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10-Q
GENERAL MOTORS CO filed this Form 10-Q on 07/24/2014
Entire Document
 
GM 2014 Q2

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
Form 10-Q
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2014
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to

Commission file number 001-34960
GENERAL MOTORS COMPANY
(Exact Name of Registrant as Specified in its Charter)
STATE OF DELAWARE
27-0756180
(State or other jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
 
 
300 Renaissance Center, Detroit, Michigan
48265-3000
(Address of Principal Executive Offices)
(Zip Code)
(313) 556-5000
(Registrant’s telephone number, including area code)

Not applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  þ  No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  þ  No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  þ  Accelerated filer  ¨  Non-accelerated filer  ¨  Smaller reporting company  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨  No  þ
As of July 17, 2014 the number of shares outstanding of common stock was 1,604,681,874 shares.

Website Access to Company's Reports

General Motors Company's internet website address is www.gm.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act are available free of charge through our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission.




INDEX
 
 
 
Page
PART I
Item 1.
Condensed Consolidated Financial Statements
 
Condensed Consolidated Income Statements (Unaudited)
 
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
 
Condensed Consolidated Balance Sheets (Unaudited)
 
Condensed Consolidated Statements of Equity (Unaudited)
 
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
Notes to Condensed Consolidated Financial Statements
 
Note 1.
Nature of Operations and Basis of Presentation
 
Note 2.
Marketable Securities
 
Note 3.
GM Financial Receivables, net
 
Note 4.
Inventories
 
Note 5.
Equity in Net Assets of Nonconsolidated Affiliates
 
Note 6.
Variable Interest Entities
 
Note 7.
Short-Term and Long-Term Debt
 
Note 8.
Product Warranty and Related Liabilities
 
Note 9.
Pensions and Other Postretirement Benefits
 
Note 10.
Commitments and Contingencies
 
Note 11.
Income Taxes
 
Note 12.
Restructuring and Other Initiatives
 
Note 13.
Stockholders' Equity
 
Note 14.
Earnings Per Share
 
Note 15.
Segment Reporting
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Item 4.
Controls and Procedures
PART II
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.
Exhibits
Signature
 





GENERAL MOTORS COMPANY AND SUBSIDIARIES

PART I

Item 1. Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED INCOME STATEMENTS
(In millions, except per share amounts)
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
June 30, 2014
 
June 30, 2013
 
June 30, 2014
 
June 30, 2013
Net sales and revenue
 
 
 
 
 
 
 
Automotive
$
38,462

 
$
38,240

 
$
74,777

 
$
74,584

GM Financial
1,187

 
835

 
2,280

 
1,375

Total net sales and revenue
39,649

 
39,075

 
77,057

 
75,959

Costs and expenses
 
 
 
 
 
 
 
Automotive cost of sales (Note 8)
35,851

 
33,824

 
69,978

 
66,441

GM Financial operating and other expenses
926

 
575

 
1,801

 
931

Automotive selling, general and administrative expense
3,343

 
2,925

 
6,284

 
5,877

Total costs and expenses
40,120

 
37,324

 
78,063

 
73,249

Operating income (loss)
(471
)
 
1,751

 
(1,006
)
 
2,710

Automotive interest expense
100

 
61

 
203

 
152

Interest income and other non-operating income, net
81

 
251

 
170

 
422

Loss on extinguishment of debt (Note 7)

 
240

 

 
240

Equity income (Note 5)
523

 
429

 
1,128

 
984

Income before income taxes
33

 
2,130

 
89

 
3,724

Income tax expense (benefit) (Note 11)
(254
)
 
742

 
(478
)
 
1,151

Net income
287

 
1,388

 
567

 
2,573

Net (income) loss attributable to noncontrolling interests
(9
)
 
26

 
(76
)
 
16

Net income attributable to stockholders
$
278

 
$
1,414

 
$
491

 
$
2,589

 
 
 
 
 
 
 
 
Net income attributable to common stockholders
$
190

 
$
1,200

 
$
315

 
$
2,160

 
 
 
 
 
 
 
 
Earnings per share (Note 14)
 
 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
Basic earnings per common share
$
0.12

 
$
0.87

 
$
0.20

 
$
1.57

Weighted-average common shares outstanding
1,608

 
1,376

 
1,598

 
1,374

Diluted
 
 
 
 
 
 
 
Diluted earnings per common share
$
0.11

 
$
0.75

 
$
0.18

 
$
1.37

Weighted-average common shares outstanding
1,688

 
1,677

 
1,689

 
1,668

 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.30

 
$

 
$
0.60

 
$


Reference should be made to the notes to condensed consolidated financial statements.


1





GENERAL MOTORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
June 30, 2014
 
June 30, 2013
 
June 30, 2014
 
June 30, 2013
Net income
$
287

 
$
1,388

 
$
567

 
$
2,573

Other comprehensive income (loss), net of tax (Note 13)
 
 
 
 
 
 
 
Foreign currency translation adjustments
46

 
(506
)
 
(52
)
 
(243
)
Unrealized gains (losses) on securities, net

 
(5
)
 
3

 
(18
)
Defined benefit plans, net
(43
)
 
79

 
24

 
262

Other comprehensive income (loss), net of tax
3

 
(432
)
 
(25
)
 
1

Comprehensive income
290

 
956

 
542

 
2,574

Comprehensive (income) loss attributable to noncontrolling interests
(7
)
 
29

 
(71
)
 
27

Comprehensive income attributable to stockholders
$
283

 
$
985

 
$
471

 
$
2,601


Reference should be made to the notes to condensed consolidated financial statements.


2





GENERAL MOTORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
(Unaudited)


 
June 30, 2014
 
December 31, 2013
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
19,864

 
$
20,021

Marketable securities (Note 2)
9,935

 
8,972

Restricted cash and marketable securities (Note 2)
1,325

 
1,247

Accounts and notes receivable (net of allowance of $358 and $344)
11,480

 
8,535

GM Financial receivables, net (Note 3)(including receivables at VIEs of $11,362 and $10,001; Note 6)
15,797

 
14,278

Inventories (Note 4)
15,200

 
14,039

Equipment on operating leases, net
4,633

 
2,398

Deferred income taxes
11,499

 
10,349

Other current assets
1,910

 
1,662

Total current assets
91,643

 
81,501

Non-current Assets
 
 
 
Restricted cash and marketable securities (Note 2)
969

 
829

GM Financial receivables, net (Note 3)(including receivables at VIEs of $12,007 and $11,216; Note 6)
15,430

 
14,354

Equity in net assets of nonconsolidated affiliates (Note 5)
7,485

 
8,094

Property, net
27,023

 
25,867

Goodwill
1,573

 
1,560

Intangible assets, net
5,220

 
5,668

GM Financial equipment on operating leases, net (including assets at VIEs of $3,475 and $1,803; Note 6)
4,748

 
3,383

Deferred income taxes
22,582

 
22,736

Other assets
2,425

 
2,352

Total non-current assets
87,455

 
84,843

Total Assets
$
179,098

 
$
166,344

LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts payable (principally trade)
$
26,992

 
$
23,621

Short-term debt and current portion of long-term debt (Note 7)
 
 
 
Automotive (including certain debt at VIEs of $194 and $219; Note 6)
610

 
564

GM Financial (including certain debt at VIEs of $11,382 and $10,088; Note 6)
15,193

 
13,594

Accrued liabilities
29,552

 
24,633

Total current liabilities
72,347

 
62,412

Non-current Liabilities
 
 
 
Long-term debt (Note 7)
 
 
 
Automotive (including certain debt at VIEs of $24 and $23; Note 6)
6,864

 
6,573

GM Financial (including certain debt at VIEs of $10,989 and $9,330; Note 6)
17,409

 
15,452

Postretirement benefits other than pensions (Note 9)
5,826

 
5,897

Pensions (Note 9)
19,068

 
19,483

Other liabilities and deferred income taxes
14,999

 
13,353

Total non-current liabilities
64,166

 
60,758

Total Liabilities
136,513

 
123,170

Commitments and contingencies (Note 10)


 


Equity (Note 13)
 
 
 
Series A preferred stock, $0.01 par value
3,109

 
3,109

Common stock, $0.01 par value
16

 
15

Additional paid-in capital
28,840

 
28,780

Retained earnings
13,162

 
13,816

Accumulated other comprehensive loss
(3,133
)
 
(3,113
)
Total stockholders’ equity
41,994

 
42,607

Noncontrolling interests
591

 
567

Total Equity
42,585

 
43,174

Total Liabilities and Equity
$
179,098

 
$
166,344


Reference should be made to the notes to condensed consolidated financial statements.

3





GENERAL MOTORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In millions)
(Unaudited)
 
Series A Preferred Stock
 
Series B Preferred Stock
 
Common Stockholders’
 
Noncontrolling Interests
 
Total Equity
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Balance at December 31, 2012
$
5,536

 
$
4,855

 
$
14

 
$
23,834

 
$
10,057

 
$
(8,052
)
 
$
756

 
$
37,000

Net income

 

 

 

 
2,589

 

 
(16
)
 
2,573

Other comprehensive income

 

 

 

 

 
12

 
(11
)
 
1

Exercise of common stock warrants

 

 

 
2

 

 

 

 
2

Stock based compensation

 

 

 
(32
)
 

 

 

 
(32
)
Cumulative dividends and cash dividends paid on Series A Preferred Stock and cumulative dividends on Series B Preferred Stock

 

 

 

 
(455
)
 

 

 
(455
)
Dividends declared or paid to noncontrolling interests

 

 

 

 

 

 
(52
)
 
(52
)
Other

 

 

 
14

 

 

 
(47
)
 
(33
)
Balance at June 30, 2013
$
5,536

 
$
4,855

 
$
14

 
$
23,818

 
$
12,191

 
$
(8,040
)
 
$
630

 
$
39,004

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013
$
3,109

 
 
 
$
15

 
$
28,780

 
$
13,816

 
$
(3,113
)
 
$
567

 
$
43,174

Net income

 
 
 

 

 
491

 

 
76

 
567

Other comprehensive loss

 
 
 

 

 

 
(20
)
 
(5
)
 
(25
)
Exercise of common stock warrants

 
 
 
1

 
14

 

 

 

 
15

Stock based compensation

 
 
 

 
47

 
(7
)
 

 

 
40

Cash dividends paid on Series A Preferred Stock

 
 
 

 

 
(176
)
 

 

 
(176
)
Cash dividends paid on Common Stock

 
 
 

 

 
(962
)
 

 

 
(962
)
Dividends declared or paid to noncontrolling interests

 
 
 

 

 

 

 
(66
)
 
(66
)
Other

 
 
 

 
(1
)
 

 

 
19

 
18

Balance at June 30, 2014
$
3,109

 
 
 
$
16

 
$
28,840

 
$
13,162

 
$
(3,133
)
 
$
591

 
$
42,585


Reference should be made to the notes to condensed consolidated financial statements.


4





GENERAL MOTORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
Six Months Ended
 
June 30, 2014
 
June 30, 2013
Net cash provided by operating activities
$
5,806

 
$
5,712

Cash flows from investing activities
 
 
 
Expenditures for property
(3,425
)
 
(3,833
)
Available-for-sale marketable securities, acquisitions
(3,714
)
 
(1,841
)
Trading marketable securities, acquisitions
(1,426
)
 
(2,967
)
Available-for-sale marketable securities, liquidations
2,723

 
2,387

Trading marketable securities, liquidations
1,456

 
4,921

Acquisition of companies, net of cash acquired
(50
)
 
(2,111
)
Proceeds from sale of business units/investments, net of cash disposed

 
(81
)
Increase in restricted cash and marketable securities
(418
)
 
(477
)
Decrease in restricted cash and marketable securities
212

 
553

Purchases of finance receivables
(6,818
)
 
(4,289
)
Principal collections and recoveries on finance receivables
5,299

 
3,054

Purchases of leased vehicles, net
(1,802
)
 
(1,126
)
Proceeds from termination of leased vehicles
264

 
84

Other investing activities
99

 
(75
)
Net cash used in investing activities
(7,600
)
 
(5,801
)
Cash flows from financing activities
 
 
 
Net increase in short-term debt
259

 
98

Proceeds from issuance of debt (original maturities greater than three months)
12,697

 
11,417

Payments on debt (original maturities greater than three months)
(9,724
)
 
(9,075
)
Dividends paid
(1,193
)
 
(474
)
Other financing activities
(21
)
 
(113
)
Net cash provided by financing activities
2,018

 
1,853

Effect of exchange rate changes on cash and cash equivalents
(381
)
 
(489
)
Net increase (decrease) in cash and cash equivalents
(157
)
 
1,275

Cash and cash equivalents at beginning of period
20,021

 
18,422

Cash and cash equivalents at end of period
$
19,864

 
$
19,697

Supplemental cash flow information:
 
 
 
Non-cash property additions
$
2,949

 
$
3,457


Reference should be made to the notes to condensed consolidated financial statements.


5




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



Note 1. Nature of Operations and Basis of Presentation

General Motors Company is sometimes referred to in this Quarterly Report on Form 10-Q as “we,” “our,” “us,” “ourselves,” the “Company,” “General Motors,” or “GM.” We design, build and sell cars, trucks and automobile parts worldwide. We also provide automotive financing services through General Motors Financial Company, Inc. (GM Financial). We analyze the results of our business through the following segments: GM North America (GMNA), GM Europe (GME), GM International Operations (GMIO), GM South America (GMSA) and GM Financial. Nonsegment operations are classified as Corporate. Corporate includes certain centrally recorded income and costs, such as interest, income taxes and corporate expenditures and certain nonsegment specific revenues and expenses.

As discussed in Note 8 we announced recalls of approximately 29 million vehicles and recorded recall-related charges of approximately $2.5 billion in the six months ended June 30, 2014 and as discussed in Note 10 we announced the creation of a compensation program related to faulty ignition switches and recorded a charge of $400 million in the six months ended June 30, 2014.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information. Accordingly they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying condensed consolidated financial statements include all adjustments, composed of normal recurring adjustments, considered necessary by management to fairly state our results of operations, financial position and cash flows. The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013 (2013 Form 10-K) as filed with the SEC. Certain prior year amounts were reclassified to conform to our current year presentation.

In the three months ended March 31, 2014 we changed our managerial and financial reporting structure to reclassify the results of our Russian subsidiaries previously reported in our GMIO segment to our GME segment. We have retrospectively revised the segment presentation for all periods presented. Refer to Note 15 for our segment reporting.

Change in Accounting Estimate

We have historically accrued estimated costs related to recall campaigns in GMNA when they are probable and reasonably estimable, which typically occurs once it is determined a specific recall campaign is needed and announced. During the three months ended June 30, 2014, following the significant increase in the number of vehicles subject to recall in GMNA, the results of our ongoing comprehensive safety review, additional engineering analysis, the creation of a new Global Product Integrity organization, the appointment of a new Global Vice President of Vehicle Safety responsible for the safety development of our vehicle systems and our overall commitment to customer satisfaction, we accumulated sufficient historical data in GMNA to support the use of an actuarial-based estimation technique for recall campaigns. As such, we now accrue at the time of vehicle sale in GMNA the costs for recall campaigns. Based on expanded historical data, we recorded a catch-up adjustment of $874 million in Automotive cost of sales in the three months ended June 30, 2014 to adjust the estimate for recall costs for previously sold vehicles. In other geographical regions the historical claims data did not support the application of an actuarial-based model; therefore, recall campaigns are accrued when probable and reasonably estimable, which typically occurs once it is determined a specific recall campaign is needed and announced.

Recently Adopted Accounting Principles

On January 1, 2014 we adopted Accounting Standards Update (ASU) 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (ASU 2013-11) which was issued to eliminate diversity in practice. This update requires that companies net their unrecognized tax benefits against all same-jurisdiction net operating losses or tax credit carryforwards that would be used to settle the position with a tax authority. The adoption of ASU 2013-11 did not have an effect on our condensed consolidated financial statements.

Accounting Standards Not Yet Adopted


6




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



In May 2014 the Financial Accounting Standards Board issued ASU 2014-09, “Revenue Recognition - Revenue from Contracts with Customers” (ASU 2014-09) that requires companies to recognize revenue when a customer obtains control rather than when companies have transferred substantially all risks and rewards of a good or service. This update is effective for annual reporting periods beginning on or after December 15, 2016 and interim periods therein and requires expanded disclosures. We are currently assessing the impact the adoption of ASU 2014-09 will have on our condensed consolidated financial statements.

Note 2. Marketable Securities

The following table summarizes information regarding marketable securities (dollars in millions):
 
 
 
June 30, 2014
 
December 31, 2013
 
Fair Value Level
 
Cost
 
Fair Value
 
Cost
 
Fair Value
Cash and cash equivalents
 
 
 
 
 
 
 
 
 
Available-for-sale securities
 
 
 
 
 
 
 
 
 
U.S. government and agencies
2
 
$
1,476

 
$
1,476

 
$
1,437

 
$
1,437

Sovereign debt
2
 
942

 
942

 
515

 
515

Money market funds
1
 
1,169

 
1,169

 
1,262

 
1,262

Corporate debt
2
 
8,232

 
8,232

 
7,598

 
7,598

Total available-for-sale securities
 
 
$
11,819

 
11,819

 
$
10,812

 
10,812

Trading securities - corporate debt
2
 
 
 
51

 
 
 
25

Total marketable securities classified as cash equivalents
 
 
 
 
11,870

 
 
 
10,837

Cash, cash equivalents and time deposits
 
 
 
 
7,994

 
 
 
9,184

Total cash and cash equivalents
 
 
 
 
$
19,864

 
 
 
$
20,021

Marketable securities
 
 
 
 
 
 
 
 
 
Available-for-sale securities
 
 
 
 
 
 
 
 
 
U.S. government and agencies
2
 
$
6,315

 
$
6,317

 
$
5,343

 
$
5,344

Corporate debt
2
 
1,866

 
1,873

 
1,867

 
1,869

Sovereign debt
2
 
36

 
36

 
22

 
22

Total available-for-sale securities
 
 
$
8,217

 
8,226

 
$
7,232

 
7,235

Trading securities - sovereign debt
2
 
 
 
1,709

 
 
 
1,737

Total marketable securities
 
 
 
 
$
9,935

 
 
 
$
8,972

Restricted cash and marketable securities
 
 
 
 
 
 
 
 
 
Available-for-sale securities
 
 
 
 
 
 
 
 
 
Money market funds
1
 
$
1,424

 
$
1,424

 
$
897

 
$
897

Other
2
 
30

 
31

 
34

 
35

Total marketable securities classified as restricted cash and marketable securities
 
 
$
1,454

 
1,455

 
$
931

 
932

Restricted cash and cash equivalents and time deposits
 
 
 
 
839

 
 
 
1,144

Total restricted cash and marketable securities
 
 
 
 
$
2,294

 
 
 
$
2,076


We are required to post cash and marketable securities as collateral for certain agreements that we enter into as part of our operations. Cash and marketable securities subject to contractual restrictions and not readily available are classified as Restricted cash and marketable securities. Restricted cash and marketable securities are invested in accordance with the terms of the underlying agreements and include amounts related to securitizations, escrows and other cash collateral requirements.

Sales proceeds from investments classified as available-for-sale and sold prior to maturity were $748 million and $1.3 billion in the three months ended June 30, 2014 and 2013 and $1.5 billion and $1.7 billion in the six months ended June 30, 2014 and 2013. Cumulative unrealized gains and losses on available-for-sale securities were insignificant at June 30, 2014 and December 31, 2013 and net unrealized gains and losses on trading securities were insignificant in the three and six months ended June 30, 2014

7




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

and 2013. The following table summarizes the amortized cost and the fair value of investments classified as available-for-sale by contractual maturity at June 30, 2014 (dollars in millions):
 
Amortized Cost
 
Fair Value
Due in one year or less
$
16,936

 
$
16,938

Due after one year through five years
1,961

 
1,969

Total available-for-sale securities with contractual maturities
$
18,897

 
$
18,907


Note 3. GM Financial Receivables, net

As a result of our October 2010 acquisition of GM Financial and GM Financial's acquisition of certain of the Ally Financial Inc. (Ally Financial) international operations in the year ended December 31, 2013, finance receivables are reported in two portfolios: pre-acquisition and post-acquisition portfolios. The pre-acquisition finance receivables portfolio consists of finance receivables that were considered to have had deterioration in credit quality at the time they were acquired with the acquisitions of GM Financial and the Ally Financial international operations. The pre-acquisition portfolio will decrease over time with the amortization of the acquired receivables. The post-acquisition finance receivables portfolio consists of finance receivables that were considered to have had no deterioration in credit quality at the time they were acquired with the acquisition of the Ally Financial international operations and finance receivables originated since the acquisitions of GM Financial and the Ally Financial international operations. The post-acquisition portfolio is expected to grow over time as GM Financial originates new receivables.

The following table summarizes the components of consumer and commercial finance receivables, net (dollars in millions):
 
June 30, 2014
 
December 31, 2013
 
Consumer
 
Commercial
 
Total
 
Consumer
 
Commercial
 
Total
Pre-acquisition finance receivables, outstanding amount
$
839

 
$

 
$
839

 
$
1,294

 
$

 
$
1,294

 
 
 
 
 
 
 
 
 
 
 
 
Pre-acquisition finance receivables, carrying amount
$
755

 
$

 
$
755

 
$
1,174

 
$

 
$
1,174

Post-acquisition finance receivables, net of fees
24,291

 
6,796

 
31,087

 
21,956

 
6,050

 
28,006

Finance receivables
25,046

 
6,796

 
31,842

 
23,130

 
6,050

 
29,180

Less: allowance for loan losses
(575
)
 
(40
)
 
(615
)
 
(497
)
 
(51
)
 
(548
)
GM Financial receivables, net
$
24,471

 
$
6,756

 
$
31,227

 
$
22,633

 
$
5,999

 
$
28,632

 
 
 
 
 
 
 
 
 
 
 
 
Fair value of GM Financial receivables, net
 
 
 
 
$
31,604

 
 
 
 
 
$
28,668


Of the total allowance for loan losses in the above table, $486 million and $427 million were current at June 30, 2014 and December 31, 2013.

GM Financial determined the fair value of consumer finance receivables using observable and unobservable inputs within a cash flow model. The inputs reflect assumptions regarding expected prepayments, deferrals, delinquencies, recoveries and charge-offs of the loans within the portfolio. The cash flow model produces an estimated amortization schedule of the finance receivables which is the basis for the calculation of the series of cash flows that derive the fair value of the portfolio. The series of cash flows is calculated and discounted using a weighted-average cost of capital using unobservable debt and equity percentages, an unobservable cost of equity and an observable cost of debt based on companies with a similar credit rating and maturity profile as the portfolio. Macroeconomic factors could negatively affect the credit performance of the portfolio and therefore could potentially affect the assumptions used in GM Financial's cash flow model. A substantial majority of commercial finance receivables have variable interest rates and maturities of one year or less. Therefore the carrying amount is considered to be a reasonable estimate of fair value.
 
 
 
 
The following table summarizes activity for the allowance for loan losses on consumer and commercial finance receivables (dollars in millions):

8




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

 
Three Months Ended
 
Six Months Ended
 
June 30, 2014
 
June 30, 2013
 
June 30, 2014
 
June 30, 2013
Balance at beginning of period
$
586

 
$
393

 
$
548

 
$
351

Provision for loan losses
113

 
100

 
248

 
194

Charge-offs
(191
)
 
(116
)
 
(415
)
 
(248
)
Recoveries
107

 
70

 
234

 
150

Balance at end of period
$
615

 
$
447

 
$
615

 
$
447


The balances and activity of the allowance for commercial loan losses included in the above table at and in the three and six months ended June 30, 2014 and 2013 were insignificant.

Credit Quality

Consumer Finance Receivables

GM Financial uses proprietary scoring systems that measure the credit quality of the receivables using several factors, such as credit bureau information, consumer credit risk scores (e.g. FICO score) and contract characteristics. In addition to GM Financial's proprietary scoring systems GM Financial considers other individual consumer factors such as employment history, financial stability and capacity to pay. Subsequent to origination GM Financial reviews the credit quality of retail receivables based on customer payment activity. At the time of loan origination substantially all of GM Financial's international consumers have prime credit scores. In North America at the time of loan origination, many consumers have sub-prime credit scores, which is typically defined as a loan with a borrower that has a FICO score of less than 620. At June 30, 2014, 89% of the consumer finance receivables in North America were from consumers with FICO scores less than 620.

GM Financial purchases consumer finance contracts from automobile dealers without recourse, and accordingly, the dealer has no liability to GM Financial if the consumer defaults on the contract. Finance receivables are collateralized by vehicle titles and GM Financial has the right to repossess the vehicle in the event the consumer defaults on the payment terms of the contract.

An account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date such payment was contractually due. At June 30, 2014 and December 31, 2013 the accrual of finance charge income has been suspended on delinquent consumer finance receivables with contractual amounts due of $626 million and $642 million. The following table summarizes the contractual amount of delinquent contracts, which is not significantly different than the recorded investment of the consumer finance receivables (dollars in millions):
 
June 30, 2014
 
June 30, 2013
 
Amount
 
Percent of Contractual Amount Due
 
Amount
 
Percent of Contractual Amount Due
Delinquent contracts
 
 
 
 
 
 
 
31-to-60 days
$
886

 
3.5
%
 
$
645

 
3.4
%
Greater-than-60 days
388

 
1.6
%
 
253

 
1.4
%
Total finance receivables more than 30 days delinquent
1,274

 
5.1
%
 
898

 
4.8
%
In repossession
40

 
0.1
%
 
35

 
0.2
%
Total finance receivables more than 30 days delinquent or in repossession
$
1,314

 
5.2
%
 
$
933

 
5.0
%
Impaired Finance Receivables - Troubled Debt Restructurings (TDRs)

9




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)


Consumer finance receivables in the post-acquisition portfolio that become classified as TDRs because of payment deferral or other reasons are separately assessed for impairment. A specific allowance is estimated based on the present value of the expected future cash flows of the receivable discounted at the loan's original effective interest rate. The following table summarizes the outstanding recorded investment for consumer finance receivables that are considered to be TDRs and the related allowance (dollars in millions):
 
June 30, 2014
 
December 31, 2013
Outstanding recorded investment
$
992

 
$
767

Less: allowance for loan losses
(123
)
 
(103
)
Outstanding recorded investment, net of allowance
$
869

 
$
664

 
 
 
 
Unpaid principal balance
$
1,009

 
$
779


Commercial Finance Receivables

GM Financial's commercial finance receivables consist of dealer financings, primarily for inventory purchases. A proprietary model is used to assign a risk rating to each dealer. A credit review of each dealer is performed at least annually, and if necessary, the dealer's risk rating is adjusted on the basis of the review. At June 30, 2014 and December 31, 2013 the commercial finance receivables on non-accrual status were insignificant. The following table summarizes the credit risk profile by dealer grouping of the commercial finance receivables (dollars in millions): 
 
June 30, 2014
 
December 31, 2013
Group I - Dealers with superior financial metrics
$
747

 
$
549

Group II - Dealers with strong financial metrics
1,577

 
1,460

Group III - Dealers with fair financial metrics
2,229

 
1,982

Group IV - Dealers with weak financial metrics
1,463

 
1,462

Group V - Dealers warranting special mention due to potential weaknesses
583

 
385

Group VI - Dealers with loans classified as substandard, doubtful or impaired
197

 
212

 
$
6,796

 
$
6,050


The credit lines for Group VI dealers are suspended and no further funding is extended to these dealers. 

Note 4. Inventories

The following table summarizes the components of Inventories (dollars in millions):
 
June 30, 2014
 
December 31, 2013
Productive material, supplies and work in process
$
6,165

 
$
5,872

Finished product, including service parts
9,035

 
8,167

Total inventories
$
15,200

 
$
14,039


Note 5. Equity in Net Assets of Nonconsolidated Affiliates

Nonconsolidated affiliates are entities in which an equity ownership interest is maintained and for which the equity method of accounting is used due to the ability to exert significant influence over decisions relating to their operating and financial affairs.

Sales and income of our China joint ventures (China JVs) are not consolidated into our financial statements; rather, our proportionate share of the earnings of each joint venture is reflected as Equity income. There have been no significant ownership changes in our China JVs since December 31, 2013. The following table summarizes information regarding Equity income (dollars in millions):

10




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

 
Three Months Ended
 
Six Months Ended
 
June 30, 2014
 
June 30, 2013
 
June 30, 2014
 
June 30, 2013
China JVs
$
476

 
$
418

 
$
1,071

 
$
966

Others
47

 
11

 
57

 
18

Total equity income
$
523

 
$
429

 
$
1,128

 
$
984


We received dividends from nonconsolidated affiliates of $1.3 billion and $1.5 billion in the three months ended June 30, 2014 and 2013 and $1.3 billion and $1.6 billion in the six months ended June 30, 2014 and 2013. At June 30, 2014 and December 31, 2013 we had undistributed earnings including dividends declared but not received of $1.7 billion and $1.8 billion related to our nonconsolidated affiliates.

Transactions with Nonconsolidated Affiliates

Nonconsolidated affiliates are involved in various aspects of the development, production and marketing of cars, trucks and automobile parts. We purchase component parts and vehicles from certain nonconsolidated affiliates for resale to dealers. We also sell component parts and vehicles to certain nonconsolidated affiliates. The following tables summarize the effects of transactions with nonconsolidated affiliates (dollars in millions):
 
Three Months Ended
 
Six Months Ended
 
June 30, 2014
 
June 30, 2013
 
June 30, 2014
 
June 30, 2013
Results of operations
 
 
 
 
 
 
 
Automotive sales and revenue
$
769

 
$
707

 
$
1,552

 
$
1,301

Automotive purchases, net
$
118

 
$
196

 
$
223

 
$
375

Cash flows
 
 
 
 
 
 
 
Operating
 
 
 
 
$
2,561

 
$
2,432


 
June 30, 2014
 
December 31, 2013
Financial position
 
 
 
Accounts and notes receivable, net
$
1,166

 
$
756

Accounts payable
$
171

 
$
183


Note 6. Variable Interest Entities

Consolidated Variable Interest Entities (VIEs)

Automotive

VIEs that we do not control through a majority voting interest that are consolidated because we are the primary beneficiary include certain vehicle assembling, manufacturing and selling venture arrangements, the most significant of which is GM Egypt. Certain voting and other rights permit us to direct those activities of GM Egypt that most significantly affect its economic performance. The assets and liabilities recorded related to these VIEs consist primarily of Cash and cash equivalents, Accounts and notes receivable, net, Inventories, Property, net, Accounts payable (principally trade) and Accrued liabilities. Liabilities recognized as a result of consolidating VIEs generally do not represent claims against us or our other subsidiaries and assets recognized generally are for the benefit of the VIEs' operations and cannot be used to satisfy our obligations. The following tables summarize the carrying amounts of assets and liabilities and amounts recorded in earnings related to these consolidated VIEs stated prior to intercompany eliminations (dollars in millions):
 
June 30, 2014
 
December 31, 2013
Total assets
$
618

 
$
564

Total liabilities
$
437

 
$
395



11




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

 
Three Months Ended
 
Six Months Ended
 
June 30, 2014
 
June 30, 2013
 
June 30, 2014
 
June 30, 2013
Total net sales and revenue
$
327

 
$
250

 
$
633

 
$
496

Net income
$
30

 
$
17

 
$
57

 
$
37


GM Korea Company (GM Korea) and General Motors India Private Limited and Chevrolet Sales India Private Limited (collectively GM India) are non-wholly owned consolidated subsidiaries that we control through a majority voting interest. They are also VIEs because in the future they may require additional subordinated financial support. Combined creditors of GM Korea's and GM India's liabilities, which were composed of short-term and long-term debt, of $218 million and $242 million at June 30, 2014 and December 31, 2013, do not have recourse to our general credit.

Automotive Financing - GM Financial

GM Financial uses special purpose entities (SPEs) that are considered VIEs to issue variable funding notes to third party bank-sponsored warehouse facilities or asset-backed securities to investors in securitization transactions. The debt issued by these VIEs is backed by the cash flows related to finance receivables and leasing related assets transferred by GM Financial to the VIEs (Securitized Assets). GM Financial holds variable interests in the VIEs that could potentially be significant to the VIEs. GM Financial determined that they are the primary beneficiary of the SPEs because: (1) the servicing responsibilities for the Securitized Assets give GM Financial the power to direct the activities that most significantly impact the performance of the VIEs; and (2) the variable interests in the VIEs give GM Financial the obligation to absorb losses and the right to receive residual returns that could potentially be significant. The assets and liabilities of the VIEs are included in GM Financial's condensed consolidated balance sheets. The following table summarizes the assets and liabilities related to GM Financial's consolidated VIEs prior to intercompany eliminations (dollars in millions):
 
June 30, 2014
 
December 31, 2013
Restricted cash
$
1,741

 
$
1,523

Securitized Assets
$
27,173

 
$
23,584

Securitization notes payable and other credit facilities
$
22,371

 
$
19,448


Restricted cash represents collections from the underlying Securitized Assets and certain reserve accounts held as credit enhancement for securitizations held by GM Financial for the benefit of the noteholders. Except for acquisition accounting adjustments, which are not recorded in SPE trusts, GM Financial recognizes finance charge income, leased vehicle income and other income on the Securitized Assets and interest expense on the secured debt issued by the SPEs. GM Financial also maintains an allowance for estimated probable credit losses on securitized receivables. Cash pledged to support the secured borrowings is deposited to a restricted cash account and recorded as restricted cash, which is invested in highly liquid securities with original maturities of 90 days or less.

The assets of the VIEs and the restricted cash held by GM Financial serve as the sole source of repayment for the asset-backed securities issued by these entities. Investors in the notes issued by the VIEs do not have recourse to GM Financial or its other assets, with the exception of customary representation and warranty repurchase provisions and indemnities that GM Financial provides as the servicer. GM Financial is not required and does not currently intend to provide additional financial support to these SPEs. While these subsidiaries are included in GM Financial's condensed consolidated financial statements, these subsidiaries are separate legal entities and their assets are legally owned by them and are not available to GM Financial's creditors.

Nonconsolidated VIEs

Automotive

VIEs that are not consolidated include certain vehicle assembling, manufacturing and selling venture arrangements and other automotive related entities to which we provided financial support including Ally Financial. We concluded these entities are VIEs because they do not have sufficient equity at risk or may require additional subordinated financial support. We currently lack the power or authority through voting or similar rights to direct the activities of these entities that most significantly affect their economic performance. Our variable interests in these nonconsolidated VIEs include accounts and notes receivable, equity in net assets, guarantees and financial support, some of which were provided to certain current or previously divested suppliers in order

12




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

to ensure that supply needs for production were not disrupted due to a supplier's liquidity concerns or possible shutdowns. The following table summarizes the carrying amounts of assets and liabilities and total off-balance sheet arrangements related to nonconsolidated VIEs (dollars in millions):
 
June 30, 2014
 
December 31, 2013
Total assets
$
221

 
$
169

Total liabilities
$
945

 
$
838

Off-balance sheet arrangements
$
71

 
$
115


Assets and liabilities consist primarily of Equity in net assets of nonconsolidated affiliates, Short-term debt and current portion of long-term debt and Accrued liabilities. Off-balance sheet arrangements consist of commitments and other liquidity arrangements. Our maximum exposure to loss related to nonconsolidated VIEs approximated the carrying amount of total assets and the amount of off-balance sheet arrangements at June 30, 2014 and December 31, 2013. Refer to Note 10 for additional information on our maximum exposure to loss under agreements with Ally Financial.

Note 7. Short-Term and Long-Term Debt

Automotive

The following table summarizes the carrying amount and fair value of debt (dollars in millions):


June 30, 2014
 
December 31, 2013
Carrying amount
$
7,474

 
$
7,137

Fair value
$
7,348

 
$
6,837


The fair value of debt was measured utilizing Level 2 inputs at June 30, 2014 and December 31, 2013 consisting of quoted market prices and if unavailable, a discounted cash flow model. This model utilizes observable inputs such as contractual repayment terms and benchmark yield curves, plus a spread based on our senior unsecured notes that is intended to represent our nonperformance risk. We acquire the benchmark yield curves and yields on unsecured notes from independent sources that are widely used in the financial industry.

Senior Unsecured Notes

In September 2013 we issued $4.5 billion in aggregate principal amount of senior unsecured notes. These notes contain terms and covenants customary of these types of securities including limitations on the amount of certain secured debt we may issue. In June 2014 our registration statement for an exchange offer as part of the registration rights agreement associated with the senior unsecured notes was declared effective by the SEC. The exchange offer commenced in June 2014 and expired on July 21, 2014.

Technical Defaults and Covenant Violations

Several of our loan facilities require compliance with certain financial and operational covenants as well as regular reporting to lenders, including providing certain subsidiary financial statements. Failure to meet certain of these requirements may result in a covenant violation or an event of default depending on the terms of the agreement. An event of default may allow lenders to declare amounts outstanding under these agreements immediately due and payable, to enforce their interests against collateral pledged under these agreements or restrict our ability to obtain additional borrowings. A foreign subsidiary was not in compliance with certain financial covenants under its $71 million term loan facility. We are evaluating alternatives to cure this financial covenant issue and included this liability in Short-term debt and current portion of long-term debt at June 30, 2014 and December 31, 2013.

Losses on Extinguishment of Debt

In April 2013 GM Korea made a payment of $708 million to acquire, prior to the mandatory redemption date, the remaining balance of GM Korea's mandatorily redeemable preferred shares that had a carrying amount of $468 million. We recorded the difference of $240 million as a loss on extinguishment of debt.

13




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)


Automotive Financing - GM Financial

The following table summarizes the carrying amount and fair value of debt (dollars in millions):
 
June 30, 2014
 
December 31, 2013
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
Secured
 
 
 
 
 
 
 
Revolving credit facilities
$
8,591

 
$
8,611

 
$
9,000

 
$
8,995

Securitization notes payable
16,415

 
16,535

 
13,073

 
13,175

Total secured
25,006

 
25,146

 
22,073

 
22,170

Unsecured
 
 
 
 
 
 
 
Senior notes
4,376

 
4,524

 
4,000

 
4,106

Credit facilities and other unsecured debt
3,220

 
3,227

 
2,973

 
2,972

Total unsecured
7,596

 
7,751

 
6,973

 
7,078

Total GM Financial debt
$
32,602

 
$
32,897

 
$
29,046

 
$
29,248


The fair value of debt included $29.2 billion and $23.0 billion measured utilizing Level 2 inputs and $3.7 billion and $6.2 billion measured utilizing Level 3 inputs at June 30, 2014 and December 31, 2013. For revolving credit facilities with variable interest rates and maturities of one year or less, and certain unsecured debt with maturities of one year or less, the carrying amount is considered to be a reasonable estimate of fair value. The fair value of other secured and unsecured debt is based on quoted market prices, when available. If quoted market prices are not available, the market value is estimated using quoted market prices of similar securities or by discounting future net cash flows expected to be settled using current risk-adjusted rates.

Secured Debt

The revolving credit facilities have revolving periods ranging from one to three years. At the end of the revolving period, if the facilities are not renewed, the debt will amortize over periods ranging up to seven years. Most of the secured debt was issued by VIEs and it is repayable only from proceeds related to the underlying pledged finance receivables and leases. Refer to Note 6 for additional information relating to GM Financial's involvement with VIEs. Weighted-average interest rates on secured debt are both fixed and variable, ranging from 0.5% to 13.4% at June 30, 2014.

Securitization notes payable represents debt issued by GM Financial through securitization transactions. In the six months ended June 30, 2014 GM Financial issued securitization notes payable of $5.0 billion with a weighted-average interest rate of 1.5% maturing on various dates through 2022.

Unsecured Debt

In May 2014 GM Financial issued Canadian Dollar $400 million of 3.25% senior notes which are due in May 2017 with interest payable semiannually. GM Financial intends to use the net proceeds from this offering for general corporate purposes. Senior notes outstanding at June 30, 2014 are due beginning in 2016 through 2023 and have interest rates that range from 2.75% to 6.75%.

In July 2014 GM Financial issued $1.5 billion in aggregate principal amount of senior notes comprising $700 million of 2.625% notes due in July 2017 and $800 million of 3.5% notes due in July 2019. GM Financial intends to use the net proceeds from this offering for general corporate purposes.

The maturity dates of unsecured credit facilities range up to five years. If not renewed, any balance outstanding under these credit facilities is either immediately due in full or will amortize over a defined period. Interest rates on unsecured credit facilities ranged from 0.25% to 13.55% at June 30, 2014.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note 8. Product Warranty and Related Liabilities

The following table summarizes activity for policy, product warranty, recall campaigns and courtesy transportation (dollars in

14




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

millions):
 
Six Months Ended
 
June 30, 2014
 
June 30, 2013
Balance at beginning of period
$
7,601

 
$
7,633

Warranties issued and assumed in period - recall campaigns and courtesy transportation
2,485

 
343

Warranties issued and assumed in period - policy and warranty
1,309

 
1,369

Payments
(1,784
)
 
(1,659
)
Adjustments to pre-existing warranties
889

 
(37
)
Effect of foreign currency and other
28

 
(144
)
Balance at end of period
$
10,528

 
$
7,505


In the six months ended June 30, 2014 we recorded charges of approximately $2.5 billion in Automotive cost of sales relating to recall campaigns and courtesy transportation, of which over 90% was recorded in GMNA. The recorded charges primarily comprised: (1) approximately $680 million for 2.6 million vehicles to repair ignition switches that could result in a loss of electrical power under certain circumstances that may prevent front airbags from deploying in the event of a crash (accident victims who died or suffered physical injury associated with these vehicles (or their families) may be eligible to participate in a compensation program, as more fully described in Note 10); to fix ignition lock cylinders that could allow removal of the ignition key while the engine is running, leading to possible rollaway or crash; and to provide courtesy transportation to owners of affected vehicles; partially offset by adjustments of approximately $95 million for courtesy transportation as a result of greater part availability and fewer customers utilizing courtesy transportation than originally estimated and approximately $80 million for costs originally estimated separately for ignition switches and ignition lock cylinders that are now being shipped and repaired at the same time resulting in reduced costs; (2) approximately $340 million for 1.9 million vehicles to replace either the power steering motor, the steering column, the power steering motor control unit or a combination of the steering column and the power steering motor control unit as the electric power steering could fail under certain circumstances; (3) approximately $185 million for 1.3 million vehicles prone to non-deployment of the side impact restraints if vehicles are not serviced when the Service Air Bag warning light is illuminated; (4) approximately $90 million for 2.7 million vehicles to modify the brake lamp wiring harness that could have corrosion develop due to micro-vibration; (5) approximately $80 million for 1.5 million vehicles to replace front safety lap belt cables that could fatigue and separate over time; (6) approximately $150 million for 1.4 million vehicles to replace the shift cable that could wear out over time resulting in mismatches of the gear position indicated by the shift lever; (7) approximately $325 million for 12.1 million vehicles to rework or replace ignition keys because the ignition switch may move out of the “run” position which may impact power steering and power braking and, depending on the timing of the key movement relative to the activation of the sensing algorithm of a crash event, may result in airbags not deploying; and (8) approximately $520 million for 5.2 million vehicles for other matters.

We have historically accrued estimated costs related to recall campaigns in GMNA when they are probable and reasonably estimable, which typically occurs once it is determined a specific recall campaign is needed and announced. During the three months ended June 30, 2014, following the significant increase in the number of vehicles subject to recall in GMNA, the results of our ongoing comprehensive safety review, additional engineering analysis, the creation of a new Global Product Integrity organization, the appointment of a new Global Vice President of Vehicle Safety responsible for the safety development of our vehicle systems and our overall commitment to customer satisfaction, we accumulated sufficient historical data in GMNA to support the use of an actuarial-based estimation technique for recall campaigns. Based on the expanded historical data, adjustments to pre-existing warranties in the six months ended June 30, 2014 included a catch-up adjustment of $874 million to adjust the estimate for recall costs for previously sold vehicles. The estimation technique for recall campaigns takes into account our historical experience, including incident rates of recall campaigns.

Note 9. Pensions and Other Postretirement Benefits

The following table summarizes the components of net periodic pension and other postretirement benefits (OPEB) (income) expense (dollars in millions):

15




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

 
Three Months Ended June 30, 2014
 
Three Months Ended June 30, 2013
 
Pension Benefit Plans
 
Other Benefit Plans
 
Pension Benefit Plans
 
Other Benefit Plans
 
U.S.
 
Non-U.S.
 
U.S.
 
Non-U.S.
 
U.S.
 
Non-U.S.
 
U.S.
 
Non-U.S.
Service cost
$
96

 
$
112

 
$
3

 
$
3

 
$
99

 
$
94

 
$
6

 
$
4

Interest cost
765

 
263

 
55

 
14

 
709

 
252

 
55

 
14

Expected return on plan assets
(979
)
 
(222
)
 

 

 
(890
)
 
(205
)
 

 

Amortization of prior service cost (credit)
(1
)
 
4

 

 
(4
)
 
(1
)
 
5

 
(30
)
 
(3
)
Amortization of net actuarial (gains) losses
(23
)
 
41

 
4

 
(2
)
 
1

 
51

 
23

 
1

Curtailments, settlements and other (gains)

 
(1
)
 

 

 
(37
)
 
(1
)
 

 

Net periodic pension and OPEB (income) expense
$
(142
)
 
$
197

 
$
62

 
$
11

 
$
(119
)
 
$
196

 
$
54

 
$
16

 
Six Months Ended June 30, 2014
 
Six Months Ended June 30, 2013
 
Pension Benefit Plans
 
Other Benefit Plans
 
Pension Benefit Plans
 
Other Benefit Plans
 
U.S.
 
Non-U.S.
 
U.S.
 
Non-U.S.
 
U.S.
 
Non-U.S.
 
U.S.
 
Non-U.S.
Service cost
$
191

 
$
205

 
$
6

 
$
5

 
$
198

 
$
193

 
$
13

 
$
7

Interest cost
1,530

 
525

 
110

 
27

 
1,418

 
506

 
110

 
28

Expected return on plan assets
(1,957
)
 
(441
)
 

 

 
(1,781
)
 
(414
)
 

 

Amortization of prior service cost (credit)
(2
)
 
9

 
(1
)
 
(7
)
 
(2
)
 
10

 
(59
)
 
(7
)
Amortization of net actuarial (gains) losses
(46
)
 
80

 
7

 
(3
)
 
3

 
100

 
46

 
3

Curtailments, settlements and other (gains) losses
(2
)
 
1

 

 

 
5

 
3

 

 

Net periodic pension and OPEB (income) expense
$
(286
)
 
$
379

 
$
122

 
$
22

 
$
(159
)
 
$
398

 
$
110

 
$
31


Note 10. Commitments and Contingencies

The following tables summarize information related to Commitments and contingencies (dollars in millions):
 
June 30, 2014
 
December 31, 2013
 
Liability Recorded
 
Maximum Liability(a)
 
Liability Recorded
 
Maximum Liability(a)
Guarantees
 
 
 
 
 
 
 
Third party commercial loans and other obligations(b)
$
18

 
$
2,982

 
$
51

 
$
15,616

Other product-related claims
$
56

 
$
1,403

 
$
54

 
$
1,317

________
(a)
Calculated as future undiscounted payments.
(b)
Includes liabilities recorded of $3 million and $10 million and maximum liabilities of $2.8 billion and $15.3 billion related to Ally Financial repurchase obligations at June 30, 2014 and December 31, 2013.
 
Liability Recorded
 
June 30, 2014
 
December 31, 2013
Other litigation-related liability and tax administrative matters
$
1,343

 
$
1,227

Product liability
$
726

 
$
690

Ignition switch recall compensation program
$
400

 
$

Environmental liability
$
143

 
$
154


Guarantees

We provide payment guarantees on commercial loans outstanding with third parties such as dealers or rental car companies. We determined the fair value ascribed to the guarantees at inception and subsequent to inception to be insignificant based on the

16




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

credit worthiness of the third parties. In March 2014 a new agreement was signed with Ally Financial that removed the repurchase obligation for vehicles invoiced after December 31, 2013. The existing repurchase obligation for vehicles invoiced prior to December 31, 2013 is maintained until December 31, 2014 at which time repurchase obligations will expire for all vehicles.

We have agreements with third parties that guarantee the fulfillment of certain suppliers' commitments and other obligations. These guarantees expire in 2014 through 2019 or are ongoing, or upon the occurrence of specific events.

In some instances certain assets of the party whose debt or performance we have guaranteed may offset, to some degree, the cost of the guarantee. The offset of certain of our payables to guaranteed parties may also offset certain guarantees, if triggered. If vehicles are required to be repurchased under vehicle repurchase obligations, the total exposure would be reduced to the extent vehicles are able to be resold to another dealer.

In connection with certain divestitures of assets or operating businesses, we have entered into agreements indemnifying certain buyers and other parties with respect to environmental conditions and other closure costs pertaining to real property we owned. We periodically enter into agreements that incorporate indemnification provisions in the normal course of business. It is not possible to estimate our maximum exposure under these indemnifications or guarantees due to the conditional nature of these obligations. Insignificant amounts have been recorded for such obligations as the majority of them are not probable or estimable at this time and the fair value of the guarantees at issuance was insignificant.

In addition to the guarantees and indemnifying agreements previously discussed, we indemnify dealers for certain product liability related claims as subsequently discussed.

With respect to other product-related claims involving products manufactured by certain joint ventures, we believe that costs incurred are adequately covered by recorded accruals. These guarantees terminate in years ranging from 2020 to 2028.

Other Litigation-Related Liability and Tax Administrative Matters

Various legal actions, governmental investigations, claims and proceedings are pending against us including matters arising out of alleged product defects; employment-related matters; governmental regulations relating to safety, emissions and fuel economy; product warranties; financial services; dealer, supplier and other contractual relationships; tax-related matters not recorded pursuant to Accounting Standards Codification (ASC) 740, "Income Taxes" (indirect tax-related matters) and environmental matters.

With regard to the litigation matters discussed in the previous paragraph, reserves have been established for matters in which we believe that losses are probable and can be reasonably estimated, the majority of which are associated with indirect tax-related matters as well as non-U.S. labor-related matters. Indirect tax-related matters are being litigated globally pertaining to value added taxes, customs, duties, sales, property taxes and other non-income tax related tax exposures. The various non-U.S. labor-related matters include claims from current and former employees related to alleged unpaid wage, benefit, severance and other compensation matters. Certain South American administrative proceedings are indirect tax-related and may require that we deposit funds in escrow. Escrow deposits may range from $500 million to $700 million. Some of the matters may involve compensatory, punitive or other treble damage claims, environmental remediation programs or sanctions that, if granted, could require us to pay damages or make other expenditures in amounts that could not be reasonably estimated at June 30, 2014. We believe that appropriate accruals have been established for such matters based on information currently available. Reserves for litigation losses are recorded in Accrued liabilities and Other liabilities and deferred income taxes. Litigation is inherently unpredictable however; and unfavorable resolutions could occur. Accordingly it is possible that an adverse outcome from such proceedings could exceed the amounts accrued in an amount that could be material to our financial condition, results of operations and cash flows in any particular reporting period.

Proceedings Related to Ignition Switch Recall

In the three months ended March 31, 2014 we announced a recall to repair ignition switches that under certain circumstances could unintentionally move from the “run” position to the “accessory” or “off” position with a corresponding loss of power, which in turn may prevent front airbags from deploying in the event of a crash. The recall includes approximately 2.6 million Chevrolet Cobalt, HHR, Pontiac G5, Pursuit, Solstice, and Saturn ION and Sky vehicles.

Through July 23, 2014 we are aware of 95 putative class actions that have been filed against GM in various U.S. District Courts and state courts since the recall announcement alleging that consumers have been economically harmed by the recall and/or the

17




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

underlying vehicle condition. In the aggregate, these cases seek recovery for compensatory damages, including for alleged diminution in value of the vehicles, punitive damages and injunctive and other relief. Most, but not all, of these lawsuits are pending in federal court. Additionally, through July 23, 2014, eight putative class actions have been filed in various Provincial Courts in Canada seeking similar relief. In June 2014 the United States Judicial Panel on Multidistrict Litigation ordered that 15 of the then pending U.S. federal lawsuits involving ignition switches be transferred to and consolidated in a single federal court, the Southern District of New York. To date, more than 100 cases (including personal injury cases) have been transferred and consolidated in that same court, and GM has requested that various other recently filed federal lawsuits also be transferred and consolidated with those same actions. Because the majority of plaintiffs in these actions are suing over vehicles manufactured by pre-bankruptcy General Motors Corporation, GM will seek to enforce the terms of the federal Bankruptcy Court’s July 2009 Sale Order and Injunction to preclude liability for any economic loss damages based on vehicles and parts manufactured prior to July 2009. These cases are in their very early stages. No discovery has yet taken place.

Through July 23, 2014 we are aware of two actions that have been filed against GM alleging that GM’s purported concealment of the ignition switch and other defects that have been the subject of recalls in 2014 has diminished the value of other GM vehicles and seeking economic damages under California consumer protection statutes. One of these actions is a putative class action that has been consolidated with the ignition switch putative class actions and transferred to the Southern District of New York. The other action was brought by the Orange County, California district attorney and is pending in California state court. In the aggregate these actions seek recovery under California consumer protection statutes for economic damages as well as civil penalties, punitive damages, attorneys’ fees, and costs.

On March 21, 2014 a putative shareholder class action was filed in the United States District Court for the Eastern District of Michigan against GM and various current and former officers of GM (Pio v. General Motors Company et al.) on behalf of purchasers of GM securities from November 17, 2010 through March 10, 2014. The complaint alleges that defendants made material misstatements and omissions relating to problems with the ignition switch in SEC filings. The plaintiff seeks unspecified monetary damages, interest and attorneys’ fees and costs. Four shareholders have filed motions seeking to be appointed lead plaintiff in this putative class action. After the court rules on those motions and appoints a lead plaintiff, we anticipate the lead plaintiff will file an amended complaint that may include allegations different from those in the current complaint.

On March 28, 2014 a shareholder derivative action was filed in the United States District Court for the Eastern District of Michigan against certain current and former GM directors (Hockstein v. Barra, et al.). The complaint alleges breach of fiduciary duty, waste of corporate assets, and unjust enrichment by GM’s directors in connection with monitoring, remediation and disclosure of the issues underlying the ignition switch recall. Between April 9, 2014 and July 22, 2014 seven other similar shareholder derivative actions were filed in the Eastern District of Michigan (Police Retirement System of St. Louis v. Barra, et al.), the Circuit Court for Wayne County, Michigan (Bekkerman v. Barra, et al., Wietschiner, et al. v. Barra, et al.) the Chancery Court for the State of Delaware (Nash v. Barra, et al., DiStefano v. Barra, et al., Newspaper and Magazine Employees Union v. Barra, et al., Boso v. Solso, et al.). All of these actions seek damages allegedly resulting from defendants’ failure to timely identify, correct and disclose the ignition switch defect, an order compelling implementation of various corporate governance policies and practices, and other relief purportedly for the benefit of GM.

Through July 23, 2014 we are aware of 26 actions pending against GM alleging injury or death as a result of faulty ignition switches and/or the failure of air bags to properly deploy due to faulty ignition switches. Of these actions eight have been transferred to federal court in the Southern District of New York, three are the subject of GM’s motion to consolidate and transfer to a single state court in Texas, and 15 are pending in various other federal and state courts throughout the country. These actions generally assert that GM intentionally and fraudulently concealed facts relating to faulty ignition switches and related defects from plaintiffs, the public and the National Highway Traffic Safety Administration (NHTSA) over a lengthy period. These complaints assert various causes of action under federal and state law, including strict products liability, negligence, breach of implied warranty, fraud and fraudulent concealment, and Federal and Georgia Racketeer Influenced and Corrupt Organizations Acts and seek compensatory damages, treble damages, punitive damages and attorneys’ fees and costs.

Through July 23, 2014 we are aware of six actions pending against GM alleging injury or death as a result of inadvertent ignition key rotation and/or failure of air bags to properly deploy as a result of inadvertent ignition key rotation. Of these actions, two have been transferred to federal court in the Southern District of New York, one is pending in federal court in the Southern District of Texas, two are pending in Texas state court and one is pending in Indiana state court. In the aggregate these actions assert that GM intentionally and fraudulently concealed facts relating to the inadvertent ignition key rotation and related defects from plaintiffs, the public and NHTSA over a lengthy period. These complaints assert various causes of action under federal and state law, including

18




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

strict products liability, negligence, breach of implied warranties, fraud and fraudulent concealment and seek compensatory damages, punitive damages and attorneys' fees and costs.

We are also subject to product liability claims associated with recently announced recalls, none of which we believe to be individually material. The number of product liability claims we receive may be higher as a result of the recently announced recalls.

GM intends to vigorously defend all of these actions.

We are also the subject of various inquiries, investigations, subpoenas and requests for information from the U.S. Attorney’s Office for the Southern District of New York, Congress, the SEC, Transport Canada and 45 state attorney generals in connection with our recent recalls. We are investigating these matters internally and believe we are cooperating fully with all requests. Such investigations could in the future result in the imposition of material damages, fines or civil and criminal penalties.

We are currently unable to estimate a range of reasonably possible loss for the lawsuits and investigations because these matters involve significant uncertainties at these early stages. These uncertainties include the legal theory or the nature of the claims as well as the complexity of the facts. Although we cannot estimate a reasonable range of loss based on currently available information, the resolution of these matters could have a material adverse effect on our financial position, results of operations or cash flows.

GM Korea Wage Litigation

Commencing on or about September 29, 2010 current and former hourly employees of GM Korea filed eight separate group actions in the Incheon District Court in Incheon, Korea. The cases, which in aggregate involve more than 10,000 employees, allege that GM Korea failed to include bonuses and certain allowances in its calculation of Ordinary Wages due under the Presidential Decree of the Korean Labor Standards Act. On November 23, 2012 the Seoul High Court (an intermediate level appellate court) issued a decision affirming a decision of the Incheon District Court in a case involving five GM Korea employees which was contrary to GM Korea's position. GM Korea appealed to the Supreme Court of the Republic of Korea (Supreme Court) and initiated a constitutional challenge to the adverse interpretation of the relevant statute. In December 2013 the Supreme Court rendered a decision in a case involving another company not affiliated with us which addressed many of the issues presented in the cases pending against GM Korea and resolved many of them in a manner which we believe is favorable to GM Korea. In particular, while the Supreme Court held that fixed bonuses should be included in the calculation of Ordinary Wages, it also held that claims for retroactive application of this rule would be barred under certain circumstances. On May 29, 2014 the Supreme Court rendered its decision with respect to the case involving the five GM Korea employees and remanded the case to the Seoul High Court consistent with its December 2013 ruling. At June 30, 2014 we have an accrual of 79 billion South Korean Won (equivalent to $78 million) related to these cases. We estimate our reasonably possible loss, as defined by ASC 450, “Contingencies,” in excess of amounts accrued to be 591 billion South Korean Won (equivalent to $584 million) at June 30, 2014. We are also party to litigation with current and former salaried employees over allegations relating to Ordinary Wages regulation. At June 30, 2014 we have identified a reasonably possible loss in excess of the amount of our accrual of 159 billion South Korean Won (equivalent to $157 million). Both the scope of claims asserted and GM Korea's assessment of any or all of the individual claim elements may change if new information becomes available. These cases are currently pending before various district courts in Korea and the Supreme Court.

GMCL Dealers' Claim

On February 12, 2010 a claim was filed in the Ontario Superior Court of Justice against General Motors of Canada Limited (GMCL) on behalf of a purported class of over 200 former GMCL dealers (the Plaintiff Dealers) which had entered into wind-down agreements with GMCL. In May 2009 in the context of the global restructuring of the business and the possibility that GMCL might be required to initiate insolvency proceedings, GMCL offered the Plaintiff Dealers the wind-down agreements to assist with their exit from the GMCL dealer network and to facilitate winding down their operations in an orderly fashion by December 31, 2009 or such other date as GMCL approved but no later than on October 31, 2010. The Plaintiff Dealers allege that the Dealer Sales and Service Agreements were wrongly terminated by GMCL and that GMCL failed to comply with certain disclosure obligations, breached its statutory duty of fair dealing and unlawfully interfered with the Plaintiff Dealers' statutory right to associate in an attempt to coerce the Plaintiff Dealers into accepting the wind-down agreements. The Plaintiff Dealers seek damages and assert that the wind-down agreements are rescindable. The Plaintiff Dealers' initial pleading makes reference to a claim “not exceeding” Canadian Dollar $750 million, without explanation of any specific measure of damages. On March 1, 2011 the court approved certification of a class for the purpose of deciding a number of specifically defined issues including: (1)

19




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

whether GMCL breached its obligation of "good faith" in offering the wind-down agreements; (2) whether GMCL interfered with the Plaintiff Dealers' rights of free association; (3) whether GMCL was obligated to provide a disclosure statement and/or disclose more specific information regarding its restructuring plans in connection with proffering the wind-down agreements; and (4) assuming liability, whether the Plaintiff Dealers can recover damages in the aggregate (as opposed to proving individual damages). A number of former dealers have opted out of participation in the litigation, leaving 181 dealers in the certified class. Trial of the class issues is scheduled to commence in the third quarter of 2014. The current prospects for liability are uncertain, but because liability is not deemed probable we have no accrual relating to this litigation. We cannot estimate the range of reasonably possible loss in the event of liability as the case presents a variety of different legal theories, none of which GMCL believes are valid.

UAW Claim

On April 6, 2010 the International Union, United Automobile, Aerospace and Agriculture Implement Workers of America (UAW) filed suit against us in the U.S. District Court for the Eastern District of Michigan claiming that we breached an obligation to contribute $450 million to the UAW Retiree Medical Benefits Trust. The UAW alleges that we were contractually required to make this contribution. On December 10, 2013 the court granted our motion for summary judgment and dismissed the claims asserted by the UAW, holding that the relevant agreement is unambiguous and does not require the payment sought. The UAW has appealed. At this juncture we believe the prospects for liability on the claims asserted in this matter are remote.

Product Liability

With respect to product liability claims involving our and General Motors Corporation products, we believe that any judgment against us for actual damages will be adequately covered by our recorded accruals and, where applicable, excess liability insurance coverage. Although punitive damages are claimed in some of these lawsuits and such claims are inherently unpredictable, accruals incorporate historic experience with these types of claims. In addition we indemnify dealers for certain product liability related claims including products sold by General Motors Corporation. We monitor actual claims experience and make periodic adjustments to our estimates. In light of recent vehicle recalls it is reasonably possible that our accruals for product liability claims may increase in future periods in material amounts, although we cannot estimate a reasonable range of incremental loss based on currently available information.

Liabilities have been recorded in Accrued liabilities and Other liabilities and deferred income taxes for the expected cost of all known product liability claims plus an estimate of the expected cost for product liability claims that have already been incurred and are expected to be filed in the future for which we are self-insured.

Ignition Switch Recall Compensation Program

In the three months ended June 30, 2014 we announced the creation of a compensation program (the Program) to compensate accident victims who died or suffered physical injury (or their families) as a result of a faulty ignition switch related to the 2.6 million vehicles recalled as more fully described in Note 8. It is important to our company that we reach everyone through this Program who has been impacted. The Program is being administered by an independent program administrator. The independent administrator has established a protocol that defines the eligibility requirements to participate in the Program. There is no cap on the amount of payments that can be made to claimants under the Program.

At June 30, 2014 we have an accrual of $400 million recorded in Corporate which represents our best estimate of amounts that may be paid under the Program. However, it is reasonably possible that the liability could exceed our recorded amount by approximately $200 million. The most significant estimates affecting the amount recorded include the number of participants that have eligible claims related to death and physical injury, which also contemplates the severity of injury, the length of hospital stays and related compensation amounts and the number of people who actually elect to participate in the Program. Our estimate is subject to significant uncertainties, as programs of this nature are highly unusual and each eligible claim will have a unique underlying fact pattern. While we do not anticipate material changes to our current estimate, it is possible that material changes could occur should actual eligible claims and the related compensation amounts differ from this estimate. The Program will accept claims from August 1, 2014 through December 31, 2014. Payments to eligible claimants are anticipated to begin in the third quarter of 2014 and continue through the first half of 2015. Accident victims (or their families) could choose not to participate in the Program and pursue litigation against us.

Environmental Liability


20




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

Automotive operations, like operations of other companies engaged in similar businesses, are subject to a wide range of environmental protection laws, including laws regulating air emissions, water discharges, waste management and environmental remediation. Liabilities have been recorded primarily in Other liabilities and deferred income taxes for the expected costs to be paid over the periods of remediation for the applicable sites, which typically range from five to 30 years.

The final outcome of environmental matters cannot be predicted with certainty at this time. Subsequent adjustments to initial estimates are recorded as necessary based upon additional information obtained. In future periods new laws or regulations, advances in remediation technologies and additional information about the ultimate remediation methodology to be used could significantly change our estimates. It is possible that the resolution of one or more environmental matters could exceed the amounts accrued in an amount that could be material to our financial condition, results of operations and cash flows. At June 30, 2014 we estimate the remediation losses could range from $110 million to $210 million.

Other Matters

Brazil Excise Tax Incentive

In October 2012 the Brazilian government issued a decree which increased an excise tax rate by 30 percentage points, but also provided an offsetting tax incentive that requires participating companies to meet certain criteria, such as local investment and fuel efficiency standards. Participating companies that fail to meet the required criteria are subject to clawback provisions and fines. At June 30, 2014 we believe it is reasonably assured that the program requirements will be met based on the current business model and available technologies.

GME Planned Spending Guarantee

As part of our Opel/Vauxhall restructuring plan agreed to with European labor representatives we committed to achieving specified milestones associated with planned spending from 2011 to 2014 on certain product programs. If we had failed to accomplish the requirements set out under the agreement we would have been required to pay certain amounts up to Euro 265 million for each of those years, and/or interest on those amounts, to our employees. In April 2014 we reached an agreement with the European labor representatives terminating the agreement as all milestones have been or will be met timely in 2014.

India Tavera Emissions Compliance

We determined there was an emissions compliance issue with certain Tavera models produced in India. We self-reported this issue in the three months ended September 30, 2013 to local government authorities and are continuing to cooperate. We developed a solution, and while the issue was not safety related, we voluntarily recalled the vehicles to serve our customers.

Note 11. Income Taxes

For interim income tax reporting we estimate our annual effective tax rate and apply it to our year to date ordinary income (loss). Tax jurisdictions with a projected or year to date loss for which a tax benefit cannot be realized are excluded. The tax effects of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are reported in the interim period in which they occur.

In the three months ended June 30, 2014 income tax benefit of $254 million primarily resulted from tax benefit attributable to entities included in our effective tax rate calculation and other tax benefit items, none of which are individually significant. In the three months ended June 30, 2013 income tax expense of $742 million primarily resulted from tax expense attributable to entities included in our effective tax rate calculation. In the six months ended June 30, 2014 income tax benefit of $478 million primarily resulted from tax benefit attributable to entities included in our effective tax rate calculation and deductions taken for stock investments in non-US affiliates and tax audit settlements reported in the first quarter of 2014. In the six months ended June 30, 2013 income tax expense of $1.2 billion primarily resulted from tax expense attributable to entities included in our effective tax rate calculation, partially offset by tax benefit related to the U.S. research credit legislated in the three months ended March 31, 2013. We have open tax years from 2006 to 2013 with various significant tax jurisdictions.

Note 12. Restructuring and Other Initiatives


21




GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

We have executed various restructuring and other initiatives and we plan to execute additional initiatives in the future, if necessary, in order to align manufacturing capacity and other costs with prevailing global automotive production and to improve the utilization of remaining facilities. To the extent these programs involve voluntary separations no liabilities are generally recorded until offers to employees are accepted. If employees are involuntarily terminated a liability is generally recorded at the communication date. Related charges are recorded in Automotive cost of sales and Automotive selling, general and administrative expense.

The following tables summarize the reserves related to restructuring and other initiatives and charges by segment, including postemployment benefit reserves and charges (dollars in millions):
 
GMNA
 
GME
 
GMIO
 
GMSA
 
Total
Balance at January 1, 2014
$
497

 
$
503

 
$
333

 
$
16

 
$
1,349

Additions, interest accretion and other
10

 
191

 
48

 
49

 
298

Payments
(30
)
 
(106
)
 
(21
)
 
(51
)
 
(208
)
Revisions to estimates

 
2

 
(4
)
 

 
(2
)
Effect of foreign currency
(6
)
 

 
2

 
(1
)
 
(5
)
Balance at March 31, 2014
471

 
590

 
358

 
13

 
1,432

Additions, interest accretion and other
10

 
179

 
27

 
24

 
240

Payments
(26
)
 
(68
)
 
(116
)
 
(29
)
 
(239
)
Revisions to estimates

 
2

 
(6
)
 

 
(4
)
Effect of foreign currency
5

 
(4
)
 
1

 

 
2

Balance at June 30, 2014(a)
$
460

 
$
699

 
$
264

 
$
8

 
$
1,431

 
GMNA
 
GME
 
GMIO
 
GMSA
 
Total
Balance at January 1, 2013
$
653

 
$
590