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1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE
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ACT OF 1934
For the fiscal year ended December 31, 1993
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE
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ACT OF 1934
For the transition period from to
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Commission file number 1-143
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GENERAL MOTORS CORPORATION
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(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 38-0572515
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
767 Fifth Avenue, New York, New York 10153-0075
3044 West Grand Boulevard, Detroit, Michigan 48202-3091
- -------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (313)-556-5000
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ---------------------------------------------- -----------------------------
*Common, $1-2/3 par value (726,863,452 shares
outstanding as of February 28, 1994)........ New York Stock Exchange, Inc.
Class E Common, $0.10 par value (258,218,180
shares outstanding as of February 28, 1994). New York Stock Exchange, Inc.
Class H Common, $0.10 par value (90,921,470
shares outstanding as of February 28, 1994). New York Stock Exchange, Inc.
Preference, $0.10 par value, Series A
Conversion, dividends cumulative
(17,825,000 shares outstanding as
of February 28, 1994)....................... New York Stock Exchange, Inc.
Preference, $0.10 par value, Series B
9-1/8% Depositary Shares, stated value
$25 per share, dividends cumulative
(44,300,000 depositary shares outstanding
as of February 28, 1994).................... New York Stock Exchange, Inc.
Preference, $0.10 par value, Series C
Depositary Shares, convertible into Class E
common stock, liquidation preference
$50 per share, dividends cumulative
(31,880,600 depositary shares outstanding
as of February 28, 1994).................... New York Stock Exchange, Inc.
*Also listed on the Midwest Stock Exchange, Inc., Pacific Stock Exchange,
Inc., and Philadelphia Stock Exchange, Inc.
2
Name of each exchange on
Title of each class which registered
- ---------------------------------------------- -----------------------------
Preference, $0.10 par value, Series D
7.92% Depositary Shares, stated value
$25 per share, dividends cumulative
(15,700,000 depositary shares outstanding
as of February 28, 1994).................... New York Stock Exchange, Inc.
Preference, $0.10 par value, Series G
9.12% Depositary Shares, stated value
$25 per share, dividends cumulative
(23,000,000 depositary shares outstanding
as of February 28, 1994).................... New York Stock Exchange, Inc.
$500,000,000 8-1/8% Debentures Due
April 15, 2016............................. New York Stock Exchange, Inc.
Note: The $1-2/3 par value common stock of the Registrant is also listed for
trading on:
Montreal Stock Exchange Montreal, Quebec, Canada
Toronto Stock Exchange Toronto, Ontario, Canada
Borse Frankfurt am Main Frankfort on the Main, Germany
Borse Dusseldorf Dusseldorf, Germany
Bourse de Bruxelles Brussels, Belgium
Courtiers en Valeurs Mobilieres Paris, France
The Stock Exchange, London London, England
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. ( )
The aggregate market value (based upon the average of the highest and lowest
sales prices on the Composite Tape on February 28, 1994) of General Motors
Corporation $1-2/3 par value, Class E, and Class H common stocks held by
nonaffiliates on February 28, 1994 was approximately $42,539.2 million,
$8,497.2 million, and $3,263.8 million, respectively.
Documents incorporated by reference:
Part and Item Number of Form
Document 10-K into Which Incorporated
- ------------------------------------------ -----------------------------
General Motors Notice of Annual Meeting
of Stockholders and Proxy Statement
for the Annual Meeting of Stockholders
to be held May 20, 1994 Part III, Items 10 through 13
COVER PAGE
3
GENERAL MOTORS CORPORATION PART I
AND SUBSIDIARIES
THE CORPORATION
General Motors Corporation, incorporated in 1916 under the laws of the
State of Delaware, is hereinafter sometimes referred to as the "Registrant" or
the "Corporation" and, together with its subsidiaries, is hereinafter
sometimes referred to as "General Motors" or "GM."
ITEM 1. BUSINESS
General
The following information is incorporated herein by reference to the
indicated pages in Part II:
Item Page
------------------------------------------------------------- -----
Worldwide Wholesale Sales . . . . . . . . . . . . . . . . . . II-54
Employment and Payrolls . . . . . . . . . . . . . . . . . . . II-58
Note 17 of Notes to Financial Statements (Segment Reporting). II-38
While the major portion of the Corporation's operations is derived from
the automotive products industry segment, GM also has financing and insurance
operations and produces products and provides services in other industry
segments. The automotive products segment consists of the design,
manufacture, assembly, and sale of automobiles, trucks, and related parts and
accessories. The financing and insurance operations assist in the
merchandising of General Motors' products as well as other products. General
Motors Acceptance Corporation (GMAC) and its subsidiaries, as well as certain
other subsidiaries of GM, offer financial services and certain types of
insurance to dealers and customers. In addition, GMAC and its subsidiaries
are engaged in mortgage banking and investment services. The other products
segment consists of military vehicles, radar and weapon control systems,
guided missile systems, and defense and commercial satellites; the design,
installation, and operation of business information and telecommunication
systems; as well as the design, development, and manufacture of locomotives.
Substantially all of the products in the automotive segment are marketed
through retail dealers and through distributors and jobbers in the United
States and Canada and through distributors and dealers overseas. At
December 31, 1993, there were approximately 8,900 General Motors motor vehicle
dealers in the United States, 1,100 in other North America (Canada and
Mexico), and approximately 5,400 outlets overseas.
Backlog of Orders
Shipments of General Motors' automotive products are made as promptly as
possible after receipt of firm sales orders; therefore, no significant backlog
of unfilled orders accumulates. GM Hughes Electronics Corporation had a $13.4
billion and $14.0 billion backlog of defense and commercial contracts at the
end of 1993 and 1992, respectively.
I-1
4
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
Raw Materials and Services
General Motors purchases materials, parts, supplies, freight transpor-
tation, energy, and other services from numerous unaffiliated firms.
Interruptions in production or delivery of these goods or services could
adversely affect General Motors.
Competitive Position
General Motors' principal competitors in passenger cars and trucks in the
United States and Canada include Ford Motor Company, Chrysler Corporation,
Toyota Corporation, Nissan Motor Corporation, Ltd., Honda Motor Company, Ltd.,
Mazda Motor Corporation, Mitsubishi Motors Corporation, Isuzu Motors, Ltd.,
Fuji Heavy Industries, Ltd. (Subaru), Volkswagen A.G., Hyundai Motor Company,
Ltd., Daimler-Benz A.G. (Mercedes), Bayerische Motoren Werke AG (BMW), and
Volvo AB. All but Volkswagen, Daimler-Benz, and BMW currently operate vehicle
manufacturing facilities in the United States or Canada although BMW and
recently Mercedes have announced plans to build assembly plants in the United
States. Toyota and GM operate the New United Motor Manufacturing, Inc.
facility in Fremont, California as a joint venture which currently builds
passenger cars and light-duty trucks. Worldwide wholesale unit sales of
General Motors passenger cars and trucks during the three years ended December
31, 1993 are summarized in Management's Discussion and Analysis in Part II.
Total industry new motor vehicle (passenger cars, trucks, and buses)
registrations of domestic and foreign makes and General Motors' competitive
position during the three years ended December 31, 1993 were as follows:
1993(1) 1992 1991
------ ------ ------
(Units in Thousands)
Total industry registrations
In the United States. . . . . . . . . . . . . . 13,941 12,867 12,579
In other North America (2). . . . . . . . . . . 1,778 1,881 1,936
In other countries (3). . . . . . . . . . . . . 27,171 29,337 29,098
------ ------ ------
Total industry registrations - all countries. . . 42,890 44,085 43,613
====== ====== ======
1993(1) 1992 1991
------ ------ ------
(Percent of Total Industry)
General Motors' registrations
In the United States. . . . . . . . . . . . . . 33% 34% 35%
In other North America (2). . . . . . . . . . . 27 27 28
In other countries (3). . . . . . . . . . . . . 10 10 8
Total General Motors' registrations - all
countries . . . . . . . . . . . . . . . . . . . 18 18 17
(1) Preliminary
(2) Includes Canada and Mexico.
(3) Includes China and Eastern Europe. 1992 data were restated to include
China and 1992 and 1991 data were restated to include Eastern Europe.
The above information on registrations of new cars, trucks, and buses was
obtained from outside sources and that pertaining to General Motors'
registrations includes units which are manufactured overseas by other
companies and which are imported and sold by General Motors and affiliates.
I-2
5
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
Research and Development
In 1993, General Motors spent $6,029.9 million for research,
manufacturing engineering, product engineering, and development activities
related primarily to the development of new products or services or the
improvement of existing products or services, including activities related to
vehicle emissions control, improved fuel economy, and the safety of persons
using General Motors products. In addition, $1,340.3 million was spent for
customer-sponsored activities, the majority of which were government related.
Comparable data for 1992 were $5,916.9 million for company-sponsored
activities and $1,185.5 million for customer-sponsored activities and for
1991, $5,887.4 million and $1,239.4 million, respectively.
Environmental Matters
Automotive Emissions Control
Both the Federal and California governments currently impose stringent
emission control requirements on motor vehicles sold in their respective
jurisdictions. These requirements include pre-production testing of vehicles,
testing of vehicles after assembly, the imposition of emission defect and
performance warranties, and the obligation to recall and repair customer-owned
vehicles determined to be non-compliant with emissions requirements.
Both the U.S. Environmental Protection Agency (EPA) and the California
Air Resources Board (CARB) continue to place great emphasis on compliance
testing of customer-owned vehicles. Failure to comply with the emission
standards or defective emission control hardware discovered during such
testing can lead to substantial cost for General Motors related to emissions
recalls. New CARB and Federal requirements will increase the time and mileage
over which manufacturers are responsible for a vehicle's emission performance.
Both the EPA and the CARB emission requirements will become even more
stringent in the future. A new tier of exhaust emission standards for cars
and trucks, the "Tier 1" standards began phasing in for California vehicles in
the 1993 model year and for Federal vehicles in the 1994 model year. The
phase-in of these "Tier 1" standards will be completed by the 1997 model year.
In addition to the Tier 1 standards is the CARB Low Emission Vehicle
(LEV) Program that begins with the 1994 model year and defines requirements
through model year 2003 and beyond. This program sets even more stringent
exhaust emission standards for cars and trucks. General Motors will have to
meet the LEV Program requirements by marketing a mix of vehicles complying
with the Tier 1 standards, Transitional Low Emission Vehicles (TLEV), Low
Emission Vehicles (LEV), Ultra-Low Emission Vehicles (ULEV), or Zero Emission
Vehicles (ZEV). From model years 1998 to 2000, 2% of cars and small light-
duty trucks (up to 3,750 lb Loaded Vehicle Weight) must be ZEVs. This
requirement increases to 5% in 2001 and 10% in 2003 and thereafter.
The Clean Air Act permits states that have areas with air quality
problems to adopt the California car and truck emission standards in lieu of
the Federal requirements and two states (New York and Massachusetts) have done
so. In addition, the Ozone Transport Commission, representing twelve
Northeast states and the District of Columbia, have asked the EPA to impose
the California LEV program requirements. This could mean that vehicles
designed for the California LEV program, including ZEVs, would have to be
offered for sale in that region of the country.
I-3
6
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
In addition to the above-mentioned exhaust emission programs, onboard
diagnostic (OBD) devices, far more complex than those currently used to
diagnose problems with emission control systems, will be required both
Federally and in California effective with the 1996 model year. This new
system has the potential of increasing warranty costs and the chance for
recall.
New evaporative emission control requirements for cars and trucks begin
phasing in with the 1995 model year in California and the 1996 model year
Federally. Systems will need to be further modified to accommodate Federal
onboard refueling vapor recovery (ORVR) control standards. ORVR phases in on
passenger cars in the 1988 through 2000 model years and on light-duty trucks
in the 2001 through 2006 model years.
Industrial Environmental Control
General Motors is subject to various laws relating to the protection of
the environment, and is in various stages of investigation or remediation for
sites where contamination has been alleged. GM has recorded an accrued
liability of $659 million at December 31, 1993 and $519 million at December
31, 1992 for worldwide environmental cleanup as summarized below:
. GM has been
identified as a potentially responsible party at sites identified by
the EPA and state regulatory agencies for cleanup under the
Comprehensive Environmental Response, Compensation, and Liability Act
(CERCLA) and similar state statutes. GM voluntarily and actively
participates in cleanup activity where such involvement is verified.
The foreseeable total liability for 1994 and beyond for sites involving
GM is estimated to be $231 million, which was recorded at December 31,
1993. This compares to $203 million at December 31, 1992.
. For closed
or closing plants owned by the Corporation, an estimated liability for
environmental cleanup is typically recognized at the time the
restructuring charge is made and is based on an environmental
assessment of the plant property. The liability estimate includes
amounts for actions which are not specifically required by regulations
or government action but which serve to minimize future liability.
Such liability is estimated at $187 million, which was recorded at
December 31, 1993. This compares to $120 million at December 31, 1992.
. GM is
involved in cleanup actions at additional locations worldwide with a
foreseeable minimum liability of approximately $241 million, which was
recorded at December 31, 1993. This compares to $196 million at
December 31, 1992.
The U.S. Federal Resource Conservation and Recovery Act (RCRA)
regulations require an owner/operator of hazardous waste management facilities
to file annually with the EPA financial assurance to provide funds for closure
and post-closure care of hazardous waste management facilities (HWMFs). As of
December 31, 1993, GM had financial assurance to cover total closure, post-
closure, and mandated liability coverage totaling $138.6 million ($127.6
million closure and post-closure costs and $11 million aggregated liability)
for the HWMFs owned and/or operated by the Corporation. These costs will be
incurred only when an HWMF is closed and only for the amount covered for the
individual HWMF. The annual inflator used by the EPA is projected to be 2.73%
for 1993 (this is applied to the closure and post-closure costs); therefore,
the total financial guarantee to be filed in 1994 to cover the closure and
post-closure cost amounts is estimated to be approximately $142.1 million.
I-4
7
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
The RCRA regulations require an owner/operator of underground storage
tanks (UST) to meet, between now and 1998, standards for release detection,
tank performance, and spill/overfill control and to provide for remediation of
contamination where necessary. The associated expenditure forecast for these
activities is expected to be approximately $104 million to be spent over the
next six years. Also, owner/operators of petroleum-containing USTs are
required to demonstrate financial responsibility for corrective action and
third-party compensation. The appropriate coverage level for 1994 will be
$2.0 million in aggregate.
Nuclear Regulatory Commission rules require the GM Technical Center
Research Laboratories to demonstrate financial assurance for decommissioning
certain licensed facilities in the amount of $154,815. The intent of this
rule is to ensure that decommissioning will be accomplished in a safe and
timely manner and that licensees will provide adequate funds to cover all
costs associated with decommissioning.
The capital cost impact of 1990 Clean Air Act Amendments on GM stationary
sources will depend on the specific requirements of new state and Federal
regulations which must be developed and implemented over the next 10 years.
These regulations include operating permit programs, nitrogen oxide control
programs, chloro-fluoro-carbon phase out, and hazardous air pollutant control
programs. Estimated cost of these programs over the next 10-15 years is
approximately $1 billion. Annual operating permit emission fees will be
approximately $9 million with phase-in started in 1993 and expected to be
fully effective in 1995.
Expenditures by General Motors in the United States for industrial
environmental control facilities during the three years ended December 31,
1993 were (in millions): 1993-$186; 1992-$150; and 1991-$130. The
Corporation currently estimates that future expenditures for industrial
environmental control facilities through 1997 will be (in millions): 1994-
$171; 1995-$144; 1996-$174; and 1997-$83. Specific environmental expenses are
difficult to isolate since expenditures may be made for more than one purpose,
making precise classification difficult.
Vehicular Noise Control
The Federal Truck Regulation preempts all state/local noise regulations
for trucks over 10,000 lb Gross Vehicle Weight Rating (GVWR). All
jurisdictions regulating noise levels of school buses which are built on
medium-duty truck chassis have adopted standards compatible with Federal
regulations for medium-duty trucks.
Passenger cars and light-duty trucks are subject to state and local motor
vehicle noise regulations. The current standard for vehicles in these
classes, 80 dB as measured at 50 feet, has been in effect since 1975. Since
the end of 1991, manufacturers have the option of meeting the 80 dB light
vehicle standard using the test protocol for vehicle exports as measured at 25
feet. While General Motors is well positioned for compliance with the 80 dB
standard for light vehicles, future implementation of more stringent exhaust
emission regulations and more stringent fuel economy regulations will require
an assessment of increased costs of noise control.
I-5
8
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
Automotive Safety Engineering
Expenditures to maintain the operational safety, occupant protection, and
vehicle theft deterrence capability of new GM models continue. These
expenditures include amounts for the study of alternative approaches for
meeting the needs of all three areas.
A final rule allowing use of Daytime Running Lights (DRL) as an option
was issued by the National Highway Traffic Safety Administration (NHSTA). As
a result, GM has announced its intent to provide DRL starting in 1995 on
selected models. It is believed that this feature will enhance the overall
crash avoidance capability of GM vehicles thus reducing crashes and increasing
product sales.
GM is meeting the government requirement for passive restraints by
selectively installing automatic lap/shoulder belts or driver supplemental
inflatable restraints (air bags) on all passenger cars. The driver-side air
bag concept has been approved for all remaining passenger cars, light-duty
trucks, and vans during the 1994 through 1997 model years. Current plans call
for a phase-in of the passenger-side air bag in these same cars from the 1994
through 1999 model years.
A new government requirement for passenger car side impact protection was
issued in 1990 affecting future model year cars. A phase-in of the new
requirement began September 1, 1993. The NHTSA will propose that dynamic side
impact protection requirements be extended to light-duty trucks and vans. If
a final rule is promulgated, side structure and interior trim designs of
future models will be affected.
Regarding GM light-duty trucks and vans, a final rule required center
high-mounted stop lamps by September 1, 1993. Also, head restraints are now
required on all light-duty trucks and vans.
A final rule covering roof crush resistance has also been issued by the
NHTSA for light-duty trucks and vans that is more stringent than for passenger
cars. This rule addresses vehicles with a GVWR less than or equal to 6,000 lb
and will be effective September 1, 1994.
A final rule has been issued by NHSTA that will extend the passenger car
automatic restraint requirements to light-duty trucks and vans on a phased-in
basis beginning September 1, 1994.
Lastly, a final rule has been issued by NHSTA that will require air bags
be the only means used to meet the automatic restraint requirements for
passenger cars and light-duty trucks and vans on a phased-in basis beginning
September 1, 1996.
The NHTSA currently is considering the effects of fuel system crash
integrity requirements of the Federal Motor Vehicle Safety Standard (FMVSS)
(301). If any of the considerations ultimately are adopted as final rules,
some undetermined redesign, cost, and weight increase could be expected for
most of GM's vehicles. See Item 3, Legal Proceedings, Other Matters.
I-6
9
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
With the passage of the Anti-Car Theft Act of 1992, implementation costs
for the 1993 calendar year will affect approximately 22 passenger car assembly
plants and 9 light-duty truck plants. For the affected truck plants, the
major expenditures will be for new label printer installations and additional
stamping equipment. Both passenger car and truck plants affected will
probably require some extra tooling to accommodate full VIN-stamping on the
frame of each vehicle and noise-pollution reduction facilities to alleviate
noise associated with VIN-stamping operations.
A bill has been recently introduced into Congress by Representative
Danforth that changes the current Federal bumper impact requirement from 2.5
mph to 5 mph. The bill also calls for labeling that defines bumper
performance. This bill may have an effect on future GM products that are
designed to meet the existing FMVSS requirements. Additionally, performance
labeling may cause additional testing that will lead to increased costs.
Automotive Fuel Economy
The Energy Policy and Conservation Act passed in 1975 provided for
production-weighted average fuel economy standards for passenger cars for 1978
and thereafter. Based on EPA combined city-highway test data, the General
Motors 1993 model year domestic passenger car fleet is projected to attain a
Corporate Average Fuel Economy (CAFE) of 27.4 miles per gallon (mpg) versus
the standard of 27.5 mpg. The CAFE estimate for 1994 model year passenger
cars is projected at 27.4 mpg versus the standard of 27.5 mpg. The projected
shortfalls for 1993 and 1994 will be offset by credits projected to be earned
in future model years.
Fuel economy standards for light-duty trucks became effective in 1979.
General Motors' CAFE fleet average for the 1993 model year is 20.2 mpg versus
the standard of 20.4 mpg. For the 1994 model year, GM's estimated fleet
average CAFE is projected to be 19.9 mpg versus a standard of 20.5 mpg. The
shortfall for 1993 will be offset by credits earned in 1991. The projected
shortfall for 1994 will be partially offset by credits earned in 1991 and
1992. It is expected that the remaining shortfall will be offset by credits
from future model years. However, the exact amount cannot be determined
because standards have not been set beyond 1995.
GM's ability to meet increased CAFE standards is contingent on various
future economic, consumer, legislative, and regulatory factors that GM cannot
control and cannot predict with certainty. If GM could not comply with any
new CAFE standards, GM could be subject to sizable civil penalties and could
have to close plants or severely restrict product offerings to remain in
compliance.
Seasonal Nature of Business
In the automotive business, there are retail sales fluctuations of a
seasonal nature, so that production varies from month to month. In addition,
the changeover period related to the annual new model introduction has
traditionally occurred in the third quarter of each year. For this reason,
third quarter operating results are, in general, less favorable than those in
the other three quarters of the year, depending on the magnitude of the
changeover needed to commence production of new models incorporating, for
example, design modifications related to more fuel-efficient vehicle
packaging, stricter government standards for safety and emission controls, and
consumer-oriented improvements in performance, comfort, convenience, and
style.
Segment Reporting Data
Industry segment and geographic segment data for 1993, 1992, and 1991 are
summarized in Note 17 of Notes to Financial Statements in Part II.
******
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10
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
The Registrant makes no attempt herein to predict the future trend of its
business and earnings or the effect thereon of the results of changes in
general economic, industrial, regulatory, and international conditions.
ITEM 2. PROPERTIES
The Corporation, excluding General Motors Acceptance Corporation, has 292
locations operating in 35 states and 158 cities in the United States. Of
these, 25 are engaged in the final assembly of GM cars and trucks; 26 are
service parts operations responsible for distribution or warehousing; 13 are
associated with Electronic Data Systems Corporation as large information
processing centers; 33 major plants, offices, and research facilities relate
to the operations of Hughes Aircraft Company; and the remainder are offices or
involved primarily in the testing of vehicles or the manufacture of automotive
components and power products. In addition, the Corporation has 20 locations
in Canada and assembly, manufacturing, distribution, or warehousing operations
in 51 other countries, including equity interests in associated companies
which conduct assembly, manufacturing, or distribution operations. The major
facilities outside the United States and Canada, which are principally vehicle
manufacturing and assembly operations, are located in Germany, the United
Kingdom, Brazil, Mexico, Austria, Belgium, and Spain.
Most facilities are owned by the Corporation or its subsidiaries. Leased
properties consist primarily of warehouses and administration, engineering,
and sales offices. The leases for warehouses generally provide for an initial
period of five years and contain renewal options. Leases for sales offices
are generally for shorter periods.
Properties of the Registrant and its subsidiaries include facilities
which, in the opinion of management, are suitable and adequate for the
manufacture, assembly, and distribution of their products.
Additional information regarding worldwide expenditures for plants and
equipment is presented under Management's Discussion and Analysis in Part II.
ITEM 3. LEGAL PROCEEDINGS
Material pending legal proceedings, other than ordinary routine litigation
incidental to the business, to which the Corporation is a party as of December
31, 1993 are summarized on the following pages. Reference should also be made
to Note 19 of notes to financial statements in Part II.
Environmental Matters
On February 19, 1991, a complaint was filed in the Superior Court of
Connecticut by the Connecticut Commissioner of Environmental Protection
alleging that the plant in Bristol, Connecticut operated by GM's Delco Moraine
NDH Division (now part of the Delco Chassis Division) had violated
Connecticut's hazardous waste regulations in connection with its inspection,
recordkeeping, and remediation of a spill of chromic acid at the plant site.
The complaint seeks penalties of up to $25,000 per day for a period commencing
sometime prior to April 1989 and running through November 1990. GM contends
that its inspection, recordkeeping, and remediation practices in relation to
the spill complied with applicable rules and regulations.
* *
On March 12, 1991, the Region II office of the Environmental Protection
Agency (EPA) issued a Civil Administrative Complaint alleging that the plant
operated by GM's Central Foundry Division (now part of the GM Powertrain
Division) of the Corporation in Massena, New York had improperly disposed of
polychlorinated biphenyl contaminated sludge during the period February 1984
through October 1987. The complaint seeks a fine of $14,176,000. GM believes
that its disposal practices at Massena were in general compliance with
applicable rules and regulations.
* *
I-8
11
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
On March 1, 1993, the U.S. EPA Region V issued a civil administrative
complaint alleging that stormwater from the Chevrolet-Pontiac-GM of Canada
Group's Pontiac Fiero plant in Pontiac, Michigan exceeded the facility's
National Pollutant Discharge System Permit from May 1989 through May 1992.
The EPA complaint, as amended, cites the Corporation for 94 exceedances of
copper, lead, and zinc and is seeking $125,000 in penalties. There has been
no production at the Fiero Plant since August 1988. The Corporation believes
that the very low concentrations of metals found in the stormwater during the
specified time period occurred as a result of acid rain dissolving metal from
the gutters and roof. General Motors is contesting the allegations and has
requested a hearing.
* *
On March 26, 1993, the Region V office of the EPA issued a Civil
Administration Complaint against the Corporation alleging that 65 petroleum
and hazardous substance underground storage tanks (USTs) which it has operated
at its Technical Center in Warren, Michigan have been in violation of certain
of the EPA UST regulations. The EPA has proposed a civil penalty of $267,447.
Based upon its current evaluation of this matter, General Motors believes that
the operations cited by the EPA's complaint have been and remain in
substantial compliance with applicable UST regulations.
* *
In March 1993, the Michigan Department of National Resources (MDNR)
notified the Corporation's Powertrain Division (PD) that MDNR was making a
referral to the Michigan Attorney General for resolution of allegations by
MDNR that a PD facility in Saginaw, Michigan had failed to conduct a timely
environmental investigation to MDNR's satisfaction of a landfill and certain
other areas at the facility's property, and that PD's on-site water recycling
basins were improperly discharging contaminants to the groundwater and the
Saginaw River.
* *
Other Matters
U.S. Government contracts held by the Corporation and its subsidiaries are
subject to termination by the U.S. Government either for its convenience or
for default by the contractor. The costs recovered for terminations for
convenience do not always fully reimburse the contractor, and the profit or
fee received by the contractor may be lower than that which it had expected
for the portion of the contract performed. In cases of termination for
default, normal contract remedies generally apply. In addition, the U.S.
Government has broad discretion to suspend or debar a contractor from engaging
in new government business, including discretion as to the period of
suspension and activities affected. A contractor may be debarred based on a
conviction or civil judgment involving certain offenses, including fraud in
connection with obtaining or performing a public contract, or subcontract
thereunder, and may be suspended if indicted for such an offense or if there
is other adequate evidence that such an offense has been committed. Like
other government contractors, GM and its subsidiaries are subject to civil
audits and criminal investigations relating to their contracting activity.
* *
Hughes is cooperating with Federal authorities conducting a grand jury
investigation in Boston, Massachusetts relating to the circumstances behind
the delivery and the quality of certain components of two missile guidance
systems. Hughes has been advised that it is a target of the investigation.
Hughes has conducted its own review of the matter.
* *
I-9
12
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
In September 1973, Hughes filed suit against the U.S. Government in the
U.S. Court of Claims seeking reasonable and entire compensation for the
unauthorized manufacture or use by the United States of the invention claimed
in a Hughes patent (the "Williams Patent") covering "Velocity Control and
Orientation of a Spin Stabilized Body," principally satellites. In late 1983,
the United States Court of Appeals for the Federal Circuit (the U.S. Court
with appellate jurisdiction for patent cases) ruled that the Williams Patent
was valid and that the Government had infringed that patent. The compensation
which Hughes is entitled to recover as a result of the Government's
infringement is now being determined by the U.S. Court of Claims,
as well as whether additional U.S. Government satellites also infringe.
The trial concluded in December 1988. Subsequently, both Hughes and the
Government sought and obtained discovery and additional court hearings on
various issues. At the latest hearing, which concluded January 24, 1991,
Hughes introduced evidence that additional satellites should be added to the
royalty base. Hughes contends that its recovery should be calculated in
accordance with either of two methods for computing delay compensation and
introduced evidence to support an award of approximately $4.8 billion or $1.5
billion depending upon the methods used. The Government sought to demonstrate
to the Court that any damages awarded to Hughes in this case should not exceed
$20-30 million. Based upon the advice of counsel, Hughes believes that its
recovery will be substantially in excess of that amount; however, Hughes is
not able to predict what the ultimate recovery will actually be. In August
1993, the Court determined that approximately $4 billion in satellite
purchases infringed the patent. The Court must still determine an appropriate
royalty rate and "delay compensation" to apply for the infringing sales. The
Court has indicated that a decision on these remaining issues may be expected
sometime in 1994. It is anticipated that thereafter the Government will
endeavor to exhaust all possible appeal rights while Hughes will resist such
efforts and seek to recover the judgment as promptly as possible. It is not
possible to reasonably estimate when the decision will actually be rendered or
the duration of the Government's appeal efforts.
* *
On January 9, 1992, Electronic Data Systems Corporation, a wholly owned
subsidiary of General Motors Corporation, filed a lawsuit against Computer
Associates International, Inc. ("Computer Associates"), in the United States
District Court for the Northern District of Texas, alleging principally breach
of contract, breach of the duty of good faith and fair dealing, misuse of
copyright, fraud, interference with business relations, and violations of anti-
trust laws. EDS is requesting unspecified damages and injunctive relief. On
January 29, 1992, Computer Associates filed its answer, denying the claims of
EDS and seeking dismissal of certain claims. On that date, Computer
Associates filed counterclaims alleging principally breach of contract, breach
of the duty of good faith and fair dealing, copyright infringement, fraud,
interference with business relations, and misappropriation of trade secrets.
Under various counts, Computer Associates is asserting separate compensatory
damage claims which individually range from $100 million to $1.3 billion, and
separate exemplary damage claims which individually range from $200 million to
$1.3 billion and injunctive relief. In addition, on January 29, 1992,
Computer Associates filed a separate lawsuit against General Motors in New
York Supreme Court, Nassau County, alleging breach of contract and breach of
the duty of good faith and fair dealing based on essentially the same factual
allegations, and claiming damages of not less than $250 million on each of the
two counts. EDS believes the amount of damages asserted in the claims against
General Motors are duplicative of and included within Computer Associates'
counterclaim against EDS. On May 6, 1992, the court granted General Motors
I-10
13
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
motion to dismiss the action on procedural grounds. On October 9, 1992,
Computer Associates, and two of its wholly owned subsidiaries, On-Line
Software International, Inc. and Pansophic Systems, Inc., filed a lawsuit
against General Motors and EDS in New York Supreme Court, Suffolk County,
seeking a declaratory judgment as to their ongoing rights and obligations with
respect to General Motors and EDS under two computer software licensing
agreements. On January 29, 1993, Computer Associates filed a stipulation
discontinuing the suit against General Motors. In the continuing suit against
EDS, the action was removed to the Federal Court for the Eastern District of
New York where it was dismissed.
Management of EDS believes that EDS has strong and meritorious defenses to
the claims asserted by Computer Associates. EDS intends to vigorously defend
against such claims and EDS intends to press for the relief sought in the
claims asserted by EDS against Computer Associates.
* *
On August 21, 1992, EDS filed a breach of contract suit against the State
of Florida (the "State") in the Circuit Court of the Second Judicial Circuit
in Leon County, Florida, seeking recovery under various counts of more than
$46 million in payment for unpaid computer equipment and information
technology services. The suit arises out of a 1989 contract entered into
between EDS and the Department of Health and Rehabilitative Services ("DHRS")
of the State of Florida under which EDS had agreed to provide an information
management system to the DHRS that would integrate its offices and computer
programs statewide. EDS completed the system and turned it over to the
Department in May 1992. On September 21, 1993, the State filed an Answer and
Counterclaims, alleging principally breach of contract and breach of warranty.
Under various counts, the State is requesting approximately $90 million in
damages and approximately $140 million in indemnification for potential
liability of the State to the Federal government. On October 13, 1993, the
Court granted EDS summary judgment on one of the computer equipment counts,
awarding EDS $17.5 million. However, on December 10, 1993, the Florida First
District Court of Appeals reversed that award and dismissed EDS' action and
the State's counterclaims on the grounds that EDS should have pursued remedies
under the dispute resolution clause in its contract with the State. EDS has
filed its claims with the DHRS contracting officer.
EDS management believes that it has strong and meritorious defenses to any
counterclaims which the State may have and intends to defend itself vigorously
while continuing to pursue recovery against the State under the claims which
it has filed.
* *
On August 7, 1992, Jerome Lemelson filed a patent infringement suit in the
U.S. District Court, District of Nevada, against General Motors Corporation,
Ford Motor Company (Ford) and Chrysler Corporation (Chrysler). The patents in
suit are alleged by Lemelson to cover bar coding techniques employed by the
respective defendants. In response, each of the defendants has denied
infringement, and General Motors and Chrysler have counterclaimed to have
these Lemelson patents held invalid (Ford is seeking to have such patents
declared invalid in a separate action). On August 31, 1992, GM filed suit
against Lemelson in the same court seeking a judgment that selected Lemelson
patents alleged by him to cover certain machine vision applications are
invalid and not infringed by General Motors. In response, on September 30,
1992, Lemelson filed a counterclaim charging GM with infringement of not only
the patents sued on by GM, but also other Lemelson patents alleged by him to
cover further machine vision applications, certain semi-conductor devices, and
the use of lasers in manufacturing. General Motors has denied infringement of
these additional Lemelson patents and has counterclaimed to have such patents
declared invalid. In each of the above-described lawsuits, Lemelson is
I-11
14
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
seeking an injunction and an unspecified amount of damages. Based upon
representations by Lemelson's counsel, the aggregate damages sought by
Lemelson may be material to GM. In the opinion of its counsel, GM's position
is meritorious in each of these litigations. GM has entered into a
"standstill" agreement with Lemelson pursuant to which dismissal without
prejudice of the Lemelson action against GM is now pending before the court.
Upon resolution of the Lemelson litigation against Ford and Chrysler, Lemelson
may reinstitute his suit against General Motors in a separate action. If
either Ford or Chrysler ultimately settle, the standstill agreement provides
that GM may settle with Lemelson on a proportionate basis.
* *
Several actions seeking compensatory and punitive damages in unspecified
amounts have been filed against Hughes Aircraft Company (Hughes) by plaintiffs
alleging that they suffered injuries as a result of the migration into the
Tucson, Arizona water supply of toxic substances that were disposed of at a
facility owned by the United States Government which Hughes operates under a
contract with the U.S. Air Force. These actions include a class action filed
in Arizona State Court, BAHRS, ET AL. V. HUGHES AIRCRAFT COMPANY, ET AL.
(Super. Ct. Pima County), an individual action filed on behalf of
approximately 500 plaintiffs in Federal District Court in ARIZONA, ACEVEDO, ET
AL. V. HUGHES AIRCRAFT COMPANY, and a class action filed in Federal District
Court in Arizona, LANIER V. HUGHES AIRCRAFT COMPANY. Other governmental and
private entities are known to have also been the source of toxic substances
which may have migrated into the Tucson water supply. Hughes believes that it
has strong defenses to the claims asserted against it and that it may have
claims for contribution against the other entities.
The facts alleged in these cases are similar to the facts alleged in the
previously reported action entitled VALENZUELA V. HUGHES AIRCRAFT COMPANY. As
previously reported, the VALENZUELA action was settled pursuant to an
agreement under which Hughes' principal insurers provided $70.7 million and
Hughes provided $13.8 million. At the time of such settlement, Hughes and its
insurers were litigating in the United States District Court in Arizona their
respective ultimate liability to one another for the amounts paid in the
VALENZUELA settlement. This litigation, entitled SMITH, ET AL. V. HUGHES
AIRCRAFT COMPANY, was commenced in 1988 by various insurers seeking a
declaratory judgment that the VALENZUELA claims are not covered under the
terms of the insurance policies issued to Hughes. These insurers have taken a
similar position with respect to the more recently filed actions. In
September 1991, the SMITH court entered summary judgment in favor of Hughes'
insurers who issued policies from 1971 to 1985, based upon "pollution
exclusions" contained in those policies. In September 1992, the SMITH court
entered summary judgment in favor of Hughes' pre-1971 insurers based upon
findings and conclusions that could have been adverse to Hughes with respect
to other claims and proceedings. Hughes appealed these rulings to the Ninth
Circuit Court of Appeals. In November 1993, the Ninth Circuit affirmed in
substantial part the District Court's summary judgment on the "pollution
exclusion" policies, but reversed the District Court's summary judgment on pre-
1971 policies. The Ninth Circuit remanded the case for further proceedings in
the District Court. On January 10, 1994, Hughes and the carriers each filed
petitions for rehearing with the Ninth Circuit.
Contracts under which Hughes has operated the Air Force facility contain
provisions under which indemnification from the Air Force may be provided for
certain liabilities which Hughes may incur in connection with its operation of
the facility to the extent such liabilities are not covered by insurance.
Hughes intends to prosecute all appropriate claims it may have for insurance
coverage and, if necessary, to pursue all appropriate claims for indemnif-
ication or contribution relating to the actions described above.
* *
I-12
15
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
In December 1992, the National Highway Traffic Safety Administration
(NHTSA), granting a petition previously filed by the Center for Auto Safety
and Public Citizen, opened an investigation to determine whether 1973-1987
model Chevrolet and GMC full-size pickup trucks contain a safety defect
resulting in an unreasonably high incidence of fuel-fed fires in side impact
collisions. NHTSA emphasized then and has repeated that granting the petition
does not indicate that the agency has determined that a safety-related defect
exists in these vehicles.
On April 9, 1993, NHTSA made an informal request of GM that it voluntarily
conduct a safety-related recall campaign on the vehicles. Although in its
April 9, 1993 letter, NHTSA stated that its Office of Defects Investigation
"believes that GM's fuel tank system in the subject vehicles contains a defect
that relates to motor vehicle safety, " it nevertheless stated that "this
recommendation to conduct a safety recall does not reflect a formal conclusion
by the agency, ... should not be confused with an Initial or Final
Determination of a safety defect pursuant to ... the National Traffic and
Motor Vehicle Safety Act, ... (and) should (not) be confused with a recall
order ..." A recall order can only be issued by the agency if it makes a
Final Determination (which it has not done in this case) that a defect exists
which presents an unreasonable risk to motor vehicle safety.
On April 30, 1993, in a written response to NHTSA's letter of April 9,
1993, General Motors stated that based upon its evaluation of the data which
NHTSA had then made available to GM as having been the basis for requesting
the voluntary recall in its letter, General Motors continued to believe that
its 1973-1987 pickup trucks are neither defective nor present an unreasonable
risk, and that consequently no safety recall of such trucks is warranted.
General Motors remains strongly of this view, and intends to press its
position vigorously while continuing to cooperate with NHTSA's investigative
efforts.
There are also pending individual product liability claims and lawsuits
involving allegations of defects in the design of such vehicles resulting in
fuel-fed fires following side impact collisions. GM intends to defend these
cases vigorously.
In addition to the NHTSA investigation and the product liability cases, 38
class actions were filed in state and Federal courts against the Corporation,
claiming that 1973-1987 model Chevrolet and GMC full-size pickup trucks are
defective because their fuel tanks are mounted below the cab and outside the
frame rails. 24 Federal court class actions were transferred to the Federal
court in Philadelphia, Pennsylvania by the Judicial Panel on Multidistrict
Litigation. In these actions, plaintiffs claimed that the fuel tank locations
make the vehicles unreasonably susceptible to fuel-fed fires following side
impact collisions. Plaintiffs alleged breach of contract and warranty,
negligence, fraud, and negligent misrepresentation, as well as violation of
various state consumer protection laws. The lawsuits seek compensatory and
punitive damages and injunctions requiring notice to owners, repairs,
retrofitting, and "disgorgement" of revenues.
In July 1993, a nationwide class action settlement of the C/K pickup truck
class actions was submitted to the Pennsylvania Federal court and a state
court in Texas. After notice of the proposed settlement was sent to 6.3
million registered owners, the Pennsylvania and Texas courts held hearings to
determine if the settlement was fair, reasonable and adequate. Both courts
subsequently entered orders giving final approval of the settlement. Certain
objectors have filed appeals of those approvals in the U.S. Third Circuit
Court of Appeals and a Texas state Court of Appeals. Those appeals are
pending.
I-13
16
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
Additionally, on October 14, 1993, CROWDER, ET AL V. GENERAL MOTORS
CORPORATION was filed as a purported class action in the Federal court in
Dallas, Texas on behalf of owners of full-size pickup trucks and chassis cabs
covered by the class action settlements who elected to be excluded from the
settlements or purchased their trucks used after July 19, 1993. The
allegations are essentially the same as those made in the other class actions.
No determination has been made that the case may proceed as a class action.
GM intends to vigorously defend the case and oppose certification of a class.
The settlement provides for owners of 1973-1986 model C/K and 1987-1991
R/V pickup trucks and chassis cabs as of July 19, 1993, the date the
settlement was announced, to receive $1,000 Certificates from General Motors
which may be used in connection with the purchase of any new GMC Truck or
Chevrolet light-duty truck. The Certificates can be used in combination with
other GM and GMAC incentive programs during the 15-month period after eligible
owners are notified of the procedures for obtaining their Certificates. The
Certificates are redeemable by the eligible owner or immediate family members
residing at the same address. Within the original redemption period,
Certificates also can be transferred at face value with the truck. Original
Certificate holders also can elect to exchange the $1,000 Certificate for a
non-transferable $500 Certificate issuable in the name of another person, such
certificate being redeemable only toward the purchase of a new C/K pickup
truck, and not being usable in combination with other incentives offered by GM
or GMAC. Both the $1,000 and $500 Certificates can only be used at authorized
Chevrolet and GMC Truck dealers and cannot be redeemed for cash or any other
consideration. The Corporation believes that the settlement will not have a
material adverse impact on its operations or financial condition.
* *
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable (N/A).
* * *
I-14
17
GENERAL MOTORS CORPORATION PART II
AND SUBSIDIARIES
CROSS REFERENCE SHEET
10-K Item Page (and caption) in Part II
-------------------------------------- ----------------------------------
5. Market for Registrant's Common
Equity and Related Stockholder
Matters
(a) Market information.............. II-46 - Selected Quarterly Data
(b) Approximate number of holders
of common stocks................ II-48 - Selected Quarterly Data
(c) Dividends
(1) History................... II-46 - Selected Quarterly Data
(2) Policy.................... II-23 - Dividends on Common Stocks
6. Selected Financial Data............... II-49 - Selected Financial Data
7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... II-52 - Management's Discussion
and Analysis
8. Financial Statements and Supplementary
Data................................ II-2 - Responsibilities for
Consolidated Financial
Statements
II-3 - Independent Auditors'
Report
II-4 - Statement of Consolidated
Operations for the Years
Ended December 31,
1993, l992, and l991
II-6 - Consolidated Balance
Sheet, December 31, 1993
and 1992
II-8 - Statement of Consolidated
Cash Flows for the Years
Ended December 3l, 1993,
1992, and 1991
II-10 - Notes to Financial
Statements
II-44 - Selected Quarterly Data
9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure................ None
II-1
18
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
RESPONSIBILITIES FOR CONSOLIDATED FINANCIAL STATEMENTS
The following consolidated financial statements of General Motors Corporation
and subsidiaries were prepared by management which is responsible for their
integrity and objectivity. The statements have been prepared in conformity
with generally accepted accounting principles and, as such, include amounts
based on judgments of management. Financial information elsewhere in Part II
is consistent with that in the consolidated financial statements.
Management is further responsible for maintaining a system of internal
accounting controls, designed to provide reasonable assurance that the books
and records reflect the transactions of the companies and that its established
policies and procedures are carefully followed. From a stockholder's point of
view, perhaps the most important feature in the system of control is that it
is continually reviewed for its effectiveness and is augmented by written
policies and guidelines, the careful selection and training of qualified
personnel, and a strong program of internal audit.
Deloitte & Touche, an independent auditing firm, is engaged to audit the
consolidated financial statements of General Motors Corporation and its
subsidiaries and issue reports thereon. The audit is conducted in accordance
with generally accepted auditing standards which comprehend a review of
internal accounting controls and a test of transactions. The Independent
Auditors' Report appears on the next page.
The Board of Directors, through the Audit Committee (composed entirely of
non-employee Directors), is responsible for assuring that management fulfills
its responsibilities in the preparation of the consolidated financial
statements. The Committee selects the independent auditors annually in
advance of the Annual Meeting of Stockholders and submits the selection for
ratification at the Meeting. In addition, the Committee reviews the scope of
the audits and the accounting principles being applied in financial reporting.
The independent auditors, representatives of management, and the internal
auditors meet regularly (separately and jointly) with the Committee to review
the activities of each, to ensure that each is properly discharging its
responsibilities, and to assess the effectiveness of the system of internal
accounting controls. It is management's conclusion that the system of
internal accounting controls at December 31, 1993 provides reasonable
assurance that the books and records reflect the transactions of the companies
and that its established policies and procedures are complied with. To ensure
complete independence, Deloitte & Touche has full and free access to meet with
the Committee, without management representatives present, to discuss the
results of the audit, the adequacy of internal accounting controls, and the
quality of the financial reporting.
s/John F. Smith, Jr. s/G. Richard Wagoner, Jr.
John F. Smith, Jr. G. Richard Wagoner, Jr.
Chief Executive Officer Chief Financial Officer
and President
II-2
19
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
General Motors Corporation, its Directors, and Stockholders:
We have audited the Consolidated Balance Sheets of General Motors Corporation
and subsidiaries as of December 31, 1993 and 1992 and the related Statements
of Consolidated Operations and Consolidated Cash Flows for each of the three
years in the period ended December 31, 1993. Our audits also included the
financial statement schedules listed at Item 14. These financial statements
and financial statement schedules are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of General Motors Corporation and
subsidiaries at December 31, 1993 and 1992 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1993 in conformity with generally accepted accounting principles. Also,
in our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
As discussed in Notes 1 and 5 to the financial statements, effective
January 1, 1992 the Corporation changed its method of accounting for
postretirement benefits other than pensions and its revenue recognition policy
for a subsidiary. Also, as discussed in Note 1, effective January 1, 1991 the
Corporation changed its methods of accounting for general purpose spare parts
and income taxes.
s/DELOITTE & TOUCHE
DELOITTE & TOUCHE
Detroit, Michigan
February 9, l994
II-3
20
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES STATEMENT OF CONSOLIDATED OPERATIONS
Years Ended December 31,
-------------------------------------
1993 1992 1991
- ------------------------------------------------------------------------------
(Dollars in Millions)
Net Sales and Revenues (Note 1)
Manufactured products $119,686.3 $113,323.9 $105,025.9
Financial services 8,752.0 10,402.1 11,153.5
Computer systems services 5,183.6 4,806.7 3,666.3
Other income (Note 2) 4,597.6 3,709.5 3,263.1
- ------------------------------------------------------------------------------
Total Net Sales and Revenues 138,219.5 132,242.2 123,108.8
- ------------------------------------------------------------------------------
Costs and Expenses
Cost of sales and other operating charges,
exclusive of items listed below 106,421.9 105,248.4 97,550.7
Selling, general, and administrative
expenses 11,531.9 11,232.2 10,769.4
Interest expense (Note 14) 5,673.7 7,096.8 8,296.6
Depreciation of real estate, plants, and
equipment (Note 1) 6,576.3 6,144.8 5,684.9
Amortization of special tools (Note 1) 2,535.3 2,504.0 1,819.5
Amortization of intangible assets (Note 1) 330.4 310.2 411.4
Other deductions (Note 2) 1,624.7 1,801.9 1,647.8
Special provision for scheduled plant
closings and other restructurings
(Note 6) 950.0 1,237.0 2,820.8
- ------------------------------------------------------------------------------
Total Costs and Expenses 135,644.2 135,575.3 129,001.1
- ------------------------------------------------------------------------------
Income (Loss) before Income Taxes 2,575.3 (3,333.1) (5,892.3)
United States, foreign, and other income
taxes (credit) (Note 8) 109.5 (712.5) (900.3)
- ------------------------------------------------------------------------------
Income (Loss) before cumulative effect of
accounting changes 2,465.8 (2,620.6) (4,992.0)
Cumulative effect of accounting
changes (Notes 1 and 5) - (20,877.7) 539.2
- ------------------------------------------------------------------------------
Net Income (Loss) 2,465.8 (23,498.3) (4,452.8)
Dividends and accumulation of redemption
value on preferred and preference stocks
(Note 16) 356.8 306.3 70.4
- ------------------------------------------------------------------------------
Income (Loss) on Common Stocks $2,109.0 ($23,804.6) ($4,523.2)
==============================================================================
Earnings (Loss) Attributable to Common Stocks
$1-2/3 par value before cumulative
effect of accounting changes $1,537.3 ($3,220.6) ($5,384.6)
Cumulative effect of accounting
changes - (20,720.1) 533.2
- ------------------------------------------------------------------------------
Net earnings (loss) attributable
to $1-2/3 par value $1,537.3 ($23,940.7) ($4,851.4)
- ------------------------------------------------------------------------------
Certain amounts for 1992 and 1991 have been reclassified to conform with 1993
classifications.
Reference should be made to the Notes to Financial Statements.
II-4
21
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
Years Ended December 31,
--------------------------------
1993 1992 1991
- ------------------------------------------------------------------------------
(Dollars in Millions
Except Per Share Amounts)
Earnings (Loss) Attributable to Common Stocks (concluded)
Class E before cumulative effect of
accounting change $367.2 $278.4 $229.7
Cumulative effect of accounting change - - (6.1)
----------------------------------------------------------------------------
Net earnings attributable to
Class E $367.2 $278.4 $223.6
----------------------------------------------------------------------------
Class H before cumulative effect of
accounting changes $204.5 $ 15.3 $ 92.5
Cumulative effect of accounting changes - (157.6) 12.1
----------------------------------------------------------------------------
Net earnings (loss) attributable to
Class H $204.5 ($142.3) $104.6
----------------------------------------------------------------------------
Average number of shares of common
stocks outstanding (in millions)
$1-2/3 par value 710.2 670.5 614.6
Class E 243.0 209.1 195.3
Class H 88.6 75.3 73.7
Earnings (Loss) Per Share Attributable
to Common Stocks (Note 9)
$1-2/3 par value before cumulative
effect of accounting changes $2.13 ($4.85) ($8.85)
Cumulative effect of accounting changes - (33.43) 0.88
----------------------------------------------------------------------------
Net earnings (loss) attributable to
$1-2/3 par value $2.13 ($38.28) ($7.97)
----------------------------------------------------------------------------
Class E before cumulative effect
of accounting change $1.51 $1.33 $1.17
Cumulative effect of accounting change - - (0.03)
----------------------------------------------------------------------------
Net earnings attributable to
Class E $1.51 $1.33 $1.14
----------------------------------------------------------------------------
Class H before cumulative effect
of accounting changes $2.30 ($0.11) $1.26
Cumulative effect of accounting changes - (2.18) 0.13
----------------------------------------------------------------------------
Net earnings (loss) attributable to
Class H $2.30 ($2.29) $1.39
- ------------------------------------------------------------------------------
Reference should be made to the Notes to Financial Statements.
II-5
22
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
December 31,
-----------------------
ASSETS 1993 1992
- ------------------------------------------------------------------------------
(Dollars in Millions)
Cash and cash equivalents $13,790.5 $11,078.6
Other marketable securities 4,172.2 4,029.1
- ------------------------------------------------------------------------------
Total cash and marketable securities (Note 10) 17,962.7 15,107.7
- ------------------------------------------------------------------------------
Finance receivables - net (Note 11) 53,874.7 66,314.1
- ------------------------------------------------------------------------------
Accounts and notes receivable (less allowances) 6,389.2 6,476.7
- ------------------------------------------------------------------------------
Inventories (less allowances) (Note 1) 8,615.1 9,343.6
- ------------------------------------------------------------------------------
Contracts in process (less advances and progress
payments of $2,739.2 and $4,026.4) (Note 1) 2,376.8 2,456.4
- ------------------------------------------------------------------------------
Net equipment on operating leases (less accumulated
depreciation of $4,579.6 and $3,987.6) 13,095.3 11,286.9
- ------------------------------------------------------------------------------
Deferred income taxes (Note 8) 20,798.1 18,583.3
- ------------------------------------------------------------------------------
Other assets (less allowances) 17,757.3 15,762.1
- ------------------------------------------------------------------------------
Property (Note 1)
Real estate, plants, and equipment -
at cost (Note 13) 67,966.4 68,833.6
Less accumulated depreciation (Note 13) 41,725.5 41,462.5
- ------------------------------------------------------------------------------
Net real estate, plants, and equipment 26,240.9 27,371.1
Special tools - at cost (less amortization) 7,983.9 7,979.1
- ------------------------------------------------------------------------------
Total property 34,224.8 35,350.2
- ------------------------------------------------------------------------------
Intangible assets - at cost (less
amortization) (Notes 1 and 4) 13,106.9 9,515.0
- ------------------------------------------------------------------------------
Total Assets $188,200.9 $190,196.0
==============================================================================
Certain amounts for 1992 have been reclassified to conform with 1993
classifications.
Reference should be made to the Notes to Financial Statements.
II-6
23
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
December 31,
------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1993 1992
- ------------------------------------------------------------------------------
(Dollars in Millions
Except Per Share Amounts)
Liabilities
Accounts payable (principally trade) $10,276.5 $9,678.4
Notes and loans payable (Note 14) 70,441.2 82,592.3
United States, foreign, and other income taxes -
deferred and payable (Note 8) 2,409.3 3,140.1
Postretirement benefits other than pensions (Note 5) 37,920.0 35,550.7
Pensions (Note 4) 22,631.6 13,756.2
Other liabilities and deferred credits (Note 15) 38,474.8 38,487.7
- ------------------------------------------------------------------------------
Total Liabilities 182,153.4 183,205.4
- ------------------------------------------------------------------------------
Stocks Subject to Repurchase (Note 16) 450.0 765.0
- ------------------------------------------------------------------------------
Stockholders' Equity (Notes 3 and 16)
Preferred stocks - 234.4
Preference stocks 4.2 4.5
Common stocks
$1-2/3 par value (issued, 720,105,471
and 706,831,567 shares) 1,200.2 1,178.1
Class E (issued, 263,089,320 and
242,168,653 shares) 26.3 24.2
Class H (issued, 75,705,433 and
70,240,927 shares) 7.6 7.0
Capital surplus (principally additional
paid-in capital) 12,003.4 10,971.2
Accumulated deficit (2,002.9) (3,354.2)
- ------------------------------------------------------------------------------
Subtotal 11,238.8 9,065.2
Minimum pension liability adjustment (Note 4) (5,311.2) (2,925.3)
Accumulated foreign currency translation
adjustments and net unrealized gains
(losses) on marketable equity securities (330.1) 85.7
- ------------------------------------------------------------------------------
Total Stockholders' Equity 5,597.5 6,225.6
- ------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $188,200.9 $190,196.0
==============================================================================
Certain amounts for 1992 have been reclassified to conform with 1993 classi
fications.
Reference should be made to the Notes to Financial Statements.
II-7
24
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES STATEMENT OF CONSOLIDATED CASH FLOWS
Years Ended December 31,
----------------------------------
1993 1992 1991
- ------------------------------------------------------------------------------
(Dollars in Millions)
Cash Flows from Operating Activities
Income (Loss) before cumulative effect
of accounting changes $2,465.8 ($2,620.6) ($4,992.0)
Adjustments to reconcile income (loss)
before cumulative effect of accounting
changes to net cash provided by
operating activities
Depreciation of real estate, plants,
and equipment 3,682.7 3,646.3 3,719.8
Depreciation of equipment on
operating leases 2,893.6 2,498.5 1,965.1
Amortization of special tools 2,535.3 2,504.0 1,819.5
Amortization of intangible assets 330.4 310.2 411.4
Amortization of discount and issuance
costs on debt issues 90.5 118.1 194.4
Provision for financing losses 300.8 371.0 1,047.9
Special provision for scheduled plant
closings and other restructurings 950.0 1,237.0 2,820.8
Provision for inventory allowances 44.1 28.5 40.1
Pension expense, net of cash
contributions (1,548.2) 273.4 1,167.7
Pre-tax (gain) loss on sales of
various assets 305.6 (162.8) (610.3)
Write-down of investment in National
Car Rental System Inc. - 813.2 -
Provision for ongoing postretirement
benefits other than pensions,
net of cash payments 2,396.7 2,198.8 -
Origination/purchase of mortgage loans(21,583.7) (17,232.9) (10,311.9)
Proceeds on sale of mortgage loans 22,309.5 16,859.0 10,486.9
Change in other investments,
miscellaneous assets, deferred
credits, etc. 249.6 (298.7) (1,034.8)
Proceeds from sale of trade
receivables - - 349.3
Change in other operating assets and
liabilities
Accounts receivable (480.9) 34.7 (1,067.6)
Inventories* 240.3 886.4 (310.4)
Prepaid expense and other
deferred charges 60.2 (399.3) 129.0
Deferred taxes and income
taxes payable* (1,512.8) (2,131.8) (4,082.6)
Other liabilities* (189.3) 1,181.3 3,736.5
Other* 1,115.6 (123.4) 1,019.7
- ------------------------------------------------------------------------------
Net Cash Provided by Operating Activities $14,655.8 $9,990.9 $6,498.5
- ------------------------------------------------------------------------------
Certain amounts for 1992 and 1991 have been reclassified to conform with 1993
classifications.
*Excluding effect of accounting changes.
Reference should be made to the Notes to Financial Statements.
II-8
25
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
Years Ended December 31,
------------------------------------
1993 1992 1991
- ------------------------------------------------------------------------------
(Dollars in Millions)
Cash Flows from Investing Activities
Investment in companies, net of
cash acquired ($232.4) ($134.7) ($779.1)
Expenditures for real estate, plants,
and equipment (3,822.1) (4,336.7) (4,255.1)
Expenditures for special tools (2,648.6) (2,252.9) (2,956.8)
Proceeds from disposals of real estate,
plants, and equipment 534.9 229.0 772.8
Proceeds from sale and leaseback of
capital assets - 654.9 954.1
Proceeds from the sale of various assets 231.5 162.8 -
Change in other investing assets
Investments in other marketable
securities - acquisitions (13,545.4) (14,408.8) (13,377.9)
Investments in other marketable
securities - liquidations 13,377.0 14,129.3 13,725.0
Finance receivables - acquisitions (103,396.3) (120,829.8) (108,268.4)
Finance receivables -
liquidations 92,808.6 119,453.1 112,682.4
Finance receivables - other 9,068.0 1,895.5 120.9
Proceeds from sales of finance
receivables 13,072.2 11,201.8 2,926.9
Notes receivable (102.3) 2.0 (48.8)
Operating leases - net (4,887.7) (4,222.7) (4,294.9)
- ------------------------------------------------------------------------------
Net Cash Provided by (Used in)
Investing Activities 457.4 1,542.8 (2,798.9)
- ------------------------------------------------------------------------------
Cash Flows from Financing Activities
Net decrease in short-term
loans payable (4,278.3) (11,512.1) (4,640.2)
Increase in long-term debt 9,634.7 18,886.4 15,826.0
Decrease in long-term debt (17,029.6) (17,907.0) (12,642.4)
Redemption of Series H
preference stocks - (243.9) (225.1)
Redemption of Howard Hughes Medical
Institute put options (315.0) (300.0) (600.0)
Repurchases of common and preferred stocks (265.6) (7.2) (10.4)
Proceeds from issuing common and
preference stocks 860.2 5,555.7 2,506.6
Cash dividends paid to stockholders (1,083.9) (1,376.8) (1,162.3)
- ------------------------------------------------------------------------------
Net Cash Used in Financing Activities (12,477.5) (6,904.9) (947.8)
- ------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents 76.2 58.1 (56.4)
- ------------------------------------------------------------------------------
Net increase in cash and
cash equivalents 2,711.9 4,686.9 2,695.4
Cash and cash equivalents
at beginning of the year 11,078.6 6,391.7 3,696.3
- ------------------------------------------------------------------------------
Cash and cash equivalents
at end of the year $13,790.5 $11,078.6 $6,391.7
==============================================================================
Certain amounts for 1992 and 1991 have been reclassified to conform with 1993
classifications.
Reference should be made to the Notes to Financial Statements.
II-9
26
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTE 1. Significant Accounting Policies
- ------------------------------------------------------------------------------
Principles of Consolidation
The consolidated financial statements include the accounts of General Motors
Corporation (General Motors, GM, or the Corporation) and domestic and foreign
subsidiaries which are more than 50% owned. General Motors' share of earnings
or losses of associates in which at least 20% of the voting securities is
owned is included in consolidated operating results under the equity method of
accounting (see Note 2).
Revenue Recognition
Sales are generally recorded by the Corporation when products are shipped to
independent dealers. Provisions for normal dealer sales incentives, returns
and allowances, and GM Card rebates are made at the time of vehicle sale.
Costs related to special sales incentive programs are recognized as reductions
to sales when determinable.
Certain sales under long-term contracts, primarily in the defense
business, are recorded using the percentage-of-completion (cost-to-cost)
method of accounting. Under this method, sales are recorded equivalent to
costs incurred plus a portion of the profit expected to be realized on the
contract, determined based on the ratio of costs incurred to estimated total
costs at completion.
Effective January 1, 1992, Hughes Aircraft Company (Hughes) changed its
revenue recognition policy for certain commercial businesses from the
percentage-of-completion (cost-to-cost) method commonly followed by defense
contractors to the units-of-delivery method which is more appropriate for a
commercial business. The unfavorable cumulative effect of this change was
$40.0 million, or $0.05 per share of $1-2/3 par value and $0.10 per share of
Class H common stock.
Profits expected to be realized on contracts are based on the
Corporation's estimates of total sales value and costs at completion. These
estimates are reviewed and revised periodically throughout the lives of the
contracts, and adjustments to profits resulting from such revisions are
recorded in the accounting period in which the revisions are made. Estimated
losses on contracts are recorded in the period in which they are identified.
In the case of finance receivables in which the face amount includes the
finance charge (principally retail financing), earnings are recorded in income
over the terms of the receivables using the interest method. On finance
receivables in which the face amount represents the principal (principally
wholesale, interest-bearing financing, and fleet leasing), the interest is
taken into income as earned. Certain loan origination costs are deferred and
amortized to financing revenue over the life of the related loans using the
interest method.
Insurance premiums are earned on a basis related to coverage provided over
the terms of the policies (principally based on anticipated loss experience).
Commission costs and premium taxes incurred in acquiring new business are
deferred and amortized over the terms of the related policies on the same
basis as premiums are earned. Acquisition costs associated with direct mail
programs are amortized over a three year period. The liability for losses and
claims includes a provision for unreported losses, based on past experience,
net of the estimated salvage and subrogation recoverable.
Provision for Financing Losses
An allowance for credit losses is generally established during the period in
which receivables are acquired and is maintained in amounts considered by
management to be appropriate in relation to receivables outstanding.
Losses arising from repossession of the collateral supporting doubtful
accounts are recognized upon repossession of the collateral. Repossessed
collateral is recorded at estimated realizable value in other assets and
adjustments to the related valuation allowance are included in operating
expense. Where repossession has not been effected, losses are charged off as
soon as it is determined that the collateral cannot be repossessed, generally
not more than 150 days after default.
II-10
27
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
Inventories
Effective January 1, 1991, accounting procedures were changed to include in
inventory general purpose spare parts previously charged directly to expense.
The effect of this change on 1991 earnings was a favorable adjustment of
$306.5 million, or $0.50 per share of $1-2/3 par value and $0.04 per share of
Class H common stock.
Inventories are stated generally at cost, which is not in excess of
market. The cost of substantially all U.S. inventories other than the
inventories of Saturn Corporation (Saturn) and GM Hughes Electronics
Corporation (GMHE) is determined by the last-in, first-out (LIFO) method. If
the first-in, first-out (FIFO) method of inventory valuation had been used for
inventories valued at LIFO cost, such inventories would have been $2,519.0
million higher at December 31, 1993 and $2,668.1 million higher at December
31, 1992. As a result of decreases in U.S. inventories, certain inventory
quantities carried at lower LIFO costs prevailing in prior years, as compared
with the costs of current purchases, were liquidated in 1993 and 1992. These
inventory adjustments improved pre-tax operating results by approximately
$134.4 million in 1993, primarily from the sale of the Allison Gas Turbine
Division (AGT), and $294.7 million in 1992. The cost of inventories outside
the U.S. and of Saturn and GMHE is determined generally by FIFO or average
cost methods.
Major Classes of Inventories
(Dollars in Millions) 1993 1992
- ------------------------------------------------------------------------------
Productive material, work in process, and supplies $4,671.9 $5,124.7
Finished product, service parts, etc. 3,943.2 4,218.9
- ------------------------------------------------------------------------------
Total $8,615.1 $9,343.6
- ------------------------------------------------------------------------------
Contracts in Process
Contracts in process are stated at costs incurred plus estimated profit, less
amounts billed to customers and advances and progress payments received.
Engineering, tooling, manufacturing, and applicable overhead costs, including
administrative, research and development, and selling expenses, are charged to
costs and expenses when they are incurred. Under certain contracts with the
United States Government, progress payments are received based on costs
incurred on the respective contracts. Title to the inventories relating to
such contracts (included in contracts in process) vests with the United States
Government.
Depreciation and Amortization
Depreciation is provided based on estimated useful lives of groups of property
generally using accelerated methods, which accumulate depreciation of
approximately two-thirds of the depreciable cost during the first half of the
estimated useful lives.
Expenditures for special tools are amortized over their estimated useful
lives. Amortization is applied directly to the asset account. Replacement of
special tools for reasons other than changes in products is charged directly
to cost of sales.
General Motors Acceptance Corporation (GMAC) provides for depreciation of
vehicles and other equipment on operating leases or in company use generally
on a straight-line basis. The difference between the net book value and the
proceeds of sale or salvage on items disposed of is included in income as a
charge against or credit to the provision for depreciation.
Income Taxes
Effective January 1, 1991, the Corporation adopted Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. The
favorable (unfavorable) cumulative effect at January 1, 1991 was $232.7
million, or $0.38 per share of $1-2/3 par value, ($0.03) per share of Class E,
and $0.09 per share of Class H common stock.
II-11
28
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
Provisions are made for estimated United States and foreign income taxes,
less available tax credits and deductions, which may be incurred on the
remittance of the Corporation's share of subsidiaries' undistributed earnings
not deemed to be indefinitely invested. Taxes have not been provided on
foreign subsidiaries' earnings which are deemed indefinitely reinvested of
approximately $5.2 billion and $6.5 billion at December 31, 1993 and 1992,
respectively. Quantification of the deferred tax liability, if any,
associated with indefinitely reinvested earnings is not practicable.
Product-Related Expenses
Expenditures for advertising and sales promotion and for other product-related
expenses are charged to costs and expenses as incurred; provisions for
estimated costs related to product warranty are made at the time the products
are sold. Expenditures for research and development are charged to expenses
as incurred and amounted to $6,029.9 million in 1993, $5,916.9 million in
1992, and $5,887.4 million in 1991.
Foreign Currency Translation
Exchange and translation gains (losses) included in consolidated operating
results in 1993, 1992, and 1991 amounted to $189.0 million, ($169.0) million,
and ($154.7) million, respectively.
Acquisitions and Intangible Assets
During 1992, the Corporation obtained a majority interest in National Car
Rental System Inc. (NCRS). The accounts of NCRS were consolidated effective
December 31, 1992.
Also in 1992, GMHE acquired the missile business of General Dynamics
Corporation (GD) in exchange for 21.5 million shares of Class H common stock
and cash of $62.8 million. The acquisition was accounted for as a purchase
and, accordingly, the operating results of such operations have been
consolidated since the acquisition date. The excess of the purchase price
over the fair value of the acquired net assets, and the pro forma effect on
1992 operating results, were not material.
Intangible assets arising from the acquisition of Hughes relate to patents
and related technology and other intangible assets and totaled $3,129.1
million and $3,252.9 million (net of accumulated amortization) at December 31,
1993 and 1992, respectively. The principal portion of such assets, which were
originally recorded in 1985, is being amortized over 40 years.
Intangible assets arising from the acquisition of Electronic Data Systems
Corporation (EDS) relate to goodwill and totaled approximately $29.8 million
and $65.5 million (net of accumulated amortization) at December 31, 1993 and
1992, respectively. Such assets, which were originally recorded in 1984, are
being amortized over 10 years.
For the purpose of determining earnings (loss) per share and amounts
available for dividends on common stocks, the amortization of intangible
assets arising from the acquisitions of Hughes and EDS is charged against
earnings (loss) attributable to $1-2/3 par value common stock. The resulting
effect on the 1993, 1992, and 1991 earnings (loss) attributable to $1-2/3 par
value common stock was a net credit (charge) of $149.8 million, ($827.0)
million, and $48.3 million, respectively, for the Hughes acquisition and $39.2
million, $61.5 million, and ($61.5) million, respectively, for the EDS
acquisition. Such amounts consist of the amortization of the intangible
assets arising from the acquisitions, the profit on intercompany transactions,
and the earnings (loss) of GMHE or EDS attributable to $1-2/3 par value common
stock.
Goodwill resulting from other past acquisitions is being amortized over
periods of eight to 40 years. Certain purchased software is being amortized
over five to eight years.
The intangible assets of GMAC, amounting to $360.9 million at December 31,
1993 and $514.9 million at December 31, 1992, primarily represent purchased
mortgage servicing rights which are being amortized over periods that
generally match future net mortgage servicing revenues, while goodwill is
being amortized on a straight-line basis over 40 years.
II-12
29
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
The Corporation periodically evaluates the recoverability of goodwill and
other intangible assets, by assessing whether the unamortized intangible asset
can be recovered over its remaining life through cash flows generated by
underlying tangible assets.
Financial Instruments
The Corporation is party to a variety of interest rate and foreign exchange
forward contracts (e.g., swap agreements) and options in the management of its
interest rate and foreign exchange exposure. The differential to be paid or
received under these agreements is accrued consistent with the terms of the
agreements and market interest rates.
In accordance with the requirements of SFAS No. 107, Disclosures about
Fair Value of Financial Instruments, the Corporation has provided fair value
estimates and information about valuation methodologies in various notes to
the consolidated financial statements. The estimated fair value amounts have
been determined using available market information or other appropriate
valuation methodologies. However, considerable judgment is required in
interpreting market data to develop estimates of fair value, so the estimates
are not necessarily indicative of the amounts that could be realized or would
be paid in a current market exchange. The effect of using different market
assumptions and/or estimation methodologies may be material to the estimated
fair value amounts.
Other assets reported at December 31, 1993 and 1992 include various
financial instruments (e.g., long-term receivables and real estate mortgages
held for resale) having a fair value in excess of reported book value of
approximately $290.8 million and $149.4 million, respectively (excluding
amounts related to GMAC receivable sales as discussed in Note 11), based on
discounted cash flows, market quotations, and other appropriate valuation
techniques. Also, certain financial instruments included in other liabilities
and deferred credits, such as certain payroll, tax, and interest obligations
have carrying values which approximate fair value.
Fair value information presented herein is based on information available
at December 31, 1993 and 1992. Although management is not aware of any
factors that would significantly affect the estimated fair value amounts, such
amounts have not been updated since those dates and, therefore, the current
estimates of fair value at dates subsequent to December 31, 1993 and 1992 may
differ significantly from the amounts presented herein.
Environmental Liabilities
The Corporation recognizes environmental liabilities when a loss is probable
and can be reasonably estimated. Such obligations are generally not subject
to insurance coverage.
Each environmental obligation is estimated by engineering and legal
specialists within the Corporation based on current law and existing
technologies. Such estimates are based primarily upon the estimated cost of
investigation and remediation required and the likelihood that other
potentially responsible parties ("PRPs") will be able to fulfill their
commitments at the sites where the Corporation may be jointly and severally
liable. At sites being addressed under the U.S. Comprehensive Environmental
Response, Compensation, and Liability Act or similar state laws (the
"Superfund Sites"), the Corporation typically recognizes an estimated
liability once it has been named as a PRP and has determined that such
estimated liability is probable. The Superfund Sites are primarily multi-PRP
sites not owned or operated by the Corporation. For the Corporation's
operating plants, an estimated liability is typically recognized either upon
completion of an environmental assessment or when the Corporation proposes an
agreement with the appropriate regulatory agency to take action at a site.
For closed or closing plants owned by the Corporation and properties being
sold, an estimated liability is typically recognized at the time the
restructuring charge is made or sale is recorded and is based on an
environmental assessment of the plant property.
The Corporation periodically evaluates and revises estimates for
environmental obligations based on expenditures against established reserves
and the availability of additional information.
II-13
30
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
Accounting Change
GMAC adopted SFAS No. 113, Accounting and Reporting for Reinsurance of
Short-Duration and Long-Duration Contracts, effective January 1, 1993 and the
resulting increase in the Corporation's assets and liabilities was not
material.
New Accounting Standard
In November 1992, the Financial Accounting Standards Board (FASB) issued
SFAS No. 112, Employers' Accounting for Postemployment Benefits, which the
Corporation will adopt effective January 1, 1994. The Standard requires
accrual of the costs of benefits provided to former or inactive employees
after employment, but before retirement. The Corporation expects the adoption
of this Standard in 1994 to result in an unfavorable cumulative effect
adjustment which will be material to the Corporation's results of operations
and the Corporation's stockholders' equity. The ongoing incremental effect of
this Standard is not expected to be material.
- ------------------------------------------------------------------------------
NOTE 2. Other Income and Other Deductions
- ------------------------------------------------------------------------------
(Dollars in Millions) 1993 1992 1991
- ------------------------------------------------------------------------------
Other Income
Insurance premiums $799.3 $768.9 $724.9
Interest 1,886.2 1,839.7 1,698.7
Equity in losses of associates, net (172.5) (508.3) (724.1)
Gain on the sale of Daewoo Motor Co. - 162.8 -
Claims, commissions, and grants 489.7 328.2 219.8
Gain on the sale of finance receivables 436.4 588.8 140.3
Mortgage servicing revenue 349.5 318.8 267.3
Other 809.0 210.6 936.2
- ------------------------------------------------------------------------------
Total other income $4,597.6 $3,709.5 $3,263.1
- ------------------------------------------------------------------------------
Interest reflects nonfinancing interest income. In 1991, an option to acquire
the New York office building of General Motors was exercised by an unrelated
party and resulted in a pre-tax gain to the Corporation of $610.3 million,
which is included in Other above.
- ------------------------------------------------------------------------------
(Dollars in Millions) 1993 1992 1991
- ------------------------------------------------------------------------------
Other Deductions
Insurance losses and loss adjustment expenses $614.4 $587.3 $508.9
Provision for financing losses 300.8 371.0 1,047.9
Write-down of investment in NCRS - 813.2 -
Loss on the sale of AGT 305.6 - -
Other 403.9 30.4 91.0
- ------------------------------------------------------------------------------
Total other deductions $1,624.7 $1,801.9 $1,647.8
- ------------------------------------------------------------------------------
The provision for financing losses in 1991 also reflects a special wholesale
loss provision of $275.0 million
- ------------------------------------------------------------------------------
NOTE 3. Stock and Other Incentive Plans
- ------------------------------------------------------------------------------
The Corporation's incentive plans consist of the (i) General Motors Amended
1987 Stock Incentive Plan (the "GMSIP"), (ii) the General Motors 1992
Performance Achievement Plan (the "GMPAP"), (iii) the 1984 Electronic Data
Systems Corporation Stock Incentive Plan (the "EDS Plan"), and (iv) the GMHE
Incentive Plan (the "GMHE Plan"). These plans are administered by the
Incentive and Compensation Committee of the Board of Directors (the
"Committee").
Under the GMSIP, 39.8 million shares of $1-2/3 par value, 12.2 million
shares of Class E, and 5.9 million shares of Class H common stock may be
granted from June 1, 1992 through May 31, 1997 of which 29.9 million, 12.2
million, and 5.6 million shares, respectively, may still be granted at
December 31, 1993. Under this Plan, the Committee may use these shares to
grant either stock options or restricted stock units ("Units"). Options
II-14
31
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
granted under the GMSIP generally are exercisable one-half after one year and
one-half after two years from the dates of grant. Option prices are 100% of
fair market value on the dates of grant, and the options generally expire 10
years from the dates of grant, subject to earlier termination under certain
conditions.
Each Unit relates to one share of $1-2/3 par value, Class E, or Class H
common stock, as determined by the Committee at the time of grant. The Units
entitle the employee to receive, without payment to the Corporation, shares of
common stock or cash of equivalent value in consideration for services
performed. Such Units generally vest in up to three annual installments
commencing on the date of grant. In early 1994, the Committee anticipates
granting awards totaling approximately $9 million to executives at certain
units which had met certain pre-established earnings and operating goals.
Under the GMPAP, the Committee established target awards for the three-
year periods ending in 1994 and 1995. Awards are established based on
Corporation earnings during the award period; the percentage of target awards
ultimately distributed to participants is determined by the Committee based on
actual Corporate results in relation to established goals, and individual
performance. No awards were provided under the GMPAP for award periods ending
in 1991, 1992, or 1993.
Under the EDS Plan, the Committee may grant shares and rights or options
to acquire up to 160 million shares of Class E common stock during the 10 year
life of the EDS Plan of which 108.9 million shares may still be granted at
December 31, 1993. No options were outstanding as of December 31, 1993, 1992,
or 1991. During 1991, approximately 4.3 million shares were exercised at an
option price of $8.955 per share.
Under the EDS Plan, approximately 39.1 million shares of Class E common
stock have also been granted to key employees at stock prices up to $0.025 per
share. Such shares generally vest over a 10-year period from the date of
grant. Approximately 10.5 million shares were not yet vested at December 31,
1993. Approximately $33.8 million, $30.4 million, and $30.6 million in
compensation cost was recognized for these grants and other incentives in
1993, 1992, and 1991, respectively.
Under the GMHE Plan, the Committee may grant shares, rights, or options to
acquire up to 20 million shares of Class H common stock through May 31, 1995
of which 7.4 million shares may still be granted at December 31, 1993. Option
prices are 100% of fair market value on the dates of grant, and the options
generally expire 10 years from the dates of grant, subject to earlier
termination under certain conditions. Hughes also maintains an annual
incentive plan for certain key employees, under which awards are based on the
subsidiary's operating results and individual performance. Approximately
$43.6 million, $47.7 million, and $44.2 million in compensation cost was
recognized under this plan in 1993, 1992, and 1991, respectively.
Changes in the status of outstanding options under the GMSIP and GMHE Plan
were as follows:
GMSIP Option Shares Under
$1-2/3 Par Value Common Stock Prices Option
- ------------------------------------------------------------------------------
Outstanding at January 1, 1991 $19.13-$48.07 12,582,631
Granted 40.00 5,546,350
Exercised 19.13-41.50 (124,392)
Terminated 33.97-48.07 (175,457)
- ------------------------------------------------------------------------------
Outstanding at December 31, 1991 19.13-48.07 17,829,132
Granted 37.32-37.75 5,302,140
Exercised 19.13-41.50 (197,851)
Terminated 19.13-48.07 (864,675)
- ------------------------------------------------------------------------------
Outstanding at December 31, 1992 33.97-48.07 22,068,746
Granted 33.88-44.00 5,526,855
Exercised 33.97-48.07 (4,303,326)
Terminated 33.88-48.07 (531,218)
- ------------------------------------------------------------------------------
Outstanding at December 31, 1993 $33.88-$48.07 22,761,057
- ------------------------------------------------------------------------------
II-15
32
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
GMHE Plan Option Shares Under
Class H Common Stock Prices Option
- ------------------------------------------------------------------------------
Outstanding at January 1, 1991 $19.75-$30.25 3,592,099
Granted 17.07-18.94 1,520,120
Terminated 17.07-30.25 (51,010)
- ------------------------------------------------------------------------------
Outstanding at December 31, 1991 17.07-30.25 5,061,209
Granted 23.63-25.38 1,927,860
Exercised 17.07-24.35 (136,764)
Terminated 17.07-30.25 (335,550)
- ------------------------------------------------------------------------------
Outstanding at December 31, 1992 17.07-30.25 6,516,755
Granted 28.00-28.56 2,027,260
Exercised 17.07-30.25 (1,960,162)
Terminated 17.07-30.25 (217,845)
- ------------------------------------------------------------------------------
Outstanding at December 31, 1993 $17.07-$30.25 6,366,008
- ------------------------------------------------------------------------------
At December 31, 1993, options for approximately 15.1 million $1-2/3 par
value common shares and approximately 3.5 million Class H common shares were
exercisable under the GMSIP and GMHE Plan, respectively.
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NOTE 4. Pensions
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The Corporation and its subsidiaries have a number of defined benefit pension
plans covering substantially all employees. Plans covering U.S. and Canadian
represented employees generally provide benefits of negotiated stated amounts
for each year of service as well as significant supplemental benefits for
employees who retire with 30 years of service before normal retirement age.
The benefits provided by the plans covering its U.S. and Canadian salaried
employees, and employees in certain foreign locations, are generally based on
years of service and the employee's salary history. The Corporation and its
subsidiaries also have certain nonqualified pension plans covering executives
which are based on targeted wage replacement percentages and are unfunded.
Plan assets are primarily invested in United States Government
obligations, equity and fixed income securities, commingled pension trust
funds, insurance contracts, and GM $1-2/3 par value and Class E common stock
(valued as of the 1993 measurement date at $1,240.2 million and $775.9
million, respectively). The Corporation's funding policy with respect to its
qualified plans is to contribute annually not less than the minimum required
by applicable law and regulation nor more than the maximum amount which can be
deducted for Federal income tax purposes.
Total pension expense of the Corporation and its subsidiaries amounted to
$2,684.9 million in 1993, $1,981.5 million in 1992, and $1,520.0 million in
1991. Net periodic pension cost for 1993, 1992, and 1991 of U.S. plans and
plans of subsidiaries outside the United States included the components shown
in the tables below and on the next page.
1993 U.S. Plans Non-U.S. Plans
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(Dollars in Millions)
Benefits earned during the year $939.9 $133.1
Interest accrued on benefits earned
in prior years 4,258.9 473.9
Return on assets
-Actual gain ($7,159.0) ($775.6)
-Less deferred gain 3,329.1 (3,829.9) 453.1 (322.5)
-------- ------
Net amortization 647.7 67.7
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Net periodic pension cost $2,016.6 $352.2
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II-16
33
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
1992 U.S. Plans Non-U.S. Plans
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(Dollars in Millions)
Benefits earned during the year $859.9 $135.1
Interest accrued on benefits earned
in prior years 4,089.9 469.2
Return on assets
-Actual gain ($2,770.9) ($147.6)
-Plus deferred loss (1,320.9) (4,091.8) (217.0) (364.6)
-------- ------
Net amortization 403.9 39.0
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Net periodic pension cost $1,261.9 $278.7
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1991
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Benefits earned during the year $772.4 $109.9
Interest accrued on benefits earned
in prior years