant general instruction b form 8k reports submitted item 9 deemed filed purpose section 18 securities exchange act 1934 subject liabilities section incorporating incorporate reference reports filing securities act exchange act iv3 notes primarily reflects recovery accounts previously writtenoff b accounts written c represents net change inventory allowances reference made notes gm consolidated financial statements iv4 general motors corporation subsidiaries signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned hereunto duly authorized general motors corporation registrant date march 5 2003 sjohn f smith jr john f smith jr chairman board directors pursuant requirements securities exchange act 1934 report signed 5th day march 2003 following persons behalf registrant capacities indicated signature title sjohn f smith jr chairman board directors john f smith jr sg richard wagoner jr president chief executive officer director g richard wagoner jr sjohn devine vice chairman chief financial officer john devine swalter g borst treasurer walter g borst spaul w schmidt controller paul w schmidt speter r bible chief accounting officer peter r bible iv5 general motors corporation subsidiaries signatures concluded signature title spercy barnevik director percy barnevik sjohn h bryan director john h bryan sarmando codina director armando codina sgeorge c fisher director george c fisher snobuyuki idei director nobuyuki idei skaren katen director karen katen salan g lafley director alan g lafley sphilip laskawy director philip laskawy se stanley oneal director e stanley oneal seckhard pfeiffer director eckhard pfeiffer director lloyd ward iv6 certification g richard wagoner jr president chief executive officer certify 1 reviewed annual report form 10k general motors corporation 2 based knowledge annual report contain untrue statement material fact omit state material fact necessary make statements made light circumstances statements made misleading respect period covered annual report 3 based knowledge financial statements financial information included annual report fairly present material respects financial condition results operations cash flows registrant periods presented annual report 4 registrants certifying officers responsible establishing maintaining disclosure controls procedures defined exchange act rules 13a14 15d14 registrant designed disclosure controls procedures ensure material information relating registrant including consolidated subsidiaries made known us others within entities particularly period annual report prepared b evaluated effectiveness registrants disclosure controls procedures date within 90 days prior filing date annual report evaluation date c presented annual report conclusions effectiveness disclosure controls procedures based evaluation date 5 registrants certifying officers disclosed based recent evaluation registrants auditors audit committee registrants board directors persons performing equivalent function significant deficiencies design operation internal controls could adversely affect registrants ability record process summarize report financial data identified registrants auditors material weaknesses internal controls b fraud whether material involves management employees significant role registrants internal controls 6 registrants certifying officers indicated annual report whether significant changes internal controls factors could significantly affect internal controls subsequent date recent evaluation including corrective actions regard significant deficiencies material weaknesses date march 13 2003 g richard wagoner jr g richard wagoner jr president chief executive officer iv7 certification john devine vice chairman chief financial officer certify 1 reviewed annual report form 10k general motors corporation 2 based knowledge annual report contain untrue statement material fact omit state material fact necessary make statements made light circumstances statements made misleading respect period covered annual report 3 based knowledge financial statements financial information included annual report fairly present material respects financial condition results operations cash flows registrant periods presented annual report 4 registrants certifying officers responsible establishing maintaining disclosure controls procedures defined exchange act rules 13a14 15d14 registrant designed disclosure controls procedures ensure material information relating registrant including consolidated subsidiaries made known us others within entities particularly period annual report prepared b evaluated effectiveness registrants disclosure controls procedures date within 90 days prior filing date annual report evaluation date c presented annual report conclusions effectiveness disclosure controls procedures based evaluation date 5 registrants certifying officers disclosed based recent evaluation registrants auditors audit committee registrants board directors persons performing equivalent function significant deficiencies design operation internal controls could adversely affect registrants ability record process summarize report financial data identified registrants auditors material weaknesses internal controls b fraud whether material involves management employees significant role registrants internal controls 6 registrants certifying officers indicated annual report whether significant changes internal controls factors could significantly affect internal controls subsequent date recent evaluation including corrective actions regard significant deficiencies material weaknesses date march 13 2003 john devine john devine vice chairman chief financial officer iv8 item 15 exhibits financial statement schedule 1 financial statements supplemental information 2 financial statement schedule ii valuation qualifying accounts 3 consolidated financial statements gmac llc subsidiaries december 31 2006 2005 three years ended year ended december 31 2006 4 exhibits b exhibits listed filed sec pursuant securities act 1933 amended securities exchange act 1934 amended filed noted hereby incorporated reference made part report effect filed herewith management contract compensatory plan required filed exhibit pursuant item 15b form 10k  filed herewith general motors corporation subsidiaries schedule ii valuation qualifying accounts notes primarily reflects recovery accounts previously written b accounts written c represents net change inventory allowances primarily reflects allowances removed result sale 51 controlling interest gmac time sale gmac allowance credit loss balance miscellaneous allowance balance 35 billion 123 million respectively report independent registered public accounting firm board directors member interest holder gmac llc audited accompanying consolidated balance sheet gmac llc subsidiaries “company” december 31 2006 2005 related consolidated statements income changes equity cash flows three years period ended december 31 2006 financial statements responsibility company’s management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements present fairly material respects financial position company december 31 2006 2005 results operations cash flows three years period ended december 31 2006 conformity accounting principles generally accepted united states america discussed notes 1 24 consolidated financial statements accompanying consolidated balance sheet december 31 2005 consolidated statements income changes equity cash flows years ended december 31 2005 2004 restated also audited accordance standards public company accounting oversight board united states effectiveness company’s internal control financial reporting december 31 2006 based criteria established internal control integrated framework issued committee sponsoring organizations treadway commission report presented herein dated march 12 2007 expressed unqualified opinion management’s assessment effectiveness company’s internal control financial reporting adverse opinion effectiveness company’s internal control financial reporting material weakness deloitte touche llp deloitte touche llp detroit michigan march 12 2007 consolidated statement income gmac llc • form 10k notes consolidated financial statements integral part statements consolidated balance sheet gmac llc • form 10k notes consolidated financial statements integral part statements consolidated statement changes equity gmac llc • form 10k october 2005 repurchased operating lease assets related deferred tax liabilities gm refer note 18 consolidated financial statements detail notes consolidated financial statements integral part statements consolidated statement cash flows gmac llc • form 10k includes origination mortgage servicing rights 1732 1272 1228 2006 2005 2004 respectively b 2005 includes 371 cash equivalents classified assets held sale refer note 1 consolidated financial statements c represents consolidation certain assets related accounting change sfas 140 2004 2005 represents repurchase operating lease assets related deferred tax liabilities gm 2004 represents consolidation banco gm fin 46r beginning january 1 2004 fourth quarter purchased banco gm e described note 18 consolidated financial statements notes consolidated financial statements integral part statements notes consolidated financial statements gmac llc • form 10k 1 description business significant accounting policies gmac llc referred herein gmac us founded 1919 wholly owned subsidiary general motors corporation general motors gm november 30 2006 gm sold 51 interest us approximately 74 billion sale transactions fim holdings llc fim holdings fim holdings investment consortium led cerberus fim investors llc sole managing member citigroup inc aozora bank ltd subsidiary pnc financial services group inc prior consummation sale transactions gmac distributed gm certain assets respect automotive leases owned gmac affiliates assets net book value approximately 40 billion related deferred tax liabilities 18 billion ii gm assumed retained certain gmac’s postemployment welfare benefits iii gmac transferred gm certain entities hold fee interest certain real properties iv gmac made distributions gm portion gmac’s net income september 30 2005 date consummation sale transactions v gm subsidiaries repaid certain indebtedness owing gmac specified unsecured obligations owing gmac subsidiaries gm us subsidiaries greater 15 billion vi gmac made onetime distribution gm approximately 27 billion cash primarily reflect increase gmac’s equity resulting elimination portion net deferred tax liabilities arising conversion gmac certain subsidiaries limited liability form restatement previously issued consolidated financial statements discussed note 24 consolidated financial statements restating historical consolidated balance sheet december 31 2005 consolidated statements income changes equity cash flows two years ended restatement relates accounting treatment certain hedging transactions statement financial accounting standards 133 accounting derivative instruments hedging activities amended interpreted sfas 133 also correcting certain outofperiod errors deemed immaterial individually aggregate years originally recorded identified items relate transactions involving certain transfers financial assets valuations certain financial instruments amortization unearned income certain products income taxes inconsequential items derivative restatement correcting amounts record proper period following table sets forth reconciliation previously reported restated net income annual periods shown restatement increased january 1 2004 retained earnings 14114 million 14078 million increase 36 million comprised 55 million increase related elimination hedge accounting related certain debt instruments decrease 16 related immaterial items consolidation basis presentation consolidated financial statements include accounts majorityowned subsidiaries eliminating significant intercompany balances transactions includes variable interest entities primary beneficiary refer note 21 consolidated financial statements details variable interest entities accounting reporting policies conform accounting principles generally accepted united states america gaap certain amounts prior periods reclassified conform current period’s presentation operate international subsidiaries similar manner united states america us united states subject local laws circumstances may cause us modify procedures accordingly financial statements subsidiaries operate outside us generally measured using local currency functional currency assets liabilities foreign subsidiaries translated us dollars yearend notes consolidated financial statements gmac llc • form 10k exchange rates income expense items translated average exchange rates prevailing reporting period resulting translation adjustments recorded accumulated comprehensive income component equity use estimates assumptions preparation financial statements conformity gaap requires management make estimates assumptions affect reported amounts assets liabilities date financial statements income expenses reporting period developing estimates assumptions management uses available evidence however uncertainties associated estimating amounts timing likelihood possible outcomes actual results could differ estimates cash equivalents cash equivalents generally defined shortterm highly liquid investments original maturities 90 days less include investments balance cash equivalents 134 billion 138 billion december 31 2006 2005 respectively book value cash equivalents approximates fair value short maturities instruments certain securities original maturities less 90 days held portion longer term investment portfolios primarily relating gmac insurance holdings inc classified investment securities investment securities portfolio investment securities includes bonds equity securities asset mortgagebacked securities notes interests securitization trusts investments investment securities classified based management’s intent trading securities primarily consist retained purchased interests certain securitizations retained interests carried fair value changes fair value recorded current period earnings debt securities management intent ability hold maturity classified held maturity reported amortized cost trade date premiums discounts debt securities amortized adjustment yield contractual term security investment securities classified available sale carried fair value trade date unrealized gains losses excluding temporary impairments included accumulated comprehensive income component equity aftertax basis investments classified available sale held maturity considered impaired decline fair value judged temporary employ systematic methodology considers available evidence evaluating potential impairment investments event cost investment exceeds fair value evaluate among factors magnitude duration decline fair value equity debt securities also evaluate financial health business outlook issuer performance underlying assets interests securitized assets intent ability hold investment decline fair value determined temporary new cost basis investment established realized gains losses investment securities reported investment income determined using specific identification method normal course business enter securities lending agreements various counterparties agreements lend rights designated securities exchange collateral form cash governmental securities approximating 102 domestic 105 foreign value securities loaned agreements primarily overnight nature settle next business day december 31 2006 loaned securities 439 million received corresponding cash collateral 445 million loans securities loan december 31 2005 loans held sale loans held sale may include automotive commercial finance residential receivables loans carried lower aggregate cost estimated fair value loans part hedge accounting relationships pursuant sfas 133 reported fair value fair value based contractually established commitments investors based current investor yield requirements revenue recognition consumer automotive finance receivables suspended finance receivables loans placed nonaccrual status retail automotive receivables held sale placed nonaccrual status contractually delinquent 120 days assets held sale august 3 2005 announced entered definitive agreement sell majority equity interest capmark result previous definitive agreement assets liabilities capmark classified held sale separately consolidated balance sheet december 31 2005 march 23 2006 completed sale approximately 79 equity capmark finance receivables loans finance receivables loans reported principal amount outstanding net unearned income unearned income includes deferred origination fees reduced origination costs unearned rate support received gm amortized contractual life related finance receivable loan using interest method loan commitment fees generally deferred amortized commercial revenue commitment period acquired loans acquire certain loans individually groups portfolios experienced deterioration credit quality origination acquisition amount paid loans reflects determination probable unable collect amounts due according loan’s contractual terms acquired loans accounted american institute notes consolidated financial statements gmac llc • form 10k certified public accountants statement position 033 accounting certain loans debt securities acquired transfer sop 033 recognize accretable yield excess estimate undiscounted expected principal interest cash flows expected acquisition collected initial investment acquired asset life loan pool update estimated cash flows expect collect balance sheet date evaluate whether expected cash flows loans changed adjust amount accretable yield loans pools increase expected cash flows record valuation allowance loans pools decrease expected cash flows accordance statement financial accounting standards 114 accounting creditors impairment loan sfas 114 measure impairments based upon present value expected future cash flows discounted using loan’s effective interest rate practical expedient reliable information available fair value collateral less expected costs sell present value subsequent increase loan’s pool’s actual cash flows cash flows expected collected used first reverse existing valuation allowance loan pool nonaccrual loans consumer commercial revenue recognition suspended finance receivables loans placed nonaccrual status prime retail automotive receivables placed nonaccrual status delinquent 120 days nonprime retail automotive receivables placed nonaccrual status delinquent 60 days residential mortgages commercial real estate loans placed nonaccrual status delinquent 60 days warehouse construction lending receivables placed nonaccrual status delinquent 90 days revenue accrued collected date finance receivables loans placed nonaccrual status reversed subsequently recognized extent received cash finance receivables loans restored accrual status contractually current collection future payments reasonably assured impaired loans commercial loans considered impaired probable unable collect amounts due according terms loan agreement recorded investment loan exceeds fair value underlying collateral recognize income impaired loans discussed previously nonaccrual loans recorded investment impaired loans exceeds fair value valuation allowance established component allowance credit losses addition commercial loans specifically identified impairment pools loans collectively evaluated impairment discussed within allowance credit losses accounting policy allowance credit losses allowance credit losses management’s estimate incurred losses lending portfolios portions allowance credit losses specified cover estimated losses commercial loans specifically identified impairment unspecified portion allowance credit losses covers estimated losses homogeneous portfolios finance receivables loans collectively evaluated impairment amounts determined uncollectible charged allowance credit losses additionally losses arising sale repossessed assets collateralizing automotive finance receivables loans charged allowance credit losses recoveries previously chargedoff amounts credited time collection perform periodic systematic detailed reviews lending portfolios identify inherent risks assess overall collectibility portfolios allowance relates portfolios collectively reviewed impairment generally consumer finance receivables loans based aggregated portfolio evaluations product type loss models utilized portfolios consider variety factors including limited historical loss experience current economic conditions anticipated repossessions foreclosures based portfolio trends delinquencies credit scores expected loss factors receivable loan type loans commercial portfolios generally reviewed individual loan basis necessary allowance established individual loan impairment loans subject individual reviews analyzed based factors including limited historical loss experience current economic conditions collateral performance trends within specific geographic portfolio segments pertinent information result estimation specific allowances credit losses allowance related specifically identified impaired loans established based discounted expected cash flows observable market prices loans solely dependent collateral repayment fair value collateral evaluation factors consumer commercial finance receivables loans involves complex subjective judgments securitizations offbalance sheet transactions securitize sell service retail finance receivables operating leases wholesale loans securities residential loans interests securitized sold loans generally retained form interestonly strips senior subordinated interests cash reserve accounts servicing rights retained interests generally subordinate investors’ interests investors securitization trusts generally recourse assets failure debtors pay due retain servicing responsibilities retail finance receivable operating lease wholesale loan securitizations majority residential loan securitizations may notes consolidated financial statements gmac llc • form 10k receive servicing fees based securitized loan balances certain ancillary fees recorded servicing fees income also retain right service residential loans sold result mortgagebacked security transactions ginnie mae fannie mae freddie mac also serve collateral manager securitizations commercial investment securities gains losses securitizations sales depend previous carrying amount assets involved transfer allocated assets sold retained interests based relative fair values except certain servicing assets liabilities initially recorded fair value date sale since quoted market prices generally available estimate fair value retained interests determining present value future expected cash flows using modeling techniques incorporate management’s best estimates key variables including credit losses prepayment speeds weighted average life discount rates commensurate risks involved applicable interest finance rates variable adjustable rate contracts credit loss assumptions based upon historical experience market information similar investments characteristics individual receivables loans underlying securities prepayment speed estimates determined utilizing data obtained market participants available based historical prepayment rates similar assets discount rate assumptions determined using data obtained market participants available based current relevant treasury rates plus risk adjusted spread based analysis historical spreads similar types securities estimates interest rates variable adjustable contracts based spreads applicable benchmark interest rate using marketbased yield curves gains securitizations sales reported gain sale mortgage automotive loans retail finance receivables wholesale loans residential loans retained interests recorded fair value declines fair value carrying amount reflected comprehensive income component equity earnings declines determined temporary interests classified trading retained interestonly strips senior subordinated interests generally included available sale investment securities trading investment securities depending management’s intent time securitization retained cash reserve accounts included assets investment operating leases investment operating leases reported cost less accumulated depreciation net origination fees costs income operating lease assets includes lease origination fees net lease origination costs recognized operating lease revenue straightline basis scheduled lease term depreciation vehicles generally provided straightline basis estimated residual value period time consistent term underlying operating lease agreement evaluate depreciation policy leased vehicles regular basis significant investments residual values assets operating lease portfolio residual values represent estimate values assets end lease contracts initially recorded based residual values established contract inception consulting independently published residual value guides realization residual values dependent future ability market vehicles prevailing market conditions life lease evaluate adequacy estimate residual value may make adjustments depreciation rates extent expected value vehicle including residual support payments gm lease termination changes addition estimating residual value lease termination also evaluate current value operating lease asset test impairment extent necessary based market considerations portfolio characteristics temporary impairment determined exist undiscounted expected future cash flows lower carrying value asset lease vehicle returned us asset reclassified investment operating leases assets lower cost estimated fair value less costs sell mortgage servicing rights primary servicing involves collection payments individual borrowers distribution payments investors master servicing rights represent right service mortgage assetbacked securities whole loan packages issued investors master servicing involves collection borrower payments primary servicers distribution funds investors mortgage assetbacked securities whole loan packages capitalize value expected realized performing specified mortgage servicing activities others mortgage servicing rights msrs capitalized servicing rights purchased retained upon sale securitization mortgages prior january 1 2006 mortgage servicing rights recorded securitizations accounted sales well accounted secured financings effective january 1 2006 adoption sfas 156 mortgage servicing rights recorded securitizations accounted secured financings total cost mortgage loans includes cost acquire mortgage servicing rights allocated mortgage loans servicing rights retained assets based relative fair values measure mortgage servicing assets liabilities fair value define classes servicing rights based availability market inputs manner manage risks servicing assets liabilities manage servicing rights reportable operating segment level sufficient market inputs exist determine fair value recognized servicing assets liabilities since quoted market prices msrs available estimate fair value msrs determining present value future expected cash flows using modeling techniques incorporate notes consolidated financial statements gmac llc • form 10k management’s best estimates key variables including expected cash flows credit losses prepayment speeds return requirements commensurate risks involved cash flow assumptions based actual performance possible reasonableness assumptions periodically validated comparisons market participants credit loss assumptions based upon historical experience characteristics individual loans underlying msrs prepayment speed estimates determined historical prepayment rates similar assets obtained thirdparty data return requirement assumptions determined using data obtained market participants available based current relevant interest rates plus riskadjusted spread since many factors affect estimate fair value mortgage servicing rights regularly evaluate major assumptions modeling techniques used estimate review assumptions market comparables available monitor actual performance msrs regularly comparing actual cash flow credit prepayment experience modeled estimates periodically invest trading available sale securities derivative financial instruments mitigate effect changes fair value interest rate risk inherent msrs reinsurance assume cede insurance risk various reinsurance agreements seek reduce loss may arise catastrophes events cause unfavorable underwriting results reinsuring certain levels risk insurance enterprises remain liable respect reinsurance ceded assuming companies unable meet obligations reinsurance agreements also assume insurance risks insurance companies receiving premium consideration risk assumption amounts recoverable reinsurers paid losses loss adjustment expenses included premiums insurance receivables amounts recoverable reinsurers unpaid losses including incurred reported losses loss adjustment expenses pursuant reinsurance contracts estimated reported premiums insurance receivables amounts paid reinsurers relating unexpired portion reinsurance contracts reported prepaid reinsurance premiums within premiums insurance receivables repossessed foreclosed assets classified repossessed foreclosed included assets physical possession collateral taken regardless whether foreclosure proceedings taken place repossessed foreclosed assets carried lower outstanding balance time repossession foreclosure fair value asset less estimated costs sell losses revaluation repossessed foreclosed assets charged allowance credit losses time repossession subsequent holding period losses arising sale repossessed assets collateralizing automotive finance receivables loans expensed incurred operating expenses goodwill intangibles goodwill intangible assets net accumulated amortization reported assets accordance statement financial accounting standards 142 goodwill intangible assets sfas 142 goodwill represents excess cost acquisition fair value net assets acquired goodwill reviewed impairment utilizing two step process first step impairment test requires us define reporting units us represents operating segments disclosed note 22 compare fair value reporting units respective carrying value fair value reporting units determined based various analyses including discounted cash flow projections carrying value less fair value impairment exists second step need completed carrying value higher fair value indication impairment may exist second step must performed compute amount impairment sfas 142 requires goodwill tested impairment annually time every year event occurs circumstances change reasonably possible impairment may exist conclude annual impairment test fourth quarter intangible assets include customer lists trademarks identifiable intangible assets amortized straightline basis estimated useful life 3 15 years impairment long lived assets carrying value longlived assets including premises equipment investment operating leases well certain identifiable intangibles evaluated impairment whenever events changes circumstances indicate carrying value asset may recoverable estimated undiscounted future cash flows expected result use eventual disposition recoverability assets held used measured comparison carrying amount asset future net undiscounted cash flows expected generated asset assets considered impaired impairment measured amount carrying amount assets exceeds fair value estimated discounted cash flows material impairment recognized premises equipment premises equipment stated cost net accumulated depreciation amortization reported assets included premises equipment certain capitalized software costs capitalized software generally amortized straightline basis useful life period exceed three years capitalized software expected provide substantive service potential development costs significantly exceed notes consolidated financial statements gmac llc • form 10k amount originally expected considered impaired written fair value deferred policy acquisition costs commissions costs acquiring insurance compensation paid producers extended service contracts primarily related vary production business deferred recorded assets costs subsequently amortized terms related policies service contracts basis premiums revenue earned except direct response advertising costs amortized three year period based anticipated future benefit unearned insurance premiums service revenue insurance premiums net premiums ceded reinsurers service revenue earned terms policies portion premiums service revenue written applicable unexpired terms policies recorded unearned insurance premiums unearned service revenue short duration contracts premiums unearned service revenue earned pro rata basis extended service maintenance contracts premiums service revenues earned basis proportionate anticipated loss emergence reserves insurance losses loss adjustment expenses reserves insurance losses loss adjustment expenses established unpaid cost insured events occurred point time specifically reserves insurance losses loss adjustment expenses represent accumulation estimates reported losses provision losses incurred reported including claims adjustment expenses relating direct insurance assumed reinsurance agreements estimates salvage subrogation recoverable recognized time losses incurred netted insurance losses loss adjustment expenses reserves established business lowest meaningful level homogeneous data based actuarial analysis volatility considerations since reserves based estimates ultimate liability may less reserves adjustments estimated reserves included period adjustments considered necessary adjustments may occur future periods could material impact consolidated financial position results operations cash flows derivative instruments hedging activities accordance sfas 133 derivative financial instruments whether designated hedging relationships required recorded balance sheet assets liabilities carried fair value periodically adjusted inception hedging relationship designate qualifying derivative financial instrument hedge fair value specifically identified asset liability fair value hedge variability cash flows received paid related recognized asset liability cash flow hedge also use derivative financial instruments although acquired risk management purposes qualify hedges gaap changes fair value derivative financial instruments designated qualify fair value hedges along gain loss hedged asset liability attributable hedged risk recorded current period earnings qualifying cash flow hedges effective portion change fair value derivative financial instruments recorded comprehensive income component equity recognized income statement hedged cash flows affect earnings changes fair value derivative financial instruments held risk management purposes meet criteria qualify hedges gaap reported current period earnings ineffective portions fair value cash flow hedges immediately recognized earnings hedge accounting treatment described herein longer applied derivative financial instrument terminated hedge designation removed terminated fair value hedges changes hedged asset liability remain part basis asset liability recognized income remaining life asset liability terminated cash flow hedges unless probable forecasted cash flows occur within specified time frame changes fair value derivative financial instrument remain comprehensive income component equity reclassified earnings period cash flows affect earnings loan commitments enter commitments make loans whereby interest rate loan set prior funding ie interest rate lock commitments interest rate lock commitments loans originated purchased sale loans purchased held investment including commitments acquire senior interests mortgage loan pools offbalance sheet facilities derivative financial instruments carried fair value accordance sfas 133 staff accounting bulletin 105 application accounting principles loan commitments sab 105 sab 105 provides specific guidance measurement loan commitments specifying fair value measurement exclude expected future cash flows related customer relationship loan servicing assets recognized contractually separated underlying loan sale securitization income taxes prior november 30 2006 filed consolidated us federal income tax return gm portion consolidated tax recorded us subsidiaries included consolidated tax return generally equivalent liability would incurred separate return basis settled gm’s tax payments due notes consolidated financial statements gmac llc • form 10k 2006 number us subsidiaries converted limited liability companies llcs effective november 28 2006 became disregarded passthrough entities us federal income tax purposes income taxes incurred converting entities provided november 30 2006 required tax sharing agreement gm gmac subsequent november 30 2006 income taxes provided entities ceased taxable entities taxation entities generally levied member’s level allocable share taxable income entity level tax applies provided consolidated financial statements related deferred taxes eliminated respect entities ceased taxable enterprises banking insurance foreign subsidiaries generally corporations continue subject provide us federal state foreign income taxes deferred tax assets liabilities established future tax consequences events recognized financial statements tax returns based upon enacted tax laws rates deferred tax assets recognized subject management’s judgment realization likely also establish reserves related disputed items various tax authorities unfavorable judgment us becomes probable costs reasonably estimated preferred membership interest issued 2110000 preferred membership interests preferred interests face value 1000 november 2006 gm fim holdings purchased 1555000 555000 preferred interests respectively 10 discount total cash proceeds 19 billion preferred interests nonvoting converted additional membership interest us 3 redemption premium redeemed within first five years issuance accordance emerging issues task force topic d98 classification measurement redeemable securities preferred interests recorded mezzanine equity redemption value redeemable option holder revalued redemption value balance sheet date accretion redemption value dividends preferred interests recorded adjustment retained earnings membership interest currently three additional classes membership interests consisting 51000 class membership interests 49000 class b membership interests 5820 class c membership interests class b membership interests issued outstanding december 31 2006 equal rights preferences assets gmac fim holdings owns 51000 class interests 51 ownership interest us gm whollyowned subsidiary owns 49000 class b interests 49 ownership interest us 3703 class c membership interests authorized december 31 2006 considered “profit interests” “capital interests” defined revenue procedure 9327 19932 cb 343 class c membership interests may issued time pursuant gmac management llc class c membership interest plan outstanding class membership interest classified equity consolidated financial statements additional membership interests must approved board managers board established trading market common equity interests preferred membership interest class c membership interests december 31 2006 class c membership interests granted membership interest distributions required make certain distributions holders preferred interests preferred holders distributions made cash pro rata basis within ten business days delivering gmac financial statements members distributions issued units 1000 accrue yield fiscal quarter rate 10 per annum board may reduce distribution extent required avoid reduction equity capital gmac minimum amount equity capital equal net book value gmac november 30 2006 determined accordance gaap addition board may suspend payment distributions respect one fiscal quarters majority members’ consent distributions made respect fiscal quarter distributions noncumulative reduced zero accrued yield gmac’s preferred interests fiscal quarter fully paid preferred members excess net financial book income gmac fiscal quarter amount yield distributed holders preferred equity interests fiscal quarter distributed holders common membership interests class b membership interests follows least 40 excess paid fiscal quarters ending prior december 31 2008 least 70 excess paid fiscal quarters ending december 31 2008 event distribution priorities common membership interest holders first agreed upon amounts ratably class b class c membership interest holders based total interest holder event sale dissolution gmac cash proceeds available distribution members shall distributed first preferred interest holders ratably amount preferred accrued dividends thereafter distributions shall made preferred interest holders ratably amount aggregate unreturned preferred capital amounts unreturned preferred capital amounts fully paid following dividends preferred holders distributions shall made holder common equity interest ratably holders received return agreed initial value finally remaining distributions shall made class b class c membership interest holders based total interest holder notes consolidated financial statements gmac llc • form 10k sharebased incentive plans 2006 year compensation committee board approved two sharebased compensation plans senior executivelevel employees longterm phantom incentive plan ltip management profits interest plan mpi ltip provides cash bonus paid threeyear performance period based performance mpi provides equity interest management company holds class c membership interests grants either plan 2006 change accounting principle january 1 2006 adopted statement financial accounting standards 156 accounting servicing financial assets sfas 156 1 provides revised guidance servicing asset servicing liability recognized 2 requires separately recognized servicing assets liabilities initially measured fair value practicable 3 permits entity elect measure servicing assets liabilities fair value reporting date report changes fair value earnings period changes occur 4 upon initial adoption permits one time reclassification availableforsale securities trading securities identified offsetting entity’s exposure changes fair value servicing assets liabilities servicer elects subsequently measure fair value 5 requires separate presentation servicing assets liabilities subsequently measured fair value balance sheet additional disclosures elected subsequently measure majority servicing assets liabilities fair value report changes fair value earnings period changes occur addition made onetime reclassification 927 million available sale securities trading securities identified offsetting exposure changes fair value servicing assets liabilities adoption sfas 156 resulted 13 million reduction beginning year retained earnings net tax cumulative effect change accounting principle however impact total equity 4 million increase net tax define classes servicing rights based availability market inputs manner manage risks servicing assets liabilities manage servicing rights reportable operating segment level servicing assets liabilities recorded consolidated balance sheet january 1 2006 date adoption identified three classes servicing rights pertaining residential mortgage residential capital llc rescap reporting segment auto finance north american operations reporting segment commercial mortgages result sale approximately 79 capmark march 23 2006 commercial mortgage servicing rights longer recorded consolidated balance sheet december 31 2006 elected measure residential mortgage servicing rights fair value reporting date report changes fair value earnings period changes occur december 31 2006 2005 mortgage servicing rights valued 49 billion 40 billion respectively consolidated balance sheet auto finance servicing assets elected continue use amortization method accounting auto finance servicing assets liabilities december 31 2006 totaled 9 million 18 million respectively recorded assets liabilities respectively consolidated balance sheet recently issued accounting standards statement position 051 september 2005 american institute certified public accountants aicpa issued statement position 051 accounting insurance enterprises deferred acquisition costs connection modifications exchanges insurance contracts sop 051 sop 051 provides guidance accounting deferred acquisition costs internal replacements insurance contracts sop 051 defines internal replacement specifies conditions determine whether replacement contract substantially unsubstantially changed replaced contract internal replacement determined result substantially changed contract accounted extinguishment replaced contract unamortized deferred acquisition costs unearned revenue liabilities replaced contract longer deferred internal replacement determined result unsubstantially changed contract accounted continuation replaced asset sop 0501 introduces terms integrated nonintegrated contract features specifies nonintegrated features change base contract accounted manner similar separately issued contract integrated features evaluated conjunction base contract sop 051 effective internal replacements occurring fiscal years beginning december 15 2006 adoption sop 051 expected material impact consolidated financial position results operations statement financial accounting standards 155 february 2006 financial accounting standards board fasb issued statement financial standards 155 accounting certain hybrid financial instruments amendment fasb statements 133 140 sfas 155 standard permits fair value remeasurement hybrid financial instrument contains embedded derivative otherwise would require bifurcation sfas 155 allows entity make irrevocable election measure hybrid financial instrument fair value instrumentbyinstrument basis standard eliminates prohibition qspe holding derivative financial instrument pertains beneficial interest another derivative financial instrument sfas 155 also clarifies interestonly principalonly strips subject requirements sfas 133 well determines concentrations credit risk form subordination embedded derivatives sfas 155 effective financial instruments acquired issued notes consolidated financial statements gmac llc • form 10k beginning fiscal year begins september 15 2006 adoption sfas 155 expected material impact consolidated financial position results operations fasb staff position fin 46r6 april 2006 fasb issued fin 46r6 determining variability considered applying fasb interpretation 46r requires variability entity analyzed based design entity nature risks entity well purpose entity’s creation examined determine variability applying fin 46r variability used applying fin 46r determine whether entity variable interest entity interests variable interests entity primary beneficiary variable interest entity statement applied prospectively effective reporting periods beginning june 15 2006 guidance material impact consolidated financial position results operations fasb interpretation 48 june 2006 fasb issued interpretation 48 accounting uncertainty income taxes fin 48 supplements statement financial accounting standard 109 defining confidence level tax position must meet order recognized financial statements interpretation requires tax effects position recognized “morelikelythannot” sustained solely technical merits reporting date morelikelythannot threshold represents positive assertion management company entitled economic benefits tax position tax position considered morelikelythannot sustained based solely technical merits benefits position recognized moreover morelikelythannot threshold must continue met reporting period support continued recognition benefit adoption companies must adjust financial statements reflect tax positions morelikelythannot sustained adoption date necessary adjustment would recorded directly retained earnings period adoption reported change accounting principle adoption interpretation january 1 2007 expected material impact consolidated financial position fasb staff position fsp 132 july 2006 fasb issued fsp 132 accounting change projected change timing cash flows relating income taxes generated leveraged lease transaction fsp 132 amends sfas 13 accounting leases requiring lessors recalculate rate return periodic income allocation leveragedlease transactions change projected change timing income tax cash flows related lease fsp 132 requires lessors use model fin 48 determine timing amount expected tax cash flows leveragedlease calculations recalculations fsp 132 effective period fin 48 date adoption lessor required reassess projected income tax cash flows related leveraged leases using fin 48 model recognition measurement revisions net investment leverage lease required fsp 132 adopted would recorded adjustment beginning balance retained earnings reported change accounting principle adoption guidance expected material impact consolidated financial position results operations sec staff accounting bulletin 108 september 2006 sec issued staff accounting bulletin sab 108 quantifying financial misstatements expresses staff’s views regarding process quantifying financial statement misstatements registrants required quantify impact correcting misstatements including carryover reversing effects prior year misstatements current year financial statements techniques commonly used practice accumulate quantify misstatements generally referred “rollover” current year income statement perspective “iron curtain” yearend balance perspective approaches financial statements would require adjustment either approach results quantifying misstatement material considering relevant quantitative qualitative factors sab 108 material effect current process assessing quantifying financial statement misstatements sfas 157 september 2006 fasb issued sfas 157 fair value measurements provides definition fair value establishes framework measuring fair value requires expanded disclosures fair value measurements statement applies gaap requires allows assets liabilities measured fair value therefore expand use fair value new circumstance fair value refers price would received sell asset paid transfer liability arm’s length transaction market participants markets conduct business sfas 157 clarifies fair value based assumptions market participants would use pricing asset liability establishes fair value hierarchy prioritizes information used develop assumptions fair value hierarchy gives highest priority quoted prices available active markets lowest priority data lacking transparency level reliability inputs utilized fair value calculations drive extent disclosure requirements valuation methodologies used standard sfas 157 effective financial statements issued fiscal years beginning november 15 2007 interim periods within years provisions sfas 157 applied prospectively management assessing potential impact consolidated financial position results operations sfas 158 september 2006 fasb issued sfas 158 employers’ accounting defined benefit pension postretirement plans amends sfas 87 employers’ accounting pensions sfas 87 sfas 88 employer’s accounting settlements curtailments defined benefit pension plans termination benefits sfas 88 sfas 106 employer’s accounting postretirement benefits pensions sfas 106 sfas 132r employers’ disclosures pensions postretirement notes consolidated financial statements gmac llc • form 10k benefits revised 2003 sfas 132r statement requires companies recognize asset liability overfunded underfunded status benefit plans financial statements asset liability offset comprehensive income consisting previously unrecognized prior service costs credits actuarial gains losses transition obligations assets sfas 158 also required measurement date plan assets liabilities coincide sponsor’s year end statement provides two transition alternatives companies make measurementdate provisions recognition asset liability related funded status provision effective us fiscal years ending june 15 2007 change measurement effective fiscal years ending december 15 2008 adoption guidance expected material impact consolidated financial position results operations sfas 159 february 2007 fasb issued sfas 159 fair value option financial assets financial liabilities sfas 159 sfas 159 permits entities choose measure fair value many financial instruments certain items currently required measured fair value subsequent changes fair value designated items required reported earnings current period sfas 159 also establishes presentation disclosure requirements similar types assets liabilities measured fair value sfas 159 effective financial statements issued fiscal years beginning november 15 2007 currently assessing effect implementing guidance directly depends nature extent eligible items elected measured fair value upon initial application standard january 1 2008 2 insurance premiums service revenue earned following table summary insurance premiums service revenue written earned notes consolidated financial statements gmac llc • form 10k 3 income details income follows refer note 18 consolidated financial statements description transactions gm b refer note 15 consolidated financial statements description derivative instruments hedging activities 4 operating expenses details operating expenses follows notes consolidated financial statements gmac llc • form 10k 5 investment securities portfolio securities includes bonds equity securities asset mortgagebacked securities notes interests securitization trusts investments cost fair value gross unrealized gains losses available sale held maturity securities follows includes approximately 471 notes secured operating lease assets distributed gm november 22 2006 refer note 18 discussion b connection certain borrowings letters credit relating certain assumed reinsurance contracts 194 1098 primarily us treasury securities pledged collateral december 31 2006 2005 respectively notes consolidated financial statements gmac llc • form 10k temporary impairment writedowns 12 16 17 million years ended december 31 2006 2005 2004 respectively gross unrealized gains losses investment securities available sale totaled 997 33 million respectively december 31 2004 fair value unrealized gains losses amount pledged collateral portfolio trading securities follows unrealized gains losses included investment income current period basis net unrealized gains totaled 35 december 31 2004 maturity distribution available sale held maturity debt securities outstanding summarized following table prepayments may cause actual maturities differ scheduled maturities following table presents gross gains losses realized upon sales available sale securities gains realized 2006 primarily relate rebalancing investment portfolio insurance operations opinion management gross unrealized losses table considered temporarily impaired notes consolidated financial statements gmac llc • form 10k 6 finance receivables loans composition finance receivables loans outstanding follows net unearned income 57 billion 59 billion december 31 2006 2005 respectively b aggregate amount finance receivables loans maturing next five years follows 57230 2007 18994 2008 14974 2009 9919 2010 6212 2011 72849 2012 thereafter prepayments may cause actual maturities differ scheduled maturities following table presents analysis activity allowance credit losses finance receivables loans notes consolidated financial statements gmac llc • form 10k following table presents information commercial finance receivables loans specifically identified impairment loans acquired transfer acquisition evidence deterioration credit quality since origination probable acquisition contractually required payments would collected carrying amount loans included balance sheet amounts finance receivables loans follows loans acquired december 31 2005 sop 033 requires us record revenue using accretable yield method following table represents accretable yield activity loans acquired year probable acquisition contractually required payments would collected follows notes consolidated financial statements gmac llc • form 10k 7 offbalance sheet securitizations securitize automotive mortgage financial assets funding source sell retail finance receivables wholesale dealer loans residential mortgage loans following discussion related information applicable transfers finance receivables loans qualify offbalance sheet securitizations requirements sfas 140 retain servicing responsibilities subordinated interests securitizations retail finance receivables wholesale loans servicing responsibilities retained majority residential loan securitizations may retain subordinated interests securitizations also hold subordinated interests act collateral manager collateralized debt obligation cdo securitization program servicer generally receive monthly fee stated percentage outstanding sold receivables typically retail automotive finance receivables paid fee concluded fee represents adequate compensation servicer servicing asset liability recognized considering shortterm revolving nature wholesale loans servicing asset liability recognized upon securitization loans december 31 2006 weighted average basic servicing fees primary servicing activities 100 basis points 100 basis points 34 basis points outstanding principal balance sold retail finance receivables wholesale loans residential mortgage loans respectively additionally retain rights cash flows remaining investors securitization trusts received contractual payments certain retail securitization transactions retail receivables sold servicing retained basis servicing compensation servicing liability established recorded liabilities december 31 2006 2005 servicing liabilities 18 million 32 million respectively outstanding related retail automotive securitization transactions addition 2005 completed retail automotive securitization servicing fee received considered greater adequate compensation requiring recording servicing asset december 31 2006 2005 fair value servicing asset 9 million 30 million respectively mortgage servicing capitalize value expected realized performing specified residential mortgage servicing activities mortgage servicing rights refer note 9 consolidated financial statements maintain cash reserve accounts predetermined amounts certain securitization activities unlikely event deficiencies occur cash flows owed investors amounts available cash reserve accounts totaled 39 million 1001 million 309 million december 31 2006 related securitizations retail finance receivables wholesale loans residential mortgage loans respectively 52 million 1012 million 88 million december 31 2005 respectively following table summarizes pretax gains losses securitizations certain cash flows received paid securitization trusts transfers finance receivables loans completed 2006 notes consolidated financial statements gmac llc • form 10k following table summarizes pretax gains losses securitizations certain cash flows received paid securitization trusts transfers finance receivables loans completed 2005 2004 key economic assumptions used measuring estimated fair value retained interests sales completed 2006 2005 2004 dates sales follows fair value retained interests wholesale securitizations approximates cost shortterm floating rate nature wholesale loans b included within residential mortgage loans home equity loans lines high loantovalue loans residential first second mortgage loans c represents former gmac commercial mortgage sold approximately 79 equity interest march 23 2006 assumptions used measure expected yield variable rate retained interests based benchmark interest rate yield curve plus contractual spread appropriate actual yield curve utilized varies depending specific retained interests notes consolidated financial statements gmac llc • form 10k e based weighted average maturity wam finance receivables constant prepayment rate cpr mortgage loans following table summarizes key economic assumptions sensitivity fair value retained interests december 31 2006 2005 immediate 10 20 adverse changes assumptions fair value retained interests wholesale securitizations approximates cost 691 shortterm floating rate nature wholesale receivables b net reserve expected credit losses totaling 8 14 december 31 2006 2005 respectively amounts included fair value retained interests classified investment securities c forward benchmark interest rate yield curve plus contractual spread sensitivities hypothetical used caution figures indicate changes fair value based 10 20 variation assumptions generally cannot extrapolated relationship change assumption change fair value may linear also table effect variation particular assumption fair value retained interest calculated without changing assumption reality changes one factor may result changes another may magnify counteract sensitivities additionally hedge interest rate prepayment risks associated certain retained interests effects hedge strategies considered herein expected static pool net credit losses include actual incurred losses plus projected net credit losses divided original balance outstandings comprising securitization pool following table displays expected static pool net credit losses securitization transactions static pool losses applicable wholesale finance receivable securitizations shortterm nature b represents former commercial mortgage operations sold approximately 79 equity interest march 23 2006 notes consolidated financial statements gmac llc • form 10k following table presents components securitized financial assets managed along quantitative information delinquencies net credit losses march 23 2006 sold approximately 79 equity interest capmark commercial mortgage operations b managed portfolio represents finance receivables loans balance sheet securitized excluding securitized finance receivables loans continue service continuing involvement ie retain interest risk loss underlying receivables 8 investment operating leases investments operating leases follows november 22 2006 126 billion operating lease assets comprised 157 billion vehicles cost net 31 billion accumulated depreciation distributed gm refer note 18 consolidated financial statements description distribution future lease payments due customers equipment operating leases december 31 2006 totaled 11390 million due follows 4937 million 2007 3553 million 2008 2187 million 2009 673 million 2010 40 million 2011 investments operating lease assets represents expected future cash flows expect realize operating leases includes customer payments expected residual value upon remarketing vehicle end lease described note 18 consolidated financial statements gm may sponsor residual support programs result contractual residual value excess standard residual value gm reimburses us remarketing sales proceeds less customer’s contract residual value limited standard residual value addition residual support programs gm also participates risk sharing arrangement whereby gm shares equally residual losses extent remarketing proceeds standard residual rates limited floor connection sale 51 percent ownership interest gmac gm settled estimated liabilities respect residual support risk sharing portion operating lease portfolio based december 31 2006 outstanding us operating lease portfolio maximum amount could paid gm residual support programs risk sharing arrangement approximately 276 million 339 million respectively fully discussed note 18 consolidated financial statements 9 mortgage servicing rights define classes servicing rights based availability market inputs manner manage risks servicing assets liabilities manage servicing rights reportable operating segment level sufficient market inputs exist determine fair value recognized servicing assets servicing liabilities notes consolidated financial statements gmac llc • form 10k following table summarizes activity related mortgage servicing rights msrs carried fair value changes fair value due changes valuation inputs assumptions used valuation models include changes due revaluation model benchmarking exercise line item also includes changes fair value due change valuation assumptions andor model calculations changes fair value primarily include accretion present value discount related forecasted cash flows economic runoff portfolio well foreign currency adjustments extinguishment mortgage servicing rights related cleanup calls securitization transactions key economic assumptions sensitivity current fair value msrs immediate 10 20 adverse changes assumptions follows sensitivities hypothetical considered caution figures indicate changes fair value based 10 variation assumptions generally cannot extrapolated relationship change assumptions change fair value may linear also effect variation particular assumption fair value calculated without changing assumption reality changes one factor may result changes another eg increased market interest rates may result lower prepayments increased credit losses could magnify counteract sensitivities show change asset balances show expected change fair value instruments used manage interest rates prepayment risks associated assets servicing rights’ primary risk interest rate risk resulting impact prepayments significant decline interest rates could lead higher expected prepayments could reduce value mortgage servicing rights economically hedge income statement impact risks derivative nonderivative financial instruments include interest rate swaps caps floors options purchase items futures forward contracts andor purchasing selling us treasury principalonly securities december 31 2006 fair value derivative financial instruments nonderivative financial instruments used mitigate risks amounted 159 million 13 billion respectively change fair value derivative financial instruments amounted loss 281 million year ended december 31 2006 included servicing asset valuation hedge activities net consolidated statement income components servicing fees follows year ended december 31 2006 december 31 2006 pledged msrs 24 billion collateral borrowings following table summarizes activity related msrs prior january 1 2006 carried lower cost fair value december 31 2005 632 capmark mortgage servicing rights net transferred assets held sale consolidated balance sheet notes consolidated financial statements gmac llc • form 10k following table summarizes activity related changes valuation allowance impairment msrs changes valuation allowance reflected component amortization impairment servicing rights consolidated statement income 2005 2004 recorded temporary impairment 55 million 453 million respectively reducing msrs’ gross carrying value valuation allowance amount based statistical analysis historical changes mortgage market interest rates determine amount msrs asset value increase remote probability occurring adjustment valuation allowance reduces maximum potential future increase msrs’ carrying value lower cost market accounting impact net carrying value asset earnings active risk management program hedge value msrs management program contemplates use derivative financial instruments treasury securities principalonly securities experience changes value offsetting msrs response changes market interest rates see note 15 discussion derivative financial instruments used hedge mortgage servicing rights us treasury securities used connection risk management strategy designated trading available sale december 31 2005 21 billion us treasury securities outstanding related risk management activity reflected investment securities principalonly securities designated trading december 31 2005 596 million principalonly securities related risk management activity key economic assumptions sensitivity current fair value msrs immediate 10 20 adverse changes assumptions follows sensitivities hypothetical considered caution figures indicate changes fair value based 10 variation assumptions generally cannot extrapolated relationship change assumptions change fair value may linear also effect variation particular assumption fair value calculated without changing assumption reality changes one factor may result changes another eg increased market interest rates may result lower prepayments increased credit losses could magnify counteract sensitivities show change asset balances show expected change fair value instruments used manage interest rate prepayment risks associated assets 10 premiums insurance receivables premiums insurance receivables consisted following net 1 allowance uncollectible reinsurance recoverable paid losses december 31 2006 2005 respectively b net 7 8 allowance uncollectible premiums receivable december 31 2006 2005 respectively notes consolidated financial statements gmac llc • form 10k 11 assets consisted represents credit enhancement form cash reserves various securitization transactions executed november 22 2006 710 cash reserve deposits transferred gm part distribution certain securitized us lease assets refer note 18 consolidated financial statements description distribution b includes residential real estate investments 2 billion 13 billion related accumulated depreciation 13 9 years ended december 31 2006 2005 respectively c represents cash collection customer payments securitized receivables funds distributed investors related secured debt matures aggregate amortization expense intangible assets 16 17 including 1 8 capmark years ended december 31 2006 2005 respectively amortization expense expected average 10 per year next five fiscal years addition 2006 commercial finance group 13 intangible assets deemed impaired subsequently written third quarter 2006 notes consolidated financial statements gmac llc • form 10k changes carrying amounts goodwill periods indicated follows fourth quarter 2005 completed goodwill impairment analysis commercial finance group cfg reporting unit accordance sfas 142 cfg reporting unit’s goodwill related primarily 1999 acquisition bank new york’s commercial finance business assistance third party management performed assessment fair value cfg reporting unit fair value cfg reporting unit determined using average internally developed discounted cash flow methodology valuation derived recent market precedent transactions based assessment determined indicators impairment existed carrying amount cfg reporting unit including goodwill exceeded fair value indicators largely attributed current competitive conditions industry cfg operates relative level liquidity market cfg reporting unit experiencing declining margins difficult environment growth anticipated previous forecasts carrying amount cfg reporting unit including goodwill whole exceeded fair value management assessed fair value cfg reporting unit’s individual assets including identifiable intangible assets liabilities derive implied fair value cfg reporting unit’s goodwill based assessment recorded impairment charge 648 fourth quarter 2005 determined carrying value cfg reporting unit’s goodwill greater implied fair value addition includes impairment losses 64 related former gmac commercial mortgage business b december 31 2005 59 goodwill former gmac commercial mortgage business transferred assets held sale consolidated balance sheet c following attrition key personnel around middle year commercial finance reporting unit initiated goodwill impairment test accordance sfas 142 outside normal fourth quarter cycle necessary precedent test thorough review business new leadership particular focus longterm strategy result review operating divisions reorganized decision made implement different exit strategy workout portfolio exit product lines lower returns decisions significant impact expected asset levels growth rate assumptions used estimate fair value business particular analysis performed third quarter incorporates management’s decision discontinue activity equipment finance business portfolio 1 billion representing approximately 20 commercial finance business’s average commercial loan portfolio 2006 consistent prior analysis fair value commercial finance business determined using internally developed discounted cash flow analysis based fiveyear projected net income market driven terminal value multiple based upon results assessment concluded carrying value goodwill exceeded fair value resulting impairment loss 827 2006 notes consolidated financial statements gmac llc • form 10k 12 debt presentation debt following table classified domestic foreign based location office recording transaction weighted average interest rates include effects derivative financial instruments designated hedges debt b repurchase agreements consist secured financing arrangements third parties rescap primarily includes nonbank secured borrowings well notes payable gm refer note 18 consolidated financial statements details c issued warrants subscribe 300 aggregate principal amount 65 notes due october 15 2009 warrants entitle holder purchase us aggregate principal amount par plus accrued interest warrants exercisable including october 15 2007 december 2003 february 2004 125 warrants exercised year resulting 50 aggregate principal amount warrants remaining outstanding adjust designated fixed rate debt fair value accordance sfas 133 following summarizes assets restricted collateral payment related debt obligation primarily arising securitization transactions accounted secured borrowings repurchase agreements included part secured debt repurchase agreements 115 99 billion pledged assets reflected investment securities collateral approximately amount debt december 31 2006 2005 respectively b november 22 2006 gm assumed 101 billion debt secured 126 billion net operating lease assets gmac distributed gm refer note 18 consolidated financial statements discussion distribution time repurchase previously issued debt part cash liquidity management strategy october 2006 successfully completed debt tender offer paying 1 billion retire portion deferred interest debentures resulting 135 million aftertax loss generate significant interest savings going forward addition december 15 2006 entered agreement sell 1 billion senior unsecured notes due december 15 2011 notes consolidated financial statements gmac llc • form 10k following table presents scheduled maturity longterm debt december 31 2006 assuming early redemptions occur actual payment secured debt may vary based payment activity related secured assets debt issues totaling 14628 redeemable par option anytime prior scheduled maturity dates latest november 2049 achieve desired balance fixed variable rate debt utilize interest rate swap interest rate cap agreements use derivative financial instruments effect synthetically converting 533 billion 1473 billion fixed rate debt variable rate obligations 401 billion 901 billion variable rate debt fixed rate obligations december 31 2006 addition certain debt obligations denominated currencies currency issuing country foreign currency swap agreements used hedge exposure changes exchange rates obligations notes consolidated financial statements gmac llc • form 10k liquidity facilities liquidity facilities represent additional funding sources required financial institutions providing uncommitted facilities legally obligated fund facilities following table summarizes liquidity facilities maintained us entire 76 available use us 08 available use gmac uk plc 08 available use gmac international finance bv europe b rescap maintains 35 syndicated bank facilities consisting 175 syndicated term loan committed july 2008 875 million syndicated line credit committed july 2008 875 million syndicated line credit committed july 2007 c relates new center asset trust ncat special purpose entity administered us purpose funding assets part securitization funding programs entity funds assets primarily issuance assetbacked commercial paper represents important source liquidity us december 31 2006 ncat commercial paper outstanding 95 consolidated balance sheet consists primarily credit facilities supporting operations canada europe latin america asiapacific e august 2006 closed threeyear 10 billion facility subsidiary citigroup f rescap’s primary sources secured financing include wholeloan sales secured aggregation facilities assetbacked commercial paper facilities repurchase agreements addition rescap’s collateralized borrowings securitized trusts totaled 533 561 december 31 2006 2005 respectively g consists primarily commercial finance secured funding facilities syndicated multicurrency global facility includes 435 billion fiveyear facility expires june 2008 325 billion 364day facility expires june 2007 364day facility includes term option exercised us prior expiration carries oneyear term additionally leverage covenant liquidity facilities certain funding facilities restricts ratio consolidated borrowed funds excluding certain obligations bankruptcy remote special purpose entities consolidated net worth greater 1101 certain conditions specifically covenant applicable last day fiscal quarter fiscal quarter change rating occurs times senior unsecured longterm debt outstanding without thirdparty enhancement rated bbb less standard poor’s baa1 less moody’s leverage ratio covenant 1081 december 31 2006 therefore compliance covenant notes consolidated financial statements gmac llc • form 10k 13 reserves insurance losses loss adjustment expenses following table provides reconciliation activity reserves insurance losses loss adjustment expenses incurred losses loss adjustment expenses 2006 2005 reduced 93 116 respectively result decreases prior years’ reserve estimates certain reinsurance private passenger automobile coverages united states internationally addition 2006 included reduction reserves related insurance program transferred gm 2004 incurred losses loss adjustment expenses included increases prior years’ reserve estimates based additional knowledge available us 2004 addition 2004 also includes 29 related reinsurance agreements decided commute b reflected net reinsurance recoveries totaling 306 342 312 years ended december 31 2006 2005 2004 respectively c effects exchange rate changes years ended december 31 2006 2005 2004 includes exposure asbestos environmental claims reinsurance general liability commercial multiple peril homeowners’ workers’ compensation claims reported claim activity date significant net reserves loss adjustment expenses matters 5 6 8 december 31 2006 2005 2004 respectively 14 accrued expenses liabilities accrued expenses liabilities consisted reduction reflects 801 liabilities related us based gm sponsored postretirement programs assumed gm part sales transactions 15 derivative instruments hedging activities enter interest rate foreign currency futures forwards options swaps connection market risk management activities derivative instruments used manage interest rate risk relating specific groups assets liabilities including investment securities loans held sale mortgage servicing rights debts deposits well offbalance sheet securitizations addition foreign exchange contracts used hedge foreign currency denominated debt foreign exchange transactions accordance sfas 133 amended interpreted record derivative financial instruments consolidated balance sheet assets liabilities fair value changes fair value accounted depending use derivative financial instruments whether qualifies hedge accounting treatment primary objective utilizing derivative financial instruments manage market risk volatility associated interest rate foreign currency risks related assets liabilities automotive mortgage operations managing volatility enables us price finance mortgage offerings competitive rates minimize impact market risk earnings strategies applied decentralized basis respective automotive finance mortgage operations consistent level market risk managed subject various limits controls local unit consolidated level one key goals strategy modify asset liability interest rate mix including assets liabilities associated securitization transactions may notes consolidated financial statements gmac llc • form 10k recorded offbalance sheet special purpose entities addition use derivative financial instruments mitigate risk changes fair values mortgage loans held sale mortgage servicing rights derivative financial instruments also utilized manage foreign currency exposure related foreign currency denominated debt following summarizes derivative activity based accounting hedge designation fair value hedges fair value hedges primarily include hedges fixedrate debt loans held sale • debt obligations interest rate swaps used modify exposure interest rate risk converting fixed rate debt floating rate generally individual swaps designated hedges specific debt time issuance terms swap matching terms underlying debt terms swap designed match terms debt significant portion debt obligation hedging relationships receive shortcut treatment sfas 133 resulting assumption hedge ineffectiveness • loans held sale use derivative financial instruments hedge exposure risk associated mortgage loans held sale loans funded generally sold secondary market various investors often mortgagebacked securities sponsored fannie mae freddie mac ginnie mae mortgage loans eligible agency sponsored securitization sold public private securitization transactions whole loan sales primary risk associated closed loans awaiting sale change fair value loans due fluctuations interest rates primary strategies protect risk selling loans mortgagebacked securities forward investors using mandatory optional forward commitments use interest rate swaps hedge periods closed daily representative daily hedge portfolio rebalancing due new loan funding sales effectiveness assessed using historical daily hedge period data assess hedge effectiveness employing statisticalbased approach must meet thresholds rsquared slope fstatistic cash flow hedges enter derivative financial instrument contracts hedge exposure variability cash flows related floating rate foreign currency financial instruments interest rate swaps used modify exposure variability expected future cash flows attributable variable rate debt currency swaps forwards used hedge foreign exchange exposure foreign currency denominated debt converting funding currency assets financed similar fair value hedges swaps generally concurrent debt issuance terms swap matching terms underlying debt use derivative financial instruments hedge exposure variability expected cash flows associated future issuance bonds payable related securitizations mortgage loans held investment primary risk associated transactions variability issuance price debt securities primary strategy protect risk selling loans mortgagebacked securities forward using mandatory optional forward commitments upon issuance debt securities hedging relationship terminates changes fair value hedging instrument reclassified comprehensive income component equity earnings term debt securities adjustment yield economic hedges designated accounting hedges utilize certain derivative financial instruments manage interest rate price foreign exchange risks along value msr’s mortgage loans qualify designated hedges sfas 133 derivatives designated accounting hedges changes fair value derivative instruments recognized earnings period • mortgage servicing rights enter combination derivative contracts economic hedges servicing rights associated groups similar mortgage loans derivatives include interest rate caps floors futures options futures mortgagebacked security options interest rate swaps swaptions maturities instruments range six months twenty years entered written options us treasury futures notional amounts lower purchased options futures purchased option coverage strike price less equal corresponding written option coverage thereby mitigating loss exposure required deposit cash margin accounts maintained counterparties unrealized losses future contracts addition following describes uses derivatives qualify elect apply hedge accounting • offbalance sheet securitization activities enter interest rate swaps facilitate securitization transactions underlying receivables sold nonconsolidated qualified special purpose entity qspe underlying assets carried nonconsolidated entity interest rate swaps qualify hedge accounting treatment • foreign currency debt elected treat currency swaps used convert foreign denominated debt back functional currency floating rate hedges accounting purposes currency swaps similar foreign currency cash flow hedges described foregoing designated hedges changes fair values currency swaps substantially offset notes consolidated financial statements gmac llc • form 10k foreign currency revaluation gains losses underlying debt • mortgage related securities use interest rate options futures swaps caps floors mitigate risk related mortgage related securities classified trading • callable debt obligations enter cancellable interest rate swaps economic hedges certain callable fixed rate debt connection market risk management policy following table summarizes pretax earnings effect type hedge classification segregated asset liability hedged amount represents difference changes fair values currency swap net revaluation related foreign denominated debt following table presents additional information related derivative financial instruments estimated occur next 12 months derivative financial instruments contain element credit risk counterparties unable meet terms agreements credit risk associated derivative financial instruments measured net replacement cost counterparties owe us contract completely fail perform terms contracts assuming recoveries underlying collateral measured market value derivative financial instrument december 31 2006 2005 market value derivative financial instruments asset receivable position perspective 25 billion 30 billion including accrued interest 06 billion 07 billion respectively minimize credit risk exposure limiting counterparties major banks financial institutions meet established credit guidelines december 31 2006 74 exposure counterparties fitch rating higher equivalent rating another rating agency counterparty rated fitch compared 84 december 31 2005 additionally reduce credit risk majority derivative financial instruments entering legally enforceable agreements permit closeout netting transactions counterparty upon occurrence certain events mitigate risk counterparty default maintain collateral agreements certain counterparties agreements require parties maintain cash deposits event fair values derivative financial instruments meet established thresholds placed cash deposits totaling 206 million 125 million december 31 2006 2005 respectively accounts maintained counterparties received cash deposits counterparties totaling 215 million 247 million december 31 2006 2005 respectively cash deposits placed received included consolidated balance sheet assets accrued expenses liabilities respectively notes consolidated financial statements gmac llc • form 10k 16 pension postretirement benefits pension consummation sale transactions number employees eligible participate various domestic foreign pension plans gm participating employer plans gm allocated us portion pension expense made prorata basis impacted various assumptions discount rate return plan assets etc gm utilized determining pension obligation detailed information gm’s pension plans found gm annual report form 10k filed separately sec report deemed incorporated filings sec act exchange act certain employees primarily rescap commercial finance insurance international automotive finance groups participate separate retirement plans provide pension payments eligible employees upon retirement based factors length service salary 2006 gm announced effective immediately would freeze accrued pension benefits us salaried employees furthermore effective november 30 2006 upon completion sale employees longer eligible participate pension plans also pursuant purchase sale agreement transferred froze terminated significant portion nongm sponsored defined benefit plans 2006 december 31 2006 pension obligation lower previous periods listing significant 2006 pension transactions discussed • second quarter approved freezing benefit accrual defined benefit retirement plan december 31 2006 covering primarily rescap employees participant benefits accrue subsequent date new entrants permitted plan result developments curtailment gain approximately 43 million recorded compensation benefits expense consolidated statement income • third quarter gmac commercial finance uk gmac commercial finance canada announced intentions terminate retirement plans resulting curtailment loss approximately 9 million expense recorded compensation benefits expense consolidated statement income • fourth quarter expensed payments plans approximately 48 million fully fund gmac portion gm uk pension plans payments required section 75 debt obligation uk pension act 2004 recorded compensation benefits expense consolidated statement income • transferred gm financial liability associated gmac portion certain gm plans canada november 30 2006 2005 gmac commercial finance terminated gmac commercial credit llc us retirement plan resulting extinguishment approximately 11 million accumulated benefits following summarizes information relating nongm sponsored plans net pension expense recorded compensation benefits expense consolidated statement income includes curtailment gains losses transactions described net pension expense employees participated gm sponsored plans totaled 80 million 60 million 50 million 2006 2005 2004 respectively net pension expense nongm sponsored plans totaled 3 million 28 million 44 million 2006 2005 2004 respectively based termination eligibility gm sponsored plans transactions completed change defined benefit plans discussed anticipate net pension expense significant future years contributions nongm sponsored pension plans 2006 approximately 4 million expect contribution levels remain minimal defined benefit plans worldwide 2007 expected rate return plan assets estimate determine summing expected inflation expected real rate return stocks bonds based allocation percentages within trust weighted average assumptions nongm sponsored pension plans follows postretirement benefits certain subsidiaries participated various postretirement medical dental vision life insurance plans gm subsidiaries participated separately maintained postretirement plans benefits funded incurred general assets previously accrued postretirement benefit costs active service period employees date full eligibility notes consolidated financial statements gmac llc • form 10k benefits effective november 30 2006 upon completion sale employees longer eligible participate gm’s postretirement plans prior sale gm agreed assume retain approximately 801 million liabilities related us based gm sponsored postretirement benefit programs employees well approximately 302 million related deferred tax assets net amount recorded capital contribution provided certain amounts associated estimated future postretirement benefits pensions characterized amounts postretirement benefits notwithstanding recording amounts use terms admit otherwise acknowledge amounts existing postretirement benefit plans pensions represent legally enforceable liabilities postretirement benefits expense recorded compensation benefits expense consolidated statement income totaled 35 million 2006 lower 88 million 72 million 2005 2004 respectively primarily due gm’s restructuring benefit plans transactions mentioned expect postretirement expense minimal future years defined contribution plan significant number employees covered defined contribution plans employer contributions vary based criteria specific individual plan amounted 40 million 41 million 39 million 2006 2005 2004 respectively recorded compensation benefit expenses consolidated statement income result sale associated reorganization employee benefit plans number employees covered defined contribution plans required employer contributions expected increase 2007 17 income taxes effective november 28 2006 gmac along certain us subsidiaries became disregarded passthrough entities us federal income tax purposes income taxes incurred converting entities provided november 30 2006 required tax sharing agreement gm gmac subsequent november 30 2006 income taxes provided entities ceased taxable entities exception local jurisdictions continue tax llcs partnerships due change tax status net deferred tax liability eliminated income tax expense totaling 791 million members report share taxable income respective income tax returns banking insurance foreign subsidiaries generally corporations continue subject provide us federal foreign income taxes income tax expense related corporations included income tax expense along miscellaneous state local franchise taxes gmac certain subsidiaries significant components income tax expense follows notes consolidated financial statements gmac llc • form 10k reconciliation statutory us federal income tax rate effective tax rate applicable income change tax status shown following table 2004 principally reflects benefit favorable settlements various tax authorities us international well impact changes reserve requirements deferred tax assets liabilities result differences assets liabilities measured financial reporting purposes measured income tax return purposes terms purchase sale agreement gm fim holdings llc distribution lease assets assumption gm certain postretirement benefits resulted reduction deferred tax liabilities assets 1845 million 302 million respectively additionally change tax status resulted 791 million reduction income tax expense related elimination deferred tax liabilities assets 1486 million 695 million respectively significant components deferred tax assets liabilities consideration adjustments reflected following table gmac commercial mortgage’s net deferred tax asset 169 million transferred liabilities related assets held sale consolidated balance sheet december 31 2005 december 31 2006 net assets flowthrough entities exceeded tax basis approximately 2460 million primarily related lease transactions mortgage servicing rights sales finance receivables notes consolidated financial statements gmac llc • form 10k foreign pretax income totaled 336 million 2006 988 million 2005 1003 million 2004 foreign pretax income subject us taxation effectively repatriated entities disregarded us federal income tax purposes responsibility members provide federal income taxes undistributed earnings foreign subsidiaries extent earnings deemed permanently reinvested outside united states banking insurance subsidiaries continue subject us federal income taxes provide federal income taxes undistributed earnings foreign subsidiaries except extent earnings indefinitely reinvested outside united states december 31 2006 4388 million accumulated undistributed earnings foreign subsidiaries indefinitely reinvested quantification deferred tax liability associated indefinitely reinvested earnings practicable eleven months ending november 30 2006 years ending 2005 2004 gm consolidated federal net operating losses gm utilized prior year federal carryback potential remaining net operating losses carried forward consolidated federal net operating losses also created charitable contribution deduction foreign tax credit carryforwards pursuant tax sharing agreement gm us consolidated allocation tax attributes gm time period’s federal net operating losses due certain loss subsidiaries charitable contributions deduction foreign tax credits carried forward subsidiaries remain separate us tax paying entities company certain subsidiaries converted limited liability companies elected treated passthrough entities intercompany receivables gm related tax attributes totaling 11 billion dividended gm november 30 2006 comparative purposes december 31 2005 intercompany tax receivable gm 690 million receivable comprised federal net operating loss carryforward 611 million charitable contributions carryforward 12 million foreign tax credit carryforward 67 million terms purchase sale agreement gm fim holdings llc tax sharing agreement gm us terminated november 30 2006 terms sale agreement stipulate gm indemnify us contingent tax liabilities related periods prior november 30 2006 would excess established sale date additionally net tax related assets consisting tax deposits claims contingencies november 30 2006 converting entities assumed transferred gm equity totaling 107 million open tax years primarily 2001 current various us foreign taxing jurisdictions open years contain matters could subject differing interpretations applicable tax laws regulations related timing inclusion revenue expenses sustainability income tax credits given audit cycle established liability approximately 375 million matters amount loss probable estimable amount includes liability related banking insurance foreign subsidiaries continue subject us foreign income taxes well liability converting entities related state local jurisdictions previously filed separate company taxpayer amount liability based management’s best estimate given history similar matters interpretations current laws regulations june 2006 fasb issued fin 48 adoption interpretation january 1 2007 expected material impact consolidated financial position notes consolidated financial statements gmac llc • form 10k 18 related party transactions balance sheet summary balance sheet effect transactions gm fim holdings affiliated companies follows november 2006 gmac retained investment note secured operating lease assets transferred gm part transfer gmac provided note trust wholly owned subsidiary gm note classified investment securities consolidated balance sheet b represents wholesale financing term loans certain dealerships wholly owned gm interest c includes net balance vehicles buildings equipment classified operating lease assets leased gm affiliated entities includes borrowing arrangements gm opel arrangements related funding gm companyowned vehicles rental car vehicles awaiting sale auction funding sale gm vehicles use overseas distributors amounts related gm trade supplier finance program addition provide wholesale financing gm vehicles gm retains title vehicles consigned us dealers uk italy financing gm remains outstanding title transferred dealers amount financing provided gm arrangement varies based inventory levels e 2000 gm entered 16year lease arrangement agreed fund capitalize improvements three michigan properties leased gm totaling 12 billion 2004 lease arrangement increased 13 billion total construction advances december 30 2005 971 october 31 2006 assets transferred gm form noncash dividend subsequently lease arrangement terminated payments advances made balance december 31 2006 represents argonaut dealership leases f november 2006 gmac transferred nol tax receivables gm entities converting llc nonconverting entities amount reclassified deferred income taxes consolidated balance sheet december 31 2006 balance represents overpayment taxes included accrued expenses liabilities consolidated balance sheet g represents certain servicing activities related automotive leases distributed gm november 22 2006 h includes receivables payables gm follows wholesale settlements payable gm subvention receivables due gm receivables payables due tofrom gm included accrued expenses liabilities debt respectively represents proceeds preferred interests issued november held wholly owned subsidiary gm 1555 fim holdings 555 related accrued dividends 21 redemption premium 64 j amount includes cash dividends 48 billion noncash dividends 49 billion 2006 fourth quarter 2006 connection sale transactions gmac made 78 billion dividends gm comprised following cash dividend 27 billion representing onetime distribution gm primarily reflect increase gmac’s equity resulting elimination portion net deferred tax liabilities arising conversion gmac certain subsidiaries limited liability company ii certain assets respect automotive leases owned gmac affiliates net book value approximately 40 billion related deferred tax liabilities 18 billion iii certain michigan properties carrying value approximately 12 billion gm iv intercompany receivables gm related tax attributes 11 billion v net contingent tax assets 491 vi miscellaneous transactions k amount comprised following approximately 801 liabilities related us canadian based gm sponsored postretirement programs related deferred tax assets 302 ii contingent tax liabilities 384 assumed gm iii deferred tax assets transferred gm 68 notes consolidated financial statements gmac llc • form 10k october 2005 repurchased operating lease assets related deferred tax liabilities gm previously sold purchase sale agreement leases repurchased fair market value however assets liabilities transferred carrying value transaction related parties difference net assets acquired proceeds remitted gm reflected reduction stockholder’s equity retail lease contracts acquired us included rate residual subvention gm payable directly indirectly gm dealers percent total new retail installment lease contracts acquired follows increase 2006 primarily due 72hour sale occurred july 2006 contracts sold 0 financing 72 months gm also provides payment guarantees certain commercial assets outstanding certain thirdparty customers december 31 2006 december 31 2005 commercial obligations guaranteed gm 216 million 934 million respectively addition consignment arrangement gm commercial inventories europe december 31 2006 2005 commercial inventories related arrangement 151 million 108 million respectively reflected assets consolidated balance sheet income statement summary income statement effect transactions gm affiliated companies follows represents total amount residual support risk sharing paid invoiced residual support risk sharing programs deferred revenue related settlement residual support risk sharing obligations portion lease portfolio described b gm sponsors lease pullahead programs whereby consumers encouraged terminate lease contracts early conjunction acquisition new gm vehicle customer’s remaining payment obligation waived certain programs gm compensates us waived payments adjusted based remarketing results associated underlying vehicle c settlement terms related wholesale financing certain gm products shipment date extent wholesale settlements gm made prior expiration transit receive interest gm represents income loss related derivative transactions entered gm counterparty e gmac canada limited administered operating lease receivables behalf gm canada limited gmcl received servicing fee included income october 2005 gmac canada limited longer administers operating lease receivables f receive servicing fee gm related resale rental car repurchases december 31 2006 program terminated g represents servicing income related automotive leases distributed gm november 22 2006 h agreement gm provides reimbursement certain selling expenses incurred us offlease vehicles sold gm auction gm provides us certain services facilities services reimburse included amount rental payments primary executive administrative offices located renaissance center detroit michigan december 2006 signed lease continue renting facilities operating expenses associated parking november 30 2016 notes consolidated financial statements gmac llc • form 10k operating lease residuals marketing incentive gm may sponsor residual support programs way lower customer monthly payments residual support programs customer’s contractual residual value adjusted standard residual values historically gm reimbursed us remarketing sales proceeds less customer’s contractual residual value limited standard residual value addition residual support programs gm also participated risk sharing arrangement whereby gm shared equally residual losses extent remarketing proceeds standard residual values limited floor connection sale transactions gm settled estimated liabilities respect residual support risk sharing portion operating lease portfolio entire us balloon retail receivables portfolio series lumpsum payments negotiated amount totaling approximately 14 billion agreed gm leases balloon contracts paid us december 31 2006 maximum amount would paid residual support risk sharing arrangements gm portion portfolios totaled approximately 33 billion amount would paid unlikely event proceeds entire portfolios lease assets balloon retail receivables would lower contractual residual value gmac’s standard residual rates payments recorded deferred amount accrued expenses liabilities consolidated balance sheet treated sales proceeds underlying assets contracts terminate vehicles sold auction recognizing gain loss sale certain assets respect automotive leases subject settlement net book value 40 billion related deferred tax liabilities 18 billion distributed gm prior sale transactions part transfer automotive lease assets gm gmac relinquished rights residual support risk sharing payments otherwise would due gm lease assets addition relates us lease originations us balloon retail contract originations occurring april 30 2006 remained gmac consummation sale transactions gm agreed begin payment present value expected residual support owed us time contract origination opposed contract termination time sale related vehicle residual support amount gm actually owes us “trued up” leases actually terminate cases estimate incorrect gm may obligated pay us may obligated reimburse gm terms residual support programs affected contracts originated december 2006 gm paid agreed pay us total 486 million 2006 based december 31 2006 outstanding us operating lease portfolio additional maximum amount could paid gm residual support programs approximately 276 million would paid unlikely event proceeds entire portfolio lease assets would lower contractual residual value gmac’s standard residual rates based december 31 2006 outstanding us operating lease portfolio maximum amount could paid risk sharing arrangements approximately 339 million would paid unlikely event proceeds outstanding lease vehicles would lower gmac’s standard residual rates amounts table represent amounts paid past three years residual support risk sharing programs distribution operating lease assets connection sale gm 51 percent interest gmac november 22 2006 gmac transferred gm certain gmac us lease assets along related secured debt assets described notes 8 11 12 respectively gmac retained investment note balance december 31 2006 471 million secured lease assets distributed gm described note 5 gmac continue service assets related secured debt behalf gm receive fee service securitization transactions gmac obligated servicer repurchase lease asset breach covenants securitization documents addition number transactions securitizing lease assets transferred gm trusts issued one series floating rate debt obligations entered primary derivative transactions remove market risk associated funding fixed payment lease assets floating interest rate debt facilitate securitization transactions gmac entered secondary derivative transactions primary derivative counterparties essentially offsetting primary derivatives part distribution gm assumed rights obligations primary derivative gmac retained secondary leaving companies exposed market value movements respective derivatives gmac gm subsequently entered derivative transactions intended offset exposure party component primary secondary derivatives exclusivity arrangement gm gmac entered several service agreements codify mutually beneficial historical relationship gm gmac connection agreements gmac granted 10year exclusivity right covering us subvented automotive consumer business return exclusivity gmac pay gm annual exclusivity fee 75 million committed provide financing gm customers accordance historical practices specifically connection us consumer financing agreement gmac must meet certain targets respect consumer retail lease financings new gm vehicles contractual commitments met gm may notes consolidated financial statements gmac llc • form 10k assess financial penalties gmac even rescind gmac’s exclusivity rights agreement provides gmac ample flexibility provide gm required financing support without compromising gmac’s underwriting standards addition entered various services agreements gm designed document maintain current historical relationship us required pay gm fees connection certain agreements related financing gm consumers dealers certain parts world royalty arrangement certain insurance products gm gmac entered intellectual property license agreement right gmac use gm name certain insurance products exchange gmac pay gm minimum annual guaranteed royalty fee 15 million gm option gm retains option 10 years repurchase certain assets us related automotive finance operations north american operations international operations gm’s exercise option conditional gm’s credit rating investment grade higher credit rating call option price calculated higher fair market value ii 95 times consolidated net income automotive finance operations either calendar year call option exercised calendar year immediately following year call option exercised revolving line credit addition financing arrangements summarized foregoing table gm 4 billion revolving line credit us expired september 15 2006 renewed 19 comprehensive income comprehensive income composed net income comprehensive income includes aftertax change unrealized gains losses available sale securities foreign currency translation adjustments cash flow hedging activities following table presents components annual activity comprehensive income primarily represents aftertax difference fair value amortized cost available sale securities portfolio b includes aftertax gains losses foreign currency translation operations functional currency us dollar net change amounts net tax benefit 37 35 years ended december 31 2006 2005 respectively tax expense 104 year ended december 31 2004 notes consolidated financial statements gmac llc • form 10k net changes following table represent sum net unrealized gains losses available sale securities net unrealized gains losses cash flow hedges respective reclassification adjustments reclassification adjustments amounts recognized net income current year would reported comprehensive income previous years 2006 amounts also include cumulative effect change accounting principle due adoption sfas 156 sfas 156 upon initial adoption permitted one time reclassification availableforsale securities trading securities identified offsetting entity’s exposure liabilities servicer elects subsequently measure fair value net tax expense 107 2006 tax benefit 6 2005 tax expense 67 2004 b net tax expense 351 2006 42 2005 tax benefit 25 2004 c net tax benefit 121 2006 tax expense 23 2005 142 2004 net tax benefit 1 2006 2005 2004 20 fair value financial instruments developed following fair value estimates utilization available market information appropriate valuation methodologies however considerable judgment required interpreting market data develop estimates fair value estimates necessarily indicative amounts could realized would paid current market exchange effect using different market assumptions estimation methodologies could material estimated fair values fair value information presented herein based information available december 31 2006 2005 although management aware factors would significantly affect estimated fair value amounts updated since dates therefore current estimates fair value dates subsequent december 31 2006 2005 could differ significantly amounts following describes methodologies assumptions used determine fair value respective classes financial instruments investment securities bonds equity securities notes available sale investment securities carried fair value primarily based quoted market prices fair value mortgagerelated trading securities based market quotes extent available discounted using market prepayment assumptions discount rates external quotes available valuations based internal valuation models using market based assumptions held maturity investment securities carried amortized cost fair value held maturity investment securities based valuation models using market based assumptions interests securitization trusts carried fair value based expected cash flows discounted current market rates loans held sale fair value loans held sale based upon actual prices received recent sales loans securities investors projected prices obtained investor indications considering interest rates loan type credit quality finance receivables loans net fair value finance receivables estimated discounting future cash flows using applicable spreads approximate current rates applicable category finance receivables carrying value wholesale receivables automotive mortgage lending receivables interest rates reset shortterm basis applicable market indices assumed approximate fair value either shortterm nature interest rate adjustment feature fair value mortgage loans held investment based discounted cash flows using interest rates currently offered loans similar terms borrowers similar credit quality net realizable value collateral andor estimated sales price based quoted market prices available actual prices received comparable sales mortgage loans investors notes receivable gm fair value estimated discounting future cash flows using applicable spreads approximate current rates applicable certain categories financing assets derivative assets liabilities fair value interest rate swaps estimated based discounted expected cash flows using quoted market interest rates fair value caps written purchased options mortgagerelated interest rate swaps based upon quoted market prices brokerdealer quotes fair value foreign currency swaps based discounted expected cash flows using market exchange rates remaining term agreement notes consolidated financial statements gmac llc • form 10k debt fair value debt determined using quoted market prices similar issues available based current rates offered us debt similar remaining maturities commercial paper master notes demand notes original term less 270 days therefore carrying amount liabilities considered approximate fair value bank deposits escrows bank deposits escrows deposits represent certain consumer bank deposits well mortgage escrow deposits fair value deposits stated maturity equal carrying amount fair value fixedmaturity deposits estimated discounting cash flows using currently offered rates deposits similar maturities following table presents carrying estimated fair value assets liabilities considered financial instruments statements financial accounting standards 107 disclosures fair value financial instruments sfas 107 accordingly certain items considered financial instruments excluded table debt includes deferred interest zero coupon bonds 353 813 2006 2005 respectively 21 variable interest entities following describes variable interest entities consolidated significant variable interest described interpretation 46 consolidation variable interest entities fin 46r automotive finance receivables certain securitization transactions transfer consumer finance receivables wholesale lines credit banksponsored multiseller commercial paper conduits provide funding source us well transferors conduit fund purchase receivables issuance commercial paper total assets outstanding banksponsored conduits approximated 121 billion december 31 2006 variable interests conduits considered primary beneficiary retain majority expected losses returns maximum exposure loss result involvement nonconsolidated variable interest entities 109 million would incurred event complete loss assets transferred mortgage warehouse funding rescap operations transfer residential mortgage loans lending receivables home equity loans lines credit pending permanent sale securitization various structured finance arrangements order provide funds origination purchase future loans structured finance arrangements include transfers warehouse funding entities including gmac banksponsored commercial paper conduits transfers assets facility accounted either sales offbalance sheet secured financings onbalance sheet based provisions sfas 140 however either case creditors facilities legal recourse general credit warehouse funding entities represent variable interest entities fin 46r management determined certain mortgage warehouse funding facilities primary beneficiary consolidate entities accordance fin 46r assets residential mortgage warehouse entities totaled 145 billion december 31 2006 majority included loans held sale consolidated balance sheet beneficial interest holders variable interest entities legal recourse general credit residential mortgage loan alliances rescap invested strategic alliances several mortgage loan originators alliances may include common preferred equity investments working capital notes consolidated financial statements gmac llc • form 10k subordinated lending warrants addition warehouse lending arrangements management determined majority expected losses returns consolidation appropriate total assets alliances 158 million december 31 2006 maximum exposure loss alliances including commitments lend additional funds purchase loans abovemarket rates 110 million december 31 2006 construction real estate lending use special purpose entity finance construction lending receivables special purpose entity purchases holds receivables funds majority purchases financing obtained thirdparty assetbacked commercial paper conduits results variable interest analysis indicate primary beneficiary consolidate entity assets entity totaled 21 billion 16 billion december 31 2006 2005 respectively included finance receivables loans net unearned income consolidated balance sheet beneficial interest holders variable interest entity legal recourse general credit subordinated real estate lending arrangements certain entities created develop land construct residential homes management determined majority expected losses returns consolidation appropriate total assets entities 616 million december 31 2006 201 million represents maximum exposure loss warehouse lending facility transfer mortgage warehouse lending receivables 100 owned spe sells senior participation interest receivables unconsolidated qspe funds purchase participation interest spe financing obtained thirdparty assetbacked commercial paper conduits spe funds purchase receivables us cash obtained qspe well subordinated loan andor equity contribution us senior participation interest sold qspe commercial paper issued included assets liabilities 2004 however qspe terminated new spe created 2005 result senior participation interest sold commercial paper issued included consolidated balance sheet december 31 2006 2005 respectively receivables sold may purchased us except limited circumstances breach representations warranties management determined primary beneficiary spe consolidates entity assets spe totaled 145 billion 35 billion december 31 2006 2005 respectively included finance receivables loans net unearned income consolidated balance sheet beneficial interest holders variable interest entity legal recourse general credit collateralized debt obligations cdos rescap operations sponsors manages collateral cdos cdo transactions trust established purchases portfolio securities issues debt equity certificates representing interests portfolio assets bonds representing collateral cdo include issued us loan securitizations issued third parties addition receiving variable compensation managing portfolio sometimes retain equity investments cdos majority cdos sponsored us initially structured restructured approval senior beneficial interest holders qualifying special purpose entities therefore exempt fin 46r event asset credit impaired call option triggered whereby collateral manager may buy asset pool sell thirdparty call triggered events outside control downgrade rating agency asset pool event specified percentage mortgage loans underlying security greater 60 days delinquent liquidated event conditions exercise call option met recognize assets accordance provisions recognize assets december 31 2006 management determined certain cdo entities primary beneficiary consolidate entities assets entities totaled 732 million 569 million december 31 2006 2005 respectively majority included investment securities consolidated balance sheet beneficial interest holders variable interest entities legal recourse general credit commercial finance receivables facility transfer commercial lending receivables 100 owned spe turn issues notes received thirdparty financial institutions gmac commercial finance assetbacked commercial paper conduits spe funds purchase receivables us cash obtained sale notes management determined primary beneficiary spe consolidates entity assets spe totaled 879 million december 31 2006 included finance receivables loans net unearned income consolidated balance sheet beneficial interest holders variable interest entity legal recourse general credit securitization transactions transfer commercial trade receivables banksponsored multiseller commercial paper conduits provide funding source us well transferors conduit fund purchase receivables issuance commercial paper total assets outstanding banksponsored conduits approximated 21 billion december 31 2006 variable interest conduits may discretion prepay portion loans time notes consolidated financial statements gmac llc • form 10k 22 segment geographic information operating segments defined components enterprise engage business activity revenues earned expenses incurred discrete financial information available evaluated regularly chief operating decision makers deciding allocate resources assessing performance financial information reportable operating segments summarized follows north american operations consist automotive financing us canada corporate activities international operations consist automotive financing full service leasing countries puerto rico march 31 2006 beginning april 1 2006 puerto rico included north american operations b amounts includes intrasegment eliminations north american operations international operations c represents commercial finance business capmark certain corporate activities reclassifications elimination reporting segments financial results 2006 reflect approximately 21 equity interest capmark commencing march 23 2006 2005 financial results represent capmark wholly owned december 31 2006 total assets 54 billion commercial finance business 154 billion reclassifications eliminations notes consolidated financial statements gmac llc • form 10k information concerning principal geographic areas follows revenue consists total net financing revenue income presented consolidated statement income b consists net operating leases assets net property equipment notes consolidated financial statements gmac llc • form 10k 23 guarantees commitments contingencies risks guarantees defined contracts indemnification agreements contingently require us make payments third parties based changes underlying agreement related guaranteed party following summarizes outstanding guarantees made third parties including capmark 2005 classified assets held sale consolidated balance sheet periods indicated march 23 2006 gmac sold approximately 79 equity capmark subsequently recorded remaining balance equity method prior sale capmark number guarantees including agencyloan construction lending agencyloans sold recourse commercial mortgage securitizations standby letters credit finance operations primarily commercial finance group issues financial standby letters credit customers represent irrevocable guarantees payment specified financial obligations typically client’s suppliers addition rescap operations issues financial standby letters credit part warehouse construction lending activities expiration dates letters credit range 2006 ongoing commitments generally collateralized assets client trade receivables cash deposits etc high loantovalue hltv international securitizations rescap operations entered agreements provide credit loss protection certain hltv international securitization transactions maximum potential obligation certain agreements equal lesser specified percentage original loan pool balance specified percentage current loan pool balance required perform guaranty obligation bond insurer makes payment bond insurance policy pledged mortgage loans held sale totaling 60 million 53 million cash 9 million 43 million collateral obligations december 31 2006 2005 respectively certain hltv securitizations maximum obligation equivalent pledged collateral amount pledged mortgage loans held sale totaling 57 million 70 million collateral obligations december 31 2006 2005 respectively event require us perform guaranty obligation occurs security credit enhancements exhausted losses passed counter dealers guarantees terminate first calendar month aggregate note amount reduced zero agency loan program rescap operations deliver loans certain agencies allow streamlined loan processing limited documentation requirements event loans delivered programs reach specified delinquency status may required provide certain documentation cases repurchase loan indemnify investors losses sustained program includes termination features whereby loan performed satisfactorily specified period time longer obligated program maximum liability represents principal balance loans sold programs guarantees repayment thirdparty debt certain arrangements guarantee repayment thirdparty debt obligations case default guarantees collateralized letters credit commercial finance group provides credit protection third parties guarantee payment specified financial obligations third parties customers without purchasing obligations repurchase guarantees rescap operations issued repurchase guarantees buyers certain mortgage loans notes consolidated financial statements gmac llc • form 10k whereby closing condition document deficiency identified investor closing may required indemnify investor loan becomes delinquent nonfinancial guarantees connection sale approximately 79 equity capmark released financial guarantees related former gmac commercial holdings business certain nonfinancial guarantees survive closing indemnified capmark payment made liabilities incurred us connection guarantees standard indemnification clauses certain funding arrangements would require us pay lenders increased costs resulting certain changes laws regulations since changes would dictated legislative regulatory actions inherently unpredictable able estimate maximum exposure arrangements date made payments indemnification clauses rescap operations guaranteed certain amounts related servicing advances setaside letters credit enhancement performance guarantees connection certain asset sales securitization transactions typically deliver standard representations warranties purchaser regarding characteristics underlying transferred assets representations warranties conform specific guidelines customary securitization transactions clauses intended ensure terms conditions sales contracts met upon transfer asset prior sale securitization transaction perform due diligence respect assets included sale ensure meet purchaser’s requirements expressed representations warranties due procedures believe potential loss arrangements remote accordingly liability reflected consolidated balance sheet related potential obligations maximum potential amount future payments could required make would equal current balances assets subject securitization sale activities monitor total value assets historically transferred securitization vehicles asset sales therefore unable develop estimate maximum payout representations warranties commitments financing commitments contract amount gain loss positions financial commitments follows fair value estimated using published market information associated commitments sell similar instruments included december 31 2006 2005 commitments accounted derivatives contract amount 37082 25670 gain position 28 46 loss position 49 32 respectively b certain residential mortgage purchase agreements committed remitting shared execution partners’ cash flows exceed required rate return less credit loss reimbursements mortgage originators commitment accounted derivative c entered agreements thirdparty banks sell automotive retail receivables transfer credit risk purchaser whole loan sales committed lend equity capital certain private equity funds fair value commitments considered overall valuation underlying assets associated e committed fund completion development certain lots model homes amount agreed upon amount per project f fair value commitments considered overall valuation related assets g unused portions revolving lines credit reset prevailing market rates approximate market value notes consolidated financial statements gmac llc • form 10k mortgage lending revolving credit line commitments contain element credit risk management reduces credit risk unused mortgage lending unused revolving credit line commitments applying credit policies making commitments extending loans typically require collateral commitments drawn lease commitments future minimum rental payments required operating leases primarily real property noncancelable lease terms expire december 31 2006 follows certain leases contain escalation clauses renewal purchase options rental expenses operating leases 230 million 224 million 230 million 2006 2005 2004 respectively contractual commitments entered multiple agreements information technology marketing advertising voice communication technology maintenance many agreements subject variable price provisions fixed minimum price provisions termination renewal provisions future payment obligations agreements totaled 1093 million due follows 322 million 2007 440 million 2008 2009 246 million 2010 2011 85 million 2012 extended service maintenance contract commitments extended service contract programs provide consumers expansions extensions vehicle warranty coverage specified periods time mileages coverage generally provides repair replacement components event failure terms contracts sold automobile dealerships direct mail range 3 84 months following table presents analysis activity unearned service revenue legal contingencies subject potential liability laws government regulations various claims legal actions pending may asserted us named defendants number legal actions time involved governmental proceedings arising connection various businesses pending actions purport class actions establish reserves legal claims payments associated claims become probable costs reasonably estimated actual costs resolving legal claims may substantially higher lower amounts reserved claims based information currently available advice counsel available insurance coverage established reserves opinion management eventual outcome actions us material adverse effect consolidated financial condition results operations cash flows contingencies subject potential liability various exposures including tax nonrecourse loans selfinsurance miscellaneous contingencies establish reserves contingencies item becomes probable costs reasonably estimated actual costs resolving items may substantially higher lower amounts reserved one item based information currently available opinion management eventual outcome items material adverse effect consolidated financial condition results operations cash flows risks loans sold recourse outstanding recourse obligations follows maximum recourse exposure net amounts reinsured third parties totaling 1 december 31 2006 2005 respectively loss reserves included accrued expenses liabilities consolidated balance sheet related loans sold recourse totaled 0 11 december 31 2006 2005 respectively concentrations primary business provide vehicle financing gm products gm dealers customers wholesale dealer loan financing relates primarily gm dealers collateral consisting primarily gm vehicles wholesale gm notes consolidated financial statements gmac llc • form 10k dealership property loans wholesale financing also provided protection gm factory repurchase programs retail installment contracts operating lease assets relate primarily secured sale lease respectively vehicles primarily gm protracted reduction suspension gm’s production sale vehicles resulting decline demand work stoppage governmental action event could substantial adverse effect us conversely increase production significant marketing program could positively impact results majority finance receivables loans operating lease assets geographically diversified throughout united states outside united states finance receivables loans operating lease assets concentrated canada germany united kingdom italy australia mexico brazil insurance operations concentration credit risk related loss adjustment expenses prepaid reinsurance ceded certain state insurance funds michigan insurance law large market share north carolina result credit exposure michigan catastrophic claims association north carolina reinsurance facility totaling 909 million 782 million december 31 2006 2005 respectively originate purchase residential mortgage loans contractual features may increase exposure credit risk thereby result concentration credit risk mortgage loans include loans may subject borrowers significant future payment increases create potential negative amortization principal balance result high loantovalue ratios loan products include interest mortgages option adjustable rate mortgages high loantovalue mortgage loans teaser rate mortgages total loan production related products combined exposure related products recorded finance receivables loans held sale unpaid principal balance years ended december 31 2006 2005 summarized follows • interestonly mortgages allow interestonly payments fixed period time end interestonly period loan payment includes principal payments increases significantly borrower’s new payment loan becomes amortizing ie includes principal payments greater borrower making principal payments since origination loan • option adjustable rate mortgages permit variety repayment options repayment options include minimum interestonly fully amortizing 30year fully amortizing 15year payments minimum payment option sets monthly payment initial interest rate first year loan interest rate resets first year borrower continue make minimum payment interestonly option sets monthly payment amount interest due loan interestonly option payment would less minimum payment interestonly option available borrower fully amortizing 30year 15year payment options borrower’s monthly payment set based interest rate loan balance remaining loan term • high loantovalue mortgages defined firstlien loans loantovalue ratios excess 100 secondlien loans combined underlying firstlien mortgage loan result loantovalue ratio excess 100 • market rate teaser mortgages contain contractual features limit initial interest rate market interest rate specified time period increase market interest rate future period increase market interest rate could result significant increase borrower’s monthly payment amount mortgage loans originate mortgages purchase including higher risk loans preceding table subject underwriting guidelines loan origination standards includes guidelines standards tailored products include variety factors including borrower’s capacity repay loan credit history characteristics loan including certain characteristics summarized table may increase credit risk purchase mortgage loans correspondent lenders either reunderwrite loan prior purchase delegate underwriting responsibility correspondent originating loan believe underwriting procedures adequately consider unique risks may come products conduct variety quality control procedures periodic audits ensure compliance origination standards including criteria lending legal requirements leverage technology performing underwriting process quality control procedures capital requirements various international subsidiaries subject regulatory requirements jurisdictions operate entities operate either bank regulated finance company local market regulatory restrictions primarily dictate subsidiaries meet certain minimum capital requirements restrict dividend distributions require notes consolidated financial statements gmac llc • form 10k assets restricted date compliance various regulations materially adverse effect financial position results operations cash flows total assets entities approximated 155 billion 129 billion december 31 2006 2005 respectively gmac bank provides services automotive rescap operations licensed industrial bank pursuant laws utah deposits insured federal deposit insurance corporation fdic gmac required file periodic reports fdic concerning financial condition assets gmac bank totaled 202 billion december 31 2006 december 31 2005 certain depository institution assets held federal savings bank whollyowned rescap effective november 22 2006 substantially federal savings bank assets liabilities transferred book value gmac bank total assets institutions december 31 2005 approximated 169 billion december 31 2006 met regulatory requirements compliance minimum capital requirements june 24 2005 entered operating agreement gm rescap holding company residential mortgage business create separation gm one hand rescap operating agreement restricts rescap’s ability declare dividends prepay subordinated indebtedness us result arrangements rescap obtained investment grade credit ratings unsecured indebtedness separate ratings operating agreement amended november 27 2006 november 30 2006 conjunction sale transactions among things amendments removed gm party agreement restrictions contained rescap operating agreement include requirements rescap’s member’s equity least 65 billion dividends paid rescap permitted pay dividends pursuant previous sentence cumulative amount dividends may exceed 50 cumulative net income excluding payments income taxes election federal income tax purposes treated limited liability company measured july 1 2005 time dividend paid restrictions cease effective rescap’s member’s equity least 12 billion end two consecutive fiscal quarters cease majority owner connection sale transactions gm released party operating agreement remains effect rescap us december 31 2006 rescap consolidated equity approximately 77 billion gmac insurance subject certain minimum aggregated capital requirements restricted net assets restricted dividend distributions applicable state insurance law national association securities dealers financial services authority england office superintendent financial institution canada national insurance bonding commission mexico date compliance various regulations materially adverse effect financial condition results operations cash flows various state insurance regulations dividend distributions may made statutory unassigned surplus state regulatory authorities must approve distributions exceed certain statutory limitations based december 31 2006 statutory policyholders’ surplus maximum dividend could paid insurance subsidiaries next twelve months without prior statutory approval approximates 303 million 24 restatement financial statements subsequent issuance consolidated financial statements year ended december 31 2005 management concluded hedge accounting documentation hedge effectiveness assessment methodologies related particular hedges callable fixed rate debt instruments funding north american automotive operations satisfy requirements sfas 133 one requirements sfas 133 hedge accounting appropriate hedging relationships company sufficiently documented expectation relationships highly effective achieving offsetting changes fair values attributable risk hedged inception hedging relationship determine whether transactions continue satisfy requirement companies must periodically assess effectiveness hedging relationships prospectively retrospectively management determined hedge accounting treatment applied hedging relationships result recorded adjustments debt instruments included hedging relationships related changes fair value due movements designated benchmark interest rate accordingly restated consolidated financial statements years ended december 31 2005 2004 amounts previously reported remove recorded adjustments debt instruments reported interest expense affected years elimination hedge accounting treatment introduces increased funding cost volatility restated results changes fair value fixed rate debt previously recorded affected changes designated benchmark interest rate libor prior restatement adjustments record increases value debt occurred periods interest rates declined adjustments record decreases value made periods interest rates rose result changes benchmark interest rates caused volatility debt’s fair value adjustments recognized historical earnings mitigated changes value interest rate swaps hedge relationships interest rate swaps notes consolidated financial statements gmac llc • form 10k economically hedge debt instruments continue recorded fair value changes fair value recorded earnings also correcting certain outofperiod errors deemed immaterial individually aggregate periods originally recorded identified items relate transactions involving certain transfers financial assets valuations certain financial instruments amortization unearned income certain products income taxes inconsequential items derivative restatement correcting amounts record proper period effect restatement quarterly financial data refer note 25 consolidated financial statements following table presents effects restatement consolidated income statement certain amounts previously reported columns reclassified conform 2006 presentation significant reclassifications relate servicing fees amortization impairment servicing rights servicing asset valuation hedge activities net gain sale mortgage automotive loans net previously included mortgage banking income reflected separate components total net financing revenue income notes consolidated financial statements gmac llc • form 10k following table presents effects restatement consolidated balance sheet notes consolidated financial statements gmac llc • form 10k following table presents effects restatement consolidated statement changes equity notes consolidated financial statements gmac llc • form 10k following table presents effects restatement consolidated statement cash flows notes consolidated financial statements gmac llc • form 10k 25 quarterly financial statements unaudited following tables present quarterly results 2006 2005 including effects restatement applicable periods details restatement refer notes 1 24 consolidated financial statements decline third quarter 2006 net income primarily relates goodwill impairment taken commercial finance business refer note 11 consolidated financial statements details b effective november 28 2006 gmac along certain us subsidiaries became disregarded passthrough entities us federal income tax purposes due change tax status net deferred tax liability eliminated income tax expense totaling 791 million decline fourth quarter 2005 net income primarily relates goodwill impairments taken commercial finance business capmark refer note 11 consolidated financial statements details signatures pursuant requirements section 13 securities exchange act 1934 amended registrant duly caused report signed behalf undersigned hereunto duly authorized general motors corporation registrant date march 14 2007 g richard wagoner jr g richard wagoner jr chairman chief executive officer pursuant requirements securities exchange act 1934 report signed 14th day march 2007 following persons behalf registrant capacities indicated including majority directors item 15 exhibits financial statement schedules filed herewith furnished herewith item 16 form 10k summary omitted registrant’s option signatures pursuant requirements securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date june 3 2020 motors liquidation company guc trust wilmington trust company individual capacity solely capacity trust administrator trustee motors liquidation company guc trust david vanaskey jr name david vanaskey jr title administrative vice president wilmington trust company item 15 exhibits financial statement schedules filed herewith furnished herewith item 16 form 10k summary omitted registrant’s option signatures pursuant requirements securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date june 11 2018 motors liquidation company guc trust wilmington trust company individual capacity solely capacity trust administrator trustee motors liquidation company guc trust david vanaskey jr name david vanaskey jr title administrative vice president wilmington trust company item 15 exhibits financial statement schedule 1 financial statements supplemental information see part ii 2 financial statement schedule ii allowances years ended december 31 2005 2004 iv3 3 exhibits b exhibits listed filed sec pursuant securities act 1933 amended securities exchange act 1934 amended filed noted hereby incorporated reference made part report effect filed herewith 3i restated certificate incorporation dated march 1 2004 incorporated herein reference exhibit 3i general motors corporation’s annual report form 10k filed march 11 2004 3ii bylaws general motors corporation amended dated february 29 2004 4a indenture dated november 15 1990 general motors corporation citibank na trustee incorporated herein reference exhibit amendment 1a form s3 registration statement 3341577 filed july 3 1991 4bi indenture dated december 7 1995 general motors corporation citibank na trustee incorporated herein reference exhibit 4a amendment 1 form s3 registration statement 3364229 filed november 14 1995 4bii first supplemental indenture dated march 4 2002 general motors corporation citibank na incorporated herein reference exhibit 2 current report form 8k general motors corporation filed march 6 2002 4biii second supplemental indenture dated november 5 2004 general motors corporation citibank na incorporated herein reference exhibit 41 current report form 8k general motors corporation filed november 10 2004 4biv third supplemental indenture dated november 5 2004 general motors corporation citibank na incorporated herein reference exhibit 42 current report form 8k general motors corporation filed november 10 2004 4bv fourth supplemental indenture dated november 5 2004 general motors corporation citibank na incorporated herein reference exhibit 43 current report form 8k general motors corporation filed november 10 2004 10 agreement dated october 22 2001 general motors corporation general motors acceptance corporation 10a general motors 2002 annual incentive plan incorporated herein reference exhibit proxy statement general motors corporation filed april 21 2002 10b general motors 2002 stock incentive plan incorporated herein reference exhibit proxy statement general motors corporation filed april 21 2002 10c general motors 2002 longterm incentive plan incorporated herein reference exhibit proxy statement general motors corporation filed april 21 2002 iv1 part iv general motors corporation subsidiaries exhibits financial statement schedule concluded 10d compensation plan nonemployee directors incorporated herein reference exhibit proxy statement general motors corporation filed april 16 1997 10e employment agreement dated december 5 2000 general motors corporation john devine incorporated herein reference exhibit 10e general motors corporations’s annual report form 10k filed march 7 2001 10f extension employment agreement dated december 5 2005 general motors corporation john devine incorporated herein reference exhibit 991 current report form 8k general motors corporation filed december 9 2005 10g general motors company vehicle operations senior management vehicle program smvp supplement revised december 15 2005 10h compensation statement gr wagoner jr commencing january 1 2003 10i compensation statement john devine commencing january 1 2003 10j compensation statement robert lutz commencing january 1 2003 10k compensation statement gl cowger commencing february 1 2004 10l compensation statement thomas gottschalk commencing january 1 2005 description retirement program 10m gm supplemental executive retirement plan amended october 18 2005 10n general motors benefit equalization plan salaried employees amended october 18 2005 10o description executive board compensation reductions 12 computation ratios earnings fixed charges years ended december 31 2005 2004 2003 13 general motors acceptance corporation annual report form 10k file 00103754 fiscal year ended december 31 2005 21 subsidiaries registrant december 31 2005 23 consent independent registered public accounting firm 311 section 302 certification chief executive officer 312 section 302 certification chief financial officer 321 certification chief executive officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 322 certification chief financial officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 management contract compensatory plan required filed exhibit pursuant item 15b form 10k  filed herewith iv2 general motors corporation subsidiaries schedule ii allowances notes primarily reflects recovery accounts previously writtenoff b accounts written c represents net change inventory allowances reference made notes gm consolidated financial statements iv3 general motors corporation subsidiaries signatures pursuant requirements section 13 securities exchange act 1934 amended registrant duly caused report signed behalf undersigned hereunto duly authorized general motors corporation registrant date march 28 2006 g richard wagoner jr g richard wagoner jr chairman chief executive officer pursuant requirements securities exchange act 1934 report signed 28th day march 2006 following persons behalf registrant capacities indicated including majority directors iv4 general motors corporation subsidiaries signatures iv5 item 15 exhibits financial statement schedules signatures pursuant requirements securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date may 21 2013 motors liquidation company guc trust wilmington trust company individual capacity solely capacity trust administrator trustee motors liquidation company guc trust david vanaskey name david vanaskey title vice president wilmington trust company exhibit index item 15 exhibits financial statement schedules signatures pursuant requirements securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date may 22 2015 motors liquidation company guc trust wilmington trust company individual capacity solely capacity trust administrator trustee motors liquidation company guc trust david vanaskey name david vanaskey title vice president wilmington trust company exhibit index item 15 exhibits financial statement schedule reports form 8k page number 1 financial statements see part ii 2 financial statement schedule ii allowances years ended december 31 2003 2002 2001 iv3 3 exhibits including incorporated reference exhibit number 3i restated certificate incorporation filed march 1 2004 na 3ii bylaws general motors corporation amended february 29 2004 na 4a form indenture relating 500000000 818 debentures due april 15 2016 dated april 1 1986 general motors corporation citibank na trustee incorporated reference exhibit 4 amendment 1 form s3 registration statement 334452 resolutions adopted special committee april 15 1986 incorporated reference exhibit 4a current report form 8k general motors corporation dated april 24 1986 na 4c form indenture relating 377377000 775 debentures due march 15 2036 dated december 7 1995 general motors corporation citibank na trustee filed exhibit 4a amendment 1 form s3 registration statement 3364229 na 4d instruments defining rights holders nonregistered debt registrant omitted exhibit index amount debt authorized instrument exceed 10 total assets registrant subsidiaries registrant agrees furnish copy instrument commission upon request na 4fi indenture general motors corporation wilmington trust company incorporated reference exhibit 4di current report form 8k general motors corporation dated july 1 1997 na 4fiifirst supplemental indenture dated march 4 2002 general motors corporation citibank na respect 450 series convertible senior debentures due 2032 525 series b convertible senior debentures due 2032 incorporated reference exhibit 2 current report form 8k general motors corporation dated march 6 2002 na 10a general motors 2002 annual incentive plan incorporated reference exhibit proxy statement general motors corporation dated april 18 2002 na 10b general motors 2002 stock incentive plan incorporated reference exhibit proxy statement general motors corporation dated april 18 2002 na 10c general motors 2002 longterm incentive plan incorporated reference exhibit proxy statement general motors corporation dated april 18 2002 na 10d compensation plan nonemployee directors incorporated reference exhibit proxy statement general motors corporation dated april 161997 na 10f employment contract robert lutz dated september 1 2001 incorporated reference na 10g extension employment contract robert lutz dated december 20 2002 na 12 computation ratios earnings fixed charges years ended december 31 2003 2002 2001 iv6 21 subsidiaries registrant december 31 2003 iv7 23 consent independent auditors iv12 311 section 302 certification chief executive officer iv13 312 section 302 certification chief financial officer iv14 321 certification chief executive officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 iv15 322 certification chief financial officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 iv16 registrant hereby undertakes furnish supplementally copy omitted schedule attachment securities exchange commission upon request required filed exhibit pursuant item 15 form 10k iv1 general motors corporation subsidiaries part iv continued item 15 exhibits financial statement schedule reports form 8k concluded b reports form 8k thirteen reports form 8k filed october 1 2003 october 15 2003 2 october 27 2003 november 3 2003 november 21 2003 december 2 2003 december 3 2003 december 12 2003 december 15 2003 december 22 2003 2 december 30 2003 quarter ended december 31 2003 reporting matters item 5 events reporting certain agreements item 7 financial statements pro forma financial information exhibits asterisk indicates reports submitted securities exchange commission include information furnished pursuant items 9 12 form 8k pursuant general instruction b form 8k deemed filed purpose section 18 securities exchange act 1934 information furnished pursuant items 9 12 reports subject liabilities section 18 securities exchange act 1934 incorporated report form 10k gm intend incorporate reports reference filing securities act exchange act iv2 notes primarily reflects recovery accounts previously writtenoff b accounts written c represents net change inventory allowances reference made notes gm consolidated financial statements iv3 general motors corporation subsidiaries signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned hereunto duly authorized general motors corporation registrant date february 29 2004 sg richard wagoner jr g richard wagoner jr chairman chief executive offier pursuant requirements securities exchange act 1934 report signed 29th day february 2004 following persons behalf registrant capacities indicated signature title sg richard wagoner jr chairman chief executive officer g richard wagoner jr sjohn devine vice chairman chief financial officer john devine swalter g borst treasurer walter g borst spaul w schmidt controller paul w schmidt speter r bible chief accounting officer peter r bible iv4 general motors corporation subsidiaries signatures concluded signature title spercy barnevik director percy barnevik sjohn h bryan director john h bryan sarmando codina director armando codina sgeorge mc fisher director george mc fisher skaren katen director karen katen skent kresa director kent kresa director alan g lafley sphilip laskawy director philip laskawy se stanley oneal director e stanley oneal seckhard pfeiffer director eckhard pfeiffer iv5 item 15 exhibits financial statement schedule 1 financial statements supplemental information 2 financial statement schedule ii valuation qualifying accounts 3 consolidated financial statements gmac llc subsidiaries december 31 2007 2006 three years period ended december 31 2007 4 exhibits b exhibits listed filed sec pursuant securities act 1933 amended securities exchange act 1934 amended filed noted hereby incorporated reference made part report effect filed herewith general motors corporation subsidiaries item 15 exhibits financial statement schedule continued general motors corporation subsidiaries item 15 exhibits financial statement schedule continued 1931 general motors corporation subsidiaries item 15 exhibits financial statement schedule continued management contract compensatory plan required filed exhibit pursuant item 15b form 10k  filed herewith general motors corporation subsidiaries schedule ii valuation qualifying accounts primarily reflects allowances removed result sale 51 controlling interest gmac time sale gmac allowance credit loss balance miscellaneous allowance balance 35 billion 123 million respectively report independent registered public accounting firm board directors member interest holders gmac llc audited accompanying consolidated balance sheet gmac llc subsidiaries “company” december 31 2007 2006 related consolidated statements income changes equity cash flows three years period ended december 31 2007 financial statements responsibility company’s management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements present fairly material respects financial position company december 31 2007 2006 results operations cash flows three years period ended december 31 2007 conformity accounting principles generally accepted united states america also audited accordance standards public company accounting oversight board united states effectiveness company’s internal control financial reporting december 31 2007 based criteria established internal control integrated framework issued committee sponsoring organizations treadway commission report presented herein dated february 27 2008 expressed unqualified opinion company’s internal control financial reporting deloitte touche llp deloitte touche llp detroit michigan february 27 2008 consolidated statement income gmac llc • notes consolidated financial statements integral part statements consolidated balance sheet gmac llc • notes consolidated financial statements integral part statements consolidated statement changes equity gmac llc • october 2005 repurchased operating lease assets related deferred tax liabilities gm refer note 19 consolidated financial statements detail notes consolidated financial statements integral part statements consolidated statement cash flows gmac llc • notes consolidated financial statements integral part statements consolidated statement cash flows continued gmac llc • includes origination mortgage servicing rights 16 billion 17 billion 13 billion 2007 2006 2005 respectively b includes securities lending transactions cash collateral received corresponding liability recorded presented investing activities amount 856 million 445 million 2007 2006 respectively c 2007 includes 1 billion capital contribution general motors pursuant sale 51 gmac fim holdings llc 2005 includes 371 million cash equivalents classified assets held sale e represents conversion preferred membership interests 2007 represents repurchase operating lease assets related deferred tax liabilities gm 2005 f described note 19 consolidated financial statements notes consolidated financial statements integral part statements notes consolidated financial statements gmac llc • 1 description business significant accounting policies gmac llc referred herein gmac us founded 1919 wholly owned subsidiary general motors corporation general motors gm november 30 2006 gm sold 51 interest us approximately 74 billion sale transactions fim holdings llc fim holdings fim holdings investment consortium led cerberus fim investors llc sole managing member consortium also includes citigroup inc aozora bank ltd subsidiary pnc financial services group inc throughout 2007 domestic international residential real estate capital markets experienced significant dislocation result rescap’s liquidity negatively impacted margin calls changes advance rates secured facilities loss significant assetbacked commercial paper conduit financing capacity along secured sources liquidity including weak securitization markets market dislocation prompted rescap’s liquidity providers evaluate risk tolerance exposure mortgagerelated credits rescap identified several risks uncertainties could impact liquidity position 2008 risks uncertainties include limited following negative rating agency actions ability close new renew existing key sources liquidity tightening liquidity providers encountering counterparties opting shorterdated extensions existing facilities expensive terms lower advance rates incremental margin calls related potentially lower valuations collateralized assets credit support annexes interest rate foreign exchange swaps rescap actively manages liquidity capital positions developed plans address liquidity needs including debt maturing 2008 identified risks uncertainties plans include limited following continue work proactively maintain active dialog key credit providers optimize available liquidity options including negotiating credit terms refinancing term loans secured facilities potential pursuit strategic alternatives improve liquidity continued strategic reduction assets dispositions focused production prime conforming products currently provide liquidity options exploring potential alliances joint ventures third parties involving portions rescap business strategic acquisitions potential utilization available committed unsecured lines credit explore opportunities funding capital support successful execution cannot assured management believes plans sufficient meet rescap’s liquidity requirements expects rescap comply financial covenants next twelve months unanticipated market factors emerged rescap unable successfully execute plan would material adverse effect business results operations financial position consolidation basis presentation consolidated financial statements include accounts majorityowned subsidiaries eliminating significant intercompany balances transactions includes variable interest entities primary beneficiary refer note 22 details variable interest entities accounting reporting policies conform accounting principles generally accepted united states america gaap certain amounts prior periods reclassified conform current period’s presentation operate international subsidiaries similar manner united states america us united states subject local laws circumstances may cause us modify procedures accordingly financial statements subsidiaries operate outside united states generally measured using local currency functional currency assets liabilities foreign subsidiaries translated us dollars yearend exchange rates resulting translation adjustments recorded accumulated comprehensive income component equity income expense items translated average exchange rates prevailing reporting period change reportable segment information result change management certain corporate intercompany activities recast certain financial data north american automotive finance operations operating segment operating segment financial data primarily relates intercompany borrowing arrangements certain corporate expenses amounts 2006 2005 recast conform current management view use estimates assumptions preparation financial statements conformity gaap requires management make estimates assumptions affect reported amounts assets liabilities date financial statements affect income expenses reporting period developing estimates assumptions management uses available evidence however uncertainties associated estimating amounts timing notes consolidated financial statements gmac llc • likelihood possible outcomes actual results could differ estimates cash equivalents cash equivalents include cash hand shortterm highly liquid investments original maturities 90 days less cash equivalents restrictions ability withdraw funds included assets consolidated balance sheet balance cash equivalents 141 billion 134 billion december 31 2007 2006 respectively book value cash equivalents approximates fair value short maturities instruments certain securities original maturities less 90 days held portion longerterm investment portfolios primarily relating gmac insurance classified investment securities investment securities portfolio investment securities includes bonds equity securities asset mortgagebacked securities notes interests securitization trusts investments investment securities classified based management’s intent trading securities primarily consist retained purchased interests certain securitizations retained interests carried fair value changes fair value recorded current period earnings debt securities management intent ability hold maturity classified heldtomaturity reported amortized cost trade date premiums discounts debt securities amortized adjustment investment yield contractual term security investment securities classified availableforsale carried fair value trade date unrealized gains losses included accumulated comprehensive income loss component equity aftertax basis employ systematic methodology considers available evidence evaluating potential temporary impairment investments classified availableforsale heldtomaturity cost investment exceeds fair value evaluate among factors magnitude duration decline fair value also evaluate financial health business outlook issuer performance underlying assets interests securitized assets intent ability hold investment decline fair value determined temporary impairment charge recorded investment income consolidated statement income new cost basis investment established realized gains losses investment securities reported investment income determined using specific identification method normal course business enter securities lending agreements various counterparties agreements lend rights designated securities exchange collateral form cash governmental securities approximating 102 domestic 105 foreign value securities loaned agreements primarily overnight nature settle next business day loaned securities 850 million 439 million received corresponding cash collateral 856 million 445 million loans december 31 2007 2006 respectively loans held sale loans held sale may include automotive commercial finance residential receivables loans carried lower aggregate cost estimated fair value due changes securitization market fourth quarter 2006 disaggregated delinquent nonprime mortgage loans evaluation fair value based contractually established commitments investors based current investor yield requirements revenue recognition consumer automotive finance receivables mortgage loans suspended placed nonaccrual status interest income accrued date loan placed nonaccrual status reversed subsequently realized extent received cash automotive loans mortgage loans held sale generally placed nonaccrual status contractually delinquent 120 days 60 days respectively finance receivables loans finance receivables loans reported principal amount outstanding net unearned income discounts allowance unearned income includes deferred origination fees reduced origination costs unearned rate support received gm amortized contractual life related finance receivable loan using interest method loan commitment fees generally deferred amortized commercial revenue commitment period classify finance receivables loans held sale loans held investment based management’s assessment intent ability hold loans foreseeable future maturity management’s intent ability respect certain loans may change time depending number factors including economic liquidity capital conditions acquired loans acquire certain loans individually groups portfolios experienced deterioration credit quality origination acquisition amount notes consolidated financial statements gmac llc • paid loans reflects determination probable unable collect amounts due according loan’s contractual terms acquired loans accounted american institute certified public accountants statement position 033 accounting certain loans debt securities acquired transfer sop 033 recognize accretable yield excess estimate undiscounted expected principal interest cash flows expected acquisition collected initial investment acquired asset life loan pool update estimated cash flows expect collect balance sheet date evaluate whether expected cash flows loans changed adjust amount accretable yield loans pools increase expected cash flows record valuation allowance loans pools decrease expected cash flows accordance statement financial accounting standards 114 accounting creditors impairment loan sfas 114 measure impairments based upon present value expected future cash flows discounted using loan’s effective interest rate practical expedient reliable information available fair value collateral less expected costs sell present value subsequent increase loan’s pool’s actual cash flows cash flows expected collected used first reverse existing valuation allowance loan pool nonaccrual loans consumer commercial revenue recognition suspended finance receivables loans placed nonaccrual status prime retail automotive receivables placed nonaccrual status delinquent 120 days nonprime retail automotive receivables placed nonaccrual status delinquent 60 days residential mortgages commercial real estate loans placed nonaccrual status delinquent 60 days warehouse construction lending receivables placed nonaccrual status delinquent 90 days revenue accrued collected date finance receivables loans placed nonaccrual status reversed subsequently recognized extent received cash finance receivables loans restored accrual status contractually current collection future payments reasonably assured impaired loans commercial loans considered impaired determine probable unable collect amounts due according terms loan agreement recorded investment loan exceeds fair value underlying collateral recognize income impaired loans discussed previously nonaccrual loans recorded investment impaired loans exceeds fair value valuation allowance established component allowance credit losses addition commercial loans specifically identified impairment pools loans collectively evaluated impairment discussed within allowance credit losses accounting policy allowance credit losses allowance credit losses management’s estimate incurred losses lending portfolios portions allowance credit losses specified cover estimated losses commercial loans specifically identified impairment accordance sfas 114 unspecified portion allowance credit losses covers estimated losses homogeneous portfolios finance receivables loans collectively evaluated impairment accordance statement financial accounting standards 5 accounting contingencies sfas 5 amounts determined uncollectible charged allowance credit losses consolidated statement income additionally losses arising sale repossessed assets collateralizing automotive finance receivables loans charged allowance credit losses recoveries previously chargedoff amounts credited time collection loans outside scope sfas 114 loans individually evaluated determined impaired sfas 114 grouped pools based similar risk characteristics evaluated impairment accordance sfas 5 impairment loans determined impaired sfas 114 measured based present value expected future cash flows discounted loan’s effective interest rate observable market price fair value collateral whichever determined appropriate estimated costs sell realize value collateral discounted basis included impairment measurement perform periodic systematic detailed reviews lending portfolios identify inherent risks assess overall collectibility portfolios allowance relates portfolios collectively reviewed impairment generally consumer finance receivables loans based aggregated portfolio evaluations product type loss models utilized portfolios consider variety factors including limited historical loss experience current economic conditions anticipated repossessions foreclosures based portfolio trends delinquencies credit scores expected loss factors receivable loan type loans commercial portfolios generally reviewed individual loan basis notes consolidated financial statements gmac llc • necessary allowance established individual loan impairment loans subject individual reviews analyzed based factors including limited historical loss experience current economic conditions collateral performance trends within specific geographic portfolio segments pertinent information results estimation specific allowances credit losses evaluation factors consumer commercial finance receivables loans involves complex subjective judgments securitizations offbalance sheet transactions securitize sell service retail finance receivables operating leases wholesale loans securities residential loans securitizations accounted sales secured financings interests securitized sold assets generally retained form interestonly strips senior subordinated interests cash reserve accounts servicing rights retained interests generally subordinate investors’ interests investors securitization trusts generally recourse assets failure debtors pay due retain servicing responsibilities retail finance receivable operating lease wholesale loan securitizations majority residential loan securitizations may receive servicing fees based securitized loan balances certain ancillary fees reported servicing fees consolidated statement income also retain right service residential loans sold result mortgagebacked security transactions ginnie mae fannie mae freddie mac also serve collateral manager securitizations commercial investment securities gains losses securitizations sales depend previous carrying amount assets involved transfer allocated assets sold retained interests based relative fair values except certain servicing assets liabilities initially recorded fair value date sale estimate fair value retained interests requires us exercise significant judgment timing amount future cash flows interests since quoted market prices generally available estimate fair value retained interests determining present value future expected cash flows using modeling techniques incorporate management’s best estimates key variables including credit losses prepayment speeds weighted average life discount rates commensurate risks involved applicable interest finance rates variable adjustable rate contracts credit loss assumptions based upon historical experience market information similar investments characteristics individual receivables loans underlying securities prepayment speed estimates determined utilizing data obtained market participants available based historical prepayment rates similar assets discount rate assumptions determined using data obtained market participants available based current relevant us treasury libor yields plus risk adjusted spread based analysis historical spreads similar types securities estimates interest rates variable adjustable contracts based spreads applicable benchmark interest rate using marketbased yield curves gains losses securitizations sales reported gain sale loans net consolidated statement income retail finance receivables wholesale loans residential loans declines fair value retained interests carrying amount reflected comprehensive income component equity earnings declines determined temporary interests classified trading retained interestonly strips senior subordinated interests generally included availableforsale investment securities trading investment securities depending management’s intent time securitization retained cash reserve accounts included assets consolidated balance sheet december 6 2007 american securitization forum asf issued streamlined foreclosure loss avoidance framework securitized subprime adjustable rate mortgage loans asf framework asf framework provides guidance servicers streamline borrower evaluation procedures facilitate use foreclosure loss prevention efforts attempt reduce number subprime residential mortgage borrowers might default coming year borrowers cannot afford pay increased loan interest rate reset asf framework requires borrower loan meet specific conditions qualify modification qualifying borrower’s loan’s interest rate would kept existing rate generally five years following upcoming reset period asf framework focused us subprime firstlien adjustablerate residential mortgages initial fixed interest rate period 36 months less included securitized pools originated january 1 2005 july 31 2007 initial interest rate reset date january 1 2008 july 31 2010 defined “segment 2 subprime arm loans” within asf framework january 8 2008 sec’s office chief accountant oca issued letter oca letter addressing accounting issues may raised asf framework notes consolidated financial statements gmac llc • specifically oca letter expressed view segment 2 subprime arm loan modified pursuant asf framework loan could legally modified oca object continued status transferee qualifying specialpurpose entity qspe financial accounting standards 140 accounting transfers servicing financial assets extinguishments liabilities sfas 140 management intends conform asf framework guidelines continue comply qspe requirements sfas 140 investment operating leases investment operating leases reported cost less accumulated depreciation net origination fees costs income operating lease assets includes lease origination fees net lease origination costs recognized operating lease revenue straightline basis scheduled lease term depreciation vehicles generally provided straightline basis estimated residual value period consistent term underlying operating lease agreement evaluate depreciation policy leased vehicles regular basis significant investments residual values assets operating lease portfolio residual values represent estimate values assets end lease contracts initially recorded based residual values established contract inception consulting independently published residual value guides realization residual values dependent future ability market vehicles prevailing market conditions life lease evaluate adequacy estimate residual value may make adjustments depreciation rates extent expected value vehicle including residual support payments gm lease termination changes addition estimating residual value lease termination also evaluate current value operating lease asset test impairment extent necessary based market considerations portfolio characteristics impairment determined exist undiscounted expected future cash flows lower carrying value asset lease vehicle returned us asset reclassified investment operating leases assets lowerofcost estimated fair value less costs sell mortgage servicing rights primary servicing involves collection payments individual borrowers distribution payments investors master servicing rights represent right service mortgage assetbacked securities wholeloan packages issued investors master servicing involves collection borrower payments primary servicers distribution funds investors mortgage assetbacked securities wholeloan packages capitalize value expected realized performing specified mortgage servicing activities others mortgage servicing rights msrs capitalized servicing rights purchased retained upon sale securitization mortgage loans january 1 2006 mortgage servicing rights recorded securitizations accounted sales well accounted secured financings effective january 1 2006 adoption sfas 156 mortgageservicing rights recorded securitizations accounted secured financings measure mortgage servicing assets liabilities fair value date sale define classes servicing rights based availability market inputs manner manage risks servicing assets liabilities manage servicing rights legal entity level domestically reportable operating segment level internationally sufficient market inputs exist determine fair value recognized servicing assets liabilities since quoted market prices msrs available estimate fair value msrs determining present value future expected cash flows using modeling techniques incorporate management’s best estimates key variables including expected cash flows credit losses prepayment speeds return requirements commensurate risks involved cash flow assumptions based actual performance possible reasonableness assumptions periodically validated comparisons market participants credit loss assumptions based upon historical experience characteristics individual loans underlying msrs prepayment speed estimates determined historical prepayment rates similar assets obtained thirdparty data return requirement assumptions determined using data obtained market participants available based current relevant interest rates plus riskadjusted spread since many factors affect estimate fair value mortgage servicing rights regularly evaluate major assumptions modeling techniques used estimate review assumptions market comparables available monitor actual performance msrs regularly comparing actual cash flow credit prepayment experience modeled estimates reinsurance assume cede insurance risk various reinsurance agreements seek reduce loss may arise catastrophes events cause unfavorable notes consolidated financial statements gmac llc • underwriting results reinsuring certain levels risk insurance enterprises remain liable respect reinsurance ceded assuming companies unable meet obligations reinsurance agreements also assume insurance risks insurance companies receiving premium consideration risk assumption amounts recoverable reinsurers paid losses loss adjustment expenses included premiums insurance receivables amounts recoverable reinsurers unpaid losses including incurred reported losses loss adjustment expenses pursuant reinsurance contracts estimated reported premiums insurance receivables amounts paid reinsurers relating unexpired portion reinsurance contracts reported prepaid reinsurance premiums within premiums insurance receivables repossessed foreclosed assets classified repossessed foreclosed included assets physical possession collateral taken regardless whether foreclosure proceedings taken place repossessed foreclosed assets carried lower outstanding balance time repossession foreclosure fair value asset less estimated costs sell losses revaluation repossessed foreclosed assets charged allowance credit losses time repossession subsequent holding period losses arising sale repossessed assets collateralizing automotive finance receivables loans expensed incurred operating expenses goodwill intangibles goodwill intangible assets net accumulated amortization reported assets accordance statement financial accounting standards 142 goodwill intangible assets sfas 142 goodwill represents excess cost acquisition fair value net assets acquired goodwill reviewed impairment utilizing twostep process first step impairment test requires us define reporting units compare fair value reporting units respective carrying value reporting units used 2006 testing represented operating segments disclosed note 23 third quarter 2007 reevaluated reporting units determined insurance rescap operating segments reporting units one level operating segment therefore goodwill evaluated lower level insurance four reporting units based product offerings rescap’s reporting units consistent reportable segments standalone financial statements primary factors considered change management operates reports manages segments fair value reporting units impairment test determined based various analyses including discounted cash flow projections carrying value less fair value impairment exists second step need completed carrying value higher fair value indication impairment may exist second step must performed compute amount impairment sfas 142 requires goodwill tested impairment annually time every year whenever event occurs circumstances change would likely reduce fair value reporting unit carrying amount annual goodwill impairment assessment takes place fourth quarter year certain triggering events necessitated impairment review third quarter 2007 rescap’s goodwill reporting units see note 11 discussion related goodwill impairment charge intangible assets include customer lists trademarks identifiable intangible assets amortized straightline basis estimated useful life 3 15 years impairment longlived assets carrying value longlived assets including premises equipment investment operating leases well certain identifiable intangibles evaluated impairment whenever events changes circumstances indicate carrying values may recoverable estimated undiscounted future cash flows expected result use eventual disposition recoverability assets held used measured comparison carrying amount future net undiscounted cash flows expected generated assets considered impaired impairment measured amount carrying amount assets exceeds fair value estimated discounted cash flows material impairment recognized 2007 2006 2005 property equipment property equipment stated cost net accumulated depreciation amortization reported assets included property equipment certain buildings furniture fixtures leasehold improvements company vehicles hardware software capitalized software costs depreciation computed straightline basis estimated useful lives assets generally ranges 3 30 years capitalized software generally amortized straightline basis useful life period exceed three years capitalized software expected provide substantive service potential development costs significantly exceed amount originally expected considered impaired written fair value software notes consolidated financial statements gmac llc • expenditures considered general administrative maintenance nature expensed incurred depreciation amortization expense property equipment years ended december 31 2007 2006 2005 196 million 253 million 288 million respectively deferred policy acquisition costs commissions including compensation paid producers extended service contracts costs acquiring insurance primarily related vary production business deferred recorded assets costs subsequently amortized terms related policies service contracts basis premiums revenue earned except direct response advertising costs amortized threeyear period based anticipated future benefit unearned insurance premiums service revenue insurance premiums net premiums ceded reinsurers service revenue earned terms policies portion premiums service revenue written applicable unexpired terms policies recorded unearned insurance premiums unearned service revenue short duration contracts premiums unearned service revenue earned pro rata basis extended service maintenance contracts premiums service revenues earned basis proportionate anticipated loss emergence reserves insurance losses loss adjustment expenses reserves insurance losses loss adjustment expenses established unpaid cost insured events occurred point time specifically reserves insurance losses loss adjustment expenses represent accumulation estimates reported losses provision losses incurred reported including claims adjustment expenses relating direct insurance assumed reinsurance agreements estimates salvage subrogation recoverable recognized time losses incurred netted insurance losses loss adjustment expenses reserves established business lowest meaningful level homogeneous data based actuarial analysis volatility considerations since reserves based estimates ultimate liability may less reserves adjustments estimated reserves included period adjustments considered necessary adjustments may occur future periods could material impact consolidated financial position results operations cash flows derivative instruments hedging activities accordance sfas 133 derivative financial instruments whether designated hedging relationships required recorded balance sheet assets liabilities carried fair value inception hedging relationship designate qualifying derivative financial instrument hedge fair value specifically identified asset liability fair value hedge variability cash flows received paid related recognized asset liability cash flow hedge also use derivative financial instruments although acquired risk management purposes qualify hedge accounting gaap changes fair value derivative financial instruments designated qualify fair value hedges along gain loss hedged asset liability attributable hedged risk recorded current period earnings qualifying cash flow hedges effective portion change fair value derivative financial instruments recorded accumulated comprehensive income component equity recognized income statement hedged cash flows affect earnings changes fair value derivative financial instruments held risk management purposes meet criteria qualify hedges gaap reported current period earnings ineffective portions fair value cash flow hedges immediately recognized earnings formally document relationships hedging instruments hedged items well risk management objectives undertaking various hedge transactions process includes linking derivatives designated fair value cash flow hedges specific assets liabilities consolidated balance sheet specific firm commitments forecasted transactions hedge’s inception ongoing basis formally assess whether derivatives used hedging relationships highly effective offsetting changes fair values cash flows hedged items hedge accounting treatment described herein longer applied derivative financial instrument terminated hedge designation removed assessed longer highly effective terminated fair value hedges changes hedged asset liability remain part basis asset liability recognized income remaining life asset liability 2007 discontinued hedge accounting mortgage loans held sale terminated cash flow hedges unless probable forecasted cash flows occur within specified period changes fair value derivative financial instrument previously recognized remain comprehensive income notes consolidated financial statements gmac llc • component equity reclassified earnings period hedged cash flows affect income loan commitments enter commitments make loans whereby interest rate loan set funding ie interest rate lock commitments interest rate lock commitments loans originated purchased sale loans purchased held investment derivative financial instruments carried fair value accordance sfas 133 staff accounting bulletin 105 application accounting principles loan commitments sab 105 sab 105 provides specific guidance measurement loan commitments specifying fair value measurement exclude expected future cash flows related customer relationship loan servicing assets recognized contractually separated underlying loan sale securitization interest rate lock commitments loans held sale recorded derivatives subsequent changes value time lock recognized assets liabilities corresponding adjustment current period earnings determination change fair value include estimate future msr arise loan sold securitized income taxes prior november 30 2006 filed consolidated us federal income tax return gm portion consolidated tax recorded us subsidiaries included consolidated tax return generally equivalent liability would incurred separate return basis settled gm’s tax payments became due 2006 number us subsidiaries converted limited liability companies llcs effective november 28 2006 became passthrough entities us federal income tax purposes income taxes incurred converting entities provided november 30 2006 required taxsharing agreement gm gmac minor exceptions subsequent november 30 2006 us federal state local income taxes provided entities generally ceased taxable entities related deferred taxes eliminated respect entities ceased taxable enterprises entity level taxes still apply small number state local tax jurisdictions along foreign withholding taxes entity level withholding tax applies provided consolidated financial statements banking insurance foreign subsidiaries generally corporations continue subject provide us federal state foreign income taxes deferred tax assets liabilities established future tax consequences events recognized financial statements tax returns based upon enacted tax laws rates deferred tax assets recognized subject management’s judgment realization likely addition tax benefits related positions considered uncertain recognized based technical merits issue likely sustain position largest amount greater 50 likely realized upon ultimate settlement membership interests sale transactions gmac wholly owned subsidiary gm accordingly market common ownership interests sale transactions continues established trading market ownership interests privately held company currently authorized outstanding common membership interests consisting 55072 class membership interests 52912 class b membership interests equal rights preferences assets gmac fim holdings owns 55072 class interests 51 ownership interest us gm wholly owned subsidiaries owns 52912 class b interests 49 ownership interest us addition authorized outstanding 1021764 preferred membership interests preferred interests held gm preferred finance co holdings inc wholly owned subsidiary gm effective november 1 2007 fim holdings gm finance co holdings llc gm finance executed amendment gmac amended restated limited liability company operating agreement amendment resulted certain modifications gmac’s capital structure prior amendment gmac authorized outstanding 51000 class interests held fim holdings 49000 class b interests held gm finance prior amendment gmac authorized outstanding 2110000 preferred membership interests 555000 held fim holdings original fim preferred interests 1555000 held gm preferred finance co holdings inc original gm preferred interests amendment resulted conversion 100 original fim preferred interests 4072 additional class interests conversion 533236 original gm preferred interests 3912 additional class b interests collectively conversions following conversions fim holdings continues hold 51 gmac’s common equity interests gm finance gm preferred finance co holdings inc collectively hold 49 gmac’s common equity interests described converted preferred notes consolidated financial statements gmac llc • interests deemed longer issued outstanding terms conditions related common equity interests remaining preferred interests remain unchanged prior conversions preferred interests deemed redeemable option holder due collective holders fim holdings gm control board accordance emerging issues task force topic d98 classification measurement redeemable securities eitf d98 preferred interests recorded mezzanine equity redemption value due substantive redemption feature subsequent revaluation balance sheet date initial accretion redemption value dividends preferred interests revaluation adjustments recorded retained earnings subsequent conversions remaining preferred interests solely owned gm control board remaining shares substantive redemption feature option holder noted interests qualify mezzanine equity pursuant eitf d98 therefore reclassed permanent equity carrying value conversions authorized 5820 class c membership interests considered “profit interests” “capital interests” defined revenue procedure 9327 19932 cb 343 class c membership interests may issued time pursuant gmac management llc class c membership interest plan 4799 class c membership interests outstanding december 31 2007 membership interest distributions required make certain distributions holders preferred interests preferred holders distributions made cash pro rata basis within ten business days delivering gmac financial statements members distributions issued units 1000 accrue yield fiscal quarter rate 10 per annum board may reduce distribution extent required avoid reduction equity capital gmac minimum amount equity capital equal net book value gmac november 30 2006 determined accordance gaap addition board may suspend payment distributions respect one fiscal quarters majority members’ consent distributions made respect fiscal quarter distributions noncumulative reduced zero accrued yield gmac’s preferred interests fiscal quarter fully paid preferred members excess net financial book income gmac fiscal quarter amount yield distributed holders preferred equity interests fiscal quarter distributed holders common membership interests class b membership interests follows least 40 excess paid fiscal quarters ending prior december 31 2008 least 70 excess paid fiscal quarters ending december 31 2008 event distribution priorities common membership interest holders first agreed upon amounts ratably class b class c membership interest holders based total interest holder 2007 distributions class b class c membership interest holders preferred interest distributions accrued 2007 2006 192 million 21 million respectively event sale dissolution gmac cash proceeds available distribution members shall distributed first preferred interest holders ratably amount preferred accrued dividends thereafter distributions shall made preferred interest holders ratably amount aggregate unreturned preferred capital amounts unreturned preferred capital amounts fully paid following dividends preferred holders distributions shall made holders common equity interest ratably holders received return agreed initial value finally remaining distributions shall made class b class c membership interest holders based total interest holder sharebased incentive plans two sharebased compensation plans executives longterm phantom interest plan ltip management profits interest plan mpi approved compensation committee compensation plans provide executives opportunity share future growth value gmac plans formed 2006 grants made first quarter 2007 ltip incentive plan executives based appreciation gmac’s value excess return 10 threeyear performance period awards vest end performance period paid cash following valuation gmac performed fim holdings awards entitle participant equityownership interest gmac plan authorizes 500 units granted performance period ending december 31 2009 approximately 372 units granted outstanding december 31 2007 ltip awards accounted sfas 123r sharebased payment sfas 123r meet definition sharebased compensation awards sfas 123r awards require liability treatment remeasured notes consolidated financial statements gmac llc • quarterly fair value settled compensation cost related awards ratably charged expense requisite service period vesting period ending december 31 2009 quarterly fair value remeasurement encompass changes market industry well latest forecasts performance period changes fair value relating portion awards vested recognized earnings period changes occur fair value awards outstanding december 31 2007 approximately 41 million 12 million recognized expense 2007 mpi incentive plan whereby class c membership interests gmac held management company granted senior executives total class c membership interests 5820 approximately 4799 outstanding december 31 2007 half awards vest based service requirement half vest based meeting operating performance objectives service portion vests ratably five years beginning january 3 2008 next four anniversaries thereafter performance portion vests based five separate annual targets performance objectives met year’s pro rata share awards vest current year objectives met annual performance objectives subsequent year met unvested shares previous years vest unvested awards december 31 2011 shall forfeited mpi awards accounted sfas 123r meet definition sharebased compensation awards sfas 123r awards require equity treatment fair valued grant date using assumptions forecasts historical trends overall industry market environment compensation expense mpi shares ratably charged expense fiveyear requisite service period servicebased awards oneyear requisite service period performancebased awards extent awards actually vest third quarter 2007 performance vesting 2007 deemed probable remaining expense 2007 performance vesting portion awards ratably accrued throughout remaining 2007 2008 performance periods value awards outstanding december 31 2007 approximately 25 million 4 million recognized expense 2007 change accounting principle financial accounting standards board fasb interpretation 48 january 1 2007 adopted fasb interpretation 48 accounting uncertainty income taxes fin 48 clarifies sfas 109 accounting income taxes defining confidence level tax position must meet order recognized financial statements fin 48 requires tax effects position recognized “morelikelythannot” sustained solely technical merits morelikelythannot threshold represents positive assertion management company entitled economic benefits tax position tax position considered morelikelythannot sustained based solely technical merits benefits position recognized cumulative effect applying fin 48 recorded directly retained earnings reported change accounting principle adoption interpretation january 1 2007 material impact consolidated financial position gross unrecognized tax benefits totaled approximately 126 million january 1 2007 approximately 124 million would affect effective tax rate recognized recognize interest penalties accrued related uncertain income tax positions interest expense operating expenses respectively january 1 2007 approximately 116 million accrued payment interest penalties sfas 158 september 2006 fasb issued sfas 158 employers’ accounting defined benefit pension postretirement plans sfas 158 amends sfas 87 employers’ accounting pensions sfas 88 employers’ accounting settlements curtailments defined benefit pension plans termination benefits sfas 106 employers’ accounting postretirement benefits pensions sfas 132r employers’ disclosures pensions postretirement benefits revised 2003 statement requires companies recognize asset liability overfunded underfunded status benefit plans financial statements asset liability offset accumulated comprehensive income consisting previously unrecognized prior service costs credits actuarial gains losses accumulated transition obligations assets sfas 158 also requires measurement date plan assets liabilities coincide sponsor’s yearend standard provides two transition alternatives companies make measurementdate provisions adopted recognition disclosure elements sfas 158 material effect consolidated financial position results operations cash flows addition adopt measurement elements sfas 158 year ending december 31 2008 expect adoption measurement elements material impact consolidated financial condition results operations cash flows notes consolidated financial statements gmac llc • recently issued accounting standards sfas 157 september 2006 fasb issued sfas 157 fair value measurements sfas 157 provides definition fair value establishes framework measuring fair value requires expanded disclosures fair value measurements standard applies gaap requires allows assets liabilities measured fair value therefore expand use fair value new circumstance sfas 157 defines fair value price would received sell asset paid transfer liability arm’slength transaction market participants markets conduct business sfas 157 clarifies fair value based assumptions market participants would use pricing asset liability establishes fair value hierarchy prioritizes information used develop assumptions fair value hierarchy gives highest priority quoted prices available active markets lowest priority data lacking transparency level reliability inputs utilized fair value calculations drives extent disclosure requirements valuation methodologies used standard sfas 157 effective financial statements issued fiscal years beginning november 15 2007 interim periods within years provisions sfas 157 required applied prospectively except certain financial instruments standard applied retrospectively adopted sfas 157 january 1 2008 prospective basis included inventorying items recorded fair value necessary modifying valuation models accordance sfas 157 impact adopting sfas 157 january 1 2008 resulted increase retained earnings approximately 18 million related recognition dayone gains purchased msrs certain residential loan commitments sfas 159 february 2007 fasb issued sfas 159 fair value option financial assets financial liabilities sfas 159 sfas 159 permits entities choose measure fair value many financial instruments certain items currently required measured fair value subsequent changes fair value designated items required reported earnings current period sfas 159 also establishes presentation disclosure requirements similar types assets liabilities measured fair value sfas 159 effective financial statements issued fiscal years beginning november 15 2007 adopted sfas 159 january 1 2008 elected measure fair value certain financial assets liabilities including certain collateralized debt obligations certain mortgage loans held investment financing securitization structures estimated cumulative effect beginning retained earnings decrease 149 million january 1 2008 fasb staff position fsp fin 391 april 2007 fasb issued fsp fin 391 amendment fasb interpretation 39 fsp fin 391 defines “right setoff” specifies conditions must met derivative contract qualify right setoff also addresses applicability right setoff derivative instruments clarifies circumstances appropriate offset amounts recognized instruments statement financial position addition fsp permits offsetting fair value amounts recognized multiple derivative instruments executed counterparty master netting arrangement fair value amounts recognized right reclaim cash collateral receivable obligation return cash collateral payable arising master netting arrangement derivative instruments interpretation effective fiscal years beginning november 15 2007 early application permitted adoption fsp fin 391 january 1 2008 result material change consolidated balance sheet impact results operations sec staff accounting bulletin 109 november 2007 sec issued staff accounting bulletin 109 written loan commitments recorded fair value earnings sab 109 sab 109 provides sec staff’s views accounting written loan commitments recorded fair value gaap revises rescinds portions sab 105 application accounting principles loan commitments sab 105 sab 105 provided views sec staff regarding derivative loan commitments accounted fair value earnings pursuant sfas 133 sab 105 states measuring fair value derivative loan commitment staff believed would inappropriate incorporate expected net future cash flows related associated servicing loan sab 109 supersedes sab 105 expresses current view sec staff consistent guidance sfas 156 accounting servicing financial assets sfas 159 expected net future cash flows related associated servicing loan included measurement written loan commitments accounted fair value earnings sab 105 also indicated sec staff believed internally developed intangible assets customer relationship intangible assets recorded part fair value derivative loan commitment sab 109 retains sec staff view broadens application written loan commitments accounted fair value earnings sec staff expects registrants apply views sab 109 measuring fair value derivative loan commitments prospective basis derivative loan commitments issued modified fiscal quarters beginning notes consolidated financial statements gmac llc • december 15 2007 impact adopting sab 109 material impact consolidated financial condition results operations sfas 141r december 2007 fasb issued sfas 141r business combinations sfas 141r replaces fasb statement 141 business combinations sfas 141r establishes principles requirements acquiring company 1 recognizes measures financial statements identifiable assets acquired liabilities assumed noncontrolling interest acquiree 2 recognizes measures goodwill acquired business combination gain bargain purchase 3 determines information disclose enable users financial statements evaluate nature financial effects business combination sfas 141r effective business combinations occurring beginning fiscal year beginning december 15 2008 sfas 141r effective gmac january 1 2009 applies transactions events gmac obtains control one businesses management assess transaction casebycase basis occur sfas 160 december 2007 fasb also issued sfas 160 noncontrolling interests consolidated financial statements amendment arb 51 sfas 160 requires ownership interests subsidiaries held parties parent clearly identified labeled presented consolidated statement financial position within equity separate parent’s equity also requires amount consolidated net income attributable parent noncontrolling interest clearly identified presented face consolidated statement income sfas 160 effective fiscal years interim periods within fiscal years beginning december 15 2008 early adoption prohibited sfas 160 shall applied prospectively beginning fiscal year initially applied except presentation disclosure requirements presentation disclosure requirements shall applied retrospectively periods presented management currently assessing retrospective impacts adoption assess new transactions occur fsp fas 1403 february 2008 fasb issued fsp fas 1403 accounting transfers financial assets repurchase financing transactions fsp fas 1403 provides consistent framework evaluation transfer financial asset subsequent repurchase agreement entered counterparty fsp fas 1403 provides guidelines must met order initial transfer subsequent repurchase agreement considered linked evaluation transactions meet specified criteria required accounted one transaction fsp effective fiscal years beginning november 15 2008 shall applied prospectively initial transfers repurchase financings initial transfer executed adoption management currently assessing impact adoption 2 insurance premiums service revenue earned following table summary insurance premiums service revenue written earned notes consolidated financial statements gmac llc • 3 income details income follows refer note 19 description transactions gm b refer note 16 description derivative instruments hedging activities 4 operating expenses details operating expenses follows notes consolidated financial statements gmac llc • 5 investment securities portfolio securities includes bonds equity securities asset mortgagebacked securities notes interests securitization trusts investments cost fair value gross unrealized gains losses availableforsale heldtomaturity securities follows connection certain borrowings letters credit relating certain assumed reinsurance contracts 162 million 194 million primarily us treasury securities pledged collateral december 31 2007 2006 respectively notes consolidated financial statements gmac llc • temporary impairment writedowns 5 million 12 million 16 million years ended december 31 2007 2006 2005 respectively gross unrealized gains losses investment securities availableforsale totaled 989 million 106 million respectively december 31 2005 fair value unrealized gains losses amount pledged collateral portfolio trading securities follows unrealized gains losses included investment income current period basis net unrealized gains totaled 131 million december 31 2005 maturity distribution availableforsale heldtomaturity debt securities outstanding summarized following table prepayments may cause actual maturities differ scheduled maturities following table presents gross gains losses realized upon sales availableforsale securities gains realized 2006 primarily relate rebalancing investment portfolio insurance operations notes consolidated financial statements gmac llc • certain availableforsale securities sold loss 2007 2006 2005 result market conditions within respective periods eg downgrade rating debt security opinion management gross unrealized losses table considered temporarily impaired 6 finance receivable loans composition finance receivables loans outstanding follows net unearned income 40 billion 57 billion december 31 2007 2006 respectively b aggregate amount finance receivables loans maturing next five years follows 46461 million 2008 13742 million 2009 11232 million 2010 7500 million 2011 7127 million 2012 45451 million 2013 thereafter prepayments chargeoffs may cause actual maturities differ scheduled maturities addition finance receivables loans outstanding held investment summarized table loans held sale 206 billion 277 billion december 31 2007 2006 respectively december 31 2007 loans held sale global automotive finance operations 85 billion compared loans held sale december 31 2006 increase loans held sale global automotive finance operations attributable change funding strategy moved originate distribute model december 31 2007 loans held notes consolidated financial statements gmac llc • sale rescap 121 billion compared 271 billion december 31 2006 december 31 2006 commercial finance operations also 652 million loans held sale following table presents analysis activity allowance credit losses finance receivables loans 2007 rescap completed sale residual cash flows related number onbalance sheet securitizations rescap completed approved actions necessary cause securitization trusts satisfy qualifying specialpurpose entity requirement sfas 140 accounting transfers servicing financial assets extinguishment liabilities actions resulted deconsolidation various securitization trusts notes consolidated financial statements gmac llc • following table presents information commercial finance receivables loans specifically identified impairment loans acquired transfer acquisition evidence deterioration credit quality since origination probable acquisition contractually required payments would collected carrying amount loans included balance sheet amounts finance receivables loans follows loans acquired december 31 2005 sop 033 requires us record revenue using accretable yield method following table represents accretable yield activity loans acquired year probable acquisition contractually required payments would collected follows 7 offbalance sheet securitizations securitize automotive mortgage financial assets funding source sell retail finance receivables wholesale dealer loans residential mortgage loans securitization transactions structured sales following discussion related information applicable transfers finance receivables loans qualify offbalance sheet securitizations requirements sfas 140 retain servicing responsibilities subordinated interests securitizations retail finance receivables wholesale loans servicing responsibilities retained majority residential loan securitizations may retain subordinated interests securitizations also hold subordinated interests act collateral manager collateralized debt obligation cdo securitization program servicer generally receive monthly fee stated percentage outstanding sold receivables typically retail automotive finance receivables paid fee concluded fee represents adequate compensation servicer servicing asset liability recognized considering shortterm revolving nature wholesale loans servicing asset liability recognized upon securitization loans december 31 2007 weighted average basic servicing fees primary servicing activities 100 basis points 100 basis points 33 basis points outstanding principal balance sold retail finance receivables wholesale loans residential mortgage loans respectively additionally retain rights cash flows remaining investors securitization trusts received contractual payments certain retail securitization transactions retail receivables sold servicing retained basis servicing compensation servicing liability established recorded liabilities december 31 2007 2006 servicing liabilities 9 million 18 million respectively outstanding related retail automotive securitization transactions addition 2005 completed retail automotive securitization servicing fee received considered greater adequate notes consolidated financial statements gmac llc • compensation requiring recording servicing asset december 31 2007 2006 fair value servicing asset 0 million 9 million respectively mortgage servicing capitalize value expected realized performing specified residential mortgage servicing activities mortgage servicing rights refer note 9 maintain cash reserve accounts predetermined amounts certain securitization activities unlikely event deficiencies occur cash flows owed investors amounts available cash reserve accounts related securitizations retail finance receivables wholesale loans residential mortgage loans totaled 100 million 811 million 277 million december 31 2007 respectively 39 million 1001 million 309 million december 31 2006 respectively key economic assumptions used measuring estimated fair value retained interests sales completed 2007 2006 2005 dates sales follows fair value retained interests wholesale securitizations approximates cost shortterm floatingrate nature wholesale loans b included within residential mortgage loans home equity loans lines high loantovalue loans residential first second mortgage loans c represents former gmac commercial mortgage sold approximately 79 equity interest march 23 2006 assumptions used measure expected yield variablerate retained interests based benchmark interest rate yield curve plus contractual spread appropriate actual yield curve utilized varies depending specific retained interests e based weighted average maturity wam finance receivables constant prepayment rate cpr mortgage loans notes consolidated financial statements gmac llc • following table summarizes pretax gains securitizations certain cash flows received paid securitization trusts transfers finance receivables loans completed 2007 following table summarizes pretax losses gains securitizations certain cash flows received paid securitization trusts transfers finance receivables loans completed 2006 2005 represents former gmac commercial mortgage sold approximately 79 equity interest march 23 2006 notes consolidated financial statements gmac llc • following table summarizes key economic assumptions sensitivity fair value retained interests december 31 2007 2006 immediate 10 20 adverse changes assumptions fair value retained interests wholesale securitizations approximates cost 959 million shortterm floatingrate nature wholesale receivables b net reserve expected credit losses totaling 7 million 8 million december 31 2007 2006 respectively amounts included fair value retained interests classified investment securities c forward benchmark interest rate yield curve plus contractual spread sensitivities hypothetical used caution changes fair value based 10 20 variation assumptions generally cannot extrapolated relationship change assumption change fair value may linear also table effect variation particular assumption fair value retained interest calculated without changing assumption reality changes one factor may result changes another may magnify counteract sensitivities additionally hedge interest rate prepayment risks associated certain retained interests effects hedge strategies considered herein expected static pool net credit losses include actual incurred losses plus projected net credit losses divided original balance outstandings comprising securitization pool following table displays expected static pool net credit losses securitization transactions static pool losses applicable wholesale finance receivable securitizations shortterm nature b represents former commercial mortgage operations sold approximately 79 equity interest march 23 2006 notes consolidated financial statements gmac llc • following table presents components securitized financial assets managed along quantitative information delinquencies net credit losses march 23 2006 sold approximately 79 equity interest capmark commercial mortgage operations b managed portfolio represents finance receivables loans balance sheet securitized excluding securitized finance receivables loans continue service continuing involvement ie retain interest risk loss underlying receivables 8 investment operating leases investments operating leases follows november 22 2006 126 billion operating lease assets consisting 157 billion vehicles cost net 31 billion accumulated depreciation distributed gm refer note 19 description distribution future lease payments due customers equipment operating leases december 31 2007 totaled 15531 million due follows 6873 million 2008 5016 million 2009 2887 million 2010 714 million 2011 41 million 2012 investments operating lease assets represents expected future cash flows expect realize operating leases includes customer payments expected residual value upon remarketing vehicle end lease described note 19 gm may sponsor residual support programs result contractual residual value excess standard residual value gm reimburses us remarketing sales proceeds less customer’s contract residual value limited standard residual value addition residual support programs gm also participates risksharing arrangement whereby gm shares equally residual losses extent remarketing proceeds standard residual rates limited floor connection sale 51 ownership interest gmac gm settled estimated liabilities respect residual support risk sharing portion operating lease portfolio based december 31 2007 outstanding us operating lease portfolio maximum amount could paid gm residual support programs risksharing arrangement approximately 11 billion 11 billion respectively fully discussed note 19 9 mortgage servicing rights define classes servicing rights based availability market inputs manner manage risks servicing assets liabilities manage servicing rights reportable operating segment level sufficient market inputs exist determine fair value recognized servicing assets servicing liabilities notes consolidated financial statements gmac llc • following table summarizes activity related mortgage servicing rights msrs carried fair value changes fair value due changes valuation inputs assumptions used valuation models include changes due revaluation model benchmarking exercise line item also includes changes fair value due change valuation assumptions andor model calculations changes fair value primarily include accretion present value discount related forecasted cash flows economic runoff portfolio well foreign currency adjustments extinguishment mortgage servicing rights related cleanup calls securitization transactions key economic assumptions sensitivity current fair value msrs immediate 10 20 adverse changes assumptions follows sensitivities hypothetical considered caution changes fair value based 10 variation assumptions generally cannot extrapolated relationship change assumptions change fair value may linear also effect variation particular assumption fair value calculated without changing assumption reality changes one factor may result changes another eg increased market interest rates may result lower prepayments increased credit losses could magnify counteract sensitivities show change asset balances show expected change fair value instruments used manage interest rates prepayment risks associated assets primary risk relating servicing rights interest rate risk resulting impact prepayments significant decline interest rates could lead higher expected prepayments could reduce value mortgage servicing rights economically hedge income statement impact risks derivative nonderivative financial instruments include interest rate swaps caps floors options purchase items futures forward contracts andor purchasing selling us treasury principalonly securities december 31 2007 fair value derivative financial instruments nonderivative financial instruments used mitigate risks amounted 901 million 257 million respectively december 31 2006 fair value derivative financial instruments nonderivative financial instruments used mitigate risks amounted 159 million 13 billion respectively change fair value derivative financial instruments amounted loss 716 million 281 million years ended december 31 2007 2006 respectively included servicing asset valuation hedge activities net consolidated statement income components servicing fees follows pledged msrs 27 billion 24 billion collateral borrowings december 31 2007 2006 respectively active risk management program hedge value msrs risk management program contemplates use derivative financial instruments us treasury securities principalonly securities experience changes value offsetting msrs response changes market interest rates see note 16 discussion derivative financial instruments used hedge mortgageservicing rights us treasury securities used connection risk management strategy designated trading availableforsale notes consolidated financial statements gmac llc • 10 premiums insurance receivables premiums insurance receivables consisted following net 1 million allowance uncollectible reinsurance recoverable paid losses december 31 2006 b net 9 million 7 million allowance uncollectible premiums receivable december 31 2007 2006 respectively 11 assets consisted represents credit enhancement form cash reserves various securitization transactions executed november 22 2006 710 million cash reserve deposits transferred gm part distribution certain securitized us lease assets refer note 19 description distribution b includes residential real estate investments 1 billion 2 billion related accumulated depreciation 16 million 13 million years ended december 31 2007 2006 respectively c represents cash collection customer payments securitized receivables funds distributed investors payments related secured debt aggregate amortization expense intangible assets 18 million 16 million including 1 million capmark year ended december 31 2006 amortization expense expected average 12 million per year next five fiscal years addition 2006 commercial finance group 13 million intangible assets deemed impaired subsequently written third quarter 2006 notes consolidated financial statements gmac llc • changes carrying amounts goodwill periods shown follows following attrition key personnel around middle 2006 commercial finance reporting unit initiated goodwill impairment test accordance sfas 142 outside normal fourth quarter cycle necessary precedent test thorough review business new leadership particular focus longterm strategy result review operating divisions reorganized decision made implement different exit strategy workout portfolio exit product lines lower returns decisions significant impact expected asset levels growth rate assumptions used estimate fair value business particular analysis performed third quarter incorporates management’s decision discontinue activity equipment finance business portfolio 1 billion representing approximately 20 commercial finance business’s average commercial loan portfolio 2006 consistent prior analysis fair value commercial finance business determined using internally developed discounted cash flow analysis based fiveyear projected net income market driven terminal value multiple based upon results assessment concluded carrying value goodwill exceeded fair value resulting impairment loss 827 million 2006 b three months ended september 30 2007 initiated evaluation goodwill rescap potential impairment accordance sfas 142 interim test initiated light deteriorating conditions residential home building markets including significant changes mortgage secondary market tightening underwriting guidelines reducing product offerings recent credit downgrades rescap’s unsecured debt obligations factors significant impact view rescap’s future expected asset levels growth rate assumptions consistent prior assessments fair value rescap business determined using internally developed discounted cash flow methodology addition took consideration relevant indicators value available marketplace recent market transactions trading values rescap goodwill exceeded fair value resulting impairment loss 455 million 2007 notes consolidated financial statements gmac llc • 12 debt following table classify domestic foreign debt basis location office recording transaction weighted average interest rates include effects derivative financial instruments designated hedges debt b repurchase agreements consist secured financing arrangements third parties rescap primarily includes nonbank secured borrowings well notes payable gm refer note 19 details c adjust designated fixedrate debt fair value accordance sfas 133 following summarizes assets restricted collateral payment related debt obligation primarily arising securitization transactions accounted secured borrowings repurchase agreements included part secured debt repurchase agreements 36 billion 115 billion pledged assets collateral approximately amount debt december 31 2007 2006 respectively time repurchase publicly traded debt part cash liquidity management strategy fourth quarter 2007 paid 900 million openmarket repurchases 241 million tender offer publicly traded rescap debt securities resulting aftertax gain 563 million also fourth quarter paid 287 million openmarket repurchases gmac debt securities resulting aftertax gain 16 million october 2006 successfully completed debt tender offer paying 1 billion retire portion deferred interest debentures resulting 135 million aftertax loss notes consolidated financial statements gmac llc • following table presents scheduled maturity longterm debt december 31 2007 assuming early redemptions occur actual payment secured debt may vary based payment activity related pledged assets debt issues totaling 13985 million redeemable par option anytime scheduled maturity dates latest november 2049 achieve desired balance fixed variablerate debt utilize interest rate swap interest rate cap agreements use derivative financial instruments effect synthetically converting 766 billion 1116 billion fixedrate debt variablerate obligations 95 billion 813 billion variablerate debt fixedrate obligations december 31 2007 addition certain debt obligations denominated currencies currency issuing country foreign currency swap agreements used hedge exposure changes exchange rates obligations liquidity facilities liquidity facilities represent additional funding sources financial institutions providing uncommitted facilities legally obligated advance funds following table summarizes liquidity facilities maintain certain rescap’s credit facilities contain financial covenant among covenants requiring rescap maintain minimum consolidated tangible net worth defined respective agreement end fiscal quarter agreements rescap’s tangible net worth cannot fall base amount plus amount equal 25 rescap’s net income positive fiscal year since closing date applicable agreement december 31 2007 notes consolidated financial statements gmac llc • restrictive provision requires minimum tangible net worth 54 billion rescap’s reported tangible net worth december 31 2007 60 billion 13 reserves insurance losses loss adjustment expenses following table provides reconciliation activity reserves insurance losses loss adjustment expenses incurred losses loss adjustment expenses 2007 2006 reduced 71 million 93 million respectively result decreases prior years’ reserve estimates private passenger automobile coverages certain reinsurance coverages assumed united states internationally extended service contracts internationally addition 2006 included 20 million reduction reserves related insurance program ultimately transferred gm b reflected net reinsurance recoveries totaling 246 million 306 million 342 million years ended december 31 2007 2006 2005 respectively c effects exchangerate changes years ended december 31 2007 2006 2005 includes exposure asbestos environmental claims reinsurance general liability commercial multiple peril homeowners’ workers’ compensation claims reported claim activity date significant net reserves loss adjustment expenses matters 5 million december 31 2007 2006 6 million december 31 2005 14 deposit liabilities deposit liabilities consisted following noninterest bearing deposits primarily represent thirdparty escrows associated rescap’s loan servicing portfolio escrow deposits subject executed agreement withdrawn without penalty time december 31 2007 certificates deposit included 66 billion brokered certificates deposit following table presents scheduled maturity brokered deposits december 31 2007 15 accrued expenses liabilities accrued expenses liabilities consisted notes consolidated financial statements gmac llc • 16 derivative instruments hedging activities enter interest rate foreign currency futures forwards options swaps connection market risk management activities derivative instruments used manage interest rate risk relating specific groups assets liabilities including investment securities loans held sale mortgage servicing rights debt deposits well offbalance sheet securitizations addition foreign exchange contracts used hedge foreigncurrencydenominated debt foreign exchange transactions accordance sfas 133 amended interpreted record derivative financial instruments consolidated balance sheet assets liabilities fair value changes fair value accounted depending use derivative financial instruments whether qualifies hedge accounting treatment primary objective utilizing derivative financial instruments manage market risk volatility associated interest rate foreign currency risks related assets liabilities automotive finance mortgage operations managing volatility enables us price finance mortgage offerings competitive rates minimize impact market risk earnings strategies applied decentralized basis respective global automotive finance rescap operations consistent level market risk managed subject various limits controls local unit consolidated level one key goals strategy modify asset liability interest rate mix including assets liabilities associated securitization transactions may recorded offbalance sheet specialpurpose entities addition use derivative financial instruments mitigate risk changes fair values mortgage loans held sale mortgage servicing rights derivative financial instruments also utilized manage foreign currency exposure related foreigncurrencydenominated debt following summarizes derivative activity based accounting hedge designation fair value hedges fair value hedges consist hedges fixedrate debt obligations interest rate swaps used modify exposure interest rate risk converting fixedrate debt floating rate generally individual swaps designated hedges specific debt time issuance terms swap matching terms underlying debt terms swap designed match terms debt significant portion debt obligation hedging relationships receive shortcut treatment sfas 133 resulting assumption hedge ineffectiveness however certain fair value hedges debt receive shortcut treatment differences option features interest rate swap companion hedged debt underlying debt hedged partially repurchased swap traded ineffectiveness measured based difference fair value movement swap related hedged debt effectiveness assessed using historical data assess hedge effectiveness employing statisticalbased approach must meet thresholds rsquared slope fstatistic tstatistic cash flow hedges enter derivative financial instrument contracts hedge exposure variability cash flows related floatingrate foreign currency financial instruments interest rate swaps used modify exposure variability expected future cash flows attributable variablerate debt currency swaps forwards used hedge foreign exchange exposure foreigncurrencydenominated debt converting funding currency assets financed similar fair value hedges swaps generally entered traded concurrent debt issuance terms swap matching terms underlying debt economic hedges designated accounting hedges utilize certain derivative financial instruments qualify designated hedges sfas 133 facilitate securitization transactions manage risks related interest rate price foreign currency derivatives designated accounting hedges changes fair value derivative instruments recognized earnings period • mortgage servicing rights enter combination derivative contracts economic hedges servicing rights associated groups similar mortgage loans derivatives include interest rate caps floors futures options futures mortgagebacked security options interest rate swaps swaptions maturities instruments range six months twenty years entered written options us treasury futures notional amounts lower purchased options futures purchased option coverage strike price less equal corresponding written option coverage thereby mitigating loss exposure required deposit cash margin accounts maintained counterparties unrealized losses future contracts • loans held sale use derivative financial instruments hedge exposure risk associated mortgage automotive loans held sale notes consolidated financial statements gmac llc • mortgage loans funded generally sold secondary market various investors often mortgagebacked securities sponsored fannie mae freddie mac ginnie mae mortgage loans eligible agencysponsored securitization sold public private securitization transactions wholeloan sales automotive loans sold public private securitization transactions wholeloan sales primary risk associated closed loans awaiting sale change fair value loans attributable fluctuations interest rates primary strategies protect risk selling loans mortgagebacked securities forward investors using mandatory optional forward commitments use interest rate swaps • offbalance sheet securitization activities enter interest rate swaps facilitate securitization transactions underlying receivables sold nonconsolidated qspe underlying assets carried nonconsolidated entity interest rate swaps qualify hedge accounting treatment • foreign currency debt elected treat currency swaps used convert foreign denominated debt back functional currency floating rate hedges accounting purposes although currency swaps similar foreign currency cash flow hedges described foregoing designated hedges changes fair values currency swaps substantially offset foreign currency revaluation gains losses underlying debt • mortgage related securities use interest rate options futures swaps caps floors mitigate risk related mortgage related securities classified trading • callable debt obligations enter cancellable interest rate swaps economic hedges certain callable fixedrate debt connection market risk management policy hedging relationship meet specified effectiveness assessment threshold treated economic hedge prior may 2007 cancellable swaps hedging callable debt treated economic hedges following table summarizes pretax earnings effect type hedge classification segregated asset liability hedged amount represents difference changes fair values currency swap net revaluation related foreign denominated debt notes consolidated financial statements gmac llc • following table presents additional information related derivative financial instruments estimated occur next 12 months derivative financial instruments contain element credit risk counterparties unable meet terms agreements credit risk associated derivative financial instruments measured net replacement cost counterparties owe us contract completely fail perform terms contracts assuming recoveries underlying collateral measured market value derivative financial instrument december 31 2007 2006 market value derivative financial instruments asset receivable position perspective 44 billion 25 billion including accrued interest 400 million 600 million respectively minimize credit risk exposure limiting counterparties major banks financial institutions meet established credit guidelines december 31 2007 88 exposure counterparties fitch rating higher equivalent rating another rating agency counterparty rated fitch compared 74 december 31 2006 additionally reduce credit risk majority derivative financial instruments entering legally enforceable agreements permit closeout netting transactions counterparty upon occurrence certain events mitigate risk counterparty default maintain collateral agreements certain counterparties agreements require parties maintain cash deposits event fair values derivative financial instruments meet established thresholds placed cash deposits totaling 67 million 206 million december 31 2007 2006 respectively accounts maintained counterparties received cash deposits counterparties totaling 944 million 215 million december 31 2007 2006 respectively cash deposits placed received included consolidated balance sheet assets accrued expenses liabilities respectively 17 pension postretirement benefits pension certain employees eligible participate separate retirement plans provide pension payments eligible employees upon retirement based factors length service salary pursuant sale transactions transferred froze terminated portion defined benefit plans 2006 froze benefits participation pension plan covering primarily rescap employees resulted curtailment gain approximately 43 million also curtailed gmac commercial finance uk gmac commercial finance canada cf canada retirement plans 2006 subsequently terminated cf canada plan 2007 recorded curtailment charge approximately 9 million 2006 plans revised approximately 4 million 2007 additionally april 30 2007 closed gmac uk car care pension plan future accrual thereby freezing benefits participants resulted minimal impact earnings 2006 also recorded expense payments approximately 48 million section 75 debt obligation fully fund gmac portion gm uk pension plans required uk pension act 2004 income expense noted pension accounting recorded compensation benefits expense consolidated statement income furthermore prior consummation sale transactions november 30 2006 number employees eligible participate various domestic foreign pension plans gm participating employer plans gm allocated us portion pension expense made pro rata basis affected various assumptions discount rate return plan assets etc gm utilized determining pension obligation upon completion sale employees longer eligible participate pension plans also transferred gm financial liability associated gmac portion certain gm plans canada sale date adopted sfas 158 fiscal year ended december 31 2007 resulting 21 million increase assets 3 million increase deferred tax assets 11 million increase liabilities 13 million increase accumulated comprehensive income net tax overfunded pension plan recognized asset underfunded pension plan recognized liability unrecognized prior service costs credits net actuarial gains losses net transition obligations well subsequent changes funded status recognized component accumulated comprehensive loss equity notes consolidated financial statements gmac llc • following summarizes information relating pension plans expected rate return plan assets estimate determine calculating expected inflation expected real rate return stocks bonds based allocation percentages within trust weighted average assumptions used determining net periodic benefit cost follows net periodic pension expense includes curtailment gains losses transactions described 2007 2006 net pension expense income nongmsponsored plans totaled 2 million 3 million 28 million 2007 2006 2005 respectively allocations received gm related net pension expense employees participated gmsponsored plans 2006 2005 80 million 60 million respectively employer contributions pension plans 2007 2006 approximately 3 million 4 million respectively expect contribution levels remain minimal 2008 weightedaverage asset allocations pension plans december 31 2007 asset category follows equity securities 58 debt securities 35 7 postretirement benefits certain subsidiaries participated various postretirement medical dental vision life insurance plans gm whereas subsidiaries participated separately maintained postretirement plans benefits funded incurred general assets previously accrued postretirement benefit costs active service period employees date full eligibility benefits effective november 30 2006 upon completion sale employees longer eligible participate gm’s postretirement plans sale gm agreed assume retain approximately 801 million liabilities related usbased gmsponsored postretirement benefit programs employees well approximately 302 million related deferred tax assets net amount recorded capital contribution provided certain amounts associated estimated future postretirement benefits pensions characterized amounts postretirement benefits notwithstanding recording amounts use terms admit otherwise acknowledge amounts existing postretirement benefit plans pensions represent legally enforceable liabilities postretirement benefits expense income recorded compensation benefits expense consolidated statement income totaled 2 million 35 million 88 million 2007 2006 2005 respectively decrease expense 2007 relates transactions described expect postretirement benefit expense minimal future years impact adoption sfas 158 postretirement benefits decrease liabilities 5 million increase deferred tax liabilities 2 million increase accumulated comprehensive income approximately 3 million net tax defined contribution plan significant number employees covered defined contribution plans employer contributions vary based criteria specific individual plan amounted 71 million 40 million 41 million 2007 2006 2005 respectively costs also recorded compensation benefit expenses consolidated statement income increase contributions 2007 mainly resulted change benefit structure end 2006 defined benefit plans defined contribution plans based benefit restructuring expect contributions 2008 similar contributions made 2007 notes consolidated financial statements gmac llc • 18 income taxes effective november 28 2006 gmac along certain us subsidiaries became passthrough entities us federal income tax purposes income taxes incurred converting entities provided november 30 2006 required taxsharing agreement gm gmac subsequent november 30 2006 us federal state local income taxes generally provided entities ceased taxable entities exception local jurisdictions continue tax llcs partnerships due change tax status net deferred tax liability eliminated income tax expense totaling 791 million 2006 members report share taxable income respective income tax returns banking insurance foreign subsidiaries generally corporations continue subject provide us federal foreign income taxes income tax expense related corporations included income tax expense along miscellaneous state local franchise taxes gmac certain subsidiaries significant components income tax expense follows results 2007 reflect effect domestic subsidiaries generally taxed entity level resulting effective tax rate consolidated basis varying significantly comparison period 2006 primary reason majority net loss experienced rescap attributable llcs tax benefits losses recorded excluding rescap consolidated effective tax rate approximately 17 represents provision taxes notes consolidated financial statements gmac llc • nonllc subsidiaries combined taxable income subject tax llc subsidiaries effective tax rates applicable nonllc subsidiaries remain comparable 2006 december 31 2007 valuation allowance attributable certain foreign subsidiaries principally canada based actual forecast operating results consideration available tax planning believe unable utilize portion loss carryforwards deferred tax assets liabilities result differences assets liabilities measured financial reporting purposes measured income tax return purposes terms purchase sale agreement gm fim holdings llc distribution lease assets assumption gm certain postretirement benefits resulted reduction deferred tax liabilities assets 1845 million 302 million respectively 2006 additionally change tax status resulted 791 million reduction income tax expense related elimination deferred tax liabilities assets 1486 million 695 million respectively significant components deferred tax assets liabilities consideration adjustments reflected following table december 31 2007 book basis net assets flowthrough entities exceeded tax basis approximately 6080 million compared 2460 million december 31 2006 primarily related lease transactions mortgageservicing rights sales finance receivables foreign pretax income loss totaled 333 million 2007 336 million 2006 988 million 2005 foreign pretax income subject us taxation effectively repatriated entities disregarded us federal income tax purposes responsibility members provide federal income taxes undistributed earnings foreign subsidiaries extent earnings deemed indefinitely reinvested outside united states banking insurance subsidiaries continue subject us federal income taxes provide federal income taxes notes consolidated financial statements gmac llc • undistributed earnings foreign subsidiaries except extent earnings indefinitely reinvested outside united states december 31 2007 4895 million accumulated undistributed earnings foreign subsidiaries indefinitely reinvested quantification deferred tax liability associated indefinitely reinvested earnings practicable eleven months ending november 30 2006 year ending december 31 2005 gm consolidated federal net operating losses gm utilized prior year federal carryback potential remaining net operating losses carried forward consolidated federal net operating losses also created charitable contribution deduction foreign tax credit carryforwards pursuant taxsharing agreement gm us allocation consolidated tax attributes gm periods’ federal net operating losses due certain loss subsidiaries charitable contributions deduction foreign tax credits carried forward subsidiaries remain separate us taxpaying entities gmac certain subsidiaries converted limited liability companies elected treated passthrough entities intercompany receivables gm related tax attributes totaling 11 billion dividended gm november 30 2006 terms purchase sale agreement gm fim holdings llc taxsharing agreement gm us terminated november 30 2006 terms sale agreement stipulate gm indemnify us contingent tax liabilities related periods november 30 2006 excess established sale date additionally net taxrelated assets consisting tax deposits claims contingencies november 30 2006 converting entities assumed transferred gm equity totaling 107 million adopted provisions fasb interpretation 48 accounting uncertainty income taxes january 1 2007 cumulative effect applying fin 48 recorded directly retained earnings reported change accounting principle adoption interpretation material impact consolidated financial position reconciliation beginning ending amount unrecognized tax benefits follows amount unrecognized tax benefits recognized would affect effective tax rate approximately 153 million included within deferred taxes excluded unrecognized tax benefits detailed december 31 2007 260 million tax positions ultimate deductibility certain uncertainty timing deductibility deferred tax accounting timing deductibility would affect effective tax rate would accelerate payment cash taxing authority earlier period recognize interest penalties accrued related uncertain income tax positions interest expense operating expenses respectively year ending december 31 2007 38 million accrued interest penalties cumulative accrued balance date totaling 164 million anticipate internal revenue service examination us income tax returns 2001 2003 along examinations various state local jurisdictions completed within next twelve months reasonably possible certain tax positions may settled unrecognized tax benefits would decrease approximately 10 million file tax returns us federal jurisdiction various states foreign jurisdictions significant operations december 31 2007 oldest tax years remain subject examination united states 2001 canada 2003 germany 2003 united kingdom 1995 mexico 2001 brazil 2003 australia 2002 notes consolidated financial statements gmac llc • 19 related party transactions balance sheet summary balance sheet effect transactions gm fim holdings affiliated companies follows november 2006 gmac retained investment note secured operating lease assets transferred gm part transfer gmac provided note trust wholly owned subsidiary gm note classified investment securities consolidated balance sheet b represents wholesale financing term loans certain dealerships wholly owned gm interest c primarily represents loans various affiliates fim holdings includes vehicles buildings equipment classified operating lease assets leased gmaffiliated fim holdingsaffiliated entities e 2007 2006 also provided wholesale financing gm vehicles parts accessories gm retains title consigned us dealers uk italy germany financing gm remains outstanding title transferred dealers amount financing provided gm arrangement varies based inventory levels also included 2007 balance note receivable gm referenced f november 2006 gmac transferred nol tax receivables gm entities converting llc nonconverting entities amount reclassified deferred income taxes consolidated balance sheet december 31 2006 balance represents 2006 overpayment taxes gmac gm former taxsharing arrangement included accrued expenses liabilities consolidated balance sheet g fourth quarter 2007 gm fim holdings converted 11 billion preferred membership interest common equity interests refer note 1 discussion h amount includes cash dividends 48 billion noncash dividends 49 billion 2006 fourth quarter 2006 connection sale transactions gmac paid 78 billion dividends gm composed following cash dividend 27 billion representing onetime distribution gm primarily reflect increase gmac’s equity resulting elimination portion net deferred tax liabilities arising conversion gmac certain subsidiaries limited liability company ii certain assets respect automotive leases owned gmac affiliates net book value approximately 40 billion related deferred tax liabilities 18 billion iii certain michigan properties carrying value approximately 12 billion gm iv intercompany receivables gm related tax attributes 11 billion v net contingent tax assets 491 million vi miscellaneous transactions first quarter 2007 terms sale transactions gm made capital contribution 1 billion gmac amount 2006 composed following approximately 801 million liabilities related us canadianbased gmsponsored postretirement programs related deferred tax assets 302 million ii contingent tax liabilities 384 million assumed gm iii deferred tax assets transferred gm 68 million notes consolidated financial statements gmac llc • income statement summary income statement effect transactions gm affiliated companies follows represents total amount residual support risk sharing paid invoiced residual support risksharing programs deferred revenue related settlement residual support risksharing obligations portion lease portfolio 2006 described b gm sponsors lease pullahead programs whereby consumers encouraged terminate lease contracts early conjunction acquisition new gm vehicle customer’s remaining payment obligation waived certain programs gm compensates us waived payments adjusted based remarketing results associated underlying vehicle c settlement terms related wholesale financing certain gm products shipment date extent wholesale settlements gm made expiration transit receive interest gm represents income loss related derivative transactions entered gm counterparty e gmac canada limited administered operating lease receivables behalf gm canada limited gmcl received servicing fee included income october 2005 gmac canada limited longer administers operating lease receivables f represents receive servicing fee gm related resale rental car repurchases december 31 2006 program terminated g represents servicing income related automotive leases distributed gm november 22 2006 h agreement gm provides reimbursement certain selling expenses incurred us offlease vehicles sold gm auction reimburse gm certain services provided us amount includes rental payments primary executive administrative offices located renaissance center detroit michigan well exclusivity royalty fees retail lease programs gm may elect sponsor incentive programs retail contracts operating leases supporting financing rates standard market rates purchase retail contracts leases marketing incentives also referred rate support subvention gm utilizes marketing incentives pays us present value difference customer rate standard rate contract inception defer recognize yield adjustment life contract gm may also sponsor lease residual support programs way lower customer monthly payments residual support programs customer’s contractual residual value adjusted standard residual values historically gm reimbursed us time vehicle’s disposal remarketing sales proceeds less customer’s contractual residual value limited standard residual value addition residual support programs gm also participated risksharing arrangement whereby gm shared equally residual losses extent remarketing proceeds standard residual values limited floor connection sale transactions gm settled estimated liabilities respect residual support risk sharing portion operating lease portfolio entire us balloon retail receivables portfolio series lumpsum payments negotiated amount totaling approximately 14 billion agreed gm leases balloon contracts paid us payments recorded deferred amount accrued notes consolidated financial statements gmac llc • expenses liabilities consolidated balance sheet contracts terminate vehicles sold auction payments treated component sales proceeds recognizing gain loss sale underlying assets december 31 2007 remaining deferred amount 749 million addition regard us lease originations us balloon retail contract originations occurring april 30 2006 remained us consummation sale transactions gm agreed begin payment present value expected residual support owed us time contract origination opposed contract termination time sale related vehicle residual support amount gm actually owes us finalized leases actually terminate terms residual support program cases estimate incorrect gm may obligated pay us may obligated reimburse gm affected contracts originated year ended december 31 2007 gm paid agreed pay us total 11 billion based december 31 2007 outstanding us operating lease portfolio additional maximum amount could paid gm residual support programs approximately 11 billion would paid unlikely event proceeds entire portfolio lease assets lower contractual residual value standard residual rates based december 31 2007 outstanding us operating lease portfolio maximum amount could paid risksharing arrangements approximately 11 billion would paid unlikely event proceeds outstanding lease vehicles lower standard residual rates retail lease contracts acquired us included rate residual subvention gm payable directly indirectly gm dealers percentage total new retail installment lease contracts acquired follows decrease 2007 primarily due price repositioning mexico improved competitiveness nonsubvented products increased mexico’s retail penetration 2 comparison 2006 levels distribution operating lease assets connection sale gm 51 interest gmac november 22 2006 gmac transferred gm certain gmac us lease assets along related secured debt assets described notes 8 11 12 respectively gmac retained investment note balance december 31 2007 35 million secured lease assets distributed gm described note 5 gmac continues service assets related secured debt behalf gm receives fee service securitization transactions gmac obligated servicer repurchase lease asset breach covenants securitization documents addition number transactions securitizing lease assets transferred gm trusts issued one series floatingrate debt obligations entered primary derivative transactions remove market risk associated funding fixed payment lease assets floating interest rate debt facilitate securitization transactions gmac entered secondary derivative transactions primary derivative counterparties essentially offsetting primary derivatives part distribution gm assumed rights obligations primary derivative whereas gmac retained secondary leaving companies exposed market value movements respective derivatives gmac gm subsequently entered derivative transactions intended offset exposure party component primary secondary derivatives exclusivity arrangement gm gmac entered several service agreements codify mutually beneficial historical relationship gm gmac connection agreements gmac granted 10year exclusivity right covering us subvented automotive consumer business ends november 2016 return exclusivity gmac pay gm annual exclusivity fee 75 million committed provide financing gm customers accordance historical practices specifically connection us consumer financing agreement gmac must meet certain targets respect consumer retail lease financings new gm vehicles contractual commitments met gm may assess financial penalties gmac even rescind gmac’s exclusivity rights agreement provides gmac ample flexibility provide gm required financing support without compromising gmac’s underwriting standards addition entered various services agreements gm designed document maintain current historical relationship us required pay gm fees connection certain agreements related financing gm consumers dealers certain parts world notes consolidated financial statements gmac llc • royalty arrangement certain insurance products gm gmac entered intellectual property license agreement right gmac use gm name certain insurance products exchange gmac pay gm minimum annual guaranteed royalty fee 15 million gm also provides payment guarantees certain commercial assets outstanding certain thirdparty customers december 31 2007 2006 commercial obligations guaranteed gm 107 million 216 million respectively addition consignment arrangement gm commercial inventories europe december 31 2007 2006 commercial inventories related arrangement 90 million 151 million respectively reflected assets consolidated balance sheet gm call option gm retains option repurchase certain assets us related automotive finance operations north american operations international operations option granted pursuant purchase sale agreement expires earlier november 2016 ii date upon gm’s common equity interest gmac falls 15 gm’s exercise option conditional gm’s credit rating investment grade higher credit rating call option price calculated higher fair market value determined accordance procedures set forth purchase sale agreement ii 95 times consolidated net income automotive finance operations either calendar year call option exercised calendar year immediately following year call option exercised required purchase sale agreement created subsidiary contributed certain automotive finance assets facilitate gm’s potential exercise call option 20 comprehensive income comprehensive income composed net income comprehensive income includes aftertax change unrealized gains losses availableforsale securities foreign currency translation adjustments cash flow hedging activities sfas 158 adoption following table presents components annual activity comprehensive income primarily represents aftertax difference fair value amortized cost availableforsale securities portfolio b includes aftertax gains losses foreign currency translation operations functional currency us dollar net change amounts net tax expense 11 million tax benefit 37 million tax benefit 35 million years ended december 31 2007 2006 2005 respectively notes consolidated financial statements gmac llc • net changes following table represent sum net unrealized gains losses availableforsale securities net unrealized gains losses cash flow hedges respective reclassification adjustments reclassification adjustments amounts recognized net income current year reported comprehensive income previous years 2006 amounts also include cumulative effect change accounting principle due adoption sfas 156 sfas 156 upon initial adoption permitted onetime reclassification availableforsale securities trading securities identified offsetting entity’s exposure liabilities servicer elects subsequently measure fair value net tax expense 24 million 2007 tax expense 106 million 2006 tax benefit 6 million 2005 b net tax expense 8 million 2007 351 million 2006 42 million 2005 c net tax benefit 12 million 2007 tax benefit 121 million 2006 tax expense 23 million 2005 net tax benefit 12 million 2007 1 million 2006 2005 21 fair value financial instruments fair value financial instruments amount financial instrument could exchanged current transaction willing parties forced sale liquidation possible use quoted market prices determine fair value quoted market prices available fair value internally derived based upon appropriate valuation methodologies respect amount timing future cash flows estimated discount rates however considerable judgment required interpreting market data develop estimates fair value estimates necessarily indicative amounts could realized would paid current market exchange effect using different market assumptions estimation methodologies could material estimated fair values fair value information presented herein based information available december 31 2007 2006 although management aware factors would significantly affect estimated fair value amounts updated since dates therefore current estimates fair value dates december 31 2007 2006 could differ significantly amounts notes consolidated financial statements gmac llc • following table presents carrying estimated fair value assets liabilities considered financial instruments statements financial accounting standards 107 disclosures fair value financial instruments sfas 107 accordingly certain items considered financial instruments excluded table debt includes deferred interest zerocoupon bonds 399 million 353 million 2007 2006 respectively following describes methodologies assumptions used determine fair value respective classes financial instruments investment securities bonds equity securities notes availableforsale investment securities carried fair value primarily based quoted market prices fair value mortgagerelated trading securities based market quotes extent available discounted using market prepayment assumptions discount rates external quotes available valuations based internal valuation models using marketbased assumptions heldtomaturity investment securities carried amortized cost fair value heldtomaturity investment securities based valuation models using marketbased assumptions interests securitization trusts carried fair value based expected cash flows discounted current market rates loans held sale fair value loans held sale based upon actual prices received recent sales loans securities investors projected prices obtained investor indications considering interest rates loan type credit quality finance receivables loans net fair value finance receivables estimated discounting future cash flows using applicable spreads approximate current rates applicable category finance receivables carrying value wholesale receivables automotive mortgage lending receivables interest rates reset shortterm basis applicable market indices assumed approximate fair value either shortterm nature interest rate adjustment feature fair value mortgage loans held investment based discounted cash flows using interest rates currently offered loans similar terms borrowers similar credit quality net realizable value collateral andor estimated sales price based quoted market prices available actual prices received comparable sales mortgage loans investors notes receivable gm fair value estimated discounting future cash flows using applicable spreads approximate current rates applicable certain categories financing assets derivative assets liabilities fair value interest rate swaps estimated based discounted expected cash flows using quoted market interest rates fair value caps written purchased options mortgagerelated interest rate swaps based upon quoted market prices brokerdealer quotes fair value foreign currency swaps based discounted expected cash flows using market exchange rates remaining term agreement debt fair value debt determined using quoted market prices similar issues available based current rates offered us debt similar remaining maturities commercial paper master notes demand notes original term less 270 days therefore carrying amount liabilities considered approximate fair value deposit liabilities deposit liabilities represent certain consumer bank deposits well mortgage escrow deposits fair value deposits stated maturity equal carrying notes consolidated financial statements gmac llc • amount fair value fixedmaturity deposits estimated discounting cash flows using currently offered rates deposits similar maturities 22 variable interest entities following describes variable interest entities consolidated significant variable interest described interpretation 46 consolidation variable interest entities fin 46r automotive finance receivables certain securitization transactions transfer consumer finance receivables wholesale lines credit banksponsored multiseller commercial paper conduits provide funding source us well transferors conduit fund purchase receivables issuance commercial paper total assets outstanding banksponsored conduits approximated 124 billion december 31 2007 although variable interests conduits considered primary beneficiary retain majority expected losses returns maximum exposure loss involvement nonconsolidated variable interest entities 152 million would incurred event complete loss assets transferred mortgage warehouse funding rescap operations transfer residential mortgage loans lending receivables home equity loans lines credit pending permanent sale securitization various structured finance arrangements provide funds origination purchase future loans structured finance arrangements include transfers warehouse funding entities including gmac banksponsored commercial paper conduits transfers assets facility accounted either sales offbalance sheet secured financings onbalance sheet based provisions sfas 140 however either case creditors facilities legal recourse general credit warehouse funding entities represent variable interest entities fin 46r management determined certain mortgage warehouse funding facilities primary beneficiary consolidate entities accordance fin 46r assets residential mortgage warehouse entities totaled 77 billion december 31 2007 majority included loans held sale consolidated balance sheet beneficial interest holders variable interest entities legal recourse general credit residential mortgage loan alliances rescap invested strategic alliances several mortgage loan originators alliances may include common preferred equity investments working capital subordinated lending warrants addition warehouse lending arrangements management determined majority expected losses returns consolidation appropriate total assets alliances 32 million december 31 2007 maximum exposure loss alliances including commitments lend additional funds purchase loans abovemarket rates 16 million december 31 2007 construction real estate lending use specialpurpose entity finance constructionlending receivables specialpurpose entity purchases holds receivables funds majority purchases financing obtained thirdparty assetbacked commercial paper conduits results variable interest analysis indicate primary beneficiary consolidate entity assets entity totaled 26 billion 21 billion december 31 2007 2006 respectively included finance receivables loans net unearned income consolidated balance sheet beneficial interest holders variable interest entity legal recourse general credit subordinated real estate lending arrangements certain entities created develop land construct properties management determined majority expected losses returns consolidation appropriate total assets entities 549 million december 31 2007 195 million represents maximum exposure loss warehouse lending facility transfer mortgage warehouse lending receivables 100 owned spe sells senior participation interest receivables unconsolidated qspe funds purchase participation interest spe financing obtained thirdparty assetbacked commercial paper conduits spe funds purchase receivables us cash obtained qspe well subordinated loan andor equity contribution us senior participation interest sold qspe commercial paper issued included assets liabilities 2004 however qspe terminated new spe created 2005 result senior participation interest sold commercial paper issued included consolidated balance sheet december 31 2007 2006 respectively receivables sold may purchased us except limited circumstances breach representations warranties management determined primary beneficiary spe consolidates entity assets spe totaled 514 million 145 billion december 31 2007 2006 respectively included notes consolidated financial statements gmac llc • finance receivables loans net unearned income consolidated balance sheet beneficial interest holders variable interest entity legal recourse general credit collateralized debt obligations cdos rescap operations sponsors manages collateral certain cdos cdo transactions trust established purchases portfolio securities issues debt equity certificates representing interests portfolio assets bonds representing collateral cdo include issued us loan securitizations issued third parties addition receiving variable compensation managing portfolio sometimes retain equity investments cdos management determined certain cdo entities primary beneficiary consolidate entities assets entities totaled 363 million 732 million december 31 2007 2006 respectively majority included investment securities consolidated balance sheet beneficial interest holders variable interest entities legal recourse general credit commercial finance receivables facility transfer commercial lending receivables 100 owned spe turn issues notes received thirdparty financial institutions gmac commercial finance assetbacked commercial paper conduits spe funds purchase receivables us cash obtained sale notes management determined primary beneficiary spe consolidates entity assets spe totaled 17 billion december 31 2007 included finance receivables loans net unearned income consolidated balance sheet beneficial interest holders variable interest entity legal recourse general credit securitization transactions transfer commercial trade receivables banksponsored multiseller commercial paper conduits provide funding source us well transferors conduit fund purchase receivables issuance commercial paper total assets outstanding banksponsored conduits approximated 20 billion december 31 2007 although variable interest conduits may discretion prepay portion loans time notes consolidated financial statements gmac llc • 23 segment geographic information operating segments defined components enterprise engage business activity revenues earned expenses incurred discrete financial information available evaluated regularly chief operating decision makers deciding allocate resources assessing performance financial information reportable operating segments summarized follows north american operations consist automotive financing united states canada international operations consist automotive financing fullservice leasing countries puerto rico march 31 2006 beginning april 1 2006 puerto rico included north american operations b refer note 1 description changes historical financial data north american operations operating segment c amounts include intrasegment eliminations north american operations international operations represents commercial finance business capmark certain corporate activities reclassifications elimination reporting segments financial results 2006 reflect approximately 21 equity interest capmark commencing march 23 2006 whereas 2005 financial results represent capmark wholly owned december 31 2007 total assets 53 billion commercial finance business 140 billion corporate intercompany activity reclassifications eliminations notes consolidated financial statements gmac llc • information concerning principal geographic areas follows revenue consists total net financing revenue presented consolidated statement income b consists net operating leases assets net property equipment notes consolidated financial statements gmac llc • 24 restructuring charges october 17 2007 rescap announced restructuring plan would reduce workforce streamline operations revise cost structure enhance flexibility allowing rescap scale operations rapidly meet changing market conditions restructuring plan announced included reducing rescap worldwide workforce approximately 25 approximately 3000 associates majority reductions occurring fourth quarter 2007 reduction workforce addition measures undertaken first half 2007 2000 positions eliminated fourth quarter rescap incurred restructuring costs related severance related costs associated workforce reduction 58 million contract termination costs related closure facilities 46 million asset writedowns 23 million additionally fourth quarter north american automotive finance operations insurance operations incurred restructuring costs related severance related costs 4 million restructuring charges primarily include severance pay buyout employee agreements lease terminations following table summarizes category restructuring charge activity year ended december 31 2007 25 guarantees commitments contingencies risks guarantees defined contracts indemnification agreements contingently require us make payments third parties based changes underlying agreement related guaranteed party following summarizes outstanding guarantees made third parties consolidated balance sheet periods shown standby letters credit finance operations primarily commercial finance group issues financial standby letters credit customers represent irrevocable guarantees payment specified financial obligations typically client’s suppliers addition rescap operations issues financial standby letters credit part warehouse construction lending activities expiration dates letters credit range 2006 ongoing commitments generally collateralized assets client trade receivables cash deposits etc high loantovalue hltv international securitizations rescap operations entered agreements provide credit loss protection certain hltv international securitization transactions maximum potential obligation certain agreements equal notes consolidated financial statements gmac llc • lesser specified percentage original loan pool balance specified percentage current loan pool balance required perform guaranty obligation bond insurer makes payment bond insurance policy pledged mortgage loans held sale totaling 32 million 60 million cash 0 million 9 million collateral obligations december 31 2007 2006 respectively certain hltv securitizations maximum obligation equivalent pledged collateral amount pledged mortgage loans held sale totaling 51 million 57 million collateral obligations december 31 2007 2006 respectively event require us perform guaranty obligation occurs security credit enhancements exhausted losses passed counter dealers guarantees terminate first calendar month aggregate note amount reduced zero agency loan program rescap operations deliver loans certain agencies allow streamlined loan processing limited documentation requirements event loans delivered programs reach specified delinquency status may required provide certain documentation cases repurchase loan indemnify investors losses sustained program includes termination features whereby loan performed satisfactorily specified period time longer obligated program maximum liability represents principal balance loans sold programs guarantees repayment thirdparty debt certain arrangements guarantee repayment thirdparty debt obligations case default guarantees collateralized letters credit commercial finance group provides credit protection third parties guarantee payment specified financial obligations third parties customers without purchasing obligations repurchase guarantees rescap operations issued repurchase guarantees buyers certain mortgage loans whereby closing condition document deficiency identified investor closing may required indemnify investor loan becomes delinquent nonfinancial guarantees connection sale approximately 79 equity capmark released financial guarantees related former gmac commercial holdings business certain nonfinancial guarantees survive closing indemnified capmark payment made liabilities incurred us connection guarantees standard indemnification clauses certain funding arrangements would require us pay lenders increased costs resulting certain changes laws regulations since changes would dictated legislative regulatory actions inherently unpredictable able estimate maximum exposure arrangements date made payments indemnification clauses rescap operations guaranteed certain amounts related servicing advances setaside letters credit enhancement performance guarantees connection certain asset sales securitization transactions typically deliver standard representations warranties purchaser regarding characteristics underlying transferred assets representations warranties conform specific guidelines customary securitization transactions clauses intended ensure terms conditions sales contracts met upon transfer asset sale securitization transaction perform due diligence respect assets included sale ensure meet purchaser’s requirements expressed representations warranties due procedures believe potential loss arrangements remote accordingly liability reflected consolidated balance sheet related potential obligations maximum potential amount future payments could required make would equal current balances assets subject securitization sale activities monitor total value assets historically transferred securitization vehicles asset sales therefore unable develop estimate maximum payout representations warranties notes consolidated financial statements gmac llc • commitments financing commitments contract amount gain loss positions financial commitments follows fair value estimated using published market information associated commitments sell similar instruments included december 31 2007 2006 commitments accounted derivatives contract amount 18118 million 37082 million gain position 11 million 28 million loss position 41 million 49 million respectively b certain residential mortgage purchase agreements committed remitting shared execution partners’ cash flows exceed required rate return less credit loss reimbursements mortgage originators commitment accounted derivative c entered agreements thirdparty banks sell automotive retail receivables transfer credit risk purchaser whole loan sales committed lend equity capital certain private equity funds fair value commitments considered overall valuation underlying assets associated e committed fund completion development certain lots model homes amount agreed upon amount per project f fair value commitments considered overall valuation related assets g unused portions revolving lines credit reset prevailing market rates approximate market value mortgage lending revolving credit line commitments contain element credit risk management reduces credit risk unused mortgage lending unused revolving credit line commitments applying credit policies making commitments extending loans typically require collateral commitments drawn lease commitments future minimum rental payments required operating leases primarily real property noncancelable lease terms expiring december 31 2007 follows certain leases contain escalation clauses renewal purchase options rental expenses operating leases 227 million 230 million 224 million 2007 2006 2005 respectively contractual commitments entered multiple agreements information technology marketing advertising voice communication technology maintenance many agreements subject variable price provisions fixed minimum price provisions termination renewal provisions future payment obligations agreements totaled 3117 million due follows 2505 million 2008 382 million 2009 2010 165 million 2011 2012 65 million 2013 extended service maintenance contract commitments extended service contract programs provide consumers expansions extensions vehicle warranty coverage specified periods time mileages coverage generally provides repair replacement components event failure terms notes consolidated financial statements gmac llc • contracts sold automobile dealerships direct mail range 3 120 months following table presents analysis activity unearned service contract revenue legal contingencies subject potential liability laws government regulations various claims legal actions pending may asserted us named defendants number legal actions time involved governmental proceedings arising connection various businesses pending actions purport class actions establish reserves legal claims payments associated claims become probable costs reasonably estimated actual costs resolving legal claims may substantially higher lower amounts reserved claims based information currently available advice counsel available insurance coverage established reserves opinion management eventual outcome actions us material adverse effect consolidated financial condition results operations cash flows contingencies subject potential liability various exposures including tax nonrecourse loans selfinsurance miscellaneous contingencies establish reserves contingencies item becomes probable costs reasonably estimated actual costs resolving items may substantially higher lower amounts reserved one item based information currently available opinion management eventual outcome items material adverse effect consolidated financial condition results operations cash flows risks loans sold recourse outstanding recourse obligations follows represents loans sold normal course securitization process various forms representations early payment defaults b maximum recourse exposure net amounts reinsured third parties totaling 1 million 1 million december 31 2007 2006 respectively concentrations primary business provide vehicle financing gm products gm dealers customers wholesale dealer loan financing relates primarily gm dealers collateral consisting primarily gm vehicles wholesale gm dealership property loans wholesale financing also provided protection gm factory repurchase programs retail installment contracts operating lease assets relate primarily secured sale lease respectively vehicles primarily gm protracted reduction suspension gm’s production sale vehicles resulting decline demand work stoppage governmental action event could substantial adverse effect us conversely increase production significant marketing program could positively impact results majority finance receivables loans operating lease assets geographically diversified throughout united states outside united states finance receivables loans operating lease assets concentrated canada germany united kingdom italy australia mexico brazil insurance operations concentration credit risk related loss adjustment expenses prepaid reinsurance ceded certain state insurance funds michigan insurance law large market share north carolina result credit exposure michigan catastrophic claims association north carolina reinsurance facility totaling 819 million 909 million december 31 2007 2006 respectively originate purchase residential mortgage loans contractual features may increase exposure credit risk thereby result concentration credit risk mortgage loans include loans may subject notes consolidated financial statements gmac llc • borrowers significant future payment increases create potential negative amortization principal balance result high loantovalue ratios loan products include interest mortgages classified prime conforming nonconforming domestic production prime nonconforming nonprime international production option adjustable rate mortgages prime nonconforming high loantovalue mortgage loans nonprime teaser rate mortgages prime nonprime total loan production related products combined exposure related products recorded finance receivables loans held sale unpaid principal balance years ended december 31 2007 2006 summarized follows • interestonly mortgages allow interestonly payments fixed period end interestonly period loan payment includes principal payments increases significantly borrower’s new payment loan becomes amortizing ie includes principal payments greater borrower making principal payments since origination loan • option adjustable rate mortgages permit variety repayment options repayment options include minimum interestonly fully amortizing 30year fully amortizing 15year payments minimum payment option sets monthly payment initial interest rate first year loan interest rate resets first year borrower continue make minimum payment interestonly option sets monthly payment amount interest due loan interestonly option payment would less minimum payment interestonly option available borrower fully amortizing 30 15year payment options borrower’s monthly payment set based interest rate loan balance remaining loan term • high loantovalue mortgages defined firstlien loans loantovalue ratios excess 100 secondlien loans combined underlying firstlien mortgage loan result loantovalue ratio excess 100 • market rate teaser mortgages contain contractual features limit initial interest rate market interest rate specified time period increase market interest rate future period increase market interest rate could result significant increase borrower’s monthly payment amount mortgage loans originate mortgages purchase including higher risk loans preceding table subject underwriting guidelines loan origination standards includes guidelines standards tailored products include variety factors including borrower’s capacity repay loan credit history characteristics loan including certain characteristics summarized table may increase credit risk purchase mortgage loans correspondent lenders either reunderwrite loan purchase delegate underwriting responsibility correspondent originating loan believe underwriting procedures adequately consider unique risks may come products conduct variety quality control procedures periodic audits ensure compliance origination standards including criteria lending legal requirements leverage technology performing underwriting process quality control procedures capital requirements certain international subsidiaries subject regulatory requirements jurisdictions operate entities either operate banks regulated finance companies local markets regulatory restrictions primarily dictate subsidiaries meet certain minimum capital requirements restrict dividend distributions require assets restricted date compliance various regulations materially adverse effect financial position results operations cash flows total assets entities approximated 177 billion 155 billion december 31 2007 2006 respectively gmac bank provides services automotive rescap operations licensed industrial bank pursuant laws utah deposits insured federal deposit insurance corporation fdic gmac required file periodic reports fdic concerning financial condition assets gmac bank totaled 284 billion december 31 2007 december 31 2005 certain depository institution assets held federal savings bank wholly owned rescap effective november 22 2006 substantially notes consolidated financial statements gmac llc • federal savings bank assets liabilities transferred book value gmac bank december 31 2007 met regulatory requirements compliance minimum capital requirements june 24 2005 entered operating agreement gm rescap holding company residential mortgage business create separation gm us one hand rescap operating agreement restricts rescap’s ability declare dividends prepay subordinated indebtedness us operating agreement amended november 27 2006 november 30 2006 conjunction sale transactions among things amendments removed gm party agreement restrictions contained rescap operating agreement include requirements rescap’s member’s equity least 65 billion dividends paid rescap permitted pay dividends pursuant previous sentence cumulative amount dividends may exceed 50 cumulative net income excluding payments income taxes election federal income tax purposes treated limited liability company measured july 1 2005 time dividend paid restrictions cease effective rescap’s member’s equity least 12 billion end two consecutive fiscal quarters cease majority owner connection sale transactions gm released party operating agreement remains effect rescap us december 31 2007 rescap consolidated equity approximately 60 billion gmac insurance subject certain minimum aggregated capital requirements restricted net assets restricted dividend distributions applicable state insurance law national association securities dealers financial services authority england office superintendent financial institution canada national insurance bonding commission mexico date compliance various regulations materially adverse effect financial condition results operations cash flows various us state insurance regulations dividend distributions may made statutory unassigned surplus state regulatory authorities must approve distributions exceed certain statutory limitations december 31 2007 maximum dividend could paid insurance subsidiaries next twelve months without prior statutory approval approximates 380 million notes consolidated financial statements gmac llc • 26 quarterly financial statements unaudited decline third quarter 2006 net income primarily relates goodwill impairment taken commercial finance business refer note 11 b effective november 28 2006 gmac along certain us subsidiaries became disregarded passthrough entities us federal income tax purposes due change tax status net deferred tax liability eliminated income tax expense totaling 791 million 27 subsequent event february 20 2008 announced restructuring north american automotive finance operations reduce costs streamline operations position business scalable growth restructuring include merging number separate business offices five regional business centers located areas atlanta chicago dallas pittsburgh toronto plan includes reducing north american automotive finance operations workforce approximately 930 employees represents 15 percent 6275 employees operations actions planned occur largely end 2008 expect incur restructuring charges approximately 65 million 85 million includes costs related severance employeerelated costs approximately 60 million 70 million closure facilities approximately 5 million 15 million charges incurred course 2008 majority charges occurring second half year charges expected result future cash expenditures approximately 65 million 85 million signatures pursuant requirements section 13 securities exchange act 1934 amended registrant duly caused report signed behalf undersigned hereunto duly authorized pursuant requirements securities exchange act 1934 report signed 28th day february 2008 following persons behalf registrant capacities indicated including majority directors item 15 exhibits financial statement schedules signatures pursuant requirements securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date may 25 2016 motors liquidation company guc trust wilmington trust company individual capacity solely capacity trust administrator trustee motors liquidation company guc trust david vanaskey name david vanaskey title vice president wilmington trust company exhibit index item 15 exhibits financial statement schedules signatures pursuant requirements securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date may 25 2017 motors liquidation company guc trust wilmington trust company individual capacity solely capacity trust administrator trustee motors liquidation company guc trust beth andrews name beth andrews title vice president wilmington trust company exhibit index item 15 exhibits financial statement schedule page number 1 financial statements supplemental information see part ii 2 financial statement schedule ii allowances years ended december 31 2004 2003 2002 iv3 3 exhibits including incorporated reference b exhibits 3i restated certificate incorporation filed march 1 2004 na 3ii bylaws general motors corporation amended february 29 2004 na 4a form indenture relating 500000000 818 debentures due april 15 2016 dated april 1 1986 general motors corporation citibank na trustee incorporated reference exhibit 4 amendment 1 form s3 registration statement 334452 resolutions adopted special committee april 15 1986 incorporated reference exhibit 4a current report form 8k general motors corporation dated april 24 1986 na 4c form indenture relating 377377000 775 debentures due march 15 2036 dated december 7 1995 general motors corporation citibank na trustee filed exhibit 4a amendment 1 form s3 registration statement 3364229 na 4d instruments defining rights holders nonregistered debt registrant omitted exhibit index amount debt authorized instrument exceed 10 total assets registrant subsidiaries registrant agrees furnish copy instrument commission upon request na 4fiindenture general motors corporation wilmington trust company incorporated reference exhibit 4di current report form 8k general motors corporation dated july 1 1997 na 4fiifirst supplemental indenture dated march 4 2002 general motors corporation citibank na respect 450 series convertible senior debentures due 2032 525 series b convertible senior debentures due 2032 incorporated reference exhibit 2 current report form 8k general motors corporation dated march 6 2002 na 10 copy agreement dated october 22 2001 general motors general motors acceptance corporation iv5 10ageneral motors 2002 annual incentive plan incorporated reference exhibit proxy statement general motors corporation dated april 18 2002 na 10bgeneral motors 2002 stock incentive plan incorporated reference exhibita proxy statement general motors corporation dated april 18 2002 na 10cgeneral motors 2002 longterm incentive plan incorporated reference exhibit proxy statement general motorscorporation dated april 18 2002 na 10dcompensation plan nonemployee directors incorporated reference exhibit proxy statement general motors corporation na dated april 16 1997 na 10f employment contract robert lutz dated september 1 2001 incorporated reference na 10g extension employment contract robert lutz dated december 20 2002 na 12 computation ratios earnings fixed charges years ended december 31 2004 2003 2002 iv8 21 subsidiaries registrant december 31 2004 iv9 23 consent independent auditors iv15 311 section 302 certification chief executive officer iv16 312 section 302 certification chief financial officer iv17 321 certification chief executive officer pursuant 18 uscsection 1350 adopted pursuant section 906 sarbanesoxley act 2002 iv18 322 certification chief financial officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 iv19 registrant hereby undertakes furnish supplementally copy omitted schedule attachment securities exchange commission upon request required filed exhibit pursuant item 15 form 10k iv1 notes primarily reflects recovery accounts previously writtenoff b accounts written c represents net change inventory allowances reference made notes gm consolidated financial statements iv2 general motors corporation subsidiaries signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned hereunto duly authorized general motors corporation registrant date march 16 2005 sg richard wagoner jr g richard wagoner jr chairman chief executive offier pursuant requirements securities exchange act 1934 report signed 16th day march 2005 following persons behalf registrant capacities indicated signature title sg richard wagoner jr chairman chief executive officer g richard wagoner jr sjohn devine vice chairman chief financial officer john devine swalter g borst treasurer walter g borst spaul w schmidt controller paul w schmidt speter r bible chief accounting officer peter r bible iv3 general motors corporation subsidiaries signatures concluded signature title spercy barnevik director percy barnevik sjohn h bryan director john h bryan sarmando codina director armando codina sgeorge mc fisher director george mc fisher skaren katen director karen katen skent kresa director kent kresa sellen j kullman director ellen j kullman salan g lafley director alan g lafley sphilip laskawy director philip laskawy se stanley oneal director e stanley oneal seckhard pfeiffer director eckhard pfeiffer iv4 item 15 exhibits financial statement schedules filed herewith furnished herewith item 16 form 10k summary omitted registrant’s option signatures pursuant requirements securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date june 4 2019 motors liquidation company guc trust wilmington trust company individual capacity solely capacity trust administrator trustee motors liquidation company guc trust david vanaskey jr name david vanaskey jr title administrative vice president wilmington trust company